20141104Application.pdf

EXECUTIVE OFFICES
I rurenuouNTArn Gas CorupnNv
555 SOUTH COLE ROAD o p.O. BOX 7608 . BOiSE, TDAHO 83707 . (2OS)377€OOO . FAX:32_6097
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RE:
November 4,2014
Ms. Jean Jewell
Idaho Public Utilities Commission
472 W. Washington Street
P.O. Box 83720
Boise, lD 83720-0074
Intermountain Gas Company
Case No. INT-G-14-02
Dear Ms. Jewell:
Enclosed for filing with this Commission is an original and seven (7) copies of Intermountain
Gas Company's Application seeking approval to place into effect a change in its Composite
Depreciation and Amortization Rates.
Please acknowledge receipt of this filing by stamping and retuming a copy of this Application
cover letter to us.
If you have any questions or require additional information regarding the attached, please contact
me at 377-6168.
Very truly yours,
Director, Regulatory Affairs
Intermountain Gas Company
Enclosure
Scott Madison
Mark Chiles
Ron Williams
RECrf i/Fi]
?0tr t{0v -L fiH t0! 07INTERMOUNTAIN GAS COMPAI\Yt - l;,u.ilo i-:u:, ,,,
CASE NO. INT.G-I4.02 u r r rl?i r s-Cdl,q #i i 5s r or.j
APPLICATION
AI\D
EXHIBITS
In the Matter of the Application of INTERMOUNTAIN GAS COMPAI\"Y
for Approval to Place into Effect
a Change in Its Composite Depreciation and Amortization Rates
Ronald L. Williams, ISB 3034
Williams Bradbury PC
1015 W. Hays St.
Boise,Idaho 83702
Telephone: [phone]
Attomey for Intermountain Gas Company
In the Matter of the Application of
INTERMOUNTAIN GAS COMPANY fOT
Approval to Place into Effect a Change in
Its Composite Depreciation and
Amortization Rates
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
Case No. INT-G-14-02
APPLICATION
COMES NOW Intermountain Gas Company ("Intermountain" or "Applicant"), a subsidiary
of MDU Resources Group, Inc. with general offices located at 555 South Cole Road, Boise, Idaho,
and pursuant to Idaho Code, Title 61, and rules 6.2 afi 6.3 of the Rules of Practice and Procedure of
the Idaho Public Utilities Commission ("Commission"), makes an Application seeking approval to
place into effect a change in its composite depreciation and amortization rates.
Communications in reference to this Application should be addressed to:
Michael P. McGrath
Director - Regulatory Affairs
Intermountain Gas Company
Post Office Box 7608
Boise,ID 83707
and
Ronald L. Williams
Williams Bradbury PC
1015 W. Hays St.
Boise,Idaho 83702
In support of this Application, Intermountain does allege and state as follows:
APPLICATION - 2
I.
Intermountain is an Idaho corporation, whose principal place of business is 555 South Cole
Road, Boise, Idaho, and is qualified to do business in the state of Idaho.
II.
Intermountain is a gas utility, subject to the jurisdiction of the Idaho Public Utilities
Commission, engaged in the sale of and distribution of natural gas within the State of Idaho under
authority of Commission Certificate No. 219 issued December2,1955, as amended and
supplemented by Order No. 6564, dated October 3,1962.
Intermountain provides natural gas service to the following Idaho communities and counties
and adjoining areas:
Ada County - Boise, Eagle, Garden City, Kuna, Meridian, and Star;
Bannock County - Chubbuck,Inkom, Lava Hot Springs, McCammon, and Pocatello;
Bear Lake County - Georgetown, and Montpelier;
Bingham County - Aberdeen, Basalt, Blackfoot, Firth, Fort Hall, Moreland/Riverside, and Shelley;
Blaine County - Bellevue, Hailey, Ketchum, and Sun Valley;
Bonneville County - Ammon,Idaho Falls,Iona, and Ucon;
Canyon County - Caldwell, Greenleaf, Middleton, Nampa, Parma, and Wilder;
Caribou County - Bancroft, Grace, and Soda Springs;
Cassia County - Burley, Declo, Malta, and Raft River;
Elmore County - Glenns Ferry, Hammett, and Mountain Home;
Fremont County - Parker, and St. Anthony;
Gem County - Emmett;
Gooding County - Gooding, and Wendell;
Jefferson County - Lewisville, Menan, Rigby, and Ririe;
Jerome County - Jerome;
Lincoln County - Shoshone;
Madison County - Rexburg, and Sugar City;
Minidoka County - Heyburn, Paul, and Rupert;
Owyhee County - Bruneau, and Homedale;
Payette County - Fruitland, New Plymouth, and Payette;
Power County - American Falls;
Twin Falls County - Buhl, Filer, Hansen, Kimberly, Murtaugh, and Twin Falls;
Washington County - Weiser.
Intermountain's properties in these locations consist of transmission pipelines, a liquefied
natural gas storage facility, distribution mains, services, meters and regulators, and general plant and
equipment.
APPLICATION - 3
III.
Intermountain's currently effective composite depreciation rate of 3.07o/o was approved by
this Commission in Case No. INT-G-ll-0z, Order No 32427, dated December 30, 2011. Applicant
has traditionally reviewed and filed an update to its deprecation rates with this Commission every
three years. Case INT-G-14-02 reflects an update to the Applicant's last Study.
Iv.
With each update of Applicant's depreciation parameters and associated rates, special
circumstances regarding Intermountain's recovery rates are addressed. The current study addresses,
Elmong other things, adjustments to the projected lives of Electronic Read Transmitters ("ERTs")
and installations, mains and service lines, improvements made to the Company's Nampa LNG
facility and corresponding net salvage values of the same.
Intermountain began utilizing ERTs system-wide beginning in 2002 and the units were
expected to continue in service for 15 years. However, recent sampling studies indicate that these
devices will need to be replaced earlier than anticipated, beginning in 2012, resulting in a shortening
of the remaining useful life of the ERTs and ERT Installations asset classes.
Intermountain continues to make increased use of plastic pipe in its main and service lines.
The cost advantage of plastic pipe over steel pipe, coupled with increasing evidence for the longer
service life of plastic pipe, necessitated the increase in the lives of main (from 54 to 58 years) and
service (from 46 to 52 years) investrnent. This study reflects the continuation of the mains service
life at the 58 year level and a slight decrease in the service life ofthe service lines to 50 years based
on the study statistics.
V.
Intermountain contracted the services of AUS Consultants, the same outside vendor
employed for the prior seven (7) depreciation filings (from INT-G-94-1 through INT-G-11-02) to
perform an update of the 2011 study. The results of this study indicate that Intermountain's
current composite rate is under-depreciating its assets. Therefore, Applicant requests an increase
in its composite depreciation rate from 3.07% (3.06% when the accrual rates per Order 32427 are
weighted by December 31,2013 assets) to 3.l2Yo.The effect of the higher rate would be to
increase lntermountain's annual depreciation accrual by $307,211.
APPLICATION - 4
vI.
Intermountain does not seek a change in its prices as a result of this requested change in
deprecation.
VII.
The current definition of depreciation used by the Federal Energy Regulatory Commission
and the National Association of Regulatory Commissioners is as follows:
o'Depreciation," as applied to depreciable plant, means the loss in service value not restored
by curent maintenance, incurred in connection with the consumption or prospective
retirement of utility plant in the cotrse of service from causes which are known to be in
current operation and against which the utility is not protected by insurance. Among the
causes to be given consideration are wear and tear, decay, action of the elements,
inadequacy, obsolescence, changes in the art, changes in demand, and requirements of
public authorities.
The American Institute of Certified Public Accountants in its Accounting Terminology
Bulletin #l defines depreciation accounting as follows:
Depreciation accounting is a system of accounting which aims to distribute cost or other
basic value of tangible capital assets, less salvage (if any), over the estimated useful life of
the unit (which may be a group of assets) in a systematic and rational manner. It is a process
of allocation, not of valuation.
The prescription of depreciation rates is an important element of the regulatory process
because it must allocate the full cost of an asset over the life of the property items in a rational
manner.
VIII.
The depreciation study update filed with this Case was based upon Intermountain's books
and records as of December 31,2013. The calculation of the amount of the annual depreciation
expense required per year was calculated on an individual account basis. The method used in the
calculation was the Simulated Plant Record Balances Method ("SPR-Balance"). The SPR-Balance
APPLICATION - 5
Method uses the "Iowa Curves" mortality distribution. The current study was conducted using
Applicant's data and the "Iowa Curves" as described in the NARUC publication of July 25,1984,
"Depreciation Practices for Small Gas Distribution Companies". The current study is summarized
and shown on Exhibit No. I as attached hereto and incorporated herein by reference. A copy of the
curent depreciation study working papers, which is voluminous, is available for inspection and
examination at Intermountain's general business office located at 555 S. Cole Road in Boise,Idaho.
Ix.
Since Applicant's last depreciation filing in Case No. INT-G-I1-02, the original cost of
depreciable property increased from $415,697,857 to $478,544,370 as shown in Column (d), Line
27, on Page I of Exhibit No. l. The accumulated reserve increased from $240,667,847 to
$274,473,793 as shown in Column (e), Line 27,on Page I of ExhibitNo. 1. The cunent study
necessitates an annual depreciation accrual of $14,951,242 per year over the remaining life of the
property as shown in Column (n), Line 27, onPage2 of Exhibit No. l.
x.
The curent study indicates a need to increase the current composite rate of 3.07% (3.06%
when weighted by l2l3ll20l0 assets) to 3.l2Yo, an increase of 0.06 percentage points (.0006). This
increase is required in order to accrue the proper dollars over the remaining life of the property.
Exhibit No. 1, Pages 2 - 4, contains a sunmary comparison of the current depreciation rates, by
plant function and by account, versus the requested rates in the Application.
xr.
Applicant requests that the increase to the annual composite depreciation rate be effective
January 1,2015 consistent with the beginning of lntermountain's annual financial reporting period.
xII.
Pursuant to Case No. NT-G-99-2, OrderNo. 28331, the Company changed the depreciation
methodology for six identified general plant accounts (i.e., Acct. Nos. 39I,393,394,395,397 and
398) from a depreciation method to an amortization method.
APPLICATION - 6
xilI.
Intermountain contracted the services of AUS Consultants, the same outside vendor
employed for the Company's depreciation study, to perform an updated amortization study. The
results of this study indicate that Intermountain's current amortization rates are under-amortizing
the before mentioned six General Plant accounts. Therefore, Applicant requests an increase to the
total General Plant account amortizations from $1,749,970 to $2,598,813, or an annual increase of
$848,843, as shown on Exhibit No. 2, Page l, column (h), line 14. This increase is required in order
to accrue the proper dollars over the remaining life of the designated amortized accounts. Exhibit
No. 2, Pages 1-7, contains a sunmary comparison of the Company's curent amortization rates, by
General Plant account, versus the requested rates in this Application. Exhibit No. 2 is attached
hereto and incorporated herein by reference. A copy of the cturent amortization study working
papers, which is voluminous, is available for inspection and examination at Intermountain's general
business office located at 555 S. Cole Road in Boise, Idaho. The current rates utilized by the
Company are based on the 2002 AUS study as detailed on Exhibit No. 3. Exhibit No. 3 is attached
hereto and incorporated herein by reference.
xIV.
Intermountain does not seek a change in its prices as a result of this requested change in
xv.
Intermountain requests that this matter be processed pursuant to Rules 201-204 under the
Commission's Rules of Modified Procedure. Intermountain stands ready to respond to any requests
for information in this matter.
APPLICATION - 7
WHEREFORE, Intermountain respectfully petitions this Commission for relief as follows:
l. That Applicant be authorized to increase the current composite depreciation rate on an
accrual rate on an account by account basis from 3.07% (3.06% when the accrual rates
per Order 32427 are weighted by December 31,2013 assets) to3.l2%o as shown in
Column (i), on Page I of ExhibitNo.l.
2. That Applicant be authorized to change the amortization rates for the General Plant
accounts as outlined on ExhibitNo. 2.
3. That Applicant's current prices remain unchanged as a result of this Application.
4. That Applicant be authorized to record these changes in the annual composite
deprecation rate and amortization rates effective on January 1,2015.
5. For such other relief as this Commission may determine proper herein.
DATED at Boise, Idaho, this 4th day ofNovember, 2014.
INTERMOUNTAIN GAS COMPANY Williams Bradbury PC
By ?,A Lil//t*-
Michael Ronald L. Williams
Attorney for Intermountain Gas CompanyDi- Regulatory Affairs
By
APPLICATION - 8
E)GIIBIT NO. 1
CASE NO. INT.G.I4.O2
INTERMOTJNTAIN GAS COMPAII"Y
@epreciation Study)
(4 pages)
Exhibit No. 1
Case No. INT-G-14-02
lntermountain Gas Company
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EXHIBIT NO.2
CASE NO. INT.G-I4.02
INTERMOTINTAIN GAS COMPANY
(Current Amortization Study)
(7 pages)
Exhibit No. 2
Case No. INT-G-14-02
lntermountain Gas Company
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Exhibit No. 2
Case No. INT-G-14-02
lntermountain Gas Company
Page2 of 7
S:\lntermountain Gas 2014\Amortization\Support Assets 1 2-31-201 3.xlsx
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 2013
(d)(c)(b)(a)
Line
Number
1
2
3
4
5
6
7I
Existing Amortization Rate and Expense
Amortization Rate 01072
Annual Amortization
Proposed Amortlzatlon Rate and Expense
Assets to be Retlred
Account
lnvestment
Reserve
lnvestment
Reserve
Amortization Rate
Annual Amortization
lnvestment
Reserve
lnvestment
Reserve
391 Furniture and Office Equipment
Amortization
Plant & ReserveBalances Rate
10,570,598.45
5,412.167,89
948,700.93
948,700.93
9,621,897.52
4,463,466.96
Annual
Amortization
1,133,168
1,556,823
0.1 08108108
1,556,82s
423,655
Assets wlth Contlnuing Amortization
10,570,598.45
5,412,167.89
0.0000
0,1618
9.25
o.1473
I
10
11
12
Amortization Rate
Annual Amortization
Total Amortlzation Rate and Expense
13
14
15
16
Life
Amortization Rate
Annual Amortization
Dlfference ln Amortlzation Rate and Expense
Annual Amortization17
Account 391 Summary
S :\l ntermountain Gas 20 1 4\Amortization\Support Assets 1 2-3 1 -20 1 3. xlsx
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 201 3
(a) (b) (c) (d)
393 Stores Equipment
Amortization
Exhibit No. 2
Case No. INT-G-14-02
lntermountain Gas Company
Page 3 of 7
(310)
Line
Number Account
lnvestment
Assets to be Retired
lnvestment
Reserve
Amortization Rate
Annual Amortization
lnvestment
Reserve
Assets with Continulng Amortizatlon
lnvestment
Reserve 6,950.23
Amortization Rate
Annual Amortization
Total Amortization Rate and Expense
Plant & ReserveBalances Rate
10,529.34
10,529.34
10,529.34
10,529.34
17,479.57
Annual
Amortization
1
2
3
4
5
b
Reserve 17,479.57
Existing Amortization Rate and Expense
Amortization Rate 0.0294
Annual Amortization
Proposed Amortizatlon Rate and Expense
310
7
8
9
10
11
12
13
14
15
16
17
0.0000
0.0000
0.0000Amortization Rate
Annual Amortization
Difference in Amortization Rate and Expense
Annual Amortization
Account 393 Summary
Exhibit No. 2
Case No. INT-G-14-02
lntermountain Gas Company
Page 4 of 7
S:\lntermountain Gas 20 1 4\Amortization\Support Assets 1 2-31 -201 3.xlsx
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 201 3
(b) (c)
Line
Number Account 394 Tools, Shop, and Work Equipment
Amortization
Plant & Reserve AnnualBalances Rate Amortization
(d)(a)
Existing Amortization Rate and Expense3 Amortization Rate
4 AnnualAmortization
Proposed Amortization Rate and Expense
Assets to be Retired
1 lnvestment2 Reserve
5 lnvestment6 Reserve
7 Amortization Rate8 AnnualAmortization
9 lnvestment10 Reserve
11 Amortization Rate12 AnnualAmortization
13 lnvestment14 Reserve
15 Amortization Rate16 AnnualAmortization
3,657,403.91
1,179,802.86
259,985.10
259,985.10
3,397,418.81
919,817.76
3,657,403.91
1,179,802.86
0.0695
0,0000
0.0559
0.0519
254,190
183,916
189,916
(64,274)
Assets with Continuing Amortization
Total Amortizatlon Rate and Expense
Difference in Amortization Rate and Expense17 AnnualAmortization
Account 394 Summary
Exhibit No. 2
Case No.lNT-G-14-02
lntermountain Gas Company
Page 5 of 7
S:\l ntermountain Gas 201 4\Amortization\Support Assets 1 2-3 1 -201 3.xlsx
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 2013
(a) (b) (c) (d)
Line
Number Account 395 Laboratory Equipment
Amortization
Plant & Reserve AnnualBalances Rate Amortization
1 lnvestment2 Reserve
Exlsting Amortlzatlon Rate and Expense3 Amortization Rate4 AnnualAmortization
Proposed Amortization Rate and Expense
Assets to be Retired5 lnvestment 0.006 Reserve 0.00
7 Amortization Rate
8 AnnualAmortization
Assets with Contlnuing Amortizatlon9 lnvestment10 Reserve
11 Amortization Rate12 AnnualAmortization
Total Amortlzation Rate and Expense
13 lnvestment14 Reserve
15 Amortization Rate16 AnnualAmortization
Difference ln Amortizatlon Rate and Expense17 AnnualAmortization
0.0000
0.0000
0.0000
0.00
0.00
Account 395 Summary
Exhibit No. 2
Case No. INT-G-14-02
lntermountain Gas Company
Page 6 of 7
S:\lntermountain Gas 2014\Amortization\Support Assets 12-31 -201 3.xlsx
lntermountain Gas Company
General Plant Amortizalion Study
As of December 31, 2013
(d)(c)(b)(a)
Line
Number
3
4
Existing Amortization Rate and Expense
Amortization Rate
Annual Amortization
Proposed Amortization Rate and Expense
Account
lnvestment
Reserve
Assets to be Retired
lnvestment
Reserve
lnvestment
Reserve
lnvestment
Reserve
397 Communications Equipment
Amortization
Plant & Reserve
Balances
4,493,872,31
1,654,615.90
1,675,226.29
1,675,226.29
2,818,&16.02
(20,610.3s)
4,493,872.31
1,654,615.90
AnnualRate Amortization
0.0806
362,206
0.0000
0.3021
851,513
851,513
489,307
5
6
7
8
9
10
11
12
13
14
15
16
17
Amortization Rate
Annual Amortization
Assets with Gontinuing Amortlzation
Amortization Rate
Annual Amortization
Total Amortization Rate and Expense
Amortization Rate 0.1895
Annual Amortization
Dlfference in Amortization Rate and Expense
Annual Amortization
Account 397 Summary
Exhibit No. 2
Case No.INT-G-14-02
lntermountain Gas Company
PageT of 7
S:\lntermountain Gas 201 4\Amortization\Support Assets 1 2-31 -201 3. xlsx
Line
Number Account
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 2013
(a) (b) (c) (d)
398 Miscellaneous Equipment
Amortization
Existing Amortization Rate and Expense3 Amortization Rate 0.08334 AnnualAmortization
Proposed Amoftization Rate and Expense
Assets to be Retired
lnvestment
Reserve
Amortization Rate
Annual Amortization
0,0000
Assets wlth Continulng Amortizatlon
1 lnvestment2 Reserve
Plant & Reserve
Balances
1,152.88
(3,0s1.35)
AnnualRate Amortization
0.4866
96
5
6
7I
13
14
15
16
17
0.00
0.00
o
10
11
12
lnvestment
Reserve
lnvestment
Reserve
Amortization Rate
Annual Amortization
1,152.88
(3,051.35)
1,152.88
(3,051.35)
561
Amortization Rate 0.4862
Annual Amortization
Total Amortizatlon Rate and Expense
561
455
Difference in Amortization Rate and Expense
Annual Amortization
Account 398 Summary
EXHIBIT NO.3
CASE NO. INT-G.I4.02
INTERMOUNTAIN GAS COMPANY
Q002 Amortization Study)
(2 pages)
Jerome G. Weinert, PE, ASA, CDP
Erccutive Vlce Presldent
September 15, 2003
lntennountain Gas Company
Boise, ldaho
At your authorization we have reviewed the status of the depreciation and amortization of
lntermountain Gas's general support assets accounts. This review was prepared utilizing the
plant and reserve information, as well as, the fixed asset inventory as of September 30, 2001.
in the 1998 depreciation study the ldaho Commission approved a change in depreciation
procedures to individual unit depreciation wherein the support assets are depreciated over their
assigned lives. After the assets are fully recovered, depreciation ceases and the assets may be
retired. The culmination of the 1998 depreciation study and Commission review, depreciation lives
were established for the support asset accounts and a reserye imbalance amortization was
established. Our analysis in this review included the updating of the fixed asset inventory for the
assets acquired subsequent to September 30, 1998, the calculation of the recuning monthly
depreciation expense associated with the un-recovered inventory, and the determination of fully
recovered inventory items. The described monthly depreciation was then used, along with the
remaining reserve imbalance amortization to determine composite depreciation rate for the
Company's ongoing depreciation administration.
The accompanying spreadsheet 'General Support Assets.xls" details our finding. ln genoral, the
adjustment to the depreciation rates are mlnimal with the exception of account 395 Laboratory
Equipment, which is fully recovered and the depreciation and reserve imbalance should be
ceased. The reason for this over-recovery ls that the 1998 study results were not implement until
2000 and the Laboratory Equipment account's depreciation expense was significantly reduced in
that study; as such, the 1999 depreclation was overstated. The following table details the
composite depreciation and reserve imbalance rates as approved in the 1998 study and sirnilar
rates the updated to September 30 2001:
Exhibit No. 3
Case No. INT-G-14-02
lntermountain Gas Company
Page 1 of 2
AUS Consultants
Depreciation and Valuation Services
8555 WEst Forest Home Avenue
Suite 201
Greenfield, Wl 53228
Telephone: [phone]Fax :[phone]
E-Mail :weiner$@AUS1A/EST.net
Exhibit No. 3
Case No. INT-G-14-02
lntermountain Gas Company
Page2 of 2
Account Description
Effective Effective
Depreciation DepreciationRate Rate
9/30/1998 9/30/2001
391
393
Fumiture and Office
Equipment
Store Equipment
10.17o/o
3.39%
10.72%
2.94o/o
6.95%
0.00%
8.06%
8.33%
394
395
397
We have established an Access data base and can now update these rates annually. We would
need an data file containing the fixed asset inventory, preferably at fiscal year end, and the plant
and reserve information subsequent to September 30, 2001.
I trust this information will fulfill your needs, after your review please feel free to contact me with
any questions.
Sincerely,
ilerry Weinert,
Jerome C. Weinert
398
Tools, Shop, &
Garage Equipment 6.53%
LaboratoryEquipment 10.76Yo
CommunicationsEquipment 8.46%
MiscellaneousEquipment 8.32o/o