HomeMy WebLinkAbout20151117Comments.pdfKARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0320
IDAHO BAR NO. 5I56
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702.5918
Attomey for the Commission Staff
IN THE MATTER OF INTERMOUNTAIN GAS
COMPANY'S APPLICATION FOR AN
ACCOUNTING ORDER REGARDING THE
TREATMENT OF CERTAIN REGULATORY
EXPENSES.
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. INT-G-15-03
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on
Intermountain Gas Company' s Application.
BACKGROUND
On October 9,2015, Intermountain Gas Company applied for an accounting order
authorizing it to defer and record, as a regulatory asset, expenses it incurs to prepare for and
present its next general rate case. The Company is not asking the Commission to determine
ratemaking treatment at this time; the Company simply proposes accounting treatment that
would let the Company track those costs and then argue for their recovery at alater date when it
seeks a rate increase. The Company asks that the proposed accounting treatment be effective as
of November 1,2015. An accounting order may be approved for booking purposes at any point
within a financial reporting quarter.
In support of its Application, the Company explains that it has not filed a general rate
case since 1985 (see Case No. U-1034-122). The Company states, however, that it expects to
file a general rate case in the next twelve (12) months. The Company states that it lacks the
STAFF COMMENTS NOVEMBER 17,2OI5
necessary staff to prepare and present the expected rate case, and that it will thus need to retain
outside consultants. The Company thus seeks an accounting order allowing it to record its
consultant-related expenses as a regulatory asset so it will have the opportunity to ask the
Commission to let it recover those expenses in the future.
STAFF REVIEW
Staff found no prior authorization or precedence allowing the Company to capture and
defer expected rate case expenses. The Company filed its last rate case in 1985. Staff
understands the Company does not have personnel available to prepare and perform the work
necessary to present a case in the next 12 months, and that the Company thus expects to hire
outside consultants and incur incremental costs to prepare and process the case.
The Company notes that rate case expenses do not fall under the category of usual or
recurring, but that such, expenses can nevertheless qualify for regulatory asset consideration
under the Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 980 - Regulated Operations. Staff agrees with the Company. Two conditions must be
satisfied for the expenses to qualify as a regulatory asset. The conditions are that future revenue,
at least equal to the expense, musf (l) occur because the rate case expense has been expended,
and (2) be applied to that specific rate case expense incurred. Upon review of similar requests
and cases, Staff believes the Company will meet these criteria. Staff thus recommends the
Commission grant authority to create a regulatory asset to capture and defer external rate case
expenses incurred by the Company for prudence review at the time of the next general rate case.
Treating the expenses as a regulatory asset recognizes the nature ofthe expenses and
allows them to be deferred for potential future recovery in a rate case. At this time, the estimated
deferred expenses are less than $400,000. Expenses anticipated to be deferred include: outside
legal counsel, working capital analysis, revenue requirement studies, cost of capital, cost of
service model and associated studies, rate design, contract computer programming, intervenor
funding, climatological studies and customer awareness. Staff recommends that the Commission
limit the types of expenses allowed for deferral by excluding all salaries and other usual and
recurring costs incurred in operating the utility, and unnecessary or imprudent expenditures
specifically promoting the pending rate case. A deferral order does not prevent Staff from
auditing or challenging the appropriateness, reasonableness and prudence ofany costs deferred.
And, ultimately, the Company must provide detailed documentation supporting any expenses
STAFF COMMENTS NOVEMBER 17, 2015
claimed in the next general rate case. The Company and Staff agree that any ratemaking
treatment associated with this regulatory asset, should the Commission approve it, will be
determined by the Commission in the general rate case that the Company intends to file within
the next 12 months. Staff does not, however, believe it is appropriate to defer rate case costs for
an extended period of time beyond a normal time frame to prepare and process a general rate
case. Staff thus recommends that deferrals stop if the Company has not filed by January 1,2017.
STAFF RECOMMENDATIONS
Staff recommends that the Commission issue an accounting order authorizing the
Company to establish a regulatory asset effective November 1,2015, to defer the external costs
associated with the onset, continuance and completion of the general rate case anticipated to
occur within the next 12 months. Staff believes deferring those expenses is reasonable since the
last general rate case was in 1985, and the Company currently lacks appropriate personnel to
prepare and present its next rate case. Allowing the Company to defer the expenses will afford
the Company a reasonable opportunity to recover rate case expenses and provide consistent
regulatory treatment with other Idaho utilities. Accordingly, Staff recommends that the
Commission:
l. Allow deferral of external costs associated with the impending rate case to occur
within the next 12 months;
2. Order compilation and retention of detailed documentation supporting rate case
expenses presented for deferral; and
3. Stop deferral of rate case expenses if the Company has not filed a general rate case by
January 1,2077.
Respectfully submitted this t ++l day of November 2015.
Karl T. Klein
Deputy Attorney General
Technical Staff: Amber Christofferson
Terri Carlock
i : umisc/comments/intg I 5, 3kktcac comments
STAFF COMMENTS
Klein
NOVEMBER 17, 2015
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 17TH DAY OF NOVEMBER 2015,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. INT.G-15-03, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
MICHAEL P McGRATH
DIR _ REGULATORY AFFAIRS
INTERMOUNTAIN GAS CO
PO BOX 7608
BOISE ID 83707
E-MAIL: mike.mcgrath@intgas.com
RONALD L WILLIAMS
WILLIAMS BRADBURY
1015 W HAYS ST
BOISE ID 83702
E-MAIL: ron@williamsbradbury.com
)
CERTIFICATE OF SERVICE