20160812Swenson Direct.pdf

Ronald L. Williams, ISB No. 3034
Williams Bradbury, P.C.
1015 W. Hays St.
Boise, ID 83702
Telephone: [phone]
Email: [e-mail]

Attorneys for Intermountain Gas Company

BEFORE THE IDAHO PUBLIC UTILITES COMMISSION

IN THE MATTER OF THE APPLICATION OF
INTERMOUNTAIN GAS COMPANY FOR
THE AUTHORITY TO CHANGE ITS RATES
AND CHARGES FOR NATURAL GAS
SERVICE TO NATURAL GAS CUSTOMERS
IN THE STATE OF IDAHO

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Case No. INT-G-16-02

DIRECT TESTIMONY OF DAVID SWENSON

FOR INTERMOUNTAIN GAS COMPANY

August 12, 2016

Swenson, Di 1
Intermountain Gas Company
I. INTRODUCTION 1
Q. Please state your name, title and business address. 2
A. My name is David Swenson. I am Manager of Industrial Services at
Intermountain Gas Company (“Intermountain” or “the Company”). My business
address is 555 S. Cole Road, Boise, Idaho 83707.
Q. Mr. Swenson, please summarize your educational and professional 6
experience.
A. I have been working in the natural gas industry for 33 years. I have been at
Intermountain Gas for over 26 years where I started as an analyst in Pricing and
Special Studies. I also previously worked for IGI resources Inc., a natural gas
marketing company where I held several positions including Manager of Gas
Supply and Business Development. I was named Manager, Industrial Services for
Intermountain in January 2013. Prior to this role, I held various positions in
Intermountain’s accounting, regulatory and gas supply departments. In my
current assignment, I am responsible for the retention and growth strategies for all
large-volume market segments and to build strong, strategic relationships with
these customers and other trade allies. I am also responsible to manage policies
and procedures, oversee forecasting and planning, and conduct contract
negotiations. I also manage the company’s Liquefied Natural Gas sales efforts. I 19
am a graduate of Brigham Young University with a Bachelor of Science degree in
finance and a minor in accounting and economics. Currently, I also serve as a
member of the board of directors of the Boise Valley Economic Partnership.
Q. Please describe the purpose of your testimony. 23
A. In this testimony, I describe and explain the Company’s proposals to:

Swenson, Di 2
Intermountain Gas Company
(1) Charge all Large Volume Contract (“Industrial”) firm service customers a 1
demand charge for the capacity on the Company’s distribution system that is 2
made available to these industrial customers.
(2) Combine current rate schedules T-4 and T-5 into a new rate schedule, also
designated as Rate Schedule T-4
(3) Eliminate of the Exit Fee provision in the LV-1 Rate Schedule and the historic
high provision that determined access to block three of the T-4 Rate Schedule.
II. INDUSTRIAL RATE SCHEDULES 8
A. Introduction: Description of Industrial Rate Schedules 9
Q. As a preliminary matter, please describe and explain the rate schedules that 10
are available to the Company’s Industrial customers. 11
A. Intermountain provides service to its largest natural gas consumers (hereinafter
referred to as “Large Volume Industrial”) through one fully bundled sales tariff 13
and three distribution-only transportation tariffs. The Company provides firm
sales service to the Large Volume Industrial customers that meet the eligibility
conditions of and elect to be served under Rate Schedule LV-1. Firm distribution
system-only transportation service is provided to Large Volume Industrial
customers that meet the eligibility conditions of and elect to be served under Rate
Schedules T-4 or T-5. The Company also offers a distribution system-only
interruptible transportation service to Large Volume Industrial customers that
meet the eligibility conditions of and elect to be served under Rate Schedule T-3.
I have prepared Table DS-1, below, which provides the availability provisions for
the Company’s current industrial Rate Schedules.

Swenson, Di 3
Intermountain Gas Company
Table DS-1 Intermountain Gas Company Industrial Rate Classifications 1
1
service under the Company’s rate schedule LV
2
Q. Please describe how the Company charges interruptible industrial customers 3
served on Rate Schedule T-3. 4
A. Currently, the Company charges a Volumetric Rate to T-3 customers for
interruptible transportation service.
Table DS-2 Currently Effective T-3 Rates2 7
st

1 In addition, applicable to all industrial customers, service will only be provided upon execution of
a one year minimum written service contract and, specifically relating to customers receiving
transport service, any customer delivery of natural gas must occur at any mutually agreeable
delivery point on the Company's distribution system.
2 Rate Schedule T-3 Interruptible Distribution Transportation Service, Eleventh Revised Sheet No.
8, Effective: October 1, 2015

Swenson, Di 4
Intermountain Gas Company
Q. Please describe how the Company charges firm industrial customers served 1
on Rate Schedule T-4. 2
A. Currently, the Company charges a Volumetric Rate to T-4 customers for firm
distribution only transportation service.
Table DS-3 Currently Effective T-4 Rates3 5
st
6
Q. Please describe how the Company charges firm industrial customers served 7
on Rate Schedule T-5. 8
A. Differing from the rate schedules described above, the T-5 customers are billed
monthly under a two-part rate: a demand charge and a volumetric rate. The
demand charge is the product of the T-5 demand rate times the effective
Maximum Daily Firm Quantity (“MDFQ”). The MDFQ is more fully described 12
below. In addition to the demand charge, T-5 customers are also charged a
Volumetric Rate for all firm therms transported and, when applicable, an overrun
rate for all therms transported in excess of the maximum monthly firm amount.
The Company’s currently effective T-5 rates are shown in Table DS-5, below. 16
Table DS-4 Currently Effective T-5 Rates4 17

3 Rate Schedule T-4 Firm Distribution Only Transportation Service, Tenth Revised Sheet No. 9,
Effective: October 1, 2015
4 Rate Schedule T-5 Firm Distribution Service with Maximum Daily Demands, Effective: October
1, 2015

Swenson, Di 5
Intermountain Gas Company
B. Industrial Demand Charge Proposal 1
Q. Please describe the Company’s proposal to bill a demand charge to all 2
Industrial customers taking firm transportation service. 3
A. The testimony of Company Witness Branko Terzic provides support for demand
charges for large industrial customers. Specifically, Mr. Terzic makes the points
that it is a fundamental rate making principle that the capacity of a gas distribution
system is designed to meet customers’ cumulative demands when the system peak 7
demand occurs and that customers should pay their proportionate share of costs in
meeting that system peak demand.
Based on the Company’s experience with the current Rate Schedule T-5
demand charge, the Company is proposing to add a demand charge to all firm
industrial rate schedules, to equitably charge all firm industrial customers for their
use of the Company’s distribution capacity. Similar to the rate structure for the 13
current Rate Schedule T-5, all firm industrial customers will also be charged
volumetric rates, in addition to the demand rate. The calculation of the proposed
demand and volumetric rates for Intermountain’s firm industrial rate schedules is 16
described and explained in the testimony of Witness Blattner. The demand charge
for all firm industrial customers in Intermountain’s proposed firm Rate Schedules 18
will be based on the effective MDFQ.
Q. Please explain how a firm industrial customer’s Maximum Daily Firm 20
Quantity is determined. 21
A. Delivery capacity on Northwest Pipeline’s interstate transportation system, as 22
well as the Company’s distribution system, are finite resources and so there must 23
be a methodology to allocate that the resource fairly. All firm service, large

Swenson, Di 6
Intermountain Gas Company
volume industrial customer contracts include a mutually agreed upon MDFQ. The
Company utilizes daily usage data from its SCADA (Supervisory Control and
Data Acquisition) system along with connected load ratings from the customer’s 3
natural gas fired equipment to determine a recommended MDFQ. Upon
confirmation from the engineering and measurement departments that
Intermountain can, in fact, provide that level of peak service to the customer, and
upon agreement with the customer, that MDFQ is written into the customer’s 7
contract. Once the contract is executed, Intermountain commits to the LV-1
customers that it can provide each day during the contract a level of interstate
transportation capacity, gas supply and distribution capacity equal to the
customer’s MDFQ. Similarly, Intermountain commits to the firm transport
customers that it can provide that level of daily distribution capacity equal to the
customer’s MDFQ.
All daily natural gas deliveries above the customer’s MDFQ are on an “as 14
available” basis and, during periods of Entitlement, Intermountain could restrict a
customer’s usage to no more than the customer’s MDFQ. Knowing that natural 16
gas deliveries to their factories and places of business can be capped by the
contracted MDFQ, industrial customers are generally careful to nominate an
MDFQ that will satisfy their peak delivery needs.
C. Proposal to Combine Rate Schedules T-4 and T-5 20
Q. Please describe the Company’s proposal to combine current rate schedules 21
T-4 and T-5 into a new rate schedule, also designated as Rate Schedule T-4. 22
A. The current Rate Schedules T-4 and T-5 are almost identical, except that current
Rate Schedule T-5 includes both a demand charge and a volumetric charge, and

Swenson, Di 7
Intermountain Gas Company
current schedule T-4 includes only a volumetric charge. As shown in Table DS-1,
above, the availability provisions for both Rate Schedules are the same, and as
shown in Table DS-6, below, typical T-4 and T-5 customers are structurally
similar. Thus, after adding a demand charge to Schedule T-4, there is no
remaining distinguishing differences between the two rate schedules and therefore
no purpose to be served by continuing to offer both T-4 and T-5.
Table DS-5 Current Rate Schedules T-4, T-5: Customer data (Actual 2015) 7
Current Rate
Schedule Customers
Therms MDFQ
Total Average Total Average
T-4 82 246,066,376 3,000,809 1,447,697 17,655
T-5 13 26,054,206 2,004,170 72,750 5,596
Combined 95 272,120,582 2,864,427 1,520,447 16,005

D. Industrial Proposed Rates to Industrial Rate Schedules
Q. Have you reviewed the proposed rates to Industrial Rate Schedules, as 10
described and explained in the testimony of Witness Blattner? 11
A. Yes, I have.
Q. What are your general observations related to the proposed Rate Schedule 13
LV-1 rates? 14
A. Under the proposed LV-1 rates, as explained by Witness Blattner, the typical
(average) LV-1 customer will experience a small decrease in annual bills. Based
on my review of projected LV-1 customer charges using 2015 billed
consumption, current MDFQs and the proposed LV-1 demand and volumetric
rates, customers that consume gas more evenly from day-to-day and month-to-
month (i.e. a high “Load Factor”5) will experience larger decreases and customers

5 Load Factor is a commonly used measure to describe day-to-day and month-to-month gas
consumption patterns. Load Factor is the ratio of the average daily therm use divided by some

Swenson, Di 8
Intermountain Gas Company
that have relatively large differences in gas consumption by day and by month
will experience smaller decreases. Some LV-1 customers with relatively large
differences in gas consumption by day and by month may experience small
increases in annual bills.
Q. Why do some Industrial customers have lower load factors than others? 5
A. In most instances, industrial customers that utilize natural gas largely for heating
load will show relatively less usage during non-heating load periods and therefore
have a lower than average load factor. In some instances however, customers
have knowingly elect an MDFQ higher than needed, when compared to current
gas consumption, in order to protect future growth expectations. In a few cases,
the customer may have elected an MDFQ that does not reflect current or future
expected consumption and the Company continues its efforts to educate such
customers regarding the economic and operational value of a properly set MDFQ.
It is my belief that the inclusion of a demand charge in all firm industrial large
volume rate schedules will provide the necessary price signals for industrial
customers to better manage their contracted peak day requirements. As a result,
the Company will be better able to optimize the use of its distribution system.
Q. What are your general observations related to the new proposed rate 18
Schedule T-4 and the proposed Rate Schedule T-4 rates? 19
A. In general, the proposal to combine current Rate Schedules T-4 and T-5, and to
charge a demand rate to customers in this class has similar impacts on these

measure of the peak day or, in this case, the MDFQ. The greater the difference between the
MDFQ and the average daily use, the lower the Load Factor. For customers that are charged a
demand rate and a volumetric rate, total charges are inversely related to a customer’s load factor,
for a given level of consumption.

Swenson, Di 9
Intermountain Gas Company
customers as the LV-1 impacts that I described above. That is, under the
proposed T-4 rates as explained by Witness Blattner, the typical (average) T-4
customer will experience a small decrease in annual bills. Based on my review of
projected T-4 customer billing based on 2015 billed consumption, current
MDFQs and the proposed demand and volumetric rates, T-4 customers with
relatively high load factors will experience larger decreases, customers with lower
load factors will experience smaller decreases and, in some cases, T-4 customers
with the lowest load factors may experience small increases in annual bills.
Q. Please explain the Firm Demand Relief provision, which is included in the 9
proposed LV-1 and T-4 Tariffs. 10
A. The Firm Demand Relief provision states, “Demand charge relief will be afforded
to those LV-1 (or T-4) customers when circumstances impacted by force majeure
events prevent the Company from delivering natural gas to the customer’s meter.” 13
The Company has included this provision to provide a mechanism to refund the
affected portion of a customer’s demand charge in the unlikely event that the 15
company cannot deliver the customer’s full MDFQ for any days during a given 16
month. This provision does not provide for refunds to a customer that cannot
arrange for delivery of its full MDFQ or otherwise fails to deliver the needed
amount of natural gas to one of the Company’s city gates.
Q. Please explain the removal of the Exit Fee provision formerly found in the 20
LV-1 Rate Schedule. 21
A. When the Company first implemented the T-4 Rate Schedule, it was believed that
many customers would desire to switch to T-4 service and in fact, the majority of
the large volume industrials did switch to T-4. In order to not saddle remaining

Swenson, Di 10
Intermountain Gas Company
customers with the cost of interstate capacity that Intermountain held on behalf of
those customers migrating to T-4, the Exit Fee provision required those T-4
customers to pay for some of that capacity cost over a two-year period. Since
most of the large volume industrials migrated to transport years ago and most of
the remaining LV-1 customer are relatively small, the amount of capacity that
would be freed up by one of the customers migrating to transport if largely
insignificant and so the Company proposes to eliminate this provision.
Q. Please explain why LV-1 customers were removed from eligibility to use the 8
T-3 tariff as an overrun service. 9
A. LV-1 customers utilize Intermountain’s WACOG supply. In the unlikely event of 10
Entitlement, curtailment or during periods of managing a T-3 imbalance, it would
be difficult, if not impossible, to identify the source of gas supplies used by an
LV-1 customer.
Q. Please explain the removal of the historic high therm use provision from the 14
T-4 Rate Schedule. 15
A. Because the Company is proposing the inclusion of a demand charge for the T-4
Tariff, there is no longer any concern that customers growing in the lowest price
tail block or those with unusually high usage for just a short period of time, would
cause other customers to bear fixed costs belonging to those growing customers.
So the Company proposes to eliminate this provision.
Q. Does this conclude your testimony? 21
A. Yes, it does.