20170817McGrath Direct.pdf

L. Williams, ISB No.3034 i;;:,iIl'*/ElJ
..;'.i"irl i? Pil I:0gBradbury, P.C.
.O. Box 388, 802 W. Bannock Street, Suite 900
rD 83701
[phone] ' - , lr. r C.t".j
ron @ williamsbradbury. com
for Intermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITES COMMISSION
THE MATTER OF THE APPLICATION OF )
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GAS COMPANY FOR Case No. INT-G-16-02
AUTHORITY TO CHANGE ITS RATES
CHARGES FOR NATURAL GAS TESTIMOI{Y IN SUPPORT
OF STIPULATION AND
SETTLEMENT
TO NATURAL GAS CUSTOMERS
THE STATE OF IDAHO
DIRECT TESTIMONY OF MICHAEL P. McGRATH
FOR INTERMOUNTAIN GAS COMPANY
August ll,2OL7
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I. INTRODUCTION
Please state your name and business address.
My name is Michael McGrath. I am the Director of Regulatory Affairs at
Intermountain Gas Company. My business address is 555 S. Cole Road, Boise, Idaho
83707.
Are you the same Michael McGrath that filed both testimony in this case?
Yes, I submitted both direct and rebuttal testimony on behalf of Intermountain in this
case
What is the purpose of your testimony?
The purpose of my testimony is to describe the Stipulation and Settlement
(Settlement) that was signed by the Company, Commission Staff and the Northwest
Industrial Gas Users Association (NWIGU) (the "Signing Parties") that settles all
four issues the Company raised in its Petition for Reconsideration in this case, and to
urge the Commission to adopt the Settlement without material change of condition.
Do you believe that the Settlement is in the public interest?
Yes. The Signing Parties have agreed to settle the issues identified in the Settlement,
thus indicating their satisfaction with the outcome. From lntermountain's perspective,
the proposed Settlement provides the Company with the ability to update its rates to
better reflect current costs, economically finance new investments in infrastructure
for its system, and to better serve its Idaho customers. The Company believes that the
Settlement outcome is just, fair and reasonable and strikes a balance between the
interests of the Company and its customers.
Did all Parties join in settlement negotiations or in signing the Settlement?
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Intermountain Gas Company
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tA.No. Signatories to the Settlement include the Company, Commission Staff and
NWIGU. All Parties were notified of and invited to participate in settlement
discussions, with some declining to do so.
Please describe the weather normalization settlement process?
Staff and the Company primarily engaged in settlement conferences and exchanges of
information regarding the two weather normalization issues, with several other parties
monitoring some of those settlement conferences. Primarily, the weather
normalization settlement was negotiated between Staff and the Company. Settlement
conferences were held on June 22, July 19 and July 24,2011 , with a robust and free-
flow of data, models, information and dialogue between the Company and Staff
before, during and after the settlement conferences.
Please describe the affiliated charges and incentive compensation settlement
process?
Pursuant to the modified procedure schedule and process agreed to between the
Parties and then ordered by the Commission, Intermountain filed additional evidence
and exhibits regarding affiliated charges and incentive compensation, and then
initiated settlement discussions with NWIGU regarding those two issues.
Negotiations between Intermountain and NWIGU were conducted with the
knowledge of Staff, but with Staff declining to participate. Intermountain and
NWIGU were able to reach a settlement in principal on the affiliated charges and
incentive compensation issues before the date for Parties to file a response to the
Company, thus obviating the need for NWIGU to file a written response. Neither
Staff nor any other Party in the case filed a written response to the Company's
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additional evidence and exhibits regarding affiliated charges and incentive
compensation.
II. BASE RATE REVENUE REQUIREMENT INCREASE
What is the base rate revenue requirement increase agreed to by the Signing
Parties?
The Signing Parties agree to a base rate revenue requirement increase of $1.2 million
which represents a settlement of all four issues which were petitioned for
reconsideration by the Company, and to which the Commission granted
reconsideration in Order No. 33789. Exhibit A to the Settlement, entitled Revised
Commission Order Revenue Requirement Summary, represents the base rate revenue
requirement increase settlement negotiated between the Signing Parties.
What is the overall percentage increase to rates resulting from the Stipulation
and Settlement?
Exhibit B to the Settlement shows a l.36%oincrease to the base rates of all customer
classes of the Company, which is the allocation of this $1.2 million increase among
the classes.
When will the rates to recover the stipulated increase to base rate revenues go
into effect?
The signing parties agreed to an October l,2Ol7 effective date. Intermountain Gas
Company would like to point out the benefits of implementing this change coincident
with the effective date of the price change pursuant to the Company's Annual
Purchased Gas Cost Adjustment (PGA) filing.
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I III. ACCEPTANCE OF STIPULATION AND SETTLEMENT
Why is Intermountain willing to accept the terms of the Settlement regarding
weather normalization?
Both the Company and Staff worked hard, over the course of three settlement
conferences and countless information exchanges, to understand each other's position
regarding weather normalization, to get to a solution that both sides understood, and
to find a balance between the competing models and modeling outcomes. Neither the
Company nor Staff wanted to enable Intermountain to receive unwarranted revenues
over the course of time, due to weather normalization modeling. Nor did either side
want to see the Company fall consistently short over time in collecting authorized
revenues, due to weather. While difficult, both Staff and the Company had to
compromise at certain times, and on certain issues, and the settlement reached on the
weather normalization issues reflect those compromises.
Why is the Company willing to accept the terms of the Settlement regarding
affiliated charges and incentive compensation?
Commission Order No. 33757 rejected a portion of the Company's affiliated charges
and all of its incentive compensation expense, for the reason that the Commission
believed that the Company failed to meet its burden of proof. With the filing of its
supplemental information and exhibits on June 30,2017, the Company believed it had
met its burden of proof in proving the reasonableness of these two issues. Even so, as
paragraph l6 of the Settlement describes, the Company and NWIGU decided to settle
these two issues on a 50/50 dollar basis, after adjusting for the "double counting"
error noted in the Settlement. Certainly, Intermountain saw the wisdom of "splitting
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the difference" on these two issues as a compromise to help end this Case, and
apparently so did NWIGU.
How does the settlement of these two issues tie together?
In the final analysis, any settlement reflects the compromise that occurred during the
give-and-take of the negotiations. That certainly occurred here, both between the
Company and Staff, and between the Company and NWIGU. Intermountain believes
that the final outcome of this process provided the Company with an acceptable
balance between the Company's need for timely cost recovery and the needs of its
customers which were so ably represented by both Staff and NWIGU.
Do you have any concluding remarks regarding the Stipulation and Settlement?
Yes. During this proceeding, the Company experienced a willingness by both the
Commission and NWIGU to address the issues at hand during the reconsideration
period in a straight-forward and positive manner, and to approach the possibility of
settlement in a productive way. The Company is very appreciative of those efforts by
the Commission, the Commission Staff and representatives of the Northwest
Industrial Gas Users.
Does this conclude your testimony?
Yes, it does.
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CERTIFICATE OF DELIVERY
I HEREBY CERTIFY that on ttris -l I - day of August, 2Ol7,I caused to be served a
true and corect copy of Intermountain Gas Company's TESTIMONY IN SUPORT OF
STIPULATION AND SETTLEMENT upon the following individuals in the manner indicated
below:
Hand Deliverv: (original and 7 copies)
Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
47 2 W . Washington Street
Boise,ID 83120
! Hand Delivery
US Mail (postage prepaid)
Facsimile Transmission
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Michael P. McGrath
Intermountain Gas Company
555 S. Cole Road
Boise,lD 83707
E-Mail: Mike.McGrath @intgas.com
Brad M. Purdy
2019 N. 17th Street
Boise, lD 83702
E-Mail: [e-mail]
Attorney for Community Action
Partnership Association of Idaho (CAPAI)
Benjamin J. Otto
Idaho Conservation League
710 N. 6th Street
Boise, lD 83702
E-Mail: botto @ idahoconservation.org
F. Diego Rivas
NW Energy Coalition
1101 8th Avenue
Helena, MT 59601
E-Mail: [e-mail]
Edward A. Finklea
Northwest Industrial Gas Users (NWIGU)
545 Grandview Drive
Ashland, OR 91520
E-Mail: [e-mail]
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CERTIFICATE OF DELIVERY Case No. INT-G-16-02 Page 1
Chad M. Stokes
Tommy A. Brooks
Cable Huston LLP
1001 SW Fifth Avenue, Ste. 2000
Portland, OR 97204-1 136
E-Mail: [e-mail]
tbrooks @ cablehuston.com
Attorneys for NWIGU
Electronic service only:
Michael C. Creamer
Givens Pursley LLP
E-Mail: [e-mail]
Attorneys for NWIGU
Scott Dale Blickenstaff
The Amalgamated Sugar Company LLC
1951 S. Saturn Way, Ste. 100
Boise,ID 83102
E-Mail: sblickenstaff@ amalsugar.com
Peter Richardson
Gregory M. Adams
Richardson Adams, PLLC
515 N.27th Street
Boise,lD 83702
E-Mail: [e-mail]
greg @ richardsonadams. com
Attorneys for The Amalgamated Sugar
Company LLC
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Dr. Don Reading
E-Mail: dreading @mindspring.com
The Amalgamated Sugar Company LLC
CERTIFICATE OF DELIVERY Case No. INT-G-16-02 Page 2
Ken Miller
Snake River Alliance
223N.6th St., Ste. 317
P.O. Box 1731
Boise,ID 83701
E-Mail: kmiller@ snakeriveralliance.org
Andrew J. Unsicker
Lanny L.Zieman
Natalie A. Cepak
Thomas A. Jernigan
Ebony M. Payton
AFLOA/JA-ULFSC
139 Barnes Drive, Suite I
Tyndall AFB, FL32403
E-Mail: [e-mail]
Lanny.zieman. 1 @ us.af.mil
Natalie.cepak.2 @ us. af. mil
Thomas jernigan. 3 @ us. af.mil
Ebony.payton. ctr @ us. af.mil
Attorneys for Federal Executive Agencies
(FEA)
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,?e / u,yu-
Ronald L. Williams
Williams Bradbury, P.C.
Attorney for Intermountain Gas Company
CERTIFICATE OF DELIVERY Case No. INT-G-16-02 Page 3