20170208press release.pdf

Case No. INT-G-16-02, Notice of Public Hearing
Contact: Gene Fadness [phone] or 890-2712
www.puc.idaho.gov

Commission sets March 2 public and telephonic hearing
regarding Intermountain Gas’ rate increase request

BOISE (February 8, 2017) – Customers of Intermountain Gas Company will be able to testify in
person or over the telephone at a public hearing on Thursday, March 2, regarding the utility’s
request for an average 4 percent rate increase.

The hearing will begin at 7 p.m. in the commission hearing at 472 W. Washington St. in Boise.
Customers who want to testify over the telephone or just listen to the hearing may call toll-free
at 1-800-920-7487 and, when prompted, enter the participant code, which is 76373262#.

Those wishing to testify over the telephone should call in between 6:45 and 7 p.m. so that
names of those wanting to testify can be taken. When it is your turn to testify, your name will
be called. After testifying, callers can still stay on the line to listen to the rest of the hearing.

The commission is conducting the hearing both in-person and by telephone in an effort to make
it easier for more people throughout southern Idaho to participate. The commission may
consider scheduling more in-person hearings in other parts of the state if customers submit
written comments requesting such a hearing. The comments should explain why the current in-
person and telephonic hearing is not sufficient.

On Aug. 12, 2016, Intermountain Gas filed an application to increase its annual revenue by
$10.2 million. This is the first time since 1985 that Intermountain Gas has requested a base rate
increase.

The commission, by state law, cannot accept or deny the requested increase without first
considering the evidence. State law requires that regulated utilities be allowed to recover their
prudently incurred expenses and earn a reasonable rate of return, which is also established by
the commission. The burden of proof is on the utility to demonstrate that its additional capital
investment is necessary to serve customers and if those expenses are prudently incurred.
Commission decisions can be appealed to the state Supreme Court by either the utility or
customer groups.

While the company is requesting a 4 percent increase, commission staff is recommending a
1.94 percent increase. If the commission staff recommendation were adopted, the company’s
annual revenue would increase by $4.88 million rather than the requested $10.2 million.
Intermountain Gas is requesting a 9.9 percent return on equity, while commission staff
recommends a 9.25 percent ROE. Intermountain Gas is seeking an overall rate of return of 7.42
percent, while staff recommends 7.1 percent.

The commission staff operates independently of the three commissioners who will decide the
case. The commissioners may accept or reject any or all of the company request or staff
recommendation.

If Intermountain Gas’ full base rate request were granted, a residential customer who uses the
company’s average of 747 therms per year and uses natural gas for space and water heating,
would experience an increase of about $2.31 per month. A residential customer who uses
natural gas only for space heating would see an increase of about $1.16 per month. Commercial
customers’ monthly increase would be about $12.16. The company is requesting an effective
date of April 1.

Intermountain Gas, which serves about 334,650 customers in 75 communities across southern
Idaho, says the base rate increase is needed because of increased operating costs to meet
customer growth, the need to replace customer service information and technology systems,
and increased costs related to pipeline safety regulations and compliance.

Since its last rate case in 1985, the number of Intermountain Gas residential customers has
increased from 85,400 to more than 300,000. In the same period, the number of commercial
customers has increased from 13,300 to nearly 32,000. While more customers increase sales
revenue, they also require more investment in non-revenue generating infrastructure such as
pipeline expansion and replacement and customer care systems and information technology,
Intermountain Gas claims. The amount of capital plant in-service has grown in the past 30 years
from $117 million to $600 million.
Another issue in the case is Intermountain Gas’ proposal to create demand side management
(DSM) programs to help customers reduce natural gas consumption. The programs proposed by
the company promote the use of high-efficiency natural gas equipment through rebates to
customers.
Natural gas utilities, like electric utilities, are sometimes discouraged from enacting programs to
help customers reduce consumption because they depend on sales to meet their fixed costs of
operating. In recent years, more efficient building code standards and appliances have resulted
in customers using less natural gas, thus reducing the margin the company relies on to pay for
fixed costs such as expanding or replacing its pipeline distribution system.
To address the financial disincentive to encourage conservation and the reduced fixed cost
recovery, Intermountain Gas is proposing to implement a Fixed Cost Collection Mechanism
(FCCM) – similar to Idaho Power’s Fixed Cost Adjustment – that ensures stability in revenues
regardless of how much natural gas customers use. The company claims the yearly rate
adjustment would allow Intermountain Gas to effectively promote DSM programs without the
financial disincentives that currently exist.
Commission staff maintains the company has not justified its proposed FCCM at this time,
stating that the company has not experienced significant revenue loss from DSM programs or
ongoing customer consumption decline.
Customers can track the progress of the case from the commission’s website. Click on “Open
Cases,” under the Natural Gas heading and scroll down to Case No. INT-G-16-02. The
company’s application and supporting testimony is available. Testimony from intervening
parties and commission staff and customer comments will be added as the case progresses.
Anyone with questions about how to participate in the hearing may call the commission at 1-
800-432-0369 or 208-334-0339.