20170817Settlement Comments.pdf

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KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BARNO. 5I56
a
li;ii,',i- l IJ Pil 5; 20
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attomey for Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF INTERMOUNTAIN GAS COMPANY
FOR AUTHORITY TO CHANGE ITS RATES
AND CHARGES FOR NATURAL GAS
SERVICE IN THE STATE OF IDAHO
CASE NO. INT.G-I6.02
COMMISSION STAFF'S
COMMENTS IN SUPPORT OF
STIPULATION AND
SETTLEMENT
The Staff of the Idaho Public Utilities Commission files these comments to support the
August 16,2017 Stipulation and Settlement (Stipulation) between Intermountain Gas Company
(Company), Staff, and the Northwest Industrial Gas Users (NWIGU). Staff believes the
Stipulation is reasonable and in the public interest, and recommends that the Commission
approve it. In these comments, Staff summarizes the procedural background leading to the
Stipulation, the Stipulation's main provisions, and why Staff believes the Stipulation is in the
public interest and should be approved.
BACKGROUND
On August 12, 2016, the Company filed a general rate case and asked to increase its
overall rates by $10.2 million (4.06%). The Company subsequently reduced its requested
revenue increase to $9.4 million (3.7%). The Company proposed a September 12,2016 effective
date for the new rates. The Commission ultimately suspended the proposed effective date until
May I 1,2016 (see Order No. 33648), and NWIGU, Amalgamated Sugar Company, Community
Action Partnership of Idaho, Federal Executive Agencies, Idaho Conservation LeagueA.,lW
Energy Coalition, and Snake River Alliance intervened as parties to the case.
COMMISSION STAFF'S COMMENTS IN
SUPPORT OF STIPULATION AND SETTLEMENT
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A public workshop, public hearing, and technical hearing occurred and, on April 28,
2017, the Commission issued final Order No. 33757, which granted Intermountain a $4.12
million (1.58%) revenue increase.
On May 18,2071, the Company petitioned the Commission to reconsider the final Order
relating to: (l) the data input into Staffs weather normalization model; (2) the Commission's
preference for Staffs weather normalization model over the Company's model; (3) the
disallowance of certain affiliated operations and maintenance (O&M) expenses; and (4) the
disallowance of incentive compensation. In Order No. 33789, the Commission granted
reconsideration on these four issues, and directed the Company, Staff, and other parties to meet
to narrow disputed facts and issues and explore settlement possibilities. The Commission noted
the reconsideration process must be completed by August 17, 2017, and that the Commission
will have 28 days from then to issue a final order on reconsideration. See Order No. 33789.
Subsequently, Staff, the Company, Amalgamated Sugar, and NWIGU met as directed.
Staff and the Company focused on the weather normalization issues (Issues I and 2), while
NWIGU and the Company focused on the disallowance of certain affiliated O&M expenses and
incentive compensation (lssues 3 and 4). Following the meeting, the parties reported back to the
Commission with a proposed schedule that the Commission ultimately adopted. On Issues 3 and
4 (disallowance of certain O&M expenses and incentive compensation) the Commission directed
the Company to file comments by June 30,2017, other parties to file any response comments by
July 28, 2017, and the Company to file any reply comments by August 15,2017. The Company
and NWIGU filed comments and a response on Issues 3 and 4. Comments were not received
from other parties. Id.
On Issues I and 2 (weather normalization), the Commission directed the parties to
continue to meet to narrow disputed facts and issues and explore settlement possibilities. The
Commission gave the parties flexibility on the meeting times, but required them to "report to the
Commission on their progress in time for the Commission to schedule additional proceedings on
these issues, if necessary, before the reconsideration process must end." 1d.
On August 16, 2017, the Staff, Company, and NWIGU signed the Stipulation. The
Stipulation was filed on August 17, 2017, with a Motion asking the Commission to approve it.
Amalgamated participated in the settlement discussion but did not sign the Stipulation. The
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COMMISSION STAFF'S COMMENTS IN
SUPPORT OF STIPULATION AND SETTLEMENT 2
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Company has advised Staff, however, that Amalgamated has indicated it does not oppose the
Stipulation.
STIPULATION SUMMARY
Under the Stipulation:
1. Annual Revenue. Effective October 1,2077, the Company would implement revised
tariff schedules designed to recover $1,219,206 (136%) more in annual revenue than the
amounts approved in OrderNo.33757. Newrates would take effect October 1,2017. Details
are reflected in Exhibit A to the Stipulation, which revises Attachment A to Order No. 33757.
2. Billing Determinants. Annual weather normalized billing determinants for the
Company's: (a) residential customer class RS, including Residential Snowmelt, would be
213,576,738 therms; and (b) commercial customer class GS, including Commercial Snowmelt,
would be 108,995,228 therms.
3. Consumption and Weather-Related Adjustments. The Company's base revenue
requirement would increase by $6,065, while the overall revenue requirement would decrease by
$2,634,338 from the amounts approved in Order No. 33757.
4. Gas Consumption Normalization. In future cases, weather-based gas consumption
normalization would reflect actual test year consumption, rather than forecast test year
consumption, unless the Company and Staff agree in advance that forecast test year consumption
is acceptable.
5. Weather Data. In future cases, heating degree days may be weighted using billing
system customer counts or customer counts obtained from the Company's o'weather system."
But if weather system data is used, modeling results must be consistently adjusted for weather
system and billing system differences for all months and customer classes.
6. Future Weather Modeling Methodology. No specific weather normalization
methodology would be approved for this case (except as it relates to Gas Consumption
Normalization and Weather Data as outlined above). Before the Company's next general rate
case, however, Staff, the Company, and interested parties would discuss and attempt to agree on
consumption modeling methodology related to weather.
7. Affiliated Charges and Incentive Compensation: The Company would recover
$1,206,500 more in annual expenses-which amounts to $1 ,213,741in both annual revenues and
base rate revenues-related to affiliated charges and incentive compensation. The Company and
COMMISSION STAFF'S COMMENTS IN
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NWIGU negotiated this amount to be a 50/50 split of the dollar amounts related to these two
issues, after adjusting for 5328,000 of affiliated charges that were "double counted" in Order No.
33757. This $328,000 adjustment is included in the $1.2 million increase in expense
recovery/annual and base revenues referenced above.
8. Rate Spread. The additional $l ,219 ,206 (l .36%) in annual base rate revenues related
to the above-described settlements on "Consumption and Weather-Related Revenue
Adjustments" and "Affiliated Charges and Incentive Compensation," will be allocated among
customer classes using the rate spread from Attachment B of the Second Enata to Order No.
33757, and a "50oA move towards cost-of-service [] for all affected customer classes." Order
No. 33757 at 28. Exhibit B to the Stipulation is a revised Attachment B to Order No. 33757
reflecting the rate spread of the additional annual base rate revenues.
STAFF EVALUATION OF STIPULATION
Staff has reviewed and supports the Stipulation resolving all issues raised by the
Company in its Petition for Reconsideration. Staff maintains that the terms put forth in the
Stipulation are just and reasonable and should be approved by the Commission without change.
Stafls view of the weather normalization and affiliated transaction and incentive compensation
is as follows.
A. Weather Normalization
Because of extensive discussions with the Company and additional analysis, Staff has a
much improved understanding of customer and consumption data used by the Company in its
weather normalization methodology and the modeling techniques applied to derive test year
billing determinates. Likewise, Staff has a better understanding of the differences between the
Staff and the Company's consumption normalization methodology.
While the parties may disagree on the quality of the underlying data and the most
appropriate modeling techniques to weather normalize test year consumption, we agree on the
annual billing determinates that should be used to establish residential and general service base
rates for this case.
The stipulated billing determinants eliminate 73Yo of the difference between those
proposed by the Company and those proposed by Staff and approved by the Commission in
Order No. 33757. Staff believes the adjusted level of billing determinants is a reasonable
compromise on this issue, and notes that the change in annual revenue requirement resulting
COMMISSION STAFF'S COMMENTS IN
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from this billing determinant change is only $6,065. Staff also recognizes that base rates applied
to residential and commercial customer consumption will be higher because of this change.
In exchange for lower billing determinants and slightly higher rates, the Stipulation
includes steps the parties will take before the next general rate case to improve input data and
modeling methodology. The Stipulation specifically includes three provisions that were critical
to Staff supporting it. In particular, the parties agreed that: (l) consumption normalization
methodology will be used to adjust actual test year consumption rather than to forecast test year
consumption; (2) any adjustment to customer or consumption input data will be uniformly
applied to all customer classes and all months; and (3) interested parties will meet before the next
rate case to seek consensus on weather normalization methodology. These provisions will help
assure that contentious issues in this case will not reoccur in future general rate cases.
B. AfJiliate Transactions and Incentive Compensation
While Staff did not actively participate in the negotiations regarding affiliate transactions
and incentive compensation expenses, it nevertheless supports the Company and NWIGU's
50/50 compromise solution. Staff further supports the class allocation of this additional revenue
requirement. Staff notes that the allocation follows the class revenue allocation approved by the
Commission in Order No. 33757 and maintains that same fair and equitable cost distribution.
Respecttully submitted this , 1fttauy of August 2017.
lQ/
Karl T. Klein
Deputy Attomey General
N: INT-G- I 6-02_kk_Settlement Comments
COMMISSION STAFF'S COMMENTS IN
SUPPORT OF STIPULATION AND SETTLEMENT 5
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CBRTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS ITth DAY OF AUGUST 2017,
SERVED THE FOREGOING STAFF COMMENTS IN SUPPORT OF STIPULATION
AND SETTLEMENT, N CASE NO. INT-G-16-02, BY MAILING A COPY THEREOF,
POSTAGE PREPAID, TO THE FOLLOWING:
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MICHAEL P McGRATH
DIR - REGULATORY AFFAIRS
INTERMOTINTAIN GAS CO
PO BOX 7608
BOISE TD 83107
E-MAIL: mike.mcgrath@,intgas.com
CHAD M STOKES
TOMMY A BROOKS
CABLE HUSTON LLP
1OO1 SW 5TH AVE STE 2OOO
PORTLAND OR 97204-1136
E-MAIL: cstokes(Ecablehuston.com
[e-mail]
BENJAMIN J OTTO
ID CONSERVATION LEAGUE
710 N 6TH STREET
BOISE ID 83702
E-MAIL: [e-mail]
RONALD L WILLIAMS
WILLIAMS BRADBURY
IOI5 W HAYS ST
BOISE TD 83702
E-MAIL : ron@wil liamsbradbury.com
EDWARD A FINKLEA
EXECUTIVE DIRECTOR
NW INDUSTRIAL GAS USERS
545 GRANDVIEW DR
ASHLAND OR 87520
E-MAIL: [e-mail]
ELECTRONIC ONLY
MICHAEL C CREAMER
GIVENS PURSLEY LLP
E-MAIL : mcc@ givenspursley.com
F DIEGO RIVAS
NW ENERGY COALITION
I101 8TH AVENUE
HELENA MT 5960I
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE
BRAD M PURDY
ATTORNEY AT LAW
2019 N 17TH STREET
BOISE TD 83]02
E-MAIL: [e-mail]
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PETER RICHARDSON
GREGORY M ADAMS
RICHARDSON ADAMS PLLC
5I5 N 27TH STREET
BOISE ID 83702
E-MAIL : [e-mail]
gre q@ri chardsonadams. com
SCOTT DALE BLICKENSTAFF
AMALGAMATED SUGAR CO LLC
I95I S SATURN WAY
STE IOO
BOISE ID 83709
E-MAIL: [e-mail]
KEN MILLER
SNAKE RIVER ALLIANCE
PO BOX 1731
BOISE ID 83701
E-MAIL: [e-mail]
ANDREW J LTNSICKER MAJ USAF
AFLOA/JACE-ULFSC
139 BARNES DR STE 1
TYNDALL AFB FL 32403
E-MAIL : Andrew. unsicker(a)us. af.mil
LANNY L ZIEMAN
NATALIE A CEPAK
THOMAS A JERNIGAN
EBONY M PAYTON
AFLOA/JA-ULFSC
139 BARNES DR STE 1
TYNDALL AFB FL 32403
E-MAIL : lanny.zierran. I @us.af.mil
Natal ie. cepak. 2 @us. af. mil
Thomas j erni gan. 3 @us.al.mil
Ebony.palton. ctr@us. af.mil
hwla()l^^d
SECRETARY
CERTIFICATE OF SERVICE