20160927final_order_no_33604.pdf

Office of the Secretary
Service Date
September 27, 2016
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN )
GAS COMPANY'S APPLICATION FOR ) CASE NO. INT-G-16-03
AUTHORITY TO DECREASE ITS PRICES )
(2016 PURCHASED GAS COST ) ORDER NO. 33604
_A_D_JU_S_T_M_E_N_T-'-) __________ )
On August 12, 2016, Intermountain Gas Company filed its annual Purchased Gas Cost
Adjustment (PGA) Application. The Company has proposed to decrease the weighted average
cost of gas ("WACOG") from the currently approved $0.32764 per therm to $0.29695 per therm.
This would result in a PGA rate decrease to the Company's annualized revenues by $17 .2 million
(7.11 %). The new rates would take effect October 1, 2016.
On August 24, 2016, the Commission issued a Notice of Application and Notice of
Modified Procedure setting a September 15, 2016 comment deadline, and a September 20, 2016
reply deadline. The Snake River Alliance and Commission Staff filed comments. The Company
did not reply.
Based on our review of the record, we approve the Company's Application as more
specifically described below.
THE APPLICATION
With this PGA Application, the Company proposed to pass through to customers gas­
related cost changes that would decrease the average bill of: (1) residential customers who use
natural gas for space heating and water heating by $3.48/month (7.55%); (2) customers who use
gas for space heating only by $2.31/month (6.50%); and (3) commercial customers by
$14.23/month (7.34%).
The Company explained that the proposed decrease results from: ( 1) a decrease in
transportation costs; (2) a decrease in the Company's weighted average cost of gas ("W ACOG"); 1
(3) an updated customer allocation of gas-related costs under the Company's PGA provision; (4)
the inclusion of temporary surcharges and credits for one year relating to natural gas purchases
1 The WACOG is the Company's average variable cost to buy and transport gas to satisfy its customers' estimated
annual gas needs. The WACOG includes the volumetric interstate transportation rate, city gate costs, !GI Resources
administrative fees, and Gas Technology Institute (GT!) charges. It does not include fixed-capacity costs for interstate
transportation, liquid storage, and underground storage. The WA COG is roughly 68% of the Company's total annual
gas cost. See Staff Comments at 4.
ORDER NO. 33604 1
and interstate transportation costs from the Company's deferred gas cost accounts; and (5) benefits
resulting from the Company's management of its storage and firm capacity rights. The temporary
rebates approved in last year's PGA Order No. 33386 have also been eliminated. Overall, the
Company's proposed changes will result in a decrease in annual revenues of $17,224,457.
As stated, the Company proposed decreasing the W ACOG from the currently-approved
$0.32764 per therm to $0.29695 per therm. This is $0.03069 (9.4%) per therm lower than the
W ACOG established in the 2015 PGA. The Company stated that significant supplies of North
American shale gas and substantial storage balances have contributed to the decrease in the
Company's WACOG. The Company noted that in an effort to further stabilize prices it has
entered into various fixed-price agreements to lock in the price for portions of its underground
storage and other winter "flowing" supplies.
The Company also proposed to pass through to its customers, as per therm credits, $3. 9
million that will be generated from the management of its transportation capacity. In this regard,
the Company proposed to temporarily adjust prices for 12 months -until September 30, 2017 -to
allocate deferred gas costs from its Account No. 191, including deferred fixed-gas costs of $7.3
million, and a variable gas cost debit of $1.9 million.
The Company stated that the resulting overall pnce changes are a just, fair, and
equitable pass through of changes in gas-related costs to the Company's customers.
COMMENTS
A. Commission Staff
Staff examined the Company's Application and gas purchases for the year. Staff
confirmed that the Company's PGA proposal would not change the Company's earnings, the
Company's deferred costs are prudent, and the Company's proposed WACOG is reasonable. Staff
thus recommended the Commission approve the Company's Application and tariffs as filed to
decrease the Company's annual revenue by $17 .2 million (7.11 % ) and establish a W ACOG of
$0.29695 per therm. Staff also recommended the Commission direct the Company to promptly
return to the Commission to amend its WA COG if prices materially deviate from proposed rates in
the upcoming year.
While Staff recommended the Commission approve the Application, Staff expressed
concerns about the Company's customer notice in this case. Specifically, the customer notice
failed to inform customers that written comments could be filed with the Commission. Further,
ORDER NO. 33604 2
the Company issued notice of two separate cases-this PGA filing and the general rate case (INT­
G-16-02)-under the caption "Intermountain Gas Company files for an overall decrease to its
prices." Staff pointed out that the notice is potentially misleading to customers because the PGA
filing requests a temporary decrease, and the rate case requests a permanent increase in rates.
B. S11ake River Alliance
Snake River Alliance's (SRA) comments were primarily directed at Intermountain's
simultaneously-filed general rate case. To the extent that its comments address the PGA, SRA is
supportive of the Company's Application.
DISCUSSION AND FINDINGS
The Commission has reviewed the record for this case, including the Application and
comments. The Company is a public utility, and the Commission has jurisdiction over it and the
issues in this case under Title 61 of the Idaho Code, and more specifically, Idaho Code§§ 61-501
and 61-502. The Commission must establish just, reasonable, and sufficient rates for utilities
subject to its jurisdiction. Idaho Code§ 61-502. As noted above, the PGA adjusts the Company's
rates to reflect changes in the Company's costs to buy natural gas from suppliers-including
transportation, storage and other related costs. The PGA passes the Company's prudently incurred
natural gas costs to customers through new rates, but the resulting rate changes do not increase or
decrease the Company's profits. See Order No. 26019.
The Commission has examined the Company's Application and gas purchases for the
year and finds that the Application should be granted. We approve the Company's proposed
decrease in its WACOG from $0.32764 per therm to $0.29695 per therm, and find that that the
resulting customer rates are fair, just, and reasonable.
Finally, we address the form and content of the Company's customer notice. The
Commission's rules require that customer notices clearly identify a utility's proposal(s) in a way
that can be easily understood. IDAPA 31.01.01.125.03. The purpose of this rule is to encourage
wide dissemination to customers of the proposed rate change and allow customers to participate in
the proceedings before the Commission. IDAPA 31.01.01.125. Combining notice of an annual
rate adjustment with a proposal to permanently increase base rates did not produce the clarity
called for in the Rules of Procedure. In the event of future simultaneously-filed applications, we
direct the Company to strictly adhere to the language and intent of our customer notice rule.
ORDER NO. 33604 3
ORDER
IT IS HEREBY ORDERED that the Company's annual Purchased Gas Cost
Adjustment (PGA) Application is granted. The Company is authorized to pass through its
proposed adjustments, surcharges, and credits to customers as filed. The Company shall establish
a WACOG of $0.29695 per therm. The tariff sheets filed with the Company's Application are
hereby approved, effective October 1, 2016.
IT IS FURTHER ORDERED that the Company shall promptly apply to amend its
W ACOG if natural gas prices materially deviate from the W ACOG approved in this Order.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) may petition for reconsideration within twenty-one (21) days of the service
date of this Order. Within seven (7) days after any person has petitioned for reconsideration, any
other person may cross-petition for reconsideration. See Idaho Code§ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this el, ? -tA
day of September 2016.
ERIC ANDERSON, COMMISSIONER
ATTEST:
O:INT-G-16-03_bk2
ORDER NO. 33604 4