20171027Application.pdf

EXECUTIVE OFFICES
lrurgnuouNTArN Ges Coruparuv
555 SOUTH COLE ROAD o p.O. BOX 7608 . BO|SE, TDAHO 99707 . [phone] o FAX:[phone]
RECEIVED
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RE
October 27,2017
Ms. Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington Street
P.O. Box 83720
Boise, ID 83720-0074
Intermountain Gas Company
Case No. INT-G-17-06
Dear Ms. Hanian:
Enclosed for filing with this Commission is an original and seven (7) copies of Intermountain
Gas Company's Application seeking approval to place into effect a change in its Composite
Depreciation and Amortization Rates.
Please acknowledge receipt of this filing by stamping and returning a copy of this Application
cover letter to us.
If you have any questions or require additional information regarding the attached, please contact
me at [phone].
Very truly yours,
P. McGrath
Director, Regulatory Affairs
Intermountain Gas Company
Enclosure
Scott Madison
Mark Chiles
Ron Williams
cc
INTBRMOUNTAIN GAS COMPANY
CASE NO. INT.G-17-06
APPLICATION
AND
EXHIBITS
In the Matter of the Application of INTERMOIINTAIN GAS COMPAI\"Y
for Approval to Place into Effect
a Change in Its Depreciation and Amortization Rates
Ronald L. Williams, ISB 3034
Williams Bradbury PC
802 W. Bannock, Suite 900
Boise, Idaho 83702
Telephone: [phone]
Attorney for Intermountain Gas Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
In the Matter of the Application of
TNTERMOLINTAIN GAS COMPANY fOT
Approvalto Place into Effect a Change in
Its and Amortization Rates
COMES NOW Intermountain Gas Company ("lntermountain" or "Applicant"), a subsidiary
of MDU Resources Group, Inc. with general offices located at 555 South Cole Road, Boise, Idaho,
pursuant to the Rules of Procedure of the Idaho Public Utilities Commission ("Commission"), makes
an Application seeking approval to place into effect a change in its composite depreciation and
amortization rates.
Communications in reference to this Application should be addressed to:
MichaelP. McGrath
Director - Regulatory Affairs
Intermountain Gas Company
Post Office Box 7608
Boise,ID 83707
and
Ronald L. Williams
Williams Bradbury PC
802 W. Bannock, Suite 900
Boise,ldaho 83702
In support of this Application, Intermountain does allege and state as follows:
Case No. INT-G-17-06
APPLICATION
APPLICATION - 2
I.
Intermountain is a gas utility, subject to the jurisdiction of the Idaho Public Utilities
Commission, engaged in the sale of and distribution of natural gas within the State of Idaho under
authority of Commission Certificate No. 219 issued December 2,1955, as amended and
supplemented by Order No. 6564, dated October 3, 1962.
Intermountain provides natural gas service to the following Idaho communities and counties
and adjoining areas:
Ada County - Boise, Eagle, Garden City, Kuna, Meridian, and Star;
Bannock County - Arimo, Chubbuck, Inkom, Lava Hot Springs, McCammon, and Pocatello;
Bear Lake County - Georgetown, and Montpelier;
Bingham County - Aberdeen, Basalt, Blackfoot, Firth, Fort Hall, Moreland,/Riverside, and Shelley;
Blaine County - Bellevue, Hailey, Ketchum, and Sun Valley;
Bonneville County - Ammon,Idaho Falls,lona, and Ucon;
Canyon County - Caldwell, Greenleaf, Middleton, Nampa, Parma, and Wilder;
Caribou County - Bancroft, Grace, and Soda Springs;
Cassia County - Burley, Declo, Malta, and Raft River;
Elmore County - Glenns Ferry, Hammett, and Mountain Home;
Fremont County - Parker, and St. Anthony;
Gem County - Emmett;
Gooding County - Gooding, and Wendell;
Jefferson County - Lewisville, Menan, Rigby, and Ririe;
Jerome County - Jerome;
Lincoln County - Shoshone;
Madison County - Rexburg, and Sugar City;
Minidoka County - Heyburn, Paul, and Rupert;
Owyhee County - Bruneau, and Homedale;
Payette County - Fruitland, New Plymouth, and Payette;
Power County - American Falls;
Twin Falls County - Buhl, Filer, Hansen, Kimberly, Murtaugh, and Twin Falls;
Washington County - Weiser.
Intermountain's properties in these locations consist of transmission pipelines, a liquefied
natural gas storage facility, distribution mains, services, meters and regulators, and general plant and
equipment.
II.
Intermountain's currently effective composite depreciation rate of 3.05% was approved by
this Commission in Case No. INT-G-14-02,Order No. 33260, dated March 26,2015. Applicant has
traditionally reviewed and filed an update to its deprecation rates with this Commission every three
years. Case [NT-G-17-06 reflects an update to the Applicant's last Study.
APPLICATION - 3
III.
Intermountain contracted the services of AUS Consultants, the same outside vendor
employed for the prior eight (8) depreciation filings to perform an update of the 2014 study. The
results of this study indicate that Intermountain's current composite rate is under-depreciating its
assets. Therefore, Applicant requests an increase in its composite depreciation rate from 3.05%
(3.09% when the accrual rates per OrderNo. 33260 are weighted by December 31, 2016 assets) to
3.18%. This increase is required in order to accrue the proper dollars over the remaining life of the
property. The effect of the higher rate would be to increase Intermountain's annual depreciation
accrual by $451,824.
IV.
With each update of Applicant's depreciation parameters and associated rates, special
circumstances regarding Intermountain's recovery rates are addressed. In the current study, the most
notable adjustments pertain to the projected lives of Encoder Receiver Transmitters ("ERTs") and
installations, distribution mains, and transmission mains. In addition, Intermountain will address net
salvage values and the Nampa LNG Facility as directed by the Commission in Case No. NT-G-14-
02, Order No. 33260.
v.
Intermountain began utilizing ERTs system-wide beginning in 2002. ln Case No.INT-G-14-
02, Order No. 33260, the Commission directed Intermountain to not change the ERT depreciation
rate until after it had replaced all the ERTs. Intermountain began replacing the ERTs in 2014 and
finished replacing the majority of the ERTs in20l7 . Based on the manufacturer's life expectancy for
the ERT's intemal battery and Intermountain's service life experience in replacing its first generation
ERTs, Intermountain is proposing to lengthen the remaining useful lives of the ERTs and ERT
Installations asset classes from ll to 18 years and from12.2 to 18 years, respectively, as seen on
Exhibit No. l, Pages 2 and 4, Column (h), Lines l6 and 18.
vI.
The service lives of Intermountain's distribution and transmission mains continue to lengthen
due to their modern construction, cathodic protection and increased use of plastic main materials.
This necessitated the increase in the lives of distribution main (from 58 to 65 years) and transmission
main (from 49 to 52 years) in this Study as seen on Exhibit No. l, Pages 2 and 4, Column (h), Lines
6 and 12.
APPLICATION - 4
VIL
In the current study, the recommended salvage values (i.e. gross salvage net of removal costs)
have remained similar to those net salvage values experienced in Intermountain's depreciation study
filed in Case No. INT-G-14-02. The only notable exception is the net salvage associated with Account
380 - Services. The net salvage of the services account has become increasingly negative since the
Applicant's last depreciation study, with a negative net salvage recommendation of l2lo/o in this
Study versus the current negative net salvage of 50%o. This increasingly negative net salvage is due
to procedures put in place during 2013 which better tracks services removals versus new services
construction.
yIII.
Intermountain's LNG investment for depreciation purposes is tracked separately for its
Nampa LNG facility (storage and terminal) and its Rexburg LNG facility (vaporization and
distribution). Service lives and net salvage depreciation parameters were considered and
recommended for each facility based on the various plant categories at each facility, the investment
amount in each plant category, and the life and net salvage expectancies of those plant categories.
ExhibitNo. l, page 5 includes the additional detail discussed above as directed by the Commission
in Case No. INT-G-14-02, Order No. 33260. Based on the service lives of the underlying plant
categories, the recommendation forthe service life of the Nampa LNG facility is 32 years, up from
30.5 years as seen on Exhibit No. 1, Pages 2 and 4, Column (h), Line l. Intermountain recommends
that the depreciation rate for the Nampa facility increase from2.00Yoto 3.56%o.
In Case No. INT-G-14-02, OrderNo. 33260,the Commission directed lntermountain and the
Staff of the Commission to work together to oore-evaluate the customer cost allocations associated
with the commercial sale of LNG from the Company's Nampa LNG facility". The Staff has
performed audits of the customer cost allocations since the issuance of the Commission's Order, and
did not raise any significant issues.
To date, Intermountain has applied the $0.025 credit per gallon of LNG sold to offset
approximately $322,000 of capital expenses since 2013 when the Company first began selling LNG
to non-utility customers.
IX.
lntermountain does not seek a change in its prices as a result of this requested change in
deprecation.
APPLICATION - 5
x.
The current definition of depreciation used by the Federal Energy Regulatory Commission
and the NationalAssociation of Regulatory Commissioners is as follows:
"Depreciation," as applied to depreciable plant, means the loss in service value not restored
by current maintenance, incurred in connection with the consumption or prospective
retirement of utility plant in the course of service from causes which are known to be in current
operation and against which the utility is not protected by insurance. Among the causes to be
given consideration are wear and tear, decay, action of the elements, inadequacy,
obsolescence, changes in the art, changes in demand, and requirements of public authorities,
and, in the case of natural gas companies, the exhaustion of natural resources.
The American Institute of Certified Public Accountants in its Accounting Terminology
Bulletin #l defines depreciation accounting as follows:
Depreciation accounting is a system of accounting which aims to distribute cost or other basic
value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit
(which may be a group of assets) in a systematic and rational manner. It is a process of
allocation, not of valuation.
The prescription of depreciation rates is an important element of the regulatory process
because it must allocate the full cost of an asset over the life of the property items in a rational manner.
xI.
The depreciation study update filed with this Case was based upon Intermountain's books and
records as of December 31,2016. The calculation of the amount of the annualdepreciation expense
required per year was calculated on an individual account basis. The method used in the calculation
was the Simulated Plant Record Balances Method ("SPR-Balance"). The SPR-Balance Method uses
the "lowa Curves" mortality distribution. The current study was conducted using Applicant's data
and the "lowa Curves" as described in the NARUC publication of July 25, l9S4, "Depreciation
Practices for Small Gas Distribution Companies". The current study is summarized and shown on
Exhibit No. I as attached hereto and incorporated herein by reference. A copy of the current
depreciation study working papers, which is voluminous, is available for inspection and examination
at Intermountain's general business office located at 555 S. Cole Road in Boise, Idaho.
APPLICATION - 6
xII.
Since Applicant's last depreciation filing in Case No. INT-G-14-02, the original cost of
depreciable property increased from $478,544,370to$545,922,771 as shown in Column (d),Line27,
on Page I of Exhibit No. 1. The accumulated reserve increased from $274,473,793 to $295,896,720
as shown in Column (e), Line 27,onPage I of ExhibitNo. 1. The current study necessitates an annual
depreciation accrual of $17,341,387 per year over the remaining life of the property as shown in
Column (n), Line 27,onPage2 of ExhibitNo. l.
xIII.
Exhibit No. 1, Pages 2 - 4, contains a summary comparison of the current depreciation rates,
by plant function and by account, versus the requested rates in the Application.
xlv.
Applicant requests that the increase to the annual composite depreciation rate be effective
January l, 2018 consistent with the beginning of Intermountain's annual financial reporting period.
xv.
Pursuant to Case No. INT-G-99-2, Ordq No. 28331, the Company changed the depreciation
methodology for six identified general plant accounts (i.e., Acct. Nos. 391,393,394,395,397 and
398) from a depreciation method to an amortization method.
xvI.
Intermountain contracted the services of AUS Consultants, the same outside vendor
employed for the Company's depreciation study, to perform an updated amortization study. The
results of this study indicate that Intermountain's current amortization rates are over-amortizing
the above mentioned six General Plant accounts. Therefore, Applicant requests a decrease to the
total General Plant account amortizations from $2,066,577 to $1,648,415, or an annual decrease of
$4 I 8, I 62, as shown on Exhibit No. 2, Page I , column (h), line 10. This decrease is required in order
to accrue the proper dollars over the remaining life of the designated amortized accounts. Exhibit No.
2, Pages l-4, contains a summary comparison of the Company's current amortization rates, by
General Plant account, versus the requested rates in this Application. Additionally, Exhibit No. 2,
Page 5, includes additional detail about Accounts 391,394, and 397 as directed by the Commission
in Case No. NT-G-14-02, OrderNo. 33260. ExhibitNo. 2 is attached hereto and incorporated herein
by reference. A copy of the current amortization study working papers, which is voluminous, is
available for inspection and examination at Intermountain's general business office located at 555 S.
APPLICATION - 7
Cole Road in Boise, Idaho. The current rates utilized by the Company are based on the rates approved
by the Commission in Case No. INT-G-14-02, Order No. 33260.
XYII.
Intermountain does not seek a change in its prices as a result of this requested change in
amortization.
xVIII.
Intermountain requests that this matter be processed pursuant to Rules 201-204 under the
Commission's Rules of Modified Procedure. Intermountain stands ready to respond to any requests
for information in this matter.
APPLICATION - 8
\\'l lF.Rl:FORE. lnternrounlaitt rcspcctthlly pctilions llris ('onrnrission ltrr relicl'as follos's:
l. 'l'hat Applicant be authoriz-ed to increasc the currcnt cornpositc deprcciation rate otl an
account b1'account hasis liom 3.05% (.1.0{)% s'lrcn thc accnrnl ratcs pcr Ordcr No. 33260
arcrveighlcdb;-l)eccmbcrII.2016asscts)to3.Itl%asslrou'nirrColunrn(i).onl)agc I
of l:xhibit No. L
?. That Applicant be authorizcd to change thc anronization mtes for the General Plant
accounls as oullincd on Exhibit No. 2.
3. 'l'hat Applicant's currcnt priccs rcnrain unclurrgcd as a rcsult ol'this Application.
4. 'l'hat Applicant be authorized to rccord thcsr"'changcs in the annual composite dc'precation
rate and anronization ratcs clli:ctivc on Januarl I . 2018.
5. lior such olltcr relicl':ts this ('onuttission ntav clclenninc pr()psr lrcrcin.
l)A-l'l;l) at lloisc. ldalto. this 27tlr dlv ol'Octol^*r. 1017"
INI'ERMOt'N'I'N IN GAS COMI'NNY Williams llradburl' I'C
llv
Mic
lll'Ra t Jw-
IVI I{onald 1.. Williarns
Attorncv lor lntcrnrourrtain (irs C'orrrparrl,A I lirirs
;\l'l'l.l(',,\ I l( )N - ()
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 27th day of October,2017,l served a copy of the
foregoing Case No. INT-G-17-06 upon:
Ed Finklea
Northwest Industrial Gas Users
545 Grandview Drive
Ashland, OR 97520
Chad Stokes
Cable Huston et al.
l00l SW Fifth Avenue, Suite 2000
Portfand, Oregon 97204-1136
Don Sturtevant
J. R. Simplot Company
PO Box 27
Boise, lD 83707
by depositing true copies thereof in the United States Mail, postage prepaid, in envelopes addressed
to said persons at the above addresses.
Affairs
P
APPLICATION. IO
EXHIBIT NO. 1
CASE NO. INT.G.17.O6
INTERMOUNTAIN GAS COMPANY
@epreciation Study)
(5 pages)
Exhibit No. 1
Case No. INT-G-17-06
lntermountain Gas Company
Page 1 of 5
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Case No. INT-G-17-06
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Page 4 of 5
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Case No. INT-G-17-06
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Page 5 of 5
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EXHIBIT NO.2
CASE NO. INT-G.17-06
INTERMOUNTAIN GAS COMPANY
(Amortization Study)
(5 pages)
398397391
lntermountain Gas Company
As of Deccmb€r 31, 2016
A@unt A@unt
393 394
Exhibit No. 2
Case No. INT-G-17-06
lntermountain Gas Company
Page 1 of 5
Account A@ount
Line
Number Deicriotion
(a)
Activity At 12-31-2015
5 ExiEting Amortlzrtion Rrt6 and Exponrs6 Amortization P€riod as ot'12-31-2013 (yoars)
7 Rate as of 12-31-2013 (%/yead
8 Expense ($s/year)
9 Propossd Amortl.rtlon Rrt!.nd Exp6nse
10 Age as of'12.3'1.2016 (years)
11 Amorlization Period as of 12-3'l-2016 (years)
72 Rsmaining Lif6 as of 12.31-2016 (years)
A@ount
Furniture and
Office Equipment
(b)
a,536,a74
5,3L1,773
62.22%
Stores
Equipment
Tools, shop, and
Work Equioment
5,158,589
1,780,909
28.92%
18.t7
5.59%
344,265
A@ount
Labo6tory
Eouioment
(e)
Communications
Eouipment
(f)(c)(d)
5,950
7,799,775
-792,223
-LO.68vo
7.00
18.95%
341,045
N,liscellaneous Total General Plant
EouiDment Amonizations
(e) (h)
76,495,778
6,907,409
4L.880,4
L2.53%
2,066,577
0
0
0
0
0
14
15
9.25
76.79%
1,381,256
4.80
9.87
5,07
4.72
15.48
10.76
3.77
7.OO
3.29
a5
406,848 505,452
in Amortization Rata and Expense
as of 1.2-31.2016 (Ss/year)
l%lyearl 7,45%
635,115
Amortiration Summary
395
1 Plant and Reserye lnvestment
2 lnvestment {Ss)3 Reserue ($s)
4 % ReseNed
Line
Number
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 2016
Plant & Reserve
Balances
Ss
(b)
8,536,874
5,31L,773
62.2%
Acount 391 Furniture and Office Equipment
Amortization
Exhibit No. 2
Case No. INT-G-17-06
I ntermountain Gas Company
Page 2 of 5
Annual
Amortization
Ss/year
(d)
5.03
9.25
0.1618
L,39L,266
4.80
9.87
5.07
0.0745
636,115
(t45,L5tl
RateDescription
(a)
Plant and Reserve lnvestment
lnvestment (Ss)
Reserve (Ss)
% Reserved
(c)
1
2
3
4
5
6
7
8
9
10
11
L2
13
L4
15
16
Existing Amortization Rate and Expense
Age as of L2-3L-20t3 (years)
Amortization Period as of 12-31-2013 (years)
Remaining Life as of L2-31-2OL3 (years)
Amortization Rate as of t2-3L-20L3l%/yearl
Annual Amortization as of 12-31-2015 (Ss/year)
Proposed Amortization Rate and Expense
Age as of t2-3L-2016 (years)
Amortization Period as of L2-3L-2016 (years)
Remaining Life as of L2-31-20L6 (years)
Amortization Rate as of I2-3L-20L6l%/yearsl
Annual Amortization as of 12-3L-2016 (Ss/years)
39l Summary
17 Difference in Amortization Rate and Expense
18 Annual Amortization Change (S/years)
Line
Number
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 2016
Plant & Reserve
Balances
Ss
(b)
6,159,599
t,7g0,g0g
28.9%
Account 394 Tools, Shop, and Garage Equipment
Amortization
Exhibit No. 2
Case No. INT-G-17-06
lntermountain Gas Company
Page 3 of 5
(c)
Annual
Amortization
Ss/year
(d)
s.03
18.L7
0.0559
344,265
4.72
15.48
10.76
0.0651
406,848
62,583
Rate
L
2
3
4
Description
(a)
Plant and Reserve lnvestment
lnvestment (Ss)
Reserve (Ss)
% Reserved
Existing Amortization Rate and Expense
Age as of 72-31-20L3 (years)
Amortization Period as of 12-31-2013 (years)
Remaining Life as of t2-31-20t3 (years)
Amortization Rate as of L2-31-2O13 (o/o/yearsl
Annual Amortization as of L2-37-2015 ($s/year)
Proposed Amortization Rate and Expense
Age as of L2-3L-2076 (years)
Amortization Period as of l2-3t-20l6 (years)
Remaining Life as of t2-3L-20L6 (years)
Amortization Rate as of L2-3L-2075 (%lVearl
Annual Amortization as of 72-3L-2016 (Ss/year)
Difference in Amortization Rate and Expense
Annual Amortization Change (Ss/year)
5
6
7
8
9
10
11
t2
13
L4
15
16
17
18
397 Summary
Line
Number
lntermountain Gas Company
General Plant Amortization Study
As of December 31, 2016
Account 397
Plant & Reserve
Balances
Ss
(b)
L,799,775
-792,223
-70.7%
Communications Equipment
Amortization
Annual
Rate
Exhibit No. 2
Case No. INT-G-17-06
lntermountain Gas Company
Page 4 of 5
Amortization
Ss/year
(d)
5.44
7.0
0.1895
347,046
3.7L
7.00
3.29
0.3364
605,452
264,406
Description
(a)
Plant and Reserve lnvestment
lnvestment (Ss)
Reserve (5s)
% Reserved
Existing Amortization Rate and Expense
Age as of L2-3L-2OL3 (years)
Amortization Period as of 12-31-2013 (years)
Remaining Life as of L2-3L-20L3 (years)
Amortization Rate as of L2-3L-2013 (%lyearsl
Annual Amortization as of 12-31-2016 (Ss/year)
Proposed Amortization Rate and Expense
Age as of L2-3L-20L6 (years)
Amortization Period as of L2-3L-20L6 (years)
Remaining Life as of L2-3L-20L6 (years)
Amortization Rate as of L2-3L-20!6 (%lVearl
Annual Amortization as of 12-31-2015 (Ss/year)
Difference in Amortization Rate and Expense
Annual Amortization Change (Ss/year)
(c)
1
2
3
4
5
6
7
8
9
10
11
t2
13
t4
15
16
t7
18
397 Summary
Line
Number Account
(a)
Equipment
lntermountain Gas Company
General Plant Amortization Study
As of December 31 ,2016
Exhibit No. 2
Case No. INT-G-I7-06
lntermountain Gas Company
Page 5 of 5
lnvestment
12t31t2016
$s
(0
1
2
3
4
5
6
7
I
9
10
(b)
Account 391: Furniture and Office Equipment
391 Cabinet 18
391 Computers 7
391 Desks, Chairs, Tables 18
391 Furniture 18
391 Kitchen 15
391 Office Equipment 12
391 Software 7
391 Workstations 12
TotalAccount
2016
years
(c)
Lives
2014
years
(d)
18
7
18
18
15
12
7
12
12I
22
18
10
20
2004
years
(e)
22
7
22
22
12
12
7
NA
12 15
15
12
10
4,770,966
1,715,333
839,191
710,852
9,036,341
1,322,663
74,141
509,924
1,057,996
76,585
398,888
2,698,376
6,138,573
654,487
670,132
494,624
25,741
1,844,983
11
12
13
14
15
16
17
18
19
20
394
394
394
394
394
394
394
394
Account 394: Tools, Shop. and Garaoe Equipment
Detectors 12
Emergency Equipment 12
Mains Construction 22
Power Tools 18Provers 10
Racks, Shelving 20
Micellaneous Tools 15
Tools 15
TotalAccount
15
24
20
12
24
21
22
23
24
25
26
Account 397: Communications Equipment
397 Communication 7
397 Radio 7
397 SCADA 7
397 Telephone 7
TotalAccount
7
7
7
Account Lives