20180328final_order_no_34013.pdf

Office of the Secretary
Service Date
March 28,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.INT-G-17-06
OF INTERMOUNTAIN GAS COMPANY FOR )
APPROVAL TO PLACE INTO EFFECT A )
CHANGE IN ITS DEPRECIATION AND )ORDER NO.34013
AMORTIZATION RATES )
On October 27,2017,Intermountain Gas Company applied for approval to change its
composite depreciation and amortization rates.The Company asked to:(1)increase its composite
depreciation rate from 3.05%(3.09%when weighted by December 31,2016 assets)to 3.18%;'
and (2)decrease its total General Plant account amortizations from $2,066,577 to $1,648,415.2
The Company did not propose increasing the prices that customers pay for natural gas service.
The Company requested that the increase to the annual composite depreciation rate be effective
January 1,2018,consistent with the beginning of its annual financial reporting period.
The Commission issued a Notice of Application and set a deadline for interventions.
Order No.33934.No interventions were received.A settlement conference was noticed and held
on January 10,2018.On February 12,2018,Commission Staff filed a Motion to approve a
Settlement Stipulation (the Stipulation)agreed to by the Company and Staff (collectively,the
Parties).The Motion asked the Commission to accept the Stipulation and implement revised
depreciation and amortization schedules effective January 1,2018.The Commission issued a
Notice of Settlement and Notice of Modified Procedure setting comment deadlines.Order No.
33990.Commission Staff timely filed comments;no other comments were received.The
Commission now issues this Order approving the Stipulation and the resulting depreciation and
amortization rates.
THE APPLICATION
Regarding its proposal to increase its depreciation rates to a 3.18%composite rate,the
Company explained that the "most notable adjustments"related to the projected lives of Encoder
Receiver Transmitters (ERTs)and installations,distribution mains,and transmission mains.
Application at 4.Specifically,the Company replaced most of its ERTs with newer models and
'As shown in Exhibit 1 of the Application.
2 As shown on Exhibit 2 of the Application.
ORDER NO.34013 1
proposed to lengthen the remaining useful lives of ERTs and related assets from 11 and 12.2 years
to 18 years.Id Similarly,Intermountain explained that the service lives of its distribution and
transmission mains continue to lengthen "due to their modern construction,cathodic protection
and increased use of plastic main materials."Id Intermountain thus proposed to increase the lives
of distribution mains (from 58 to 65 years)and transmission mains (from 49 to 52 years).Id
Intermountain also addressed net salvage values,explaining that recommended values
have generally remained similar to those in the last depreciation study,except for Account 380 -
Services.Id at 5.The net salvage values for that account have become increasingly negative (the
proposed value is negative 121%;the current value is negative 50%).Id The Company stated
this occurred because it implemented procedures to better track services removals versus new
services construction.Id
In addition,the Company addressed its Nampa and Rexburg liquefied natural gas
(LNG)facilities.Id The Company indicated that this Application includes additional detail
requested by the Commission in Order No.33260.Id (see Ex.1,p.5).Based on the service lives
of the underlyingplant categories,the Company proposed to increase the service life of the Nampa
LNG facility from 30.5 years to 32 years.ld The Company also proposed to increase the
depreciation rate from 2%to 3.56%.1d The Company further explainedthat in Order No.33260,
the Commission directed it and Staff to work together to reevaluate the customer cost allocations
associated with the commercial sale of LNG from the Nampa facility.Id.Intermountain asserted
that Staff audited "the customer cost allocations since the issuance of the Commission's Order,
and did not raise any significant issues."Id Intermountain stated that since 2013,when it began
selling LNG to non-utility customers,it has applied the $.025 credit per gallon of LNG sold to
offset approximately $322,000 of capital expenses.Id
Regarding the proposed decrease to its amortization rates,the Company explained that
its study showed its current rates over-amortize General Plant Account Nos.391,393,394,395,
397,and 398.Id at 7.The Companytherefore requested an annual decrease of $418,162,resulting
in amortizations of $1,648,415,in order to accrue the proper dollars over the remaining life of the
accounts.Id
THE SETTLEMENT STIPULATION
In the Stipulation,the Parties agreed to depreciation rates set forth in Attachment A to
the Stipulation,recommended acceptance of all other depreciation account accruals shown in the
ORDER NO.34013 2
Application's Exhibits in this case,and recommended acceptance of the changes in amortization
expenses shown in the Application's Exhibits in Case No.INT-G-17-06.Stipulation at 3.The
Stipulation would decrease the Company's overall depreciation rate to 2.78%,as compared to the
originallyproposed 3.18%.Id
In addition,the Parties agreed to further discuss,outside of this proceeding,possible
changes to the accounting structure for the Nampa and Rexburg LNG facilities and the appropriate
depreciation study cycle (that is,a three-year cycle or something else)going forward.Id
STAFF COMMENTS
Staff believed the Stipulation represents a compromise of all the issues and results in
depreciation and amortization rates that are fair,just,and reasonable.Staff Comments at 3,7.
Further,Staff supported the Company's requested effective date of January 1,2018.Id at 3.Staff
explained that a January I effective date,and Commission approval of the depreciation and
amortization rates within the first quarter of 2018 (that is,by the end of March),will allow the
Company to record depreciation expense for the full year.Id
Staff described its evaluation of Account No.380 -Services.Id at 3-4.Staff believed
the proposed depreciation change is due primarily to improved reporting of costs,rather than to an
actual under-recovery of costs.Id at 4.In Staff's view,it is more appropriate to spread the change
over several depreciation periods,rather than including it all in a single adjustment.Id Staff and
the Company agreed to spread the increase in depreciation expense over the next three depreciation
studies,resulting in the depreciation rates and expenses in the Stipulation.Id
Staff also reviewed the Company's proposed rates relating to ERTs and the Nampa and
Rexburg LNG facilities,and supported the Stipulation's treatment of these items.Id at 3-6.Staff
explained that,as described in the Stipulation,Staff will discuss with the Company possible future
changes to the accounting structure for the LNG facilities,to result in greater detail by asset type
for the assets that make up those facilities.Id at 6.Staff also evaluated and supported the
Company's amortization rates.Id at 6-7.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Title 61 of the Idaho Code,
including Idaho Code §§61-501,-503,-524,and -525.Specifically,Idaho Code §61-525
empowers the Commission to ascertain and determine proper and adequate depreciation rates.
Each utility under the Commission's jurisdiction must conform its depreciation accounts to the
ORDER NO.34013 3
Commission-approved rates.The Comrnission may periodically change the depreciation rates as
needed.
The Commission has thoroughlyreviewed the Application,Stipulation,and comments.
Based on this review,the Commission finds it fair,justand reasonable to approve (1)the agreed
upon depreciation rates as filed,reflected in Exhibit A to this Order,resulting in a composite
depreciation rate of 2.78%;and (2)the Company's proposed amortization rates as filed,reflected
in Exhibit B.3 We appreciate the Parties'efforts to reach agreement on these rates.We also
appreciate the Parties'willingness to continue to discuss possible changes to the accounting
structure for the Nampa and Rexburg LNG facilities and the appropriate depreciation study cycle
going forward.
ORDER
IT IS HEREBY ORDERED that Staff's Motion to approve the Parties'Stipulation is
granted,and the Stipulation is approved.The depreciation rates agreed to by the Parties,and set
forth in Exhibit A to this Order,are approved.The resulting composite depreciation rate is 2.78%.
The Company's proposed amortization rates,as summarized in Exhibit B to this Order,are also
approved.
IT IS FURTHER ORDERED that the new depreciation rates and amortization rates
shall be effective and reflected in the Company's books as of January 1,2018,consistent with the
start of the Company's financial reporting period.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order with regard to any
matter decided in 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.
3 These Exhibits A and B were also attached to Staff's comments.Exhibit A was originally from the Stipulation.
Exhibit B was originally from Exhibit 2,page 1,of the Company's Application.
ORDER NO.34013 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of March 2018.
PAUL KJELLANDER,PRESIDENT
KRIS'Í INE RAPE SQ MISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
1:\Legal\LORDERS\fNTGl706_ccfinal orderAocx
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6
Exhibit No.2
Case No.INT-G-17-06
Intermountain Gas Company
Page 1 of 5
latermountainGas Company
General PhotAmortitationStudy
As of December 31,2016
Account Account Account Account Account Account
391 393 394 395 397 398
Une Furniture and Stores Tools,Shop,and Laboratoty Communications Miscellaneous Total General PlantgymbirDescriotíonOfficeEauipmentj|22[Gmtg B (ggigggg Eguioment Enciament Amortizations
(a)(b)(c)(d)(e)(f)(g)(h)
Activity At 12-31-2016
1 Plant and Reserve Investment
2 Investment ($s)8,536,874 0 6,158,589 0 1,799,715 0 16,495,178
3 Reserve ($s)5,311,773 6,950 1,780,909 0 192,223 0 6,907,409
à %Reserved 62.22%28.92%-10.68%4188%
5 ExistingAmortiration Rate and Expense
6 Amortization Period as of 12-31-2013 (years)9.25 18,17 TOO
7 Rate as of 12-31-2013 (%/year)16.18%5,59%18,95%12.53¾
8 Expense ($s/year)1,381,266 344,265 341,046 2,066,577
9 ProposedAmortizationRate andExpense
10 Age as of 12-31-2018 (years)4,80 4.72 3.71
11 Amortization Pedod as of 12-31-2016 (years)9.87 15,48 7,00
12 Remaining Life as of 12-31-2016 (years)5,07 1016 3.29
13 AmortizationRate as of 12-31-2016 (%/year)7AS¾6.61%33.64¾9.99¾
14 Annual Amortirationas of 12-31-2016 ($s/year)636,115 406,848 605,452 1,648,415
15 Offferencein AmortizationRate and Expense
16 Annual Amottization($sfyear)(745,151)62,583 264,406 -418,162
Exhibit B
Amortistionsummary ggg $OÑ $
Order No.34013
Case No,INT-G 06