20200504Application.pdf

A INTERMOU}.ffAIN'
GAs COMPANYAStMydNXt &,t,,6 Odry,tB.
ln the Co/rrnrunty rb Sarra'
Lori A. Blattner
Director, Regulatory Affairs
Intermountain Gas Company
Enclosure
Mark Chiles
Preston Carter
RECEIYED
2020 May 4,,4il111:54
IDAHO PABLIC
UTILITIES COMMISSION
May 4,2020
Ms. Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
P.O. Box 83720
Boise,lD 83720-0074
RE: Case No. INT-G-20-03
Dear Ms. Hanian:
Attached for consideration by this Commission is an electronic submission of Intermountain Gas
Company's Application for Authority to Facilitate Renewable Natural Gas Access.
If you should have any questions regarding the attached, please don't hesitate to contact me at (208)
377-6015.
Sincerely,
dhkBlt#
cc
INTERMOUNTAIN GAS COMPAIYY
CASE NO.INT.G.2O.O3
APPLICATION
AND
DCIIBITS
In the Matter of the Application of INTERMOT NTAIN GAS COMPAI\IY
for Authority to Facilitate Renewable Natural Gas Access
Preston N. Carter, ISB No. 8462
Givens Pursley LLP
601 W. Bannock St.
Boise,Idaho 83702
Telephone: [phone]
Attorneys for Intermountain Gas Company
In the Matter of the Application of
INTERMOI.'NTAIN GAS COMPANY
for Authority to Facilitate Renewable
Natural Gas Access
BEFORE TFIE IDAHO PUBLIC UTILITIES COMMISSION
Case No.INT-G-20{3
APPLICATION
Intermountain Gas Company ("Intermountain" or "Company''), a subsidiary of MDU
Resources Group,Inc. with general offrces located at 555 South Cole Road, Boise,Idaho, pursuant
to the Rules of Procedure of the tdatro Public Utilities Commission ("Commission"), requests
authority, pursuant to Idaho Code Sections 6l-307 and6l-622, to facilitate access by Renewable
Natural Gas ("RNG") producers to Intermountain's distribution system for the purpose of moving
RNG to the producer's end use customer.
Please address communications regarding this Application to:
Lori A. Blattner
Director - Regulatory Affairs
Intermountain Gas Company
Post Office Box 7608
Boise,Idaho 83707
Lori.B [e-mail]
and
Preston N. Carter
Givens Pursley LLP
601 W. Bannock St.
Boise,Idaho 83702
nnc@s. i vensourslev.com
kendrah@e ivensnurslev.com
ln support of this Application, lntermountain alleges and states as follows:
INTERMOI-INTAIN GAS COIvPANY,S APPLICATION . 2
I. INTRODUCTION
trntermountain is a gas utility, subject to the jurisdiction of the Commission, engaged in the
sale of and distribution of natural gas within the State of tdaho under authority of Commission
Certificate No. 219, issued December 2,1955, as amended and supplemented by OrderNo. 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 Crty, Kuna, Meridian, and Sar;
Bannock County - Arimo, Chubbuck, Inkom, [,ava Hot Springs, McCammon, and Pocatello;
Bear Lake County - Georgetown, and Montpelier;
Bingham County - Aberdeen, Basalt, Blackfoog Firth, Fort Hall, MorelandlRiverside, and Shelley;
Blaine County - Bellevue, Hailey, Ketchum, and Sun Valley;
Bonneville County - Ammon, Idaho Falls, Iona, and Ucon;
Canyon County - Caldwell, Greenleaf, Middleton, Namp4 Parma, and Wilder;
Caribou County - Bancroft, Grace, and Soda Springs;
Cassia County - Burley, Declo, Malta, and Raft River;
Elmore County - Glenns Ferry, Hammetf and Mountain Home;
Fremont County - Parker, and St. Anthony;
Gem County - Emmett;
Gooding County - Bliss, 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, Marsing, 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, liquefied
nafural gas storage facilities, a compressor station, distribution mains, services, meters and
regulators, and general plant and equipment.
INTBRUOINTAIN GAS CoIVPANY,S AppIIcanoN - 3
II. BACKGROUND
Renewable Natural Gas is the term used to describe pipeline-quality biomethane produced
from biomass. Common sources of biomass used in the production of RNG are livestock operations,
landfills, and wastewater treahent facilities. It is interchangeable with natural gas, carbon neutral,
and fully compatible with the U.S. pipeline infrastructure. [t can be used in homes and businesses, in
manufacturing and heavy industries, for electricity production, and as an alternative fuel for
transportation.
From a greenhouse gas emissions perspective, RNG has the potential to provide impressive
benefits. RNG production captures methane from animal waste and other biomass sources that
otherwise would have directly entered Earth's atmosphere. When it is eventually combusted, the
RNG releases significantly fewer greenhouse gas emissions than the total that otherwise would have
entered the atmosphere.
RNG also has the potential to provide a valuable new revenue stream for Idaho farmers. It
may allow livestock operations to convert waste into a beneficial supplementary revenue source.
The Idaho Department of Agriculture reports that Idaho is the fourth largest milk producing state in
the nation. With the large number of dairies, the state has seen significant activity around dairy
RNG projects over the past year. As neighboring states implement or look to implement policies
that encourage or mandate the use of renewable sources of energy, including RNG, Idaho is in a
prime location with the necessary biomass to produce and transport a significant amount of RNG to
these markets.
The methane produced by RNG projects is expensive, however. When compared to
traditional natural gas, the cost of RNG over the past two years has been anywhere from three to ten
times more per therm. Govemment policies and programs in other states that provide generous
INTERMoI.]NTAIN GAS COIVOANY'S APPLICATION - 4
subsidies or mandate the use of renewable energy sources provide the additional revenues that make
RNG projects profitable today. As the emerging RNG industry continues to evolve, production
costs may fall to levels that make RNG more competitive with faditional natural gas. In the interim,
however, there is significant risk inherent in the RNG industry.
lntermountain proposes to help facilitate the growth and development of the emerging RNG
industry across its service territory. The Company will do this by providing natural gas as necessary
to operate RNG production facilities and/or by providing access to its distribution system to allow
the producer to move RNG to their end use customer.
Because of the risky nature of this industry, Intermountain proposes to completely insulate
utility customers from all potential impacts of RNG production.
III. TRADITIONAL NATURAL GAS SERVICE
Gas delivered to an RNG producer to operate their facilities will be billed at
Intermountain's standard tariffed rates. A standard customer agreement will be executed with the
RNG producer. All monthly billing will happen exactly as it would for any other lntermountain
customer based upon the tariffselected.
IV. RNG ACCESS SERVICE
On the produced RNG, Intermountain proposes a monthly fee that would allow the RNG
producer to access lntermountain's distribution system and move the RNG to their end use
customer. The fee would consist of two components: a Maintenance Fee and an Access Fee. The
agreements would also include a clause to cover Startup and Extraordinary O&M expenses.
Maintenance Fee. The Maintenance Fee would cover the expenses incurred by
lntermountain to provide service to RNG producers on a monthly basis. Anticipated expenses
include items such as a) labor for inspection of meters, regulators, reliefs, odorizers, valves, etc., b)
INTERMOT]NTANT GAS COTvIPANY'S APPLICATION - 5
odorant, c) gas chromatograph, including calibration gas and helium, d) SCADA equipment, e)
other utility costs which may include electricity and telephone, f) direct general administrative costs,
g) direct contractor costs, h) an overhead loading rate, i) material replacement costs, j) such other
costs as may be necessary to provide service. At this time, it is anticipated that the monthly
Maintenance Fee will be set at $2,500 based on the current average of monthly costs.
Access Fee. The Access Fee will be recorded as non-utility revenue for lntermountain. This
component of the fee provides a retum to the Company for granting access to its distribution
facilities and for bearing all the financial risk associated with providing pipeline access to the RNG
projects.
Startup and Extraordinar.v O&M Expenses. In the event of startup O&M expenses or other
out of the ordinary O&M expense at an RNG production facility, the producer will be billed for the
actual additional expenses incurred by Intermountain. This protects other RNG producers from
being required to share in higher startup costs or other extraordinary expenses incurred by a specific
producer.
V. COM1VIISSION FEES
For the purposes of computing Intermountain's proportionate assessment of Commission
Fees, all revenues from the RNG Access Service will be included in Intermountain's gross
operating revenues.
VI. AI\IIIUAL MAINTENAI\ICE FEE TIPDATE
The monthly Maintenance Fee will be updated on an annual basis by Intermountain. The
expense incurred to provide RNG Access will change over time. Adjusting the monthly fee annually
will ensure it accurately reflects the true cost of providing service to RNG producers. Intermountain
will calculate the new fee each September based on actual expenses for the September ls through
INTERMoI NTAnTGAs CoMPANY'SAppllcanoN - 6
August 3l$ time period. The new fee will take effect October l$ of each yearto align it with
Intermountain's PGA price changes.
The annual update will consist of two parts: l) an update to the monthly Maintenance Fee,
2) a Maintenance Fee Adjustnent.
Maintenance Fee Update. Actual RNG expenses will be separately tracked and booked as a
non-utility expense into an RNG business unit. The actual RNG expenses for the previous l2-month
period will be used to compute a new monthly fee that reflects the actual expenses incurred over the
previous year. Intermountain will sum all the actual expenses from September l$ through August
31$ and divide the total by 12. The result will be the Maintenance Fee for the new year beginning
on October l$.
Maintenance Fee Adjustnent. Intermountain will also review the actual expenses incurred
to serve RNG producers compared to the revenue generated by the monthly Maintenance Fee for
the same l2-month period. The difference between nevenue and expenses will be the Adjustment
Balance. The Adjustment Balance will be divided by 12 to arrive at the Maintenance Fee
Adjustment.
The monthly Maintenance Fee Adjustnent will be added to or subtracted from the new
monthly Maintenance Fee to arrive at the Maintenance Fee to be charged to each RNG producer for
the l2-months starting on October ls each year.
YII. UTILITY CUSTOMER FINANCIAL IMPACT PROTECTION
Utility customers will not be impacted by the service extended to RNG producers. RNG
producers will pay for all startup costs associated with RNG Access projects such as permitting,
engineering drawings, specifications, surveying, and property research. The producer will also pay
for the cost of all Access related infrastructure and facilities upfront. All capital costs related to an
INTERMOUNTAI.I GAS CoN4PANY,S APPLICATIoN - 7
RNG production project will be included in ratebase, but then exactly offset with a Contribution In
Aid of Construction ("C[AC") payment from the RNG producer.
Furthermore, additional monthly expenses incurred by Intermountain to provide on-going
service to RNG producers will be recovered in the monthly Maintenance Fee described above.
Intermountain's shareholders will assume all financial risks of providing access to the
Company's system for RNG producers.
VIII.INCOME TAX GROSS UP
Under Commission Order No. 21933, Intermountain is not permitted to gross up CIACs
to cover the additional income tax generated by the CIAC payment. Instead, Intermountain adds
the income tax paid to ratebase where it is charged to ratepayers over time. While this method
makes sense for plant that is used by utility customers, in the case of RNG projects, this process
would result in a negative financial impact to customers. To ensure there is no financial impact
to utility customers from the RNG projects, Intermountain proposes the RNG projects be grossed
up to account for the additional income tax the CIAC revenue from RNG projects will incur. The
income tax gross up would be booked as utility revenue to offset the additional income taxes and
ensure zero financial impact on utility customers.
IX. SYSTEM SAFETY PROTECTION
All RNG agreements will include safety provisions to protect the safety and reliability of
service for utility customers. Safety requirements will include: a) minimum/maximum daily and
hourly flow, b) minimum/maximum delivery pressure, operating pressure, and maximum allowable
operating pressure, c) required installation of regulation, odorization, pressure relief, control valve
equipment, and a gas chromatography system, d) biomethane quality specifications, e) required gas
quality testing and monitoring, 0 any other provisions lntermountain may deem necessary to protect
INTERMOUNTAIN GAS COIVTPANY'S APPLICATION . 8
the safety and reliability of its system. A clause will also be incorporated in the agreements to
speci$ that lntermountain will not be under any obligation to take the gas produced by an RNG
facility if the Company's distribution system is at maximum capacity.
X. EXISTING PRODUCERS
The RNG industry has been rapidly evolving over the past year, and lntermountain has been
working with producers to help facilitate the development of the industry. As part of that
involvement, Intermountain has executed contracts with three RNG producers to facilitate access to
lntermountain's system. Although the contracts are similar to the proposal outlined in this filing,
there are some differences in all the contracts. Intermountain plans to honor the three existing
contacts that have been executed while also negotiating with those same producers to bring the
existing contracts into alignment with the RNG facilitation plan that is ultimately approved by this
Commission. Any contracts executed subsequent to a Commission Order will follow the terms
outlined in the RNG facilitation plan approved by this Commission.
XI. CUSTOMER NOTICE
The Company will issue notice of this Application to its affected customers. During the
week of May 4,2020lntermountain will send a letter to the RNG producers that may be affected by
the proposed changes to inform them ofthe Company's request. A copy of the letter is attached and
incorporated by reference.
XII. MODIFIED PROCEDTIRE
lntermountain requests that this matter be handled under modified procedure pursuant to
Rules 201-204 of the Commission's Rules of Procedure. lntermountain stands ready for immediate
consideration of this maffer.
INTERMoTINTAIN GAs CoIVPANY, S APPLICATIoN - 9
xrtr. REQIEST FOR RELTEF
Intermountain respectfully petitions the Idaho Public Utilities Commissirin as follows:
a. That the proposed authority to facilitate Renewable Natural Gas Access as described
herein be approved without suspension and made effective no laterthan June 15, 2020,
b. That the Company be allowed to gross up CIAC payments as described above,
c. That this Application be heard and acted upon without hearing under modified procedure,
d. For such other relief as this Commission may determine proper.
DATED: May 4,2020.
INTERMOI.]NTAIN GAS COMPANY GIVENS PURSLEY LLP
and
By
Lori A. Blathrer
Director - Regulatory Affairs
dnhBbM / ___--__-:-- 4._Z _By
Preston N. Caner
Attorney for Intermountain Gas Company
INTERMoI.,NTaT GES COIVPANY,S APPLICANON . IO