20200612Final_Order_No_34693.pdf

ORDER NO. 34693 1

Office of the Secretary
Service Date
June 12, 2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On May 4, 2020, Intermountain Gas Company (“Intermountain” or “Company”)
applied to the Commission for authority to facilitate access for Renewable Natural Gas (“RNG”)
producers to the Company’s distribution system for the purpose of moving RNG to their buyers.
Intermountain requested its Application be processed under Modified Procedure, and that that the
authority be granted by June 15, 2020.
On May 13, 2020, the Commission issued a Notice of Application and Modified
Procedure, setting a May 29, 2020 comment deadline and a June 4, 2020 reply comment deadline.
Commission Staff filed comments, and the Company did not file reply comments. No other
comments were received.
On May 20, 2020, Intermountain filed a Motion for Clarification Regarding Customer
Notice requesting the Commission determine whether direct notice of the Application to all of
Intermountain’s customers is required. On May 29, 2020, the Commission issued an order
clarifying that direct notice to Intermountain’s customers is not required in this case. Order No.
34680.
BACKGROUND
RNG is pipeline-quality biomethane produced from biogas. Increasingly in Idaho,
livestock operations are using animal waste to produce biogas which is then cleaned to produce
RNG for the burgeoning RNG market. Several nearby states subsidize RNG production or mandate
the use of renewable energy sources. Intermountain believes these policies make RNG production
profitable for producers.
To move RNG to its buyer, an RNG producer must access the local gas utility’s
distribution system. So far, Intermountain has executed contracts with three RNG producers to
facilitate access, but the Company seeks Commission approval of an RNG facilitation plan that
will guide all future distribution system access by RNG producers. Once the Commission approves
IN THE MATTER OF INTERMOUNTAIN
GAS COMPANY’S APPLICATION FOR
AUTHORITY TO FACILITATE
RENEWABLE NATURAL GAS ACCESS

)
)
)
)
)
CASE NO. INT-G-20-03

ORDER NO. 34693
ORDER NO. 34693 2

the RNG facilitation plan, the Company would make all subsequent RNG agreements consistent
with it.
THE APPLICATION
Monthly fee
Intermountain intends to “completely insulate utility customers from all potential
impacts of RNG production.” Application at 5. Intermountain proposed a monthly fee for access
to the Company’s distribution system. Also, if Intermountain must incur startup or extraordinary
Operation & Maintenance (“O&M”) expenses at an RNG facility, “the producer will be billed for
the actual additional expenses incurred by Intermountain.” Id. at 6.
The monthly fee will include a Maintenance Fee and an Access Fee. The Maintenance
Fee will cover Intermountain’s monthly expenses to serve RNG producers. The Company’s
anticipated maintenance expenses include “a) labor for inspection of meters, regulators, reliefs,
odorizers, valves, etc., b) 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) [and] such other costs as may be necessary to provide service.” Id. at 5-6.
Based on the current average of monthly costs, the Company anticipated the monthly Maintenance
Fee will be $2,500.
The other component of the monthly fee is the Access Fee, which provides a return to
Intermountain for granting access to its distribution facilities. The Company stated the Access Fee
“will be recorded as non-utility revenue for Intermountain.” Id. at 6.
The Company plans to update the Maintenance Fee annually. The new fee will be
calculated each September based on actual expenses for the September 1 through August 31 time
period. To align with the Company’s Purchased Gas Adjustment price changes, the new fee will
take effect October 1 of each year.
Computing Intermountain’s proportionate regulatory fee assessment
The Company stated it will add its RNG access service revenue to its gross intrastate
operating revenue report so the Commission can include the RNG access revenue when computing
the Company’s annual regulatory fee assessment. See Idaho Code §§ 61-1001 through 61-1008.

ORDER NO. 34693 3

Traditional natural gas service to RNG producers
RNG producers often use natural gas in their operations and receive natural gas delivery
from Intermountain. The Company stated that natural gas service to RNG producers will be billed
at Intermountain’s standard tariffed rates. “All monthly billing will happen exactly as it would for
any other Intermountain customer based upon the tariff selected.” Application at 5.
Income tax gross up
Consistent with its intent that utility customers not bear the cost of letting RNG
producers access its distribution system, Intermountain requested it be permitted to gross up an
RNG producer’s Contribution In Aid of Construction (“CIAC”) to cover additional income tax
generated by a CIAC payment. The Company plans to include all capital costs related to an RNG
production project in rate base and then offset the capital costs with the CIAC payment from the
RNG producer. However, the Company pointed out that under Commission Order No. 21933,
“Intermountain is not permitted to gross up CIACs to cover the additional income tax generated
by the CIAC payment.” Id. at 8. Intermountain requested it be permitted to gross up CIACs from
RNG producers, which will then “be booked as utility revenue to offset the additional income taxes
and ensure zero financial impact on utility customers.” Id.
Other matters
The Company stated its RNG agreements “will include safety provisions to protect the
safety and reliability of service for utility customers.” Id.
Intermountain asserted it would issue notice of its Application during the week of May
4, 2020 to RNG producers who may be affected by it.
STAFF COMMENTS
Staff’s review focused on whether Intermountain’s RNG facilitation plan would
insulate its utility customers from any risks associated with providing access to RNG producers.
Specifically, Staff verified whether the RNG facilitation plan would 1) identify all RNG delivery
costs; 2) properly separate and allocate the costs; and 3) sufficiently recover from RNG producers
to ensure Intermountain’s utility customers “do not bear the risk of stranded assets and costs.”
Staff Comments at 2. Staff concluded the RNG facilitation plan is an appropriate method for
achieving these objectives, and recommended the Commission approve the Application.
Staff noted that if market conditions or incentive structures change for RNG
production, the industry may become unprofitable. Because of this risk, Staff believes “utility
ORDER NO. 34693 4

customers need to be shielded from potential negative cost impacts of RNG production.” Id. at 2.
Staff believes the Company’s proposed RNG producer fee structure will achieve this end.
The Company will bill each RNG producer directly for startup O&M expenses, capital
expenses, and any unforeseen expenses. Staff noted an RNG producer’s payments to
Intermountain for the Company’s capital expenses will be a CIAC. Staff believes utility customers
will not be affected by RNG producer startup and facilities costs because these will be paid by the
RNG producer and will not be included in rate base.
Staff noted that line extension facilities to provide gas to an RNG producer as an
Intermountain utility customer will be separate from facilities needed to deliver RNG from the
RNG producer to the Company’s pipeline. Staff observed that “[b]ecause this infrastructure is
physically separated, the Company can easily identify and separately track both upfront facilities
cost and O&M expenses, and separately recover the cost.” Staff Comments at 3.
Staff reviewed Intermountain’s proposed Maintenance Fee and Access Fee, noting the
Company plans to include all revenues from RNG access service in its annual gross intrastate
operating revenue report to the Commission.
To account for income tax generated by RNG producer payments, Staff recommended
the Commission allow Intermountain to gross up CIACs charged to RNG producers. The
Commission would have to provide a waiver to the prohibition against this practice in Order No.
21933. Staff observed that “[g]rossing up the CIAC paid by RNG producers will ensure that the
entity causing the increased income tax liability will be the same entity that pays the increased
income tax.” Id. at 4.
Staff noted the Company has executed contracts with three RNG producers to facilitate
access to Intermountain’s distribution system. The Company intends its RNG facilitation plan to
guide all future RNG producer contracts. Staff expressed concern that the existing three contracts
may not isolate utility customers from RNG facility costs. Staff plans to audit the costs arising
from these three contracts in the Company’s next general rate case to ensure utility customers will
not bear these costs. Staff recommended the Commission require the Company to implement the
RNG facilitation plan into all new and renewal contracts with RNG producers. Additionally, Staff
recommended the Commission require the Company to update the Commission when any of the
three existing RNG producer contracts become consistent with Intermountain’s RNG facilitation
plan.
ORDER NO. 34693 5

COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code § 61-501. The
Commission has broad authority to regulate the practices and operations of public utilities and may
prescribe rules and regulations. Idaho Code §§ 61-501 and 61-507. Notably, the Commission is
authorized to set quality, safety, and service standards, and may regulate a public utility’s
accounting practices. Idaho Code §§ 61-520 and 61-524. Intermountain is a Commission-regulated
public utility under Idaho Code § 61-129 and a gas corporation under Idaho Code § 61-117. As a
public utility, Intermountain must provide service that is “in all respects adequate, efficient, just
and reasonable,” and at rates that are just and reasonable. See Idaho Code §§ 61-301 and 61-302.
The Commission has reviewed the record, including the Application and the comments
of Staff. We find Intermountain’s RNG facilitation plan reasonable. The Company’s proposal
adequately addresses how the Company plans to insulate utility customers from risks associated
with providing access to RNG producers. We are confident the RNG facilitation plan’s proposed
fees and accounting mechanisms are structured to protect utility customers from bearing the cost
of RNG producer access. Likewise, the Company has acceptable standards for ensuring the
continued quality and safety of its utility service.
We find it reasonable for Intermountain to gross up CIAC payments from RNG
producers to cover the income tax generated by the CIAC payment. The income tax liability from
a CIAC payment should be borne by the RNG producer, not utility customers. Therefore, we grant
a limited waiver to Order No. 21933 for this purpose.
The fast-growing RNG market is a phenomenon sustained by the incentives and
policies of numerous states. Nationwide, natural gas utilities and their state regulators are
responding to the transportation needs of RNG producers. The challenges and benefits of
facilitating access to RNG producers will only be fully revealed over time. We are pleased to note
that Intermountain’s RNG facilitation plan satisfactorily protects Intermountain and its utility
customers from sudden shifts in the RNG production industry. Therefore, we direct Intermountain
to conform future RNG producer contracts to its RNG facilitation plan.
Regarding the three RNG producer contracts Intermountain has executed, we direct
Intermountain to update the Commission as these existing contracts conform (either through
amendment, renewal, or termination) to its RNG facilitation plan.

ORDER NO. 34693 6

O R D E R
IT IS HEREBY ORDERED that Intermountain’s RNG facilitation plan is approved.
IT IS FURTHER ORDERED that Intermountain shall gross up each CIAC payment
from RNG producers to cover the income tax generated by the CIAC payment.
IT IS FURTHER ORDERED that Intermountain shall make all future RNG producer
contracts consistent with its RNG facilitation plan. This directive also applies to renewals of RNG
producer contracts already in effect.
IT IS FURTHER ORDERED that Intermountain shall update the Commission when
existing RNG producer contracts conform with the Company’s RNG facilitation plan, whether
through amendment, renewal, or termination.
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 about 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.
///

ORDER NO. 34693 7

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 12th
day of June 2020.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Diane M. Hanian
Commission Secretary

I:\Legal\GAS\INT-G-20-03\INTG2003_Final_mh.docx