20200508Decision Memo.pdf

DECISION MEMORANDUM 1

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: MATT HUNTER
DEPUTY ATTORNEY GENERAL

DATE: MAY 8, 2020

SUBJECT: IN THE MATTER OF INTERMOUNTAIN GAS COMPANY’S
APPLICATION FOR AUTHORITY TO FACILITATE RENEWABLE
NATURAL GAS ACCESS; CASE NO. INT-G-20-03.

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 end-use customers. Application at 2. Intermountain requests its Application be processed
under Modified Procedure, and that that the authority be granted by June 15, 2020. Id. at 9-10.
BACKGROUND
RNG is pipeline-quality biomethane produced from biogas. Id. at 4. Increasingly in
Idaho, livestock operations are using animal waste to produce biogas which is then cleaned to
produce RNG for the burgeoning RNG market. Id. A number of nearby states subsidize RNG
production or mandate the use of renewable energy sources. Id. at 5. These policies make RNG
production profitable. Id.
In order to move RNG to its end-user customer, an RNG producer needs access to
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.
Id. at 9-10. Once the RNG facilitation plan is approved by the Commission, the Company plans
to make all subsequent RNG agreements consistent with it. Id. at 9.

DECISION MEMORANDUM 2

THE APPLICATION
Monthly fee
Intermountain intends to “completely insulate utility customers from all potential
impacts of RNG production.” Id. at 5. Intermountain proposes a monthly fee for access to the
Company’s distribution system. Id. Also, if Intermountain must incur startup or extraordinary
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 have two components: a Maintenance Fee and an Access Fee.
Id. at 5. The Maintenance Fee will cover Intermountain’s monthly expenses to provide service
to RNG producers. Id. 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 anticipates the monthly Maintenance Fee will be $2,500. Id. at 6.
The other component of the monthly fee is the Access Fee, which provides a return
to Intermountain for granting access to its distribution facilities. Id. The Company states the
Access Fee “will be recorded as non-utility revenue for Intermountain.” Id.
The Company plans to update the Maintenance Fee annually. Id. The new fee will
be calculated each September based on actual expenses for the September 1 through August 31
time period. Id. at 7. To align with the Company’s PGA price changes, the new fee will take
effect October 1 of each year. Id.
Computing Intermountain’s proportionate regulatory fee assessment
In order to compute Intermountain’s proportionate regulatory fee assessment to the
Commission, the Company will include all revenues from RNG access service in its gross
operating revenues. Id.; see Idaho Code §§ 61-1001 through 61-1008.
Traditional natural gas service to RNG producers
RNG producers often use natural gas in their operations and receive natural gas
delivery from Intermountain. See Id. at 5. The Company states that natural gas service to RNG
producers will be billed at Intermountain’s standard tariffed rates. Application at 5. “All
DECISION MEMORANDUM 3

monthly billing will happen exactly as it would for any other Intermountain customer based
upon the tariff selected.” Id.
Income tax gross up
Consistent with its intent that utility customers not bear any of the cost associated
with providing RNG producers access to its distribution system, Intermountain requests 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. Id. at 8. 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. Id. However, the Company points
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. Intermountain
requests 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 states its RNG agreements “will include safety provisions to protect
the safety and reliability of service for utility customers.” Id.
Intermountain asserts it will issue notice of its Application during the week of May
4, 2020 to RNG producers who may be affected by it. Id. at 9, Attachment 1.
STAFF RECOMMENDATION
Staff recommends the Commission issue a Notice of Modified Procedure, setting a
May 29, 2020 comment deadline and a June 4, 2020 reply comment deadline. This schedule is
supported by all parties.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Modified Procedure, setting a May
29, 2020 comment deadline and a June 4, 2020 reply comment deadline?

Matt Hunter
Deputy Attorney General

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