20200921Comments.pdf

EDWARD J. JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
[phone]
BAR NO. t0446
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Street Address for Express Mail:
I I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, D 837 T4
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN GAS
COMPANY'S APPLICATION FOR
AUTHORITY TO CTIANGE ITS PRICES
CASE NO. INT.G-20-05
COMMENTS OF THE
COMMISSION STAFF
The staff of the Idaho Public uriliries commission ("sraff') submits the following
comments regarding the above referenced case.
BACKGROUND
On August 14,2020, lntermountain Gas Company ("Intermountain" or "Company,,)
requested authority to place into effect on October I,2O2O new rate schedules that would
increase its annualized revenues by $8.6 million. Id. at2.
The Company's rates include a base-rate component and a gas-related cost component.
The base-rate component is intended to cover the Company's fixed costs to serve its customers -
for example, the Company's costs for equipment and facilities to provide service - and rarely
change. The Commission approved the Company's current base rates in Order No. 33757, Case
No. INT-G-16-02.
The gas-related cost component of the Company's rates is at issue in this case.
Specifically, with this Application, the Company seeks to change its rates to pass through to
STAITF COMMENTS SEPTEMBER 2I,2O2O
)
)
)
)
)
)
1
customers changes in gas-related costs resulting from: (1) costs billed to the Company from firm
transportation providers (including Northwest Pipeline LLC); (2) replacement of long-term
segmented Northwest Pipeline LLC capacity received from third parties with firm Northwest
Pipeline LLC capacity held directly by the Company; (3) an increase to the Company,s
Weighted Average Cost of Gas ("WACOG"); (4) anupdated customer allocation of gas-related
costs pursuant to the Company's Purchased Gas Cost Adjustment ("PGA") provision; (5) the
inclusion of temporary surcharges and credits for one year relating to natural gas purchases and
interstate transportation costs from Intermountain's deferred gas accounts; (6) benefits generated
from the Company's management of its storage and firm capacity rights on various pipeline
systems; (7) benefits associated with the sale of liquefied natural gas from the Company,s
Nampa, Idaho facility; (8) a portion of the costs accrued related to the Company's latest general
rate case, Case No. INT-G-16-02; and (9) the recovery of deferred in-person customer payment
fees. Application at 4. The Company seeks to eliminate the temporary surcharges and credits
included in its current prices during the past 12 months under Case No. INT-G-19-06.
If approved, the Company's proposal would increase the average RS (Residential)
customer's rates by 3.667o or $1.41 per month, the average GS-1 (General Service) customers
rates by 4.297o or $7.11 per month and LV-l (Large Volume) customers rates S.IOVo.
Volumetric rates for Schedule T-3 (Transportation) customers would decrease by 3.O2Vo and,
decrease the demand charge rate for Schedule T-4 (Transportation) customers by l.68To. Exhibit
No. l.
STAFF ANALYSIS
Staff examined the Company's Application, workpapers, and exhibits for this case and
confirmed: (1) the PGA proposal would not affect the Company's earnings; (2) the deferred costs
are prudent and properly calculated; and (3) the Company's WACOG request is reasonable.
Staff recommends that the Company's Application be approved.
Table No. 1 summarizes the impact of the proposed changes on customer classes.
2STAITF COMMENTS SEPTEMBER2I,2O2O
Table No. 1: Proposed Change by Customer Class
Change in
Class
Average
Change in
Average
Vo
Average
Price
Class:
RS Residential
GS-1 General Service
LV-l Large Volume
T-3 Transportation Volumetric
T-4 Transportation Volumetric
$5,666,132
$2,856,495$ ll7,2t7
$ (19,706)
$
$0.02213
$0.02224
$0.01674
$(0.00033)
$
3.66Vo
4.29Vo
5.IjVo
-3.027o
0.0OVo
$0.62687
$0.54097
$0.34s24
$0.01061
$0.01345
$22,136,702
$(12.862.000)
$9,274,702
-1
Overall, the Company's proposal increases annual revenue by approximately $g.6 million
which is detailed in Table No. 2 below
Table No.2: Proposed Change to Annual Revenue
Deferrals:
Removal of INT-G-19-06 Temporary Credits and Charges
Additional INT-G-20-05 Temporary Credits and Charges
Fixed Deferred Gas Costs
Variable Deferred Gas Costs
Lost and Unaccounted for Gas
LNG Sales Credit
Deferred General Rate Case Costs
Tax Reform
In-Person Payment Fees Deferral
Total Additional Temporary Credits and Surcharges
Total Deferrals
Fixed Cost Changes:
NWP Full Rate Reservation
NWP Discounted Reservation
Upstream Full Rate
Upstream Discounted
SGS-2F and LS-2F
Other Storage Costs
Total Fixed Cost Changes
Changes in WACOG
Reallocation and True-Up of Fixed Costs
Difference
Total WACOG and True-Up Changes
Total Annual Revenue Change
niferences aue to ro
STAFF COMMENTS
$(16,616,272)
4,956,270
(289,950)
(1,005,060)
59,442
(32,995)
66.56s
$(100,473)
427,736
(562,548)
(356,514)
(6,492)
.900)
$(1,083,191)
$3,r40,763
$Q.736.682\
3
$(679,110)
$8,595,s92
$E 600,263
__1(591)
SEPTEMBER2I,2O2O
The company eliminated $16,616,272 intemporary credits and surcharges that were part
of last year's PGA, Case No. INT-G-19-06. The proposed temporary credits and surcharges in
this Application rebate $12,862,000 to customers. These consist of in-person payment fee
deferral, market segmentation and capacity release revenues, interest, per therm amortization of
deferrals, and over collections from last year's PGA. Additionally, a credit for off-system sales
of Liquefied Natural Gas, and a true-up of the of benefits from the Tax Cuts and Jobs Act are
included in this request.
Weighted Average Cost of Gas (WACOG)
The WACoG is the Company's average variable cost to buy and transport natural gas to
meet customer estimated annual requirements. The WACOG components include the volumetric
interstate transportation rate, the city gate costs, the IGI Resources administrative fees, and the
Gas Technology Institute (GTI) charges. The WACoG does not include fixed capacity costs for
interstate transportation, liquid storage, and underground storage. The proposed WACOG of
$0.21699 per therm is an increase of 3.gvo from the prior 2019 wACoG of $0.20904 per therm.
This increase in the wACoG represents an approximate $8.6 million increase to the Company,s
billed revenues. Chart No. 1 below shows the Company's historical WACOG price trend.
Chart No. 1: Weighted Average Cost of Gas (per Therm)
STAFF COMMENTS SEPTEMBER2I,2O2O4
0.6000
0.5000
0.4000
0.3000
0.2000
0.1000
0.0000
lcc PGA WAcoG (S/rherm)
2010 20Lt 2013 20L6 20t7
E
otF
1r|
20L2 20L5 20t8 20L9 2020
So.qgz So.2t7So.4s3 So.zosSo.33s 50.227S0.373 So.zooSo.szs So.2s7So.39s
2074
Year
Market Fundamentals & Price Analysis
Although the Company hedges or stores much of its forecasted supply at fixed prices,
market fluctuations can impact the WACOG. Staff analyzed,the Company,s projected cost to
purchase natural gas by comparing the Company's price projection to forecasts from several
national and regional otganizations, including the Energy Information Administration (,.EIA,,)
and the Northwest Gas Association ("NWGA"). Staff believes the Company,s projected natural
gas costs are reasonable.
Risk Management
Staff examined how the Company manages price and risk given the Company,s market
purchases, storage, and interstate transportation capacity to determine whether the Company
reasonably purchased natural gas to minimize risk to ratepayers. The Company,s approach is
flexible, by allowing it to opportunistically buy gas, manage storage, and utilize interstate
transportation capacity as market conditions change. Overall, Staff believes the Company,s
strategy and practices associated with managing its resource portfolio provides price stability for
customers.
The Company fulfills its mainline requirement with hedges, spot market purchases,
underground storage, and liquified natural gas ("LNG") storage. Underground storage enables
the Company to purchase natural gas for the upcoming heating season during the summer when
prices are typically lower. When opportunities arise, the Company manages its interstate
transportation capacity, selling surplus capacity into the market. Table No. 3 shows the
Company's seasonal hedges over the last seven years.
Table No. 3: Hedging Ratios
I Va Locked,-in gas includes storage volumes that are both hedged and index purchases.
STAFF COMMENTS SEPTEMBER 21, 2O2O5
Vo Locked-in Gas by PGA yearr
2014 20r5 2016 2017 2018 2019 2020
Non-Summer Months (Oct.-Mar.)74 78 82 80 77 77 74
Summer Months (Apr.-Sept.)63 62 55 49 49 82 72
Full Year 72 74 76 73 70 78 74
Purchasing
Staff analyzedthe Company's purchasing practices to ensure that the Company
reasonably adapted them to meet current market conditions. As in recent years, about 26Vo of the
Company's total throughput is purchased at index or spot prices. Staff believes the Company,s
hedging ratios complement current market conditions, particularly since natural gas prices are
low.
The Company continues to utilize index or spot purchases, allowing it to react to upward
price risk. Including the Company's storage gas, about 74Vo isessentially locked-in gas which is
lower than last year.
Staff reviewed the natural gas purchases by the Company during the pGA period by
examining a six-month sample of invoices. Staff confirmed that the natural gas purchases
reconciled with the amount of natural gas purchases reported in the monthly deferral reports.
Natural Gas underground storage and Interstate Transportation
The Company delivers domestically produced natural gas to its city gates through
Northwest Pipeline. The Company also delivers natural gas from Canada by using pipeline
capacity on Gas Transmission Northwest (GTN), TransCanada's Foothills pipeline system
(Foothills), and TransCanada's Alberta system known as Nova Gas Transmission (NOVA).
Permanent transportation and storage costs reflect a net decrease totaling $1,0g3,191
relative to costs in Case No. INT-G-19-06. Management of the Company,s storage assets at
Northwest Pipeline's Jackson prairie and euestar's Clay Basin resulted in $490,000 of savings.
Because natural gas added to storage is procured during the summer season when prices are
typically lower than the winter, the Company's cost of storage gas is typically lower than what
could be procured in winter months. The Company has also entered into various fixed price
agreements for portions of underground storage and other winter flowing supplies to further
stabilize prices.
Management of Pipeline Capacity
Staff reviewed the Company's procedures for maintaining and releasing pipeline capacity
and believes that the Company's capacity planning was prudently conducted. The Company was
able to replace long-term segmented capacity contracts with direct third-party contracts between
the Company and Northwest Pipeline. Id at 5. The Company holds excess capacity in case of
STAFF COMMENTS 6 SEPTEMBERLI,IO2O
increased demand and mitigates the cost of this excess by selling it back into the market, and
benefitting customers through the pGA.
In last year's PGA filing, the Company included a $7.1 million credit to customers
embedded in its forecast. The Company's capacity release revenue for the current pGA is
forecasted to be $6.4 million, which will be credited back to customers over the coming pGA
year. If capacity release revenues exceed the $6.4 million embedded in the forecast, customers
will receive an additional credit within the 2O2l PGA. These credits are included in the Fixed
Deferred Gas Costs listed in Table No. 2.
LNG Storage
In Order No.32793, the Commission authorized the Company to sell excess LNG
capacity from its Nampa LNG facility to non-utility customers. Pursuant to that Order, the
Company provides a credit to ratepayers of 2.5 cents per gallon of LNG sold for costs related
O&M expense. Further, the Company is required to share 50Vo ofthe total net margin from the
non-utility sale of LNG with ratepayers, up to $1.5 million, and then 70Vo onany amounts
greater than $1.5 million. In this Application, the Company proposes to credit rarepayers
$1,005,060 for their share of the revenues from the non-utility sale of LNG. Staff reviewed the
Company's non-utility sales of LNG and verified that the credit to ratepayers has been calculated
correctly.
Lost and Unaccounted for Gas and Line Break Rate
Lost and Unaccounted for (LAUF) Gas is essentially the difference between the volume
of natural gas delivered to the distribution system at the city gate and volume of gas billed to
customers at the meter. During the period from the Company's 1985 General Rate Case until
conclusion of the 2016 General Rate Case, the Company recovered a portion of LAUF Gas
amounts through a $0.00182 per therm charge, embedded in base rates. Any additional cost or
credit was administered annually in the PGA. In the 2016 General Rate Case, the embedded rate
of $0.00182 was removed resulting in recovery of LAUF Gas solely in the pGA.
This year, the Company's LAUF Gas rate is -0.I795Vo (found gas). The Company,s
LAUF rate continues to be below the maximum allowable level of 0.85Vo specified in
Commission order No. 30649' The Company allocates LAUF Gas at 75vo tothe core customers
(Residential and General Service) and257o to the industrial customers (Large Volume and
STAFF COMMENTS 7 SEPTEMB ER2I,2O2O
Transportation) through a per therm surcharge or credit. In this PGA, the total credit for LAUF
is $289,888 of which $217 ,416 is credited to core customers and$72,412 is credited to industrial
customers.
The Company charges a Line Break Rate to contractors or other parties who are
responsible for damage to the distribution system causing a gas leak. The Company proposes to
increase the Line Break Rate from the current rate of $0.38991 per therm (ZOI} pGA) to
$0.39010 per therm. The proposed Line Break Rate includes a g0.I73lI Fixed-Cost Component
(Transportation Cost) per therm and a $0.21699 Variable-Cost Component (WACOG) per therm
for a total of $0.39010. Both components of the Line Break Rate are determined annually with
the PGA filing. Staff concluded that the Company calculated the proposed Line Break Rate
consistent with Order No. 33139.
True-Up of Deferred Tax Liability
In Case No. GNR-U-18-01 the Commission ordered an investigation of the effects of the
Tax Cuts and Jobs Act of 2017 (TCJA). In Order No. 34073, the Commission approved a multi-
party settlement. The Company was directed to include in its annual PGA filing the benefits
received from the TCJA that were accrued during 2018 before the Company reduced rates on
June l, 20L8. Staff conducted a true-up of the deferred tax liability for this year in the amount of
$32,995 to be credited to customers.
Rate Case Expenses
In Order No. 33887, Case No INT-G-17-05, the Commission authorized the Company to
establish a regulatory asset account to recover the external costs associated with the general rate
case, Case No. INT-G-16-02. These expenses totaled $378,614 and are to be amortized over five
years ($75,723 per year) through the annual Purchased Gas Cost Adjustment mechanism (pGA).
During this deferral period, the Company over-collected the rate case amortization by $16,281,
leaving $59,442 to be collected during the upcoming PGA year, as shown in Table No. 2 above.
Staff verified the annual calculations and confirmed that the expenses were properly amortized,
and this year's recovery amount was properly calculated.
8STAFF COMMENTS SEPTEMBER 2L,2O2O
Payment Fees Deferral
In Order No. 34099, Case No. INT-G-18-01, the Company was directed to create a
regulatory asset to capture the costs associated with in-person customer pay station transactions
handled by Western Union. Furthermore, the Company was authorized to seek recovery of those
costs in the Company's PGA beginning in2OI9, until February 1,2021, or until the Company
files a general rate case, whichever comes first. As of June 30,2020, the balance of the total
deferred In-Person payment fees was $66,565. This is composed of $47 ,527 for Residential
Service (RS) customers and $19,038 for General Service (GS-1) customers. Staff verified that
this balance is correct.
Quarterly Reports
In Order No. 34448, the Commission found that quarterly WACOG reports and monthly
deferred cost reports provide useful information and assist Staff with determining whether to
audit earlier than planned, and whether an interim filing might be needed. In its Application, the
Company requested that the Commission revert to filing deferred cost reports on a quarterly
basis. The Company stated that it is committed to notifying the Commission if an interim filing
might be needed. Staff believes quarterly reporting is reasonable given that the Company's
commitment to notifying the Commission.
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Staff reviewed the documents and determined that both meet the requirements of Rule 125 of the
Commission's Rules of Procedure. IDAPA 31.01.01.125. The notice was included with bills
mailed to customers beginning August 17,2020 and ending September 16,2020.
The Commission set a comment deadline of September 2I,2020. Some customers in the
last billing cycles will not have received/and or had adequate time to submit comments before
the deadline. Customers must have the opportunity to file comments and have those comments
considered by the Commission. Staff recommends that the Commission accept late filed
comments from customers. As of September 21,2020, one customer filed a comment opposed
to the residential increase at double the Consumer Price Index.
9STAFF COMMENTS SEPTEMBER2I,2O2O
STAFF RECOMMENDATIONS
Staff recommends the Commission approve the Company's Application, increasing
revenues by $8.6 million as shown in Table No. 2, and approve the proposed WACOG amount
of $0.21699 per therm. Staff further recommends that the Commission direct the Company to
file tariffs representing the Commission's order for this case, and file quarterly WACOG and
deferred costs reports with the Commission.
If gas prices significantly deviate from projections, Staff recommends the Company to
file an adjustment to its PGA-related rates. Additionally, Staff recommends the Commission
order the Company to file quarterly reports reflecting deferred gas costs and WACOG
projections.
Respectfully submitted this 21st day of September 2020.
L
Edward J
Deputy General
Technical Staff: Kevin Keyt
Johan Kalala-Kasanda
Rick Keller
Curtis Thaden
i :umisc/commentVintg20.53ejkskjkrkct comments
STAFF COMMENTS 10 SEPTEMBER 21, 2O2O
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 21ST DAY OF SEPTEMBER 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. INT-G-20-05, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
LORI BLATTNER
DIR _ REGULATORY AFFAIRS
INTERMOUNTAIN GAS CO
PO BOX 7608
BOISE TD 83707
E-MAIL: [e-mail]
PRESTON N CARTER
GIVENS PURSLEY LLP
601 W BANNOCK ST
BOISE D 83702
E-MAIL: prestoncarter @ givenspursley.com
kendrah @ qi ven spurSley.com
SECRETARY
CERTIFICATE OF SERVICE