20230119Comments.pdf

CHRIS BURDIN ¡V60
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION \9 ŸÀ
PO BOX 83720
BOISE,IDAHO 83720-0074 gre
[phone]
IDAHO BAR NO.981
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF INTERMOUNTAIN GAS )COMPANY'S APPLICATION FOR )CASE NO.INT-G-22-08
AUTHORITY TO CHANGE ITS PRICES )
)COMMENTS OF THE
)COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission,by and through its Attorney of
record,Chris Burdin,Deputy Attorney General,submits the followingcomments.
BACKGROUND
On December 27,2022,Intermountain Gas Company ("Intermountain"or "Company"),a
subsidiary of MDU Resources Group,Inc.,filed an application ("Application"or "Interim
Purchased Gas Adjustment (PGA)"or "PGA")requesting authorityto increase rates for its
Residential Service ("RS"),General Service ("GS-l"),Large Volume Firm Sales Service ("LV-
1"),Residential InterruptibleSnowmelt Service ("IS-R"),and Small Commercial Interruptible
Snowmelt Service ("IS-C")customer classes.The Company represents that the proposed
changes will increase the Company's annualized revenues by approximately $56.5 million,or
roughly 17.1%;however,the Company's earnings will not be increased as a result of the
proposed changes in prices and revenues.The Company represents that the average residential
STAFF COMMENTS 1 JANUARY 19,2023
customer would see a monthlyincrease of $8.58,or approximately 16.6%,and the average
commercial customer would see a monthlyincrease of $43.10,or approximately 17.9%.The
Company requests that the Commission approve the proposed changes effective as of
February 1,2023.
Table No.1 summarizes the impact of the proposed changes on customer classes:
Table No.1:Proposed Change by Customer Class
Change in Average Average Average
Class Change in Percent Price
Customer Class:Revenue $/Therm Change $/Therm
RS Residential $36,865,654 $0.13592 16.55%$0.95696
GS-1 General Service $17,919,253 $0.13592 17.90%$0.89522
LV-1 Large Volume $1,685,331 $0.13592 24.19%$0.69788
IS-R Res Snowmelt -$0.13592 --
IS-C Sm Comm Snowmelt -$0.13592 --
TOTAL $56,470,238 $0.13592 17.12%$0.92964
The PGA is a Commission-approvedmechanism that adjusts rates up or down to reflect
changes in the Company's costs to buy natural gas from suppliers and other related costs.The
Company defers these costs into its PGA account and then passes them on to customers through
an increase or decrease in rates.
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,
such as the Company's costs for equipment and facilities to provide service.The Company does
not propose to change its gas transportation cost or temporary purchased gas cost adjustments as
they will be adjusted as part of the Company's regular 2023 PGA filing.
The gas-related costs of the Company's Weighted Average Cost of Gas ("WACOG")is
at issue in this case.The Company seeks to pass through higher gas-related costs to customers
through an increase in rates due to:(1)colder than normal weather that increased demand for
natural gas,putting upward pressure on pricing;(2)a must flow Operational Flow Order
("OFO")on the Northwest Pipeline that resulted in higher prices from the Sumas hub located in
British Columbia and the Stanfield hub in Washington;and (3)maintenance and constraints on
southwestern pipelines serving California that increased demand for natural gas from Alberta and
STAFF COMMENTS 2 JANUARY 19,2023
the Rockies.If approved,the WACOG would incrementally increase $0.13592 per therm from
the currentlyapproved rate of $0.392161 per therm to $0.52808 per therm.
The Company represents that its Application has been brought to the attention of its
customers through a Customer Notice and by a Press Release sent to daily and weekly
newspapers,and major radio and television stations in the Company's service area.
STAFF ANALYSIS
Staff reviewed the Company's Application,workpapers,and exhibits for this case and
Staff believes:(1)the proposal would not affect the Company's earnings;and (2)the Company's
WACOG request is reasonable.Staff recommends that the Company's Application be approved.
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 city gate
natural gas cost,the transport variable cost,the IGI Resources administrative fees,and the Gas
Technology Institute ("GTI")charges.The gas transportation cost and temporary purchased gas
cost adjustment components of customer rates approved in the last regular PGA are not changing
with this proposal and will be addressed in the next regular PGA filing.
The Company estimated a WACOG of $0.66399 based on actual purchases through
December 21,2022,and forecasts through September 30,2023.To mitigate the estimated
WACOG increase,the Company proposed a WACOG of $0.52808 per therm,which is an
increase of 34.66%from the current WACOG of $0.39216 per therm.Chart No.I below shows
the Company's historical WACOG price trend.
*Approvedin Order No.35538.
STAFF COMMENTS 3 JANUARY 19,2023
Chart No.1:Weighted Average Cost of Gas (Per Therm)
IGC PGA WACOG ($/Therm)0.600
0.500
E 0.400 4 ,**
.C 0.300 *i-++
©0.200
0.100
0.000
$0.373 $0.395 $0.328 $0.297 $0.260 $0.227 $0.209 $0.217 $0.260 $0.424 $0.392 $0.528
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022*I 2022 2022
Year 2022*Order No.35479
Market Fundamentals &Price Analysis
Althoughthe Company hedges or stores a portion of its forecasted supply at fixed prices,
market fluctuations impact the WACOG.Over the last few months,natural gas costs across the
region have remained uncharacteristically high in relation to Henry Hub benchmark pricing and
exceeds the Company's forecasted expectations.The Energy Information Administration's
("EIA")Natural Gas Weekly Update2 for the western United States provides:
On December 21,2022,daily natural gas spot prices at three major trading
hubs in the western United States ...settled higher than $50.00 per million
British thermal units (MMBtu),the highest level of any other market and an
average of $48.12/MMBtu above Henry Hub,the national benchmark
natural gas price...
Several events occurring simultaneously at this point in the season
contributed to prices rising to these levels:
Widespread,below-normal temperatures
High natural gas consumption
Reduced natural gas flows
Pipeline constraints,including maintenance in West Texas
Low natural gas storage levels in the Pacific region
From the end of November to mid-December,below-normal
temperatures stretched from Western Canada to California,leading to
increased demand for natural gas for heating.In the first three weeks of
December,natural gas consumption in the residential and commercial
2 EIA Natural Gas Weekly Update December 21,2022 https://www.eia.gov/naturaleas/weeklv/#itn-tabs-1.
STAFF COMMENTS 4 JANUARY 19,2023
sectors in the Pacif'ic Northwest and California combined increased by 23%
from the second half of November,and in the electric power sector,natural
gas consumption increased 14%,according to data from Point Logic.
Based on the recent spikes in demand and natural gas costs,Staff believes the adjustment
to the Company's WACOG is necessary and reasonable to recover the higher than projected cost
of natural gas.The requested WACOG of $0.52808 per therm is less than the estimated
WACOG of $0.66399.Any difference between the WACOG and actual gas costs continue to be
tracked so customers are not overcharged for gas commodity costs.
In addition,Staff reviewed the Company's projected cost to purchase natural gas for the
remaining PGA period by comparing the Company's price projection to forecasts from several
national and regional organizations,includingthe EIA3 and the Northwest Gas Association
("NWGA").Based on a review of the market fundamentals,trends,natural gas futures,and
current EIA data,Staff believes that the Company's estimated cost of forward-looking purchases
are reasonable.
Line Break Rate
The Company charges a Line Break Rate to parties who are responsible for damage to the
distribution system causing a natural gas leak.The Company proposes to increase the Line
Break Rate from the current rate of $0.588484 per therm to $0.69172 per therm.The proposed
Line Break Rate includes a $0.16364 Fixed-Cost Component per therm (Transportation Cost)
and a $0.52808 Variable-Cost Component per therm (WACOG)for a total of $0.69172 per
therm.Staff concludes that the Company calculated the proposed Line Break Rate consistent
with Order No.33139.
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Staff reviewed the documents and determinedthat 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 January 5,2023 and ending February 1,2023.
3 EIA Natural Gas Weekly httos://www.eia.gov/naturalgas/.
4 The current rate was set in Order No.35479.
STAFF COMMENTS 5 JANUARY 19,2023
The Commission set a comment deadline of January 19,2023.Some customers in the
last billing cycles will not have received and or had adequate time to submit comments before
the January 19,2023,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 January 18,2023,four comments have been filed in
opposition to the Company's proposed increase.Customers are concerned about recent and
proposed increases,the cost of livingin the State,the Company's hedging practices,declining
natural gas spot prices when the Company's proposed rates are increasing,and if declining spot
prices would result in reduced rates in the next traditional annual PGA filing.
STAFF RECOMMENDATIONS
After reviewing the Company's Application,natural gas costs,and price projections,
Staff recommends the Commission:
1.approve the Company's Application and the proposed WACOG amount of
$0.52808 per therm.
2.approve the Company's proposed Rate Schedules RS,GS-1,IS-R,IS-C,and LV-
1 as filed with the Application.
3.direct the Company to continue filing quarterly reports reflecting deferred natural
gas costs and WACOG projections.
4.order the Company to file an adjustment to its PGA-related rates,if natural gas
prices significantlydeviate from projections.
5.accept late-filed comments from customers.
Respectfully submitted this Ñ&day of January 2023.
Chris Burdin
Deputy AttorneyGeneral
Technical Staff:Kevin Keyt
Curtis Thaden
i:umisc/comments/intg22.8cbkketcomments
STAFF COMMENTS 6 JANUARY 19,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 19th DAY OF JANUARY 2023,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,IN
CASE NO.INT-G-22-08,BY E-MAILING A COPY THEREOF,TO THE
FOLLOWING:
LORI BLATTNER PRESTON N CARTER
DIR -REGULATORY AFFAIRS GIVENS PURSLEY LLP
INTERMOUNTAIN GAS CO 601 W BANNOCK ST
PO BOX 7608 BOISE ID 83702
BOISE ID 83707 E-MAIL:[e-mail]
E-MAIL:[e-mail] stephaniew eivenspursley.com
SECRETAI Y
CERTIFICATE OF SERVICE