20230627Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER ANDERSON
COMMISSIONER HAMMOND
COMMISSIONER LODGE
COMMISSION SECRETARY
LEGAL
FROM:JOSEPH TERRY
CLAIRE SHARP
DATE:JUNE 27,2023
RE:IN THE MATTER OF THE APPLICATION OF INTERMOUNTAIN GAS
COMPANY FOR AUTHORIZATION TO ISSUE AND SELL
SECURITIES;CASE NO.INT-G-23-02
BACKGROUND
On June 2,2023,Intermountain Gas Company ("Company"or "Intermountain")filed an
application requesting authorityto issue up to $50 million in debt to refinance existing debt,and
to fund capital expenditures and general corporate needs.The debt issuance may consist of one
or more loans with terms ranging from 5 to 40 years.The interest rate on the debt will be
dependent on the term of the loan and the Treasury rate at the time.For 5-year and 15-year
loans,current estimated interest rates are based on 5-year Treasury rates plus 120-160 basis
points and 175-215 basis points respectively.For 30 and 40-year loans current estimated interest
rates are based on 30-year Treasury rates plus 175-220 basis points.The Commission received
the application fee on June 5,2023.
STAFF ANALYSIS
The proposed debt meets the requirement under Idaho Code §61-901.It is for more than
one year (5-40 years)and is for the acquisition of property;for the construction,completion,
extension,or improvement of its facilities;for the improvement or maintenance of its service or
refinancing of its current obligations.The filing complies with the IDAPA 31.01.01.141.
DECISION MEMORANDUM -1 -JUNE 27,2023
The interest rates would be within the ranges included in the followingchart assuming
current treasury rates:
Term in Years Low Interest Rate High Interest Rate
5 5.13%5.53%
15 5.68%6.08%
30 5.70%6.15%
40 5.70%6.15%
In the Company's most recent rate case,Case No.INT-G-22-07,the parties agreed to a
Stipulation and Settlement which included a cost of debt of 4.448%.While the interest rates are
above the weighted average cost of debt currentlyincluded in rates,interest rates are
significantlyhigher today than they were when much of the current debt was issued.In 2019 the
average 5-year treasury rates were 1.953%and 30-yeartreasury rates were 2.5804%.On June 7,
2023,the 5-year treasury rate was 3.93%and the 30-year treasury rate was 3.95%.
STAFF RECOMMENDATION
Staff recommends that the Commission authorize the Company to issue up to $50 million
in debt.
Staff recommends the Commission require the Company to file with the Commission the
loan documents showing the amount borrowed and all other terms of the loan within seven days
of those documents being available.
Staff recommends the Commission order the Company to continue to file quarterly
reports that include date of issuance,principal amount,date of maturity,and identity of payee.
COMMISSION DECISION
Does the Commission wish to approve Intermountain Gas Company's request to issue up
to $50 million in debt?
Does the Commission wish to require the Company to file with the Commission the loan
documents showing the amount borrowed and all other terms of the loan within seven days of
those documents being available?
DECISION MEMORANDUM -2 -JUNE 27,2023
Does the Commission wish to order the Company to continue to file quarterlyreports that
include date of issuance,principal amount,date of maturity,and identityof payee?
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Udmemos/INT-G-23-02 Decision Memo
DECISION MEMORANDUM -3 -JUNE 27,2023