20230726Comments of the Commission Staff.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074
[phone]
IDAHO BAR NO.9917
Street Address for Express Mail:
11331 W CHINDEN BVLD,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-23-03
AUTHORITY TO UPDATE THE )
RENEWABLE NATURAL GAS )COMMENTS OF THE
FACILITATION PLAN )COMMISSION STAFF
COMMISSION STAFF (STAFF)OF the Idaho Public Utilities Commission,by and
through its Attorneyof record,Dayn Hardie,Deputy Attorney General,submits the following
comments.
BACKGROUND
On June 9,2023,Intermountain Gas Company ("Company")applied for authority to
modify its Renewable Natural Gas ("RNG")Facilitation Plan in three ways:(1)a new
maintenance fee applicable to RNG producers that need facilities to export natural gas to an
interstate pipeline;(2)develop a method for calculating the monthly access fee;and (3)clarify
that the InterruptibleDistribution Transportation Service ("Schedule T-3")tariff rate will apply
to the transport of RNG using the Company's distribution system to any interconnection point
with Northwest Pipeline.The Company's Application includes several supporting exhibits and
requests an effective date of July 1,2023.The Commission,in Order No.35830,suspended the
STAFF COMMENTS 1 JULY 26,2023
Company's proposed effective date until September 1,2023,unless the Commission issues an
earlier order.
In Case No.INT-G-20-03 Order No.34693,the Commission granted the Company
authorityto facilitate access to RNG producers.The Company proposed an RNG Facilitation
Plan to guide access by RNG producers which includes monthly fees for access to the
Company's distribution system consisting of a monthlyMaintenance Fee and monthlyAccess
Fee.The Company anticipated the Maintenance Fee would be updated annuallyto ensure RNG
producers cover expenses necessary to operate and maintain required facilities and the Access
Fee is intended to provide a return to the Company as non-utility revenue.
Since approval and implementation,the Company has received requests from RNG
producers to access interstate markets utilizingNorthwest Pipeline.In addition to the
Maintenance and Access Fees described above,the Company is proposing a new monthly$5,400
Export Facility Maintenance Fee ("EFMF")that would apply only to RNG producers in areas
along the Company's distribution system where the load is insufficient to absorb the RNG
without construction of additional export facilities to transport the RNG.
In totality,the Company is proposing Maintenance,Access,EFMF,and extraordinary
startup and O&M Fees for RNG producers wishing to access interstate markets.The various
fees-aside from the Access Fee-would ensure the Company's customers are not subsidizing
RNG producers'who access interstate markets through the Northwest Pipeline.
The EFMF,as proposed by the Company,would be updated annuallyand applied over
the same 12-month period as the Maintenance Fee.The Company would update the EFMF by
comparing actual compressor station expenses with revenues generated by the monthlyEFMF.
Like the Maintenance Fee adjustment,the EFMF adjustment would be added or subtracted to
RNG producers'monthlybills dependingon the prior years'expenses and revenues.
The Company's Facilitation Plan does not currentlyallow the Company to charge RNG
producers for transportation to the interconnection point using a tariffed rate.Therefore,the
Company proposes updating Schedule T-3 so that the monthlyrate applies to RNG producers.
The Company would treat the revenue collected under Schedule T-3 from RNG producers as an
offsettingrevenue credit for its next general rate case.
STAFF COMMENTS 2 JULY 26,2023
To insulate utility customers,the Company proposes to include the capital costs
associated with RNG production projects in rate base,but offset those costs with Contribution in
Aid of Construction ("CIAC")payments made by the RNG producers.
In Case No.INT-G-20-03,1 Order No.34693,the Commission granted the Company a
limited waiver allowingthe Company to gross up CIAC payments to cover additional taxable
income generated from CIAC payments.Under this waiver,the Company is allowed to gross
"[grosses]up the RNG projects to account for the additional income tax the CIAC revenue from
RNG projects."Application at 12."The income tax gross up is booked as utility revenue to
offset the additional income taxes."Id.The Company proposes this waiver be extended to
export facilities necessary for injection of RNG to Northwest Pipeline.
STAFF ANALYSIS
Staff's major objective for its review of the Application was to protect the Company's
retail customers and ensure RNG producers cover the cost to transport RNG.Staff believes the
Company's proposed modifications to the RNG Facilitation Plan are reasonable because the
modifications would protect the Company's core retail customers from liability by ensuring all
costs related to the RNG production and transportation are paid for by the RNG producer.This
conclusion is based on Staff's review of the Application,responses to Production Requests,and
research of potential issues with the Company's proposal.
Export Facility Maintenance Fee
Staff reviewed the costs used to determine the EFMF and believes the costs included are
appropriate and cover the costs created by RNG producers.The EFMF is designed to cover the
costs to maintain and operate compressor stations required to inject RNG into Northwest
Pipeline.The fee is applicable to all RNG producers requiring a compressor station to export gas
to Northwest Pipeline.The EFMF includes costs for required overhaul and maintenance
expense,operating labor expense,and emissions testing expense.
The Company proposes to update the EFMF annuallyto recover actual cost from the
previous 12-months consistent with the update process used for the existing Maintenance Fee.
I The Company's Application mistakenly cites Case No.INT-G-23-03 but correctly cites Order No.34693.
STAFF COMMENTS 3 JULY 26,2023
Staff believes the proposed annual update is reasonable because it will ensure RNG producers
continue to cover their costs.
Access Fee Methodology
The intent of the Access Fee is to provide the Company a return for providing RNG
producers access to the Company's distribution system.In Case No.INT-G-20-03,this Access
Fee component was established as a monthlyfee for RNG producers but did not clearly state the
basis for the Access Fee or establish a methodology to calculate it.The Company is proposing
the calculation of a risk premium using a methodology focused on Return on Equity ("ROE")
value as the basis for the Access Fee.Providing services to RNG producers is beyond the scope
of the Company's normal gas service to retail customers,which poses an additional risk that
should be compensated.Because ROE correlates to stockholder's investment risk,Staff believes
that using ROE as a basis is a reasonable approach.Staff reviewed the Access Charge
Calculation included in Company Exhibit No.1,which Staff believes is reasonable.
When the Company files its annual gross intrastate operating revenue report with the
Commission (Fiscal),it will include all revenues from RNG access service,includingthe Access
Fee.This will allow for a proper assessment to calculate Commission Fees.
Schedule T-3 Tariff Rate
The current RNG Facilitation Plan does not address charging RNG producers for
transporting RNG to Northwest Pipeline.The Company proposes to charge RNG producers
Schedule T-3 tariff rates for RNG transported to Northwest Pipeline.Staff supports Schedule T-
3 rates because it protects the Company's retail customers in two ways.First,the Schedule T-3
rate fairly allocates the cost associated with the RNG producers using the distribution system.
Second,the Schedule T-3 rate is an interruptiblerate,which means the Company can better
utilize its distribution system without the need to increase the capacity of the system to
accommodate the additional load.2 This additional utilization will result in incremental revenue
being spread to cover existing fixed distribution cost benefitting all retail customers.
2 The Company should not be including peak-day loads from its interruptiblecustomers in its Integrated Resource
Plan.
STAFF COMMENTS 4 JULY 26,2023
As part of its Application,in Exhibit Nos.3 and 4,the Company included proposed
changes to the Schedule T-3 tariff to address T-3 rates for RNG transportation.Staff had
concerns with the proposed language regarding an annual minimum bill for RNG production
facilities.Through responses to Staff Production Request No.12,the Company proposed new
language to clarify the applicability of the annual minimum bill.This Response is provided as
Attachment A to these comments.Staff recommends the proposed new language be used instead
of the original language because it makes clear no annual minimum bill will apply to RNG
facilities.Staff believes no minimum bill for RNG facilities is reasonable since these facilities
are covering their system cost through other charges and fees.
Accounting Treatment
In Case INT-G-20-03,Order No.34693,the Commission issued a limited waiver to
Order No.21933.This waiver was issued to ensure there is no financial impact to utility
customers from RNG projects.The income tax gross up is booked as utility revenue to offset
additional income taxes and ensure there is no financial impact on utility customers.Staff
supports the Company's request that this treatment be continued and that it extends to the export
facilities required for the injection of RNG into Northwest Pipeline.
The Company proposes updating its Schedule T-3 to apply to RNG producers and hold
utility customers financiallyharmless.Revenue recovered from the RNG producers specific to
Schedule T-3 rates will be treated as an offsetting revenue credit in the Company's next general
rate case.Staff has reviewed and supports the Company's proposed update to Schedule T-3 with
the above-mentionedclarification of language.
Customer Notice and Comments
The proposed changes in the Application will not impact existing RNG producers or
existing Schedule T-3 customers.The Company sent a letter outliningthe proposed changes to
RNG Producers currentlycontracting for service and a letter to current Schedule T-3 customers
explaining the proposed changes to the T-3 tariff.In addition to the customer letters,the
Company sent out a press release regarding the Application to newspapers,radio,and television
stations in its service areas.The letters and press release were included as attachments to the
STAFF COMMENTS 5 JULY 26,2023
Application.As of M,there have been no Customer Comments received for this
case.
STAFF RECOMMENDATION
Staff recommends the Commission approve the Company's proposed modifications as
filed with the exception of the annual minimum bill language provided in the proposed Schedule
T-3 tariff.Staff recommends the Commission order the Company to file an updated conforming
tariff includingthe annual minimum bill clarifying language included in Attachment A.
Respectfully submitted this day of July 2023.
n Ha ie
Deputy Attorney General
Technical Staff:Michael Eldred
Kevin Keyt
Laura Gilman
i:umisc/comments/intg23.3dhmecomments
STAFF COMMENTS 6 JULY 26,2023
INTERMOUNTAIN GAS COMPANY
CASE INT-G-23-03
FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF
Preparer/Sponsoring Witness:Zach Harris
REQUEST NO.12:
In reference to Exhibit No.4 of the Application and the statement "[a]n annual minimum
bill may not apply if the customer is a renewable natural gas production facility ..."please
explain under which situations an annual minimum bill would or would not apply to RNG
production facilities.Please include the justification why the annual minimum bill applies or
does not apply for each situation.
RESPONSE NO.12:
The Company appreciates Commission Staff questioning the language in the proposed
Rate Schedule T-3.After reviewing the schedule language,the Company proposes to clarifythe
language in its proposed Rate Schedule T-3 to "An annual minimum bill will not apply if the
customer is a renewable natural gas production facility."
Attachment No.A
INT-G-23-03
Staff Comments
7/26/23
Page 1 of 1
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 26th DAY OF JULY 2023,SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF,IN CASE NO.
INT-G-23-03,BY E-MAILING A COPY THEREOF,TO THE FOLLOWING:
LORI BLATTNER PRESTON N CARTER
DIR -REGULATORY AFFAIRS MORGAN D GOODIN
INTERMOUNTAIN GAS CO GIVENS PURSLEY LLP
PO BOX 7608 601 W BANNOCK ST
BOISE ID 83707 BOISE ID 83702
E-MAIL:[e-mail] E-MAIL:[e-mail]
[e-mail]
[e-mail]
SECRETARY
CERTIFICATE OF SERVICE