20231107Comments of the Commission Staff.pdf

STAFF COMMENTS 1 NOVEMBER 7, 2023
ADAM TRIPLETT DEPUTY ATTORNEY GENERAL IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720 BOISE, IDAHO 83720-0074 [phone] IDAHO BAR NO. 10221
Street Address for Express Mail: 11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A BOISE, ID 83714 Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF INTERMOUNTAIN GAS COMPANY’S APPLICATION FOR AUTHORITY TO FILE ITS COMPOSITE DEPRECIATION AND AMORTIZATION RATES EVERY FIVE YEARS INSTEAD OF EVERY THREE YEARS

INT-G-23-05
OMMENTS OF THE
COMMISSION STAFF (“STAFF”) OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Adam Triplett, Deputy Attorney General, submits the following
comments.

BACKGROUND
On August 29, 2023, Intermountain Gas Company (“Company”), applied for authority to
file updated composite depreciation and amortization rates every five years, rather than every
three years as the current filing schedule requires. The Company requests that the Application be
processed by Modified Procedure.
The Company represents that it is currently in the practice of filing composite
depreciation and amortization rates every three years.
RECEIVED
2023 November 7 10:01 AM
IDAHO PUBLIC
UTILITIES COMMISSION
STAFF COMMENTS 2 NOVEMBER 7, 2023
The Company represents that depreciation studies are costly. Accordingly, reducing the
frequency at which the Company files composite depreciation and amortization rates would
reduce costs, benefiting both the Company and its customers.
The Company represents that depreciation rates do not significantly change year over
year and extending the filing schedule would not have a significant impact.
The Company represents that depreciation and amortization rates were embedded into its
most recent general rate case that was settled last year, Case No. INT-G-22-07.
The Company represents that, under the current filing schedule, it will submit its next
application to change its depreciation and amortization rates based upon its books and records
through December 31, 2022, immediately disconnecting its base rates from its depreciation and
amortization rates.
The Company represents that, if its Application is granted, it will file its next application
based upon its books and records through December 31, 2024, potentially providing better
alignment between the depreciation study conducted at that time and the Company’s next general
rate case.

STAFF ANALYSIS
Staff has reviewed the Company’s Application, responses to Production Requests, and
previous Company depreciation cases. Based upon the requirements of peer utilities, increasing
costs of studies, and insignificant year-to-year changes in depreciation rates, Staff believes the
Company’s request is reasonable and recommends the Commission approve the Company’s
Application. If approved, the next depreciation study will be based upon the Company’s records
through December 31, 2024.

Cost of Depreciation Studies
Staff reviewed the invoices and case processing expenses for the previous three
depreciation studies in 2014, 2017, and 2020. The data shows that the cost of depreciation
studies are becoming more expensive as time progresses. The 2020 study was a particularly
expensive as costs increased by 362% from 2017. However, a notable portion of the expenses
were due to an increased number of Production Requests requiring responses from the
Company’s depreciation consultants that were not required in 2014 and 2017.
STAFF COMMENTS 3 NOVEMBER 7, 2023
The Company provided the estimate for the next depreciation study. Response to
Production Request No. 2. The estimate reveals that the cost for the next depreciation study will
likely be more than double that of 2017, assuming no additional factors that would increase the
cost. Staff agrees that the outsourced depreciation studies are becoming increasingly expensive
and reducing the frequency would save the Company and its customers money.

Changes in Depreciation Rates
Staff reviewed the results of the Company’s previous four depreciation cases (INT-G-11-
02, INT-G-14-02, INT-G-17-06, and INT-G-21-01). The results are as follows:
• INT-G-11-02- The composite depreciation rate increased from 2.96% to 3.07%;
• INT-G-14-02- The composite depreciation rate decreased from 3.07% to 3.05%;
• INT-G-17-06- The composite depreciation rate decreased from 3.05% to 2.97%; and
• INT-G-21-01- The composite depreciation rate decreased from 2.97% to 2.55%.
Based upon the results of the previous four depreciation cases, Staff agrees with the
Company that composite depreciation rates do not significantly change year over year and would
not substantially impact cost accounting. Furthermore, Staff contends that benefits of more
frequent deprecation rate changes do not outweigh the downside that the studies are drastically
increasing in cost.

Disconnect Between Approved Rates and Updated Depreciation Rates
The Company recent rate case, Case No. INT-G-22-07, resulted in new rates that became
effective on July 1, 2023. The Company used its currently approved depreciation rates to
determine the appropriate depreciation expense to include in rates. Submitting a depreciation
study based upon the Company’s books through December 31, 2022, would create a disconnect
between base rates and the depreciation expense it records to its income statement. However,
this reasoning is not justification of changing the frequency of depreciation rates. The
disconnect would be corrected in the Company’s next general rate case and would not have a
significant impact on the Company or its customers.

STAFF COMMENTS 4 NOVEMBER 7, 2023
Frequency of Depreciation Studies
The Company has been following Commission Order No. 23463 in Case No. INT-G-90-
01, which required the Company to conduct depreciation studies and change depreciation rates
and practices at three-year intervals. At that time, changes to methodology to determine
depreciation by account was Staff’s rationale for a three-year study period but the Order did not
provide specific reasons. However, peer utilities, such as Idaho Power and Avista, currently are
required to conduct depreciation studies using five-year intervals, as the Company is requesting.
Staff believes that depreciation rate updates every five years have not created any negative
impact for peer utility companies or their customers. Furthermore, Staff could not identify any
reasons or negative impacts, from the Company followed the five-year interval. Staff
recommends approval of requiring the Company to submit depreciation rate changes every five
years.

STAFF RECOMMENDATION
Staff recommends the Commission issue an Order that:
1. Requires the Company to submit depreciation studies and changes to its depreciation
rates to the Commission every five years, with the next study based upon Company
records through December 31, 2024.

Respectfully submitted this 7th day of November 2023.

________________________________ Adam Triplett
Deputy Attorney General
Technical Staff: James Chandler
Kevin Keyt

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