INTG992.SWS.doc

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF INTERMOUNTAIN GAS COMPANY FOR AUTHORITY TO PLACE INTO EFFECT AN INCREASE IN ITS COMPOSITE DEPRECIATION RATE. )
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CASE NO. INT-G-99-2

COMMENTS OF THE COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on January 12, 2000, submits the following Comments.

SUMMARY
Intermountain Gas Company (Intermountain Gas, Company) has requested changes in depreciation rates that, if approved, would result in an increase in depreciation expense totaling approximately $335,000. (Source: Company Exhibit No. 1). Staff reviewed the related depreciation study and recommends the following adjustments to the Company’s request.
Total increase requested - Company $335,000
Staff Adjustments:
Decrease for change to amortization $ 40,000
Decrease for LNG plant $ 46,000
Staff recommended increase $249,000

CHANGE TO AMORTIZATION
Intermountain Gas Company requested in the Application filed with this Commission on December 23, 1999 that a change in depreciation methodology be approved for six accounts. (See Application section VII, page 6). The account balances as of September 30, 1998 for the six accounts total about $12 million (See Attachment A), or approximately 4.9% of total plant in service at that date. The Company wants to change from an ordinary depreciation method to an amortization method for those six accounts. In so doing, the Company requested that two changes be made at the same time: 1) Change the life of the assets with each account having its own amortization life. 2) Amortize a calculated Theoretical Reserve over a six-year period.
The amount of account-related expense prior to any change is about $1,041,000. (See Attachment A, column F, line 7). The amount of the expense requested by the Company after both changes is about $1,119,000. (See Attachment A, column G, line7). The change in the life of the assets reduces the amount of the expense by about $70,000. The change in amortizing the Theoretical Reserve creates an increase in expense of about $148,000. The net change requested is an increase of about $78,000 ($148,000 - $70,000 = $78,000).
Staff agrees with the Company's proposal to change the life of the assets and to change from a depreciation methodology to the amortization methodology. Staff disagrees with the Company's proposal to amortize the Theoretical Reserve over a shorter time period than the asset will be amortized. Staff recommends amortization of the Theoretical Reserve at the same rate as the asset, creating an expense of approximately $108,000 instead of the $148,000 requested by the Company. Staff's recommended change lowers the requested expense by $40,000. The Company’s request for an increase
in related expense is about $78, 000. Staff’s recommendation, an overall increase in expense for these six accounts, is approximately $38,000. (See Attachment A, column F line 7, minus column H line 7).

LNG PLANT
The LNG plant near Nampa, Idaho is approximately 24 years old.
The Company has been depreciating the plant on a 30-year life. The concept that the plant must be removed when it is no longer used and useful creates an additional requirement for capital recovery in excess of the original cost. The Company’s consultants (AUS Consultants) recommend that 15% of the original cost be collected to cover removal costs. AUS Consultants have recommended the same 15% removal cost for several years. As of September 30, 1998 the Company had recovered almost 105% of the original cost. Therefore, there is about 10% of the original cost including estimated removal costs ($700,000) still to be recovered in the next six years.
Theoretically, based on estimated depreciable life and the accumulated depreciation balance, the plant should be removed from service in about seven years. However, there are no plans to remove the LNG plant from service at that time. Staff contends that now is the time to make adjustments to the depreciation rate reflecting the previously unexpected prolonged life. Staff contends that this kind of knowledge and related planning is the reason for periodic depreciation studies as ordered by this Commission (See Order No. 26813). Staff recommends a 12-year life for the remaining unrecovered cost. Therefore, depreciation expense should be about $58,000 per year instead of the $104,000 requested by Intermountain Gas, a $46,000 decrease. The rate of depreciation recommended by Staff would calculate to be 0.8% instead of 1.45% requested by the Company.

LEASED LAND PIPELINE
The Company has a pipeline on leased land across the Fort Hall Indian Reservation. The length of the lease is 20 years starting December, 1994. Intermountain Gas is expensing the costs of that pipeline over the lease period of 20 years. The normal depreciation period for that type of pipeline is 44 years. If the lease is renewed, the expense now recorded is wrong and will be too high. If the lease is not renewed, the expense now recorded is correct. Staff recommends that the 20-year life expense rate be continued until a more accurate determination of the future of the lease can be made.

Dated at Boise, Idaho, this day of February 2000.

________________________
Scott Woodbury
Deputy Attorney General

Technical Staff: Syd Lansing

SL:va:word:u:umisc/comments/intg992.sws
COMMENTS OF THE
COMMISSION STAFF 3 FEBRUARY 15, 2000
INT-G-99-2