20180531final_order_no_34073_intermountain_gas.pdf

Office of the Secretary
Service Date
May 31,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION )CASE NO.GNR-U-18-01
INTO THE IMPACT OF FEDERAL TAX )CODE REVISIONS ON UTILITY COSTS AND )RATEMAKING )ORDER NO.34073
)(INTERMOUNTAINGAS)
On May 10,2018,Intermountain Gas Company (the "Company")filed a Stipulation and
Settlement ("Settlement Stipulation")and a Motion to Approve settlement Stipulation and Request
for Modified Procedure (the "Motion)."The Settlement Stipulation was signed by the Company,
Commission Staff,and intervenor Alliance of Western Energy Consumers ("AWEC")(the sole
intervenor as to the Company in this multi-utilitycase).If approved,the Settlement Stipulation
would return to customers the tax benefits the Company has realized under new tax laws that
decreased the Company's corporate tax rate and expenses.
Having reviewed the record,the Commission finds the Settlement Stipulation is just,fair,
and reasonable.The Commission thus grants the Motion,and approves the Settlement Stipulation
in the public interest as discussed below.
BACKGROUND
The federal Tax Cuts and Jobs Act of 2017 (the "TCJA")decreased the federal corporate
tax rate from 35%to 21%,effective January 1,2018.After the TCJA passed,the Governor of
Idaho signed House Bill 463 reducing the Idaho State Corporate Income Tax rate from 7.4%to
6.925%.
The Commission opened this multi-utilitycase to investigatewhether to adjust the rates of
certain utilities that benefit from the reduced tax rates.See Order No.33965.The Commission
directed all affected utilities-including the Company-to immediately account for the tax
benefits as a regulatory liability.The utilities also were to report on how the tax changes affected
them,and how they could pass any resulting benefits to customers.See id.at 1-2.
The Company filed its report,which the Company styled as an application,on March 23,
2018 (the Company's "Report").The Company proposed to return $4,966,895 in tax benefits to
customers,with new rates to take effect April 1,2018.See Report,at 1.To better enable the
Commission and its Staff to assess the Company's proposal,the Commission suspended the
Company's proposed effective date until October 1,2018,or when the Commission issues an
ORDER NO.34073 1
earlier order accepting,rejecting,or modifyingthe Company's proposed schedules.See Order No.
34030 (citing Idaho Code §61-622).
The Company,Commission Staff,and AWEC (collectively,the "Parties")then conducted
settlement discussions and filed the Settlement Stipulation now under consideration.If approved,
the Settlement Stipulation would return about $5.1 million in tax benefits to the Company's
customers.See Settlement Stipulation,at 3.
The Commission issued a Notice of Settlement Stipulation setting deadlines for interested
persons to comment on the Settlement Stipulation.See Order No.34063.Commission Staff filed
the only comments,and recommended that the Commission approve the Settlement Stipulation in
the public interest.See Comments of the Commission Staff in Support of Settlement Stipulation
Re:Intermountain Gas Company ("Staff Comments").
The Settlement Stipulation,and Staff's Comments,are summarized below.
THE SETTLEMENT STIPULATION AND STAFF COMMENTS
The Parties believe the Settlement Stipulation is fair,just,and reasonable,and that the
Commission should approve it in the public interest,because it would return to customers the tax
benefits the Company has realized under the federal and state tax law changes.See Settlement
Stipulation at 3-4;Staff Comments at 4.In summary,the Settlement Stipulation would provide
customers a long-term benefit by decreasing base rates by about $5.1 million effective June 1,
2018.The Settlement Stipulation also would provide a short-term benefit by crediting customers
to the extent the rates they paid from January 1,2018 to May 31,2018 included tax expense that
became excessive after the TCJA took effect.These customer benefits are further explainedbelow.
A.The Company would decrease customer base rates by $5.1 Million.
The Settlement Stipulation would decrease the Company's revenue requirement by about
$5.1 million,which represents the tax benefits the Company is returning to customers.Settlement
Stipulation,at 3.The Company would return this amount to customers through a uniform
percentage decrease to base rates for each customer class.See Settlement Stipulation,Attachment
1,page 1.The total amount consists of these components:
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Revenue Requirement
1 Income Tax Benefit $2,750,730
2 Deferred Income Tax -Plant $1,189,021
3 Deferred Income Tax -Non Plant $(154,543)
4 Amortization of Investment Tax Credits $(47,482)
5 Total Benefit $3,737,726
6 Revenue Conversion Factor 1.36749
7 Total Benefit Returned to Customers $5,111,303
See Staff Comments at 2-3 (furtherexplaining the components).To accomplish these changes,the
Settlement Stipulation attached proposed tariffs that the Parties recommend the Commission
approve with an effective date of June 1,2018.See Settlement Stipulation at 3,Attachment 3.
B.The Company would credit customers for tax-related benefits it received from
January 1 -May 31,2018.
Because the new tax laws decreased the tax expense included in customers'rates,the
Commission required the Company to immediately treat the excess tax collected as a deferred
regulatory liability to be returned to customers later.Specifically,per Commission Order No.
33965,the Company began to "immediately account for the financial benefits from the January 1,
2018 tax rate reduction to 21%,"by treating the benefits as a deferred regulatory liability.The
Company's monthlydeferral includes the tax benefit of reducing current and deferred income tax
expense to 21%,and the monthly amortization of the excess plant accumulated deferred income
taxes from January 1,2018 -May 31,2018.Under the Settlement Stipulation,the Company would
return this liability to customers over 12 months as a credit in the Company's next PGA filing,
with new rates reflecting the credit to be effective October 1,2018.See Settlement Stipulation at
3;Staff Comments at 4.
DISCUSSION AND FINDINGS
The Commission's process for considering settlement stipulations is set forth in Procedural
Rules 271-277.IDAPA 31.01.01.271-277.When a settlement is presented to the Commission,
the Commission will prescribe the procedures appropriate to the nature of the settlement to
consider it.IDAPA 31.01.01.274.Further,proponents of a settlement must show that the
settlement is reasonable,in the public interest,or otherwise in accordance with law or regulatory
policy.IDAPA 31.01.01.275.Finally,the Commission is not bound by settlement
agreements.Instead,the Commission "will independently review any settlement proposed to it to
ORDER NO.34073 3
determine whether the settlement is just,fair and reasonable,in the public interest,or otherwise in
accordance with law or regulatory policy."IDAPA 31.01.01.276.
We have reviewed the record,including the Company's initial Report,the Settlement
Stipulation,and Staff's Comments.We note all Parties have signed the Settlement Stipulation and
support it,and that no one opposes it.Further,the settling Parties-includingthe Company,
AWEC,and Staff-represent that the Settlement Stipulation reasonably resolves the case,and that
it is in the public interest for the Commission to approve it.We agree.We find the Settlement
Stipulation reasonably returns to customers 100%of the fmancial benefit the Company realized
under the tax law changes.Accordingly,based upon the record before us,and to aid "in securing
a just,speedy and economical determination of the issues presented to the Commission,"we find
it reasonable and appropriate to approve the Settlement Stipulation in the public interest.IDAPA
31.01.01.273.
ORDER
IT IS HEREBY ORDERED that the Company's Motion is granted,and the associated
Settlement Stipulation-includingproposed Tariff Schedules RS,GS-1,IS-R,IS-C,LV-1,T-3,
and T-4 in Attachment No.3 to the Settlement Stipulation-isapproved effective June 1,2018.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
ORDER NO.34073 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /
day of May 2018.
PAUI KJELLAWI R,PRESIDENT
KRIS INE RA¥ER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
GNRUl801 INT SettlementOrderkk
ORDER NO.34073 5