Case No. INT-G-06-04, Order No. 30137

September 28, 2006

Contact: Gene Fadness (208) 334-0339




Intermountain Gas rates going down Oct. 1


Intermountain Gas customers will be getting a near 4 percent decrease effective Sunday, due to falling wholesale market prices for natural gas and the company’s gas purchasing and storage strategies.


The Idaho Public Utilities Commission today approved Intermountain Gas’ annual purchased gas cost adjustment (PGA), which will result in a monthly decrease of about $2.77 for the average residential customer using natural gas for both space and water heating. A customer using natural gas for space heating only will notice a monthly decrease of about $1.85 and commercial customers will get an average $16.58 monthly decrease.


Intermountain Gas applied on Aug. 16 for a Weighted Average Cost of Gas (WACOG) of about 72.4 cents per therm, down from its current 73.2 cents per therm. Then on Sept. 20, due to a further softening in the wholesale market, the company amended its WACOG to 68.5 cents per therm. The WACOG is the average price a gas utility estimates it will need to acquire the gas it needs for the upcoming year. It is based on anticipated demand and the forecasted market price for gas supply for the upcoming year. Also included in the calculation is a true up of last year’s forecast to actual prices.


It is the first time in four years the PGA has resulted in a credit to customer bills rather than a surcharge. Annual adjustments to the PGA, whether a surcharge or a credit, do not increase or decrease company earnings. Money collected from a surcharge goes directly into a deferral account to pay Intermountain’s wholesale gas suppliers. A decrease is credited directly to customers. The PGA, which represents over half the total customer bill, is intended to reflect the costs Intermountain Gas incurs acquiring natural gas to serve its approximate 275,000 southern Idaho customers.


The disruption of gas supply in the Gulf of Mexico caused by hurricanes Katrina and Rita, which occurred soon after the company filed last year’s PGA, caused large spikes in the cost of wholesale gas. The high prices and volatility that occurred as a result of those price spikes were included in the company’s deferral account. However, the company was able to take advantage of its storage options (Intermountain provides about 60 percent of its winter gas sales from storage) and made favorable gas purchases when the price was low. Both of those actions enabled the company to seek a lower WACOG, the commission said. Unfortunately, Intermountain is not able to buy all its gas when prices are low because of physical limits on transportation and storage. Consequently, the WACOG is based more on a full year’s view of wholesale gas prices rather than just when prices are at the lowest.


The WACOG also includes an anticipated increase in the company’s pipeline expenses due to proposed price increases from both the Northwest Pipeline Corporation and Gas Transmission Northwest. The pipeline distributors, both of which serve Intermountain Gas, have pending general rate cases before the Federal Energy Regulatory Commission (FERC). Intermountain estimates the dollar impact of the pipeline cost increase will be $11.3 million during the 2006-07 PGA year. Commission staff recommended that the commission reserve the right to reopen any approved tariffs should the pipeline increase be less than what the company included in its application. The commission also directed Intermountain Gas to come before the commission again before the winter heating season if forward prices materially deviate for the current WACOG.


A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site at Click on “File Room” and then on “Gas Cases” and scroll down to Case No. INT-G-06-04.