Website: www.puc.idaho.gov
Intermountain Gas proposes 8 percent PGA reduction
For the second consecutive year, Intermountain Gas is
proposing to reduce rates, reflecting lower than anticipated costs for
purchasing gas supply. The company is proposing an average 8.1 percent decrease
to residential bills. The Idaho Public Utilities Commission is taking comment
through Sept. 18 on the company’s proposal.
Each year, Intermountain Gas rates are adjusted through a
Purchased Gas Cost Adjustment (PGA) mechanism. The adjustment does not change
the base rates paid by customers, but does impact the size of a surcharge that
is adjusted annually to adapt to the always varying costs of buying gas from
suppliers and related transportation and storage expenses.
Factors typically beyond the company’s control impact the
PGA. Natural disasters – such as the Gulf hurricanes two years ago – severe
winter weather or decreased production from drilling, can impact supply and,
hence, wholesale gas prices. Since Intermountain Gas does not drill its own
wells, it is wholly dependent on the wholesale gas market. Last year’s PGA was
a 4 percent decrease, while in 2005, the PGA was a 27 percent increase.
To hedge against price volatility, the company buys gas
during the traditionally lower-priced summer season and stores it for use in
the winter when wholesale prices are higher. As a financial hedge, the company
buys on the forward market when it believes prices are reasonable and may trend
upward if purchased later.
Whether the PGA is an increase or a decrease, it does not
impact company earnings. Similar to the electric utilities’ annual Power Cost
Adjustment (PCA) process, an increase or decrease in the yearly PGA goes
directly to wholesale suppliers in the event of an increase or to customers in
the event of a decrease. Money collected through the PGA cannot go to salaries,
equipment or other needs, but must go directly to paying for gas supply,
transportation and storage. When the cost of purchasing gas is higher than the
amount customers pay in the current surcharge, the surcharge is increased. When
gas supply purchases are less than that covered in the surcharge, the reduction
goes directly to customers.
Intermountain Gas, which serves about 280,000 customers in
its southern Idaho territory, has not had a change to its base rate since 1985.
If approved, the proposed PGA reduction would bring
average customer bills down by 8.1 percent. An average customer using natural
gas for both space and water heating would experience an average $6 per month
decrease. A residential customer using natural gas for space heating only would
see an average reduction of about $4 per month. Commercial customer rates would
go down by about $29 per month, or 8.7 percent. Industrial customers who use
Intermountain’s delivery service, but do not buy their gas from the company, would
experience a rate increase of about 9.5 percent, according to the company’s
proposal.
According to Intermountain Gas, an increased number of
drilling rigs searching for new gas supply and an increase in gas production
resulted in lower wholesale prices for gas. Intermountain Gas also benefited
from lower transportation costs resulting from a settlement to the general rate
case filed before the Federal Energy Regulatory Corporation by Northwest
Pipeline Corporation, which transports Intermountain Gas’ over its pipelines
into Idaho.
The commission’s job is to review the application
to see if Intermountain Gas was prudent in its gas purchasing decisions and if
it executed hedges properly to protect customers against price volatility. The
commission will proceed under a modified procedure that allows the case to be
handled through written public comments rather than by public hearing. However,
comments may request a public hearing.
Those wishing to submit comments must do so by no
later than Sept. 18. Comments are accepted via e-mail by accessing the
commission’s homepage at www.puc.idaho.gov
and clicking on "Comments & Questions." Fill in the case number
(INT-G-07-03) and enter your comments. Comments can also be mailed to P.O. Box
83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.
A full
text of the commission’s order, along with the company’s application and other
documents, are available on the commission’s Web site. Click on “File Room” and
then on “Gas Cases” and scroll down to the above case number.