Idaho Public Utilities Commission

November 13, 2008

Case No. INT-G-08-04

Contact: Gene Fadness (208) 334-0339, 890-2712

Declining wholesale gas prices lead to reduced PGA increase

About half the increase passed on to customers of Intermountain Gas on Oct. 1, will be eliminated effective Nov. 15. Declining prices in the natural gas wholesale market led Intermountain Gas to file an application with the Idaho Public Utilities Commission seeking a reduction in its annual Purchased Gas Cost Adjustment (PGA).

The commission approved the reduction in the gas cost portion of customers’ bills – from 78.5 cents per therm to 67.5 cents per therm – and made the reduced rate effective for Nov. 15, rather than the company’s requested Dec. 1 date.

The PGA surcharge, adjusted every Oct. 1, increased the average bill of a residential customer who uses natural gas for both space and water heating by about $12.30 per month, or 18 percent. However, the Nov. 15 reduces that adjustment to about $7.41 per month, or 9.22 percent. For a residential customer who uses natural gas for space heating only, the Oct. 1 increase raised an average monthly bill by $7.90 or 15 percent. The Nov. 15 adjustment lowers that increase to $5.18 per month, or 8.5 percent.

Commercial rates also increased by 18 percent on Oct. 1, or about $55.30 per month. But the Nov. 15 adjustment reduces that increase to 9.7 percent, or about $34.63 per month.

“Wholesale natural gas prices have continued to fluctuate dramatically,” the commission said. “Intermountain Gas pursues a gas supply and risk management program designed to mitigate the adverse impact that significant price movements in the natural gas commodity can have on the company’s supplies, customers and other operations. We commend Intermountain Gas for taking advantage of lower prices when the opportunity arises within its established risk management policy.”

The commission staff investigating the case compared the gas supply cost requested by Intermountain to the NYMEX Futures Index, Global Insights Forecast and the Energy Information Administration’s outlook. Commission staff said that while the company’s forecast is “somewhat optimistic,” the estimates are reasonable.

Every year on Oct. 1, gas rates are adjusted either downward or upward through the Purchased Gas Cost Adjustment (PGA) process to account for the always-fluctuating wholesale prices for natural gas. When wholesale gas prices are lower than anticipated, customers get a credit. When they are higher, customers get a surcharge.

The company does not get to keep the money collected from the surcharge. It is kept in a deferred account and used only to pay gas supply costs, including storage and transportation. Therefore, company earnings are not impacted either positively or negatively with the yearly PGA adjustment.

In 2007, Intermountain Gas customers got an 8 percent PGA decrease. In 2006, customers got a 4 percent decrease.

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Gas Cases” and scroll down to Case Number INT-G-08-04.