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Natural Gas Infrastructure Cost Recovery

The Idaho Public Utilities Commission has denied a proposal by  Intermountain Gas Company, a natural local distribution company (LDC),  to implement a cost recovery clause that would have allowed the company to recover from ratepayers the costs incurred on infrastructure improvements made during the previous calendar year. The Idaho Public Utilities Commission said that while it supported the goals of the company’s proposed Infrastructure Integrity Management Mechanism plan related to safety and reliability, all LDCs are obligated to maintain safe and reliable service to their customers regardless of the existence of a cost-recovery mechanism for advance recovery of capital investments.   Additionally, the commission said, the costs the company sought to recover through the IIMM are “predictable and not necessarily volatile” and “do not pose an imminent threat to the safety or integrity of Intermountain’s system.” It also said the cost recovery mechanism would run afoul of provisions in the state utility code that prohibit the commission from setting rates for any utility that grant a return on property not currently used and useful. The commission found that allowing the LDC to implement its proposed rider would create conflict with the statutory used and useful requirement. It explained that the company’s return on rate base would exceed the used and useful amount because there is no provision for the less than fully depreciated pipe that is removed—i.e., without retiring existing pipe for purposes of depreciation, the company would be allowed a return on property that has been removed from service. Re Intermountain Gas Co., Case No. INT-G-17-07, Order No. 34090, Jun. 27, 2018 (Idaho P.U.C.).


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