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1 BOISE, IDAHO, TUESDAY, JULY 13, 1999, 9:30 A.M.
2
3
4 COMMISSIONER HANSEN: Well, good
5 morning, ladies and gentlemen. This hearing will be
6 in order.
7 This is the time and place set by the
8 Idaho Public Utility Commission to hear Case
9 No. PAC-E-99-1, known as In the matter of the joint
10 application and petition of PacifiCorp and
11 ScottishPower for an Order approving a proposed
12 transaction and Order approving the issuance of
13 PacifiCorp common stock.
14 I am Commissioner Dennis Hansen; I'll
15 be Chairman of this hearing. At my left is
16 Commissioner Marsha Smith and at my right is
17 Commissioner Paul Kjellander.
18 I'd like to note that we are providing
19 this hearing over the Internet. This is a pilot
20 program and we hope it works out for those people
21 that couldn't be here but may want to tune in and
22 hear the proceedings today.
23 Second note I'd like to make is that
24 we had a sign-up sheet as you entered, and for those
25 of you that signed up, this was just for information
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HEDRICK COURT REPORTING COLLOQUY
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1 of those that are attending this technical hearing
2 today. This is not a public hearing today. Those
3 of you that want to participate at a public hearing,
4 we have scheduled two public hearings: One in
5 Rexburg on the 27th of July at seven p.m., and one
6 in Pocatello on the 28th at seven p.m. And so this
7 will give those an opportunity -- the public -- to
8 give us testimony at that time and their feelings.
9 I believe now we'll take the
10 appearances of the parties, and we'll start with the
11 PUC Staff on my right.
12 MR. PURDY: Thank you, Mr. Chairman.
13 Brad Purdy, deputy attorney general, appearing on
14 behalf of the Commission Staff.
15 MR. MILLER: Mr. Chairman, Dean J.
16 Miller -- Miller of the firm McDevitt and Miller, on
17 behalf of the Joint Applicant ScottishPower.
18 I'd also like to introduce my
19 cocounsel, Mr. James Van Nostrand of the Perkins
20 Coie firm. Mr. Van Nostrand was admitted to
21 practice before the Commission previously at the
22 prehearing conference. And his name is spelled
23 V-A-N-N-O-S-T-R-A-N-D.
24 COMMISSIONER HANSEN: Mr. Eriksson.
25 MR. ERIKSSON: John Eriksson with
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1 Stoel Rives for PacifiCorp.
2 And with me is George Galloway. I'd
3 like to move for the admission of Mr. Galloway. He
4 is in our Portland office. Mr. Galloway is a member
5 of the Oregon bar since 1976, also a member of the
6 DC bar, and admitted before the 9th Circuit and
7 DC Court of Appeals. He's appeared before this
8 Commission previously.
9 COMMISSIONER HANSEN: Thank you.
10 MR. BUDGE: Randy Budge of the firm
11 Racine, Olson, Nye, Budge, and Bailey, appearing on
12 behalf of Intervenor Solutia, Inc.
13 COMMISSIONER HANSEN: Just go back to
14 the Idaho Irrigation Pumpers.
15 MR. NYE: Mr. Chairman, Mark Nye,
16 Pocatello, Racine, Olson, Nye, Budge, and Bailey, on
17 behalf of the Irrigation, appearing with Mr. Yankel.
18 MR. PASLEY: I'm Scott Pasley,
19 assistant general counsel for the J. R. Simplot
20 Company, one of the Intervenors.
21 MR. WARD: And Conley Ward of the firm
22 Givens Pursley for the Idaho Consumer-Owned
23 Utilities Association.
24 COMMISSIONER HANSEN: Okay.
25 MR. RICHARDSON: And I'm Peter
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1 Richardson of the firm Davis Wright Tremaine,
2 appearing on behalf of the Public Power Council.
3 Shelly Richardson has previously entered an
4 appearance, as well as I, and Shelly is not able to
5 be here today.
6 COMMISSIONER HANSEN: Okay. I believe
7 also we had registered as Intervenors Avista Power
8 which notified the Commission yesterday that they
9 would not have or would not be represented here
10 today. Just in case there's a change, is there
11 anyone from Avista here today?
12 Okay. Also, Idaho Power. Do we have
13 anyone here representing Idaho Power today?
14 MR. TWIGGS: Commissioner, Thane
15 Twiggs for Idaho Power. We do not anticipate having
16 any questions or witnesses.
17 COMMISSIONER HANSEN: Okay. Thank
18 you.
19 Have I missed anyone?
20 Okay. Before we get started, there
21 was a couple things I'd like to just make that I
22 think may help us as we proceed along with this
23 hearing:
24 As you ask questions or address the
25 Bench or whatever, if you would make sure your mike
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1 is turned on. You just press the front of that and
2 a little red light should come on and that tells us
3 that everyone will be able to hear you today.
4 Before we get started, I would ask
5 both the counsel making cross-examination questions
6 and all the witnesses if they would try hard to be
7 to the point as much as you can. Rather than your
8 philosophy, would you please respond directly to the
9 question if you would, please.
10 Also, before we begin, let me once
11 again review the appropriate standards for
12 evaluating the merger as contained in the Idaho Code
13 61-328:
14 That the public interest will not be
15 adversely affected by this transaction;
16 That the costs of and rates for
17 supplying electrical service will not increase by
18 reason of such transaction;
19 And, third, that in this case,
20 ScottishPower has a bona fide intent, a financial
21 ability to operate and maintain electrical property
22 to be used in the public service.
23 With that, I would ask is there any
24 other matters that need to be discussed before we
25 begin the hearing?
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1 Yes, Mr. Nye.
2 MR. NYE: Mr. Chairman, I have a
3 preliminary matter I'd like to take up with a
4 Motion. I think that would be the appropriate time.
5 COMMISSIONER HANSEN: Mr. Nye, please
6 proceed.
7 MR. NYE: Please the Commission, the
8 Intervenor respectfully moves to dismiss this matter
9 or in the alternative, to postpone or stay it
10 pending receipt of the technical information
11 promised by the Applicant which would give us
12 information on whether or not the Application will
13 affect rates. I would like to speak to the Motion
14 if I might.
15 COMMISSIONER HANSEN: You may.
16 MR. NYE: Please the Commission, this
17 Intervenor, based upon the Application and the
18 material supplied to date, both direct and rebuttal,
19 would respectfully show that the Applicant has not
20 shown that rates will be unaffected. The evidence
21 is clear that while rates have been essentially
22 level for a decade, at least for the Pumpers, it's
23 the intent of the Application to increase the same.
24 This Applicant has indicated that it
25 will not know what the impact of this merger is
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1 until it does a study some six months from now. And
2 that's the cart before the horse that we
3 respectfully submit.
4 One cannot pay a billion dollar
5 premium for an enterprise and not expect to have
6 some impact on rates. One cannot pay $20 million to
7 27 senior executives as a gold handshake and not
8 have some impact on rates or come here and say, We
9 won't know for six months.
10 The evidence is that the rates for
11 Idaho farmers range from 26 percent more to nearly
12 double the cost of their neighbors in other states
13 under the same PacifiCorp system.
14 This Commission directed the Applicant
15 to address these irrigation issues and it's failed
16 or refused to do so.
17 By Statute, the Applicant can only
18 receive authorization from this Commission by
19 setting forth the facts of the matter. The
20 Commission shall prescribe it as it did, and the
21 Applicant has not done so.
22 There has been no showing that the
23 rates for supplying service will not be increased.
24 The evidence appears to be that the Applicant must
25 increase them based upon the acquisition costs and
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1 other expenditures.
2 The Applicant in this case, unusual as
3 it is, is similar to what happened in Virginia this
4 past spring, and on March 31, that Commission
5 refused to grant an Application for utility when
6 they were vague and uncertain about the benefits and
7 would not commit to do what the Statute requires.
8 ScottishPower will not commit that the
9 cost savings here will go to the benefit of reduced
10 rates. They're unable to tell us the magnitude or
11 the timing of expected savings, and on these
12 matters, there is no dispute of fact.
13 They don't know what they're paying to
14 purchase this entity. The swing rate is a billion
15 dollars on what the cost of acquisition is: Between
16 point eight and 1.6 billion to buy it and to acquire
17 PacifiCorp.
18 And they want us to believe that they
19 will not adversely affect rates but they don't know
20 for sure.
21 They made no promise or commitment
22 that the costs of service will not be increased.
23 They made no promise or commitment that rates will
24 not be increased.
25 Such a showing is a condition
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1 precedent to approval. There is no statutory
2 authority to approve or accept the proposed merger
3 even if one wanted to. It would be a violation of
4 law to approve this Application. The statute itself
5 specifically prohibits such a transaction. This
6 Applicant defers any discussion or indication on
7 rates until after this study some six months from
8 now and will say, Well, that will be the subject of
9 a rate case, or that's a study subject for the
10 future. If there could be no showing now that the
11 transaction will not affect rates, the proposed
12 transaction must fail and be denied, or in the
13 alternative, stayed or deferred until the terms of
14 the Statute are complied with.
15 Our Statutes from the Legislature have
16 been there since 1951. And I'm referring to Idaho
17 Code Section 61-328. It states that no
18 authorization shall be issued or granted any
19 Applicant coming within the prohibitions. This
20 case, the failure to show that the cost of -- cost
21 of and the rates for supplying service will not be
22 increased as required by law appears to be evidence
23 of a lack of a bona fide intent that is also
24 required by law.
25 In conclusion, the Idaho Irrigation
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1 Pumpers Association brings this Motion reluctantly
2 but respectfully, and we question whether the
3 proposed transaction will meet the public interest.
4 We assert and so move that the matter be dismissed
5 or deferred. We intend to renew this at the
6 conclusion of the evidence because there has been a
7 complete failure to address the irrigation issues
8 directed by this Commission, and no comment on costs
9 of service or rates or on the disparity that Idaho
10 farmers must face every season.
11 The evidence will show that the
12 Applicant wants approval now and a showing later.
13 This is not permissible, we respectfully submit,
14 under the Statute, and not available under Idaho
15 law; and as filed and as pursued, based upon all of
16 the evidence and all the testimony that's been
17 submitted, we respectfully submit that this
18 Application must fail or -- and that this Commission
19 has no authority, really, to decide based upon the
20 lack of showing. So therefore, we thank you for
21 allowing us this opportunity to present our Motion,
22 and we do so respectfully move and ask that the
23 matter be dismissed, or in the alternatively --
24 alternative, deferred until there is a sufficient
25 showing.
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1 Thank you.
2 COMMISSIONER HANSEN: ScottishPower,
3 do you have a response?
4 MR. MILLER: Mr. Chairman, thank you.
5 I think I do for ScottishPower, and I think, given
6 the nature of this Motion, PacifiCorp should be
7 allowed to make a separate response as well. But
8 from ScottishPower's point of view, a couple of
9 observations:
10 First, this Motion strikes me as
11 somewhat disingenuous, could have been made much
12 before this hearing, and given -- the parties given
13 an opportunity to respond to it rather than make it
14 unannounced at the start of this hearing.
15 Secondly, I think as we go through the
16 evidence, the Commission will find Mr. Nye has, in
17 my view, misstated the evidence in several material
18 respects in his argument.
19 Third, I would point out that the
20 Applicants responded to more than 100 data requests
21 from the Irrigators. Those data requests were all
22 timely filed, and there was never, with respect to
23 any one of them, a motion or a contention that the
24 response was incomplete or nonresponsive to the
25 question that was profounded. There have been no
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1 suggestions that we have -- by way of Motion
2 anyway -- failed to respond to and provide
3 information requested.
4 We think, obviously, the Commission
5 should take this Motion under advisement and
6 consider it after it has heard all the witnesses,
7 all of the testimony. It would be a serious denial
8 of our rights if the Commission were to simply grant
9 this Motion based on Mr. Nye's misstatement of facts
10 and without an opportunity to present our
11 witnesses.
12 So we would suggest that the
13 Commission take the Motion under advisement,
14 consider it at the end of the hearing.
15 COMMISSIONER HANSEN: Thank you.
16 PacifiCorp.
17 MR. GALLOWAY: Thank you,
18 Mr. Chairman.
19 We certainly concur that, with all due
20 respect, that Mr. Nye has not provided either a fair
21 or accurate characterization of the evidence that
22 has been submitted by the Applicants in this
23 proceeding. The testimony of the ScottishPower
24 witnesses is replete with references to an
25 expectation that rates for PacifiCorp will be lower
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1 than they otherwise would have been as a result of
2 this transaction, with substantial explanation as to
3 why that would occur. I would refer particularly to
4 the testimony of Messrs. Richardson and Morris in
5 this respect.
6 More specifically, the case contains a
7 specific and detailed commitment by the Applicants
8 to reflect a $10 million per year reduction in rates
9 arising from the consolidation of corporate savings
10 with a commitment that even if savings of that
11 magnitude are not enjoyed, that after three years,
12 rates will nonetheless be set on the basis that that
13 $10 million had been achieved.
14 Therefore, given that evidence, we
15 believe the Motion is without merit.
16 COMMISSIONER HANSEN: Thank you.
17 We will go at ease for a few minutes,
18 and so we go off the record.
19 (Discussion off the record.)
20 COMMISSIONER HANSEN: Okay, we'll go
21 back on the record.
22 As a Commission, I think that we need
23 to hear the evidence to know whether or not the
24 conditions have been met. I think after we go
25 through the evidence presented here at the hearing,
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1 we'll be in a better position to rule on this
2 Motion. We will take this Motion under advisement
3 and we'll rule on it at a later time.
4 With that, we will move on with the
5 hearing.
6 I failed to mention as I started, we
7 have one of our legislators with us today: Senator
8 Robert Geddes. We're pleased to have him here.
9 Is there any other legislators here
10 that I failed to miss?
11 Okay, with that, I would ask
12 ScottishPower, are you ready to commence with your
13 witness?
14 MR. MILLER: We are, Mr. Chairman. I
15 might just very briefly, for the convenience of the
16 Commission and the parties, indicate our order of
17 witnesses so that everybody will have a
18 understanding of how we would propose to proceed, if
19 that would be agreeable.
20 COMMISSIONER HANSEN: Would you,
21 please?
22 MR. MILLER: Thank you very much.
23 Mr. Chairman, members of the Commission and parties,
24 our first witness will be Mr. Alan Richardson who
25 will be the chief executive officer of PacifiCorp.
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1 Mr. Richardson generally testifies as to the
2 benefits to the public arising as a result of the
3 proposed merger.
4 The second witness will be
5 Mr. Richard T. O'Brien who is currently executive
6 vice president and chief operating officer of
7 PacifiCorp. Mr. O'Brien explains why PacifiCorp
8 decided to pursue this merger, and why from its
9 point of view it is in the public interest.
10 The third witness is
11 Mr. Scott Brattebo. He is responsible for managing
12 PacifiCorp's relationships with the Bonneville Power
13 Administration. He has filed rebuttal testimony
14 only and establishes the merger will have no effect
15 on the exchange credit.
16 I might, at this point, mention that
17 it's our intention to present both rebuttal and
18 direct testimony at the start of the hearing
19 simultaneously without breaking it up.
20 The fourth witness is Mr. Bob Moir,
21 who offers direct and rebuttal testimony.
22 Currently, he is the manager of metered businesses
23 within ScottishPower's power system division, and in
24 his testimony he explains ScottishPower's
25 commitments to implement customer service and
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1 customer guarantees programs.
2 The fifth witness is
3 Mr. Robin MacLaren. He is the chief engineer of
4 power systems. He has filed rebuttal testimony only
5 and discusses ScottishPower's commitments regarding
6 network performance standards. He will also sponsor
7 an additional exhibit and be asked a few live
8 questions relating to it.
9 The next witness would be
10 Mr. Jack Kelly. He has filed direct testimony only.
11 He is the manager of ScottishPower Learning, and
12 discusses ScottishPower's commitments to
13 communities.
14 The seventh witness would be
15 Mr. Carly Burton, who has also filed only rebuttal
16 testimony. Currently, he is a independent
17 consultant, but from 1973 to 1998 he was employed by
18 PacifiCorp and managed all of the Company's water
19 rights and water supplies. He testifies that the
20 merger will have no adverse impact on water rights
21 or upon the existing relationships between
22 PacifiCorp and its irrigation customers.
23 The eighth witness will be
24 Mr. Graham Morris. Mr. Morris is sponsoring direct
25 and rebuttal testimony that was prefiled by
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1 Mr. Robert Green. And at the time he testifies,
2 Mr. Van Nostrand will introduce additional exhibits
3 to establish his qualifications in the area.
4 Finally will be Mr. Andrew MacRitchie.
5 Mr. MacRitchie, with offices in Portland, is
6 responsible for managing all of the US-based teams
7 of ScottishPower personnel who are working on this
8 merger. Mr. MacRitchie, in his direct and rebuttal
9 testimony, discusses ScottishPower's capabilities in
10 the areas of transforming utility businesses, and in
11 rebuttal testimony, he puts forward a new commitment
12 to file a detailed transition plan shortly after
13 closing.
14 In all, we think that this evidence,
15 when taken together, will lead inevitably to the
16 conclusion that the Applicants have more than met
17 their burdens of proof under the relevant statutes.
18 With that, we're prepared to proceed,
19 Mr. Chairman.
20 COMMISSIONER HANSEN: Okay, I might
21 mention as we -- as you call your witnesses forward
22 for cross-examination, if they can come forward,
23 Commissioner Smith will swear you in, and then if
24 you'll just take the chair right there at the
25 witness stand, that's how we'll proceed.
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1 Okay, we're ready to go. Call your
2 first witness.
3 MR. GALLOWAY: Applicants call
4 Alan V. Richardson.
5
6 ALAN V. RICHARDSON,
7 produced as a witness at the instance of
8 ScottishPower, being first duly sworn, was examined
9 and testified as follows:
10
11 DIRECT EXAMINATION
12
13 BY MR. GALLOWAY:
14 Q. Mr. Richardson, please state your full
15 name.
16 A. My full name is Alan V. Richardson.
17 Q. What is your business address?
18 A. My business address is 500 Northeast
19 Multnomah Street, Suite 900, Portland, Oregon,
20 97232.
21 Q. By whom are you employed and in what
22 capacity?
23 A. I'm employed by Scottish Power plc. I
24 am an executive director of that company.
25 Q. Are you a member of the board of
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HEDRICK COURT REPORTING RICHARDSON (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 directors of Scottish Power plc?
2 A. I am a member of the board of
3 directors, yes.
4 Q. What are your duties and
5 responsibilities with Scottish Power plc?
6 A. My current responsibilities are to
7 manage the issues regarding the transaction between
8 ScottishPower and PacifiCorp. These include
9 regulatory affairs, communications, community
10 interface, and strategic and business planning.
11 Q. What will be your duties and
12 responsibilities at such time as this transaction
13 closes?
14 A. I will be the chief executive officer
15 of PacifiCorp.
16 Q. Mr. Richardson, did you have occasion
17 to file in this proceeding direct testimony
18 consisting of 20 pages entitled the Direct Testimony
19 of Alan V. Richardson?
20 A. I did.
21 Q. And are there appended to that
22 testimony Exhibits 201 through 205?
23 A. That's correct.
24 Q. Are you aware that appended as
25 Exhibit 105 to the prefiled testimony of Staff
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HEDRICK COURT REPORTING RICHARDSON (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 witness Sterling is your supplemental direct
2 testimony from the Utah Public Service Commission
3 proceedings?
4 A. I am so aware.
5 Q. And are you aware that appended to
6 that Exhibit 5 (sic) are two exhibits marked as
7 AVR-1 and AVR-2?
8 A. That's correct.
9 Q. And, finally, do you cause to have
10 prefiled in this proceeding certain rebuttal
11 testimony consisting of 10 pages?
12 A. Yes, I did.
13 Q. And appended to that testimony, is it
14 not, is Exhibit 220?
15 A. That's correct.
16 Q. Are there any corrections that you
17 would wish to make in your direct, supplemental, or
18 rebuttal testimony as previously described?
19 A. I think there is one small correction,
20 Commissioners, which is on page 3, line 12. We've
21 already referred to it, in fact, that Mr. Robert
22 Green will be leaving ScottishPower in the month of
23 August. And we have, therefore, replaced Mr. Robert
24 Green with Mr. Graham Morris who will fully sponsor
25 that testimony. So any other references in our
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HEDRICK COURT REPORTING RICHARDSON (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 testimonies from ScottishPower to Mr. Robert Green
2 I'd be pleased if you could accept reading
3 Mr. Graham Morris instead.
4 Q. Mr. Richardson, if I were to ask you
5 the questions today that are set forth in your
6 direct, supplemental, and rebuttal testimony, would
7 your answers be the same as set forth therein?
8 A. They would.
9 Q. And is that testimony true and
10 correct, to the best of your knowledge?
11 A. It is.
12 MR. GALLOWAY: Mr. Chairman, at this
13 time, I would ask that the direct, supplemental, and
14 rebuttal testimony of Mr. Richardson be spread on
15 the record as if read; and offer Exhibits 201
16 through 205 and Exhibit 220.
17 COMMISSIONER HANSEN: Okay. If there
18 is no objection, it will be so ordered and the
19 testimony will be spread upon the record, and
20 exhibits marked as 201 through 205 and 220 will be
21 identified on the record. If there's no objection,
22 it will be so ordered also.
23 (The following prefiled direct and
24 rebuttal testimony of Mr. Richardson is spread upon
25 the record.)
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HEDRICK COURT REPORTING RICHARDSON (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower