Response to Staff.doc

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 1: Please provide a schedule showing in detail the calculation of demand charges that would have been paid by Astaris to Idaho Power for the Second Block of power if Paragraph 2 of the Letter Agreement had not been negotiated or if Astaris chose to operate either furnace 1, 4 or both.

Response to Staff Request No. 1: For the period April 1, 2001 through March 31, 2003 the charge would have been: 130,000 kW x 24 months x $1.39/kW-month = $4,336,800.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 2: Does Astaris agree that Paragraph 2 of the Letter Agreement could have been negotiated separate from the buy-back agreement? If not, please explain in detail why not.

Response to Staff Request No. 2: Astaris objects to this request because it calls for speculation and may call for a legal conclusion. Notwithstanding this objection, Astaris does not understand the question and would need further clarification before this question may be answered.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 3: Referring to page 5, lines 12 and 13 of Mr. Seder’s testimony he states that, “Astaris was unlikely to be able to secure Block 2 power at cost-effective market rates”.
a. At that time what market rate was cost effective?
b. If Astaris were to evaluate the current feasibility of operating these furnaces, what market rate would be cost effective?

Response to Request No. 3:
a. Astaris did not perform any such study or analysis. In February 2001, Astaris was aware of the prices of electricity in the market and the projected prices of electricity. Based on this information, Astaris made the business judgment that it could not produce phosphorus at a competitive price using Second Block power.
b. Astaris has not performed any such study or analysis.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 4: Assuming power rates were cost effective, please explain in detail whether or not Block 2 power, up to 130 MW, could have been used after March 31, 2001 to operate the other two furnaces. Provide supporting documents and any calculations.

Response to Request No. 4: No. Paragraph 2 of the Letter Agreement reduces Second Block demand under Paragraph 5.2.4 of the ESA by the full 130,000 kW. Therefore, Second Block power was unavailable for running any of the furnaces at Pocatello.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 5: Referring to page 5, lines 20 through 22 and page 6, line 1 of Mr. Seder’s testimony he states that the Commission Staff implies that Astaris knew in early 2001 that it would be shutting down all furnaces and closing the Pocatello plant during the remaining term of the contract. Please provide all information that Mr. Seder believes makes this implication.

Response to Request No. 5: An implication is, of course, not explicitly expressed but rather arises out of the assertions in the Staff’s petition and in Mr. Hessing’s testimony that Astaris will receive a “windfall” unless the Staff’s suggestion is adopted. The Staff’s petition and testimony use the term “windfall” as a pejorative and implies that the payments to Astaris under the buy-back contract are undeserved because the plant was shut-down. Further, the Staff implies that Astaris’ decisions regarding changes to its operation drove the decision for the ultimate shut-down and that these changes were known at the time the Letter Agreement was signed. Neither conclusion is warranted or supported by the facts.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 6: Referring to page 6, lines 20 and 21, and again on page 9, lines 6 through 8 of Mr. Seder’s testimony he states that Astaris advised Commission Staff that closure of one of its furnaces under the Letter Agreement Amendment would be irreversible. Please provide any and all documentation that demonstrates that Astaris advised Commission Staff of that fact and the specific Staff members that this was provided to.

Response to Request No. 6: Mr. Seder participated in a meeting on the morning of March 16 with Chief Dep. AG Don Howell, two commissioners and representatives of Idaho Power in attendance. The purpose of the meeting was to discuss the concept of the buyback arrangement and impress upon those present that no such proposal could be brought forward by Astaris without a high degree of certainty that one of the options proposed would receive commission approval. Idaho Power provided an outline of a potential buyback deal, on yellow paper, to Mr. Howell during the course of the meeting. One of the key points Mr. Seder made in this meeting was the fact that the buyback deal would result in the closure of two furnaces and the rotation of the remaining two furnaces permanently reducing Astaris’ power usage at Pocatello by 50 MW.
The Staff clearly understood the implications for the irreversibility of the decision as indicated by the Idaho PUC press release issued on March 19, 2001 headed “Commission approves changes to the Astaris-Idaho Power contract; seeks comment on costs” in which it is stated “As a result, Astaris plans to permanently discontinue using two furnaces of its four furnaces and putting a third in standby.”

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 7: Referring to page 10, lines 7 through 9, Mr. Seder’s testimony states that the Commission Staff wanted to lock in a fixed price and that they were not willing to take the risk that market prices in the region would rise even higher.
a. Please provide any and all documentation demonstrating Staff’s desire and willingness to lock in fixed contract prices.
b. Please identify the dates associated with all documentation.
c. Was Staff involved in the negotiation of the fixed price?

Response to Request No. 7:
The Commission Staff willingness to lock into a fixed price contract was clearly expressed in the Staff’s comments on Case No. IPC-E-01-9 where the Staff recommended approval of the buyback deal with clear knowledge that the contract price was fixed. Also, at the meeting referenced in response to Request No. 6, the commissioners made favorable remarks when Idaho Power pointed out that the forward market pricing had continued to climb since the price was set making the buyback deal more valuable since the buyback payments would be fixed from an earlier date.
The information was transmitted initially on March 16, 2001 at the meeting referenced in response to Request No. 6 above.
c. The Staff was not directly involved with the negotiation of the specific fixed price. The Staff did recommend the approval of the buyback deal with full knowledge of the fixed price nature of the contract.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 8: Referring to page 10, line 7 and page 10, line 15, Mr. Seder’s testimony makes reference to “Idaho Power and the Commission Staff.” Please provide the following information concerning each of those references:
a. Who were the Staff involved?
b. When did the meeting, discussion or information exchange take place?
c. What was the purpose of the meeting, discussion or information exchange?
d. How was the information communicated?
e. Please provide any documents exchanged or discussed as part of the communication.

Response to Request No. 8:
The Commission Staff member involved was Chief Dep. AG Don Howell.
See Response to Request No. 6 above.
See Response to Request No. 6 above.
See Response to Request No. 6 above.
e. Idaho Power provided an outline of a potential buyback deal, on yellow paper, to the Idaho PUC attendees. All other communications were verbal.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 9: Referring to pages 13 and 14 of Mr. Seder’s testimony he discusses the shut down of the last furnace; please explain in detail why the last furnace was shut down. Include documentation supporting the circumstances and calculations for the business plan.

Response to Request No. 9: While Astaris did not expect to shut down the Pocatello operation in 2001, several factors ultimately led to the October 2001 decision to close in Pocatello: high costs, especially power costs; low cost alternative sources of supply of elemental phosphorus and purified phosphoric acid; and concerns regarding environmental compliance and relations with the Indian tribes.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 10: Referring to page 5, lines 3 through 5 of Mr. Binz’s testimony that states, “changing the contract after Astaris has responded to these economic implications with an after the fact analysis unfairly undercuts the company’s decisions.” To the extent that the Commission maintains jurisdiction over a contract for the supply of utility services between a utility and its electric customer after initial contract approval, do you believe contract provisions can be changed prospectively during the contract period? If you believe it can be changed, under what circumstances should it be changed? If you believe it cannot be changed please explain why.
Response to Request No. 10: Astaris objects to the question because it calls for a legal conclusion.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 11: Did Mr. Binz or his staff ever recommend changing a contract for the supply of electric service between a regulated utility and one of its customers after the contract was initially approved by the appropriate regulatory agency? If yes, please identify the case by number. Also provide a copy of all documents and materials included in the case file.

Response to Request No. 11: Mr. Binz states that, to the best of his knowledge, neither he nor any member of his staff ever advocated that a regulatory commission act to change a contract for the supply of electric service between a regulated utility and one of its customers after the contract was initially approved by the appropriate regulatory agency.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 12: Please provide copies of all testimony or comments filed by Mr. Binz or a person under his supervision in a case before a utility regulatory commission for the last five years that meet any of the following criteria.
a. Include a utility contract with one of its customers for a utility service.
b. Discuss rate increase impacts on low income customers.
c. If for any reason the testimony or comments cannot be provided, please provide a summary of the issues and positions taken in the case, case number and positions identified by party or person.

Response to Request No. 12: Mr. Binz states that, to the best of his knowledge, he has not filed testimony in the past five years that meet these criteria.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 13: Referring to page 15, line 2 of Mr. Binz’s testimony he states, “The contract must stand on its own …”. Please specify whether the word “contract” relates to the Letter Agreement amendment by itself or the Letter Agreement amendment and Electric Service Agreement (ESA) together. Please innumerate the reasons why he believes “the contract must stand on its own…”.

Response to Request No. 13:
a) In this instance, “contract” refers to the Letter Agreement by itself.
b) In stating that the “contract must stand on its own,” Mr. Binz was stating his opinion that the resource acquired through the Letter Agreement should be judged by the same standards the Commission would judge any other resource acquisition by a regulated utility. Such a contract should be reviewed on the basis of whether the resource is needed and how the cost of the resource compares to the cost of alternative resources available at the time of the resource acquisition. Information about the profitability of the seller is not typically considered in such an analysis (except possibly to ascertain the financial stability of the seller in order to assess the risk of default).

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 14: In her testimony Ms. McCarvill identifies 8 types of costs incurred by Astaris to perform its obligations under the Letter Agreement amendment. For each of the 8 types of costs individually, please respond to the following questions.
a. Please provide the detailed calculations, invoices, contracts and any other documents supporting the front-end costs incurred.
b. Please provide the detailed calculations, invoices, contracts and any other documents showing the continuing costs.
c. Would the cost have been incurred without the buy-back? Please explain your answer.
d. Was the cost required by a contract or law or did Astaris have discretion as to whether to incur the cost without direct financial liability? Please explain your answer and provide references to legal authority and copies of contracts that required the costs to be incurred.

Response to Request No. 14:
(a) and (b) See Attachment to Response to Staff Request No. 14. Portions of this attachment are confidential and will be made available for inspection at Holland & Hart’s office in Boise. Due to the business sensitivity, copies and notes may not be made of these materials. A portion of these materials will not be available for inspection until Monday, February 11, 2002.
(c) Please see the testimony of Ms McCarvill at p. 3, line 7 to p. 4, line 10 and the testimony of Mr. Seder at p. 8, line 14 to p. 9, line 3.
(d) Astaris object to this request because it calls for a legal conclusion.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 15: Please prepare and provide a detailed calculation with supporting documents showing the estimated annual costs and revenues that might have occurred if Astaris made the business decision to operate an additional furnace(s) using Second Block power in 2001, 2002 and 2003.

Response to Request No. 15: Astaris has performed no such study or analysis.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 16: Referring to page 6, line 9 of Ms. McCarvill’s testimony, she states “Astaris purchased raw materials in the open market to cover the shortfall.”
a. What was the length of purchase?
b. Why was this time frame chosen?
c. Were there contracts for these purchases? Please provide all contracts. If previously provided, please reference the document number.
d. Who was it purchased from?
e. What would be the estimated cost to produce the materials at the Pocatello facility?

Response to Request No. 16:
a. The length of Astaris’s purchases varied depending on supplier. Some purchases commenced in April and lasted through mid-December, when the Pocatello plant ceased production. Other supplier arrangements lasted for a matter of months.
b. The time frame was April through mid-December, 2001, which was the time period that Astaris operated one furnace.
c. Some items were purchased under contracts, and some were purchased on a spot basis. See Attachment to Response to Staff Request No. 16. These documents are confidential and will be made available for inspection at Holland & Hart’s office in Boise. Due to the business sensitivity, copies and notes may not be made of these materials. These materials should be available for inspection on Monday, February 11, 2002.
d. See Response to Request No. 16(c) above.
e. See Testimony of Ms. McCarvill at page 11, lines 8-12.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 17: Referring to page 7, lines 12 and 13 of Ms. McCarvill’s testimony, please explain why a larger fleet of railcars was needed.

Response to Request No. 17: There are at least 3 reasons why a larger fleet of railcars was needed: (a) Pocatello elemental phosphorus was transported in tankcars specially designed to transport elemental phosphorus. Most of the purchased elemental phosphorus substituted for Pocatello elemental phosphorus was received in isotainers which required a flat-bed railcars which had to be secured; (b) Purchased phosphoric acid substituted for Pocatello elemental phosphorus had to be transported in tankcars specially designed to handle phosphoric acid which had to be secured. In addition, one pound of elemental phosphorus is equivalent to 4.2 pounds of 75% phosphoric acid with the effect that over four times as many phosphoric acid tankcars are required to transport an equivalent amount of elemental phosphorus; and (c) In addition, the transit times for the movement of the substitute raw materials overall tended to be longer than the transit times for moving Pocatello elemental phosphorus to Astaris' downstream operations, further increasing the size of the rail fleet required.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 18: Referring to page 7, line 13 of Ms. McCarvill’s testimony, please explain why increased shipments of phosphoric acid were needed.

Response to Request No. 18: Please refer to page 6, lines 14-18 of Ms. McCarvill's testimony. Phosphoric acid can be a replacement raw material for elemental phosphorous for many, though not all, end uses. However, about 4.2 pounds of phosphoric acid are needed to replace 1 pound of phosphorous to make the same amount of end-use products. Phosphorous and phosphoric acid require very different storage handling and safety procedures. In addition, the Astaris plants were originally built to handle significantly more phosphorous versus phosphoric acid. As a result, handling large volumes of phosphoric acid meant inefficient usage of the plants’ assets.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 19: Referring to page 10, lines 1 through 11 of Ms. McCarvill’s testimony, please explain in detail and provide supporting documentation in response to the following questions:
a. Please provide the dollar amounts and dates booked for the write-offs.
b. Why were booked write-offs reflected associated with the buy-back if the intent was to continue operation after the buy-back ended in March of 2003.
c. Isn’t it true that the write-offs were actually a result of the final shut down of the Pocatello plant? If your answer is no, please provide supporting documentation, contracts, and accounting rules etc. to support this position.

Response to Request No. 19:
(a) and (b) The trigger event for writing down the No. 1 furnace at Pocatello and the Kemmerer assets, in accordance with GAAP, was the disconnection of power from the No. 1 and No. 4 furnaces, and this occurred as a result of the power agreement. At that time Astaris had a change in the productive nature of the assets. That event effectively meant Astaris would no longer contemplate four-furnace operation. The power sale back therefore pointed to a write-off of at least one furnace. As Astaris began to analyze the implications of the power sale back it became apparent that the Kemmerer facility would be uneconomical. Astaris couldn’t sustain such high costs for two years when it could buy coke in the merchant market for significantly lower prices. This led Astaris to the conclusion that it was unlikely it would restart Kemmerer if it went to a long-term two-furnace mode. By year end, the conservative accounting treatment would be to write the assets down.
(c) The above-referenced write-offs were not a product of final shutdown. Astaris’ internal forecasts of write-offs and shutdown costs projected for the company clearly show that these assets – furnace one and Kemmerer assets -- were being forecasted for the second and third quarters of 2001.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 20: Referring to page 10, line 17 through 22 of Ms. McCarvill’s testimony, please respond to the following and provide requested supporting documents:
a. When were the notices of lay offs given?
b. Please provide a copy of each type of lay off notice provided with the employee name or any employee identification removed or blackened.
c. Please provide the dollar amount and supporting documentation showing the labor cost by month for April, May, June and July of 2001.

Response to Request No. 20: See Attachment to Response to Staff Request No. 20. Portions of this attachment are confidential and will be made available for inspection at Holland & Hart’s office in Boise. Due to the business sensitivity, copies and notes may not be made of these materials.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 21: If payments from Idaho Power under the Letter Agreement amendment were needed to provide alternatives to production from the First Block furnace that was shut down as a result of the buy-back, why was it reasonable to shut down the last remaining furnace without similar compensation?

Response to Request No. 21: The decision to enter into the Letter Agreement and the decision to close the plant were made independently and were both made based on the business judgment of Astaris and its owners and the best information available at the time. In the period between the execution of the power buy-back from Idaho Power and the decision to close Pocatello, Astaris and its owners learned a great deal about the merchant market for phosphorous and phosphoric acid. Astaris learned that there was more supply available then it originally imagined and during that period were able to acquire a new, long-term source of supply that gave Astaris security in terms of its longer term ability to serve customer needs. Astaris also now saw more clearly that Pocatello was likely to be cost-disadvantaged in the future versus other supply options.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 22: For Astaris Idaho’s and any Astaris operation that the Company claims was affected by the buy-back, annual payroll for each company’s last fiscal year that ended before September 2001?

Response to Request No. 22: Astaris’ last fiscal year’s (2001) annual payroll was $77.3 Million.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 23: When did Astaris officially notify Idaho Power that it would no longer be taking power to operate even one furnace? Please provide a copy of the notification. If there has been no notification, please explain why.

Response to Request No. 23: See Response to Idaho Power Requests No. 1-4.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 24: Please prepare and provide a copy of an Astaris organization chart at March 31, 2001 and currently showing the entities that includes the Pocatello plant, all parents and affiliates.

Response to Request No. 24: See Attachment to Response to Request No. 24.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 25: For all Astaris entities or affiliates that file Securities and Exchange (SEC) documents please provide the following:
a. Please provide the exact name of each registrant filing SEC documents.
b. Please provide copies of the 10-Ks for 1999, 2000 and 2001 for each registrant.
c. Please provide the last two10-Qs for each registrant.

Response to Request No. 25: Astaris does not file with the SEC. See Response to Idaho Power Request No. 6, 7, 10, and 11 for FMC Corporation and Solutia, Inc. filings.

Case No IPC-E-01-43
February 8, 2002

Staff Request No. 26: Please provide the following information for Astaris, Astaris Idaho and FMC for the last full fiscal year that ended before September 2001. If provided previously, please provide document reference.
a. Balance Sheet and Income Statements.
b. The owners, except stockholders, and their ownership share of each company.
c. The outstanding shares of publicly traded common stock, if any, and the outstanding shares of common stock for any corporate partners.

Response to Request No. 26:
a. See Attachment to Response to Staff Request No. 26. This attachment is confidential and will be made available for inspection at Holland & Hart’s office in Boise. Due to the business sensitivity, copies and notes may not be made of these materials. These materials should be available for inspection on Monday, February 11, 2002.
b. See Response to Staff Request No. 24. See Response to Idaho Power Request No. 6, 7, 10, and 11 for FMC Corporation and Solutia, Inc. filings.
c. See Response to Staff Request No. 26(b).

CERTIFICATE OF SERVICE

I hereby certify that I have this 8th day of February 2002, served the foregoing RESPONSE TO FIRST PRODUCTION REQUEST OF THE COMMISSION STAFF TO ASTARIS, LLC. in case no. IPC-E-01-43, by electronically filing a copy thereof, postage prepaid, to the following:

LARRY D. RIPLEY
IDAHO POWER COMPANY
PO BOX 70
BOISE, ID 83707-0070
e-mail: [e-mail]
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
e-mail: [e-mail]
ROBERT M POMEROY JR
THORVALD A NELSON
HOLLAND & HART LLP
8390 E CRESCENT PKWY, STE 400
GREENWOOD VILLAGE CO 80111
e-mail: [e-mail]
MIQUEL F UGARTE
ASTARIS LLC
622 EMERSON RD
PO BOX 411160
ST LOUIS MO 63141
e-mail: [e-mail]
RICHARD PASQUIER
FMC CORPORATION
1735 MARKET ST
PHILADELPIA PA 19103
e-mail: [e-mail]
RANDALL C. BUDGE
RACINE OLSON NYE ET AL
PO BOX 1391
POCATELLO, ID 83204-1391
e-mail: [e-mail]
PETER J. RICHARDSON
RICHARDSON & O’LEARY
PO BOX 1849
EAGLE ID 83616
e-mail: [e-mail]
ANTHONY YANKEL
29814 LAKE RD.
BAY VILLAGE, OH 44140
e-mail: [e-mail]

SECRETARY