HomeMy WebLinkAboutBINZ.txt
1 (The following proceedings were
2 had in open hearing.)
3 (Astaris Exhibit Nos. 206 and 207,
4 having been premarked for identification, were
5 admitted into evidence.)
6 MR. NELSON: Mr. Binz is now -- I
7 tender him for cross-examination, Mr. Chairman.
8 COMMISSIONER KJELLANDER: Thank you.
9 Mr. Richardson.
10 MR. RICHARDSON: Thank you,
11 Mr. Chairman.
12
13 CROSS-EXAMINATION
14
15 BY MR. RICHARDSON:
16 Q. Good morning, Mr. Binz.
17 A. Good morning.
18 Q. On page 2 of your testimony, you're
19 asked a question on line 19 whether you have been
20 involved in regulatory cases involving issues
21 similar to those raised in this case, and then you
22 answer, "yes," and go on to explain; but then over
23 on page 8 of your testimony, on line 16, you start
24 out with you discussing that you would note that
25 when Regulators made adjustments to accounts for
427
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 very high prices, they lay the blame at the feet of
2 the Utility, not the suppliers to the Utilities.
3 Then you state that: I am not aware of any cases
4 where the Regulators acted to terminate or modify
5 vendor Contracts.
6 That seems somewhat inconsistent.
7 Could you explain for me from a regulatory
8 perspective how you distinguish this case from
9 regular rate cases?
10 A. Yes. I think, as has been fairly
11 clear in discussions in the room, this is a
12 relatively unusual situation. I think one of the
13 reasons I was actually interested in working in this
14 case was the kind of unique posture that this one
15 has. I think it calls on a relatively creative
16 thinking by a regulatory Commission and doesn't fit
17 neatly into any traditional regulatory boxes. It is
18 a situation which arose in response to a market
19 emergency and power shortage due to drought and high
20 prices. It resembles, in my view, more nearly a
21 purchase of power than a traditional DSM type
22 arrangement where you've got the luxury of time.
23 And so I think that as a general matter, although I
24 am quite familiar with the elements of such analyses
25 as cost-related revenues, issues like free riders
428
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 which come up in these, this is a very unusual set
2 of circumstances.
3 To the extent that the Commission
4 views this in the nature of a purchase of
5 capacity -- and I realize that Astaris is not a
6 generator, but we also know that the Utility needed
7 system capacity, so it tends to work like that
8 too -- to the extent that it looks at that, it would
9 be very unusual, in my history, to have seen a
10 Utility Contract of this sort changed after its
11 approval by a regulatory Commission.
12 Q. Mr. Binz, then along page 8 there, on
13 line 19, you talk about vendor Contracts. Could you
14 define what a vendor Contract is for me?
15 A. In this circumstance, I mean provision
16 of service to a Utility by an entity outside of the
17 Utility.
18 Q. And you include the Letter Agreement
19 buyback provisions as the vendor Contract?
20 A. I'm not using that in the legal term.
21 I'm suggesting this Commission needs to think of
22 that in those terms in order to arrive at the
23 correct regulatory approach to the issue. I have
24 heard the debate, I've read the Briefs about whether
25 this is subject to the body of the law which treats
429
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 how this Commission reviews after-the-fact Contracts
2 for utility services, the so-called Agricultural
3 Products Doctrine. I'm familiar with all of that.
4 It seems to me a very awkward fit to
5 say that this is the same, that reviewing a Buyback
6 Agreement for 50 megawatts at these kinds of dollars
7 under those circumstances is exactly parallel to a
8 Contract for the provision of firm power, which is
9 the kind of Contract that does come under the
10 Commission's purview for its review periodically.
11 This is similar to the purchase of power off-system.
12 It's similar to the purchase of other goods and
13 services by the Utility.
14 Now, I'm not making a legal judgment.
15 The Commission and possibly the Courts will sort all
16 that out. But I'm saying from a policy perspective,
17 I think there is a very compelling reason why the
18 Commission should view this like it views vendor
19 Contracts, and apply to that, to this Contract, the
20 sorts of analyses that would apply and regulatory
21 treatment that would apply.
22 Q. Thank you, Mr. Binz.
23 MR. RICHARDSON: Mr. Chairman, that's
24 all I have.
25 COMMISSIONER KJELLANDER: Thank you,
430
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Mr. Richardson.
2 Let's move now to Mr. Hammond.
3
4 CROSS-EXAMINATION
5
6 BY MR. HAMMOND:
7 Q. You mentioned the term "free rider."
8 Do you know what a free rider is, Mr. Binz?
9 A. In a common parlance, yes, I think as
10 applied to things like demand-side management
11 programs, yes, I do.
12 Q. Could you tell me in your view or your
13 words what that is?
14 A. I think one of the Commissioners asked
15 a question earlier of an earlier witness, Would you
16 pay for something you were going to get for free?
17 That's sort of the classic situation
18 which somebody is paid for a service that they would
19 have undertaken anyway. And in the utility world, I
20 think this term came into use mainly when
21 demand-side management programs were initiated, so
22 that the classic case would be Utility might pay for
23 insulation or light bulbs or something like that,
24 and the question is we're giving people money to buy
25 these things, it offsets load, it has an analytical
431
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 value to the Utility, but won't some of these people
2 do that anyway? And so designing your programs, DSM
3 programs, for example, to minimize the possibility
4 of a lot of free riders improves the efficiency of
5 the program, and that's how that tends to come into
6 the debate.
7 Q. Isn't the load reduction that Astaris
8 is being paid for in this matter a demand-side
9 management program?
10 A. It's got elements of lots of things,
11 as I said. It's a true in-between issue, as far as
12 I'm concerned. I do not know, in my experience, of
13 an issue quite like this one coming before a
14 regulatory Commission. And I think that part of the
15 analysis about -- part of the analysis that would
16 apply to demand-side management makes sense in this
17 case.
18 Q. You stated that when the Commission
19 approved the Letter Agreement, that regulation did
20 its job.
21 Is it not also regulation's job to
22 ensure that rates are not unjust and unreasonable?
23 A. As a general matter.
24 I was a consumer advocate for the
25 State of Colorado for many years and I saw that as
432
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 my duty, along with the Colorado Commission, to make
2 sure that ratepayers got the right deal at all
3 times. And I certainly understand your client's
4 interest in this. I applaud Staff's attempt to
5 protect consumers in this matter through what
6 they -- what they are doing. But as I said in my
7 testimony, unfortunately, I think the effort here,
8 for reasons I said on my testimony, will cause some
9 difficulties for regulation that, unbalanced, add up
10 to my advice that it should not undertake the
11 reformation of a Contract of this sort.
12 MR. HAMMOND: I don't have any
13 further -- excuse me. I don't have any further
14 questions.
15 COMMISSIONER KJELLANDER: Mr. Ripley.
16 MR. RIPLEY: Yes, just a few.
17
18 CROSS-EXAMINATION
19
20 BY MR. RIPLEY:
21 Q. Mr. Binz, I would direct your
22 attention to page 16 of your testimony, commencing
23 at line 15, and there you are asked to discuss the
24 Staff's presentation and you start out -- your
25 answer was As the Commission knows, the Energy
433
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Service Agreement between Astaris and Idaho Power
2 Company requires the Utility to make available and
3 Astaris to purchase a block of 120 megawatts of
4 power at a rate specified in the Contract.
5 Do you see that?
6 A. Yes.
7 Q. Then you go on at -- on page 17, line
8 2, and say The take-or-pay obligation under the
9 Contract is for 120,000 kilowatt hours per hour?
10 A. Yes.
11 Q. Do you see that?
12 A. Yes.
13 Q. Now, how are you using the term,
14 "take-or-pay obligation"?
15 A. Not in a legal sense. I'm using it in
16 what I think is sort of a commonly-understood sense
17 that even if you don't take the power, you pay for
18 it.
19 Q. Now, that is a fairly common term in
20 the utility industry, is it not?
21 A. It's in a lot of Contracts, yes.
22 Q. And isn't it the way that it is used
23 in the utility Contracts, the take-or-pay obligation
24 is you either take the power or you pay for it?
25 A. Up to a point, yes. What happens when
434
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 the provision is triggered and issues such as those
2 raised in this case where part of it is part of the
3 power taking is then reverted to the Utility I think
4 changes that analysis, but, yes.
5 Q. All right. Now, take-or-pay
6 obligations are very common in the natural gas
7 industry, are they not?
8 A. They are.
9 Q. And how is the normal usage of
10 take-or-pay gas Contracts interpreted?
11 A. I'm aware of the fact that they are
12 common. I have not been involved in any litigation
13 or regulation where that's been an issue, per se, so
14 I'm not able to answer your question on that last
15 point.
16 Q. You use the term and then you don't
17 really have very much knowledge about it?
18 A. I don't believe I said that. I
19 said -- you asked me about natural gas and the
20 application take-or-pay.
21 Q. So you don't know anything about the
22 natural gas business?
23 A. I didn't say that either.
24 Q. You don't know very much about the
25 take-or-pay Contracts in the natural gas business?
435
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 A. I said I've not been involved in cases
2 where that's been an issue. I'm aware generally of
3 the concept of take-or-pay as applied to natural gas
4 and I've read a lot of natural gas Contracts over
5 the years, yes.
6 Q. All right. Let me ask you this:
7 Isn't the normal usage of a natural
8 gas take-or-pay Contract the fact that you either
9 take the gas or you pay for it?
10 A. I would agree with that, yes.
11 Q. There's no provision that if you don't
12 take the gas, that you're then entitled to some
13 offset?
14 A. I am not able to answer that.
15 Q. Now, on page 5 of your testimony, you
16 have your bullet points, lines 14 through 19. You
17 say Staff's analysis significantly overstates the
18 benefits of the buyback. Its analysis fails to
19 account for the payment made to Idaho Power by
20 Astaris under the existing Purchase Power Contract.
21 Now, what payment are you referring to
22 when you refer to that analysis, the entire 120
23 megawatt payment or the 50 megawatts payment?
24 A. I'm referring there to the payment for
25 50 megawatt -- it's 50,000 kilowatt hours per hour.
436
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. All right. Now, as a consumer
2 advocate, do you believe that it would be proper for
3 this Commission to insist that Astaris present
4 documents that would demonstrate the decision to
5 close was made after the March Agreement?
6 A. Would you repeat the question again?
7 Q. Yes. Do you believe, based upon your
8 experience as a consumer advocate, it would be
9 reasonable for this Commission to insist that
10 Astaris present documents that demonstrate the
11 decision to close was made after March, after the
12 March Agreement?
13 A. You're asking me in this case --
14 Q. Yes.
15 A. -- or should the Commission have
16 investigated the same?
17 Q. If it would be reasonable for the
18 Commission to insist upon that in this proceeding.
19 A. As I suggested in my testimony, I
20 don't think that issue should be dispositive as to
21 whether or not the Contract is honored. That's my
22 position.
23 I also am fully aware that it's an
24 issue of interest at several levels whether or not
25 Astaris planned to close both -- both facilities at
437
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 that point. They were clearly going to close one,
2 because they were selling back 50 megawatts of power
3 and could not operate more than one furnace.
4 I say in my testimony that I have
5 reviewed records and spoken with Staff from several
6 corporations here, and I'm convinced there's no free
7 rider issue here. They passed up a deal in February
8 that would have paid them more than they're being
9 paid under this Buyback Agreement to shut down
10 entirely and did not take that deal. So I'm -- I'm
11 untroubled by suggestions that they were planning to
12 shut down any way, because I do not believe they
13 were.
14 Q. All right. But let's answer my
15 question. You've now gotten your speech into the
16 record, Mr. Binz. My question is this:
17 Do you believe that it is reasonable
18 in this proceeding for this Commission to insist
19 that Astaris present documents that demonstrate the
20 decision to close the Pocatello plant in its
21 entirety was made after the March Voluntary Load
22 Reduction Agreement?
23 A. If I were a Regulator, I would not
24 need that information to make a Decision in this
25 case. This Commission may ask or not for that
438
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 information. From my perspective, it is not
2 dispositive.
3 Q. Now -- and the reason for that is it
4 shouldn't matter, in your opinion, whether Astaris
5 intended to close or not its entire plant?
6 A. I said I do not believe they were.
7 Q. That isn't my question, Mr. Binz. My
8 question is you don't believe that it's relevant
9 whether they intended to close or not?
10 A. As a general matter -- I've tried to
11 say this earlier -- as a general matter, you at the
12 front end of a project like this attempt to assure
13 yourself that you're not paying for something you
14 don't have to pay for.
15 Q. But as a consumer advocate, you are
16 telling me that this Commission should not concern
17 itself as to whether or not Astaris had made its
18 decision to close its plant entirely before it
19 entered into the voluntary load reduction?
20 A. I believe that it is a matter of
21 interest. I do not think it should determine
22 whether or not this Contract is honored.
23 Q. And why not?
24 A. Because as I set out in several
25 different ways in my Contract (sic), regulation has
439
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 certain abilities, gives out certain signals and
2 incentives to the entire industry, and I think that
3 abrogating a Contract at this point under these
4 circumstances delivers very wrong signals and very
5 likely poisons the well going forward for these
6 kinds of arrangements.
7 I also, on the same information that
8 is before the Commission right now, looking at
9 Commissioner Smith also relaid the 11-year history
10 of her history with these kinds of issues. I think
11 that the analysis done in March by this Commission
12 was exactly the right analysis, and although it's
13 very tempting to look back at a previous Decision to
14 see how it worked out, it's not consistent utility
15 regulatory practice to go back and do a what-if, and
16 that's what that fact would invite.
17 Q. So in short, it is irrelevant, in your
18 opinion, as to whether or not Astaris intended to
19 close its plant or not prior to the time it entered
20 into the March Agreement?
21 MR. NELSON: I'm going to object to
22 that question as I believe he misstates Mr. Binz's
23 earlier testimony as his preface to that question.
24 COMMISSIONER KJELLANDER: I think that
25 Mr. Binz can respond appropriately to that
440
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 question. If that's what he believes, then that can
2 be part of his response.
3 THE WITNESS: Would you ask it again?
4 MR. RIPLEY: Could you read it back,
5 please?
6 (Whereupon, the requested portion
7 of the record was read by the court reporter.)
8 THE WITNESS: My testimony in this is
9 that the internal economics to Astaris of this deal
10 are not -- is not the analysis this Commission
11 should undertake. And to the extent that Astaris
12 considered or didn't consider shutting this plant
13 requires this Commission to go into that analysis.
14 I do not think that that, in a perfect regulatory
15 world -- I'll say that -- is relevant.
16 I'm also a veteran of a lot of work
17 before Regulatory Commissions, and if I were a
18 Commissioner here, I would want to know whether I
19 had paid for something I could have gotten for free.
20 I don't think they did in this case. If this
21 Commission wants to inquire into it, it may do so.
22 My advice is this should not be the dispositive
23 issue in whether the Contract is honored.
24 Q. Now, you then say there is another way
25 to solve the Staff's problem of rate shock, if you
441
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 will -- paraphrasing -- and that's just phase out
2 the recovery of the payment over a longer period of
3 time. Is that correct?
4 A. I said that's an option this
5 Commission should consider, yes.
6 Q. That would be very fortuitous for
7 Astaris, would it not, since they're canceling their
8 Contract at the end of March of '03? If you phase
9 out the payment over a long period of time, Astaris
10 would get all the benefits and wouldn't have to pay
11 anything?
12 A. You're referring to its PCA for that
13 period of time.
14 Q. Yeah.
15 A. It would have that effect, yes.
16 Q. The take-or-pay on 120?
17 A. Right. That's a relatively small
18 issue in the scheme of things, but, yes.
19 Q. Did you take that into consideration
20 when you made your recommendation?
21 A. Well, I ignored something else, and
22 that is that Astaris will pay through the PCA on the
23 full 120 megawatts for the period as well.
24 Q. That was your assumption?
25 A. They get a bill for 120 megawatts and
442
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 it includes the PCA. So actually the costs that I
2 put in mine, I was calculating what the effective
3 discount to forward market prices were. I did not
4 put in -- I should have, but I did not -- put in the
5 PCA recovery on 70 megawatts.
6 Q. And you're assuming that Astaris was
7 going to pay take-or-pay on 120 megawatts when you
8 made that analysis. That's all I was asking.
9 A. I didn't make the analysis, that's my
10 point.
11 I'm sorry. We're not -- we're not
12 clicking here. I did not make that analysis. I'm
13 saying today that that's an additional factor.
14 Q. Which will be a plus?
15 A. Plus? I'm sorry.
16 Q. If you're looking at the pros and cons
17 of whether to phase it in or phase it out and you
18 say, well, Astaris is going to pay for 120 megawatts
19 of power through March of '03, then that would be a
20 reason, I assume, that you would use to support your
21 idea of a phasing?
22 A. No, I'm sorry, we're missing each
23 other. My point was a different one. You asked me
24 earlier did I consider the payments that Astaris
25 would make after the termination after the end of
443
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 the ESA.
2 Q. Yeah, about the fact that Astaris
3 would not make any payments.
4 A. That's right, and the effect of
5 spreading that out. And I said that's a fairly
6 small effect is what I said.
7 And then I said -- and maybe I wasn't
8 clear; this is my next point -- that that small
9 effect on the tail of this is swamped by an
10 adjustment I didn't make; namely, the additional
11 recovery of this program cost in the PCA on the
12 120 -- full 120 megawatts during the pendency of the
13 ESA.
14 Q. Okay. I think you're agreeing with me
15 that when you did that, you assumed that Astaris
16 would continue to pay take-or-pay on 120 megawatts
17 for the period of time until the Contract --
18 A. We're going to loop back around.
19 Q. I think it's important.
20 A. Yes, except that I did not do the
21 arithmetic.
22 Q. I understand that.
23 A. So I didn't make any assumption at
24 all. I'm telling you today that that's an offset
25 that could be made, yes, under the assumption they
444
HEDRICK COURT REPORTING BINZ (X)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 paid. I'm --
2 Q. All right.
3 A. I'm trying to answer your question.
4 Q. Yes. Just one second.
5 On page 20, lines 12 through 14, do
6 you see that?
7 A. Yes.
8 Q. Now, you describe the Astaris Contract
9 as a capacity reduction. Is that correct?
10 A. Yes.
11 Q. And by "capacity reduction," do I take
12 it that you mean that Astaris has agreed not to
13 consume?
14 A. I'm using "capacity reduction" to
15 describe the letter -- the effect of the Letter
16 Agreement.
17 Q. Which is an Agreement not to consume?
18 A. Yes.
19 MR. RIPLEY: Thank you. That's all
20 the questions I have.
21
22 EXAMINATION
23
24 BY COMMISSIONER KJELLANDER:
25 Q. And I believe we're ready for
445
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 questions from the Commission, if I'm not mistaken,
2 and I'll go ahead and lead off on at least one here,
3 Mr. Binz.
4 In your testimony, you made reference
5 to the abrogation of the Contract would be, in
6 essence, "poisoning the well," I believe are your
7 words, for future Contracts. I guess I want to get
8 to the flip side of that.
9 How does closing the operation within
10 months of a Contract being put together for this
11 Letter Agreement also poison the well for future
12 deals? Does it have a similar effect?
13 A. I certainly -- well, you mean with
14 respect to this Commission's interest in similar
15 deals?
16 Q. Absolutely.
17 A. I certainly do understand that, and
18 it's the closing the second facility of course we're
19 talking about here. The first Order was the basis
20 for closing it, and so they were on a ramp to do
21 that.
22 I think it's a very unfortunate
23 situation. I am very empathetic to the Decision
24 you're facing. I think it's a very unfortunate
25 situation, and I must say that when I signed on to
446
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 take this case, it's one of the things I was
2 interested in, and I talked to them about it, and I
3 learned how they made the decision to shut down
4 entirely.
5 My context is, yes, Commissioner
6 Smith, they would have eventually shut down anyway,
7 and I serve you the capacity buyback as almost
8 inadvertently triggering the complete shutdown,
9 because what happened was the basis over which they
10 were recovering, fixed costs shrunk in a way they
11 didn't understand.
12 And they were not looking for
13 phosphorus in the world market until they agreed to
14 shut down and sell the 50 megawatts back. They
15 started looking. They were afraid they weren't
16 going to buy enough for this plant that was shut
17 down to displace that and they found out there was
18 lots out there, and so the events kind of cascaded.
19 Now, you're stuck with a Decision
20 which looks like in retrospect you would have done
21 differently had you known the future, and of course
22 you might have, but unfortunately, none of us gets
23 that choice.
24 Q. But to bring you closer to that
25 specific issue, there's a chilling effect on both
447
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 sides as we start to look at future Contracts with
2 regards to a plant closing after a Contract has been
3 initiated like this?
4 A. I agree completely, and so if I could
5 just say one of the lessons out of this that I am
6 suggesting is that you need to think through and
7 articulate exactly what kinds of things you would
8 like to see come forward, and I -- contingencies
9 like that might well be fair. I think it's
10 problematic to apply it now. That's really the
11 thrust of my analysis, but, yes.
12 And you may not be interested any
13 longer in a forward market price lock-in. I mean,
14 everybody was, but it turned out we wish we weren't,
15 at least from the consumer side.
16 Q. And I do have another question before
17 I go there. First of all, I want to thank you for
18 the elevation of stature in referring to me as
19 Commissioner Smith.
20 VOICES: (Laughter.)
21 Q. BY COMMISSIONER KJELLANDER: First of
22 all, that is a compliment, and I take it as a
23 compliment.
24 A. Actually, I did -- I was referring to
25 her when I said that. I'm sorry.
448
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. I was fishing for a compliment. So
2 let me go back now.
3 You were very familiar then with the
4 Letter Agreement, Exhibit 111 I believe it is?
5 A. I've read it lots of times.
6 Q. Well, on page 6 of 8 in Exhibit
7 No. 111 -- and I'll give you time to get there.
8 Section 3 and Section 5 is what I would like to
9 refer to on that.
10 A. I'm very sorry. Which document are we
11 talking about?
12 Q. It's Exhibit 111, the Letter Agreement
13 that is signed by --
14 MR. RIPLEY: Excuse me, Mr. Chairman.
15 That's Staff's Exhibit 111.
16 Q. BY COMMISSIONER KJELLANDER: I'm
17 sorry. Staff Exhibit 111.
18 A. That's what I need. I've got it.
19 Q. And if you could refer to page 6?
20 A. Six of eight?
21 Q. Section 3 and also Section 5 are the
22 two areas I would like to just touch on. And in
23 reading Section 3, it says Continuing through the
24 term of this Agreement, Astaris agrees to consume no
25 more than 70,000 kilowatts of energy per hour.
449
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 And in that, I'd like to focus on
2 "Astaris agrees to consume no more than 70,000
3 kilowatts of energy per hour."
4 And then in Section 5, it refers to
5 The parties recognize that after March 31, 2003,
6 Astaris is likely to require continuing electrical
7 service at its Pocatello facility to support
8 manufacturing operations at the facility.
9 And I'll stop at that point.
10 Could you conclude legitimately from
11 this portion of the Letter Agreement that there is
12 some sort of underlying belief that the Company is
13 going to be in business and, in essence, that is a
14 part of this Agreement, that there is a belief and
15 an understanding that the Company will be in
16 business when you see language like that?
17 You said that if you were a
18 Commissioner. Well, let's put yourself in that role
19 and you're looking at this. Wouldn't you think that
20 there was some underlying core belief that because
21 of the language contained in this Letter Agreement,
22 that the Company would remain in business? Would
23 you have that belief?
24 A. Yes, I think everybody had that belief
25 when this was written.
450
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 Q. Okay. And now they're not?
2 A. They're not in business, that's right.
3 Q. Thank you.
4 A. If I might, Commissioner, the other
5 thing to fall back on there is the take-or-pay
6 issue. We were going to -- to the extent that that
7 was not -- the power was not resold -- and I don't
8 want to get into the debate about mitigation -- but
9 to the extent that that power was still sitting
10 there, it would have been paid for.
11 Q. Thank you.
12 COMMISSIONER KJELLANDER: Are there
13 further questions from the Commission? Commissioner
14 Smith.
15 COMMISSIONER SMITH: Yes.
16
17 EXAMINATION
18
19 BY COMMISSIONER SMITH:
20 Q. Welcome to Idaho, Mr. Binz.
21 A. Thank you, Commissioner Kjellander.
22 Is that right?
23 VOICES: (Laughter.)
24 Q. BY COMMISSIONER SMITH: Thanks. I've
25 just been promoted. Okay.
451
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 A. Thank you. Thank you, Commissioner
2 Smith.
3 Q. I guess you've answered some of my
4 questions, but since I wrote them I'll start in the
5 order I wrote them, and that is, when did you
6 prepare your written testimony?
7 A. I don't know if I can tell you. When
8 was it due?
9 Q. I can tell you it was filed at the
10 Commission on January 29, 2002, at 4:33 p.m.
11 A. I worked on that testimony for about
12 three weeks up until the day it was filed, so I
13 prepared it over a space of January.
14 Q. And when you were preparing it, what
15 were you using? I assume you had the Staff's
16 filing, prefiled; you were, in essence, trying to
17 respond to that?
18 A. That was one of the things I was using
19 or looking at.
20 Q. Okay. What else did you have?
21 A. Well, I put a whole list in my
22 testimony. Let me just refer to that.
23 Q. Okay.
24 A. I reviewed a number of proceedings at
25 this Commission going back in time. I remember
452
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 reviewing a full record in the PCA case that was
2 filed in October, and that was for the deferral.
3 I reviewed an IRP Order and some of
4 the comments in that.
5 I reviewed all the relevant Contracts
6 and all the documents filed in this docket at that
7 point.
8 Q. Okay. And you earlier gave a
9 description I think of some conversations you also
10 had with your client?
11 A. Typically, through Counsel.
12 Q. Now, you've been present in the
13 hearing room these last two days, haven't you?
14 A. Yes.
15 Q. Were there any surprises here for you
16 today in terms of what your client has done in terms
17 of shuffling corporate responsibilities for the
18 plant site, or in terms of its filings in other
19 fora?
20 A. I was aware of the filing on
21 take-and-pay. I was aware of that.
22 Q. In the District Court?
23 A. Yes. You ask about changing the --
24 you said, Shuffling of corporate responsibilities.
25 I was generally -- I was aware that
453
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 the plant had been transferred. I think that's
2 about all. I didn't really factor that in in any
3 way, but I think that's about all.
4 Q. And I guess I just want to make it
5 very clear. You know, you use the phrase, People
6 are doing a what-if.
7 Well, I'm not doing a what-if. I'm
8 not one to go back and look at what happened and
9 grieve over it or be elated. I live in the present
10 and the future, and we have to go forward with what
11 things are now. And, you know, it could have been
12 that the way things were now is that we had a Staff
13 filing saying We think the rate is unfair; and we
14 had an Astaris filing saying We can't use 120
15 anymore, relieve us of this obligation under the
16 Contract; and the Commission could have sat down and
17 said, Well, we see there are equities on both
18 sides. And we could have fashioned some solution
19 that would have been fair to Astaris, fair to the
20 ratepayers, fair to Idaho Power, and the Commission
21 could have felt it adequately addressed everybody's
22 concerns and needs.
23 But we don't have that situation here,
24 do we? Essentially, we only have one half of the
25 whole picture, which is the Staff Petition?
454
HEDRICK COURT REPORTING BINZ (Com)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 A. And the other part being the
2 take-or-pay litigation? I'm sorry.
3 Q. The issue of this Company which can no
4 longer take the power that it's obligated by
5 Contract to take.
6 A. Correct.
7 COMMISSIONER SMITH: Thank you,
8 Mr. Chairman.
9 COMMISSIONER KJELLANDER: And we'll
10 move now to redirect.
11 MR. NELSON: Thank you, Mr. Chairman.
12
13 REDIRECT EXAMINATION
14
15 BY MR. NELSON:
16 Q. I believe just one question that came
17 up from the last question that Commissioner Smith
18 raised, which I believe, Mr. Binz, do you recall
19 when Commissioner Smith asked the question and I
20 believe made the conclusion that Astaris is no
21 longer able to take the power that it's obligated to
22 take? Do you recall that, Mr. Binz?
23 A. Yes.
24 Q. Whether or not Astaris is able to take
25 the power, are you aware of whether or not Astaris
455
HEDRICK COURT REPORTING BINZ (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 continues to pay for the 120 -- the full 120
2 megawatts of power at this point in time?
3 A. They are, today, paying for the full
4 amount. I asked them in preparation of my testimony
5 what the -- their position was with respect to this.
6 I was told they agreed they were obliged to pay for
7 the 120 megawatts. I asked them because it was
8 important to me for the same reason Commissioner
9 Smith just relaid, what was this lawsuit about.
10 And I will admit not having read the
11 Complaint, but the representation to me that this is
12 the case, this is what I relied on, is that it had
13 to do with whether the pay obligation was absolute
14 or whether there was -- I need to be careful here;
15 I'm not playing a lawyer -- whether or not there was
16 a consideration that if the power was sold to
17 someone else, disposed of, that there would be a
18 consideration in the payment. But I was -- I took
19 it to understand that Astaris and its corporate
20 parents were not taking the position that they
21 should be able to get out of the take-or-pay
22 provision. It had more to do with an interpretation
23 of what happens with respect to mitigation of the
24 take-or-pay provision.
25 Q. And putting aside the take-or-pay
456
HEDRICK COURT REPORTING BINZ (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 litigation for a moment, if Astaris continues to pay
2 for the full 120 megawatts of power, is there any
3 difference as to the rest of the Idaho Power Idaho
4 ratepayers whether Astaris actually takes that power
5 or not?
6 A. No, the payments are going to be made.
7 COMMISSIONER SMITH: Mr. Chairman, I
8 apologize for interrupting this redirect, but I
9 would ask Mr. Binz to reconsider his answer to that
10 question, because the Company does load resource
11 planning and gets resources based on the obligations
12 it has in its stack.
13 And so I think you ought to be
14 carefully considering everything else that could be
15 affected by that question.
16 THE WITNESS: Commissioner Smith, my
17 answer should be taken to be narrow in the sense of
18 rates. That's what I took the question to mean.
19 Q. BY MR. NELSON: Is there -- is there
20 an impact -- perhaps to get to part of the question
21 that Commissioner Smith was raising -- is there an
22 impact on the cost to Idaho Power if Astaris
23 continues to pay the full demand and energy rate for
24 the power that Idaho Power then does not need to
25 incur the cost to produce?
457
HEDRICK COURT REPORTING BINZ (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 A. I'm not sure -- would you mind
2 repeating the question, please?
3 Q. Are there any cost savings to
4 Idaho Power associated with not actually generating
5 the power that Astaris is nevertheless paying for?
6 A. There was a lot of discussion earlier
7 about whether they have to stand by with capacity,
8 and I can't contribute to that. We heard what
9 Astaris said their projected requirements are.
10 My answer to you earlier was that the
11 120 megawatts will be paid for under the terms, as I
12 understand it, with everything that's going forward.
13 The issue of whether Idaho Power
14 maintains capacity to produce 120 megawatts on
15 demand is a separate question I don't have
16 information about. I know that Astaris is saying
17 it's highly likely we will need no more than three.
18 Commissioner Hansen, you asked this
19 question about notice. That all feeds into that.
20 Q. Thank you, Mr. Binz.
21 MR. NELSON: I have no more questions,
22 Mr. Chairman.
23 COMMISSIONER KJELLANDER: Thank you.
24 At this point, given the fact that we
25 don't want to run into Saturday, or even late this
458
HEDRICK COURT REPORTING BINZ (Di)
P.O. BOX 578, BOISE, ID 83701 Astaris
1 afternoon, what we will probably do is go ahead and
2 dismiss this witness and thank you for coming here
3 to Idaho and participating in the process, and we
4 will go ahead and start -- start -- with the
5 rebuttal, because I do believe that does conclude
6 your case with direct. Is that correct?
7 MR. NELSON: Yes, Mr. Chairman.
8 COMMISSIONER KJELLANDER: Okay. So
9 let's get started with the intent that when we find
10 a breaking point once we get close to noon, we will
11 take it.
12 (The witness left the stand.)
13 COMMISSIONER KJELLANDER: In lieu of
14 keeping my seat here, what we will do now is break
15 for lunch and we will return at 1:00, at which time
16 we will proceed accordingly and go from there. Have
17 a nice lunch.
18 (Noon recess.)
19
20
21
22
23
24
25
459
HEDRICK COURT REPORTING AUTHENTICATION
P.O. BOX 578, BOISE, ID 83701
1 AUTHENTICATION
2
3
4 This is to certify that the foregoing
5 is a true and correct transcript to the best of my
6 ability of the proceedings held in the matter of the
7 Petition of the Commission Staff requesting that the
8 Commission investigate the buyback rates in the
9 Letter Agreement entered into by Idaho Power Company
10 and Astaris LLC, Case No. IPC-E-01-43, commencing on
11 Friday, February 22, 2002 at the Commission Hearing
12 Room, 472 West Washington, Boise, Idaho, and the
13 original thereof for the file of the Commission.
14 Accuracy of all prefiled testimony as
15 originally submitted to this Reporter and
16 incorporated herein at the direction of the
17 Commission is the sole responsibility of the
18 submitting parties.
19
20
21 __________________________________
WENDY J. MURRAY, Notary Public
22 in and for the State of Idaho,
residing at Meridian, Idaho.
23 My Commission expires 2-5-2008.
Idaho CSR No. 475
24
25
460
HEDRICK COURT REPORTING AUTHENTICATION
P.O. BOX 578, BOISE, ID 83701