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1 (The following proceedings were had in
2 open hearing.)
3 MR. HAMMOND: I do have one additional
4 matter that needs to be addressed if the Commission
5 will --
6 COMMISSIONER KJELLANDER: With that
7 objection, and everybody has a right to object on
8 about what he's going about to say.
9 Q BY MR. HAMMOND: Were you present
10 yesterday while Mr. Ripley crossed Mr. Seder on the
11 Pocatello closure, on the issue of the Pocatello
12 closure?
13 A Yes, I was.
14 Q In respect to documents supplied to
15 Staff in response to its production requests, Nos. 27
16 and 28, what documents were provided for your review?
17 And were those documents provided prior to your
18 filing your testimony?
19 A There were -- in specific response to
20 No. 27 and 28, those documents, some of them were
21 filed prior to me filing my testimony. The others I
22 received after filing my testimony, as far as the
23 confidential documents. And it was just due to the
24 mechanics of being able to get them.
25 They were not items that I had
519
1 reviewed at the offices of Holland & Hart with the
2 confidential information. Those documents included
3 management reports that may have talked about the
4 closure. But I did not receive any documents such as
5 those referenced by Mr. Seder, regarding Project
6 Peace, that would specifically talk about the
7 Company's plans for the Pocatello closure.
8 Q Now, just in all candor, do you know
9 when Staff's production request was sent, Nos. 27 and
10 28 to Astaris?
11 A I do not have that piece of it with
12 me. I have the date that it was responded to, but I
13 do not have when it was sent.
14 Q But to your knowledge, they responded
15 timely on that Wednesday?
16 A I'm assuming they did. They responded
17 electronically on the 18th, and then the confidential
18 documents were forwarded later on.
19 Q And just because of the timing,
20 essentially, you were not able to at least see those
21 prior to filing your testimony?
22 A That's correct. And I did not see
23 anything in those documents -- those were primarily
24 documents between Idaho Power and Astaris, and there
25 were very limited documents regarding the Pocatello
520
1 closure. There was a summary that was provided that
2 talks about -- it was basically an employee briefing
3 at Pocatello and a few other minor documents.
4 But none of that provided a change to
5 my testimony. It just reaffirmed to me that not all
6 of the costs were associated with the letter
7 agreement itself, but they were either associated
8 with the continuing practice of the Company to move
9 away from the phosphorus or P-4 processing, and also
10 the ultimate closure of the Company. One of those
11 two items were where those costs should be recorded
12 for an economic analysis of what was the cost causer.
13 MR. HAMMOND: With that, we would
14 tender Ms. Carlock for cross.
15 COMMISSIONER KJELLANDER: Thank you.
16 And we'll begin with Mr. Ripley.
17 MR. RIPLEY: No questions.
18 COMMISSIONER KJELLANDER: Move to
19 Mr. Richardson.
20 MR. RICHARDSON: Thank you,
21 Mr. Chairman. I have no witnesses for this witness.
22 COMMISSIONER KJELLANDER: We will then
23 move to Counsel representing Astaris.
24 MR. TARPEY: Thank you, Mr. Chairman.
25 With regard to the testimony that was given to the
521
1 Staff, I may at some point just like to have a few
2 moments for a recess, so I can look at some stuff.
3 That's the first I heard, and John and I didn't have
4 a chance to go ahead and look beforehand.
5 I'll do my cross, which is on stuff
6 that was given to us in advance. I don't have that
7 much, so we can shortly do that. Like I say, I just
8 want to have a chance to have a few minutes to talk
9 with co-counsel.
10 COMMISSIONER KJELLANDER: That's only
11 fair.
12 MR. TARPEY: Okay. I appreciate that.
13
14 CROSS-EXAMINATION
15
16 BY MR. TARPEY:
17 Q Good afternoon, Ms. Carlock.
18 A Good afternoon.
19 Q What I'd like to do is to ask you some
20 questions, which are primarily directed or working
21 off the work papers that you had provided to us. And
22 do you have a set of those available to you up there?
23 A I do have them available on that cart
24 if I need to get them.
25 Q I'm talking about the work papers, the
522
1 five or six pages that you faxed to us.
2 A I can pull that out of the documents.
3 I did not keep a copy myself. I do have some notes
4 that reference those. If you have an extra copy
5 handy, it might be faster.
6 MR. TARPEY: Maybe, Mr. Chairman, what
7 we could do is, maybe we ought to take a few minutes
8 and I'll cover both things, and see if I have an
9 extra copy for her and take some oral testimony.
10 COMMISSIONER KJELLANDER: It sounds
11 like a good recommendation. And we'll go off the
12 record.
13 (A recess was had.)
14 COMMISSIONER KJELLANDER: We'll go
15 back on the record. And Counsel for Astaris would
16 like to continue.
17 MR. TARPEY: If I could, and it's
18 somewhat unusual, but Mr. Pomeroy and Mr. Hammond and
19 Ms. Carlock have looked at further documents that she
20 was talking about that she had gotten or such. And I
21 think it might be easier if Mr. Pomeroy or
22 Mr. Hammond summarized what they concluded there.
23 COMMISSIONER KJELLANDER: Why don't we
24 let Mr. Pomeroy summarize. And if there is any
25 additional comment to be made, Mr. Hammond can jump
523
1 on board there. Mr. Pomeroy.
2 MR. POMEROY: Thank you, Mr. Chairman.
3 I think what's happened is, in the scramble on the
4 time table we had here to get confidential documents
5 available for Ms. Carlock's review in our office here
6 in town, we provided documents in segments as we were
7 able to get make them available and get them. They
8 were confidential documents. They are subject to a
9 protective agreement, and therefore, have not been
10 copied and made a part of any record.
11 Having said all that, apparently,
12 somehow in the flurry of paper, there were some
13 documents referenced by Mr. Seder today, which he
14 referred to as the Project Peace documents, which he
15 described what that was. So I won't go through that.
16 But the documents, in essence, set up the closure
17 evaluation team in June for the Pocatello operations.
18 Those documents, apparently, were not
19 seen by Ms. Carlock, although we had thought we had
20 provided them. And right now, since the documents
21 are over here, there is no way for me to prove
22 whether they were there before or not. But in any
23 event, we have copies that we will leave for
24 Ms. Carlock's review. Rather than stopping the
25 hearing now and having her review them, we will leave
524
1 them for her review.
2 And to the extent that something needs
3 to happen as a result of that, in terms of further
4 paper or whatever, we'll do whatever it takes to
5 satisfy the record on that subject. And while I'm at
6 it, since the question came up about documentary
7 evidence, of course, this information which is highly
8 confidential business information, is potentially
9 available for review by the Commission, but we
10 haven't put it in the record because of the sensitive
11 nature of the documents.
12 So I'm not intending to offer any new
13 exhibits or anything of the sort. But I just simply
14 made that offer in case, for the Commission's
15 benefit. If the Commission wants to see -- it comes
16 up to see more documentation about this so-called
17 free-riding issue, if you will.
18 COMMISSIONER KJELLANDER: Mr. Hammond,
19 does that pretty much comport with your beliefs?
20 MR. HAMMOND: Yes, I believe that
21 things happened fast and furious. And I don't have a
22 reason to believe that they didn't attempt to get
23 these to us. There may have been a snafu in the last
24 flurry of days.
25 COMMISSIONER KJELLANDER: So the
525
1 answer would be yes?
2 MR. HAMMOND: Yes. Sorry.
3 COMMISSIONER KJELLANDER: All right.
4 MR. RIPLEY: Mr. Chairman, just one
5 question, and that is: If Idaho Power Company
6 desires to review those documents, then I assume
7 Astaris will make available the confidentiality
8 documents that they desire for us to sign?
9 MR. POMEROY: Yes.
10 MR. RIPLEY: Thank you.
11 COMMISSIONER KJELLANDER: All right.
12 And I think in essence of the brief responses we've
13 seen, we're going to move to you then.
14 MR. TARPEY: Thank you. The
15 cross-examination won't take anywhere near as long.
16 Q BY MR. TARPEY: Ms. Carlock, what I
17 wanted to ask you about the thing I started earlier
18 with regard to your testimony, basically you have
19 performed an analysis of costs for 2001. And were
20 you doing an economic analysis or responding from an
21 economic analysis with respect to what had been done
22 by Ms. McCarvill?
23 A I was looking at documents. Some of
24 them were outside of the 2001 year. But primarily
25 looking at documents that could be associated with
526
1 costs caused by the letter agreement, not necessarily
2 costs that would be associated with the closure at
3 the end of December 2001, on December 10th, or costs
4 that were caused, because the Company had moved to a
5 two-furnace operation earlier the end of 2000, the
6 beginning of 2001 for the most part. Just using two
7 furnaces, unless they had to run the third.
8 Q So if I understand this, you are
9 focusing on costs that were related to what I'll call
10 "letter agreement events," and you were also looking
11 at what I'll call "incremental costs," costs that are
12 in addition to what otherwise would have been there?
13 A The first part of your question is
14 correct. I was looking for costs that were caused
15 because of the letter agreement. The second part as
16 far as incremental costs, not all of the costs that I
17 allowed were simply incremental costs. They may have
18 occurred anyway without the letter agreement, but I
19 thought they were caused by the letter agreement. So
20 they were included.
21 Q Okay. And is it a fair statement that
22 with regard to Ms. McCarvill, she was looking at
23 costs that were incurred as it relates from her
24 perspective, as it relates to the letter agreement,
25 and it was the "accounting costs," I think, is the
527
1 term she used?
2 A This is my interpretation of what she
3 did: In looking at the analysis and the costs that
4 she put together, they were the costs that they
5 should report for financial statement purposes. It
6 was developed in the most economic light and with the
7 best tax advantages for Astaris. It was not
8 necessarily associated with what was for the letter
9 agreement itself.
10 Q One of the areas that is discussed by
11 you and by Ms. McCarvill relates to service costs?
12 A Yes.
13 Q And earlier I think at the beginning
14 of cross-examination, we had talked about some
15 documents, and what I call, work papers that you sent
16 to us?
17 A Yes.
18 Q And do you have those available to you
19 now?
20 A I do.
21 Q And have we agreed that whatever
22 handwritten notes on mine, you will not use them
23 back?
24 A That's okay. I can't read them
25 anyway.
528
1 Q One category that you looked at
2 relates to severance costs?
3 A That's correct.
4 Q And you were provided, I guess, with
5 information about the number of employees that the
6 Company was letting go as a result of the closing of
7 the one furnace, and you had a chance to analyze
8 that. And from your perspective, the number that
9 should have been utilized, the number of employees
10 and the costs associated with them, was a number that
11 was lower than that set forth by Ms. McCarvill; is
12 that correct?
13 A I think the answer is, yes, but I will
14 explain what I have looked at and what I have done.
15 What I looked at was a stack of documents that
16 included severance agreements with the Union as to
17 what would be paid. Looked at conditions and
18 exceptions, such as an exception to Pocatello if
19 there were layoffs due to cutbacks in production, or
20 if there were layoffs due to closure. Those were
21 exceptions to these documents that were set up with
22 the Union.
23 And looked at what the actual payments
24 would be. Then I also looked at for the three sites,
25 Pocatello, Kimmerer and Dry Valley, the actual
529
1 severances that occurred, and when they were
2 incurred, and what the dollar amounts were. So if
3 that's what you've paraphrased, then the answer is
4 yes.
5 Q And in Ms. McCarvill's testimony, I
6 think she identified severance costs or calculated
7 severance costs in the amount of five million
8 dollars. And if you need a reference, that's on page
9 12 of the table.
10 A (Witness complying.) She has in
11 her -- as Exhibit No. 204, a list of the employee
12 numbers and the amounts, and that would round to five
13 million. Yes.
14 Q And what is the comparable amount that
15 you developed?
16 A My rounding was 2.7 million -- I'm
17 sorry -- 2.6 million.
18 Q One of the categories, and you
19 mentioned it earlier, where there is the largest
20 difference may be on the number of employees being
21 counted, relates to Pocatello; is that correct?
22 A That's correct.
23 Q And would you explain why, with
24 respect to Pocatello, there is a big group that you
25 said that you were setting aside, and would you
530
1 explain why you had chosen those?
2 A Yes, and this rationale applies for
3 all of them.
4 Q Okay.
5 A And that is, I looked at when the
6 severance was effective. It was effective for
7 9-1-01. I looked at the time periods that the
8 employees were laid off, and when they were in the
9 actual severance state. And then looked at the
10 groupings in the documentation that then showed when
11 the layoff was reflected. And any of them that
12 occurred after 9-1 for the effective date, unless
13 they were just looking like it was just dribblers for
14 some reason or another, was looking at big blocks of
15 layoffs.
16 If they came in big blocks after that
17 time, I looked to see if it was associated with the
18 letter agreement, or if it was probably associated
19 with something else. And in that the case of both
20 the Dry Valley and the Pocatello, I believe it was
21 associated with something else. Particularly, in the
22 Pocatello associated with the closure, either the cut
23 back of the two furnaces that was earlier on, or the
24 fact that the fourth furnace closed, and the plant
25 closed entirely on December 10th. Most of the
531
1 employees that I eliminated were severed on December
2 10th.
3 Q With regard to the employees at
4 Pocatello, did the information that you had indicate
5 that the initial termination date was expected to be
6 June 30 of 2002?
7 A It indicated that there were various
8 expected times, some of them were in, for instance,
9 6-30 of '02. And then they were actually terminated
10 earlier?
11 Q Right. And with regard to the ones
12 that showed a date of June 30 of 2002, and then were
13 terminated earlier, and I think you said the day was
14 December 10 of 2001. Is that magnitude-wise the vast
15 majority of the employees involved at Pocatello that
16 you then discounted or disallowed in your
17 calculation?
18 A Yes, it is. In fact, there was only
19 one other that was not a December 10th, 2001
20 severance date.
21 Q Now, in the review of your documents,
22 did you come across information indicating that the
23 reason for the date of June 30, 2002, was that most
24 of those employees had been retained specifically for
25 the purpose of working on environmental matters and
532
1 other things, rather than being just let go in June
2 of 2001, they actually were being kept on for these
3 other purposes?
4 A Those documents were not specific in
5 the severance items, but I did get that impression
6 from reading of all of the documents I saw.
7 Q And with respect to that group, if in
8 fact, they then wound up being terminated on December
9 10 because of the close down of Pocatello, would that
10 help explain how we wind up with the date of June 30,
11 which then got accelerated to December 10?
12 A Yes, but it doesn't make me believe
13 that it should be included in the letter agreement
14 analysis.
15 Q But the difference in approach that
16 you took versus the approach taken by Ms. McCarvill
17 if those employees were, in fact, given notice in
18 June following the shutdown of the one furnace, and
19 then even though they were being held on for other
20 reasons and then let go, does it make sense that she,
21 from an accounting point of view, was recording all
22 that as related to the letter agreement?
23 A It makes sense from an accounting
24 point of view from the Astaris' books, that they were
25 associated with either the letter agreement or
533
1 shutdown. It's an accounting process that she has to
2 go through for accounting of that. That part makes
3 sense to me. What the Commission should look at in
4 respect to the letter agreement is what I tried to
5 split out.
6 Q Now, with respect to what Astaris did
7 and what was being recorded by Ms. McCarvill from an
8 accounting perspective, in tracking what the Company
9 did as a result of going from two furnaces two one
10 furnace -- well, strike that. Let me try something
11 else first.
12 One of the other areas that you have
13 taken issue with relates to contract-related costs, I
14 believe?
15 A Yes.
16 Q And the amount that Ms. McCarvill has
17 related to contract-related costs in her
18 calculations, I think, was 13 million dollars; is
19 that correct?
20 A Her contract-related costs were 13
21 million dollars, yes.
22 Q And the amount that you have utilized
23 is how much?
24 A 1.5 million.
25 Q How many contracts are involved in
534
1 this calculation or this difference between yourself
2 and Ms. McCarvill?
3 A Primarily two. There are more
4 contracts, but those are the two that have penalty
5 provisions.
6 Q And of the two, I think one of them
7 was related to a silica mine?
8 A Yes, one was related to a silica mine,
9 and the other was related to a coal contract.
10 Q And the coal contract was related to
11 Kemmerer?
12 A That is correct.
13 Q And am I correct that with regard to
14 the a silica mine, you and Ms. McCarvill have no
15 disagreement over as to how it relates to the
16 numbers?
17 A I don't know. I simply showed what I
18 believed was attributed to the letter agreement.
19 When I received the document that supported the
20 numbers that Ms. McCarvill had, it was just a simple
21 stack of documents, and they were not split out to
22 support any one particular one.
23 Later on, some of them would try to
24 be. Employees over at Holland & Hart tried to split
25 some of them out. So I'm not sure that this reflects
535
1 everything that was in her number. But it does
2 reflect all of the documentation that I was able to
3 see associated with these.
4 Q Okay. With regard to Kemmerer, I
5 think you said the coal contract?
6 A The coal contract.
7 Q Can you describe what Kemmerer is?
8 A Kemmerer is a plant that takes coal
9 and ultimately produces a coke product that can be
10 used at Pocatello.
11 Q And so it's what is called an upstream
12 facility?
13 A Upstream from Pocatello, yes.
14 Q As a result of the Company going from
15 two furnaces to one furnace, do they, in fact, make
16 the decision to close down the Kemmerer facility?
17 A The Company did make that decision,
18 yes.
19 Q And that decision came after the
20 letter agreement?
21 A That decision came after the letter
22 agreement based on the amount of coal inventory that
23 was available from that facility.
24 Q And what is your understanding of
25 whether or not that -- what it is that Astaris
536
1 intends to do with that facility?
2 A I don't know exactly what Astaris
3 intends to do. I believe that they will be looking
4 at economics of trying to get salvage from it,
5 whatever the other options might be. But at this
6 point in time, it was not being utilized for the
7 Pocatello facility, so they wrote it off.
8 Q And do you know whether or not they
9 are actually trying to sell the assets that are
10 there?
11 A I believe they are.
12 Q And if they are able to sell the
13 assets, is the coal contract something that will go
14 with the sale?
15 A It may go with the sale, or the
16 Company could look at other alternatives for selling
17 the coal itself in other markets. I know that the
18 price is less than what I've seen utilities paying
19 for coal. So it may be a good source in the open
20 market.
21 Q And with regard to the facility
22 itself, you are not aware of any plans by Astaris to
23 restore that or operate it themselves?
24 A None that I have seen.
25 Q With regards to the comments that you
537
1 are making that the coal could be re-sold, did you
2 have a chance to look at the contracts or have
3 Counsel look at those?
4 A I looked at the contracts primarily
5 related to the penalty provisions.
6 Q Does the contract indicate that the
7 coal is for use at Kemmerer?
8 A Yes, it does. In fact, the contract
9 is split between different parties, and FMC is
10 another party to that. So there is potential that
11 FMC could take that remaining coal if they chose, or
12 it might be sold to someone else.
13 Q And that's the interpretation you have
14 is that that coal could be moved between facilities?
15 A The interpretation I had is that that
16 coal, since it is a joint one, could be used
17 definitely by FMC. Now, it may require some
18 additional negotiations, and I know those
19 negotiations are going on between Astaris and the
20 coal provider for other options.
21 Q And is it your thought that the coal
22 provider will actually allow that coal that will
23 basically allow Astaris to become a middle man,
24 selling that coal on the open market?
25 A I'm not sure what that provider
538
1 actually would be doing. I know that there are, you
2 know, some additional options available. What this
3 particular provider seems to be is really sticky in
4 their provisions, so it might be a little bit more
5 negotiation required in order to do that.
6 Q I assume over the years that Staff has
7 had opportunity to review coal contracts?
8 A I have.
9 Q And is it typical that coal providers
10 actually allow the Utility, for example, or others to
11 take that coal and sell it on the market, or is that
12 very unusual, if at all?
13 A It's unusual for the contract to be
14 sold through a middle man, but it's not unusual for a
15 replacement type of contract to be negotiated or a
16 change in that contract. I've seen that happen many
17 times when we've been reviewing utility provisions.
18 Q Now, I think from your testimony
19 earlier, that that amount has been written off on the
20 books of Astaris?
21 A Astaris has written that amount off,
22 yes.
23 Q And would that be consistent with
24 their understanding that that coal contract has
25 little economic value to them?
539
1 A If that is the position of the
2 Company, that would be consistent, yes.
3 Q One of the other items that you and
4 Ms. McCarvill have some disagreement over relates to
5 what is referred to in Ms. McCarvill's testimony as
6 "closure costs"?
7 A Yes.
8 Q And I think you put that together with
9 write-offs; is that correct?
10 A Yes, I lumped closure costs and
11 write-offs together.
12 Q In Ms. McCarvill's testimony and on
13 the summary page, she refers to closure costs as, I
14 think the amount is three million, and book
15 write-offs as seven million; is that correct?
16 A That's correct. And those numbers are
17 on page 12 of her testimony, if anybody wanted to
18 refer to those.
19 Q Right. And what are comparable
20 numbers in your testimony?
21 A As shown on page 3 of my testimony,
22 the comparable number is 1.8 million.
23 Q 1.8 million for the entire 10?
24 A That's correct.
25 Q Is the majority of the costs that are
540
1 included there -- are referred to there -- related to
2 Kemmerer?
3 A Yes. I take that to mean that you are
4 talking about the ones that I have allowed?
5 Q Correct.
6 A That's correct.
7 Q And I think, well, with regard to the
8 Kemmerer, what closure costs or write-off costs did
9 you recognize in your numbers?
10 A For Kemmerer closure or write-offs?
11 Q Correct.
12 A I recognized depreciation of 653,000,
13 mothballing, which would be associated with the
14 closure and cut back of 433,000. The write-off of
15 the Kemmerer inventory, because I wasn't sure what
16 that inventory life might have, I went ahead and
17 allowed it. It might be excessive, but I recognize
18 622,000.
19 Q Now, I think that with regard to the
20 closure, the 433,000 that you mentioned, do you have
21 a sheet that indicates that information on there?
22 A Yes, I do. It was obtained from the
23 Company's management report for December on page 8.
24 That was a confidential information, so I don't have
25 any further references to that.
541
1 Q And that's fine. And I'm not going to
2 try to take you too far in that. All I was going to
3 ask you is, in looking at that particular sheet that
4 you have, and the line item that you were
5 referencing, if you would also look at the line above
6 it?
7 A (Witness complying.) Okay.
8 Q What I was going to ask you to do is
9 look at the item that you mentioned, which I think
10 you referred to it as mothballing.
11 A That's correct.
12 Q And then if you would look at the item
13 above that, and then also look at from the bottom of
14 the page, about nine or ten lines up, there are two
15 additional Kemmerer items. And they are all on that
16 page 8?
17 A Looking at the page 8 of this, the
18 line that I allowed was "Kemmerer mothballing for
19 $433,000."
20 Q Right.
21 A And the line above it is identified,
22 "Kemmerer restructuring decommissioning ongoing
23 costs, and that was for $1,464,000." I did not allow
24 that, because as explained to me by Astaris
25 accounting personnel, that those were for dismantling
542
1 and restructuring costs going forward. So I did not
2 believe they were directly associated with the letter
3 agreement, although they resulted about the same
4 time. The letter agreement would not have required
5 that in and by itself, is my opinion.
6 Q Would the close down of Kemmerer
7 started a chain of events, which includes the
8 decommissioning item that you just mentioned; is that
9 correct?
10 A That is correct. But I do not believe
11 that the close down of Kemmerer was related only to
12 the letter agreement.
13 Q Okay. From an accounting perspective,
14 the amount that is reflected on that line is an
15 amount that, again, in accordance with the accounting
16 principle, it should be recognized?
17 A It's an amount that must be recorded
18 as a cost. And because they closed Kemmerer, it must
19 be recorded as a closing cost for Kemmerer.
20 Q And is the same thing in general true
21 about going up from the bottom nine or ten lines,
22 there is a reference to Kemmerer dismantling an
23 additional Kemmerer extended item, the same
24 discussion?
25 A Exactly, in my opinion, those were not
543
1 associated only with the letter agreement. But for
2 purposes of recording it on the books, the Company
3 did have to reflect them, because they chose to write
4 the plant off.
5 Q Now, also on the same page and
6 switching maybe to your discussion about write-offs,
7 as I understand from your testimony, you are
8 recognizing depreciation expense for some items but
9 not recognizing the write-off of the remainder of the
10 assets; is that a fair statement?
11 A That's correct. I was trying to look
12 at costs directly associated with the letter
13 agreement. During the time of the letter agreement,
14 the Company was putting those on standby, so to
15 speak, to start back up in 2003, they would still be
16 occurring the depreciation on those plants. And
17 that, in my opinion, was directly associated with the
18 letter agreement. The write-off was not, and so I
19 did not allow the write-off costs, but did reflect
20 the actual depreciation that would have been
21 recorded.
22 Q Now, in the case of Kemmerer -- I
23 think we just talked about this earlier -- from the
24 Company's perspective, there was no intention of
25 re-opening Kemmerer regardless of what happened in
544
1 Pocatello; is that correct?
2 MR. RIPLEY: Excuse me. When Counsel
3 is referring to "Company" is that Astaris LLC, that
4 is the being referred to?
5 MR. TARPEY: That's correct,
6 Mr. Chairman.
7 MR. RIPLEY: Thank you.
8 THE WITNESS: I'm sorry. I lost the
9 question in that discussion. Could you repeat it,
10 please?
11 Q BY MR. TARPEY: I was afraid you were
12 going to say that. With regard to Kemmerer and the
13 Company, isn't it correct that the Company had
14 indicated that that facility was being closed down or
15 sold. But in any event, they were not going to
16 reopen Kemmerer regardless of what happened in
17 Pocatello in 2002, 2003?
18 A From my review of the accounting
19 documents, management reports and that type of thing,
20 I do not believe that the Company intended to reopen
21 Kemmerer. But I do not believe that that's
22 associated with the letter agreement.
23 Q The amount that we're talking about,
24 the items, is that approximately on the write-offs,
25 is that the difference between yourself and
545
1 Ms. McCarvill, approximately, 7 million dollars?
2 A Roughly, I would say, yes. It is the
3 primary difference between our two numbers.
4 Q One of the other items that you have
5 disagreement over is reflection of the take-or-pay
6 amount for 2001?
7 A Yes.
8 Q And Ms. McCarvill has reflected that
9 as a cost to be taken into account of, approximately,
10 12 million dollars. I think you were -- I want to
11 say basically reversing that -- but you had put an
12 amount for take -- taken out. You had not shown that
13 amount in your calculation?
14 A I did two things: One, I did not
15 reflect it as a reduction to the revenue like
16 Ms. McCarvill did, for the many reasons I and
17 Mr. Hessing explained in our testimonies. We can go
18 through those again, if you'd like. But at this
19 point, I won't.
20 And also I reflected, as part of the
21 replacement raw materials piece and higher
22 manufacturing costs, because I was removing costs
23 from the Pocatello plant, I added it back in. And
24 that calculation for the accounting piece of the raw
25 materials, it was not an incremental cost that the
546
1 Company incurred. But it was a cost that by removing
2 the bulk amount from Pocatello, I had to add back in
3 because it was a letter agreement amount.
4 Q Now, when you say you needed to add it
5 back in, you were adding back in the 12 million?
6 A The 12 million is in the section of
7 replacement raw materials and higher manufacturing
8 costs. As part of the higher manufacturing costs,
9 there were some duplicates or some additional
10 downstream savings, that I felt should be reflected.
11 And in order to do that, I removed the costs of the
12 Pocatello plant for the pounds that was not used at
13 Pocatello from the additional raw material
14 calculation for those savings, and then add it back
15 in the take-or-pay amount. Because the full amount
16 that I remove for Pocatello included that
17 take-or-pay, and it was a cost that was incurred.
18 It's just not an incremental cost to reduce the
19 revenue portion here.
20 Q In your testimony on page 3, where you
21 have basically a tabular summary of your numbers,
22 where is the 15 million dollars reflected on here?
23 A The replacement higher materials costs
24 and higher manufacturing costs, 15.4 million.
25 Q Now, is the take-or-pays amount also
547
1 reflected in here?
2 A That is in that number.
3 Q And the one last item I wanted to ask
4 you about is with regard to the replacement raw
5 materials, you made an adjustment with regard to, I
6 think on your worksheet, it's referred to "removed
7 Pocatello costs charge downstream?
8 A That's correct.
9 Q And what were you trying to an
10 accomplish by that adjustment?
11 A What I was trying to accomplish is
12 that there are many downstream savings that were
13 achieved for product replacement. If you reflect the
14 additional costs to handle the new materials
15 downstream, you should also reflect the savings per
16 pound that was received downstream by the actual
17 materials received.
18 And in order to do that, since the new
19 material was a replacement for Pocatello, I removed
20 the Pocatello costs for the pounds that was not
21 produced at Pocatello, added in the new costs for
22 materials for that amount, and the additional costs
23 for downstream for upgrading those facilities on the
24 annualized basis.
25 Q And if, in essence, you were trying to
548
1 figure out that if they had operated at two furnaces,
2 what the costs would have been or the savings would
3 have been?
4 A It reflects the numbers that are in
5 the Company's reports that are for the actual
6 operations in Pocatello. Then the amount that would
7 have been saved downstream, because it was not
8 received from Pocatello, but it was received from
9 another source.
10 Q Now, when you made the adjustment to
11 take out the 52 million pounds for that purpose, you
12 took it out at a price at the end of the year,
13 calculated in December of 2001?
14 A I took it out at what I was -- what
15 was reflected to me as the average costs over 2001.
16 Q And that would have been a cost that
17 reflected two-furnace operations for three months and
18 one-furnace operation for nine months?
19 A That's correct.
20 Q Rather than doing that, did you look
21 at the number for the fist three months of the year
22 when it was two-furnace operation, and then annualize
23 that for the year to get what the costs of the 52,000
24 would be with the efficiencies of the two-furnace
25 operation?
549
1 A I looked at what those costs were.
2 And because of the way that the reporting was and the
3 lack of information I had available to me, I do not
4 believe that I could account for that properly. So I
5 went and used the actual number reflected on the
6 document that Ms. McCarvill had provided or her Staff
7 had provided.
8 Q With respect to March of 2001, do you
9 have what the price-per-pound, the cost-per-pound
10 was?
11 A Yes, I do. One moment. I'm sorry.
12 We're sharing boxes so they are not all in the same
13 order that I had them before. The costs reflected
14 for the production at the end of March, it looks like
15 it was 87.64.
16 Q Okay. The price you have for the end
17 of December is 93 cents, 93.6 cents, I think?
18 A Yes.
19 MR. TARPEY: Mr. Chairman, may I
20 approach the witness for a moment?
21 COMMISSIONER KJELLANDER: Yes.
22 Q BY MR. TARPEY: Ms. Carlock, you
23 indicated what the number was for December, and
24 earlier I think you indicated an amount for March.
25 The amount you mentioned was 87 cents; do you recall
550
1 that?
2 A Yes.
3 Q And the document you have in front of
4 you is a cost book from the Company?
5 A That's correct.
6 Q And what is the amount that that
7 reflects for March?
8 A It reflects 78.65. However, this
9 document is different from the actual management
10 reports that reflected the costs. They are two
11 different documents and two different numbers.
12 MR. TARPEY: May I approach again,
13 Mr. Chairman?
14 COMMISSIONER KJELLANDER: Yes.
15 Q BY MR. TARPEY: Just to complete all
16 of this, I just handed you the cost book for December
17 of the year. And the numbers shown on there
18 cost-wise, is that 94 cents?
19 A The numbers shown on there is 94.35.
20 And again, that is different from the numbers I have
21 in the management report for actual costs reported
22 after the date.
23 Q From the perspective of the cost books
24 showing March versus December, those numbers are 90
25 cents versus 88 cents?
551
1 A From the cost books, yes.
2 MR. TARPEY: I have no other
3 questions.
4 THE WITNESS: I cannot explain the
5 difference between the two documents, though, that
6 were provided.
7 MR. TARPEY: Thanks.
8 MR. RIPLEY: Again, do I assume that
9 these are Astaris LLC cost book numbers?
10 MR. TARPEY: Yes, they are.
11 COMMISSIONER KJELLANDER: And that
12 concludes your questioning?
13 MR. TARPEY: That concludes the
14 questioning, Mr. Chairman.
15 COMMISSIONER KJELLANDER: Questions
16 for Members of the Commission?
17 COMMISSIONER KJELLANDER: None. So we
18 will move to redirect.
19 MR. HAMMOND: We don't have any
20 redirect.
21 COMMISSIONER KJELLANDER: Does that,
22 then, conclude Staff's case with regards to rebuttal?
23 MR. HAMMOND: Yes, it does,
24 Mr. President.
25 COMMISSIONER KJELLANDER: I think that
552
1 brings us into the question: Are there any other
2 matters that need to come before the Commission at
3 this time in relationship to this case?
4 MR. RIPLEY: We have one,
5 Mr. Chairman, and that is we have noted
6 Mr. Richardson's cross-examination. But, frankly, we
7 can't tell what the position of his client is. And
8 before we file briefs, we believe the other parties
9 are entitled to know what the position of the
10 Industrial customers are. So that when we file what
11 I assume to be simultaneous briefs, we'll at least
12 know what their initial position is.
13 All we need to do is have that, say, a
14 week before briefs are due, just a very short
15 statement. But I think it's certainly something
16 we're entitled to.
17 COMMISSIONER KJELLANDER:
18 Mr. Richardson, is that something that you could
19 accommodate?
20 MR. RICHARDSON: I could accommodate
21 that, Mr. Chairman.
22 COMMISSIONER KJELLANDER: Thank you.
23 So I can gather, then, from your comment, Mr. Ripley,
24 that we'll be looking at some post-hearing briefs?
25 MR. RIPLEY: I understood that
553
1 schedule had already been set, but perhaps I'm wrong.
2 COMMISSIONER KJELLANDER: To be
3 truthful with you, it's not in front of me right now.
4 So I guess you've refreshed my memory, or at least
5 enlightened it.
6 MR. RIPLEY: I think there is an
7 outstanding order that provides for that
8 procedurally.
9 COMMISSIONER KJELLANDER: March 8th.
10 MR. POMEROY: Yes, I was going to
11 clarify for, Mr. Chairman, that post simultaneous
12 post-hearing briefs on March the 8th. And if I may,
13 I would like to raise one other clarification for the
14 record, if I may?
15 COMMISSIONER KJELLANDER: That would
16 be appropriate at this time.
17 MR. POMEROY: Thank you. There was
18 some confusion clearly about documents that
19 Ms. Carlock had seen or not seen, or we provided or
20 not provided. And I do want again to simply offer,
21 for whatever value it is for this decision to the
22 record, to clarify what was going on in Staff
23 requests No. 27.
24 They asked us for copies of any
25 written reports or other documents from the past five
554
1 years that discuss the partial shutdown or full
2 closure of the Pocatello plant. We have objected to
3 the requests, because it was too burdensome in one
4 week to get five years worth of documents together.
5 But we did make our best effort and provide a sample
6 of documents that were readily retrievable that took
7 care of the issue.
8 There has been some suggestion today,
9 for I think the first time, that oral testimony is
10 inadequate, and that only written documents would
11 prove a particular point. I don't think testimony
12 versus written documents really works that way. But
13 again, I just want to be clear on the record, we have
14 provided documents about the closure to the Staff.
15 We've done that pursuant to a protective order, where
16 they are not allowed to keep copies. We would be
17 willing to extend that offer to the other parties,
18 such as, Mr. Ripley.
19 We do have a concern that I need to
20 put on the record, because of Mr. Budge, because of
21 his long-standing representation at Monsanto. And I
22 want to be up front about that, and I understand
23 Mr. Budge is not representing Monsanto in this case,
24 but I think it is a matter of record that he does
25 represent them, and we have some concerns about that.
555
1 And I want that to be on the record, as far as my
2 offer to Mr. Ripley.
3 Further, if there is a way for the
4 Commissioners themselves, if that becomes a part of
5 what the Commissioners need to see, subject to
6 whatever confidentiality protections are customary or
7 appropriate. I want to extend that offer also to the
8 Commission.
9 COMMISSIONER KJELLANDER: Thank you
10 for that offer, and we certainly do appreciate it,
11 and we do have it in the record.
12 Let me go back to Mr. Richardson for
13 just a second. The requests was made that you
14 provide the other parties a position of the
15 Industrial customers. And at that point, I guess it
16 had slipped my mind that March 8th was the date for
17 the simultaneous briefs to be filed. And I think
18 that leaves us roughly 14 days between this point and
19 the 8th.
20 And what was the request, that that be
21 provided a week prior to?
22 MR. RIPLEY: Whatever Pete could.
23 We're not wed to it. We just would like to have some
24 advance notice so we have some idea where the
25 Industrial Customers are coming from.
556
1 COMMISSIONER KJELLANDER: I don't want
2 to pin down Mr. Richardson.
3 MR. RICHARDSON: I'll be as prompt as
4 I can, Mr. Chairman.
5 COMMISSIONER KJELLANDER: Great.
6 Thank you.
7 Are there any other matters that need
8 to come before the Commission at this time? If not,
9 then this portion of the proceedings will come to a
10 close.
11 (IPCo Exhibit Nos. 1 through 6 were
12 admitted into evidence.)
13 (Staff Exhibit Nos. 101 through 112
14 were admitted into evidence.)
15 (Astaris Exhibit Nos. 201, 202, 208,
16 209, 210, 211 and 212 were admitted into evidence.)
17 (The hearing concluded at 2:40 p.m.)
18
19
20
21
22
23
24
25
557
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
22 _______________________________
23 COLLEEN P. KLINE, Notary Public
in and for the State of Idaho.
24 My Commission expires 8-5-05.
Idaho CSR No. 345
25
558