HomeMy WebLinkAbouthessing.txt
1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER KJELLANDER: And you are
4 tendering for cross?
5 MR. HAMMOND: Yes, we are tendering
6 for cross.
7 COMMISSIONER KJELLANDER: Let's move
8 first to Counsel for Astaris.
9 MR. POMEROY: Mr. Chairman, on the
10 Staff witnesses, we've previously been
11 cross-examining at the end of the other parties. But
12 if you prefer that I proceed, I will do that.
13 COMMISSIONER KJELLANDER: That's fine.
14 In fact, you have brought that back to my attention.
15 I appreciate that. And in lieu of our previous
16 discussion on that issue, we'll begin with
17 Mr. Ripley.
18 MR. RIPLEY: No questions.
19 COMMISSIONER KJELLANDER:
20 Mr. Richardson?
21 MR. RICHARDSON: Thank you.
22
23
24
25
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1 CROSS-EXAMINATION
2
3 BY MR. RICHARDSON:
4 Q Mr. Hessing, at page 2 of your
5 testimony beginning at line 3, you state that it is
6 very important or it is important to distinguish
7 between a vendor contract or a special contract. Do
8 you see that?
9 A Yes, I do.
10 Q And if I understand correctly, the
11 reason for that is according to your testimony, that
12 these are treated differently for regulatory
13 purposes; correct?
14 A That's correct.
15 Q And what you call a special contract,
16 is one that is subject to Commission approval, and
17 the Commission retains oversight during the full term
18 of the special contract; correct?
19 A That's correct.
20 Q Now, you state on the other hand, that
21 the vendor contract is not approved by the
22 Commission, and is not subject to the Commission's
23 ongoing regulations; correct?
24 A The contract isn't approved by the
25 Commission, although the effects of the contracts may
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1 have impacts on the utilities rates. But the
2 contract isn't approved by the Commission.
3 Q And it's not subject to ongoing
4 Commission oversight or regulation?
5 A That's my understanding.
6 Q So when a utility enters into a vendor
7 contract, and the Commission may find that the costs
8 or expenses incurred under that vendor contract are
9 unreasonable, the Commission's only avenue to protect
10 the ratepayers is to disallow the costs associated
11 with that contract for ratemaking purposes; correct?
12 A I think that would be the formal way
13 that the Commission could find that the costs are not
14 appropriate for ratemaking purposes. I think the
15 Commission might be able to assert some influence to
16 have the contract renegotiated, even though that
17 would be on a less formal basis.
18 Q But it's your testimony, though, that
19 the Commission doesn't have the authority to abrogate
20 the contract itself?
21 A That's true.
22 Q So when a special contract is
23 unreasonable, it's your testimony that the Commission
24 may actually change the rates in that special
25 contract at any time; correct?
485
1 A Correct.
2 Q So under the Astaris special contract,
3 it is your position that the Commission can change
4 the rates in that contract at any time?
5 A I think there was to be appropriate
6 findings that it's not -- that those rates are not
7 reasonable, and then, yes the Commission can do that.
8 Q Certainly, upon a finding that the
9 rates are unreasonable?
10 A Yes.
11 Q Yesterday, you testified that the
12 Staff waited until December to recommend that the
13 Astaris special contract be changed, because the
14 Staff was concerned that the rates might go back up.
15 Do you recall that?
16 A I do.
17 Q So explain to me your explanation, I
18 guess, that you were waiting to see if the rates
19 would go up, if you could have acted in the summer
20 when the rates went back down, to abrogate the
21 contract?
22 A Well, one of the things that I believe
23 that the Staff has to show is that the rates are
24 unreasonable. And in order to do that, I don't think
25 that involves maybe a temporary change in rates. And
486
1 it was unclear to the Staff as to whether that change
2 that occurred when the rates first went down, was
3 going to last or not. So we waited a period of time
4 to where we were more sure that the rates were going
5 to stay down before we made our filing in this case.
6 Q So if the rates were down in the
7 summer, and you had acted at that time to change the
8 rates to a lower rate, wouldn't that have been more
9 beneficial for the ratepayers than waiting until the
10 winter, when perhaps they were higher, thereby, you
11 would have affectively locked in the higher rates?
12 A I guess I also believed that if the
13 rates were to have gone back up, that Astaris or
14 whoever was effected, the Irrigators possibly even in
15 the summertime, might have been able to come in and
16 make a filing that it wasn't in the public's interest
17 to have those rates stay down.
18 I mean, the public interest is the
19 criteria here. What's in the public's interest at
20 different points in time and under different
21 circumstances.
22 Q Now, on page 4 of your testimony, you
23 state that the rates in the ESA, that means the
24 Electric Service Agreement --
25 A Yes.
487
1 Q -- are retail rates; do you see that?
2 A I do.
3 Q Now, are you referring to the ESA, or
4 the letter agreement, or both when you refer to those
5 as being retail rates?
6 A I'm referring to both, the ESA and its
7 amending letter agreement.
8 Q And you say that you put the word
9 "retail" there on line 10 in quotation marks. Who or
10 what are you quoting?
11 A I guess that's just a general
12 reference that in some circumstances there was a
13 question as to whether the rates that Astaris pays
14 and receives were actually retail rates. So it was
15 just a method of drawing emphasis to the word.
16 Q You put quotes around it to indicate
17 that it has some special significance?
18 A I probably should have underlined it
19 instead of putting quotes around it.
20 Q Because you wanted to emphasize the
21 word "retail"?
22 A Yes.
23 Q Now, when you say that the rates are
24 retail rates, you've established that you are talking
25 about the rates in the ESA and the amending
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1 agreement. Which rates are you specifically
2 referring to?
3 A All of the rates that are identified
4 in the ESA and the amending agreement.
5 Q So if we look at your Exhibit 111,
6 which the ESA; correct? That's the letter
7 agreement -- excuse me.
8 A Yes.
9 Q The Attachment A, the schedule, the
10 prices shown on Attachment A of Exhibit 111, are
11 retail rates?
12 A Yes, in that they are rates that the
13 Commission approves for the provision of service to a
14 customer of the regulated utility.
15 Q Aren't they prices or payments?
16 A Certainly they impact the payments
17 that Idaho Power makes under this agreement. And I
18 guess you could say they are the prices for that, but
19 they are also the rate for that service in my mind.
20 Q When did the Staff decide that the
21 prices became rates? If you look at your comments
22 that were filed in this case, Exhibit 210, if you
23 look at the decision memorandum that Staff prepared
24 in this case, Exhibit 211, and you look at the
25 Commission order that approved the letter agreement,
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1 Exhibit 212, not once does the Staff or the
2 Commission refer to these prices as rates. So when
3 did the prices become rates?
4 A I guess that I believed an apple by
5 any other name is still an apple. And I believe that
6 they were a rate all along.
7 Q So perhaps the wordsmanship in these
8 three exhibits I referenced were a little sloppy
9 maybe?
10 A I think it's just another way of
11 referencing to -- of relating to the prices or rates
12 that are paid under that letter agreement contract.
13 Q Do you have your response to Astaris'
14 first data request available to you?
15 A I have it back over here in the
16 corner. I can certainly get it.
17 Q Well, I'm just going to ask you a
18 couple of questions about that, so you might want to
19 do that?
20 A (Witness complying.) Those responses
21 are in three volumes. Do you have a particular
22 volume?
23 Q Not the attachments, I don't need any
24 of the attachments. Just the responses to the first
25 data request only. It's about 15 pages long.
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1 A Okay. Let me get that. (Witness
2 complying.) I have the Staff's response to the first
3 data request of Astaris.
4 Q And you are representative as the
5 witness to sponsor this at hearing; are you not?
6 A I am.
7 Q So did you prepare these?
8 A In cooperation with other Staff
9 members and Counsel, yes.
10 Q Well, turn to page 15, looking
11 specifically at Request No. 1.24.
12 A I have that.
13 Q And you are asked to -- this is
14 probably for the record -- "Please explain why the
15 Commission's authority to declare an action by a
16 Utility isn't prudent and disallow their coverage
17 from ratepayers is an insufficient tool for the
18 Commission to achieve the public interests in this
19 case."
20 And your response to that question
21 provides that, "The Commission's authority to
22 disallow a cost is generally associated with its
23 ratemaking authority. In this case, the parties
24 filed an ESA rate contract and the amending letter
25 agreement containing the buyback provisions pursuant
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1 to Idaho Code 61-305."
2 And then you go onto state that, "The
3 Commission approved the ESA and this amending letter
4 agreement retained authority over both." There you
5 say, "The Staff is advocating that the Commission
6 finds existing rates in the buyback letter agreement
7 to be unjust and unreasonable, and that the
8 Commission then established just and reasonable rates
9 as of January 8th, 2002 pursuant to Idaho Code,
10 Sections 61-502 and 61-503. Do you see that?
11 A I do.
12 Q Have you read those Idaho Code
13 Sections?
14 A I have.
15 Q Do they contemplate who the ratepayer
16 is and who the utility is?
17 A In my recollection, I don't recall
18 that it says anything about who the ratepayer is.
19 Q So in your mind in this transaction
20 between Astaris and Idaho Power, is Idaho Power the
21 ratepayer and is Astaris the utility?
22 A Not in my mind.
23 Q So who pays the utility rates; the
24 ratepayers or the Utilities?
25 A Ratepayers pay utility rates. And
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1 sometimes under the contract, the utility pays a
2 ratepayer for services provided.
3 Q For utility services?
4 A For utility services.
5 Q Then who is the utility of the
6 ratepayer providing utility services?
7 A The utility provides utility services.
8 And in this particular case that we're talking about
9 here, Astaris is the ratepayer. And Astaris is being
10 paid for a reduction in utility services, a reduction
11 in load, and that's a regulated utility service.
12 Q Looking at Schedule A to Exhibit 111,
13 who's paying who?
14 A Idaho Power is paying Astaris for the
15 reduction of load.
16 Q So --
17 A And that's a portion of the service
18 agreement that Astaris and Idaho Power have. And
19 it's not -- there are other services provided under
20 the ESA that are similar where -- just leave it at
21 that.
22 Q And I'm not talking about the other
23 services, just the Schedule A. Idaho Power is paying
24 Astaris, and in your mind, Astaris is the ratepayer?
25 A Yes.
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1 Q Looking at your response to Request
2 No. 1.22 and 1.23, let's start with 1.22. And you
3 are asked if the utility has any contracts with the
4 supplier for the purchase of coal by the utility that
5 are currently above market, should the Commission
6 conform all such contracts to the lower price to the
7 coal market? And if not, why not?
8 Your response is, "No, the Commission
9 does not have the authority to modify coal supply
10 contracts. This type of contract is not filed with
11 or approved by the Commission."
12 Now, instead of coal that let's say
13 that the product the utility was purchasing
14 electricity from say Montana Power; would your
15 response be the same?
16 A Yes, because Montana Power is not a
17 customer, and is not taking regulated utility service
18 from Idaho Power Company.
19 Q Now, in that answer, you said that you
20 note you observed that this type of contract is not
21 filed with or approved by the Commission. Let's take
22 that same example with Montana Power, but let's say
23 that contract with Montana Power was filed with the
24 Commission, and Idaho Power sought approval of it;
25 would your answer be the same?
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1 A Well, that's a hypothetical.
2 Q It is.
3 A And in the time that I've -- the 18
4 years that I've been here at the Commission, no such
5 contract for those kinds of things has been filed,
6 and Idaho Power has purchased a tremendous amount of
7 power from other utilities and brokers. So first
8 off, that contract wouldn't be filed with the
9 Commission for approval, and therefore, it wouldn't
10 be approved. If it was, I would say -- if it's
11 filed, the Commission shouldn't approve it, because
12 it wouldn't be appropriate to do so.
13 Q What if Idaho Power had some concerns
14 about the rates it was paying Montana Power in that
15 contract, and wanted to be sure that those rates got
16 flowed through the PCA, so they filed it with the
17 Commission?
18 A Then the Commission may approve the
19 costs associated with that for PCA treatment.
20 Q But would it have, according to your
21 rationale here, it wouldn't be able to change the
22 rates in the contract?
23 A The contract itself wouldn't be
24 approved, and the Commission wouldn't have ongoing
25 authority over the rates in the contract.
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1 Q If Astaris and Idaho Power, when they
2 entered into this letter agreement, chose not to file
3 it with the Commission, but just to proceed with the
4 50-megawatt buyback, would the Commission have
5 jurisdictions over the contract?
6 MR. RIPLEY: Mr. Commissioner, I'm
7 going to object. He's obviously now asking the Staff
8 witness purely legal questions.
9 COMMISSIONER KJELLANDER: Mr.
10 Richardson.
11 MR. RICHARDSON: Mr. Chairman, this
12 witness has addressed what he describes as the
13 authority of the Commission to modify contracts
14 multiple times in his response to discovery.
15 Obviously, this witness feels that he is qualified to
16 answer questions along these lines, because he's done
17 it in discovery.
18 They didn't object to the discovery
19 from Astaris saying, "What can the Commission do with
20 this type of contract, or that type of contract?" He
21 answered. He quoted the Idaho Code. He says, he's
22 read it. He's obviously representing himself as
23 obviously being able to answer these questions.
24 COMMISSIONER KJELLANDER: Mr. Ripley?
25 MR. RIPLEY: Mr. Chairman, I believe
496
1 there is a big difference between responding to an
2 information request, and at the same time, then
3 cross-examining a witness on the stand. The two are
4 night and day. And to add to that, to say, well, the
5 witness has already undergone some cross-examination
6 that requested legal responses, that doesn't mean
7 that you can continue to ask the witness, obviously,
8 legal questions. We're getting nowhere fast here.
9 Whether or not Mr. Hessing thinks or
10 does not think what the law is, I question the
11 materiality of it, asking the witness legal
12 questions.
13 MR. RICHARDSON: Mr. Chairman?
14 COMMISSIONER KJELLANDER: Mr.
15 Richardson.
16 MR. RICHARDSON: The Staff represented
17 in their response to discovery requests, quote, "All
18 Staff responses to this set of requests may be
19 sponsored at the hearing by Keith Hessing." And I'm
20 just asking him the natural follow-up questions to
21 the questions he was asked in discovery and to which
22 he responded, thereby purporting to suggest that he
23 has the ability to answer these questions.
24 COMMISSIONER KJELLANDER: Mr. Ripley?
25 MR. RIPLEY: Mr. Chairman, there is a
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1 vast difference between a discovery requests
2 response, and then transferring that discovery
3 requests response into cross-examination, that I'm
4 bewildered as to where to go from there. The two are
5 totally, totally in opposite.
6 COMMISSIONER KJELLANDER:
7 Mr. Richardson, is there another way to get at the
8 response you are looking for without trying to pose
9 it in such a fashion that the witness has to deal
10 with it as if he were some kind of an attorney
11 responding back to your question in terms of a legal
12 interpretation?
13 MR. RICHARDSON: I wasn't asking for a
14 legal interpretation, Mr. Chairman. I was asking if
15 it was this witness' belief that if this contract
16 wasn't filed with the Commission, if in his mind, the
17 Commission would have authority to abrogate it. He
18 addresses that at length in his response to
19 discovery, and it's also addressed in his testimony
20 where he talks about retail rates, and the difference
21 between a vendor contract and special contract. And
22 he addresses the Commission's authority, regulatory
23 authority over different types of contracts.
24 COMMISSIONER KJELLANDER: Is there a
25 factual issue here, or are we getting back to the
498
1 issue that was briefed before the Commission with
2 regards to the motion to deny? Because I'm guess I'm
3 trying to ferret out where we're going here? Is
4 there a factual issue you would like him to respond
5 to? And if so, can we get to that.
6 MR. RICHARDSON: What I'm trying to
7 ferret out, Mr. Chairman, is this witness' where he
8 draws the line between the two contracts he
9 identified in his direct testimony on page 2.
10 COMMISSIONER KJELLANDER: And hasn't
11 he already defined that for you in earlier responses?
12 MR. RICHARDSON: I believe he has not,
13 Mr. Chairman.
14 COMMISSIONER KJELLANDER: Would you
15 like to ask that specific question?
16 MR. RICHARDSON: Yes, Mr. Chairman.
17 COMMISSIONER KJELLANDER: Then please
18 go with it.
19 Q BY MR. RICHARDSON: Where do you draw
20 the line, Mr. Hessing? Does the contract have to be
21 filed or not?
22 MR. HAMMOND: Well, I'm going to raise
23 an objection again to the same question. I think
24 he's asking what's Mr. Hessing's opinion on a legal
25 issue has no bearing on this matter. The legal
499
1 issues that will be decided in this case will be
2 decided by the Commission. If it's a factual
3 question, then he can answer that. But I don't think
4 that's what he's asking.
5 MR. RICHARDSON: Mr. Chairman, on page
6 2 of his testimony, beginning on line 6.
7 COMMISSIONER KJELLANDER: Thank you.
8 We're getting back to the testimony. Page 2 of the
9 rebuttal?
10 MR. RICHARDSON: Page 2 of his
11 rebuttal testimony on line 6.
12 COMMISSIONER KJELLANDER: Okay. Let
13 me get to it here. It's page 6?
14 MR. RICHARDSON: Page 2, line 6.
15 COMMISSIONER KJELLANDER: Page 2,
16 line 6; okay.
17 MR. RICHARDSON: In there you will
18 find the discussion by this witness, two types of
19 contracts and the regulatory authority this
20 Commission has over those two kinds of contracts.
21 It's clear to me that there is a gray area between
22 the two types of contracts.
23 And I'm trying to ferret out from this
24 witness what his understanding of where the line
25 between the vendor contract, which he says the
500
1 Commission has no jurisdiction over, and the special
2 contract, which this witness says that the Commission
3 says it does have jurisdiction over. Where does he
4 draw that line, that's what I'm trying to ferret out.
5 It is directly related to his
6 testimony. He raised the issue in his testimony,
7 addresses the issue in his discovery. It seems like
8 if this witness isn't qualified to talk about those
9 issues, then this portion of his testimony should be
10 stricken.
11 MR. HAMMOND: Again, I'm going to
12 object. Mr. Richardson has already asked that
13 question previously regarding this very portion of
14 his testimony. If he wants to recover that ground
15 again, fine, but I don't know where that's going.
16 COMMISSIONER KJELLANDER: I'll have to
17 agree that I thought that that question was asked and
18 answered. But to the extent that perhaps it wasn't,
19 if you would like to ask it one more time, so we
20 don't have to go back in the record, and we can bring
21 closure to that specific issue.
22 MR. RICHARDSON: Mr. Chairman, my
23 initial questions were to lay a foundation for this
24 question. So I appreciate your indulgence, and I
25 will try to be as brief as possible.
501
1 COMMISSIONER KJELLANDER: Thank you.
2 Q BY MR. RICHARDSON: Now, Mr. Hessing,
3 looking at your description for the two types of
4 contracts, vendor and special.
5 A Okay.
6 Q And I'm asking, where you draw the
7 line? Now, if Astaris didn't file this contract with
8 the Commission, would that be a special contract or a
9 vendor contract?
10 MR. HAMMOND: I'm going to object. He
11 asking for a legal conclusion again.
12 MR. RICHARDSON: Mr. Chairman, this
13 witness purports to know the difference between a
14 special contract and a --
15 MR. HAMMOND: But he's asking for a
16 legal conclusion. He's not asking about any of the
17 facts.
18 MR. RICHARDSON: I'm asking about his
19 rebuttal testimony.
20 COMMISSIONER KJELLANDER: Could you
21 put it directly to a line within the testimony, and
22 have the question directly tied to a line in his
23 testimony, and let's get through this.
24 Q BY MR. RICHARDSON: Mr. Hessing,
25 Astaris did not file this contract with the
502
1 Commission, and Idaho Power did not file this
2 contract with the Commission, would that contract be
3 a vendor contract as you describe on page 2, line 13,
4 or would it be a special contract as you describe on
5 page 2, line 4?
6 A That particular situation isn't in my
7 experience here at the Commission, and I do believe
8 it would require a legal interpretation, which I'm
9 not ready to make.
10 Q So you don't know what the difference
11 between a vendor and a special contract is in your
12 testimony?
13 A I know what the difference between a
14 vendor and a special contract is in my testimony, and
15 it's specified in my testimony.
16 Q Where did you come up with the terms
17 "vendor contract" and "special contract"?
18 A I guess I don't recall right off the
19 top of my head where the word "vendor" first came up.
20 It was used to -- well, it was interpreted by me to
21 be what I describe it as in my testimony. Special
22 contracts, if you want to look at my Exhibit 105, the
23 last four contracts for Idaho Power's largest
24 customers are called "special contracts" on that
25 exhibit. That's what they've always been called
503
1 during my tenure here at the Commission. And
2 certainly that probably isn't the limit of all the
3 special contracts, but those four at least have been
4 entitled that.
5 MR. RICHARDSON: Mr. Chairman, I think
6 I've exhausted this subject. I'm finished.
7 Thank you, Mr. Hessing.
8 COMMISSIONER KJELLANDER: Let's see if
9 I can recall who's next. I believe it's you.
10 MR. POMEROY: I am next. And I have
11 no questions for Mr. Hessing.
12 COMMISSIONER KJELLANDER: Let's move
13 to Members of the Commission.
14 We're ready for redirect.
15 Mr. Hammond, any redirect?
16 MR. HAMMOND: I don't believe I have
17 any redirect.
18 COMMISSIONER KJELLANDER: Mr. Hessing,
19 I believe you are done.
20 THE WITNESS: Thank you very much.
21 (Witness excused.)
22 COMMISSIONER KJELLANDER: And your
23 next witness on rebuttal.
24 MR. HAMMOND: The Staff would call
25 Terry Carlock.
504
1 COMMISSIONER KJELLANDER: And just as
2 a reminder, Ms. Carlock is already sworn in -- or,
3 no, she is not. Just as a reminder to me, she is
4 not.
5
6 TERRI CARLOCK,
7 produced as a rebuttal witness at the instance of the
8 Staff, having been first duly sworn, was examined as
9 follows:
10
11 DIRECT EXAMINATION
12
13 BY MR. HAMMOND:
14 Q Could you please state your name, and
15 spell your last name for the record?
16 A Terri Carlock, C-a-r-l-o-c-k.
17 Q By whom are you employed and in what
18 capacity?
19 A Idaho Public Utilities Commission as
20 the Utilities Division, Audit Section Supervisor.
21 Q Are you the Terri Carlock that filed
22 rebuttal testimony?
23 A Yes, I am.
24 Q Do you have any corrections, changes,
25 clarifications to be made?
505
1 A The minor corrections that I had were
2 filed as a revised set of testimony on February 20th.
3 So the parties have all of those.
4 Q Ms. Carlock, if I ask you the same
5 questions that are set forth in your rebuttal
6 testimony, would your answers be the same today?
7 A Yes.
8 MR. HAMMOND: I would move that the
9 rebuttal testimony of Terri Carlock be spread upon
10 the record in its entirety with the corrections --
11 well, I believe the corrections have been made.
12 Let's omit that -- as if read and be entered into the
13 record.
14 COMMISSIONER KJELLANDER: And without
15 objection, we will spread the testimony of Terri
16 Carlock in rebuttal across the record as if read.
17 (The following prefiled rebuttal
18 testimony of Ms. Carlock is spread upon the record.)
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