20071231ICIP to IPC 1-11.pdf

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Peter J. Richardson ISB # 3195
RICHARSON & O'LEARY PLLC
515 N. 27th Street
Boise, Idao 83702
Telephone: [phone]
Fax: [phone]
peter~richardsonandolear .com
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20ai DEC 31 Mi fO= 52
Attorneys for the Industral Customers of Idaho Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
TO ELECTRIC CUSTOMERS IN THE STATE )
OF IDAHO. )
CASE NO. IPC-E-07-08
RESPONSE OF THE
INDUSTRIL CUSTOMERS
OF IDAHO POWER TO IDAHO
POWER COMPANY'S FIRST
PRODUCTION REQUEST
Pursuat to Rule 225 of the Rules of Procedure of the Idaho Public Utilties Commission
(the "Commission"), the Industrial Customers ofIdao Power (ICIP), by and through their
attorney of record, Peter J. Richardson, hereby provides the following responses to Idaho Power
Company's First Production Request:
REQUEST NO.1: Please identify the corporations, individuals and other business
entities that are the members of the Industrial Customers of Idaho Power.
RESPONSE TO REQUEST NO 1: Pursuant to Rule of Procedure No. 225, the ICIP
objects to this request because it is not reasonably calculated to lead to the discovery of
admissible evidence.
1 - ICIP RESPONSE TO IDAHO POWER'S FIRST PRODUCTION REQUEST ~ IPC-E-07-08
REQUEST NO.2: From the list of the members of the ICIP provided in response to
Request No.1, please identify the members that have reviewed and approved the testimony Dr.
Reading has filed in this case.
RESPONSE TO REQUEST NO.2: Please see the response to Request No.1.
REQUEST NO.3: Please provide copies of any testimony or comments Dr. Reading
has prepared or submitted in the last five years in any utilty regulatory proceeding which
addresses forecasted test years, utilty cost of service computation or utilty rate design including
generation and transmission allocation factors. Testimony and comments on the above-
referenced issues presented in proceedings in which Idaho Power Company was a par do not
need to be provided.
RESPONSE TO REQUEST NO 3: The requested documents are attched hereto.
REQUEST NO.4: Please provide copies of all documents including copies of e-mail
correspondence produced since December 1, 2004 in which members of the Industrial Customers
of Idao Power discuss their support or opposition to Idaho Power's industrial time-of-use rates.
RESPONSE TO REQUEST NO.4: No documents or e-mail correspondence exist due
to the fact that said communcations were all oral in format.
REQUEST FOR PRODUCTION NO.5: Please provide any studies, analyses, reports
or other sources Dr. Reading relies upon to support his recommendation that the Company's
hydro resources should be allocated 75% to capacity and 25% to energy.
RESPONSE TO REQUEST NO.5: In addition to the NARUC study which is
attched, Dr. Reading relied on his many years of experience in the utility rate making arena to
support his recommendation.
2 - ICIP RESPONSE TO IDAHQ POWER'S FIRST PRODUCTION REQUEST - IPC-E-07-08
REQUEST FOR PRODUCTION NO.6: Please provide all documentation and
analyses that Dr. Reading relies on to support his conclusion that a 75%/25% spli between
capacity and energy for hydro resources is more in line with stadard cost allocations as stated on
page 15 of his direct testimony.
RESPONSE TO REQUEST NO.6: Dr. Reading relied upon the NARUC cost of
service manual, which argubly sets the stadard cost allocations for use in regulatory
proceedings such as this one. In addition, Dr. Reading relied upon the fact that PaciCorp uses the
75%/25% split and he observed that PacifiCorp is a much larger utility than Idaho Power and
operates in many more jurisdictions than Idaho Power.
REQUEST FOR PRODUCTION NO.7: Please describe the similarties and
differences between PacifiCorp's and Idaho Power's generation resources and system operations
that Dr. Reading relied upon to support his conclusion that using PacifiCorp's class cost of
service allocation methodology for hydro resources is appropriate in Idaho Power's cost-of-
service studies. (Reading Testimony p. 15)
RESPONSE TO REQUEST NO.7: Dr. Reading does not recommend that ths
Commission use PacifiCorp's class cost of service allocation methodology. He observed that the
75%/25% split is used by PacifiCorp, but not that such a split is the PacifiCorp methodology. He
observed that assignig hydro resources to demand is endorsed by the NARUC manual.
REQUEST FOR PRODUCTION NO.8: Please explain Dr. Reading's rationale for
recommending a 75%/25% split between capacity and energy for hydro resources and his
recommendation that the system load factor split (41.47% to capacity and 58.53% to energy) be
applied to PRUP A resources.
3 - ICIP RESPONSE TO IDAHO POWER'S FIRST PRODUCTION REQUEST - IPC-E-07-08
RESPONSE TO REQUEST NO 8: The question canot be answered due to vagueness.
Please see the responses to Request Nos. 6 and 7 for the first half of ths Request. The rationale
for Dr. Reading's PURP A allocation recommendation is found in his testimony beginnng on
page 17.
REQUEST FOR PRODUCTION NO.9: Please clarfy the rationale supporting the
capacity/energy split recommended by Dr. Reading for coal-fired thermal plants and gas-fired
peaking plants.
RESPONSE TO REQUEST NO.9: Dr. Reading did not address any issues related to
the capacity/energy split for coal-fired thermal plants and gas-fired peakng plants.
REQUEST FOR PRODUCTION NO. 10: Please provide the spreadsheet or
spreadsheets used to determine the demand and energy allocation factors used to produce the
results shown on Dr. Readings Exhibits 206, 209, 210 and 211. Please provide the
spreadsheet( s) in electronic formal with all formulas intact.
RESPONSE TO REQUEST NO. 10: Please see the attched.
REQUEST FOR PRODUCTION NO. 11: Please provide Exhibits 206,209,210 and
211 in electronic format with all formulas intact.
RESPONSE TO REQUEST NO 11: Please see the attached.
DATED this 31 st day of December 2007.
RICHASON & O'LEARY PLLC
BYtkO~
Peter J. Richardson, ISB #3195
Attorneys for the Industrial Customers
of Idaho Power
4 - tCIP RESPONSE TO IDAHO POWER'S FIRST PRODUCTION REQUEST - IFC-E-07-08
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 31st day of December, 2007, a tre and correct copy of
the foregoing RESPONSE OF THE INDUSTRIL CUSTOMERS TO IDAHO POWER'S
FIRST PRODUCTION REQUEST was served by U.S. Mail, postage prepaid to:
Baron Kline
Lisa Nordstrom
Idaho Power Company
POBox 70
Boise, Idaho 83707-0070
Also Hand Delivery
Weldon Stutzan
Donovan Walker
Idaho Public Utilties Commission
PO Box 83720
Boise, Idaho 83720-0074
Also Hand Delivery
John R. Gale
Vice President, Regulatory Affairs
Idaho Power Company
POBox 70
Boise, Idaho 83707-0070
Also Hand Delivery
Eric Olsen
Racine, Olson, Nye, Budge
PO Box 1391
Pocatello, Idaho
Jean Jewell
Commssion Secreta
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idao 83702
Also Hand Delivery
Anthony Yanel
29814 Lake Road
Bay Vilage, OH 44140
Conley Ward
Givens Pursley LLP
PO Box 2720
Boise, Idaho 83701-2720
Michael Kurz
Boehm, Kurz & Lowr
36 E. Seventh Street, Ste. 1510
Cincinnati, OH 45202
LotH. Cooke
United States DOE
1000 Independence Ave. SW
Washington, DC 20585
Dennis Peseau
Utilty Resources, Inc.
1500 Libert Street, Ste. 250
Salem, OR 97302
~~~Pete Ri-¿on
Dale Swan
Exeter Associates
5565 Sterrett Place, Ste. 310
Columbia, MD 21044
5 - ICIP RESPONSE TO IDAHO POWER'S FIRST PRODUCTION REQUEST - IPC-E-07-08
Peter J. Richardson ISB # 3195
RICHARSON & O'LEARY PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter~richardsonandoleary .com
Attorneys for the Industrial Customers of Idaho Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
TO ELECTRC CUSTOMERS IN THE STATE)OF IDAHQ )
CASE NO. IPC-E-07-08
RESPONSE OF THE
INDUSTRIAL CUSTOMERS
OF IDAHO POWER TO IDAHO
POWER COMPANY'S FIRST
PRODUCTION REQUEST
ATTACHMENT FOR REQUEST NO.3
BEFORE THE
PUBLIC UTILITIES BOARD
MANITOBA ("BOARD")
CENTRA GAS MANITOBA INC. ("CENTRA")
2004 COST OF GAS APPLICATION
EVIDENCE
OF
DON C. READING, Ph.D.
Ben Johnson Associates, Inc.
on behalf of
SIMPLOT CANADA LIMITED ("SIMPLOr')
Q1. Pleas state your full name and bl.siness address.
A 1. Don C. Reading, Ben Johnson Associates, 6070 Hil Road Boise, Idaho 83703
U.S.A.
Q2. Pleaé state your qualm.cations.
A2. Please see Attchment 1 for a description of my qualifications.
Q3. Have you préviously tes.tified before the Public Utilities Board (Manitoba)?
A3. No.
Q4. Does your evidence include any attchments?
A4. Yes, attached are:
Attachment 1: Curriculum Vitae of Don C. Reading
Attachment 2: Centra Proposed UFG Identified by Category and Customer
Class
Attachment 3: Centra Gas Manitoba Inc, 2003/04 Test Year, Schedule 11
(Ypdated) , "Anocafön Results of Revenue Requirement
Elements"
QS. What is the purpose of your evi4enGeinthis proceeding?
A5. Our firm has been retained by Simplot to assist in the evaluation of Centra's
review of unaccounted for gas ("UFG") and a few cost-of-service issues
associated with Centra's Cost of Gas Application filed with the Board on
February 19, 2004. Silence on other issues does not imply acceptance of
Centra's position.
Q6. Could youplease\give abrifreviewof Simplot's Brandon facility?
A6. The Simplot fertilzer facilty at Brandon ("Simplot Brandon Plant") has seen
significant growth over the past 37 years. Products produced by the plant
include anhydrous ammorüa, granular urea, urea ammonium nitrate solutions
(UAN), .ammonLum thiosuJp hate , ammonium nitrate priUs and ammonium
polyphosphate. Carbon dioxide is also produced. About 900,000 tons of
fertilizer are produced and marketed in Canada and the adjoining regions of the
United States. Simplot has introduced several innovative products, including
ammonium polyphosphate solutions and ammonium thiosulphate. Simplot was
the first to market nitrogen solutions (UAN) in western Canada.
Simplot employs more than 210 people on a full-time basis, adding 50 part-time
positions for the busy spring and fall shipping seasons. The Simp lot Brandon
Plant operates 24 hours per day, 365 days per year and is the only fertilzer
manufacturing facility in the Province of Manitoba. The Simplot Brandon Plant is
considered a prime employer in southwestern Manitoba.
The payroll for the Simplot Brandon Plant is approximately $15 milion. Simplot
pays approximately $2 millon per year in propert taxes. The economic impact
on Manitoba extends beyond these direct effects at the plant through economic
multipliers. A recent study in California indicates that a fertilizer plant's income
nearly doubles as it ripples through the economy and creates an additional 1.8
jobs for ev.ery plafit job. Supplies and services purchased within the province by
Simplot are estima;ted at $31 mi/tion per year.
Q7. Simplot is a Speial Contrct customer. Are thére any other Special
Contract customers on Cehtra's system?
A7. No. Schedule 6.1.1 filed by Centra shows two Special Contract customers.
However, in response to Simplot Information Request 15, Centra indicates the
Co-op Class was inadvertently included and that Simplot is the only Special
Contract customerøn Centra's system. Since the Simplot Brandon Plant is
unique from any other customers on Centra's system, it makes sense that it is in
a customer class of its own.
Q8. You indi~te that the Simplot Brandon Plant is unique from other
customel" on Cehtr's system. Could you please e~plain?
AS. Sirnplotis Centra's largest customer, accunting for nearly ~O% of the natural
gas usage in Manitoba. However, Simplots usa;ge of natural gas is unlike any
other customer on the system. Virtually all of the gas is used in the production of
fertilizer as fedstock, with less than 1% used for seasonal heating. Natural gas
costs account for over 60% of Simplots overall operating costs. For example,
production of a ton of ammonia uses 33.5 million Btu of natural gas. . As the
natural gas is used for feedstock, the production process requires that the gas be
un-odorized. In addition, because the plant operates ~4hoursa day, 7 days a
week the load factor is constant irrespective of season, time~of-day, or weather.
Q9. You have explained how the use of natural gas by th Simplot Brandon
Plant is unique. Are there other aspets that make this plant unique within
Centr's system?
A9. Yes. The Simplot Brandon Plant uses only a fraction of Centra's transmission
pipelines and none of its distribution system. The fertilizer plant is located just 23
kilometers south of Centra's TCPL take-off point and is served by a looped
transmission main. Originally, Simplot was the only customer on the line. The
power stattön was added several years ago. The majorit of Centra's customers
are downstream from the Brandon TCPL take-off point, in the Winnipe area.
Any contribution to UFG on Centra's system caused by the SimplotBrandon
Plant could only occur over the 23 kilometer stretch of pipeline from the TCPL
take-off point to the Simplot Brandon Plant.
In addition, the metering for this facility is tightly controlled and is also unique
among other customer classes on Centra's system. According to Centra:
The metering requirements for the Special Contract Class customer are
unique to the Centra system in several ways. This customer consumers
almost 200/b of the overaii annual system throughput, and its usage
pattern is characterized by extremely constant flow. It requires un-
odorized gas directly from the Centra transmission system at
transmission line pressure. It is served through a pair ot close tolerance
åutO'correcting turbine meters, that enable Oentra to switch from one
meter to another if required. Centra calibrates. the pressure and
temperature correction apparatus once each month to ensure optimum
accuracy. This customer has invested in a redundant check metering
taCilit in series wih the Centra metering station. Both metering stations
are connected to the Centra SOADA system and are monitored daily.
The potential tor an out-ot-range meter error is fairly low compared to
other customer classes. 1
Therefore, due to the strict metering requirements for the Simplot Brandon Plant,
any loss of gas between the TCPL take-off point and the Simplot Brandon Plant
can be eas.ily determined.
Q10. Doe Simplot purchase its natral gas from Centr?
A10. No. Simplot purchases its own gas and relies on Centra for transportation only.
Theirfore, any costs -orbenefrts - . caused by volati.Lity in gas market prices is
bOlGme by Simplot and not Centra or any other of Centra's system customers. It
also means that Simplot bears the costs of market analysis and the costs of
natural gas purchases.
1 Applicaìon: Tab 7, Attachment 1, Unaccounted for Gas Review, page 2, line 27 through page 3, line 7.
Q11. Bot you and Centr have explained how the Simplot Brandon Plant is
unique, within Centra's system. What implications doe this have for
ratemaking?
A11. Rates in regulated mårket . should reflect the costs tmp.oS. on the system by a
particular customer class. The first step is to assign any directly applicable costs
to the customer or customer class, then to allocate the remaining costs based on
cost causation. The dean of utilit regulation, Professor James C. Bonbnght, has
called this the "golden rule of socially optimal ratemaking":
True, other factors of ratemaking are potent and are sometimes
contrøllng . . . IbJut the cost standard has the widest range of application.
Rates found to be far in eXt!ssof cøsfareat least higfHy vtilnerableto a
chare of unre.asonablenesS, Rates. found well below cost are likely to be
tolerated, if at all, only as a necessary and temporary eviL. For if rates are
not compensatory, they are not subsidy free. ln fact, the golden rule of
sooiaJly.optimal rate"!aking is that". wheneverpossible, prices should track
all identifable... costs occasioned by a services prøvision.2
Q12. How could thepriricipJe of identifiable costs be applied to the allocation of
UFG costs to the Simplot BraridonPJant?
A12. Given the high amount of natural gas consumed by the Simplot Brandon Plant,
one might assume by that one dimension that a signifcant portion of system
UFG costs should be assigned to the Simp lot Brandon Plant. However, using
volume to allocate costs would be unreasonable and violate the 'golden rule'
criteria related to the costs the Simplot Brandon Plant imposes on Centra's
system. As explained above, the Simp:lot Brandon Plant (i) uses only 23
kilometers at pipeltne;.(ii) uses un..odonzed gas; (iii) purchases its own gas; (iv)
has a constant usage pattern; and
(v) is only one customer for bilUng and
accounting purposes. The costs imposed on Centra for gas delivery to the
Simplot Brandon Plant are very small relative to the amount of gas used at
Simplot Canada's Brandon Plant.
;¡ James Bonbrìght. Principles Of PUbliCl:litRat. 19æediton. atpp. 109-110.
Q13. Wh ar some approahe that could be used to allocae UF'G costs to the
Simplot Brandon Plant?
A13. According to Centra, "Gas measurement is complex due to the nature of natural
gas.1i3 Asexp;lained abov:e,/iø:ever, gas delivery to the Sìmplot Brandon Plant
is strai~ht!orwardand simple.
One method of allocating UFG costs would be to do so based on distance of
pipeline used. The Simplot Brandon Plant uses only 23 kilometers out of a total
of 8,143 kilometers of pipelines in Centra's system.4 This would mean the 23
ldlometres from the TCPL take-offpoint to the Simplot Brandon Plant represents
only Q.28% of the Centra's total transmission and distributi$n system. Centra's
system had 1,999 kUometers of transmission pipeHne at the end of 2002.5 This
would mean tlt the 23 kiliometFesof pipeline used to serve the Simplot Brandon
Plant represents only 1.15%..of Centra's total transmission system.
Q14. The data above is based on pipeline capacity. Are there other measures
that could be used?
A14. Since measurement (meters) is a major cause of UFG, another method of
allocting UFG costs would be to do so based on number of meters used. The
Simplot Brandon Plant has 2 meters. Centra's system has approximately
255,000 meters in service at customer premises.6 This would mean the Simplot
Brandon Plant represents only 0.001 % of Centra's total meters.
Q15. The above discusion bas ben ahout physicl measures. Would financial
measures also be a viable approach?
A15. A further method of allocating UFG costs would be to do so based on financial
rather than physical indicators, such as revenue requirement or rate base:
3 Application, Tab 7, Atachment 1, Unaccounted for Gas Review, page 1, line 15
4 Centr Web Site, at: hìt:/Iww.hydro.mb.calour_facilitesmanitoba_hydro_naturalgas.shtmi.
5 Centra Response to Simplot Informaton Reques No. 14(e).
6 Centr Response to Information Reques ofSimplOìCanada, No. 14(f).
Centra's overall revenue requirement for the 2003/2003 Test Year in the 2003/04
General Rate ApplIcation was $S21,659,.00. Of the $521,659,400, the Special
Contract Class accounted for $1,794,200 or 0.34% of the overall revenue
requirement. 7
The total rate base approved in the 2003/04 GRA was $361,403,700. The
special Contract Class' responsibilit is $2,792,720 or 0.77%.8
The values behind these financial values are based on cost causation principles.
Both also allocate less th.an 1 % .CO$t responsibility to Simplot Canada's Brandon
Plant.
Q16. It appears the fie measures you have outlined above allocate to the
Brandon facility just over 1 % to significantly less. Could you summarize
these approaches.
A16. Three of the measures are based on physical measures and two are based on
financial indicators. The Simplot Brandon Plant would be allocated cost
responsibility the following. Percents based on these indi.cators:
Physical Measures
.Total Pipeline Kilometers:0.28%
.Transmission Pipeline Kilometers:1.15%
.Number Of Meters:0.001%
Financial Measures
.Revenue Requirement:0.34%
.Rate Base:0.77%
7 Centra Response to InfOrmation Requests of Simplot Canada, No. 14(h).
8 Centra Respons to Informaton Request of Simplot Canada, NO. 14(i).
The range is from a very low 0.001 % to a high of 1.15%. In general, these
indicators suggest that cost responsibilit on Centra's system from the Simplot
Brandon Plant is around 1% or less.
Q17. Are you advocating any of the above described methods of allocating UFG
costs?
A 17. No. I was pointing out that there are a variety ways to rationally allocate UFG
costs toSimplots uniquely situated Brandorl plant. These altematives indicate
that eVen though the Simplot Brandon Plant èonsumes neariy 20% of total gas
on the Centra system, the actual costs imposed on the Centra system by the
Simplot Brandon Plant represent a very small percent of total Centra system
costs.
Q18. What do you think of Centra's method of assigning tJFGCøstesponsibility
in this proceeding?
A18. First, I would liRe to compliment Centra for its efforts in developing a
methodology for assigning UFG costs that uses the 'golden rule' of rate making.
Centra's approach is to look at the causes of UFG and assign costs on that
basis. Centra has identified a variety of causes that account for UFG and has
attempted to assign those to customer classes where applicable. gimplot's
position is that there are some adjustment to Centra's approach, as discusse
below, that wil refine Centra's assignments. However, I support the direction of
Centra's approach to UFG costs. Centra's proposed methodology would allocate
5.7% of total UFG to Simplot as compared to historical allocations in the order of
12.8%.9 It is clear that past allocations of UFG costs for the Simplot Brandon
Plant were out of line with cost causation principles and that the present
Application represents a commendable effort to address that situation.
Q19. Could you please discuss each of the components of Centra's UFG cost
calculations and expla.in any differences you may have with Centr?
A 19. Centra defines three major ca.uses of UFG (Tab 7, Attachment 1, page 1, Hnes
10-11). Thes are: (i) measurement; (ii) physical ,loss, and (iii) accounting
factors. There are subcategories under measurement and accounting with
calculations for eight speöifcfactors - Attöhment 2 shows each of these factors.
Q20. Would you please identify the major factor?
A20. Measurement error is thelargest category accounting for UFG. Metering
accuracy is the major cause of UFG accounting for 69% of totalidentifle UFG.
It is also accounts for 85% qfthe allocation to Simplot'$ iran€fon plant. Simplot
is being assig,ned by Centra .9.7% of aU measurement error. Translated into
dollars this rneans that Centra is charging Simplot nearly$194,364 per year for
potential measurement error from just a "a pair of close tolerance auto.,rrecting
tutbine meters" with respect to ViiÏch "(Tbe potential for an out--f-range meter
error is fairly low compared to other customer classes".10 In addition Simplot has
purchased its own meters as a redundant check against the Company's meters.
The Cornpany and Sìrnplot shared itl a study to insurerneter accuracy and have
entered into a protocol dealing with meter accuracy.
Q21. These meteri.ng errors are based on the Company's "high" case. How does
the "base" ca vary for the various type of meters?
A21. In response to an information request from Simplot, Centra provided the
difference between the "high" UFG case and the "base" UF'G case.11 The
"bas~' UFGcae leads to a curious result. Tl-ie "base" case indicates that all
classes, except the Special Contract Class, have a gain - not a loss - of
Unaccounted For Gas. 80th the Special Contract and Interruptible classes have
les.$ than a 1% loss factor with the total gain being 4,990 103m3. This fact
indi.ees that there nes to befirther refinement of the process and explains
why Centra chose the "high" case that showed a loss of gas. While applauding
9 Applicion: Tab 7, page 9.
10 Application: Tab 7, Attachment 1, Unaccunt fQr Ga Review, page 3. lines 1 to 7.
11 Centra Respons to Simplot IR No. 22, pag~2.
Centr's effort to deal wit UFG on a causal basis, the result indicate that more
work needs to be done to accurately represent the causes of UFG.
Q22. What other categories under "Measurement Error" impact UFG alloctions
to the Simplot Brandon Plant?
A22. Centra made a correction in the UFG calculation to compensate for different
measuremel1t criteria beteenits own system and the TCPL system. The result
isa gain on the Centra system. This transl(1tes into a reduction in UFG
assignment for all customer classes. The basis for the calculatiol1is gas receipt
volumes 12. Thisl1thod öf acfocation'is rational because the conversion factors
are based on the tötal amount of gas delivered from TCPL to Ceritra. Therefore,
the amöunt of gas delivered to customers should receive a proportional
a.llocation. The other measurement error categories are.corrected at the meter or
do not apply to the Simplot Brandon Plant loads.
Q23. Ho. does Cériûa deal withphysicallO$in its calculation of UFG?
A23. Physical losses accourit for 12.4% of identifed UFG on Centra's system.
Included in tRis categ.ory are: 13
· Fugitive emissions (leakage from pipe lines, service lines, meter sets and
pressure regulating stations).
· Vented gas (from control instrument operation, station purging and
venting, system pressure relief valve operation, system blowdown and
purging, odorant injection and losses from line hits and damag.es).
· Company use (provisions of line pack in new mains and services).
In response to questions from Simplot, Centra previously estimated annual
losses to atmosphere for the transmission line serving the SimplotBrandon Plant
to be 1.35 103m3 at most. This estimate was based on an industry emission
factor of one leak per year for every 60 kilometres of line. i note that this number
12 Applicaion: Tab 7, Attachment 1, Una~unt fur Ga Review, page 4, line 14.
13 Applìcation: Tab 7, Attchnient 1, UnacCOUnte for Gas
Revi, page 8" tìt'es 24 through 29.
is in.$onsistent with the Appli~tion's much higher allocation of physical UFG
losses14 to the SimplotBrandon Plant of 30 103m3. Physical UFG losses are
dependent on physical facilities used. The 1.35 103m3 allocation is much more in
line with the results of an aHocation based on facilities use, such as pipeline
distance or number of meters, as noted in OtA 16.
In Q/A 16, allocations of a portion of the total annual physical loss of 1,550 103m3
to the SimplotBrandon Plant based Ön altèrnate aFlocation methodologies would
yield: (i) share of system total pipelinedistan~ is 0.28%, or 4.34 103m3; (ii) share
of system transmission pipeline distan~ is 1.15%, or 17.83 103m3; (Hi) share of
number of meters is 0.001%, or 0.02 103m3; (iv) share of revenue requirement is
0.34%, or 5.27 103m3; and (v) share of rate base is 0.77%, or 11.94 103m3.
Q24. Are.there any other rea.sOl1 why you believe that tbe#!,llocationof UFG to
the S i:m plot Brandon Plant as a result of rnea$urementloS$esis too high?
A24. Yes. The Simplot Brandon Plant uses 2 state-of-the-art meters. Centra
describes them as "one of the most accurate meter product offerings available.ti15
In addition to these two Centrameters, Simplot invested in its own "check" meter.
The Centra meters and Simpfot check meter are all very similar, turbine meters.
These meters have been calibrated to within 0.1 % accuracy in one of the few
certified facilities in the country by TransCanada Pipelines Limited. The check
meter is used to literally "check" the readings of the Centra meters to ensure their
accuracy. When readings are taking, all conditions are normalized, with the
meters operating at the same temperature and metering gas with a similar
composmon (the gas composition can affect measurement).
While the Centra Tariff refers to tolerances of 2% before certin metering invoice
adjustments are called for, effective January of 2004 Simplot and Centra entered
into a Natural Gas Metering Protocol to ensure the meters at the Simplot
Brandon Plant operate vvthin much tighter tolerances. While meter maintenance
14 Application: Tab 7, Attachment 1, Unaccounte for Gas Review, page 10.
, .
is scheduled once a month, the Natural Gas Meering Protocol calls for
immediate action if the check meter and measurement meters fall outside of a
very low tolerance.
Q25. Can you provide us with some furter details concerning this "Natural Gas
Metering Protocol" that is unique to the Simp;lotB;randon Plant?
Ä2,5. Yes. Meter readings are avaUable daily, on a virtuai real-time basis. If:
(i) there are two consecutie days with metering at either a plus or minus
0.35% or higher discrepancy between the Simplot check meter and the
Centra measurement meters; or
(ii) there is one day with metering at either plus or minus 0.60% or higher
discrepancy between the Simplot check meter and the Centra
meâ'Surement meters;
then Simplot contacts a Centra technician who will be scheduled to corne to the
Simplot Brandon Plant no later than two wortdng days after Centra receives such
notification, although Centra will send technicians on the same day if they are
available. A joint check of both meters is then performed by the Simplot and
Centra technicians, which includes checkin'g the meters for any active alarms
and verifying the calibration of the pressure and temperature sensors. All
information and the results of the audit are then forwarded to the appropriate
personneL.
The above described Natural Ga Metering Protocol is unique to Simplot and
ensures that any measurement variances at the Simplot Brandon Plant remains
within very strict tolerances. I am not aware of other meters on the Centra system
that are subject to such a rigorous validation process.
15 Centra response to Simplot IR No. 14.
Q26. Did Centra asign any UFG contr to th Simpl Brndon Plant to
K&9ltfor th difrenc Betwee bilUng cycle and whn ga is actually
delivered?
A26. No. Acoordjng to Centra:
. . . Special Contract Classe(s) have their meters read on the month-end,
which corrsponds mor appropriately wrh the invoicing recived frm
TCPL for pipeline deliveries. These customer groups do not contribute to
the vaiabilit of UFG related to cyclic billing. 16
Because the Speaial Centract Ct$$S (Simp lot BranGlon Plant) billing matches
actual consumption there is no reason to assign UFG to the Simplot Brandon
Plant for this category.
027. In allocating UFG cO&ts, did Centr use it cost-of-servce study that was
accept 8Y tll Board last yer but which study is not speifically at issue
in this procedi,ng?
A27. Yes. Tab 7 of the Applicatioh, Schedule 7 spreads UFG costs among the
customer classes based on cost functional and allocation factors that are not at
issue in thìs proceGling. However, these factors are nonethele useG to
allocate UFG costs amongst customer classes in this proceeding. That is,
Centra used the same factors to Glistribute UFG costs that it woulGl if this were a
full rate case proceeing.
Q28. Do you have somé exam.ples of the items that conce.m you?
A28. Yes, there are severaL. i would like to hote that the items IisteGl below shoulGl not
be considerec an exhaustive list. The BoarGl should know that Simplot has had
some preliminary Gliscussìons with Centra on the meaning anGl rationale for
assigning costs. I woulGl like to thank Centra for its cooperation when we have
inquireGl about specifc items. At this point we are attempting to gain a better
understanGling of why Centra has made some assignments.
Q29. Ple brifl prÐVid some example of speifc ites in the cost-of-
serice stuy that you feel mayor may not be corretly assgned to the
Simplot Brandon Plant.
A29. According to Schedule 11 (Updated) of Centra's May 1, 2003cøst-of-service
filing with the Board (copy provided in Attachment 3). Centra allocatec
Commodity or Other gas cost to Sìmp.lot of $43,958. Thes were based on
'Oklahoma Supply' of $14,654 and 'Minell Charges' of $29,304. However,
Simp lot purchases all of its own gas supply and uses Centra only for
transpottaiior"service. We are unsure how these ôharges rationally apply to
Simp.lot.
In addition, the Simplot Brandon Plant was also allocatec $85,648 for 'Gas
Proouremer"t .It . is my undertandlngfrém discussions wìh Centra that this
allocatiøncø from .aBoard directive that aU customers should share in the
cost of gas procurement, even if they buy their supply through a broker. Since
Centra is a supplier of last resort, all customers should share in the costs of
being able to fall back on thecømpany for their supply. While this rationale may
be vaHd for smaller customers, this is not the case for a customer of Simplot's
size. Simplot is paying its own brokers for gas supply and would not rely on
Centra for supply. SImplot is a Special Contract customer and in the unlìkely
event that it would ever use Centra for gas supply, those costs would properly be
includec in the contract terms between Simp lot and Centra.
Q30. Are theré any other cost-of-service items that cause you concern?
A30. Yes. Simplot was charged $81,787 for 'Line Location'. However, as pointed out
above, the Simplot Brandon Plant uses only 23 kilometers of transmission
pipeline. While line location is a service that is important for safety reasons, this
amount for a main transmission line appears excessive. The Simplot Brandon
Plant was also allocatec $196,863 for 'Distribution Maintenance'. Discussions
16 Application: Tab 7, Attachment 1, Unaccounted for Gas Review, page 12, lines 5 through 8.
with Centra indicated that in fact thisaUocation related to transmission . facilities
and not distribution. However, this amount appears. high for only 23 kilometers of
line.
Q31. What are you asking the Board tQ.clQ ...ab9ut thescost~of..service itms
considering they are not part of this proceéding?
A31. I understand that the dollars allocated to Simplot discussedpbove for last year
containUFG cha\7es that are being...calcuJated diffrentlY in this case. However,
we want .tobe abte to. fuiiy understand how Centra views the Simpl.ot Brandon
Plant as part of Centra's system. We are as.king the Board to support a dialog
between Simplot and Centra on these issues until such time as Centra files a
new cost-of-service study.
Q32. Could you $l.mmarize what you would like to see the Soard do in this
proceeding with respect to the allocation of UFG costs?
A32. Yes. At this time, i would support Centra's proposed allocation of UFG costs as
a welcome step in the right direction. However, i would submit that a proper
allocation of UFG to the Simplot Brandon Plant has not yet been achieved. The
Simplot Brandon Plant:
· is served by only 23 kilometers of transmission line;
· is a customer in its own class;
· . purchases its own gas;
· uses un-odourized gas;
· has a constant usage pattern; and
· has only 2 state-of-the-art meters that are monitored daily by an additional
check meter and recalibrated if they fall outside of very tight tolerances.
In light of the above, the cost causation contribution to UFG of the Siniplot
Brandon Plant is obviously less than the 5.7% assigned by Centra. The five
alternative indicators I have outlined in this Testimony all point to a UFG cost
causation on the part of the Simp lot Brandon Plant of 1 % or less.
Accordingly, 1 would urge the Board to direct Centra to work with its customers to
stdy the UFO isst. further .wñ. tne aim of developing a more accurate and fair
aUocation of UFG costs..
Q33. Do you have any concluding observations?
A33. I would like to again compliment Centra for its efforts in allocting UFG based on
its real causes. We are supporting the filing as a whole even though we do not
agree wih all of its aspects. We intend to continue a dialog with Centra to further
refine its UFG aflocation methodology to ensure fairness to Simplot and all other
customers on Centra's system.
Q34. Does this conclude your evidence in this proceeding?
A34. Yes, it does.
Presnt Poitn:
Education:
Honors & Awards:
Professional &
& Busines Hisry:
Firm Expeènce:
ATTACHMENT 1
CurriooJum Vita Of
Don C. Reading
Viæ Present and Consulting Economist
B.S., Econømics - Utah State University
M.S., EconømiCs - Universit of Oregon
Ph.D., Economics - Utah.. State Universit
Omicron Delta Epsilon, NSF Fellowship
Ben Johnson Associate, Inc.:
1989 - Viæ President
1986 - Consulting Economist
Idaho Public Utilities Commission:
1981-86 Economrsttirector of Policy and
Administration
Teaching:
1960~1:
1970-0:
Associate Professer, Universit of Hawaii-Hilo
ASsøcìatéandAšsistant Professor, Idaho State
UMÎVêršity
Assistant Pròfessor, Middle Tennessee State
Universit
Dr. Readíng provides expert testimony concerning economic
and regulatory issues. He has testifed on more than 35
ocesiòns before utilit regulatory commissions in Alaska,
Califorrria, Colorado, the Distrct of Columbia, Hawaii, Idaho,
Nêvada, NorthOåkota, Texas, Utah, Wyoming, and
Wâshingtön.
1968-70:
Dr. Reading has more than 30 years experienæ in the field
ofeconemÎcs. He has participated in the development of
indices reflctingeconornic trends, GNP growth rates,
förêi~tI exèhan~!market$,the money supply, stock market
levels., and inflaton. He has analyzed such public policy
issues as'terninirnüm wage, federal spending and taxation,
andimporteXport bàlanCês. Dr. Reading is one of four
economists providing yearly forecasts of statewide personal
income to théStte áf Idaho for purposes of establishing
state personal income tax rates.
In thefietdof telecommunications, Dr. Reading has provided
expertt~~im~ny?n the issues of marginai cost, price
elasticrt, ànd meàsured service. Dr. Reading prepared a
state-specifc study of the price elasticity of demand for local
te~honesêrviG in Idaho an(!recently oond.acte( researd
for, and directed the preparation of, a report to the Idaho
legislature regarding the status of telecommunications
competition. in that state.
Dr. Réadihg's areas of expertise in the field of electric power
include demand forecasting, long-range planning, price
ê'lastiCity ,matg¡nal and average cost pirillg,
production-simulation modeling, and econometric modeling.
Among. :n.~~ect ~esVíasan. electric ratedesigna.n.alvsis
for the Indu.stralCustámersof l(!aho Power. Dr. Reading is
currentlva o.risultant to the Idaho Legislature=s Committee
on Electric Restructuring.
Sinpe 19~ .Dr...R.tading has been affliated with the Climate
Impact Group (GIG) at the University of Washington. His
work with the CIG has involved an analysis of the impact of
Global Warming on the hydofaoilites on the Snake River. It
also includes an investigation into water markets in the
Northwest .and Florida. In addition he has analyzed the
economics of snowmaking for ski area's impacted by Global
Warming.
Among Dr. Reading's recent projeots are a FERC
hydropOV\er relicensingstady (for the Skokomish Indian
Tribe) and an analysis of Northern States Power's North
Dakota rate design proposals affecting large industrial
cu~tQters (for J,R. Simp lot Company). Dr. Reading has also
perormed analysis for the Idaho Governor's Offce of the
impaot on the NorthWest Power Grid of various plans to
increase salmon runs in the Columbia River Basin.
Dr. Reading has prepared ecnometric forecasts for the
Southeastldaho Council of Governments and the Revenue
Projecln Committee. of the Idaho State Legislature. He has
also been a meffber of several Northwest Power Planning
Council Statist¡cal Advisory Committees and was vioe
ohairman of. the Govemor's Economic Research Council in
Idaho
Whrle Pit.ldal"o State Univers'ity, Dr. Reading performed
demog~~l"icstl.die using a cohortsurvival modèl and
severaleenorniGirnpact studies using input/output analysis.
He has also provided expert testimony in cases concerning
loss ofim~tteresultng from wrongful death, injury, orem~lovment discrimination. He is currently a adjunct
profesor of ecoomics at Boise State Universit (Idaho
economic history, urbanlregional economics and labor
economic.)
Dr. Readin, has rentlycompleted a public interest water
rights transfer case. He has also just completed .an
economic impact analysis of the 2001 salmon season in
Idaho.
Publications:The Economic Impact of the 2001 Salmon Season In Idaho,
Idaho Fish and WHdlìfe Foundation, April 2003.
The Economic Impact of a Restored Salmon Fishery in
Idaho, Idaho Fish and WildIìe Foundation, April, 1999.
The Economic Impact of Steel head Fishing and the Return
of Salmon Fishing in Idaho, Idaho Fish and Wildlife
Foundation, September, 1997.
A Cost Savings from Nuclear Resources Reform: An
Econometric Model~ (with E. Ray Canterbery and Ben
Johnson) Southern Economic Journal, Spring 1996.
A Visitor Analysis for a Birds of Prey Public Attraction,
Peregrine Fund, Inc., November, 1988.
Investigation of a Capitalization Rate for Idaho Hydroelectric
Projects, Idaho State Tax Commission, June, 1988.
"Post-PURPA Views," In Proceedings of tl"e NARUC
Biennial Regulatory Conference, 1 ~83.
An Input-Output Analysis of the Impact from Proposed
Mining in the Challis Area (with R. Davies). Public Policy
Research Center, Idaho State University, February 1980.
Phosphate and Southeast: A Socio Economic Analysis (wih
J. Eyre, et al). Government Research Institute of Idaho State
University and the Southeast Idaho Council of Governments,
August 1975.
Estimating General Fund Revenues of the State of Idaho
(with S. Ghazanfar and D. Hölley). Center for Business and
Economic'Research, Boise State University, June 1975.
"A Note bn the Distribution of Federal Expenditures: An
Intersate Comparison, 1933-1939 and 1961-1965." In The
Amerian Economist, Vol. XVII, No.2 (Fall 1974), pp. 125-
128.
"New Deal Activity and the States, 1933-1939." In Journal ofE(¡o~mi(¡ History, Vot )ØIU, Decmber 1973, pp. 792-
810.
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Peter J. Richardson ISB # 3195
RICHASON & O'LEARY PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone: (208) 938~7901
Fax: [phone]
peter~ichardsonandolear.com
Attorneys for the Industral Customers of Idaho Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE )
TO ELECTRIC CUSTOMERS IN THE STATE)
OF IDAHO )
CASE NO. IPC-E-07~08
RESPONSE OF THE
INDUSTRIAL CUSTOMERS
OF IDAHO POWER TO IDAHO
POWER COMPANY'S FIRST
PRODUCTION REQUEST
ATTACHMENT FOR REQUEST NO.4
.
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Cos~ iSa ~ reg to 11 ~ to ~ wha or wh, is~I ÇO to be.~ lllh tdit. Fo_ paic ~ cocaat co de ..~ a di'$ pr pla in....t des.Cot casaon ct: (1).. ~_ ad ~ CO l' ~ ~ plgrelibity ~ sn as løs of lo ~iit (L. lo of lo ho (LO,
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-l ~.
Peter J. Richardson ISB # 3195
RICHASON & O'LEARY PLLC
515 N. 27th Street
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter~richardsonandoleary .com
Attorneys for the Industral Customers of Idaho Power
E~
'ìm1' 0' ¡;(' 3. "..vU t i.l; I 10: 54
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO INCREASE ITS RATES )
AND CHAGES FOR ELECTRIC SERVICE )
TO ELECTRIC CUSTOMERS IN THE STATE)
OF IDAHO )
CASE NO. IPC-E-07-08
RESPONSE OF THE
INDUSTRIAL CUSTOMERS
OF IDAHO POWER TO IDAHO
POWER COMPANY'S FIRST
PRODUCTION REQUEST
ATTACHMENT FOR REQUEST NO. 10 AND 11
IPC- E-07 -08
FOR THE RESPONSE OF THE
INDUSTRIAL CUSTOMERS OF
IDAHO POWER TO IDAHO POWER
COMPANY'S FIRST PRODUCTION
REQUEST, THE ATTACHMENT
FOR REQUEST NOS. 10 AND 11 IS
ON A COMPACT DISC, WHICH IS
NOT SCANNABLE