HomeMy WebLinkAbout20020905Volume 6, pg 736-749.pdf
1 (The following proceedings were
2 had in open hearing.)
3 (Staff Exhibit Nos. 101 and 102
4 were premarked for identification.)
5 MR. WOODBURY: And I would present
6 Mr. Schunke for cross-examination.
7 COMMISSIONER SMITH: I guess
8 apparently Mr. Olsen has no questions, so then
9 Mr. Budge.
10 MR. BUDGE: Thank you.
11
12 CROSS-EXAMINATION
13
14 BY MR. BUDGE:
15 Q. Mr. Schunke, I don't believe you filed
16 any rebuttal testimony, just your direct testimony.
17 Correct?
18 A. That's correct.
19 Q. And so subsequent to that testimony,
20 Monsanto presented an alternative proposal to
21 increase the amount offered in the way of
22 interruptibility. Are you familiar with that?
23 A. Yes.
24 Q. And would those additional offerings
25 of interruptibility have the effect of lowering the
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HEDRICK COURT REPORTING SCHUNKE (X)
P.O. BOX 578, BOISE, ID 83701 Staff
1 range of the proposal in your testimony as to what
2 you thought would be a reasonable net rate to
3 Monsanto?
4 A. Well, if I were to put that increased
5 interruptibility into my exhibit and recalculate
6 that number, it would -- it would lower the rate
7 from the Monsanto's original proposal, but it's
8 actually still higher -- excuse me -- the 1992
9 contract still had greater interruptibility
10 resulting in a lower rate even than the 1,000 hours
11 being proposed now by Monsanto.
12 Q. So the effect would be then to lower
13 your upper range?
14 A. It would lower the upper range, yes.
15 Q. When you did your calculation, is my
16 understanding correct that did you not place any
17 value on the Monsanto emergency interruption or
18 sometimes called system integrity?
19 A. That's true.
20 Q. And would you agree that that does, in
21 fact, have value to the Company?
22 A. Yes. I believe the Company did put a
23 numeric value on that in their rebuttal testimony,
24 and that seemed like a reasonable number to me.
25 Q. If I recall correctly, you made a
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HEDRICK COURT REPORTING SCHUNKE (X)
P.O. BOX 578, BOISE, ID 83701 Staff
1 statement in your testimony to the effect that the
2 lowest rate you thought Monsanto -- or, could be
3 justified for Monsanto with the additional
4 interruptions would be the current rate of $18.50.
5 Your thinking, if I remember right, was that some
6 costs have gone up from the Company since the 1995
7 contract. So if those costs went up, Monsanto is
8 now giving up interruptibility it didn't before, and
9 therefore, that's the lowest rate you could possibly
10 support would be the existing contract rate?
11 A. That's true.
12 Q. And I probably misstated that, but --
13 A. Yeah, actually I said it was the
14 effective rate, which I -- referring to Monsanto's
15 comments in the '92 -- in the rewriting of the
16 '95 -- the contract in 1995, they indicated it was
17 23 mills, and that's the amount I used as the
18 effective rate. But, yes, I did use that as the
19 floor of what I thought was a reasonable range.
20 Q. And did you use that as the floor in
21 part because you assumed that the operating costs
22 and expenses of the Company must have increased from
23 that time until now?
24 A. Well, yes, I generally view the
25 electric industry as a increasing-cost industry, and
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HEDRICK COURT REPORTING SCHUNKE (X)
P.O. BOX 578, BOISE, ID 83701 Staff
1 I mean there are exceptions to that, but --
2 Q. If, in fact, the costs of the Company
3 have declined until now as a result of merger
4 savings or Centralia or something of that nature,
5 would you agree that it may be appropriate to
6 justify a lower cost than what you have suggested?
7 A. Sure. If -- I guess if it could be
8 shown that the rates that were found to be just and
9 reasonable in '95 and really clear back to '87 I
10 think it was in excess of 20 mills, but if those --
11 if those rates that were then just and reasonable
12 and if it can be shown that costs have actually
13 declined since those times, then I would not oppose
14 lowering the floor to a different appropriate level.
15 MR. BUDGE: No further questions.
16 Thank you.
17 COMMISSIONER SMITH: Thank you,
18 Mr. Budge.
19 Did you have questions, Mr. Olsen?
20 MR. OLSEN: No, Madam Chairman.
21 COMMISSIONER SMITH: Mr. Fell?
22 MR. FELL: Yes, please.
23
24
25
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HEDRICK COURT REPORTING SCHUNKE (X)
P.O. BOX 578, BOISE, ID 83701 Staff
1 CROSS-EXAMINATION
2
3 BY MR. FELL:
4 Q. Mr. Schunke, on that last line of
5 questioning, there was an implication that the
6 Company's costs have declined since the 1992
7 contract. Is that what was the gist of what was
8 going on?
9 A. Well, I thought the gist of what was
10 going on was that if it could be shown that costs
11 had declined, then would my floor reduce -- also
12 reduce, and I said, yes.
13 Q. And if they had declined from what
14 time period?
15 A. I think the original question was
16 referred to the '95 contract period.
17 Q. And are you familiar with what gas
18 prices have done since that, during that time
19 period?
20 A. Generally, yes.
21 Q. They've generally gone up?
22 A. Well, they went way up and they have
23 come back down.
24 Q. Generally higher?
25 A. You know, I honestly can't say.
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HEDRICK COURT REPORTING SCHUNKE (X)
P.O. BOX 578, BOISE, ID 83701 Staff
1 Q. Well let me move on to another one.
2 What about the cost of hydropower with relicensing
3 and other -- and licensing condition issues and that
4 sort of thing?
5 A. Well, I'm fairly sure that hydropower
6 would have increases other than -- other than
7 depreciation, but --
8 Q. But it generally would be more
9 expensive today than it was before --
10 A. There are significant --
11 Q. -- on a per-megawatt-hour basis, which
12 means that I'm asking you to take into account
13 reductions in generation due to fish passage and
14 other issues?
15 A. Yeah. I would generally say, "yes."
16 I'm a little nervous because there are so many
17 things that happened on both sides of the equation,
18 but I think, in general, there's been an upward
19 pressure on the cost of hydropower.
20 Q. And has there been a general upward
21 pressure in the wholesale power markets?
22 A. Since '95?
23 Q. Yes.
24 A. Now if you'd have asked me these
25 questions a year and a half ago, it would have been
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HEDRICK COURT REPORTING SCHUNKE (X)
P.O. BOX 578, BOISE, ID 83701 Staff
1 easier.
2 I think that's true. I think since
3 '95, I think there has been an upward pressure.
4 Q. I guess my point is that it isn't --
5 bearing these things in mind, it isn't all that
6 clear the costs have actually gone down on a total
7 cost basis?
8 A. I would agree with that.
9 Q. Thank you.
10 MR. FELL: No more questions.
11 COMMISSIONER SMITH: Are there
12 questions from the Commission?
13 Do you have redirect, Mr. Woodbury?
14
15 REDIRECT EXAMINATION
16
17 BY MR. WOODBURY:
18 Q. Mr. Schunke, regarding the floor that
19 you chose, the 23 mills, do you have any evidence
20 that the costs have declined?
21 A. No, I don't.
22 MR. WOODBURY: Thank you, Madam
23 Chair. No questions.
24 COMMISSIONER SMITH: Thank you,
25 Mr. Schunke.
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HEDRICK COURT REPORTING SCHUNKE (Di)
P.O. BOX 578, BOISE, ID 83701 Staff
1 (The witness left the stand.)
2 MR. WOODBURY: Staff has no further
3 witnesses.
4 COMMISSIONER SMITH: Thank you,
5 Mr. Woodbury.
6 Mr. Olsen.
7 MR. OLSEN: Yes, Madam, we would call
8 Anthony J. Yankel.
9
10 ANTHONY J. YANKEL,
11 produced as a witness at the instance of the Idaho
12 Irrigation Pumpers Association, being first duly
13 sworn, was examined and testified as follows:
14
15 DIRECT EXAMINATION
16
17 BY MR. OLSEN:
18 Mr. Yankel, could you state your name
19 and address for the record, please?
20 A. Anthony J. Yankel, 29814 Lake Road,
21 Bay Village, Ohio.
22 Q. Did you prefile testimony and sponsor
23 Exhibits 301 and 302 in this proceeding?
24 A. Yes, I did.
25 Q. Are there any clarifications or
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA
1 corrections you would like to make to that prefiled
2 testimony?
3 A. I have one minor correction. Page 12,
4 line 2 -- excuse me -- line 11, there's the word
5 "Utah." It should be just stricken.
6 Q. Are there any other corrections on
7 your direct testimony?
8 A. Not that I'm aware of.
9 Q. Are there any clarifications you would
10 like to make to that testimony?
11 A. I have put together a brief summary I
12 can go through.
13 MR. OLSEN: May I approach the
14 Commissioners?
15 COMMISSIONER SMITH: Yes.
16 Q. BY MR. OLSEN: Would you please
17 provide a brief overview of your direct testimony,
18 Mr. Yankel?
19 A. My direct testimony was designed to,
20 one, support the continued use of interruptibility
21 on a PacifiCorp system as a means of benefiting both
22 interruptible customer as well as the system as a
23 whole.
24 Two, develop an analytical approach to
25 pricing interruptible power so as to remove as much
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA
1 rhetoric as possible in the price-setting process,
2 and in order to ensure that both the interruptible
3 customer and the system as a whole receive benefits.
4 Three, support the continued use of
5 system treatment of interruptible loads until such
6 time as the present multijurisdictional process
7 yields a consensus treatment.
8 Q. Could you please comment on the
9 testimony filed by others in this case since the
10 time your direct testimony was filed?
11 A. In my opinion, there's been a
12 consolidation of positions as opposed to divergence.
13 Both Staff witness Schunke and I independently
14 developed extremely similar methods of pricing
15 interruptible power. Although our original
16 recommended prices were different, this difference
17 was primarily the result of different assumptions
18 regarding the amount of interruption that could
19 occur, not the pricing mechanism itself. I agree
20 the degree of interruptibility that Mr. Schunke
21 originally used was more appropriate at the time. I
22 still stand by my position that the pricing
23 mechanism should account for losses in the use of a
24 Utah as opposed to an Oregon peaking unit.
25 Recently Monsanto has filed a revised
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA
1 offer for far more interruptions than originally
2 proposed. When this new level of interruptions is
3 inserted into my version of the pricing method
4 developed by Mr. Schunke and myself, the price to
5 Monsanto comes out at $20.45 per megawatt hour,
6 blindly assuming that the Company's
7 $31.40-per-megawatt-hour firm price is the correct
8 starting point.
9 Although Mr. Schunke and I both took
10 exception to the cost allocations and
11 cost-of-service study proposed by Monsanto, the
12 present firm starting price of $29.30 per megawatt
13 hour offered by Monsanto does not suffer from the
14 concerns I originally raised.
15 If the Commission accepts the starting
16 price presently proposed by Monsanto, then my
17 pricing method would yield a price to Monsanto of
18 $18.35 per megawatt hour. Thus, based upon the new
19 level of interruptibility offered by Monsanto, my
20 pricing method would yield a price to be set for
21 Monsanto that is in the range of $18.35 to $20.45
22 per megawatt hour.
23 Although I have confidence in the
24 pricing method Mr. Schunke and I have proposed, I
25 recognize that it may be only appropriate within
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA
1 certain limits. One concern I have is that at some
2 level of interruption, my method of developing an
3 interruptibility credit can provide more credit than
4 is appropriate. For the sake of putting a stake in
5 the ground, I offer that the minimum price that an
6 interruptible customer should pay is the average
7 price for fuel for PacifiCorp's fossil fuel plants.
8 All hydro should go to firm customers. From the
9 Company's filing in Case PCA-E-02-1 (sic), this
10 price can be calculated to be $10.32 per megawatt
11 hour at generation and $10.86 per megawatt hour at
12 transmission level. Price as the result from my
13 pricing formula are well above this minimum.
14 Given the range produced by my pricing
15 method and my recognition of the limitations of that
16 method, I now recommend a price to Monsanto of $20
17 per megawatt hour.
18 Q. Mr. Yankel, with this clarification in
19 your direct testimony, if I were to ask you the same
20 questions today as contained in your direct
21 testimony, would they be the same?
22 A. Yes, they would.
23 MR. OLSEN: Madam Chairman, I would
24 move to spread Mr. Yankel's testimony on the record,
25 and also move for the entrance of Exhibits 301 and
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA
1 302 in the record.
2 COMMISSIONER SMITH: If there's no
3 objection, we will spread the prefiled testimony --
4 MR. FELL: Madam Chair.
5 COMMISSIONER SMITH: Mr. Fell.
6 MR. FELL: This is pretty new
7 testimony. Could we take a break so we could talk
8 about it before -- I need to understand what
9 Mr. Yankel just proposed. This is a new proposal.
10 COMMISSIONER SMITH: Okay.
11 MR. FELL: Does he have -- is that
12 proposal in writing, the calculation?
13 THE WITNESS: I can provide that, yes.
14 COMMISSIONER SMITH: Okay. Let's take
15 about a 15-minute break.
16 MR. FELL: Thank you.
17 (Recess.)
18 COMMISSIONER SMITH: I believe we were
19 just ready to spread the testimony on the record and
20 we will admit the exhibits, and so I will once again
21 say if there's no objection, I will spread the
22 prefiled testimony of Mr. Yankel upon the record as
23 if read, and admit Exhibits 301 and 302.
24 Hearing no objection, so ordered.
25 (The following prefiled direct
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA
1 testimony of Mr. Yankel is spread upon the record.)
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HEDRICK COURT REPORTING YANKEL (Di)
P.O. BOX 578, BOISE, ID 83701 IIPA