HomeMy WebLinkAbout20020905Volume 6, pg 770-791.pdf
1 (The following proceedings were
2 had in open hearing.)
3 (Idaho Irrigation Pumpers
4 Association Exhibit Nos. 301 and 302 were admitted
5 into evidence.)
6 COMMISSIONER SMITH: Now, questions,
7 Mr. Budge?
8
9 CROSS-EXAMINATION
10
11 BY MR. BUDGE:
12 Q. Mr. Yankel, is it correct in your
13 calculation that you didn't include any value for
14 the system interruptibility -- or, excuse me --
15 system integrity or emergency interruption provided
16 by Monsanto in its proposal?
17 A. That's correct.
18 Q. Would you agree that that does offer
19 value to the Company?
20 A. Yes, and the Company has put a number
21 or value on it. I have not checked that number or
22 value for accuracy, but, yes, there is a value to
23 it.
24 Q. When I read Mr. Taylor's rebuttal, he
25 made a statement on page 6 to the effect that he
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1 thought both you and Mr. Schunke had endorsed the
2 Company's cost-of-service study and the 31.40 price
3 that it developed for Monsanto. Then as I hear your
4 summary, you made the comment: Blindly assuming
5 that the Company's 31.40 is a correct starting
6 place.
7 Is it my understanding when you say
8 "blindly assuming," you're not necessarily endorsing
9 the Company's cost-of-service study as the starting
10 place?
11 A. When I originally went through -- I
12 thought I was clear on that -- I accepted the
13 Company's methodology over that of Monsanto. I did
14 not really go through line by line the
15 cost-of-service study to determine what it should be
16 or look at everything, but I felt that as a starting
17 place the Company's methodology at that time was
18 more in line with what I've seen historically,
19 specifically with respect to the 12 CP method and
20 the use of 75/25 split on the demand, and that's
21 primarily what I was aiming at as I was choosing
22 that portion of the Company's cost allocation
23 methodology over Monsanto's.
24 Q. Your direct testimony was primarily
25 focusing on how to calculate the interruptibility
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1 credit?
2 A. Yes, but the starting point, I mean,
3 the point you are referring to, the Company's
4 cost-of-service study, I was choosing the Company's
5 cost-of-service study over Monsanto's because
6 primarily those two points: The 12 CP method and the
7 split of the demand cost between energy and demand.
8 Q. But now, as I understand it, you are
9 accepting the starting point proposed by Monsanto of
10 29.30?
11 A. Yes, and the reason for that is the
12 new number that Monsanto has in there is based upon,
13 again, the 12 CP method and it's based upon my
14 understanding of the 75/25 split, and the main
15 difference being that the rate of return is set
16 equal to the jurisdictional rate of return for
17 Monsanto. So with that correction, I basically
18 accepted that as a viable calculation. I didn't
19 actually pick one or the other in the stuff that
20 I've offered now. I've kind of gone in between the
21 two.
22 Q. So starting at that number as you did
23 and then going through your calculation with the new
24 Monsanto hours, is that what leads you to the price
25 of 18.35 per megawatt hour?
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1 A. Yes, it is.
2 Q. And that number would be further
3 reduced, I believe you agreed, as part of your
4 calculation by whatever value is appropriate for the
5 system integrity interruption?
6 A. If one wants to add that, yes.
7 MR. BUDGE: No further questions.
8 COMMISSIONER SMITH: Thank you,
9 Mr. Budge.
10 Mr. Fell, do you have questions -- or,
11 I'm sorry, Mr. Eriksson?
12 MR. ERIKSSON: Thank you.
13
14 CROSS-EXAMINATION
15
16 BY MR. ERIKSSON:
17 Q. Mr. Yankel, in performing your
18 analysis of the value of the interruptibility, you
19 did what you have described as a top-down approach?
20 A. Yes.
21 Q. And in doing so, starting with a firm
22 cost of service and reducing a value based on a
23 peaking resource?
24 A. Yes.
25 Q. And the reason for that is that the
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1 interruptibility contracts are viewed as reducing
2 the need for peaking capacity?
3 A. That was my view, yes, in that
4 particular analysis. I mean, there was another
5 analysis where I was doing something different, yes.
6 Q. I understand that. Now, you would
7 agree that the interruptibility acquired from a
8 contract customer such as Monsanto is something that
9 is acquired by the Utility from the customer?
10 A. Yes, it's usually a contract. I guess
11 it could be tariff, but if that's what you're
12 asking -- I'm not sure what you're asking.
13 Q. As opposed to the Utility's provision
14 of electric service to the customer?
15 A. I guess I'm just having a difficult
16 time with the question. I've seen where there have
17 been some actually interruptible tariffs and
18 whatnot, so I'm not sure what you're asking.
19 Q. Well in this context, the way this is
20 being -- interruptibility is being valued in this
21 case is to recognize a purchase or credit for a
22 product to be provided by Monsanto to PacifiCorp?
23 A. Yes.
24 Q. Okay. Now, in valuing
25 interruptibility -- well, let me refer you to
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1 page 10 of your testimony, and at lines 11 through
2 13, you state: Rates should be based upon the
3 benefits of the interruptibility that Monsanto
4 provides to the system, not just the benefits to the
5 Idaho jurisdiction.
6 And you're making that statement in
7 the context that was referenced to system versus
8 situs treatment?
9 A. Okay. Okay, I'll accept that.
10 Q. Now, the -- looking at
11 interruptibility as a separate product to be
12 acquired by the Utility from a customer, isn't that
13 the piece that you're looking at in terms of what
14 ought to be allocated on a system basis instead of
15 situs?
16 A. I thought about that and, you know,
17 like allocating two different things, maybe firm as
18 situs, interruptible portion as system. I ended up
19 at the same spot where we're at now. The reason
20 being is that on the interruptible portion, one
21 needs to then value the interruption, and then value
22 the impact upon the jurisdictional separation. So I
23 just kind of ended up back -- kind of came full
24 circle on it, so I ended up right where I'm at. I
25 had actually thought about that.
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1 Q. But it is appropriate to separately
2 value the interruptibility, isn't it?
3 A. That's how I came up with the
4 interruptibility credit, yes, I valued them
5 separately.
6 Q. And by doing so, the state of Idaho
7 and other states, they can look at whether or not
8 the price is appropriate -- that is, PacifiCorp's
9 acquisition of interruptibility for the system is an
10 appropriate price -- isn't that correct, as compared
11 to if the Commission were to just say service to
12 Monsanto would be interruptible and the rate is X,
13 without any identification of what the value of that
14 interruptibility is. In that situation, isn't it
15 difficult for the Commission to determine whether or
16 not there is some subsidy flowing to Monsanto?
17 A. Yes. And I believe the method at
18 least as I outlined, possibly as maybe the Company
19 has, does tend to put a price on firm service and
20 then what the difference is with the
21 interruptibility. So if nothing else, other
22 Commissions, whether they agree or disagree, will at
23 least have something more concrete to look at than
24 just a price and that's all they have.
25 Q. Now, looking at page 4 of your
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1 testimony -- well, never mind. Skip that.
2 In your testimony, you state that
3 there hasn't been a fundamental change in the
4 electric industry that now renders useless these
5 contracts -- that is, interruptible contracts --
6 from a system cost point of view. Do you recall
7 that --
8 A. Yes.
9 Q. -- on page 5?
10 Now, you are not of the position that
11 PacifiCorp is taking the position that
12 interruptibility is useless. Correct?
13 A. That's correct.
14 Q. And on page 11 of your testimony, you
15 discuss an option of treating Monsanto as its own
16 jurisdiction. And maybe you haven't considered this
17 enough to answer, but in that situation, who would
18 set the rates for Monsanto?
19 A. The Idaho Commission. It would just
20 be strictly setting the rates just for
21 jurisdictional cost purposes. It would not be part
22 of the Idaho jurisdiction is all I was suggesting.
23 The Idaho Commission would still set the rates for
24 Monsanto in the same way we're doing now.
25 Q. So you say for interjurisdictional
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1 purposes, there would be a separate jurisdiction?
2 A. Yes, and it was just a -- just a
3 thought thrown out. It would be a separate category
4 called "interruptible" just like "FERC" is a
5 separate category or "Oregon" is a separate
6 category.
7 Q. And if there were costs under recovery
8 in that separate jurisdiction, where would
9 PacifiCorp look to get cost recovery?
10 A. Probably the same place it looks
11 nowdays: Just from the other jurisdictions for one,
12 or be coming back to this Commission for the
13 Monsanto contract in looking for something.
14 My only intent there was to try to
15 shield the other Idaho customers from any shortfall
16 is all I was really trying to do there.
17 Q. Okay. And if Monsanto's prices were
18 set at full cost-of-service study, there wouldn't be
19 a shortfall to look to the other Idaho customers
20 for. Correct?
21 A. If they were set at full
22 cost-of-service study and if they were firm, yes, I
23 believe that would be the case. The problem comes
24 in when you start talking about interruptible.
25 Q. Now, in your top-down analysis, if I
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1 could refer you to -- well, you read Mr. Taylor's
2 rebuttal --
3 A. Yes.
4 Q. -- testimony?
5 And in that he discusses the hours of
6 interruption which you used in your Exhibit 301, I
7 believe it is?
8 A. I believe he did, yes. I don't recall
9 specifically, but I think so.
10 Q. And in that exhibit, you used 160
11 megawatts times the 800 hours --
12 A. Yes.
13 Q. -- and calculated a number.
14 Do you agree that that number resulted
15 in more megawatt hours of interruption than Monsanto
16 was proposing with the 300/500 approach with no more
17 than two furnaces at a time?
18 A. Yes, at the time that was in error due
19 to the amount of megawatt hours I attributed to
20 interruption, yes.
21 Q. And in the -- in your summary of new
22 positions you stated today describing or relating to
23 Monsanto's 1,000-hour proposal, as I understand it,
24 you substituted the number on line 6 of Exhibit 301
25 with 1,000 hours?
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1 A. Yes. And I would have substituted the
2 line above that with I believe 162.5.
3 Q. Okay. And so we end up with line 7
4 being 162,500 megawatt hours?
5 A. Correct.
6 Q. And things flow through down there to
7 result in a bottom line that would be on line 14 of
8 the number that you presented in your --
9 A. $20.45.
10 Q. Okay. And that is based on 1,400,846
11 megawatt hours per year?
12 A. Correct.
13 Q. If you were to use instead of that
14 level of energy 1,354,000 megawatt hours as is used
15 by Monsanto --
16 Do you by chance have a calculator
17 with you?
18 A. I do, but I'll accept something you
19 would like to give me.
20 Q. 23.57 in your original Exhibit 301
21 rather than 22.78?
22 A. Just working off the original exhibit?
23 Q. Yes.
24 A. I probably want to do that. Give
25 me -- one million --
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1 Q. 354,000.
2 A. Four thousand. Okay.
3 Did you when you did that use that
4 number both places or -- I'm just thinking numbers
5 to go the other direction, that's all.
6 Q. The 1,400,000 is taken from
7 Mr. Taylor's exhibit.
8 A. Yes.
9 Q. Okay. And that's Monsanto's usage
10 from the test year?
11 A. It's the ones that Mr. Taylor -- I
12 don't know. I didn't check the source. But again,
13 I think the number would have been lower if I would
14 have stuck in a lower kilowatt number. I would have
15 come up with a lower number for the rate as opposed
16 to the higher number. You gave me a higher number.
17 I'm not sure how you got the higher number.
18 Q. All right. The second approach that
19 you took was to look at market purchases instead of
20 a single-cycle combustion turbine?
21 A. Yes.
22 Q. And in particular, you use the market
23 prices for the years 2000, 2001?
24 A. Yes.
25 Q. And you agree or recognize in your
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1 testimony the extraordinary high level of the prices
2 in I believe it was July and August or June and July
3 of 2000?
4 A. Yes. But again, they were higher --
5 as I pointed out in my testimony, they were higher
6 in November and December, the numbers I chose.
7 Q. In fact, they were also higher than
8 historically has been the case and, in fact, since
9 2001?
10 A. Yes.
11 Q. Okay. And the effect of using the
12 higher prices results in a higher interruptibility
13 credit for Monsanto?
14 A. Yes. But, again, I didn't look at
15 superpeak or I didn't try to define that all, so I
16 felt the number was still relatively conservative to
17 show what they could have saved over the last couple
18 of years.
19 Q. So you didn't intend it to be
20 representative of what would go on in the future?
21 A. I don't know what the future will
22 bring. And, again, I use that more as a check on my
23 first method as opposed to using this as the
24 cornerstone of what I was advocating.
25 Q. Okay. Monsanto's not always been
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1 treated as a system customer, has it?
2 A. No, it was -- about 20 years ago, it
3 was treated as a situs customer.
4 Q. And, in fact, didn't Counsel give to
5 you some testimony from 20 years ago when you were
6 discussing this issue?
7 A. Yeah.
8 Q. And I'd just like to run through a few
9 statements in that with you to see if you agree that
10 they still pertain.
11 Looking at that testimony on page 18,
12 you were asked to list reasons for assigning full
13 amount of revenues from Monsanto to the Idaho
14 Irrigation -- or, Monsanto and the Idaho Irrigation
15 interruptible load completely to the Idaho
16 jurisdiction, and first you stated Monsanto and the
17 Irrigation interruptible load is totally within the
18 state of Idaho, should be treated like every other
19 customer that is under the Commission's control;
20 that is, an Idaho jurisdiction customer.
21 That statement still holds true that
22 Monsanto is totally within the state of Idaho?
23 A. Yes.
24 Q. And second statement, second reason
25 you provide: Idaho's economy is disrupted when
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1 Monsanto or the Irrigators receive interruption in
2 their power supply. These economic disruptions are
3 not shared with other jurisdictions?
4 A. That's correct.
5 Q. That would still be the case.
6 And, third: Even though
7 jurisdictions -- other jurisdictions -- are not as
8 actively seeking new interruptible loads like the
9 Idaho jurisdiction is, and even if all the revenues
10 from Monsanto and Irrigation interruptible loads
11 were assigned to Idaho, there would still be some
12 benefit that could be passed through to the other
13 jurisdictions.
14 Is that still the case if there would
15 be situs assignment or situs allocation of firm
16 service to Monsanto and system allocation of the
17 interruptible product?
18 A. There's a problem with this generally
19 there's been from obviously going into the entire
20 system. My reservation in this particular one deals
21 with the allocation of costs, the assignment of
22 costs.
23 The assignment of costs 20 years ago
24 is very different as I point out in my original
25 testimony than it is today. It was just strictly --
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1 Mr. Dunn never called it this but kind of pulled it
2 out of the air. He had a 50/50 split on demand or
3 fixed cost that he assigned to Monsanto and there
4 was more of a direct assignment within the
5 interjurisdictional process as well. Today, we
6 don't seem to have that division and, therefore,
7 that's why I guess I have a problem with this.
8 And my biggest problem with going to
9 situs now -- if there was a better way to define an
10 interruptible product numerically if that could be
11 passed through on an interjurisdictional basis, I
12 probably wouldn't have a problem with situs
13 treatment, but right today I don't feel we have a
14 good way to quantify and pass that through on a
15 jurisdictional basis, so that's kind of my
16 reservation on that one. But, yes, the benefit goes
17 to all jurisdictions.
18 MR. OLSEN: Madam Chair, I just have
19 just to clarify the record, could you identify what
20 that was that he was reading from, the prior
21 testimony?
22 MR. ERIKSSON: It is submitted in Case
23 No. U-1009-19.
24 MR. OLSEN: Okay.
25 Q. BY MR. ERIKSSON: And then the fourth
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1 reason: Monsanto's and the Irrigators' rates are
2 only set by the Idaho Commission and are subject to
3 the laws of Idaho.
4 Still the case?
5 A. Yes.
6 Q. And would you agree that in light of
7 and recognizing that the limit of interruptibility
8 proposed by Monsanto, whether it's 800 hours or
9 1,000 hours, could be reached, and that the Company
10 must nevertheless consider and plan on serving
11 Monsanto's load in its planning of resources?
12 A. I've always been told that they never
13 plan to meet Monsanto's load, never plan on meeting
14 an interruptible load, just something that the
15 Company --
16 Q. Let me read a statement to you and see
17 if you agree with it:
18 It must be remembered that Monsanto's
19 interruptible load is not, in fact, interruptible in
20 its entirety. Once the interruptible --
21 interruptibility limits are reached Monsanto is
22 entitled to firm service, and the Company must
23 consider this possibility when designing its system
24 capacity.
25 Would you agree with that?
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1 A. I agree with that. That's more of a I
2 guess a base load concern as opposed to a peak load
3 concern, but it certainly is a concern. So I mean
4 my first statement was in respect to what I've
5 always heard from the Company is they don't plan on
6 serving -- they don't plan on building plant for the
7 interruptible portion on a demand basis, but I would
8 assume they would have to on an energy basis,
9 especially given the kind of the hydro nature around
10 here. Hydro starts to dry up a little bit, you've
11 got a bit of a problem. But you do need after the
12 interruptions 1,000 hours, you know, 800 hours,
13 whatever. After that is used up, yes.
14 MR. ERIKSSON: And for the record, for
15 the Commission's information, that statement was
16 read from page 36 of Order No. 13448, Case No.
17 U-1009-84, which I believe Mr. Yankel -- maybe he
18 didn't refer to in his testimony.
19 THE WITNESS: '84?
20 MR. ERIKSSON: In any event --
21 THE WITNESS: I think I commented. I
22 meant to. I had reviewed that, so, yes.
23 MR. ERIKSSON: And that is all I
24 have. Thank you.
25 COMMISSIONER SMITH: Thank you,
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1 Mr. Eriksson.
2 Do you have questions, Mr. Woodbury?
3 MR. WOODBURY: Thank you, Madam
4 Chair. Just one, I believe.
5
6 CROSS-EXAMINATION
7
8 BY MR. WOODBURY:
9 Q. Mr. Yankel, you just had an exchange
10 with Mr. Eriksson with respect to I guess the system
11 or situs treatment of Monsanto, and you express some
12 unease in the proposed situs treatment in this case.
13 You do understand that PacifiCorp in this case is
14 proposing treatment of their firm load as situs and
15 their interruptible load as system, don't you,
16 because --
17 A. I believe that's a change that I've
18 seen in the rebuttal testimony filed by the Company.
19 I guess I am still of the opinion that we should
20 stick with system until we get more of a definition
21 on a multistate jurisdictional basis. You know,
22 until that happens, there's no sense in I think
23 moving one way and going back and forth until that's
24 done.
25 Q. Well, assuming that we do stay with
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1 system, to the extent that a value of
2 interruptibility is overvalued and rejected by other
3 jurisdictions, is there any risk of subsidy by other
4 Idaho customers, including the Irrigators?
5 A. The risk of subsidy depends upon how
6 much other jurisdictions -- and we're speaking
7 strictly of Idaho -- how much the Idaho jurisdiction
8 would be willing to pick up that shortfall. The
9 Idaho Irrigators, the Idaho residential customers,
10 would not pick up that shortfall if the Idaho
11 Commission in its rate-setting process on an
12 interjurisdictional basis defines the Idaho share to
13 be what it defines to be, which would be an
14 appropriate share, I would assume whatever they
15 would consider to be appropriate.
16 Now, other -- Utah Commission, Oregon
17 Commission may disagree with that. There would be
18 either a shortfall error or if they believe that
19 there is a subsidy, meaning Monsanto is being
20 underpriced, there would only be a subsidy if they
21 pick that up. So, unfortunately, I think the
22 problem would come back to the Company basically,
23 shortfall would go to the Company.
24 Q. I think it was addressed in the
25 testimony but it was also covered yesterday in
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1 PacifiCorp's presentation that should there be a
2 shortfall, that they would come back to the Idaho
3 Commission and ask to recover those costs?
4 A. But I guess I believe that if this
5 Commission ruled -- not that they can't change its
6 ruling -- but if they ruled that they felt something
7 is fair, for the Company to come back and say let's
8 redo the whole process, I think the Commission would
9 probably stick with its first opinion on Monsanto
10 and allocate costs from there. I don't know, I've
11 not gone through the process, but I would think that
12 would be the case.
13 MR. WOODBURY: Thank you. Madam
14 Chair, no further questions.
15 COMMISSIONER SMITH: Thank you,
16 Mr. Woodbury.
17 I believe there are no questions from
18 the Commission.
19 Do you have redirect, Mr. Olsen?
20 MR. OLSEN: No, Madam.
21 COMMISSIONER SMITH: Thank you.
22 Then I believe that concludes all of
23 your witnesses.
24 MR. OLSEN: Yes, it does.
25 COMMISSIONER SMITH: Thank you.
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