Loading...
HomeMy WebLinkAbout20050623PAC respnse Monsanto req 11-31.pdf825 E. Multnomah Portland, Oregon 97232 (503) 813-5000 ' \l, ~ . o.;.,! ~.' LJ ILED (Il 1. PACIFICORP znn5 JUftf 23 irl'3:t)~ PACIFIC POWER lJI'AH POWER 10;\1-10 PUBLiC . -""'"".""'"-' .O. ..'.'!j ". 'L-' """ iJi!Ltllt....; t,. .fT t.. v ...June 22, 2005 Randall C. Budge Racine, Olson, Nye, Budge & Bailey, Chtd O. Box 1391; 201 E. Center Pocatello, ID 83204-1391 Katie Iverson Brubaker & Associates 17244 W. Cordova Court Surprise, Arizona 85387 James R, Smith Monsanto Company O. Box 816 Soda Springs, Idaho 83276 RE:ID PAC-05- Monsanto Data Request 11- Please find enclosed PacifiCorp s Response to Monsanto Data Request Responses to Monsanto Number (11-31). Provided on the enclosed CD are Attachments Monsanto 23(A-E), and 31 B. Provided on the enclosed Confidential CD are Attachments Monsanto 29 (A-F), 30 (A-B), and 31 (C-D). If you have any questions, please call Barry Bell at (801) 220-4985. Sincerely, ~V~~~ Jp. Bob Lively, Manager Regulation Enclosures cc:James FelVStoel Rives Jean Jewell (3 copies) Service List CERTIFICATE OF SERVICE I hereby certify that I caused the foregoing document to be served on the following named person(s) on the date indicated below by mailing to said person(s) a true copy thereof, contained in a sealed envelope, addressed to said person(s) at their last known addressees) indicated below. Patricia Lopas Regulatory Coordinator Dated: CD ;;.&j JEFF LARSON ACIFICORP 201 S. MAIN STREET. SUITE 2300 SALT LAKE CITY, UT 84140 JAMES M. V AN NOSTRAND STOEL RIVES LLP 900 SW FIFTH A VE.SUITE 2600 PORTLAND, OR 97204 SCOTT WOODBURY IDAHO PUBLIC UTILITIES COMMISION 472 W. WASHINGTON BOISE, ID 83702-5983 KIRA PFISTERER IDAHO PUBLIC UTILITIES COMMISION 472 W. WASHINGTON BOISE, ID 83702-5983 RANDALL C. BUDGE RACINE, OLSON, NYE BUDGE&BAILEY, CHARTERED 201 E. CENTER POCA TELLO, ID 83204 JAMES R. SMITH . MONSANTO COMPANY HIGHWAY 34 NORTH SODA SPRINGS ID 83276 ERIC L. OLSEN RACINE, OLSON, NYE, BUDGE&BAILEY, CHARTERED 201 E. CENTER POCA TELLO, ID 83204 ANTHONY Y ANKEL 29814 LAKE ROAD BAY VILLAGE, OH 44140. CONLEY E. WARD GIVENS PURSLEY LLP 601 W. BANNOCK ST. BOISE, ID 83702 DENNIS E. PESEAU UTILITY RESOURCES, INC. 1500 LIBERTY ST. SE, SUITE 250 SALEM, OR 97302 R. SCOTT PASLEY ASSISTANT GENERAL COUNSEL IR. SIMPLOT COMPANY 999 MAIN ST. BOISE, ID 83702 DA VID HAWK DIRECTOR, ENREGY NATURAL RESOURCES J .R. SIMPLOT COMPANY 999 MAIN ST. BOISE, ID 83702 TIMOTHY J. SHURTZ 411 S. MAIN FIRTH, ID 83236 BRADY M. PURDY A TTORNEY A T LA W 2019 N. 17TH STREET BOISE, ID 83702 P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request Monsanto Data Request Regarding PacifiCorp s Response to IPUC Production Request 55 as to the current valuation of Monsanto Operating Reserves: Please explain the overall methodology employed by PacifiCorp to arrive at its current valuation of Monsanto Operating Reserves. What is the source of the (i) Mona HLH ("Mona 6x 16") prices and (H) Mona LLH ("Mona 6x8+ 24") prices? (Hi) How often are these prices updated and (iv) by whom? (i) Please explain the calculation for the "Mona MSu - HLH" price, and (ii) provide an example of the details of the calculation for one of the months shown (e., January 2007). What is the discount rate used in the present value calculations? Provide the equation used for the determination of the discount factors DF" ). Response to Monsanto Data Request a. In deriving the value of reserves for PacifiCorp s eastern control area, the Company utilizes a methodology which looks at the opportunity cost of holding its highest cost in-the-money resource offline during heavy load hours. For the time frame assumed in PacifiCorp s response to IPUC Production Request 55 , January 2007 through December 2011 , the supply stack utilized in the analysis included LM 6000 units (Gadsby 4-6/West Valley), Currant Creek duct firing, Currant Creek CCCT and Cholla 4. As a result, the analysis starts at the highest cost resource, an LM 6000, calculates its marginal cost and compares it to the Mona 7x 16 price. If there is an intrinsic spread, between these two, meaning that the marginal cost is below the Mona 7x 16 price, then this is the calculated monthly value of a resource which offers operating reserves Monday-Sunday HE 7-22 PPT. If there is not an intrinsic spread, the model moves to the next highest cost resource, Currant Creek duct firing, and repeats the calculation. This calculation is repeated on a monthly basis to determine the highest cost resource that is in-the-money. The spread between the highest cost in-the-money resource and the market is the opportunity cost of holding a resource offline, and thus the value of operating reserves. F or the Monsanto operating reserves valuation, the resulting summation of the all of the month's values are present valued, then put into an annuity payment ($/KW -mo) which when applied to a nominal MW value every month and present valued results in the exact same present value as the present value of the monthly values. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request b. (i) & (ii) The Mona 6x16 and 6x8+24 monthly prices are PacifiCorp forward prices for deliveries to take place at a set time in the future at the Mona substation. For the first 72 months of the Company s forward curves (iv) market quotes obtained by Commercial & Trading s traders are utilized daily to provide the most accurate representation of the liquid period's value. For months 85 and beyond the Company utilizes a fundamentals curve which depending on market conditions/fundamentals, (iii) is updated either monthly or quarterly. Months 73 through 84 utilize a blend of the liquid period and the first 12 months of the fundamentals period. c. (i) & (ii) "Mona MSu HLH" price represents the Company s estimate, based on current 6x 16 and 6x8+ 24 forward curves scalars, of a monthly Mona 7x product (Monday-Sunday including NERC holidays, HE 7-22 PPT). The methodology for turning the Company s standard forward price curves (6x16 and 6x8+24) into a non-standard forward price curve, such as a 7x16 or 7x8 can be found in Attachment Monsanto 3.11. Detailed equations regarding the calculation of any given hour s value can be found in the aforementioned attachment. d. The discount factor curve is based on the Company s forward United States Treasury yield curve. e. DFt = 1/((1 +R('((m - q)/365.25))) Where: DFt is the discount factor that should be used for month t Rt = Treasury yield for month t m = 20th day of the month following month t. q = quote date. IDAHO PAC-O5- GENERAL RATE CASE ACIFICORP MONSANTO I)A T A REQUEST ATTACHMENT MONSANTO Scalar Methodology Structuring and Pricing Group Pacificorp Abstract February 2003 This note describes the methodology used by the. Structuring and Pricing Group to compute the monthly and hourly scalars that are applied to forward power price curves to produce forward prices for specific days of the week and hours of the day. Introduction Market based forward price curves are available for electricity delivered during on-peak (6x16 Monday- Saturday) and off-peak (everything else) periods. Given these on- and off-peak forward curves, the Structuring and Pricing Group needs to estimate forward prices for Monday-Friday and Saturday on- and off-peak delivery and Sunday (off-peak) delivery. This decomposition of two forward price curves into five forward price curves requires five multiplicative factors, as illustrated in Fig. 1 , where each arrow represents a multiplicative factor. off off Off Sat Sat off Sun Fig. 1 These multiplicative factors will depend on the delivery month and location, and will be called "monthly scalars . After the five forward curves have been detennined, a set of hourly multiplicative factors, called hourly scalars , will be applied to the monthly forward curves to produce homly forward price curves. Finally, small correction factors are applied to ensure that the monthly revenues calculated from the five decomposed forward price curves sum to the same value as calculated from the two original forward price curves. The methodology used to compute monthly, hourly, and correction scalars is described in the following sections. Monthly Scalars Monthly scalars have been calculated from historical Dow-Jones day-ahead, on- and off-peak power price data for the following delivery regions: PV, MIDC, COB, NP15, and SP15. The PV, COB, and MIDC data start on 1/1/1998, whereas the NP15 and SP15 data start on 6/1/2001. Furthermore, data from the period during which price caps were in effect (12/1/2000-6/3/2001) has been excluded from the analysis. The monthly scalar factors are calculated by taking ratios of averaged day-ahead power prices. The on- peak monthly scalar factors are given by on .c:::: :;' an .c:::: :;. M -F -Sat on .c:::: :;. Sat Sat an .c:::: . :;. Sat Eq. (1) where .c:::::;. denotes the arithmetic average operator and the subscript denotes the averaging period. The off-peak monthly scalar factors are given by off R' .c:::: :;. off .. .c:::: :;. Sat-Sun off off .c:::: :;. Sat Sat off .c( :;. Sat-Sun off off .c:::: :;. Sun S Sun off .c:::: :;. Sat-Sun Eq. (2) where the denominator is the average price over the off-peak period and is given by NM-NS/JI Nsun 8:LP; +8:LP; 24:LP; .c:::: off :;. . = ;=1 ;=1 ;=1 M -F -Sat-Sun 8N M-8N Sat 24NSun Eq. (3) In this equation is the number of days of type in the month (holidays are counted as Sundays) and the factors 8 and 24 are the number of off-peak hours in the day. Hourly Scalars Hourly scalars are calculated from historical market clearing price data. Risk Management and Trading (RMT) data has been used whenever it exists, otherwise, MCP (Market Clearing Price) and PowerDex data is used. The date is fIrst aggregated according to month and type of day (Monday-Friday, Saturday, or Sunday). The average hourly price is then calculated for each month and type of day. The hourly scalars are given by the ratio of the average hourly price to the average hourly price over the appropriate on-peak, off-peak, or whole day period i. e., . --= Eq. (4) where P; is the average price for hour i. For Sundays is the average of P; over the 24 hours in the day, while for Monday-Friday and Saturday, is the average of P; over the 16 on-peak hours if E (7,22), otherwise, the average is over the 8 off-peak hours. Note that the use of different denominators for the on- and off-peak periods enhances the off-peak hourly scalars relative to the on-peak hourly scalars. (Remember that hourly forward prices are obtained by multiplying on-peak scalars with on- peak forward prices and off-peak scalars with off-peak forward prices. Hourly scalars have been calculated from historical hourly prices for the PV, MIDC, COB, 4C, NP15, and SP15 delivery regions. The PV, MIDC, COB, and 4C hourly data start on 4/22/1996, whereas theNP15 and SP15 data start on 5/1/2002. Once again, data from the price cap period (12/l/200-6/3/2001) has been excluded from the analysis. To handle the lack of hourly data in the NP15 and SP15 regions, it is suggested that COB and PV hourly scalars, respectively, be used as proxies for these regions. Correction Factors Multiplicative correction factors are necessary to ensure that the decomposed forward prices produce the same monthly revenues as the original forward prices. These correction factors are very close to 1. In terms of the original on-peak and off-peak forward prices fan and foff the expected monthly revenue is l = fon Q(16N M-16NSot foff Q(8N M-sot 24Nsun Eq. (5) where is the rate at which energy is delivered (in units ofMW) and is the number of days of type in a month. In tenDS of the five decomposed forward prices, written here is terms of the monthly scalars, the expected monthly revenue is fon Q(16S:;-N M-16S;:t sot +foff Q(8S:f-F N M-8S;~ N Sot 24S;~N Sun Eq. (6) To make Rl andR2 equal for all fan and foff it is necessary to introduce two correction factors, on and off' into Eq. (6): fon Q(16S:;-N M-16S;:t Sat )C Eq. (7) +foff Q(8S:1-FN M-8St!t Sat 24S;!Nsun off' Equating Eqs. (5) and (7), and solving for on and off yields Sat on on on F M-Sat Sat Eq. (8) C - Sat +3Nsun off off off off F M-Sat Sat Sun Sun Decomposed Forward Prices The decomposed forward price for a particular month, day, and hour, is given by the product of the original forward price, a monthly scalar, an hourly scalar, and a correction factor: =1: h o m o d m Eq. (9) Here is the original forward price is the monthly scalar, is the hourly scalar, and C is the correction factor. The subscripts m, d, hand 0 denote the month, day, hour, andonlotIpeak respectively. Summary This paper has described the methodology used by the Structuring and Pricing Group to calculate the monthly and hourly scalars that are used to estimate forward price curves for delivery on specific weekdays at specific hours. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 12 Monsanto Data Request 12 Regarding PacifiCorp s Response to IPUC Production Request 55 as to the current valuation of Monsanto Operating Reserves: What is "mgetrate" and how is it used in the current valuation? Please explain why the reserve value is the difference between the Mona Msu - HLH price and marginal cost. Upon what number of hours a year of curtailment is this valuation based? Please fully explain your answer. In IPUC Case No. PAC-01-, PacifiCorp adjusted its valuation of Operating Revenues to account for revenues lost due to curtailment (see Final Order No. 29157, page 9). Please explain whether PacifiCorp current valuation likewise has been adjusted to account for revenues lost due to curtailment, and if so identify the amount of such adjustment and how this adjustment is performed in Confidential Attachment IPUC 55. Response to Monsanto Data Request 12 a. "mgetrate" is a function within PacifiCorp s CTIRateServer.xlaVBA based Excel add-in. This function is used in the response to IPUC Production Request 55 to apply the scalar methodology, provided in Attachment Monsanto 3., to the Company s standard forward price curves in order to obtain the 7x16 prices utilized in the valuation. b. Reserve value is equal to the difference between the Mona 7x 16 price and the marginal cost, as this is the opportunity cost of holding a unit offline. Since there is not a liquid forward market for operating reserves, the opportunity cost of holding reserves is utilized as a proxy for what the market would bear for such a product. c. The operating reserve valuation is based on 12 hours per day being available. d. The operating reserve evaluation included in IPUC Production Request 55 did not adjust to account for revenues lost due to curtailment. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request Monsanto Data Request According to the Response to IPUC Production Request 55, PacifiCorp currently values Monsanto s Operating Reserves at $1.93 per kW-month for 95 MW, resulting in an annual value of $2.2 million ($1.93 x 95,000 kW per month x 12 months per year). In September 2002 in IPUC Case No. PAC-01-16, PacifiCorp claimed that operating reserves for 95 MW and 288 hours curtailment per year were valued at $4.4 million per year, once the "lost revenue adjustment proposed by PacifiCorp was eliminated per the Commission s finding. Please explain all underlying factors and cost considerations as to why PacifiCorp s current valuation is substantially below the valuation made by the Company in 2002. Response to Monsanto Data Request While there are many factors that have impacted the diminished value associated with operating reserves to the Company since September 2002, including, but not limited to, scalars, forward curves and Treasury rates all changing, the main driver of this decrease is that for the timeframe associated with Response to IPUC Production Request 55, the Company s supply stack has changed relative to 2002. As a result of this change in the Company s supply stack, the spread between the market value of energy and the marginal cost of that energy has decreased. As a result, the opportunity cost of holding a unit offline for operating reserves has decreased; hence, the substantial decrease in the value of Monsanto s operating reserves to the Company. PAC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 14 Monsanto Data Request 14 RegardingPacifiCorp s Response to IPUC Production Request 55 as to the current valuation of Monsanto Economic Curtailment: Please explain the overall methodology employed by PacifiCorp to arrive at its current valuation of Monsanto Economic Curtailment. Please provide the source of the Retail Rate $/MWH. Is the Retail Rate also the "strike price" of this valuation? (i) Please explain the source of "PV 7x 16" and (ii) provide an example of the details of the calculation for one of the months shown (e., January 2007). (iii) Does this represent a flat rate for 7 days per week, 16 hours per day? (iv) How often is this updated and (v) by whom? (i) Please explain the source of "Mona Basis 7x 16" and (ii) provide an example of the details of the calculation for one of the months shown (e. January 2007). (iii) How often is this updated and (iv) by whom? Why did PacifiCorp select the PV 7x16 price plus the Mona Basis, as adjusted by the Scalar, as the relevant market cost on which to value Monsanto s economic curtailment? Please fully explain your answer. Response to Monsanto Data Request 14 a. The methodology employed by PacifiCorp to arrive at the valuation included in the Response to IPUC Production Request 55 is based on determining the 500 hours with the largest spread between wholesale and retail. The monthly spread, when applied to the MWhs, is then turned into an annuity value $3.26/KW-mo, that when applied to the nominal monthly MWsand present valued equals the present value of the nominal value. The method employed to derive the value associated with this spread utilizes the Company s forward price curve, volatilities, scalars, and the industry standard Black-Scholes option pricing model. While Black-Scholes was utilized in this analysis, it has virtually zero impact on the value due to the money-ness of this curtailment product. The term "money-ness" refers to the degree to which an option is in- the-money. b. The Retail Rate $/MWH was calculated using the "Unit Cost at Target Return" section of the Idaho FY04 Cost of Service Study with Monsanto included that was provided in response to Staff Production Request 35 in the current GRC. The Retail Rate is the "strike price" of the valuation. PAC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request ' c. (i) & (ii) Please refer to the response Monsanto Set 3, DR 11. Both the PV and Mona 7x16 are prices derived from PacifiCorp s standard 6x16 and 6x8+ 24 forward price curves at their respective Points of Delivery, utilizing the Company s scalars. For the scalar methodology, please see Attachment Monsanto 11. For the first 72 months of the Company s forward curves market quotes (v) obtained by Commercial & Trading s traders are utilized daily to provide the most accurate representation of the respective liquid period's value. For months 85 and beyond the Company utilizes a fundamentals curve which, depending on market conditions/fundamentals, is updated either monthly or quarterly. Months 73 through 84 utilize a blend of the liquid period and the first 12 months of the fundamentals period. (iii) " 16" represents Monday-Sunday HE 7-22 PPT (iv) updated by traders. d. (i) (ii) & (iii) Please see Response to Monsanto Data Request 11. b. (iv) Updates are done by traders. e. PacifiCorp chose the Mona 7x 16 price to value this curtailment product with the view that the energy flowing to Monsanto has a value equal to that at the Mona substation. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 15 Monsanto Data Request 15 Regarding.PacifiCorp s Response to IPUC Production Request 55 as to the current valuation of Monsanto Economic Curtailment: What does "Vols" stand for? (i) Please explain the meaning of "Super Peak V ols , and (ii) provide an example of the details of the calculation for one of the months shown (e. January 2007). (i) Please explain the meaning of "Scalar (Super peak average)", and (ii) provide an example of the details of the calculation for one of the months shown (e., January 2007). (i) Please explain the meaning of "Intrinsic . Since Intrinsic is based upon reducing the "Market Cost" by the "Retail Rate , (ii) please confirm or deny that PacifiCorp is adjusting the economic curtailment valuation to account for revenues lost due to curtailment. Please explain "undiscountedoption" as used in determining the "Option Premium Value $/MWH". If this is a macro, please provide all supporting formulae in order to understand the steps involved. Response to Monsanto Data Request a. "Vols" stands for volatility. b. "Super Peak Vols" is the implied volatility from an at-the-money daily super peak call option. The calculation is shown in the formula s associated with row 15 in the "Curtailment" tab ofPacifiCorp s response to IPUC ProductionRequest 55. c. (i) & (ii) "Scalar (Super peak average)" is the average of the HE 13-20 M- Sunday (including NERC holiday) scalars that when multiplied by a 7x16 price, will provide a 7x8 (HE 13-20) price. The methodology and calculations for a similar product can be found in Attachment Monsanto 11 of Set 3. d. (i) The "Intrinsic" value of an option is defined as the maximum of zero and the value it would have if an option were to be exercised immediately. (ii) Confirm, PacifiCorp is adjusting the economic curtailment valuation to account for revenues lost due to curtailment. Since Monsanto does not own the energy to sell back to the Company without paying for it, it is important that PacifiCorp net out the retail rate when purchasing energy back from customers. Doing otherwise would be on par with Monsanto selling the PAC-OS-l/PacifiCorp June 22, 2005 Monsanto Data Request ' Company energy that Monsanto never owned. Such an action would not be fair to other PacifiCorp customers, as they would be subsidizing Monsanto short sell. e. "undiscounted option" is an Excel add-in which replicates the Black-Scholes formula. Please see a & b below for the supporting formula. a. SN(dt )"'" .AS-I'(r-r) N(d . b. where: d1 1n(j-)+(r-lO.5aZ)(T-t) u~T 1n(~)+(r-D.Su2)(T-t) 2 -cr,fr . . 11. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 16 Monsanto Data Request 16 Regarding PacifiCorp s Response to IPUC Production Request 55 as to the current valuation of Monsanto Economic Curtailment: What is "QuoteDT" and how is this used in the valuation? What is "Option Delta" and how is this used in the valuation? Please explain the impact of the "expir" on the PacifiCorp s current valuation. For example, if the January 2007 "expir" amount was 0. rather than 1.769, and all other months were correspondingly lowered as well, how would this affect the valuation and specifically the "Option Delta Response to Monsanto Data Request 16 a. "QuoteDT" is the quote date associated with the Company s forward price volatility, and DF curves utilized for this analysis, and hence, the valuationdate. b. "Option Delta" is the ratio of the change in the price of the energy option to the change in the price of the underlying energy. While the option delta is calculated in this valuation, it is not used. c. "expir" is the time (in years) until a given option expires. All else equal, the more years until an option expires, the greater its value. With regards to expiry and the option delta, the impact of expiry on delta depends on the money-ness of an option. The term "money-ness" refers to the degree to which an option is in-the-money. A change in expiry to a deep-in-the-money option will have significantly less impact on the option s delta than a deep- out-of-the-money option s delta. P AC-O5-1/PacifiCorp June 22, 2005 Monsanto Data Request 17 Monsanto Data Request 17 According to the Response to IPUC Production Request 55, PacifiCorp currently values Monsanto s economic curtailment at $3.26 per kW-month for 67 MW, resulting in an annual value of$2.6 million ($3.26 x 67 000 kW per month x 12 months per year). In September 2002 in IPUC Case No. PAC-Ol-16, PacifiCorp claimed that economic curtailment for 67 MW and 500 hours curtailment per year were valued at $4.6 million per year, once the "lost revenue adjustment proposed by PacifiCorp was eliminated per the Commission s finding. Please explain all underlying factors and cost considerations as to why PacifiCorp s current valuation is substantially below the valuation made by the Company in 2002. Response to Monsanto Data Request 17 The Company s pricing of economic curtailment and operating reserves in September 2002 was based on an overall value provided by the two components as a whole. As a result, the operating reserve credit was lower than PacifiCorp view of its value, whilethe curtailment was higher than PacifiCorp s view of its value. The resulting overall net credit to Monsanto by PacifiCorp was priced at-market. That being the case, economic curtailment's value has not decreased, but rather, it has increased. The value of operating reserves is what has decreased. While there are many factors that have impacted the diminished value associated with operating reserves to the Company since September 2002, including, but not limited to, scalars, forward curves, and Treasury rates.all changing, the main driver of this decrease is that for the timeframe associated with Response to IPUC Production Request 55 , the Company s supply stack has changed relative to 2002. As a result of this change in the Company s supply stack, the spread between the market value of energy and the marginal cost of that energy has decreased. As a result, the opportunity cost of holding a unit offline for operating reserves has decreased. Hence the substantial decrease in the value of Monsanto s operating reserves to the Company. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 18 Monsanto Data Request 18 In Final Order 29157, the Commission found "it reasonable to eliminate the "lost revenue" adjustment proposed by PacifiCorp in its rebuttal." Please explain whether PacifiCorp continues to adjust its current valuation of Monsanto ancillary services for "lost revenues , and if so, provide the reasoning for such an adjustment. Response to Monsanto Data Request 18 PacifiCorp is adjusting the economic curtailment valuation to account for revenues lost due to curtailment. Since Monsanto does not own the energy to sell back to the Company without paying for it, it is important that PacifiCorp net out the retail rate when purchasing energy back from customers. Doing otherwise would be tantamount to Monsanto selling the Company energy that Monsanto never owned. Such an action would not be fair to other PacifiCorp customers, as they would be subsidizing Monsanto s short sell. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 19 Monsanto Data Request 19 Page 3 of the testimony of Mr. Watters references PacifiCorp s 2003 IRP: Please identify where Monsanto s contract for ancillary services is located Table C. 2 orC.3 of the 2003 IRP. Response to Monsanto Data Request 19 Table C., found on page 184 of the 2003 IRP, lists a resource called Interruptible (P)". This resource is a proxy resource representing the aggregate capacity of interruptible load contracts included in the Load & Resource Balance and modeled for the study period. The Monsanto contract is included in the 70 MW s listed for this proxy resource. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 20 Monsanto Data Request 20 Please provide the total variable costs ($), total generation output (MWH) and unit costs ($ per MWH) associated with purchasing energy from the West Valley Project for each month in 2003, 2004 and 2005 (to date). Response to Monsanto Data Request 20 The West Valley project is owned by PPM Energy, a subsidiary ofScottishPower. PacifiCorp leases and operates the project. The project is recorded as PacifiCorp generation from a leased facility, rather than purchased energy. The fuel consumed is the only assumed "variable" cost. The data requested is shown in the table below, and corresponds with data reported in the FERC Form 1 for 2003 and 2004. NOTE: Since the West Valley Plant is a leased facility, the lease payments charged to Operation and Maintenance expense include the equivalent depreciation on the capital asset owned by PPM as well as their return on investment. This causes the Unit Cost Per MWH to appear to be significantly higher than rates shown for other plants. To make equivalent comparisons, these items would need to be excluded from the West Valley OMAG costs or added to the costs of other plants, to arrive at comparable rates between plants. West Valley CY 2003 CY 2004 CY2005 (thru April) Total Variable Costs (Fuel Consumed)$19,543 768 $10 916 009 943 472 Total Generation - Net (MWH)580 823 395 480 78,911 Fuel Consumed per Net MWH $33.$27.$37. Unit Cost Per MWH ($/MWH)$67.$75.$123. P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 21 Monsanto Data Request 21 With respect to the West Valley Lease, please provide a detailed description of the lease costs, including purchase and termination options in three- and six-year windows and the costs associated with purchasing generation. Response to Monsanto Data Request 21 The West Valley Lease requires PacifiCorp to make quarterly payments of $749,150 for each of the five units ($14 983 000/year). In May 2002, PacifiCorp entered into a 15-year operating lease with PPM Energy. The operating lease terms grant PacifiCorp two independent early termination options that provide PacifiCorp the right to terminate the lease and, at PacifiCorp s further option, to purchase the facility for predetermined amounts. On May 28,2004 PacifiCorp exercised its first option to terminate the West Valley lease. PacifiCorp subsequently exercised its right to rescind the termination on September 28, 2004 after determining, through a public request for proposal process, that the resource could not be replaced on a more economic basis and without increasing risks to system reliability. PacifiCorp has a second option to terminate the West Valley lease if written notice is provided to West Valley on or before December 1 , 2006. If PacifiCorp elects to exercise either purchase option, the fixed purchase prices are $138 million and $123 million respectively. In the event the Company terminates the West Valley Lease without exercising a purchase option, the Company must pay a Major Maintenance Payment equal to the sum of: (a) $63.40 per unit fired hour since the last performed hot section repair or major overhaul, whichever is later, and (b) $25.30 per unit fired hour since the last performed major overhaul (reflecting General Electric recommendations for LM-6000 maintenance). P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 22 Monsanto Data Request 22 Page 6 of the testimony of Mr. Watters references "the volatility of the power markets in recent years . Please describe in more specificity this volatility, as well as PacifiCorp s expectation of volatility over the rest of the decade. Response to Monsanto Data Request 22 Mr. Watters referenced "the volatility of the power markets in recent years" in a general sense, meaning that prices have shown a substantial variance. As an illustration of this volatility, the monthly average of daily prices for heavy load hour electricity at the Mid-Columbia, since mid-2001 (after the western power crises had receded), have varied between approximately $10 and $56/MWh with monthly differences of 20% or more not unusual. PacifiCorp expects the fundamental supply and demand conditions will continue to determine the volatility of energy markets and that the volatility of these markets. will continue unless or until such time as a shift occurs in the fundamentals that determine these markets for any given time period. P AC-OS-l/PacifiCorp June 22, 2005 Monsanto Data Request 23 Monsanto Data Request 23 Please provide the three proposals in response to RFP 2004- X, and any report or summary generated by Lands Energy Inc. as to the three proposals and the narrowing to the 150 MW market alternative. Response to Monsanto Data Request 23 The requested information is provided in Attachments Monsanto 23 A-E on the enclosed CD. IDAHO P A C- O5- GENERAL RATE CASE ACIFICORP MONSANTO DATA REQUEST ATTACHMENT MONSANTO 23 (A- ON THE EN CLOSED. CD P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 24 Monsanto Data Request 24 Please provide all reports, documents, workpapers or studies prepared by PacifiCorp, or on its behalf, regarding the Company s decision to rescind the first termination option of the West Valley Lease. Response to Monsanto Data Request 24 Highly Confidential Attachments Monsanto 24-1 and 24-2 will be made available for Monsanto s review at the company s offices, subject to the terms and conditions of the protective agreement in this proceeding. IDAHO PA C- O5- PACIFICORP P AC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 25 Monsanto Data Request 25 Please provide all supporting workpapers for Exhibit No. 12 in sufficient detail that all benefits, costs and energy amounts are fully explained and documented. Response to Monsanto Data Request 25 Please see Attachment Monsanto 25. IDAHO PAC-O5- GENERAL RATE CASE ACIFICORP MONSANTO DATA REQUEST ATTACHMENT MONSANTO At t a c h Mo n s a n t o 2 5 . xl s Ph y s i c a l Ph y s i c a l Ph y s i c a l Ph y s i c a l Ph y s i c a l De l i v e r y P a t t e m 7 x 2 4 On - pe a k 7 x 2 4 On - pe a k 6x 1 6 On - pe a k D A 6 x 1 6 On - pe a k D A Ho u r l y C a l l Ho u r l y C a l l Ca l l Ca l l 6 x 1 6 On - pe a k PO D PC E U PC E U NU B Mo n a Mo n a Mo n a Op t i o n T y p e To l l i n g O p t i o n P C E U To l l i n g O p t i o n P C E U To l l i n g O p t i o n N U B v s Ph y s i c a l F i r m Fi x e d S t r i k e O p t i o n Ph y s i c a l F i r m vs R o c k i e s G a s vs R o c k i e s G a s Ma l i n G a s Te r m S t a r t 6/ 1 / 2 0 0 2 6/ 1 / 2 0 0 2 6/ 1 / 2 0 0 2 6/ 1 / 2 0 0 2 6/ 1 / 2 0 0 2 6/ 1 / 2 0 0 2 Te r m E n d 9/ 3 0 / 2 0 0 4 9/ 3 0 / 2 0 0 4 9/ 3 0 / 2 0 0 4 9/ 3 0 / 2 0 0 4 9/ 3 0 / 2 0 0 4 9/ 3 0 1 2 0 0 4 He a t R a t e 10 , 20 0 10 , 00 0 12 , 50 0 De l i v e r y M o n t h s Ju n e - S e p t Ju n e - S e p t Ju n e - S e p t Ju n e - S e p t Ju n e - S e p t Ju n e - S e p t Ne t B e n e f i t ( P V $ ) 94 0 , 63 1 31 4 , 39 1 26 3 , 07 4 (8 1 0 , 63 5 (1 , 50 4 , 07 6 ) (4 , 18 2 . 87 7 Ne t B e n e f i t ( P V $ ) ~1 0 0 M W 78 3 , 85 9 15 7 , 19 6 26 3 , 07 4 (8 1 0 , 63 5 (1 , 50 4 , 07 6 ) (4 , 18 2 , 87 7 Pr e m i u m C o s t - $ ( 1 Y e a r ) (5 , 33 3 , 33 3 ) (1 4 , 98 3 , 00 0 ) (2 , 50 0 . 00 0 ) (2 , 50 2 , 4 0 0 (2 , 7 4 0 , 00 0 ) (9 , 7 1 5 , 93 6 Pr e m i u m C o s t - $ ( 3 Y e a r ) (1 6 , 00 0 , 00 0 ) (4 4 , 94 9 , 00 0 ) 50 0 , 00 0 ) (7 , 50 7 , 20 0 (8 , 22 0 , 00 0 ) (2 9 . 14 7 , 80 8 Pr e m i u m C o s t ( $ / M W h ) 15 . 25 . 15 . 46 . 16 . 59 . Pr e m i u m C o s t ( $ / K W - m o ) 18 . 24 . Av e r a g e S t r i k e P r i c e ( $ / M W h ) 25 . 25 . 30 . 46 . 55 . 59 . Ca p a c i t y - M W 12 0 20 0 10 0 10 0 To t a l E n e r g y P o s s i b l e - M W h 05 4 , 08 0 75 6 , 80 0 49 1 20 0 12 2 , 49 1 , 20 0 49 1 , En e r g y C a l l e d F l a t ( M W h ) 63 2 , 4 4 8 12 4 . 35 2 34 8 , 75 2 12 2 , 11 2 , 97 6 49 1 , En e r g y C a l l e d F l a t ( a M W ) . 12 8 En e r g y C a l l e d H L H ( a M W ) 11 8 18 8 De l t a ( F l a t ) De l t a ( H L H ) Ne t B e n e f i t C h a n g e ~ 1 0 0 MW ( P V $ ) 59 4 , 4 9 4 96 7 , 83 1 07 3 , 70 9 67 8 . 80 1 SD R e d u c t i o n (4 3 3 . 42 5 ) (5 6 1 , 28 4 ) (3 7 3 , 88 4 ) (2 5 7 , 06 1 ) RE L A T I V E R A N K I N G P AC-OS-l/PacifiCorp June 22, 2005 Monsanto Data Request 26 Monsanto Data Request 26 Please provide the total variable costs ($), total generation output (MWH)and unit costs ($ per MWH) associated with producing energy from the Gadsby Project for each month in 2003,2004 and 2005 (to date). Response to Monsanto Data Request 26 Fuel consumed is the only assumed "variable" cost. We also assume that the Gadsby Project" refers only to the Gadsby Peakers (Units 4, 5, 6). The data requested is shown in the table below, and corresponds with data reported in the FERC Form 1 for 2003 and 2004. NOTE: Hedging revenues from PacifiCorp s sale of natural gas for resale are booked primarily against Gadsby Project fuel cost. Thus, the Fuel Consumed per Net MWH figures in the table below are lower than those for West Valley. Gadsby Peakers CY 2003 CY 2004 CY2005 tbruApril) Total Variable Costs (Fuel Consumed)$11 979,586 660 791 $869,301 Total Generation -Net (MWH)385 069 258 948 46,824 Fuel Consumed per Net MWH $31.11 $10.$18. Unit Cost Per MWH ($/MWH)$32.14 $14.$27. PAC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 27 Monsanto Data Request 27 Page 11 of the testimony of Mr. Watters states that the Gadsby Project "gas turbines can provide ancillary services in the form of operating reserves." What value does PacifiCorp attribute to these operating reserves provided by the Gadsby Project? Please provide all supporting workpapers, studies and analyses used in the valuation. Response to Monsanto Data Request 27 No such calculation has been performed. P AC-O5-1/PacifiCorp June 22, 2005 Monsanto Data Request 28 Monsanto Data Request 28 Please provide the projected total variable costs ($), total generation output (MWH) and unit costs ($ per MWH) associated with producing energy from the Currant Creek Project for each month in 2005,2006 and 2007. Response to Monsanto Data Request 28 Fuel consumed is the only assumed "variable" cost. The Currant Creek project is being constructed in phases, with the first phase (simple cycle) becoming commercial in May and June 2005 and the combined cycle operation estimated to become commercial in March 2006. Consequently, the data below represents estimates based on the portiones) of the project that are commercial during each fiscal year. $/MWH numbers are based on Variable costs only. Jun- Jul- Aug- Sep- Mar-O6 Apr- May-O6 Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May-O7 Jun- Jul- Aug-O7 Sep- Oct- Nov- Dec- Currant Creek Projected Operations Fuel Cost 186 376 659 762 838,494 788 356 405 913 332 328 130,717 101 778 10,491 621 10,595 033 780 717 840,476 108 226 581 782 171 010 342 787 605,594 886 068 309 179 954 896 176 956 274 729 849,954 981 627 594 940 915 244 MWH 2,476 628 706 170 961 169 392 164 350 161 593 207 777 206,489 191 489 155 079 194 578 214 606 218 050 186,177 196 670 191 906 157 509 147 082 195 884 195 132 161 309 147 132 169 978 193,665 Variable $/MWH 75. 77. 78. 78. 58. 49. 49.47 50. 50. 51. 51. 50. 51. 53. 55. 55. 53. 46. 46. 47. 46. 47. 48. 47.45 50. 51. Source: Utah DRR Avoided Cost Study dated 5/24/2005 AC- E-05-/PacifiCorp June 22, 2005 Monsanto Data Request 29 Monsanto Data Request 29 Please provide all workpapers, analysis and studies supporting the lease payments for West Valley as described on page 5 of Mr. Watters' testimony. . Response to Monsanto Data Request 29 To the extent the request asks for all workpapers, analysis, and studies, PacifiCorp objects on the grounds that the request is overly broad and unduly burdensome. Without waiving these objections, PacifiCorp states that workpapers, analysis and studies are provided as Confidential Attachments Monsanto 29A - F on the enclosed CD. This information is confidential and is provided subject to the terms and conditions of the protective agreement in this proceeding. IDAHO. C- O5- GENERAL RATE CASE ACIFICORP MONSANTO DATA REQUEST CONFIDENTIAL ATTACHMENT MONSANTO 29 (A- CONFIDENTIAL (LEVEL YELLOW) ON THE ENCLOSED CD PAC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 30 Monsanto Data Request 30 Please provide all workpapers, analysis and studies supporting the cost of the Gadsby Project as described on page 11 of Mr. Watters' testimony. Response to Monsanto Data Request 30 To the extent the request asks for all workpapers, analysis, and studies, PacifiCorp objects on the grounds that this request is overly broad and unduly burdensome. Without waiving these objections, PacifiCorp states that workpapers, analysis and studies are provided on the enclosed CD as Confidential Attachments Monsanto 30 A-B. These documents contain confidential information and are provided subject to the terms and conditions of the protective agreement in this proceeding. IDAHO PAC-O5- GENERAL RATE CASE ACIFICORP MONSANTO DATA REQUEST CONFIDENTIAL ATTACHMENT MONSANTO 30 (A-B) CONFIDENTIAL (LEVEL YELLOW) ON THE ENCLOSED CD PAC-05-1/PacifiCorp June 22, 2005 Monsanto Data Request 31 Monsanto Data Request 31 Please provide all workpapers, analysis and studies supporting the cost of the Currant Creek Phase One and Phase Two as described on page 14 of Mr. Watters testimony. Response to Monsanto Data Request 31 To the extent the request asks for all workpapers, analysis, and studies, PacifiCorp objects on the grounds that the request is overly broad and unduly burdensome. Without waiving these objections, PacifiCorpstates that workpapers, analysis, and studies are provided on the enclosed CD. Highly Confidential Attachment Monsanto 31A is made available for review at the Company s offices subject to the terms and conditions of the protective order in this proceeding. Attachment Monsanto 31 B is provided as an attachment. Confidential Attachments Monsanto 31 C and 31 D contain confidential information and are provided subject to the terms and conditions of the protective agreement in this proceeding. IDAHO PAC O5- GENERAL RATE CASE ACIFICORP MONSANTO DAT A REQUEST . HIGHL Y CONFIDENTIAL ATTACHMENT MONSANTO 31 A . ' .. " HIGHL Y CONFIDENTIAL (LEVEL PINK) IDAHO A C- O5- GENERAL RATE CASE ACIFICORP MONSANTO DATA REQUEST ATTACHMENT MONSANTO 31 B ON THE ENCLOSED CD IDAHO C- E-O5- GENERAL RATE CASE PACIFICORP MONSANTO DATA REQUEST CONFIDENTIAL ATTACHMENT MONSANTO 31 (C- CONFIDENTIAL (LEVEL YELLOW) ON THE ENCLOSED CD