20070809PAC to Monsanto 3-1, 2-7.pdf

l~OUNTA'N r,t E C
20 I South Main, Suite 2300
Salt Lake City. Utah &tIll
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UT! L gfE S.J d3r\;K1\:jSI- -
August 8, 2007
Randall C. Budge
RACINE, OLSON, NYE, BUDGE &
BAILEY, C~TERED
O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
RE:PAC-07-
Monsanto Data Request Set 3 (1- 7)
Please find enclosed PacifiCorp s responses to 3rd Set Monsanto Data Request 3.1-
Provided on the enclosed CD are Attachments Monsanto 3.2 L, 3.3, 3.7. Provided on the
enclosed confidential CD are Confidential Attachments Monsanto 3.1 a, 3.1 c, 3.2 a.
If you have any questions, please feel free to call me at [phone].
Sincerely,
U)/
~"-
Brian Dickman, Manager
Regulation
Enclosures
Cc: James R. Smith
Maurice Brubaker
Richard Anderson
PAC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.
Monsanto Data Request 3.
With respect to Mr. Widmer s supplemental direct testimony and Exhibit No. 42,
please provide:a. A listing of all assumptions used in each model;b. Complete executable copy of each model in native format with all
formulas intact;
All work papers and supporting documentation for the forward price
curves; and
All other workpapers supporting the modeling and calculations of the
value of interruptible power.
Response to Monsanto Data Request 3.
Front Office Model
a. An assessment of all assumptions pertinent to the economic evaluation
completed using the front office model is provided as Confidential
Attachment Monsanto 3.1(a) on the enclosed CD. This information is
confidential and is provided subject to the terms and conditions of the
protective order in this proceeding.
b. The front office models are extremely confidential, price and transaction
sensitive, and commercially proprietary. Disclosure of this material may give
an undue advantage to competitors and therefore requires the highest level of
confidential treatment. The models will be made available for review via
secure access to the company s website. Please contact Brian Dickman at
801-220-4975 to make arrangements to review. The relevant models are
named Monsanto _2007 -06-- OldApp - TestimonyV2.xls and Monsanto
Final 20060508- 01.07-12.Reserves & Curtailments.xls.
c. A copy of the confidential documentation supporting the forward price curve
pertinent to the economic evaluation completed using the front office model is
provided as Confidential Attachment Monsanto 3.1(c) on the enclosed CD.
This information is confidential and is provided subject to the terms and
conditions of the protective order in this proceeding.
d. Please refer to the documents provided in response to parts a, b, and c above
for all supporting workpapers and calculations used to value the interruptible
products with the front office model.
GRID Model
a. Please see response to Monsanto Data Request 3.
PAC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3 rd Set Data Request 3.
b. Please see response to Monsanto Data Request 3.
c. The Monsanto valuation used the same forward price curves as used in the
current case. These forward price curves were provided as Attachment
Monsanto 1.8 L.
d. Please see the Company s response to Monsanto Data Request 3.3.
(Mark T. Widmer is expected to sponsor this response at hearing.
ID AD
P AC-O7-
ROCKY MOUNTAIN POWER
MONSANTO DATA REQUESTS SET 3 (1-
CONFIDENTIAL A TT ACDMENT
MONSANTO 3.1 a
ON THE ENCLOSED CONFIDENTIAL CD
IDAHO
P A C- E-07 -
ROCKY MOUNTAIN POWER
MONSANTO DATA REQUESTS SET 3 (1-
CONFIDENTIAL A TT ACHMENT
MONSANTO 3.1 c
ON THE ENCLOSED CONFIDENTIAL CD
P AC-07 -OS/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.2
Monsanto Data Request 3.
Concerning Mr. Widmer s supplemental direct testimony and Exhibit No. 42, if
not provided in response to other data requests, please provide for the "Front
Office Model" the following:a. The generating units evaluated to calculate the value of operating reserves,
the number of megawatt of reserves evaluated on each unit, the
incremental cost for each unit and the market price.
The name and incremental cost of the unites) selected as the unit(s) "in-
the-money
All assumptions used in determining the incremental cost of each unit
evaluated including heat rates, gas prices and variable operating and
maintenance expenses;
The source of the market prices used in the valuation of operating reserves
and the date the market price forecast was prepared;
The hours (per day, per month and per year) and loads of Monsanto
modeled in the valuation of operating reserves;
The market price values for each hour in the year, with the particular 800
most expensive" hours identified;
The source of the market price values used in the valuation of the
economic curtailment and the date the market price forecast was prepared;
The derivation of the "annual average on peak market price" used for the
system integrity valuation, with workpapers to show the values foreach
hour of each day;
A description and explanation of any adjustment made in the Front Office
Model for "lost revenues ; and
A description, derivation, and explanation of any discount rate used in the
Front Office Model.
If the Front Office Model was in fact used to establish the Existing
Contract value of$12.4M shown in Exhibit No. 42, page 1, please
describe why the value decreased to $1O.8M in 2008 and to $8.7M in 2009
and provide all supporting information.
Please describe in detail how the $12.4M value in 2007 for the Existing
Contract shown in Exhibit No. 42, page 1 was established, how the Front
Office Model and GRID Model were utilized to establish this value and
provide all supporting work papers.
Response to Monsanto Data Request 3.
a. Please refer to page two of Confidential Attachment Monsanto 3.1 (a) for a list of
generating units evaluated to calculate the value of operating reserves. The
number of megawatt of reserves evaluated on each unit is the amount of reserves
available through the existing Monsanto interruptible products, which is 95 MW.
This amount of reserves is applied regardless of the generating unit. A table
listing the incremental cost for each unit and the market prices is provided as
IDAHO
P A C- E-07 -
ROCKY MOUNTAIN POWER
MONSANTO DATA REQUESTS SET 3 (1-
CO NFID E NTIAL A TT A CHME NT
MONSANTO 3.2 a
ON THE ENCLOSED CONFIDENTIAL CD
P AC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.
Confidential Attachment Monsanto 3.2 a on the enclosed CD. This information is
confidential and is provided subject to the terms and conditions of the protective
order in this proceeding. The name of the file is
Monsanto OR PriceVsCost.PDF.
b. Please refer to Confidential Attachment Monsanto 3.
c. Please refer to Attachment Monsanto 3.1(a) for heat rate and variable operating
and maintenance expenses. Gas prices for each unit are extremely confidential
price and transaction sensitive, and commercially proprietary. Disclosure of this
material may give an undue advantage to competitors and therefore requires the
highest level of confidential treatment. The information will be made available
for review via secure access to the company s website. Please contact Brian
Dickman at 801-220-4975 to make arrangements to review. The name of the file
is Monsanto Gas - HighlyConfidential. pdf.
d. The market prices used in the valuation are derived from the company s hourly
price scalars and the highly confidential forward price curve as of June 28, 2007.
e. Monsanto loads are not considered in the front office evaluation of operating
reserves.
f. The average monthly prices for individual peak hours, the average four-hour peak
prices that were applied in the valuation, and the number of hours to which the
prices are applied. The front office models are extremely confidential, price and
transaction sensitive, and commercially proprietary. Disclosure of this material
may give an undue advantage to competitors and therefore requires the highest
level of confidential treatment. The models will be made available for review via
secure access to the company s website. Please contact Brian Dickman at 801-
220-4975 to make arrangements to review. The name of the highly confidential
file is Monsanto Curtail Hourly.PDF.
g. Please refer to the company s response to parts d and f above.
h. The company did not produce a price for each hour in the year for the valuation of
the system integrity product. Notwithstanding, the annual average on-peak
market price used to value the system integrity product is calculated from the
company s highly confidential forward price curve dated June 28, 2007.
1. Lost revenues are not included in the front office model evaluation.
J. All evaluation results referenced in Mr. Widmer s supplemental direct testimony
and Exhibit No. 42 as related to the front office model are in nominal dollars.
PAC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3 rd Set Data Request 3.
k. The front office model used to support the existing contract value was updated
with a more recent forward price curve and reserve stack operating cost data.
Considering that the evaluation model was not changed and that the contract
characteristics were not changed, the updated forward price curve and reServe
stack operating cost data used in the front office model explain the decrease in
value.
I. The $12.4m value in 2007 for the existing contract shown in Exhibit No. 42, page
1 was established by taking the average of the annual values produced by the front
office model for years 2007, 2008, and 2009 (the initial term of the existing
contract) at the time the existing contract was negotiated and executed. The
GRID model was used as other value information but was not directly used to
determine reserve value. Provided as Attachment Monsanto 3.2 L is the Front
Office valuations.
(Mark T. Widmer is expected to sponsor this response at hearing.
IDAHO
P AC-07-
ROCKY MOUNTAIN POWER
MONSANTO DATA REQUESTS SET 3 (1-
ATTACHMENT MONSANTO 3.2 I
ON THE ENCLOSED CD
P AC-07 -O5/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.3
Monsanto Data Request 3.
Concerning Mr. Widmer s supplemental direct testimony and Exhibit No. 42, if
not provided in response to other data requests, please provide the following
information with respect to the "Grid Model" evaluation:a. Complete copies of both Grid model runs used in the evaluation;b. A detailed listing of all assumptions;c. A copy of all standard output reports;d. Work papers deriving the value of the interruptible product; ande. A detailed explanation of how the Monsanto curtailment products are
modeled in the second Grid model run.
Response to Monsanto Data Request 3.
The requesteq GRID project is provided as Attachment Monsanto 3.3(a).
The GRID project can be imported onto the GRID computer provided to
Monsanto.
All of the assumptions and inputs used to calculate the Monsanto
valuation are included with the GRID project provided in response to part
a. above.
A copy of the GRID output reports used to derive the value of the
interruptible product are provided as Attachment Monsanto 3.3(c).
Please see the Company s response to part c above.
Provided as Attachment Monsanto 3.3(e) is a list of the GRID modeling
assumptions used to model the Monsanto contract. The Monsanto
contract is broken into two sections, curtailment and reserves.
i. The "Monsanto Curtailment" component is an energy limited call
option purchase with a maximum annual take of 53 600 MWH and
with a maximum hourly take of 67 MW. GRID curtails Monsanto
load in the 800 highest value hours.
ii. The operating reserve component is for 95 MW in all hours. The
de-rate is an operating reserve sale with a maximum of 7 MW in
all hours. The use of a purchase and offsetting sale provides
modeling flexibility. The net effect of the two components is an
operating reserve pur-chase from Monsanto of 88 MW in all hours.
(Mark T. Widmer is expected to sponsor this response at hearing.
IDAHO
PAC-07-
ROCKY MOUNTAIN POWER
MONSANTO DATA REQUESTS SET 3 (1-
ATTACHMENT MONSANTO 3.
ON THE ENCLOSED CD
P AC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.4
Monsanto Data Request 3.
For the existing contract the Front Office Model and the GRID Model, for each
year, please separately identify the values attributed to Monsanto s operating
reserves, economic curtailment and system integrity features.
Response to Monsanto Data Request 3.
Existing Contract
The value for both 2008 and 2009 were estimated as per the provisions of the
contract.
Contract Cost as listed in the Idaho GRC FilingMonsanto Curtailment 5 113,440P4 Production 7 250,400Total 12 363,840
67 MW x 12 Month x $6.36/kW = 5 113,440
95 MW x 12 Month x $6.36/kW = 7,250,400
Curtailment
Reserves
Front Office Model
The breakdown of each product evaluated with the front office model is as
follows:
GRID Model
Please see table below. As explained in Mr. Widmer s testimony, the GRID
model is not capable of calculating a value for the system integrity component of
the contract.
2008 2009
Total Value of Curtailment and
Reserves 179 729 10,444 874
Value of Curtailments 993 624 865 232
Value of Reserves 186,105 579,642
(Mark T. Widmer is expected to sponsor this response at hearing.
P AC- E-07 -OS/Rocky Mountain Power
August 8, 2007
Monsanto 3 rd Set Data Request 3.
Monsanto Data Request 3.
Please explain why from 2008 to 2009 the valuation of the interruptible products
decreases under the Front Office Model and increases under the GRID Model and
provide all supporting work papers and detail.
Response to Monsanto Data Request 3.
Front Office Model
With respect to the front office model, the year-on-year decline in value is driven
by the operating reserve product. The operating reserve product declines in 2009
relative to 2008 due to a decline in the spread between the market value of energy
and the highest cost in the money resource in the reserve stack.
GRID Model
With respect to the GRID model, the year-on-year increase in value is related to
the May 2008 expiration of the West Valley lease. With the expiration, reserves
are carried on lower cost units than West Valley, which increases the value of the
reserves for 2009.
For the requested work papers, please see the company s response to Monsanto
Data Request 3.
(Mark T. Widmer is expected to sponsor this response at hearing.
P AC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.
Monsanto Data Request 3.
PacifiCorp Pricing and Regulatory Operations Director William Griffith is quoted
in the July 9, 2007 Power Week West publication with respect to the Wyoming
general rate case filed June 19,2007, as stating that Wyoming industrial
customers, primarily mining and other extractive industries, have told PacifiCorp
they expect to add 1 000 MW of new load, of which 560 MW is expected to
accrue over the next five years. Further, that the Company proposes that new
large customers be priced for firm service using the same avoided costs
methodology that the Wyoming Public Service Commission recently approved for
new, large power generation qualifying facilities so that prices charged for new
customers will be set based on the same method used to set prices paid to the new
large QFs; and, that the "benefits of this proposal are that it will provide better
price signals for new customers about the cost of serving them, and it will reduce
future price impacts on our current Wyoming customers." Also, that "a more
accurate price signal is needed to help ensure that these anticipated new large load
customers are making the most economically fuel efficient choice when obtaining
new service for their new facilities." Please state:a. The number, size and total new load of industrial customers added in the
Company s service area in Idaho in each of the last five years and the
projected amounts in the next three years;
Does the Company propose that new large customers in Idaho be priced
for firm service using the same avoided costs methodology that the Idaho
Public Utilities Commission has approved for QFs? If not, please explain
why.
With respect to the Company s proposed rate increase in Wyoming, please
indicate the percentage increase in rates the Company proposes for each
customer class.
Response to Monsanto Data Request 3.
a. Below is a table that summarizes the load growth for the last 5 years by the
industrial operations in Idaho. The growth in Idaho has been very low and the
forecast growth is basically zero. This data is not specifically maintained from
customer requests but developed from analyzing actual load over the historical
period.
PAC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3rd Set Data Request 3.
Number of Load
Year Size of customers customers Growth
2002 oe( 1 MW of load 0.2 MW
:::-1 MWofload 7MW
2003 oe( 1 MW of load 7MW
:::-1 MWofload 3MW
2004 oe( 1 MW of load 8MW
:::- 1 MWofload 1.1 MW
2005 oe( 1 MW of load 6MW
:::-1 MWofload 5MW
2006 oe( 1 MW of load 2MW
:::- 1 MWofload 6MW
No. In this docket, the Company has not proposed that new large
customers in Idaho be priced for firm service using the same avoided costs
methodology that the Idaho Public Utilities Commission has approved for
QFs.
If in the future our Idaho service territory experiences the same kind of
growth as anticipated in Wyoming then a new large customer pricing
proposal may be proposed.
The proposed percentage increase in rates in the Wyoming rate case by
customer class are:
Residential
Commercial
Industrial
Irrigation
Street Lighting
7.4%
11.1%
(William R. Griffith is expected to sponsor this response at hearing.
PAC-07-05/Rocky Mountain Power
August 8, 2007
Monsanto 3 rd Set Data Request 3.
Monsanto Data Request 3.
The July 9, 2007 publication of Power Week West also quotes PacifiCorp
spokesman Jeff Hymus as stating that "based on actual and projected costs from
December 31 , 2006, through August 31 , 2008, the Company will have invested
$153,000,000 in generation, transmission and distribution to serve Wyoming
customers.
a. Please indicate the amount the Company will have invested in Idaho in each
year 2006 through 2008 in generation, transmission and distribution to serve
Idaho customers.
b. Break the amount invested into each category: generation, transmission and
distribution;
c. With respect to your answer to the previous question, indicate how much of
said investments occurred in Idaho and the location of the balance of said
investments.
Response to Monsanto Data Request 3.
To provide context for the amounts given below, it should be noted that the $153
million figure referenced above represents only generation investment allocated to
Wyoming in the Company s recently filed Wyoming general rate case, not
transmission and distribution as the data request suggests. This amount also
reflects the averaging methodology used for rate base in the Wyoming general
rate case. The amounts below are on an Idaho allocated basis and do not reflect
any averaging methodology.
a. The Idaho allocated amount of generation, transmi~sion and distribution
investment made by the Company in 2006 is $63 million and is forecast to be
$97.2 million for 2007 and $32.million for the 8 months ended August 2008
for a total of$192.7 million.
b. Of the Idaho allocated $192.7 million investment $125.million is for
generation assets $25.3 million is for transmission assets and $42.3 million is
for distribution assets.
c. Please see Attachment Monsanto 3.7 for a listing of the plant investment
locations.
(Steven R. McDougal is expected to sponsor this response at hearing.
IDAHO
P AC-07-
ROCKY MOUNTAIN POWER
MONSANTO DATA REQUESTS SET 3 (1-
ATTACHMENT MONSANTO 3.
ON THE ENCLOSED CD