20150413Simplot to Staff 1-9.pdf

:iii: i,::R I J fili ll: rr0
Peter J. Richardson (lSB No. 3195) I ,.t i ,: , i: ,
Gregory M. Adams (ISB No. 7454) 1l l:_: i-il:1,-Ciji,t , ,,'.i,,,*,;,
Richardson Adams, PLLC
515 N.27ft Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone] I
Fax:[phone]
[e-mail]
greg@richardsonadams. com
Attorneys for J.R. Simplot Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
rN THE MATTER OF rDAHO POWER )
coMPANy'S PETITION TO MODIFY ) CASE NO. IPC-E-15-01
TERMS AI\D CONDITIONS OF PURPA )
PURCHASE AGREEMENTS )
)
IN THE MATTER OF IDAHO POWER )
coRPoRATTON',S PETITION TO MODTFY ) CASE NO. AVU-E-15-01
TERMS AND CONDITIONS OF PURPA )
PURCHASE AGREEMENTS )
)
IN THE MATTER OF ROCKY MOUNTAIN )
POWER COMPANY'S PETITION TO ) CASE NO. PAC-E-I5-03
MODIFY TERMS AND CONDITIONS OF )
PURPA PURCHASE AGREEMENTS ) RESPONSES AND OBJECTIONS
) oF THE J. R. SIMPLOT COMPANY
) TO STAFF',S FIRST PRODUCTION
) REQUEST
The J. R. Simplot Company ("Simplot") provides the following responses and objections
to the Stafls First Production Request.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE I
REQUEST NO. 1: Please explain why Simplot has never negotiated a2}-year term for
any of its prior PURPA contracts with tdaho Power.
RESPONSE TO REQUEST NO. 1:
Simplot does not agree with the assertion that it has never had a PURPA contract with a
term that is 20 years or greater in length. Simplot's Magic Reservoir Hydroelectric QF is
currently selling to Idaho Power pursuant to a 35-year contract, which expires in2024.
Interestingly, the current base price paid by ldaho Power to Magic Hydroelectric is at
$.04994/kwh which is below the current non-seasonal hydro PURPA rates by 32o/o.t This
demonstrates that a long-term contract has been positive for the utility, its ratepayers, and the
financing of a project that required stable, Iong-term pricing.
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
I Current Schedule 89 Season 3 rate as a percentage of IPCo Non-seasonal Hydro 20 year contract levelized rate
beginning in 2015. See IPC-E-I4-l l.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 2
REQUEST NO. 2: Has Simplot ever signed a2}-year fixed price contract for any of the
following for any of its facilities in the U.S.:
a. purchase of electricity;
b. sale of electricity;
c. purchase of natural gas or other non-electric fuels; and
d. purchase of any raw materials used for production, supplies, labor, or transportation.
If the answer to any of the above is "yes," please describe the general terms of the
contracts.
RESPONSE TO REQUEST NO.2:
a. Simplot is not aware of any recent retail energy contracts that provided Simplot
with a fixed price for 20 years. In ldaho, as with all other states that Simplot operates in, Simplot
purchases electricity at retail rates set by regulatory commissions and the Commission Staff
therefore possesses all such Idaho contracts and tariffs responsive to this request. Under the
Commission's recent implementation of Idaho law, Idaho Power has not offered a 20-year fixed
price rate for retail electricity rates, and instead Idaho Power reserves the right to ensure that the
level of retail rates paid by Simplot allows ldaho Power to earn a return on its investment in
electrical plant.
The rates in PURPA contacts have historically been fixed for a2}-year term in Idaho,
which means the costs Idaho Power's ratepayers are obligated to reimburse Idaho Power for its
payments to those PURPA projects never increases over the life of the contract. By way of
contrast, Simplot has not been allowed to enjoy fixed retail rates from its monopoly utility
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 3
service provider. In fact, according to the PUC's most recent Annual Report to the Legislature
(on file at the PUC) Idaho Power has raised its rates nine times over just the last l0 years.
b. Simplot does not sell electricity to retail consumers. To the extent it has sold
electricity for resale in ldaho, as in other states, those sales were made pursuant to Commission-
approved contracts that are on file at the Commission. The Commission Stafftherefore possesses
all such ldaho contracts and tariffs responsive to this request.
c. Simplot objects to this question because it seeks information that is not relevant or
likely to lead to the discovery of admissible evidence, and therefore obtaining, reviewing and
providing "all" contracts related to the purchase of natural gas or other non-electric fuels Simplot
has "ever" purchased at "any of its facilities in the U.S." would impose an undue burden.
d. Simplot objects to this question because it seeks information that is not relevant or
likely to lead to the discovery of admissible evidence, and therefore obtaining, reviewing and
providing "q[!" contracts related to "raw materials used for production, supplies, labor, or
transportation" that Simplot has "ever" had at "any of its facilities in the U.S." would impose an
undue burden.
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 4
REQUEST NO. 3: Please describe how Simplot finances the construction of new plants
or major plant expansions. Specifically discuss whether a contractualZD-year fixed revenue
stream is necessary in order to secure outside financing for major capital projects.
RESPONSE TO REQUEST NO.3:
On large, multi-million dollar projects, Simplot is not unlike other businesses which
employ sound financial analysis as part of our capital process. Conservative, risk-weighted
analysis plays into the overall decision on whether a project is funded. Depending on our risk
aversion, a2}-year contract for revenue would most definitely be considered an option. Simplot
also considers market trends and performs sensitivity analysis on a multitude of factors, all of
which combine into making the decision on whether or not to proceed with a project.
However, Simplot finances construction of new plants with funds, the source/cost of
which are not relevant to this proceeding. Unlike utilities, if a Simplot investment sits idle it
doesn't continue to earn a return on that investment. The question of whether a 20-year fixed
revenue stream is necessary to invest in a major capital investment that is not related to the
generation of electricity for sale to another entity is not relevant to whether Simplot or any
prospective qualifying facility project would need 20 years of fixed prices to support an electrical
generation plant. Unlike sales of potato products, fertilizer products, or other products produced
by the capital investments at Simplot's facilities, state law bars Simplot from selling electricity at
retail to any customer. Additionally, there is no wholesale market for the sale of electricity that
meets the minimum requirements of Section 210(m) of PURPA in this region. Thus, Simplot's
decision to invest in a capital project to produce products it is entitled to sell in a free and open
market is entirely different from investment in electricity generation facilities from which the
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 5
product may not be sold at retail by Simplot and for which there is no free and open wholesale
market in this region of the country.
As to the second part of this request, the ability to consider contract lengths up to and
including 2}-year terms are vital to performing a comprehensive financial analysis. For the
more risk adverse times, Simplot might possibly desire to lock-in the longer contract and thus
assure that the project will meet the specified project payback. It is possible that in risk adverse
times, without the 2O-year contract option and being limited to a two or five year contract, the
project may not be feasible whereas it might be under the 20-year option. As to the remaining
part of this request, it is too vague and speculative to respond to, and it is not relevant or likely to
lead to the discovery of admissible evidence. Therefore, Simplot objects to this aspect of the
request on those grounds. In addition, to the extent the second part of the request seeks
information specific as to how Simplot finances major capital qualifying facility projects, it
violates federal law, 16 U.S.C. $ 824a-3(e) and l8 C.F.R S 292.602, which bar detailed financial
and regulatory inquiries into the finances and operations of QFs. Simplot objects to that aspect
ofthe request on that ground.
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 6
REQUEST NO. 4: Does Simplot have Z0-year contracts at fixed prices for purchase by
customers of any of its products? If not, please explain why Simplot believes it should be
entitled to 20-year contracts at fixed prices for its PURPA generation.
RESPONSE TO REQUEST NO.4:
Simplot objects to the request on the grounds of relevance and undue burden because
Simplot has not conducted the requested study of all of its contracts to ascertain if any meet the
parameters specified in the request. To the extent Simplot may, or may not, have 2O-year
contracts at fixed prices for sale of any products it produces, that fact would be irrelevant to the
appropriate term to set for sale of electricity under PURPA.
Simplot is entirely a different business than a regulated utility. Because Simplot is not
entitled to a monopoly for its products under the law, it sells products, not to ratepayers, but to
customers who are free to choose which competitor with whom they do business. The market in
which Simplot sells its products (aside from electricity) are free and open markets in which
Simplot is legally entitled to compete. Consumers choose which product to purchase based on
the value that they put on that product. As with any other business which competes in the free
market economy, the business goal is to maximize shareholder value while providing satisfactory
value to the consumer. Thus, investments in facilities to produce products for sale in such free
markets are supported by the fact that there is a market that anti-trust laws ensure will be free and
open markets. However, unlike sales of the products produced by the capital investments at
Simplot's facilities, state law bars Simplot from selling electricity at retail to any customer.
Similarly, neighboring states' laws largely bar Simplot from selling electricity at retail in those
neighboring states to which the electricity may be delivered. Additionally, there is no wholesale
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 7
market for the sale of electricity that meets the minimum requirements of Section 210(m) of
PURPA in this region. Thus, in the absence of any legal and economically viable retail or
wholesale market in which QFs may sell electricity, Congress enacted PURPA to provide a
market for QF electricity. Conversely, the regulated utility has a duty to serve in a monopoly
where consumers have no choice and regulators limit shareholder profits to protect consumers
from predatory practices.
Without waving Simplot's objection to this production request, Simplot believes it should
be entitled to 2}-year fixed rate PURPA contracts for, inter alia, the same reasons this
Commission believes Simplot is entitled to 2O-year fixed rate PURPA contracts. In Order No.
32697, issued in December 2012, the Commission explained why Simplot, and other PURPA
developers, should be entitled to Z0-year contracts at fixed prices:
We find that a 2l-year contract length, along with other factors, has been beneficial in
encouraging PURPA development in ldaho. We continue to believe that2}-year
contracts better coincide with the useful life of the renewable/cogeneration resources.
While it is not this Commission's responsibility to ensure a contract length that allows a
QF to obtain financing, we find that reducing maximum contract length to five years
would unduly hinder PURPA development. That is not the Commission's objective. We
believe that, by utilizing other tools to ensure an accurate and up-to-date avoided cost
valuation, we can continue to encourage the types of projects that were envisioned by
PURPA while maintaining the transparency for ratepayers as PURPA requires.
Therefore, we find that a maximum contract length of 20 years is appropriate. The parties
to a power purchase agreement are free to negotiate a shorter contract if that would be
most suitable for the project. As in the past, this Commission will consider contracts of
more than 20 years on a case-by-case basis.
Thus it is apparent that the Commission, in deciding this issue, was not attempting to mimic the
contracting practices of an entity (unlike the utility parties to this case) that is subject to the rigor
and discipline of the free market.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 8
Additionally, it is important to note that when utilities build electricity generation
facilities, Idaho law essentially guarantees them recovery of their investment plus a return on it
for the entire useful life of the facility. In the absence of grossly negligent mismanagement of
those facilities, there is no cap on the amount that a utility may recover. Twenty years is a
reasonable period, according to the Commission's order No. 32697, to 'oensure a contract length
that allows a QF to obtain financing" and that will "better coincide with the useful life of the
renewable/cogeneration resources" and that will "encourage the types of projects that were
envisioned by PURPA."
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 9
REQUEST NO. 5: As a retail customer of ldaho Power, does Simplot believe retail
rates should increase as a result of the utility signing PURPA contracts instead of generating the
power itself or obtaining it from another source?
RESPONSE TO REQUEST NO.5:
No. As the Commission explained in Order No. 32697:
The legal standard for an appropriate determination of avoided cost rates is clearly
defined by PURPA. Rates for purchases from a QF shall "(i) be just and reasonable to
the electric consumer of the electric utility and in the public interest; and (ii) not
discriminate against qualifying cogeneration and small power production facilities."
l8 C.F.R. 5292.304(aXl). "Nothing in this subpart requires any electric utility to pay
more than the avoided costs for purchases." Id. at * 292.304(a)(2). Avoided costs are
those costs which a public utility would otherwise incur for electric power, whether
that power was purchased from another source or generated by the utility itself. 18
C.F.R. * 292.101(bX6). PURPA allows QFs to obtain a rate equivalent to the utility's
avoided cost, a rate that holds utility customers harmless . . .
Simplot agrees with the Commission's statement that "avoided costs are those costs
which a public utility would otherwise incur for electric power" and that the rate ought to be one
that "holds utility customers harmless."
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE IO
REQUEST NO. 6: Does Simplot plan to or has it constructed a PURPA Qualifying
Facility (QF) at its new Caldwell potato processing plant? If yes, what type(s) of QF is planned
or constructed? tf yes, what is the approximate nameplate capacity of the QF(s) in MW?
RESPONSE TO REQUEST NO.6:
Simplot is always considering projects that reduce operating costs, improve reliability,
and have the potential to improve the environment in which we all live and work. Specifically,
Simplot looks at implementing combined heat and power (CHP) at each of its industrial
facilities where it makes sense and has undertaken several, high-level analysis of the cost/benefit
ratios of these projects. Simplot has performed this analysis at the Caldwell potato processing
plant, and other locations, and is considering a natural gas fired CHP unit anywhere from 5-
25MW in size. This QF would utilize natural gas and steam in a topping cycle cogeneration
process that meets FERC's efficiency rules. CHP has several advantages including increased
reliability, increased efficiency in total BTU utilization, and reduced emissions. It also can help
insulate businesses from ever-increasing electrical rates due to increased generation,
transmission, and distribution costs as well as fuel and environmental uncertainty. No decision
has been made yet to move forward with this specific project and, consequently, no capital has
been spent nor has an in-service date been decided upon.
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE I I
REQUEST NO. 7: Has Simplot filed a FERC Form 556 for any QFs at the Caldwell
plant?
RESPONSE TO REQUEST NO. 7:
Simplot objects to this request on grounds of relevance and federal preemption and the
fact that there are no QFs at the Caldwell plant. The information is irrelevant because FERC's
requirement that a new QF file a Form 556 attaches at the time the facility becomes operational.
See WM Renewable Energt, L.L.C.,130 FERC lJ61,268 (2010); OREG I, Inc. 135 FERC'lT
61,150, P 7 (201I ). Additionally, to the extent the inquiry is an investigation into whether the
facility's proposed design meets FERC's criteria for QFs, PURPA grants FERC exclusive
authority over QF status determinations and preempts state jurisdiction over that matter. See Ind.
Energt Producers Assoc., Inc. v. Cal. Pub. Util. Commn.,36 F.3d 848,853-5419ft Cir. 1995).
Without waiving these objections, no.
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 12
REQUEST NO. 8: Has Simplot ceased operations at the Nampa and Aberdeen
processing plants?
RESPONSE TO REQUEST NO.8:
Simplot objects to this question because it violates federal law, l6 U.S.C. $ 824a-3(e) and
l8 C.F.R S 292.602, and it seeks information that is not relevant or likely to lead to the discovery
of admissible evidence. Answering these questions in a public environment could potentially
reduce Simplot's competitive advantage and Simplot therefore declines to comment on the
specifics of these questions. However, Simplot will soon notify ldaho Power directly in formal,
protected, communication as to the planned operational status of these facilities. Should the
electrical load increase or decrease at these or any other facilities, Simplot will work closely with
Idaho Power to ensure that we are operating on the correct tariff which is appropriate to the load
and approved by the ldaho PUC.
In accordance with Rule of Procedure 228, this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE I3
REQUEST NO. 9: Has Simplot begun commercial operations at the new Caldwell
processing plant? If so, when?
RESPONSE TO REQUEST NO.9:
Simplot objects to this question because it violates federal law, l6 U.S.C. $ 824a-3(e) and
l8 C.F.R 5 292.602, and it seeks information that is not relevant or likely to lead to the discovery
of admissible evidence.
Without waiving these objections, yes in 2014.
In accordance with Rule of Procedure 228,this response was prepared by Peter J. Richardson
and Don Sturtevant. Don Sturtevant is the person who would be able to answer questions about
or sponsor factual matters in the answer at hearing.
Dated at Boise, tdaho, this 13tr day of April20l5.
Peter Richardson ISB #3195
Richardson Adams, PLLC
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 14
CERTIFICATE OF SERVICE
I hereby certify that on the l3th day of April,2}l5,l served the forgoing J. R. SIMPLOT
COMPANY'S response and objections to the PUC Staff s First Production Requests in Case
Nos. IPC-E-15-01, AVU-E-15-01 and PAC-E-15-03 via electronic mail as noted below.
IDAHO POWER COMPANY
Donovan Walker
dwal ker@ idahopower. com
dockets@ idahopower.com
COMMISSION STAFF
Donald Howell
Daphne Huang
Jean Jewell
don.howel l@puc. idaho. gov
daphne.huan [e-mail]. gov
iean jewell@puc. idaho. gov
IDAHO CONSERVATION LEAGUE
SIERRA CLUB
Benjamin J. Otto
Matt Vespa
botto@ idahoconservation.org
matt.vespa@ s ierracl ub.org
TNTERMOUNTAIN ENERGY PARTNERS, LLC
Leif Elgethun
Dean Miller
lei f@s itebasedenerey.com
[e-mail]
SNAKE RIVER ALLINCE
Kelsey Jae Nunez
Ken Miller
kn unez@ snakeriveral I iance.org
kmi I [e-mail]
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 15
PACIFCORP, DBA ROCKY MOUNTATN POWER
Ted Weston
Daniel Solander
Yvonne Hogel
Data Response Center
ted.weston@naci fi com.com
yvonne.ho gel @naci fi corp.com
datarequest@fraci fi corP. com
TWIN FALLS CANAL COMPANY
NORTHSIDE CANAL COMPANY
AMERICAN FALLS RESERVOIR DTSTRICT NO. 2
C. Tom Arkoosh
Erin Cecil
[e-mail]
ein.ceci I @arkoosh.com
IDAHO IRRIGATTON PUMPERS ASSOCIATION, TNC.
Eric Olsen
Anthony Yankel
[e-mail]
[e-mail]
CLEARWATER PAPER CORPORATION
Peter Richardson
Gregory Adams
Don Reading
oeter@.rich ardsonadams.com
greg@ richardsonadams.com
dreadine@m indsprins.com
RENEWABLE ENERGY COALITTON
Ron Williams
Irion Sanger
ron@wi I I iamsbradbury.com
[e-mail]
AVISTA CORPORATION
Michael Andrea
Clint Kalich
m ichael.andrea@avi stacorp.com
cl int.kal ich @avi stacorp. com
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAFF
PAGE 16
MICRON TECHNOLOGY, INC.
Frederick Schmidt
Pamela Howland
Richard Malmgren
fschm idt@ho I landandhart.com
phowland@hol landandhart.com
remalm gren @micron.com
THE AMALGAMATED SUGAR COMPANY
Scott Blickenstaff
s b I icken sta ff@ am al s u gar. com
AGPOWER DCD, LLC AND
AGPOWER JEROME, LLC
Andrew Jackura
Dean Miller
andrew j ackura@ camcoc leanener g.v. com
ioe@mcdevitt-mi I ler.com
O. .rr- tlrdtmh'
Nina Curtis
RESPONSES AND OBJECTIONS OF THE J. R. SIMPLOT COMPANY TO
FIRST PRODUCTION REQUEST OF THE STAPF
PAGE 17