ROS1121A.txt

1 BOISE, IDAHO, MONDAY, NOVEMBER 21, 1994, 1:30 P. M.

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4 COMMISSIONER MILLER: Let's see,

5 Mr. Eriksson, I think we're ready for your examination of

6 Dr. Slaughter.

7 MR. ERIKSSON: Thank you.

8

9 RICHARD A. SLAUGHTER,

10 produced as a witness at the instance of Rosebud

11 Enterprises, Inc., having been previously duly sworn,

12 resumed the stand and was further examined and testified

13 as follows:

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15 CROSS-EXAMINATION

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17 BY MR. ERIKSSON:

18 Q Dr. Slaughter, if you'd please turn to

19 Page 5 of your direct testimony, on Line 11 you state that

20 in Case IPC-E-92-31, identical in many of its issues to

21 this case, and that case is, of course, the Rosebud versus

22 Idaho Power case, isn't it?

23 A Yes.

24 Q In that case, wasn't the pricing proposal

25 made by Idaho Power different than the pricing proposal

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Wilder, Idaho 83676 Rosebud Enterprises

1 made by PacifiCorp in this case?

2 A Yes, it was.

3 Q And Idaho Power didn't have the transmission

4 constraint issue that PacifiCorp has?

5 A They did not present such an issue, no.

6 Q And the events occurring in the negotiation

7 process in the Idaho Power case are not the same as those

8 that occurred in the PacifiCorp-Rosebud case; correct?

9 A I'm sorry, the negotiations process is not

10 the same?

11 Q Right.

12 A The events in the process, no, you're right.

13 Q Turning to Page 8 of your testimony, your

14 direct testimony, you testify at Lines 21 and 22 that all

15 of these components, that is, referring to generation

16 capital costs, fixed O&M, transmission capital costs, and

17 transmission O&M, are properly considered capacity costs;

18 is that correct?

19 A That's what it says, yes.

20 Q Have you testified in electric utility rate

21 cases, general rate cases or cost of service rate cases?

22 A Yes.

23 Q Who have you represented?

24 A I don't remember right now. It was the 265

25 case.

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Wilder, Idaho 83676 Rosebud Enterprises

1 Q Would it have been industrial? Commercial?

2 Irrigation?

3 A No, it was small power.

4 Q Looking at Page 10 of your direct testimony,

5 at Line 9 you suggest that a dispatchable/peaking

6 structure modeled after the structure accepted by the

7 Commission in Order No. 25706 be adopted in this case; is

8 that correct?

9 A Yes, that's what it says.

10 Q Is that rate structure acceptable to

11 Rosebud?

12 A To the extent that I've described it, I

13 believe that it is, it's my understanding that it would

14 be.

15 Q Is that the Order that Rosebud petitioned

16 for reconsideration or is that the result of the petition

17 for reconsideration?

18 MR. ORNDORFF: I think maybe we should have

19 an objection. I think we should have one question at a

20 time and let the witness answer one at a time.

21 COMMISSIONER MILLER: That's a fair

22 objection.

23 MR. ERIKSSON: Okay.

24 Q BY MR. ERIKSSON: First question, did

25 Rosebud petition for reconsideration of that Order?

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Wilder, Idaho 83676 Rosebud Enterprises

1 A Okay, in between the time that this

2 testimony was written and today, there have been a number

3 of communications, including, I believe, a petition for

4 reconsideration over interpretation of items in that

5 Order, yes.

6 Q On the same page, Lines 19 to 21, you

7 testify that PacifiCorp has indicated near term needs for

8 dispatchable and/or peaking resources. Could you please

9 identify for me the basis of your assertion there?

10 A Well, with regard to PacifiCorp, there is

11 the July 11th proposal to Rosebud which is specifically

12 directed at and rationalized in terms of need for peaking

13 resource. With regard to Idaho Power, there have been a

14 series of proposals, there was a series of proposals, from

15 Idaho Power to Rosebud that have in them for capacity

16 peaking kinds of units, and in Idaho Power's --

17 Q My question was with respect to PacifiCorp.

18 A Okay, I'm sorry.

19 Q So the basis is your interpretation of the

20 meaning and inferences of the Company's July 11th

21 proposal?

22 A Yes, the Company has said that they need,

23 they have a requirement for power during the daytime.

24 They do not because of transmission constraints have a

25 requirement for power on the east side of their system at

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Wilder, Idaho 83676 Rosebud Enterprises

1 night and I interpret that to be of a peaking nature.

2 Q Did the Company say it has a need for

3 resources of a peaking nature on the east side?

4 A I don't know whether the Company used that

5 exact phrase or not.

6 Q On the same page at the beginning, you state

7 that from a policy perspective, refusing generation

8 because of perceived transmission constraints is

9 untenable.

10 A Yes.

11 Q My focus is on refusing generation. Is it

12 your position that PacifiCorp has refused Rosebud's

13 generation?

14 A Again, I think there is a question of

15 semantics here. My reading of the contract proposal says

16 that during the off-peak hours defined in the proposal

17 that PacifiCorp believes that the generation has no value

18 to PacifiCorp other than possible fuel savings.

19 Q So it's a pricing issue; that is, the prices

20 proposed by PacifiCorp are not feasible for Rosebud?

21 A Well, it goes beyond that. If the question

22 is did PacifiCorp say no, we do not want and will not take

23 your generation period, no, I'm not testifying that

24 PacifiCorp has said that. What I am testifying to is that

25 PacifiCorp has created a rate structure in which they

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Wilder, Idaho 83676 Rosebud Enterprises

1 propose to pay during the off-peak period of time for

2 capacity based on a gas peaking unit, a simple cycle

3 turbine, and for fuel based on a coal unit, and it didn't

4 seem to me to make -- you know, either the SCCT should

5 burn coal or the capacity payment should be based on -- I

6 mean, yeah, either your gas system should burn coal or the

7 capacity payment should be based on coal.

8 Q Will you please define capacity as you use

9 that term?

10 A Well, it is clear from Mr. Weaver's direct

11 testimony that he wants to define capacity in the sense,

12 and it's my interpretation of it, of the construction cost

13 of the capacity alone. I am using, I was in here using,

14 capacity in the sense of the fixed portion of the avoided

15 cost rate. There are only two portions, the fixed and the

16 adjustable, and the fixed includes the items which I

17 enumerated in the earlier section.

18 Q Okay, I'm not referring to capacity cost.

19 I'm referring to capacity, electrical capacity or

20 generating capacity.

21 A The ability to generate energy in an

22 instantaneous period of time would be a way I would define

23 it.

24 Q Referring to Page 4 of your rebuttal

25 testimony, at the top of the page you testify that

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Wilder, Idaho 83676 Rosebud Enterprises

1 Dr. Weaver confuses QF revenues and ratepayer costs. In

2 fact, aren't the revenues that a QF receives from power

3 sales to the utility equal to ratepayer costs, aren't they

4 the same thing?

5 A No, they're not, anymore than the utility's

6 retail rate is equal to its gross revenue. I'm speaking

7 of ratepayer costs in terms of price paid per

8 kilowatt-hour consumed.

9 Q Do the ratepayers pay the revenues that a QF

10 receives from the utility?

11 A Ultimately, yes, they do.

12 Q So those ratepayer costs are equal to the QF

13 revenues, aren't they?

14 A As an identity, yes, of course, they are.

15 Q Page 10 of your rebuttal testimony,

16 Lines 13 through 16, you testify that Dr. Weaver argues

17 that any new QF resource must be designed to provide power

18 only during peak periods. Can you identify for me where

19 Dr. Weaver argues that?

20 A Dr. Weaver spoke at some length, as did

21 Mr. Morris, about the wheeling constraints, the

22 transmission constraints, faced by the Company and

23 although he may characterize that as a pricing question,

24 it comes down in practical terms to offering to purchase

25 capacity only during the peak period of day.

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Wilder, Idaho 83676 Rosebud Enterprises

1 Q That is if the QF wants more than the

2 off-peak rates that are proposed by the utility; isn't

3 that correct?

4 A It comes down to what can be built for what

5 kinds of prices. The structure that is put there assumes

6 the existence of capacity of such a quality and such a

7 nature that it can produce energy at the adjustable rate.

8 The only way you can do that is with a solid-fueled

9 facility, but the capacity payment offered for off-peak

10 periods is derived from a gas-fired simple turbine. The

11 two don't mesh. That's the fundamental point, whatever

12 the specific language may be.

13 Q Isn't there a market for electric utilities

14 to acquire capacity and only capacity in the wholesale

15 market?

16 A Yes, I would expect that there is.

17 MR. ERIKSSON: That's all I have.

18 COMMISSIONER MILLER: Redirect.

19 MR. ORNDORFF: Mr. Chairman, I have none.

20 COMMISSIONER MILLER: Dr. Slaughter, thank

21 you, as always, for your help.

22 (The witness left the stand.)

23 MR. ORNDORFF: Mr. Chairman, could I

24 summarily ask for Dr. Slaughter to be excused from the

25 Hearing Room? I know he has testimony to work on that's

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Wilder, Idaho 83676 Rosebud Enterprises

1 due today and he will be available if we need him by

2 phone.

3 COMMISSIONER MILLER: In the absence of

4 objection, Doctor, you can be excused from further

5 attendance if you remain subject to call.

6 MR. ORNDORFF: Mr. Chairman, I think that

7 completes Rosebud's direct case and I think we've done the

8 rebuttal case; so I think the ball moves over to the other

9 side of the aisle.

10 COMMISSIONER MILLER: All right, let's go

11 there.

12 MR. FELL: PacifiCorp's first witness is

13 Mr. Gregory Duvall.

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15 GREGORY N. DUVALL,

16 produced as a witness at the instance of PacifiCorp,

17 having been first duly sworn, was examined and testified

18 as follows:

19

20 DIRECT EXAMINATION

21

22 BY MR. FELL:

23 Q Mr. Duvall, would you please state your

24 name, business address, and present position with

25 PacifiCorp?

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Wilder, Idaho 83676 PacifiCorp

1 A My name is Gregory N. Duvall. My address is

2 825 N.E. Multnomah Boulevard in Portland and I am the

3 director of power system coordination.

4 Q Mr. Duvall, have you prefiled direct

5 testimony in this case?

6 A Yes, I have.

7 Q And have you also prefiled an exhibit which

8 has been marked Exhibit 101?

9 A Yes.

10 Q And Exhibit 101 contains three letters, one

11 dated October 7, 1992, from Mr. Orndorff to Mr. Lowe. For

12 the record, I'll just identify each one of these. The

13 second one is a letter from Mr. Fell, me, of Stoel, Rives

14 to Mr. Orndorff, dated October 22, 1992; and the third

15 letter is a letter from Mr. Orndorff to me dated

16 October 27, 1992. Is that correct, Mr. Duvall?

17 A Yes, it is.

18 Q Mr. Duvall, if I were to ask you today the

19 questions that are contained in your prefiled direct

20 testimony, would your answers be the same?

21 A Yes, they would.

22 MR. FELL: We move that Mr. Duvall's direct

23 testimony be spread on the record as if read.

24 COMMISSIONER MILLER: If there's no

25 objection, it will be so ordered.

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Wilder, Idaho 83676 PacifiCorp

1 (The following prefiled testimony of

2 Mr. Gregory Duvall is spread upon the record.)

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CSB REPORTING DUVALL (Di)
Wilder, Idaho 83676 PacifiCorp

1 Q Please state your name, business address and

2 present position with PacifiCorp (the Company).

3 A My name is Gregory N. Duvall. My business

4 address is 825 NE Multnomah, Portland, Oregon 97232, and

5 my present position is Power System Coordination Director.

6 Q Please briefly describe your education and

7 business experience.

8 A I received an undergraduate degree in

9 Mathematics from the University of Washington and a

10 Masters Degree in Business Administration from the

11 University of Portland. I have worked for PacifiCorp

12 since 1976 and have held various positions in both the

13 power supply and regulatory areas. I was promoted to my

14 present position in 1992.

15 Q Please describe your present duties.

16 A I am responsible for the presentation of

17 power resource information used in retail and wholesale

18 price filings. I oversee the Company's resource planning

19 and acquisition activities. In addition, I manage

20 PacifiCorp's Sulfur Dioxide allowance trading activities

21 and direct the Company's involvement in power planning

22 issues of various agencies in the Pacific Northwest

23 including issues relating to the Bonneville Power

24 Administration.

25 Q Please describe the purpose of your

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1 testimony.

2 A The purpose of my testimony is to

3 provide an overview of PacifiCorp's position in this

4 case. I will summarize the

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1 issues of grandfathering status and appropriate price

2 calculation for the Rosebud project. My testimony will

3 show that the Rosebud project is not entitled to

4 grandfathered avoided cost rates, and that the appropriate

5 pricing calculation for the Rosebud project should

6 consider important factors that affect the cost the

7 Company can avoid by purchasing the output of the Rosebud

8 project, including project location and dispatchability.

9 This case is unique and the issues presented need to be

10 considered on a case specific basis.

11 Q What is unique about this particular case?

12 A The Rosebud project is the first facility

13 greater than 10 MW to request to sell power into

14 PacifiCorp's system in Idaho. Unlike other Idaho

15 utilities, PacifiCorp operates in seven western states and

16 has generation and transmission resources as well as load

17 centers spread throughout the west. The size of

18 PacifiCorp's system load requirement provides significant

19 opportunities for the development of new resources,

20 including qualifying facilities. In 1993, for example,

21 the Company purchased $54.4 million of QF power from 57

22 separate facilities, of which 15 are located in Idaho.

23 However, along with providing such opportunity for

24 resource development, the geographic size of PacifiCorp's

25 system requires consideration of resource location and
transmission limitations.
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PacifiCorp

1 Also, unlike other Idaho utilities, PacifiCorp has

2 an 1100 MW peaking contract with the Bonneville Power

3 Administration and receives about 80 percent of its energy

4 requirements from baseload coal plants, which are

5 primarily located in Utah and Wyoming. To efficiently

6 combine these two unique resource features, east to west

7 transmission capacity is needed. The availability of

8 transmission capacity needs to be considered when

9 determining the cost which a QF resource located in Idaho

10 allows the Company to avoid.

11 Finally, Rosebud's claim of entitlement to

12 grandfathered prices must be based on the unique

13 negotiation history and factual evidence of this case.

14 The Company's testimony will show that this case does not

15 satisfy the standards for grandfathering.

16 Q What does the Company believe constitutes

17 sufficient evidence for the demonstration of entitlement

18 to grandfathered rates?

19 A The Company relies on the Commission's

20 standards for a qualifying facility's entitlement to

21 superseded or grandfathered avoided cost rates. Under

22 A.W. Brown, Order No. 23271, the Commission found that the

23 avoided costs to be used for purchases from a qualifying

24 facility are those in effect at the time a contract is

25 signed. There is only one exception to this rule, and

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1 that requires the QF to file a meritorious complaint with

2 the Commission showing that "but

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1 for" the actions of the utility, the QF is otherwise

2 entitled to a contract and avoided cost rates. For the

3 complaint to be considered meritorious, it is the

4 responsibility of the developer to:

5 "...allege and prove (1) that the project was
substantially mature to the extent that would
6 justify finding that the developer was ready,
willing and able to sign a contract and (2)
7 that the developer had actively negotiated
for a contract which, but for the reluctance of
8 the utility, would have been executed."

9 Q Has Rosebud demonstrated that the project

10 was substantially mature to qualify for grandfathered

11 rates?

12 A No. Mr. Ramisch's testimony illustrates

13 Rosebud's lack of project maturity. Mr. Ramisch describes

14 the status of the project throughout the project's history

15 and shows that Rosebud has never been ready, willing and

16 able to enter into an agreement with PacifiCorp. The

17 primary reasons for Rosebud's failure to have a contract

18 are their lack of maturity in developing project-specific

19 information and their failure to diligently pursue

20 contract negotiations.

21 Mr. Ramisch shows that the complaint was

22 not meritorious at the time it was filed with the

23 Commission because Rosebud

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1 did not have a viable site, had not ascertained project

2 viability, and had not negotiated with the Company or

3 provided the Company with basic information to develop a

4 contract. Even today, Rosebud is not ready, willing and

5 able to sign a contract.

6 The law requires that the developer be responsible

7 for proving that the QF is ready, willing and able to

8 enter into a contract. The utility cannot demonstrate the

9 readiness of the developer.

10 Q Please describe PacifiCorp's communications

11 with Rosebud regarding contract negotiations.

12 A From the outset, PacifiCorp has indicated a

13 willingness to discuss the project and has repeatedly

14 attempted to initiate negotiations with Rosebud. In

15 response, Rosebud's written communications have been

16 misleading and accusatory. Mr. Ramisch's testimony

17 provides a chronological discussion of the Company's

18 communications with Rosebud showing that Rosebud has

19 failed to enter into meaningful negotiations with the

20 Company even though the Company has expressed a specific

21 desire and need to do so.

22 As an example of the communication style employed

23 by Rosebud, I refer you to my Exhibit 101. This exhibit

24 includes three letters, two from Mr. Owen Orndorff

25 and one from PacifiCorp. The first letter is dated

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PacifiCorp

1 October 7, 1992, and is addressed to PacifiCorp

2 from Mr. Orndorff. This

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1 letter was delivered to PacifiCorp less than two weeks

2 after Rosebud's project proposal letter. Essentially the

3 October 7 letter reprimands PacifiCorp for failure to

4 respond to the project proposal letter and threatens

5 PacifiCorp with legal action if no response is received by

6 Mr. Orndorff within a specified period of time. This

7 letter in itself was unreasonable and counter-productive

8 to meaningful negotiations.

9 PacifiCorp's response to the October 7 letter is

10 dated October 22, 1992, which complied with the time limit

11 requested in the October 7 letter. PacifiCorp's letter

12 specifically states that the Company "would be willing to

13 schedule a meeting" to discuss issues relating to the

14 Rosebud project, issues which the Company indicated

15 included transmission, interconnection, operating

16 characteristics, and fuel supply.

17 The third letter is Mr. Orndorff's response to

18 PacifiCorp's October 22 letter. Quoting from Mr.

19 Orndorff's October 27, 1992, letter:

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21 PP&L's response does not constitute an offer
to purchase or even a willingness to discuss
22 further the project. [emphasis added]

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PacifiCorp

1 willingness to discuss the project. This exchange is

2 characteristic of the communications the Company has

3 received from Mr. Orndorff. From the beginning, Rosebud's

4 strategy has been one of confrontation and litigation

5 rather than cooperation and negotiation.

6 PacifiCorp has attempted to negotiate with Rosebud

7 in good faith. Rosebud has declined to discuss important

8 issues and has refused to provide the information

9 necessary to formulate a reasonable power purchase

10 agreement even after agreeing to do so in a pre-hearing

11 conference.

12 Q Please explain how Rosebud responded to the

13 pre-hearing conference requirements.

14 A The first conference was held on January 20,

15 1993. Mr. Orndorff requested that PacifiCorp provide him

16 with purchase prices that would enable Rosebud to assess

17 project viability and potential fuel supply agreements.

18 As stated in the Commission's Notice of Scheduling, dated

19 January 27, 1993,

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21 It is the understanding of the Commission that
Rosebud is not seeking a contract or a lock-in
22 of a firm rate at this time, merely a reasonable
estimated rate which it can then use to ascertain
23 project viability.

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PacifiCorp

1 provided estimated rates to Rosebud. Instead of

2 responding with fuel supply or basic project information,

3 Rosebud countered with a price proposal of their own.

4 The second pre-hearing conference was held on

5 September 2, 1993. At this point in time, Rosebud still

6 had not provided fuel supply or basic project information

7 to PacifiCorp. At the second conference, the prices

8 provided by PacifiCorp were discussed. Mr. Orndorff

9 indicated that he had assumed PacifiCorp's prices would

10 constitute a firm proposal and he was upset with the

11 notion that the prices were estimates. The conference

12 transcript shows that the Commission indicated PacifiCorp

13 had satisfied the requirements by providing Rosebud with

14 estimated rates and that no further action with regard to

15 pricing was indicated to be necessary at that time. As a

16 result of the second conference, PacifiCorp was to provide

17 Rosebud with a description of the information necessary to

18 proceed with meaningful negotiations. After receiving the

19 Company's information request, Rosebud was to request

20 commencement of the formal complaint proceeding if they

21 believed they were entitled to a contract at that point

22 without responding to the Company's request. Alternatively,

23 Rosebud was to provide the requested information to

24 PacifiCorp and to enter into meaningful negotiations.

25 Again PacifiCorp complied with the conference
requirements and Rosebud did not. Rosebud did not
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1 request a formal proceeding and refused to provide the

2 requested information or even an explanation for their

3 non-compliance.

4 The third pre-hearing conference was held on May

5 11, 1994. Rosebud proposed to PacifiCorp that the

6 contract procedure used by Idaho Power Company should be

7 adopted in this case. PacifiCorp agreed and developed a

8 proposed detailed power purchase agreement according to

9 these procedures. Rosebud's response was to file with the

10 Commission their own proposed rates without any contract

11 terms accompanying them. There was no direct negotiating

12 response to the Company.

13 Instead of diligently pursuing contract negotiation

14 as required by Commission rules, Rosebud has steadfastly

15 refused to negotiate with PacifiCorp.

16 Q Please discuss the pricing issue in this

17 case.

18 A Because the Rosebud project is the first

19 qualifying facility over 10 MW in PacifiCorp's Idaho

20 territory, no developed standard for price calculation

21 exists. The Company's position in this case is that in a

22 pricing proposal starting from the existing SAR,

23 significant factors affecting the actual avoided costs

24 need to be taken into consideration. Careful and accurate

25 valuation of avoided costs is required in order for the

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1 Company to negotiate prudently and thereby protect

2 customers from unnecessarily high costs.

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1 The calculation of appropriate prices for the

2 Rosebud project is addressed in Dr. Rodger Weaver's

3 testimony, which examines specific factors that must be

4 considered. These factors include the costs associated

5 with a lack of dispatchability and the impact of resource

6 location within PacifiCorp's system.

7 Dr. Weaver employs a widely accepted and

8 appropriate method for classifying baseload plant capital

9 costs into capacity and energy components. This same

10 method is used to develop avoided cost prices in the

11 Company's six other jurisdictions. The result is a

12 pricing proposal for Rosebud that includes capacity,

13 on-peak energy, and off-peak energy prices. In developing

14 the pricing proposal, Dr. Weaver applies two adjustments

15 to the approved SAR calculated avoided cost prices.

16 Dr. Weaver also explains why the pricing method proposed

17 by Rosebud is incorrect.

18 Q What is the cost impact of the differing

19 Rosebud project prices?

20 A Dr. Weaver presents an exhibit comparing

21 Rosebud's proposed prices to PacifiCorp's proposed prices

22 and to the Company's Hermiston plant prices. If valued at

23 Rosebud's prices, the Net Present Value of the project

24 represents an overpayment of $68 million when compared to

25 PacifiCorp's proposed prices. Compared with Hermiston

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1 prices, Rosebud's prices result in a Net Present

2 Value overpayment of $84 million. This

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1 represents a significant cost impact that the customers

2 will have to bear.

3 Q What is the importance of resource location

4 in this case?

5 A Location of resources is always an important

6 issue for any utility and especially so for a multi-state

7 utility such as PacifiCorp. The Company's multi-state

8 load requirements allow for resource development

9 opportunities throughout the Company's territory. The

10 ability to transmit resources to load requirement areas is

11 essential and therefore considerations such as

12 transmission availability and the variation between on-

13 and off-peak load requirements make resource location an

14 important issue. Mr. Ken Morris will present testimony

15 for PacifiCorp detailing the Company's transmission system

16 and the impacts to the system of resource location.

17 The load requirements in the Company's Southeast

18 Idaho territory alone do not exhibit a growth rate that

19 would support resource additions in this area any time in

20 the near future. Therefore, in this case it would be

21 necessary to transmit generation from a new resource in

22 this area to other parts of PacifiCorp's system.

23 As explained by Mr. Morris, an east-to-west

24 transmission limitation exists on the Company's

25 system. This limitation reduces the costs that east

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1 side resources on the Company's system can avoid. The

2 impact of the transmission limitation

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1 needs to be considered when determining the cost an east

2 side resource would allow the Company to avoid. Dr.

3 Weaver explains why the transmission limitation exists and

4 incorporates Mr. Morris' transmission limitation

5 conclusions in the price calculation for Rosebud.

6 Q What is your conclusion regarding the

7 grandfathering issue?

8 A It is the Company's position that Rosebud is

9 not entitled to grandfathered avoided cost rates. The

10 developer was not ready, willing, and able to enter into a

11 contract at any time necessary to lock into grandfathered

12 rates. The Company's testimony demonstrates that the

13 project was not well defined, project information had not

14 been provided to PacifiCorp as requested, and significant

15 project negotiations had not occurred despite the

16 Company's desire and requests to do so.

17 Q What is the Company's position if the

18 Commission determines that Rosebud is entitled to

19 grandfathered rates in this case?

20 A The Commission should adopt the Company's

21 pricing proposal sponsored by Dr. Weaver. The Company's

22 proposal upholds the purposes of PURPA and the

23 Commission's QF regulations. It is fair to customers and

24 the developer by incorporating adjustments to published

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1 be able to avoid. It contains prices that are higher than

2 the prices for an equivalent amount of power from a

3 contemporaneous power purchase contract, the

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1 Hermiston contract, and thus is more than sufficient to

2 encourage the development of cost effective QF generation.

3 Q Does this conclude your testimony?

4 A Yes.

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1 (The following proceedings were had in

2 open hearing.)

3 MR. FELL: Mr. Chairman, I have one question

4 I'd like to ask Mr. Duvall in response to Dr. Slaughter's

5 testimony. May I supplement with that?

6 COMMISSIONER MILLER: Yes.

7

8 DIRECT EXAMINATION

9

10 BY MR. FELL: (Continued)

11 Q Mr. Duvall, in Dr. Slaughter's rebuttal

12 testimony on Page 18, Line 7, to the end of the testimony

13 from there, he talks about the Hermiston contract and

14 characterizes the variable energy charge as a floor cost

15 that may not go down but may go up. Is this an accurate

16 characterization of that contract?

17 A No, it's not.

18 Q Would you please explain?

19 A Yes, the Hermiston Generating Company is the

20 entity involved who has a power sales contract with us on

21 the one hand and gas supply contracts with producers on

22 the other hand. What Mr. Slaughter is referring to is the

23 instance that one of those producers breaches their

24 contract. Hermiston Generating Company in that situation

25 has the obligation to go out and replace that gas supply

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1 contract under terms and conditions that the original

2 contracts were under and at whatever price they can get.

3 In terms of their power sale contract to us,

4 however, the price we pay does not change and what

5 Mr. Slaughter has suggested is that if they have to pay a

6 higher price for the replacement gas contract in the case

7 of breach that that would be passed through somehow to us

8 and that is just not how the contract works.

9 MR. ORNDORFF: Mr. Chairman, can I inquire

10 for purposes of an objection of the witness?

11 COMMISSIONER MILLER: Yes.

12 MR. ORNDORFF: Mr. Duvall, are you familiar

13 with all aspects of the Hermiston transaction, including

14 the partnership agreement, the fuel agreements, the

15 transmission agreement?

16 THE WITNESS: I'm very familiar with the

17 power sales agreement, somewhat familiar with the fuel

18 contracts. I'm not familiar with a partnership agreement

19 if that's what the question was.

20 MR. ORNDORFF: I thought -- Mr. Chairman,

21 I'd like to file an objection to the testimony. He's not

22 familiar with the partnership agreement which he was just

23 allegedly testifying about as to the rates. I'm a little

24 bit -- yeah, I think that I'd like to file an objection to

25 him testifying if he's not familiar with the entire

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1 transaction.

2 COMMISSIONER MILLER: Mr. Fell.

3 MR. FELL: The partnership agreement

4 presumably would be the agreement among the owners. The

5 issue here that was raised in Dr. Slaughter's testimony

6 was the agreement with PacifiCorp, the power sales

7 agreement, and Mr. Duvall has said that he is very

8 familiar with that.

9 COMMISSIONER MILLER: Maybe we could just

10 ask Mr. Duvall if you could explain for the Commission the

11 basis for your or the extent of your personal knowledge

12 with respect to the gas supply arrangements that you've

13 just discussed; that is, how do you come to know that and

14 what is the depth of your knowledge in that area.

15 THE WITNESS: The gas contracts are actually

16 between Hermiston Generating Company and the gas

17 suppliers, which are North Canadian, Can States and

18 Chevron. We did not participate in those negotiations

19 because we are not a party. We had our folks in our

20 Company who are familiar with gas supply contracts review

21 those. We had counsel from Stoel, Rives and Canadian

22 counsel all review those as well and had basically

23 assurances from them that they met the conditions that

24 were set forth in the power sales agreement in

25 Section 15.4 which were the conditions for requiring

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1 natural gas contracts.

2 COMMISSIONER MILLER: And the basis of your

3 knowledge with respect to the terms you describe between

4 the generating company and purchasers of electricity and

5 the effect of changing gas costs on the purchasers, what's

6 the basis of your knowledge in that area?

7 THE WITNESS: That is the power sales

8 agreement and I was on the negotiating team with two other

9 folks. I participated in every negotiation that we had

10 with U.S. Generating on that contract.

11 COMMISSIONER MILLER: So you, obviously,

12 have seen the contract personally?

13 THE WITNESS: Very closely and very many

14 times.

15 COMMISSIONER MILLER: Mr. Orndorff, I guess

16 it would be, if my colleagues concur, the Chair's ruling

17 at this point that --

18 MR. ORNDORFF: I'll withdraw my objection

19 with that testimony, Mr. Chairman.

20 COMMISSIONER MILLER: I was going to say if

21 you want to have Dr. Slaughter come back, we can do that.

22 MR. ORNDORFF: I may. I hope that we as a

23 practice can avoid oral supplementation. It will prolong

24 this and we did go to considerable efforts to have

25 prefiled done and to the extent we have this live

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1 testimony, it does tend to make the hearing like this

2 messy.

3 COMMISSIONER MILLER: My impression is that

4 was your only supplemental question.

5 MR. FELL: That is correct and really asked

6 only because of our belief that Dr. Slaughter's testimony

7 was in error.

8 COMMISSIONER MILLER: All right, well, we'll

9 leave the record as it is now.

10 MR. FELL: That concludes my questions for

11 Mr. Duvall and he's available for cross-examination.

12 COMMISSIONER MILLER: Mr. Orndorff.

13

14 CROSS-EXAMINATION

15

16 BY MR. ORNDORFF:

17 Q Mr. Duvall, when did you first become

18 involved in negotiations with Rosebud?

19 A I think personally the first involvement I

20 had, other than discussions with my staff who were

21 personally involved, I was at the prehearing conference in

22 January of 1993.

23 Q I see. Could you maybe explain how your

24 staff works? We seem to have seen a number of people from

25 PacifiCorp in and out of the negotiations.

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1 A Okay. Tom Ramisch works for me and John

2 Lowe works for him. They both have been involved.

3 Mr. Witbeck, I believe is the name, is an area engineer,

4 works in the division area, helps out. I'm trying to

5 think of who else was involved.

6 Q We have a lady that's in and out of the

7 negotiations. Does she work for you, also?

8 A Would her name be Gail Miller?

9 MR. FELL: Excuse me, Mr. Chairman, this is

10 Maurene Bishop who was involved in the spring of 1993.

11 THE WITNESS: Right, Tom Ramisch took over

12 Maurene's responsibilities. She's no longer in that

13 capacity.

14 Q BY MR. ORNDORFF: Okay; so if a letter is

15 addressed to Mr. Fell or any of the people you just

16 mentioned, it would in essence be coming across your desk;

17 is that right?

18 A As far as I know, that's right.

19 Q Is there any case that you know of that

20 that's not correct?

21 A I think there are cases where that's not

22 correct in terms of negotiations with qualifying

23 facilities. I don't get involved in each and every one of

24 them.

25 Q I was frankly referring specifically to this

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1 particular case at hand. In the case of Rosebud

2 Enterprises, is there anything that you are not familiar

3 with, were not familiar with, when the letter was sent and

4 received by PacifiCorp that you can identify? I have

5 about 30 some exhibits, no mystery, I mean, I'm inquiring

6 as to foundation whether you're familiar with the

7 transaction as it progressed from 1992 until roughly where

8 we are today.

9 A I think I'm generally familiar with it,

10 maybe even more than generally, and I think Mr. Ramisch

11 and Mr. Weaver also have a lot of specific knowledge in

12 response to specific items that they have more in-depth

13 understanding on than I do.

14 Q But in any case, your testimony is that you

15 are responsible, these people work for you?

16 A That's right.

17 MR. FELL: Mr. Chairman.

18 COMMISSIONER MILLER: Mr. Fell.

19 MR. FELL: I might as well object early if

20 what is about to happen is what has been described. If

21 Mr. Orndorff is prepared to introduce about 30 exhibits

22 through this witness, we ought to talk about it for a

23 minute before he embarks on that path. He has filed

24 direct testimony and rebuttal testimony and this a

25 surprise to me.

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1 MR. ORNDORFF: Well, Mr. Chairman, it may be

2 useful to talk about this, but Mr. Duvall, I think it's on

3 Page 2 or 3 of his testimony, we can find the exact place,

4 has testified in his opinion Rosebud was not ready,

5 willing and able to sign a contract. I believe the QF has

6 the burden to show that that is not the case now that the

7 issue has been raised by PacifiCorp. I am prepared to put

8 in the testimony. A scant amount of it has been offered

9 by Pacific in their testimony. The communications are

10 extensive, they are thorough. There is no doubt as to

11 what Rosebud's state of involvement was and what

12 PacifiCorp did to frustrate the negotiations and delay.

13 It's Rosebud's obligation to diligently

14 pursue negotiations and where the utility is not able,

15 whether intentionally or otherwise, to offer rates, then

16 we have the grandfathering concept which is a large part

17 of what this hearing is about, and I have letters from

18 Staff, letters from PacifiCorp, letters from Rosebud that

19 I think bear on this case and are necessary to have in the

20 record so the Commission can make a fair and reasoned

21 decision as to the state of the negotiations and whether

22 or not Rosebud is entitled to grandfathering.

23 COMMISSIONER MILLER: Well, it seems to me

24 that the issue Mr. Orndorff has identified is obviously

25 relevant to the proceedings and this witness has testified

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1 contrary to Mr. Orndorff's position; so I think within

2 some latitude he's entitled to pursue this on

3 cross-examination even if it involves exhibits which would

4 tend to, I guess, impeach Mr. Duvall's testimony, and

5 we'll note that a substantial number of exhibits have been

6 introduced already today through Rosebud witnesses, but

7 this will be subject to the relevance and non-cumulative

8 presentation of evidence.

9 MR. FELL: Mr. Chairman, there's a more

10 fundamental problem with this, too. Rosebud has failed to

11 meet its prima facie burden of proof. They have failed to

12 make a prima facie case on the grandfathering issue in

13 their direct testimony. Their case would be subject to a

14 motion for directed verdict if this were a civil case.

15 Their case is certainly subject to a motion to dismiss

16 their grandfathering claim right now on the basis of their

17 direct testimony and I make that motion right now. What

18 Mr. Orndorff is seeking to do is make his prima facie case

19 in cross-examination of our testimony.

20 COMMISSIONER MILLER: Mr. Orndorff.

21 MR. ORNDORFF: I'm not sure where this is

22 evolving. Are we now at the motion stage? I mean, I

23 haven't even put a piece of cross-examination on yet to

24 which we can object. Is this a motion to dismiss?

25 MR. FELL: It is a motion to dismiss your

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1 grandfathering claim.

2 MR. ORNDORFF: Well, should I proceed to

3 speak to that, Mr. Chairman, or do you want to --

4 COMMISSIONER MILLER: Let's get your

5 preliminary thoughts on it.

6 MR. ORNDORFF: Mr. Chairman, I believe the

7 record in the case that's filed by Rosebud has within it a

8 demand for a contract, it's very clear on September 24th.

9 It has a QF that was filed. The notice of

10 self-certification is uncontested in the name of Rosebud

11 Enterprises filed and dated October 1st, 1992. It has

12 letters in it dated the 7th of October and I believe the

13 22nd. There is a letter from PacifiCorp that Rosebud

14 included in its complaint in which PacifiCorp, if we get

15 into cross-examination on this issue, violated its own

16 policy as to when to give a QF rates.

17 Between filing the QF, or for that matter

18 the letter of the 24th, until July 11th, 1994, PacifiCorp

19 came up with some bogus rates which had nothing to do with

20 the Idaho system of avoided cost, has raised every

21 objection it could, while at the same time it was

22 proceeding with the Hermiston contract, offered Hermiston

23 rates, signed a full contract when Hermiston had no fuel

24 agreement, had no transmission agreement.

25 Now, PacifiCorp's position with Rosebud was

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1 we can't give you rates unless you have a fuel agreement

2 and transmission agreement. Well, they sure did that with

3 Hermiston and violated what they told us they were

4 absolutely not willing to do, violated their general

5 procedures, which is dated November 11th, 1992, and has

6 consistently for two years refused to offer Rosebud any

7 rates that were in effect under Commission Orders 24383

8 and then in '93 the succeeding Order.

9 Now, the rules in this area as pointed out

10 in 25454 are no mystery. There's a starting point and

11 there's a point for negotiations. The rate that they

12 offered Rosebud on January 16th, 1993, was roughly

13 2.1 cents or thereabouts a kilowatt-hour and as

14 denominated their standard avoided cost. Standard, of

15 course, has nothing to do with what the standard avoided

16 cost in Idaho is. It's just simply something they sent

17 Rosebud, go away, we only offer you two cents.

18 They then came up four months later after

19 prehearing with some rates that they've reneged on and we

20 can get into that little series of testimony and whatnot,

21 and the bottom line is that I think Rosebud has -- you

22 know, if you want to consider a prima facie case, we

23 prepared a QF, we prepared a contract, we contacted them.

24 I'm prepared to put in the Arco exhibit which I don't know

25 this Commission has even considered. It was part of the

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1 September 24th letter and the Company conveniently left it

2 out and I think that there is a whole lot more background

3 to this case than what has so far been presented.

4 Now, you can ask, well, why doesn't Rosebud

5 get all the correspondence, staple it to the back of their

6 testimony and the let the Commission see all the

7 testimony. One reason is the Staff has all the testimony,

8 has been involved, we've had four prehearings, these

9 letters have been back and forth and are subject to many

10 prehearings, and just as a matter of trying to understand

11 a case, I don't know if it's real helpful to take 30,

12 well, a large number of letters and documents and just put

13 them on to some testimony and say, see there, and what do

14 we have. I think it's a lot more helpful to see what the

15 Company has to say and then cross-examine them and see if

16 they really -- if Rosebud met its burden or just what the

17 Company's view was on it.

18 In summary, I'd submit that Rosebud has

19 satisfied the prima facie grandfathering what with the QF,

20 the September 24th letter, the November 11th letter from

21 PacifiCorp, and Rosebud's November 13th letter which was

22 filed the day of the complaint.

23 COMMISSIONER MILLER: All right, I'm

24 inclined to take a short recess here. Mr. Fell, since

25 this is your motion, I guess you could have a brief last

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1 word.

2 MR. FELL: Well, I would just like to point

3 out that a lot of the factual statements that Mr. Orndorff

4 just made are not in the record, they are not part of his

5 direct case, not even part of his rebuttal testimony to

6 our case did any of this come in; so he's had two rounds

7 now to make his case and has not done it. Thank you.

8 COMMISSIONER MILLER: Commissioner Smith, do

9 you have a question?

10 COMMISSIONER SMITH: Yes, I did for

11 Mr. Orndorff. Were any of these letters that you just

12 mentioned after the 15th of March, 1993?

13 MR. ORNDORFF: There are, yes, there are a

14 number of letters that go back and forth.

15 COMMISSIONER SMITH: You said the

16 September 24th. That's '92; correct?

17 MR. ORNDORFF: That' '92. There's a

18 contract proposal that PacifiCorp sent Rosebud, I believe,

19 October 15th, 1993, which Rosebud replied in detail to on

20 October 27th, '93, which has not been put in the record.

21 COMMISSIONER SMITH: These aren't in the

22 record, okay.

23 MR. ORNDORFF: There's a whole litany of

24 negotiations. The Commission in the four prehearings

25 we've had and the interaction have seen a lot of these

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1 letters and while this is a case on the complaint, it's

2 certainly not the first time the Commission has

3 entertained these facts and has been aware of these

4 negotiations.

5 COMMISSIONER SMITH: Thank you.

6 COMMISSIONER MILLER: All right, we'll take

7 a brief recess and rejoin you in a few minutes.

8 (Recess.)

9 COMMISSIONER MILLER: Well, the Commission

10 has considered the Respondent's motion to dismiss and the

11 motion will be denied and to the extent necessary a full

12 explanation of the reasons will be included in the final

13 order.

14 Mr. Orndorff, you can proceed. We will ask

15 you to be properly restrained by relevance and avoidance

16 of cumulative testimony or exhibits.

17 MR. ORNDORFF: Mr. Chairman, I'll do my very

18 best. I've never competed with a jackhammer before.

19 Q BY MR. ORNDORFF: Mr. Duvall, we were -- we

20 had just finished, I believe, some questions as to your

21 involvement in the negotiating process. I'd like to start

22 with, I believe it would be, Rosebud's Exhibit 59 and this

23 is the proposal, a detailed proposal, that was attached to

24 exhibit or, pardon me, the letter of the 24th of 1992,

25 which is included in PacifiCorp's Exhibit 122 as

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1 Exhibit A, the first part. It is also found in the

2 complaint. We seem to have gotten this letter, the

3 covering letter, twice in the record. I would propose not

4 to put the covering letter in because three is a crowd and

5 just put the PacifiCorp proposal which was attached to the

6 letter in if that would meet with everybody's satisfaction

7 or I can put the letter in again. I think that's a waste,

8 though.

9 MR. FELL: Excuse me, I don't see where the

10 letter is already an exhibit. The letter itself is an

11 exhibit as part of Exhibit 122.

12 MR. ORNDORFF: It's also in the complaint.

13 If you would like to make it a separate exhibit for the

14 third time, we will certainly accommodate you.

15 MR. FELL: I'm sorry, Mr. Chairman, I

16 misunderstood. With an exhibit number it is in 122.

17 COMMISSIONER MILLER: Could you direct us

18 exactly to which letter we're discussing?

19 MR. ORNDORFF: Yes, Mr. Chairman, I will.

20 Turning to Exhibit 122, if one turns to Exhibit A, the

21 first letter there is dated September 24th, 1992, and that

22 letter is what I propose not to put in for the third time,

23 and what is missing that I will shortly introduce unless

24 there is an objection is the second paragraph where we

25 talk about a BPA proposal that was attached to this letter

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1 that never quite was included in the complaint because,

2 frankly, it bulked the complaint up and Pacific did not

3 put it in; so I thought we'd put it in and talk about it

4 for a minute or two, I think it will be useful, and I have

5 copies for everybody.

6 (Ms. Orndorff distributing documents.)

7 Q BY MR. ORNDORFF: Mr. Duvall, I've handed

8 you what is going to be marked Petitioner's Exhibit 59. I

9 believe that's the correct number. Do you recognize --

10 it's in two parts. It's a proposal -- maybe you want to

11 describe it.

12 MR. FELL: Mr. Chairman, before we go

13 further, I object on the grounds that there is more here,

14 at least there is more here, than what we were provided in

15 September, 1992. The entire, I believe the entire, second

16 set entitled "Arco Generation Supporting Documentation"

17 was never provided to us with that September letter and

18 this is the first time, also, that we have seen it.

19 COMMISSIONER MILLER: The second part?

20 MR. FELL: That's correct, and I don't know

21 whether the first part is exactly the same.

22 MR. ORNDORFF: Mr. Chairman, it was sent to

23 them and it certainly is incumbent upon them if they

24 didn't get it when it's referenced in the letter to have

25 called us. When they never make contact with you as I

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1 think the record shows and then when they don't ask you

2 where is it, I think they constructively should be charged

3 with having received it.

4 MR. FELL: I think anyone here can read the

5 transmittal letter and see that there is nothing there

6 that would have caused us to expect the other document as

7 well.

8 COMMISSIONER MILLER: Well, it does seem to

9 clearly contemplate that there is some sort of enclosure

10 with it. The second paragraph refers to that and there's

11 a reference to enclosure at the end. We, of course, have

12 no way of knowing what actually was enclosed.

13 MR. FELL: Mr. Chairman, I have it right

14 here what we received and my point is that the first part

15 of it looks like what we received. This whole second part

16 called "Supporting Documentation" was not in what we

17 received and there was no reference to it in the

18 transmittal letter.

19 COMMISSIONER MILLER: This second part is

20 starting to look a little questionable, Mr. Orndorff.

21 MR. ORNDORFF: Mr. Chairman, although I

22 don't want to draw the Staff necessarily into it, they

23 also got the packet and certainly the topic has come up

24 about the Bonneville -- they have testified and offered

25 testimony and crossed my witnesses on the Bonneville power

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1 proposal. We have submitted that proposal. It's a public

2 document and to the extent they wanted to investigate it

3 or had questions, they certainly could have asked us.

4 They did not and where there's some confusion and they

5 have never contacted us to ask questions about it, as I

6 said, I think they're probably chargeable with it. It's

7 my understanding and normal custom in the office to send

8 everything and if in fact they don't have it today, I

9 can't help that.

10 COMMISSIONER MILLER: I'm going to suggest

11 we see if we can solve this problem this way: I'm going

12 to suggest that we mark the first document we got as

13 Exhibit 59, the second document as Exhibit 60 and treat

14 them separately as there does appear to be, in effect, a

15 stipulation that at a minimum Exhibit 59 was part of this

16 letter and was received by PacifiCorp; so I think

17 cross-examination with respect to that document is

18 probably permissible. If we get to the point of needing

19 cross-examination on Exhibit 60, we'll face that problem

20 when we get to it.

21 MR. ORNDORFF: Thank you, Mr. Chairman.

22 (Rosebud Enterprises, Inc. Exhibit

23 Nos. 59 & 60 were marked for identification.)

24 Q BY MR. ORNDORFF: Now, on Page 2 of your

25 testimony, Mr. Duvall, Lines 3 through it looks like

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1 it's 7, you indicate that it's your testimony that Rosebud

2 was not entitled to grandfathering status. Do you see

3 that?

4 A Yes.

5 Q Had you reviewed the Exhibit 59?

6 A Prior to putting this testimony in?

7 Q Yes.

8 A Generally.

9 Q Had you read it?

10 A I have read through it.

11 Q When did you read through it?

12 A I don't know exactly when.

13 Q Was it in 1992?

14 A It was in 1994, recently.

15 Q Wouldn't you normally read a proposal that

16 came in when the QF sent it to you to examine it?

17 A Not necessarily personally. I think either

18 Maurene Bishop or Tom Ramisch read through it in detail,

19 John Lowe, whoever. I don't read everything in detail. I

20 trust their judgment.

21 Q But someone on your staff did read through

22 this and what was their conclusion in 1992?

23 A I think that shows up in our letter to you

24 that's my exhibit.

25 Q Which exhibit is that?

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1 A That is Exhibit 101, Page 2 of 4, which

2 basically responded to you and said that we're working on

3 your request. We hope to have questions and issues to

4 discuss sometime in November and be willing to schedule a

5 meeting for that purpose, and we identified specifically

6 transmission and interconnection requirements, power

7 generation characteristics of the project and reliability

8 issues associated with fuel supply, none of which were

9 included in any kind of detail in the Bonneville proposal.

10 MR. FELL: Mr. Chairman, on that copy of the

11 letter that has been included in the record in

12 Exhibit 101, there is a sentence that is underscored.

13 That was not underscored in the original. I would just

14 like the record clear on that.

15 Q BY MR. ORNDORFF: Looking at Page 4 of

16 Exhibit 59, it refers to a 40 megawatt project; is that

17 correct?

18 A I'm sorry.

19 Q Page 4 under the question, "In the space

20 below provide a brief description of the proposed resource

21 or contract."

22 A Is this the document you just gave us?

23 Q It's Document 59 which should be marked,

24 which I believe Mr. Fell has conceded that you received.

25 A And where are you on that document?

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1 Q I'm on Page 4.

2 A Okay.

3 Q And the question is, "In the space below

4 provide a brief description of the proposed resource or

5 contract." Now, it talks about a 40 megawatt qualified

6 facility, doesn't it?

7 A Yes, it does.

8 Q And I believe it talks about a circulating

9 fluidized bed boiler as you read down about six lines. It

10 even tells you who will manufacture it. Does it also tell

11 you on the last two lines it's going to be similar to the

12 Colstrip facility?

13 A The last two lines say, "The facility will

14 be nearly identical to the Sponsor's existing Colstrip

15 facility."

16 Q Okay.

17 A Which no other detail was provided.

18 Q Was a picture provided of the Colstrip

19 facility?

20 A A picture was provided, but I don't think

21 that we have any way of determining a whole lot about a

22 project by looking at a picture and that's not our

23 responsibility, that's yours.

24 Q Well, let me ask you this question,

25 Mr. Duvall: If you claim a facility is unreliable and

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1 then refuse to investigate its reliability, does that seem

2 somewhat inconsistent to you?

3 A I think there were a lot of issues around

4 reliability, one of them being the fuel supply. We had a

5 letter that said this was a coke-burning facility. You

6 had a letter from Louisiana Carbon that said if they're

7 making petroleum coke, then they would be willing to talk

8 to you about selling it to you at some price to be

9 negotiated, but that certainly didn't give us much of a

10 sense that you had a reliable fuel supply which is a very

11 important piece of having a reliable generating facility.

12 Q At the Hermiston facility, Mr. Duvall, did

13 you sign a power sales agreement before they had fuel

14 agreements?

15 A We signed a power sales agreement before

16 they had definitive fuel agreements, but what they

17 presented were letters of intent from Canadian suppliers

18 that specified firm fuel availability or firm letter of

19 intent-type commitments to fuel at certain prices. They

20 also put up a letter of credit shortly after signing the

21 agreement in the amount of a million-and-a-half dollars.

22 The agreement was signed in early October and if they did

23 not have those definitive agreements in place in less than

24 two months by January 1st of 1994, they forfeited the

25 letter of credit and if they didn't have them in place by

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1 June 30th of 1994, the contract was terminated.

2 Q So it's your testimony that in fact

3 Hermiston didn't have fuel agreements when you signed the

4 contract?

5 A My testimony is what it was.

6 Q Now, Mr. Duvall, does the Hermiston contract

7 have a milestone schedule in it?

8 A Yes, it does.

9 Q Requiring all the things that you said after

10 the contract was signed?

11 A It requires a variety of things, that's

12 correct.

13 Q Does it require the fuel agreements to be

14 signed after the contract was signed?

15 A Yes.

16 Q Does it require a transmission agreement to

17 be obtained after the power sales agreement was signed?

18 A Yes, it does and that's the transmission

19 agreement with Bonneville Power Administration which had

20 to go through an environmental impact statement process,

21 could not be signed prior to the agreement.

22 Q Now, Mr. Duvall, on Page 17 of Exhibit 59,

23 do you see a description of commercial operation date and

24 some verbiage as to how long it takes to develop and build

25 a plant? Looking specifically five lines down, "The

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1 period from Notice to Proceed to Substantial Completion is

2 29 months."

3 A That's what it says there.

4 Q Turn the page on D.5, is there a discussion,

5 in fact a fairly lengthy discussion, about technology?

6 A There is a discussion of technology. I

7 assume this is to indicate the similarity with the plants

8 you had at Colstrip and Billings. I'm not sure if it

9 talks about the specific plant in Arco, and one thing that

10 is noticeable there is in the second line it talks about a

11 site near Arco. We found out later that's the best

12 information we had about it. We didn't know if it was

13 north of town or south of town, where the interconnections

14 were; so there was a real lack of information in this

15 document about the particular site and how it might

16 integrate into our system.

17 Q Well, turning now to the document that you

18 claim you never received, let's look at some of the

19 material that you claim you didn't receive, although, as

20 you know, I dispute that you didn't receive it.

21 Specifically, let's start from the back forward because I

22 think --

23 MR. FELL: Mr. Chairman.

24 MR. ORNDORFF: -- I think the document

25 otherwise speaks for itself.

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1 MR. FELL: It probably does, but I object

2 because there is no foundation for questioning Mr. Duvall

3 about this document since we were never provided it as

4 part of any of the negotiations to date. We are about to

5 build a record about what is in here that was never even

6 part of our dealings.

7 COMMISSIONER MILLER: Mr. Orndorff, I

8 sympathize with you, but at this point there is no

9 foundation for this document in terms of any proof or

10 stipulation that it was ever received by --

11 MR. ORNDORFF: Can I least have a response?

12 COMMISSIONER MILLER: Certainly. I'm just

13 telling you what I'm thinking about.

14 MR. ORNDORFF: I have raised the issue as to

15 whether it was received or not. I have also raised the

16 issue that if they got a letter that says there was an

17 enclosure and they had questions, they should have called

18 up and asked what their questions were. Now, they have

19 raised permitting questions and a lot of other issues that

20 are thoroughly covered in this document.

21 You know, I doubt very seriously that

22 PacifiCorp was totally surprised that we had submitted a

23 BPA bid and in all likelihood knew that it had to be

24 thorough. After all, they gave us the Oregon bid and

25 they've argued, you know, here's an Oregon proposal and,

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1 gee, you know, you don't fulfill those requirements. You

2 know, it's a little frustrating to find out that they

3 don't have the document.

4 At the same time, I would like to at least

5 get from the witness that if he had seen this information

6 it would have been helpful and the Commission can make its

7 own judgment whether they're charged with it, because in

8 this document is a host of information that they claim

9 they never received which we claim that they got, or if

10 they didn't, they're constructively charged; for instance,

11 there's permitting, there's site, there's a transmission

12 map, there's a host of things that are normally and

13 customarily in an RFP proposal.

14 COMMISSIONER MILLER: Well --

15 MR. FELL: Mr. Chairman.

16 COMMISSIONER MILLER: Mr. Fell.

17 MR. FELL: There is no doctrine of

18 constructive knowledge of something like this unless maybe

19 he recorded it on Mr. Duvall's home mortgage. This is

20 really becoming outrageous to charge us with having known

21 about something that he never gave us. He might as well

22 say that the World Book Encyclopedia was with this letter

23 because it's not referred to in the transmittal either.

24 COMMISSIONER MILLER: Mr. Woodbury.

25 MR. WOODBURY: Mr. Orndorff did indicate

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1 that document was provided to Staff and I would indicate

2 that, yes, we are in receipt of that document and received

3 this early on in this case. Both of them came in at the

4 same time.

5 COMMISSIONER MILLER: Well, I am going to

6 suggest this: My initial inclination is that there isn't

7 anything really in the September 24th letter that fairly

8 should have caused PacifiCorp to ask for or believe that

9 something other than Exhibit 59 was intended to be

10 included; so I'm going to suggest that we not have

11 cross-examination on Exhibit 60 right now. During our

12 next recess, the Commissioners will discuss further what

13 should be done with Exhibit 60 and we can come back to it,

14 if necessary, but I wonder if we could go to another area

15 of cross-examination and we'll come back to this if we

16 have to.

17 Q BY MR. ORNDORFF: Mr. Duvall, do you recall

18 receiving a copy of Rosebud's notice of self-certification

19 in October of 1992?

20 A Yes.

21 Q When you received the notice of

22 self-certification, do you recall looking at the size of

23 the project?

24 A I didn't review the notice of

25 self-certification at the time. I think Mr. Ramisch is

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1 much more familiar with that than I am.

2 Q If you would turn to Exhibit 122,

3 Appendix B.

4 A I don't have a copy of that.

5 MR. ORNDORFF: I would ask the court

6 reporter to provide a copy.

7 (Exhibit 122 was handed to the

8 witness.)

9 Q BY MR. ORNDORFF: Do you have that?

10 A Yes.

11 Q Just quickly starting at the top, the name

12 of the developer on the notice of self-certification is

13 who?

14 A It's Rosebud Enterprises, Inc.

15 Q I see, and the type of the facility is on

16 the second paragraph, first line, small power.

17 A The small power production facility?

18 Q Right, and it's located, two lines down,

19 where is it located?

20 A In the immediate vicinity of Arco, Idaho.

21 Q Okay, and then the next page, in the middle

22 of the page, we have power production capacity, the size

23 of the plant is identified as what?

24 A Forty megawatts and the turbine-generator

25 will produce approximately 45 megawatts gross.

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1 Q In reading this notice of

2 self-certification, is it clear to you what the size of

3 the plant was?

4 A It appears to be a 40 megawatt plant.

5 Q Now, still in Exhibit 122, do you recall

6 receiving on or about November 3rd, 1992, a power, a draft

7 power, purchase agreement which -- oh, it's in

8 Exhibit 122, I believe, as Appendix C, first item in

9 Appendix C?

10 A Right, this is the one that Mr. Fell went

11 through with Mr. Roberts, I believe.

12 Q Do you recall receiving that on or about

13 November 3rd, 1992?

14 A Yes.

15 Q Did you review this document?

16 A No, I did not, not in detail.

17 Q I see. Without going through it all, I'd

18 like to just quickly run through some of the high points.

19 Do you recall the number of kilowatt-hours that were

20 proposed to be produced by this facility?

21 A No, I don't. Could you --

22 Q Looking at Section 6.1, Item 1 on Page 11,

23 do you see there Item 1 where it says, "Utah Power will

24 purchase all of the Surplus Energy if offered by Seller

25 and up to," I believe the number is, what, 236 million

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1 kilowatt-hours?

2 A Mine says 336,384,000, which number has

3 changed over time.

4 Q Does this draft identify a firm number, a

5 definite number?

6 A It identifies a maximum number.

7 Q Does it also indicate that Utah Power will

8 purchase surplus energy above that? Maybe we need to

9 read -- do you want to read us the first three lines of

10 6.1 (1) if there's some confusion, although the document

11 does speak for itself.

12 A It says, "Utah Power will purchase all of

13 the Surplus Energy if offered by Seller and up to

14 336,384,000 kilowatt-hours of Net Firm Energy produced by

15 the Facility."

16 Q Okay. Do you recall if there were security

17 provisions in this agreement?

18 A I don't recall. I believe there were. Can

19 you point me to something?

20 Q Oh, I think so. Do you recall if there

21 were -- I can usually find it, but I can't.

22 MR. FELL: Mr. Chairman, this document is in

23 the record. Mr. Orndorff could, provided we'd have a

24 reply brief, he can argue from this in his brief if he

25 would like, but we will want a reply brief.

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1 Q BY MR. ORNDORFF: Looking at Section 4.1.1

2 on Page 6 are the provisions for security. Do you see

3 that?

4 A Yes, I see it.

5 Q Now, Mr. Duvall, moving on, after you

6 received or actually before you received the exhibit we

7 just looked at, you did receive a letter dated October 7th

8 from Rosebud that I believe is in your Exhibit 101 in

9 which Rosebud asked for a response or some indication you

10 even received it. Do you see your Exhibit 101 where we

11 had not even received the courtesy of yes, I received the

12 detailed package?

13 A That's what the letter says.

14 Q Then we have, and again in your Exhibit 101,

15 another Rosebud letter. I believe the first contact with

16 Rosebud from PacifiCorp, was that October 22nd?

17 A I believe the first written correspondence

18 was.

19 Q I see. Is it customary for PacifiCorp to

20 receive a package like this and not do anything for a

21 month, not contact the developer?

22 A Well, I think not contacting the developer

23 and not doing anything are two different things.

24 Q I'm sorry, is it customary not to contact

25 the developer for a month after receiving a package?

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1 A I don't have a comment on that. I don't

2 know if we really have a custom.

3 Q I see.

4 A We were in the process of reviewing the

5 packet and I think it was indicated real well in the

6 letter that we sent back to you where we were at on it.

7 Q Now, turning to your exhibit -- it would be

8 an exhibit to Mr. Ramisch's testimony, Exhibit 102, are

9 you familiar with that letter sent by PacifiCorp?

10 A I think Mr. Ramisch is much more familiar

11 with it than I am. He sponsored it.

12 Q How about the general procedures that are

13 attached to the letter, are you not familiar with your

14 general procedures? It's attached to the letter entitled,

15 "Pacific Power & Light, Informational Document for

16 Qualifying Facilities under OAR 860-29-005."

17 A It's not included in his exhibit; is that

18 correct?

19 Q It's attached to Exhibit 102 of your

20 exhibits and it's Page 3 of 7, Page 4 of 7 and so forth.

21 MR. FELL: Mr. Chairman, may I approach the

22 witness to show him?

23 COMMISSIONER MILLER: Yes.

24 (Mr. Fell approached the witness.)

25 THE WITNESS: I've got it. Thanks, Jim.

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1 Mr. Ramisch is much more familiar with these than I am.

2 Q BY MR. ORNDORFF: So if I have any questions

3 to Mr. Ramisch, that's where they should be directed, you

4 do not have any input as to the general procedures?

5 A If you have questions about this document,

6 they should be directed at Mr. Ramisch.

7 Q As a general rule, when PacifiCorp has

8 general procedures, do they follow the general procedures?

9 A Yes.

10 Q When you don't follow -- when employees

11 don't follow general procedures, is that something you

12 authorize when they're under your responsibility?

13 MR. FELL: Mr. Chairman, the witness should

14 be asked direct questions about factual matters. I'm not

15 sure what this is, frankly.

16 COMMISSIONER MILLER: It's slightly

17 argumentative is what it sounds like.

18 MR. ORNDORFF: Mr. Chairman, as long as I

19 have the right to recall Mr. Duvall, I'll move on.

20 Q BY MR. ORNDORFF: Mr. Duvall, on

21 November 13th, 1992, do you recall receiving a copy of a

22 letter from me regarding that we had filed a complaint and

23 why we had filed a complaint?

24 MR. FELL: Could we have an identification

25 of the letter, please?

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1 MR. ORNDORFF: I'm trying to keep the number

2 of paperwork down. If he doesn't have it, I'll put it

3 in. If he's looked at it, I'll start putting stuff in.

4 COMMISSIONER MILLER: I think it would

5 probably be a good idea to have it.

6 MR. ORNDORFF: All right.

7 (Ms. Orndorff distributing documents.)

8 MR. ORNDORFF: I believe this should be

9 marked as 61.

10 COMMISSIONER MILLER: All right, we've

11 marked 61.

12 (Rosebud Enterprises, Inc. Exhibit

13 No. 61 was marked for identification.)

14 Q BY MR. ORNDORFF: Do you recall seeing this

15 letter, Mr. Duvall?

16 A Yes.

17 Q When do you recall seeing this letter?

18 A Most recently I recall seeing it in

19 preparation for this case.

20 Q Do you recall if you saw it in 1992?

21 A I don't recall whether I did or not.

22 Q Looking at the third paragraph, the last

23 sentence, would you read what that says?

24 A It says, "It appears that Pacific Power and

25 Light's negotiation strategy is to stall and ignore Idaho

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1 law. This being the case, the only vehicle available to

2 the Arco project on a timely basis is to bring PP&L's

3 conduct to the attention of the Commission and require

4 PP&L to negotiate in good faith. Rosebud is ready,

5 willing and able to sign a contract and PP&L has the legal

6 obligation to offer to purchase."

7 Q Do you disagree with the legal obligation to

8 offer to purchase?

9 A I think if in fact Rosebud was ready,

10 willing and able to sign a contract that we'd have a legal

11 obligation to offer to purchase. I don't believe you

12 were.

13 Q Who makes the determination of whether

14 somebody is ready, willing and able to sign a contract?

15 A The Commission makes that determination.

16 Q Is it fair to say that no one can be ready,

17 willing and able to sign a contract if they don't know

18 what the rates are?

19 A I don't think that's the case. I think

20 some -- my understanding is that basically the laws and

21 rules speak for themselves. If you are, can show that you

22 are ready, willing and able, then you have a -- we have an

23 obligation to offer to purchase at that time you are

24 ready. I don't think providing prices to you are a

25 prerequisite for you being ready, willing and able and I

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1 think the statutes and rules are all set up to show just

2 the opposite. That doesn't mean that we couldn't make

3 prices available to you and, in fact, we did in early 1993

4 so you could determine the feasibility of your project,

5 that's what you requested.

6 Q Let's push on. The next letter I want to

7 show you, Mr. Duvall, is a letter to Mr. Fell dated

8 December 23rd, 1992. I believe this is 62.

9 (Ms. Orndorff distributing documents.)

10 COMMISSIONER MILLER: Exhibit 62 has been

11 marked.

12 (Rosebud Enterprises, Inc. Exhibit

13 No. 62 was marked for identification.)

14 Q BY MR. ORNDORFF: Do you recognize this

15 letter, Mr. Duvall?

16 A Yes, I do.

17 Q Did you instruct Mr. Lowe not to contact

18 Rosebud prior to the date of this letter?

19 A No, I did not.

20 Q Can you explain why he did not?

21 MR. FELL: Excuse me, Mr. Chairman, between

22 what time and the date of this letter? Are we talking

23 about a period of two days or some other time period?

24 MR. ORNDORFF: I think the letter is fairly

25 accurate. It says that there had been no contact from

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1 Mr. Lowe and the date of the letter, I think, speaks for

2 itself, December 23rd. I believe we have testimony in the

3 record Mr. Lowe works for Mr. Duvall.

4 MR. FELL: I understand now.

5 THE WITNESS: My recollection is

6 December 21st, this was the time period after you had

7 filed your complaint and prior to the first prehearing

8 conference and I don't know personally, I guess, if

9 Mr. Lowe had contacted anyone. It says that you had not

10 received any calls.

11 MR. ORNDORFF: Okay, the next letter I'm

12 going to show you, Mr. Duvall, will be marked Exhibit 63.

13 COMMISSIONER MILLER: Mr. Orndorff, if I can

14 interrupt, I think we'll take our afternoon break now and

15 we'll resume at 3:15.

16 (Recess.)

17 COMMISSIONER MILLER: All right, we'll go

18 back on the record.

19 MR. ORNDORFF: Mr. Chairman, I was about

20 ready to pass out Exhibit 63. I'd like to also pass out

21 two other exhibits with that and they would be 64 and 65

22 and we can identify them as we go, but it maybe would

23 speed things up.

24 (Ms. Orndorff distributing documents.)

25 MR. ORNDORFF: For purposes of simplicity,

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1 I'd propose to label them by their dates of origin. 63

2 would be the January 13th, '93 letter from Stoel, Rives.

3 64 would be the January 15th letter, and 65 would be the

4 January 19th cover letter, including a copy of Commission

5 Order 24383.

6 (Rosebud Enterprises, Inc. Exhibit

7 Nos. 63 - 65 were marked for identification.)

8 Q BY MR. ORNDORFF: Mr. Duvall, do you have in

9 front of you Exhibits 63, 64 and 65?

10 A Yes, I do.

11 Q Do you remember having received or seen

12 Exhibit 63?

13 A Yes.

14 Q And 63 has attached to it a schedule, I

15 believe, doesn't it?

16 A It has an attachment.

17 Q And that attachment is, I believe, labeled,

18 "Avoided Cost Prices for Purchase Power"; is that right?

19 A That's correct.

20 Q And for 1997, the firm energy prices average

21 cents per kilowatt are what?

22 A I'm sorry, which --

23 Q I'm looking at Exhibit 63, the attachment to

24 it that has firm energy prices, deliveries during calendar

25 year, and then going down I see 1997 and then reading

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1 across, what's the average price per kilowatt-hour that

2 you have as your avoided cost prices for purchase of

3 power?

4 A It's 23.7 mills per kilowatt-hour.

5 Q And that's equivalent to how many cents a

6 kilowatt-hour?

7 A It's 2.37 cents per kilowatt-hour.

8 Q Now, going to Exhibit 64, do you recall

9 seeing this letter?

10 A Yes.

11 Q Specifically looking at the first sentence,

12 did you have any concerns that Rosebud suggested the

13 avoided costs were not those determined by the Idaho

14 Public Utilities Commission?

15 A I didn't have any concern. I think that's

16 what the letter says.

17 Q Did you determine the avoided costs to offer

18 Rosebud on Exhibit 63?

19 A I'm sorry, the question was? I was reading

20 the exhibit.

21 Q Did you determine the avoided costs in

22 Exhibit 63 to offer Rosebud?

23 A Did I determine them?

24 Q Yes.

25 A I think they were published avoided costs

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1 and I was involved in the determination.

2 Q Where are they published, can you tell me?

3 A I believe -- I don't know exactly where

4 these were published. It could be in multiple states.

5 Q I would now like to look at Exhibit 65. Do

6 you recall looking at Exhibit 65?

7 A Can you give me just a minute?

8 Q Sure. You might want to look at the

9 attachment, too. I'd suggest also you look at the last

10 page of the attachment.

11 A Basically, what this is is a letter that has

12 attached to it a Commission Order, I believe in the last

13 approved Pacific/Utah Power avoided costs. It indicates

14 we ought to review the Bonneville, is that right, the BPA

15 RFP response which you indicate here fully describes the

16 project location and I wouldn't agree with that

17 characterization at all.

18 Q If you didn't receive the second volume,

19 wouldn't you normally have been concerned and told Rosebud

20 that you didn't agree with the location, the location that

21 was there?

22 A And we did and we did not receive the second

23 volume, but we did express our concerns. They're in the

24 letters and they're in the record.

25 Q Now, turning to the last page of Exhibit 65

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1 and going down to contract year 1997, can you explain to

2 me how -- well, looking across at '97, what is the rate in

3 1997 that's shown on this schedule?

4 A For 1997, the average non-levelized avoided

5 cost rate is 47.11 mills. It says it has an adjustable

6 portion of 9.52 mills per kilowatt-hour and these are the

7 standard prices which are not directly available to

8 facilities such as the Rosebud facility.

9 Q Where does it say standard avoided cost?

10 A That was my characterization.

11 Q What does it actually say?

12 A It says, "Average Non-Levelized Avoided Cost

13 Rates."

14 Q Can you explain to me how your calculation

15 in Exhibit 63 is consistent with Exhibit 65, the last

16 page?

17 MR. FELL: Mr. Chairman, I'd like to have

18 Mr. Duvall read the letter before he does that.

19 COMMISSIONER MILLER: Take as much time as

20 you need.

21 THE WITNESS: Okay. I think the letter

22 speaks for itself. There was never an intent for those

23 prices to be the same as the prices that you have pointed

24 to in Exhibit 65, that they were for energy. We indicate

25 in that letter that we need more information about the

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1 facility on the project's fuel supply, operating

2 characteristics in order to estimate capacity values.

3 Capacity was not intended to be in those prices that were

4 attached to Exhibit 63. Capacity is a consideration in

5 the prices in Exhibit 65. There was never any

6 representation that these were to represent the prices in

7 Exhibit 65. That's not the point.

8 Q BY MR. ORNDORFF: You just testified,

9 Mr. Duvall, that Exhibit 63 prices were published. Will

10 you now tell me where they're published?

11 A I don't know for sure. They look like they

12 are the types of numbers we publish in Oregon, probably

13 Wyoming, maybe Utah. I don't know exactly where these

14 came from.

15 Q But you were willing to send them to

16 Rosebud; is that true?

17 A Yes.

18 Q Mr. Duvall, the next exhibit we already have

19 done, it will be Exhibit 123.

20 A Okay, I have that.

21 Q Now, who is Jon M. Lanfear? Does he work

22 for you?

23 A He works for Tom Ramisch.

24 Q And Tom Ramisch works for you?

25 A That's correct.

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1 Q Do you recall seeing this letter?

2 A Yes.

3 Q Did you see it in 1993?

4 A Yes, I did.

5 Q Could you tell me why PacifiCorp wouldn't

6 give Rosebud a firm price? I'm referring specifically to

7 the second paragraph.

8 A I guess when doing interconnection studies

9 we never give firm prices. This was nothing that was

10 aimed specifically at Rosebud, that we make the best

11 estimate of what the cost of that interconnection study is

12 and it describes there what that does. It identifies the

13 facilities and estimated cost of those facilities required

14 to provide interconnection for the project. This is a

15 real standard form of interconnection agreement that we

16 use throughout our system and, in fact, other utilities

17 use the same sorts of things when we want interconnection

18 studies done by them. This is real standard in the

19 industry.

20 Q Well, is it standard for PacifiCorp to sign

21 unlimited obligations? You just pay whatever the bill is;

22 is that right?

23 A No, and this is not intended to be an

24 unlimited obligation. The estimate is a thought-out

25 estimate. It's not just a wild guess of any kind. I

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1 think we have a pretty good idea of what those costs might

2 be and this was our best estimate at the time.

3 Q Did Rosebud object to the open-ended nature

4 of the estimate?

5 A Yeah, Rosebud did object. This is in fact,

6 I believe this letter was basically taken from the form of

7 letter that we used for the Firth contract which they had

8 signed for an interconnection agreement, but Rosebud did

9 object, that's correct.

10 Q I'm handing you what is now going to be

11 marked Exhibit 66.

12 (Ms. Orndorff distributing documents.)

13 (Rosebud Enterprises, Inc. Exhibit

14 No. 66 was marked for identification.)

15 Q BY MR. ORNDORFF: When you received this

16 letter, did you try to go back and more accurately

17 quantify what the costs would be to satisfy Rosebud's

18 concern about an open-ended obligation?

19 A I think on this one, I think there were some

20 things that did transpire that aren't reflected in this

21 letter and I'd like to have time to review those.

22 Q Well, I might be able to help you because

23 the next one is a Commission letter commemorating a phone

24 conversation you had with Commission Staff. Maybe that

25 would help.

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1 A That's not what I was thinking of. I was

2 thinking of some correspondence that I recall with, I

3 think it was, Mr. Fell that put a range of 2,000 to $4,000

4 and a $4,000 cap. I'm not sure if that was offered or

5 not. That's what I need to review.

6 Q Well, I certainly am prepared to put on

7 every piece of paper I have. I don't recall ever

8 receiving it, nor did Rosebud, but maybe it did come in

9 and Mr. Fell could offer that on redirect if he so chose

10 if he has it.

11 A And there may be other documents on that

12 issue as well.

13 MR. ORNDORFF: I'm sure Mr. Fell will be

14 able to hand those out on redirect if I've missed

15 something and it's certainly unintentional if I have.

16 (Ms. Orndorff distributing documents.)

17 MR. ORNDORFF: I believe this is

18 Exhibit 67.

19 (Rosebud Enterprises, Inc. Exhibit

20 No. 67 was marked for identification.)

21 Q BY MR. ORNDORFF: Do you recall this letter,

22 Mr. Duvall? I think it's specifically addressed to you.

23 A Yes.

24 Q First, let's follow this discussion. On the

25 second page, there's a discussion about this interconnect

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1 cost issue and is Mr. Faull's characterization in the last

2 sentence of the first paragraph on Page 2 accurate?

3 A Your question is which -- what part are you

4 asking whether it's accurate?

5 Q The last sentence in the first paragraph,

6 second page, where it says, "You said, `Yes,' but would

7 not assure me that you could send Mr. Orndorff a letter

8 committing to this `not to exceed' price." Is that what

9 you told Mr. Fell?

10 A Mr. Faull.

11 Q Mr. Faull, pardon me.

12 A I believe that's probably correct.

13 Q Is there a reason why you logically would

14 tell the Staff one thing and tell me something else on

15 behalf of Rosebud?

16 MR. FELL: I object. That is truly

17 argumentative and there's no foundation for that.

18 MR. ORNDORFF: There is a foundation. It's

19 in the letter. I'm sorry, that's what the letter said and

20 he just testified. I'm asking for a reason why he would

21 say it and if there is, I would like to know what the

22 logical explanation is.

23 COMMISSIONER MILLER: Mr. Fell.

24 MR. FELL: If I could hear the question

25 again, it sounded like he was asking if there was a reason

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1 that he would tell Mr. Faull something and Mr. Orndorff

2 something else and I don't know where the foundation is

3 for what he told Mr. Orndorff.

4 COMMISSIONER MILLER: Can you firm up the

5 foundation for the second half of that question?

6 MR. ORNDORFF: I have here a letter --

7 okay.

8 Q BY MR. ORNDORFF: Mr. Duvall, looking at the

9 last sentence, the second paragraph, the word "yes," can

10 you tell me what that refers to?

11 A If we had a firm -- the previous sentence

12 says, "I asked if you were certain the cost would not

13 exceed $4,000," that was the question and the "yes" refers

14 to that question.

15 Q So you told Mr. Faull yes to that not to

16 exceed 4,000?

17 A That's his representation of what I said,

18 that's correct.

19 Q Then the next part of that last sentence in

20 the first paragraph goes on to say, "but would not assure

21 me," which I gather is Mr. Faull, "that you could send

22 Mr. Orndorff a letter committing to this `not to exceed'

23 price." Presumably, is it a fair saying that that "not to

24 exceed" price is $4,000?

25 A That's the way I interpret this letter.

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1 Q My question is, you were willing to make a

2 representation to Commission Staff not to exceed $4,000,

3 but you were not willing to make a representation to

4 Rosebud not to exceed 4,000.

5 A I think the way I would interpret that would

6 be would you be willing to put into contractual terms with

7 Mr. Orndorff or Rosebud a not to exceed provision. If you

8 would have asked me at the time, I would have told you

9 that I was certain the cost would not exceed the $4,000,

10 but it is our practice to make our best estimate, which at

11 the time was $2,000 to do the study, and we would expect

12 that it would come in close to $2,000. That's the

13 standard practice and I don't see any reason in the case

14 of Rosebud that we would need to do anything other than

15 that.

16 For a project of the size of the Rosebud

17 project which is over, I believe over, half a billion

18 dollars worth of revenue over a 20-year period, to dicker

19 over a 2,000 to $4,000 expense and claim that we were not

20 willing to do something that was non-standard for you is

21 just out of the ordinary.

22 Q Is there any assurance that the bill

23 wouldn't have been $100,000 and you would have billed

24 Rosebud for $100,000?

25 A I think there's a reason to believe that it

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1 would not exceed, would not be too much different than

2 $2,000. We've done many of these studies.

3 Q Did you ever tell Rosebud that in writing?

4 A I don't know if we told Rosebud that in

5 writing or not.

6 Q Turning to the first part of the letter, the

7 second paragraph, Mr. Faull, I believe, recounts some

8 advice he gave you as to avoided costs in Idaho. If you

9 look at, I believe it's, the third sentence where "I,"

10 being Mr. Faull, "countered that the Idaho Commission has

11 a long history of determining generic avoided costs based

12 on the assumption that reliability would be ensured by

13 contract language," when you received this letter and that

14 language, what did you do?

15 A I read it. It's his opinion.

16 (Ms. Orndorff distributing documents.)

17 (Rosebud Enterprises, Inc. Exhibit

18 No. 68 was marked for identification.)

19 Q BY MR. ORNDORFF: Have you looked now at 68?

20 A I've looked at part of it.

21 Q Do you want to finish reading it?

22 A Yes. Okay.

23 Q Turning to the second page of it, the

24 partial paragraph on the top of the second page, and again

25 at the bottom, there's a discussion about the interconnect

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1 study, which there's some verbiage about the price being

2 $2,000 and working out an understanding. Do you know if a

3 new agreement was ever sent to Rosebud commemorating this

4 understanding?

5 A I don't recall, but I think the important

6 point there in the partial paragraph that talks about

7 beginning the study upon receipt of a $2,000 advance and

8 the Company would invoice Rosebud later based on actual

9 costs is what we've been talking about, and in the next

10 paragraph, it says there was an agreement reached between

11 yourself and Mr. Fell that you'll pay a $2,000 advance and

12 be responsible for actual costs up to $4,000. This is the

13 document that I was unsure of and wanted to see and that

14 we could stop the work if the actual costs reached

15 $4,000. That's non-standard, but apparently, was an

16 agreement that was reached.

17 Q Do you know if PacifiCorp ever sent a

18 revised agreement to Rosebud?

19 A I don't recall if we did or not.

20 MR. ORNDORFF: I'm now handing out

21 Exhibit 69, a letter dated February 24th, addressed to

22 Scott Woodbury.

23 (Ms. Orndorff distributing documents.)

24 (Rosebud Enterprises, Inc. Exhibit

25 No. 69 was marked for identification.)

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1 Q BY MR. ORNDORFF: Do you recall seeing this

2 letter?

3 A Yes.

4 Q In your testimony you discuss, I can dig it

5 out, but do you recall in your testimony discussing a

6 meeting held in early '93 on the feasibility of burning

7 petroleum coke?

8 A Where in my testimony is that?

9 Q I'll come back to it. We'll go through your

10 testimony line by line. Look at the second paragraph --

11 in the first full paragraph, second page, and when you

12 read this, did you have any reaction to this paragraph?

13 A I don't think so. I think the February 24th

14 time frame, though, was during the time frame that we were

15 preparing pricing information for you so you could

16 ascertain project viability.

17 MR. ORNDORFF: Okay. I'm now handing out

18 Exhibit 70. It's a letter dated April 15th, 1993. It's

19 addressed to Jim Fell.

20 (Ms. Orndorff distributing documents.)

21 COMMISSIONER MILLER: Okay, we've marked

22 Exhibit 70.

23 (Rosebud Enterprises, Inc. Exhibit

24 No. 70 was marked for identification.)

25 Q BY MR. ORNDORFF: Do you recognize this

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1 letter, Mr. Duvall?

2 A Yes.

3 Q In the last two lines, the letter refers to

4 receiving SAR coal avoided costs from PacifiCorp. Do you

5 see that?

6 A That's what it says.

7 Q Did you ever provide that rate?

8 A The rates that were to be provided at that

9 time frame were to be estimated prices for purposes of

10 determining project viability. That came out of the

11 prehearing conference in January. We provided those rates

12 and had no objection to them from Rosebud.

13 Q We'll come to that in a minute. Did you

14 ever provide Rosebud avoided costs and offer to purchase

15 avoided costs based on a SAR coal plant?

16 A The prices that we provided were not based

17 on a line-by-line adjustment from the avoided costs, the

18 SAR avoided cost prices. That became apparent in 1994

19 that that was the starting point with the adjustments and

20 we did not do that in providing you the estimated costs

21 for purposes of determining project viability.

22 Q You provided costs -- Mr. Lowe provided a

23 letter with standard avoided costs of 2.37 cents. Now,

24 was that an avoided cost that you offered Rosebud?

25 A That was provided prior to the prehearing

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1 conference. That was not what I'm talking about.

2 Q Did you ever provide an avoided cost to

3 Rosebud after the prehearing conference?

4 A Yes.

5 Q Was that an offer to purchase at those

6 rates?

7 A That was not an offer to purchase at those

8 rates. That was what we were ordered or requested to do

9 out of the first prehearing conference. They were

10 estimated rates. That's what they were supposed to be.

11 They were discussed again at the second prehearing

12 conference as estimated rates. You had indicated you had

13 gotten these rates from the Company and they claimed they

14 were estimated and I recall the transcripts say basically

15 you got what you asked for.

16 MR. FELL: Excuse me, this is --

17 MR. ORNDORFF: This will be Exhibit 71.

18 MR. FELL: It's already an exhibit. This is

19 Exhibit 104.

20 MR. ORNDORFF: Okay, thank you, Mr. Fell.

21 Q BY MR. ORNDORFF: Turning to your

22 Exhibit 104, now, is this the letter you were just

23 referring to, Mr. Duvall?

24 A Yes.

25 Q Can you tell me how these rates were

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1 calculated?

2 A I would basically have Mr. Weaver explain

3 how they were calculated.

4 Q Okay.

5 A These rates were what were provided as

6 estimated rates in April of '93 as compared to the rates

7 that we did calculate just recently based on the

8 Commission's Order of a starting point of the SAR with

9 specified line-by-line adjustments. By way of comparison,

10 these rates are higher than the rates based on

11 line-by-line adjustments.

12 Q Can you tell me how you would envision

13 Rosebud obtaining contractual commitments that you were

14 anxious that Rosebud obtain and not be able to rely on

15 these rates?

16 MR. FELL: Objection. The question assumes

17 some contractual commitment requirements for which really

18 no foundation has been laid again.

19 Q BY MR. ORNDORFF: Looking at the first

20 sentence --

21 COMMISSIONER MILLER: We'll sustain the

22 objection.

23 Q BY MR. ORNDORFF: Looking at the first

24 sentence of Page 2, I believe it says, "These prices are

25 for informational purposes only and should not be

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1 considered as an offer by PacifiCorp to purchase the

2 output of the proposed project." It goes on to say that

3 we will negotiate the price in the full context of

4 negotiations of a power agreement. Well, you offered

5 estimates; is that right?

6 A Yeah, and these are the estimates that we

7 were, we promised to give out of the January prehearing

8 conference so that Rosebud could go assess the viability

9 of the project, go talk with fuel suppliers to see if the

10 project was even viable.

11 Q Did you expect Rosebud to fulfill its

12 requirements under your general procedures based on these

13 rates?

14 A I don't understand the question.

15 Q Well, Mr. Duvall, PacifiCorp has put in the

16 record attached to a letter dated November 11th general

17 procedures as to dealing with QFs. Now, I know, we know

18 from testimony that you're responsible for this area. You

19 claim you're not knowledgeable in the general procedures

20 and yet --

21 MR. FELL: Objection, he's starting to

22 characterize testimony again.

23 MR. ORNDORFF: I believe he testified that

24 he was not knowledgeable in the procedures and that I

25 should talk with Mr. Ramisch and yet he's responsible.

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1 You want to tell me you're not responsible now?

2 COMMISSIONER MILLER: For the purpose of

3 keeping the record clear, we'll sustain the objection.

4 Q BY MR. ORNDORFF: Are you responsible for

5 the general procedures, Mr. Duvall, of administrating

6 avoided costs?

7 A Yes.

8 Q Do your general procedures contemplate that

9 the QF will prepare a pro forma to show feasibility to

10 PacifiCorp?

11 A I think I indicated before that Mr. Ramisch

12 is a much better witness to talk about the general

13 procedures and how they're implemented and what they

14 mean. I don't work with them day by day. I'm just

15 generally familiar with them and Mr. Ramisch is the one

16 who is most familiar with them.

17 Q Okay, we'll ask Mr. Ramisch more about

18 this. In any case, this Exhibit 71 is not an offer to

19 purchase?

20 A Nor was it ever intended to be.

21 MR. FELL: Correction, it's Exhibit 104.

22 MR. ORNDORFF: Thank you.

23 (Ms. Orndorff distributing documents.)

24 MR. ORNDORFF: Mr. Duvall, I'm handing out

25 what will be 71 and 72. 71 is a letter addressed to you

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1 from the Commission Staff, and 72 is a letter from your

2 counsel accepting avoided cost rates.

3 (Rosebud Enterprises, Inc. Exhibit

4 Nos. 71 & 72 were marked for identification.)

5 Q BY MR. ORNDORFF: In looking at 71, it's a

6 letter dated May 27th, 1993. Do you recall receiving

7 that?

8 A Yes.

9 Q Looking at 72, it's a letter dated June 9th,

10 1993. Did you instruct Mr. Eriksson to acknowledge that

11 those were the correct avoided costs?

12 A Yes.

13 MR. ORNDORFF: The next exhibit I'm handing

14 you will be Exhibit No. 73. It's dated June 18, 1993.

15 (Ms. Orndorff distributing documents.)

16 (Rosebud Enterprises, Inc. Exhibit

17 No. 73 was marked for identification.)

18 Q BY MR. ORNDORFF: Do you recall seeing this

19 letter?

20 A Yes, it lays out some prices from Rosebud

21 which are based on the approved avoided costs with a five

22 percent discount, no explanation as to why or how those

23 were come up with. It also in the third paragraph talks

24 about changing the on-line date by a matter of actually

25 commercial deliveries commencing January 1st, '98 from

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1 January 1st, '96, talking about delays that have

2 occurred. This is less than six months or, let's see,

3 maybe eight months from the time they filed a complaint

4 and saying that that causes a two-year delay.

5 Q Well, given PacifiCorp's failure to present

6 any rates, wouldn't you think it would be reasonable to

7 stretch the on-line date from what was initially proposed?

8 A There are no reasons given.

9 Q Is there any reason why you didn't -- did

10 you respond to this letter?

11 A I believe we did. My recollection is that

12 might be an exhibit already.

13 MR. FELL: I can refer the witness to

14 Exhibit 105.

15 MR. ORNDORFF: Let's move on to Exhibit 105.

16 Q BY MR. ORNDORFF: Did you ever tell Rosebud

17 why you would not accept the rates that are in Exhibits 71

18 and 72?

19 A I don't have Exhibit 105. Is that part of

20 Mr. Ramisch's testimony?

21 MR. FELL: It is an exhibit to Mr. Ramisch's

22 testimony.

23 THE WITNESS: And the question was?

24 Q BY MR. ORNDORFF: Did you ever respond to

25 why you wouldn't offer Rosebud the rates that are in

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1 Exhibits 71 and 72?

2 A We responded to Rosebud's proposal.

3 Q Did you tell Rosebud why?

4 A They're in the June 28th letter,

5 Exhibit 105.

6 Q Would you read me that portion you're

7 referring to, please?

8 A "This price offer from Rosebud is not

9 acceptable to PacifiCorp for the reasons including:

10 1) The prices and contract term are not consistent

11 with the prices and contract term provided to

12 Rosebud in PacifiCorp's April 16th, 1993 letter;

13 and,

14 2) PacifiCorp's April 16th, 1993 letter on pricing was

15 intended for `information' purposes to determine

16 the economic feasibility of the project and not as

17 an offer to purchase prices; and,

18 3) The final pricing applicable to this project will

19 be determined through negotiation and in the entire

20 context of the contract terms.

21 The prices provided to Rosebud in our April 16th, 1993

22 letter are appropriate to determine the project

23 feasibility and for project development commitments

24 including the fuel supply. We can begin discussing the

25 terms and pricing for a power purchase agreement when

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1 Rosebud has proceeded with the prerequisite project

2 development mentioned above," and this is consistent with

3 the types of information that we have been asking from

4 Rosebud ever since we got their initial offer.

5 Q Now, would you look at Exhibits 71 and 72

6 again and refresh your recollection what they are? I

7 believe 71 is a letter from the Commission Staff saying

8 please acknowledge that the effective avoided costs are

9 acceptable. 72 is the response from PacifiCorp saying

10 that those avoided costs are acceptable. My question is,

11 did you ever tell Rosebud why you weren't going to offer

12 those rates?

13 A What we told Rosebud were that we needed

14 more information to assess the feasibility of the

15 project. We identified what type of information that

16 was. We provided illustrative prices so Rosebud could go

17 determine the feasibility of the project, that's what they

18 had asked for. We expected they would go out and talk

19 with fuel suppliers to firm up fuel supplies. We have no

20 evidence that they did that. There's very little in the

21 record with regard to their pursuing fuel supplies and

22 transportation agreements, and when we got to the second

23 prehearing conference, those prices were brought up again,

24 acknowledged by the Commission that those were the prices

25 that were what PacifiCorp was supposed to have given

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1 Rosebud, and when we indicated we needed more information,

2 Mr. Orndorff indicated that this was the first time he had

3 heard about it; so we did a data request to which he was

4 to respond to out of the second prehearing conference.

5 Q I take it that I'm not going to get a

6 response to my question?

7 A I thought I responded.

8 Q No, I'll repeat the question again. Did you

9 ever tell Rosebud why you were not offering to purchase at

10 the rates that you agreed to in Exhibits 71 and 72?

11 A Yes, and if we didn't, I'm sure it's in

12 there somewhere that Rosebud is above 10 megawatts and

13 that the standard rates and standard terms are not

14 generally applicable and that it needs to be negotiated on

15 a case-by-case basis and that's been flushed out over time

16 and that by just adopting the standard avoided costs for

17 facilities under 10 megawatts is not the way we proceed in

18 the State of Idaho.

19 Q Who sets avoided costs in the State of

20 Idaho?

21 A The Commission does.

22 Q So to the extent the Commission were to

23 determine what the avoided costs are for over 10

24 megawatts, PacifiCorp would accept those rates?

25 A That's correct, and that's done on a

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1 case-by-case basis.

2 Q Now, Mr. Duvall, before I pass out an

3 exhibit -- well, I've got to pass it out. I'm passing out

4 a letter dated September 16th, 1993.

5 (Ms. Orndorff distributing documents.)

6 MR. FELL: Mr. Chairman, this is Exhibit 108

7 to Mr. Ramisch's testimony.

8 MR. ORNDORFF: Okay, thank you.

9 Q BY MR. ORNDORFF: Looking at this letter, is

10 this something I should direct to Mr. Ramisch, also?

11 A Yes, it is.

12 MR. ORNDORFF: I'm going to hand out a

13 letter dated October 15th, 1993, and enclosing a copy of a

14 power sales agreement.

15 (Ms. Orndorff distributing documents.)

16 MR. FELL: This is Exhibit 109.

17 MR. ORNDORFF: Okay, we can pass on that.

18 (Ms. Orndorff distributing documents.)

19 COMMISSIONER MILLER: Exhibit 74 is marked.

20 (Rosebud Enterprises, Inc. Exhibit

21 No. 74 was marked for identification.)

22 Q BY MR. ORNDORFF: I can talk with

23 Mr. Ramisch about this in conjunction with the previous

24 exhibit on procedures, but I'd like to ask you about in

25 the bottom of the page, last paragraph from the top.

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1 A And your question was? I'm sorry.

2 Q Mr. Duvall, there's an invitation here to go

3 look at Rosebud's plant in Colstrip. Did PacifiCorp ever

4 contact Rosebud and inquire as to when it could make that

5 trip?

6 A I don't recall if we did. I think the

7 answer is no and I think to go see a plant that is played

8 up to be similar to the plant in Idaho, I guess it's not

9 our responsibility to go look at it and figure out how it

10 works and what the plant configuration is. I think a site

11 visit would be useful at some time. At this point, too,

12 we were expecting some more information from Rosebud about

13 the project so they could tell us about the project and we

14 didn't have to go look at it to try to figure out what it

15 might be, at least what it might be similar to.

16 Q Now, Mr. Duvall, is it true that PacifiCorp

17 is a partnership in Colstrip, the large Colstrip 1-4?

18 A No, it's not. We are partners in 3 and 4.

19 Q Three and four?

20 A Correct.

21 Q And in the course of the last three years,

22 would it be fair to expect that several, perhaps even

23 numerous, PacifiCorp employees, perhaps even yourself,

24 have been at Colstrip to look at the plant and talk with

25 the management of the plant, review the operations of the

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1 larger units; is that a fair statement?

2 A It's certainly not a fair statement with

3 regard to me and I have no knowledge of what sorts of

4 visits any of PacifiCorp's employees have had to that

5 plant.

6 MR. FELL: Excuse me, could we clarify what

7 plant we're talking about, whether it's Colstrip 3 and 4

8 or the Colstrip Rosebud project?

9 MR. ORNDORFF: We're talking about the large

10 plants, 3 and 4.

11 THE WITNESS: Oh, Colstrip 3 and 4? I

12 thought you were talking about the Rosebud plant, I'm

13 sorry.

14 Q BY MR. ORNDORFF: I'm talking about Colstrip

15 1, 2, 3 and 4 and you just testified that PacifiCorp was

16 involved in 3 and 4.

17 A Correct.

18 Q Now, would it be a fair statement that

19 PacifiCorp employees from more than seldom, in fact

20 reasonably frequent, would be at those plants talking to

21 management?

22 A Yeah, because we have a 10 percent ownership

23 share in both Unit 3 and Unit 4 and we are on the

24 operating committee for the plant. The relationship of

25 the plant to the Rosebud facility in that area, in fact,

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1 our relationship, we have none, as far as I know.

2 Q Well, Mr. Duvall, have you personally been

3 to the Colstrip 3 and 4 plant?

4 A Yes, I have.

5 Q And I presume you drove from Billings; is

6 that true?

7 A Yes, I did.

8 Q And, let's see, you probably went to

9 Forsyth, didn't you, and you took Highway 39?

10 A I went to Forsyth and spent the night at the

11 Hotel Howdy.

12 Q And then you drove up about 20 miles to

13 Colstrip; is that basically the route you went?

14 A I believe so.

15 Q And do you recall going by the Rosebud power

16 plant on the west side of the road?

17 A No, I did not. I believe when I went there

18 it was probably in maybe 1986, '87, somewhere in that

19 range.

20 Q But you would agree that anyone that goes to

21 the power plant that you own 10 percent interest in, a

22 very large interest, would drive right by the Colstrip

23 power plant?

24 A I don't know that for a fact. I presume if

25 it's on the only road into Colstrip, that would be the

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1 case.

2 Q But it is your testimony that nobody from

3 PacifiCorp tried to go or made an appointment to go see

4 the plant, the Rosebud power plant?

5 A That's correct.

6 MR. ORNDORFF: I'm now handing out a letter

7 dated October 27th, 1993, and it is entitled, "Comments on

8 Montpelier Contract."

9 (Ms. Orndorff distributing documents.)

10 MR. ORNDORFF: We will not go through all

11 the comments, nor will we go through the contract.

12 COMMISSIONER MILLER: All right, Exhibit 75

13 will be marked.

14 MR. ORNDORFF: I believe it is 75.

15 (Rosebud Enterprises, Inc. Exhibit

16 No. 75 was marked for identification.)

17 Q BY MR. ORNDORFF: I'm not going to go

18 through this letter in detail, but generally, do you

19 recall receiving it?

20 A Yes, I do, and I'd like to point out a few

21 things on the letter.

22 Q Okay.

23 A Under Item 1, it says, "Rosebud's plant is a

24 base load plant and not subject to being dispatched."

25 There's been a question in this proceeding as to why we

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1 didn't propose rates for a dispatchable plant. We were

2 told it was not dispatchable.

3 The second objection was the proposal of a

4 20-year term, it's a standard term. Rosebud wanted a

5 35-year term. That was an objection they had to the

6 contract; and the third point right off the top is we

7 broke out the prices into capacity and energy and Rosebud

8 objected to that. These are all things that have been

9 determined to be reasonable for facilities over

10 10 megawatts.

11 Q Mr. Duvall, at the time that you are

12 referring to, had the Commission made those

13 determinations?

14 A No, nor had they made the determination as

15 to how you determine the prices in general, which was a

16 line-item-by-line-item adjustment from the current prices

17 for facilities under 10 megawatts.

18 Q So would it be fair to say, Mr. Duvall, that

19 if the Commission had been perhaps with the benefit of

20 hindsight a bit quicker in whatever the avoided costs were

21 you would have promptly offered those to Rosebud?

22 A I am not going to comment on the

23 Commission's quickness. I think they have done what they

24 have done through the course of time and we've provided

25 information to you that was the best of our ability given

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1 what we knew at the time.

2 Q Well, if the Commission had the methodology

3 that was now in place in Commission Order 25454 and 25706,

4 would you have offered Rosebud those rates?

5 MR. FELL: Objection. It asks for a

6 speculative answer.

7 COMMISSIONER MILLER: Sustained.

8 Q BY MR. ORNDORFF: Then turning to the

9 attachments, there's one attachment with rates on it. Do

10 you recall looking at that? I think it's an attachment

11 labeled, "Structured Levelized and Delevelized Rates."

12 A I remember looking at it, if I can find it.

13 I don't seem to find it.

14 Q Well, I think it's right after my comment

15 letter --

16 A Oh, up front.

17 Q -- Page 6 of my comment letter and attached

18 to my comment letter is "Rosebud Enterprises, Inc.,

19 Structured Levelized and Delevelized Rates."

20 A Right.

21 Q Do you recall looking at that?

22 A Yes.

23 Q Did you ever respond to that proposal?

24 A We responded to the proposal in total and I

25 believe at the time, the data request that came out of the

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1 second prehearing conference was still outstanding. We

2 indicated that we needed the data that had been requested

3 there to help fill in the contract and move forward.

4 Q The next attachment called "Standard Power

5 Purchase Agreement," and then somebody has handwritten in

6 "Rosebud Enterprises, Inc.," is that generally, and we're

7 not going to go through it at length, the document speaks

8 for itself, but is that generally PacifiCorp's standard

9 power purchase agreement that you gave Rosebud?

10 A I'm going to say that it is, but Mr. Ramisch

11 is much more familiar with this.

12 Q Okay. Prior to January 13th, 1994, did

13 PacifiCorp ever respond to Rosebud's six pages of

14 comments?

15 A Before January 13th, 1994?

16 Q Uh-huh.

17 A I believe so. There was a meeting in late

18 December, a negotiating session.

19 Q Were you there?

20 A No, I was not.

21 Q Do you have anything in writing that

22 indicates there was a response?

23 A That there was actually a meeting, a

24 negotiation?

25 Q No, a response to the six pages of

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1 comments.

2 A I don't recall. I'd have to review the

3 correspondence.

4 Q Could I ask you if after you've reviewed it

5 if you come up with a written response to provide me that

6 response?

7 A Well, I think the response was to set up a

8 meeting and discuss these issues face to face. I don't

9 believe that there was a written response and I don't

10 think that --

11 Q Let me ask you this question, then: After

12 the meeting, did PacifiCorp respond to Rosebud's comments?

13 A After the December meeting?

14 Q The December 30th meeting that you referred

15 to, did PacifiCorp take Rosebud's comments, Rosebud's

16 contract draft, your contract draft with Rosebud's

17 comments, did PacifiCorp respond?

18 MR. FELL: Mr. Chairman, I think the witness

19 should be given an opportunity to review his records as he

20 said he would have to do to find out. We'll be back

21 tomorrow.

22 COMMISSIONER MILLER: If you can recall

23 right now what the answer to that question is, you can

24 express it. If you can't recall, you can say that.

25 THE WITNESS: Yeah, I can't recall

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1 completely. I know there was the meeting at the end of

2 December. There were new avoided costs on file at that

3 point. Mid-January was the Commission's decision on the

4 avoided costs. We had provided the Hermiston contract at

5 Rosebud's request at the December meeting and they

6 modified that and sent that back at the end of January in

7 some form, and we continued to look forward to receiving

8 the information that we had requested out of the second

9 prehearing conference. Eventually, that all got turned

10 into a contract when we received the information, I

11 believe it was in June of '94, and was turned into a

12 contract and was our proposal to the Commission and to

13 Rosebud.

14 MR. ORNDORFF: Rather than have me ask

15 tomorrow, can I simply reach a stipulation if there is

16 anything in writing commemorating the December 30th

17 meeting and the contract that it be provided or do I have

18 to come back and ask the question again and go through

19 this exercise? If we can reach an understanding, I'll

20 drop the line of questioning.

21 THE WITNESS: I think in part the response

22 to the January meeting was the June proposal, along with

23 the other information that we received.

24 Q BY MR. ORNDORFF: So between December 30th

25 and June -- actually July, I think it was July 11th,

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1 wasn't it, that you put it in?

2 A I don't know the exact date.

3 Q We'll come to that.

4 MR. FELL: Mr. Chairman.

5 COMMISSIONER MILLER: Mr. Fell.

6 MR. FELL: The witness has explained that

7 the response may have been a serial-type response, a

8 process response and tomorrow we will provide an

9 explanation as to how the response was provided. If that

10 is provided in a single document or a series of documents

11 and meetings, we will address all of that.

12 COMMISSIONER MILLER: Fine.

13 MR. ORNDORFF: The next document I'm going

14 to hand you, Mr. Duvall, is a letter from PacifiCorp dated

15 November 17th, 1993, and this may be another item that I

16 need to talk to Mr. Ramisch about.

17 (Ms. Orndorff distributing documents.)

18 MR. WOODBURY: It's Exhibit 110. It doesn't

19 have the attachment.

20 MR. ORNDORFF: Is it 110? Thanks. Does it

21 have the attachment or not?

22 MR. WOODBURY: No.

23 MR. ORNDORFF: This is a letter dated

24 November 17th, 1993, with an attachment and if this is not

25 something that you're familiar with and Mr. Ramisch is,

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1 then I'll gladly direct my questions to Mr. Ramisch on

2 this.

3 COMMISSIONER MILLER: Exhibit 76 is marked.

4 (Rosebud Enterprises, Inc. Exhibit

5 No. 76 was marked for identification.)

6 THE WITNESS: Yes, Mr. Ramisch is prepared

7 to testify to that letter.

8 MR. ORNDORFF: Okay. Rather than introduce

9 a lot of others, let's see if we can quickly go through

10 the rest of this. Do you recall after the -- no. I

11 believe this is, what, 77.

12 COMMISSIONER MILLER: This is Exhibit 77.

13 (Ms. Orndorff distributing documents.)

14 MR. ORNDORFF: This is a letter dated

15 November 23rd, 1993, responding to Exhibit 76 and, again,

16 I'll defer and talk to Mr. Ramisch about it, but the two

17 need to go together.

18 (Rosebud Enterprises, Inc. Exhibit

19 No. 77 was marked for identification.)

20 Q BY MR. ORNDORFF: Now, after January 14th,

21 1994, do you recall if the Commission suspended avoided

22 costs?

23 A My recollection is that the Commission

24 indicated that any contract after that date would have

25 prices subject to whatever came out of the new avoided

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1 cost case.

2 Q And there was some correspondence between

3 Rosebud and PacifiCorp that recognized the status quo. Do

4 you remember that correspondence?

5 A No, I don't off the top of my head.

6 MR. ORNDORFF: I'm trying to move it along,

7 Mr. Chairman, as quickly as I can.

8 (Ms. Orndorff distributing documents.)

9 COMMISSIONER MILLER: Will this be all of

10 the documents under any circumstances?

11 MR. ORNDORFF: Pardon me, Mr. Chairman?

12 COMMISSIONER MILLER: Will this be all the

13 documents under any circumstances or are there potentially

14 still more?

15 MR. ORNDORFF: Dr. Slaughter will want to

16 testify. He may have something, I don't know.

17 COMMISSIONER MILLER: I mean with respect to

18 the examination of Mr. Duvall.

19 MR. ORNDORFF: I believe so. I have some

20 questions on the Hermiston contract. Yeah, I think

21 probably this is it other than Hermiston.

22 (Off the record discussion.)

23 MR. ORNDORFF: Exhibit 78 is a letter dated

24 February 26th, 1994, from PacifiCorp talking about future

25 negotiations and the Idaho Power case and the

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1 methodology.

2 MR. FELL: Excuse me, that may already be an

3 exhibit. That is Exhibit 111 to Mr. Ramisch's testimony.

4 MR. ORNDORFF: Okay, we'll put a 111 on

5 that. 111 is the February 26th, '94, letter; so 78 needs

6 to be the March 3rd, '94, letter.

7 COMMISSIONER MILLER: That's marked.

8 (Rosebud Enterprises, Inc. Exhibit

9 No. 78 was marked for identification.)

10 MR. ORNDORFF: 79 is the March 11th, '94,

11 letter from PacifiCorp. 80 is a letter from Rosebud to

12 PacifiCorp.

13 COMMISSIONER MILLER: April 28th?

14 MR. ORNDORFF: Yes, it is, Mr. Chairman.

15 COMMISSIONER MILLER: All right.

16 MR. ORNDORFF: And then the April 29th

17 letter from PacifiCorp to Rosebud.

18 (Rosebud Enterprises, Inc. Exhibit

19 Nos. 79 - 81 were marked for identification.)

20 MR. ORNDORFF: That pretty much closes out

21 the documents and the foundation on the documents as to

22 the grandfathering issues. Now, I will hand Mr. Fell my

23 material on the RAMPP which I would be happy to do so that

24 he can be prepared to talk about RAMPP and copies of the

25 Hermiston material that I have identified so he can be

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1 prepared to talk about that tomorrow, and I have a few

2 questions to ask about these letters.

3 COMMISSIONER MILLER: Why don't we just take

4 all that up in the morning. I think it's an appropriate

5 time to quit for the day and give everybody an opportunity

6 to reflect on all of this.

7 MR. FELL: Mr. Chairman.

8 COMMISSIONER MILLER: Mr. Fell.

9 MR. FELL: Since I haven't had much chance

10 to comment on what's been going on, this is obviously a

11 premeditated ambush. All this copying has been done in

12 advance and none of this was included in their prefiled

13 testimony. I have nothing further to say about that, but

14 to point it out that it is a clearly premeditated ambush.

15 COMMISSIONER MILLER: Mr. Orndorff, how

16 would you characterize this?

17 MR. ORNDORFF: I would consider PacifiCorp's

18 conduct in this matter outrageous, unreasonable, unlawful,

19 and, frankly, in the next rate case, I hope the Commission

20 takes it up in the area of good faith negotiations and has

21 a disincentive for future conduct in this line.

22 COMMISSIONER MILLER: All right, well, I

23 think that's an appropriate place to end this. I'll

24 suggest that all the parties get a good night's sleep

25 and come back ready to approach this with a fresh

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1 attitude in the morning. We'll resume tomorrow morning

2 at 9:00 o'clock.

3 (The Hearing recessed at 4:45 p.m.)

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