20030218Petition for Reconsideration.pdf

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ATTORNEYS AT lAW
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VIA OVE~~LIVERY AND u.s. MAIL
February 18, 2003
JOHN M. ERIKSSON
Direct Dial
[phone]
email jmeriksson~stoeLcom
Ms. Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, ill 83702
Re:Case No. PAC-Ol-
Confidential Transcript
Dear Ms. Jewell:
Enclosed in the attached, sealed envelope is a copy of a portion of the confidential transcript
from the in camera portion of the hearings in Case No. PAC-01-16. Please accept this copy
for filing with PacifiCorp s Petition for Reconsideration and Clarification of Order No. 29157
filed on this same date.
Thank you for your assistance.
Very truly yours
John M. Eriksson
JME:sm
Enclosures
cc: All Parties wlo enc.
Oregon
Washington
Calirornia
Utah
idaho
James F. Fell
John M. Eriksson
STOEL RIVES LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204
Telephone: [phone]
Fax Number: [phone]
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UTILI f iES CUI"Ii~;)lor,
Attorneys for PacifiCorp
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
In the Matter of the Application ofPacifiCorp
d/bla Utah Power & Light Company for
Approval of Interim Provisions for the Supply
of Electric Service to Monsanto Company
P ACIFICORP'S PETITION FOR
RECONSIDERATION AND
CLARIFICATION OF ORDER NO. 29157
PAC-01-
Pursuant to Idaho Code ~ 61-626 and Idaho Public Utilities Commission Rules of
Procedure 325 and 331 , PacifiCorp, dba Utah Power & Light Company ("PacifiCorp" or the
Company ) hereby petitions this Commission: 1) for reconsideration of its determination in
Order No. 29157, issued January 27 2003 ("Order ), not to prorate or otherwise adjust monthly
credits for interruptiblelcurtailment options to reflect the monthly availability of furnace load; 2)
for reconsideration of its determination that system integrity interruptions should be limited to 95
MW; 3) for clarification or reconsideration of the Order with respect to the amount of
Monsanto s load to which firm pricing shall apply; and 4) for clarification with respect to true-up
under the Order and Order No. 28918 , dated December 21 2001 , and the implementation ofthe
pricing approved in the Order. PacifiCorp requests reconsideration by written briefs or
statements.
P ACIFICORP' S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
In support of this Petition, PacifiCorp states as follows:
INTRODUCTION
The Commission issued its Proposed Order in this case on December 10, 2002 and
invited parties to submit comments regarding the Proposed Order. One of the issues on which
PacifiCorp submitted Comments was the billing of Monsanto s monthly credits for
interruptibility. In the final Order, the Commission rejected "PacifiCorp s proposal to revise the
method for calculation of monthly credits for interruptiblelcurtailment options to reflect the
monthly availability of furnace load." Order at 2. The Commission s failure to prorate or
otherwise adjust to account for furnace unavailability is unreasonable and erroneous.
The Order provides that system integrity interruptions are to be limited to 95 MW. That
limitation was not requested by any party and lacks any support, and PacifiCorp requests that on
reconsideration the Commission provide that system integrity interruptions can be utilized by
PacifiCorp to interrupt Monsanto s entire furnace load.
The Order is unclear as to the amount of Monsanto s load which the Commission intends
PacifiCorp to bill as firm load. The Commission should clarify that all of Monsanto s firm load
not just 9 MW, should be billed as firm. If the Commission intends otherwise through the Order
that any consumption above 9 MW shall be billed as interruptible, such a determination is
unreasonable and erroneous.
Further, the Commission s Order No. 28918 in this case adopted a true-up mechanism in
the event the u.S. District court determines the 1995 Agreement expired December 31 2001.
PacifiCorp requests clarification as to whether the Commission intends that the true-up shall
account for the fact that Monsanto already received payments for operating reserve curtailment
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
under separate agreements during certain months of 2002. Failure to take such prior payments
into account will result in double payment to Monsanto for operating reserves for those months.
ARGUMENT
It is unreasonable not to allow monthly credits for curtailment and interruptibility
to be adjusted to account for furnace unavailability.
The Order requires that PacifiCorp compensate Monsanto for the value of curtailment
and interruptibility by means of a fixed discounted monthly demand charge. The adopted pricing
design is unreasonable and erroneous, as it will allow Monsanto to receive compensation for
curtailment and interruptibility which it may, by its own unilateral election or otherwise, not
provide or not be able to provide.
In its Order, the Commission found that "separate rate components for customer demand
and energy charges are appropriate." (Order at 8.) To reflect the firm rate the Commission
found reasonable -- $30.27 per MWh -- the Commission established a customer charge of $283
per month, a demand charge of$8.81 per kW-mo, and an energy charge of$16.31 per MWh.
(Id.) Based on the $30.27 per MWh, as an all-inclusive expected firm energy rate, and an
interruptible credit of7.48 mills/kWh, the Commission calculated a total overall expected energy
net price of $22.80 per MWh for Monsanto s interruptible service. (Order at 13.) In its
discussion regarding the value ofinterruptibility, the Commission affirmed the Company
proposed energy or "strike price" of $16.31 per MWh upon which the value of interruptibility
and curtailment is at least in part based, but found "a discounted demand charge of$4.09/kW-
month to be reasonable based on net annual revenue of$22.80/MWh." (Order at 13.
In its Comments to the Proposed Order, PacifiCorp stated that it was not clear how the
Commission intended that the credits for interruptibility be reflected on Monsanto s monthly
bills. The Company took exception to the Proposed Order to the extent it required PacifiCorp to
P ACIFICORP' S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
provide an interruptibility credit by billing Monsanto a fixed discounted monthly demand charge
and proposed a method of providing the same level of approved interruptibility credits, while
also allowing for adjustment necessary to account for the unavailability of furnaces for
curtailment or interruption. Without explanation or discussion, the Commission rejected
PacifiCorp s proposal.
A fixed discounted demand charge would not maintain the necessary relationship
between the credit given for interruptibility and the amount of interruptibility actually made
available by Monsanto. Specifically, if Monsanto does not operate a furnace in a billing month
or takes a furnace out of service entirely, interruption of that furnace load will not be available to
PacifiCorp for either operating reserves interruption or economic curtailment. Yet, if Monsanto
is billed at the fixed discounted demand charge as required by the Order, it will be getting a
discounted rate in exchange for something it could not or unilaterally elected not to provide. It is
not reasonable to require a rate design with a discounted rate, where the discount is based on the
customer providing a level ofinterruptibility which the customer, by its own choosing or
otherwise, does not provide.
As PacifiCorp noted in its post-hearing brief and its Comments, one of the advantages to
separate demand and energy charges is to accurately capture changes to furnace availability
and/or usage. PacifiCorp will be paying Monsanto substantial sums, in the form of credits, for
the right to interrupt its furnace load for operating reserves and economic curtailment.
Monsanto s furnace load is reduced for economic or operational reasons during the term of the
agreement, permanently or temporarily, PacifiCorp will not be able to interrupt Monsanto for the
full amount of load specified in the Order. With a fixed demand charge that is discounted to
ACIFICORP' S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
reflect the full value of interruptibility, PacifiCorp would be paying Monsanto for the right to
curtail a non-existent load. To require such payments is clearly not reasonable.
Further, there is no evidence, let alone substantial evidence, supporting a fixed
discounted demand charge that cannot be adjusted to reflect the reduced value to PacifiCorp
resulting from the inability to interrupt furnace load. The appropriateness of prorating
interruptibility credits has been recognized and agreed to by Monsanto in prior operating reserve
agreements. (PacifiCorp Brief, Attachment A, pp. 3 4; Exhibit 5; see also, the confidential
cross-examination of Daniel Schettler, Tr. 468-469, submitted herewith.
While the above discussion applies to both interruptibility for operating reserves and
economic curtailment, the inability to prorate interruptibility credits is especially significant with
respect to operating reserves and the WECC criteria which must be met in order for load to
qualify as operating reserves. The Order provides that PacifiCorp will purchase, and that
Monsanto will provide, 95 MW of operating reserves. Subject to specified limitations
PacifiCorp is entitled to call upon, and Monsanto must provide, 95 MW of operating reserves by
interruption of its 46 MW and 49 MW furnaces. The credit PacifiCorp is to pay Monsanto
through the reduced demand charge set by the Order, is based on that 95 MW. The
inappropriateness of compensating Monsanto through a discounted demand charge is illustrated
by a simple example, which unfortunately became a real life example three days following the
issuance of the Order. On January 29 2003, PacifiCorp advised Monsanto that it was
designating 95 MW of Monsanto s furnace load for operating reserves. Only hours later
Monsanto advised PacifiCorp that it experienced a failure of its 67 MW furnace (furnace #9),
thus leaving it with only its 46 MW and 49 MW furnaces, and that furnace #9 would be out of
service for as many as 15 days. Monsanto advised PacifiCorp that it could not interrupt both the
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
remaining furnaces which made up the 95 MW of operating reserves, because it needs to keep at
least one furnace operating at all times to supply Monsanto s kiln. Affidavit of Bruce Griswold
attached hereto ("Griswold Affidavit"). Under these circumstances and the provisions of the
Order, Monsanto will receive, through the fixed discounted demand charge for January and
February, value for 95 MW of operating reserves as though that level of operating reserves was
available during the entire period of each month. Yet, because of the unavailability of the entire
95 MW, PacifiCorp was required to otherwise obtain 46 MW of operating reserves, at a
substantial cost, because under WECC criteria, interruptible load cannot be counted toward
operating reserves if it is not available for interruption. Tr. 143. It is manifestly unfair and
unreasonable to require PacifiCorp to compensate Monsanto for a service which Monsanto
cannot or will not provide.
The Commission s rejection ofPacifiCorp s proposal to design prices to allow for
proration of the interruptibility credit is particularly difficult to understand in light of the
Commission s recognition of the appropriateness of a contract reopener if WECC changes
criteria for operating reserves. As the Commission found
, "
WECC Operating Reserve
requirements are outside the Company s control and are critical to the valuation of Non-spinning
Operating Reserves." Order at 15. That is, if the value of operating reserves provided by
Monsanto changes due to amendment of WECC criteria, it is appropriate to reflect that changed
value by revising the compensation provided by PacifiCorp to Monsanto. Yet, the Order
prevents PacifiCorp from adjusting the compensation for operating reserves when Monsanto
changes its operations, whether voluntarily or not, in a way that drastically reduces the value of
the operating reserves it is supposed to provide. Such a contrary result is not reasonable.
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION - 6
The outage of Monsanto s 67 MW furnace also highlights the inappropriateness of not
allowing PacifiCorp to prorate the interruptibility credit to account for the unavailability of that
furnace for economic curtailment. Assuming Monsanto s proj ection is correct, the furnace will
not be available for economic curtailment for half the month of February. Yet, because
PacifiCorp must compensate Monsanto with a fixed discounted demand charge for the right to
exercise economic curtailment, Monsanto will receive value for that option as though the furnace
was actually available for economic curtailment the entire month.
While the outage of Monsanto s 67 MW furnace is an actual situation that highlights the
inequity of not being able to reduce the interruptibility credit to account for furnace
unavailability, the inequity will be even greater if Monsanto, simply to advance its economic
interests, shuts down a furnace. In that case, with respect to operating reserves, PacifiCorp will
have to incur the cost of obtaining the operating reserves otherwise, while at the same time
compensating Monsanto as though Monsanto was providing the full level of required operating
reserves. Similarly, with respect to economic curtailment, PacifiCorp will still need to provide
the full value of interruptibility, even though Monsanto is not interrupting load in response to a
call by PacifiCorp for economic curtailment. In that situation, Monsanto would be a "free rider
taking benefit from the utility for customer conduct that occurs irrespective of any request or
incentive from the utility.
It is no answer to the inequities described above that the issue might be capable of being
addressed in the electric service agreement to be negotiated by PacifiCorp and Monsanto. First
there will be a period of time before the parties are able to conclude negotiations on an
agreement. During the interim, just as the Company and Monsanto have already experienced
situations may occur which result in PacifiCorp having to pay full value for a level of
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION - 7
interruptibility which Monsanto will not or cannot provide. Second, Monsanto may not agree to
contract provisions designed to make PacifiCorp whole for the overpayment ofinterruptibility
credits.l In that case, PacifiCorp and Monsanto will again be before the Commission to address
the matter in some fashion, which would likely take a number of months to resolve. All the
while, Monsanto may have furnaces out of service for one reason or another, not providing the
level of interruptibility it is supposed to provide, although it will be receiving full compensation
as though it were providing the full level of interruptibility.
PacifiCorp requests that the Commission grant reconsideration regarding this issue, and
allow for adjustments related to furnace unavailability so that PacifiCorp s other customers may
receive the level of service being paid for. In its Comments, PacifiCorp recommended that the
Commission order that the credit for interruptibility be billed as individual credits against the
non-discounted demand charge each month for the various types of interruptibility which
Monsanto will provide, and that PacifiCorp should also bill all energy to Monsanto at $16.31 per
MWh, and all demand at the non-discounted demand charge. PacifiCorp proposed that the
credits be set at levels consistent with the total value of interruptibility reflected in the
Commission s Proposed Order. In light of the Commission s adoption in the Order of a higher
value for interruptibility, the credits proposed by PacifiCorp in it Comments are no longer
applicable. To allow for adjustment to account for furnace unavailability, while retaining the
discounted demand charge set by the Order, PacifiCorp proposes that on reconsideration, the
Commission order that that the demand charge will be adjusted to account for hours of
unavailability within the billing month. Specifically, PacifiCorp proposes the demand charge be
1 Indeed, Monsanto has already expressed its view that it is entitled to the full value of
interruptibility even when it cannot provide the full level of interruptibility. See letter from Jim
Smith attached to Griswold Affidavit.
P ACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
adjusted for periods in which the operating reserve capacity of 95 MW and/or the economic
curtailment capacity of67 MW is not available at least ninety-two percent (92%) of the total
hours each billing month? Within each billing month, the demand charge of $4.09 per kW-
month would be adjusted to reflect the percentage that the actual availability hours within the
billing month are below 92 percent, as shown in the formula below. Actual availability for the
Reserve Availability Adjustment shall be determined by dividing the sum of(46 MW times
actual operating hours for furnace #7 for the month divided by total hours in the month) plus (49
MW times actual operating hours for furnace #8 for the month divided by total hours in the
month), by 95 MW. Actual Availability for the Economic Curtailment Availability Adjustment
shall be determined by dividing the total actual operating hours for the #9 furnace for the month
by the total hours in the month. If the Actual Availability for either Reserves or Economic
Curtailment is calculated to be greater than 92%, the Actual Availability shall be deemed to be
92% and there would be no adjustment to the Monthly Demand Charge. Calculation of the
adjustments is as follows:
Reserve Availability Adjustment = (92% - Actual Availability %) * 95MW I South Line Load
Economic Curtailment Availability Adjustment = (92% - Actual Availability %) * 67MW I
South Line Load
Monthly demand charge = $4.09 * (1 + Reserve Availability Adjustment + Economic
Curtailment Availability Adjustment)
If reconsideration is granted, PacifiCorp will, if determined necessary by the
Commission, present evidence as to the appropriate manner of adjusting the demand charge to
reflect furnace unavailability for operating reserves and economic curtailment.
2 Ninety-two percent is based on the assumption, used in PacifiCorp s valuation of
interruptibility, that furnaces #7 and #8 will be available for operating reserve interruption eleven
out of twelve months. Tr.797.
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
II.System Integrity Interruptions should not be limited to 95 MW.
In the Order, the Commission limited "spinning reserve and system integrity interruptions
to 300 hours per year at 95 MW." Order at 12. The limitation of95 MW for system integrity
interruptions is not supported by any substantial evidence and is not reasonable.
PacifiCorp proposed that the entire interruptible furnace load - 162 MW - be subject to
system integrity interruptions. Exhibit 10. That proposal was not opposed by Monsanto.
Indeed, Monsanto s initial proposal provided for system integrity or "emergency interruptions
already provided in the (1995) contract" without limiting those interruptions to 95 MW of load.
Tr. 417-418; Exhibit 210. Monsanto subsequently proposed providing up to 1 000 hours of
economic interruptibility, without operating reserve interruptibility, but did not change the level
for "emergency curtailments." Tr.427.
Further, the value of interruptibility established by the Commission is based in part on the
value proposed by the Company, which, as to system integrity interruptions, is based on the
availability of 162 MW, not 95 MW. Exhibits 15 27. Thus, limiting system integrity
interruptions to 95 MW is inconsistent with the level ofinterruptibility credit determined by the
Commission.
For the foregoing reasons, PacifiCorp requests that the Commission, on reconsideration
conclude that the system integrity interruptibility can be used to interrupt Monsanto s entire
furnace load, not 95 MW.
III.The Commission should clarify that PacifiCorp should bill all of Monsanto s firm
service at the firm service rates approved in the Order.
PacifiCorp delivers electric service to Monsanto over two transmission lines, the "106
Line" and the "109 Line." The 106 Line serves only firm load, and PacifiCorp does not have the
capability to interrupt service on that line, without also interrupting service to other customers.
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
Griswold Affidavit. The 109 Line serves Monsanto s interruptible load. Separate metering
exists on the 106 and 109 Lines. Although the 1995 Agreement provided for 9 MW of firm
service, Monsanto s load on the 106 Line has actually been higher, exceeding 12 MW in all but
one of the months in 2002. Id.
Certain language in the Order creates uncertainty with respect to whether the
Commission intends PacifiCorp to bill all of Monsanto s firm load at the firm rates set in the
Order, or only 9 MW of Monsanto s firm load. PacifiCorp requests that the Commission clarify
that all of Monsanto s load on the 106 Line shall be billed at the firm rates.
In its findings regarding the issue of system versus situs allocation, the Commission
found it "reasonable to continue with the situs allocation ofPacifiCorp s 9 MW firm non-furnace
load and to apply the Commission-approved firm rate to such load.Order at 6. In the same
discussion of findings, the Commission referred to the "remainder of Monsanto s firm" load
which the Commission found should be allocated on a system-wide basis. Further, in its findings
regarding the value of interruptibility, the Commission discussed the effective "all-" energy
price resulting from its decision, and stated
, "
When 9 MW of firm non-furnace load is included
in annual revenues at the firm rate, the net annual revenue per MWh is increased to $23.16.
Order at 13. These statements by the Commission may indicate that it is considering that
although Monsanto does have firm load in excess of9 MW, only 9 MW will be priced at the firm
rates. However, in its findings regarding the cost of firm service to Monsanto, the Commission
stated
, "
These rates and charges reasonably reflect the Company s cost of service to Monsanto
going forward. This rate is for firm service only and does not reflect an adjustment or credit for
interruptibility." Order at 8. In that instance, the Commission appropriately indicates that the
firm rate should apply to firm service generally, without regard to the 9 MW level.
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
, contrary to PacifiCorp s understanding, the Order reflects an intention that only firm
service up to a 9 MW demand should be billed at the firm rate, PacifiCorp requests
reconsideration on that point. There is no evidence in the record supporting a discounted rate for
any firm service to Monsanto, and requiring PacifiCorp to bill any amount of firm service at a
rate lower than the cost of service approved by the Commission for firm service would be
unreasonable.
IV.The Commission should clarify that the true-up mechanism should account for the
payments previously made to Monsanto.
The Order requires a true-up initially provided by Order No. 28918: "A true-up
mechanism retroactive to the termination date of the existing Agreement will be used to adjust
the difference between the existing rate and the new rate." Order at 2. Of course, a true-up
which is based on a rate that includes an interruptibility credit will necessarily reflect an
assumption that Monsanto could have been interrupted in accordance with the terms of
interruption upon which the interruptibility credit was established. Obviously, that ability did
not exist in 2002. Absent the ability to implement interruptions during all the months for which
the true-up applies, the true-up will therefore effectively result in payment to Monsanto for
interruptibility which did not exist. However, PacifiCorp does not contest that aspect of the true-
up. The aspect of the true-up on which PacifiCorp seeks clarification is determination ofthe
existing rate" during those months in 2002 when PacifiCorp was paying Monsanto for operating
reserves under separate agreements. As proposed by PacifiCorp, the true-up should be based on
the net effective price to Monsanto, recognizing payments it received for operating reserves. Tr.
43.
The separate operating reserve agreements under which payments were made to
Monsanto in 2002 are reflected in the record and the Order. Exhibit 5; Tr. 343 428; Order at 10.
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
Indeed, the Order expressly recognizes that because of payments received by Monsanto under
separate operating reserve agreements in 2000 2001 and 2002, and an Outage Deferral
Agreement (Ex. 6 , effective in 2001), "the actual annual energy rate Monsanto paid was
considerably less than $18., being $17.57 in 2000, $16.61 in 2001 , and is expected to be in the
same range in 2002." Order at 10. In 2002, two operating reserve agreements were in effect for
different periods of the year: The March 1 , 2001 agreement (Ex. 5) was in effect during January
and February, and the July 2002 agreement was in effect July 9 through September 15. Tr.343.
PacifiCorp made payments to Monsanto under those agreements totaling over $1 million, as
detailed in the Griswold Affidavit.
If the true-up were to be made based on an "existing rate" of$18.50 for the months for
which PacifiCorp paid Monsanto for operating reserves, PacifiCorp would be compensating
Monsanto twice for operating reserves. Such a result is indisputably unfair and unreasonable.
To avoid that result, PacifiCorp requests that the Commission clarify that the true-up for those
months shall be based on the "existing rate" that results from subtracting the operating reserve
payments for those months from the payments made by Monsanto for those months. The
respective existing rates for those months under such an approach are shown in the Griswold
Affidavit.
P ACIFICORP' S PETITION FOR
RECONSIDERATION AND CLARIFICATION - 13
CONCLUSION
WHEREFORE, PacifiCorp respectfully requests that the Commission grant
reconsideration and clarification as described above.
DATED: February j2, 2003
STOEL RIvES LLP
mes F. Fell
John M. Eriksson
Attorneys for PacifiCorp
P ACIFICORP' S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
CERTIFICATE OF SERVICE
I hereby certify that I caused a copy of the foregoing PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION OF ORDER NO. 29157 to be served upon
the following by United States mail, postage prepaid, at the addresses indicated on February
~,
2003:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
Boise, ID 83702-5983
Eric Olson
Racine, Olson, Nye, Budge & Bailey
201 E. Center
Pocatello, ID 83204-1391
James R. Smith
Monsanto Company
O. Box 816
Soda Springs, ID 83276
Randall C. Budge
Racine, Olson, Nye, Budge & Bailey
201 E. Center
Pocatello, ID 83204-1391
it j \ta NvVVM~ft
PACIFICORP'S PETITION FOR
RECONSIDERATION AND CLARIFICATION -
AFFIDAVIT OF BRUCE GRISWOLD
STATE OF OREGON
: ss.
COUNTY OF MULTNOMAH
Bruce W. Griswold, being duly sworn, deposes and states as follows:
I am the Director, Energy Contracts, at PacifiCorp.
On January 29 2003, PacifiCorp advised Monsanto that it was designating 95
MW of Monsanto s furnace load for operating reserves.
On January 30 2003 , Monsanto advised PacifiCorp that it had experienced an
outage of its 67 MW furnace and that Monsanto could not interrupt both the remaining furnaces
because it needed to keep at least one furnace operating for Monsanto s kiln. Monsanto also
advised PacifiCorp that the furnace (furnace #9) would be out of service for as many as 15 days.
Attached hereto is a true and correct copy of a letter from Monsanto to me related
to the furnace outage and operating reserve requirements.
PacifiCorp delivers electric service to Monsanto over two transmission lines, one
being referred to as the "106 Line" or "North Line" and the other being referred to as the "109
Line" or the "South Line." The 106 Line serves only firm load, and PacifiCorp does not have the
ability to interrupt service on that line without also interrupting electric service to other
customers. The 109 Line serves Monsanto s interruptible load. In 2002, Monsanto s load on
Line 106 exceeded 12 MW in all months except August.
Pursuant to an operating reserve agreement entered into with Monsanto, dated
March 1 2001 , PacifiCorp made payments to Monsanto for the months of January and February,
2002 in the amount of$115 000 for each month. Pursuant to an operating reserve agreement
with Monsanto, dated July 9 2002, PacifiCorp made payments to Monsanto in the amounts of
SaltLake-194977.1 0058802-00104
$187 533., $436 713., and $237 500., for the months of July, August and September
2002, respectively.
When the amounts stated in paragraph 6 above are deducted from payments made
by Monsanto for electric service during the respective months, the effective rate for electric
service to Monsanto, calculated by dividing the net payment for a month by the kilowatt hours
delivered to Monsanto during the respective month, are as follows: January: $17.68 per MWh;
February: $17.53 per MWh; July: $16.61 per MWh; August: $14.64; September: $16.54.
The foregoing is true and correct to the best of my knowledge and belief.
DATED February 2003.
Subscribed and sworn to before me this day of February, 2003.
LIC
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My Commission Expires:
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OF'Fi'CiAL SEAL
LORI J ADAMS
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' NOTARY PUBLlC-OREGON
COMMISSION NO. 326385
I./YCOMfAISSION :::XI'IRESAUG 192003
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SaltLake-194977.10058802-00104
2/0.tl20D' 16: 41 FAX [phone] RAC1NE . OLSID! Ij!J DOl
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MONSANTO
Soda Springs, Idaho Plant
1853 Highway 34
Post Office Box 816
Soda Springs, Idaho 83276-0816
Phone: [phone]
Fax: [phone]
Bruce Griswold
PacifiCorp
825 N.E. Multnomah
Portland Or. 97232
Transmitted Via Fax:
February 4, 2003
503-813-5512
Subject: PacifiCorp letter regarding obligation to provide operating reserves per
PAC-O1-
Dear Bruce:
This replies to your January 31, 2003 letters. The first deals with the 95 MW of
operating reserves which Monsanto provides to PacifiCorp pursuant to IPUC'
Final Order No. 29151- The second letter, also dated January 31 , 2003, was
f~ceived February 3, 2003 , with the invoice of the same date for the month of
, .
January 2003.
First, let me clarify my discussions with Brent Barker, our Account Manager, on
January 29, 2003. During our discussions, we agreed that the new rates under
the Final Order No. 29157 dated January 27,2003, would be billed to Monsanto
effective January 1 , 2003. We also agreed that PacifiCorp could also begin
using at the same time the operating reserves limited to 300 hours per year at 95
MW. We further agreed that until the new contract has been approved by the
Commission, we would utilize the last Operating Reserve Agreement in effect,
which was dated July 9r 2002, to govern the operating procedures. Accordingly,
I instructed Monsanto s operators to follow the procedures in the last Operating
Agreement dated July g, 2002, for purposes of handling operating reserve
requests from PacifiCorp.
Mr. Barker further indicated that PacifiCorp did not plan on exercising economic
curtailment until the summer. Accordingly, we agreed that those details need not
be addressed now, as they would be handled in the new contract.
The next day the plant operators indicated that the Number 9 Furnace was being
shut down for maintenance and overhauls estimated to take 12 days.
immediately called Mr. Barker and notified him of the shutdown. The July 9,
2002 Operating Agreementwe are operating under addresses this problem in
Section 9, which states:
~2/04/2003 16: 42 . FAX [phone] RACINE & OLSE~l(g I) 1);0::
PacifiCorp acknowledges that the electric phosphorus furnaces at P4 will be removed
from service from time to time during the terms of this agreement for maintenance and
overhauls. P4 will provide PacifiCorp notice by telephone with folloW up fax of expected
maintenance schedules and delt;iys, including scheduled time of interruption, durt;ition
and electrical load of corresponding fumace- P4 will also infonn PacifiCorp by telephone
or fax prior to restoring electrical power to a furnace after such a delay. If two of P4'
furnaces are simultaneously unavailable due to maintenance or overhaul and/or
interruption by PacifiCoTp due to other agreements, P4 shalll1ave nO obligation to curtail
load and PaciflCorp shall be relieved from its oblig;ations to pay during such mainten;ance
period."
While this language mayor may not be included in the new contract, it is in fact
what Mr. Barker and I agreed to use until the new contract is in place.
As I understand Order No. 29157, the Commission approved a credit value of
7.48 mills/kWh for "spinning reserve and system integrity interruptions up to 300
hours per year at 95 MW and economic interruptions to 500 hours per year at 67
MW." (Order p. 12) The Order also states:
3. We reject PacifiCorp s proposal to revise the method for calculation of monthly credits
for interruptible/curtailment options to reflect the monthly availability of furnace load:
(Order p. 2)
As you acknowledged in your second January 31 letter
, "
the Order does not
provide the ability to pro-rate the interruptibility creditn Obviously, while
Monsanto s furnace is down , PacifiCorp has that power that can be used to meet
operating reserves or to sell to other customers at a profit.
Monsanto agrees to the demand charge and energy charges, but does not agree
to the power factor charge as set forth in the February 3, 2003 Invoice. The
Order does not provide for any power factors charge. Nor would a charge be
incurred if one uses total metered power.
I trust this clarifies our position. If you have any questions. please don t hesitate
to call me.
These things underscore the importance of us working towards a new contract
without delay. We are prepared to meet with you for this purpose as soon as
possible.
Sincerel .
//. /
James R. Smith
JRS:rr
02/04/200 3 16:42 FAX [phone]
be:Daniel J. Schettler
Randall C. Budge
RACINE & OLSE~IgJOO3