20101008Response to Monsanto's Motion to Dismiss etc.pdf

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October 8, 2010
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VI HA DELIVERY
Jean D. Jewell
Commssion Secretay
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Re: Case No. PAC~E~10~07
Rocky Mountain Power's Response to Monsanto's Motion to Dismiss or Strike
Testimony
Dear Ms. Jewell:
Please find enclosed for filing an onginal and (7) seven copies of Rocky Mounta Power's
response to Monsanto's Motion to Dismiss or Stne Testimony.
All fortal correspondence regarding ths supplemental testimony should be addressed to:
Ted Weston
Rocky Mountaii Power
201 South Mai, Suite 2300
Salt Lake City, Uta 84111
Telephone: [phone]
Fax: [phone]
Email: ted.weston(ßpacificorp.com
Danel E. Solander
Rocky Mounta Power
201 South Mai Street, Suite 2300
Salt Lake City, Uta 84111
Telephone: [phone]
Fax: [phone]
Email: danel.solander(Øpacificorp.com
Communications regarding discovery matters, including data requests issued to Rocky
Mounta Power, should be addrssed to the following:
By E-mail (preferred):datarequestcmpacificorp.com
By regular mail:Data Request Response Center
PacifiCorp
825 NE Multnomah St., Suite 2000
Portand, OR 97232
Iiformal inquines may be directed to Ted Weston, Idaho Regulatory Manager at (801) 220-
2963.
Idaho Public Utilities Commssion
October 8, 2010
Page 2
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Enclosures
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Mark C. Moench
Yvonne R. Hogle
ROCKY MOUNTAIN POWER
201 South Main, Suite 2400
SALT LAK CITY, UT 84111
[phone]
[phone]
lOin OCT -8 P.H q: l+ I
Paul J. Hickey - Pro Hac Vice
Hickey & Evan, LLP
1800 Carey Avenue, Suite 700
P.O. Box 467
Cheyenne, WY 82003-0467
(307) 634..1525
[phone]
Attorneys for Rocky Mountan Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. PAC.E~10~07
OF ROCKY MOUNTAIN POWER FOR )
APPROVAL OF CHANGES TO ITS ELECTRIC )
SERVICE SCHEDULES AN A PRICE )
INCREASE OF $27.7 MILLION, OR )
APPROXIMATELY 13.7 PERCENT )
ROCKY MOUNTAIN POWER'S RESPONSE
TO MONSANTO'S MOTION TO DISMISS
Pursuat to IDAPA Rule 31.01.01.057, PacifiCorp, dba Rocky Mountan Power
(the "Company"), though its attorneys, hereby responds to the MOTION TO DISMISS
OR STRI TESTIMONY ("Motion") fied by Monsanto Company ("Monsanto")
October t 2010.
t. Background
Rocky Mounta Power effectively has two commercial arangements with
Monsanto within the Electrc Servce Agreement between PacifiCorp and Monsanto
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Company ("ESA"), one is the provision of retal electnc service to Monsanto, and the
second is a bilateral agreemeiit whereby the Company procures and Monsaito provides
curlment products for values established by the ESA. The relationship with Monsanto
is set fort in and governed by the ESA, which expires December 3 i, 2010.
Absent the Compaiy requesting a chage to its curently authonzed taffs and the
Commission authonzig a change in the tanffs, the reguated retail service rates governed
by the Commssion under Electnc Service Schedule 400 would continue to be in effect
unti changed by Commission order. The Compaiy fied with the Commssioii May 28,
c 2010, its application for approval. of changes to its electnc service schedules and a pnce
increase of $27.7 milion, or approximately 13.7 percent ("Application") to reset the taff
rates charged to all retail customers, includig Monsanto.
Pror to fiing of the Application, the Company met numerous tin:es with
Monsanto to discuss the second con:ponent of the commercial arangement with
Monsanto on valuation of the curtlment products and the terms and conditions of the
bilateral contract argements that would be in place afer the existing coiitract related to
these products expires December 31, 2010. Due to the lack of progrss in settlement
discussioiis to reach a resolution on the valuation of the curtailn:ent products, the
Company fied Supplen:eiita Testimony of Paul H. Clements ("Supplemental
Testin:ony") in Case No. PACE-E-1Q-07 outlining the issue and Company's valuation
reomiendation with the intent that the Commission would resolve the issue pnor to the
expiration of the ESA on December 31, 2010.
Monsanto is now seeking to strike the Supplemental Testimony or dismiss the
case altogether, eliminating an impaial foru to resolve the question of valuation pnor
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to the expiration of the ESA. Absent a negotiated agreemeiit between Monsanto and the
Company or a fmding by the Coinission, neither par is bound by the provisions of the
ESA related to curailment products past December 31, 2010.
Rocky Mountain Power entered into discussions in good faith with Moiisanto
very early in the year to establish a new commercial arangemeiit for Januar 1,2011 and
beyond. The Company met with Monsanto on March 18, 2010, to discuss the fact that
the existing agreement Will tertinate effective December 31,2010, and provided wntten
iiotice to tht effect consistent with the ESA terms. The Company and Monsanto
subsequeiitly met on May 25, 2010, in Salt Lake City, and on June 9, 2010, July 13,
2010, August 26,2010, September 23,2010, in St. Louis. At the September 23rd meeting,
the Company informed Monsanto of its intent to fie the Supplementa Testimony as a
backstop on the issue of the curailment. valuation for the Commssion to resolve in the
eVent tht an agreement could not be reached.
Pnor to the decision to file the Supplemental Testimony and the September 23rd
discussion With Monsanto, the Company had sought advice from the Idaho Public
Utilties Comiission Staff ("Staff') on their preference in adstratively dealing With
the issue if it were placed before the Commission. Staff suggested that the Company fie
supplemeiital testimoiiy on the issue rather than fie it as a separate matter in a new case.
Whle Monsanto mayor ma.y not agree with the valuations Set fort in the
Supplemeiital Testony, the fact that the Company filed the Supplementa Testimony
should not be a "surrise" to anyone. If the Commission chooses to not address the
curlment valuation, then the Company's Application should proceed on the ordered
schedule and establish the retail taff rate based on cost of service for Monsanto. The
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curlment credit referenced ii Schedule 400 will be zero due to the expiration of the
contrt. As of Janua 1, 2011, no agrement for curent products will exist
between Monsanto and the Compaiy uness a mutu agreement is reached before then.
ARGUMNT
i. The Application Should Not Be Dismissed Because It Meets the
Requirements of Rule 121 and Complies with the Order(defined below).
The Company's Application, including the proposed revisions to Electnc Service
Schedule No. 400, is complete and includes the information required under Rule
121.01.a. which states, in par:
Applications by any public utility to increase, decrease or change any rate, fare,
toll, rental or charge or any classification, contract, practice, rue or reguation
resulting in any such increase, decreae or change must include the followig
data: a. an exhibit showing in full each proposed chage in rates, tolls, rentas,
chages ...
ID ADC § 121.01
Specifically, the proposed Schedule No. 400 iii the Application reflects the
cureiit reveiiue requirement and cost of service pertining to Monsanto. Proposed
Schedule No. 400 of the Application specifically includes the proposed tanff-based-rate
that Monsanto would be paying once new rates go into effect. Ths recognizes the
Commission's "tranition of Monsanto from contract to taiff standard customer" as
noted by the Commssion in its Order Number 30917 ii Case No. PAC-E-06-09
("Order"). Contrar to Monsanto's false representation that the Company ignored the
Commission's direction, Schedule No. 400 eveii "addresses ... interrptible product
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valuation" which the Commission orderedl paries to address, as follows: "Iiterrptible
Demand Chage: Firm Demand charge minus Iiterrptible Credit."
Curlment products and their value are separate commercial argements
governed by contracts tht customers like Monsto may paricipate in. They are market
dnven products that the Company purchaes at a rate reflecting their value. The value for
such products has changed and the Company has calculated that the rate will be
significantly lower from the curent rate.
Proposed Schedule No. 400 purosefully referenced the value for interrptible
services ~roadly so that it could accommodate and reflect chages to the terms of the
contracts, including pnce, as old contracts expire and new ones are entered into. The
"interrptible demand. chage" is equal to the Firm Demand Charge mius the
"Interrptible Credit". The Interrptible Credit is whatever is provided for by contract.
If there is no contract in place, the Iiterrptible Credit would be zero. In addition, the
broad refereiice also accommodates the differences in the time penods used to set retal
rates in ~eneral rate cases relative to the tie penod used for valuation of interrptible
services. For example, ths case was filed May 28, 2010 using a histoncal test year
ending December 31, 2009, with knowi and measurble changes though December 31,
2010. What was known and measurable and in effect though the eiid of the test penod is
the curent ESA which won't expire until December 31,2010.
By broadly referencing the value for interrptible services, Schedule No. 400
allows the retail rate set in the ESA to contiue under taff though the expiration of the
ESA. Currntly the paries don't know whether there will be a new contract for
interrptible services with Monsanto, but any new contract that is reached will be beyond
1 Order, p. 9
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the test penod of the Application. Such new contract will reflect the curent market
conditions that will dictate the pnce to be paid for interrptible serices over the tert of a
new contract. Assuming the Company and Monsanto execute another contract in Januar
2011, it will not be necessar to amend Schedule 400 to account for the new value for
interrptible services. If the Company and Monsanto do not execute another contract in
Janua 2011, it wil also not be necessar to amend Schedule 400 because there wil be
no "Interrptible Credit" to be netted against the Firm Demand Chage referenced in
Schedule 400. Regardless, all other customers will not be haed because the actual
expenses for power costs incured in 2011 will be tred-up on a histoncal basis though
the energy cost adjustment mechansm (ECAM). Given that the Application complies
with both Rule 121 and the Order, the Commission should deiiy Monsanto's Motioii to
Dismiss or Strke Testimony.
H. The Supplemental Testimony of Paul H. Clements Should Not Be
Strcken Because the Company Presented Monsanto With Its
Calculations for Valuation of Interruptible Services on. Numerous
Occasions and in Advance of Filig Its Application.
The Company provided Monsanto notice of intent to terminate the ESA at its first
meeting with Monsanto on March 18, 2010, well in advance of the 180 days specified in
the ESA. Subsequent to that meetiiig, the Company and Monsanto met on five separate
occasions. At the March 18, 2010 meeting and durg the subsequent meetings,
calculations for the valuation of interrptible servces were discussed as par of the effort
to negotiate a new contract upon the expiration of the ESA on December 31, 2010. The
analysis and economic value for interrptible services has beeii the topic of information
exchange, discussions and negotiations for approximately haf a year. The Company did
not include direct testimony to support its valuation of interrptible servces in its
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Application becaus it wanted to give the paries the opportity to negotiate and reach
an agreement. Monsato was both aware of the Company's positioii on value and its
intent to file the Supplemental Testimony if a settlement could not be reached. Therefore,
the Supplemeiita Testimony should not be strcken.
III. Paul H. Clements' Supplemental. Testimony is Necessary to Avoid the
Overpayment of Interruptible Credits to the Detriment of Customers.
The Company stil hopes that an agreement on purchaing curilment products
from Moiisanto can be reached. If the parties are not able to reach an agreement,
Monsanto should pay cost of service based rates as determined by the Commission the
sae as all other customers. The Company adopts a "customer indifference" approach
when valuing interrptible products offered by industral cusomers. In other words, the
Company seeks to pay industral customers who can offer interrptible products the same
pnce the Company would otherwse pay if it were to acquire those same products from
other sources, such as the market or its own resources.
It is importt to pnce curilmeiit products tht industral customers provide
consistent with the pnce the Company would pay to acquire the same product from other
sources because all customers are allocated their proportionate share of prudently
incured costs by the Company. The pnce paid to industral customers for interrptible
products is included in net power costs which are . alocated on a system basis to all
customers. If the Company pays industral customers more for the interrptible products
th it would otherwse incur acquiring those same products from another source, all
customers would be paying more for energy and would be subsidizing the industnal
customers who provide these products.
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Therefore, in order to matan faiess to all customers, the pnce paid to
industnal customers, and in this case to Monsanto, for interrptible products should be no
greater than the amount the Company would incur if it were to acquire those same
products from the next lowest cost available resource. The Company uses this no har to
customer priciple in its approach to value intertptible products provided by industnal
customers. With ths approach industnal customers are fairly compensated for providing
these products, and other customers are indifferent as to whether the products are
provided by the industnal customer or from other resources.
IV. The ESA Expires December 31, 2010 and the Obligation to Purchase
Interrptible Servces From Monsanto Expires With It.
The Company is required to provide electric service to Monsanto at cost of
service based rates under the regulatory guidelines and puriew of the Commission. In
this case, there is a separte transaction between the Company and Monsanto tht is
governed by the ESA. The Commission authonzed the ESA after reviewig the contract
and finding that it was reasonable? The Compaiy is responding to Monsato's attempt
to strong ar the Company into continuing to pay the same pnce for interrptible
servces beyond December 31,2010. The Commission should iiot alow Monsanto to use
heavy haded tactics to get its way.
Afer December 31, 2010, the Company is under no contractu obligation to
continue to purchase iiiterrptible products from Monsanto. In fact, given what the
Compaiy's models are showing the value for interrptible services wil be in 2011, it
would be uneasonable to require the Company to continue to pay the same amount for
the curlment products.
2 Order No. 30482 in Case No. PAC-E-07-05.
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While the pares have negotiated extensively, a new agreement for interrptible
servces between the Company and Monsanto has not beeii reached. If the pares are
able to agree on the appropriate fair value for curilment products, the Company wil
purchase those products from Monsanto under a new agreement. At that time, the
Commssion will have the opportnity to review the terms of the new contract for
reasonableness. Unless a new contract is reached before December 31, 2010, the
Company will have no right to curl Monsto and Monsato will have no claim for
curlmeiit credits, or other value or compensation for interrptible products it curently
provides the Company.
V. The Company Offers to Extend the Filig Deadline to Respond to the
Supplemental Testimony of Paul H. Clements.
Given that Commission staff and other intervening paries have not been involved
in the discussions, the Company proposes an extension to the curnt schedule oii this
issue to allow paries ample opportunity to fie testimony responding Clemeiits'
Supplementa Testimony. The Company proposes that the deadline to respond to the
Supplemental Testimony of Paul H. Clements be extended to November 10, 2010. The
Company proposed to provide its rebutt response to the November 10, 2010, filing of
the pares by November 24, 2010. The Company also proposes tht data requests
pertainig to the Supplementa Testimony or pares responses to the issue be responded
within 7 calendar days of receipt of such requests. The Company respectfully requests
that the rest of the schedule remain as ordered by the Commission.
CONCLUSION
Based on the foregoing, the Company respectfuly requests that the Commissioii
deiiy Monsanto's Motion to Dismiss or Stne Testimony.
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Respectfly submitted this 8th day of October 20 i o.
f1J¡V~Y(1
Mark C. Moeiich í,
Yvonne Hogle
Rocky Mounta Power
Paul J. Hickey
Hickey & Evan, LLP
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CERTIFICATE OF SERVICE
I herby certfy that on ths 8th day of October, 2010, I caused to be served via E-mail, a
tre and correct copy of Rocky Mountain Power's Response to Monsanto's Motion to
Dismiss in P AC-E-1 0-07 to the followig:
Eric L. Olsen
Racine, OlSon, Nye,.Budge & Bailey,
Charered
201 E. Center
P.O. Box 1391
Pocatello,ID 83204-1391
E-Mail: eloaMracinelaw.net
Tim Buller
Jason Hars
Agnum, Inc.
3010 Conda Road
Soda Spnngs, il 83276
E-Mail: tbulleraMagrum.com
JAHarrsaMagrium.com
Brad Purdy
CAPAI
2019 N. 17th St.
Boise, ID. 83702
E..mail: bmpurdycmhotmaiL.com
Anthony Yaiel
29814 Lake Road
Bay Vilage, Ohio 44140
E-mail: tonycmyaiel.net
James R. Smith (E-mail oiiy)
Moiisanto Company
P.O. Box 816
Soda Spnngs, Idaho 83276
E-Mail: jim.r.smith(ßmonsanto.com
Ronald L. Wiliams
Willams Brabur, P.C.
1015 W. Hays St.
Boise ID, 83702
E-mail: ronaMwillamsbradbur.com
Radal C. Budge
Racine, Olson, Nye, Budge & Bailey,
Chaered
201 E. Center
P.O. Box 1391
Pocatello,ID 83204-1391
E-Mail: rcbcmracinelaw.net
Paul J. Hickey
Hickey & Evans, LLP
1800 Cary Ave. , Suite 700
PO Box 467
Cheyenne, WY 82003
E-Mail: phickey(ßhickeyevans.com
Benjamn J. Otto
Idaho Conservation League
710 N. 6th St.
P.O. Box 844
Boise, Idao 83702
E-mail: bottocmidahoconservation.org
Katie Iverson (E-mail only)
Brubaker & Associates
17244 W. Cordova Cour
Sunse, Anzona 85387
E-Mail: kiversonØ)consultbai.com
Melinda J. Davison
Davison Van Cleve, P.C.
333 S.W. Taylor, Suite 400
Portland, OR 97204
E-mail: mjdØ)dvciaw.com
Scott Woodbur
Deputy Attorney General
Idao Public Utilties Commission
472 W. Washigton (83702)
PO Box 83720
Boise,ID 83720-0074
E. Mail: scott. woodburlßuc.daho.gov
Dr. Don Readig (E-mail Only)
Idaho Coiiservation League
6070 Hil Road
Boise, ID 83703
E-mail: dreadingtimindspring.com ~~.Came Meyer ~ ¿
Coordinator, Admstrtive Servces