20110208Statement of Position.pdf

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~-201 South Main, Suite 2300
Salt Lake City, Utah 84111
Februar 8,2011 ~ itsi
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VI u.s. MAIL AND ELECTRONIOg¡j:itiPc,t
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Jean Jewell
Idaho Public Serice Commission
472 W. Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
RE: Case No. PAC-E-10-07- In the Matter of the Application of Rocky Mountain Power for
Approval of Changes to its Electrc Serce Schedules and a Price Increase of $27.7
Milion, or Approximately 13.7 Percent.
Dea Ms. Jewell:
Attached please find an original and seven copies of Rocky Mountain Power's Statement of
Position in the above captioned proceeding, filed in accordance with the opportity provided to
the paries at the conclusion of the heargs on Februar 1, 2011.
Please contact me directly at [phone] if you have any questions or if I can be of furter
assistance.
Ver Truly,
4:£/ ~ /1//
fi"
Daniel E. Solander
Senior Counsel
Rocky ~ountain Power
OORIGINAL
Mark C. Moench
Daniel E. Solander
201 South Main Street, Suite 11d FEB -8
Salt Lake City, Utah 84111 , '
Telephone No. (801) 220-40141TII \~ftrt!:.;
Facsimile No. [phone]') "I." .~
mark.moench(ipacificorp.com
daniel. so lander(ipacificorp. com
BEeE
Pri 2t 52
Paul J. Hickey
Hickey & Evans, LLP
1800 Carey Avenue, Suite 700
P.O. Box 467
Cheyenne, WY 82003-0467
Ph. 307-634-1525
Fx. 307-638-7335
phickey(á),hickeyevans.com
Attorneys for Rocky Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR
APPROVAL OF CHANGES TO ITS
ELECTRIC SERVICE SCHEDULES
)
) CASE NO. PAC-E-IO-07
)
) STATEMENT OF POSITION
)
)
)
ROCKY MOUNTAIN POWER'S STATEMENT OF POSITION
Comes now, Rocky Mountain Power, hereinafter "RMP" or "the Company" and pursuant
to the opportity given paries at the conclusion of the hearing, does hereby submit its
Statement of Position on the issue of the economic valuation of Monsanto's interrptible
products.
i. INTRODUCTION:
The Commission set the Februar 1, 2011, hearing for the sale purose of addressing "the
economic valuation of Monsanto interruptible products." ORDER No. 32098 at 4,5 and 6. Cost
of service and rate design issues were litigated in Phase 1 of these hearings. Therefore, the
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impact of the now approved rate increase was previously decided in the INTERLOCUTORY
ORDER NO. 32151 entered on December 27,2010. See Attachments A and B to ORDER No.
32151.
RMP respectfully submits that the public interest to be addressed at this phase of the case
is to see that other Idaho customers do not subsidize Monsanto's cost of electricity. Monsanto's
self serving argument of "rate shock" is an attempt to divert the Commission's attention from the
fact that it asks that other customers fund a portion of its cost of electricity in the form of its
interrptible curtilment value. Such a result is unfair and not in the public interest.
Testimony clearly established that the value of the interrptible products is market
driven. The interrptible credit increased significantly from 2008 to 2010. Over these three
years, Monsanto enjoyed a 31 % increase in the contract value of the credit when compared to the
2007 credit amount. If Monsanto's proposed value in this case of $25.5 milion is considered,
the interrptible credit value will increase by 95% when compared to the 2007 credit amount.
No complaint is lodged by Monsanto regarding the magnitude of the increase to the credit, a cost
that is paid by other customers, when market conditions increase the value of the interrptible
products. Now, however, when curent market conditions have decreased the value of the
interrptible products, Monsanto claims rate shock and opposes setting the value of its
interruptible products at a level that is reflective of current market conditions. Rather, it offered
inflated and overstated values based upon a peaker methodology rejected by both staff and the
Company. Monsanto can't have it both ways. It must accept that market values fluctuate
downward, just as they fluctuated upward, during the term of the now expired electric service,
agreement.
Finally, in order to protect due process in this proceeding, RMP is compelled to comment
on the brief fied by Monsanto on February 7, 2011. Monsanto's brief includes new infoqnation
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that was not presented in either pre-filed testimony or discussed in any manner during the
Februar 1, 2011, hearing. Furthermore, Monsanto's brief contains misrepresentations of other
parties' positions and inaccurate statements and facts, all of which they are now trying to
introduce on the record without the Applicant having the opportunity to challenge these facts
either through cross examination or through rebuttal by Company witnesses. The Commission's
instructions that the brief contain only a short summar of the submitting par's proposal were
clearly ignored by Monsanto. Consistent with the Commission's clear instructions regarding the
content of the brief, the Company does not intend to rebut in its brief the new information or
misrepresentations contained in Monsanto's brief. Instead, the Company submits for
consideration a brief summary of the key points supporting the Company's position and a
summar of the Company's proposed contract values for Monsanto's interruptible products, and
asks the Commission to not prejudice the Company by giving any weight to the assertions in
Monsanto's unsubstantiated sumar of position.
II. ARGUMENT
1.
THE PEAKER METHODOLOGY WAS THOROUGHLY DISCREDITED AS NOT
COMPARABLE AND AN INFLATED VALUATION OF MONSANTO'S
INTERRUPTIBLE PRODUCTS.
The evidence was nearly uncontroverted that the peaker methodology offered by
Monsanto substatially overstated the value of the interruptible products. Indeed, even Mr.
Collns conceded that Monsanto's interruptible products are not equivalent to a combustion
turbine. The evidence also was unrefuted that the resource that Monsanto's products allow RMP
to avoid is market purchases, not a simple cycle combustion turbine. Both the GRID analysis
(short-term) and IRP analysis (long-term), as explained by Mr. Clements and Mr. Duvall,
demonstrated that Monsanto's products do not avoid, or defer, the acquisition of a combustion
turbine. In fact, the GRID analysis showed that the Monsanto contract would not need to be
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replaced during certain time periods and that the contract can be replaced by utilizing existing
resources durng time periods when replacement is needed. See also RMP Exhibit 58, IRP
analysis.
The evidence was further unrefuted that a combustion turbine provides other products
and services that simply cannot be otIered by Monsanto. Because base load energy, load
following, and automatic generation control are not offered by Monsanto's products, the peaker
methodology is not an appropnate surrogate for purposes of setting the value of the interrptible
credit.
Finally, nothing in the record supports the use of Monsanto's peaker methodology as a
means of defining the payment to be made to Monsanto for their interruptible products.
Monsanto's curtailment products have been valued consistent with the models that the Company
uses to value all of its commercial wholesale transactions in all six states.
2.
MONSANTO is NOT INTERRUPTED 1000 HOURS A YEAR
BECAUSE OF BUY THROUGH OPTION.
Evidence was also unrefuted that Monsanto has routinely bought through the economic
curtailment notifications. Therefore, even though the 800 to 850 hours of economic curtailment
appear significant, as testified to by Mr. Clements, because of the numerous and frequent buy
through events, the actual physical interrptions have been extremely limited. The economic
curtailment product could more appropriately be termed a "pricing mechanism". Monsanto, as
explained by Mr. Smith, looks at the market price of electricity, inventory levels, customer
orders and makes an economic decision whether to buy through or allow interrptions. Mr.
Smith stated during the hearing that Monsanto's practice has been to buy through a substantial
number of times in accordance with the terms of the contract.
3.
STAFF'S EVALUATION OF THE INTERRUPTIBLE PRODUCTS is
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MORE REASONABLE THAN THE MONSANTO PEAKER METHODOLOGY.
While RMP believe the values proposed by Staff are higher than current market, it
does acknowledge that the values identified by Mr. Hessing are more reasonable than
Monsanto's inflated peaker methodology.
Mr. Clements has proposed two adjustments to Mr. Hessing's analysis which result in
modifying Staff's incremental operating reserve capacity value from $7.3 Millon to $3.0
Milion. See RMP Exhibit 97. The Company would accept staff's valuation with these
modifications.
Monsanto incorrectly attempts to adjust Staffs position at page 4 of its Post-Hearing
Position Statement fied February 7, 2011. Monsanto did not question Mr. Hessing on any such
adjustment and it cannot now imply or assert that Staff's valuation has been adjusted or
increased. No evidence of any such adjustment is in the record and no consideration should be
given to Monsanto's contention that Staf's valuation of the credit was adjusted.
4.
IT WOULD BE UNFAIR TO REQUIRE OTHER RMP CUSTOMERS TO
SUBSIDIZE MONSANTO'S COST OF ELECTRICITY.
Monsanto's Peaker Methodology must be rejected because it would unfairly result in
other RMP customers (in Idaho and other states) subsidizing Monsanto's cost of electricity. This
unjust outcome should not be allowed by the Commission.
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III. CONCLUSION:
RMP asks that the Commission adopt the value for the interrptible credit set forth in
Mr. Clements testimony, to wit:
Operating Economic System
$ millons Reserves Curailment Integrity Total
2011 2.4 3.6 0.1 6.1
2012 3.0 4.0 0.1 7.1
2013 3.3 4.2 0.1 7.6
Alternatively, RMP would accept Staffs valuation, as adjusted by RMP Exhibit 97, in
the event the Commission determines incremental capacity value is. to be assigned to the non-
spining operating reserves product.
Lastly, RMP respectfully requests that the Commission state values for each product for
the three years of20ll, 2012, 2013. The Company and Monsanto wil then need to determine the
actual contract terms and length given the pricing decision by the Commission.
DATED this ~ day of February, 2011.
ROCKY MOUNTAIN POWER
1ò ~~Paul J. Hickey v
Hickey & Evans, LLP
1800 Carey Avenue, Suite 700
P.O. Box 467
Cheyenne, WY 82003-0467
Ph. 307-634-1525
Fx. 307-638-7335
phickeyiihickeyevans.com
Mark C. Moench
Daniel E. Solander
201 South Main Street, Suite 2300
Salt Lake City, Uta 84111
Telephone No. [phone]
Facsimile No. [phone]
mark.moench(ipacificorp.com
danieL. so lander(ipacificorp.com
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