20101022notice_of_technical_hearing_order_no_32098.pdf

Office of the Secretary
Service Date
October 22 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF P ACIFICORP DBA ROCKY MOUNTAIN
POWER FOR APPROVAL OF CHANGES TO
ITS ELECTRIC SERVICE SCHEDULES
CASE NO. PAC-IO-
NOTICE OF
FURTHER SCHEDULING
NOTICE OF
TECHNICAL HEARING
(Economic Valuation of
Monsanto Interruptible Products)
ORDER NO. 32098
On May 28 2010, PacifiCorp dba Rocky Mountain Power (RMP; Company) filed an
Application with the Commission for authority to change its electric service schedules to reflect
a proposed revenue increase of $27.7 million, or 13.7%. The rate case is scheduled for technical
hearing beginning November 30, 2010. The current suspension period for the rate case expires
December 28 , 2010. Order No. 32001.
On September 30, 2010, the Company filed supplemental testimony with the
Commission regarding the economic valuation of interruptible products (operating reserve
economic curtailment, and system integrity) offered by Monsanto Company and purchased by
PacifiCorp. The MonsantolPacifiCorp business relationship is currently defined by a 2008
Service Agreement (i.e., a contract) and electric tariff Schedule 400. The Service Agreement
expires December 31 , 2010.
On October 1 , 2010, Monsanto filed a Motion to Dismiss the rate case or Strike the
Supplemental Testimony of Paul H. Clements. On October 8 , 2010, PacifiCorp and Commission
Staff each filed Answers to Monsanto s Motion. PacifiCorp opposed Monsanto s Motions. Staff
recommended that the issue presented by the supplemental testimony of Mr. Clements be moved
to a new case. Monsanto and PacifiCorp each opposed Staffs recommendation.
On October 18 , 2010, the Commission convened an oral argument to consider the
Motion and the Answers. Order No. 32093. Appearing before the Commission and presenting
oral argument were PacifiCorp represented by Paul 1. Hickey, Monsanto Company represented
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ORDER NO. 32098
by Randall C. Budge, and Commission Staff represented by Scott D. Woodbury. Also in
attendance but not participating was Ben Otto, attorney for Idaho Conservation League.
DISCUSSION AND COMMISSION FINDINGS
The Commission has reviewed PacifiCorp s supplemental testimony, Monsanto
Motion to Dismiss or Strike (and accompanying brief), and the related Answers of PacifiCorp
and Commission Staff. We have also reviewed PacifiCorp s electric Schedule 400 (Monsanto),
the 2008 Service Agreement between PacifiCorp and Monsanto, Order No. 30197 in Case No.
PAC-06-09 (approving Monsanto s 2007 Agreement) and Order No. 30482 in Case No. PAC-
07-05 (approving the 2008 Service Agreement).
The Commission thanks the parties for their presentations and response to
Commission questions.
In Order No. 30197 we stated:
The transition of Monsanto from contract to tariff standard customer, we find
will facilitate future rate adjustments and should serve to keep Monsanto
rates better aligned with its cost of service. We appreciate that in moving to a
tariff-based rate Monsanto has given up some of the certainty provided in a
contract-based rate structure. In doing so , however, we note that Monsanto
was the' last of PacifiCorp s contract customers to make the transition. While
tariff rates may present Monsanto with new challenges, we perceive the
regulatory result to be positive and one of greater equity. Under the submitted
Agreement Monsanto s future rates after January 1 , 2008 will be adjusted
using the same process as all other customers.
Included in the Agreement are three interruptible prOViSIOns that provide
operational benefits to PacifiCorp. The products offered also provide
Monsanto with a means of controlling its net energy price. We find the
products to be priced at a level commensurate with the value they represent
today. Monsanto contends that public disclosure of the interruptible demand
credit will compromise its ability to compete in the world market for
elemental phosphorus. We accept its certified representations as true and
agree to maintain the confidentiality of that information.
The Commission also recognizes that the value of interruptible products
furnished by Monsanto as well as Monsanto s cost of service will be
important considerations in establishing the net rate to Monsanto in the future.
Consequently, we expect the parties to address interruptible product
valuation in the context of a general rate case when Monsanto s cost of
service is determined.
Order No. 31097, p. 9 (emphasis added).
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In moving Monsanto from a contract customer to a Schedule 400 tariff customer, we
did so with the understanding that the general nature of electric service long provided to
Monsanto by PacifiCorp (and its predecessors) would remain unchanged, i.e., a small amount of
firm power and energy and a much larger amount of interruptible power and energy. Moving
Monsanto from a contract customer to a tariff customer, we find, carried with it the continuing
responsibility of PacifiCorp to negotiate and bargain in good faith. We find this to be a minimal
standard of behavior, a standard that we expect of our regulated utilities in all business relations
with their customers. PacifiCorp represents that "the analysis and economic value for
interruptible services has been the topic of information, exchange, discussions, and negotiations
for approximately half a year." Answer (Response), p. 6. The Commission doubts that true
negotiation can be conducted if the utility s representative, as indicated at oral argument, has no
authority to negotiate or bind the Company. Monsanto and PacifiCorp, as explained at the
argument, have failed to reach agreement on terms for interruptible service beyond the contract
termination date of the 2008 Agreement. Despite Mr. Budge s representations to the contrary,
the only recital of the interruptible credit amount is that set forth in the 2008 Agreement, and that
expires December 31 , 2010. Thus, it is necessary for this Commission to establish an
interruptible credit value and terms of service beginning January 1 , 2011 , for Monsanto.
When the Commission stated "we expect the parties to address interruptible product
valuation in the context of a general rate case when Monsanto s cost of service is determined " it
was not a suggestion, it was a requirement. We are informed by Staff that PacifiCorp in its June
, 2007 general rate case neglected to file interruptible product valuation testimony and had to be
reminded by Monsanto on June 21 , 2007, to do so. We find that PacifiCorp in this present rate
case again failed to file testimony addressing interruptible product valuation. In its filed
response to Monsanto s Motion, the Company states, it "did not include direct testimony to
support its valuation of interruptible services in its Application because it wanted to give the
parties the opportunity to negotiate and reach agreement." Response, pp. 6-
In failing to file its interruptible product valuation testimony with its Application, we
find that PacifiCorp has failed to comply with the prior Commission Order. Order No. 31097;
Idaho Code 9 61-406. We find that PacifiCorp s late filing of an issue merely two weeks before
the date for Staff/intervenors direct testimony will unacceptably disrupt the processing of the rate
case and development of a proper decision record unless we adjust the schedule. We find also
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that without adjustment the untimely filing of the new supplemental testimony may be adverse to
the procedural rights of other parties who may wish to conduct discovery and submit testimony
on this issue. PacifiCorp and Monsanto insist that the issue of the economic valuation of
Monsanto s interruptible products be taken up and considered in the rate case docket.
accordingly find it reasonable and necessary to toll the existing suspension period and amend the
scheduling of this rate case to allow the parties to fully address this issue, to investigate, to
prepare direct testimony, and prepare cross-examination and rebuttal. In doing so, we reject
Staff s recommendation to open a separate proceeding.
To establish a clean record for decision, we find it reasonable to consider the
economic valuation of Monsanto s interruptible products separately from the rest of the
Company s rate case. We direct Monsanto (and all parties who have addressed this issue in their
October 14 2010 prefile) to separate this issue out and re-file their direct testimony on all other
issues no later than the close of business, November 1 2010.
We accept the supplemental testimony of Mr. Clements as the Company s direct
filing on this issue. In accepting Mr. Clements' testimony we reject Monsanto s argument that
PacifiCorp should be precluded from advocating for any interruptible credit value less than the
existing amount. Monsanto Brief, p. 7. We find that it does not serve the public interest or
contribute to a reasoned decision process to restrict testimony on valuation. As the decision
maker, we should hear arguments both for an increase and decrease in the credit amount. We
find Monsanto s statements that it "had every reason to believe that no decrease in the
interruptible value was being sought" (Brief, p. 3) and that "much to the surprise of Monsanto
the Company in its supplemental testimony is proposing for the first time new methodologies
analysis and recommendations" (Brief, p. 3) to be disingenuous. The "front office" and "GRID"
valuation methodologies presented by the Company in Mr. Clements' testimony are not "new" to
Monsanto but are the same methodologies presented by the Company to Monsanto in the 2008
Agreement filings. Further, we find that on March 18 2010, PacifiCorp provided Monsanto with
notice of its intent to terminate the 2008 Agreement pursuant to the terms of the contract.
PacifiCorp Answer, p. 6. This is undisputed. Both PacifiCorp and Monsanto are experienced
and sophisticated in their business practices. We do not accept posturing to the contrary by
either party.
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We establish the following scheduling and technical hearing dates for the separated
issue of the economic valuation of Monsanto s interruptible products.
December 22, 2010 Staff/Intervenor direct testimony prefile
deadline
January 14 2011 Rebuttal testimony prefile deadline
February 1 (2) , 2011 Technical hearing (economic valuation of
Monsanto interruptible products) commencing
at 9:30 a.m. in the Commission s Hearing
Room, 472 W. Washington Street, Boise
Idaho
All testimony filings on this issue (including the supplemental testimony filing of Mr. Clements)
should clearly state in the first page heading following witness identification "Economic
Valuation of Monsanto Interruptible Products." Acknowledging the Company s stated ability to
do so, data requests pertaining to the supplemental testimony are to be responded to by the
Company within seven calendar days of receipt of such requests.
It is the Commission s intent to issue an interim order by December 28, 2010
establishing rates for all tariffs, save and except the interruptible credit portion of Monsanto
Schedule 400. Given the presentation of the evidence on this issue at this late date and the new
schedule set out above, we find it reasonable to continue the existing interruptible credit that
would otherwise expire by contract on December 31 , 2010, until the matter is decided by the
Commission. As per the stated willingness of PacifiCorp and Monsanto at oral argument, all
other service terms in the 2008 Agreement shall remain unchanged.
Finally, we find it fair, just and reasonable to toll the suspension of the rate case for
61 days, so that the Commission can decide the valuation of interruptible products provided by
Monsanto. Addressing this issue in the present rate case, we find, is administratively more
efficient than opening a new case. As mentioned above, it is our intention to issue an interim
rate order by December 28, 2010 , so that those rates can be decided and implemented and then
take up the interruptible issue. Tolling the present suspension period also avoids the possibility
of two reconsideration periods - one during the processing of the interruptible issue.
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ORDER
In consideration of the foregoing and as more particularly described above IT IS
HEREBY ORDERED and the Commission does hereby (1) deny the Motion of Monsanto to
Dismiss or Strike; (2) toll the suspension period for the Company s rate case 61 days from
October 28 2010 to December 28 2010; (3) continue the existing interruptible credit (and terms
of service) under the Monsanto contract until February 28, 2011; (4) adopt the foregoing
procedure, scheduling and hearing dates for the issue of economic valuation of Monsanto
interruptible products; and (5) require Monsanto and all parties who have addressed the
economic valuation of Monsanto interruptible products in their October 14, 2010 filings to
separate this issue out and re- file their direct testimony on issues other than that no later than the
close of business, November 1 2010.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;l.J. 1tJ...
day of October 2010.
~ff. JIM . KEMPTON, PRES ENT
t;b" th-
ARSHA H. SMITH, COMMISSIONER
ATTEST:
bls/O:P AC-l 0-07 _sw9
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ORDER NO. 32098