20110711Monsanto Comments.pdf

W. MARCUS W. NYE
RANDALL C. BUDGE
JOHN A. BAILEY, JR.
JOHN R. GOODELL
JOHN B. INGELSTROM
DANIEL C. GREEN
BRENT O. ROCHE
KIRK B. HADLEY
FRED J. LEWIS
ERIC L. OLSEN
CONRAD J. AIKEN
RICHARD A. HEARN, M.D.
LANE V. ERICKSON
FREDERICK J. HAHN, III
PATRICK N. GEORGE
SCOTT J. SMITH
DAVID E. ALEXNDER
JOSHUA D. JOHNSON
STEPHEN J. MUHONEN
CANDICE M. MCHUGH
CAROL TIPPI VOLYN
JONATHON S. BYINGTON
JONATHAN M. VOLYN
BRENT L. WHITING
DAVE BAGLEY
THOMAS J. BUDGE
JASON E. FLAIG
FERRELL S. RYAN, III
AARON A. CRARY
JOHN J. BULGER
BRETT R CAHOON
LAW OFFICES OF
RACINE OLSON NYE ,,~~eflBAILEY
CHARTERED
201 EAST2MidTRI:i: PM 3: 38
POST OFFICE Boxï3g1
POCATELLO, IDAHO 83204-1391
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TELEPHO~Q~Yobr ~~ r~;).' .
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LOUIS F. RACINE (1917-2005)
WILLIAM D. OLSON. OF COUNSEL
July 7, 2011
Re:
~--Jean Jewell, Secretar
Idaho Public Utilities Commission
P.O. Box 83720
Boise, Idaho 83720-0074
Dear Mrs. Jewell:
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Enclosed for filing please find the original and seven copies of Comments of Monsanto
Company in the captioned matter. Than you for your assistance.
Sincerely,
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RCB:rr
Enclosures
cc: Serice List (w/enclosure)
Randall C. Budge, ISB No. 1949
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]l0l
Fax: [phone]
rcb(iracinelaw.net
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ZUlI JUL II Pl1 3: 39
Attorneys for Intervenor Monsanto Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA ITER OF P ACIFICORP )
DBA ROCKY MOUNTAIN POWER'S )
2011 INTEGRATED RESOURCE PLAN )
)
)
)
)
CASE NO. PAC-E-ll-IO
COMMENTS OF
MONSANTO COMPAN
INTRODUCTION
Monsanto Company ("Monsanto") submits these comments to the Idaho Public Utilities
Commission ("Commission") regarding PacifiCorp dba Rocky Mountain Power ("Company")
2011 Integrated Resource Plan ("IRP") filing on April 1,2011 and pursuant to Order No. 32243
giving notice of modified procedure and directing that wrtten comments be filed no later than
July 11, 2011. Monsanto does not request a hearng. At ths junctue, Monsanto does not intend
to offer detailed comments on specific modeling efforts or assumptions employed by the
Company, except as it applies to the Company's existing interptible resources. Instead,
Monsanto wishes to highight certain aspects of the IRP's conclusions, primarly centerng on the
potential cost to ratepayers though implementation of the resource portfolio(s) identified by the
Company as preferable.
THE AFFORDABILITY TEST IS NEITHER ASKED NOR ANSWERED
We note that the IR modeling effort today is an extension of earlier utility planng
efforts that were labeled 'Least Cost' - an acknowledgement that any resource acquisition plan
selected through the planing effort was done so by the fact that the path chosen was identified as
COMMENTS OF MONSANO COMPAN-l
having the least likely impact on ratepayers. Today's modeling continues in a similar vein with
its concentration on PVRR (present value revenue requirement), a term of art for least cost.
In both approaches the Company fails to address the crtical question of whether the
selected resource path is affordable for ratepayers and for the states in which the economic
burden wil be placed. Today this is a critical question to ask given the fact that technology and
capital investments carr an implied cost that supersedes the value of capital investments of a
decade or two ago. Additionally, as acknowledged in the Company's last fied IRP, the recent
economic recession continues to have substantial lingerng impact and is likely to have instiled
in the economy peranent structural change, all of which has greatly lessened the economic
competitiveness of many of our industries and the economic wherewithal of our families. The
bottom line is that while 'least cost' may ver well be the less expensive path to acquiring a
selected portfolio of new resources, such a path violates what is affordable from those who wil
pay for such investments. This is parcularly evident in a PVRR analysis where futue and
highy uncerain benefits are used to justify the ver real and immediate rate impacts to
customers today.
The deterination of the preferred portfolio(s) is, of course, an outcome of the modeling
effort undertaken by the Company. In that regard, the emergence of any single or set of
portfolios can be influenced by the assumptions imbedded within the model and the strcture of
the model algorithms. As an example, the Company's assumptions regarding continuation of the
Production Tax Credits for renewables clearly increase the perceived economic investment of
that class of resources. It is an assumption that provides an advantage to developing more
renewables compared to the case where these credits are either eliminated or phased out in the
emergig fiscal debate in Congress, This is an excellent example of how a model's outcome is
ultimately influenced by how one asks key questions. If no questions were asked regarding the
ultimate impact on ratepayers (by that, not just what the resulting PVR is, but, instead, what is
the ability of the ratepayer to absorb the cost burden), then the selected resource acquisition path
remains only half examined and may fail an 'affordability' test.
One has to look no further than the assumptions imbedded in the Company's modeling
relating to transmission investment. The Gateway Transmission project is included in its entirety
COMMNTS OF MONSANO COMPAN. 2
in the IRP modeL. The reasons underlying its inclusion stem from a varety of implied
assumptions regarding a continuation of a myrad of state and federal policies all aimed at th~
expansion of renewable development in the wester states. No doubt there has been and
continues to be the emergence of a more conducive governent policy toward renewable
development. That in itself is, however, little justification for a massive transmission build-out
that is, first and foremost, aimed at the deliver of Wyoming wind to markets scattered
thoughout varous western states. As the Company states, "One thing is clear; the Energy
Gateway strategy provides the necessar capacity for the Company to be aligned with a green
resource future." IR p. 82 PacifiCorp then fails to ask the question of whether a 'green
resource future' is affordable to the ratepayer today. Yet, the affordability of a 'green resource
futue' is being asked across multiple regulatory venues today. A most recent example can be
seen at the Los Angeles Deparent of Water and Power ("LADWP"), a taget market for
multiple wester based renewable and transmission line developers (including perhaps Gateway).
LADWP has recently experienced considerable controvery before the LA City Council due to
forecasted rate increases that wil be necessar to meet LADWP's aggressive renewable
acquisition program. In a similar maner, the question of cost containment is now being asked as
a crtical factor at the California Public Utility Commission as it moves into rulemakng on the
state's new highy aggressive 33 percent RPS (S.B LX_2).
To highight the ever changig topology of renewable investment in the west, we can
point to PacifiCorp's own revision of its planed Gateway South project. Orginally viewed as
deliverng Wyoming wind to the Crystal substation in souther Nevada, a jumping off spot for
wholesale sales in the Deser Southwest and Souther California, the Company has now
realigned its proposed transmission path to end at Mona, Utah. The reason - no firm taers were
wiling to make a financial commitment to the extended Gateway South configuation. In other
words, the market as conceived originally by the Company did not materialize. One can only
assume that the reason why the origial market configuation did not materal was related to cost,
that is, from the potential third-par off-takers the PacifiCorp proposal was too expensive.
The point of the above examples is quite simple - the Company's assumptions, which
drive in large par the modeling results, are predicated on an ever changing set of realities
COMMNTS OF MONSANO COMPAN. 3
regarding both market behavior and public policy. While it is not possible to ascertain with
cerainty the future, to propose a resource expansion plan based upon a most aggressive set of
assumptions is perhaps equally dangerous. It tends to automatically align the expansion plan to a
futue of course of action that wil entail massive investment. The question of whether these
aggressive resource acquisition plans are affordable - not in the sense that one has a superor
PVRR, but in the tre since of the impact of the economic burden placed upon those that
ultimately underwte these tye of investments should be made a crtical par of the overall
assessment of future resources. We believe the Company has failed to ask or answer this
question in its IRP. The ratepayers are only now beginning to understand the tre cost of the
answer to that crtical question though rate filing after rate filing. When reviewing the proposed
acquisition plans of the Company in this IRP document and more importantly when rate recover
is sought, Monsanto believes it is crtically important that resource acquisitions not simply pass a
least-cost PVRR test, but passed a more crtical test of the affordability.
MONSANTO'S INTERRUPTIBLE RESOURCE
Monsanto also draws the Commission's attention to a reduction of 46 MW in the
Company's assumption of Monsanto's existing interrptible resource. The prior IR included
327 MW of interrptible resources (Table 5.6, PacifiCorp 2008 IRP Update), while the curent
IRP includes only 281 MW (Table 5.11, PacifiCorp - 2011 IRP). The justification for this
decline is unsupportable by PacifiCorp. Monsanto has been a long-standing interptible
customer of the Company, and indeed, nothing has changed during the last several years with
respect to its interrptible products. Consequently, Monsanto recommends that the Commission
reject the Company's faulty assumption of a decline in existing interptible resources in any
ruling on ths IR.
Specifically, the Company basis reducing the existing interptible resource was languge
PacifiCorp insisted upon in the 2007 Electrc Serice Agreement entered into between Monsanto
and PacifiCorp. At that time the Company failed to disclose that this language would in any way
be detrmental to their planing models. For the Company to now claim their own languge
somehow decreases interptible resources by 46 MW is a disingenuous attempt to reduce
existing resources in order to unecessarly boost futue resource needs. If the Company takes
COMMNTS OF MONSANTO COMPAN - 4
issue with the contractual language used as the basis for their reduction, then the prudent and
least-cost course of action would be to advise Monsanto of its desire to revert to pre-2007
language in order to preserve the existing resource. The Company has made no attempt to do so.
RESPECTFULLY SUBMITTED.
DATED this 1l1 day of July, 2011.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
By:~~.~RANDALL C. BUDG
COMMNTS OF MONSANTO COMPAN. 5
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 1"' day of July, 2011, I served a tre, correct and
complete copy of the foregoing document, to each of the following, via the method so indicated:
Jean D. Jewell, Secretar (original and 7)
Idaho Public Utilities Commission
P.O. Box 83720
Boise, ID 83720-0074
E-mail: jjewell~puc.state.id.us U.S. Mail
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
E-mail: ted.weston(ipacificoro.com E-Mail
Daniel Solander
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, Utah 84111
E-mail: mark.moench(ipacificoro.com
danel.solander(iacificorp.com
E-Mail
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon 97232
E-mail: datarequest(ipacificorp.com
E-Mail
Scott Woodbur
Deputy Attorney General
Idaho Public Utilities Commission
P. O. Box 83720
Boise, Idaho 83720-0074
E-mail: scott. woodbur(ipuc.idaho.gov
E-Mail
Katie Iverson
Brubaker & Associates
17244 W. Cordova Cour
Surrise, Arzona 85387
E-mail: kiverson(iconsultbai.com
E-Mail
COMMNTS OF MONSANO COMPAN - 6
James R. Smith
Monsanto Company
P. O. Box 816
Soda Springs, Idaho 83276
E-mail: jim.r.smith(imonsanto.com
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey
P.O. Box 1391
Pocatello, Idaho 83204-1391
E-mail: elo(iracinelaw.net
Anthony Yanel
29814 Lake Road
Bay Vilage, Ohio 44140
E-mail: tony(ianel.net
COMMENTS OF MONSANTO COMPAN-7
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~~,~
RANDALL C. BUDGE