Rebuttal Testimony of Daniel Schettler.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

In the Matter of the Application of PacifiCorp )
dba Utah Power & Light Company for ) Case No. PAC-E-01-16
Approval of Interim Provisions for the Supply )
of Electric Service to Monsanto Company. ) REBUTTAL
TESTIMONY OF
DANIEL R. SCHETTLER

Q: PLEASE STATE YOUR NAME, BUSINESS ADDRESS AND
EMPLOYMENT.
A: Daniel R. Schettler, Monsanto Company, 800 North Lindbergh Blvd, St.
Louis, MO 63167.
Q: ARE YOU THE SAME DANIEL R. SCHETTLER THAT
PREVIOUSLY FILED DIRECT TESTIMONY IN THIS CASE?
A: Yes.
Q: WHAT IS THE PURPOSE OF YOUR TESTIMONY?
A: I will discuss PacifiCorp’s new curtailment proposal and describe why it
is not adequate to meet Monsanto’s price needs. Additionally, I will
address certain positions asserted by Bruce W. Griswold in his Rebuttal
Testimony.
Q: WHEN DID MONSANTO FIRST LEARN IN THIS CASE THAT
PACIFICORP WAS WILLING TO PROVIDE MONSANTO AN
ELECTRIC SERVICE AGREEMENT AND SEPARATE
Rebuttal Testimony of Daniel R. Schettler

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CURTAILMENT AGREEMENT THAT HAVE THE SAME
LENGTH OF TERM?
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A: We learned in late August 2002, upon reading the Rebuttal Testimony of Mr.
Griswold filed August 23, 2002, at page 1, lines 15-18. The Company’s
Application and Direct Testimony filed previously in this case gave no
indication that PacifiCorp would enter into an agreement for curtailment that
had the same term as the electric service agreement. To the contrary, in this
proceeding prior to Mr. Griswold’s Rebuttal Testimony, PacifiCorp has
repeatedly and continuously insisted that curtailment would only be acquired
from Monsanto pursuant to short-term agreements. Monsanto is pleased that
PacifiCorp now concedes in its Rebuttal Testimony that interruptible service
will be provided, and that both firm and interruptible service will be provided
simultaneously for a fixed term. We only wish this concession had been made
long ago, which would have facilitated settlement negotiations and avoided the
considerable effort made in Monsanto’s filing to oppose PacifiCorp’s new
policy against long-term interruptible contracts.
Q: DO YOU AGREE WITH MR. GRISWOLD’S TESTIMONY ON
PAGE 1, LINE 20-22, THAT ALL DURING CONTRACT
NEGOTIATIONS, PACIFICORP WAS WILLING TO ALIGN
THE TERMS OF ALL AGREEMENTS SUCH THAT THEY
WERE OF THE SAME LENGTH OF TERM?
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A: No. Mr. Griswold’s statement is totally irrelevant to the issues
presented to the Commission in this case and ordinarily should be
ignored as unworthy of a response. However, Monsanto feels
compelled to respond. First, because Mr. Griswold’s statement is
absolutely inaccurate. Second, because Mr. Griswold improperly
brought before this Commission the substance of settlement
negotiations between the parties which were highly confidential and
privileged communications. It is my understanding that confidential
settlement negotiations are not admissible evidence and should
properly be stricken from the record. While Monsanto believes it is
totally inappropriate and in bad faith to discuss before this Commission
any details of confidential settlement negotiations, I will do so only to
the extent necessary to respond to Mr. Griswold’s statement. At no
time, from the time our settlement negotiations began in 1999 until
August 21, 2002, did PacifiCorp ever offer Monsanto a long-term
curtailment agreement of the same term as an electric service
agreement, either in a single agreement or separate agreements. The
first time any such proposal was ever made by PacifiCorp was just a few
days ago on August 21, 2002, when I traveled to Portland and met with
Mr. Griswold, Mr. Kline, Sr. Vice President for PacifiCorp, and others in
a final attempt to negotiate a settlement of this case, in addition to
settling the pending Federal Court litigation, and Monsanto’s kiln-
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Rebuttal Testimony of Daniel R. Schettler

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damage claim. Following our meeting, PacifiCorp sent me draft terms
for a proposed Electric Service Agreement and Interruptible Agreement
of equal terms. This was essentially the same document now marked as
Mr. Griswold’s Exhibit 10, except that some of the pricing terms were
changed and the document I received was clearly marked confidential
for the purpose of settlement of litigation. It appears obvious that after
Monsanto’s Testimony was filed, PacifiCorp changed its tune and abandoned
its previously-stated policy of offering only short-term curtailment agreements.
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Q: DO YOU HAVE COMMENT ON MR. GRISWOLD’S EXHIBIT NO. 9,
THE NOVEMBER 5, 2001 LETTER FROM FRANK MITCHELL TO
THE COMMISSION?
A: Yes. First of all, PacifiCorp did not provide Monsanto with a copy of this
letter. Nor was Monsanto invited, nor aware, that PacifiCorp was meeting
October 25, 2001, with the Commission and Staff for the purpose of discussing
the negotiations with Monsanto, as referred to in Mr. Mitchell’s letter. We are
surprised and disappointed to know that PacifiCorp cannot be trusted to honor
the confidential and privileged nature of settlement negotiations, despite their
claims of good faith negotiations.
Q: ARE THE TERMS OF PACIFICORP’S NEW PROPOSAL DETAILED
IN MR. GRISWOLD’S REBUTTAL TESTIMONY AND EXHIBIT 10
ACCEPTABLE?
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A: No. Without discussing all reasons, the primary objection Monsanto has is
that the net price of $27 per MWH proposed by PacifiCorp will not allow the
Soda Springs plant to remain competitive. Additionally, PacifiCorp continues
to insist that the price be adjusted with tariff rate changes. This does not
provide the required price stability and certainty as discussed in my Direct
Testimony.
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Q: DO YOU HAVE ANY COMMENTS ON THE CALCULATION OF
MONTHLY PAYMENTS FOR THE CURTAILMENT OPTIONS
UNDER THE SEPARATE INTERRUPTIBLE AGREEMENT
DISCUSSED ON PAGE 9, LINES 1-7 OF MR. GRISWOLD’S
REBUTTAL TESTIMONY, AND ALSO ON PAGE 8 OF MR. WATERS’
REBUTTAL TESTIMONY?
A: Yes. Mr. Griswold and Mr. Waters calculate the operating reserves payment
for 95 MW, which would be Monsanto Furnaces 7 and 8. They then calculate
the economic curtailment payment for 46 MW. That payment should be
calculated for 67 MW, the size of the remaining Furnace No. 9. Mrs. Iverson’s
and Mr. Rosenberg’s rebuttal testimony will address the correct calculations
and value.
Q: AS A RESULT OF PACIFICORP’S REBUTTAL TESTIMONY, IS
MONSANTO WILLING TO CHANGE ANY OF THE TERMS OF ITS
PROPOSAL TO THE COMMISSION FOR ELECTRIC SERVICE AS
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DISCUSSED IN YOUR DIRECT TESTIMONY AND EXHIBIT NO.
210?
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A: Yes. If necessary, to achieve the stable price of $18.50 per MWH for a 5-year
contract term requested by Monsanto for the Soda Springs plant, Monsanto is
willing to propose an alternative curtailment proposal. It has been Monsanto’s
understanding based on numerous conversations and meetings with PacifiCorp
that operating reserves were of greater value to PacifiCorp as economic
curtailment. However, Mr. Griswold’s and Mr. Water’s Rebuttal Testimonies
place a considerably higher value on economic curtailment than on operating
reserves. Accordingly, Monsanto now proposes to eliminate the 300 hours of
operating reserves curtailment previously proposed, and offers economic
curtailment of up to 1000 hours (12%) per year. Additionally, Monsanto
offers up all three furnaces, provided a two-hour notice of curtailment is given
when all three furnaces are to be taken down simultaneously as proposed by
PacifiCorp in Mr. Griswold’s Exhibit 9. The emergency curtailments and
other terms would continue as set forth in Exhibit A to Monsanto’s Proposed
Electric Service Agreement, Exhibit 210. The Rebuttal Testimony and
Exhibits of Mrs. Iverson quantify the value of this alternative curtailment
proposal.
Q: DO YOU AGREE WITH PACIFICORP’S ARGUMENT THAT THE
EFFECTIVE PRICE MONSANTO IS CURRENTLY PAYING IS $23.50
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PER MWH, AS A RESULT OF THE $30 MILLION PAYMENT MADE
IN 1995?
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A: No. Monsanto definitely considered the $30 million as a buy-out of the old
1992 Contract. Additionally, Monsanto reflects power supply costs under the
1995 Contract on the books at $18.50 per MWH. In fact, since Monsanto
entered into the 1995 Contract, it has never paid more than $18.50 per MWH.
In each of the last 3 years, Monsanto’s annual energy rate has actually been
considerably less than $18.50, as a result of payments received under various
Operating Reserve Agreements and the Deferred Outage Agreement. As a
result, the net price Monsanto paid to PacifiCorp was as follows:
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2000 $17.5726
2001 $16.6103
2002 $18.237 (Year to date through July)

Keep in mind that PacifiCorp came to Monsanto to acquire these interruptions.
When PacifiCorp argues that the effective price is $23.50, it conveniently
neglects to mention that the pricing for the 1995 Contract provided no
operating reserve or economic curtailment, while the proposed new contract
provides 1000 hours of curtailment.
Q: ARE THERE OTHER ASPECTS OF PACIFICORP’S REBUTTAL
TESTIMONY MONSANTO DISAGREES WITH?
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Rebuttal Testimony of Daniel R. Schettler

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A: Yes. Some of these areas will be addressed by the Rebuttal Testimony of Mr.
Anderson, Mrs. Iverson and Mr. Rosenberg. The fact that Monsanto may not
specifically address in its Rebuttal Testimony all of the points raised by
PacifiCorp should not be construed as acceptance or approval.

Q: DOES THIS CONCLUDE YOUR TESTIMONY?
A: Yes.