20030327JR Simplot Co. Comments.pdf

--5'-13
ECC:.1\'EO
~:t en
, .~'~
"'.., 8":r.c'1
. ;:'.
hi! '.;' oJ"';
, . . ,,'" ...,.
TiU - i:.
, ),
d'-'
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FILING BY
PACIFICORP DBA UTAH POWER & LIGHT
COMPANY OF ITS 2003 ELECTRIC
INTEGRATED RESOURCE PLAN (IRP)
CASE NO. PAC-03-
COMMENTS OF THE J. R. SIMPLOT
COMP ANY
COMES NOW, the J. R. Simplot Company ("Simplot") and pursuant to that Notice of
Filing issued by the Secretary of the Idaho Public Utilities Commission ("Commission ) on
February 12, 2003, and provides its comments on the IRP filing by PacifiCorp (Utah Power &
Light) referenced the above.
Simplot asks the Commission to consider the filed IRP ofPacifiCorp as having been
developed against the backdrop of a western regulated electric industry where there are more
constants than variables. Many of the changes and variables of this industry are being proposed
by the investor owned utilities themselves, such as PacifiCorp. The degree of public
involvement from industrial endusers and customer interest groups in the IRP has perhaps, not
been as comprehensive as necessary or possible.
COMMENTS OF THE J. R. SIMPLOT CO MP ANY - 1
As an industrial enduser, we agree that a diverse portfolio ofresource options follows the
prudent path suggested by the many types of endusers which are distinguished by volume and
consumption patterns. PacifiCorp has been supportive of cost effective demand side
management programs and of industrial enduser dollars flowing to industrial energy
conservation projects. That past and continued position is appreciated.
The lack of a legitimate discussion ofPURP AlA voided Cost projects (the energy from
which is priced, based on a surrogate avoided resource) is distressing and leaves the report
incomplete. PacifiCorp has not been a supporter of the development of these projects, nor their
inclusion into their generation portfolios. They continue, however, to develop regulated projects
whose energy price costs seem to exceed that of published avoided cost rates in the states where
they operate.
Throughout the Northwest, industrial endusers are telling electric utilities and state
agencies that they would like to see the next generation of large power plants built with coal as
the fuel. Very few knowledgeable energy experts, if any, would disagree that natural gas is a
just-in-time commodity. In fact, it appears as deliverability decreases and with only modest
gains in drilling, the industry could be .8 bcfd to 2 bcfd short over the next twelve months.
Continued use of natural gas across the United States to generate electricity at the approximate
rate of 40 mmcfd per 230 megawatts exacerbates the supply/demand picture forcing gas prices to
rise and stay high significantly into the future. There is in fact, a question as to whether the
United States and Canadian oil and gas industry have the infrastructure to meet demand even
with the higher prices. Demand destruction will inevitability occur limiting recovery and growth
of the economy.
PacifiCorp s acquisition of renewable resources, especially wind, which are advertised as
exceeding the amount ultimately requested or mandated by state and federal agencies seems to
be designed to curry favor with specific individuals and agencies rather than meet the test of
economic reality and the best interests of all rate payers.
COMMENTS OF THE J. R. SIMPLOT COMPANY- 2
Historically PacifiCorp has added generation with high cost (at the time) fuel contracts
such as Hermiston in the rate base while shepherding low cost projects like Klamath Falls into its
unregulated merchant side. The West Valley proj ect in Utah is an example of a perception issue
relating to the separation of the regulated and unregulated side of their business. The acquisition
of western coal facilities in the mid 1990's was done at a time when it appeared that PacifiCorp
mission was to become the preeminent electric supplier/utility in the western United States.
Comments and logical thoughts that these facilities would ultimately require financially
significant environmental upgrades were apparently given short shrift.
It still remains unclear in the IRP whether the underlying demand forecast assumes the
effects ofPacifiCorp s projected costs for hydro relicensing (and the attendant loss of hydro
capability) and emission improvements on PacifiCorp s existing coal facilities. PacifiCorp has
stated that these costs will be in the billions. While Appendix K provides a brief sketch of
PacifiCorp s load forecasting approach it fails to provide key assumptions that admittedly impact
the load forecast. Examples would include changes in the price of electricity, price and
availability of competing fuels and changes in the composition of economic activity. With the
load forecast being the fundamental foundation of any IRP, there should be a more detailed
explanation of the key assumptions used in the analysis (including whether the costs mentioned
above are reflected in the load forecast).
It would also make the IRP more useful to customers to know whether the hydro and coal
plant emission costs are included in the rate projections (page 116) and if not, what those rate
projections would be if they were included.
In summary, we encourage the Commission to further publicly discuss this IRP and the
ramifications and signals of simply accepting it. Future base load capacity should be coal, with a
COMMENTS OF THE J. R. SIMPLOT COMPANY-
thorough discussion of appropriate generating resources for peaking capacity including an Idaho
Power Company-type risk advisory program for market access and relevant specific rate designs.
There is a great deal of valid analysis in the IRP but the questions must be asked, are
assumptions valid and are the conclusions fair to all concerned, shareholders, employees, and
rate payers, and will the results be good public policy for the future, short term and long term.
DATED this 26th day of March 2003.
1. R. SIMPLOT COMPANYRJ~~~David Hawk
Director, Energy Natural Resources
COMMENTS OF THE J. R. SIMPLOT COMPANY- 4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 26th day of March, 2003 , a true and correct copy of
the within and foregoing COMMENTS OF THE 1. R. SIMPLOT COMPANY, in Case No.
P AC- E-03-, was served on the following by the method indicated:
Commission Secretary
Idaho Public Utilities Commission
472 West Washington Street
PO Box 83720
Boise, Idaho 83720-0074
(via hand delivery)
Janet Morrison
Directory of Resource Planning
PacifiCorp
825 NE Multnomah Steet, Ste 800
Portland, Oregon 97232
John Eriksson
Stoel Rives LLP
201 S. Main, Ste 1100
Salt Late City, UT 84111
//-
,IPi"YKari ryant
Administrative Assistant
COMMENTS OF THE J. R. SIMPLOT COMPANY - 5