20101014Corrected Brief in Support.pdf

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]
Fax: [phone]
rcb§racinelaw.net
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Attorneys for Intervenor Monsanto Company
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 AND A PRICE INCREASE OF )
$27.7 MILLION, OR APPROXIMATELY )13.7 PERCENT )
)
Case No. PAC-E-IO-07
BRIEF IN SUPPORT OF MOTION TO DISMISS OR STRIKE TESTIMONY
COMES NOW Intervenor, Monsanto Company ("Monsanto"), though counsel, and
hereby submits this Brief in support of its Motion to Dismiss or Strike Testimony of Paul J.
Clements.
STATEMENT OF MATERIAL FACTS
Monsanto is the largest single-point customer on the PacifiCorp system in its six-state
service area with an electrical load of just under 200 MW. On average, Monsanto consumes
approximately 1.4 milion MWH of electricity, roughly 42 percent of Rocky Mountain Power's
("Company's") Idaho jurisdictional load, contributing annual revenues exceeding $42.4 milion.
Monsanto mines phosphate ore in eastern Idaho utilized at the Soda Springs plant to produce
elemental phosphorus. Electricity is the largest single cost of producing phosphorus at
Monsanto's Soda Springs plant. With three electric fuaces and approximately 20 MW of
auxiliar load, of which 9 MW is firm, Monsanto's total load is approximately 182 MW.
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - i
Monsanto is a unique customer because it supplies 1,050 hours in three interrption options to
provide operating reserves, system integrty, as well as economic curtilment to Rocky Mountain
Power.
Monsanto has been a special contract customer of Rocky Mountain Power (PacifiCorp)
and its predecessor, Utah Power and Light Company, since 1951. Except for 9 MW of firm load,
Monsanto has always been an interruptible customer. The current electric service agreement,
effective Januar 1,2008, ("2008 Agreement"), was approved by the Commission's Order No.
30482, entered December 28, 2007, which approved a Stipulation offered as a proposed
settlement of the rate issues in Case No. PAC-E-07-05. The Stipulation paragraph 33 and Order
No. 30482, at page 8, stated:
"The curailment valuation for Monsanto is based on a "black box" determination
with no pary accepting a specific methodology for setting this valuation."
The terms and conditions of the 2008 Agreement approved by the Commission, including
the monthly charge for firm power and energy and interrptible power and energy are set fort in
Electric Service Schedule No. 400.
APPLICATION OF ROCKY MOUNTAIN POWER
On May 28, 2010, Rocky Mountain Power fied the Application of Rocky Mountain
Power For Approval of Changes to Its Electric Service Schedules and a price increase of $27.7
milion, or approximately 13.7 percent ("Application"). The proposed increase to Monsanto's
contract Schedule 400 was 19.6 percent, the largest of any customer.
In recognizing the value of Monsanto's interruptible products, this Commission has
recognized their importance in establishing the net rate to Monsanto in the future and directed the
parties to address interrptible product valuation in a general rate case.
In Order No. 30197 entered December 18,2006, in Case No. PAC-E-0609, the
Commission stated:
"The Commission also recognizes that the value of interrptible products
furnished by Monsanto, as well as Monsanto's cost of service, wil be important
considerations in establishing the net rate to Monsanto in the future.
Consequently, we expect the paries to address interrptible product valuation in
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 2
the context of a general rate case when Monsanto's cost of service is determined."
Notwithstanding this clear directive from the Commission, Rocky Mountain Power
inexplicably failed to address in its direct testimony any discussion regarding any decrease to the
value ofthe interrptible products. The Application included the existing value for interrptible
products provided to the Company as a component of the total net power costs. The Application
presented no testimony, exhibits, or work papers presenting or proposing any decrease to the
interrptible credit value established by the paries as a "black box" settlement in the last case.
Case No. PAC-E-07-05. Nor did Rocky Mountain Power present any exhibit showing any
proposed change in Schedule 400 as would have been required by Rule 121 if a change was
sought. As such, Monsanto had every reason to believe that no decrease in the interrptible value
was being sought. From the outset, Monsanto has dilgently pursued discovery and is now
finalizing its direct testimony to meet the October 14 filing deadline in reliance upon the
Company's initial filings.
Much to the surrise of Monsanto, on September 30, 2010, more than four months after
the Application was filed and just two weeks before intervenor testimony is due, Rocky
Mountain Power fied supplemental testimony of Paul H. Clements ("Clements testimony")
proposing for the first time new methodologies, analyses, and recommendation regarding the
economic valuation of the interruptible products offered by Monsanto, proposing a new reduced
value, which is 62 percent lower than the value in the existing contract and the May 28, 2010
Application. This results in a 54 percent net increase in Monsanto's overall rate, more than
double what was proposed in the Application.
ARGUMENT
1. The Company's Application to Change Rates Fails to Comply With the Rules of
Procedure and Order No. 30197 and Should Be Dismissed in its Entirety.
In Case No. PAC-E-06-09, Order No. 30197 ("The Order") moved Monsanto from a
contract to a tariff-based rate for the first time, stating:
~~The transition of Monsanto from contract to tariff standard customer, we find,
wil faciltate future rate adjustments and should serve to keep Monsanto's rates
better aligned with its costs of service. We appreciate that in moving to a tariff-
based rate, Monsanto's has given up some of the certainty provided in a contract-
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 3
based rate structure."
In the Order, the Commission also recognized that the value of interrptible products
fuished by Monsanto, as well as Monsanto's cost of service, will be important considerations
in establishing the net rate to Monsanto in the future. For that reason, the Commission ordered:
"Consequently, we expect the paries to address interrptible product valuation in the context of
a general rate case when Monsanto's cost of service is determined." Order, p. 9. The Company
knew that valuing Monsanto interruptibility was not only important, but necessar to establish
the net rate for Monsanto in this case, as admitted by the Clements testimony. Clements
testimony page 3, lines 8-13. The Company not only had every opportunity, but an absolute
obligation under the Order, to address interrptible product valuation and in particular any
decrease that would negatively impact Monsanto. Instead, the Company chose to ignore it and
remained silent on this critically important issue until the eleventh hour. The Order specifically
provided that Monsanto's interrptible product valuation must be addressed "when Monsanto's
cost of service is determined." Accordingly, the time to file for a decrease in the credit, which
the company now seeks, was at the same time the Application was fied for an increase in firm
rates.
The Clements testimony is a thinly veiled attempt to correct the Company's defect and
omission in the original Application and amounts to an improper amendment to the pleadings
because amendment is only allowed by leave of the Commission. Rule 66.
Furhermore, by failing to set forth the reduction to the Monsanto interrptible product
valuation and the resulting proposed changes of the existing rates and tariffs of Monsanto in the
Application, the Company has failed to comply with Rule 121 which governs the form and
contents of an application to change rates. Rule 121 provides in pertinent par:
"121. FORM AND CONTENTS OF APPLICATION TO CHANGE RATES
(Rule 121).
01. Utilty Applications to Change Rates. Applications by any public utility
to increase, decrease or change any rate, fare, toll, rental or charge or any
classification, contract, practice, rule or regulation resulting in any such
increase, decrease or change must include the following data:
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 4
a. An exhibit showing in full each proposed change in rates, tolls, rentals,
charges, rules or regulation by striking over proposed deletions to existing
tariffs and underlining proposed additions or amendments to existing
tariffs, except applications to increase or decrease all or almost all rates
and charges by a uniform percentage or by a uniform amount may be made
by filing a tariff listing the proposed change and all unchanged rates and
charges or rates and charges not changed by a uniform percentage or a
uniform amount, or by use of another designation previously approved by
the Commission that clearly calls attention to all proposed changes in
numbers or wording. . . .
02. Proposals Based Upon Computer Modeling. In addition, in any
application in which a computer model is used to represent or simulate
processes from which the revenue requirement is derived or upon which
allocations of the revenue requirement to different customer classes are based,
complete documentation of all those computer models must be supplied to the
Staff, upon request, and be available in the utility's office or other depository."
Neither the Application nor the Clements testimony included any exhibit showing
a decrease in the value of Monsanto interrptible products as required by Rule 121.01a.
Quoting the testimony of Clements, the Company now proposes to value the Monsanto
interrptible products based upon the "Front Office model" and "the GRID modeL." See
Clements testimony page 14, lines 4-18. These models have never been previously
approved by the Commission for valuing Monsanto's interruptible products and are
presented for the first time in this case by the Clements testimony.
In fact, Monsanto asked the Company to provide such a GRID model in order to
evaluate the value of its interrptible products in Monsanto Data Request 3.41. The
Company responded as follows:
Monsanto Data Request 3.41
Please provide a GRID model populated with the latest forecast information for
2011,2012 and 2013 so that Monsanto can evaluate the system value of Monsanto
curtailments and non-spin reserves.
Response to Monsanto Data Request 3.41
The Company objects to the request on the basis that the Company has not
prepared such an analysis. The Company has provided the GRID model to
Monsanto so they can perform their own analysis. The net power cost study in the
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 5
current proceeding includes the contract that was entered into in 2007 and is
curently in effect for Monsanto curailment and non-spin reserves.
Without explanation, the Company now proposes to use the very same GRID
model analysis to establish a reduction in the value which they previously indicated to
Monsanto did not exist. Furhermore, the Company stated in the response that the curent
proceeding includes the curailment value currently in effect, and thus gave no indication
that a decrease was waranted. It is obvious now the Company was not being forthright
in responding to Monsanto's data request and has been "hiding the ball" for months.
The Clements testimony suggests that beyond December 31, 2010, "there wil be
no contract in place governing curtailment or obligating the paries to any contract terms."
Clements supp, page 26, lines 19-23. This statement, like many others in his testimony
which wil not be addressed at this time, is clearly erroneous. Monsanto's 2008 Electric
Service Agreement with PacifiCorp provides in paragraph 2.1 for a term commencing on
Januar 1,2008 and ending on December 31, 2010. It then goes on to provide that "after
the termination date, PacifiCorp shall continue to provide any electric service to
Monsanto as specified in Idaho Electric Service Schedule No. 400 or its successor then in
effect until such time as the Commission establishes or approves other terms and
conditions and prices." As such, the terms of the electric service agreement and Schedule
400 wil remain controllng and operable until changed by the Commission. While the
delay arguably may result in some prejudice to the Company, it is the Company alone that
should bear this burden and responsibilty by reason of the untimely fied Clements
testimony.
The Company's Application should be dismissed by reason of its failure to
comply with the Order and Rule 121.
2. The New Clements Testimony Is Untimely, Prejudicial, and Should Be
Dismissed.
If the Commission chooses not to dismiss the Application, the Clements testimony
should be dismissed as a late-fied pleading that is untimely, filed without the requisite
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 6
order from the Commission, prejudicial and adversely affecting the substantial rights of
Monsanto and other parties.
Without first obtaining Commission approval, the Clements testimony amounts to an
improper amendment of the Application by attempting to reduce the interruptible credit
value in the existing contract and the May 28th Application to a new much smaller
amount. The effect is to lower Monsanto's curtailment product value by 62 percent and
increase by 54 percent Monsanto's overall rate, more than double what was proposed
when the Application was fied. This is clearly prejudicial to Monsanto, which has
conducted extensive discovery and prepared its direct testimony in reliance upon the
Company's representation in the Application that there would be no decrease e in the
curilment value. Rule 65 provides that "late pleadings may be retured or dismissed."
Furhermore, Rule 66 provides that only "the Commission may allow any pleading to be
amended or corrected, or any omission to be supplied." The time to fie for a decrease in
the interrptible credit was when the Application was fied to increase rates, not more
than four months later and a mere two weeks before staff and intervenor testimony is due.
The dismissal of the Clements testimony wil not prejudice the Company which
wil have a full and fair opportnity to address in its rebuttal testimony the change in
value Monsanto and or others may recommend. However, Rocky Mountain Power only
could properly rebut Monsanto's recommended value, without advocating for any value
less than the existing amount. As the Interrptible Credit of Schedule 400 is a critical
component of the overall rate which Monsanto pays Rocky Mountain Power, the
opportunity to seek authority to decrease that credit was squarely the responsibility of the
Company in their original Application. To stall for four months before fiing for a
decrease in the credit is an unfair and self-serving tactic that now prejudices Monsanto.
The May 28th Application sought an increase of$II.7 milion to Monsanto. The
Clements testimony effectively raises that increase now to $22.7 millon.
Furhermore, the Clements testimony substantially alters the direct testimony the
Company fied on May 28 with respect to the rate design for Schedule 400:
Q Please describe the Company's proposed rate design changes for
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 7
Schedule 19, 23, 23A, 400 and 401.
A For customers served on these schedules, the Company proposes a uniform
percentage increase to all biling elements. (Direct Testimony of Wiliam
R. Griffth, page 8, lines 15-18)
Schedule 400 contains several biling elements, of which the Interrptible Demand
Charge is one. This single billng element accounts for over $8 millon of Monsanto's
curent total payment of $42.4 milion under Schedule 400. Accordingly, the Company
proposal filed May 28 was that this biling element was scheduled to increase by the
19.6% uniform percentage increase the Company is seeking for Monsanto. However, the
Clements testimony ignores the Company's earlier Application and fails to address the
corresponding rate impact. Monsanto estimates that with the new reduced interrptible
valuation proposed in the Clements testimony, the Interrptible Demand Charge in
Schedule 400 wil increase from the present level of$3.94 per kW to $11.54, an
increase
of 192 percent. i That is, some four months since its Application the Company now
proposes to increase the curent Interrptible Demand Charge almost three times.
The late-fied Clements testimony also claims that "The Company is filing its
recommendation as a backstop in the event that a settlement is not reached with
Monsanto and the Commission is required to evaluate the evidence and ascribe a value to
the interrptible products from Monsanto in order to determine a net rate for Monsanto
staring Januar 1,2011." Clements testimony, page 3, lines 13-17. The "backstop" to
which Mr. Clements refers is the Company's desire for a substatially reduced
interrptible credit. If the Commission is required to evaluate any evidence on changing
the current net rate of Monsanto, then the Company's evidence should have been
presented with its May 28 Application.
It is clear now that the Company intentionally misled Monsanto and the Commission
when the Application was filed with respect to the value. Unless the Clements testimony
is stricken, the Company wil be allowed to benefit from its own misconduct at the
i The proposed firm demand charge of $14.68 less $1 i .54, times 162 MW of curtailable product equals $6. i milion
as proposed in the Clements testimony.
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 8
expense of Monsanto.
CONCLUSION
Based on the forgoing, Monsanto respectfully submits that the Company's
Application should be dismissed entirety by reason of its failure to comply with the
Commission's Order No. 30197 and the IPUC Rules of Procedure. Alternatively, the
new Testimony of Company witness Paul J. Clements late fied on September 30, 2010
should be stricken from the record.
RESPECTFULLY SUBMITTED this 1st day of October, 2010.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
By~~~.4
RANDALL C. BUDGE
BRIEF IN SUPPORT OF MOTION TO DISMISS, STRIKE TESTIMONY
OR RE-SET SCHEDULE - 9
CERTIFICATE OF MAILING
! 3- fl
I HEREBY CERTIFY that on thisy- day of October, 2010, I served a true, 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 Utilties Commission
P.O. Box 83720
Boise,ID 83720-0074
E-mail: jjewell(fpuc.state.id.us U.S. Mail
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
E-mail: ted.westonCipacificorp.com E-Mail
Paul J. Hickey
Hickey & Evans, LLP
1800 CareyAve., Ste 700
PO Box 467
Cheyenne, WY 82003
E-mail: phickey§hickeyvans.com E-Mail
Mark C. Moench
Daniel Solander
Rocky Mountain Power
201 S. Main Street, Suite 2300
Salt Lake City, Utah 84111
E-mail: mark.moench(ßacificorp.com
daniel.so landerCipacificorp. com
E-Mail
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon 97232
E-mail: datarequestCipacificorp.com
E-Mail
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
P. O. Box 83720
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Boise, Idaho 83720-0074
E-mail: scott.woodbury§puc.idaho.gov
Katie Iverson
Brubaker & Associates
17244 W. Cordova Court
Surprise, Arizona 85387
E-mail: kiverson(fconsultbai.com
James R. Smith
Monsanto Company
P. O. Box 816
Soda Springs, Idaho 83276
E-mail: jim.r.smithCfmonsanto.com
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey
P.O. Box 1391
Pocatello, Idaho 83204-1391
E-mail: elo(fracinelaw.net
Anthony Yanel
29814 Lake Road
Bay Vilage, Ohio 44140
E-mail: tony(fyankel.net
Tim Buller
Jason Haris
Agrium, Inc.
3010 Conda Road
Soda Springs, Idaho 83276
E-mail: tbuller(fagrium.com
jaharis§agriuni.com
Benjamin J. Otto
Idaho Conservation League
P. O. Box 844
Boise, Idaho 83702
E-mail: botto§idahoconservation.org
Dr. Don Reading
6070 Hil Road
Boise, ID 83703
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E-Mail
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E-mail: dreading(imindspring.com
Melinda J. Davison
Davison Van Cleve, P.C.
333 SW Taylor, Suite 400
Portland, Oregon 97204
E-mail: mjd(idvclaw.com
Ronald L. Wiliams
Willams Bradbur, P.C.
1015 W. Hays Street
Boise, Idaho 83702
E-mail: ron(iwiliamsbradbury.com
Brad M. Purdy
Attorney at Law
2019 N. 1 ih Street
Boise, Idaho 83702
E-mail: bmpurdy§hotmaiLcom
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_~t-~
RANDALL C. BUDGE
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OR RE-SET SCHEDULE - 12