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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-10-07
Direct Testimony of
Kathryn E.lverson
(Economic Valuation of Monsanto Interruptible Products)
On Behalf of
Monsanto Company
December 22, 2010
Project 9210
ßaijW'ER & AsSOCIAT£S INC.
Public
Version
PACIFICORP dba ROCKY MOUNTAIN POWER
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. PAC-E-10-07
Table of Contents to the
Direct Testimony of Kathryn E.lverson
I. INTRODUCTION ............................................................................................................1
II. PURPOSE OF TESTIMONY AND SUMMARY OF CONCLUSIONS ............................2
II. FUNDAMENTAL PRINCIPLES OF INTERRUPTIBLE SERVICE.................................4
IV. INTERRUPTIBLE DEMAND CHARGES .....................................................................13
V. ANALYSIS OF MONSANTO'S COST TO SERVE BY COMPONENT........................ 15
VI. RECOMMENDED INTERRUPTIBLE RATE................................................................22
Exhibits:
Exhibit 257 (KEI-4) - Summary of Idaho Class Cost of Service Study with
Monsanto's Load Separated Into Four Components
PACIFICORP dba ROCKY MOUNTAIN POWER
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. PAC-E-10-07
Direct Testimony of Kathryn E.lverson
"Economic Valuation of Monsanto Interruptible Products"
1 I. INTRODUCTION
2 Q PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A My name is Kathryn E. Iverson; 17244 W. Cordova Court, Surprise, Arizona 85387.
4 Q ON WHOSE BEHALF ARE YOU APPEARING IN THIS PROCEEDING?
5 A I am appearing on behalf of Monsanto Company ("Monsanto"), a special contract
6 customer of Rocky Mountain Power ("RMP" or "Company"). RMP is a division of
7 PacifiCorp.
8 Q ARE YOU THE SAME KATHRYN IVERSON WHO PREVIOUSLY FILED
9 TESTIMONY IN THIS PROCEEDING?
10 A Yes, I am. On November 1, 2010 I provided testimony on Monsanto's rates, the
11 allocation of jurisdictional costs, the impacts from adjustments made by other
12 Monsanto witnesses as to revenue requirement, and rate design.
13 Q PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND EXPERIENCE.
14 A This information was included in my direct testimony filed November 1, 2010.
Iverson, Di - 1
Monsanto Company
1 Q WHAT ISSUE ARE YOU ADDRESSING IN THIS TESTIMONY?
2 A I am addressing the "economic valuation of Monsanto's interrptible products" as
3 requested by the Commission in Order No. 32098. The suspension of the current
4 rate case has been tolled for 61 days so the Commission can decide the valuation of
5 interruptible products and establish the interruptible rate to be charged by RMP.
6 II. PURPOSE OF TESTIMONY AND SUMMARY OF CONCLUSIONS
7 Q WHAT IS THE PURPOSE OF YOUR TESTIMONY?
8 A The purpose of my testimony is to: (1) discuss the fundamental nature of interrptible
9 service and why the Company's "customer indifference" approach is not a suitable
10 basis for valuing interruptible products; (2) review Monsanto's firm and interruptible
11 demand rates including the Company's proposal; (3) provide an analysis of the costs
12 allocated to Monsanto under RMP's premise that Monsanto is served entirely as a
13 firm customer; and (4) present Monsanto's recommended overall rate for interrptible
14 service.
15 Q ARE YOU SPONSORING ANY EXHIBITS IN CONNECTION WITH YOUR
16 TESTIMONY?
17 A Yes. i am sponsoring Exhibit 257 (KEI-4).
18 Q WHAT AMOUNT OF INCREASE IS THE COMPANY SEEKING IN THIS CASE TO
19 MONSANTO'S RATES?
20 A The Company proposes to increase rates to Monsanto by $21.8 milion. or 51.4%.
21 based on Supplemental Testimony filed September 30,2010 and Rebuttal Testimony
22 filed on November 16, 2010:
Iverson, Di - 2
Monsanto Company
TABLE 1
Results of RMP Revenue Increase
and Reduction of Interruptible Credit
Present RMP Proposed
Revenues Request Chanqe
Revenues as "All Firm"$59,524,497 $70,346,599 $10,822,102
Less: Credit for Interruptibilty ( 17 ,086,629)(6,092,112)($10,994,518)
Net Revenues $42,437,868 $64,254,487 $21,816,620
1 Q PLEASE EXPLAIN THE COMPANY'S PROPOSED $21.8 MILLION INCREASE.
2 A The $10.8 millon increase to firm rates was presented by the Company in its Rebuttal
3 Testimony of Mr. Wiliam Griffth, Exhibit No. 84, page 1. The $11.0 milion change in
4 the interrptible credit is the result of the Company's proposal to decrease the current
5 interruptible demand credit from $8.33 per kW-month down to $2.97 per kW-month.1
6 The overall increase to Monsanto from the Company's proposal is thus $21.8 milion,
7 or over 51 %.
8 Q HAS THE COMPANY EVER ACKNOWLEDGED THAT ITS REQUESTS IN THIS
9 CASE, IF GRANTED BY THE COMMISSION, WOULD INCREASE MONSANTO'S
10 RATE BY OVER 50%
11 A Apparently not. Despite the 1,975 pages of testimony and exhibits filed by RMP in
12 this case thus far, the Company has never once come out with a straight-forward rate
13 impact to Monsanto. Whether intentional or not, the Company's filing is grossly
14 inadequate in providing the rate impact to Monsanto.
1 Response to Monsanto Data Request 18.1.
Iverson, Di - 3
Monsanto Company
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WOULD YOU PLEASE SUMMARIZE YOUR FINDINGS AND CONCLUSIONS?
My findings and conclusions are as follows:
1. Interruptible customers impose less costs on the utilty than do firm customers.
The Company's premise that requires interrptible customers to first buy
everyhing at firm rates, and then "sell" a product to RMP fundamentally ignores
this fundamental regulatory cost causation principle.
2. The Company's valuation method fails to recognize the planning and operational
benefits of interruptible service.
3. The "customer indifference" approach of RMP is not suitable for valuing
Monsanto's interruptibilty, and can lead to volatile swings in Monsanto's
interruptible rates.
4. i recommend the Commission reject RMP's proposal to convert Monsanto's
interrptible load to firm service, and that the Commission establish a lower rate
for interruptible service because interruptible loads impose a lower cost on the
utilty than firm loads.
5. I recommend the Commission reject RMP's proposal to raise Monsanto's
interruptible demand charge by 192%, and instead establish rates that reflect the
valuation proposed by Mr. Collns. This would result in an overall net increase to
Monsanto of $2.4 milion based on the Company's most recent revenue request.
II. FUNDAMENTAL PRINCIPLES OF INTERRUPTIBLE SERVICE
WHAT TYPE OF ELECTRICAL SERVICE DOES MONSANTO TAKE FROM
ROCKY MOUNTAIN POWER?
24 level and under charges set forth in Schedule 400. Of this amount, 9 MW Oust 5%) is
Monsanto has a total load of approximately 182 MW served at transmission voltage
25 served at firm energy and demand rates. The remaining 95% of Monsanto's load is
26 interruptible and biled under interrptible demand charges.
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WHY DO YOU MAINTAIN THAT 95% OF MONSANTO'S LOAD IS
INTERRUPTIBLE?
The Electric Service Agreement between PacifiCorp and Monsanto dated
November 5, 2007 ("2008 Agreement") provides that PacifCorp is the exclusive
Iverson, Di - 4
Monsanto Company
1 provider of all electric power and energy to Monsanto's Soda Springs Plant. The
2 2008 Agreement sets forth the definition of "firm" and "interruptible" power and energy
3 in Sections 1.5 and 1.6. Specifically, it states that the first 9 megawatts are served at
4 firm demand charges, and the remaining measured demand is served at the
5 interruptible demand charge. Based on the 2010 forecasted loads used in this
6 proceeding, Monsanto's firm demand is 108,000 kW-months and the non-firm
7 demand is 2,051,216 kW-months.2 Thus, even the Company's own exhibits are
8 unequivocal that 95% of Monsanto's demand is not firm.
9 Q ARE YOU USING THE TERMS "NON-FIRM" AND "INTERRUPTIBLE"
10 INTERCHANGEABLY?
11 A Yes. Mr. Griffth's exhibits clearly describe the majority of Monsanto's billng units as
12 "non-firm." In order to minimize controversy, however, I wil use the term
13 "interruptible" in describing Monsanto's service.
14 Q THE COMPANY HAS TESTIFIED REPEATEDLY THAT MONSANTO IS
15 RECEIVING THE EXACT SAME SERVICE AS EVERYONE IN ITS SERVICE
16 TERRITORY, AND THAT THEY HAVE NO OBLIGATION TO PROVIDE NON-FIRM
17 OR INTERRUPTIBLE SERVICE. DO YOU AGREE WITH THEIR ASSESSMENT?
18 A No. If nothing else, this case has certainly revealed the Company's true intent for
19 serving Monsanto, a long-standing interrptible customer. Rather than recognize the
20 unique interrptible nature of Monsanto's load, the Company is determined to convert
21 Monsanto to a 100% firm customer. Consequently, RMP and Monsanto have a
22 fundamental difference of opinion on the provision of interrptible service that is truly
23 at the heart of determining the economic valuation of Monsanto's interrptibilty.
2Exhibit No. 84, page 12 of 21.
Iverson, Di - 5
Monsanto Company
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HOW SO?
It is now obvious that RMP no longer desires to supply Monsanto interruptible power
and energy. It wants to sell only firm power to Monsanto as Mr. Walje claims it has
no obligation to provide interruptible service
Rocky Mountain Power has the obligation to provide electric service.
There is no obligation to provide non-firm or interruptible service -- that
type of service is arranged through a separate agreement between the
Company and Monsanto or other businesses that are willng to allow
the Company to interrpt their service and receive just financial
consideration for that interrption. (Walje Rebuttal, page 11 -12,
emphasis added.)
The Company's premise that requires interruptible customers to "sell" a
product to RMP fundamentally ignores the very real notion of regulatory
cost-causation. A lower rate for interruptible service is not due to the customer
"sellng" a product back to the utility. A lower rate for interruptible service reflects the
lower costs incurred by the utilty to provide the interrptible service. It is a lesser
quality of service, with corresponding lower costs than firm service for the utilty to
provide and corresponding lower rates than firm service:
In contrast, interrptible power may be curtailed or interrupted if
conditions arise that are burdensome to the supplier. In short, the
interruptible customer is buyinq a lower quality service that a cost
incurrence philosophy would deem appropriate for a lower rate.
Interruptible and curtailable rates are particularly beneficial when they
involve relatively large loads. Under interruptible rates, a utilty turns
off service for specified periods of time during system peak, while stil
providing the customer with a satisfactory level of service. Interruptible
customers are charged lower rates since they do not have any
demand or capacity costs. (Principles of Public Utility Rates, by James
C. Bonbright, Albert L. Danielsen and David R. Kamerschen, 1988,
p. 403, emphasis added.)
Iverson, Di - 6
Monsanto Company
1 Q HAS PACIFICORP PREVIOUSLY RECOGNIZED THAT INTERRUPTIBLE LOADS
2 ARE LESS COSTLY TO SERVE?
3 A Yes. As noted in a 2002 Utah order, all parties - including PacifCorp - agreed with
4 this cost incurrence philosophy:
5 All parties agree that large customers who are willng to receive
6 interruptible service under certain conditions impose less costs on the
7 utility than do firm customers, and therefore warrant special pricing
8 consideration. (Order of Public Service Commission of Utah, Docket
9 No. 01-035-38, issued May 24,2002, page 3, emphasis added)
10 Q HOW DO INTERRUPTIBLE LOADS IMPOSE LOWER COSTS ON THE SYSTEM?
11 A Interruptible power offers several benefis to the utilty from both a planning and
12 operational perspective. Reduced capacity costs are usually associated with
13 planning benefits, and reduced energy and maintenance costs are associated with
14 operating benefis, although there is some overlap.
15 Q WHAT ARE THE PLANNING BENEFITS ASSOCIATED WITH INTERRUPTIBLE
16 SERVICE?
17 A From a planning perspective, load supplied on an interrptible basis does not require
18 the installation of generating capacity since it is provided from capacity available on
19 the system after the utility has served the needs of its firm customers. By contrast, to
20 provide firm service, the utilty must install enough generating capacity to meet the
21 maximum firm demands of its customers, regardless of when they occur. Unlike a
22 restaurant, a utility cannot tell a firm customer that he or she wil have to wait for
23 service. When a customer flips a switch, they expect instantaneous results.
24 Therefore, the utilty must always have suffcient capacity and reserves to meet all
25 demands from its firm customers.
Iverson, Di - 7
Monsanto Company
1 Like most service providers, RMP has seasonal peak loads -- times of the
2 year when load is higher than average -- and valley periods, when the load is lower.
3 During these valley periods, there is capacity that is able to serve load, but it is
4 unused because customers do not desire service at such times. Interruptible load,
5 thus, helps the utilty avoid installing excess capacity by smoothing out the peaks and
6 valleys of the firm demand that must be served. The utility does not have to install
7 capacity to serve the interruptible load; nor does it have to install a reserve margin
8 that is necessary to assure continuous, on-demand service characterized as "firm."
9 Q . DOES RMP RECOGNIZE THE PLANNING BENEFITS OF INTERRUPTIBLE
10 SERVICE?
11 A Yes, apparently they do, but this recognition does not translate whatsoever into Mr.
12 Clements' valuation. As explained by Mr. Collins, RMP includes Monsanto's
13 interruptibilty as a resource in the 2008 IRP Update in PacifiCorp's assessment of
need.3 Furthermore, interruptible resources are excluded from the Company's14
15 obligations for purposes of determining its planning reserves. The presence of
16 interrptible load thus enables PacifiCorp to avoid future resource additions.
17 Q WHAT ARE SOME OF THE OPERATIONAL BENEFITS OF INTERRUPTIBLE
18 SERVICE?
19 A Interruptible load can provide greater operating flexibilty. For example, large base
20 load generating units are often constrained in their abilty to follow loads (that is, to
21 respond quickly to changes in load). System demand can increase very quickly or
22 capacity can be lost instantaneously if the utilty loses a large generating unit. A large
23 block of interruptible load gives the utilty the means to meet such load increases on
3See Monsanto Exhibit 248.
Iverson, Di - 8
Monsanto Company
1 short notice by diverting service from interruptible customers to firm customers. If the
2 utility is unsure about hourly variations in load, it may decide that a particular type of
3 unit is uneconomical because it is not flexible enough. On the other hand, if some
4 load can be interrpted to offset large increases in firm load, overall system load
5 changes can be moderated and the utility can have flexibilty to pick the economical
6 generation alternative.
7 From an operating perspective, savings can also be achieved when
8 interruptible service provides an opportunity for the utility to make more effcient use
9 of its existing generating capacity. Additional energy can be sold to interruptible
10 customers during light load periods without incurring the obligation to serve those
11 customers during heavy load periods.
12 Potential fuel cost savings associated with "noticed" interrptible load are also
13 possible. For example, some units may be run at reduced levels, below their most
14 effcient loading. If these units are used to carr interruptible load, instead of simply
15 idling, they can be loaded to a more effcient level, thereby reducing the amount of
16 fuel required to produce energy. Less cycling of base load and intermediate capacity
17 can also result in lower maintenance costs. This is because cycling causes greater
18 thermal stress on the boiler and related equipment.
19 And finally, no-notice interruptible load can protect system integrity during
20 sudden frequency decays (Le., voltage) caused by significant generation and/or
21 transmission outages.
22 Q HAS RMP RECOGNIZED ANY OF THESE BENEFITS IN ITS VALUATION OF
23 INTERRUPTIBLE PRODUCTS?
24 A No. According to Mr. Clements, the Company follows a "customer indiference"
25 approach that pays interruptible customers "the same price the Company would
Iverson, Di - 9
Monsanto Company
1 otherwise pay if it were to acquire those same products from other sources, such as
2 the market or its own resources.,,4
:3 Q DO YOU BELIEVE THE COMPANY'S UNDERLYING PRINCIPLE OF "CUSTOMER
4 INDIFFERENCE" MAKES SENSE IN VALUING MONSANTO?
5 A No, I do not. In the first place, the entire "indifference" approach requires the initial
6 assumption that the product being priced (that is, Monsanto's interrptibilty) can
7 actually be acquired from other sources. They cannot. We are not talking about a
8 structured marketplace where PacifiCorp is deciding to buy widgets from either
9 Supplier A or Supplier B. Monsanto's own unique interruptibilty is just that -
10 Monsanto's own. It is not a "product" one could find in the marketplace, as the
11 Commission noted in Order No. 29157: "the economic curtailment option offered by
12 Monsanto is not available in the market and ... there are no counter parties willng to
13 sell this product."s Consequently, the entire "indifference" approach is based upon a
14 faulty starting position.
15 Second, if the product cannot be found in the marketplace, then Mr. Clements'
16 approach claims the price paid would be what the Company would pay to acquire
17 those same products from "its own resources." However, Mr. Clements does not
18 price out this acquisition based upon the full cost of the Company's resources. He
19 conveniently ignores all capital-related costs in his pricing. This is because the
20 Company doesn't "pay" anything for the use of its existing resources - rather, it is all
21 of PacifiCorp's customers that must pay those capital costs through firm rates. For
22 example, Mr. Clements values Monsanto's operating reserves using only short-term
4Supplemental Testimony of Paul Clements, page 4.
sFinal Order No. 29157, Case No. PAC-E-01-16, page 12. Furthermore, Mr. Clements himself
states that "Each curtailment product terms and conditions is unique to that particular contract."
Response to Monsanto Data Request 17.11.
Iverson, Di - 10
Monsanto Company
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market prices and "lost profis" from the least profitable unit. His notion that this is
somehow fair to all customers is misplaced.
WHY DO YOU SAY HIS APPROACH IS UNFAIR?
This approach is unfair as it could lead to all other customers actually paying more in
the long-run. If the Company has its way and succeeds in converting Monsanto to
100% firm, and then succeeds in driving the economic valuation down to
unacceptable levels, then Monsanto's interruptible resource would in effect be wiped
from PacifiCorp's resource portolio and the Company would need to plan to replace
this lost resource. Its planning reserves would also increase. The costs of adding
more resources to make up for this lost resource would put additional upward
pressure on already increasing rates.6
Furthermore, the Company's short-term valuation is unfair in that it places
undue volatilty on Monsanto's interruptible rate. As aptly described in Mr. Clements'
testimony at page 6, his contracting approach of using market values can lead to
volatile swings in values that would translate into unnecessary volatilty in Monsanto's
interruptible rate:
This contracting approach results in the value of the interruptible
products being driven largely by both the current market value of those
products and the Company's requirement for the interruptible products
at a given time in which the value is determined. The market value of
the interruptible products can be volatile as the energy markets go
through cycles of over and under capacity utilzation. In addition, the
Company's requirements for the interrptible products offered by
Monsanto are constantly changing as load forecasts change and the
Company acquires new resources to meet its obligation to serve.
(Clements Supplemental, page 6, emphasis added.)
To exacerbate the situation, the Company's approach results not only in
volatile swings in price paid to Monsanto for its interruptibilty, but even to quantity the
61n addition, the power prices charged to Monsanto under this scheme could also lead to a
loss of jobs and a consequent adverse impact to the service territory.
Iverson, Di - 11
Monsanto Company
1 Company would be willng to procure as Mr. Clements alludes to above. This is
2 further compounded by the perverse incentive that PacifiCorp makes no return on
3 "buying" a product from an interruptible customer, but makes a return on supply-side
4 resources it puts into service. Consequently, under the Company's approach
5 Monsanto as a "seller" would be faced with a volatie clearing price, a single "buyet'
6 with little or no motivation to procure the product, and a "constantly changing" need
7 for its product based on data known only to the sole "buyer." It's dificult to see how
8 Mr. Clements could possibly characterize this as a "fait' approach.
9 Q HOW DO YOU RECOMMEND THE COMMISSION VALUE MONSANTO'S
10 INTERRUPTIBILlTY?
11 A First, I recommend the Commission reject the Company's proposal to convert
12 Monsanto to 100% firm service. The Company should continue to provide Monsanto
13 with a single contract that provides for the provision of interruptible power and energy.
14 Second, i recommend the Commission establish a lower rate for interruptible
15 service because interruptible loads impose a lower cost on the utilty than firm loads.
16 This lower rate should not hinge on a short-term, separate arrangement. Rather, this
17 lower cost should reflect exclusion of fixed costs since interruptible load helps the
18 utilty avoid installng excess capacity. The reason for excluding fixed plant costs is
19 that the utilty may interrupt service at any time when capacity is needed to meet the
20 requirements of firm customers. In other words, interrptible customers do not cause
21 the utilty to install capacity, and therefore, those related plant costs should not be
22 allocable to interruptible customers.
23 i wil address the overall rate proposal for Monsanto in section Vi of my
24 testimony.
Iverson, Di -12
Monsanto Company
1 IV. INTERRUPTIBLE DEMAND CHARGES
2 Q YOUR TABLE 1 SHOWS A "CREDIT FOR INTERRUPTIBILlTY." DOES
3 MONSANTO SELL BACK POWER TO RMP AT THAT PRICE?
4 A No, they do not. The "Interrptible Credit" is a reduction to the firm rate to reflect the
5 fact that Monsanto takes a lower quality of service. It is not a pàyment but a
6 component of the rate used to develop the interruptible demand charge. The concept
7 of a "credit" was first introduced in Case No. PAC-E-01-16, where the Commission
8 established a "discounted demand charge of $4.09/kW-month" for interrptible
9 power.7
10 Q HOW HAS THE INTERRUPTIBLE DEMAND CHARGE CHANGED SINCE IT WAS
11 FIRST ESTABLISHED IN CASE NO. PAC-E-01-16?
12 A Table 2 below shows the history of both firm and interruptible demand charges paid
13 by Monsanto since rates were established in Case No. PAC-E-01-16:
7Case No. PAC-E-01-16, Final Order No. 29157, p. 13.
Iverson, Di - 13
Monsanto Company
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TABLE 2
History of Schedule 400 Firm and Interruptible
Demand Charqes ($ per kW-month)
Firm Interruptible
2004 - 2006 $8.81 $4.09
2007 $10.00 $3.64
2008 $11.35 $3.65
2009 $11.69 $3.76
2010 $12.27 $3.94
2011 - RMP Proposal $14.50 $11.53*
Firm demand rates increased by 13.5% in 2007 and then by another 13.5% in
2008. The interruptible demand charge during this time actually decreased, however,
primarily as a result of Monsanto agreeing to raise the hours of interruption from
800 hours to 1,000 hours, an increase of 25%. As detailed in the Order approving the
2007 rates:
After PacifiCorp's cost of service studies indicated a substantial
increase in firm rates, Monsanto states it felt compelled to increase the
interruption hours to increase the interruptible credit in an amount
suffcient to establish a lower net rate in an effort to keep production
costs at a competitive leveL. Both parties, it states, continue to place
considerable value on Monsanto's interrptibilty as to its quantity,
timing and dependabilty. (Case No. PAC-E-06-09, Order No. 30197,
p.3)
HOW MUCH DOES RMP PROPOSE TO INCREASE THE INTERRUPTIBLE
DEMAND CHARGE IN THIS PROCEEDING?
RM P proposes to increase the Schedule 400 interruptible demand charge by a
staqqerinq 192% - or close to triplinq the rate. To put this in context, the proposed
Iverson, Di -14
Monsanto Company
1 interruptible demand charge of $11.53 is nearly what Monsanto paid for firm service
2 just two years ago in 2009.
3 Looked at another way, the proposed power charges in the Schedule 9 High
4 Voltage General Service Tariff in Idaho average $8.28 per kW-month for firm service.8
5 A Schedule 9 customer with an 85% load factor would pay 49 mils/kWh for firm
6 service.9 Under the Company's proposed interruptible demand charge, Monsanto
7 would pay 46.72 mils/kWh for interruptible service.10 The reduction in rates,
8 therefore, is a mere 2.29 mils/kWh for taking interruptible service. The Commission
9 found a credit value of 7.48 mils/kWh for Monsanto in Case No. PAC-E-01-16.11
10. Consequently, RMP is seeking approval for an interruptible credit that is less than a
11 third of what is was back in 2002 despite the significant increases made to firm rates
12 since that time, as well as the additional hours of curtailment Monsanto provides
13 since then. The Commission should find RMP's proposed interruptible demand
14 charge is neither fair nor reasonable, and it should be rejected.
15 V. ANALYSIS OF MONSANTO'S COST TO SERVE BY COMPONENT
16 Q HAS THE COMPANY ALLOCATED COSTS TO THE STATE OF IDAHO AS
17 THOUGH MONSANTO WERE A FIRM CUSTOMER?
18 A Yes, it has. The Company has treated Monsanto's load within its Jurisdictional
19 Allocation Model ("JAM") study as though it were served 100% firm. System-wide
20 resource costs are allocated to Idaho, and then ultimately allocated to Monsanto as
21 "Contract 1" in the Idaho cost of service ("COS") study. According to RMP's latest
8 Exhibit No. 84, page 7.
9 ($8.28 + (730 x 85%)) + 0.035667 = $0.04901 per kWh, or 49 mils/kWh.
10 ($11.53 + (730 x 85%)) + 0.02814 = $0.04672 per kWh, or 46.72 mils/kWh.11 Order No. 29157, page 12.
Iverson, Di - 15
Monsanto Company
1 Idaho COS study, the total cost to serve Monsanto as an "all firm" customer is
$70.4 millon.122
3 Q DO YOU AGREE THAT THE ACTUAL COST TO SERVE MONSANTO IS
4 $70.4 MILLION?
5 A No, I do not. The Commission Staff, as well as Monsanto and the PacifiCorp Idaho
6 Industrial Customers, have proposed several revenue adjustments that lower the
7 overall requested increase to the state of Idaho. More importantly, the $70.4 millon
8 is overstated as it fails to reflect whatsoever Monsanto's interruptibility.
9 Q DID YOU PREVIOUSLY PROVIDE A JAM STUDY THAT BETTER REFLECTED
10 MONSANTO'S INTERRUPTIBILlTY?
11 A Yes. In my November 1,2010 Direct Testimony, I provided a JAM study where the
12 coincident peaks for Idaho were reduced by Monsanto's interruptible load.13 The
13 Company took issue with this study criticizing: (1) the size of the peak reduction
14 (162 MW); (2) the number of months the reduction was made (12 months); and
15 (3) the adjustment to the revenues.
16 Q DO YOU BELIEVE THE COMPANY'S CRITICISMS HAVE MERIT?
17 A No. To prove they are without merit, I am providing an Idaho class COS study that
18 separates out Monsanto's "Contract 1" line into four distinct components. This refined
19 model shows how much costs have been allocated to Monsanto's interruptible load
20 because of the Company's characterization that Monsanto is 1 00% firm.
12Exhibit No. 81, page 2 of 2, line 10, column F, ''Total Cost of Serice"
130irect Testimony of Kathryn Iverson, page 9 for a description of this revised JAM study.
Iverson, Di -16
Monsanto Company
1 Q UPON WHAT BASIS DID YOU SEPARATE OUT THESE FOUR COMPONENTS?
2 A The components are based on Monsanto's loads and interruptibilty provisions.
3 Q PLEASE EXPLAIN.
4 A Monsanto is unique in that it has three furnaces and so is able to offer various levels
5 of capacity reduction: 46 MW for furnace #7, 49 MW for furnace #8 and 67 MW for
6 furnace #9 for a total of 162 MW. The 2008 Agreement defines the terms and
7 conditions associated with three different curtailment purposes: (1) Operating
8 Reserves of 95 MW which can be called upon 188 hours per calendar year;
9 (2) Economic Curtailment of 67 MW available for 850 hours per calendar year; and
10 (3) System Integrity of 162 MW available 12 hours per calendar year.
11 Q PLEASE DESCRIBE OPERATING RESERVE INTERRUPTIONS.
12 A The 2008 Agreement allows PacifiCorp to interrupt Monsanto for the purpose of
13 operating reserves in any month, and on any day. Operating reserve interruptions
14 have priority over economic curtailment and typically provide at least 95 MW of
15 curtailment (furnaces #7 and #8). For the 47 months during the period January 2006
16 through November 2010, the Company called upon Monsanto for operating reserves
17 in every single month except one.14 In fact, the Company often times receives more
18 than 95 MW of operating reserves during a called interruption. This is because
19 Monsanto must curtail a minimum of 95 MW if two furnaces are operating and the
20 third is unavailable due to maintenance or overhaul.15
14 There was no interruption called for operating reserves in February 2010.
15For example, usually Furnaces #7 (46 MW) and #8 (49 MW) are curtailed for a total of
95 MW. However, if Furnace #7 is down, then Furnaces #8 and #9 (67 MW) are curtailed for a total of
116 MW. If Furnace #8 is down, then a total of 113 MW is curtailed.
Iverson, Di - 17
Monsanto Company
1 As explained in Mr. Collns' testimony, RMP currently includes 90 MW of
2 Monsanto operating reserve as an interruptible resource, rather than the 95 MW
3 found in the 2008 Agreement. This difference is the result of the Company de-rating
4 the 95 MW downward to 90 MW because of economic curtailment hours. However,
5 this de-rating is completely unwarranted. Operating reserve interruptions have
6 priority over economic curtailment. Furthermore, as a result of the Agreement's
7 provision to curtail a minimum of 95 MW if a furnace is down for maintenance or
8 overhaul, interrptions greater than 95 MW happen more times than interrptions less
9 than 95 MW.
10 Q PLEASE EXPLAIN THE RESULTS OF THE IDAHO CLASS COS STUDY WITH
11 MONSANTO'S LOAD SEPARATED OUT INTO FOUR COMPONENTS.
12 A Exhibit 257 (KEI-4) provides the summary page of the Idaho class COS study with
13 the "Contract 1" line separated out into four distinct components. This class COS
14 study makes no change whatsoever to the allocations or cost results found in the
15 Company's class COS filed in its November 16,2010 rebuttal testimony. However, it
16 separates the Monsanto load into four distinct components:
Iverson, Di - 18
Monsanto Company
TABLE 3
Separatinq Monsanto's Load Into Four Components
Component Component Component Component
1 2 3 4 Total
95 MWof 67 MWof InterruptibleDescription9 MWofFirm Operating Economic Total
Reserves Curtailment Load
Hours of load 8,760 188 850
Energy (MWH)78,840 17,860 56,950 1,231,523 1,385,173
Annual CP (kW)108,000 1,004,370 708,345 21,913 1,842,628
$3.3 $9.9 $8.1 $38.3 $59.5
$4.3 $15.1 $12.1 $38.9 $70.4
1 The totals shown above (energy, coincident peak, revenues, and cost of service) all
2 match those found in Exhibit 81. The coincident peaks have been broken down so
3 that the firm component has 9 MW each month, and Components 2 and 3 are at most
4 95 and 67 MWeach month.16
5 Q PLEASE EXPLAIN THE FIRST COMPONENT LABELED AS "FIRM."
6 A The first component is the 9 MW firm load at 100% load factor. It includes the
7 allocation of customer-related expenses, as well as the transmission costs that are
8 directly assigned to Monsanto in the cost study. The results of the cost study indicate
9 an increase of just over $1 millon as shown on Exhibit 257 (KEI-4). Thus, of the
10 $10.8 milion increase proposed by the Company for firm rates, only around 10% of
11 this increase can be directly attributable to Monsanto's actual firm service.
161n ten of the months, Monsanto's coincident peak was less than 171 MW (9 + 95 + 67 MW).
In those instances, the monthly coincident peak (less the 9 MW) was split between Components 2 and
3 proportionally (95/162 to Component 2 and 67/162 to Component 3).
Iverson, Di - 19
Monsanto Company
1 Q PLEASE EXPLAIN THE SECOND AND THIRD COMPONENTS LABELED AS
2 OPERATING RESERVES AND ECONOMIC CURTAILMENT.
3 A The second component separates out the costs allocated to Monsanto for the 95 MW
4 of operating reserves. Because the Company has characterized Monsanto as "firm"
5 in its JAM and COS studies, Monsanto is allocated $15.1 milion of costs for this
6 component of its load. Thus, the Company is requesting that Monsanto first pay over
7 $15 milion in firm rates for these 95 MW, and then the Company proposes to credit
8 Monsanto a mere $2.4 millon for operating reserves, or less than 16% of what the
9 Company is charging Monsanto.17
10 Likewise, the third component separates out the costs allocated to Monsanto
11 for the 67 MW of economic curtailment. The cost study reveals that $12.1 millon is
12 allocated to Monsanto for the 67 MW. The Company effectively charges Monsanto
13 $12.1 millon for this component, and then proposes to credit them only $3.6 milion.
14 Q DOES IT SEEM FAIR AND REASONABLE FOR THE COMPANY TO CHARGE
15 MONSANTO ROUGHLY $27 MILLION FOR FIRM SERVICE RELATED TO THESE
16 "PRODUCTS" AND THEN CREDIT IT BACK ONLY $6 MILLION?
17 A No. Other customers would receive a benefit at Monsanto's expense, since the
18 Company is in effect using an interruptible resource to offset its firm obligations, yet
19 only crediting Monsanto for a small fraction of the value it brings to the system.
20 Q PLEASE EXPLAIN THE FOURTH COMPONENT LABELED AS INTERRUPTIBLE
21 LOAD.
22 A This component includes the bulk of Monsanto's energy loads since it excludes the
23 firm energy of the first component, and the curtailed energy of the second and third
17Clements, Supplemental Testimony, page 25.
Iverson, Di - 20
Monsanto Company
1 components. It also includes the coincident peaks not accounted for in the first three
2 components. The results of separating out this final component reveal a total cost to
3 serve of $38.9 milion.
4 The cost to serve both the first and fourth components total $42.3 milion, or
5 an increase $0.8 milion above present revenues. The resulting increase of
6 $0.8 milion is very similar to the amount I previously found ($0.9 millon) when I
7 revised the JAM study to better reflect Monsanto's interruptibilty. Thus, this analysis
8 shows that by including interruptible demand in their allocation studies, the Company
9 has allocated over $27 milion to Monsanto because the load is characterized as
10 "firm," yet only supports a credit of $6 millon.
11 Q THE COMPANY CLAIMS THAT CURTAILMENTS MUST ACTUALLY OCCUR
12 DURING THE SYSTEM COINCIDENT PEAK IN ORDER FOR THEIR REMOVAL
13 FROM MONSANTO'S ALLOCATION. DO YOU AGREE?
14 A No. First of all, assuming interruptible customers must actually be off the system
15 peak for allocation purposes places all risk on the interrptible customer when, in fact,
16 it is the utilty that controls the timing of interruptions. Whether or not an interruptible
17 customer is actually curtailed during the system peak in no way negates the benefits
18 of interruptible load. It is the abilty to be interrupted during peak times that underlies
19 its value, not necessarily if the customer is actually called. If there is adequate
20 capacity to serve the load at time of peak, it would be poor management to waste an
21 interruption that might be needed at a later time.
22 Interruptions can occur at any time throughout the year with as little as six
23 minutes notice. Thus, Monsanto must establish the necessary protocols and make
24 the necessary investments in order to comply with all requested curtailments or pay a
25 substantial penalty for non-compliance.
Iverson, Di - 21
Monsanto Company
1 Furthermore, unlike interrptible contracts RMP has with other customers,
2 Monsanto's agreement is not limited to curtailments only in certain months. This
3 should be an added value when comparing Monsanto against other customers as i
4 wil explain in more detail later. As Company witness Craig Paice testified in his
5 rebuttal, "The 12 CP methodology recognizes that each of the monthly peaks is
6 important because the Company must plan for and dispatch its resources during each
7 of the 12 months of the year."18 Thus, the value of being available 12 months of the ,
8 year should be reflected in Monsanto's lower interrptible rate.
9 Finally, the Idaho class COS, which separates out Monsanto load into the
1 0 components, clearly identifies the costs being allocated to Monsanto as a result of the
11 Company's insistence it be served at firm rates. In truth, i have not "removed" those
12 coincident peaks from Idaho's class cost of service, but merely exposed them and
13 their associated cost implications.
14 Vi. RECOMMENDED INTERRUPTIBLE RATE
15 Q DO YOU HAVE A RECOMMENDED OVERALL RATE FOR MONSANTO'S
16 INTERRUPTIBLE LOAD?
17 A Yes. However, before I provide this rate, it would be helpful to first examine the rates
18 paid by RMP's other two interruptible customers in order to put our recommended
19 rate in context.
20 Q MR. CLEMENTS REFERENCES TWO OTHER RMP CUSTOMERS WITH
21 INTERRUPTIBLE LOADS IN HIS TESTIMONY. DOES HIS ANALYSIS PROVIDE A
22 FULL AND MEANINGFUL COMPARISON?
23 A No, it does not. Mr. Clements' evaluation does not tell the whole story.
18Paice Rebuttal, page 4.
Iverson, Di - 22
Monsanto Company
1 Q LOOKING FIRST AT CUSTOMER #1 IDENTIFIED BY MR. CLEMENTS AT PAGE
2 18 OF HIS TESTIMONY, HAVE YOU REVIEWED THEIR CONTRACT?
3 A Yes. This contract includes a fairly typical industrial rate structure with customer and
4 facilties charges, and seasonal power and energy charges for heavy and light load
5 hours. The rate is applicable to a contract demand of 100 MW. A separate
6 curtailment credit is applicable to the first 85 MW of load. The rate is subject to an
7 index that reflects changes in RMP's Utah jurisdictional rates in the previous year;
8 e.g., the 2011 rates reflect changes made to Utah rates during 2010.
9 If Monsanto's loads were priced out under Customer #1'5 rates in effect
10 January 1, 2011 without the interrptible credit (Le., 100% firm), Monsanto's total firm
11 cost would be $56.4 million, or $40.75 per MWH. Consequently, even before
12 consideration of any discount for interruptibility, Customer #1'5 firm rates in 2011 are
13 substantially lower than the Company's proposal in this case and even lower than
14 what Monsanto currently pays:
TABLE 4
Cost to Monsanto at 100% Firm
Firm Cost
Before Credit Firm Cost
($ millons)$ perMWH
Present Schedule 400 $59.5 $42.95
Company Proposal $70.6 $51.00
Staff Proposal $67.2 $48.54
Customer #1 in 2011 *$56.4 $40.75
* Application of Customer #1 rates in 2011 to Monsanto billng
determinants
Iverson, Di - 23
Monsanto Company
1 Q DOES THE CONTRACT FOR CUSTOMER #1 ALSO INCLUDE A "CURTAILMENT
2 CREDIT?"
3 A Yes. The curtailment credit for Customer #1 effective January 1, 2011 wil be
4 $4.90 per kW-month.19
5 Q MR. CLEMENTS SHOWS A CREDIT OF $4.25 ON HIS PAGE 18 TABLE FOR
6 CUSTOMER #1. WHAT EXPLAINS THIS DIFFERENCE?
7 A Two things account for this difference. First of all, Mr. Clements is using only a
8 portion of Customer #1'5 credit, as his workpapers indicate, he bases his table figures
on 92% of the total credit.20 This explains why we were not able to reconcile his table9
10 figures to the credit shown in the contract. Second, Mr. Clements is using the
11 average monetary amounts for 2007 through 2010. The credit, however, is adjusted
12 annually at the same percentage rate as all other rate components. This is clearly
13 spelled out in the contract, which means that as the firm charges go up, the credit
14 does likewise:
15
16
17
18
19
***
*** (Response to Monsanto Data Request
1.27, Confidential Attachment Monsanto 1.27, emphasis added)
20 By using an average of past partial credits, Mr. Clements is not being entirely truthful
21 about the full credit level for 2011.
19Response to Monsanto Data Request 18.4, Attachment 18.4a.
2oAccording to the Company, "the interruptible product terms and conditions included in the
customets contract are such that the Company can call for an interruption with a seven minute notice
for any reason. Therefore this interruptible product can be used for non-spinning operating reserves,
economic curtailment, or for any other purpose desired by the Company within the contract terms and
conditions." See Response to Monsanto Data Request No. 18.4 a.
Iverson, Di - 24
Monsanto Company
1 Q WHAT IS THE COST TO MONSANTO USING CUSTOMER #1'S 2011 RATES
2 INCLUDING THE CREDIT OF $4.90 PER KW-MONTH?
3 A Based on Monsanto's billng determinants of this case, their overall cost would be
4 $46.4 milion, or $33.49 per MWH. In summary, based on Customer #1'5 firm rates
5 and curtailment credit in place for 2011, Monsanto would require an increase less
6 than $4 milion above its present rate. This is in stark contrast to the Company's
7 request for an increase of $21.8 millon.
8 Q HOW DOES THE "CURTAILMENT PRODUCT" OF CUSTOMER #1 COMPARE TO
9 MONSANTO?
10 A The following comparison shows that Monsanto's terms and conditions offer more
11 value to the Company due to hours, notice time, length of curtailment, interruptions
12 per day and size of load:
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
.Number of Hours of Curtailment: Customer #1 offers only 130 hours total
for the entire year, with Mr. Clements claiming that 70 hours are set aside for
operating reserves. Monsanto offers a total of 1,050 hours total for the entire
year. Of that amount, operating reserves account for 188 hours, or more than
2% times that of Customer #1.
.Notice Time Required Prior to Curtailment: Customer #1 must interrpt
within no greater than seven minutes. Monsanto must interrupt within six
minutes for operating reserve interruptions. Consequently, Monsanto offers
more hours (188 hours versus 70) and faster response (6 minutes versus 7).
.Lenqth of curtailment: For Customer #1, the maximum duration of any
single interruption is 60 minutes. Interruptions to Monsanto related to
operating reserves shall not exceed 120 minutes, and those related to
economic curtailment are not limited to length. Again, Monsanto's terms offer
more value with a longer curtailment opportunity.
.Interruptions per day: For Customer #1, the Company is allowed unlimited
interruptions each day so long as the customer has not been interrupted more
than 6 times in a single day 3 times in a calendar year. Once Customer #1
has been interrupted more than 6 times in a single day 3 times during the
calendar year, future interruptions for that calendar year are limited to five
interruptions per day. Monsanto has no such limitation, again making it the
more flexible, and thus valuable resource.
Iverson, Di - 25
Monsanto Company
1
2
3
4
5
6
7
· Size of the load that can be curtailed: The estimated load for interrption
for Customer #1 is 85 MW. Due to Monsanto's three furnace configuration,
Monsanto can interrupt 1, 2 or all 3 furnaces. As explained earlier, Monsanto
typically provides 95 MW for operating reserves, but this amount can be
higher at 113MW or 116 MW depending on the furnaces taken down at the
time of the operator's calL. Monsanto can also curtail another 67 MW, making
a total load available of 162 MW.
8 Q TURNING NOW TO CUSTOMER #2, HAVE YOU REVIEWED THEIR CONTRACT?
9 A Yes. We received a copy of their agreement on August 19, 2010.21 Unlike Customer
10 #1, however, there was no curtailment credit in the agreement we received.
11 Q DOES THIS MEAN CUSTOMER #2 DOES NOT RECEIVE A CURTAILMENT
12 CREDIT?
13 A No, it does not. It means that RMP failed to provide us in August with both contracts
14 for Customer #2. A separate agreement for operating reserves was provided by RM P
15 four months after we received the first contract, and only once we made RMP aware
16 we knew of its existence.22
17 Q HOW DOES THE RATE STRUCTURE FOR CUSTOMER #2 COMPARE TO
18 CUSTOMER #1?
19 A While Customer #1 has a single agreement with PacifiCorp and a single credit,
20 Customer #2 has two agreements: (1) an Electric Service Agreement ("ESA") that
21 provides the rate to be paid by Customer #2, and (2) an "Operating Reserve
22 Interruption Agreement," which provides the mechanism by which Customer
23 #2 receives compensation related to its interruptions for operating reserves.
21Confidential Attchment Monsanto 1-30.
22Confidential Attachment Monsanto 17.1 b 1 st Supplemental, provided December 17, 2010.
Iverson, Di - 26
Monsanto Company
1 The ESA is a simple flat year-round energy-only rate for delivered power. It is
2 adjusted annually based on average percentage changes as ordered by the Utah
3 Commission for a specific industrial rate schedule. The rate is also adjusted annually
4 by a series of $/MWH rate adjustments in order to bring Customer #2 to cost of
5 service.
6 If Monsanto's loads were priced out under Customer #2'5 rates in effect
7 January 1, 2011, Monsanto's cost would be $43.4 millon, or ****** per MWH.23
8 Q DOES THE ***** PER MWH COST INCLUDE THE CREDIT ASSOCIATED
9 WITH INTERRUPTIONS FOR OPERATING RESERVES?
10 A No, it does not. Interrptions for operating reserves are handled separately through a
11 curtailment credit of $4.01 per kW-month.
12 Q WHAT WOULD MONSANTO PAY IF IT WERE SERVED AT THE RATES
13 PACIFICORP CHARGES CUSTOMER #2 IN 2011?
14 A The curtailment credit for operating reserves would be applied to 95 MW each month,
15 for a total credit of $4.6 millon. This would reduce the cost down to $38.8 milion, or
16 $29.06 per MWH.
17 Q ISN'T THAT LESS THAN WHAT MONSANTO CURRENTLY PAYS?
18 A Yes, it is. However, as I mentioned earlier, Customer #2 is facing a series of fixed
19 $/MWH adders over the next four years in order to target their cost of service as
20 projected by RMP in their last general rate case proceeding. The first of those adders
21 has already been included in the 2011 rate. Another ****** per MWH is set to
22 be phased in over 2012-2014. If this ****** per MWH adder is added to the
23See Confidential Attachment Monsanto Rebuttal 2.1.
Iverson, Di - 27
Monsanto Company
1 $29.06 above, the total cost would be $32.84 per MWH. In summary, based on
2 Customer #2'5 firm rates and curtailment credit in place for 2011, plus the additional
3 cost of service based increase, Monsanto would require an increase of only
4 $1.4 milion above its present rate. Again, this is in stark contrast to the Company's
5 request for an increase of $21.8 milion.
6 Q HOW DO THE "CURTAILMENT PRODUCTS" OF CUSTOMER #2 COMPARE TO
7 MONSANTO?
8 A The following comparison shows that Monsanto's terms and conditions again offer
9 more value to the Company:
10
11
12
13
14
15
16
· Number of Hours of Curtailment: Customer #2 offers up to 480 hours of
curtailment, and 100 hours of interruptions for operating reserves during each
calendar year. The hours for curtailment are limited to certain months, certain
days, and certain times of the day as described below. In contrast, Monsanto
provides 850 hours for economic curtailment, 188 hours for operating
reserves, along with another 12 hours for system integrity with no such
limitation as to months, days or time of day.
17
18
19
20
21
22
23
· Notice Time Required Prior to Curtailment: Customer #2 must interrpt
within 10 minutes for operating reserves. Monsanto must interrupt within six
minutes for operating reserve interrptions. For curtailments, Customer #2 is
provided notice by noon the day before a curtailment is scheduled. In
contrast, Monsanto receives only a two-hour notice for economic curtailment.
Consequently, Monsanto again offers superior response time (6 minutes
versus 10, and 2 hours versus day before).
24
25
26
27
28
29
30
31
32
33
34
· Lenqth of curtailment: For Customer #2, curtailments are limited to the
months of June through September (summer) and December and January
(winter), and are limited to Monday through Friday. Curtailments may not
occur on NERC holidays. Summer curtailments are limited to 4 consecutive
hours Monday through Friday during the period of 12:00 PM to 8:00 PM.
Winter curtailments are limited to two blocks of 2 hours each Monday through
Friday during the period of 6:00 AM to 11 :00 AM and 4:00 PM to 8:00 PM. In
contrast, Monsanto economic curtailments are not limited to length and can be
taken any day, any month, and any hour.
For operating reserves, both Customer #2 and Monsanto are limited to
120 minutes per interruption.
35
36
37
· Interruptions per day: For Customer #2, the Company is allowed a single
curtailment per day in the summer of up to 4 hours, and two curtailments per
day in the winter of up to 2 hours each. Monsanto's economic curtailments
Iverson, Di - 28
Monsanto Company
1
2
3
4
5
may occur any number of times per day. For Customer #2, operating
reserves are limited to 3 hours of interruption during anyone four hour period
in anyone day, while Monsanto may be interrupted 4 hours in any four hour
period, again making Monsanto the more flexible resource. Monsanto,
however, is limited to 25 interruptions for operating reserves per month.
6
7
8
9
10
11
12
· Size of the load that can be curtailed: The load for interruption for
Customer #2 is 100 MW. Due to Monsanto's three furnace configuration,
Monsanto can interrupt 1, 2 or all 3 furnaces. As explained earlier, Monsanto
typically provides 95 MW for operating reserves, but this amount can be
higher at 113 or 116 MW depending on the furnaces taken down at the time of
the operator's calL. Monsanto can also curtail another 67 MW, making a total
load available of 162 MW.
13
14
15
16
· Particular event required for curtailment: The rights for the Company to
curtail Customer #2 in the summer are primarily triggered by forecasted
maximum temperatures. Monsanto has no such trigger mechanism, thereby
making it more flexible and less restrictive.
17 Q CAN YOU SUMMARIZE YOUR REVIEW OF THE PRODUCTS OFFERED BY
18 CUSTOMER #1 AND CUSTOMER #2 AGAINST MONSANTO, ALONG WITH A
19 PRICE COMPARISON?
20 A Monsanto's larger size, more hours, faster response times, unconstrained timing and
21 flexibilty provide ample evidence that it should be priced commensurate, if not lower,
22 than other RMP interruptible customers:
23
24
· Larqer Size: Monsanto offers up to 162 MW of interrptible load, in contrast
to 85 MW or 100 MW of the other customers.
25
26
· More Hours: Monsanto offers 920 more hours than Customer #1 and 470
more hours than Customer #2.
27
28
29
30
· Faster Response: Monsanto responds in six minutes for operating reserves,
compared to seven or ten for the other customers. For curtailments,
Monsanto responds with only a two hour notice, compared to the day-ahead
notice provision for Customer #2.
31
32
33
34
· Unconstrained Timinq: Monsanto is available every month, every day,
every hour. Unlike Customer #2 that limits curtailments to only non-holiday
weekdays in six months, and only during certain times of the day, Monsanto is
available for curtailment 24/7.
35
36
· Flexibilty: Curtailments at the Soda Springs facilty are not premised on
temperature triggers.
Iverson, Di - 29
Monsanto Company
1
2
3
4
5
6
7
.Pricinq: With fewer hours, smaller loads, longer response time, and more
constraints as to months, days, and times, the other interruptible customers
have rates for 2011 that range from $32.84 per MWH to $33.50 per MWH.
Given Monsanto's unique characteristics as a long-standing interruptible
customer, it would not be unreasonable to see an overall price to Monsanto
coming from this case that is actually less than the rates paid by Customer #1
and Customer #2.
8 Q WHAT IS THE CURRENT "INTERRUPTIBLE CREDIT" TO MONSANTO?
9 A The credit is $8.33 per kW-month, or roughly $17.1 millon.
10 Q SHOULD THE CREDIT REMAIN AT ITS CURRENT LEVEL?
11 A No. As discussed in the testimony of Mr. Collns, the valuation (credit) should be
12 higher than it is currently. Furthermore, if the credit remained at today's level,
13 Monsanto's rate would be substantially higher than either Customer #1 or Customer
14 #2 as shown in the following table:
TABLE 5
Comparison of Monsanto's Overall Rate
Based On Company and Staff Revenues
While Maintaining the Current Credit
($ Milions)
RMP Staff
Present Revenue $42.4 $42.4
Increase $10.8 $7.7
Proposed Revenue $53.2 $50.1
$ perMWH $38.45 $36.20
Percentage Change 25.5%18.2%
Iverson, Di - 30
Monsanto Company
1 Q WHAT IS THE OVERALL IMPACT TO MONSANTO WITH THE VALUATION
2 UPDATED TO $25.5 MILLION AS RECOMMENDED IN MR. COLLINS'
3 TESTIMONY?
4 A Table 6 shows the results of using an updated valuation of $25.5 milion:
TABLE 6
Comparison of Monsanto's Overall Rate
Based On Company and Staff Revenues
and Updating the Credit to $25.5 Milion
($ Milions)
RMP Staff
Present Revenue . $42.4 $42.4
Increase $2.4 æw
Proposed Revenue $44.8 $41.7
$ perMWH $32.38 $30.13
Percentage Change 5.7%-1.7%
5 Q ARE THE RESULTS SHOWN IN YOUR TABLE 61N LINE WITH 2011 RATES FOR
6 CUSTOMER #1 AND CUSTOMER #2?
7 A Yes, however, the overall rate for Monsanto is somewhat lower. Since Monsanto's
8 terms and conditions provide more value to the Company, it would not be
9 unreasonable for Monsanto's rate to be lower than other interruptible customers. In
10 fact, the rate of $32.38 per MWH shown in Table 6 is quite in line with the $32.84 per
11 MWH based on rates paid by Customer #2.
12 Furthermore, the results of the Idaho class COS with Monsanto's loads
13 separated out reveals an increase of $0.8 milion for an overall cost of $31.19 per
14 MWH. This further points to a reasonable rate level that is within the range of using
15 either the Company's or the Stafls revenue requirement together with Monsanto's
16 valuation.
Iverson, Di - 31
Monsanto Company
1 Q
2 A
DOES THIS CONCLUDE YOUR TESTIMONY IN THIS CASE?
Yes.
Iverson, Di - 32
Monsanto Company
Exhibit No. 257 (KEI-4)
Case No. PAC-E-10-07
Witness: Kathryn E. Iverson
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-10-07
Exhibit Accompanying Direct Testimony of Kathryn E. Iverson
Exhibit 257 (KEI-4)
"Economic Valuation of Monsanto Interruptible Products"
On Behalf of
Monsanto Company
December 22, 2010
Project 9210
6RUMKER. & AsSOCIATES, INC
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