20110207Post-hearing Position Statement.pdf

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Randall C. Budge, 1SB No. 1949
RACINE, OLSON, NYE, BUDGE &
BAIEY, CHARTERED
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]
Fax: [phone]
rcb(ßacinelaw.net
RECEl\l
iOll FEB -7 PM 3: 52
Attorneys for Intervenor Monsanto Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
ROCKY MOUNAIN POWER FOR APPROVAL )
OF CHAGES TO ITS ELECTRC SERVICE )
SCHEDULES AN A PRICE INCREASE OF )
$27.7 MILLION, OR APPROXITELY )13.7 PERCENT )
)
Case No. PAC-E-IO-07
MONSANTO'S POST-HEARG POSITION STATEMENT
Monsanto submits ths Position Statement to address the issues presented at the
Februar 1, 2011 hearg to establish the rate for Monsanto interptible power, to-wit:
I. Contract Terms
Proposal: Commission need only deterne Schedule 400 hiterptib1e Demand Charge.
Reasonig: Monsanto proposed no change to the hour orJother curailment option ters, and
neither did PacifiCorp.l The Schedule 400 Fir Demand Chge has been ordered in
hiterlocutory Order No. 32151.1 Upon the termnation of the existing Contract oIl Februar 28,
2011, PacifiCorp must continue to provide electrc serce to Monsanto under Schedule 400 in
accordance with paragraph 2.1 of the Contract. 3 Thus, the Commission need only detere
¡.Dirt Testiony of James R. Smith daed December 22,2010, p. 3 and Supplementa Testiony of Paul H.
Clements, p. 25.
2 Interlocutor Order No. 32151 dated December 27,2010, AttchmentB, p 3.3 The Electrc Service Agrent, Exbit 25, provides in pargraph 2.1: "Af the Teration Date PacifiCoip
MONSAO'S POST-BEARG POSmON STATEME - i
Schedule 400 hiterptible Demand Charge in ths phase based on existing contract terms and
conditions. Mo:isanto remains committed to a longer term contract even though rates are subject
to tarff rate changes. However, PacifiCorp failed to address this issue at the hearng.
II. Overall Rate Impact
Proposal: The tota rate impact to Monsanto should be considered by Commission.
Reasonig: PacifiCorp has failed to adequately address the rate shock of its proposal:
. PacifiCorp's as filed. case would have increased Monsanto's rate by over 50%, or more
than $21 millon.4
. PacifiCorp's proposed valuation; together with hiterlocutory Order No. 32151, will
increase Monsanto's rate by 39.4%, or $16.7 millon.s
. Mr. Clements, PacifiCorp's manager of all Monsanto contract-related issues since 2004,
adtted to not knowing either of these rate impacts and furterore, not even troubled
or alared with their importce.
. The Company has made no effort to address the rate shock of such an extreme rate
change, despite their agreement to do so with other customers in the past.
. The Commssion has a duty to consider the ful impact ofPacifiCorpts proposal in order
to arve at a fair, just and reaonable rate for serce to Monsanto.
m. Long-Term Perspective
Proposal: Monsanto should be valued as a long-term resource.
Reasonig: Monsanto has bee an interrptible customer ofPacifiCorp or its predecessor
since 1951. PacifiCorp reflects Monsanto as a long-ter resource in its 2008 IR Update
through 20196 and in its 2010 Business Plan though 20287. Monsanto intends to remain a long-
term interptible customer. A long-ter resource valuation:
. Results in better price cerainty and stabilty.
. Avoids volatility of short-ter market valuation approach.
. Promotes proper policy to retaining valuable demand-side resources.
sha contiue to provide any electrc servce to Monsanto as specifed in Idao Electrc Servce Schedule No. 400 or
its succeor then in effect until such tie as the Commission establishes or approves other 'term and conditions and
price."
4 Direct Testiony of Kath E. Iverson dated December 22,2010, page 3.
5 Based on an increase of$5,n5,000 from Intelocutory Order No. 32151, and decrease of vauation of$l1 million.6 Exhbit 248
7 Exhbit 262
MONSANO'S POST-BEG POSITION STATEME - 2
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iv. Change in Valuation
Proposal:The Interptible Credit should increase in an amount equal to or greater than the
9.6% increase in Monsanto's finn rate.
Reasoning: PacifiCorp sought to increae rates by $27.7 million and to simultaneously reduce
the valuation of Monsanto's interptible products by $11 milion:
. Ths reduction in the face of increaing rates is counter-intutive and at odds with reality.
. The curent hiterrptible Credit is $8.33 per kW-year, or $17.1 milion based on
Monsanto's test year loads. Credit amounts have been based on past stipulations.
Monsanto's rates increased in 2007,2008,2009 and 2010 -and each time the hiterptib1e
Credits increased by a percentae at least as great as the percentage increase in fi rates.
. Customer #1 's contract provides for the Interrptible Credit to be adjusted at the same
percentage change as change in fi rate.
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. An increase in the valuation acts as a hedge against rising costs and promotes retention of
demand-side resources.
. The Commission should not allow discriinatory treatment for supply-side resources and
to the detrent of demand-side resources.
V. PacifCorp's Short-Term Market Valuation Approach
Proposal: The $6.1 millon valuation is uneasonable and should be given no weight.
Reasonig: The method has never been accepted by the PUC and:
. Is based on a single yea of short-ter energy markets and short-term energy prices and
does not reflect a long-term valuation.
. Results in implied capacity values which do not reasonably reflect avoided capacity cost.9
. Has no recogntion of resource deferraL.
. Would result in a volatile and uncertin price to Monsanto over time.
. Would result in a signficant increase to Monsanto of$16.7 milion, or 39.4%.
. Would result in a overall price to Monsanto of$42.71/MWhlo which is signficantly
higter than price paid by the other two interptible industral customers:
.. Customer #1 's price is $33.49/M with only 130 hours of interrption;
.¡ Customer #2's price is $32.84/M with at most 480 hours economic
curailment and 100 hours of operating resere interption.
8 See Dit Testiony ofKathE. Iveron dated December 22,2010, page 24, lines 11 - 19.9 Exhbit 256 "(CC-3)
10 Based on $5.75 millon increase frm Interlocutory Order No. 32151, and $11 mion proposed decrease in value.
MONSANO'S POST-BEG POSmON STATEMENT - 3
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I . Is inconsistent with valuation of irrgation load control program which heavily weights
resource deferral scenaro and explicitly "acknowledges the longer-term outlook towards
demand-side resources and the national trend in valuation ofload control programs.ilIl
VI. Stafts Valuation
Proposal: Staffs Economic Curtailment valuation should be increased by $3.8 millon.
Reasonig: The Stas acceptance ofPacifiCorp's $3.9 millon economic curailment value12
should be adjusted in order to reflect avoidance of resources:
. PacifiCorp admits that removing 67 MW from six months of coincident peaks in the cost
of servce "'studies values the economic curailment product at $7.7 millon.13
. Both the IR and the 2010 Business Blan include the 67 MW as a long-ter resource and
therefore should not be modeled though short-ter energy only prices.
. Mr. McDougal's $7.7 milion valuation is consistent with valuation of Cutomer #2's
economic curtailment product which is at most only 480 hours, in COntrast to Monsanto's
850 hours.
. This adjustment brings the Staffs proposed valuation of $14.2 milion to $18.0 millon.
VII. Peaker Valuation
Proposal: Peaker valuation should be incorporated into the Commssion's determnation.
Reasonig: The peaker valuation appropriately reflects the value of a long-ter resource:
. Provides a long-term and stable price signL.
. Consistent with a policy supportng demand-side resourcès.
. Used in irrgation load control program valuation where the peaker deferral scenaro was
weighted by 67%.14
. Consistent with PacifiCorp's long-term QF pricing of$115.80 per kW-year and
$53.40/M1S
. Appropriate for those resources proven to be both "reliable and sustainable
II 16
II Exhbit 259, p. 7.
12 See Confdential Exbit No. 135, average of 20 11-20 13 Economic Curtilment vaues of $3.6, $4.0 and $4.2
milion is $3.9 milion.13 See Stephen McDougal Rebutt Testiony dated November 2010, page 47.
14 See Surebutt testiony of Brian C. Collins dated Januar 25,2011, p. 14 - 15.
15 See Direct Testiony of Bri C. Coll dated December 22, 2010 and Exbit 255 (BCC-2).
16 Exhbit 259, p. 7.
MONSANO'S POST~HEG POSITION STATEME - 4
VIII. Schedule 400 Interruptible Demand Charge
Proposal: The curent Interrptible Demand Charge should not be increased.
Reasoning: If the Commission does not exclusively accept the peaker valuation, there is still
ample evidence that the lIterrptible Demand Charge not be increased:
. An hiterrptible Demand Charge of$3.94 per kW-month equates to al hiterptible
Credt of$9.51 per kW-monthI7, for an anual valuation of$19.5 millon.ls
. Provides a reasonable compromise between the Staffs value of $ 18 millon and the
peaker valuation of$25.5 millon.
. Consistent with the irrgaon load control prograi valuation methodology tha:t weights a
peaker valuation by 67% and a strct short-tèr approach by 33%.19
. Sends a proper signal that demand-side resources are valu~d on a long-ter basis.
. Is consistent with past precedent that valuation increases as fi rates increase.
. Results in Monsanto average price of $33.03!M20 which is in line wlth prices paid by
Customer #1 ($33.401M) and Customer #2 ($32.84/MWh).
. Resulting rate does not constitute "rate shock" and is fair, just and reasonable, cost-
justified and supported by the evidence.
. Sends a proper signal to Monsanto maIagement that for long-term planng, the Soda
Sprigs plant wîl remai viable and competitive.
IX. Summar
In suar, Monsanto's proposals outlined above rightfully acknowledge a 10ng-terI
outlook towards demand-side resource including interptibility that is consistent with the
valuation of load control programs in Idao as well as nationally. Ths trend is based upon the
proper assumption that over tie, where the acquied demand-side resource is reliable and
sustainable, peakng resource deferral exists. Monsanto has proven to be a long-ter reliable
and sustnable resource, and thus the valuation should reflect those important characteristics.
An Interptible Demand Charge of no greater than $3.94 per kW -month is fair, just and
reasonable, cost-justifed and supported by the evidence.
17 See Interlocutory Order No. 32151, AttchmentB, p. 3 of3, where the Fir Demand Charge is shown as $13.45
per kW-month. Retag the cuent Interptible Demand Chage of $3.94 results in an Intertible Credit of
$9.51 per kW-moiith ($13.45 - $3.94 = $9.51).
18 $9.51 x 2,051,216 biling unts = $19.5 million.
19 (67% X. peaker valuation of $25.5 milonJ + (33% x short-term market price of $6. 1 milionJ == $19.1 millon.
MONSANO'S POST-HEARG posmON STATEME - 5
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RESPECTFULLY SUBMITTED ths ~ day of Februar, 2011.
RACIN, OLSON, NYE, BUDGE &
BAIEY, CHAtERED
By ~~~RA C. BUDGE
MONSANO'S POST-HEARG POSITION STATEMENT - 6
CERTIFICATE OF MALING
I HEREBY CERTIFY that on ths 1lf day of Februar. 2011, I served a tre.
correct and complete copy of the foregoing document, to each of the following, via the method so
imticated:
Jea D. Jewell, Secretar (origial and 7)
Idaho Public Utilities Commission
P.O. Box 83720
Boise, il 83720-0074
E-mail: jjewell(Ðpuc.state.id.us Hand-Delivered
Ted Weston
Rocky Mountai Power
201 South Main, Suite 2300
Salt Lae City, Uta 84111
E-mail: ted.westoncgacificorp.com E-Mail
Paul J, Hickey
Hickey & Evan, LLP
1800 CareyAve., Ste 700
POBox 467
Cheyenne, WY 82003
E-mail: phickey($hickevvans.com E-Mail
Mark C. Moench
Daniel Solander
Rocky Mountain Power
201 S. Mai Street, Suite "23 00
Salt Lake City, Uta 84111
E-mail: mark.moenchtIacificorp.com
danel.solander($acificorp.com
E-Mail
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portand, Oregon 97232
E-mail: datareguesttêacificorp.com
E-Mai
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commssion
P. O. Box 83720
MONSANO'S POST-HEG posmON STATEME - 7
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Boise, Idao 83720-0074
E-mail: scott. woodbury~uc.daho. gov
E-Mai
Katie Iverson
Brubaker & Associates
17244 W. Cordova Cour
Surprise, Arzona 85387
E-mai: kiverson§consultbai.com
E-Mai
James R. Smith
Monsanto Company.
P. O. Box 816
Soda Sprigs, Idao 83276
E-mai: jim.r.smith~onsanto.com
E-Mail
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey
P.O. Box 1391
Pocatello, Idao 83204-1391
E-mail: elo(ßacinelaw.net
E-Mail
Anthony Yanel
29814 Lake Road
Bay Vilage, Ohio 44140
E-mail: tony(yancel.net
E-Mail.
Tim Buller
Jason Has
Agrut, Inc.
3010 Conda Road
Soda Springs, Idaho 83276
E-mail: tbuller§agrum.coin
j aharis§agi.um.com
E-mal
Benjam J. Otto
Idao Conseration Legue
P. O. Box 844
Boise, Idao 83702
E-mail: bottotWdahoconservation.org
E-Mai
Dr. Don Reading
6070 Hill Road
Boise, il 83703
E-mail: dreadig~dspring.com E-Mail
MONSANTO'S POST-BEG POSITION STATEMNT - 8
Melinda J. Davison
Davison Van Cleve, P.C.
333 SW Taylor, Suite 400
Portland, Oregon 97204
E-mai: mjd§dvclaw.com
Ronald L. Williams
William Bradbur, P .C.
1015 W. Hays Street
Boise, Idao 83702
E-mai: ron(iwillamsbradbury.com
Brad M. Purdy
Attorney at Law
2019 N. 17th Street
Boise, Idaho 83702
E-mai: bmpurdy§hotrail.com
MONSANTO'S POST-BEARG POSITION STATEMENT - 9
E-Mail
E-Mai
E-Mail
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RAALL C. BUDGE -