20110328Answer to PAC Petition for Clarification, Reconsideration etc.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(fracinelaw.net
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lUff MAR 28 PH 3: , 2
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
ANSWER TO ROCKY MOUNTAIN POWER'S PETITION FOR CLARIFICATION
AND RECONSIDERATION AND CROSS-PETITION FOR RECONSIDERATION
COMES NOW Intervenor, Monsanto Company ("Monsanto"), through counsel, and
pursuant to Rule 331 of the Rules of Procedure, IDAPA 31.01.01, hereby submits this Answer To
Rocky Mountain Power's Petition or Clarifcation and Cross-Petition For Reconsideration
("Answer") to Rocky Mountain Power's ("RMP" or "Company") Petition for Clarifcation And
Reconsideration filed herein on March 21,2011 ("RMP's Petition").
COURSE OF PROCEEDING
On Februar 28, 2011, the Commission issued Order No. 32196 ("the Order"). On
March 15,2011, Monsanto fied its Petition to Clarif Order No. 32196 ("Monsanto's Petition")
pursuant to Rule 325 of the Rules of Procedure, together with Supporting Affdavit of Randall C.
Budge with attached Exhibits 1-5. Monsanto's Petition identified four issues for clarfication and
respectfuly requested that the Commission rule as follows:
MONSANTO'S ANSWER - 1
1. That except for the changes in the firm and interrptible credit
rates as set forth in the Order, the terms of Monsanto's new five-year ESA with
the Company and Tarff Schedule 400 should remain unchanged.
2. That the Interrptible Demand Charge of $4.71 per kW ($13.45
firm rate less the credit of $8.74) established in the Order should apply to
Monsanto's full load in excess of the 9 MW of firm power and energy consistent
with the previous Agreement, specifically Sections 1.5 and 1.6.
3. That the firm power and energy charges and interrptible credit
should remain fixed for the five-year terms of the Agreement; or, that both should
be subject to adjustments during the five-year term of the ESA.
4. The Dow Jones index in Exhibit B should remain unchanged.
Issues 1 though 3 remain properly before the Commission for decision based upon
Monsanto's and RMP's Petitions. Issue number 4, the Company's proposal to change the index
in ESA Exhibit B from "Dow Jones" to "Intercontinental Exchange" ("ICE") day ahead and
delete Exhibit "B-3" need not be decided by the Commission. Monsanto believes it can work out
this index with the Company based upon the Company's representation that the ICE reporting
service provides the same information as Dow Jones and is readily available without cost.
RMP's Petition asserts that the Order "is unclear, uneasonable, erroneous, not supported
by the evidence or otherwise affected by errors of law," and seeks "clarfication and
reconsideration" of the Commission's Decisions that: (1) 27% of the Populus Terminal
transmission line is not used and useful; (2) actual labor costs of$993,515 should be disallowed;
(3) all integration costs be disallowed; (4) the interrptible product valuation of credit for
Monsanto should be $17M and other related issues; (5) other errors affecting revenue
requirement calculations; and (6) a retu on common equity of 9.9% is reasonable. RMP
Petition, p. 1-2.
INTRODUCTION
Monsanto's Answer only responds to pages 25-30 ofRMP's Petition seeking clarification
or in the alternative rehearng of issues regarding the Monsanto Contract. All other issues
MONSANTO'S ANSWER - 2
presented by RMP's Petition have been clearly decided by the Commission based upon
substantial and competent evidence in the record with the Company's Petition merely reiterating
arguents previously made and rejected.
Monsanto's Answer will respond to pages 28-29 of RMP's Petition concernng: (1)
translating the $17M valuation into an Interrptible Credit rate which can then be used to
determine the tarff Interrptible Demand Charge for Schedule 400; (2) the application of that
Interrptible Demand Charge to Monsanto's load; and (3) potential refusal by the Company to
execute a new ESA with Monsanto in an attempt to convert Monsanto to a firm rate customer
only contrar to the Order, which can and should be easily remedied by incorporating the
interrptible products in Tarff Schedule 400.
MONSANTO'S REPLY
1. Determination of the Interruptible Credit and Interruptible Demand Charge
In order to revise Schedule 400 to reflect the Commssion's Order, the Commission must
establish rates and not just simply order a valuation, so that Monsanto may be properly biled.
RMP notes in its Petition at page 28 that the Interrptible Credit of$8.74 per kW is not specified
in the Order. RMP is correct. The Commission's Order failed to show a rate for the Interrptible
Credit. Monsanto asks that the Commission establish this rate in its clarfication as $8.74 per
kW. See footnote 17 ofRMP's Petition. Based on this credit, the Commission should then
establish the Interrptible Demand Charge as $4.71 per kW ($13.45 Firm Demand charge less
$8.74 Interrptible Credit).
The $8.74 is the correct Interrptible Credit rate because the $17 milion found in Order
No. 32196 is premised on valuations of 162 MW. We agree with RMP that the valuation of
Monsanto's products was indeed calculated on the basis of 162 MW, i.e., simply the rated sizes
of just the three fuaces. It would be entirely inappropriate to use any denominator other than
MONSANO'S ANSWER - 3
162 MW for determining the Interrptible Credit rate since the $17 milion is a valuation based
on 162 MW, and no other amount. Had the paries used any amount higher or lower than 162
MW in their analysis, the valuation would have been either correspondingly higher or lower.
Furhermore, the Interrptible Credit rate can not be based on Monsanto's biling determinants as
that amount is greater than 162 MW and would unjustly result in an artificially reduced credit
which would be lower than the existing credit of $8.33 per kW.
The importt consideration the Commission must keep in mind in developing the
Interrptible Credit rate is to maintain consistency between the numerator (expressed as milions
of dollars) and the denominator (the size of product valued). This consistency is maintained
when the $17 milion is divided by 162 MW, and then divided by 12 to come up with a monthly
$ per kW rate. Monsanto asks the Commission to establish an Interrptible Credit rate of$8.74
per kW, and to fuher establish an Interrptible Demand Charge of$4.71 per kW for Schedule
400.
2. Application of the Interruptible Demand Charge to Monsanto's Loads
RMP's Petition states at page 28 there is no evidence that the Interrptible Demand
Charge applies to Monsanto's full load in excess of the 9 MW of firm power. In this instance,
RMP is blatantly wrong. There is overwhelming evidence in this proceeding that Monsanto
should pay firm demand charges only for the 9 MW of firm power, and that all load in excess of
the 9 MW is interrptible power, and has been historically charged under the interrptible
demand charge.
Ever since 2004, Monsanto has been served under Electrc Service Agreements that
MONSANTO'S ANSWER - 4
clearly identify that the first 9,000 kW of Measured Demand each month is "Firm Power" and
that "Interrptible Power shall be the. Measured Demand in any Biling Period in excess of the
Fir Power" and up to the total contract demand of up to 215,000 kW. These definitions are
found in Sections 1.5, 1.6 and 1.14 of the 2008 Agreement. These undisputed facts were stated
repeatedly in prefied testimony of Monsanto:
"(Monsanto 1 has a single agreement where 9 MW are biled at firm demand and energy
charges, and the remainder of the load is biled at interrptible demand and energy charges."
Direct Testimony of Kathr Iverson, page 8, November 1,2010.
"Only a very small portion (9 MW) of Monsanto's total 182 MW load is served under
firm rates. The vast majority of Monsanto's load is interrptible and is charged a lesser demand
charge." Direct Testimony of Brian Collns, page 2, November 1,2010.
"Monsanto's long-term plans are to continue to take service as an interrptible customer
for our entire load, except for the 9 MW of firm power." Direct Testimony of James Smith, page
2, December 22, 2010.
"The 2008 Agreement sets forth the definition of "firm" and "interrptible" power and
energy in Sections 1.5 and 1.6. Specifically, it states that the first 9 megawatts are served at firm
demand charges, and the remaining measured demand is served at the interrptible demand
charge." Direct Testimony of Kath Iverson, page 5, December 22,2010.
"As I explained in my direct testimony, only 9 MW of Monsanto's load is served at Firm
Demand Charges. The remaining load is served under Interrptible Demand Charges, which, for
confidential reasons, are not specified in the public version of Schedule 400." Rebuttal
Testimony of Kathr Iverson, page 2, Janua 14,2011.
The test year biling determnants used in this case showed 9 MW of firm load and
roughy 171 MW of "non firm" load for Monsanto. (See Exhbit 55, page 6 of 6, with firm kW
shown as 108,000 kW (9 MW per month) and non-firm kW shown as 2,051,216 kW (roughly
171 MW per month)).
As we explained earlier, the $8.74 per kW is the correct Interrptible Credit since it is
MONSANTO'S ANSWER - 5
based on 162 MW, i.e., the rating of simply the three fuaces. RMP now seeks for the first time
to limit the application of Interrptible Demand Charge only to 162 MW each month despite the
long-stading agreement that all load in excess of 9 MW is interrptible. This request should be
denied by the Commission for several reasons.
First and foremost, this change to limit interrptible power to 162 MW fles in the face of
both the Company's testimony and its statements during oral arguent in front ofthis
Commission. For example, Mr. Clements clearly testified on page 25 of his Supplemental
Testimony filed in October 2010 that other than pricing, the terms of the contract should not
change at this time. At page 22 of his rebuttl testimony, Mr. Clements stated, "The proposed
contract values assume Monsanto will enter into a contract with terms and conditions equal to
those found in the existing agreement and that Monsanto's load characteristics remain similar to
historical patterns." (emphasis added) Furhermore, the Commission also noted in Order No.
32098 : "As per the stated wilingness ofPacifiCorp and Monsanto at oral argument, all other
service terms in the 2008 Agreement shall remain unchanged." Page 5, emphasis added.
Second, the Company has been well aware that all loads in excess of the 9 MW would be
charged the lesser demand charge. This is exactly how the agreement has worked since 2004 and
RMP has never taken any issue with billng arangement until now. In fact, ths is the very
reason why RMP's workpapers showed an existing interrptible credit of$16.1 milion in the
Net Power Costs (the prior credit of $8.33 per kW x 162,000 kW x 12 months), while Ms.
Iverson showed on page 3 of her December 22, 2010 Direct testimony that based on the biling
determinants of this case, Monsanto's prior credit was $17,086,629 ($8.33 x 2,051,216 kWof
MONSANO'S ANSWER - 6
Monsanto's non-firm load as shown in Exhibit 55), a difference ofless than $900,000. The
Company has never previously raised any concerns regarding the fact that all power in excess of
the 9 MW is interrptible, and thus biled at the Interrptible Demand Charge.
Third, it is entirely fair, just and reasonable if the application of the $8.74 Interrptible
Credit rate should result in more than $17 milion. For example, the interrptible biling
determinants of ths case were 2,051,216 kW-months (or roughy 171 MW each month).
Applying $8.74 to that biling determinant results in $17.9 milion, a difference of roughly the
same $900,000 shown above, which reflects the fact that all loads above 9 MW are indeed
interrptible and thus deserving of being biled at the lesser demand charge.
Had RMP raised this issue in either negotiations or durng the proceeding, Monsanto
would have had the opportity to explain how the auxilar loads associated with the fuaces
come down together with the fuaces durng interrptions. RMP actully receives more than
162 MW of demand response from Monsanto on occasion and Monsanto should be compensated
accordingly for this demand response. (The interrptible demand credit based on actual metered
demand above 9 MW assures that Monsanto is not under or over compensated for demand
response it actuly provides.) Until the March 2, 2011 letter from RMP, long after the record
was closed, the Commission and Monsanto were unaware that RMP had any problem with the
fact that all loads above 9 MW are interrptible. Instead, RMP chose to mislead Monsanto and
the Commission into believing that it sought no change in the terms of the 2008 Agreement, that
is until the Commission presented its Order on Febru 28, 2011. Whle this could have been
handled in the valuation process by raising the 162 MW upwards to reflect ths auxilar load, it
MONSANTO'S ANSWER-7
has always been handled instead through the agreement which provided for all loads except the 9
MW being classified as interrptible. RMP should have brought up this issue months ago if it
had any concerns.
For these reasons, the Commission should reject any attempt by RMP to change the
definitions of Firm and Interrptible Power in Monsanto's agreement.
3. Monsanto's ESA and Tariff Schedule 400.
It is noteworthy that neither Monsanto, the Company or Staff propose changes to any of
the terms or conditions of Monsanto's three interrptible products, Tarff Schedule 400 or the
curent ESA between the Company and Monsanto, except for the firm rate and interrptible
credit.
Since Janua 1, 2007, Monsanto's rates have been established in accordance with the
Tarff Standard, Schedule 400. This occured for the first time as a result of the Commission's
Order No. 30197 dated December 18, 2006, in Case No. PAC-E-06-09 where the Commission
stated at page 9 as follows:
"The transition of Monsanto from Contract to tariff standard customer, we find,
will facilitate future rate adjustments and should serve to keepMonsanto's rates
better aligned with its cost of service. We appreciate that the moving to a tariff-
based rate Monsanto has given up some of the certainty provided in a contract-
based rate structue. In so doing, however, we note that Monsanto was the last of
PacifiCorp's contract customers to make the transition. While tariff rates may
present Monsanto with new challenges, we perceive the regulatory result to be
positive and one of greater equity. Under the submitted Agreement, Monsanto's
future rates afer Januar 1, 2008, wil be adjusted using the same process as all
other customers."
It is clear that the Commission in Order 30197 moving Monsanto to tariff-based rates was
referrng to both firm and interrptible rates and the pricing for both has been set fort on every
Schedule 400. Paragraph 2.1 of the ESA (Exhbit 251) provides:
"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
MONSANTO'S ANSWER - 8
successor then in effect until such time as the Commission establishes or approves
other terms and conditions and prices."
Paragraph 2.2 of the ESA provides that all charges and credits as specified in Schedule
No. 400 or its successor are subject to adjustment "from any general rate case or other filing by
PacifiCorp." Since no par proposed any change to the terms of the ESA and Schedule No. 400
has always been subject to changes in both the firm and interrptible charges, the Order should
be clarified to provide that both charges are subject to review and change in any futue rate case.
Despite nearly 60 years of providing interrptible service to Monsanto, it appears the
Company may now seek punitive or retaliatory action against Monsanto by refusing to sign a new
Contract and asserting that the interrptible credit is contract rather than tarff-rate based. The
Company may then refuse to take interrptions and bil Monsanto for all power at firm rates.
This would deprive Monsanto of the interrptible credit ordered by the Commission and
intentionally create a biling dispute.
Whle the Commission may not be able to force the Company to sign a new ESA, it can
and should incorporate in Tariff Schedule 400 the terms of the interrptible products as contained
in the ESA, in addition to the charges for both firm and interrptible power. This would not only
render moot the need for a new signed ESA, but also preclude any Company effort to undermine
the Commission's Order and deprive Monsanto of its right to an interrptible rate and to receive
an interrptible credit. This would be consistent with the Idaho Irrigation Load Control Program
offered to Idaho irrigation customers under Tariff Schedule Nos. 72 and 72A.
The position asserted in RMP's Petition that Monsanto's firm rates should be subject to
adjustment but the interrptible rate fixed for a five-year term is contrary to the position the
Company has asserted in this case. In fact, the Company's witness Clements acknowledged in
his testimony the pricing should be subject to change in the next general rate case and that the
Company was recommending no change in any of the contract terms other than price. In this
regard, Clements testified in his Supplementa Testimony dated October 2011, page 25, lines 3-
11 as follows:
"Q. How long should the pricing you are recommending be in effect?
MONSANTO'S ANSWER - 9
A. Absent an agreement between the Company and Monsanto on contract
length, the Commission ordered pricing should be in effect until rates change in
the context of the next general rate case or other appropriate docket properly
before the Commission.
Q. Should other terms of the Contract change at this time?
A. No. The values recommended by the Company apply only if Monsanto
provides the same interrptible products under the same terms and conditions as
those found in the Contract, with the assumption of 800 hours of economic
curailment. "
As stated in its Petition to Clarfy, Monsanto remains willng to execute an ESA which
complies with the Order as clarified by the Commission and until such time will continue to
make all interrptible products available to the Company as per the Order.
MONSANO'S ANSWER - 10
RESPECTFULLY SUBMITTED this 28th day of March, 2011.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
By~t.~RA C. BUDG~
MONSANO'S ANSWER - 11
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 28th day of March, 2011, 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, Secretary (original and 7)
Idaho Public Utilities Commission
P.O. Box 83720
Boise, ID 83720-0074
E-mail: jjewell(ßpuc.state.id.us U.S. Mail
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
E-mail: ted.westonCßacificorp.com E-Mail
Paul J. Hickey
Hickey & Evans, LLP
1800 CareyAve., Ste 700
PO Box 467
Cheyenne, WY 82003
E-mail: phickey(fhickeyyans.com E-Mail
Mark C. Moench
Daniel Solander
Rocky Mountain Power
20l S. Main Street, Suite 2300
Salt Lake City, Utah 84111
E-mail: mark.moench(fpacificorp.com
daniel.solanderCßacificorp.com
E-Mail
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon 97232
E-mail: datarequest(fpacificorp.com
E-Mail
MONSANTO'S ANSWER - 11
Scott Woodbur
Deputy Attorney General
Idaho Public Utilities Commission
P. O. Box 83720
Boise, Idaho 83720-0074
E-mail: scott.woodbury(fpuc.idaho.gov
E-Mail
Katie Iverson
Brubaker & Associates
17244 W. Cordova Court
Surprise, Arizona 85387
E-mail: kiverson(fconsultbai.com
E-Mail
James R. Smith
Monsanto Company
P. O. Box 816
Soda Springs, Idaho 83276
E-mail: jim.r.smith(fmonsanto.com
E-Mail
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey
P.O. Box 1391
Pocatello, Idaho 83204-1391
E-mail: elo(fracinelaw.net
E-Mail
Anthony Yanel
29814 Lake Road
Bay Vilage, Ohio 44140
E-mail: tony(fyanel.net
E-Mail
Tim Buller
Jason Haris
Agrium, Inc.
3010 Conda Road
Soda Springs, Idaho 83276
E-mail: tbuller(fagrium.com
jaharris(áagrium.com
E-mail
Benjamin J. Otto
Idaho Conservation League
P. O. Box 844
Boise, Idaho 83702 E-Mail
MONSANTO'S ANSWER - 12
E-mail: botto(fidahoconservation.org
Dr. Don Reading
6070 Hil Road
Boise, ID 83703
E-mail: dreading(fmindspring.com
Melinda J. Davison
Davison Van Cleve, P.Co
333 SW Taylor, Suite 400
Portland, Oregon 97204
E-mail: mjd(ádvc1awocom
Ronald L. Wiliams
Williams Bradbury, PoCo
1015 W. Hays Street
Boise, Idaho 83702
E-mail: ron(fwiliamsbradbury.com
Brad M. Purdy
Attorney at Law
2019 N. 17th Street
Boise, Idaho 83702
E-mail: bmpurdy(fhotmail.com
MONSANTO'S ANSWER - 13
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