20111219Comments.pdf

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Randall C. Budge (ISB No. 1949)
Thomas J. Budge (ISB No. 7465)
RACINE OLSON NYE BUDGE &
BAILEY, CHARTERED
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
[phone] - Telephone:
[phone] - Fax:
rcb(ßracinelaw.net
REC:E!
lOll DEC 19 PM f= 04
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 $32.7 MILLION, OR
APPROXIMATELY 15 PERCENT
Case No. PAC-E-ll-12
MONSANTO COMMENTS
INTRODUCTION
Comes now Intervenor Monsanto Company ("Monsanto"), by and through counsel, and
submits these comments with regard to the settlement Stipulation dated October 17, 2011
("Stipulation") signed by Monsanto and all but one other pary. The Stipulation has been fied
with the Idaho Public Utility Commission ("Commission") and scheduled for an approval
hearing on December 19, 2011. Since the terms of the Stipulation and the basis upon for
approval are well-described in the direct testimony of Staff Utilties Division Administrator
Randy Lobb and PacifiCorp dba Rocky Mountain Power (the "Company" or "RMr") witness
Ted Weston, and since the Stipulation speaks for itself as to the terms, Monsanto felt it was
unecessar to fie written testimony but does deem it important that the Commission understand
that Monsanto signed the Stipulation with great trepidation and serious concerns, as explained in
MONSANTO COMMENTS - 1
the following comments.
MONSANTO APPROVEDTHE STIPULATION WITH GREAT RELUCTANCE
Monsanto approved and signed the Stipulation because it believes that the Stipulation
represents a reasonable compromise of the disputed claims and positions of the paries. Accor-
dingly, Monsanto urges the Commission to approve it in its entirety.
That said, Monsanto's approval of the Stipulation came after considerable question and
with serious trepidation, and Monsanto believes it is important to apprise the Commission not
only of the reasons supporting approval but also of important issues concernng sustainabilty of
the course being taken by the Company.
Monsanto appreciates the fact that this Commission has recognized the importance of
price certainty and stability to Monsanto for planing, operational, and competitive reasons.
Whle the Stipulation provides price certainty for two years, it does not provide price stability.
The primary reasons Monsanto approved the Stipulation are as follows:
1. The Stipulation provides price certainty for the next two years, although prices
will increase anually. (Stipulation ir 4, 19)
2. The Stipulation is a "black box" settlement, with no agreement or acceptance by
the Paries of any specific revenue requirement, cost allocation or cost of service
methodology. (Stipulation, ir 5, 24)
3. The Stipulation represents a compromise of disputed claims with the risks,
uncertainties, and costs associated with a contested rate case eliminated.
(Stipulation, ir 21)
4. The ECAM balances that Monsanto and AgriUI now are exposed to, which
MONSANTO COMMENTS - 2
would have caused a dramatic rate shock, are being amortized over three years.
(Stipulation, ir 9)
5. The value of Monsanto's curailment products will increase each year (Januar 1,
2012 and Januar 1,2013). (Stipulation, ir 9)
6. The Company agrees to work collaboratively and in good faith during the rate
plan period to address the terms, conditions and valuation of Monsanto's
curailment products and to discuss alternative cost of service methodologies.
(Stipulation, ir 14)
7. Monsanto and the Company will execute a new Electric Service Agreement
covering the next two years. The two-year period will provide Monsanto with an
opportity to take a proactive role of scrutinizing, influencing and changing the
Company's present plans to expend nearly $9 bilion over the next eight years
(driven by the Gateway Transmission Project) with little if any concern for the
resulting anual rate increases to the customers and whether the customers can
afford them.
MONSANTO CONCERNS
Rapidly Escalating Energy Costs:
Since Mid-American Energy Holding Company ("MEHC") acquired PacifiCorp in 2005,
Monsanto and other customers have experienced rapidly escalating energy costs. The amount
and frequency of rate increases has been dramatic, far outpacing what was promised at the time
of the acquisition. When MEHC sought regulatory approval of its acquisition of PacifiCorp in
2005, MEHC management testified that, under its ownership, PacifiCorp's rates would increase
MONSANTO COMMENTS - 3
less that 4% per year.l Actul increases since have exceeded that promise by more than double.
To ilustrate, in 2006, the year that MEHC's acquisition was approved, Monsanto's
electric bil was $32.1 milion. In 2013 Monsanto's electric bil will be over $63 milion with the
ECAM2. Monsanto's rates have increased more than 4% percent in every year but one since
MEHC3 acquired the Company, including increases of 11% in 2007, 11% in 2008, and 16% in
2011. As a result of this Stipulation, Monsanto's rates will increase another 8.91 % Januar 1,
2012, and 8.25% in 2013. While these increases are reasonable based on the Stipulation and
when compared with what the Company requested, the reality is that they far outstrp infation
and exacerbate the stress already caused by the Company's recent history of heavy anual
increases.
As shown in Figure 2 below, the Company's Idaho service territory electricity costs are
increasing at rates significantly higher than the Consumer Price Index.4 Figure 3 below shows
that Monsanto's rate increases when compared to the Consumer Price Index are dramatically and
disproportionately higher yet.
1 Re: MEHC and PacifiCorp Application, Oregon PUC Docket No. UM 1209, PPL/312 at Brett Gale/6-7 (Dec. 7, 2005)
2 Stipulation, Attachment 1- Settlement Revenue Requirement and Rate Spread, Rocky Mountain Power - State of
Idaho, Case No. PAC-E-ll-12
42007-2011 CPI data is from http://www.usinflationcalculator.com/inflation/current-inflation-rates/
2012-2013 CPI data forecast from Consensus Forecasts, http://www.ltroth.com/valuation-update/article/economic-outlookl
2007 RMP rate increase taen from IPUC 2006 Annua Report htt://ww.puc.statejd.us/ar2006/electric.pdf
2008 RMP rate increase taen from ¡PUC 2007 Annua Report htt://ww.puc.statejd.us/ar2007/electric.odf
2009 RMP rate increase taken from IPUC 2009 Annual Report http://www.puc.state.id.us/ar2009/electric.pdf
2011 RMP rate increase taken from IPUC, Case No. PAC-E-1D-07, Interlocutory Order No. 32151,
http://www .puc.idaho.gov /internet!cases/elec/PAC/PACE1007/ordnotc!20101227INTERLOCUTORV ORDER NO 3215L.PDF
2012-13 RMP rate increase pending as proposed in IPUC, Case No. PAC-E-11-12, Notice of Proposed Settlement, Order No. 32399, p. 2,
http://www.puc.idaho.gov/internet/cases/elec/PAC/PACE1112/ordnotc!20111109NOTICE OF PROPOSED SETTLEMENT ORDER NO 32399.P
OF
MONSANTO COMMENTS - 4
Figure 2 - RM Electric Base Rates vs. CPI (percent increase since 2006)
Figure 3 - Monsanto Rates vs. CPI (percent increase since 2006)
io
20
11$
1'0
m
Ul
17$
110
lO
ic *' lO io 2010 2111 2012
Despite providing 1,050 hours of interrptible power, Monsanto rates are approaching
full firm rate levels paid in other pars of the country. Clearly, the Company's Idaho customers
have lost their competitive energy advantage since MEHC acquired the Company. Monsanto
canot tolerate these types of increases in the futue and does not believe that other Idaho
customers can either.
MONSANTO COMMENTS - 5
Capital Investment Plans:
When this Commission approved MEHC's acquisition of PacifiCorp from Scottish
Power, the Order acknowledged that MEHC projects "that PacifiCorp's service terrtories will
require investments of at least $1 bilion per year, for the next five years, in order to assure
reliable electric service."s At that time MEHC also asserted "it is 'uniquely suited' to undertake
such investments because it is 'privately held and not subject to shareholder expectations or
regular quarterly dividends and relatively fast retus on investments;" fuher, that "Mid-
American has access to significant financial and managerial resources through its relationship
with Berkshire-Hathaway.,,6 Ratepayers have now experienced first-hand Berkshire-Hathaway's
capitalization of Pacifi Corp.
For example, MEHC's merger commitment included a transmission upgrade of Path C
from Southeast Idaho to Northern Utah at an estimated cost of $78 milion.7 Yet, we leared in
the 2010 rate case the actual cost was more than $801 milion.8 This casts considerable doubt and
should raise the concern among ratepayers as to whether the Company's projected expenditues
of $8.8 bilion through 2020 (of which $5 bilion is Gateway Transmission) are realistic (even
assuming these expenditues are necessary).
While the Company is able and comfortble in "projecting" enormous capital expenditure
costs through 2020, it has never disclosed how these will translate into rate increases to the
customers that wil be asked to foot the bil. Further, the "affordabilty" of substantially
increased energy costs to affected customers has been disregarded. The negative economic
5 Order No. 29973 dated February 13, 2006, in Case No. PAC-E-05-8, p. 4.
6 Order No. 29973 at p. 5.
7 Order No. 29973, IDAHO COMMITMENTS, No. 34 (a), p. 6
8 Order No. 32196 dated February 28, 2011, CASE NO. PAC-E-10-07, p. 35.
MONSANTO COMMENTS - 6
impacts that continuing large rate increases will have on the regional economy and how it wil
effect load growt has apparently not been analyzed. If energy costs continue to escalate at these
rates, there is a significant likelihood that loads of many customers will disappear.
In sum, the need for the Company's plan to expend $9 bilion in capital improvements is
unclear, the effect such expenditues will have on rates and demand has not been disclosed, and a
cost-benefit analysis is non-existent.
Monsanto notes with interest that the recent Wyoming settlement requires a "certificate
of public convenience and necessity" be obtained in advance for the Gateway transmission
project and large environmental projects. Monsanto believes that this process of requiring
advanced scrutiny and approval before huge capital expenditures are incured is a signficant
development that should provide a focused process to determine not only whether such projects
are waranted and cost effective, but also to address the resulting rate increases and affordabilty
questions. Idaho should closely follow these proceedings and perhaps require similar advance
approval in Idaho.
Given the protracted recession, stagnant economy, and recent regular rate increases,
PacifiCorp should moderate and defer if not abandon its huge capital expenditures programs that
benefit primarily the shareholders in favor or austerity plans that to provide affordable rates.
CONCLUSION
Monsanto approved and signed the Stipulation and for the reasons stated believes the
settlement in the best interests of all customers under the paricular circumstances of this case
and therefore urges approval by the Commission. Monsanto is extremely concerned about
massive past and planed future capital investments programs since MEHC acquired PacifiCorp
which have and will continue to result in substantial and regular rate increase that far exceed
MONSANO COMMENTS-7
what MEHC promised customers when the merger was approved in 2006. "Affordabilty" of
electricity to customers should not be ignored simply because a utilty has a monopoly, an
obligation to serve all customers within its jurisdiction and an entitlement to a reasonable rate of
retur. The Company should not be operated as a Berkshire Hathaway investment haven. Given
the protracted recession, MEHC and PacifiCorp are urged to defer and moderate if not abandon
their huge capital expenditures plans that primarily benefit shareholders and embark upon new
austerity plans that provide electricity rates that are affordable and sustainable.
RESPECTIVELY SUBMITTED.
DATED this 19th day of December, 2011.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
By 1ic-~
RANDALL C. BUD
MONSANTO COMMENTS - 8
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 19th day of December, 2011, I served a tre, correct
and complete copy of the foregoing document, to each of the following, via the method so
indicated:
Jean D. Jewell, Secreta (original and 7)
Idaho Public Utilities Commission
P.O. Box 83720
Boise,ID 83720-0074
E-mail: jjewell(ipuc.state.id.us Hand Delivery
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111
E-mail: ted.weston(ßpacificorp.com Hand Delivery
Daniel Solander
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake city, Utah 84111
E-mail: DanieL.solander(ßpacificorp.com
Hand Delivery
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon 97232
Fax: [phone]
datarequest(ßpacificorp.com E-Mail
Neil Price, Deputy AG
Idaho Public Utilities Commission
P.O. Box 83720; 472 W. Washington
Boise ID 83720-0074
NeiL. price(ßpuc.idaho. gov Hand Delivery
Maurce Brubaker
Katie Iverson
Brubaker & Associates, Inc.
1215 Fern Ridge Parkway, Suite 208
St. Louis, MO 63141
mbrubaker(ßconsultbai.com
kiverson(ßconsultbai.com
E-Mail
MONSANTO COMMENTS - 9
James R. Smith
Monsanto Company
P.O. Box 816
Soda Springs, Idaho 83276
jim.r. smith(ßmonsanto.com E-Mail
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey
P.O. Box 1391
Pocatello, Idaho 83204-139 i
elo(ßracinelaw.net
E-Mail
Anthony Yankel
29814 Lake Road
Bay Vilage, Ohio 44140
tony(ßyanel.com E-Mail
Gar Kajander
Manager, Energy Procurement
Monsanto Company
800 N. Lindbergh Blvd., Z C2NF
St. Louis, Missouri 63167
Gar.r.kajander(ßmonsanto.com
E-Mail
Rick Anderson
Energy Strategies, LLC
215 S. State Street, #100
Salt Lake City, Utah 84111-2322
randerson(ßenergystrat.com
E-Mail
Brad M. Purdy
Attorney at Law
2019 N. 1 ih Street
Boise,ID 83702
bmpurdy(ßhotmail.com E-Mail
Benjamin J. Otto
Idaho Conservation League
710 N. 6th Street
Boise,ID 83702
botto (ßidahoconservation. org E-Mail
MONSANTO COMMENTS - 10
Ronald L. Wiliams
Wilams Bradbur, PC
1015 W. Hays St.
Boise, ID 83702
ron(ßwillamsbradbur.com E-Mail
Don Schoenbeck
RCS, Inc.
900 Washington St, Ste 780
Vancouver, WA 98660
E-Mail: dws(ßr-c-s-inc.com E-Mail
Tim Buller
PacifiCorp Idaho Industrial Customers
Agrium US Inc./Nu-West Industries
tbuller(ßagrium.com E-Mail
~e-~RAND UnGE
MONSANTO COMMENTS-11