20120330Reply Comments.pdf

LAW OFFICES OF
W. MARCUS W. NYE
RANDALL C. BUDGE
JOHN A. BAILEY, JR.
JOHN R. G000ELL
JOHN B. INGELSTROM
DANIEL C. GREEN
BRENT 0. ROCHE
KIRK B. HADLEY
FRED J. LEWIS
ERIC L. OLSEN
CONRAD J. AIKEN
RICHARD A. HEARN, M.D.
LANE V. ERICKSON
FREDERICK J. HAHN, III
PATRICK N. GEORGE
SCOTT J. SMITH
JOSHUA D. JOHNSON
DAVID E. ALEXANDER
STEPHEN J. MUHONEN
CANDICE M. MCHUGH
CAROL TIPPI VOLYN
JONATHON S BYINGTON
JONATHAN M. VOLYN
THOMAS J. BUDGE
BRENT L. WHITING
DAVE BAGLEY
JASON E. FLAIG
FERRELL S. RYAN, III
AARON A. CRARY
JOHN J. BULGER
BRETT R CAHOON
JEFFREY A. WARR
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
P.O. Box 83720
Boise, Idaho 83720-0074
Re.- Case No. PAC-E-12-03
Dear Mrs. Jewell:
RACINE OLSON NYE BUDGE & BAILEY
CHARTERED
201 EAST CENTER STREET
POST OFFICE BOX 1391
POCATELLO, IDAHO 83204-1391
TELEPHONE [phone]
FACSIMILE [phone]
www.radnelaw.net
SENDER'S E-MAIL ADDRESS: [e-mail]
March 16, 2012
BOISE OFFICE
101 SOUTH CAPITOL
BOULEVARD, SUITE 300
BOISE, IDAHO 83702
TELEPHONE, [phone]
FACSIMILE: [phone]
IDAHO FALLS OFFICE
477 SHOUP AVENUE
SUITE 107
POST OFFICE BOX 50698
IDAHO FALLS, ID 83405
TELEPHONE: [phone]
FACSIMILE, [phone]
ALL OFFICES TOLL FREE
[phone]
LOUIS F. RACINE (1917-2005)
WILLIAM D. OLSON, OF COUNSEL
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Enclosed for filing please find the original and seven copies of Monsanto Company's Reply
Comments in Case No. PAC-E-12-03, together with four CDs containing Confidential Revised
Exhibit 1 Excess Outages. Thank you for your assistance.
Sincerely,
4i
RAN C. BUDGE
RCB:rr
Enclosures
cc: Service List (w/encls.)
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
Telephone: [phone]
Fax: [phone]
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IDAHO

PUBLIC UTILII IES COMMSS!ON
Attorneys for Intervenor Monsanto Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF ROCKY)
MOUNTAIN POWER FOR AUTHORITY TO ) Case No. PAC-E-12-03
INCREASE RATES BY $2.6 MILLION TO RECOVER )
DEFERRED NET POWER COSTS THROUGH THE ) MONSANTO
ENERGY COST ADJUSTMENT MECHANISM ) REPLY COMMENTS
INTRODUCTION
Comes now Intervenor Monsanto Company ("Monsanto"), by and through counsel, and
submits these reply comments with regard to the Application of Rocky Mountain Power (the
"Company" or "RMP") to increase rates by $2.6 million to recover deferred net power costs
through the Energy Cost Adjustment Mechanisms ("ECAM").
1. Loss Factors For Base and Actual Loads
In its reply comments, RMP agreed with Commission Staff and Monsanto that it failed to
update the line loss factor used to adjust Idaho Actual loads from sales to input level. The
Company, however, is sticking with its proposal for using transmission losses of 9.884906% for
Monsanto and Agrium Base Load, while using losses of 3.605% for their Actual Load. The
MONSANTO REPLY COMMENTS -1
Commission should be aware that the Company mischaracterized Monsanto's request and has
not responded to Monsanto's concerns about the impact of two different loss factors applied to
sales.
To be perfectly clear: Monsanto is not seeking a change in the Base Load for Monsanto
at meter. The Company's comments at page 3 noting Peter Eelkema's testimony about 2009
loads is totally irrelevant to Monsanto's concerns in this ECAM proceeding. In fact, Monsanto
has accepted the Base Loads from Case No. PAC-E-10-07 for purposes of this ECAM filing.
What is at issue here are the losses applied to the Base Loads, not the loads themselves.
RMP raised two objections to Monsanto's comments: (1) that "Monsanto is attempting
to relitigate an issue that has already been litigated", and (2) that even assuming the Commission
were to ignore due process rights, the Company's numbers only show a difference of 2,255
MWhs between the Company's Base Loads and Actual Loads of Monsanto. Both of these
assertions are in error.
First, as to due process, Monsanto did review their Base Loads in Case No. PAC-E-10-
07, specifically, the monthly loads shown on page 10.14 of Exhibit No. 2 of Mr. McDougal. In
Data Request 10.6, Monsanto specifically asked the Company:
Monsanto Data Request 10.6
Questions Directed to Steven R. McDougal
Reference page 10.14. Please identify how much of the Idaho monthly "Metered
Loads (MWII)" are for Monsanto.
Monsanto's discovery was a very simple basic question: how much of the Idaho load shown on
page 10.14 is for Monsanto? The Company responded on August 27, 2010: "Please refer to
Row 41 on sheet "Energy-2010" of Attachment Monsanto 1.18, which has the monthly sales (at
the customer meter) which was used to develop test year sales." This is the crux of the issue
MONSANTO REPLY COMMENTS -2
here: what the Company cleverly provided this Commission and Monsanto in response to our
Data Request 10.6 back in 2010 was Monsanto's monthly sales at the customer meter. There
was no mention of any 10% losses to Monsanto in the Company's response. What was provided
and litigated in Case No PAC-E- 10-07 was Monsanto's monthly sales at the customer meter.
Monsanto has verified that the Company did in fact use those monthly sales (at the
customer meter) provided in Attachment Monsanto 1.18 when RMP filed its ECAM. Monsanto
agrees with the Company and accepts those monthly sales at the customer meter (less
replacement energy) for purposes of the Base Load. However, what Monsanto cannot accept -
and what the Commission should reject - is the application of a 9.884906% loss factor to
Monsanto's and Agrium's Base Loads.
Second, the Company attempts to show that their numbers yield a difference of 2,255
MWH. Their assertion is wrong. The Company's comparison erroneously includes the
replacement energy which even the Company agrees should be removed. Their difference is in
fact 7Y2 times greater than what they filed in their Comments:
January - November Base Load including 9.884906% losses = 1,351,296 MWH
January - November Actual Load including 3.605% losses = 1,334,211 MWH
Difference = 17,085 MWH
Furthermore, the absurdness of using two completely different loss factors can easily be
demonstrated when looking at the January and February load changes between Base Load and
Actual Load. Here's what the Company is claiming is Monsanto should pay for Load Change
Adjustment in the months of January and February:
11
MONSANTO REPLY COMMENTS -3
Monsanto Loads: January 2010 February 2010
Base MWH Sales at Meter 126,100 106,919
Losses @ 9.884906% 12,465 10,569
Base MWITI Sales at Input 138,565 117,487
Actual MWH Sales at Meter 125,300 105,400
Losses @ 3.605% 4,517 3,800
Actual MWIT Sales at Input 129,817 109,200
Load Change MWH at Meter 800 1,519
Load Change Losses 7,948 6,769
Load Change MWH at Input 8,748 8,288
LCAR Rate ($/MWH) $21.89 $21.89
LCA Revenues to be collected' $191,489 $181,418
Even though the Load Change at the meter is only 800 MWFI and 1,519 MWH in
January and February, through RMP's misapplication of two different loss factors, the Load
Change increases by 634% on average to 8,748 MWFI and 8,288 MWH, for a total of 17,036
MWH Load Change at Input. The Commission should reject such an absurd proposal by the
Company. A more reasonable approach would show Monsanto's load change to be 2,319 MWH
(800 + 1,519) adjusted upwards by 3.605%, or only 2,403 MWH. Clearly, RMP's
misapplication causes a distortion in the true load change between Base Loads and Actual Loads.
For the time period January through November, Monsanto's Base Load was 1,229,737
MWH at the meter, while the Actual Load was 1,287,786 MWH at the meter, thus the Actual
Load was higher than the Base Load. The Company should not dispute this. But because the
Company uses two different loss factors, the Company shows Monsanto's Base Load as
1 See RMP's Revised Exhibit 1, provided with their comments, line 24 for these LCA revenues.
MONSANTO REPLY COMMENTS -4
1,351,296 MWH at input, while the Actual Load is 1,334,211 MWH at input, making the Actual
Load lower than the Base Load. This flip-flop in load change direction should be rejected by the
Commission.
Interestingly, the Company had nothing to say in its reply comments about the fact that
the exact same loss factor was used for both the Base Load and the Actual Load for the
December 2008 column in their ECAM filing.2 Since the Company clearly has treated loss
factors consistently for the December 2008 period, there is no justifiable reason for their refusal
to correct this error starting January 2010.
2. Wind Integration Costs for Wholesale Wheeling Customers
RIVIP's reply comments claim that the actual incurred costs are undisputable and it is
inappropriate for Monsanto to arbitrarily remove any actual costs without showing that the costs
were not prudently incurred. This claim is misplaced because the Commission did not predicate
recovery of wind integration costs incurred due to the operation of wholesale wheeling
customers located in the Company's control area on a determination of prudence. The
Commission stated in Order No. 32196 from Case No PAC-E-10-07 that "the responsibility for
recovery of wind integration costs from wholesale transmission customers resides with the
Company.' In other words, the costs are not recoverable from retail customers and should be
removed from the ECAM calculation.
RMP also claims that it would somehow be inappropriate to disallow recovery of wind
integration costs imposed on the Company by wholesale wheeling customers from retail
2 See RIMP's Revised Exhibit 1, sheet "ID Base Load" cells C 10 and Cli, and "ID Actual Load" cell B 13 where in
both Actual and Base load determination a loss factor of 4.543% is used for Monsanto and Agrium.
MONSANTO REPLY COMMENTS -5
customers through the ECAM, because the mechanism already has a 10 percent sharing band.
This is simply irrational reasoning on the Company's part. The two issues are distinct and
separate and are not appropriate to be combined. The Commission granted RMP's request to
implement an ECAM, which included a 10 percent sharing band. Nowhere in the order
approving the ECAM did the Commission indicate that costs previously determined to not be
recoverable from retail customers, would be recoverable from those same retail customers
through the ECAM. There is no basis for the Company's claims.
Monsanto agrees that it should have used a wind integration rate that excluded the inter-
hour component and agrees with the revised customer impact shown in the Company's reply
comments.
Monsanto acknowledges that the Company made a filing with FERC for recovery of
wind integration costs from wholesale wheeling customers. Accordingly, Monsanto believes it
would be reasonable to remove any revenues that are related to this ECAM test period from
future ECAM results if the Commission adopts Monsanto's proposed adjustment. However, it
should be noted that recovery of wind integration costs incurred during this ECAM test period
through FERC is uncertain since the Company's request has not been approved, and if they do
approve the request, it may not be retroactive back to the time of the filing. Further, it should
also be noted, that the Company's FERC proposed rates are based on capacity costs and
therefore, will not recover the full cost of wind integration for wholesale wheeling customers
because it will not recover the energy related component of wind integration cost.
3. Liquidated Damages
RMP claims that accounting guidelines require that revenue received for liquidated
MONSANTO REPLY COMMENTS -6
damages be charged to property plant and equipment not net power costs in almost all
circumstances. While Monsanto does not disagree with the Company's statements made related
to AICPA Guideline TPA 2210.28 - Accounting for Certain Liquidated Damages from a purely
accounting perspective, we are concerned with what the Company did not say. In Idaho, the
Company previously proposed regulatory treatment that is different than the treatment prescribed
by an accounting pronouncement so that costs and benefits would be better matched.
Specifically, the Company proposed that Emerging Issues Task Force (EITF) 04-06
recommended accounting for coal stripping costs be bypassed through the use of SFAS 71:
Accounting for the Effects of Certain Types of Regulation, to better match coal stripping costs
and tons mined. Specifically, EITF 04-06 states that coal stripping costs incurred while mining
coal are variable production costs that should be included in inventory costs during the period
stripping cost are incurred. This has the effect of raising coal prices when a mine plan requires
more stripping to produce coal. SFAS 71 allows normalization of stripping costs over the total
tons recoverable as a result of stripping. This allows stripping costs to be deferred to rate base so
they can be amortized over all of the coal that will be produced as a result of the stripping costs,
thereby smoothing out fluctuations in coal prices. In the same light, SFAS 71 allows the
Commission to adopt regulatory treatment of liquidated damages that would produce a better
match between costs and benefits in the manner Monsanto proposed.
4. Excessive Forced Outages
After review of additional material produced in discovery responses provided by the
Company after Monsanto's opening comments were filed, Monsanto has an additional concern
with the Company's ECAM filing.
MONSANTO REPLY COMMENTS -7
PacifiCorp's thermal plant forced outage experience compared to industry averages for
generation plants sized 400-599 MW for NERC boiler tube failure outage codes 1040, 1050,
1070 and 1080 were significantly worse than comparable industry averages. Monsanto believes
that the Company should not be allowed to recover the costs of such outages because outages
that significantly exceed industry averages do not represent prudent operation of those resources.
For this adjustment, Monsanto is defining significantly exceeding industry averages as when a
PaeifiCorp plant's generation lost for a specific NERC outage code exceeds the industry average
by more than 100 percent. This way the adjustment only captures extreme divergences.
PacifiCorp plants that exceeded industry averages by more than 100 percent during the ECAM
test period include Hunter, Huntington and Jim Bridger. The comparison of PacifiCorp plant
performance to industry averages and the impact of each plant adjustment are shown in the
attached file named "Excessive NERC Outages". The deferral impact of Monsanto's proposed
adjustment is shown below for tariff customers, Monsanto and Agrium in Table 1. The deferral
impact of the adjustment was calculated in the attached file named "Exhibit 1 —ID ECAM
Excessive Outages Confidential"
TABLE 1.
Correction of Wind Integration Costs
Tariff Customers ($303,072)
Monsanto (1) ($173,773)
Agrium (1) ($6,601)
(1) Prior to three-year amortization
MONSANTO REPLY COMMENTS -8
CONCLUSION
The Commission should reject the Company's proposal to use transmission losses of
9.884906% for Monsanto and Agrium Base Load, while using losses of 3.605% for their Actual
Load. Instead, the Company should be required to utilize a 3.605% loss factor for both the Base
Load and the Actual Load, Since the Company clearly has treated loss factors consistently in the
past, there is no justifiable reason for their refusal to correct this error.
Wind integration costs associated incurred due to the operation of wholesale wheeling
customers located in the Company's control area should not be recoverable through the ECAM.
Nowhere in the order approving the ECAM did the Commission indicate that costs previously
determined to not be recoverable from retail customers, would be recoverable from those same
retail customers through the ECAM.
The Commission should adopt Monsanto's recommendation to pass liquidated damages
payments received by the Company through the ECAM to provide a better match between costs
and benefits.
Finally, the Company should not be allowed to recover excessive forced thermal outage
costs because outages that significantly exceed industry averages do not represent prudent
operation of those resources.
RESPECTFULLY SUBMITTED,
MONSANTO REPLY COMMENTS -9
DATED this 28thth day of March, 2012.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
MONSANTO REPLY COMMENTS -10
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 28th day of March 2012, 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 3)
Idaho Public Utilities Commission
P.O. Box 83720
Boise, ID 83720-0074
E-mail: jjewellpuc.state.id.us U.S. Mail and E-Mail
Ted Weston
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 84111 E-Mail
[e-mail]
Yvonne Hogle
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake city, Utah 84111 E-Mail
yvonne.hogle(acificorp.com
Data Request Response Center
PacifiCorp
825 NE Multnomah, Suite 2000
Portland, Oregon 97232
Fax: [phone]
[e-mail] E-Mail
Neil Price, Deputy AG
Idaho Public Utilities Commission
P.O. Box 83720; 472 W. Washington
Boise ID 83720-0074
[e-mail] E-Mail
Maurice Brubaker
Katie Iverson
Brubaker & Associates, Inc.
1215 Fern Ridge Parkway, Suite 208
St. Louis, MO 63141
[e-mail] E-Mail
[e-mail]
James R. Smith
MONSANTO REPLY COMMENTS -11
Monsanto Company
P.O. Box 816
Soda Springs, Idaho 83276
j [e-mail] E-Mail
Mark Widmer
Northwest Energy Consulting, LLC
27388 S.W. Ladd Hill Rd.
Sherwood, Oregon 97140
[e-mail] E Mail
frtM
Randall C. Budge
MONSANTO REPLY COMMENTS -12