20160520Comments.pdf

RF+glNF"gLsoN RANDALL C. BUDGE
It E C fi IVED [e-mail]
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May 17, 2016
,,'',, i i-i.;,ilrul;iSsrom
Jean D. Jewell, Secretary
ldaho Public Utilities Commission
PO Box 83720
Boise, ldaho 83720-007 4
iean.jewell @ puc.idaho.gov
Re: IPUC Case No. PAC-E-I5-16
Dear Ms. Jewell:
Enclosed you wil! find the original and seven (7) copies of Comments of
Monsanto Company. Please file the same with the Commission's records. lf you
have any questions, please don't hesitate to call.
Thank you.
RCB:tscc: Seruice List
Sincerely,
2O1 E. Center St. I
P: [phone] I
P.O Box 1391 I Pocatello, lD 83204
F: (2O8) 232-6109 I racinelaw.net Offices in Boise, Pocatello, and ldaho Falls
Randall C. Budge, ISB No. 1949
Thomas J. Budge, ISB No. 7465
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box l39l; 201E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]
Fax: [phone]
[e-mail]
Attorneys for Intervenor Monsanto Company
IN THE MATTER OF TIIE APPLICATION
OF PACIFICORP dba ROCKY MOUNTAIN
POWER FOR APPROVAL OF THE 2017
PROTOCOL ALLOCATION
METHODOLOGY
I"ECEIVED
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. PAC-E.15.16
COMMENTS
OF
MONSANTO COMPAI\IY
INTRODUCTION
COMES NOW Intervenor Monsanto Company ("Monsanto") through counsel and
submits these Comments with respect to the December 31,2015 Application of PacifiCorp, dlbla
Rocky Mountain Power ("Company'') seeking approval of the 2017 Protocol Allocation
Methodology ("Application"). Monsanto's Comments are in response to Order No. 33485 of the
Idaho Public Utilities Commission ("Commission") dated March 23,2016, giving notice of the
Application, that this matter will proceed under Modified Procedure, authorizing interested
persons to file written comments in support or opposition by May 23,2016, and providing rights
or participation by filing a Petition to lntervene. Monsanto previously timely filed its Petition to
Intervene dated February 12,2016.
BACKGROI]ND
Monsanto owns and operates phosphate mines in Caribou County, Idaho, together with a
plant in Soda Springs which produces elemental phosphorous utilizing three electric furnaces.
Elemental phosphorous becomes the primary building block for the active ingredient glyphosate
used in Roundup@ herbicide, the foremost weed-control agent in the world. With a load of
COMMENTS OF MONSAIITO COMPAIIY - I
approximately 180 megawatts, Monsanto's Soda Springs plant is Idaho's single largest user of
electricity and the largest single user on the PacifiCorp system.
The Company provides electric service to Monsanto pursuant to an Electric Service
Agreement effective January 1,2016 for a two-year term ("Contract") as provided in rate taiff
Schedule 400. Pursuant to the Contract, Monsanto receives firm and intemrptible power and
energy. Monsanto's intemrptible products provide the Company with up to 188 hours of
operating reserves intemrptions at 95 MW, up to 12 hours of system integnty intemrptions at
162 MW and up to 800 hours of economic curtailments at 67 MW. These intemrption options
provide valuable resource to the Company for which Monsanto receives arute credit.
Monsanto has continuously been a special contract customer of PacifiCorp since plant
operations began in l95l . Even though Monsanto has a special contract, its rates are still subject
to periodic rate adjustments just like all other customers of PacifiCorp. Monsanto's electrical
energy cost exceeds $70 million per year and represents the largest single cost of producing
elemental phosphorus. The allocation of resource costs among the states within the PacifiCorp
system is a critical component in determining fair and reasonable rates to be paid by Monsanto
and all other Idaho ratepayers.
MONSANTO COMMENTS
Monsanto recommends that the Commission adopt the 2017 Protocol for purposes of cost
allocation for the effective transition period, a proposed term of two years with the opportunity to
extend an additional year. [n evaluating the proposed allocation, Monsanto believes the
Commission Staff s prior basic regulatory objectives it outlined in the last Commission review of
PacifiCorp's allocation methodology remain pertinent today.il These objectives are:
. The protocol should lead to allocations that are fair to PacifiCorp's Idaho ratepayers and
to the Company's ratepayers in each of the other states served by PacifiCorp.
o The protocol, when followed, should provide PacifiCorp with the opportunity to recover
all of its prudently incurred costs.
I Case No. PAC-E-I0-09, Order No. 32346, page7.
COMMENTS OT'MONSANTO COMPAIYY - 2
. Explicit jurisdictional allocation methodologies, predominately based on a consensus
methodoloW, are preferred to foster investor confidence and thus the ability to attract
capital at a reasonable cost.
o Administration of the allocations protocol should be reasonably transparent, simple to
understand, and not overly burdensome to administer.
o The allocations should not lead to undue revenue requirement volatility or gross
unpredictability.
o The method should allow for states to independently pursue their energy policies.
Monsanto's recommendation for approval is supported by the following six points.
1. The2017 Protocol Fulfills the Need for a Post-2106 Allocation Method.
The allocation method in effect today is commonly referred to as the "2010 Protocol"
approved by the Commission on August3l,2}ll2 andis set to expire December 31, 2016. The
2017 Protocol satisfies the need for a new allocation method effective January 1,2017.
2. The2017 Protocol Was Developed Collaboratively With the Broad Review Work
Group ("Work Group").
During the Multi-State Process ("MSP"), PacifiCorp worked collaboratively with the
Work Group3 to develop the mutually agreed upon allocation methodology known as the 2017
Protocol as set forth in the Application. The Work Group met on a regular basis to discuss
altemative proposed methods and explore modeling runs based on various load growth scenarios,
fuel price sensitivities, transmission planning and divisional studies.
Monsanto commends the Company for its consensus approach in developingthe20lT
Protocol which effectively fostered communication among various states and stakeholders
resulting in the recommended20lT Protocol which provides a fair and reasonable basis for
allocating costs between the states governing all regulatory filings starting January 1,2017. The
2 PeC-r-to-09, order No. 32346
3 The MSP Work Group collaborative meetings were typically attended by in excess of 50 individuals representing
l8 entities from the states of Idaho, Oregon, Utah, Washington and Wyoming, including representatives from the
Company, state commission policy staffs, advocacy staffs, indushial customers (including Monsanto) and consumer
goups.
COMMENTS OF MONSANTO COMPAIYY.3
Idaho Commission Staff also should be commended for taking an active role in the process,
displaying leadership and extraordinary resolve in its efforts to represent and protect the interests
of Idaho ratepayers. Accordingly, Idaho ratepayers' were well represented despite the fact that
Idaho represents a very small part of the load and could easily be overshadowed by the interests
of the larger states.
3. The 2017 Protocol Provides a Short-Term Transition While PacifiCorp Continues to
Analyze Options.
The Work Group was ultimately only able to arrive at a short-term transition solution for
2017 and 2018 due to various changing and uncertain circumstances, despite meeting regularly
to review and discuss alternative allocation methods. Monsanto agrees this shortterm transition
solution is the best course of action at this time. An optional one-year extension through 2019 is
also possible if all state Commissions that approvethe20lT Protocol agree by March 31,2017 to
extend it for anoth e, year.o This agreement offers a short-term solution while key policies are
further analyzed, as explained in the direct testimony of Jeffrey K. Larsen:
"The2017 Protocol is intended to be a transitional allocation mechanism while
the impacts of Rule I I l(d) and other multi-jurisdictional issues are better
understood andanalyzed. The 2017 Protocol also provides an opportunity for
PacifiCorp to analyze, among other things, altemative allocation methods that
may include the formation for a regional independent system operator, corporate
structure alternatives, or divisional allocation methodologies, in light of the
changing electric industry in the Western United States." page 12
4. The20l7 Protocol Provides Rate Continuity and Leads To Allocations Which Are
Fair To PacifiCorp Ratepayers.
The Work Group used the 2010 Protocol as the starting point for drafting and finalizing
the 2017 Protocol. This was done in order to minimize controversy and provide continuity.
While some areas of the 2010 Protocol, such as direct access, required detailed updates, the
fundamental components of the 2010 Protocol remain unchanged in the 2017 Protocol. These
include the long-standing classification of all resource fixed costs as 75 percent Demand-Related
and25 percent Energy-Related based on twelve coincident peaks and annual energy, as well as
a See Section II, i.e.
COMMENTS OF MONSAI\TO COMPAIVY - 4
l.
Rate.
the continued treatment of special contracts outlined in Appendix D.
Monsanto believes that continuation of these important fundamentals will provide rate
continuity, facilitate administration over the next two (or three years if extended), will eliminate
any risks of undue revenue requirement volatility or gross unpredictability, and ultimately will
result in fair and reasonable rates.
The 2017 Protocol Retains Provisions for Independent State Commission Review of
The 2017 Protocol retains independent state commission review. This was confirmed by
Company witness Larsen's testimony that "the 2017 Protocol is not intended to prejudge the
prudence of any costs or abrogate a State Commission's right andlor obligation to determine fair,
just, and reasonable rates based upon the law of that State..." Importantly, the 2017 Protocol
does not prejudge issues of prudence, rate spread, rate design, rate design or cost recovery, and
allows each state commission to establish fair, just and reasonable rates.
6. The2017 Protocol Includes a Small Incremental Fixed Cost To Bring Idaho to A
Fully "Rolled-In" Allocation.
When Pacific Power and Light merged with Utah Power and Light in 1988, discussions
on inter-jurisdictional allocation focused on the expectation that all common costs of the two
utility systems would eventually be combined and allocated among all the states.s The goal was
to get to a point of allocation where there would be no distinction between the two divisions and
costs would be "rolled-in" and allocated to all states. The 2010 Protocol made considerable
movement towards a fully "Rolled-In" allocation, particularly with respect to reducing and
limiting the impacts from the Embedded Cost Differential ("ECD"), a comparison of embedded
hydro and non-hydro resource costs. The 2010 Protocol provided for Idaho to include a flat
"fixed" ECD expense of $836,000. Rates in place today in Idaho include this $836,000 cost.
The 2010 Protocol ECD, however, resulted in fuither rate-making concerns. Analysis
presented by the Company during Work Group meetings showed an allocation shortfall as a
' Distribution costs are state-specific and thus directly assigned to their respective jurisdictions.
COMMENTS OF MONSAI\TO COMPA}TY.5
result of differences among the states' implementation of the 2010 Protocol respective to the
treatment of the hydro ECD adjustment. While Idaho went with a "fixed" ECD, other states
chose instead a "dynamic" approach to the hydro ECD in the 2010 Protocol, and one state
Commission opted to eliminate the ECD entirely and move directly to "Rolled-In". Thus
PacifiCorp was faced with a growing problem of an allocation shortfall stemming from different
ECDs. To equitably share this shortfall, a new "Equalization Adjustment" of $986,000 for Idaho
is included in the proposed 2017 Protocol in Section XIV. For Idaho, the "Equalization
Adjustment" is based on the previous $836,000 fixed ECD plus an incremental negotiated
$150,000, a relatively small amount.
Based on Idaho's revenue requirement of approximately $270 million, this $150,000
incremental cost represents an increase of 0.05 percent to Idaho (in other words, five l/l00ths of
one percent).6 For example, this would increase the average residential customer's monthly bill
by less than 5 cents. For Monsanto, this will increase their monthly rates by approximately
$3,500. While no customer wants to see rates increase, Monsanto considers the incremental cost
of the "Equalization Adjustment" a reasonable short-term solution and should be approved as
part of the 2017 Protocol. It represents Idaho's good faith contribution to reducing the shortfall
faced by PacifiCorp. It also means that eliminating the ECD and replacing it with the
"Equalization Adjustment" will result in a fully "Rolled-In" inter-jurisdictional allocation for
Idaho ratepayers, a goal Idaho regulators have been pursuing since 1988.
CONCLUSION
Monsanto respectfully asks the Commission to approve the Company's Application and
adopt the 2017 Protocol as filed and presented by general consensus of the Work Group. The
proposed 2017 Protocol meets the six standards outlined when the Commission adopted the
previous 2010 Protocol. It also represents a timely and necessary interim solution for the
allocation of costs between the states that is fair, just and reasonable. While this will result in a
6The rate impact from the Equalization Adjustment will not occur until base rates change as a result of the
Company's next Idaho general rate case which will be no earlier than January l, 2018. If a case is filed with a rate
effective date later than January 1,2018, the incremental portion of $150,000 will be deferred on a monthly basis
($12,500) from January 2018 forward as a regulatory asset until the rate effective date of the Company's next Idaho
general rate case. See page 24-25 of dkect testimony of Jeffrey Larsen.
COMMENTS OF MONSAI\TO COMPANY -6
$150,000 increase in cost allocated to Idaho, it is a relatively small amount and a reasonable
compromise to reach an agreement.
RESPECTFULLY SUBMITTED this lTth day of May, 2016.
RACINE, OLSON, N[YE, BUDGE &
BAILEY, CHARTERED
RANDALL C. BUDGE'.
COMMENTS OF MONSANTO COMPANY - 7
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this l7ftday of May, 2016,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 andT)
Idaho Public Utilities Commission
P.O. Box 83720
Boise,lD 83720-0074E-mail:[e-mail] U.S. Mail and E-Mail
Ted Weston
Idaho Regulatory Affairs Manager
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, Utah 8411I
E-mail: [e-mail] E-Mail
Daniel E. Solander
Senior Counsel
Rocky Mountain Power
1407 West North Temple, Suite 320
Salt Lake City, UT 841l6
E-mail: [e-mail] E-Mail
Yvonne R. Hogle
Senior Counsel
Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake city, utah 84111 E-Mail
E-mail: Yvonne.hoeel@pacifi corp.com
Dlrr,r/ c- F (t,
RANDALL C. BUD
COMMENTS OF MONSANTO COMPANY - 8