COMMISSION WASHINGTON UTILITIES AND ) TRANSPORTATION COMMISSION, ) Complainant, ) vs. ) DOCKET NO. UG-971071 THE WASHINGTON WATER ) VOLUME 1 POWER COMPANY, ) Pages 1-29 Respondent. ) ------------------------------) A pre-hearing conference in the above matter was held on August 27, 1997, at 9:30 a.m., at 1300 South Evergreen Park Drive Southwest, Olympia, Washington, before Administrative Law Judge MARJORIE R. SCHAER. The parties were present as follows: WASHINGTON WATER POWER COMPANY, by DAVID MEYER, Attorney at Law, 1200 Washington Trust, Spokane, Washington 99204. NORTHWEST ALLOYS, INC., AND NORTHWEST INDUSTRIAL GAS USERS, by EDWARD A. FINKLEA, Attorney at Law, 101 Southwest Main Street, Suite 1100, Portland, Oregon 97204. THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION, by ROBERT CEDARBAUM, Assistant Attorney General, 1400 South Evergreeen Park Drive, Olympia, Washington 98504. THE PUBLIC, by SIMON FFITCH, Assistant Attorney General, 900 Fourth Avenue, Suite 2000, Seattle, Washington 98164. Kathryn T. Wilson, CCR Court Reporter I N D E X EXHIBIT MARKED T-1 29 2 29 3 29 4 29 5 29 T-6 29 7 29 8 29 9 29 10 29 11 29 12 29 13 29 T-14 29 15 29 16 29 T-17 29 18 29 19 29 T-20 29 21 29 T-22 29 23 29 24 29 T-25 29 26 29 27 29 28 29 29 29 T-30 29 31 29 32 29 P R O C E E D I N G S JUDGE SCHAER: The hearing will come to order. This is a hearing in Docket Number UG-971071, which is a filing by the Washington Water Power Company for a general increase in its rates for gas service. This is a pre-hearing conference that was set by a notice of pre-hearing conference dated August 6th, 1997. It's taking place on August 27th, 1997 at Olympia, Washington. The hearing is being held before Administrative Law Judge Marjorie R. Schaer. We had some discussion off the record. I indicated we would take appearances first. Then we will take motions and petitions to intervene. Then we will go off the record to discuss scheduling and other issues. I'd like to start by taking appearances, and in your appearance, please include your telefax number. Let's begin with the appearance of the Company, please. MR. MEYER: Thank you. David Meyer appearing on behalf of applicant, Washington Water Power Company. I'll provide my business address to the reporter. Would you like it on the record now, as well? JUDGE SCHAER: Yes. MR. MEYER: It's 1200 Washington Trust Building, Spokane, Washington 99204. The fax number, (509)838-4626. The telephone number is (509)455-6048. JUDGE SCHAER: Thank you, and for the Commission staff, please? MR. CEDARBAUM: My name is Robert Cedarbaum. I'm assistant attorney general. My business address is the Heritage Plaza, 1400 South Evergreen Park Drive Southwest in Olympia. Zip code is 98504. My fax number is area code (360)586-5522, and I have a new telephone number which is area code (360)664-1188. JUDGE SCHAER: Thank you. For public counsel, please? MR. FFITCH: Simon ffitch, assistant attorney general, public counsel section, 900 Fourth Avenue, Suite 2000, Seattle, Washington, 98164. Phone number, (206)389-2055. Fax, (206)389-2058. I'll just note for the record that public counsel may be represented in this case either by myself or by Mr. Rob Manifold. You may want to have both of our names on the service list. We're not sure yet who from our office will be participating further in the case. JUDGE SCHAER: Thank you. Mr. Finklea? MR. FINKLEA: Yes, your Honor, for intervenors the Northwest Industrial Gas Users and Northwest Alloys, my name is Edward Finklea. I'm with the law firm Ball Janik LLP. My business address is 101 Southwest Main Street, Suite 1100, Portland, Oregon, 97204. My fax number is area code (503)295-1058. JUDGE SCHAER: Thank you. First order of business will be the petitions and motions to intervene. I have received a copy of a petition to intervene of Northwest Alloys, Inc. Have all counsel received a copy of that petition? MR. CEDARBAUM: I have. JUDGE SCHAER: Mr. Finklea, do you have anything to add to your petition? MR. FINKLEA: Not really. Northwest Alloys is a customer of the Washington Water Power Company purchasing natural gas transportation service. The rates and terms and conditions of that service will be affected by the outcome of the proceeding. I've been asked some questions by the Company off the record. I'll clarify that Northwest Alloys is not a member of the Northwest Industrial Gas Users. JUDGE SCHAER: Thank you. Is there any objection to the participation of Northwest Alloys? MR. MEYER: I just have a few issues to take up, and if perhaps with assurances of counsel, we would not have an objection. Off the record, I had talked to Mr. Finklea about whether the presentation of both intervenors would be consolidated through a single counsel both in terms of case presentation and cross-examination of other witnesses so as to avoid, essentially, a double teaming, and I'll let Mr. Finklea give whatever assurances he can in that regard. MR. FINKLEA: It's the intention of the Industrial Gas Users as an organization and Northwest Alloys as a separate entity to work together in the proceedings. We have done this in previous proceedings before this Commission. I can't absolutely guarantee that the interests of the two entities will at all times be identical, but I can assure you that we will endeavor to put on a single case. It's not the intention of Northwest Alloys to have separate counsel at the proceeding in the sense of having two lawyers. Ms. Pyron, who is my partner, is also on the petitions to intervene because she and I work together on this case, but it's not our intention to have two lawyers at any of the hearings, so I think Mr. Meyer's concern that there might be two lawyers asking questions or that sort of thing, we can alleviate. JUDGE SCHAER: Thank you. With that, is there any objection to their participation, Mr. Meyer? MR. MEYER: With one further point of clarification, and I assume the answer from Mr. Finklea will be no, but I gather Alcoa will not be separately participating? MR. FINKLEA: That's correct. I can clarify this on the record as well. Northwest Alloys is a wholly-owned subsidiary of Alcoa, but it is a completely separate business unit. The Alcoa Company is not seeking to intervene. It is Northwest Alloys that seeks party status, and Northwest Alloys, as I said earlier, is not a member of the Northwest Industrial Gas Users. Alcoa is a member of the Northwest Industrial Gas Users for its Wenatchee plant, which takes natural gas service from Cascade Natural Gas but does not take service from Washington Water Power. MR. MEYER: Then with the assurances of counsel, we don't object. JUDGE SCHAER: Any other party have an objection? Hearing no response, I will grant the petition to intervene. The next petition I have received is the petition to intervene of the Northwest Industrial Gas Users. Do you have anything that you wish to add to that petition, Mr. Finklea? MR. FINKLEA: No, your Honor. I think I've already clarified the membership situation. As we state on Page 2, the companies that are members of the Northwest Industrial Gas Users that take natural gas services from Washington Water Power are the Boeing Company, Kaiser Aluminum and Chemical Corporation, Lamb Weston, and Inland Empire Paper Company. JUDGE SCHAER: Is there any objection to participation of the Northwest Industrial Gas Users? MR. MEYER: There isn't, although just for the sake of economy, I assume, Mr. Finklea, if we just provide you -- or I should say your office -- with a single copy of whatever documents need to be distributed as well as to the separate individuals in these two respective pleadings, that will suffice. We don't have to give you double copies? MR. FINKLEA: That's correct. MR. MEYER: We don't object. JUDGE SCHAER: Any other objections or concerns? Then the petition to intervene of Northwest Industrial Gas Users is granted. Is there anyone else in the hearing room who wishes to intervene in this matter? Hearing no response, we will move forward. I would like to confirm at this time that the individuals who have appeared here today will be the contact persons for their clients for distributions in this matter, and that if parties send a copy of materials in this matter to you, Mr. Finklea, or to you, Mr. ffitch, that if Ms. Pyron or Mr. Manifold should have them instead, you will have your offices coordinate that and to make sure that materials are distributed. MR. FFITCH: Speaking for public counsel, your Honor, I guess I would ask that at least the service list show both of our names with one address, but one service copy would be fine, but that would help with our internal process. JUDGE SCHAER: I can certainly show both names in both cases, but I believe it appropriate for the parties to have to send just one copy of materials. MR. CEDARBAUM: Along that similar point, can I just ask Mr. Finklea whether or not, in terms of just kind of day-to-day distributing data request copies and correspondences, are we supposed to be giving a copy also to Mr. Clauson for Northwest Alloys and Mary Ann Hutton for the Gas Users, or can we just send all this to you? MR. FINKLEA: If you send it all to me, that's fine. I can distribute to clients. I guess we would ask when pre-filed testimony is filed, if the client is listed on the intervention as well, my office would be served. That would be appreciated, but on the day-to-day, they're not involved. MR. CEDARBAUM: Thank you. JUDGE SCHAER: Let me indicate then that for formal purposes in this proceeding, I will let each party have one contact person, and it will be your responsibility to distribute. I understand that it usually is a courtesy with the distribution of testimony and other materials, even discovery materials, when a request is made, the parties accommodate each other on getting those served quickly by providing copies to others, but that will be something I will expect counsel to handle as a professional courtesy among yourselves. MR. FINKLEA: Thank you, your Honor. JUDGE SCHAER: The next item I would like to take up is the discussion of scheduling. In terms of scheduling, I have been contacted before the hearing both by Mr. Meyer and by Mr. Cedarbaum with proposed schedules, both a proposed schedule and a proposed revised schedule from Mr. Meyer, and then I received a letter of August 26th, 1997, from Mr. Cedarbaum setting out a proposed staff schedule, which he had provided to me informally earlier, and I would like to find out first if everyone has received copies of all those documents. Mr. Finklea, have you been included? MR. FINKLEA: Yes. JUDGE SCHAER: And Mr. ffitch, are you familiar with that correspondence? MR. FFITCH: Yes, I am, your Honor. JUDGE SCHAER: What I would suggest that we do at this point is go off the record and discuss scheduling, and once we've got scheduling -- and in terms of the scheduling discussion, sometimes it's helpful to discuss discovery as well because I know that often discovery matters will influence the amount of time that's needed at different stages in the proceeding. So let's go off the record to discuss those matters and then when we have something concluded, we can reach consensus, that would be the goal. If we cannot and I need to rule on something, at that point we can come back on the record. We're off the record. (Off-the-record discussion.) JUDGE SCHAER: Back on the record. While we were off the record, we had an extensive discussion about scheduling, which we will conclude after our morning recess. But we're going to take our morning recess now and be back in 15 minutes in Room 108. MR. FFITCH: May I be heard briefly? JUDGE SCHAER: Yes, Mr. ffitch. MR. FFITCH: On the scheduling matter, I need to attend a simultaneously scheduled U.S. West oral argument, and if there's no objection from any of the parties, I'd like to, at this point, leave and go to that hearing in the Commission's hearing room and allow Mr. Lazar to speak for us on the scheduling matter, so if there's no objection to that. JUDGE SCHAER: Let me just ask you quickly. I know that Water Power is going to seek a protective order. Do you have any objection to that? MR. FFITCH: We don't have any objection. We would request that the order provision permit disclosure by experts when ordered by a regulatory commission or Court. I don't know if the Company wants to address that at this point, but we would request that it include that privilege. JUDGE SCHAER: I think I'm going to need something in writing from you or for you to appear for that part of our discussion. We can postpone that to the end of our hearing and see if you can rejoin us, or we can take it up immediately after the break. MR. FFITCH: I'd like to join you as soon as possible. I'll just report in to the judge in the other proceeding and then rejoin you. JUDGE SCHAER: Do you have a copy of our standard protective order? Would you like me to give you a copy so you could look at where you would like to add language and what you would suggest? MR. FFITCH: That would be helpful. Thank you. JUDGE SCHAER: I'm going to give Mr. ffitch a copy of what I faxed to Mr. Meyer as being our standard protective order so he can look at where he may want to suggest modifications. So we will be at recess until 10:35. We're off the record. (Recess.) JUDGE SCHAER: Let's be back on the record. During our recess, we've moved down to Room 108 of the Commission. Before we went on recess, we had agreed to a schedule that would be followed in this proceeding, and at this point, I would like to focus on the issue of discovery. Does anyone wish to trigger the provisions of the Commission's discovery rule in WAC 480-09-480? MR. CEDARBAUM: The staff would move that rule be and procedure be triggered. We do have a couple of clarifications or proposals to modify it somewhat, and I don't know if you want to state that now or when we go off the record. JUDGE SCHAER: I think we'll discuss those when we go off the record. Does anyone object to triggering the discovery rule, as the staff has moved? MR. MEYER: There you're referring to 10-day turnaround and five-day notice objection rule? JUDGE SCHAER: I'm referring to the provisions of WAC 480-09-480, which would allow you to do data requests which are otherwise not allowed and which sets out certain time frames for data requests and responses. Then I'm going to rule that the discovery rule will be triggered in this proceeding, and at this point, let's go off the record to discuss how that will work and how it will work in the terms of the schedule and whether there should be modifications, and then we'll come back on the record and reflect those discussions. We're off the record. (Off-the-record discussion.) JUDGE SCHAER: We've had extensive discussions off the record this morning regarding scheduling, and in those discussions, we reviewed two proposals from the Company regarding schedule and a modified schedule. We've reviewed a proposal from the Commission staff for scheduling, and the parties have agreed, with some reservations, but have agreed to go forward using the schedule that was proposed by the Commission staff. Under that schedule, there will be cross-examination of the Company's direct filing from November 3rd through 7th, 1997, and at this point, let me interject something that I need to add to the schedule. I would like to plan to do that cross-examination between the 3rd and the 6th, if we could, and not to use the 7th, because I have at least one commissioner and possibly two that will be leaving on the 7th because they have committee meetings in Boston on the 8th. I think we should be able to complete cross-examination in four days, but if you're looking in terms of witness scheduling at a later time, please try to look at scheduling everyone in those four days. If we need to go over, we will do so. We are then looking at pre-filing of staff, public counsel, and intervenors' testimony on December 19th, 1997; pre-filing of the Company's rebuttal testimony on January 19th, 1998; cross-examination of staff, public counsel, intervenors, and rebuttal during the time period of February 16th through 20th, and 23rd through 27th, 1998; and briefs due on March 31st, 1998. Then I believe that the suspension date in this proceeding is May 31st, 1998; is that correct? MR. CEDARBAUM: My understanding is that the tariffs were filed with an effective date of August 1. JUDGE SCHAER: So what would the suspension date be? MR. CEDARBAUM: The order would need to be issued by June 1. JUDGE SCHAER: So the suspension date in this matter is June 1, 1998? MR. MEYER: I haven't done the arithmetic. Subject to check, I would agree. MR. CEDARBAUM: It's 10 months after August 1, as I understand it. MR. MEYER: That I can follow. JUDGE SCHAER: We haven't discussed public hearing. There will need to be a public hearing in the Spokane area. Usually, we try to schedule a public hearing after the direct cases of all parties but before the Company rebuttal so that the Company may rebut anything it wishes to rebut from the public hearing. Does anyone have any thoughts when in that February time period we should schedule the public hearing in Spokane? MR. MEYER: Why don't we be off the record for just a moment. JUDGE SCHAER: Okay, we're off the record. (Off-the-record discussion.) JUDGE SCHAER: Back on the record. While we were off the record we talked about scheduling a public hearing in this matter, and we're going to look at scheduling a public hearing sometime during the week of February 2nd, 1998, in Spokane, but let me also indicate on the record that if there should be progress toward a settlement in this matter, that would mean that that date should be earlier, then it will be moved earlier. Anything will be done as needed to accommodate having hearings around the settlement proposal, if one happens earlier in the proceeding. Briefs in this matter will be due March 31st and the suspension date of June 1st, 1998 has already been reflected. Is there anything further that needs to go in the record about the schedule? Mr. Meyer, I believe you wanted to make some comments. MR. MEYER: Yes, I do. As you've indicated, Water Power has, with a good deal of reluctance, agreed to the schedule. Let me begin by saying we all hope that a fair and reasonable settlement can be reached, in which case the fully litigated time frame will be moved. And to that end, we tried, and all parties, I should say, have been very cooperative. In the initial stages of this case, we had a pre-filing meeting, which was well attended. Good questions were asked. Hopefully, we were responsive, and staff and intervenors have all shown good faith and have been very cooperative and have expressed a real desire to move this case on in a discovery phase, and we're generally appreciative of that. So we were hopeful, prior to today, that we could have had a more accelerated schedule, even for the fully litigated case. To that end, we proposed what amounted to a nine month schedule. It was our original proposal. Staff countered with a proposal that anticipated an order by the end of May, just on the eve of the end of the suspension period. We were unable to reach agreement yesterday and the day before. We then suggested that perhaps a middle ground, a 10 month proposal, and even did that with some reluctance. The Company is mindful of what we understand to be the Commission's interest in expediting cases where they can, even if they're on a fully litigated track, and so we didn't see the 11 month schedule as accomplishing that objective in this case. Again, this assumes we don't have settlement. So we were disappointed that we couldn't come to terms on something less than the full 11 month schedule. In our discussions today, we sense that there wasn't -- not only with the staff but other parties as well -- a willingness to do better than that with the schedule, and I will say, in no event do we want to shortchange the staff and intervenors in their time allotted for discovery and case preparation. That doesn't serve anybody's interests, but just in closing, we have agreed with great reluctance to the schedule, and I think I've given you the reasons why. JUDGE SCHAER: Anyone else wish to comment on the schedule? MR. CEDARBAUM: Just one quick comment, your Honor. Just for the record, the revised schedule Company proposed to staff and to the Commission this morning had a briefing date of March 27th, 1998. I had offered both yesterday and today to move the briefing schedule of March 31st that has been adopted up to March 20th, which would put us only about three weeks apart from the Company, and the Company rejected that offer. There was some willingness on the staff's part to shorten the time frame in this case, and secondly, Commission can issue this order before May 31st. It can issue it in April when the Company is proposing that the Commission issue it as well, so I think an effort was made to get closer to what the Company wanted, and this case may get over before the end of the time frame the Company wanted, even in a litigated mode. JUDGE SCHAER: Any other comments on the schedule? MR. MEYER: I think you may have misspoke yourself. Our suggested briefing was February 27th. MR. CEDARBAUM: That's what I meant to say. JUDGE SCHAER: The other item that we discussed when we were off the record was the discovery in this matter. I have already ruled that the discovery rule in WAC 480-09-480 should be triggered in this proceeding. After a discussion of the terms of that rule and the time lines included in it, the parties have agreed that they will follow the time line set out in that rule, although they have agreed to work together informally to attempt to get as quick responses as possible to data requests and to make sure that information is provided in a manner that will allow all parties to adequately prepare for their cases. An additional part of that discussion was a discussion of depositions, and the Commission staff indicated that it would like to proceed informally to have depositions of the Company witnesses, and it anticipated doing that at the end of September or the early part of October. Parties have agreed to proceed informally with the deposition process. I had indicated to the parties that if discovery disputes should arise that they are unable to work out in a cooperative manner that the Commission is available by telephone conference or by other expedited means to work with them on those problems, although I do not expect with this group of counsel that that will arise. Is there anything further we need to say about discovery? I'd like to note that all of the dates that we've talked about for these pre-filing and also under the discovery rule are receipt dates. That is that the items in the pre-file must be received in the Commission's offices and logged before 5:00 on the day specified. You also need to make arrangements for those documents to be received by other counsel also on that date either by overnight mail or mailing a couple of days in advance or using some kind of special delivery service so you can meet your filing requirements. The next matter that we would like to discuss is protective order. It's my understanding, Mr. Meyer, that you were going to move for a protective order in this matter. MR. MEYER: Yes. Now is my opportunity? JUDGE SCHAER: Yes. MR. MEYER: May we be off the record? JUDGE SCHAER: Yes. Let's go off the record. (Off-the record discussion.) JUDGE SCHAER: While we were off the record, we had a discussion of the terms of the Commission's form protective order and provided by Mr. ffitch with some draft language which he suggested be added to Paragraph 2 on Page 2 of that order. That language reads: "Nothing in this order shall prohibit disclosure of confidential information by persons authorized under this order when such disclosure is ordered by a regulatory commission or Court. If such disclosure is ordered, the authorized person shall notify the provider of the information of the order within three business days and not less than five days prior to making any disclosure." What I would propose to do is have the Commission's order issue a form protective order with this additional language in this proceeding. Is that agreeable to all parties? MR. MEYER: Yes. When do you think you would have this available? JUDGE SCHAER: I would expect it would go out tomorrow. I don't have two commissioner's here today, but I will attempt to have it issued by the end of the week. I would like the parties to start operating as if this order were in existence as of right now in terms of how they treat materials and ask that you proceed in good faith under these terms as of right now in your exchanges of information. Please pay particular attention to the terms of the order on how you're supposed to identify and how you're supposed to segregate materials that come in, so that when materials have reached the Commission's records center, they are properly segregated and marked. Otherwise, things can get distributed, and we have a hard time putting the Genie back in the bottle, and we do try to respect confidentiality of your information. MR. MEYER: And to that end, I would encourage counsel and their experts to return those attached forms, the authorization forms, so we don't hold up. I'm not aware of anything in the works now discovery-wise that would need to be protected, but let's get those forms filled out sooner. JUDGE SCHAER: We do not distribute anything that is protected material to anyone who has not signed a protective order. I believe that the parties are aware that responses to discovery requests must be sent directly to counsel for the Commission staff. Do not send those materials through the Commission secretary, but all other pre-filed materials and case related correspondence need to be filed through the Commission secretary, and if Commission secretary has not logged it in, it is not filed under our rules. Commission would like people to use the post office box address, not their street address. That address is Post Office Box 47250, Olympia, Washington 98504-7250. You do not need to send courtesy copies to me. If, at any time, however, you're sending time sensitive materials that I need to see, please be sure that you notify the Commission records center that the materials are time sensitive and that my copy needs to be hand delivered immediately. Otherwise, sometimes I don't see things for two or three days, even if they come in on fax. Is there anything else that we need to discuss at this pre-hearing conference? MR. MEYER: Marking of exhibits. JUDGE SCHAER: Thank you. I went right by that note. I'd like to pre-mark the Company's direct case at this time. MR. FFITCH: Your Honor, if I might at this time attend my other matter. Mr. Lazar will take over. JUDGE SCHAER: Certainly, Mr. ffitch. Let me indicate that there is an exhibit sheet, Mr. ffitch, in the notebook provided by the Company, and I'm going to follow that. So if you want to mark the materials, start with "T-1" and go forward in the order indicated on the sheet. Let's go off the record for just a moment. (Off-the-record discussion.) JUDGE SCHAER: Back on the record. At this time, we're going to pre-mark the exhibits filed by the Company. Marked as Exhibit T-1 for identification is the Direct Testimony of W. Lester Bryan. Exhibit 2 is a Service Area Map. Exhibit 3 shows Revenue, Sales, and Customer Base. Exhibit 4 for identification shows Energy Delivery Operating Statistics, and Exhibit 5 shows Rate Of Return. Exhibit T-6 for identification is the Direct Testimony of Nancy J. Racicot. Exhibit 7 for identification is Washington Cost of Service Components as a Percentage of Total Revenue with Proposed Rates. Exhibit 8 for identification shows Average Number of Customers. Exhibit 9 shows Washington Fuel