20110523Vol II Boise.pdf

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ORIGINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S
INVESTIGATION INTO DISAGGREGATION
AND AN APPROPRIATE PUBLISHED
AVOIDED COST RATE ELIGIBILITY CAP
STRUCTURE FOR PURPA QUALI FYING
FACILITIES.
CASE NO . GNR-E-11-01
BEFORE
COMMISSIONER MARSHA SMITH (Presiding)
COMMISSIONER PAUL KJELLANDER
COMMISSIONER MACK REDFORD.
PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:May 10, 2011
VOLUME II - Pages 113 -389
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CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way* Wilder, Idaho 83676
[phone] * [phone]
Email csb(iheritagewifi.com
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1 APPEARANCES
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3 For the Staff:Kristine Sasser, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
Donovan Walker, Esq.
and Jason Williams, Esq.
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
LOVINGER KAUFMANN
by Kenneth E. Kaufmann, Esq.
825 NE. Mul tnomah
Suite 925
Portland, Oregon 97232-2150
Michael G. Andrea, Esq.
Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99202
RICHARDSON & 0' LEARY
by Peter J. Richardson, Esq.
Post Office Box 7218
Boise, Idaho 83702
Williams Bradbury, P. C.
by Ronald L. Williams, Esq.
1015 West Hays Street
Boise, Idaho 83702
McDEVITT & MILLER
by Dean J. Miller, Esq.
Post Office Box 2564
Boise, Idaho 83701-2564
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For PacifiCorp dba Rocky
Mountain Power:
For Avista Corporation:
For NIPPC:
For Cedar Creek Wind:
For Intermountain
Wind, LLC and Renewable
Northwest Proj ect:
CSB REPORTING
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APPEARANCES
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1 A P PEA RAN C E S (Continued)
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3 For North Side Canal
Company & Twin Falls
Canal Company:
Barker Rosholt & Simpson
by Shelley M. Davis, Esq.
Post Office Box 2139
Boise, Idaho 83701
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6 For Idaho Conservation
League:
Benjamin J. Otto, Esq.
Attorney at Law
Idaho Conservation League
Post Office Box 844
Boise, Idaho 83701
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9 For Snake River Alliance:Mr. Ken Miller
Snake River Alliance
Post Office Box 1731
Boise, Idaho 83701
For Renewable Energy
Coalition:
(Telephonically)
John R. Lowe
12050 SW Tremont Street
Portland, Oregon 97225
CSB REPORTING
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APPEARANCES
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3 WITNESS
I N D E X
EXAMINATION BY
Mr. Andrea (Direct-Cont' d)
Prefiled Direct Testimony
Prefiled Rebuttal Testimony
Mr. Miller (Cross)Mr. Richardson (Cross)
Ms. Sasser (Cross)
Mr. Otto (Cross)
Commissioner SmithMr. Andrea (Redirect)
Mr. Miller (Direct)
Prefiled Direct Testimony
Prefiled Rebuttal Testimony
Ms. Sasser (Cross)
Mr. Kaufmann (Cross)
Mr. Walker (Cross)
Mr. Andrea (Cross)
Mr. Kaufmann (Direct)
Prefiled Direct Testimony
Prefiled Rebuttal Testimony
Mr. Jason Williams (Cross)
Mr. Richardson (Cross)
Mr. Miller (Cross)
Mr. Otto (Cross)
Ms. Davis (Cross)
Ms. Sasser (Cross)
Commissioner Redford
Mr. Lowe (Cross)
Mr. Kaufmann (Redirect)
PAGE
113
123
184
197
203
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216
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223
228
232
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258
268
273
315
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336
352
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368
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4 Clint Kalich
(Avista)
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9 Paul Martin
(Intermountain Wind)
Bruce Griswold
(Rocky Mountain)
CSB REPORTING
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INDEX
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1 EXHIBITS
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PAGE
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
Premarked
3 NUMBER DESCRIPTION
4 FOR AVISTA CORPORATION:
5 102.PURPA History and 2009-
2010 PURPA Activity
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FOR ROCKY MOUNTAIN POWER:
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201.Rocky Mountain Power
System PURPA Proj ects9
202.Letter from Janet Prewitt to
PUC of Oregon, with attachment
203.Proposed Criteria for Published
Avoided Cost Eligibility
204.Proposed common characteristics
between proj ects, etc.
205.Cri teria for Determining
Published Avoided Cost
Eligibili ty
206.Qualifying Facility SizeDetermination Application
CSB REPORTING
[phone]
EXHIBITS
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1 BOISE, IDAHO, TUESDAY, MAY 10, 2011, 1:15 P. M.
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4 COMMISSIONER SMITH: Welcome back, ladies
5 and gentlemen. We were taking up the motions to strike
6 for Mr. Kalich' s testimony. Mr. Kalich, you can resume
7 your seat. I know how much you like it.
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9 CLINT KALICH,
10 produced as a witness at the instance of the Avista
11 Corporation, having been previously duly sworn, resumed
12 the stand and was further examined and testified as
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follows:
COMMISSIONER SMITH: I am going to
16 announce my rulings by using the motion and then if Mr.
17 Andrea or Mr. Miller wish to make further comment or
18 argument regarding what I propose to do, that i s certainly
19 acceptable. First of all, with regard to page 5, line 1
20 through page 9, line 23, I would strike that material.
21 With regard to page 10, line 20 through page 22, line 10,
22 I would propose to strike page 10, line 20 through page
23 12, line 6, leave in page 12, line 7 through page 16,
24 line 6, viewing this as historical information that is
25 not prej udicial in any way to the parties, and strike
CSB REPORTING
[phone]
113 KALICH (Di)
Avista Corporation
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1 page 16, line 7 through page 22, line 10.
2 The testimony on page 22, line 11 through
3 page 23, line 5 has already been withdrawn, and I would
4 strike page 23, line 7 through page 24, line 19. I would
5 also strike page 24, line 20 through page 25, line 19,
6 and also page 25, line 20 through page 30, line 2, and I
7 would not strike page 34, line 10. I would begin at page
8 35, line 12 through page 41, line 17 which would also
9 eliminate Exhibit 101, so Mr. Miller, do have any further
10 argument or comments regarding that?
11 MR. MILLER: No, Madam Chairman, it's
12 clear the Commission has thought about this and you i ve
heard enough from me.
COMMISSIONER SMITH: Mr. Andrea.
MR. ANDREA: Thank you, Madam Chair.
16 Starting with your proposal to strike page 5, line 1
17 through page 9, line 23, I view that as essential to the
18 testimony and central to the issues set for this
19 proceeding. Specifically, I would draw your attention to
20 page 6, starting at lines 12 through 15 which really is
21 the central point, that the fundamental driver of the
22 disaggregation issue is the economic issue and that is
23 central in this proceeding and frankly, we cannot solve
24 the central issue of disaggregation without also solving.25 the economic issue, so we would view page 5, line 1
CSB REPORTING
[phone]
114 KALICH (Di)
Avista Corporation
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1 through page 9, line 23 clearly within the scope of the
2 notice, which specifically asked for criteria that would
3 ensure that the QFs are not able to take advantage of a'
4 published avoided cost rate that exceeds the utility's
5 actual avoided cost, which appears on page 3 in the
6 fourth paragraph after Notice of Inquiry.
7 Do you want to take these one at a time
8 and allow Mr. Miller an opportunity?
9 COMMISSIONER SMITH: I do want to take
10 them one at a time. I think we understand that economics
11 is a driver here, but I don i t think I'm going to change
12 my ruling on this, because I do believe it's kind of
13 tangential to the real purpose of trying to develop a
14 targeted approach for disaggregation, so I i m going to let
15 my ruling stand and assume you have a continuing
16 objection.
17 MR. ANDREA: Yes, I would like a
18 continuing obj ection. Thank you, Madam Chair. If you
19 can give me just a moment to take a look at the next
20 one.
21 COMMISSIONER SMITH: Certainly.
22 MR. ANDREA: Thank you.
(Pause in proceedings.)
MR. ANDREA: With regard to this section,
as I understand it, your proposal is to strike starting
CSB REPORTING
[phone]
115 KALICH (Di)
Avista Corporation
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1 page 12, line 7 through 16, 6, did I get that wrong?
2 COMMISSIONER SMITH: That's what is left
3 in.
4 MR. ANDREA: I apologize, so starting 10,
5 20 through 12, 6.
6 COMMISSIONER SMITH: Yes.
7 MR. ANDREA: And Madam Chair, on this we
8 would also ask for a continuing objection to striking
9 this on the same grounds. Again, you've asked for
10 cri teria to solve disaggregation. It can't be done
11 wi thout solving the economic issue. That i s what all of
12 this testimony goes to. It's directly responsive to the
13 request for information regarding a way to ensure that
14 large QFs do not avail themselves of a published avoided
15 cost rate that exceeds the utility's actual avoided
16 cost.
17 COMMISSIONER SMITH: Your continuing
18 objection is noted.
19 MR. ANDREA: Wi th regard to the proposal
20 to strike page 16, line 7 through 22, 10, again, it goes
21 to exactly the same issue as before and, again, I would
22 ask for a continuing obj ection. It shows the historical
23 economic driver that the rates had been. It provides
24 context. It's important for this proceeding, so, again,
25 I would obj ect to the striking of that on the same
CSB REPORTING
[phone]
116 KALICH (Di)
Avista Corporation
.1 grounds.
2 COMMISSIONER SMITH: Your obj ection is
3 noted.
4 MR. ANDREA: With regard to the proposal
5 to strike page 23, line 7 through 24, 19, this section
6 basically goes to the central point, again, of economics.
7 Again, we i re not challenging the IRP methodology. We
8 take it as an accepted methodology; however, the point
9 really here is that the IRP methodology, accepted and
10 approved methodology, provides a published avoided cost
11 rate. That's what the QFs are entitled to, nothing more,
12 and to the extent they get more, it provides the economic.13 incentive that drives to disaggregation, so, again, I
14 would ask for a continuing obj ection with regard to that
15 section as well.
16 COMMISSIONER SMITH: So noted and I
17 believe this falls into what the Commission believes will
18 be detailed information we'll want in a future
19 proceeding.
20 MR. ANDREA: Thank you. Same objection
21 with regard to page 24, line 20 through page 25, line 19.
22 Again, it shows the economic driver that is causing the
23 disaggregation. Simply stated, you can' t solve
24 disaggregation wi thout solving the economic issue that.25 underlies it.
CSB REPORTING
[phone]
117 KALICH (Di)
Avista Corporation
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1 COMMISSIONER SMITH: Okay, so noted.
2 MR. ANDREA: Page 25, line 20 through page
3 30, line 2, this really discusses the utility's need as a
4 factor that should be considered in determining the
5 appropriate avoided cost rate. It's consistent with
6 utility or this Commission's prior precedent and has done
7 so before. It stopped doing so at a point in, gosh, I
8 can't remember exactly which order or what year, but
9 again, it goes to the economic issue.
COMMISSIONER SMITH: Okay.
MR. ANDREA: Same continuing objection.
12 Thank you..13 COMMISSIONER SMITH: So noted. In case I
14 wasn i t clear, this last one I struck on page 35,
15 beginning line 12, following footnote 16 through page 41,
16 line 17. I may not have made that clear.
17 MR. ANDREA: No, I've got that as my note.
18 This is very much essential. As important as the rest of
19 the testimony is, a fundamental premise in this case is
20 that 10 average megawatt PURPAs are small and we've got
21 testimony here that demonstrates that in fact a 10
22 average megawatt PURPA wind proj ect is a $ 60 million
23 proj ect. That is not fairly characterized as small. The
24 point is to the extent that the Commission's intent is to.25 ensure that there's a published avoided cost rate
CSB REPORTING
[phone]
118 KALICH (Di)
Avista Corporation
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1 available for truly small QFs, we share that goal and we
2 just ask that the Commission understand that 10 average
3 megawatts, that is not properly characterized as small.
4 These are not unsophisticated developers who can do a $60
5 million proj ect. This is very, very essential to this
6 testimony, very, very essential to this proceeding.
7 Frankly, I don't see how you can continue to try and find
8 a proposal that solves disaggregation with the portions
9 that are stricken and very particularly this last
10 section, so continuing objection.
11 COMMISSIONER SMITH: Mr. Miller, would you
12 have any response to that if I were to change my mind or
13 consider changing my mind?
14 MR. MILLER: We would strongly urge that
15 you not change your mind. It seems to us that the 10
16 average megawatt size cap may be a legitimate issue for
17 exploration in further proceedings, but in this
18 proceeding the Commission asked how can proj ects of up to
19 10 average megawatts qualify under some eligibility
20 criteria, did not ask should the size of the cap change.
21 The point I was going to make later on is the -- I i II
22 make this point later on, but I think your initial ruling
23 is correct and you should stand by it.
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COMMISSIONER SMITH: Thank you,
Mr. Miller.
CSB REPORTING
[phone]
119 KALICH (Di)
Avista Corporation
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1 MR. ANDREA: If I could just respond,
2 specifically stated in the notice, very first sentence,
3 the Commission seeks information regarding criteria
4 wi thin which small wind and solar QFS can obtain a
5 published avoided cost rate without allowing large QFs to
6 obtain a rate that is not an accurate reflection of a
7 utili ty' s avoided cost for such proj ects. That is the
8 first sentence that precedes the two points that follow.
9 To the extent -- you know, it specifically said the
10 question is, is it a large QF and Avista submitted
11 testimony that it is. It's essential to the proceeding
12 and it i S right directly wi thin the issue that is set
13 here. I know that others would like to skip right over
14 it and just want to focus on 10 average megawatts and
15 criteria assuming that cap, but that is not a small QF.
16 It is a large QF.
COMMISSIONER SMITH: We'll be at ease for
18 a moment.
19 (Pause in proceedings.)
20 COMMISSIONER SMITH: All right, we'll go
21 back on the record and I guess we have modified our
22 decision, so with regard to page 35, beginning at the
23 middle of line 12 to page 37, line 2, we would not strike
24 that, feeling that it goes to the issue of what a small.25 QF is. We would strike page 37, line 3 through page 38,
CSB REPORTING
[phone]
120 KALICH (Di)
Avista Corporation
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1 line 18; leave in page 39, lines 1 through 18; strike
2 page 39, line 19 through page 41, line 3, and leave in
3 page 41, line 4 through 17.
4 MR. AN DREA: Than k you, Madam Cha i r ,
5 Commissioners. I appreciate your reconsideration of
6 portions of this section. Again, it's not Avista' s
7 intent to reargue the IRP methodology. That i s why we
8 removed the section that we did. From this morning's
9 testimony, it is clear and from our testimony and others
10 that one of the factors for consideration has got to be
11 price.It's got to be price. We've been asked for
12 factors, but we're being limited on how much we can
13 include price as one of those factors to be considered,
14 so I just continue to obj ect to the portions that have
15 been stricken on the grounds that they are wi thin the
16 scope, they're essential. I appreciate your
17 consideration.
18 COMMISSIONER SMITH: I understand, Mr.
19 Andrea. Your continuing obj ection is noted for the
20 record. All right, we will now spread upon the record
21 the portions of Mr. Kalich i s testimony on his direct that
22 have not been stricken. We will also spread his rebuttal
23 testimony upon the record and identify Exhibit 202.
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MR. MILLER: Madam Chair, could I just ask
a quick question?
CSB REPORTING
[phone]
121 KALICH (Di)
Avista Corporation
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1 COMMISSIONER SMITH: Yes, Mr. Miller,
2 certainly.
3 MR. MILLER: When the transcript is
4 prepared, will the portions with respect to which the
5 motions have been granted show in the transcript --
6 COMMISSIONER SMITH: They will not.
7 MR. MILLER: -- stricken through or just
8 not show up at all?
9 COMMISSIONER SMITH: It will be blank.
10 MR. ANDREA: One minor housekeeping
11 matter.
12 COMMISSIONER SMITH: Yes, Mr. Andrea.
13 MR. ANDREA: I apologize, I may have
14 misheard, but I thought you said Exhibit 202 and it
15 should be Exhibit 102, just a housekeeping matter for the
16 record.
17 COMMISSIONER SMITH: Oh, you're correct,
18 thank you so much. I appreciate that. Exhibit 102.
19 Just trying to move ahead.
20 (The following prefiled direct and
21 rebuttal testimony of Mr. Clint Kalich is spread upon the
22 record.)
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CSB REPORTING
[phone]
122 KALICH (Di)
Avista Corporation
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1 I.INTRODUCTION AN TESTIMONY OVERVIEW
2 Q Please state your name, the name of
3 your employer, and your business address.
4 A My name is Clint Kalich. I am
5 employed by Avista Corporation ("Avista") at 1411 East
6 Mission Avenue, Spokane, Washington.
7 Q In what capacity are you employed?
8 A I am the Manager of Resource Planning
9 & Power Supply Analyses, in the Energy Resources
10 Department of Avista.
Q Please state your educational
12 background and professional experience..13
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A I graduated from Central Washington
University in 1991 with a Bachelor of Science Degree in
15 Business Economics. Shortly after graduation, I accepted
16 an analyst position with Economic and Engineering
17 Services, Inc. (now EES Consulting, Inc.), a northwest
18 management-consulting firm located in Bellevue,
19 Washington. While employed by EES, I worked primarily
20 for municipalities, public utility districts, and
21 cooperati ves in the area of electric utility management.
22 My specific areas of focus were economic analyses of new
23 resource development, rate case proceedings involving the
24 Bonneville Power Administration, integrated (least-cost).25 resource planning, and demand-side management program
GNR-E-11-01
March 25, 2011
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Avista Corporation
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1 development.
2 In late 1995, I left Economic and Engineering
3 Services, Inc. to join Tacoma Power in Tacoma,
4 Washington. I provided key analytical and policy support
5 in the areas of resource development, procurement, and
6 optimization, hydroelectric
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GNR-E-II-0l
March 25, 2011
124 Kalich, C. (Di) 1a
Avista Corporation
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1 operations and re-licensing, unbundled power supply
2 rate-making, contract negotiations, and system
3 operations. I helped develop, and ultimately managed,
4 Tacoma Power i s industrial market access program serving
5 one-quarter of the company i s retail load.
6 In mid-2000, I joined Avista and accepted my current
7 position assisting in resource analysis, dispatch
8 modeling, resource procurement, integrated resource
9 planning, and rate case proceedings. Much of my career
10 has involved resource dispatch modeling of the nature
11 described in this testimony. I have represented Avista
12 in substantially all PURPA-related cases in which Avista
has participated since 2000, including providing expert
wi tness testimony.
Q What is the purpose of your
16 testimony?
17 A In Order No. 32176 issued in Case No.
18 GNR-E-10-04, the Commission temporarily set the
19 eligibili ty cap for published avoided cost rates for wind
20 and solar qualifying facilities at 100 kW, while the
21 Commission investigates the implications of disaggregated
22 QF proj ects. To that end, the Commission initiated this
23 proceeding to investigate and determine in a finite
24 timeframe requirements by which wind and solar QFs can.25 obtain a published avoided cost rate without allowing
GNR-E-11-01
March 25, 2011
125 Kalich, C. (Di) 2
Avista Corporation
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1 large QFs to obtain a rate that is not an accurate
2 reflection of a utility's avoided cost for such proj ects.
3 Specifically, the Commission on page 11 of Order No.
4 32 i 76 solicited in this proceeding II information and
5 investigation of a published avoided cost rate
6 eligibili ty cap structure that:(l) allows small wind
7 and solar QFs to avail themselves of published rates for
8 proj ects producing 10
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GNR-E-II-01
March 25, 2011
126 Kalich, C. (Di) 2a
Avista Corporation
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1 aMW or less; and (2) prevents large QFs from
2 disaggregating in order to obtain a published avoided
3 cost rate that exceeds a utility's avoided cost. II
4 In my testimony, I explain that it will be difficult
5 or impossible to prevent disaggregation of large QF
6 projects so long as the published avoided cost rate is
7 available to QFs as large as 10 aMW. However, assuming
8 the Commission reestablishes the 10 aMW eligibility cap
9 for published avoided cost rates, I will explain why it
10 is important that the Commission ensure that the
11 published avoided cost rate reflects the utilities i
12 actual avoided costs to remove the economic incentive
13 that currently exists for developers to disaggregate.
14 Simply stated, the economic incentive created by the
15 current published avoided cost rates, which exceed the
1 6 utilities' actual avoided costs, is the fundamental
17 dri ver of Idaho's PURPA issues-including disaggregation.
18 In addition to addressing the published avoided cost
19 rate, I will explain that, if the Commission
20 reestablishes the 10 aMW eligibility cap for published
21 avoided cost rates, it is also important that the
22 Commission adopt additional requirements designed to
23 prevent disaggregation. In my testimony, I outline some
24 requirements the Commission might adopt to reduce the
25 likelihood of disaggregation, but at the same time
GNR-E-11-01
March 25, 2011
127 Kalich, C. (Di) 3
Avista Corporation
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1 explain that even if such requirements are adopted, it is
2 unlikely that disaggregation will be prevented over the
3 longer term. I will explain why enforcement and
4 monitoring of such requirements will likely create
5 substantial administrative burden due to the need to
6 moni tor and enforce such requirements.
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March 25, 2011
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Avista Corporation
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1 Finally, I will explain why making tr e 100 kW
2 eligibili ty cap for published avoided cost rates
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permanent is a more effective and efficieqt way to
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prevent disaggregation while fully meetin~ the intent of
Are you sponsoring an~ exhibits in
Yes. I am sponsoring Itwo exhibits
i
wi th my testimony. The first, Exhibit NO.1 101, details
the variability of a solar facili ty reiat~ve to a wind
facili ty, and explains that solar variabi~i ty should be
of great concern to the Commission. The Jecond, Exhibit
i102, details the PURPA requests presently IibeforeAvista. I
II. INITIAL OBSERVATIONS J
Q Before beginning, do iou have any
overriding observations to share with the ICommission?
iA Yes. There are three Ifundamentai
dri vers that have brought us together in 1hiS proceeding:
(1) the utility i s avoided cost to build 01 acquire wind
or solar variable energy renewable resourqes, and their
associated benefits to the system, is fundamentally
1
different from that of a combined cycle co1mbustion
turbine, (2) published avoided cost rates for variable
energy renewable resources exceed Avista i ~ actual avoided
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5 PURPA.
6 Q
7 your testimony?
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March 25, 2011
129 Kalic , C. (Di) 4
Av sta Corporation
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1 costs for similar resources, and (3) an eligibility cap
2 for published avoided cost rates that extends those rates
3 to large sophisticated developers.
4 I believe that it is in the interest of all
5 participants, including the developers, the Commission,
6 and the utili ties to finally address the underlying
7 long-standing PURPA issues so that a more permanent
8 resolution of these issues can be accomplished.
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March 25, 2011
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Avista Corporation
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24 III. PREVENTING DISAGGREGATION WITH A 10 AM PUBLISHED.25 RATE ELIGIBILITY CAP WILL BE DIFFICULT AT BEST
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.1 Q The Commission has indicated its
2 desire to remove the temporary 100 kW limit on wind and
3 solar eligibility for published avoided cost rates, and
4 return the eligibility cap to 10 aMW. Can the Commission
5 adopt a PURPA eligibility cap structure that both allows
6 wind and solar QFs as large as 10 aMW to avail themselves
7 to published rates and also prevent large QFs from
8 disaggregating in order to obtain the published avoided
9 cost rate?
10 A No. It is very unlikely that the
11 Commission will be able to adopt a PURPA eligibility cap
12 structure that both allows wind and solar QFs as large as.13 10 aMW to avail themselves to published rates and also
14 prevent disaggregation. As discussed earlier, the
15 Commission will, at minimum, both need to address the
16 published avoided cost rate methodology applicable to
17 wind and solar variable energy resources and, second,
18 adopt a strict set of requirements in order to
1 9 effectively prevent disaggregation. Such requirements
20 may include, for example, requirements with regard to
21 project ownership, the sharing of equipment and
22 infrastructure, and a geographical separation rule. Most
23 importantly, the foundational step should be to put in
24 place an avoided cost structure representative of the.25 characteristics, costs and benefits unique to wind and
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1 solar variable energy resources that customers otherwise
2 would receive if the utility had built or purchased from
3 the marketplace a resource of similar type.
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7 Q Please describe the relevant history
8 of wind development in Idaho, especially with regard to
9 PURPA development.
10 A Idaho has witnessed a significant
11 build-out of PURPA wind proj ects in the past two years.
12 Prior to 2009, Idaho had 75 MW of PURPA wind nameplate.13 capaci ty in the state and delivered to the electric
14 systems of the three jurisdictional utili ties. 1 At the
15 end of 2010 the total rose to 460 MW. The following
16 Chart 2 details development in Idaho.
17 III
18 III
19 III
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23 1 This total focuses on proj ects in Idaho. It does not include the
9MW Exergy Horseshoe Bend wind farm located in Montana that sells to
24 Idaho Power under PURPA..25
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1
2010
Wind development in Idaho prior to 2009 consisted of
21 one additional developer (who operated under three
15 just two proj ects: the 10.5 MW Fossil Gulch proj ect in
.25
2 Chart 2
Cumulative Idaho Wind Development (MW)
16 2005 and the 64.5 MW Wolverine Creek project in 2006.
3 500
4 450-,
II Other
5 400 ~----PURPA
-'--- --- --- - -"----~.~-----.--
6 350
17 These wind proj ects were sold under PURPA to Idaho Power
300
7
250
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200 -;--
18 and PacifiCorp, respectively. In 2009, Idaho went from
9
19 two to eight wind projects. The additional six 2009 wind
150
100
50
20 facilities were completed by two developers, Exergy and
o ¡~~~-,
22 different limited liability companies). Another ten
2005 2009
23 projects were added in 2010 by three developers-Exergy
2006 2007 2008
24 built eight projects, John Deere and Ridgeline built one
each~bringing the total number of developed wind projects
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1 in the state to 18 at the end of 2010.All but one of.2 the wind proj ects are being sold to Idaho utili ties under
3 PURPA.
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1 PURPA contracts presently account for approximately
2 three-quarters (~) of total Idaho wind farm nameplate
3 capacity.
4 Q What has been the principle driver
5 for wind development in Idaho?
6 A As with any development, the driver
7 is fundamentally economics. A rational developer will
8 not complete a proj ect where its net costs exceed
9 expected revenue. But once proj ect costs are exceeded by
10 revenues, development occurs. Where developers judge
11 that they can expect revenues to substantially exceed net
12 costs, one can expect the market to swing dramatically to
13 deliver to that sector of the market. The wind PURPA
14 market in the state of Idaho has experienced exactly this
15 type of substantial market shift.
16 Q Please explain the conditions that
17 existed in 2005 and 2006 when the first 75 MW of Idaho
18 wind came online.
19 A The conditions in 2005 and 2006 were
20 qui te different from today. Even under those conditions,
21 the economics were good enough to convince two developers
22 to complete Idaho proj ects. Both wind proj ects were sold
23 to Idaho utilities under published avoided cost rates
24 that were much lower than they are today. State and
federal tax incentives were generous in the 2005-06
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1 period, but arguably the then-available production tax
2 credit ("PTC") offered by the federal government was of
3 less value relative to the current federal investment tax
4 credit ("ITC").
5 Wind proj ect costs are heavily front-weighted. More
6 than 70% of the lifecycle cost of a project is determined
7 by the cost of the wind farm installation. 2 In 2004
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22 2 Based on "Avoided Cost Wind 1 L.xlsm" model received via email
from Idaho Commission Staff on December 7, 2010. Results are based
23 on using Avista' s capital cost structure contained in the model, a
plant cost of $1,500 per kilowatt, use of the federal lTC, a net
24 capaci ty factor of 31.3% and excluding the
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1 and 2005, the likely timeframe in which turbine purchases
2 were made for the 2005-06 wind projects, wind turbine
3 prices averaged $939 according to a 2010 Lawrence Berkley
4 National Laboratory study. 3 Overall installation costs
5 averaged $384 per kilowatt, for a total installed cost of
6 $1,323 per kilowatt. These costs equate to a 20-year
7 levelized production cost of $56.98 per MWh.4
8 The $56.98 per MWh wind cost compares favorably to
9 the then-available Idaho published avoided cost rate of
10 roughly $70 per MWh. Given that the cost of a wind farm
11 completed in 2005 or 2006 was substantially below the
12 available published avoided cost rate, developers in a
13 posi tion to construct wind farms were able to proceed at
14 substantial profit.
15 Q Why did development pause after 2006?
A There were two reasons. First, in
17 August 2005 the Commission issued Order No. 29839. This
18 order reduced the eligibility of wind proj ects for
19 published rates to 100 kW. This cap was in effect until
20 Order No. 30500 was issued on February 20, 2008 after the
21 utili ties and the QF developers agreed to a wind
22 integration charge to account for the system impacts of
23 wind i s varying generation profile.
24 Second, the economics of wind were no longer as.25 favorable to wind development. Wind proj ect costs (i. e. ,
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1 turbines and construction) increased substantially, yet
2 the published avoided cost rate remained the same as in
3 2005.In 2006, again using the Lawrence Berkley National
4 Laboratory study, average wind construction costs
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remained the same as the model from IPUC Staff.
22 3 2009 Wind Technologies Market Report, Wiser R. and M. Bolinger.
LBNL-3716E. August 2010, see http://eetd.lbl.gov/ea/ems/re-pubs.html
23 4 See footnote 1, except use $1,323 per kW for the wind project cost.
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1 were $ 1, 602 per kW. This cost equated to a figure of
2 $68.19 per MWh, a figure essentially equivalent to the
3 published avoided cost rate available at the time.As
4 a result, the economics were not as favorable to the
5 development of wind proj ects during this time period.
6 Wind turbine prices continued to increase after 2006,
7 whereas the Idaho published avoided cost rate did not
8 change substantially until 2008.
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3 iv. IN ADDITION TO CHAGES TO THE SAR METHODOLOGY, THE
COMMISSION WILL NEED TO ADOPT ADDITIONAL REQUIRENTS TO
4 PREVENT DISAGGREGATION.
5 Q You stated earlier that, in addition
6 to changes in the methodology for determining avoided
7 cost rates, a strict set of requirements with regard to
8 ownership, sharing of equipment and infrastructure, and
9 geographical separation rules will be required to prevent
10 disaggregation. Please explain.
11 A Al though aligning published rates
12 wi th utility avoided cost rates will be helpful in
13 removing the economic incentive to disaggregate to take
14 advantage of published avoided cost rates, it will be
15 very difficult or impossible to completely remove that
16 incenti ve. Therefore, if the published avoided cost
17 rates are available to proj ects as large as 10 aMW,
18 additional requirements will need to be adopted to make
19 it more difficult for developers to disaggregate in order
20 to circumvent the intent of the published avoided cost
21 rate. Requirements might include ownership limitations
22 such as contractual representations and warranties
23 affirming that developers of proj ects greater than 100 kW
24 do not share any equipment (e. g., interconnection
25 facilities, maintenance buildings, collector systems)
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1 wi th any other QF and that the developer does not have a
2 direct or indirect interest in any other QF within 10 or
3 more miles.
4 Q Why will aligning published rates
5 with utility avoided costs by itself not prevent
6 disaggregation?
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1 A Published rates are updated
2 infrequently, and data sources used to develop the SAR
3 are based on historical pricing information that could be
4 inaccurate. It is therefore possible, and in fact is
5 what we are seeing today, for the published rate to
6 significantly exceed current resource development and
7 operation costs. Even if the recommendations presented
8 in this testimony were adopted, the lag could enable
9 large proj ects to arbitrage where market conditions have
10 changed and the published rates have not.
11 Q Does Avista believe that the adoption
12 of such requirements will prevent disaggregation?
13 A No. Such requirements may help in
14 the short term. However, so long as published avoided
15 cost rates are available to projects as large as 10 aMW,
16 developers will likely find a way to disaggregate their
17 proj ects so that they can take advantage of the published
18 avoided cost rate.
19 Q Why do you believe that developers
20 will try to find a way around any requirements adopted by
21 the Commission that are designed to prevent
22 disaggregation?
23 A Developers have already demonstrated
24 that they will go to great lengths to take advantage of
the published avoided cost rates. The Commission need
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1 look no further than the efficiency in which developers
2 have already abused the 10 aMW eligibility cap. As
3 Commission Staff acknowledged in GNR-E-10-04:
4 The development of large wind proj ects in Idaho over
the past six years has blurred the distinction
5 between large and small QFs. Wind proj ects are
unique from other generation technologies because
6 they normally consist of multiple turbines, each
wi th its own generator, often scattered over large
7 areas. Because of this characteristic, wind
proj ects capable of8 I
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March 25, 2011
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generating more than 10 aMW per month can be
subdivided into multiple legal entities andreconfigured into smaller proj ects in order to
qualify for the historically higher published
avoided cost rates. It has become quite common for
large wind proj ects to be structured as multiple,
separate QFs, each 10 aMW in size, but collectively
60, 80 or 120 MW in size. In fact, nearly all new
wind contracts submitted for Commission approval in
recent years are collections of two or more adj acent
10 aMW proj ects, each with common ownership and
developers. 14
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8 Q Are there other examples of QFs
9 circumventing state PURPA requirements to take advantage
10 of published avoided cost rates?
11 A Yes. Avista understands that there
12 is a recent example in Oregon where a developer was able
13 to effectively dis aggregate a 65 MW wind proj ect. In
14 this case, published avoided cost rates were available
15 under Oregon rules only for proj ects that were 10 MW
16 (nameplate rating) or less and that were separated by at
17 least five miles from other QF proj ects owned by the same
18 developer. Notwithstanding those limitations, a single
19 developer was able to devise a scheme to break down its
20 65 MW wind project, covering an 8-10 mile footprint, into
21 mul tiple QFs so that each qualified for published rates.
22 To achieve this result, ownership was broken up
23 between the developer, the various landowners, and the
24 enti ty providing proj ect financing . Five miles separated
25 each "owner" and the large project was developed as one,
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1 enabling economies of scale across the whole development,
2 construction, and operations cycle. Absent
3 disaggregation, this developer almost certainly could
4 have constructed at most two 10 MW PURPA projects on its
5 development, or 20 MW.
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1 Instead, it managed to work wi thin the rules and develop
2 more than three times the limit.
3 This example is particularly instructive in that it
4 demonstrates the ability of a developer to disaggregate
5 to take advantage of published avoided cost rates even
6 where an eligibility cap is set at a level substantially
7 less than the 10 aMW level that the Commission is
8 considering here (10 MW nameplate wind is approximately
9 one-third the size of a 10 aMW wind project) .It also
10 demonstrates how a developer can circumvent rules put in
11 place (i. e., a five-mile separation and ownership) to
12 prevent it. Certainly the State of Oregon, in its
13 attempt to limit eligibility, expected its adopted rules
14 to successfully prevent disaggregation. Yet it was not
15 successful. The Commission should expect no greater
16 success where the economics of disaggregation remain.
17 Q Are there other issues associated
18 with a rate structure that includes an eligibility cap of
19 10 aMW?
20 A Yes. As the example discussed above
21 illustrates, developers can come up with very imaginative
22 ways to disaggregate and still comply with even very
23 strict requirements designed to prevent such
24 disaggregation. It is impossible to foresee the various.25 ways that developers may come up with to circumvent the
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1 intent of the eligibility cap by disaggregating their
2 proj ects. Additional requirements regarding ownership,
3 sharing of equipment and interconnection facilities, and
4 project separation rules might help, but they will be
5 very difficult for utilities, and ultimately this
6 Commission, to monitor and enforce. Avista is concerned
7 that such additional requirements will lead to additional
8 li tigation that will require
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1 substantial time and resources in order to enforce the
2 intent of the published avoided cost rate eligibility
3 cap. More importantly, to the extent that developers are
4 able to require utilities to pay rates above the
5 utili ties' actual avoided costs for large QF proj ects,
6 the utili ties' customers will shoulder the burden of
7 those costs through higher retail rates.
8 V. PERMENTLY SETTING THE ELIGIBILITY CAP FOR
PUBLISHED AVOIDED COST RATES AT 100 KW IS THE MOST
9 EFFICIENT WAY TO SOLVE THE DISAGGREGATION PROBLEM.
Q Does Avista have a proposal that will
11 achieve the Commission i s goals of solving the
12 disaggregation problem and ensuring that published.13
14
15
avoided cost rates are still available for truly small
QFs?
A Yes. Permanently setting the
16 eligibility cap for avoided cost rates at 100 kW will
17 satisfy the goals of solving the disaggregation problem,
18 protecting utility customers from paying significantly
19 more for QF power than they otherwise might, and the goal
20 of ensuring that published avoided cost rates are
21 available for truly small QFs.
22 Q The Commission has indicated that it
23 is interested in an eligibility cap structure that
24 II allows small wind and solar QFs to avail themselves of.25 published rates for proj ects producing 10 aMW or
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1 less. . . . "15 Does Avista i S proposal meet that criterion?
2 A Avista' s proposal does not provide an
3 eligibili ty cap structure that allows QFs as large as 10
4 aMW to avail themselves of published avoided cost rates.
5 However, Avista' s proposal is consistent with what the
6 Commission has indicated as the
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1 primary reason for published rates-to ensure that truly
2 small QFs can avail themselves of published avoided cost
3 rates.
4 Q Please explain why Avista believes
5 its proposal is consistent with the Commission i s intent.
6 A The Commission clearly indicated in
7 Order No. 32176 that it is interested in ensuring that
8 small wind and solar QFs are able to avail themselves to
9 published avoided cost rates. Avista agrees that
10 published avoided cost rates are generally appropriate
11 for truly small QFs. For such proj ects, published rates
12 are justified because "small QFs are less likely to be
13 large, well-financed organizations, capable of
14 sophisticated contract negotiations. By making published
15 rates available for small proj ects, rate negotiations can
16 be eliminated and contracting costs can be minimized." 16
1 7 10 aMW wind or solar proj ects are not small QFs.
18 Published rates are required by FERC for proj ects of up
19 to 100 kW in size. This Commission has expanded
20 eligibili ty to include proj ects up to 10 aMW.Indeed, it
21 might well be efficient from a Commission and societal
22 perspective to allow developers with modest means access
23 to a published rate. However, any developer that is able
24 to develop a QF as large as 10 aMW cannot fairly be
25 characterized as small, of modest means, or
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1 unsophisticated.
2 First, the ability to secure land control for
3 hundreds, if not thousands, of acres of land indicates a
4 level of competency beyond that which one could fairly
5 characterize as small and unsophisticated. Second, the
6 negotiation of turbine supply and balance of plant
7 contracts that run into the tens if not hundreds of
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March 25, 2011
171 Kalich, C. (Di) 35a
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millions of dollars requires a level of competency beyond
that of an entity or individual that is small and
unsophisticated. Third the creativity required to take a
large generation project and re-arrange it in a manner so
that each qualifies individually in Idaho for published
rate eligibility indicates a level of competency beyond
that one should define as small and unsophisticated.
Finally, in reviewing the list of present PURPA
developers, a maj ori ty of the proj ects in Idaho are being
buil t by developers who clearly are not small or
unsophisticated.
The following Table 2 illustrates an estimate of the
magni tude of the dollars being expended in Idaho to
develop various resources. The cost data are taken from
Avista's 2009 IRP.
," -~"Table 2
..Capital Cost From Avist:a 200I11P (200 $millions)
Technology ..$/kw l00kW lMW SMW lOMW 30MW SOMW l00MW lSOMW
Biomass Open loop 5,00 0.5 5.0 25.0 iisÖ.õ 150.0 250.0 500.0 750.0
Geothermal 5,000 0.5 5.0 25.0 $0.0 150.0 250.0 500.0 750.0
Cogeneration 2,000 0.2 2.0 10.0 20.0 60.0 100,0 200.0 300.0
SolarPV 7,500 0.8 7.5 37.5 75.0 225.0 .375.0 750.0 1,125.0
SmallScaleWind 3,000 0.3 3.0
Largè SelèWind 2,000 10.0 20.0 èò.o 100.0 200.0 300.0
As the table shows, a 100 kW eligibility cap is more
consistent with the concept of providing published rates
to small proj ects. As demonstrated in Table 2, 100 kW
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March 25, 2011
172 Kalich, C. (Di) 36
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1 proj ects generally cost $500,000 or less, except for
2 solar at $800,000. Conversely, projects presently
3 eligible for published rates at 10 aMW are highlighted in
4 Table 2. For example, a 30 MW wind proj ect would
5 generate approximately 10 aMW. The total cost to build
6 such a proj ect is approximately $ 60 million. A solar
7 plant, with its much lower capacity factor, could be as
8 large
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March 25, 2011
173 Kalich, C. (Di) 36a
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1 as 50 or 60 MW, equating to $375 million. Other
2 potential QF proj ect sizes are described in Table 2 as
3 well.
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March 25, 2011
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March 25, 2011
175 Kalich, C. (Di) 38
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1 Q If 10 aMW developers do not fit the
2 defini tion of being small, should they be eligible for
3 published rates?
4 A No. As noted earlier, the
5 justification for published avoided cost rates is largely
6 administrati ve ease for developers that are not well
7 financed and sophisticated. Any developer of a 10 aMW
8 project cannot be fairly characterized as small or
9 unsophisticated. Only truly small proj ects (i. e., those
10 projects that are at or below 100 kW) should be eligible
11 for published avoided cost rates.
12 Q How does Avista' s proposal satisfy
13 the Commission's goal of preventing large QFs from
disaggregating in order to obtain a published avoided
15 cost rate that exceeds a utility's avoided cost?
16 A If the eligibility cap for published
17 avoided cost rates is permanently set at 100 kW it will
18 be very difficult for developers to disaggregate large
19 proj ects into small enough pieces to take advantage of
20 the published avoided cost rates. Although it may be
21 technically possible in some cases to dis aggregate down
22 to several 100 kW projects, it is unlikely that it will
23 be cost effective to do so. Therefore, the 100 kW
24 eligibility cap achieves the Commission's goal of
25 preventing disaggregation by making it both physically
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March 25, 2011
176 Kalich, C. (Di) 39
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2 disaggregate their proj ects.
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6 struck from the record.)
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March 25, 2011
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March 25, 2011
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3 Q Are developers' concerns regarding
4 the 100 kW eligibility cap justified?
5 A No. QF developers, and particularly
6 developers of wind QFs, have argued against lowering the
7 eligibili ty cap in substantial part because they are
8 concerned that the avoided cost rate calculated using the
9 utili ties i IRP methodologies will be lower than the
10 published avoided cost rate. This argument, however,
11 should not advance their cause. If anything, this
12 argument should be viewed as evidence of the need to
13 ei ther permanently set the eligibility cap for the
14 published avoided cost rate at 100 kW or substantially
15 modify the methodology for setting the published avoided
16 cost rate.
17 Avista' s IRP Methodology establishes a rate that
18 reflects Avista' s actual avoided cost. If the published
19 avoided cost rate accurately reflected the utility's
20 actual avoided cost for their projects, developers should
21 be indifferent as to whether the avoided cost rate was
22 calculated using the IRP Methodology or whether published
23 avoided cost rates were applied.
24 VI . ALTERNATIVES TO IRP METHOD FOR PROJECTS LAGER THA
100 KW AN UP TO 10 AM
25
GNR-E-11-01
March 25, 2011
179 Kalich, C. (Di) 41
Avista Corporation
1 Q Is there an alternative to the IRP.2 Methodology for proj ects of sizes between 100 kW and 10
3 aMW?
4 A Yes,although it would not afford
5 customers the same price protection as the IRP
6 Methodology because it would be subj ect to arbitrage by
7 QF developers where
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GNR-E-11-01 180 Kalich,C.(Di)41aMarch 25,2011 Avista Corporation
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1 market conditions move faster than published rates are
2 updated by the Commission. There are actually two
3 potential al ternati ves to the IRP Methodology, though one
4 likely would be simpler and more consistent with
5 historical precedent.
6 Q What is one method available to the
7 Commission?
8 A The Commission could re-visit the
9 issues presented in case GNR-E-09-03. In that case,
10 Commission Staff developed a straw man wind SAR proposal
11 to set published rates for variable generation resources
12 such as wind and solar. Though that proceeding was
13 vacated, in light of the current situation it might make
14 sense to re-opening the issues that were to be addressed
15 in that proceeding.
16 Q What is the simpler method?
17 A The simpler method would be to
18 continue to use the present SAR methodology and resource
19 (i. e., a gas-fired CCCT). However, for resources that
20 are not expected to provide any significant on-peak
21 capacity contribution (e.g., wind and solar) an on-peak
22 capacity discount would be applied. The on-peak capacity
23 discount concept was illustrated in Joint Utility
24 comments in the recent wind SAR straw man proceeding .17.25 In addition to the capacity discount, a more
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March 25, 2011
181 Kalich, C. (Di) 42
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1 frequent update of the key input assumptions is
2 essential, including the price forecast for natural gas.
3 To the extent this method is pursued, Avista proposes
4 that the annual EIA forecast be implemented due to its
5 public availability.
6 Q Does this conclude your direct
7 testimony?
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17 See Case No. GNR-E-09-03.
GNR-E-11-01
March 25, 2011
182 Kalich, C. (Di) 42a
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GNR-E-11-01 183 Kalich,C.(Di)43March 25,2011 Avista Corporation
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1 Q Please state your name, the name of
2 your employer, and your business address.
3 A My name is Clint Kalich. I am
4 employed by Avista Corporation ("Avista ") at 1411 East
5 Mission Avenue, Spokane, Washington.
6 Q Did you provide direct testimony in
7 this proceeding?
8 A Yes. I submitted the Direct
9 Testimony of Clint Kalich that was filed in this
10 proceeding on behalf of Avista Corporation on March 25,
11 2011.
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Q Do you have any corrections to your
direct testimony that was previously filed in this
proceeding?
A Yes. On pages 24 and 25 of my direct
16 testimony, I testified that, at a published rate of
17 approximately $77 per MWh plus the value of RECs, the
18 20-year additional profit to the PURPA developer, as
19 compared to a fair market for wind proj ects near $ 60 per
20 MWh with RECs, is around $56 million. I further noted
21 that it is customers who would bear the burden of that
22 addi tional profit; however, I inadvertently testified
23 that such burden was $47 million instead of the $56
24 million previously stated. Accordingly, the II $4 7
25 million" that appears on page 25, line 10 of my direct
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April 22, 2011
184 Kalich, C. (Di -Reb) 1
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1 testimony should be "$56 million"
2 Q Renewable Northwest Proj ect ("RNP")
3 submi tted testimony in this proceeding regarding certain
4 factors to consider in determining eligibility for
5 published avoided cost rates. If the Commission adopts a
6 published avoided cost rate eligibility cap structure
7 that allows QFs as large as 10 aMW to take advantage of
8 published avoided cost rates, will consideration of these
9 factors prevent disaggregation?
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April 22, 2011
185 Kalich, C. (Di-Reb) 1a
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1 A No. As I testified in my direct
2 testimony, it will be extremely difficult or impossible
3 to prevent disaggregation if the published avoided cost
4 rate is available to QFs as large as 10 aMW. RNP
5 presents a laundry list of no fewer than 14 factors that
6 may need to be considered in determining whether a QF is
7 a single proj ect or a piece of a dis aggregated proj ect.
8 The number of factors for consideration on RNP' s list
9 itself illustrates the high level of complexity and
10 burden that will be required in any effort to prevent
11 disaggregation if a published avoided rate eligibility
12 cap structure that provides published rates to QFs as
13 large as 10 aMW is adopted.
14 Q Does RNP in its testimony provide any
15 insights that you wish to highlight here?
16 A Yes. RNP makes three statements that
17 warrant further discussion. The first begins at line 4
18 of page 12 of Ms. Decker's direct testimony. Ms. Decker
19 states:
20 "for enforcing the PURPA published rate threshold,
where the rationale for published rates is driven by
the QF' s level of economic and bargaining power, the
most important characteristics may be financial in
nature: beneficial ownership, financing, cost and
revenue sharing, combined purchases of generating
equipment, and combined construction contracts.
However, because each of those factors could be
relati vely easy to obscure with extra paperwork and
possibly difficult to determine at the time of
ini tial contracting, a distance factor between
21
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GNR-E-11-01
April 22, 2011
186 Kalich, C. (Di-Reb) 2
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1 proj ects may be a necessary addition to the
framework. II (Emphasis added.)
2
3 In this testimony, RNP itself acknowledges that, absent a
4 distance requirement, QF developers could circumvent
5 limitations on factors such as beneficial ownership,
6 financing, cost and revenue sharing, combined purchases
7 of generating equipment, and combined construction
8 contracts that the Commission
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GNR-E-11-01
April 22, 2011
187 Kalich, C. (Di-Reb) 2a
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1 may adopt to prevent disaggregation.RNP, as discussed
2 below, goes further and acknowledges that even distance
3 limi ts can also be circumvented.
4 Q Explain what you mean when you state
5 that RNP acknowledges that even distance limitations can
6 be circumvented.
7 A At line 14 of page 12 of Ms. Decker's
8 testimony, she states that:
9 "...any distance rule can be overcome with creativeplanning, (but J a larger distance requirement is
more likely to deter a proj ect from organizing into
smaller pieces to obtain published rates. II
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11
12 At a minimum, this acknowledgement by RNP illustrates
13 that even enhanced physical separation requirements may
not prevent disaggregation. This acknowledgment is also
15 instructive in that it explains that "creative planning II
16 can be used to circumvent the intent of disaggregation
17 rules. The current published avoided cost rates are
18 attracting a significant level of wind development, and
19 Avista is concerned that developers will use such
20 creative planning to enable their large proj ects to
21 qualify for the published avoided cost rates.
22 Q Does RNP' s testimony raise any
23 addi tional concerns regarding the ability of ownership
24 restrictions to prevent disaggregation?
25 Yes. At line 6 of page 13 of Ms. Decker iS
GNR-E-11-01
Ap r i 1 22, 2011 188 Kalich, C. (Di-Reb) 3
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1 testimony, RNP raises questions regarding the benefits of
2 using ownership as a measure for preventing
3 disaggregation by stating that lithe presence of separate
4 LLCs should not determine whether ownership is separate,
5 because separate LLCs are relatively simple to create. ii
6 RNP i S acknowledgements of the potential limitations in
7 imposing ownership limitations and other factors to
8 prevent disaggregation is consistent with Avista' s
9 position that PURPA developers will find creative ways
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GNR-E-11-01
April 22, 2011
189 Kalich, C. (Di-Reb) 3a
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1 to get around any such rules to take advantage of the
2 published avoided cost rates if such rates provide an
3 economic incentive to do so.
4 As long as the published avoided cost rates are
5 available to large QFs, and those rates provide an
6 economic advantage to developers, Avista is concerned
7 that developers will find ways to disaggregate to take
8 advantage of the favorable published rates.
9 Q RNP cites Oregon disaggregation rules
10 as a template for preventing disaggregation. Does Avista
11 have any concerns with the Oregon rules?
12 A Yes. As outlined in my direct
13 testimony and the direct testimony of Bruce Griswold that
14 was also submitted in this proceeding, the Oregon
15 disaggregation rules were circumvented to enable nine
16 disaggregated projects to qualify in that State. The
17 Oregon example does not support the use of distance and
18 ownership requirements to prevent disaggregation; rather,
19 the experience with Oregon's rules illustrates Avista' s
20 concern that eliminating the 100 kW eligibility cap in
21 favor of an eligibility cap structure that returns the
22 cap to 10 aMW will not prevent disaggregation.
23 Q In its Exhibit 1901 to Ms. Decker's
24 testimony, RNP presents a proposal for determining
25 whether a proj ect is a single QF or a disaggregated
GNR-E-11-01
April 22, 2011
190 Kalich, C. (Di-Reb) 4
Avista Corporation
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1 proj ect. Does Avista have any concerns with that
2 proposal?
3 Yes. RNP' s Exhibit 1901 sets out four criteria for
4 determining whether a proj ect with multiple generation
5 sources qualifies as a single QF or is part of a larger
6 disaggregated proj ect. Under that proposal, if the PURPA
7 proj ect does not meet all of four criteria, it would be
8 considered to be a single QF and not part of a
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GNR-E-11-01
Ap r i 1 22, 2011 191 Kalich, C. (Di-Reb) 4a
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1 larger disaggregated proj ect. Such a rule could be
2 circumvented easily. For example, a five-investor
3 development company could develop a single large 150 MW
4 proj ect and simply separate the proj ect into five 30-MW
5 proj ect companies before requesting published rate
6 contracts.In that example, ownership would be separate,
7 but the five investors could share in all other
8 development costs and risks and benefit from economies of
9 scale as if they built the proj ect as one. By not
10 violating this one aspect of the rules set forth in
11 Exhibit 1901, the developers could circumvent the intent
12 of the disaggregation rule and the utility would find
13 itself offering five published rate contracts.
14 Q Does Idaho Conservation League
15 (" ICL") provide any insights that you wish to highlight
16 here?
1 7 A Yes. On page one of its statements
18 of position and strawman proposal submitted in this
19 proceeding, ICL makes the following statement:
20 "0f course, a complete resolution of this dispute
requires addressing two elements: which QFs are21 eligible to receive published rates, and how to set
an appropriate rate upon which published rates are
22 based. II
23 ICL also acknowledges that a resolution requires
24 eligibili ty criteria and an appropriate published rate
25 and that setting an eligibility criterion is "an
GNR-E-11-01
April 22, 2011
192 Kalich, C. (Di-Reb) 5
Avista Corporation
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1 important first step. II These statements are consistent
2 wi th Avista' s position that published rates should not be
3 made available to QFs as large as 10 aMW without, at a
4 minimum, first ensuring that the published avoided cost
5 rate reflects the utilities' actual avoided costs.
6 Q Do you have any comments on ICL 's
7 strawman proposal?
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GNR-E-11-01
April 22, 2011
193 Kalich, C. (Di-Reb) 5a
Avista Corporation
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1 A Yes. ICL presents a litany of rules
2 that will need to be fleshed out greatly to provide any
3 chance of preventing disaggregation. In addition to many
4 criteria, ICL already envisions litigation around
5 eligibility that Avista believes would be burdensome on
6 the utili ties, the developers, and the Commission. ICL
7 sets out a process whereby the QF developer would make a
8 determination of eligibility with its application. The
9 utili ty would then need to expend resources to makes its
10 own determination. Where the parties disagree on
11 eligibili ty, the Commission would be called upon to make
12 the final determination.
13 Q Does Avista have any summary thoughts
14 at this juncture?
15 A Yes. Developers in Idaho have
16 demonstrated their ability to find means to disaggregate
17 larger proj ects to qualify for published avoided cost
18 rates when such rates are provided to projects as large
19 as 10 aMW. Similarly in Oregon, even with restrictive
20 rules such as distance and ownership, QF developers have
21 managed to disaggregate. Even the testimony of RNP and
22 ICL illustrate the risk of making published avoided cost
23 rates available to large QFs. These proponents of
24 returning the published rate eligibility cap to 10 aMW
25 themsel ves acknowledge that ownership and distance rules
GNR-E-11-01
April 22, 2011
194 Kalich, C. (Di-Reb) 6
Avista Corporation
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1 can be easily circumvented.
2 Avista is concerned that so long as published
3 avoided cost rates provide developers an economic
4 advantage (i. e., where rates exceed the true avoided cost
5 of the utility), developers will find ways to circumvent
6 even the best-intended rules. Ultimately Avista' s
7 customers end up with retail rates that are higher than
8 they otherwise would be.
9 Q Does this conclude your rebuttal
10 testimony?
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GNR-E-11-01
April 22, 2011
195 Kalich, C. (Di-Reb) 6a
Avista Corporation
1 A Yes..2
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GNR-E-11-01 196 Kalich,C.(Di-Reb)7
April 22,2011 Avista Corporation
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1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER SMITH: All right, now we i re
4 ready for cross-examination. Do you have any questions,
5 Mr. Miller?
6 MR. MILLER: The way you asked that
7 question leads me to think I shouldn't, but...
8 COMMISSIONER SMITH: I didn't mean to
9 infer anything. I was just starting with you.
10 MR. MILLER: If you'll indulge me, I have
11 just a few.
12
13 CROSS-EXAMINATION
14
15 BY COMMISSIONER MILLER:
16 Q Good afternoon, Mr. Kalich.
17 A Good afternoon.
18 Q I i m going to start with a sentence that
19 appears on page 6, lines 10 through 12.
20 MR. ANDREA: Objection, Madam Chair. That
21 appears to be a section that has been stricken; however,
22 I would entertain having it put back in the record if
23 Mr. Miller would like to ask questions about that
24 section..25 MR. MILLER: I was actually referring to
CSB REPORTING
[phone]
197 KALICH (X)
Avista Corporation
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18
1 the rebuttal testimony.
2 COMMISSIONER SMITH: Rebuttal testimony.
3 Okay, thank you for that clarification.
4 MR. MILLER: I apologize.
5 THE WITNESS: Would you be kind enough,
6 then, to repeat the page and line number again?
7 Q BY MR. MILLER: Page 6, line 10, starting
8 with line 10, where you say developers have demonstrated
9 their ability to find means to disaggregate larger
10 projects. Are you with me?
11 A Yes, I'm there.
12 Q Are there any proj ects on the Avista
13 electrical system in Idaho, wind projects, that you would
14 consider to be disaggregated?
15 MR. ANDREA: Objection. That's beyond the
16 scope of Mr. Kalich' s testimony. I don i t see anything in
17 here that goes to that.
COMMISSIONER SMITH: I'm going to overrule
19 the objection and allow the witness to answer the
20 question.
21 THE WITNESS: We have no wind PURPA
22 contracts in our service terri tory.
23 Q BY MR. MILLER: Is Avista currently
24 considering any proposal from one or more wind developers
25 that in your mind would raise a disaggregation issue on
CSB REPORTING
[phone]
198 KALICH (X)
Avista Corporation
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1 the Avista Idaho electric system?
2 A We are aware of a few, a couple of
3 proj ects that would have the potential to disaggregate on
4 our system, yes.
5 Q I'm sorry,I couldn't hear you.
A The answer is yes.
Q And what is the state of those proj ects?
MR.ANDREA:Excuse me,I'm sorry,but I
6
7
8
9 have to obj ect again. This is beyond the scope and it's
10 not relevant to this proceeding.
11 COMMISSIONER SMITH: I'm going to overrule
12 the obj ection and allow the witness to respond.
13
14
THE WITNESS: As a utility, it can be
rather difficult to understand exactly where a PURPA
15 proj ect is in its development process. There will be
16 I can think of a few proj ects that would come in. The
17 developers would be very focused and we're going to build
18 this year, we're going to build early next year, and then
19 we might get another piece of communication and then they
20 pull back and we don't hear from them for quite awhile,
21 maybe even years, so I would say it's very difficult to
22 judge to what stage or what place those proj ects are in.
23 There are some that have more definitively
24 removed themselves from consideration, but there are a
25 number, and I have listed in Exhibit 102 a number, of
CSB REPORTING
[phone]
199 KALICH (X)
Avista Corporation
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20
1 developers that have not provided any indication that
2 they i re not interested in pursuing, with the exception of
3 the two proj ects that I believe are clients of
4 Mr. Richardson.
5 Q Are there any of those proj ects that are
6 at the stage of executing a contract?
7 A Maybe you could then define for me what
8 you would consider execution of a contract.
9 Q Have you provided execution copies of
10 power purchase agreements to any of those identified
11 projects?
12 A No.
13 MR. ANDREA: I'm sorry, Madam Chair, but I
14 have to obj ect. I'm not trying to be obstinate, but I
15 have no idea how the status of PURPA proj ects in our
16 service area or whether any proj ects are execution ready
17 has any relevance to this proceeding.
18 COMMISSIONER SMITH: Mr. Miller.
19 MR. MILLER: Well, Avista has expressed
great worry about disaggregation.It seems to me it's
21 relevant if it can be shown that it's never been an issue
22 on their system and it's only a speculative possibility
23 that it will be a future issue on their system.
24.25
COMMISSIONER SMITH: I i ve allowed the
questions because this is your expert witness, Mr.
CSB REPORTING
[phone]
200 KALICH (X)
Avista Corporation
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1 Andrea.I think if he has an opinion on these, he can
2 provide it.If he doesn't have an opinion, he can so
3 state.
4 MR. ANDREA: Okay, if I could just have on
5 the record a continuing obj ection to this.I disagree
6 with Mr. Miller's idea that we have to somehow wait for
7 the horse to leave the barn before we can start worrying
8 about what is clearly an issue and a problem within the
9 state.
10 COMMISSIONER SMITH: Thank you, so noted.
11 Q BY MR. MILLER: And in this regard you
12 have cited to the experience in Oregon where a developer
13 was able under the Oregon rules to combine proj ects. I
14 think it was Oregon Wind Farms; is that correct?
15 A Honestly, I don't know the specific name.
16 Again, that entity, that project, was broken up, 65
17 megawatts. Actually, it was disaggregated, not
18 aggregated, in my understanding, and it was broken into
19 nine proj ects with different ownership throughout the
20 projects, so I'm not sure exactly who, again, the owners
21 are of those proj ects. I believe one of the proj ects, at
22 least, of those disaggregated proj ects is owned by that
23 company.
24.25
Q And have you in this case examined the
proposals of the Staff, Renewable Northwest Proj ect and
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201 KALICH (X)
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1 Rocky Mountain Power?
2 A Yes, I have.
3 Q Have you noted any differences in the
4 Idaho proposals compared to the Oregon rules?
5 A Yes, there are clear differences.
6 Q Is one of the differences that all of the
7 Idaho proposals have a common feature of permitting, when
8 necessary, Commission review and decision with respect to
9 whether a proj ect is either aggregated or
10 disaggregated?
11 A You know, I i m not as familiar with the
12 specifics of the Oregon rules. The point I guess that
13 I'm making in my testimony is that Oregon set up a number
14 of rules to prevent disaggregation in that state
15 predominantly to avoid abuse of a business energy tax
16 credi t and I can't imagine that the State of Oregon
17 expected those rules based upon what they placed to be
18 bent as they were so that a developer could essentially
19 get a number of tax credits, but I can't speak
20 specifically to what you're asking.
21 Q So you don't know if the Idaho proposals
22 are different from the Oregon rules or you do know?
23 A Oh, I think I answered that, they are
24 different.
25 Q Does Avista lack confidence in the
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202 KALICH (X)
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1 intellectual ability of this Commission to review facts
2 and come to a reasoned conclusion based on that review?
3 A I have no reason to have any concerns
4 about the Commission' s abilities in those areas.
5 Q Does Avista lack confidence in the ability
6 of this Commission to enforce its orders?
7 A No.
8 MR. MILLER: Those are all the questions I
9 have, Madam Chairman.
10 COMMISSIONER SMITH: Thank you,
11 Mr. Miller, and I would note, I had an oversight this
12 morning, I failed to acknowledge that we're pleased to
13 have in our Hearing Room Representative Tom Lurcher and
14 thank you for coming back so I get to remedy my error and
15 we appreciate your interest in our case.
16 Mr. Richardson, do you have questions?
17 MR. RICHARDSON: Just a very few,
18 Madam Chair.
19
20
21
CROSS-EXAMINATION
22 BY MR. RICHARDSON:
23 Q Mr. Kalich, one of the premises of your
24 testimony is that this Commission ought to leave the.25 eligibility cap at 100 kW; correct?
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203 KALICH (X)
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1 A Yes.
2 Q And in your testimony on page 15, you talk
3 about--
4 A Direct? I'm sorry.
5 Q Your direct testimony on page 15.
6 A Okay.
7 Q You address some of the causes of what you
8 called a pause in development of new QF proj ects in
9 Idaho. Do you see that?
10 A Yes.
11 Q And wasn't one of the causes that QF
12 development ceased in Idaho starting in August of 2005
13 was that the Commission reduced the eligibility cap to
14 100 kW. That i s one of the causes you identify, isn't
15 it?
16 A During that period of time I think the
17 only way a wind project could get a rate was to pay the
18 avoided cost rate as defined by the IRP methodology, but
19 I think you are correct in the fact that during that time
20 the published rate was only available to projects at or
21 below 100 kilowatts.
22 Q And that i s one of the reasons you identify
23 as the reasons that QF development ceased in the State
24 Idaho; correct?
25 A And if I didn't put it in my testimony,
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204 KALICH (X)
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1 that is a true statement.
2 Q And where in your testimony are we to find
3 a recommended methodology that would allow small wind and
4 solar QFs to avail themselves of published rates for
5 proj ects producing 10 average megawatts or less?
6 A It's probably in some of the stricken
7 testimony. In seriousness, actually, in reviewing the
8 proposals and alsD looking at other entities or states
9 that have tried to stop disaggregation, Avista believes
10 when the economic incentives are as extremely robust as
11 they are today for development, there's always going to
12 be an opportunity to find a different way to get around
13 almost any rule or structure of rules set up. We've seen
14 it in the past, I would expect to see it again. I'm not
15 saying that today we can see where those loopholes are,
16 but I would expect going forward we will see some things
17 come out if indeed the 100 kW cap is lifted and we end up
18 with large projects that can be disaggregated.
19 Today the cost for a wind development is
20 so substantially below PURPA that you can spend a lot of
21 money, a lot of legal time, a lot of ways to create
22 enti ties and work around rules
23 MR. RICHARDSON: Madam Chair, I wonder if
24 you could direct the witness to respond to the question..25 COMMISSIONER SMITH: I think he's trying
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205 KALICH (X)
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1 to, Mr. Richardson.
2 MR. RI CHARDSON : Than k you, Madam Cha i r .
3 THE WITNESS: I'LL stop there.
4 Q BY MR. RICHARDSON: Thank you; so the
5 question was, Mr. Kalich, where in your testimony will we
6 find a methodology that would allow a small wind and
7 solar QF to avail itself of published rates for proj ects
8 producing 10 average megawatts or less?
9 A In the interest of time, I would just say
10 that the focus of the testimony is to illustrate that we
11 do not believe that any set of rules will be successful
12 in preventing disaggregation, so I guess by that, we
13 would not propose any set of rules that we believe in the
14 first place would be violated at first opportunity by a
15 developer so motivated by the financial benefits
16 associated with the published PURPA rate.
17 MR. RICHARDSON: Thank you, Madam Chair.
18 That's all I have.
19 COMMISSIONER SMITH: Thank you,
20 Mr. Richardson.
21 Ms. Sasser, do you have questions?
22 MS. SASSER: Just one question,
23 Madam Chair, for clarification purposes.
24.25
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206 KALICH (X)
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1 CROSS-EXAMINATION
2
3 BY MS. SASSER:
4 Q So is it your position, Mr. Kalich, that
5 the Commission cannot effectively control disaggregation
6 of proj ects regardless of criteria put into place?
7 A Nobody can say anything with 100 percent
8 certainty. We've seen that the rules, arguably -- well,
9 we do have rules in place today to prevent
10 disaggregation. They're fairly limited in Idaho, the
11 one-mile separation, the 10 average megawatts. In Oregon
12 we have a five-mile, 10 megawatt nameplate requirement as
13 well with a number of things like shared ownership and
14 things like that. Those have not been successful.
15 Certainly, this Commission could go further and put
16 additional criteria around and Mr. Sterling's
17 recommendation certainly would be great enhancements in
18 my opinion upon what's already been built in other
19 states. I'm just simply concerned and my testimony
20 states that we probably cannot stop disaggregation when
21 the economics are as aggressively in the favor of
22 developers as they are.
.
23
24
25
COMMISSIONER SMITH: So is that --
Q BY MS. SASSER: So that would be a no?
I'm sorry, Chair.
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207 KALICH (X)
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1 COMMISSIONER SMITH: I was just going to
2 say that.
3 THE WITNESS: No.
4 MS. SASSER: Thank you. That's all I
5 have.
6 COMMISSIONER SMITH: Mr. Otto, do you have
7 questions?
8 MR. OTTO: Yes, I do, Madam Chair.
9
10 CROSS-EXAMINATION
11
12 BY MR. OTTO:
13 Q Mr. Kalich, we've heard from Commissioner
14 Smi th and others that pricing is an issue. I don't think
15 anybody is disagreeing that pricing is an issue, but that
16 that is going to be addressed in another part of this, so
17 this entire case, the arc of this case is, one, rules
18 about disaggregation and, two, pricing. Would you agree
19 that there's kind of two tracks that we i re going on
20 here?
21 A The concern we have with the two -- I
22 don't disagree there's two tracks. The challenge here is
23 customers are being asked to pay substantially above what
24 our avoided costs are and that's a 20-year commitment
25 that we're obligating our customers to pay and with the
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208 KALICH (X)
Avista Corporation
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1 100 kilowatt cap in place, at least we're prevented from
2 a 20-year commitment. It certainly will take time to get
3 through all these other issues, but if we allow the
4 floodgates to open, developers come in to grab these
5 very, very attractive PURPA rates, so you end up with a
6 20-year obligation on the behalf of the customers, so
7 maybe it takes us six months, a year, 18 months, I don't
8 know what the time frame would be, but it's a pretty
9 broad window.
10 If you look at the contracts that were
11 signed just by Idaho Power in a very short period of time
12 last year when the gate was open, it was closing due to
13 the 10-04 hearing, I think there's a great opportunity
14 for developers to take a run at this. They've been out
15 of the game here for a period of months and I would
16 anticipate a number of those developers are ready to come
17 in and grab a contract and lock in what are absolutely
18 tremendously advantageous PURPA rates.
19 Q Well, we've established that this case is
20 not about the rates. This phase is about what size
21 proj ects are going to get those rates and so I'd like to
22 ask you about some criteria that we might have.
23 A Sure.
24 Q So let's see, in your direct testimony,
25 portions that are left in, on page 30, lines 17 through
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209 KALICH (X)
Avista Corporation
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1 22 and again on page 33, well, page 30, you offer some
2 suggestions about contractual representations,
3 warranties, the types of criteria that might work. Do
4 you recall that from your direct testimony?
5 A Yes, I'm looking at it now.
6 Q Right, and then did you review the
7 proposals that were submitted, that we submitted and
8 Staff submitted and Rocky Mountain submitted and RNP
9 submi tted?
10 A Yes, I did.
11 Q And were some of those suggestions
12 included in those proposals?
13 A They were, yes.
14 Q Right, and then turning to your rebuttal
15 testimony, are there portions in your rebuttal testimony
16 that seek to build upon those ideas?
17 A No, actually most of my rebuttal testimony
18 is using the words of your clients and of RNP' s clients
19 to illustrate that there are major holes that are out
20 there potentially. I could quote anything basically from
21 Ms. Decker talks about any distance rule can be overcome
22 with creative planning. There's another comment from
23 your client, I won't quote it here, but essentially what
24 my rebuttal testimony was intended to do was explain that.25 even those that are advocating these limitations have
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210 KALICH (X)
Avista Corporation
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1 explained that these limitations, it almost seems no
2 matter what they are, there's going to be a way for
3 somebody to game the system, which was reaffirming my
4 direct testimony.
5 Q Sure; so in the proposals, though, there
6 were a variety of criteria that were designed to work in
7 concert with each other. Would you agree that the
8 proposals share that kind of commonality?
9 A Well, you might say some of the proposals
10 did. Your proposal had, I believe it was, four criteria
11 and all I had to do was not violate one and I still was
12 able to have a dis aggregated proj ect.
13 Q Sure, that's a fair point, of course, but
14 I think what I was pointing out is that nobody is relying
15 on a single criteria. I think the commonality you might
16 find is you can -- we've seen proposals that have several
17 cri teria together that balance each other. Would you
18 agree that there's a potential -- there is a way to have
19 things that work together to get at a problem?
20 A The more criteria you have, certainly the
21 harder the filter is to get through, so if you have a
22 list of one , it's a certain level of difficulty. If it's
23 100, it's a different level.
24 Q Yeah, and then another issue you raised is
25 kind of the administrative burden and the propensity for
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211 KALICH (X)
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19
1 Ii tigation to come out of any structure we might set up.
2 I'm just kind of generally characterizing one of the
3 concerns. Is that fair, your concerns about the proposed
4 criteria?
5 A Yeah, witness Stokes talked extensively
6 about his concerns, we would share those ~
7 Q That's a fair characterization, we'll
8 start there, so do you have PURPA proj ects in Avista' s
9 system?
10 A Yes, we have a number of PURPA proj ects.
11 Q Can you talk to me about how the process
12 of deciding what size, you know, if they're large or
13 small and what rates they should go through, how does
14 that work for you?
15 A Well, again, assuming we're talking here
16 about Idaho PURPA proj ects or PURPA proj ects that have
17 figured out a way to deliver their energy to our service
18 territory in Idaho, as I mentioned earlier, it's a pretty
simple criteria that's straight mathematics.It's 10
20 average megawatts and the projects have to be, if they're
21 two projects they have to be, one mile apart, so those
22 cri teria are pretty simple to ascertain and understand.
23 If you look at a map, you can do the comparisons on the
24 proj ect boundaries. You do the math on the expected.25 deli veries that we're committing to and you figure out if
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212 KALICH (X)
Avista Corporation
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1 it's 10 average megawatts or less.
2 Q Well, yeah, that does sound simple.
3 There's maps, there's looking at the project, its
4 characteristics and its comparison to other proj ects
5 around it and making a decision, simple.
6 A Yes.
7 Q That seems very similar to a lot of
8 proposals that are on the table, looking at a variety of
9 characteristics, comparing it with the proj ects around it
10 and making a consideration.
11 A Well, I can see that some of the proposals
12 included those provisions, but they also included a
13 number of other provisions, for example, ownership,
14 sharing of O&M contracts, financing contracts. Those
15 contracts will not be nearly so easy to determine or
16 figure out or conclude I submit relative to the criteria
17 we have today, which I mentioned just those two.
18 Q Okay; so part of RNP' s proposal included a
19 form that would be used to kind of solicit all this
20 information from proj ect developers to help the utility
21 make a decision. Do you think that form is a helpful
22 start on getting out this information in a way that's
23 manageable to make the determination?
24.25
A Personally, I don't know that I would
value that very highly. I still feel as though the
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213 KALICH (X)
Avista Corporation
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1 Company would have to extend a significant number of
2 resources to confirm it and make sure that those issues
3 were in place. Additionally, I don't think it was in my
4 testimony, but I'LL take the time here, there's a lot of
5 ownership and sale of these proj ects going forward
6 potentially and there's no way to know that as soon as
7 those proj ects are constructed and contracted that they
8 aren't immediately sold to someone else and now we have
9 an aggregated proj ect again, so there's lots of ways to
10 be concerned about in how a utility would police such a
11 set of rules.
12 Q So in your direct testimony on page 30,
13 again, one of the things you point to is contractual
14 language and warranties that would try to self-police
15 some of the system and I know ICL' s proposal contains
16 some of that, I believe, and Rocky Mountain's revised and
17 RNP had similar ones. Do you think there is a way to
18 craft some contractual warranties that get at a
19 self-policing?
20 A As I stated earlier, I don't think that,
21 no matter the rules, you i II be successful.I certainly
22 would hope to the extent that Avista is compelled to take
23 a 10 average megawatt project at the end of this hearing,
24 I would hope that the Commission would include some of
25 these provisions, because as I mentioned earlier, at
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214 KALICH (X)
Avista Corporation
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1 least it does add some filters, but I still think there
2 will be an opportunity for gamesmanship.
3 Q Do you have any personal knowledge of
4 contractual obligations and warranties not working out in
5 this manner?
6 A No.
7 Q So you're just assuming they won't?
8 A I'm basing some of this information on
9 experiences I've had and discussions I've had with
10 developers over the last number of years. I share the
11 Idaho Wind Task Force. I am in communication with
12 developers in various ways, not just in my utility
13 business, and I've heard a lot of interesting ideas about
14 how to disaggregate and really giggling at the rules that
15 are set up, frankly.
16 Q But those folks aren't here today and you
17 are and I'm asking about your personal experience with
18 those kinds of things not working.
19 A Again, my personal experience is as I just
20 explained it.
21
22
23
24.25
MR. OTTO: That's all I have.
COMMISSIONER SMITH: Thank you, Mr. Otto.
Ms. Davis.
MS. DAVIS: Nothing for Mr. Kalich. Thank
you.
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215 KALICH (X)
Avista Corporation
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1 COMMISSIONER SMITH: Any of the other
2 attorneys who made appearances wish to cross-examine?
3 Seeing none, we'll ask the Commissioners if they have
4 questions.
5
6 EXAMINATION
7
8 BY COMMISSIONER SMITH:
9 Q I do, Mr. Kalich. Have you read Mr.
10 Martin's testimony in this matter?
11 A Yes, I have.
12 Q Does he seem to be to you the exact type
13 of proj ect that PURPA was designed to include?
14 A I'll answer it this way and see if it
15 meets your needs, I don't think that Mr. Martin
16 represents a small developer.
17 Q Okay, because?
18 A Because he has apparent interests in other
19 developments beyond his own small project, what he
20 defines as a small project, the 10 average megawatt
21 project.
22
23
Q Would you explain?
A Well, I believe we had some discovery and
24 I don't have it in front of me, it's not in the record, I.25 guess, but he has some development interests for a
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216 KALICH (Com)
Avista Corporation
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1 relationship he has. We did some preliminary analysis.
2 He may have some interest in a renewable energy business
3 in Colorado and we do believe he may have some additional
4 interest in other states outside of Idaho and I'd welcome
5 an opportunity to learn if these things are true.
6 Q Well, I don't have jurisdiction in
7 Colorado or other states, but in Idaho, when I read his
8 testimony, he looked like a small proj ect developer.
9 Would you agree in Idaho he looks like a small proj ect
10 developer?
11 A If you want to put sideboards up on the
12 State of Idaho,I think he looks a lot more like a small
developer than if you take those sideboards off.
Q Well,that's all I can deal with is Idaho.
A So then the answer to your question would
be yes.
13
14
15
16
17 Q I don't get to make rules for Colorado,
18 you know, even if they cry out for it.
19 A I guess to me it gets back to we've talked
20 a lot about what small means and oftentimes it comes back
21 to the sophistication and financial capability. To me,
22 that would envelope projects outside of the state and
23 other proj ects within the state.
24.25
Q So if we took your and other witnesses'
proposals to maintain the 100 kilowatt as the size limit
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217 KALICH (Com)
Avista Corporation
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1 for proj ects eligible for the published rate, what
2 happens to his proj ect?
3 A Well, I guess he would have two options.
4 One would be to wait until the end of the next
5 proceeding, supposing that the 100 kilowatt would be
6 something we would consider in the next proceeding for
7 eligibili ty.
8 Q Right.
9 A But in the short run, Mr. Martin could
10 come to Avista and ask for an IRP methodology rate, so we
11 would run it through our IRP and put it on par with all
12 the other resources that we consider when we look for a
13 least cost mix of resources.
14 Q So if we had that 100 kilowatt size limit,
15 then that would be his only choice. There wouldn't be
16 any exemption process or other action that might help him
17 achieve the published avoided cost rate if he's more than
18 100 kilowatts?
19 A I guess I don't understand an exemption.
20 We've talked about grandfathering before. What would be
21 an example of that?
22 Q I was just asking you to use your
23 imagination.
24
25
A Well, certainly, Mr. Martin could
negotiate a bilateral contract with Avista as well for
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218 KALICH (Com)
Avista Corporation
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10
1 his proj ect, but other than that, it would be through the
2 IRP methodology and we stand ready to do that. We've
3 talked to many of the PURPA developers about do you want
4 to take this through PURPA or would you like to take it
5 through a contract discussion. You know, there's issues,
6 and I won't bring them up here, outside of just the PURPA
7 rate and sometimes there could be more value to a
8 supplier if they're willing to do certain things that add
9 val ue to the proj ect .
Q So if there were characteristics of his
11 proj ect that made it more valuable than whatever your IRP
12 cranked out, there would be a potential for a higher.13 rate?
14 A Yes. For example, there's two examples
15 that are pretty easy. One is depending on where your
16 project is located, to the extent that -- we call it 12
17 by 24, so it's the 12 months and the 24 hourly shape, so
18 to the extent there's more energy relative to the IRP
19 wind resources coming in the more valuable months and
20 hours, and I don't know Mr. Martin's proj ect
21 specifically, but I've seen PURPA resources that tend to
22 have, or wind resources that tend to have, a winter shape
23 or a heavy summer shape relative to the spring which is
24 less valuable, that's one avenue..25 Another avenue that we pursue now with all
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219 KALICH (Com)
Avista Corporation
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22
23
1 of our of wind contracts we talk about, if you're able
2 to -- one of the things you have to do as a balancing
3 authority is you have to provide system reliability. A
4 wind proj ect just running willy-nilly at the whim of
5 Mother Nature actually causes quite a bit of reserve
6 costs, so to the extent you as a wind developer are
7 willing to give us pretty modest interruption rights,
8 even to the extent we might pay you for those, it allows
9 us to avoid capacity and then therefore we can add an
10 addi tional premium to that contract as well.
11 Under PURPA, unfortunately, the standard
12 rates, I suppose one could argue you could add to that
13 somehow on a separate contract, but there's really not a
14 way to value those types of benefits. We really would
15 like to see and as we negotiate all of our wind contracts
16 now, we almost unilaterally are asking for the ability at
17 least to pay for interruption rights, because these wind
18 turbines have an amazing ability to ramp down and shut
19 off.It's an economic issue, not a physical issue, in
20 our experience.
21 COMMISSIONER SMITH: All right, thank you.
Do you have redirect?
MR. ANDREA: I do, Madam Commissioner,
24 just a quick kind of follow-up on your line of.25 questioning.
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220 KALICH (Com)
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1 REDIRECT EXAMINATION
2
3 BY MR. ANDREA:
4 Q Mr. Kalich, in response to Commissioner
5 Smi th 's question, you said one of the options was the IRP
6 methodology, they could come to Avista and we would get
7 them the rate through the IRP methodology. Is there
8 anything fundamentally unfair about that approach?
9 A Well --
10 MR. MILLER: Which we obj ect as leading
11 and suggestive.
12 Q BY MR. ANDREA: Do you see any problems
13 wi th that approach?
14 A I think it's the best approach that's out
15 there for these larger proj ects for the administrative
16 burden. It's worth the administrative burden to get the
17 price right.
18 Q Does it provide a rate that is lower than
19 what Mr. Martin would be entitled to?
20 A No, not if he did competitively,
21 certainly.
22
23
Q So it reflects the actual avoided costs?
A Yes, we have a -- we had a request for
24 proposals out on the street and Mr. Martin chose not to.25 bid into it. I mean, there's always an opportunity
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221 KALICH (Di)
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20
21
22
23
24.25
1 through competi ti ve bidding processes.
2 Q Is there any reason that the fact that Mr.
3 Martin is less than 10 average megawatts he should be
4 enti tled to greater than the actual avoided cost?
5 A To the extent that there are no additional
6 features like I just described, on peak or
7 interruptibili ty, I do not believe so. To the extent
8 that some of those flexibili ties were provided, it is
9 possible that he would be and provide more value to our
10 system than the published avoided cost rate.
11 MR. ANDREA: Thank you.
12 COMMISSIONER SMITH: Thank you, Mr.
13 Kalich, appreciate your attendance and your help.
14 (The witness left the stand.)
15 COMMISSIONER SMITH: Mr. Miller, would you
16 like to do Mr. Martin now?
17 MR. MILLER: Thank you very much. On
18 behalf of Intermountain Wind, we would call Mr. Paul
19 Martin.
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222 KALICH (Di)
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1 PAUL MARTIN,
2 produced as a witness at the instance of Intermountain
3 Wind LLC, having been first duly sworn, was examined and
4 testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. MILLER:
9 Q Sir, would you state your name, please?
10 A Paul Martin.
11 Q Mr. Martin, are you the same Paul Martin
12 that previously filed direct written testimony in this
13 case on March 25th consisting of three pages?
14 A Yes.
15 Q And are you the same Paul Martin that
16 previously filed written rebuttal testimony on April 22nd
17 consisting of three pages?
18 A Yes.
19 Q Wi th respect to your direct testimony, if
20 I asked you the questions that are contained in that
21 testimony, would your answers as written then be the same
22 today?
23
24.25
A Yes.
Q And with respect to your rebuttal
testimony, if I asked you the questions contained in your
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223 MARTIN (Di)
Intermountain Wind
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20
1 rebuttal testimony, would your answers be the same?
2 A Yes.
3 MR. MILLER: Madam Chairman, I'm ready to
4 spread--
5 Q BY MR. MILLER: Oh, your testimony did not
6 contain any exhibits; correct?
7 A Correct.
8 MR. MILLER: I'm ready to spread Mr.
9 Martin's testimony, but if the Chair would permit, I
10 would like to ask just a couple of questions based on
11 COMMISSIONER SMITH: We're always very
12 indulgent, Mr. Miller. Please proceed.
13 MR. MILLER: And we are always very
14 appreciative.
15 Q BY MR. MILLER: Mr. Martin, were you in
16 the Hearing Room a few moments ago when Commissioner
17 Smi th asked the previous witness some questions about
18 your project?
19 A Yes.
Q In your opinion from your perspective,
21 what is the feasibility of your project obtaining what
22 I'll call an IRP-based rate?
23 A I think it would be very difficult for us.
24 It was hard enough for us to get through the process of a.25 SAR PPA or a PPA with that type of rate. Supposedly
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224 MARTIN (Di)
Intermountain Wind
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.13
14
1 we're supposed to just be able to ask for it and get it.
2 It took me two years to ask the question correctly to get
3 to the point that I could have a draft. Since then I've
4 spent about two years trying to get that draft financed
5 to no avail.Issues such as curtailment with no
6 compensation, issues such as no cost recovery for the
7 developer with regard to transmission upgrades, those
8 things have prevented us from being able to move forward
9 to date.
10 The IRP methodology, Clint suggests that
11 we could just hire somebody to go through that process.
12 I don't see that -- I mean, yes, we could hire somebody,
but the impact to the costs would be extremely
significant, even based on his estimates. For him to
15 suggest that that would be insignificant demonstrates he
16 doesn't understand what a small developer goes through,
17 the shoestring that we're working on. To add a level of
18 complexity with the IRP, somebody like myself having to
19 go in there and negotiate against the utility, it's a
20 non-starter.
21 MR. WALKER: Madam Chair, I object to this
22 tactic of filing extremely minimal written prefiled
23 direct testimony and then offering much more substantial
24 testimony from his client in a live manner direct.25 testimony here at the hearing. I don't think that's fair
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225 MARTIN (Di)
Intermountain Wind
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1 and I don't think that's proper. All the other witnesses
2 provided the bulk of their, all of their, direct in a
3 prefiled manner and I obj ect.
4 COMMISSIONER SMITH: I'm going to overrule
5 your obj ection, Mr. Walker. I think I probably generated
6 this and I think the Commission is sincerely interested
7 in the developer's views to the extent it's relevant to
8 our finding a solution immediately to a disaggregation
9 issue, so you are going a little beyond that.
10 MR. MILLER: And I'll limit my couple
11 remaining questions to be strictly wi thin the area that
12 was raised by your questions.
13 Q BY MR. MILLER: Another point that was
14 touched on is the idea that a 10 average megawatt project
15 is a big proj ect. From your perspective, could you share
16 wi th the Commission your thoughts on that point?
17 A I have not had the ability to get a
18 utility to give me the time of day with a project of 10
19 average megawatts, and as I stated, it was hard enough to
20 go through the PURPA process, but to go to a utility and
21 say I have a 10 or 20 megawatt project, they say okay,
22 maybe sometime I won't be working on 200 megawatts and
23 maybe sometime I won't be working on our 300 megawatt gas
24 plant and I might get around to it. No RFP -- every RFP.25 I'm aware of throughout the West has been for large
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226 MARTIN (Di)
Intermountain Wind
.1 sizes.
2 Even the small providers that serve
3 municipalities won't even consider something as small as
4 50 megawatts. They want much bigger than that. They
5 don't want to waste their time and I understand that, but
6 PURPA provides the only access for someone such as myself
7 to get to a PPA with a proj ect of this size , and Mr.
8 Kalich may believe that the cost of these facilities is
9 low or, excuse me, is high and is not small, but you
10 compare that to the cost of these utilities for every
11 project that they work on, it's extremely small and --
12 well, I'll leave it at that..13 MR. MILLER: Thank you, Madam Chairman,
14 for your indulgence. If I haven't, I would at this point
15 move that the direct prefiled and rebuttal testimony of
16 Mr. Martin be spread on the record as if read.
17 COMMISSIONER SMITH: Is there any
18 objection? Seeing none, the prefiled direct and rebuttal
19 testimony of Mr. Martin shall be spread upon the record
20 as if read.
21 (The following prefiled direct and
22 rebuttal testimony of Mr. Paul Martin is spread upon the
23 record.)
.24
25
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227 MARTIN (Di)
Intermountain Wind
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1 Q PLEASE STATE YOUR NAME AND BUSINESS
2 AFFILIATION.
3 A My name is Paul Martin. I am a
4 member of Intermountain Wind LLC which is the developer
5 of a wind energy proj ect located in Bonneville County
6 Idaho, known as the Black Canyon Proj ect.
7 Q PLEASE EXPLAIN YOUR INTEREST IN THIS
8 PROCEEDING.
9 A As I will explain, the Black Canyon
10 Project is a "true PURPA" project, not part of a larger
11 proj ect and should not be subj ect to a reduction in the
12 eligibili ty cap for published avoided cost rates.
13 Q PLEASE DESCRIBE THE BLACK CANYON
14 PROJECT.
15 A Members of my family own agricultural
16 land in Bonneville County. Commencing in 2006 we began
17 work to develop a 10 aMw project on the property and for
18 that purpose created a limited liability company, Black
19 Canyon LLC, with is a Self Certified Qualifying Facility.
20 Q PLEASE DESCRIBE THE PROGRESS YOU HAVE
21 MADE TOWARD CONSTRUCTION OF THE PROJECT.
22 A Wind data has been collected onsi te
23 since summer 2007. Bonneville County has approved
24 conditional use permits for the proj ect and an
25 Interconnection Agreement has been executed with
228 MARTIN, Di -Test 1
Intermountain Wind
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14
15
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18
19
20
21
22
23
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25
1 PacifiCorp Transmission Services.
2 Q PLEASE DESCRIBE THE STATUS OF
3 NEGOTIATIONS FOR A PURCHASE POWER CONTRACT.
4 A Intermountain has been working with
5 PacifiCorp regarding a PPA for several years but has not
6 moved forward with execution until financing was secured.
7 This was due to the significant security deposits that
8 PacifiCorp required in order to
9 I
10 I
11 I
12
229 MARTIN, Di -Test 1a
Intermountain Wind
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1 move forward, inherently discouraging small developers
2 such as Intermountain while making PURPA contracts only
3 available to large, well funded corporations. Just as
4 Intermountain was succeeding in securing the financing to
5 move forward with these deposits, the Joint Petition in
6 Case No. GNR-E-10-4 was filed, threatening the projects
7 abili ty to move forward.
8 Q DO YOU OR ANY MEMBER OF THE MARTIN
9 FAMILY OR RELATED LIMITED LIABILITY COMPANIES HAVE ANY
10 OWNERSHIP INTEREST, OF ANY KIND, IN ANY WIND GENERATION
11 PROJECTS LOCATED WITHIN FIVE MILES OF THE BLACK CANYON
12 PROJECT?
13 A No.
14 Q WOULD INTENDED FINANCING ARRANGEMENTS
15 FOR BLACK CANYON LLC RELATE SOLELY TO BLACK CANYON?
16 A Yes.
17 Q WHEN BLACK CANYON APPLIED FOR A
18 CONDITIONAL USE PERMIT FROM BONNEVILLE COUNTY, WERE ANY
19 OTHER PROJECTS INCLUDED IN THE APPLICATION?
20
21
A No.
Q WOULD BLACK CANYON SHARE EXPENSE AND
22 REVENUE WITH ANY OTHER WIND PROJECT?
23
24
25
A No.
Q DOES BLACK CANYON HAVE ANY SHARED
PERSONNEL WITH ANY OTHER WIND PROJECT?
230 MARTIN, Di -Test 2
Intermountain Wind
.1 A No.
2 Q DOES THAT COMPLETE YOUR TESTIMONY?
3 A Yes it does.
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12.13
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24.25
231 MARTIN,Di-Test 3
Intermountain Wind
.
.
1 Q PLEASE STATE YOUR NAME.
2 A My name is Paul Martin and I am a
3 member of Intermountain Wind LLC.
4 Q ARE YOU THE SAME PAUL MARTIN WHO
5 PREVIOUSLY FILED DIRECT PRE-FILED TESTIMONY IN THIS
6 MATTER?
7 A Yes I am.
8 Q HAVE YOU REVIEWED THE DIRECT
9 PRE-FILED TESTIMONY OF MR. BRUCE W. GRISWOLD, FILED ON
10 BEHALF OF ROCKY MOUNTAIN POWER (RMP)?
11 A Yes I have.
12 Q COULD YOU SUMMARI ZE YOUR
13 UNDERSTANDING OF MR. GRISWOLD'S TESTIMONY?
14 A As I understand it, RMP believes a
15 permanent 100kW size threshold is the best method to
16 prevent disaggregation. However, in the event the
17 Commission seeks an al ternati ve in the form of rules to
18 prevent disaggregation, RMP proposes, in Exhibit 203, a
19 proposed rule and implementing procedures.
20 Q WHAT IS YOUR REACTION TO RMP' S
21 CONTENTION THAT THE 100 KW SIZE THRESHOLD SHOULD BE MADE
22 PERMANENT?
23 A For the reasons stated in
24 Intermountain's Comments in Case No. GNR-E-10-4, I.25 respectfully disagree with the proposal to make that
232 Martin, R (Di) 1
Intermountain Wind LLC
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1 threshold permanent, but I will not repeat those
2 arguments here.
3 Q WHAT is YOUR GENERAL REACTION TO THE
4 RULE AND PROCEDURES PROPOSED IN EXHIBIT 203?
5 I
6 I
7 I
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
233 Martin, R (Di) 1a
Intermountain Wind LLC
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20
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1 A I am pleased that RMP has
2 demonstrated a cooperative spirit in responding to the
3 Commission's request, contained in the Notice of Inquiry,
4 for information and proposals about a possible avoided
5 cost rate eligibility cap structure that: (1) allows
6 small wind and solar QFs to avail themselves of published
7 rates for proj ects producing 10 aMW or less; and (2)
8 prevents large QFs from disaggregating.(Order No.
9 32195, pg. 3).
10 Q MORE SPECIFICALLY, DO YOU BELIEVE THE
11 PROPOSED CRITERIA CONTAINED ON PAGE 1 OF EXHIBIT NO. 203
12 ARE WORKABLE?
13 A Yes, I believe they are reasonable
14 cri teria for determining whether a proj ect is a true
15 stand-alone proj ect or is part of a larger enterprise. I
16 do have some hesitation about the criteria of "shared
17 interconnection. II This criterion should not be applied
18 in a way that forces wasteful duplication of
19 interconnection facilities.
Q DO YOU BELIEVE THE PROCEDURES
21 CONTAINED IN PARAGRAPH (B) ARE APPROPRIATE?
22 A Yes I do. I believe the 30 day
23 deadline for response by the utility would give the
24 utility adequate time for review of information submitted.25 by the developer and would guard against the possibility
234 Martin, R (Di) 2
Intermountain Wind LLC
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10
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15
16
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21
22
23
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25
1 of undue delay. I also believe dispute resolution by the
2 Commission is a necessary safeguard.
3 Q DO YOU BELIEVE THE INFORMATION
4 REQUESTED BY THE QUALIFYING FACILITY SIZE DETERMINATION
5 APPLICATION (EXHIBIT NO. 203, PGS. 2-3) IS APPROPRIATE?
6 I
7 I
8 I
9
235 Martin, R (Di) 2a
Intermountain Wind LLC
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13
14
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16
17
18
19
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1 A Yes. I do not think the information
2 requested would be unduly burdensome. Some of the
3 information requested, however, may be considered as
4 proprietary by a developer and there should be an ability
5 to submit it on a confidential basis.
6 Q DO YOU HAVE ANY OTHER SUGGESTIONS FOR
7 IMPROVEMENTS TO EXHIBIT NO. 203?
8 A Exhibit 203 bases size determination
9 on nameplate capacity. To be consistent with current
10 Idaho practice, the Commission could consider changing
11 this to expected monthly generation.
12 Q DOES THAT COMPLETE YOUR TESTIMONY?
A Yes it does.
236 Martin, R (Di) 3
Intermountain Wind LLC
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1
2 open hearing.)
(The following proceedings were had in
COMMISSIONER SMITH: Mr. Otto, do you have
MR. OTTO: No, I don't have.
COMMISSIONER SMITH: Ms. Davis?
MS. DAVIS: No, nothing from me. Thank
COMMISSIONER SMITH: Ms. Sasser.
MS. SASSER: One, possibly two questions,
COMMISSIONER SMITH: Go ahead.
MS. SASSER: Thank you.
CROSS-EXAMINATION
Thank you for being here. On page 1, line
19 7 of your direct testimony, if you need to get there you
3
4 any questions?
5
6
7
8 you.
9
10
11 Madam Chair.
12
13
14
15
16
17 BY MS. SASSER:
18 Q
20 can, if not, it's just a statement, you state that the
21 Black Canyon Proj ect is a true PURPA proj ect. Could you
22 explain your defiITi tion of what a true PURPA proj ect
23 is?
24.25
A A proj ect that has less than -- that
produces less than 10 average megawatts within anyone
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237 MARTIN (X)
Intermountain Wind
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.
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1 month and that's probably about it. I mean, I'm not
2 looking at two proj ects, so it's only based on one
3 proj ect and that's the only current criteria for that.
4 Q So your definition of true proj ect is a
5 reflection of what the Commission's prior standard before
6 reducing to 100 kilowatts was; is that correct?
7 A Sure, absolutely.
8 Q You spoke to Mr. Miller in terms of the
9 costs to your proj ect. Do you believe that a QF
10 developer should receive compensation in excess of the
11 utility's avoided cost for purchasing that energy?
12 A I think that a small proj ect such as my
13 own is faced with transmission upgrades that can be
14 spread across a larger proj ect and we can't do that in
15 our circumstance. That inherently makes us try and do it
16 as large as we can, but still following the rules because
17 I have to build a substation, assuming I'm able to build
18 the proj ect, we would build a substation and a
19 transmission line, give those to PacifiCorp, and then
20 also we have to upgrade three system substations and give
21 those upgrades to PacifiCorp, so we don't get any __
22 there's no ability to make that relative to our usage, so
23 that. . .
24 Q Is that a yes, you do believe that the
25 utility andlor utility's customers should pay an amount
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238 MARTIN (X)
Intermountain Wind
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17
1 in excess of the utility's avoided cost if it were to
2 generate the energy on its own?
3 A If the avoided cost is based on the next
4 incremental generation, then I think that it's accurate.
5 If the avoided cost is based on the IRP methodology,
6 which my understanding is that is a backwards looking
7 structure
8 Q I'm not discussing the IRP methodology at
9 all. I'm not referencing that.
10 A I do believe a small proj ect should be
11 able to get higher prices because of the hurdles that we
12 face.
13 MS. SASSER: That's all I had. Thank
14 you.
15 COMMISSIONER SMITH: Mr. Richardson, do
16 you have questions?
18 Madam Chair.
MR. RI CHARDSON : I have none,
19
20
21
COMMISSIONER SMITH: Thank you.
MR. MILLER: No redirect.
22 yet, Mr. Miller.
COMMISSIONER SMITH: Well, we're not there
23
24
25
MR. MILLER: Well, we should be.
COMMISSIONER SMITH: That was a nice try.
We haven't heard from Mr. Kaufmann. Maybe he has
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239 MARTIN (X)
Intermountain Wind
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1 questions.
2 MR. KAUFMANN: Thank you, Madam Chair.
3
4 CROSS-EXAMINATION
5
6 BY MR. KAUFMANN:
7 Q I have a few questions on your direct
8 testimony, but before I get there, I want to touch on one
9 thing you said when you started answering questions
10 today. You said it took two years to ask the question
11 correctly, then two years to get financed. Do you mean
12 to suggest that it took you two years to negotiate a PPA
13 wi th PacifiCorp?
14 A No, that's not right. What I meant -- the
15 process of getting to a document from PacifiCorp that is
16 executable took a very long time and the steps between
17 well, it took -- I would ask a question about the next
18 step to progress towards that executable document and
19 getting the next version to review took a very long time.
20 You know, that varied depending on how long I waited
21 before I called up Bruce and harassed him.
22
23
Q So why did you say two years?
A From the time that I first started -- so
24 the first two-year increment is defining the amount of
25 time it took for me to first ask for a PPA or say hey,
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240 MARTIN (X)
Intermountain Wind
.
10
1 I'd like to sell my power to you guys, PacifiCorp, to the
2 time when PacifiCorp provided me with an executable
3 draft. The next two-year process or segment that I
4 identified was where I was taking that document and going
5 to banks to try and get debt financing and other
6 financing providers to try and, well, build the
7 project.
8 Q Did you complain to PacifiCorp about the
9 two-year process that it took you to get the PPA?
A To be honest, since it was my first time
11 ever doing this sort of thing, I just assumed that's the
12 way it goes. You know, in this context I've heard that.13 method is supposed to be very simple which compelled me
14 to say, you know, even that is not so simple.
15 Q But in that two-year period there were
16 substantial periods where, to use a colloquialism, the
17 ball was in your court and PacifiCorp didn't hear back
18 from you?
19 A I think it's fair to say that PacifiCorp
20 would ask me for additional information that I may not
21 have had available at that time, so it took me two years
22 to get to an executable -- I don't want to say that Bruce
23 is at fault for that. You know, the process took two
24 years and I was part of the process..25 Q Can you please look at page 1, line 22 of
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241 MARTIN (X)
Intermountain Wind
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1 your direct testimony? Could you please read the first
2 sentence there?
3 A Line 22?
4 Q Yes.
5 A I'm sorry, what page?
6 Q Your direct testimony, page 1.
7 A II Intermountain has been working with
8 PacifiCorp regard a PPA for several... ".
9 Q Go ahead and finish the sentence, please.
10 A ". . . years but has not moved forward with
11 execution until financing was secured. II
12 Q So if Rocky Mountain Power did not require
13 a security deposit, would Intermountain execute a PPA
14 before it secured proj ect financing?
15 A I can't necessarily say. What I can say
16 is that the terms that I had provided to me that I was
17 trying to get financed were too onerous for somebody to
18 say yes, I will finance that and we don't have the
19 capabili ty to -- I mean, we can't make -- since the
20 security is something that gets drawn down and we have to
21 replenish it, I mean, it's an unlimited liability that
22 didn't make sense for us to step in and do that on our
23 own.
24
25
Q What about the second sentence starting on
line 23 on page 1, could you read that to the first
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242 MARTIN (X)
Intermountain Wind
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1 comma, please?
2 A "This was due to the significant security
3 deposits that PacifiCorp required in order to move
4 forward. . . II .
5 Q It sounds like you're suggesting that the
6 securi ty deposit was the reason you didn i t move forward
7 with executing a PPA. Is that what you're suggesting?
8 A I think I could add to that, that the
9 curtailment was the other big issue.
10 Q So would you have signed a PPA before you
11 had your project financing finalized if there was no
12 securi ty deposit?
13 A I don't think so and the reason for that
14 is since this is the first time we have gone through this
15 process, I have tried to take my cues from people who
16 know what they're doing and if a financing provider
17 looked at me and said this is a non-financeable contract,
18 I didn't want to sign it.
19 Q Have you studied the potential of your
20 family land, family-owned land, in Bonneville County to
21 site more than 10 average megawatts of wind?
22
23
A No.
Q How many acres does your family own in
24 Bonneville?
25 A All told, 640. Only about 300 of it is
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243 MARTIN (X)
Intermountain Wind
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1 part of this proj ect.
2 Q So the proj ect footprint is,say, less
3 than half of your
4 A Yes.
5 Q Okay.
6 A The rest is down at the bottom of a ridge
7 which will never support wind development.
8 Q You're anticipating my questions. So you
9 haven't leased wind rights or lease options to anybody
10 else?
11 A Not associated with that area.
12 Q Okay. Has Intermountain considered
13 sharing the interconnection facilities of the Black
14 Canyon Proj ect with other proj ects?
15 A I thought that that would be a great
16 solution and have talked to other wind developers in the
17 area and was rebuffed.
18 Q Are you sizing the interconnection
19 facili ties or making any provisions in the design for
20 future expansion?
21
22
A No, not to my knowledge.
Q Why is it that you feel it's important
23 that interconnection facilities, shared interconnection
24 facilities, not be a criteria for evaluating.25 disaggregated projects?
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244 MARTIN (X)
Intermountain Wind
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1 A I think that that would be a mistake
2 because you are -- say I'm developing a PURPA project and
3 my neighbor is developing a PURPA proj ect and we don't
4 have any ties whatsoever, if there are benefits to the
5 Idaho ratepayer -- well, I guess in PURPA maybe that
6 doesn't flow.I guess what I was getting at is it
7 doesn't make sense to duplicate two substations next to
8 each other if they can use the same system.
9 Q What is the nameplate capacity of your 10
10 average megawatt proj ect?
11 A We have 11 sites and we would -- depending
12 on the turbine we select, it might be somewhere a little
13 below 19 to as much as 22 megawatts nameplate.
14 Q What is your maximum deli very capacity in
15 your executed generator interconnection agreement?
A Oh, the nameplate that is in the
17 agreement, I think, is 19.65 megawatts.
18 Q How did you arrive at 10 average
19 megawatts?
20 A We used standard criteria wi thin the wind
21 industry for spacing and then looked at how many of those
22 si tes we really could find on the proj ect. That criteria
23 is really reinforced by the financing community. They
24 don't want you to squeeze too many in there; otherwise,
25 the longevity of the turbine is in question, so we just
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245 MARTIN (X)
Intermountain Wind
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10
1 took our guidance from industry practice.
2 Q Are you familiar with the term P50?
3 A Yes.
4 Q Can you explain what it means to you?
5 A P50 is a statistical term that describes
6 the most likely production in anyone year of a
7 proj ect.
8 Q Did you use P50 as the measure for your 10
9 average megawatt calculation?
A We did and in doing so, you know, P 50 gets
11 us well below 10 average megawatts. Our net capacity
12 factor is mid 30s, low 30s, depending on the turbine, and.13
14
just to make sure we weren't violating anything, we used
P50, and I think when you look at the P90 or something
15 like that, one of the higher scenarios, we still don't
16 even in our highest wind month that we project, we still
17 are below that threshold, and I think as some have
18 suggested that a PURPA project might be 30 megawatts, I
19 think that's unrealistic because no one would finance
20 that because there's no way you can guarantee that in a
21 month that blows higher than P50 and if it happens to be
22 one of your windy months, you're definitely going to
23 violate that, so even though a developer may ask for a 30
24 megawatt project, realistically, that's never going to.25 happen.
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246 MARTIN (X)
Intermountain Wind
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21
22
1 Q So to make sure I understand, does P50 of
2 10 average megawatts mean that the proj ect with 50
3 percent probability will generate at 10 average megawatts
4 or greater in a year?
5 A I don't know if you're characterizing it
6 correctly. That gets into the -- you are in saying 50
7 percent of the time, I don't think that's an accurate
8 characterization of what P50 is describing.
9 Q Do you --
10 A I think P50 is the most likely scenario,
11 not necessarily that 50 percent of the time it's going to
12 be at that level. I could be wrong. That's my
13 understanding.
14 Q Okay, fair enough. Does Intermountain or
15 members of your family intend to own and use depreciation
16 benefi ts, production tax credits or any other tax
17 benefi ts from the proj ect?
18 A At this time I don't know how that's going
to play out.You know,we'll
Q You haven't sold them?
A No.I have to have a PPA first.
Q Has Intermountain sold or does it
19
23 anticipate selling any future interest or option in the
24 Black Canyon Proj ect?
25 A Well, so a future interest -- well, I
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247 MARTIN (X)
Intermountain Wind
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1 don't know that you can call it a sale, but the way wind
2 proj ects are financed, it's a complicated structure where
3 a party monetizes those attributes that you're talking
4 about and in doing so, the IRS requires that they hold a
5 form of an equity stake. You know, that's about the
6 extent of how I think I can comment on it, so is ita
7 sale, is it an investment, I don't know but we intend to
8 hold on to our interest through -- we plan to own,
9 operate and maintain this project through its life
10 span.
11 Q In addition to Mr. Miller, do you have
12 other legal counsel representing you and representing the
13 Black Canyon Proj ect?
14 A My dad who is my partner in Intermountain
15 Wind and is also one of the landowners of Black Canyon,
16 he's an attorney and his law firm, you know, he
17 necessarily consults with me on this issue.
18 Q Anybody else?
19 A Not on the Black Canyon, no.
20 Q Do you have engineering consultants to the
21 Black Canyon Proj ect or the Intermountain Wind?
22 A I have hired folks in the past to do
23 analysis for me or design or that sort of thing. I do it
24 as infrequently as possible, but since I am not an
25 engineer, you know, I have to outsource all that and my
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248 MARTIN (X)
Intermountain Wind
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18
19
1 company is, I am the sole employee of my company, so
2 anything technical associated with the proj ect has to be
3 out sourced .
4 Q Can you name your engineering consultants
5 in the last 24 months on the proj ect?
6 A I haven't hired anybody in the last --
7 well, you know, I have relied on a construction company.
8 I told you I was doing it on a shoestring. A
9 construction company, you can convince a construction
10 company to do some design work for you. They have them
11 on board, on their staff and as part of soliciting work,
12 you can get them to do some stuff for you, so that's
13 really what I have done.
14 Q Do you have, retain financial consultants
15 for the proj ect?
16 A No.
17 Q Or for Intermountain Wind?
A No.
Q This is my final question, if the
20 Commission changed the eligibility cap from 10 average
21 megawatts to 10 megawatts nameplate, would the Black
22 Canyon Proj ect still be viable economically?
23 A I don't think so and it's because we have
24 to build $2.6 million worth of upgrades we have to give
25 PacifiCorp. Everybody I talked to about financing this
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249 MARTIN (X)
Intermountain Wind
.
.
1 proj ect looks at me and says this is awful margins. You
2 can't make -- nobody is going to finance this. It's too
3 skinny. There's no profit in it, so if I have to go from
4 spreading $2.6 million across 20 megawatts to spreading
5 it over 10 megawatts, as I sit, I'm pretty confident that
6 would destroy my proj ect.
7 MR. KAUFMANN: Madam Chair, I have no
8 further questions.
9 COMMISSIONER SMITH: Thank you, Mr.
10 Kaufmann.
11 Mr. Walker, do you have questions?
12
13 CROSS-EXAMINATION
14
15 BY MR. WALKER:
16 Q Mr. Martin, on page 1 of your direct, line
17 2, you start out by saying you're a member of
18 Intermountain Wind LLC. What does that mean?
19 A So member is a legal characterization of
20 an LLC. I'm one of two of those parties.
21
22
Q What does Intermountain Wind LLC do?
A It is a company that I created in order to
23 develop the Black Canyon Project since I personally did
24 not have any interest, equity interest, in the project..25 Q Down further, line 13, you talk about
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250 MARTIN (X)
Intermountain Wind
.
.
20
1 Black Canyon LLC, what's that?
2 A So we created Black Canyon LLC, my dad and
3 I created Black Canyon LLC, to be the tenant on the wind
4 lease.
5 Q Why do you have two?
6 A Well, so Black Canyon LLC has different
7 owners than Intermountain Wind. Black Canyon LLC is
8 owned by the folks that have financed it, which is still
9 my family, but the proportions are different.
10 Intermountain Wind is my company that gets paid a
11 development fee to develop the proj ect.
12 Q So you got these things going to make
13 money?
14 A We got these things going so that we don't
15 destroy our family relations and make sure that
16 everything is contractually spelled out --
17 Q What's the purpose of the whole thing?
18 A -- before any money comes in.
19 Q Are you trying to make money?
COMMISSIONER SMITH: Mr. Walker, would you
21 please allow the witness to answer before you start your
22 next question?
23
24.25
MR. WALKER: I'm sorry.
COMMISSIONER SMITH: Let i s go to your next
question.
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251 MARTIN (X)
Intermountain Wind
.
.
.
1 Q BY MR. WALKER: Okay.Is the purpose of
2 these to make money for the members?
3 A You know, the real purpose of this proj ect
4 is to find something to do with this 650 acres that
5 doesn't result in us selling it to someone else. We used
6 to have 5,000 acres in the area, but due to estate taxes
7 when my grandparents died, we had to sell almost of it.
8 We could only keep this small little corner, so the
9 intent of doing a wind proj ect was really to find a way
10 so we could keep this ground in our family.
11 Q So would you pursue the proj ect if you're
12 not going to make any money?
13 A I can't build a proj ect if there's no
14 money in it to pay the debt.
15 Q Now, you talked a lot about financing.
16 How much financing do you need to build this proj ect?
17 A Well, I know that there i s been a lot of
18 discussion about what is proprietary information and what
19 isn't and I have -- in order to get prices from turbine
20 manufacturers, I have to agree to quite a bit of
21 confidentiality, so I can't be very specific, but what I
22 can tell you is that the suggestions of prices that have
23 been made, which is roughly about $2 million a megawatt
24 as an installed cost, is a gross exaggeration. That may
25 have been the case at the peak of the market when gas was
CSB REPORTING
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252 MARTIN (X)
Intermountain Wind
.
.
.
1 at $8.00 and, you know, all the rest, but today the cost
2 of an installed megawatt is maybe 60 percent of that.
3 Q So you can't ball park how many millions
4 of dollars it's going to cost you to build your power
5 plant without violating some kind of
6 A Sure, I can do that. Somewhere in between
7 25 and $35 million.
8 Q Okay, and you made some statements that
9 this was supposed to be simple. What is supposed to be
10 simple about it?
11 A Well, I guess to clarify, my understanding
12 was that the intent of a published avoided cost was to
13 simplify access or smooth out the road for access to a
14 PPA for a small developer. If that's not the intent of
15 PURPA, then I was mistaken.
16 Q Do you think it should be simple like
17 going to buy a house simple?
18 A No, clearly not and, you know, even to
19 characterize, somebody has suggested that you're not a
20 true small developer if you're doing a proj ect of this
21 size, but 100 kW is a little more accurate. You know,
22 100 kW,that's my neighbor putting a turbine in his back
yard and yeah,that is simple,but developing a wind
proj ect is not and if we had known how simple it is,we
probably would have taken a little more time to think
23
24
25
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253 MARTIN (X)
Intermountain Wind
.
.
.
19
1 about it or how difficult it is, but we had no pretenses
2 that we were getting into something like going and buying
3 a house.
4 Q Do you know how much the proj ected power
5 sales payments from PacifiCorp to your project over the
6 next 20 years would be even in a ball park?
7 A No,I don't.
Q Could it be more than 50 million,say?
A Are we going to sell more --well
Q How much do you think you'll be paid?
A How much will we be paid?I don't know.
8
9
10
11
12 I don't know off the top of my head. You're asking for
13 an aggregated number. What I can say, and you can do the
14 calculations yourself, is that we'll probably end up
15 between 50 and 60,000 megawatt-hours a year and then
16 times the published avoided cost.
17 Q So I'm pretty poor at math myself, but
18 it's a pretty big number; right?
A Well, and the vast majority of that, the
20 vast maj ori ty, goes to pay the folks that provide the
21 debt
22
23
Q Right.
A -- so it's not a matter of hey, developers
24 are making a killing here because that's not the case.
25 Those dollars are required in order to finance any
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254 MARTIN (X)
Intermountain Wind
.
.
1 project. That's the nature of project finance and in our
2 case, our rates, the margin for an unlevered internal
3 rate of return for a wind proj ect is vastly lower than
4 the unlevered rate of return for any other proj ect that a
5 financier looks at, whether it's a toll road or a natural
6 gas facility or anything else like that. We are so low
7 that it's hard for us to get anybody to pay attention to
8 us unless they've already been tasked with it.
9 Q Do you know where that money comes from
10 for those payments?
11 A Which payments are you referring to?
12 Q The payments that your proj ect would
13 potentially receive from the utility.
14 A Sure, yeah, my dad pays that when he pays
15 his electric bill.
16 Q Who else?
17 A Presumably other ratepayers.
18 Q Okay. You also talked about transmission
19 saying that you can't do it, the QF pays for it, who do
20 you think pays for that if the QF doesn't pay for it?
21 MR. MILLER: Madam Chairman, other than
22 just generalized harassment, is there some point to these
23 questions?
24.25
COMMISSIONER SMITH: Mr. Walker.
MR. WALKER: Certainly. I think they've
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255 MARTIN (X)
Intermountain Wind
.
.
1 opened the door to hold themselves out as a small QF
2 developer that's on the margin and I think we need to see
3 the other side about the marginal people that have to pay
4 the bill to hook them up.
5 COMMISSIONER SMITH: I think the substance
6 of the question is allowable. I would hope for a more
7 cordial tone.
8 THE WITNESS: I would think that every
9 time somebody plugs in their iPod they have to pay for
10 the electricity.
11 Q BY MR. WALKER: So how do you plan to
12 operate your power plant if you get it built?
13 A We would contract with a third party for
14 the O&M services. We would just, we would oversee that,
15 oversee the O&M provided.
16 Q What kind of anticipated energy deliveries
17 would you expect to make to the utility from your site?
18 A 50 to 60,000 megawatt-hours a year.
19 Q Do you have any idea when you would make
20 those deliveries?
21 A You mean what is the shape of our wind or
22 our 12 by 24?
23 Q Sure, do you plan to shape your energy
24 deli veries to the utility, say, by maybe when they need.25 to serve load on their system?
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256 MARTIN (X)
Intermountain Wind
.
.
20
21
22
23
24.25
1 A We plan to provide electricity to the grid
2 whenever PacifiCorp can accept it and when they cannot
3 accept it, we will curtail our proj ect.
4 Q So assuming there's transmission that it
5 can get into the grid, you would provide energy whenever
6 the wind is blowing and turning the turbines; correct?
7 A That's correct. That's the motive force
8 for wind.
9 Q And you'd have no regard for whether that
10 energy was needed to serve load or not?
11 A Well, unfortunately, you guys have already
12 kind of taken care of that with the integration charge.
13 The integration charge compensates the utilities for that
14 service that you provide to wind developers.
15 MR. WALKER: I've got no other
16 questions.
17 COMMISSIONER SMITH: Thank you,
18 Mr. Walker.
19 Mr. Andrea?
MR. ANDREA: Yes, thank you.
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257 MARTIN (X)
Intermountain Wind
.
.
1 CROSS-EXAMINATION
2
3 BY MR. ANDREA:
4 Q Good afternoon, Mr. Martin.
5 A Good afternoon.
6 Q If I understood correctly, you testified
7 earlier that a 10 average megawatt wind project is not a
8 big proj ect in your view; is that correct?
9 A Correct.
10 Q And your basis for that was because
11 utilities were not interested in that project presumably
12 through an RFP process?
13 A Yeah, I mean, you compare the size of it
14 to my salary or your salary and these numbers look really
15 big, but when you're trying to get the attention of a
16 utili ty executive who has to allocate his resources, he
17 looks at 10 megawatts and says that's not worth my
18 time.
19 Q So what utilities are you referring to
20 specifically there?
21 A I've had a lot of conversations with
22 PacifiCorp.
23
24.25
Q Okay.
A Not Bruce, but PacifiCorp.
Q So noted, but not Avista?
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258 MARTIN (X)
Intermountain Wind
.1 A You guys are on the other side of the
2 state from us. There's not really any reason for us to
3 talk to you guys.
4 Q So you wouldn't be aware of the fact that
5 in 2009 Avista did an RFP for projects as small as five
6 megawatts?
7 A I was not aware of that, no.
8 Q And you wouldn't be aware of the fact that
9 just recently we did an RFP for a wind proj ect with no
10 lower limit?
11 A I'm not aware of that either, no. I guess
12 that's probably a function of the lack of personnel that.13
14
I have to study every remote possibility of selling
something. The reality of the possibility of me
15 competing with a project -- see, I would have to pay
16 PacifiCorp wheeling charges; whereas, a proj ect that's
17 close to you would not have to pay any wheeling charges,
18 so automatically it doesn't make any sense for me to try
19 and compete with one of those proj ects, especially when I
20 know that my wind resource is the same as everybody else
21 that's going to be bidding in, so I don't have the
22 resources to really chase every possible RFP that comes
23 out around the country.
.24
25
Q So you would agree with me that your
statement that utili ties plural are not interested was an
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259 MARTIN (X)
Intermountain Wind
.
.
.
1 overstatement on your part?
2 A No, I don't agree with that.I think most
3 RFPs and clearly, I haven't read yours so I don't know,
4 but most RFPs that I do know or have read have the option
5 of the utility not to select any project, so most
6 developers that I talk to look at that as extremely
7 disingenuous in that the utility is really just going out
8 to fulfill their obligation, but in reality, they're
9 going to self-build anyway.
10 Q So let's move to you said that your
11 project is a 20 megawatt project and your costs are
12 somewhere between 25 and 35 million ball park. Pretty
13 big to me, but beyond that, let's assume a 30 percent
14 capaci ty factor, so a 30 megawatt proj ect. Have you done
15 any analysis of what the capital costs associated with a
16 30 megawatt wind project would be?
17 A No, I've only worked on my own.
18 Q So you would have no reason to dispute Mr.
19 Kalich' s testimony that such a proj ect 's capital costs
20 are 60 --
21 A I would think that I have a better
22 perspecti ve than Mr. Kalich since I'm talking to the
23 turbine manufacturers about their cost and the turbine
24 cost is 70 percent of the cost of any facility, so that
25 really drives it, so when I hear numbers like that that
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260 MARTIN (X)
Intermountain Wind
.
.
.
1 are thrown out, I know he's not talking to any turbine
2 manufacturers.
3 Q Well, that's very interesting, Mr. Martin,
4 because what I'm hearing you tell me is that you're small
5 and understaffed, but yet, you're telling me you have
6 more sophistication than a utility.
7 A No, I'm saying that Mr. Kalich was
8 overreaching as an individual. I'm sure the utility, if
9 you went to the right person wi thin the utility, you
10 know, the guy who evaluates wind turbines and said how
11 much does it cost, I'm sure that he would have the
12 answer, but clearly, two megawatts per or 2 million per
13 megawatt is not accurate.
14 Q Okay; so just in the interest of time,
15 maybe we could have a short answer to this question, you
16 have done no independent analysis to refute the $60
17 million capital costs associated with a 30 megawatt
18 proj ect?
19 A Well, okay, so I'LL restate that. I want
20 to take back my earlier statement and I'll say yes, I
21 have. I know what a wind turbine costs and I can make an
22 informed guess at what a 30 megawatt proj ect would cost
23 and I can do that right here on the back of an
24 envelope.
25 Q I'm not interested in your informed guess,
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261 MARTIN (X)
Intermountain Wind
.
.
.
1 Mr. Martin. Going to your proj ect, the 25 to 35 million,
2 you seem to obj ect to the idea of having a consultant
3 help you with an IRP methodology negotiation on the basis
4 that the cost would be burdensome. Did I understand that
5 correctly?
6 A Mr. Kalich' s estimate of the cost of such
7 a contract would be burdensome. I don't know what it
8 would cost. I've never gone to anybody and asked.
9 Q Okay; so $50,000, which is Mr. Kalich' s
10 estimate, would be burdensome in your view?
11 A That would be a significant portion of
12 what we've spent developing this proj ect to date.
13 Q Okay, I've done the math a little bit and
14 gi ven the range that you've told us is your capital costs
15 of 25 to 35 million, would it surprise you that that is
16 .2 to .14 percent of the --
17 A No, that wouldn't surprise me at all and
18 the difference is that dollars that you described, you
19 know, the cost of doing an analysis of a PPA is very
20 speculati ve dollars. That's the money that we are
21 putting toward. The other dollars is not speculative.
22 That money doesn't come in until the PPA is signed, the
23 interconnection agreement is done, the permits are in
24 place and the project has no risk, so the comparison I
25 would say is an apples to oranges comparison and doesn't
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262 MARTIN (X)
Intermountain Wind
.
.
1 really have any relevance.
2 Q I'm not sure I understand that answer, but
3 I'll move on. You said that financing your proj ect
4 involves a complicated structure. Do you recall saying
5 that?
6 A It could involve a complicated structure,
7 yeah.
8 Q Has it been your experience that it's been
9 a complicated process for financing?
10 A I haven't gotten that far because I don't
11 have a PPA yet.
12 Q How do you intend to work your way through
13 that complicated process that you suppose will be coming
14 if you were
15 A I'll hire an attorney.
16 Q Okay. Have you budgeted an amount to pay
17 for that attorney?
18 A Uh-huh.
19 Q And could you share with us what you
20 expect to spend for that process?
21 A Less than you estimate it will cost to do
22 the consultant for the financial negotiations.
23 Q You said that you've got 2.6 million in
24 capital that you would have to spread over 10 megawatts.25 instead of 20 megawatts if the cap was lowered. Why
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263 MARTIN (X)
Intermountain Wind
.
.
1 would you have to reduce your size of your project to 10
2 megawatts? Wouldn't you still be entitled to an avoided
3 cost rate?
4 A Well, so the cost of the substation and
5 the transmission line and the system upgrades are fixed
6 whether I'm putting two megawatts on the system in that
7 area or I'm putting 100 megawatts on the system in that
8 area, so just economies of scale, if I'm developing 10
9 megawatt nameplate, that's going to have a higher cost
10 per megawatt-hour produced than if I have a 20 megawatt
11 nameplate proj ect.
12 Q Sure, but you're going to still get an
13 avoided cost rate; right?
14 A Yeah, but it doesn't make up for that,
15 unless you increase the avoided cost rate by 25 percent
16 or something like that or 50 percent.
17 Q In other words, to make your proj ect
18 viable, you have to receive a rate that is greater than
19 the utility's avoided costs?
20 A Another way to do it would be to allow us
21 to have cost recovery of our transmission upgrades. I
22 would take that, I mean, in the context of other changes,
23 but that's something that Idaho doesn't have that from my
24 limi ted understanding most of the rest of the country.25 has.
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264 MARTIN (X)
Intermountain Wind
.
.
20
21
22
1 Q Just really quickly, you said there was no
2 other consultant when asked about consultants for Black
3 Canyon LLC. Beside Black Canyon LLC and Intermountain
4 Wind which we are aware of, do you have any other
5 enti ties that are pursuing wind proj ects?
6 A I do, yeah, so as I described in my
7 testimony, we have set up another partnership in Wyoming
8 to do essentially the same thing, where the vehicle I
9 creat'ed, Intermountain Wind, has been hired by a
10 landowner in Wyoming to develop his resources.
11 Q Any other proj ects you're pursuing?
12 A And there are some earlier stage l' s that
13 Intermountain Wind has leased itself, but I haven't
14 really done anything on those.
15 Q Are those the ones that are in Colorado or
16 the ones that are in Kansas?
17 A Those are the ones that I'm talking about,
18 yeah.
19 Q Okay, in Colorado?
A Both of those.
Q What about in Kansas, is that the same?
A Yeah, but those proj ects, you know, the
23 Black Canyon Project is the one where I'm learning this
24.25
business.I entered into this industry really just to
develop this single proj ect. Over the course of the last
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265 MARTIN (X)
Intermountain Wind
.
.
.
1 fi ve years, I've developed a certain expertise and I've
2 really dedicated myself to this industry. I mean, this
3 is what I do every day, all day and as a result, I've
4 developed a certain amount of expertise and, you know,
5 for me to finish the Black Canyon and suddenly go back to
6 anything else doesn't make as much sense as for me to
7 have a forward plan that would take advantage of the
8 expertise that I've developed, so really, that's the goal
9 wi th those other proj ects is that once I'm done with
10 Black Canyon, I might be able to continue in the wind
11 industry.
12 MR. ANDREA: Thank you. I don't have
13 anything further.
14 COMMISSIONER SMITH: Mr. Miller, do you
15 have any redirect?
16 MR. MILLER: No, I have no redirect.
17 COMMISSIONER SMITH: Excellent, excellent
18 choice.
19 Mr. Martin, we appreciate your appearance
20 here, your testimony in the case and your help and thank
21 you for being here.
22 (The witness left the stand.)
23 COMMISSIONER SMITH: We will now take a
24 break until 10 minutes past 3: 00.
25 MR. MILLER: May Mr. Martin be excused?
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266 MARTIN (X)
Intermountain Wind
.
.
.
1 COMMISSIONER SMITH: If there is no
2 objection, Mr. Martin is excused.
3 (Recess. )
4 COMMISSIONER SMITH: Thank you all for
5 being prompt back from the break. I think, Mr. Kaufmann,
6 we're ready to move to your witness.
7 MR. KAUFMANN: Thank you, Madam Chair and
8 Commissioners. If I may, as the other attorneys have
9 done, make an opening remark.
10 COMMISSIONER SMITH: You may.
11 MR. KAUFMANN: And Mr. Griswold is
12 PacifiCorp' s witness. My observation is that so far
13 today the Commission has excepted from striking generally
14 testimony that generally states the Company's position,
15 testimony of historical facts that provide context to
16 today' s discussion and testimony regarding whether
17 average megawatt as opposed to megawatt nameplate is a
18 workable criteria for a disaggregation rule, so with that
19 in mind --
20 COMMISSIONER KJELLANDER: I think I
21 misheard you. Did you say we removed that?
22 MR. KAUFMANN: No, I said the Commission
23 has allowed testimony on that issue.
24
25
COMMISSIONER KJELLANDER: Thank you.
MR. KAUFMANN: Okay, with those categories
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267 COLLOQUY
.
.
20
1 in my mind, Mr. Griswold and I have gone through his
2 testimony and when he's on the stand, I will go through
3 wi th him and withdraw the testimony that's been obj ected
4 to that is not wi thin one of those three categories.
5 Wi th that, Rocky Mountain Power calls
6 Bruce Griswold as its witness.
7
8 BRUCE W. GRI SWOLD,
9 produced as a witness at the instance of Rocky Mountain
10 Power, having been first duly sworn, was examined and
11 testified as follows:
12
13 DIRECT EXAMINATION
14
15 BY MR. KAUFMANN:
16 Q Good afternoon.
17 A Good afternoon.
18 Q Mr. Griswold, by whom are you employed and
19 in what capacity?
A PacifiCorp as the director of short-term
21 origination and QF contracts.
22 Q Thank you, and could you state your name
23 and spell your last name for the record, please?
24.25
A Bruce Griswold, G-r-i-s-w-o-I-d.
Q Did you file in this matter, GNR-E-11-01,
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268 GRISWOLD (Di)
Rocky Mountain Power
.
.
1 your direct testimony on March 25th, 2011?
2 A Yes.
3 Q And did you also file your rebuttal
4 testimony on April 22, 2011?
5 A Yes.
6 Q I'd like you to look at that testimony
7 with me now, please. NIPPC has moved to strike lines 16
8 through 21 on page 6. Rather than proceed with that
9 inquiry, are you willing to withdraw that testimony
10 now?
11 A Yes.
12 Q And would you also agree on page 9 of your
13 direct testimony to withdraw the obj ected-to provisions
14 on line 3 to 6?
15 A Yes.
16 Q And also on page 9, are you agreeable to
17 wi thdrawing your testimony beginning with "Rocky Mountain
18 Power" on line 12 through line 21?
19
20
A Yes, I am.
Q On page 11 would you agree to withdraw
21 your testimony beginning on line 10 and continuing to
22 line 3 on page 12?
23
24 20.
COMMISSIONER SMITH: I think that's line
.25 MR. KAUFMANN: I'm sorry, I said line 3 on
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269 GRISWOLD (Di)
Rocky Mountain Power
.
.
1 page 12.
2 COMMISSIONER SMITH: Okay, gotcha. All
3 right.
4 THE WITNESS: Yes.
5 Q BY MR. KAUFMANN: Are you willing to
6 wi thdraw your testimony on page 12, beginning on line 18
7 and continuing to line 23?
8 A Yes.
9 Q Wi th those stipulations, if I were to ask
10 you the same questions in your remaining direct and
11 rebuttal testimony today, would your answers be the same
12 as in that direct and rebuttal testimony filed March 25th
13 and April 22 , respectively?
14 A Yes, it would.
15 MR. KAUFMANN: Madam Chair, I now move to
16 spread the testimony of Mr. Bruce Griswold into evidence,
17 including attached Exhibits 201, 202, 203, 204, 205, and
18 206.
19 COMMISSIONER SMITH: Is there any
20 objection?
21
22
23
MR. RICHARDSON: There is, Madam Chair.
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: Thank you, Madam Chair.
24 I appreciate PacifiCorp' s willingness to move forward on.25 this and withdraw some portions of the obj ected-to
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270 GRISWOLD (Di)
Rocky Mountain Power
.
.
20
1 testimony, but with your indulgence, I think there's some
2 parts that still need to be withdrawn or stricken. Page
3 10, lines 9 through 20, it's our position that that's an
4 improper reference to the IRP methodology in terms of
5 setting avoided cost rates.
6 COMMISSIONER SMITH: Do you have a
7 response, Mr. Kaufmann?
8 MR. KAUFMANN: Yes, Madam Chair. This
9 testimony that Mr. Richardson obj ects to concerns whether
10 QF proj ects have inquired about the IRP. I believe this
11 testimony is proper under the historical facts exception
12 that the Commission has allowed other testimony in under.
13 Mr. Griswold is testifying as to the existence of a
14 methodology and its availability which the Commission
15 might not otherwise be aware of. I think this is
16 relevant as it goes forward in considering how to fashion
17 disaggregation.
18 COMMISSIONER SMITH: And Mr. Richardson, I
19 tend to agree with Mr. Kaufmann unless you
MR. RICHARDSON: Thank you, Madam Chair,
21 I'LL withdraw the obj ection to that portion of his
22 testimony.
23
24.25
COMMISSIONER SMITH: Thank you.
MR. RICHARDSON: On page 12, lines 4
through 17, this is a wind integration issue that has
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271 GRI SWOLD ( Di )
Rocky Mountain Power
.
.
.
18
1 been addressed by the Commission in a different docket.
2 Wind integration is not an issue in this docket or the
3 cost of wind integration, and that's the basis for which
4 I would obj ect to this testimony.
5 COMMISSIONER SMITH: Mr. Kaufmann, I tend
6 to agree with Mr. Richardson on this, unless you have
7 anything to add.
8 MR. KAUFMANN: No, Your Honor, nothing to
9 add.
10 COMMISSIONER SMITH: All right, then lines
11 4 through 17 on page 12 will be stricken.
12 MR. RICHARDSON: I think that's all I
13 have, Madam Chair.
14 COMMISSIONER SMITH: So page 14, lines 3
15 through 13, you're okay with that?
16 MR. RICHARDSON: Given the Commission's
17 recent rulings, yes.
19 wi th these withdrawn or stricken material as has been
COMMISSIONER SMITH: Okay. All right,
20 determined at this time, we will spread the prefiled
21 direct and rebuttal testimony of Mr. Griswold upon the
22 record as if read and identify Exhibits 201 through 206.
23 (The following prefiled direct and
24 rebuttal testimony of Mr. Bruce Griswold is spread upon
25 the record.)
CSB REPORTING
[phone]
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1 Q Please state your name, business
2 address and position with PacifiCorp dba Rocky Mountain
3 Power (the Company).
4 A My name is Bruce W. Griswold. My
5 business address is 825 NE Mul tnomah, Suite 600,
6 Portland, Oregon. I am the Director, Short-term
7 Origination and QF Contracts at PacifiCorp Energy, which
8 is responsible for the Company's electric generation and
9 energy trading functions.
10 Qualifications
11 Q Please briefly describe your
12 education and business experience.
13 A I have a B. S. and M. S. degree in
14 Agricul tural Engineering from Montana State and Oregon
15 State, respectively. I have been employed with PacifiCorp
16 over 25 years in various positions of responsibility in
17 retail energy services, engineering, marketing and
18 wholesale energy services. I have also worked in private
19 industry and with an environmental firm as a proj ect
20 engineer. I currently work in Commercial and Trading at
21 pacifiCorp Energy. My responsibilities include
22 negotiation and management of wholesale power supply and
23 resource acquisition agreements as well as direct
2 4 responsibility for all Company Qualifying Facility ("QF")
25 power purchase agreements. I have represented the
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1 Company in multiple PURPA related proceedings across our
2 six-state jurisdictions, including providing testimony as
3 well as participating as an expert witness.
4 Purpose and Sumary of Testimony
5 Q What is the purpose of your
6 testimony?
7 A My testimony will:
8 . explain why the surest method of
9 controlling disaggregation of wind QF
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1 proj ects is for the Idaho Public Utilities Commission
2 (the "Commission") to continue the present stay on size
3 eligibility threshold at 100 kW for wind and solar QFs
4 seeking Idaho published avoided cost prices;
5 .explain the rationale behind keeping the
6 100 kW eligibility threshold in place, and why other
7 methods to limit disaggregation are not as effective as
8 the 100 kW cap;
9 .explain the rationale for basing a size
10 limit on nameplate capacity rather than on monthly
11 average generation;
12 .provide examples of disaggregation limits
13 used in other states;
14 . provide documentation of the current
15 volume of wind QF proj ects proposed to Rocky Mountain
16 Power (RMP) and the potential impact on the Company's
17 customers; and
18 .submi t a set of rules that the Company
19 believes could be employed should the Commission seek to
20 reinstate a higher eligibility threshold but restrict
21 disaggregation.
22 Q Please provide the background for
23 your testimony.
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A In Order No. 32176 issued in Case No.
GNR-E-10-04 on February 7, 2011, the Commission
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1 temporarily set the size eligibility threshold for
2 published avoided cost rates for wind and solar
3 qualifying facilities at 100 kW. The Commission also
4 established Case No. GNR-E-11-01 (the second phase of
5 Case No. GNR-E-10-04) to set up an investigation and
6 solicitation of information whereby the end result would
7 allow wind and solar QFs that met the 10 aMW threshold
8 limit and specific proj ect criteria to obtain a published
9 avoided cost rate without allowing
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1 large wind or solar proj ects to break up into multiple
2 smaller QF proj ects and obtain a rate that is not an
3 accurate reflection of a utility's avoided cost for such
4 large proj ects. Specifically, the Commission sought
5 "information and investigation of a published avoided
6 cost rate eligibility cap structure that.(l) allows
7 small wind and solar QFs to avail themselves of published
8 rates for projects producing 10 aMW or less; and (2)
9 prevents large QFs from disaggregating in order to obtain
10 a published avoided cost rate that exceeds a utility's
11 avoided cost. "1
12 Q Please summarize your testimony.
A Rocky Mountain Power has experienced
a sharp increase in the number and magnitude of QF
15 proj ects seeking published rate contracts with the
16 Company in Idaho recently. Most of the recent acti vi ty
17 has come from large wind proj ects that are disaggregating
18 into two or more smaller projects in order to satisfy the
19 10 aMW size eligibility threshold, although
20 disaggregation may occur in other resource types of QF
21 proj ects, as well. The current Idaho published rates are
22 significantly higher than pricing from alternative offers
23 which Rocky Mountain Power receives; whether through its
24 competitive request for proposal ("RFP") process or
25 through the Commission-ordered Integrated Resource Plan
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1 ("IRP") methodology that the Company utilizes to price QF
2 proj ects over 10 aMW in Idaho. The 10 aMW eligibility
3 threshold allows a wind QF proj ect with a nameplate
4 capacity range of up to 30 MW to qualify for published
5 rates.The resulting costs to the Company and customers
6 to integrate the intermittent
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1 resource are significant and need to be revisited. Left
2 unchanged, the Commission's current rules and
3 methodologies implementing PURPA are likely to have a
4 long-term, significant impact on the Company's power
5 supply costs and its customers' rates. Rocky Mountain
6 Power, Idaho Power Company, and Avista have asked the
7 Commission to reassess the rules, in GNR-E-10-04. While
8 there are proposed criteria to limit the disaggregation
9 of large wind and solar proj ects, it is clear from the
10 Company's experience in other states such an approach is
11 less reliable compared to implementing a permanent lower
12 size threshold for these types of resources. Therefore
13 the Commission should make permanent the size eligibility
14 threshold of wind and solar QFs seeking Idaho published
15 avoided cost prices at 100 kW as the surest method of
16 controlling disaggregation. Should the Commission seek
17 to reinstate a higher eligibility threshold but restrict
18 disaggregation, the Commission should retain discretion
19 to deny eligibility for published rates in the event a
20 large QF finds a way to meet the eligibility criteria but
21 is found by the Commission to be a large QF on other
22 grounds.
23 Disaggregation
24 Q What is disaggregation?
25 A Disaggregation is defined by
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1 BusinessDictionary. com as "Breaking up of a total
2 (aggregate), integrated whole, or a conglomerate, into
3 smaller elements, parts, or units, usually for easier
4 handling or management. II
5 Q Why is disaggregation an issue in
6 Idaho?
7 A In 2009, the Company began receiving
8 requests from developers for multiple published avoided
9 cost PURPA contracts. Rocky Mountain Power realized that
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1 this same phenomenon also was occurring with the other
2 Idaho investor-owned utilities. Each utility was
3 receiving requests for multiple published rate power
4 purchase agreements where these proposed PURPA proj ects
5 were owned and controlled by the same entity, share
6 interconnection facilities, engineering procurement
7 contracts, wind leases, and other common features. Under
8 the dictionary definition for disaggregation above, you
9 would believe that a developer seeking a PURPA contract,
10 as long as that proj ect met Federal Energy Regulatory
11 Commission's (FERC) 80 MW rule2 for a small power
12 producer, would seek a single contract or seek to limit
13 the number of contracts in order to minimize the legal
14 and administrative costs of securing a contract (s). A
15 developer who is disaggregating a large project and
16 seeking multiple contracts will incur incremental costs
17 as well as time for additional legal review, meeting
18 additional permit and regulatory requirements, and
19 proj ect administration. Having multiple power contracts
20 as opposed to a single contract for the larger single
21 aggregate proj ect increases the cost of proj ect
22 development, increases the handling, and increases the
23 overall management of the proj ects for the QF developer.
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Q Is this an issue that is limited to
wind Qualifying Facilities in Idaho?
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1 A No. In the current Idaho Legislature
2 there is a proposed bill, House Bill No. 2653, under
3 consideration which proposes to implement a moratorium on
4 all wind farms and wind turbines in excess of 100 feet in
5 height and 100 kilowatts. This moratorium is proposed to
6 be implemented immediately and enforced until July 1,
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1 2013. The moratorium is proposed to allow time for a
2 report and recommendations to be completed by various
3 Idaho stakeholders that will address some fundamental
4 questions on the need for more intermittent wind power,
5 the impact to wildlife, the effect on the utilities, and
6 the costs being passed on to ratepayers for the addition
7 of new wind farms. These recommendations would be
8 considered as possible amendments to the 2007 Idaho
9 Energy Plan. If, in fact, the Idaho Legislature is
10 considered such a moratorium statewide then this
11 proceeding and the decisions facing the Commission
12 regarding the eligibility cap threshold and
13 disaggregation have become even more important and
14 timely.
15 Q Why would a QF developer disaggregate
16 a large proj ect into multiple smaller proj ects increasing
17 the cost of the proj ect?
18 A It is clear to the Company that the
19 dri ver for disaggregation is the Idaho published avoided
20 cost rate. Developers are willing and able to
21 disaggregate large projects into separate smaller
22 proj ects to meet the 10 aMW size threshold in order to
23 qualify for published avoided cost prices ordered by the
24 Commission.
25 (Material contained on this portion of
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2 Q Can you cite specific examples of
3 proj ect disaggregation?
4 Yes. On August 18, 2010, Rocky Mountain Power
5 executed identical power
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1 purchase agreements ("PPAs") with Power County Wind Park
2 North, LLC, and Power County Wind Park South, LLC. These
3 two contracts were approved by the Commission on October
4 6, 2010 with a target on-line date of December 31, 2011.
5 Both proj ects are owned and controlled by the same
6 enti ty, share common interconnection facilities,
7 engineering procurement contracts, wind leases, and other
8 common features. Each has a nameplate capacity of 21.78
9 MW and a peak monthly average generation of less than 10
10 aMW. Prior to applying for the two QF contracts with
11 published avoided cost prices, the developer bid a single
12 100MW wind proj ect into a PacifiCorp Request For Proposal
13 (RFP). When the project was not selected through the RFP
14 process because it was not competi ti ve to the
15 al ternatives, the developer held discussions with
16 PacifiCorp regarding the sale of the aggregate wind farm
17 site.
18 Q Are there any other examples of
19 proj ect disaggregation?
20 A Yes. On December 20, 2010, Rocky
21 Mountain Power executed five identical published avoided
22 cost price PPAs with Cedar Creek Wind, LLC (Cedar Creek).
23 The five QF proj ects are owned and controlled by the same
24 enti ty, share interconnection facilities under the
25 original single large proj ect 's interconnection
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1 agreement, engineering procurement contracts, wind
2 leases, and other common features. The five proj ects
3 complied with all federal regulations including the
4 1-mile separation requirement, and met all Idaho rules
5 and Commission Orders. Each has a nameplate capacity of
6 25 MW or above, and a peak monthly average generation of
7 just below 10 aMW.
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1 Prior to applying for a QF contract with
2 published prices, Cedar Creek submitted a bid into the
3 Company's 2009 renewable RFP as a single 151 MW project
4 but their bid was not selected by the Company because
5 their proposed price was too high and not competi ti ve
6 with the alternatives. In March 2010, the developer
7 requested QF pricing for two 78 MW proj ects. The
8 proj ects' avoided cost prices were determined using the
9 Commission-ordered IRP methodology for Idaho QFs over 10
10 aMW. The Company prepared and delivered a term sheet
11 containing a twenty-year stream of avoided cost prices.
12 On a twenty-year nominal levelized payment basis the
13 resultant avoided cost price was $56.06 per MWh assuming
14 a start date in 2012. The avoided cost prices were
15 rej ected by the developer due to the price being too low.
16 In May 2010, the developer resubmitted five
17 distinct proj ects totaling 133 MW and requested the
18 published avoided cost prices. Cedar Creek is a
19 large-scale, sophisticated developer with legal and
20 technical assets who disaggregated a single large proj ect
21 that was not selected through the Company's competitive
22 bid process into multiple proj ects in order to meet the
23 10 aMW threshold and qualify for much higher published
24 avoided cost contracts.
25 Because the Company and Cedar Creek reached
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1 agreement on all terms of their power purchase agreements
2 including the avoided cost price prior to December 14,
3 2010, (the effective date of Commission Order No. 32131)
4 Rocky Mountain Power executed final power purchase
5 agreements and, on January 10, 2010, filed them with the
6 Commission. These contracts are currently before the
7 Commission for review and decision. On a comparative
8 basis, the 20-year
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1 nominal levelized published avoided cost price was $79.21
2 per MWh (after subtracting the $6.50 per MWh wind
3 integration cost), only slightly lower than their
4 original bid into the Company's RFP.
5 (Material contained on this portion of the page has been
6 struck from the record.)
7 Q Can you cite a non-wind example of
8 proj ect disaggregation?
9 A Yes. Eastern Idaho Regional Solid
10 Waste District (EIRSWD), a proposed QF using solid waste
11 for fuel, initially requested a PURPA contract for a
12 proj ect that exceeded 10 aMW and then later revised its
13 request to be a published price QF proj ect. EIRSWD' s
14 initial proj ect was sized to accommodate the municipal
15 solid waste from the region that it serves.
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18 struck from the record.)
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1 Q Are there off-system dis aggregated QF
2 proj ects in the queue for published avoided cost price
3 contracts?
4 A Yes. Several of the pending requests
5 for published price contracts are from QFs that plan to
6 wheel their output to Rocky Mountain Power via another
7 utility's system.Some of these proj ects appear to be a
8 single proj ect, dis aggregated into multiple proj ects,
9 interconnected through a common interconnection to the
10 transmission provider, to be delivered via a common
11 transmission service agreement to the Company's electric
12 system.
13 Q Has the Company executed any
14 contracts with QF proj ects who have requested pricing
15 under the IRP methodology in Idaho?
16 A Not as of this proceeding; however
17 one off-system wind QF has recently accepted the proposed
18 IRP methodology pricing and is in the contract
19 negotiation process with the Company, having been
20 provided a draft power purchase agreement for review.
21 Until this recent QF acti vi ty with the large wind
22 proj ects, the Company had no requests for avoided cost
23 pricing under its IRP methodology. Prior QF proj ect
24 requests to the Company consisted of small hydro and
25 bio-gas proj ects at dairy farms, all less than 10 aMW.
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1 Since 2010, the Company has received four requests for
2 IRP methodology pricing and has responded with pricing.
3 As I noted above, one wind QF proj ect has requested IRP
4 methodology pricing and has been provided a draft
5 contract for review.
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1 Other Impacts of Disaggregation
2 Q Does disaggregation cause other
3 issues besides increased cost to the customers?
4 A Yes. Large volumes of generation,
5 particularly intermittent wind generation, may cause
6 system reliability issues during periods of minimum
7 utili ty loads. The Company believes that the ability for
8 large single wind proj ects to disaggregate into smaller
9 projects and qualify for published avoided cost rates
10 provides these large wind projects the pathway to still
11 be built when they otherwise might not be built on the
12 same physical scale.
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1 Q Is integration unique to
2 dis aggregated QF proj ects?
3 A No. However the minimum load issues
4 could be more significant if disaggregated QF proj ects
5 are completed because of their combined size. When the
6 Commission adopted published prices for QFs under 10 aMW,
7 nobody assumed that the maj ori ty of resulting development
8 (in terms of total installed capacity) would come from
9 projects much larger than 10 aMW, dis aggregated into 10
10 aMW sub-projects.
11 Impact of Disaggregation on Customers
12 Q How many MW of QF published avoided
13 cost contract requests does Rocky Mountain Power
14 currently have pending?
15 A The Company submits Exhibit 201,
16 attached hereto, which documents its pending wind QF
17 requests. As of March 22,2011, there were 10 wind
18 projects totaling 229 MW requesting Idaho published
19 avoided cost QF PPAs that are in various stages including
20 contract preparation and due diligence but have not been
21 executed by the Company. In addition, five published
22 rate contracts totaling 133 MW have been submitted to the
23 Commission for review and a decision on their published
24 avoided cost contracts. The Company has one project of
25 78 MW that has requested pricing under the IRP
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1 methodology and two Commission-approved but not
2 operational wind QF proj ects totaling 43.6 MW. In all
3 there is a total of 483 MW of proposed, executed or
4 Commission-approved wind QF contracts in Idaho. None of
5 the executed or Commission approved QF proj ects are
6 operational as of March 22, 2011. If all of these wind
7 projects were developed and came on-line, the 483 MW
8 would typically exceed the Company's load in
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1 Idaho eight or nine months of the year, making it
2 necessary for the Company to wheel the excess to other
3 load outside of Idaho.
4 Would purchase of all 229 MW ofQ
5 pending requests at the published Idaho QF price tend to
6 increase Rocky Mountain Power's system power purchase
7 costs?
8 Yes. The maj ori ty of these pendingA
9 requests are large wind proj ects that have been
10 disaggregated into smaller wind QF proj ects of less than
11 10 aMW. I compared their contract volume (assuming
12 typical capacity factors ) multiplied by avoided cost
13 prices to an equivalent volume of new QF capacity
14 mul tiplied by an estimate of avoided cost prices Rocky
15 Mountain Power would have paid under its IRP methodology
16 for QFs over 10 aMW. I estimate that the additional cost
17 of 229 MW of published price QF contracts would exceed
18 the IRP cost to customers by $12 million annually.
19 Do you believe that lowering theQ
20 eligibili ty threshold for published prices from 10 aMW
21 down to 100 kW on a permanent basis would stop developers
22 from disaggregating their large proj ects into smaller
23 ones?
24 Yes. Keeping the published avoidedA
25 cost eligibility cap at 100 kW would eliminate
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1 disaggregation by large wind proj ect developers.
2 Q Does keeping the eligibility cap at
3 100 kW eliminate the Company's PURPA obligation to
4 purchase from a QF?
5 A No. The Company would continue to
6 meet its PURPA obligation by providing SAR methodology
7 published rates for QF projects 100 kW or less and IRP
8 methodology avoided cost rates for larger proj ects.
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1 Q Does a lower eligibility cap for
2 published or standard avoided cost rates deter wind
3 development?
4 A No. In fact, one has only to look at
5 the Company's other jurisdictions to see that a lower
6 eligibility threshold for published avoided cost proj ects
7 and the use of an IRP methodology for larger proj ects is
8 appropriate and does work. Wyoming, for example, has
9 been a hot bed for wind development in recent years. The
10 Company has acquired wind resources in that state
11 including company-owned assets, power purchase
12 agreements, and QF purchases. In Wyoming, the Company
13 has a published avoided cost tariff, Schedule 37, Avoided
14 Cost Purchases from Qualifying Facili ties4. QF proj ects
15 qualify for the standard avoided costs if they are 1 MW
16 or less and have a capacity factor of seventy percent or
17 less. A wind proj ect is below this seventy percent
18 capaci ty factor threshold so QF wind proj ects in Wyoming
19 have to be below 1 MW to receive standard avoided cost or
20 be priced through the Company's non-standard avoided cost
21 methodology - an IRP methodology.
22 Q What has been the QF development in
23 Wyoming?
24 A To date, the Company has executed 5
25 PURPA contracts totaling 256.2 MW, the average size of
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1 the proj ects was 51.4 MW, with three of the proj ects
2 currently operating. The five proj ects all were
3 evaluated as QFs based on their proj ect specific
4 characteristics. All were significantly below the Idaho
5 published avoided cost rates and the proj ect renewable
6 energy credits ("RECs ") were included in the purchase
7 price.
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1 What about small wind QFs in WyomingQ
2 that qualify for standard avoided cost rates?
3 The Company has also receivedA
4 requests for wind projects less than a megawatt and is in
5 the process of finalizing a wind QF proj ect for 125 kW.
6 Do you believe that lowering theQ
7 eligibili ty threshold for published prices from 10 aMW
8 down to a lower cap based on average monthly production
9 (rather than nameplate capacity) would, by itself, stop
10 developers from disaggregating their large projects?
11 No. It is clear that the monthlyA
12 production threshold that only Idaho uses is an
13 ineffecti ve method to control disaggregation. Let's say
14 the threshold is set at 5 aMW. What stops wind
15 developers from dividing their 10 aMW proj ects into two 5
16 aMW proj ects? They could still share all the common
17 attributes that they need for 10 aMW and only have to
18 incur some additional proj ect costs to split into 5 aMW.
19 A 5 aMW project is still a 15 MW nameplate wind project
20 assuming a 30 percent capacity factor. It will be shown
21 later in my testimony that even with the equivalent of a
22 10 MW nameplate capacity threshold, disaggregation can
23 occur. If the published avoided costs are in the $80 per
24 MWh range compared to an IRP rate in the $60 per MWh
25 range, there is significant economic room to cover the
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1 proj ect costs to dis aggregate .
2 What if the eligibility threshold wasQ
3 based on nameplate capacity?
4 This would be a step in the right direction but
5 still subj ect to the QF manipulating the rules to
6 dis aggregate a large single proj ect as I will discuss an
7 actual example later in my testimony. Using nameplate
8 capaci ty as the threshold goes a long way
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1 towards neutralizing the impact of low capacity factor
2 and intermittency of wind proj ects. None of the
3 Company's other jurisdictions use QF monthly production
4 for their threshold on published or standard rates, they
5 all use nameplate capacity ranging from 1 MW to 10 MW.
6 When you compare a 10 MW nameplate QF project you are
7 looking at 3 aMW wind proj ect versus a 10 aMW QF proj ect
8 in Idaho. Using an eligibility threshold of 10 MW
9 nameplate capacity would encompass 84 percent of the
10 Company's existing QF proj ects.Set the threshold to 5
11 MW nameplate capacity and you still cover all of the
12 Company's Idaho QFs with the exception of one 6.0 MW
13 hydro and the seven recently executed wind QF contracts.
14 Expand that to the Company's other jurisdictions, and a 5
15 MW nameplate capacity limit captures 67 percent of all
16 the QFs the Company has contracts with regardless of
17 resource type. PURPA was designed to assist and support
18 the small community-based independent power producer and
19 for 67 percent of our QF contracts, a realistic
20 eligibility threshold based on nameplate capacity works.
21 In Idaho, the unrestricted 10 aMW threshold is allowing
22 large wind QF proj ects access to published avoided cost
23 rates.
24 Multiple QF Project Eligibility
25 Does the Company have a positionQ
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1 regarding the eligibility criteria for published avoided
2 cost prices and contract terms that should be used when
3 multiple QF proj ects are developed by a single entity or
4 similar ownership structure?
5 A Yes. While the Company believes that
6 the surest method of restricting disaggregation is to
7 maintain the existing 100 kW size threshold, the Company
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1 also understands that the Commission may be seeking
2 criteria that could be applied to a developer seeking to
3 disaggregate a large proj ect. While PURPA provides the
4 overlying criteria that apply to whether the QF proj ect
5 qualifies as a single project or multiple QF projects, it
6 does not provide the criteria at a sufficient granular
7 level related to state standard price and contract
8 offers. Rather, it leaves that control to the state.
9 Q Does the Company have experience with
10 mul tiple QF proj ect eligibility in its other
11 jurisdictions?
12 A Yes. The Company participated in an
13 Oregon QF docket, UM 1129, which resulted in a Partial
14 Stipulation in 2006. I have attached it hereto as Exhibit
15 202. In Order No. 06-538, the Oregon Commission adopted
16 clarifying language for determining when generating
17 facilities located near each other and using the same
18 moti ve force should be deemed a single facility, for
19 purposes of determining the Facility Capacity Rating
20 which establishes the size threshold for eligibility for
21 Oregon Schedule 37 standard avoided cost prices and
22 contract ("Partial Stipulation"). The purpose of the
23 Partial Stipulation was to develop a mechanism that would
24 allow independent family or community-based QF proj ects
25 the ability to share common infrastructure and have
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1 common passive investors without violating PURPA or state
2 regulations. After the Partial Stipulation was approved
3 by the Oregon Commission, the Company received a multiple
4 QF proj ect request for nine QF contracts ranging in size
5 from 1.65 MW to 10 MW, totaling 64.5 MW. The proj ects
6 clearly were a disaggregation of a large single wind
7 proj ect. Under the Partial Stipulation Eligibility Test,
8 proj ects located at the same site
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1 using the same motive force are ineligible for the Oregon
2 Schedule 37 i£ they are owned or controlled by the same
3 or affiliated person (s). In this case, there was a
4 single common owner who owned at least 99 percent of each
5 of the nine proj ects, thus initially disqualify a number
6 of the proj ects. However, the Partial Stipulation also
7 provides an exception whereby the proj ects may still be
8 eligible even if they are owned by the same person. That
9 exception provides:
10 "two facilities will not be held to be owned or
controlled by the same person (s) or affiliated person (s)
if such common person or persons is a 'passive investor'
whose ownership interest in the QF is primarily related
to utilizing production tax credits, green tag values and
MACRS depreciation as the primary ownership benefit. II
("passive investor exception") .
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14 After significant due diligence by the Company
15 and a review of the proj ects ownership structure with the
16 Oregon Commission staff, the Oregon Department of Energy,
17 it was agreed that a single maj ori ty owner for the nine
18 proj ects met the passive investor exception and therefore
19 was eligible under the Partial Stipulation for Oregon
20 Schedule 37.
21 Q Do you believe the Oregon Partial
22 Stipulation provided a successful mechanism to limit
23 disaggregation?
24 No. While the Partial StipulationA
25 provided specific eligibility criteria, those criteria,
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1 as it turned out, did not prevent a large (64.5 MW)
2 proj ect from devising an ownership structure that enabled
3 it to meet the eligibility criteria and therefore receive
4 published rates. As a result, nine small proj ects were
5 buil t by a large sophisticated developer who received
6 Oregon standard avoided cost prices which were higher
7 than the prices they would have otherwise received as a
8 single large QF proj ect. Those nine proj ects are
9 operated by a single developer and deliver
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1 power to the Company as a single large proj ect. The
2 proj ects retained the renewable energy credits, and the
3 individual proj ects secured the maximum Oregon Business
4 Energy Tax Credits (BETC).
5 Q What did the Company and its
6 customers receive in this case?
7 A The Company paid rates above its
8 avoided cost for a large non-standard wind QF and also
9 must absorb the cost of wind integration which is not
10 part of Oregon Schedule 37 avoided cost prices.
11 Q Would the Company support a similar
12 disaggregation mechanism in Idaho?
13 A Maybe, but clearly not as it is
14 wri tten in Oregon. As can be seen from the nine proj ect
15 example above, the Partial Stipulation was effectively
16 manipulated by the developer to secure the higher avoided
17 cost prices as well as more lenient standard contract
18 terms.
19 Q Does the Company have a suggested set
20 of rules to limit disaggregation?
21 A Yes. The rules are modeled after a
22 Minnesota Statute 216F. 011, adopted in 2007.5 This
23 statute, while not specifically used in Minnesota for QF
24 projects, establishes a set of rules for size
25 determination when determining permitting requirements
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1 for wind proj ects. From discussions with experts on the
2 statute, the Company learned that it was enacted to
3 restrict disaggregation of wind proj ects, and therefore
4 may have application in this proceeding.
5 Q Please explain the Company's proposed
6 set of rules.
7 A The Company submits Exhibi. t 203 which
8 outlines a set of rules based on the Minnesota statute
9 that the Company believes would restrict disaggregation
10 as well
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1 as the application forms that the wind or solar QF would
2 submi t to the utility regarding their proj ects. The
3 rules are not based on any specific megawatt size limit
4 but rather are structured to be used with any size limit
5 adopted by the Commission. The rules consist of three
6 simple triggers to determine the total size of a QF
7 system for the purpose of determining whether a QF is
8 eligible for published avoided cost prices. The
9 nameplate capacity of one QF system must be combined with
10 the nameplate capacity of any other QF system that:
11 (1) is located wi thin five miles of the QF system;
12 (2) is constructed within 24-months of the QF
13 system; and
14 (3) exhibits characteristics of being a single
15 development, including, but not limited to, ownership
16 structure, an umbrella sales arrangement, shared
17 interconnection, revenue sharing arrangements, and common
18 debt or equity financing.
19 Q How would the Company manage the
20 disaggregation rules?
21 A If the rules are adopted, the Company
22 would be responsible for determining whether the resource
23 meets the disaggregation rules. It is proposed that the
24 utility would provide forms for the QF project developers
25 to complete a request for a disaggregation determination.
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1 Upon submittal of completed application forms by the QF
2 project developer, the utility shall provide a written
3 disaggregation determination wi thin 30 days of receipt of
4 the request subj ect to validation of any information
5 requested by the utility. In the case of a dispute, the
6 QF proj ect developer can request the Commission to review
7 and make a final disaggregation determination. Under
8 these rules, the QF must have a final disaggregation
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1 determination completed prior to the power purchase
2 agreement for published avoided cost prices being
3 prepared. This process simply becomes part of the early
4 due diligence being completed by the utility when a QF
5 proj ect request is made.
6 Q Are there other steps you would
7 recommend?
8 A Yes. I would recommend that the QF
9 be required to warrant that it meets the size eligibility
10 threshold at the time the contract is executed. I also
11 recommend that it warrant that it will not make any
12 changes in ownership, control, or management during the
13 term of the contract that would cause it not to be in
14 compliance with the size eligibility threshold. Both
15 warranties cause the lender to a proj ect to take an
16 active interest in whether the developer has complied
17 wi th the requirements for eligibility for published rates
18 and, therefore, will tend to reduce the likelihood of a
19 developer gaming the size eligibility threshold.
Q Are you confident that the rules you
21 discuss will be successful at preventing large QFs from
22 disaggregating and receiving published rates?
23 A No. Experience has taught me that,
24 where there is a financial incentive to do so, QF
25 developers are very innovative at working around
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1 anti-disaggregation rules. However, the rule proposed by
2 Company has an important safeguard in that a QF that
3 meets the criteria in the rule does not automatically
4 qualify for published rates. If there is evidence that
5 the applicant is really a large QF notwithstanding that
6 it has met the criteria, the Commission has the
7 discretion to deny the QF eligibility for published
8 rates. This is an essential feature of any rule the
9 Commission may adopt.
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1 Q Do you have any final comments?
2 A Yes. The Company acknowledges it has
3 a clear obligation under PURPA to purchase the output
4 from a QF resource at the Company's avoided cost. This
5 proceeding is seeking to determine how to allow wind and
6 solar proj ects to sell their output to the utili ties as a
7 QF at the appropriate avoided cost for the resource
8 operating characteristics. The Company believes a
9 permanent 100 kW size threshold for wind and solar is the
10 surest mechanism to allow small independent projects to
11 continue to receive published avoided cost prices while
12 restricting large resources from disaggregating to
13 smaller proj ects to acquire published avoided cost
14 prices. The Company does not support returning the
15 eligibili ty threshold back to 10 aMW. However if the
16 Commission seeks the al ternati ve - to establish a set of
17 rules that restricts disaggregation - then the Company
18 has set forth a set of rules that it believes can be
19 implemented quickly and fairly. These rules have been
20 drafted with no set eligibility cap, rather they are
21 wri tten as general rules that can be applied regardless
22 of size.
23 Q Does this conclude your direct
24 testimony in this proceeding?
25 A Yes.
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1 Q Please state your name, business
2 address and position with PacifiCorp dba Rocky Mountain
3 Power (the Company).
4 A My name is Bruce W. Griswold. My
5 business address is 825 NE Multnomah, Suite 600,
6 Portland, Oregon. I am the Director, Short-term
7 Origination and QF Contracts at PacifiCorp Energy, which
8 is responsible for the Company's electric generation and
9 energy trading functions.
10 Q Are you the same Bruce W. Griswold
11 who provided direct testimony in this proceeding?
12 A Yes.
13 Purpose and Sumary of Testimony
14 Q What is the purpose of your
15 testimony?
16 A My testimony will respond to and
17 compare sets of rules proposed by Mr. Rick Sterling of
18 the Idaho Public Utility Commission staff (" Staff"), Ms.
19 Megan Decker of Renewable Northwest Proj ect ("RNP"), and
20 Mr. Benj amin Otto of the Idaho Conservation League
21 ("ICL") to reinstate the 10 aMW eligibility threshold but
22 restrict disaggregation of large single wind and solar
23 proj ects. I will also address why the Company's proposed
24 set of rules and procedures from my direct testimony (as
25 updated in my rebuttal testimony) will work more
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1 effectively than those proposed by others.
2 Q Please summarize your testimony.
3 A While a set of criteria to limit the
4 disaggregation of large wind and solar proj ects can be
5 developed and implemented, it is clear from the Company's
6 experience that any such approach is not fool-proof and
7 it is our experience that it can
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1 ul timately be manipulated by large proj ect developers.
2 The Company's first position continues to be that the
3 correct method of ensuring that there are controls
4 regarding disaggregation is for the Commission to make
5 permanent the 100 kW eligibility threshold for wind and
6 solar QFs seeking Idaho's published avoided cost prices.
7 Absent that directive by the Commission, Rocky Mountain
8 Power has completed a comparison of the three strawman
9 proposals submitted by the Staff, RNP and ICL to the
10 Company's proposed strawman and prepared a table
11 comparing the four proposals, attached hereto as Rocky
12 Mountain Power Exhibit No. 204. After that review, the
13 Company believes that its proposed strawman is still the
14 most reasonable of the four proposals before the
15 Commission and will provide the best assurance that large
16 QFs will not receive the Idaho published avoided cost
17 rates. However, the Company believes that a number of
18 the elements of Staff's proposal are valid and the
19 Company has modified its proposal to incorporate those
20 elements that strengthen the Company's proposal. Even
21 with specific disaggregation criteria in place, the
22 ul timate eligibility test should remain whether the QF
23 (together with any other wholesale generators developed
24 in concert with the QF) exceeds the size eligibility cap.
25 Therefore, the Commission should require developers to
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1 demonstrate that they are in fact not disaggregating a
2 large proj ect and retain the discretion to deny
3 eligibility for published rates in the event a large QF
4 finds a way to meet the eligibility criteria but is found
5 by the Commission to be a large QF on other grounds.
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1 Review of Strawman Proposals
2 Q Please recap Rocky Mountain Power's
3 strawman proposal.
4 A Rocky Mountain Power's proposed rules
5 are modeled after a Minnesota Statute 216F. 011, adopted
6 in 2007.1 This statute established rules for size
7 determination when determining permitting requirements
8 for wind proj ects. While the rules are not based on any
9 specific megawatt size limit the Company proposes using a
10 nameplate capacity of 10 MW as an absolute threshold
11 versus the 10 aMW threshold. The 10 aMW threshold is a
12 somewhat subj ecti ve level and can lead to disputes
13 between the utility and the QF both on the acceptance by
14 the utility that the QF proj ect meets the 10 aMW
15 threshold and on the monitoring and enforcement of the
16 threshold throughout the term of the power purchase
17 agreement. This is especially true when the estimated
18 output from multiple wind or solar plants must be added
19 together in the evaluation. Adding up nameplate capacity
20 is very straightforward with no room for disagreement
21 over proposed production of each QF system. The
22 nameplate capacity of the applicant QF must be combined
23 wi th the nameplate capacity of any other wholesale
24 generator2 that:
25 (1)is located wi thin five miles of the QF;
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1 (2)is constructed wi thin 24 -months of the QF; and
2 (3 )exhibi ts characteristics of being a common
3 development.
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2 The Company uses the term "wholesale generator" to make clear that
24 the rules apply to a QF that is developed in concert with a non-QF
project.
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1 Under Rocky Mountain Power's proposal, the utility
2 would be responsible for determining the size of the QF
3 using information provided by the QF proj ect developer.
4 The Company would provide a written determination wi thin
5 30 days of receipt of the request with any dispute
6 resol ved by the Commission. The determination would be
7 completed as part of the normal due diligence process
8 prior to the power purchase agreement being prepared.
9 The QF would warrant that it meets the size eligibility
10 threshold at the purchase power agreement ("PPA")
11 execution and not make any changes in ownership, control,
12 or management during the term of the contract to reduce
13 the ability of a developer to manipulate the size
14 eligibili ty threshold.
15 Q Why do you believe the Company's
16 proposal is the most appropriate?
A The Company's proposal presented in
18 my direct testimony established a clear and concise
19 method to stop disaggregation, however to improve the
20 Company's proposal, I have incorporated some of the other
21 parties' proposal characteristics into a revised proposal
22 summarized later in this testimony. The Company's
23 proposal sets a five-mile limit on the distance between
24 projects while the other proposals use a one-mile
25 cri terion. We have already observed, as evidenced by
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1 Cedar Creek Wind's five QF PPAs in front of the
2 Commission for review and decision, that a one-mile
3 separation requirement does not prevent disaggregation.
4 The Company's proposal establishes that the proj ects
5 cannot come on-line within 24 months of each other which
6 severely limits the ability to finance or construct the
7 proj ects as if they were a single proj ect. Finally,
8 Rocky Mountain Power proposes using a nameplate capacity
9 si ze limit instead of a limit based on average
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1 megawatts. While this is a maj or divergence from the
2 current eligibility threshold, it does provide a very
3 clear size threshold on proj ects, eliminating future
4 disputes over proj ect production capacity. In our
5 revised proposal we establish 10 MW nameplate capacity as
6 the threshold because this will continue to allow
7 individuals and communi ties the ability to develop
8 renewable resources, very much in line with the
9 directives of PURPA. The Company's standard QF
10 experience in Oregon demonstrates that 10 MW nameplate is
11 a reasonable threshold for published avoided cost rates
12 while not deterring proj ect development.
13 Q Please summarize the ICL proposal.
14 A The ICL proposal summarized by Mr.
15 Otto utilizes four criteria to determine the size of a QF
16 system comprised of more than a single electrical
17 generator. Those criteria are:
18 1.Energy Source - Uses the same energy source.
19 2.Ownership - Owned by the same person or
20 affiliate where the affiliate does not include
21 passive investors whose sole purpose is tax
22 credi ts, green tags or depreciation; or control
of management, operation or policies over the
person of owning the electrical generator.
3.Location - Electrical generator is located
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wi thin one-mile of any other electrical
generator with the exception of the
hydroelectric generators which use the same
impoundment or canal drop.
4. Timing - The electricity is ini tially delivered
by each electrical generator to the utility
within the same 24-month period.
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.1 As with the Rocky Mountain Power's proposal, the
2 size determination is completed by the utility based on
3 submi tted documentation by the QF. The QF must warrant
4 and represent that its maximum size is 10 aMW and that
5 ownership, control or management will not change the size
6 eligibility over the term of the PPA. However, unlike
7 Company's proposal, the utility has only 15 days to make
8 the determination. In the event the QF is in
9 disagreement with the determination, the QF can request a
10 Commission review wi thin 15 days.
11 Q Please explain the deficiencies of
12 the ICL proposal..13 A The maj or deficiency of the ICL
14 proposal is that it does not address a number of the
15 common ownership characteristics of being a single
16 development, including an umbrella sales arrangement,
17 shared interconnection and infrastructure, shared
18 transmission services agreement (off-system resource
19 only), revenue sharing arrangements, and common debt or
20 equi ty financing, to name a few. The Company also notes
21 that the amount of time to make a determination is
22 woefully short. In the various cases where the Company
23 had to complete due diligence on the various criteria,
24 the time to complete ranged from 30 to 45 days due to the.25 need for additional data from the QF. The Company
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1 further notes that the 10 aMW threshold can be subj ecti ve
2 and provides an opportunity for disputes to occur between
3 the utility and the developer on the proj ect 's output.
4 Q What is contained in the RNP
5 proposal?
6 A RNP's proposal summarized by Ms.
7 Decker's testimony also has four maj or points to
8 determine if a proj ect with multiple generation sources
9 is a single QF. They are:
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1 1.Uses the same motive force as the QF.
2 2.Owned or controlled by the same person or
3 affiliate where the affiliate is a person or
4 legal entity sharing common ownership,
5 management or control of management, operation
6 or policies over another person or entity but
7 the affiliate does not include passive
8 investors whose sole purpose is tax credits,
9 green tags or depreciation.
10 3.The generation source is placed into service
11 within 12 months of the QF's on-line date.
12 4.Shares common interconnection, controls and
13 infrastructure as the QF.
14 As with Company's proposal, the size determination
15 is completed by the utility based on documentation
16 submitted by the QF. In the event the QF is in
17 disagreement with the determination, the QF can request a
18 Commission review. The QF must warrant and represent
19 that the project satisfies the four requirements and that
20 ownership, control or management will not change the size
21 eligibility over the term of the PPA.
22 Q Do you see any deficiencies in the
23 RNP proposal?
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A Yes. The RNP proposal, similar to the
ICL proposal, does not address a number of important
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1 common ownership characteristics of being a single
2 development. More importantly, the RNP proposal requires
3 that the multiple facilities must meet all four of the
4 condi tions and be over 10 aMW in order to be deemed a
5 single entity. A proj ect could easily sidestep one of
6 the conditions and all of the multiple proj ects are
7 eligible for standard rates. Nor does the RNP proposal
8 establish any minimum distance requirement; in fact, it
9 does not even discuss the
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1 one-mile PURPA distance requirement. Thus, the Company
2 believes the RNP proposal is flawed and could be
3 manipulated. As with the ICL proposal, Company notes that
4 the 10 aMW threshold can lead to disputes over the
5 project's size.
6 Q Please describe Staff's proposal.
7 A Staff's proposal as presented in Mr.
8 Sterling's direct testimony is the most comprehensive of
9 the proposals. It identifies 15 characteristics that
10 multiple generation sources may exhibit and qualify as a
11 single proj ect. Many of the characteristics are similar
12 to the other proposals but Mr. Sterling also identifies
13 several that are not included in the Company's, RNP' s or
14 ICL's proposal including permitting multiple proj ects as
15 a single entity, sharing engineering and procurement
16 contracts, sharing common land leases. The list proposed
17 by Mr. Sterling is very complete and his methodology for
18 evaluation is reasonable.
19 Q Do you find any deficiencies in
20 Staff's proposal?
21 A Yes. I believe the 12 month period
22 for construction is too lenient. For example, the
23 Company has wind QF PPAs in other states that are a
24 single project split into two projects and constructed to
25 come on-line 12 months apart to meet a regulatory
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1 stipulation. The proj ects are owned by the same entity,
2 share common ownership traits including land lease,
3 interconnection, and construction and procurement
4 contracts.
5 Does the Company have a revisedQ
6 disaggregation proposal?
7 Yes. After reviewing the threeA
8 proposals by Staff, RNP and ICL, the Company has prepared
9 a revised set of proposed criteria, attached hereto as
10 Rocky Mountain Power Exhibit No. 205. A redline showing
11 changes from my direct
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1 testimony is included along with a clean version of the
2 revised proposal. The revision incorporates a number of
3 characteristics from Staff's proposal including shared
4 common land leases, shared construction and procurement
5 contracts, and permitting of multiple proj ects as a
6 single entity. Like the other proposals, the Company has
7 modified its rule to apply generally to all types of QFs,
8 rather than limiting it to wind and solar QFs. The
9 proposal also sets the threshold limit at 10 MW nameplate
10 capacity which is a key component to limiting
11 disaggregation while maintaining viability for small
12 communi ty developed proj ects.
13 Q Will you describe the Company's
14 revisions to the Qualifying Facility Size Determination
15 Application?
16 A Yes. Because the revised proposal
17 treats all QF applicants of any motive force equally, the
18 solar and wind specific application forms are replaced by
19 a form sui table for any QF applicant. Because the
20 Company added elements of Staff's proposal to its
21 proposed rule, it added request for information about
22 those elements to the application form. The Company made
23 additional organizational changes and edits intended to
24 make the application form shorter and easier to
25 understand. A clean version of the revised proposed
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1 Qualifying Facility Size Determination Application is
2 attached hereto as Rocky Mountain Power Exhibit No. 206.
3 Q Does this conclude your rebuttal
4 testimony in this proceeding?
5 A Yes.
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2 open hearing.)
(The following proceedings were had in
COMMISSIONER SMITH: And I assume the
4 wi tness is available for cross.
3
5
6
7 have questions?
8
MR. KAUFMANN: Yes, Madam Chair.
COMMISSIONER SMITH: Mr. Walker, do you
MR. WALKER: Yes, Madam Chair.
9 Mr. Williams has a couple of questions for Mr.
10 Griswold.
11
12 Chair.
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MR. JASON WILLIAMS: Thank you, Madam
CROSS-EXAMINATION
16 BY MR. JASON WILLIAMS:
17 Q Good afternoon, Mr. Griswold. Can you
18 please provide the states in which PacifiCorp and its
19 subsidiaries operate and provide electrical service?
20 A Yes, Oregon, Washington, California,
21 Idaho, Wyoming, Utah.
22 Q And do you have QF contracts, PURPA
23 contracts with QF facilities, in each of those
24 jurisdictions?
25 A Yes, we do.
CSB REPORTING
[phone]
333 GRISWOLD (X)
Rocky Mountain Power
.
.
.
20
1 Q And are you responsible for negotiating
2 and managing the PPAs PacifiCorp has with those PURPA
3 proj ects in those states?
4 A Yes, I am.
5 Q And is it true that as part of your
6 testimony you proposed to set up disaggregation
7 criteria?
8 A Yes.
9 Q Would you agree with me that while a set
10 of criteria to limit the disaggregation of large wind and
11 solar proj ects could be developed and implemented, such
12 an approach is not foolproof and ultimately could be
13 manipulated by large proj ect developers?
14 A Yes.
15 Q And based on your experience and the
16 Company's experience in other states, is making permanent
17 the 100 kW eligibility threshold for wind and solar
18 projects a better way to control disaggregation than is
19 developing and implementing disaggregation criteria?
MR. RICHARDSON: Madam Chair, I'm going to
21 obj ect to this friendly cross-examination.
22
23
COMMISSIONER SMITH: Mr. Williams.
MR. JASON WILLIAMS: Madam Chair, I'm
24 simply pointing out Mr. Griswold has proposed two
25 al ternati ves in his testimony and I'm simply getting
CSB REPORTING
[phone]
334 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 confirmation of his preferred approach.
2 COMMISSIONER SMITH: I'm going to allow
3 this right now, Mr. Richardson, but we don't need
4 anything that unnecessarily extends the hearing.
5 MR. JASON WILLIAMS: Understood,
6 Madam Chair.
7 Q BY MR. JASON WILLIAMS: Would you like me
8 to repeat the question?
9 A Please.
10 Q Based on your experience and the Company's
11 experience in other states, is making permanent the 100
12 kW eligibility threshold for wind and solar proj ects a
13 better way of controlling disaggregation than is
14 developing and implementing disaggregation criteria?
15 A Yes, it is. As I pointed out in my direct
16 testimony, it's a clear finite line in the sand level as
17 opposed to something that could be, you know, figured out
18 a way to manipulate.
19 MR. JASON WILLIAMS: Thank you. No
20 further questions, Madam Chair.
21 COMMISSIONER SMITH: Thank you.
22 Mr. Andrea, do you have questions?
23 MR. ANDREA: No, Madam Chair. Thank you.
24 COMMISSIONER SMITH: Mr. Richardson, it's
25 now your turn.
CSB REPORTING
[phone]
335 GRISWOLD (X)
Rocky Mountain Power
.
.
.
20
1 MR. RICHARDSON: Thank you, Madam Chair.
2
3 CROSS-EXAMINATION
4
5 BY MR. RICHARDSON:
6 Q Good afternoon, Mr. Griswold.
7 A Good afternoon.
8 Q On the bottom of page 1 of your direct
9 testimony, you state that the surest method of
10 controlling disaggregation is to keep the 100 kW
11 threshold in place. Then over on page 2 you state the
12 other methods are not as effective in controlling
13 disaggregation, but you would agree, wouldn't you, that
14 there are other methods that would work to prevent
15 disaggregation?
16 A Yes.
17 Q Would you please read your direct
18 testimony at page 3, line 3 starting with the word
19 II specifically"?
A II Specifically, the Commission sought
21 'information and investigation of a published avoided
22 cost rate eligibility cap structure that, (1) allows
23 small wind and solar QFs to avail themselves of published
24 rates for projects producing 10 average megawatts or
25 less; and (2), prevents large QFs from disaggregating in
CSB REPORTING
[phone]
336 GRI SWOLD (X)
Rocky Mountain Power
.
.
.
17
18
1 order to obtain a published avoided cost rate that
2 exceeds a utility's avoided cost.' II
3 Q Thank you. Now would you please reconcile
4 this Commission directive with your testimony that the
5 Commission should make the 100 kW cap permanent?
6 A 100 kW cap goes to the point of preventing
7 large QFs from disaggregating. It's, as I mentioned
8 earlier, it is a clear and finite level that we believe
9 does not allow large QFs to disaggregate.
10 Q Would you agree with me that the sole
11 reason we are here in this docket is to find a way to
12 allow QFs to avail themselves of published rates for
13 projects up to 10 average megawatts?
14 A No, that's only partially what's being
15 asked.
16 Q It is being asked, isn' t it?
A Yes, it is.
Q And your testimony doesn't do that, does
19 it?
20 A My testimony does that. It provides a
21 strawman proposal with criteria for minimizing
22 disaggregation of large QFs. However, my testimony also
23 says that the surest way and the surest mechanism to
24 prevent disaggregation is establishing and using the
25 100 -- making the 100 kW limit permanent.
CSB REPORTING
[phone]
337 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 Q On page 3 at line 15, you start a
2 discussion of the RFP methodology for setting rates and
3 you make the claim that the published avoided cost rates
4 are higher than the RFP rates, and isn't it true that the
5 validity of your avoided cost rates are not at issue in
6 this docket?
7 A You're speaking to -- let me try and
8 clarify. Are you speaking to line 17, whether it's
9 through our competi ti ve proposal RFP process, is that
10 what you're specifically asking me about?
11 Q Correct, I'm asking you if you think that
12 the validity of your avoided cost rates is an issue
13 that's legitimately discussed in this docket?
14 A Well, we're not discussing the competi ti ve
15 RFP process. I simply pointed out as a reference that
16 the avoided cost standard, the published avoided cost
17 rates in Idaho are higher, have been higher, than the
18 prices that have been paid through our competi ti ve RFPs.
19 Q And also at the bottom of that page,
20 beginning at the last word on line 21, you state that the
21 costs to the Company of integrating wind are significant
22 and over to the top of page 4 you conclude that they need
23 to be revised. Would you agree with me that the wind
24 integration rates are not at issue in this docket?
25 A I would agree with that.
CSB REPORTING
[phone]
338 GRI SWOLD (X)
Rocky Mountain Power
.
.
.
1 Q And you would also agree, wouldn't you,
2 that the Company is free to at any time file a case with
3 this Commission to explore the ongoing validity of your
4 wind integration charges?
5 A I would agree, yes.
6 Q And would you agree that this case is
7 about your Company's concern that large wind and solar,
8 at least in the case of solar may, break up their
9 proj ects into multiple smaller QF proj ects?
10 A I would agree with that.
11 Q So that brings to mind a question, why do
12 you care who owns the QF proj ects?
13 A I guess I'm not sure what your question
14 is.
15 Q Let me rephrase it.
16 A Maybe rephrase it.
17 Q One of the criteria people are putting
18 forth in terms of disaggregation is who the owner of the
19 proj ect is and my question is what difference does that
20 make to you or does it?
21 A It does even when -- yes, it does make a
22 difference and irregardless of if they have access to the
23 published rates or if they are a large QF that's
24 disaggregating or if they're actually a large QF that's
25 being afforded IRP methodology pricing, the owner and
CSB REPORTING
[phone]
339 GRI SWOLD (X)
Rocky Mountain Power
.
.
.
1 their ability and, I guess, the counterparty that's
2 standing behind the power purchase agreement is an
3 important criteria for us.
4 Q What difference should it make as to
5 whether or not the party is entitled to the published
6 avoided cost rate?
7 MR. KAUFMANN: Madam Chair, I'd like to
8 object.
9 COMMISSIONER SMITH: Mr. Kaufmann.
10 MR. KAUFMANN: Yes, I think Mr. Richardson
11 is beyond the scope of the inquiry here, the question
12 being whether -- what disaggregation criteria should be.
13 I don't see the relèvance to this question.
14 COMMISSIONER SMITH: Mr. Richardson.
15 MR. RICHARDSON: Thank you, Madam Chair.
16 One of the fundamental premise of this Company and the
17 other parties to the docket is that ownership of the QF
18 proj ect is one of the driving criteria for preventing
19 so-called disaggregation and I'd like to explore with the
20 witness why that's relevant to whether or not a party is
2 1 entitled to the published avoided cost rates. I think
22 it's at the heart of the case.
23 COMMISSIONER SMITH: I'm going to allow
24 the question, Mr. Kaufmann.
25 Q BY MR. RICHARDSON: So the question was --
CSB REPORTING
[phone]
340 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 do you recall the question?
2 A Please restate it.
3 Q Yeah, the question was why is it relevant
4 to you who owns the QF as to whether or not that entity
5 is entitled to the published cost rates?
6 A Well, in the case of a large QF
7 disaggregating, it would clearly show single ownership if
8 it was a single party. If you're referring to who that
9 specific counterparty is, company name, et cetera, that
10 part of it makes no difference. It's the acknowledgment
11 that it is a large project being developed or owned by a
12 single party and they are breaking that proj ect up into
13 multiple proj ects in order to qualify for the published
14 rate.
15 Q So it matters because of the rates?
16 A It matters because they are disaggregating
17 the -- one of the criteria for limiting or controlling
18 disaggregation is a common ownership of all of the
19 proj ects, and in order for those proj ects -- you know, if
20 it's being developed by a single proj ect developer or
21 owner breaking it up into multiple proj ects to simply
22 qualify for the published rates, we're establishing that
23 as one of the criteria.
24
25
Q So part of it is about rates?
A Absolutely, yes.
CSB REPORTING
[phone]
341 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 Q So let's assume that the avoided cost
2 rates are in fact accurate. If that is true, then
3 wouldn't the Company be indifferent when buying QF power
4 and its ratepayers would be held harmless?
5 A No, I don't believe they would. A large
6 proj ect that comes to us and is going through, would be
7 required to go through, the IRP methodology may have a
8 different price, may have a different avoided cost,
9 because it's been modeled individually to it. I'm not
10 saying it's higher or lower. I'm simply saying it's a
11 different price. That's the reason why there was
12 established a different methodology for larger proj ects.
13 By disaggregating into multiple proj ects, they are, in
14 effect, not using their -- applying their characteristics
15 to the wind proj ect. They're becoming multiple proj ects
16 that can have available to them the published rates.
17 Q Right, but if we were to assume that the
18 avoided cost rates were accurate, wouldn i t it be true
19 that the Company would be indifferent buying the QF power
20 and its ratepayers would be held harmless if the rates
21 were accurate? That was the question and the premise of
22 your answer was the rates weren't accurate.
23 A Let me -- I'll rephrase it back to you.
24 Are you asking me if the published avoided cost rates
25 that use the SAR methodology for a proj ect 10 average
CSB REPORTING
[phone]
342 GRISWOLD (X)
Rocky Mountain Power
.
.
.
19
1 megawatts and below are accurate and if that project
2 qualified for it, would that proj ect be
3 MR. WALKER: Madam Chairman?
4 COMMISSIONER SMITH: Mr. Walker.
5 MR. WALKER: If I may interrupt, I
6 apologize for the interruption here, but Mr. Richardson
7 is going down a line of questioning, talking about the
8 difference in price and this is specifically information
9 that this Commission has stricken from our testimony and
10 excluded and if this is to continue, I ask that those
11 stricken portions be spread upon the record so that this
12 Commission has the full range of evidence before it when
13 making its decision.
14 COMMISSIONER SMITH: Thank you, Mr.
15 Walker, but what I was going to suggest, Mr. Richardson,
16 is your questions seem complex and I'm having a hard time
17 following them and I believe the witness may also be
18 having a hard time following them.
20 I'LL move on.
MR. RICHARDSON: Thank you, Madam Chair,
21
22
COMMISSIONER SMITH: Thank you.
Q BY MR. RICHARDSON: On page 13 -- excuse
23 me, page 9, just generally, can you tell me what the
24 Company's position is on the disaggregation applicability
25 to non-wind and non-solar?
CSB REPORTING
[phone]
343 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 A Well, our general position is that, you
2 know,from an equity perspective, a quality perspective,
3 it should apply to each QF proj ect irregardless of the
4 resource type. That would be our general position.
5 Q On page 11 at line 4, you state that large
6 volumes of -- no, strike that. If you would reference
7 page 13, towards the very bottom, you state that the --
8 and over to the top of page 14, you discuss 483 megawatts
9 of wind that you identify as possible in Idaho and you
10 observe that that amount of wind or generation would
11 exceed the Company's load in Idaho eight or nine months
12 of the year, making it necessary to wheel the excess to
13 other load outside of Idaho, but isn't it true that
14 PacifiCorp has almost no native generation in Idaho?
15 A Subj ect to check, I would say we may
16 not.
17 Q So doesn't that mean that you already have
18 to import essentially all of the electricity you need to
19 serve your Idaho customers from other states?
20 A That would be correct.
21 Q Over on page 15 at line 17, you discuss
22 the fact that the Company has five Wyoming PURPA proj ects
23 wi th costs below the Idaho published avoided cost rates.
24 Do you see that?
25 A I do.
CSB REPORTING
[phone]
344 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 Q And wouldn't you agree with me that
2 generally the wind capacity factors in Wyoming are much
3 more robust than in Idaho?
4 A Generally, I would agree, yes.
5 Q Do you know the effect of increasing the
6 capacity factor for a wind proj ect from, say, 32 to 33
7 percent?
8 A Well, generally, it would produce more
9 energy.
10 Q And would you agree it's not a linear
11 progression, but an exponential progression?
12 A Subj ect to check, yes.
13 Q Do you know how much it costs to wheel all
14 that power out of Wyoming to Idaho load?
15 MR. KAUFMANN: Objection, Your Honor,
16 relevance.
17 COMMISSIONER SMITH: Mr. Richardson.
18 MR. RICHARDSON: Madam Chair, the witness
19 has identified these Wyoming proj ects as an example that
20 he is using to compare the costs of developing wind
21 proj ects in Wyoming to the costs of developing wind
22 proj ects in Idaho and I would like to inquire as to
23 whether or not he's identified all the costs associated
24 wi th the Wyoming proj ects.
25 COMMISSIONER SMITH: Okay, I'll allow the
CSB REPORTING
[phone]
345 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 question.
2 THE WITNESS: Restate it, please.
3 Q BY MR. RICHARDSON: Do you know how much
4 it costs to wheel that output to Idaho from Wyoming wind
5 projects?
6 A I do not. As you know, all of our QFs are
7 deemed as system resources and are to serve network load,
8 so I can't tell you how much is brought to Idaho
9 versus -- excuse me, or consumed in Wyoming or moved to
10 Utah.
11 Q So when you complain about having to move
12 the Idaho generation out of Idaho, it's pretty much the
13 same situation as your Wyoming proj ects, they're all
14 network resources and we don't color code by state
15 boundary, do we?
16 A Correct.
17 Q And you mentioned earlier in your
18 testimony that PacifiCorp believes that the IRP process
19 and the RFP process are preferred ways to acquire maj or
20 new resources; correct?
21 A The Company acquires -- the Company plans
22 for its new resources using its integration resource
23 plan, the IRP. To acquire new resources, based on what
24 we've produced in our IRP, we issue competi ti ve RFPs for
25 new resources. QFs are, you know, and to the point in
CSB REPORTING
[phone]
346 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 there, our RFPs because we're multi-state, we have some
2 restrictions around the size of the projects that are
3 allowed to be bid, but QFs are allowed to bid into the
4 RFP process.
5 Q Do you know whether the Idaho Commission
6 has adopted RFP guidelines?
7 MR. KAUFMANN: I'm going to object on
8 relevance.
9 COMMISSIONER SMITH: Mr. Richardson.
10 MR. RICHARDSON: Madam Chair, the witness
11 has testified that the RFP process is a preferred method
12 of acquiring large new resources, including QF resources,
13 and it would be proper to inquire as to what the process
14 of doing so in Idaho is.
15 MR. KAUFMANN: Your Honor, if I may, we've
16 been straying farther and farther from the scope that we
17 started with in this exam. I recognize that most of
18 Mr. Richardson's questions have to do with Mr. Griswold's
19 direct and are fair, but I think we're moving into new
20 territory that's not in the scope and have diminishing
21 relevance.
22 COMMISSIONER SMITH: And I tend to agree,
23 Mr. Richardson. I f we're going to save the RFP or, I
24 mean, the IRP pricing and SARs for the next case, we
25 can --
CSB REPORTING
[phone]
347 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1
2
MR. RICHARDSON: Actually, that's not
where I'm going with this, Madam Chair.
3
4
5 a couple.
6
7
8 Q
COMMISSIONER SMITH: Okay.
MR. RICHARDSON: If you'll indulge me for
COMMISSIONER SMITH: I will.
MR. RICHARDSON: Thank you.
BY MR. RICHARDSON: So do you know if the
9 Idaho Commission has adopted RFP guidelines for resource
10 acquisitions?
11 A I do not.
Do you know if there's a docket pending
13 where NPPIC has asked the Idaho Commission to do just
19 guidelines?
Q
Wyoming?
CSB REPORTING
[phone]
I would not know that.
Assuming that there are no RFP guidelines
17 in Idaho, if you were doing an RFP in Idaho for new
12 Q
14 that?
18 resources, would you rely on, say, your Oregon RFP
20
15 A
MR. KAUFMANN: Objection, Your Honor.
21 This calls for speculation of the witness.
22
23
16 Q
COMMISSIONER SMITH: Sustained.
BY MR. RICHARDSON: Are you aware that
24 PacifiCorp has developed several of its own wind farms in
25
348 GRISWOLD (X)
Rocky Mountain Power
.
.
.
20
21
22
1 A Yes.
2 Q And are you familiar with the Seven Mile,
3 Glenrock and Rolling Hills wind --
4 MR. KAUFMANN: Obj ection, Your Honor.
5 This is also beyond the scope of his testimony.
6 COMMISSIONER SMITH: Mr. Richardson, he's
7 obj ected that it's beyond the scope of the testimony.
8 MR. RICHARDSON: This witness has
9 specifically brought up the question of wind proj ects in
10 Wyoming and it seems like I'm following up on his direct
11 testimony.
12 COMMISSIONER SMITH: Mr. Kaufmann.
13 MR. KAUFMANN: Yes, if you would please
14 ask Mr. Richardson to specify the direct testimony which
15 he's referring to, I'd like to
16 MR. RICHARDSON: That would be page 15,
17 line 16.
18 MR. KAUFMANN: Madam Chair, if that is his
19 inquiry based on that, I withdraw my obj ection.
COMMISSIONER SMITH: Thank you.
MR. RICHARDSON: Thank you.
Q BY MR. RICHARDSON: Are you familiar with
23 the Seven Mile, Glenrock and Rolling Hills wind projects
24 buil t by PacifiCorp in Wyoming?
25 A In general, yes.
CSB REPORTING
[phone]
349 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 Q Do you know what the nameplate capacity of
2 each of those three proj ects is?
3 A I do not.
4 Q Would you accept, subj ect to check, that
5 the nameplate capacity of those three proj ects is 99
6 each?
7 A Subj ect to check, yes.
8 Q Are you aware that the Oregon PUC staff
9 argued that the Glenrock and Rolling Hills proj ects were
10 dis aggregated by PacifiCorp in order to avoid compliance
11 wi th Oregon's RFP guidelines?
12 MR. KAUFMANN: I obj ect to the question,
13 Your Honor. This is a proceeding about Idaho
14 disaggregation and I think it's not relevant.
15 COMMISSIONER SMITH: Mr. Richardson.
16 MR. RICHARDSON: Madam Chair, this Company
17 is arguing that QFs in Idaho should not be allowed to
18 disaggregate, while at the same time it is engaging in
19 the very same activity in order to avoid regulatory
20 compliance in other states. I think it's relevant to the
21 credibili ty of the witness' testimony and the position of
22 the Company.
23 COMMISSIONER SMITH: Well, Mr. Richardson,
24 I don't agree. There is not an inquiry into this
25 utility's compliance with the requirements in the State
CSB REPORTING
[phone]
350 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 of Oregon.
2 MR. RICHARDSON: I'LL withdraw the
3 question, Madam Chair.
4 Q BY MR. RICHARDSON: Mr. Griswold, at page
5 16, line 9 you state that the use of a monthly production
6 threshold is an ineffective method to control
7 disaggregation. Do you see that?
8 A I see that, yes.
9 Q On the flip side of that, wouldn't you
10 agree that it is an effective way to encourage QF
11 development?
12 A No, I disagree with that and my rationale
13 for that is we have multiple QFs in various states that
14 are all based on nameplate and it hasn't deterred
15 development of QFs in other states, whether that be wind
16 or solar, well not solar because solar is new, but hydro
17 or any of that, so I would disagree.
18 Q For the Idaho experience, would you agree
19 that the average monthly threshold has been an effective
20 way to encourage QF development in Idaho?
21 A It's been the standard for published rates
22 for projects under 10 average megawatts to develop, yes,
23 it has.
24 Q And at the risk of an objection here, do
25 you know whether this Commission is under a legal
CSB REPORTING
[phone]
351 GRISWOLD (X)
Rocky Mountain Power
.
.
.
18
19
1 obligation to encourage QF development? Do you know that
2 or not?
3 MR. KAUFMANN: Obj ection, Your Honor, that
4 calls for a legal conclusion and our witness is not an
5 attorney.
6 COMMISSIONER SMITH: Sustained.
7 MR. RICHARDSON: Thank you, Madam
8 Chairman. That's all I have.
9 COMMISSIONER SMITH: Thank you.
10 Mr. Miller, do you have questions?
11 MR. MILLER: Just a couple.
12
13 CROS S - EXAMINAT ION
14
15 BY MR. MILLER:
16 Q Mr. Griswold, would you have your
17 testimony with you?
A I do.
Q Almost all of my questions are going to
20 focus on your Exhibit No. 205 which accompanies your
21 rebuttal testimony.
22
23
A I have it.
Q In general terms, can you explain for us
24 what is embodied in Exhibit 205?
25 A Exhibit 205 is a set of criteria that we
CSB REPORTING
[phone]
352 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 propose as a method to restrict large QFs from
2 disaggregating. The criteria was developed using some
3 statute we had found in Minnesota and there it was
4 designed for permitting, but it was designed for
5 permitting wind proj ects. We took that. We modified it
6 to really reflect the ability to be afforded the
7 published avoided costs and then kind of reworked it and
8 submi tted it with our direct testimony.
9 This version here with my rebuttal
10 contains criteria from the original submittal by us, but
11 wi th some additional criteria that the other parties
12 submitted, the Commission Staff, RNP and ICL, so we tried
13 to develop this into a proposed criteria that
14 incorporated, you know, the thoughts of all that
15 submi tted strawman proposals.
16 Q Not to put words in your mouth, but this
17 reflects an evolution in your thinking based on your
18 review of what other parties have had to say?
19 A Correct. After reading the direct
20 testimonies as I pointed out of the other proposals, we
21 believed that there were some additional criteria that
22 strengthened our original submittal.
23 Q You mentioned RNP, in the course of this
24 proceeding and in the discussion of these criteria, if
25 you had not previously been acquainted with her, did you
CSB REPORTING
[phone]
353 GRI SWOLD (X)
Rocky Mountain Power
.
.
.
1 become acquainted with Ms. Decker?
2 A I did, yes.
3 Q And has Ms. Decker engaged with you in
4 discussions with respect to the development of these
5 criteria?
6 A Yes, she has.
7 Q Have you found Ms. Decker to be a
8 constructive participant in this process?
9 A Yes.
10 Q Has Ms. Decker communicated to you some
11 additional comments with respect to Exhibit 205?
12 A Yes, she has.
13 Q And I wonder if we could go through and
14 ask you to indicate your understanding of her
15 communications and your responses to them. I understand
16 there's been a comment with respect to item (a) (1) .
17 A Yes, she, as I recall, supported having
18 that five-mile criteria used.
19 Q Did she indicate that the five-mile
20 measurement would be from generating equipment to
21 generating equipment?
22 A Yes. Our interpretation has always been
23 that it's based on, for example, wind, it would be from
24 turbine tip to turbine tip would be the -- the five miles
25 would be the minimum, and originally I think she had
CSB REPORTING
[phone]
354 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 asked if that was based on the interconnection points and
2 our interpretation is no, it's between the closest
3 turbines of each proj ect.
4 Q So it turns out that you and she think the
5 same way on that point, maybe just not precisely clear in
6 the language?
7 A Right.
8 Q And with respect to item (3) (c), did
9 Ms. Decker have a comment or suggestion on that point?
10 A Yes, her point was that proj ects should
11 be, QF projects should be, allowed to share, have shared
12 interconnection facilities and an interconnection point
13 and, you know, the Company's interpretation based on
14 PURPA is that's an allowed and that is something that is
15 allowed, yes.
16 Q So that's a point that perhaps could be
17 clarified, but there's no substantive disagreement on?
18 A Correct.
19 Q And did Ms. Decker have a comment with
20 respect to item (3)(j)?
21 A Yes, she did, but I can't remember it. I
22 apologize.
23 Q She'll have an opportunity to clarify
24 that, but do you have a recollection of her comment
25 creating any point of disagreement between you and she?
CSB REPORTING
[phone]
355 GRISWOLD (X)
Rocky Mountain Power
.
.
.
1 MR. KAUFMANN: Madam Chair, I appreciate
2 Mr. Miller's diplomacy. I wouldn't mind if he asked a
3 leading question here. I think it's hard for my witness
4 to agree to something that's going to be testified to
5 later by Ms. Decker without knowing what that is.
6 COMMISSIONER SMITH: Mr. Miller, do you
7 wish to pursue it?
8 MR. MILLER: No, we can clarify it when
9 Ms. Decker testifies.
10 COMMISSIONER SMITH: All right, thank you.
11 THE WITNESS: I do remember the fourth.
12 The fourth had to do with confidentiality or proprietary
13 information while going through this criteria and the
14 Co~pany has and respects, you know, whether it's a QF or
15 a counterparty' s proprietary or confidential information
16 and would have no qualms about signing a confidentiality
17 agreement as part of the process to evaluate a number of
18 projects.
19 Q BY MR. MILLER: So with respect to your
20 Exhibit 206, which is sort a of questionnaire of the
21 proj ect details, the Company would not have a problem if
22 the developer wanted to submit some of that information
23 confidentially?
24 A Absolutely not.
25 MR. ANDREA: Madam Chair, if I could just,
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356 GRISWOLD (X)
Rocky Mountain Power
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1 I apologize for interrupting the flow --
2 COMMISSIONER SMITH: No problem, Mr.
3 Andrea.
4 MR. ANDREA:I've just been informed
5 that Mr. Kalich has a plane to catch. I would like to
6 have him excused, if possible, but I wanted the
7 Commission's and parties' approval before excusing him.
8 COMMISSIONER SMITH: Is there any
9 obj ection to excusing Mr. Kalich? You're free to go.
10 MR. ANDREA: Thank you, Madam Chair.
11 Q BY MR. MILLER: And just one final area,
12 Mr. Griswold. Did Ms. Decker have a comment with respect
13 to item ( 2) (d) ?
14 A Are we speaking back on --
15 Q 205.
16 A -- 205? She may have, but I don't
17 recall.
18 Q All, right we'll cover that, again, with
19 Ms. Decker. Stepping back just one step from Exhibit
20 205, there's been sort of repeated testimony about an
21 experience in Oregon of a proj ect that appears to have
22 been able to aggregate or disaggregate itself. Was that
23 a PacifiCorp was PacifiCorp the purchaser of the
24 output of those projects?
25 A Yes, it is.
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357 GRISWOLD (X)
Rocky Mountain Power
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1 Q And did you have experience in working
2 through the process of applying the Oregon rules to that
3 proj ect or proj ects?
4 A Yes, we did.
5 Q And did you take into account that
6 experience when you prepared Exhibit 205 and the criteria
7 and the structure in Exhibit 205?
8 A Yes.
9 Q In your opinion, is Exhibit 205 and the
10 cri teria it proposes an improvement over the Oregon
11 rules?
12 A I believe it is. I mean, it certainly
13 addresses or attempts to address the criteria that we
14 believe shows common ownership, development, management,
15 and the Oregon rules were a little bit more flexible and
16 really did not go into a number of these criteria, so
17 yeah, it is a strong, what I consider a stronger, set of
18 criteria.
19 Q From an administrative standpoint, do you
20 believe that PacifiCorp would be capable of administering
21 and applying these criteria as proj ects are brought to
22 PacifiCorp?
23 A Yes, we would be able to manage this. I
24 will say that it will create some additional
25 administrati ve work. The one thing that we do, whether
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358 GRISWOLD (X)
Rocky Mountain Power
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.
1 it's a standard or published rate QF or a large QF, is we
2 have a fairly rigorous due diligence which incorporates a
3 lot of the components of the criteria, but not
4 necessarily from the aspect of looking to see whether
5 it's a disaggregated proj ect or not. It's important for
6 us to know regardless of the size that the project, it's
7 going to be a resource to serve our system, our
8 ratepayers are paying for it and we do the due diligence
9 to make sure that it's going to be there, so this will
10 just become if it's adopted one additional step we would
11 do in looking at a project here in Idaho, but it will be
12 an additional step, an additional burden and frankly, it
13 could be subj ect to disputes and I think that's one of
14 the key criteria to consider here is that it's a
15 subj ecti ve -- as much as we established that the
16 criteria -- as much criteria as possible to limit
17 disaggregation, it is subj ecti ve and, as I have said
18 before, having a 100 kW level is in fact not subjective.
19 It's a clear line in the sand.
20 Q We'll come back to that 100 kW question in
21 just a moment, but I take it, it's your testimony that
22 although administration of the program contemplated by
23 the criteria would add to your due diligence
24 responsibili ties, it's wi thin your management
25 capability?
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359 GRI SWOLD (X)
Rocky Mountain Power
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1 A Yes, it is.
2 Q All right, and your proposal does have a
3 feature for Commission review in the event of a dispute;
4 correct?
5 A Correct. Irregardless of what our
6 evaluation is, I mean, ultimately, the Commission has the
7 right to seek and determine if they are, you know, a
8 disaggregated project, but our -- this proposal is really
9 designed to at least fundamentally identify up front if
10 it meets that or not.
11 Q And in return for your cooperative spirit,
12 I won't ask the questions I asked the other utility
13 wi tnesses regarding the Commission. Changing the subj ect
14 just slightly, have you reviewed the testimony of Paul
15 Martin on behalf of Intermountain Wind?
16 A I have, yes.
17 Q And were you in the Hearing Room today
18 when he testified?
19 A Yes, I was.
20 Q Based on your acquaintance and
21 understanding of the Intermountain proj ect, do you
22 believe that the proposed Black Canyon Project is a,
23 depending on how you want to look at it, an aggregated or
24 disaggregated proj ect?
25 A Well, he has only submitted the single
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360 GRI SWOLD (X)
Rocky Mountain Power
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1 proj ect to US for a power purchase agreement. Under the
2 current temporary 100 kW cap, he could request IRP
3 pricing from us.
4 Q Or if the Commission were to adopt your
5 cri teria proposed in Exhibit 205 and retain the 10
6 average megawatt eligibility?
7 MR. KAUFMANN: Madam Chair, I understand
8 Mr. Miller's line of questioning. He is advocating very
9 well for his client, but the fact of the matter is we
10 can't apply this rule without the written attested
11 submi ttals that are contemplated in the rule. I think
12 that Bruce would do his very best to answer, but I would
13 want that to be without prejudice for us to reach a
14 different conclusion if and when we actually did the
15 analysis and I just want to make that point for the
16 record.
17 COMMISSIONER SMITH: Thank you, Mr.
18 Kaufmann.
19 COMMISSIONER SMITH: Mr. Miller.
20 MR. MILLER: Well, I think I was trying to
21 prove the obvious, that it's not a disaggregated project,
22 so perhaps there's no real need to continue to get proof
23 from the obvious.
24 Q BY MR. MILLER: Just one final question or
25 area. You indicated that in your opinion the 10 kilowatt
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361 GRI SWOLD (X)
Rocky Mountain Power
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1 threshold is the surest way to prevent disaggregation.
2 A The 100 kW?
3 Q Yes.
4 A Yes.
5 Q All right. If we made an analogy to human
6 terms, would you agree that the human death penalty is a
7 sure way to ensure that a person will not transgress __
8 MR. KAUFMANN: Madam Chair, I'm getting
9 kicked under the table by even his own client here.
10 Obj ect to that question. It's speculative.
11 COMMISSIONER SMITH: I assume you were
12 only inserting a little levity.
13 MR. MILLER: The death penalty? There's
14 nothing funny about that.
15 COMMISSIONER SMITH: It depends.
16 MR. MILLER: I was.
17 COMMISSIONER SMITH: Thank you,
18 Mr. Miller. You're finished?
19 MR. MILLER: Just about. I want to make
20 clear RNP' s position that retention of the 10 average
21 megawatt current cap is critically important from our
22 point of view and I know that Mr. Griswold has suggested
23 going to a megawatt cap and in light of PacifiCorp' s
24 cooperati ve approach to this case --
25 MR. WALKER: Is that a question or would
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362 GRISWOLD (X)
Rocky Mountain Power
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1 Mr. Miller like to take the stand and testify?
2 MR. MILLER: I'd like to make a small
3 statement if you don't mind.
4 MR. WALKER: That's improper and I object.
5 It's not a time for attorneys to make statements. He's
6 supposed to be cross-examining Mr. Griswold and I
7 object.
8 COMMISSIONER SMITH: Mr. Miller, can you
9 save your statement for later?
10 MR. MILLER: Well, I guess I'm a little
11 frustrated by counsel for Idaho Power's inflexibility in
12 allowing parties to address the Commission.
13 COMMISSIONER SMITH: Which you'll have
14 ample opportunity to do before we close the hearing.
15 MR. MILLER: What I would like to do,
16 then, is say that rather than attempt to make my points
17 with respect to the 10 megawatt versus average megawatt
18 issue through cross-examination, I'd like to reserve the
19 opportunity to make those points through a statement at
20 the time, at some point in time, when it does not offend
21 Idaho Power.
22 COMMISSIONER SMITH: And I think there
23 will be ample opportunity for any closing statements any
24 party wishes to make before we conclude the hearing.
25 MR. MILLER: Thank you.
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363 GRISWOLD (X)
Rocky Mountain Power
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1 COMMISSIONER SMITH: You're welcome.
2 MR. ANDREA: And Madam Chair, just an
3 addi tional point. To the extent that Mr. Miller intends
4 to make those points through a statement, it's my
5 assumption that statements of attorneys are not evidence,
6 so I would just like clarification that that is in fact
7 true.
8 COMMISSIONER SMITH: We always give the
9 opportuni ty for parties to give opening or closing
10 comments and I don't think this case will be any
11 different.
12 MR. ANDREA: Thank you.
13 COMMISSIONER SMITH: Mr. Otto.
14 MR. OTTO: Thank you, Madam Chairman. I
15 just have a few questions.
16
17 CROSS-EXAMINATION
18
19 BY MR. OTTO:
20 Q First, I'd just like to say thanks for
21 making an effort on some criteria. That was commendable
22 and I think you did a good job of it. I'd like to ask
23 you a couple of things, of course. One is you've stated
24 a position there's several options to address
25 disaggregation. One is to set the cap at 100 kilowatts
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364 GRISWOLD (X)
Rocky Mountain Power
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1 and one is to set the cap at 10 average megawatts and
2 develop some proj ect criteria.
3 A That's correct, except for one correction.
4 Our criteria that we established as part of the rebuttal
5 set the threshold at 10 nameplate, 10 megawatts
6 nameplate.
7 Q Granted, and also, of course, pricing is
8 an issue. My question is who gets to make the policy
9 determination of what the cap is, 100 kilowatts or 10
10 megawatts?
11 A I believe the Commission ultimately rules
12 on where the cap is or if this criteria is something
13 that's a valid method for limiting disaggregation.
14 Q Thank you for that, so turning to the idea
15 of average megawatts, if a proj ect is -- if the cap is 10
16 average megawatts or it's 10 nameplate megawatts, it
17 still doesn' t resolve identifying what is a single
18 project; is that true?
19 A That's true. It's just one component of
20 criteria.
21 Q Okay. Turning to -- so you provide a very
22 helpful Exhibit 204 which lays out the -- in your
23 rebuttal testimony.
24.25
A Uh-huh, yes.
Q And that lays out kind of the positions of
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365 GRI SWOLD (X)
Rocky Mountain Power
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20
1 the parties who decided to engage on this issue. I think
2 a take-away, and you can maybe correct me if I'm wrong,
3 is that there is some substantial common ground.
4 A Yes, I would agree there's common ground
5 in these various proposals that were submitted.
6 Q Would you say that your exhibit, let's
7 see, is it 205, is an outgrowth of that common ground?
8 A Yes, I would. As my rebuttal testimony
9 MS. SASSER: Objection.
10 COMMISSIONER SMITH: Ms. Sasser.
11 MS. SASSER: To the extent that Mr. Otto
12 is trying to draw some kind of conclusion that Commission
13 Staff being a category in Exhibit 204 then shows some
14 kind of tacit agreement to Exhibit 205, that would be
15 incorrect.
16 MR. OTTO: That was not the statement I
17 was trying to make at all and I'm sorry if my question
18 implied that. I was not trying to state that the other
19 parties agree, just Mr. Griswold's position.
COMMISSIONER SMITH: Maybe you need to
21 clarify your question.
22 MR. OTTO: How about I'll withdraw the
23 question on that.
24.25
COMMISSIONER SMITH: Excellent.
Q BY MR. OTTO: So let's just look at
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366 GRISWOLD (X)
Rocky Mountain Power
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1 Exhibit 205.
2 A Okay.
3 Q And, of course, we'll just ask Rocky
4 Mountain Power's position on that exhibit. One of your
5 concerns is a level of discretion or not discretion, but
6 subj ecti vi ty, that having criteria and having this
7 process could lead to an administrative burden.
8 A Yes, it is.
9 Q And I noticed that in these criteria
10 there's 10, but you don't identify what -- would you
11 think of a way to cut down on the subj ectivity would be
12 to name a number that are more important or to maybe have
13 some key factors that are more obj ecti ve and then have
14 more subj ecti ve factors?
15 A Well, any time you have any sort of
16 criteria that you're judging any project or multiple
17 proj ects on, it's always better to have obj ecti ve
18 criteria that is very clear and black and white and you
19 can just check that off as opposed to something that's
20 more subj ecti ve and so I guess the general answer would
21 be yes, more objective is always better.
22 Q So I would take it that when you crafted
23 these criteria you had that in mind, that you were going
24 for objective of things?
25 A Yes. You know, we looked at this as
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367 GRISWOLD (X)
Rocky Mountain Power
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.
1 things that you could, information that would be provided
2 by the developer and that you could analyze and check the
3 box off.
4 MR. OTTO: Thank you. That's all I
5 have.
6 COMMISSIONER SMITH: Thank you, Mr. Otto.
7 Ms. Davis?
8 MS. DAVIS: Yes, thank you, just one
9 question for Mr. Griswold.
10
11 CROSS-EXAMINATION
12
13 BY MS. DAVIS:
14 Q I took some time and reviewed your Exhibit
15 205 and I think the scope of this proceeding will answer
16 this question for me, but I just wanted some reassurance,
17 if you could provide that, that the strawman proposal
18 that's been negotiated and could potentially, I assume,
19 be adopted by this Commission is intended to apply only
20 to wind and solar QFs?
21 A No, it does not, and it's really not,
22 first to clarify, it wasn't a negotiated proposal. It
23 was -~ it is Rocky Mountain Power's own proposal. We did
24 incorporate some of the criteria that others have.25 proposed to us. One of those suggestions that seemed to
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368 GRISWOLD (X)
Rocky Mountain Power
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1 come through from the other parties who submitted was
2 that this criteria should be applied equally to all QFs
3 and not j list wind and solar. Our original testimony,
4 direct testimony, had said wind and solar and this one
5 which came through with our rebuttal was expanded to
6 include all QFs.
7 Q Based on the scope of this proceeding,do
you think that that's an appropriate proposal to make at
this point?
A I do.
Q And why is that?
A If in fact a QF irregardless of the
8
9
10
11
12
13 resource type is attempting to disaggregate then if
14 they're not attempting to disaggregate regardless of
15 whether they're wind, solar, hydro, biomass, whatever the
16 resource type, they should be able to go through this and
17 come out the other end, be available for published
18 rates.
19
20 further?
MS. DAVIS: May I inquire a little
21
22
COMMISSIONER SMITH: Certainly.
Q BY MS. DAVIS: PacifiCorp has a fairly
23 large service area and so I assume that within that
24 service area you do service or have PURPA contracts with
25 small hydro developers; is that a correct assumption?
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369 GRI SWOLD (X)
Rocky Mountain Power
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1 A It is, yes.
2 Q Have you -- which states do those exist
3 in?
4 A Well, we're in six states, we have small
5 hydro in all six.
6 Q Have you ever in any of those six states
7 run into an instance where there was a disaggregation
8 scenario posed by a small hydropower development in
9 conduit?
10 A Not that I can recall.
11 Q Do you in any of those five or six states
12 off the top of your head, if you can recall this, have
13 any instances where there are small hydro in conduit QF
14 PURPA facilities that are wi thin five miles of one
15 another?
16 A I really don't know that. You know, we
17 have a large number of them scattered across a large
18 geographical area and I couldn't tell you how close they
19 were to each other.
20 Q Do you anticipate that under the criteria
21 proposed by Rocky Mountain Power that there would be some
22 subj ecti vi ty built into that system so that if a small
23 canal company were attempting to develop hydropower
24 wi thin five miles of one another just based on the
25 availability of the terrain to support that type of
CSB REPORTING
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370 GRISWOLD (X)
Rocky Mountain Power
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1 development, would your criteria automatically disqualify
2 them as an attempt to disaggregate or violate the
3 cri teria that you've proposed?
4 A It would likely depend on the proj ects. I
5 mean, we would provide -- we would apply the criteria
6 equally to all resource types and to the extent that, you
7 know -- and part of that ultimately becomes looking at
8 subj ecti ve criteria and certainly, if we did rule that
9 the small hydros violated the criteria, you do have the
10 right to have that decision reviewed by the Commission.
11 I mean, ultimately the Commission has the control over
12 this.
13 Q So if I could just try to take this to a
14 fine point, there is some subj ecti vi ty that you believe
15 would be built into this criteria, but there would also
16 be room for appeal to the Public Utilities Commission if
17 the power developer disagreed with your determination?
18 A We would make the initial determination,
19 that's correct. I can't speak to the subj ectivity
20 because this criteria has not been formally approved and
21 we would look to once if this ultimately became the
22 guideline, we would then have to sit down and determine
23 how we would look at projects on resource types coming
24 through, but at the end of that, the QF developer,
25 whether they're wind, hydro, whatever, still can take
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GRISWOLD (X)
Rocky Mountain Power
371
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19
1 whatever the decision is that comes from the Company and
2 bring that to the Commission.
3 MS. DAVIS: At this time, Madam
4 Chairwoman, I'd like to move to strike Exhibit 205 on the
5 basis that it goes beyond the scope of today' s
6 proceedings and beyond the scope of the GNR-E-11-01 case
7 as it stands before us.
8 COMMISSIONER SMITH: Mr. Kaufmann.
9 MR. KAU FMANN : Than k you, Madam Cha i r .
10 First of all, I note that the motion to strike goes
11 beyond the scope of the offending provisions. There
12 certainly is a lot in this exhibit other than the
13 five-mile rule and just note that this applicability to
14 all of the QFs was something that came up in rebuttal and
15 was raised by Commission Staff as well. I think the
16 Commission knows how to deal with this kind of issue
17 without striking the exhibit.
18 COMMISSIONER SMITH: Any response?
MS. DAVIS: If I may clarify briefly, I
20 wasn't obj ecting to it simply on the basis of the
21 five-file distinction between the facilities, but on the
22 basis that it goes beyond wind and solar, that the scope
23 of the proposed criteria goes beyond the scope of today' s
24 proceedings dealing with disaggregation of wind and solar
25 facili ties.
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372 GRISWOLD (X)
Rocky Mountain Power
.1 MR. KAUFMANN: And Madam Chair, my point
2 remains the same, there's much more to the agreement than
3 that particular passage, but I think that's what I meant
4 to say was the wind and solar was something that the
5 Commission has other tools to deal with besides just
6 striking this.
7 COMMISSIONER SMITH: I'm going to deny the
8 motion to strike the exhibit. I think we're receiving it
9 in the context of a case that is noticed only for wind
10 and solar, so I think the Commission might have a notice
11 problem if we tried to extend it beyond that, so I don't
12 think it's necessary..
.
13 MS. DAVIS: Thank you, Madam Chairwoman.
14 I have no further questions.
15 COMMISSIONER SMITH: Thank you.
16 Mr. Williams?
17 MR. WILLIAMS: No questions.
18 COMMISSIONER SMITH: Okay, Ms. Sasser.
19 MS. SASSER: I have a few questions,
20 Madam Chair. Thank you.
21
22
23
24
25
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Rocky Mountain Power
373
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1 CROSS-EXAMINATION
2
3 BY MS. SASSER:
4 Q Mr. Griswold, Mr. Miller and Mr. Otto have
5 gone to great lengths to show your agreement and
6 participation in the collaboration of Exhibit No. 205.
7 Should it be my understanding based on that exhibit
8 wi thin your rebuttal testimony that your initial position
9 as to reducing the threshold to 100 kilowatt permanently
10 is no longer PacifiCorp' s primary position in the case?
11 A No, our primary position is that making
12 100 kW permanent is our -- is the surest way to limit
13 disaggregation. We provided this, our strawman proposal,
14 if in fact that was denied, that the Commission agreed
15 that it should be moved back. It's important that this
16 kind of criteria get put in place if in fact the size of
17 the proj ect goes up, but our first position is that it
18 should be 100 kW permanently.
19 Q Thank you; so have you reviewed Staff
20 witness Sterling's testimony in this case?
21 A I have.
22 Q If I can refer you to page 4 of your
23 direct testimony, lines 11 through 15, and it is exactly
24 what you were just speaking to, I quote, "Should the
25 Commission seek to reinstate a higher eligibility
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374 GRI SWOLD (X)
Rocky Mountain Power
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10
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.
1 threshold but restrict disaggregation, the Commission
2 should retain discretion to deny eligibility for
3 published rates in the event a large QF finds a way to
4 meet the eligibility criteria but is found by the
5 Commission to be a large QF on other grounds. II
6 Isn' t it true that under Staff's proposal
7 the Commission retains the very discretion to deny
8 eligibility for published rates that you're referring to?
9 Yes, as I read the Staff's proposal.A
Q And my final question, do you have a ball
11 park figure of how much wind is currently on PacifiCorp' s
12 system, both Idaho and --
13 A On their whole system? It's roughly
14 18-1,900 megawatts, maybe 2,000 megawatts, of wind and
15 that includes QFs, resources that we own and resources
16 that we purchase through bilateral power purchase
17 agreements.
18 And that's the system as a whole?Q
19 The system as a whole, yes.A
20 MS. SASSER: Thank you. That's all the
21 questions that I have.
22 COMMISSIONER SMITH: Commissioner Redford.
23
24
25
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375 GRISWOLD (X)
Rocky Mountain Power
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1 EXAMINATION
2
3 BY COMMISSIONER REDFORD:
4 Q I just have a couple of questions, Mr.
5 Griswold. I'm still having a good deal of trouble with
6 regard to some of the criteria that you listed here and
7 it appears to be a menu of items that have been put
8 together by -- is it put together by Rocky Mountain or is
9 it PacifiCorp or is it a combination of folks or who is
10 it?
11 A If we're referring to Exhibit 205 --
12 Q Yes.
13 A -- this was put together by PacifiCorp.
14 Our initial proposal was submitted with my direct
15 testimony and the history of that came about from a rule
16 that was put in place in Minnesota for permitting wind
17 proj ects. We modified that to fit QF, the published rate
18 eligibili ty. We looked at our experiences in our other
19 states, and specifically in Oregon, and we strengthened
20 that proposal with extra criteria.
21 A number of the other parties here also
22 submitted with their direct testimony a number of
23 strawman proposals. We looked at those and we realized
24 there were some good criteria in those and we
25 incorporated those into Exhibit 205.
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376 GRISWOLD (Com)
Rocky Mountain Power
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1 Q Does PacifiCorp have any j oint ventures
2 whereby it's j oint venturing with other companies to
3 construct these wind turbine facilities?
4 A To my knowledge, no.
5 Q Under the construction, who constructs the
6 facilities? Is that Rocky Mountain or is it
7 PacifiCorp?
8 Well, Rocky Mountain is the distributionA
9 arm for Wyoming, Utah and Idaho of PacifiCorp and the
10 wind turbines, if the Company owned a wind farm, that
11 wind farm would be constructed by our generation
12 department or under the direction of our generation
13
14
department, which is under the PacifiCorp Energy which
manages all of the power plants and assets for power
15 generation for the Company.
16 So there are a lot of collaborationQ
17 agreements between the various divisions and various
18 companies under the umbrella of PacifiCorp?
19 A Well, we are a vertically integrated
20 utility and we do work as, in theory should be working
21 as, a single Company.
22 Well, this might seem to be a sillyQ
23 question, do you apply the criteria that's listed in
24 Exhibi t 205 to your intercompany transactions?
25 I guess Ilm not sure of your question.A
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377 GRISWOLD (Com)
Rocky Mountain Power
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1 Q Well, okay.
2 Could you rephrase it?A
3 You said, first one, ownership by the sameQ
4 or affiliated entity. Isn't Rocky Mountain an affiliated
5 entity of PacifiCorp or it's directly owned by?
6 I don't know how the ownership is betweenA
7 the business units. The assets are, they're owned by
8 PacifiCorp, the Company. The development of the resource
9 is done by the business unit PacifiCorp Energy which
10 manages everything from coal to our hydro to our wind
11 farms.
12
13
14
15
Q Okay, I guess I'll try to answer my own
question. None of these criteria apply to intercompany
transactions as regards the development of wind farms?
A No, these were developed specifically for
16 the Idaho, this Idaho, QF docket.
17 And there's no way that, not that youQ
18 would, but that PacifiCorp or Rocky Mountain can game
19 that system either?
20 PacifiCorplRocky Mountain does not developA
21 QFs. We're not a QF developer.
22 Rocky Mountain isn't or PacifiCorp?Q
23 Nei ther of us. The Company as a wholeA
24 does not develop QFs.
25 COMMISSIONER REDFORD: Okay, that's the
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378 GRISWOLD (Com)
Rocky Mountain Power
.1 question. I don't have any further questions.
2 COMMISSIONER SMITH: Commissioner
3 Kj ellander?
4 COMMISSIONER KJELLANDER: No.
5 COMMISSIONER SMITH: Okay, do we have any
6 redirect, Mr. Kaufmann?
7 MR. KAUFMANN: Yes, thank you,
8 Madam Chair. I need just a moment to read my writing, if
9 you please.
10 (Pause in proceedings.)
11
12.
.
MR. LOWE: Madam Chair?
COMMISSIONER SMITH:Yes, please identify
13 yourself on the phone.
14 MR. LOWE: This is John Lowe.
15 COMMISSIONER SMITH: Yes, Mr. Lowe.
16 MR. LOWE: Could I ask Mr. Griswold a
17 question or two?
18 COMMISSIONER SMITH: You may certainly do
19 that.
20 MR. LOWE: Thank you.
21
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CSB REPORTING
[phone]
379 GRISWOLD (Com)
Rocky Mountain Power
.1 CROSS-EXAMINATION
2
3 BY MR. LOWE:
4 Q Mr. Griswold, are you aware that there may
5 be a couple of situations in PacifiCorp' s service
6 territory where there are small hydro proj ects well
7 wi thin one mile or at least wi thin five miles of a
8 si tuation in Oregon as well as a potential situation in
9 the Howe Valley in Idaho where there are clusters, so to
10 speak, of small hydros or QFs?
11 A I'm not aware of your specifics.
12 Q Are you aware of Stayton Santiam Water.13 Control District and Tony Rausch projects?
14 A Subj ect to check, I believe they are QFs
15 on our system. They're existing QFs that have been
16 operating for a significant time. Those are in Oregon.
17 Q Correct, and there's also a cluster of
18 four proj ects in the Howe Valley in Idaho. It's unclear
19 as to what their proximity is, but certainly, there may
20 be more than one of them or two of them that are in a
21 cluster that are covered by a five-mile radius.
22 COMMISSIONER SMITH: So Mr. Lowe, it just
23 occurred to me to look at my parties list. It appears
24 you are not an attorney..25 MR. LOWE: Correct.
CSB REPORTING
[phone]
380 GRISWOLD (X)
Rocky Mountain Power
.
10
11
1 COMMISSIONER SMITH: So I'm sorry, but you
2 can't ask any more questions because the Idaho State Bar
3 is a very strong union and unless you're a lawyer and
4 have paid them your money, then you don't get to practice
5 before the Idaho Public Utilities Commission.
6 MR. LOWE: Okay, well, I asked.
7 COMMISSIONER SMITH: All right, thank you,
8 it was my mistake.
9 MR. RICHARDSON: Madam Chair?
COMMISSIONER SMITH: Mr. Richardson.
MR. RICHARDSON: I'm not sure what entity
12 Mr. Lowe is with, but I believe there's an exception in.
.
13 your rules for officers of --
14 COMMISSIONER SMITH: He's a consultant to
15 the Renewable Energy Coalition in Portland, Oregon.
16 MR. RICHARDSON: Okay.
17 COMMISSIONER SMITH: And his lawyer is
18 also an Oregon lawyer and I don't know if he's made peace
19 wi th the Bar, so we don't want to be sued again by the
20 Supreme Court.
21 All right, Mr. Kaufmann.
22 MR. KAUFMANN: Thank you, Madam Chair. I
23 have just three points I want to touch on in redirect.
24
25
CSB REPORTING
[phone]
381 GRI SWOLD (X)
Rocky Mountain Power
1 REDIRECT EXAMINATION.2
3 BY MR. KAUFMANN:
4 Q You were asked about PacifiCorp' s
5 recommendation for a size criteria based on nameplate
6 megawatts as opposed to average megawatts. Is your
7 motivation just purely to shrink the size of proj ects
8 that are eligible for standard costs?
9 A Well, I believe it's an additional
10 cri teria that would help limit disaggregation. It
11 doesn't preclude small wind proj ects from getting
12 developed. We have a number of proj ects that are less.13 than 10 megawatts, wind proj ects, so it doesn't preclude
14 the development, but the one thing it does is it is,
15 again, a clear obj ecti ve line in the sand that you can
16 determine projects from.
17 Q Let's take a stab at applying the strawman
18 rule in Exhibit 205 and let's assume that a developer has
19 managed to meet the criteria, but still appears in your
20 judgment to be, in essence, a disaggregated proj ect. As
21 you understand the rule that Rocky Mountain has proposed,
22 would the utility or the Commission be obligated to offer
23 this developer standard avoided cost rates?
24 A Are you asking me if it went through the.25 criteria and was successful?
CSB REPORTING
[phone]
382 GRISWOLD (DI)
Rocky Mountain Power
.
.
.
1 Q If you applied the criteria in Exhibit
2 205, the five miles, the constructed within a 24-month
3 period, the exhibits characteristics, let's say it didn't
4 trigger a hit on items (a) through (j), but you you
5 know, like obscenity, you know it when you see it and you
6 think that this proj ect is a disaggregated proj ect, do
7 you interpret your rule as requiring the utility andlor
8 the Commission to offer a published avoided cost PPA to
9 this developer?
10 No, this criteria, you know, if at the endA
11 of this we felt it was still a dis aggregated proj ect, we
12 would provide that to the QF and the QF would have the
13 opportuni ty to take that before the Commission for an
14 ultimate decision.
15 And how important would you say thisQ
16 feature is to the strawman proposal of Rocky Mountain
17 Power?
18 I think it's very important. I mean, IA
19 think like, you know, other criteria throughout the QF,
20 you know, the Commission is what I call the ultimate
21 backstop decider on proj ects, whether they qualify for
22 published avoided costs or any other disputes you may
23 have, they are the party of resolution.
24 My final issue I'll touch on here, Mr.Q
25 Griswold, were you in a capacity where you were closely
CSB REPORTING
[phone]
383 GRI SWOLD (DI)
Rocky Mountain Power
.1 invol ved with QF contracts in Idaho at the time the
2 Commission issued its U. S. Geothermal Order ordaining the
3 10 average megawatt eligibility cap?
4 A No, I was not.
5 Q That would have been about 2005. You
6 weren't
7 A Oh, I think -- I'm sorry, did you ask me
8 if I was involved in the docket?
9 Q No, I asked you if you were working with
10 Idaho QF contracts at that time.
11 A Yes.
12 Q And have you been working continuously in.13 Idaho, PURPA, for the Company since the inception of the
14 10 average megawatt eligibility cap?
15 A I have.
16 Q And Mr. Richardson asked you in cross-exam
17 whether the average megawatt threshold has been effective
18 for development of QFs in Idaho and you said yes. You're
19 familiar with the Company's, the QF PPAs that the Company
20 has signed with Idaho QFs; is that correct?
21 A Yes, I am.
22 Q And how would you categorize the QFs that
23 have signed in terms of total megawatts and in terms of
24 contracts between what you would consider small, under 10.25 average megawatt, proj ects and proj ects that you would
CSB REPORTING
[phone]
384 GRISWOLD (DI)
Rocky Mountain Power
.1 consider dis aggregated? I think I've asked a pretty bad
2 question.
3 COMMISSIONER SMITH: Mr. Kaufmann, this is
4 great. You have reconfirmed my long-held belief that the
5 hardest questions for any witness come from their own
6 lawyer.
7 MR. KAUFMANN: I think so.
8 COMMISSIONER SMITH: It's just great.
9 MR. KAUFMANN: I might try to pare that
10 down a little bit.
11 Q BY MR. KAUFMANN: The Commission's 10
12 average megawatt rule, who has it helped by and large?.13 What size QF developer has it helped by and large in your
14 experience?
15 COMMISSIONER SMITH: If you don't have an
16 opinion, that's okay.
17 THE WITNESS: Well, I'll have an opinion
18 after I'm put off the stand, I can talk to him alone. I
19 don't think that -- you know, in Idaho we've had QFs
20 smaller than 10 average megawatts that have gotten
21 developed and we've had, you know, a single wind proj ect
22 developed in '05, '06 that hasn't been built, but it went
23 through that criteria as a single proj ect, and now we're
24 faced with some large proj ects disaggregated into some.25 published rate size proj ects, so I don't -- there's been
CSB REPORTING
[phone]
385 GRISWOLD (DI)
Rocky Mountain Power
.1 QF development in Idaho irregardless of whatever the size
2 is and my belief is there will continue to be. I don't
3 know if that answered your question.
4 Q BY MR. KAUFMANN: Well, I think so. Is it
5 accurate well, can you mention the QF proj ects that
6 PacifiCorp has fileò with the Commission for approval of
7 PPAs in the last -- in 2010 and so far in 2011?
8 A Sure. We've had two proj ects, two wind
9 proj ects, that were developed, Power County North and
10 South, that were approved. They're currently under
11 construction and those were approved in '10. We have
12 fi ve by Cedar Creek Wind before the Commission for.13 decision. We've got, I believe we've had a small hydro,
14 Lower Valley Energy, that has been approved in '09 or
15 2010, something like that. We've also had -- we have a
16 biogas by Cargill before the Commission for decision and
17 I think that captures the resources.
18 Q My final question, if this rule, the
19 Exhibit 205 rule, were in effect in 2005 -- sorry, in
20 2010, which of those projects you just mentioned likely
21 would have qualified for the contract they received and
22 which likely would not?
23 A Well, the two Power County contracts would
24 have to go through some sort of criteria. If this was.25 the ultimate criteria, they would have to go through
CSB REPORTING
[phone]
386 GRISWOLD (DI)
Rocky Mountain Power
.1 that. Likewise, the five Cedar Creek proj ects would have
2 to go through the same criteria. They were built or
3 it's a hard question to answer because you've asked me if
4 they would get built and, you know, I can't tell you.
5 Q My question was would they have been
6 offered the standard rates? Would PacifiCorp have
7 offered them the standard rate contract if this
8 eligibili ty criteria were in effect?
9 COMMISSIONER SMITH: Well, according to
10 your own words back to you, Mr. Kaufmann, I would say
11 that would depend on whether they gave you the certified
12 statement that's required..13 MR. KAUFMANN: That's a fair comment.
14 Thank you.
15 Q BY MR. KAUFMANN: To your knowledge, did
16 the Power County proj ects share interdependent
17 financing?
18 A To my knowledge, they did.
19 Q And Cedar Creek proj ects, the five QFs you
20 mentioned, did they share interdependent financing?
21 A I do not know the answer to that.
22 Q Okay, do you know if they shared a common
23 development scheme?
24 A Yes, they did..25 Q Do you know if they shared common control,
CSB REPORTING
[phone]
387 GRISWOLD (DI)
Rocky Mountain Power
.
.
.
1 communication or operations facilities?
2 COMMISSIONER SMITH: So Mr. Kaufman, does
3 this relate to any cross-examination he received?
4 MR. KAUFMANN: My intent, Madam Chair, was
5 to respond to Mr. Richardson's line of inquiry that these
6 QFs, that the average megawatt, the 10 average megawatt,
7 rule has been effective in the development of small QFs
8 in Idaho and this rebuttal is intended to show that it
9 has been effective in the development of large QFs.
10 COMMISSIONER SMITH: Well, I think your
11 point is clearly understood by the Commission.
12 MR. KAUFMANN: I will take your repeated .
13 hint and thank you and I have no further questions.
14 COMMISSIONER SMITH: Thank you.
15 We appreciate your help, Mr. Griswold.
16 (The witness left the stand.)
17 COMMISSIONER SMITH: We're going to quit
18 for the day right now. We have three witnesses left who
19 I assume will all be available tomorrow. Let's see,
20 starting time, how about 9: 00 0' clock?
21 So I have something I want to say before
22 we all pack up and go and that is that the Commission has
23 always appreciated the collegiality of the hearing
24 participants in our Hearing Room. Even when we have the
25 most vigorously contested cases or issues, we seem to
CSB REPORTING
[phone]
388 GRISWOLD (DI)
Rocky Mountain Power
.
.
20
21
.
1 enjoy that in our Hearing Room, and I'm dismayed at what
2 seems to be a decline in that standard in our hearing
3 today, a decline in ci viIi ty and courtesy and I hope that
4 tomorrow our previous standard will return and we can get
5 back to what we're used to here, so everybody go get a
6 good night's sleep and come back with your smiley faces.
7 Thank you. See you at 9: 00.
8 (The Hearing recessed at 4: 50 p.m.)
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CSB REPORTING
[phone]
389 COLLOQUY