20120605Clearwater, Simplot, Exergy to Avista 1-4.pdf

Peter J. Richardson (ISB # 3195)
Gregory M. Adams (ISB # 7454)
Richardson & O'Leary, PLLC
515 N. 27th Street
P.O. Box 7218
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
[e-mail]
greg(richardsonando1eary.com
RE CE! V ED
2012JUH5 PM 2:t7
u,trlL UT1L1ES :;OMMlSSO'
Attorneys for Clearwater Paper Corporation, J.R. Simplot Company and
Exergy Development Group of Idaho
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S )
REVIEW OF PURPA CONTRACT ) PROVISIONS INCLUDING THE ) SURROGATE AVOIDED RESOURCE (SAR) )
AND INTEGRATED RESOURCE PLANNING)
(IRP) METHODOLOGIES FOR )
CALCULATING PUBLISHED AVOIDED )
COST RATES )
)
)
Case No. GNR-E- I I -Q4 V3
RESPONSE TO AVISTA
CORPORATION'S FIRST
PRODUCTION REQUEST TO
CLEAR WATER PAPER
CORPORATION, J.R. SIMPLOT
COMPANY AND EXERGY
DEVELOPMENT GROUP OF IDAHO
COMES NOW, Clearwater Paper Corporation, J. R. Simplot Company and Exergy
Development Group of Idaho and hereby responds to the First Production Request of Avista
Corporation. Dr. Don Reading is available to respond to questions about or sponsor these
responses.
Page 1 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
REQUEST NO. 1: On page 7, beginning at line 7 of the direct testimony of Dr. Don Reading,
Dr. Reading states: "The SAR methodology has been robust through all of those changes and has
produced avoided cost rates that have proven to be remarkably accurate in hindsight."
A Please provide all analysis and data supporting this statement.
B.Please provide the Companies' position on whether Idaho's published avoided cost rate
rates available to wind PURPA developers from January 1, 2010 through December 14, 2010
were "remarkably accurate in hindsight."
C.Please explain the basis for the response(s) to subpart b of this request and provide any
analysis or data supporting such response(s).
RESPONSE TO REQUEST NO.!:
A Dr. Reading's statement is based on his almost three decades of experience of
involvement in PURPA rate cases before the Idaho Commission, and an even longer time period
involved in electric utility rate cases before the Idaho Commission. No studies were necessary
for Dr. Reading to express his expert opinion on electric utility rates and PURPA rates in
particular.
B Dr. Readings observation was not limited to a specific point in time. "In hindsight" has
a broader meaning than just eleven and a half months in 2010. Avoided cost rates fluctuate over
time in both directions - up and down.
C None. The Companies rely on Dr. Reading's expert opinion.
Page 2 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
REQUEST NO. 2: On page 34 of the direct testimony of Dr. Don Reading, Chart 1 is used to
explain the difference between the proposed Idaho IRP method rates in this case and those for
the current Idaho IRP method, the Idaho 2011 JRP, and the Langley Gulch project.
A Please provide all analysis supporting the data contained in Chart 1 in an Excel
spreadsheet with all formulas intact.
B Does the data used to create Chart 1 include any adjustments to the gas prices to reflect
current prices?
C If the answer to subpart b is "no", please explain why no adjustment to gas prices was
used in preparing Chart 1.
D If the answer to subpart b is "yes," please explain and provide any supporting analysis
and data for any adjustment to the gas prices that was made in preparing Chart 1.
E If the answer to subpart b of this request is "no", please explain the purpose of Chart 1
and its relevance to this proceeding.
RESPONSE TO REQUEST NO. 2:
A Please see the attached spreadsheet.
C The per $/MWh avoided costs are taken from either the filings of Idaho Power or the
Idaho Commission Staff. One would need each of the separate models used and rerun with the
same gas price. The values were selected as being presented by Idaho Power within the same
relatively close time period. The exception being Langley Gulch that the Company is currently
being put into rates, so the value used is the one presented to the Commission when Idaho Power
requested the CPCN for Langley Gulch. The implication of the question appears to presuppose
natural gas prices are the only impact on the avoided cost rates. Many other assumptions and
Page 3 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
factors can impact the calculation of avoided costs. For example the Idaho Commission Staff
stated that the Langley Gulch capacity factor in more recent runs is not 65% but rather 49%,
which would impact the cost of capacity per MWh; By contrast, the Langley Gulch CCCT, the
only CCCT in Idaho Power's portfolio, shows an annual capacity factor ranging from 36 to 49
percent, with a 20-year average of 49 percent. [Comments of Commission Staff, IPC-E- 11-26,
January, 2012, p. 6.]
D N/A
E As stated in Dr. Reading's testimony following Table 1; While it might be argued each of
four cost estimates are not precisely comparable, the order of magnitude of the difference
between the utility's baseload load plant currently coming on line, and what it proposes to offer a
baseload QFs, is so dramatically different it calls into question the claims that the proposed
method is a realistic estimate of the Company's avoided cost. It is also important to note all four
of these estimates can be considered falling within the same time frame and are therefore
comparable. [Direct Testimony of Don Reading, IPC-E-1 1-03, p. 34.]
Page 4 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
Levelized Cost
Resource Type (Capacity Factor) $/MWh Source
Langley Gulch [300 MW] (65%) $111.13 Staff Comments, IPC-E-09-34 (Neal Hot Springs), 5/3/2010
CCCT lxi [270 MW] 2011 IRP (65%) $98.00 IPC0 2011 IRP, p. 47; without carbon adder of $10 $/MWh
Baseload -Current IRP Method [20MW] $65.00 IPCo Memorandum in Support of Stay, p. 15, GNR-E-111-03
Baseload -Proposed IRP Method [20MW] (92.0%*) $47.40 IPCo Memorandum in Support of Stay, p. 15, GNR-E-111-03
Baseload
Baseload -Proposed IRP Method [20MW] (92.0%*)
-{ I
Baseload -Current IRP Method [20Mw]
CCCT lxi [270 MW] 2011 IRP (65%)
I I
Langley Gulch [300 Mw] (65%)
$0 $20 $40 $60 $80 $100 $120
IRP Price Levelized $/MWh
* 90th Percentile Peak-Hour Capacity Factor
Response to Avista Data Request No. 2 A
REQUEST NO. 3: On page 35 of the direct testimony of Dr. Don Reading, starting at line 16,
Dr. Reading states: "For projects over 1OaMW, what is called the 'IRP Method' should be used
only when each utility's IRP is fully considered and approved through the hearing process."
A Did any of the Companies attend or otherwise participate in Avista's 2011 IRP
proceedings? If so, please list the Companies that have attended or participate in an Avista IRP
proceeding and provide dates that such Company(ies) attended or participate in an Avista IRP
proceeding and the names of any representatives of such Company(ies) that participated for on
behalf of such Company(ies).
B Please explain each Company's understands of the present oversight and participation of
Commission staff in utility IRP proceedings.
C What steps, if any, are the Companies (or, if the Companies have different positions or
proposals, any Company) proposing to meeting Dr. Reading's criteria that an "IRP" is fully
considered and approved?
RESPONSE TO REQUEST NO. 3:
A No.
B Staff usually sends a representative to IRP meetings. They sometimes ask questions.
They file comments. The agenda is set by the utility. The meetings are run by the utility. The
IRP is written by the utility. IRPs are sometimes updated by the utility.
C There can be no answer to this question until and unless a new process is established. At
that time the Companies will have an opportunity to evaluate how to participate and at what
level.
Page 5 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
REQUEST NO. 4: On page 43, beginning at line 7, of Dr. Reading's direct testimony, Dr.
Reading explains that "for many types of generation projects, it could take much longer than two
years to complete construction alone."
A Based on the statement above are the Companies stating categorically that solar and
projects [sic] cannot be constructed in two years or less?
B Do the Companies believe that the construction of different sized wind and solar QFs
might take less or more time for construction? Please discuss the impacts on construction
timelines of varying sizes of these two resources: 100 kW, 1 MW, 10 MW, 100 MW.
C This request is directed only to Exergy. Please provide a list of each PURPA facility in
Idaho that Exergy has developed or participated in the development of during the last five years.
D This request is directed only to Exergy. For each PURPA facility listed in the response
to subpart a of this request, please provide a detailed construction timeframe for the facility,
including when the facility commenced major construction and when it went commercial.
Where any construction timeframes exceed two years, please provide a detailed description of
the causes of the delay.
E Langley Gulch will be constructed in approximately two years. Do any or all of the
Companies acknowledge that the construction of a large resource like Langley Gulch might be
more complicated and take longer to obtain commercial operation that a PURPA resource?
Please explain.
F Is it any of the Companies' positions that a firm contract for the sale of the output of a
PURPA facility with pricing is required before any development expenses arer incurred or any
development timeline can commence for a PURPA facility? If so, please list which of the
Companies holds such position and explain each such Company's rationale for its position.
Page 6 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
G Is it any of the Companies' positions that a firm contract for the sale of the output of a
PURPA facility with pricing is required before any preliminary financing efforts for such facility
are completed? If so, please list which of the Companies holds such position and explain each
Company's rationale for its position.
RESPONSE TO REQUEST NO. 4:
A The Companies are not so stating absolutely and utterly without exception or
qualification.
B Yes. No such analysis has been conducted.
C Camp Reed
Tuana Gulch
Oregon Trail
Thousand Springs
Salmon Falls
Yahoo Creek
Pilgrim Stage Station
Payne's Ferry
Milner Dam
Burley Butte
Golden Valley
D Exergy begins construction on each wind project when the land rights are finally secured
from the landowner. That is when detailed wind resource measurement may begin which takes
at least one full year to satisfy lenders. That is also when environmental studies are begun.
Therefore the construction process takes several years typically.
Page 7 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
Camp Reed: construction commenced October, 2007 commercial operation December 2010.
Tuana Gulch: construction commenced November 2005 commercial operation December 2010.
Oregon Trail: construction commenced June 2005 commercial operation December 2010.
Thousand Springs: construction commenced November 2005 commercial operation December
2010.
Salmon Falls: construction commenced August 2007 commercial operation December 2010.
Yahoo Creek: construction commenced September 2005 commercial operation December 2010.
Pilgrim Stage Station: construction commenced November 2005 commercial operation
December 2010.
Payne's Ferry: construction commenced November 2002 commercial operation December 2010.
Milner Dam: construction commenced April 2007 commercial operation December 2010.
Burley Butte: construction commenced May 2007 commercial operation December 2010.
Golden Valley: construction commenced September 2007 commercial operation December
2010.
E Langley Gulch was not constructed in approximately two years. Idaho Power had placed
the order for the turbine well before the summer of 2009 when the Commission held hearings on
that plant. It is now the summer of 2012 and Langley Gulch has yet to achieve commercial
operation. That said, it is true that all projects present their own unique challenges and
opportunities and will have their own timeframe in which they can be brought to commercial
operation.
F Unless you are pursuing a hobby, without seeking serious wall street financing, every
rational project developer must demonstrate adequate debt service and/or return on equity ratios
to have a viable project. Why would a developer incur development expense if he didn't believe
Page 8 - Clearwater, Simplot and Exergy Response to Avista's First Production Request
he had a certain market for his project's output? This is especially true for the developer of a
PURPA project where the only buyer for his product is historically unmotivated (and sometimes
hostile) to the very concept of doing business with him.
G Again if one is building a hobby project then you don't worry about financing or
financial performance. If you are building a project that needs project financing from a bank or
institutional lender you need to show them the power purchase agreement with prices that meet
the operating margin requirements of the lender or the project will not be developed.
RICHARDS N AND O'LEARY, PLLC
'Peter J. c ds n (ISB No: 3195)
Gregory M. Adams (ISB No. 7454)
Attorneys for Clearwater Paper Corporation,
J. R. Simplot Company and
Exergy Development Group of Idaho
Page 9 Clearwater, Simplot and Exergy Response to Avista's First Production Request
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 5 th day of June, 2012, a true and correct
copy of the within and foregoing RESPONSE TO AVISTA CORPORATION'S FIRST
PRODUCTION REQUEST TO CLEARWATER PAPER CORPORATION, J.R.
SIMPLOT COMPANY AND EXERGY DEVELOPMENT GROUP OF IDAHO
was served as shown to:
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83702
jean.iewellpuc.idaho.gov
Donald Howell
Kris Sasser
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83702
donald.howe11puc.idaho.gov
krisine.sassercpuc.idaho.gov
Donovan E. Walker
Jason B. Williams
Idaho Power Company
P0 Box 70
Boise, ID 83707-0070
[e-mail]
jwilliamsidahopower.com
Michael G. Andrea
Avista Corporation
P.O. Box 3727
Spokane, WA 99220
[e-mail]
Daniel Solander
PacifiCorp/dba Rocky Mountain Power
201 S Main St Ste 2300
Salt Lake City, UT 84111
daniel.solander(yacificorp.com
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