20120614Dynamis 1 to IPC.pdf

Williams Bradbury
ATTORNEYS AT LAW RECEIVED
2012 JUN 11+ PM 12:43
PL -
UT1LiTE COMM!SO
June 14, 2012
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
Re: GNR-E-11-03
Dear Ms. Jewell:
Please find enclosed an original and three copies of Dynamis Energy's Response to
First Production Request of Idaho Power Company for filing in the above referenced case.
Thank you for your assistance in this matter. Please feel free to give me a call should
you have any questions.
Sincerely,
4e,4I L. W&
Ronald L. Williams
RLW/jr
Enclosures
1015 W. Hays Street - Boise, ID 83702
Phone: [phone] - Fax: [phone] - www.williamsbradbury.com
Ronald L. Williams, ISB No. 3034
Williams Bradbury, P.C.
1015 W. Hays St.
Boise ID, 83702
Telephone: [phone]
Fax: [phone]
[e-mail]
RECER'ED
2012 JUN It PM2:143
IDAHO PUE;!JC
UTIUTES COMMISSO
Attorneys for Dynamis Energy, LLC
BEFORE THE IDAHO PUBLIC UTILITES COMMISSION
IN THE MATTER OF THE COMMISSION'S
REVIEW OF PURPA QF CONTRACT
PROVISIONS INCLUDING THE
SURROGATE AVOIDED RESOURCE
(SAR) AND INTEGRATED RESOURCE
PLANNING (IRP) METHODOLOGIES FOR
CALCULATING PUBLISHED AVOIDED
COST RATES.
CASE NO. GNR-E-1 1-03
DYNAMIS ENERGY'S
RESPONSE TO FIRST
PRODUCTION REQUEST OF
IDAHO POWER COMPANY
COMES NOW, Dynamis Energy, LLC, and in response to the First Production Request
of Idaho Power Company to Dynamis Energy, LLC dated May 25, 2012, herewith submits the
following information:
REQUEST FOR PRODUCTION NO. 1: In Mr. Robert Looper's Direct Testimony,
page 7, lines 5-7, Mr. Looper states, "The incremental cost of CO2 emissions when operating
coal as opposed to natural gas units, range from $5-1 5IMWh, should greenhouse gas regulations
be implemented." Please provide the source and all supporting information that Mr. Looper
relied upon to determine the incremental cost of CO2 emissions when operating coal ranging
from $5-15/megawatt-hours.
DYNAMIS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 1
RESPONSE TO REQUEST FOR PRODUCTION NO. 1: Mr. Looper relied upon
Idaho Power's Response to Staff Request No. 12, where Idaho Power estimated 20 year
levelized avoided costs using Idaho Power's 2011 IRP carbon assumptions. As calculated by
Mr. Don Schoenbeck, and as shown in his testimony on page 25, those incremental CO2 costs
are as follows.
Comparison of 20 Year Levehzed Energy Costs
($/MWh)
IPC Current IRP Current IPC IRP Incremental
Resource Type Method w/Carbon Costs CO2 Costs
Baseload $49.96 $63.57 $13.61
Canal Drop $47.27 $60.90 $13.63
Solar $48.33 $62.00 $13.67
Wind $41.60 $56.16 $14.56
In addition, Mr. Looper relied upon a portion of the written testimony of Rocky Mountain Power
Witness Rick T. Link before the Wyoming Public Service Commission, dated April 2012, a copy
of which is attached hereto.
The response to this request was prepared by Mr. Robert D. Looper, in consultation with
Ronald L. Williams.
DATED: This 14th day of June, 2012.
[A~
Ronald L. Williams
DYNAMIS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 2
CERTIFICATE OF DELIVERY
I HEREBY CERTIFY that on this 14th day of June, 2012, I caused to be served a true and
correct copy of the foregoing document upon the following individuals in the manner indicated
below:
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
1411 E. Mission Avenue - MSC-23
Spokane, WA 99202
michael.andreaavjstacorp.com
Daniel E. Solander
PacifiCorp dba Rocky Mountain Power
201 South Main, Suite 2300
Salt Lake City, UT 84111
[e-mail]
Donald L. Howell, II
Kristine A. Sasser
Idaho Public Utilities Commission
472 W. Washington (zip: 83702)
P0 Box 83720
Boise, ID 83720-0074
[e-mail]
[e-mail]
Peter J. Richardson
Gregory M. Adams
Richardson & O'Leary, PLLC
P0 Box 7218
Boise, ID 83702
[e-mail]
[e-mail]
Attorneys for NIPPC, J.R. Simplot Co.,
Grand View, Exergy Development Group,
Board of County Commissioners of
Adams County, Idaho and Clearwater
Paper Corporation
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
LI Federal Express
Electronic Transmission
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
LI Federal Express
Electronic Transmission
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
LI Federal Express
Electronic Transmission
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
LI Federal Express
Electronic Transmission
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
LI Federal Express
Electronic Transmission
DYNAMIS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 3
Robert D. Kahn LI Hand Deliver' NIPPC, Executive Director
1117 Minor Ave., Suite 300 E] US Mail (postage prepaid)
LI Facsimile Transmission Seattle, WA 98101 LI Federal Express rkahn nippc.org Electronic Transmission
Don Sturtevant LI Hand Deliver' Energy Director fl US Mail (postage prepaid) J.R. Simplot Company LI Facsimile Transmission P.O. Box 27
Boise, ID 83707-0027 LI Federal Express
[e-mail] Electronic Transmission
Robert A. Paul LI Hand Delivery Grand View Solar II
15690 Vista Circle E:] US Mail (postage prepaid)
Desert Hot Springs, CA 92241 LI
LI
Facsimile Transmission
robertapaul08gmail.com Federal Express
Electronic Transmission
James Carkulis
Managing Member F-1 HandDelivery
Exergy Development Group of Idaho, LLC LI
LI
US Mail (postage prepaid)
Facsimile Transmission 802 West Bannock Street, Suite 1200 LI Federal Express Boise, ID 83702
[e-mail] Electronic Transmission
Dr. Don Reading LI Hand Delivery Exergy Development Group of Idaho, LLC LI US Mail (postage prepaid) 6070 Hill Road LI Facsimile Transmission Boise, ID 83703 LI Federal Express dreadingmindspring.com Electronic Transmission
Bill Brown, Chair LI Hand Delivery Board of Commissioners of Adams County LI US Mail (postage prepaid) P0 Box 48 LI Facsimile Transmission Council, ID 83612 LI Federal Express [e-mail] Electronic Transmission
Mary Lewallen
Clearwater Paper Corporation
601 W. Riverside Ave., Suite 1100
Spokane, WA 99201
Marv.lewallenclearwaterpaper.com
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
LI Federal Express
Electronic Transmission
DYNAMJS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 4
John R. Lowe
Consultant to Hand Delivery
Renewable Energy Coalition El
El
US Mail (postage prepaid)
Facsimile Transmission 12050 SW Tremont Street El Portland, OR 97225 Federal Express
Electronic Transmission jravenesanmarcosyahoo.com
R. Greg Ferney
Mimura Law Offices, PLLC El Hand Delivery
2176 E. Franklin Road, Suite 120 El
El
US Mail (postage prepaid)
Facsimile Transmission Meridian, ID 83642 El [e-mail] Federal Express
Electronic Transmission Attorneys for Interconnect Solar
Bill Piske, Manager El Hand Delivery Interconnect Solar Development, LLC El US Mail (postage prepaid) 1303 E. Carter
Boise, ID 83706 El Facsimile Transmission
[e-mail] El Federal Express
Electronic Transmission
Wade Thomas El Hand Delivery General Counsel
Dynamis Energy, LLC El US Mail (postage prepaid)
776 E. Riverside Drive, Suite 150 El
El
Facsimile Transmission
Eagle, ID 83616 Federal Express
Electronic Transmission [e-mail]
C. Thomas Arkoosh
Capitol Law Group, PLLC El Hand Delivery
205 N. 10th St., 4' Floor El US Mail (postage prepaid)
P0 Box 2598 El Facsimile Transmission
Boise, ID 83701 F-1 Federal Express
tarkooshcapitollawgroup.com Electronic Transmission
Attorneys for Twin Falls Canal Company
And North Side Canal Company
Brian Olmstead ELECTRONIC SERVICE ONLY: General Manager
Twin Falls Canal Company Electronic Transmission
[e-mail]
Ted Diehl ELECTRONIC SERVICE ONLY: General Manager
North Side Canal Company Electronic Transmission
[e-mail]
Don Schoenbeck ELECTRONIC SERVICE ONLY: RCS Electronic Transmission [e-mail]
DYNAMIS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 5
Lori Thomas
Capitol Law Group, PLLC
[e-mail]
ELECTRONIC SERVICE ONLY:
Electronic Transmission
Ted S. Sorenson F-1 Hand Deliver' Birch Power Company
5203 South 1 1th East El US Mail (postage prepaid)
Idaho Falls, ID 83404 F1 Facsimile Transmission
t [e-mail] F] Federal Express
Electronic Transmission
Dean J. Miller
Chas. F. McDevitt LI Hand Delivery
McDevitt & Miller, LLP LI US Mail (postage prepaid)
420 W. Bannock Street (zip: 83702)
P0 Box 2564
LI F]
Facsimile Transmission
Federal Express
Electronic Transmission Boise, ID 83701
[e-mail]
[e-mail]
Attorneys for Idaho Windfarms, LLC,
Renewable Northwest Project and
Ridgeline Energy LLC
Glenn Ikemoto LI Hand Delivery Margaret Rueger
Idaho Windfarms, LLC [] US Mail (postage prepaid)
672 Blair Avenue F1 Facsimile Transmission
Piedmont, CA 94611 LI Federal Express
Electronic Transmission glennienvisionwind.com
[e-mail]
Megan Walseth Decker F] Hand Delivery Senior Staff Counsel [J US Mail (postage prepaid) Renewable Northwest Project
421 SW 6th Avenue, Suite 1125 F] Facsimile Transmission
Portland, OR 97204 F] Federal Express
Electronic Transmission meganmp.org
M. J. Humphries LI Hand Delivery Blue Ribbon Energy LLC LI US Mail (postage prepaid) 4515 S. Ammon Road LI Facsimile Transmission Ammon, ID 83406 F-1 Federal Express blueribbonenergygmail.com Electronic Transmission
DYNAMIS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 6
Anon F. Jepson
Blue Ribbon Energy LLC
10660 South 540 East
Sandy, UT 84070
[e-mail]
Benjamin J. Otto
Idaho Conservation League
710 N. Sixth Street (zip: 83702)
P0 Box 844
Boise, ID 83701
[e-mail]
Liz Woodruff
Ken Miller
Snake River Alliance
P0 Box 1731
Boise, ID 83701
[e-mail]
[e-mail]
D Hand Delivery
i:i US Mail (postage prepaid)
D Facsimile Transmission
Federal Express
Electronic Transmission
Eli Hand Delivery
D US Mail (postage prepaid)
Facsimile Transmission
LI Federal Express
Electronic Transmission
Hand Delivery
E] US Mail (postage prepaid)
Facsimile Transmission
LI Federal Express
Electronic Transmission
Tauna Christensen LI Hand Delivery Energy Integrity Project U US Mail (postage prepaid) 769 N. 1100 E. LI Facsimile Transmission Shelley, ID 83274 LI Federal Express [e-mail] Electronic Transmission
Deborah E. Nelson
Kelsey J. Nunez
Givens Pursley LLP
601 W. Bannock Street (83702)
P0 Box 2720
Boise, ID 83701-2720
[e-mail]
[e-mail]
Attorneys for Idaho Wind Partners I, LLC
LI Hand Delivery
LI US Mail (postage prepaid)
LI Facsimile Transmission
O Federal Express
Electronic Transmission
Ronald L. Williams
DYNAMIS ENERGY'S RESPONSE TO FIRST PRODUCTION REQUEST OF IDAHO POWER COMPANY, Page 7
REDAcrw
Docket No. 20000-400-EA-11
Wftness Rick T. Link
I Q. Pleese state your name, busfitme addrees and position with PaclftCorp dba
2 Rocky Mo..4pin Power ("Company").
3 A. My name, is Rick T. IJi& My business address is 825 NE Multnomah St., Suite
4 600, Portland, Oregon 97232. My pmeent position is Director, Structuring &
5 Pricin&
6 Q. Are you the same Rick T. Link that submitted direct testimony In this
7-
8A. Yes.
9 Sunanary
10 Q. What Is the purpose of your rebuttal testimony?
11 A. The puipose of my testimony is to explain updates to the analysis originally used
12 by the Company to support Its application for a certificate of public convenience
13 and necessity ("CPCN") related to the selective catalytic reduction ("SCR") and
14 baghouse investments planned for the Naughton Unit 3 facility in response to
15 changing market conditions and in response to issues raised by Intervening
16 parties.
17 Q. Please summarize your rebuttal testimony In this proceeding
18 A. My rebuttal bitimony summarizes updates to the Company's analysis of SCR and
19 baghouse investments at Naughton Unit 3 This updated analysis has resulted In
20 the Company pursuing an alternative decision to convert to natural gas rather than
21 the original proposal in the CPCN application. Specifically. I will address in my
22 rebuttal testimony the following:
23 • Updates to the Company's base can natural gas price assumptions In
Page 1— REDACthD Rebuttal Testimony of Rick T Unk
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Page 2— REDAirw Rebuttal Testimony of Rick T. Link

5 A. Alternatives to the SCR and baghouse hwastmm incinde early retirement and

6 resource replacement or conversion of Naughton Unit 3 to natural gas

7 Consequently, the assumed price for natural gas directly affects the cost for gas.

8 fueled replacement resources In the case of an early retirement alternative or the

9 fuel cost and replacement energy In the case of a gas conversion alternative. The

10 price for natural gas is also a key factor in setting wholesale power prices In this
11 way, gas prices disproportionately affect the value of energy net of operating

12 costs from Naughton Unit 3 when operating as a coal-fueled resource versus the

13 value of energy net of operating costs from a gas-fueled resource replacement

14 alternative. Similarly, because of the relatively high level of carbon content in

15 coal as compared to natural gas, higher COa prices disproportionately affect the

16 prospective cost of emisdons between coal resources and natural gas as an
Page 3— REDACTED Rebuttal Testimony of Rick T. Link

1 using the December 2011 OFPC. Over the six months between June 2011 and

2 December 2011, average animal natural gas price at the Opal mArket hub over

3 the forward period 2015 through 2030 fell by approximately $0.66 per million

4 British thermal units ('mmBtu") or approximately 10 percent The downward

5 price trend Is largely a reflection of continued growth and continued growth

6 expectations for domestic shale gas production.
7 Q. Describe how the forward trend In the December 2011 natural gas prices

8 compare to historical prices at the Opal market hub?
9 A. Figure 1 below shows historical average annual natural gas prices and forward

10 natural gas prices from both the June 2011 OFPC and the updated base case

11 December 2011 OFPC at the Opal market hub. Over the 10 year period 2002

12 through 2011, prices at Opal averaged $435 per mmB. The highest annual
LI
13 average price over this period is $7.26 per minBtu, which occurred in 2005 when

14 hurricanes Katrina, Rita, and Wilma caused significant production losses in the

15 OuIf of Mexico region. Average annual prices were $6.48 per mnRtu in 2008,

16 which coincided with the general rush to commodities in advance of the collapse

17 of the housing bubble later that year.

18 Indic December 2011 OFPC, Opal market prices over the period 2015 to

19 2020 average $5.11 per minRtu. Prices over the period 2021 through 2030

20 average $7.09 per mmBtu, which is 39 percent higher than forward prices in the

21 2015 to 2020 tlnteframe and 56 piut higher than average historical prices over

22 the period 2002 through 2011. While forward prices from the December 2011

23 OFPC have fallen in relation to forward prices from the June 2011 OFFC on
Page 4— REDACIW Rebuttal Testimony of Rick T. Link
Average Annual Nahiral Gas Prices at Opal
g 10•00
I 0.00 • . I . , • . . .
•. I V w V 'v 'v ey e, AV 'V 'V 'V 'V
• Historical Am'.'l Average Price'
20G1.2011 Average Pdce
• December 2011 OFPC
L June2OIIOFPC
*Sow= ftWcoWW=WEXdMP øc
4 Q. Hn the Company updated Iii base case sumapdow for CO2 prices?
5 A. No, There have been no substantive changes in the policy arena or changes In
6 thud party expert forecasts of CO2 legislative activity that support a change to the
7 base case COa price assumption. As in its original base can analysis used to
8 support the CPCN application, the Company continues to assume CO2 prices of
9 $16 per ton beginning In 2021 and esc&athig at three percent plus inflation.
10 Natural Gas and CO2 Price Scenarios
11 Q. Has the Company evaluated dW&ent aommptlons for natural gas prices and
12 CO2prIcsslaItsupdatedanaIyaIs?
13 A. Yes In its original analysis used to support the CPCN application, the Company
14 analyzed low and high market price scenarios around the June 2011 OfPC base
15 case. The low market price scenario paired a low natural gas price forecast with a
r-) I
Page 5— REDACTED Rebuttal Testimony of Rick T. Link
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Page 6— REDAIbu Rebuttal Thatiniony of Rick T. Link
1s1
:--_- an nd COA Price an
___NalvadGav CO2 Prices
Base CM DacoobwI1 GPPC $l6Aca at 3%
On kfiidm
Lowcs,$16cO2 i.cw ohs Wbdm
HW1$16COs HWk $16%nss2IQ1,escaicthat3%
on k1aft
Base Cbs, $0 CD2 ____ No CO2 Costs
Base Cbs. $34 CO2 Cass M.siid for Price $34Aon it 2018, escaictiiig at 5%
Low Cu, $34 CO, Low Case A4ntcd for Price
Raspaso
$344cn is 2018, eseh4ig It 5%
cics -•-'•
ET*GmSDCD2 ____ No C0 Costs

9 DIsplacement of coal generation Is also influenced by low or sero emitting

10 renewable generation sources; however, not enough to entirely offset increased
11 natural gas demand. Conversely, with f*lling CO2 prices (or a market that is

12 absent CO2 prices), these is no Incremental emissions-based cost advantage for

13 natural gas or renewable generation as compared to coal, and demand for natural

14 gas in the electric sector of the U.S. economy is slightly lower. It is assumed that

15 any change In natural gas ttna1 most be balanced with a ehatiga in supply such
Page 7— REDACIW Rebuttal Testimony of Rick T. Link
IL) Page 8— REDACfw Rebuttal Testimony of Rick T. Link
I gas price forecast among all market price scenarios included in the updated
2 analysis of SCR and baghouse investments at Naughton Unit 3.
$16 ---.-----------•-.....---.-.-..-.....--.--.........--•-..•...••
$34 .. ........ t
jq $10
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Base Can (Dcc 2011 OFPC)-*-Low Gas. $16CO2 '*H1gb Gsa, $16 CO2
''.*Base (Ia, $0 CO2 -#-a Gas. $34 CO2 --Low Gas. $34 CW
Gas $00O2

3 The Company continues to assume a zero CO2 price for the low scenario

4 recognizing that there has been limited activity in the CO2 policy arena, and

5 policy makers remain unwilling or unable to address the greenhouse gas issue

6 over the study period For the high CO2 price scenario, prices are assumed to

7 remain consistent with the upper limit that would have been established under the

8 American Power Act of 2010 with an assumed start date in 2018 The high CO2

9 price scenario start date aligns with the earliest start date assumed by the third

10 party price forecasts reviewed by the Company. Figure 3 below shows the three
II CO2 price assumptions used in the market price scenarios in the updated analysis
12 of SCR and baghouse investments at Naughton Unit 3
Page 9— REDACTED Rebuttal Testimony of Rick T. Link
I W
2 Q. Did the Company we the same methodology that was used In support at the
3 appuc.uou sw iw UpUSIU am"= w we unu uuguwuv
4 Inv eslaionto at Naighto. UnIt 3?
5 A. Yes. The Company updated its assumptions, but the updated analysis uses the SO
6 Model in the same way that it was used in the analysis filed in support of the
7 CFCN application.
8 Q. Please describe the SO Model and how It is used by the Company.
9 A. The SO Model is a capacity expansion optimization tool that is used in the
10 Company's integrated resource plan (IRP") and business planning process to
11 produce resource portfolios in support of long-term plenning. The SO Model is
12 also used in the Company's analysis of resource acquisition opportunities and
13 resource procurement activities. It was used to support the successful acquisition
14 of the Chehalis combined cycle plant, to support the selection of the Lake Side 2
15 combined cycle resource in the most recently completed request for proposals
16 process, and will be used to evaluate bids that will be submitted In the currently
Page 10— REDAcrw Rebuttal Testimony of Rick T. Link

I Issued request for proposals for a 2016 resource as approved by the Utah and

2 Oregon Public Utility Commissions. The SO Model endogenously considers the

3 tradeoffs between the operating and capital revenue requirement costs of both

4 existing and prospective new resources while simnitaneously evaluating the

5 tradeoffs In energy value between existing and prospective new resource

6 alternatives.
7 Q. How was the SO Modal used In the updated analysis of the SCR and

8 baghouse Investments required for Naughton Unit 3 to continue operating as

9 a coal-flieled facility?

10 A For each of the market price scenarios evaluated, two SO Model simulations were

11 completed - an optimized simulation and a change case simulation. In the

12 optimld simuladon, the SO Model determines whether continued operation of

13 Naughton Unit 3 inclusive of incremental 5CR, baghouse, and other planned costs

14 requited to achieve compliance with emerging environmental regulations is a

15 lower cost solution than avoiding those incremental investments through early

16 retuement and resource replacement or through conversion to natural gsa.2 In die

17 change case simulation, the SO Model is forced to produce a suboptimal decision

18 by not allowing it to make the preferred decision that was made in the optimized

19 simulation. The difference in system costs between the two simulations for any

20 given market price scenario represents the PVRR(d)I which establishes how

21 favorable or unfavorable the incremental environmental capital investments
2 The (ciupsiiy COMUnM te naune Ia,ea'-1 inwasneni coats beyond the SCR and bnghoiue ojecte.
This includes cam te achieve conçllunce with EPA's mercury and air tonics it...il_4 (MATS), and coats
to achieve ccnliance with uo.,cciive mica on coal combustion noduak and cooling water lanka
Page 11— REDACFw Rebuttal Testimony of Rick T. Link