20061218Vol II Part II.pdf

cost assumptions that Idaho Power made, they assumed that
there would be no incremental fixed operating costs at
all other than property tax if the proj ect was located at
the Evander Andrews site.I think that's probably
unrealistic.At the same time they made that assumption,
they assumed that all of the fixed operating costs for
the last two years at Danskin, or the existing Danskin
plant at the Evander Andrews site, that nearly all of
those costs would have to be entirely replicated if that
proj ect was located at the (**Confidential**) site.
, think that's also unrealistic.Those are probably the
two biggest examples that I can think of.
One last question here.Should there be a
limit on how much money the Company should pay to
overcome their perceived assessment of risk on the
non-price attributes?
Well , I wouldn t necessarily say there
should be a 1 imi t.I think non-price attributes need to
be fairly valued and evaluated and compared to price
issues.I think there is some point at which non-price
issues can overcome some of the price factors, but there
certainly is a limit to how much that can happen.
don t know if I can cite a hard limit.In other words , I
don t think any price could necessarily be overcome by
non-price factors.
CSB REPORTING
Wilder , Idaho
184 STERLING (Di)Staff83676
Should customers be concerned in this case
about the amount of money being spent to overcome an
CSB REPORTING
Wilder , Idaho
assessment of non-price factor risk?
Certainly.
MR. WALKER:Nothing further.
COMMISSIONER SMITH:Thank you.
Questions?
185 STERLING (Di)Staff83676
EXAMINATION
BY COMMISSIONER SMITH:
I just have one question , Mr. Sterling,
kind of a philosophical one, and that is your view of the
Commission s responsibility when evaluating proposals to
build new plants and put this in rate base , is it simply
one of dollars and cents or is it something more?
, I don t think it's limited to just
dollars and cents.I think there are a variety of
different factors and I think Idaho Power considered a
variety of different factors besides just dollars and
cents.There are permitting issues , there are air
quality issues , there are operational issues, a whole
variety of different things that need to be considered.
So I guess my question is, what is the
Commission s responsibility when we review it?Is it to
review those same kind of factors in the same way the
Company did or is it to just look at what the Company did
to see if we can satisfy ourselves that it was
adequate?
Well , I don t think it's the Commission or
the Commission Staff's responsibility to entirely
replicate and reevaluate all of the same criteria, but
think we do need to carefully look at what the Company
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Wilder , Idaho
186 STERLING (Corn)Staff83676
and its evaluation team did, the assumptions that they
made to see whether we think what they did was reasonable
and fair.
And in spite of your recalculation of this
difference that may be the minimum of (**Confidential**) ,
you still believe that this is not the best proj ect?
Yes, I still believe that even though it'
not the (**Confidential**) difference, that it's a
minimum of (**Confidential**) , I still probably would
have chosen the other proposal, the (**Confidential **)
proposal.
Thank you.Thank youCOMMISSIONER SMITH:
for your help, Mr. Sterling.
(The witness left the stand.
COMMISSIONER SMITH:I deduce from my
notebook that you don t have other w~tnesses.
MR. WALKER:That is correct,
Madam Chairman.
COMMISSIONER SMITH:I guess we ll go to
Mr. Thompson.
MR. THOMPSON:Yes, the Industrial
Customers of Idaho Power would like to call Dr. Reading
to the stand, Dr. Don Reading.
CSB REPORTING
Wilder , Idaho
187 STERLING (Corn)Staff83676
DON C. READING,
produced as a witness at the instance of the Industrial
Customers of Idaho Power , having been first duly sworn,
was examined and testified as follows:
BY MR. THOMPSON:
DIRECT EXAMINATION
Dr. Reading, are you the same Dr. Don
Reading who caused direct testimony with Exhibit Nos. 201
CSB REPORTING
Wilder , Idaho
through 242 to be filed in this proceeding?
Yes.
And was that prefiled direct testimony and
attached exhibits prepared by you or under your
Yes.
Do you have any corrections or additions
to make to your testimony and/or exhibits today?
Yes.
Would you explain what that correction or
On page 28, lines 16 and 17 , the sentence
that says, "My understanding is that under PURPA
regulations , projects over 80 megawatts are not
considered QFs," in retrospect, a CHP or true
supervision?
addition is?
188 READING (Di)
ICIP83676
cogeneration proj ects are exempt from that, so as was
pointed out in Mr. Stokes ' testimony, he is correct and
am incorrect.
So how would you correct your testimony if
you might have said that?
I would just eliminate that paragraph.
That paragraph or that
I I m sorry, that sentence, right.It does
not change my general conclusions , but that point is
incorrect.
Thank you.If I were to ask you the same
questions today that you were asked in your prefiled
direct testimony, would your answers be the same?
Wi th that correction , yes.
Thank you.With that,MR. THOMPSON:
Madam Chair , I move that the prefiled direct testimony of
Dr. Reading be spread upon the record in this matter as
if it were read in full and Exhibit Nos. 201 through 242
be identified in the record.
COMMISSIONER SMITH:If there s no
obj ection, we will spread the testimony, keeping in mind
what belongs in the open transcript and what is
confidential.
(The following prefiled direct testimony
of Dr. Don Reading is spread upon the record.
CSB REPORTING
Wilder, Idaho
189 READING (Di)
ICIP83676
INTRODUCTION
PLEASE STATE YOUR NAME AND BUISNESS
ADDRESS.
My name is Don Reading and my
business address is Ben Johnson Associates 6070 Hill
Road , Boise, Idaho.
HAVE YOU PREPARED AN EXHIBIT
OUTLINING YOUR QUALIFICATIONS AND BACKGROUND?
Yes.Exhibit No. 201 serves that
purpose.
WHAT IS THE PURPOSE OF YOUR TESTIMONY
IN THIS CASE?
I have been retained by the
Industrial Customers of Idaho Power (" ICIP") to review
Idaho Power s request for a Certificate of Public
Convenience and Necessity ("Certificate ) for the
proposed Evander Andrews 170 MW gas-fired peaking plant,
proposed to be constructed near Mt. Home Idaho.I am
offering this testimony in order to present the evidence
supporting my conclusions that Idaho Power has not
demonstrated that the public convenience and necessity
requirements have been met for the construction of the
Evander Andrews plant.
COULD YOU PLEASE PROVIDE A BRIEF
190 Reading (Di) - ICIP
IPC-06-
DESCRIPTION OF ICIP AND ITS INTEREST IN THIS PROCEEDING?
ICIP is an unincorporated association
of Schedule 19 customers of Idaho Power.All ICIP
members receive electric utility services from Idaho
Power Company.ICIP is very concerned with making sure
that Idaho Power makes wise resource decisions and
chooses the best and most cost-effective al ternati ves for
meeting its power supply obligations.
191 Reading (Di) - ICIP
IPC-E-06-
COULD YOU PLEASE PROVIDE A BRIEF
SUMMARY OF YOUR TESTIMONY?
Yes.For the numerous reasons set
forth in my testimony, the proposed Evander Andrews
proj ect is the wrong resource for Idaho Power to be
constructing at this time.The Commission should rej ect
Idaho Power s application for a Certificate to construct
the Evander Andrews proj ect because it has not
demonstrated that the public convenience and necessity
requires it.
As discussed in detail below , there are
several fundamental problems with Idaho Power
application and the proposed proj ect.These problems
include: 1) the proposed proj ect was only evaluated using
information known by Idaho Power to be outdated and
inaccurate; 2) the proposed proj ect does not comply with
Idaho Power s 2004 Integrated Resource Plan (IRP) and is
not supported by the more recent 2006 IRP; 3) Idaho Power
failed to take an accurate and comprehensive look at
several al ternati ves it has for meeting its peak demand
and the actual loads it will be servlng; and 4) Idaho
Power has not justified its selection of a natural gas
plant which is substantially more expensive than other
similar proj ects.
192 Reading (Di) - ICIP
IPC-E-06-09
II.PUBLIC CONVENIENCE AND NECESSITY
DO YOU HAVE ANY CONCERNS ABOUT IDAHO
POWER I S APPLICATION THAT STEM FROM THE FACT THAT THE
PROPOSED PLANT IS A NATURAL GAS-FIRED COMBUSTION TURBINE?
193 Reading (Di) - ICIP
IPC-E-06-
Yes I do.Natural gas electrical
plants are increasingly being viewed as high risk and
costly resource choices.Natural gas plants are
generally expensive to operate , and have highly volatile
fuel costs, which makes most of their operating costs
highly variable.Addi tionally, there are questions about
whether it is prudent to use gas solely to create
electrici ty, given the relatively low energy efficiency
of burning natural gas solely for power generation
purposes.
This Commission has also expressly stated
concerns about Idaho Power s reliance on new natural
gas-fired electric plants.In reviewing Idaho Power
2004 IRP , this Commission stated,
We are also pleased to see that the Company
preferred portfolio includes larger acquisitions of
renewable resources, namely wind and geothermalresources. However, the Company s continued
reliance on new gas-fired generation to meet summer
peak causes us particular concern for two reasons.First , natural gas prices continue to be volatile.
Second, the continued effects of the drought on
irrigation pumping and other state actions that
reduce the amount of irrigation pumping creates
uncertainty regarding the need for additional
peaking resources. We are also concerned about a
possible over-reliance on natural gas peakers as a
fall back position due to a lack of transmission
capaci ty.
(Order No. 29762, IPC-E-04-18,
p.
10).
The Commission s concerns are as valid today as they were
in 2004.
194 Reading (Di) - ICIP
IPC-E-06-
WHY DOES THE COMPANY CLAIM IT NEEDS A
NATURAL-GAS PEAKING RESOURCE AT THIS TIME?
Idaho Power states that customer
growth is the primary driving force behind the Company
need for additional generating resources.(Said Direct,
pp. 3-4).The
195 Reading (Di) - ICIP
I PC-E-O 6-0 9
Company s stated main reason for seeking a natural gas
peaking plant is that its 2004 Integrated Resource Plan
(" IRP") Near-Term Action Plan included an 8 8 MW natural
gas combustion turbine peaking resource.(Idaho Power
Application pp. 3-4).The proposed Evander Andrews
proj ect is a 170 MW resource.Al though the proposed
plant is nearly double the size of the plant called for
in Idaho Power s 2004 IRP , Idaho Power argues that it is
consistent with the 2004 IRP.(Idaho Power Application
pp. 3-4).
WHY HAS IDAHO POWER COMPANY DOUBLED
THE SIZE OF THE PROPOSED PLANT FROM WHAT WAS CALLED FOR
IN THE COMPANY'S 2004 IRP?
The Company I s explanation is that it
was able to obtain economies of scale, or more capacity
at a competi ti ve price.(Exhibit No. 202, Response to
ICI P Request for Production No.1) .The Company is not
claiming that it requires such a large plant in order to
ensure that it can meet its peak loads.
DO YOU AGREE THAT BECAUSE THE 2004
IRP CALLS FOR A PEAKING RESOURCE, COUPLED WITH IDAHO
POWER'S CUSTOMER GROWTH IDAHO POWER HAS JUSTIFIED THE
NEED FOR THE EVANDER ANDREWS PROJECT?
No. It has been more than two years
since the Company filed its 2004 IRP with the Commission.
196 Reading (Di) - ICIP
IPC-E-06-09
(IPC-E-04-18) .The information used to prepare the 2D04
IRP (obviously complied in the months before that filing)
is substantially outdated.There have been significant
changes in both the energy picture and Idaho Power
situation since the filing of the 2004 IRP that cast
doubt on the need for a large natural gas
197 Reading (Di) - ICIP
IPC-E-06-
powered peaking unit at this time.
In addition , the Company has developed and
provided the ICIP with a draft of its 2006 IRP in this
proceeding.(Idaho Power filed its Final 2006 IRP on
October 2 , 2006).The draft and final 2006 IRPs contain
updated information , on a more current basis.It would
be more appropriate to use the current 2006 IRP
information to evaluate the question of whether to
construct the Evander Andrews proj ect, or acquire other
al ternati ve resources to meet the Company s load.
YOU SEEM CONCERNED THE PROPOSED 170
MW FACILITY IS BEING JUSTIFIED BASED ON THE COMPANY'
2004 IRP RATHER THAN CURRENT INFORMATION.COULD YOU
EXPLAIN YOUR CONCERNS FURTHER?
It is not prudent for a utility to
base expensive resource decisions on outdated
information.Al though one can always second guess a
decision with the benefit of hindsight , basing a current
decision on outdated and inaccurate data is a different
si tuation-one that can and should be avoided.
In its decision approving the Danskin unit
(currently on the site of the plant proposed in this
case), the Commission stated,
The Commission finds that Idaho Power is entitled to
include Danskin plant costs in rate base. The
extraordinary conditions that existed at the time
198 Reading (Di) - ICIP
IPC-E-06-
Danskin was developed warranted a rapid response by
the Company , and justify the investment in a peaking
facility that by design is more costly to operate
than other types of facilities.
(IPUC Order No. 29505 , IPC-E-03-13,
p.
18)(emphasis
added).Unlike the Danskin proj ect, however, which was
concei ved and constructed in the middle of the California
199 Reading (Di) - ICIP
IPC-E-06-
energy debacle, the situation for the proposed Evander
Andrews proj ect differs because the Company is not facing
an energy crisis like the one that was occurring when the
certificate for Danskin was issued.In the case of
Evander Andrews, the Commission and Idaho Power have the
abili ty to make a deliberative and thoughtful resource
decision based on current, accurate information , before
Idaho Power begins construction of the proj ect.In this
instance , the requested Certificate should be denied
based on an analysis of current information.The
Commission s determinations should not be based on the
conditions that existed in the 2004 IRP, or even those
that existed at the time Idaho Power issued its Request
for Proposals for a peaking resource.
Basing a Certificate determination on
current information only makes good sense, and seems to
be the standard backed by the Idaho Supreme Court, that
stated in Cambridge Telephone Co. v. Pine Telephone,
" Lt J he concept of 'public convenience and necessity
should be considered in light of current and changing
circumstances." 109 Idaho 875, 879 (1985).
CAN YOU GIVE AN EXAMPLE OF HOW
RELEVANT INFORMATION HAS CHANGED BETWEEN THE TIME OF THE
2004 IRP AND THE 2006 IRP?
Yes.As an example, the forecast for
200 Reading (Di) - ICIP
IPC- E-O 6-0 9
natural gas prices in 2006 was projected to be $4.89 per
therm in the 2004 IRP , but the 2006 IRP shows that they
are now more than 65% higher at $8.23 per thermo
Additionally, as compared to the assumptions in the 2004
IRP , the Company now expects natural gas prices to be
more than $1.00 per therm higher over the next 29 years.
Graph 1 below depicts this.Natural gas prices are now
expected to be especially high in the near term.
201 Reading (Di) - ICIP
IPC-E-06-09
Graph 1
IPCo IRP Natural Gas Price Forecast
$11.
$10.
--.-- ..--- --..------ - --_.- -..-------- --------- --..-- --- ----
--__m_
__-----
$8.00 ---
$6.
$5.
------------------ ----------.---!
$4.
-+-20041PR
---
2006 IRP
I created this graph using the 2004 IRP
and the Draft 2006 IRP.
YOU STATE THAT NATURAL GAS PRICES
HAVE CHANGED SUBSTANTIALLY SINCE THE 2004 IRP.DIDN'
IDAHO POWER UPDATE THOSE NUMBERS IN ITS EVALUATION OF
WHETHER THE EVANDER ANDREWS PROJECT WAS AN APPROPRIATE
RESOURCE TO BUILD?
No, it did not.In direct testimony,
Mr. Said states even though natural gas prices have risen
substantially since the 2004 IRP, all the units bid in
response to the Request For Proposals ("RFP") for a
peaking resource were evaluated with the same gas price-
price known to be significantly outdated and inaccurate.
Mr. Said states,
202 Reading (Di) - ICIP
IPC-E-06-
Forecasted natural gas prices from the 2004 IRP were
used in the bid evaluation. Forecasted natural gas
prices have gone up substantially since the issuance
of the 2004 IRP, but the same price forecast was
utilized in the evaluation of all of the natural
gas-fired project proposals and, as a result,proj ects with lower guaranteed heat rates had lower
fuel costs on a dollar per megawatt basis.
(Said Direct,
p.
15).
203 Reading (Di) - ICIP
IPC-E-06-
The ICIP followed up with a Request for
Production, asking "At any time during its evaluation of
the various responses to Idaho Power s RFP, did Idaho
Power use an updated forecast of natural gas prices?"
Idaho Power responded,
Idaho Power did not use, nor was it necessary to
use, an updated forecast of natural gas prices to
evaluate the responses to the RFP. In bid
evaluations, it is only necessary that the same gas
price forecast be used to calculate estimated
variable operating costs for all of the bids to
allow for a consistent cost comparison among the
bids.
(Exhibit No. 203, Idaho Power s Response to Request for
Production No. 23 of ICIP)(emphasis in original)
IF ALL OF THE BIDS WERE EVALUATED
USING THE SAME GAS FORECAST, AREN'T YOUR CONCERNS ABOUT
RELYING ON OUTDATED INFORMATION ALLEVIATED?
No.Al though using the same gas
forecast (even if outdated) may have allowed the Company
to determine which natural gas plant bid in response to
the RFP was the least cost, Idaho Power s use of a
significantly outdated gas price forecast prevented them
from considering the fundamental question that must be
answered before seeking a Certificate to build the
gas-fired plant.That question is:gi ven the known
substantial" increase in natural gas prices, is this
gas-fired resource the best resource choice?
204 Reading (Di) - ICIP
IPC-E-06-
As I discuss in my testimony, there are viable
alternatives to gas fired generation, such as combined
heat and power, also known as cogeneration or CHP
increased Demand-Side Management DSM"acti vi ty, and
other proven methods for decreasing or meeting peak
demand.The approach used by Idaho Power to determine
that it should build the Evander Andrews plant-relying on
an outdated IRP , and on stale
205 Reading (Di) - ICIP
IPC- E-O 6-0 9
gas price information known to be inaccurate-simply
short-circui ted a meaningful inquiry into whether the
plant is the best resource option given the significant
changes over the past few years and current proj ections
into the future.
ASIDE FROM SIGNIFICANTLY HIGHER
NATURAL GAS PRICES, WHAT OTHER EVIDENCE SUPPORTS YOUR
CONTENTION THAT CURRENT INFORMATION UNDERMINES THE
PURPORTED NEED FOR A 170 MW NATURAL GAS FIRED TURBINE?
The "preferred portfolio " in Idaho
Power s own 2006 IRP does not call for any gas-fired
combustion turbines like the Evander Andrews plant.
fact, of the four resource portfolios examined in the
2006 IRP, only one contained a natural gas-fired resource
(other than CHP)
In its 2006 IRP, the Company explains how
current and forecasted natural gas prices have affected
the Company s decisions regarding future use of natural
gas-fired combustion turbines.The Company states that
LgJ iven current and forecasted natural gas prices
purchasing energy from the regional markets, up to the
limi ts of the transmission system , will most likely be
more economical than operating the Lnatural gas
combustion turbines as an energy resource.(Exhibit No.
204 , Idaho Power Final 2006 IRP
p.
98).Addi tionally,
206 Reading (Di) - ICIP
IPC-E-06-
the Company explains that it expects to operate
combustion turbines only when customer load exceeds the
generation capacity of its other generation units and the
import capacity of the transmission system.(Exhibit No.
204 , Idaho Power Final 2006 IRP, p.98).
Thus, according to Idaho Power , it is expected to be less
expensive to purchase
207 Reading (Di) - ICIP lOa
I PC- E-O 6-0 9
power on the market than to incur the variable running
costs of gas fired power.This would mean that the
proposed plant in this case would not be run for
off-system sales , and the plant would be run only when
transmission constraints prevent the importation of
power.The results of the Company s model runs which
show the plant producing only 60,331 MWh over the next 25
years (discussed later in my testimony) also support the
conclusion that Idaho Power would use the Evander Andrews
plant very little.
YOU STATE THAT THE 2006 IRP DOES NOT
SUPPORT THE CONSTRUCTION OF THE EVANDER ANDREWS PLANT.
BUT , DOESN'T THE 2006 IRP ASSUME THE EVANDER ANDREWS
PLANT IS ALREADY PART OF IDAHO POWER I S RESOURCE MIX?
For that reason, the 2006 IRPYes.
does not provide any evaluation by Idaho Power of whether
the Evander Andrews plant is a good resource choice at
this time.
GIVEN THAT THE 2006 IRP SIMPLY
ASSUMES THE EVANDER ANDREWS PLANT IS BUILT, IS THERE ANY
WAY THE 2006 IRP, OR THE INFORMATION SUPPORTING IT, CAN
BE USED TO DETERMINE WHETHER EVANDER ANDREWS I S A GOOD
RESOURCE CHOICE BASED ON CURRENT INFORMATION?
The 2006 IRP information helpsYes.
shed light on the usefulness and value of the Evander
208 Reading (Di) - ICIP
IPC- E-O 6-0 9
Andrews plant in a couple of ways.Al though Idaho Power
did not undertake the task of using the 2006 IRP
information to evaluate the Evander Andrews proj ect, I
have been able to do that to some extent using the
information gathered in this proceeding.
209 Reading (Di) - ICIP lla
IPC-E-06-
The Commission Staff asked the Company for load-resource
balance data by month for each of the years 2006-2026,
both with and without the Evander Andrews plant, using
the data from the 2006 IRP.(Exhibit No. 206, Commission
Staff 4th Production Request, No. 96) .Commission Staff
stated because "2006 IRP load-resource balance data has
been in use by the Company for several months during the
preparation of the 2006 IRP ... Staff assumed it could
also be used to re-examine the need for the Evander
Andrews plant.The Company did not undertake a model
run to determine the results requested by Staff.
Instead, in its response the Company simply stated its
guess that, if 2006 IRP data were used and the Evander
Andrews plant were considered an option , rather than an
assumed resource, a peaking resource like the Evander
Andrews plant "would have most likely been included" in
the 2006 IRP's preferred portfolio.(Exhibit No. 207
Idaho Power Response to Staff 4th Production Request, No.
(emphasis added).This statement speaks nothing of95)
the size of such resource, or how that determination was
made.
Another way that the 2006 IRP data can be
used to determine whether the Evander Andrews plant is a
good resource decision at this time is to use it to
estimate how often the resource is expected to run.
210 Reading (Di) - ICIP
IPC-E-06-
Idaho Power did provide some information on this topic at
the request of Commission Staff, which demonstrated the
plant is forecast to be used only rarely, and only in the
near-term.
In its Request for Production No.2 6,
Commission Staff asked Idaho Power to provide estimates
by month for the period from June 2007 to December 2027
of the number of hours the Evander Andrews plant will be
expected to operate.The Company
211 Reading (Di) - ICIP 12a
IPC-E-06-
answered generally that the number of hours the plant
will be expected to operate will depend on a variety of
factors.(See Exhibit No. 208 , Response to Commission
Staff's Request for Production No.2 6) .
Staff then asked a follow-up question
explaining that it was seeking an estimate of the actual
hours the Company estimated Evander Andrews would run, as
predicted by the AURORA simulation model , using the
resource portfolio selected in the 2006 IRP.(Exhibi t
No. 209, Commission Staff's Second Production Request at
No. 100).The Company responded with an AURORA run under
average water conditions, average load conditions, and
90th percentile peak-hour loads.The results of that
model run showed the Evander Andrews plant producing only
60,331 MWh over the next 25 years (See Exhibit 209).
the total proj ected production over the next 25 years,
93% or 56 300 MWh is expected to occur in the three years
between 2008 and 2010.Further, the results showed that
the Evander Andrews plant is expected to produce zero MWh
under average water conditions for any year after 2015.
The Company attempted to explain this
surprising result by stating,
Under more severe conditions for the Idaho South
bubble " and the remainder of the WECC zones, such
as 90th percentile water and 95th percentile
peak-hour loads, the CTs are expected to dispatchmore frequently.
212 Reading (Di) - ICIP
IPC-E-06-
Thus, based on the Company s best estimate, it appears
that the plant may only be used to generate an amount of
energy equal to 355 hours of running at full capacity
under average water conditions.Almost all of that would
occur between 2008 and 2010, with the plant sitting idle
after 2015.Al though the Company states that it would
expect the plant to be dispatched "more frequently" in
more severe conditions, that is the extent of
213 Reading (Di) - ICIP 13a
IPC- E-O 6-0 9
the Company s analysis.
Using the $ 60 million commitment estimate
for construction of the plant would mean a cost of $995
per MWh under average water conditions.This does not
include the $22.8 million of estimated transmission costs
required for the proj ect, which push the cost on a per
MWh basis to over $1 350.Addi tionally, I would point
out that the Company expects the highest usage of the
plant to be over the first few years after construction
the time period over which natural gas prlces are
expected to remain relatively high.
WHAT ELSE DOES THE 2006 DRAFT IRP SAY
ABOUT SIMPLE CYCLE COMBUSTION TURBINES, SUCH AS THE
EVANDER ANDREWS PROJECT?
The Draft 2006 IRP , provided to ICIP
in this proceeding states that
L FJ easible sites and gas supply currently exist forfuture LSimple-Cycle Combustion TurbineJ
development. However , the forecasted trend of high
natural gas prices has reduced interest in future
SSCT generation plants.
(Exhibit No. 205, Draft 2006 IRP
p.
46).This statement
was in the August 1 , 2006 Draft of the 2006 IRP but was
deleted from the final version, which I find unusual.
WHY DO YOU FIND IT UNUSUAL FOR THAT
PARTICULAR STATEMENT TO BE EDITED OUT OF THE FINAL 2006
IRP?
214 Reading (Di) - ICIP
IPC-E-06-
Because it an accurate description of
the reason for waning interest in SSCT' s in the industry.
The statement indicates how conditions have changed since
the Company issued their 2004 IRP, which is being used to
justify the proposed proj ect in this docket.It is a bit
self-serving for Idaho Power I s final IRP to eliminate
talk of "reduced interest"
1 7
215 Reading (Di) - ICIP 14a
IPC-E-06-
in the very type of technology it is attempting to get
this Commission to sanction in the form of a Certificate
for Public Convenience and Necessity.
GIVEN IDAHO POWER'S STATEMENT THAT
RUNNING EVANDER ANDREWS WOULD ONLY BE ECONOMICAL WHEN
TRANSMISSION IMPORT IS IMPOSSIBLE , DOES THE 2006 IRP CALL
FOR ADDITIONAL TRANSMISSION UPGRADES TO ALLEVIATE THE
LIMITATIONS ON SERVING PEAK DEMAND ECONOMICALLY?
Yes.The 2006 IRP shows that Idaho
Power is planning significant transmission upgrades.
states that " LtJ he 2006 IRP includes 285 MW of
transmission upgrades, significantly improving Idaho
Power s ability to import power.(Exhibit No. 204
Idaho Power 2006 IRP , p. 98).In general, the 2006 IRP
seems to recognize that building natural gas plants
not a preferred approach to meeting future peak demand,
and that transmission upgrades may be a more sensible
course of action in comparison.
ASIDE FROM UTILIZING EXISTING OR NEW
IMPORT CAPABILITIES, ARE THERE OTHER WAYS IN WHICH IDAHO
POWER COULD MEET ITS PEAK DEMAND WITHOUT CONSTRUCTING THE
EVANDER ANDREWS PLANT?
Yes.Idaho Power s claim of a need
for the Evander Andrews plant does not appear to be based
on an accurate and comprehensive look at the resources
216 Reading (Di) - ICIP
IPC-E-06-
that are, or will be available to Idaho Power , or the
loads that Idaho Power will be serving..A comprehensive
evaluation shows that the plant is not required at this
time.
217 Readihg (Di) - ICIP 15a
IPC-E-06-09
PLEASE EXPLAIN WHAT OTHER RESOURCES
ARE AVAILABLE TO IDAHO POWER FOR MEETING ITS PEAK DEMAND.
There are several resources that
Idaho Power has overlooked:1) Idaho Power has not taken
advantage of significant combined heat and power (CHP)
proj ects that would obviate any need for Evander Andrews,
2) Idaho Power has overlooked proven methods for
utilizing diversified generation to meet peak demands,
Idaho Power has not effectively utilized Demand-Side
Management (DSM) resources and has failed to account for
future DSM savings, 4) Idaho Power has not accounted for
the amount of power that will be available to it through
Small Power Producer and PURPA purchases, and 5) Idaho
Power has failed to look into the costs of alternatives
that it has acknowledged it would turn to if the
Certificate for the Evander Andrews plant were denied.
* * * * *
CONFIDENTIAL INFORMATION FOLLOWS
* * * * *
218 Reading (Di) - ICIP
IPC-E-06-09
The cost of the Evander Andrews plant, on
the other hand , are substantially higher.The Company
did not indicate in its application or testimony what it
expects the cost of production for the proposed facility
to be, other than the $ 60 million Commitment Estimate for
the construction of the proj ect , and an estimated $22.
million for necessary transmission.However , the 2004
IRP indicated a levelized cost of $89.04 per MWh for
Bennett Mtn CT 2nd Unit'(162 MW), which would be a good
cost proxy for the Evander plant.In the 2006 IRP, the
Company states that its costs are based on the Northwest
Power and Conservation Council'(NWPPC) 5th Power Plan.
The NWPPC puts the benchmark cost of a simple-cycle
natural gas resource, like the Evander Andrews plant, at
$250 per MWh with a 5% capacity factor.The difference
between these cost estimates is that, unlike CHP
generation , which is generally considered more of a
base-load resource, single-cycle combustion turbines such
as Evander Andrews are peaking units.When calculating
the cost of peaking generation facilities the assumed
capacity factor - how often the plant is on-line -
impacts the costs on a per MWh basis.NWPPC's estimate
used a low capacity factor in the calculation of its
costs resulting in the high per MWh value.Idaho Power
obviously uses a significantly higher capacity factor in
228 Reading (Di) - ICIP
I PC-E-O 6-0 9
its 2004 IRP.
The Commission Staff , in analyzing the
Bennett Mountain combustion turbine, estimated that the
cost of that facility over a 10 year period with a
capaci ty factor of 20% would be $ 7 8 per MWh.(Order
29410, Case IPC-E-03-, p. 8).
* * * * *
CONFIDENTIAL INFORMATION FOLLOWS
* * * * *
229 Reading (Di) - ICIP 22a
IPC-E-06-
As stated earlier , given that Idaho Power
projects the Evander Andrews plant to run very little,
the costs on a per MWh basis of the Evander Andrews plant
could be as much as $1 350.
ISN'T THE HIGH PRICE OF THE EVANDER
ANDREWS PROJECT ON A PER MWh BAS I S S IMPL Y DUE TO THE FACT
THAT IT WILL NOT RUN VERY MANY HOURS AS A PEAKER PLANT?
That is characteristic of a peaker
plant.However , the important question here is at what
cost will the Evander Andrews plant serve Idaho Power
customers during those peak hours, and what cheaper
alternatives may exist for serving load.As outlined in
this testimony, I believe there are many al ternati ves
that Idaho Power could turn to.Many of those could meet
the limited role that the Evander Andrews plant would
serve, at a lower cost , or at a currently unknown cost,
since Idaho Power appears to not have sufficiently
analyzed them.
* * * * *
CONFIDENTIAL INFORMATION FOLLOWS
* * * * *
231 Reading (Di) - ICIP
IPC-E-06-
IN ADDITION TO DISCUSSING CHP AS A
SUBSTITUTE FOR THE EVANDER ANDREWS PLANT , YOU STATED
EARLIER THAT IDAHO POWER HAS OVERLOOKED OTHER PROVEN
METHODS FOR UTILIZING DIVERSIFIED GENERATION TO MEET PEAK
DEMANDS.PLEASE EXPLAIN.
Another proven method for utilizing
diversified generation (generation installed throughout a
utility s service territory) to meet peak demands is
through contracting with commercial and industrial
facili ty owners to make use of their backup generation
There appears to be a wealth of untappedfacilities.
peaking capacity in Idaho Power s service territory.
ON WHAT DO YOU BASE THAT ASSERTION?
A report by the Northwest Power
Planning Council (Feasibili ty of Emergency Electrical
Genera tion Uni ts to Serve System Load Requiremen ts,
Northwest Power Planning Council (August 17 , 2001))
found:
" LEJ mergency generators are available in a variety
of commercial and industrial buildings as well as
hospi tals, high schools, colleges, jails, and public
safety facilities. According to industry information
Washington , Oregon, Idaho, and Montana have just
over 26,000 generators within their borders.
(Exhibit No. 218, Feasibility of Electrical Generation
Uni ts to Serve System Load Requirements , p. 1).The
report shows the State of Idaho has 1,438 generators
241 Reading (Di) - ICIP
IPC-E-06-
ranging from 50 kW to over 2 MW, with 27 generators
having a capacity of at least 2 MW.(Exhibit No. 218,
Feasibility of Electrical Generation Units to Serve
System Load Requirements, p. 9, Table 1).This peaking
capaci ty could be tapped by Idaho Power to
242 Reading (Di) - ICI P 30a
IPC-E-06-09
meet its system peak load.
HOW CAN YOU BE SO SURE THAT THIS
PEAKING RESOURCE IS AVAILABLE TO IDAHO POWER FOR ITS USE?
Because other Northwest utilities are
currently running successful programs that do just that
right now.For example Portland General Electric (PGE)
has established a Dispatchable Standby Generation (DSG)
program , though which it has acquired a significant
virtual peaking plant" at a very low cost.In exchange
for the ability to dispatch a standby generator for up to
4 0 0 hours per year, PGE offers support and maintenance
services to the customer , and installs all necessary
swi tching to allow the generator to instantaneously put
power onto the grid.The system operates in parallel
wi th PGE' s system so there is no service interruption.
Addi tionally, if the building owner requires the
emergency backup generator for backup purposes, the
swi tching automatically makes that happen without
interruption.
Under its DSG program , PGE will:
Upgrade switchgear and install
control and communications hardware
at no charge to the customer;
Assume all maintenance and operation
costs, including fuel costs, costs ofrepairs, and overhauls
Provide additional sound attenuation,
if needed, to quiet the generator
system
243 Reading (Di) - ICIP
IPC-E-06-
Provide additional fuel storage, if
needed
Test the generator at least once a
month under full load (a benefit for
the engine)
Provide financing if a customer is
purchasing a new generator or
upgrading its system
(Exhibit No. 219, Dispatchable Standby Generation)
244 Reading tDi) - ICIP 31a
IPC-E-06-
IT SEEMS LIKE A VERY SIMPLE SOLUTION
TO PEAKING PROBLEMS AT LOAD CENTERS, CAN SUCH AN EASY
SOLUTION REALLY WORK?
Yes.For example , on July 24, 2006,
PGE successfully dispatched 25.5 MW under its DSG program
to meet its peak demand.(Exhibit No. 220, Standby
generation picks up extra load during heat wave) .PGE
will have a total of 45 MW available under its DSG
program by the end of 2007, and estimates that it may be
able to develop as much as 100 MW.(Exhibit No. 221,
Portland General Electric 2002 Integrated Resource Plan
Final Action Update, p. 7 (March 23 , 2006)).
In describing its DSG program, PGE has
stated,
We have found that customer enthusiasm and
adoption rates for this program have been
higher than we originally anticipated. The
high levels of customer interest and
participation have allowed PGE to establish one
of the most successful customer-based capacity
programs of its kind This option, because of
its distributed nature, also provides
reliability benefits for PGE and the host
customers. DSG is a high qualitycost-effective capacity resource that also
serves as reserve capacity .... Since we have
received inquiries and further interest from
customers beyond our current implementation, we
believe that the DSG program could potentially
be expanded to help meet more of PGE' s future
capaci ty needs.
(Exhibi t No. 221, Portland General Electric 2002
Integrated Resource Plan Final Action Update , p. 7 (March
245 Reading (Di) - ICIP
IPC-E-06-09
23, 2006)(emphasis provided)) .
WHAT ABOUT AIR QUALITY CONCERNS?
Addressing questions about air
quali ty concerns, ,PGE has found that the limited number
of hours that each plant can be operated "does not impair
the effectiveness of DSG as a capacity option " since it
is used only during peak events.(Exhibit No. 221,
Portland General Electric 2002 Integrated Resource Plan
Final Action Update , p. 7
246 Reading (Di) - ICI P 32a
IPC-06-
(March 23, 2006)).
IS THIS AN EXPENSIVE ALTERNATIVE?
No.It is cheaper than Evandar
Andrews, the other CHP discussed ealier in my testimony
or even the generic CHP identified in Idaho Power s IRP.
Significantly, documents presented to the Oregon Public
Utili ty Commission by PGE regarding the program list an
estimated cost of the capacity acquired under the program
at about $23/KW-yr.(Exhibit No. 222, PowerPoint
Presentation Stakeholder Dialogue No.4, PGE' s 2006
Integrated Resource Plan p. 46 (July 25, 2006)).This
is approximately half of the costs PGE estimates
Single-Cycle Combustion Turbine capacity would cost.
(Exhibit No. 222 , PowerPoint Presentation, Stakeholder
Dialogue No.4, PGE'2006 Integrated Resource Plan
46 (July 25, 2006)).
HAS I DAHO POWER EXPLORED THIS OPTION?
No,it has not.
DID YOU ASK THE COMPANY SPECIFICALLY
ABOUT THE USE OF EMERGENCY BACKUP GENERATORS TO MEET ITS
PEAK?
Yes, we did.The ICIP asked
specifically whether Idaho Power made any efforts to look
into the use of emergency generators to meet or reduce
peak load.(See Exhibit No. 223, Response to Request for
247 Reading (Di) - ICIP
IPC-E-06-
Production No. 46 of ICIP).Idaho Power s response
simply describes its buy back program that was
implemented in response to the 2000/2001 energy crisis.
Idaho Power called the program their "Energy Exchange
program under which customers were paid one half of the
wholesale market price in exchange for their reducing
their load by a minimum of 1 000 kw.Idaho Power
248 Reading (Di) - ICI P 33a
IPC-E-06-
discontinued the program shortly after it started because
wholesale prices were too low to motivate customer
participation.The Energy Exchange program is very
different from the "virtual peaking " program implemented
by PGE.Given the high cost of peaking power the Company
is asking for in this Docket, a program similar to PGE' s
DSG program makes more sense than constructing the
Evander Andrews plant.It is also compelling evidence
that Evander Andrews may not be in the public
convenience and necessity. An investigation into the size
of the potential peaking resources will have to be
conducted prior to committing the ratepayers to paying
for the Evander Andrews plant.
IS IT REASONABLE TO PUT THIS CASE ON
HOLD PENDING THE RESULTS OF SUCH AN INVESTIGATION?
Yes.
WHAT I F I DAHO POWER INCURRS
ADDITIONAL COSTS CAUSED BY SUCH A DELAY?
The shareholders should absorb any
such additional costs.
WHY SHOULD THE SHAREHOLDERS ABSORB
SUCH COSTS?
Because the idea of using diversified
backup generation is not new to Idaho Power.I was a
wi tness for ICIP in the Company s general rate case in
249 Reading (Di) - ICIP
IPC-E-06-09
Oregon.(U-167) .I presented testimony recommending the
use of emergency generators to obviate the need for new
gas-fired peaking plants in that proceeding.In that
case Idaho Power expressed a willingness to investigate
the potential of this approach to help in meeting its
peak load concerns.In its Order in that case the Oregon
Commission stated,
Idaho Power voluntarily committed to exploring
distributed generation opportunities with Holy
Rosary Medical Center and any other Oregon
250 Reading (Di) - ICIP .34a
IPC-E-06-09
customer with such potential , without direction
by the Commission. See IP/600, Gale/3. Staff
agrees with OICIP that dispatchable standby
generation could be an important asset to meet
peak load demands. See Staff brief , 19 (June
, 2005).
(Oregon Public Commission Order 05-871 , July 28 , 2005,
15) .
The Oregon Commission did not direct
Idaho Power to conduct such an investigation because
Idaho Power "voluntarily" agreed to explore the
possibili ty of the use of distributed generation
opportuni ties.The evidence gathered in this case shows
that Idaho Power has taken no steps to pursue this
resource since that time.(See Exhibit No. 223, Response
to Request for Production No.4 6 of ICI P) .Idaho Power
failure to investigate the availability of this resource,
coupled with the success other utili ties are experience
in mining this resource for meeting peak is additional
evidence of the imprudence of constructing the Evander
facili ty at this time.
YOU STATED EARLIER THAT IDAHO POWER
HAS FAILED TO EFFECTIVELY UTILIZE DEMAND-SIDE MANAGEMENT
(DSM) RESOURCES AND HAS FAILED TO ACCOUNT FOR FUTURE DSM
SAVINGS.IS THERE ANY REASON TO BELIEVE THAT IDAHO POWER
COULD IMPLEMENT, OR COULD HAVE IMPLEMENTED MORE DSM OR
CONSERVATION THAN IT HAS?
251 Reading (Di) - ICIP
IPC-E-06-
Yes.Idaho Power could have
implemented more conservation and other DSM than it has
in recent years , and it is very likely that Idaho Power
could do more in the future to use DSM and conservation
to meet its peak demand, and at least partially obviate
any need for the Evander Andrews power plant.
252 Reading (Di) - ICIP 35a
IPC-E-06-09
WHY DO YOU STATE THAT IDAHO POWER
COULD HAVE IMPLEMENTED CONSIDERABLY MORE DSM AND
CONSERVATION THAN IT HAS IN RECENT YEARS?
Between 1995 and 2001, Idaho Power
slashed its spending on DSM programs.Even though its
normalized system loads between 1995 and 2000 grew from
14.7 million MWh to 15.8 million MWh , Idaho Power s total
spending on DSM programs dropped from $ 6.2 million to
$1.6 million.(See Exhibit No. 224, Idaho Power
Response to Request for Production Nos. 1 and 4 of
Northwest Energy Coalition in Case No. IPC-E-06-08).
This means that over those five years, Idaho Power cut
its spending on conservation and DSM by almost 75%, while
its loads grew by over 8%.Only recently has Idaho
Power s spending on DSM efforts come back wi thin the
range of its pre-1995 spending levels.And, it has taken
Idaho Power the last several ye~rs to get up to those
levels, with 2004 spending still being only $3.7 million.
IS SPENDING THE BEST INDICATOR OF DSM
AND CONSERVATION THAT THE COMPANY IS ACHIEVING?
It may not be the best indicator , but
it certainly shows the Company made a deliberate and
dramatic decrease in its conservation and DSM efforts for
many of the past several years.Other indicators also
show that Idaho Power s DSM and conservation achievements
253 Reading (Di) - ICIP
IPC-E-06-09
have been relatively poor.
WHAT ARE SOME OF THE OTHER INDICATORS
THAT IDAHO POWER'S DSM AND CONSERVATION EFFORTS HAVE BEEN
RELATIVELY POOR?
254 Reading (Di) - ICIP 36a
IPC-E-06-09
Idaho Power s annual energy savings
as a result of its DSM programs are quite modest.Idaho
Power s savings in 2004 and 2005 were only 3.26 MWa and
4. 71 MWa , respectively.From available information
Idaho Power s annual energy savings from DSM programs
between 2000 and 2004 have been less than 1 MWa , and
essentially zero for a couple of those years.(See
Exhibi t No. 225, Idaho Power s Response to Request for
Production No.8 of Northwest Energy Coalition in Case
No. IPC-E-06-08).
Additionally, a comparison of Idaho
Power s historical conservation achievements to the
achievements of other regional investor-owned and
publicly-owned utili ties shows that, of the surveyed
utilities,Idaho Power has the lowest conservation
savings as a percentage of its load.Idaho Power
achievements are half of PacifiCorp ' s and less than one
third of Avista ' s.(See Exhibit No. 226, Generation
Options for Idaho s Energy Plan, presented to Idaho
Legislature s Subcommittee on Generation Resources,
August 10, 2006, p. 33).
255 Reading (Di) - ICIP
IPC-E-06-
Historical Conservation Achievements as a Share of 2003 Load
25%
-------,--
20%20%
-------------- -----------..----------
10%
15%
15% 15% 15%-- 0 14%-_-_d--___- ---
?t c;.v ~
0~
(()
~0 o
'1'
....
Cj
.;$:,.?'"
i~ ,,-0~ o
~ ~
'?' 0
'"
c;
.&.
G ~
~'1' o~'1' ~o ...t.4J'
'-
rq
~ .q:-'" ~'" ~
($ vO ~
,,'If
256 - ICIP 37a
IPC-E-06-
Reading (Di)
Finally, out of the three Idaho
jurisdictional utili ties, Idaho Power is the only one
that has planned conservation investments considerably
below the Northwest Power and Conservation Council'
targets for 2015.Idaho Power s planned conservation
investment is approximately one-third of the Council'
goal.(See Exhibit No. 226, Genera tion Options for
Idaho s Energy Plan, Presented to Idaho Legislature
Subcommittee on Generation Resources, August 10, 2006,
34) .
Planned Conservation Investments vs.
Power Council Target, 2015
140
120
100
C'II
Idaho Power PaciflCorp
Planned Conservation Investment
- Power Council Target
..
:-A\7'f'1i1!!ii"~?\
Avista
ON A GOING-FORWARD BASIS, DO YOU
BELIEVE IDAHO POWER COULD DO MORE CONSERVATION, SUCH THAT
SOME OF THE NEED FOR A PEAKER PLANT COULD BE REDUCED?
I understand that Idaho Power is
planning to significantly increase its spending on
257 Reading (Di) - ICIP
IPC-E-06-
conservation and other DSM programs.In the 2006 IRP,
for example , Idaho Power states that it plans to add
several new programs as well as expanding existing
programs. "(Exhibit No. 204 , Idaho Power 2006 IRP at
97) .Overall, it plans to add a set of DSM programs that
are expected to reduce loads by approximately 90 aMW and
258 Reading (Di) - ICIP 32a
IPC-E-06-
reduce the system peak-hour load by approximately 187 MW
during the summertime.(Exhibit No. 204 , Idaho Power
2006 IRP at
p.
2).
This focus on reducing Idaho Power s peak
demand , therefore , should alleviate to some extent the
need for the Evander Andrews power plant.Because the
2006 Draft IRP simply assumes that the Evander Andrews
plant will be built, however , Idaho Power s analysis in
the 2006 IRP is unhelpful in determining whether this
increase in DSM efforts obviates the need for the Evander
Andrews plant at this time.However, given the
surprisingly few number of hours the Evander Plant will
operate under the assumptions contained in the 2006 IRP,
the need for the plant may be obviated, possibly due to a
variety of factors, including increased DSM savings.
According to Idaho Power s own study,
Idaho Power may be underestimating the amount of peak
demand savings through DSM that are available to it.
late 2004 , Quantum Consulting completed a study for Idaho
Power in which it set out the resources available to
Idaho Power through DSM efforts.That study concluded
that there was a potential for 384 MW of economic peak
demand reduction by 2013 to Idaho Power through DSM
programs.(Exhibit No. 227 , Idaho Power Demand-Side
Management Potential Study,
p.
1).
259 Reading (Di) - ICIP
IPC-E-06-09
DO YOU REALLY THINK THAT DSM MAY
OBVIATE THE NEED TO CONSTRUCT THE EVANDER ANDREWS POWER
PLANT?
Yes, but not just DSM.I would like
to make three points about Idaho Power s DSM programs and
the need for the Evander Andrews plant:1) for the
reasons stated above, I believe it is likely that future
DSM efforts could substantially lessen any need for
260 Reading (Di) - ICIP 39a
IPC-E-06-
a peaking plant such as the Evander Andrews plant,
Idaho Power s failing to implement reas onable amounts of
DSM and conservation in the past several years has
exacerbated any need Idaho Power may have for a peaking
resource such as Evander Andrews at this time, and 3) it
would be fundamentally unfair to require customers to pay
for the total costs of a plant such as Evander Andrews
when a lack of commitment to DSM on Idaho Power s part in
recent years may be a substantial reason for its
construction.
Also , I would point out that utilities, in
general , seem to be finding increasingly innovative ways
to meet or reduce their peak demand.For example, on
July 24th of this year when record peaks were set, not
only on Idaho Power s system , but all throughout the
region , several utili ties took creative measures to
reduce and meet their peak demand.Avista, for example,
reached out to its customers through personal contact and
the media, and requested voluntary conservation
resul ting in an approximately 30 MW reduction in its peak
demand.(See Exhibit No. 228, Avista Quarterly Review
August 2006).Also on July 24th , Snohomish Public
Utility District, set a record peak load of 845 MW, but
through placing calls to select large customers it
achieved a 10 MW reduction in peak demand (approximately
261 Reading (Di) - ICIP
IPC-E-06-09
2 percent of its peak load) from reduced loads and
self-generation by customers.(See Exhibit No. 242,
Peak Load Condition , Monday, July 24 , 2006, Commission
meeting August 1, 2006
p.
7).As discussed above
Portland General Electric , also on July 24th , dispatched
25.5 MW through its Dispatchable Standby Generation
program in order to meet its peak demand.
Especially under the circumstances I describe
in this testimony, allowing Idaho
262 Reading (Di) - ICIP 40a
I PC- E-O 6-0 9
Power to construct a 170 MW gas-fired peaking unit will
discourage Idaho Power from making these, and similar
types of efforts, and could result in customers
needlessly paying for Idaho Power s reluctance to do so.
PLEASE EXPLAIN YOUR EARLIER STATEMENT
THAT IDAHO POWER HAS FAILED TO ACCOUNT FOR THE POWER THAT
WILL BE AVAILABLE TO IT THROUGH CSPP AND PURPA PURCHASES.
In its generation resource forecasts,
Idaho Power only includes the estimated output from
proj ects with signed and IPUC-approved agreements.Idaho
Power does this because it claims it has no control over
the development or operation of these proj ects, and that
the online times vary from estimated online dates.(See
Exhibit No. 229 , Response to ICIP Request No. 38).
This is problematic, however , because for
purposes of its claim that the Evander Andrews peaking
plant is necessary, Idaho Power is assuming essentially
no increase in power available from CSPP and PURPA
proj ects , even though it is almost certain that
significant increases will in fact be realized.Idaho
Power s current internal CSPP forecast shows a potential
increase of approximately 60 MW of CSPP power on an
annual average basis in 2008, but it is unclear whether
this potential increase was considered by Idaho Power in
determining that it needed the Evander Andrews plant.
263 Reading (Di) - ICIP
IPC-E~06-09
(See Exhibit No. 230 , Response to ICIP Request No.
38) .
264 Reading (Di) - ICIP 41a
IPC-E-06-09
PLEASE EXPLAIN WHAT YOU MEANT BY YOUR
STATEMENT THAT IDAHO POWER HAS FAILED TO LOOK INTO THE
COSTS OF ALTERNATIVES THAT IT HAS ACKNOWLEDGED IT WOULD
TURN TO IF THE CERTIFICATE FOR THE EVANDER ANDREWS PLANT
WAS DENIED.
In its Request for Production No. 18,
the ICIP asked the Company how it would expect to meet
loads if the Commission denied its request for a
certificate for the Evander Andrews plant.The Company
responded,
If the Commission denies Idaho Power s request
for a certificate of public convenience and
necessi ty, Idaho Power would most likely
consider several alternatives to meet peak-hour
loads during the summer of 2008. These
al ternati ves include: (1) additional firm
market purchases and the associated
transmission necessary to deliver the energy to
the east side of Idaho Power s system (2)
transmission system expansions to increase
import capacity, (3) expansion of the
Irrigation Peak Rewards program (which is
already being investigated), (4) developing
advertising messages that ask consumers to
reduce their peak-hour consumption , and (5)
utilizing diesel or other temporary gensets.
(Exhibit No. 231 , Response to ICIP Request No. 18).
When ICIP followed up by asking what cost
estimates the Company has prepared for implementing these
alternatives, Idaho Power stated that it had not
performed a detailed analysis.(Exhibit No. 232,
Response to Request for Production of ICIP No. 40).
265 Reading (Di) - ICIP
IPC-E-06-
did, however , provide preliminary estimates for the first
three alternatives, which seem to show that some of those
alternatives could be substantially less expensive than
the Evander Andrews plant.
For example , Idaho Power indicated that a
premium of $16 to $17 per MWh for additional east side
purchases might apply if al ternati ve 1 was used
(additional firm purchases to deliver to Idaho Power
east side).Given the number of hours the Evander
266 Reading (Di) - ICIP 42a
IPC-E-06~
Andrews proj ect is expected to run , however , this equates
to only a little over a million dollars, in addition to
the non-premium costs to import power.Given its
statements in the 2006 IRP that import is cheaper than
running natural-gas combustion turbines, this option may
in total be considerably cheaper in total.
Addi tionally, Idaho Power states that
al ternati ve 2 (transmission upgrades) range in cost from
$10.8 million to $282 million.(Exhibit No. 232
Response to Request for Production of ICIP No. 40).
some of these upgrades are planned to occur anyway, they
may prove more cost effective than constructing the
Evander Andrews plant in getting the power the Company
needs to serve customers.Finally, al ternati ve 3
(expansion of the Irrigation Peak Rewards program), which
is already being planned , is estimated to yield an
addi tional 4.5 MW of load reduction during the summer
peak, for an estimated cost of $ 30 0 000.
IF THERE ARE OTHER LESS-COST
ALTERNATIVES FOR MEETING IDAHO POWER'S PEAK DEMAND
COMPARED TO EVANDER ANDREWS, WHY DIDN'T IDAHO POWER'
REQUEST FOR PROPOSALS (RFP) PROCESS LEAD TO THOSE
ALTERNATIVES BEING IDENTIFIED AND SELECTED?
Idaho Power s RFP process was not
designed to determine the best resource for meeting its
267 Reading (Di) - ICIP
IPC-E-06-
peak load requirements.It sought, by its terms "peaking
electric generating resources on a turnkey basis.
(Exhibit No. 233, Idaho Power Request for Proposals,
1) .Thus, DSM, diversified generation, and smaller CHP
proj ects were not able to be bid in response.
Addi tionally, the RFP limited considered proj ects to
those "where legal title
268 Reading (Di) - ICIP 43a
IPC-E-06-09
of the generating facilities " would be conveyed to Idaho
Power.(Exhibit No. 233, Idaho Power Request for
Proposals, p. 1).Finally, the RFP encouraged bidders to
locate their proposed plants at the existing Evander
Andrews Power Complex , or the Bennett Mountain Power
Plant location.Gi ven the narrowly-tailored RFP , it
naturally lead to only consideration of natural-gas fired
combustion turbines.
PUTTING ASIDE THE APPARENT
AVAILABILITY OF OTHER RESOURCES TO MEET ITS PEAK DEMAND
IS THERE ANY REASON TO BELIEVE THAT IDAHO POWER'S FUTURE
PEAK LOAD MAY BE LESS THAN THE LEVEL THAT IT CLAIMS
JUSTIFIES THE EVANDER ANDREWS PLANT?
Yes.In May of 2006, a significant
increase in Idaho s Conservation Reserve Enhancement
Program (CREP) was announced.Through this program
farmlands will be set aside , and irrigation pumps turned
off.In a recent forecast of Idaho Power s loads, Idaho
Power has incorporated an annual energy r€duction over
the next 15 years (2007 through 2021) of approximately
because of CREP.(Exhibit No. 234 Response to ICIP
Request for Production No. 41).Because a significant
part of Idaho Power s peak load is caused by irrigation
pumpers, this is a large decrease in Idaho Power s peak
demand over prior forecasts.Idaho Power has clarified
269 Reading (Di) - ICIP
IPC-E-06-
in this proceeding, however , that " LfJ or planning
purposes, Idaho Power has not incorporated any specific
assumptions in the 2006 IRP regarding the ... CREP.
(Exhibit No. 234 Response to ICIP Request for
Production No. 41).Additionally, it has stated that
" Lt J he CREP announcement had no effect on the Company
decision regarding the 2005 RFP or the Evander Andrews
270 Reading (Di) - ICIP 44a
IPC-E-06-
plant. "(Exhibit No. 234 Response to ICIP Request for
Production No. 41).
WHAT IS YOUR RECOMMENDATION AS TO
WHETHER IDAHO POWER SHOULD PURSUE CONSTRUCTION OF THE
EVANDER ANDREWS PLANT AT THIS TIME?
Idaho Power should not proceed with
construction of the plant at this time.There simply
seems to be too much uncertainty and too many troubling
facts regarding the proposed plant, and Idaho Power
should re-assess its needs , and look to other available
options, which may well save signifi~ant costs to its
ratepayers.
Terminating or postponing construction of
the Evander Andrews plant entails little risk.One
. advantage of single-cycle natural gas peakers is a short
construction time.Therefore, not going forward with
this plant at this time would not jeopardize the long run
power supply for the Company, even without the various
alternatives and considerations I have laid out in my
testimony.In addition, Idaho Power owns the site of the
proposed Evander Andrews proj ect, and can therefore
retain the site for future construction.
ARE THERE OTHER REASONS FOR WHICH YOU
THINK THE COMMISSION SHOULD DENY THE CERTIFICATE?
I believe the Commission should also
271 Reading (Di) - ICIP
IPC-E-06-
consider the potential that the Evander Andrews plant has
to reduce any incentive for Idaho Power to achieve
cost-effecti ve DSM and conservation , and to prevent Idaho
Power from utili zing other resources , which may be
superior , to meet its peak demand for the foreseeable
future.
For example, the Company s incentives to
achieve peak-shaving programs will
272 Reading (Di) - ICIP 45a
IPC-E-06-
likely be significantly reduced if the Company has a new
170 MW peaker plant to rely on to meet peak loads, even
though it only claims to have needed an 88 MW plant in
its 2004 IRP.
Addi tionally, it appears that the fact
that the Evander Andrews plant is double what was called
for in Idaho Power s 2004 IRP is already leading the
Company to determine that it will forego other resource
development plans which may have had other posi ti ve
attributes not associated with natural gas-fired
combustion turbines.In its Response to ICIP' s Request
for Production No. 31 , Idaho Power stated
The summation of changes considered in the 2006
IRP , including the 85 MW of additional peakingcapacity Labove the 88 MW called for in the2004 IRPJ provided by the larger Evander
Andrews combustion turbine , have allowed
several of the resources selected in the 2004
IRP to be deferred. First the 100 MW
geothermal resource originally planned to be
online in 2008 in the 2004 IRP has been reduced
to 50 MW and the online date deferred until2009. Second, the 62 MW combustion
turbine/distributed generation/market purchase
resource originally planned to be online in
2010 in the 2004 IRP has been eliminated
al together , although market purchases are still
anticipated in the 2006 IRP. Finally, the
MW of CHP resources originally planned to be
online in 2007 in the 2004 IRP have been
deferred until 2010.No. 235).
In effect, Evander Andrews will defer
(Exhibi t
geothermal , distributed generation , and CHP resources.
* * * * *
CONFIDENTIAL INFORMATION FOLLOWS
* * * * *
273 Reading (Di) - ICIP
IPC-E-06-
IV.RECOMMENDATIONS AND CONCLUSION
DR. READING, BY WAY OF SUMMARY , WHAT
DO YOU BELIEVE THE COMMISSION SHOULD DO IN THIS
PROCEEDING?
The Commission should deny Idaho
Power I S application for a certificate of public
convenience and necessity to construct the Evander
Andrews plant.
IF, CONTRARY TO YOUR RECOMMENDATION
THE COMMISSION WERE TO GRANT THE CERTIFICATE , WHAT STEPS
DO YOU BELIEVE THE COMMISSION SHOULD TAKE TO PREVENT
UNNECESSARY HARM TO RATEPAYERS?
If the Commission were to grant the
certificate, it should make clear that Idaho Power will
not be allowed to collect the full costs of the Evander
Andrews plant , which include significant unnecessary and
excessi ve construction and transmission costs.
HOW DO YOU BELIEVE THE COMMISSION
SHOULD DETERMINE THE AMOUNT OF COSTS TO EXCLUDE FROM
IDAHO POWER I S RATEBASE?
* * * * *
CONFIDENTIAL INFORMATION FOLLOWS
* * * * *
289 Reading (Di) - ICIP
IPC-E-06-
I believe any of these actions would be
justified since the costs I just described are
essentially costs that the Company has decided to incur
even though they are not necessary or otherwise
warranted.The Company s ratepayers should not be
required to pay for alternatives that do not benefit
ratepayers where perfectly reasonable and sufficient
lower-cost options exist.
IS THIS THE APPROPRIATE PROCEEDING TO
RAISE ARGUMENTS ABOUT HOW MUCH IDAHO POWER SHOULD BE
ALLOWED TO RECOVER IN RATES?
Even though this proceeding concerns
only the Certificate to construct the Evander Andrews
proj ect, Idaho Power s application makes clear that Idaho
Power will interpret approval of the Evander Andrews
proj ect as evidence that it will be included in the rates
Idaho Power s customers will pay.Idaho Power has stated
that
Ul timately, it is Idaho Power s intent that the
Proj ect be included in Idaho Power s rate base
. ..
Idaho Power requests that the Commission
note in its Order ... that , in the ordinary
course of events, Idaho Power can expect to
ratebase the prudent capital costs for this
proj ect and to recover prudent fuel costs in
the Company s Power Cost Adjustment mechanism.
(Idaho Power s Application , pp. 1-2).Therefore ~ I think
it is important that the Commission note in its order its
291 Reading (Di) - ICIP
IPC-E-06-
decisions as to whether Idaho Power can or cannot expect
to recover all of the Evander Andrews costs in its rates.
DOES THIS CONCLUDE YOUR TESTIMONY?
Yes it does.
292 Reading (Di) - ICIP 57a
IPC-E-06-
(The following proceedings were had in open
hearing.
MR. THOMPSON:Thank you , Madam Chair.
Dr. Reading is now available for cross-examination.
COMMISSIONER SMITH:Let's go to
Mr. Walker.
MR. WALKER:Commission Staff has no
questions for Dr. Reading.
COMMISSIONER SMITH:Okay, Ms. Moen.
CROSS- EXAMINATION
BY MS. MOEN:
Dr. Reading, if you would please turn to
page 52 of your testimony and lines 5 through you
state, "It is apparent the fact that Idaho Power owned
the land for the Evander Andrews proj ect and that it
already had a plant at the site tipped the bid in favor
of the Evander Andrews plant.Am I reading that
correctly?
Gi ve me the lines again just to make
sure.
Lines through
don get gold star for listening,but
will accept you read correctly.
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293 READING (X)
ICIP83676
Thank you.Based on that testimony, in
your estimation , is it possible that certain costs can be
avoided by adding a facility to an existing development
instead of constructing an identical facility on an
unimproved parcel?
As an economist, are you asking me if
there can be economies of scale, the answer is certainly,
and it depends on where, who, how.There are both
economies and diseconomies of scale.
Thank you.Let's assume that two sites
were identical every respect except air quality.
Okay.
One site had greater risk
non-attainment and therefore a potential existed that a
peaking resource may not be able to be dispatched when
needed.Would it be prudent for a utility to select the
at-risk site over a non-at-risk site for development?
Back on what the foundation of my last
answer was, as an economist , it depends on what the costs
are.It depends on what the risks are , risk versus the
cost and everything else.If absolutely everything else
was exactly and perfectly the same and the costs were the
same, I'd have to say yes, but that's the kind of stuff
we give our freshmen of examples that aren t really
realistic.
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294 READING (X)
ICIP83676
MS. MOEN:I have some questions that are
going to entail some confidential information.
COMMISSIONER SMITH:When you were in the
yellow pages , I assumed you were.
BY MS. MOEN:Would you please refer to
page 48 of your testimony?
Yes.
Lines 4 to
Yes.
You testify that Idaho Power used
non-price scores to trump price scores even though the
difference in price between the Evander Andrews proj ect
and the second place proj ect was almost
(**Confidential**) .
Correct.
As an economist, would it be prudent for
Idaho Power to ignore fixed operating costs associated
wi th owning and managing a proposed facility?
I will give you the direct answer and then
explain a little.Of course not and one of the things
that has concerned me with the application in this case
lS the original application was 22 pages of testimony and
no exhibits or attachments, and so through the course
both we and the Staff have done our best to try to ferret
out all of the costs that would be involved in the
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295 READING (X)
ICIP83676
proj ect , not only the capital costs that were in the
original evaluation , but all of the additional costs that
may be involved, what the transmission costs are, which
the Company admits it can t at this point put a cap on
so the fixed operating costs, of course it should include
that.
What I would have liked to have seen
that kind of analysis made by the Company in its
application so that we could evaluate the revenue
requirement or the impact on customers of those kinds of
factors, so to come back and ignore it , no.I would have
certainly liked to have seen it before rather than
reading in the testimony, under our direction , we have a
new Exhibi t
Dr. Reading, did the Industrial Customers
of Idaho Power have the opportunity to propound discovery
In this matter?
Well , sure.
And did Idaho Power respond to that
discovery?
Yes, and I might say I thought that the
response over the (**Confidential**) stuff at the last
minute was exceptional.
So you had an opportunity to examine some
of the issues that you ve raised that you felt were
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296 READING (X)
ICIP83676
lacking in the original application?
Sure, and to the best of our ability and
since I'm in the private sector, the financial ability of
the clients that you try to keep down , we did our best.
As an economist , would you say that
certain risks -are hard to quantify?
, sure.
I f a company were uncertain whether a
power plant could be dispatched when needed because of
air quality issues, would that be a legitimate concern
that the Company should consider?
Lapsing back into my earlier one
absolutely, along with a whole bushel basketful of other
kinds of things that evaluate the risks, the needs, how
often would it operate, what gas price risk you know
all of them together.
MS. MOEN:I have no further questions.
COMMISSIONER SMITH:Questions from the
Commissioners.
COMMISSIONER HANSEN:Nothing.
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297 READING (X)
ICIP83676
EXAMINATION
BY COMMISSIONER SMITH:
Mr. Reading, were you present when I asked
Mr. Sterling my question?
Yes, I was.
So in order to avoid repeating it , would
you like to respond?
Let's see, short-term memory at my age
can you
Oh, I forgot his age.The question was,
what's the Commission s responsibility in reviewing
these?
My response to that is the Commission
responsibili ty
--
m going to ask a question.I assume
do you mean the Commissioners or the Staff in this case?
You may answer for either or both , but I
was asking about the Commission.
All right.The Commission s Staff should
be able to review and analyze all of the aspects of a
generating facility and it should have the ability to
make judgments based on what the Company files, and being
a former Staff member , I don t think the Staff has a
responsibility to make the Company s case, and to be
honest , in this particular proceeding, I saw Staff
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298 READING (Corn)
ICIP83676
struggling, attempting to make the Company s case because
it wanted to do what it viewed as its job.
As far as the Commissioners are concerned,
they have a responsibility to review the whole record and
stand back.You know , one of the issues we have here, of
course , is non-price attributes , but the Commission has
to stand back and look at a whole variety of issues that
are non-quantifiable as well as quantifiable.You know,
that's why they pay you the big bucks.That's why you
the Commissioners and that's why you have to sign the
orders and that kind of stuff, so my immediate reaction
to your question to Mr. Sterling was well , yeah , they
need to look at that, they need to look at need , they
need to look at gas price risk , which , as I pointed out
in my testimony, the Commission has obviously struggled
wi th in the past.I quoted some orders on that.They
need to look at the whole portfolio.As I pointed out in
my testimony, they need to look at the freshness of the
information , whether or not it would be legitimate to
base it on this set of criteria or an updated set of
criteria.They need to , heaven forbid, base it on
political considerations.
I guess if it goes to the Supreme Court,
they take that one out, right , so there s a whole variety
and the Commission, I guess the best way to put it is
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299 READING (Corn)
ICIP83676
we as kids down in the sandbox squabble with one another
and throw sand in each other s eyes, the Commissioners
job is to be grown up and stand back and try to analyze
whether this is from their perspective the most prudent
resource for the cost at this particular point in time.
COMMISSIONER SMITH:Any redirect?
MR. THOMPSON:Yes, Madam Chair , just one
question.
REDIRECT EXAMINATION
BY MR. THOMPSON:
Dr. Reading, Ms. Moen questioned you about
the price difference between the (**Confidential**) -- we
are in confidential, right -- the (**Confidential**)
proposal and the Evander Andrews proposal.Could you
turn to Exhibit 2 of Said and Youngblood's testimony?
m not sure I brought it with me.
COMMISSIONER SMITH:m sorry, which
exhibi t was that?
MR. THOMPSON:Exhibi t 2.It's the same
document that I handed out earlier.
(Mr. Richardson approached the witness.
THE WITNESS:Yes, I have it.
BY MR. THOMPSON:Dr. Reading, does this
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300 READING (Di)
ICIP83676
exhibi t in your opinion show that Idaho Power s customers
will be held responsible for the same costs under either
the (**Confidential**) proposal or the Evander Andrews
proposal if Idaho Power is disallowed (**Confidential**)
of recovery for the Evander Andrews plant?
, and one of the problems I have with
this exhibit is one that I had with the Said/Youngblood
testimony and that is they are examining levelized fixed
costs which is a different thing than revenue
requirement, and from the customer s point of view , one
of the things that -- well , not one of the things -- the
most important thing in a cost sense is what would those
what would the revenue requirements be , and when I saw
this exhibit , I tried to do what we do and that's back
that out and to be honest , I couldn t do it and again , to
rei terate , one of the problems I've had is new
information that we should have had a long time to
examine isn t in the record.
MR. THOMPSON:Thank you, Dr. Reading.
have no more redirect.
COMMISS lONER SMITH:Thank you for your
help, Dr. Reading.
THE WITNESS:Thank you.
(The witness left the stand.
COMMISSIONER SMITH:And I believe that
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301 READING ( Di
ICIP83676
was your only witness; is that correct?
MR. THOMPSON:That's correct.
COMMISSIONER SMITH:Okay, we re back to
you, Ms. Moen.
MS. MOEN:Chairman Smith , Idaho Power is
prepared to offer its rebuttal testimony and in doing so
request that the rebuttal testimony of Greg Said and Mike
Youngblood be admitted here.I will make that formal
request after I introduce the witnesses.
GREGORY W. SAID
produced as a rebut tal witness at the instance of Idaho
Power Company, having been previously duly sworn, resumed
the stand and was further examined and testified as
follows:
MICHAEL J. YOUNGBLOOD
produced as a rebuttal witness at the instance of Idaho
Power Company, having been first duly sworn , was examined
and testified as follows:
DIRECT EXAMINATION
BY MS. MOEN:
Mr. Youngblood, would you please state
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302 SAID/YOUNGBLOOD (Di-Reb)
Idaho Power Company83676
your full name and spell your last name for the record?
MR. YOUNGBLOOD:Michael J. Youngblood,
o-d.
address?
And would you please state your business
MR. YOUNGBLOOD:1221 West Idaho.
And for whom are you employed?
MR. YOUNGBLOOD:Idaho Power Company.
And in what capacity?
MR. YOUNGBLOOD:m a senior pricing
analyst with the pricing and regulatory department.
Mr. Said, I believe that you re still
under oath and you ve been introduced into the record.
CSB REPORTING
Wilder , Idaho
Mr. Youngblood and Mr. Said, have you previously filed
direct rebuttal testimony consisting of three pages and
Exhibi ts 1 to 3 on behalf of Idaho Power Company in this
MR. SAID:The rebuttal testimony is 33
matter?
sorry, 33 pages.
MR. SAID:And three exhibits , yes.
pages.
Do either of you wish to make any written
corrections to the testimony that you prefiled in this
MR. SAID:We have just one.On page 25
matter?
303 SAID/YOUNGBLOOD (Di-Reb)
Idaho Power Company83676
at line 23, once agaln , a word has been omitted.
should be "Idaho Power, along with other electric
utilities in the region " so the insertion of the word
with. "
Mr. Said , if I asked you the same
questions today that are contained in your prefiled
wri tten testimony, would your responses to those
questions be the same?
MR. SAID:Yes.
Mr. Youngblood, if I asked you the same
questions today that are contained in your prefiled
written testimony, would your responses be the same?
MR. YOUNGBLOOD:Yes.
MS. MOEN:Madam Chair , I move that the
prefiled rebuttal testimony of Gregory Said and Michael
Youngblood consisting of 33 pages be spread on the record
as if read in its entirety and that Exhibits 1 to 3 be
marked for identification.
COMMISSIONER SMITH:Wi thout obj ection , it
is so ordered.
(The following prefiled rebuttal
testimony of Mr. Gregory W. Said and Mr. Michael J.
Youngblood is spread upon the record.
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Wilder , Idaho
304 SAID/YOUNGBLOOD (Di-Reb)
Idaho Power Company83676
Please state your names and positions with
Idaho Power Company ("Idaho Power " or the "Company
My name is Gregory W. Said and I am the Manager
of Revenue Requirement at Idaho Power.My name is
Michael J. Youngblood and I am a Senior Pricing Analyst
at Idaho Power.
Are you the same Gregory W. Said who previously
submi tted direct testimony in this proceeding?
Yes , I am.
Mr. Youngblood , have you previously submitted
direct testimony in this proceeding?
No.
Mr. Youngblood, please describe your
educational background and work experie~ce with Idaho
Power Company.
In May of 1977 , I received a Bachelor of
Science Degree in Mathematics and Computer Science from
the Uni versi ty of Idaho.From 1994 through 1996, I was a
graduate student in the MBA program at Colorado State
University.
I became employed by Idaho Power Company in 1977.
During my career , I have worked in several departments
and subsidiaries of the Company, including Systems
Development , Demand Planning, Strategic Planning and
IDACORP Solutions.Most relevant to this testimony, is
305 SAID/YOUNGBLOOD Di-RebIdaho Power Company
my experience wi thin the Pricing and Regulatory Services
Department.From 1981 to 1988 , I worked as a Rate
Analyst in the Rates and Planning
306 SAID/YOUNGBLOOD Di-RebIdaho Power Company
Department where I was responsible for the preparation of
electric rate design studies and bill frequency analyses.
I was also responsible for the validation and analysis of
the load research data used for cost of service
allocations.
From 1988 through 1991 , I worked in Demand Planning
and was responsible for load research and load
forecasting functions including sample design
implementation , data retrieval , analysis and reporting.
I was responsible for the preparation of the five-year
and twenty-year load forecasts used revenue
proj ections and resource plans well the
presentation these forecasts the public and
regulatory commissions.
In 2001 , I returned to the Pricing and Regulatory
Services Department and have worked on special proj ects
related to deregulation , the Company s Integrated
Resource Plan , and filings with this Commission and the
Oregon Public Utility Commission.In 2005 , I was a
member of the Peaking Resource RFP Bid Evaluation Team
Evaluation Team that selected the Evander Andrews
plant which is the subj ect matter of these proceedings.
What is the purpose of your direct rebuttal
testimony in this case?
The purpose of our direct rebuttal testimony in
307 SAID/YOUNGBLOOD Di-RebIdaho Power Company
this case is to address , among other things,(1 )
Commission Staff witness Sterling s testimony regarding
the evaluation
(**Confidential information follows**)
308 SAID/YOUNGBLOOD Di-Reb
Idaho Power Company
Evander Andrews plant.What is the Company s response to
that recommendation?
The Company is willing to provide the
Commission with a Transmission Commitment Estimate not to
exceed a certain sum.At this time, however , that figure
cannot be provided as sufficient studies have not been
conducted to provide a reliable estimate.Once those
studies are completed, a Transmission Commitment Estimate
can be provided.
Why is the Company unable at this time to
provide a Commitment Estimate for the transmission and
substation facilities that would be required for the
Evander Andrews site?
Federal Energy Regulatory Commission ("FERC"
orders and rulings define the manner in which developers
of generation proj ects can interact with transmission
providers that are subj ect to FERC jurisdiction.Whether
the developer is Idaho Power Company or an unaffiliated
party, the Company s deli very department is obligated to
treat all interconnection requests consistently and in a
non-discriminatory manner.
FERC's orders define three distinct study phases to
assess what system modifications may be required to
integrate a generation proj ect into an electrical system.
The three studies determine whether the system can accept
339 SAID/YOUNGBLOOD Di-RebIdaho Power Company
the generation proj ect output and, if not, what facility
modifications will be required , and, finally, performance
of the engineering and design work needed to construct
the required facilities.This procedure is outlined in
Idaho Power s Open Access Transmission Tariff ("OATT"
In what phase of study are the transmission
requirements for the Evander Andrews facility?
This transmission proj ect is currently in the
last phase of study, that is, engineering design work
underway but not yet completed.
What degree of cost accuracy will the Company
delivery department provide?
An interconnection customer may opt for one of
two study options.Option one provides for cost
estimates with an accuracy of +/- 20% to be completed
wi thin 90 calendar days.Option two, which requires 180
calendar days, provides a cost estimate with +
/ -
10%
accuracy.In order to expedite receipt of the
transmission cost information , the Company s Power Supply
department has requested that the cost estimate be
determined with an accuracy level of 20%.
Until a cost estimate within the selected accuracy
level is obtained, only a non-binding good faith estimate
is available to the party requesting interconnection to
the Company s transmission system.Idaho Power s Power
340 SAID/YOUNGBLOOD Di-RebIdaho Power Company
Supply department expects to receive a cost estimate with
20%
(**Confidential information follows**)
341 SAID/YOUNGBLOOD Di-RebIdaho Power Company 21a
. 21
resort, load curtailments.
Longer-term alternatives include:(1) transmission
system expansions to increase import capacity,(2)
construction of base-load type resources and the
associated transmission to enable the resources I output
to be delivered to the Treasure Valley load center, and
(3) development of additional DSM programs requiring
longer lead times to implement.The Company believes
that these al ternati ves would be more costly to Idaho
Power customers than constructing the proposed peaking
resource.
How long would these al ternati ve resources be
able to reliably provide electrical energy to Idaho
Power s customers?
Theoretically, the temporary generation units
might be a solution for quite a while if the Company
added enough of them.However, Idaho Power s summertime
peak-hour loads are forecast to grow at about 80 MW per
year.Wi thout the new unit at the Evander Andrews
Complex , under the 90th percentile water and 70th
percentile load and 95th percentile peak-hour load
planning scenario, the July 2007 peak-hour deficit is
forecast to be III MW.
Assuming all other resources identified in the
Company s 2006 IRP's preferred portfolio are implemented
345 SAID/YOUNGBLOOD Di-RebIdaho Power Company
as planned, in July of 2008, 2009 and 2010 the summertime
peak-hour deficits are forecast to reach 147 MW and 154
MW and
346 SAID/YOUNGBLOOD Di-RebIdaho Power Company 24a
268 MW, respectively.The 268 MW deficit forecast for
2010 incorporated an expected DSM contribution of almost
71 MW.If for some reason this reduction did not
materialize as planned, the 2010 peak-hour deficit would
grow to nearly 339 MW.
Even if the forecast DSM contributions materialized
as expected , 268 MW of temporary generation resources is
excessi ve, expensive and logistically complex.A more
practical solution is to have permanently installed
generation capacity, such as the proposed Evander Andrews
unit, to reliably serve Idaho Power s peak-hour loads.
IDAHO POWER'S DSM EFFORTS
On page 36 of his testimony, lines 4-, Dr.
Reading asserts that between 1995 and 2001, Idaho Power
slashed its spending on DSM programs from $ 6.2 Million to
$1.6 Million.What attributed to this funding cut?
You may recall, during that timeframe,
deregulation of the electric industry was an issue on the
forefront.Even in states where full retail deregulation
was not expected , wholesale markets were expecting to
provide future resources.As recogni zed by the
Commission in its acknowledgement of the Company s 2000
IRP, Idaho Power, along with other electric utili ties in
the region, began to wind down their DSM programs in the
late 1990s in response to changing market expectations.
In place of
347 SAID/YOUNGBLOOD Di-RebIdaho Power Company
utili ty direct acquisition DSM programs , Idaho Power
moved to a regional approach to conservation during that
period through its participation in the Northwest Energy
Efficiency Alliance.
What DSM program spending commitments has the
Company made more recently?
Following the 2000-2001 western energy crisis,
utili ties once again turned to more traditional concepts
for supplying future resources.There was also a
reemergence of integrated resource planning with a
renewed emphasis on utility-based DSM programs.Idaho
Power now funds DSM activities through the Energy
Efficiency Rider , Schedule 91.This removes the threat
of stranded investment.
In 2005, the Company spent $6.7 Million on DSM
acti vi ties, an increase of approximately 80% over the
previous year.At the end of the third quarter of 2006,
Idaho Power spent $ 6.62 Million to fund DSM acti vi ties.
By the end of 2006, the Company expects to, once agaln
make a significant increase in DSM spending over the
previous year.
Dr. Reading claims that " Idaho Power s DSM and
conservation achievements have been relatively poor.
Reading Direct at 35, 11 18-19.On what basis does he
make that claim?
348 SAID/YOUNGBLOOD Di-RebIdaho Power Company
Dr. Reading s assessment concentrates on energy
savings as an indicator that the Company s DSM efforts
have
349 SAID/YOUNGBLOOD Di-Reb
Idaho Power Company 26a
been poor.Idaho Power , on the other hand , has
strategically focused its DSM efforts in recent years on
programs that reduce summer peak demands Targeting
summer peak demands is consistent with the recent
resource acquisitions of peaking units.
Summertime loads drive Idaho Power s capacity needs.
Therefore, many of the Company s DSM programs are
intentionally designed to provide significant load
reductions during summertime peak-hour needs.It's for
this reason that the Company has focused its efforts on
peak reductions instead of overall energy reductions. In
2005, Idaho Power achieved a total peak load reduction of
47 MW with 43 MW resulting from its two demand response
programs.
Idaho Power has also focused its DSM development
efforts on programs that target lost-opportunity energy
savings. Since the 2004 IRP , the Company has implemented
the Energy Star~ Homes Northwest and Building Efficiency
19 programs that achieve energy savings in the commercial
and residential sectors that would otherwise be lost as
new construction occurs.
In the 2006 IRP, the Company identified additional
non-lost-opportunity DSM resources, often referred to as
retrofi t programs, in the residential and commercial
sectors.These programs will greatly broaden Idaho
350 SAI D /YOUNGBLOOD Di - RebIdaho Power Company
Power s DSM acti vi ties beyond the initial focus on summer
peak
351 SAID/YOUNGBLOOD Di-RebIdaho Power Company 27a
reduction and lost-opportunity energy savings.
In fact , as Dr. Reading acknowledges in his
testimony, the Company plans to significantly increase
its spending on DSM programs as it implements the new and
expanded programs identified in the 2006 IRP.The
addi tional DSM resources are expected to reduce loads by
approximately 88 aMW (on an annual basis) and reduce the
system peak-hour load by approximately 187 MW during the
summertime.
On page 39, lines 11-12 of his testimony, Dr.
Reading states that, according to the Quantum Consulting
study completed on behalf of Idaho Power
, "
Idaho Power
may be underestimating the amount of peak demand savings
through DSM that are available to it.How do you
respond to that statement?
Dr. Reading I s testimony mischaracterizes the
conclusions drawn by Quantum Consulting.In November
2004 , at the request of Idaho Power , Quantum Consulting
conducted a study to determine the potential for DSM
resources through 2013 for the Company s commercial and
residential sectors.The study identified a total
economic potential of 384 MW of peak demand reduction , or
nearly 23% of the combined residential and commercial
peak demand forecast in 2013.
However , there is a distinct difference between
352 SAID/YOUNGBLOOD Di-RebIdaho Power Company
energy savings potential that is determined to be
economic " and savings potential that is determined to be
achievable
1 7
353 SAID/YOUNGBLOOD Di-RebIdaho Power Company 28a
through utility-operated programs. Economic potential
Quantum Consulting explains
, "
represents the savings
possible if all cost-effective measures were installed in
every application deemed physically feasible.See
Exhibit 3 at ES-3 (emphasis added).
Quantum Consulting further describes economic
potential as "a theoretical quantity that will exceed the
amount of potential we estimate to be achievable through
even the most aggressive voluntary program acti vi ties. "
See Exhibit 3 at 2-19.
On the other hand , achievable potential , according
to Quantum Consulting, can be viewed as a subset of
economic potential which ranges from "maximum achievable
or "the amount of economic potential that could be
achieved over time under the most aggressive program
scenario possible " to "naturally occurring " or the amount
of savings estimated to occur " in the absence of any
utili ty or governmental intervention.See Exhibit 3 at
2 and 2-
To develop the estimates of achievable potential,
Quantum Consulting modeled energy savings potential based
on four different funding ratios for the incremental cost
of implementing the various measures.The cost share
ratios used in the assessment ranged from 100% for the
maximum achievable scenario to 33% for the low funding
354 SAID/YOUNGBLOOD Di-Reb
Idaho Power Company
scenario.For year 10 of the analysis, estimates of peak
demand
355 SAID/YOUNGBLOOD Di-RebIdaho Power Company 29a
reductions corresponded directly to cost share.
Peak reduction estimates ranged from 190 MW (around
11% of 2013 peak demand) for the maximum achievable
scenario to 42 MW (less than 3% of 2013 peak demand) for
the low funding scenario.See Exhibit 3 at ES-
utilizing the estimate of economic potential rather than
achievable potential , Dr. Reading is misstating the DSM
conclusions drawn by Quantum Consulting in its 2004
report.
To help put the Quantum Consulting results in
perspecti ve, what is Idaho Power s goal for peak
reduction by 2013?
Idaho Power has a target of 123 MW of peak
reduction from the residential and commercial sectors by
2013 , which assumes a 75% cost share. All the DSM
resources identified in the 2004 IRP and 2006 IRP
combined are expected to achieve 251 MW of peak reduction
by 2013.
Dr. Reading asserts on pages 40 and 41 of his
testimony that "allowing Idaho Power to construct a 170
MW gas-fired unit will discourage Idaho Power from making
any further DSM commitments J "Do you agree with Dr.
Reading s assessment?
No, I do not agree with the conclusion drawn by
Dr. Reading.In developing the 2006 IRP , the Company
356 SAID/YOUNGBLOOD Di-RebIdaho Power Company
worked with the Integrated Resource Plan Advisory Council
(" IRPAC") which was comprised of maj or stakeholders
representing the
357 SAID/YOUNGBLOOD Di-RebIdaho Power Company 30a
environmental community, maj or industrial customers,
irrigation customers, state legislators, public utility
commission representatives, the Governor s office and
others.Input from the IRPAC, including maj or industrial
customers, was considered and incorporated into the 2006
IRP.
The 2006 IRP assumes that the proposed Evander
Andrews peaking resource that is the subj ect matter of
this proceeding will be constructed and placed in
service.Despite that assumption , the 2006 IRP sets
forth various DSM programs that will be implemented along
wi th other measures in order to meet the Company s load
requirements.Thus, Idaho Power has already demonstrated
through its 2006 IRP that allowing construction of the
Evander Andrews peaking facility will not have a
dampening effect on the Company s incentive to implement
new DSM programs.Dr. Reading s testimony on this matter
is unwarranted and unjustified.
Wi tness Sterling testifies on page 41 , lines
8 that he believes "that no matter how carefully
crafted and well-intended an RFP evaluation methodology
must be,. the reasonableness of the outcome must be
reevaluated at the end of the process , especially when
the result comes down to a tradeoff between the price and
non-price factors.Ul timately, he observes,the final
358 SAID/YOUNGBLOOD Di-RebIdaho Power Company
result must make sense and be justifiable.Do you agree
wi th this testimony?
(**Confidential information follows**)
359 SAID/YOUNGBLOOD Di-RebIdaho Power Company 31a
Does this conclude your testimony?
Yes, it does.
361 SAID/YOUNGBLOOD Di-RebIdaho Power Company
open hearing.
(The following proceedings were had in
MS. MOEN:The witnegses are available for
cross-examination.
COMMISSIONER SMITH:Okay, Mr. Walker.
MR. WALKER:Madam Chairman , I would
simply note my earlier obj ection to this format and this
procedure.
COMMISSIONER SMITH:Okay, the Chair will
note the Staff counsel's continuing obj ection.Do you
have any questions , Mr. Wal ker?
BY MR. WALKER:
MR. WALKER:Yes, I do.
CROSS-EXAMINATION
I would like to begin by asking which
wi tness is sponsoring Exhibit No.1 and Exhibit No.
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Wild , Idaho
MR. YOUNGBLOOD:Wi tness Mike Youngblood
will speak to Exhibit No.1 and both witnesses will speak
Okay.Now, there I s been a fair amount of
to Exhibit No.
testimony admitted into the record and in your rebuttal
regarding non-price attributes and their evaluation by
the RFP committee; is that a fair characterization?
362 SAID/YOUNGBLOOD (X-Reb)
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. 24
MR. YOUNGBLOOD:Yes.
And Mr. Youngblood, what was your role in
this process for the Company?
MR. YOUNGBLOOD:I was a member of the RFP
evaluation team.
So you would best be able to answer
questions directly about the evaluation of these
non-price attributes?
MR. YOUNGBLOOD:To the extent the
evaluation of those non-price attributes was done wi thin
the RFP evaluation team, yes.
Okay, and would it be fair to say in short
that the (**Confidential**) site requires a lower capital
investment than the Evander Andrews site?
MR. YOUNGBLOOD:Yes.
And in fact , the (**Confidential**) site
won the point factoring if we only look at the price
attribute categories; correct?
MR. YOUNGBLOOD:The (**Confidential**)
si te had a lower or , I'm sorry, had a greater point score
wi th regard to just the point factoring with regard to
price, correct.
So if that's all we looked at, that would
have been the winning bid?
MR. YOUNGBLOOD:I am not sure that it was
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363 SAID/YOUNGBLOOD (X-Reb)
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the lowest of all.I would have to look back , but
between the two that we re looking at right now, correct,
that would be the lower price in capital.
So if we assume that these two we
talking about were the top two and if we only look at the
pricing, the (**Confidential**) site would have won on
the bid, would have been selected as the winning
bidder?
MR. YOUNGBLOOD:If we only looked at the
capital cost and the estimated transmission cost, that
would be true.
So then Evander Andrews was selected
because the evaluation of the non-price attributes when
added in made that the best choice for the committee?
MR. YOUNGBLOOD:Evander Andrews was
selected after the complete evaluation of both price and
non-price attributes were evaluated, correct.
And I think it I S in your testimony on page
4 that of the non-price attributes that the
(**Confidential**) attributes is the area where these two
particular proposals differed the most; is that
correct?
MR. YOUNGBLOOD:That is correct.
And you also stated at the bottom of page
, going over to the top of page 5, that the magnitude
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364 SAID/YOUNGBLOOD (X-Reb)
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for some of these non-price factors, that may have
decreased , but the risks remain so material that they
could preclude development altogether or delay the
construction; is that a fair characterization of your
testimony?
MR. YOUNGBLOOD:I believe that while the
risks
--
let me go back and see.I had said that the
magnitude of certain non-price attribute risks associated
wi th the second place proposal may have been reduced
they may have increased, also, but while they may have
been reduced that there are material development
differences or risks between the two proposals which may
make it necessary to either delay the construction of a
site, to greatly reduce or restrict the output of a site
or to not build the site at all.
Okay.Well, if I can direct your
attention to pages 5 and 6, I believe you start to talk
about the magnitude of some of these price factors or,
excuse me, some of these non-price attributes.
MR. YOUNGBLOOD:I talk about the
non-prlce attributes, correct.m not sure I'm talking
about the magnitude of them.
And the first non-price attribute that you
talk about would be land ownership on page, I'm on page,
Now , does Idaho Power own the land upon which Bennett
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Mountain sits?
MR. YOUNGBLOOD:I do not know the answer
to that.
Would Mr. Said have any direct knowledge
as to whether the Company owns or leases the land upon
which the Bennett Mountain power plant sits?
MR. SAID:I believe that the conditions
of use are known , but as with Mr. Youngblood , I don
kn~w if we own or lease, but the property is under the
control of Idaho Power at known cost.
Do you know if it was the same developer
who developed the Bennett Mountain plant as proposed the
(**Confidential**) site, that being (**Confidential**)?
MR. YOUNGBLOOD:Yes, it was.
Would it surprise you to learn that
Bennett Mountain power plant is actually on leased land
leased from the City of Mountain Home?
MR. YOUNGBLOOD:Again , I do not know.
Wouldn t it be a fair statement to say
that the true issue for the evaluation committee is not
whether a lease with the City of (**Confidential**) could
have been obtained , but rather was an issue of cost and
what that would have cost?
MR. YOUNGBLOOD:No.The lease with the
Ci ty of (**Confidential**) had not been obtained at the
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366 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
time of the evaluation and to my understanding has not
yet been obtained, so with regard to that, we had no idea
what those costs might be.We felt that there may be
substantial risk associated with those costs or that
those unknown.Wi th regard to your previous statement on
the Bennett Mountain , I do not know whether or not we
lease it.I do not know , though , whether evaluation of
that property at the time of the Bennett Mountain that
that was not a known and measurable quantity on the
Bennett Mountain and so that the Company had fair
knowledge of that.We do not have knowledge of the
(**Confidential**) site like we do at the Evander Andrews
site.
Do you believe that a lease could not or
would not have been obtained from the City of
(**Confidential**) for that proj ect?
MR. YOUNGBLOOD:I do not know.The lease
had not been obtained and so that there was risk
associated with the fact that we did not know the terms
of a lease had it been able to be obtained.
Well , in fact, isn t it true that the
evaluation committee assumed an expected lease cost for
the (**Confidential**) site?
MR. YOUNGBLOOD:We did assume a cost on
the price side of the equation.On the non-price
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367 SAID/YOUNGBLOOD (X-Reb)
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attribute, we assessed the risk of whether or not that
lease would escalate, go up, go down.Wi th regard to the
value of that risk , we could not determine that.
Okay, do you recall what amount it was,
what amount of money it was , that the evaluation assumed
for the annual lease?
MR. YOUNGBLOOD:I do not know that.
don t have that.
team.There
team.
Would it surprlse you if I told you that
You were on the evaluation team?
MR. YOUNGBLOOD:I was on the evaluation
was also other members of the evaluation
the estimated amount was $27,000 a year escalated at 2.
percent, does that sound about right?
MR. YOUNGBLOOD:I do not know.I will
assume that that is correct, that those were the
assumptions we made with regard to that.Again , that was
an assumption on the part for the evaluation , but we did
not know whether or not that would go up even more or
less.There was associated risk with that.
And now , don t you think that if we
assume, like the evaluation committee did , that it'
$27 000 a year for the lease, isn t that a rather small
amount when we re talking about a $ 7 0 million power
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368 SAID/YOUNGBLOOD (X-Reb)
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plant?
MR. YOUNGBLOOD:Again
Is it small or big compared to 70
million?
MR. YOUNGBLOOD:On the non-price
attributes , we I re not looking at price.On the non-price
attributes , we re trying to assign points based up~n the
risk that may be associated with any kind of known event
and we did not know what may or may not happen with that
lease.That lease had not been acquired.
What about if we compare $27 000 a year to
an assumed $22.5 million investment in transmission?
MS. MOEN:That question has already been
asked and answered and I obj ect to that.
COMMISSIONER SMITH:m going to allow
the question.
MR. YOUNGBLOOD:I will go back to what we
were doing with non-price attributes.Non-price
attributes meant that we did not know or it was not
easily able to determine what the price value of any
particular issue may be.re trying to assess an
associated risk with regard to those different
attributes, so the knowledge of 27,000 or any other
number or what the escalation may be at some future point
was not part of the non-price attribute evaluation.
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SAID/YOUNGBLOOD IX ~eu)
Idaho Power Company
369
BY MR. WALKER:Okay, I'd like to next
direct your attention to pages 13 through 14 of your
rebuttal , specifically to the area where you discuss the
water supply and waste disposal , and you testify that the
costs for water and sewer were unknown and therefore,
they could not be considered minor issues.Is that what
you testified?This would be page 13, lines 11 through
14.
MR. YOUNGBLOOD:I said that they were
unknown at the (**Confidential**) site.They were known
at the Evander Andrews site.
And again , it wasn t necessarily an issue
for the evaluation committee that water and sewer could
not be obtained at the (**Confidential**) site, was it?
MR. YOUNGBLOOD:I I m sorry, repeat the
question.
It wasn I t an issue that -- you didn
think that the (**Confidential**) site could not obtain
water and sewer service, it was more an issue of cost and
magnitude; is that correct?
MR. YOUNGBLOOD:No, the evaluation
cri teria for land, as well as the water and waste
treatment, the evaluation on the non-price was can those
certificates and licenses be obtained in time and due
wi th the schedule and so there was an associated risk
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370 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
with the (**Confi~ential**) site in the fact that they
did not have those or had not obtained those from the
City of (**Confidential**) and (**Confidential**) at that
point in time and we did not know whether or not those
could be obtained in time with the schedule.Wi th the
Evander Andrews site, those were already obtained, so it
was an evaluation of risk between the two.
So the water supply for (**Confidential **)
was to be provided by (**Confidential**); is that
correct?
MR. YOUNGBLOOD:That is my understanding,
correct.
And the waste disposal or sewer service
was going to be provided by the City of
(**Confidential**) ?
MR. YOUNGBLOOD:That is my understanding,
correct.
And this location is located in the City
of (**Confidential**) industrial park?
MR. YOUNGBLOOD:Yes, it is.
Couldn t we -- well, strike that.
(**Confidential**) is an investor-owned utility regulated
by this Commission; right?
MS. MOEN:I obj ect to that question.The
wi tness may not have personal information regarding
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371 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
that.
COMMISSIONER SMITH:Ms. Moen , I will
allow the question.If the witness doesn t know the
answer to that , they can tell us and if they do, they
can.
MR. YOUNGBLOOD:I believe they are,
yes.
BY MR. WALKER:And as such , they would
have a publicly available tariffed price on file here at
the Commission?
MR. YOUNGBLOOD:That would be available
currently, correct.
So do you think knowing the type of
turbine and plant that was going to be installed, do you
think we could estimate an annual water usage for the
plant?
MR. YOUNGBLOOD:Yes.
I f I were to give you a hypothetical
example , and this may be better for Mr. Said as well
ll let you two decide who wants to answer it, if we
look at this particular type of turbine and we assume
that it would have a maXlmum water usage of 120 gallons
per minute when it's running full out and we assume 500
hours of operation over the summer which would be
probably a large amount for a peaker , summer peaker
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372 SAID/YOUNGBLOOD (X-Reb)
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plant and we apply that to (**Confidential**) summer
rate , would it surprise you that that yearly amount of
water under those assumptions would be approximately
, 500 ~aking service from (**Confidential**)?
MR. YOUNGBLOOD:Did you address that to
Mr. Said?
MR. SAID:500?
Yes, approximately.Subj ect to check,
would you agree if that calculation was performed that
would be the result?
MR. SAID:Well , I have no idea what the
curr~nt rate per gallon might be, but if I did the math
right, you re talking about 60 000 gallons costing
500.If the rate multiplied on a per gallon basis
gave you that number, then I assume that you know how to
do the math.That would tell you what the cost of water
would be today and obviously, that could go up in the
future.
Okay; so even if we doubled that number
to, say, $15 000 on an annual basis , and this may be back
to Mr. Youngblood , I'm not sure, but wouldn t you
consider that $15,000 to be a minor cost on a 170
megawatt gas-fired power plant?
MR. SAID:If you re only looking at
dollar issues.I believe that Mr. Youngblood has
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373 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
testified that whether or not they would be provided at
the time that the facility came on is another
consideration.
Do either of you know who provides the
water supply at the Bennett Mountain plant?
MR. YOUNGBLOOD:It is under the control
of Idaho Power.It is a well at Bennett Mountain.
apologize.I was speaking to the Evander Andrews.The
two sites that we were comparing were between Evander
Andrews and (**Confidential**) and at the Evander Andrews
si te , Idaho Power has a well and controls that.
Isn I t it true that the water supplied to
the Bennett Mountain plant is supplied by the City of
Mountain Home?
MR. YOUNGBLOOD:I do not know.
That's okay.ll direct your attention
now to pages 6 through 12 of your rebuttal testimony.
The next non-price attribute discussed on these pages is
air quality; is that correct?
MR. YOUNGBLOOD:I believe at the bottom
we start talking about air quality, correct, at the
bottom of 6, yes, okay.
Okay, and the Company submitted as -- had
a study prepared by (**Confidential **), I believe it is,
and the purpose of that was to examine air quality
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374 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
permitting issues for the top three short-listed bidders;
is that correct?
MR. YOUNGBLOOD:That is not correct.
Okay.
MR. YOUNGBLOOD:It was on three different
sites.(**Confidential **) had no knowledge of the
bidders at all.Independently Idaho Power asked
(**Confidential**) to prepare an air quality study on
three different sites:one Elmore county,one
Canyon County and one in Ada County.
And do you have copy your rebut tal
testimony there with you?
MR. YOUNGBLOOD:Yes , I do.
d like to direct you specifically to
page 8, lines 13 through 15.Now , you quote that report;
is that correct?
MR. YOUNGBLOOD:Yes.
Could you please read what you quoted from
the report?
MR. YOUNGBLOOD:Beginning where , on 10,
line 10?
Start with line 11
, "
the DEQ.
MR. YOUNGBLOOD:(**Confidential**) .
Okay, and then you refer to Exhibit 1 at
page 10.
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MR. YOUNGBLOOD:Correct.
Do you have Exhibit 1 with you?
MR. YOUNGBLOOD:Yes , I do.
Could you please turn to page 10?
MR. YOUNGBLOOD:Yes.
Okay, and the second to the last paragraph
from the bottom of the page , that's where you quoted.
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Wilder , Idaho
You quoted lines 1 through 3 of this paragraph that you
just read to us; is that correct?
MR. YOUNGBLOOD:That is correct.
Okay, can you please looking at the
report , could you continue on in that same paragraph and
read us the remainder, lines 4 through 6, the very next
MR. YOUNGBLOOD:(**Confidential**) .
Okay.Now , since we have the report out,
could you turn to page 1 of that report?This was
submi tted as rebuttal Exhibit No.1, page This is the
Executi ve Summary; correct?
MR. YOUNGBLOOD:Correct.
lines?
376 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
Could you please read aloud for us the
final paragraph of the Executive Summary?
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Wilder , Idaho
MR. YOUNGBLOOD:(**Confidential**) .
Okay.I f you would bear with me here
could we stay on this report and please turn to Table
I believe that's found on page (**Confidential**) ?
MR. YOUNGBLOOD:m sorry, please say
(**Confidential**) ?
MR. YOUNGBLOOD:It shows the turbine
that again.
modeling results for those three sites located in Ada
Elmore and Canyon County, correct.
377 SAID/YOUNGBLOOD (X-Reb)
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And that would include the Evander Andrews
in Elmore and the (**Confidential**) in Ada?
MR. YOUNGBLOOD:Correct.
And in layman s terms , this shows the
pollution that comes out of the machine; right?
simplified.
MR. SAID:I think that's --
Is that too simplified?
MR. SAID:I think that may be too
It's possible that that's combined emissions
from the specific unit and additional units in the
area.
Okay; so it would be the pollution for
that particular site, then?
accurate.
MR. SAID:I believe that would be more
Okay.Now , the column , if we look to the
right, the second to the last column is called the
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Wilder , Idaho
Significant Impact Level;Do you know how this report
defines significant impact level?
MR. YOUNGBLOOD:I do not recall , no.
Could you look at page 3, and at the very
top, very top of page 3 in parentheses, does that define
significant impact level for this table?
MR. YOUNGBLOOD:Yes , I believe so.
Could you please read what that definition
378 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
is?
MR.YOUNGBLOOD:
(*
*Confiden tial
* *)
MR.YOUNGBLOOD:I do not know at what
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point in time EPA starts to take action.I know that
when an area is termed as a maintenance area that it
headed toward non-attainment and so in that case, EPA may
step in prior to exceeding these numbers.
Okay.**Confidential**)
MR. YOUNGBLOOD:That is correct, none of
the numbers .for any of the three sites.
(*
*Confiden tial
* *)
What does n/a typically stand for?
MR. YOUNGBLOOD:Not applicable.
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Okay.**Confidential**)
So regardless, it's pretty clear from this
table that these state-of-the-art turbines don t produce
a lot of emissions, do you think that would be fair to
say?
MS. MOEN:m going to obj ect to that
question.That requires an engineering background as to
emissions standards and also the quantity of emissions
emitted by a 501F and Mr. Youngblood doesn t have that
kind of technical history.
COMMISSIONER SMITH:Mr. Walker.
MR. WALKER:That's fine, I'll withdraw
that question.
BY MR. WALKER:All right, I think I'
done with Exhibit 1 for a moment here.d like to now
direct you to pages 12 and 13.This is another risk that
you discuss which would be community support; is that
correct?
MR. YOUNGBLOOD:That is correct.
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You state at the bottom of page 12 and the
top of page 13, "The risks continue to exist that
non-support for the proj ect could result in construction
delays and increased costs for the facility.
MR. YOUNGBLOOD:That is correct.
Isn t it true that despite whatever public
opposition was expressed that the (**Confidential**) site
was ultimately granted a conditional use permit to
construct the plant?
MR. YOUNGBLOOD:It is my understanding
that it has received a conditional use permit , correct.
Now , if the conditional use permit has
been obtained, what risk is there that community
opposition will delay the construction?
MR. YOUNGBLOOD:Huge, I mean, and that'
the evaluation.There was substantial community
rej ection or opposition at the time of the announcement
of these different sites and trying to go in for a
condi tional use permit attainment does not say at all
whether or not that community support has been mitigated.
Communi ty support can still be very, very large in trying
to go ahead and build and construct the plant.It just
talks to the conditional use permit was granted.
Is it unusual for Idaho Power to face any
opposition for construction of various facilities?
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MR.YOUNGBLOOD:unusual for them?
unusual,1 i ke,say,for instance
power lines through Eagle?
MR.YOUNGBLOOD:That was contested.
There were other power plants that have been contested.
There are also power plants that have been constructed
that community support was very supportive and, in fact,
went through easily.
How many people in the (**Confidential**)
area opposed the plant at the (**Confidential**) site?
MR. YOUNGBLOOD:We did not take a survey.
I do know --
That was my next question.Did you do any
kind of survey or study?
MR. YOUNGBLOOD:During the evaluation
time and during that, there were -- first of all, at the
condi tional use permit, I don t recall the number.There
was a substantial number of individuals that were there
in opposition to the plant.During that same point in
time, e-mails were sent out to a lot of the residents in
the area.Myself, we received one not because I was a
member of the evaluation team , because I'm a member of
the soccer community and the soccer community had already
come up in arms and had started posting e-mails.
cannot give you a number.There was a number of things
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that came up during that time that led us to believe
strongly that there was strong opposition to the plant in
(**Confidential**) .
How many people in opposition does it take
in order for the Company to spend more money on an
al ternati ve site?
MS. MOEN:I obj ect to that question.
That question is argumentative.
COMMISSIONER SMITH:Mr. Walker , would you
like to rephrase that?
MR. WALKER:ll withdraw that question.
BY MR. WALKER:Do you think there would
be public opposition if the public knew that Idaho Power
was proposing to spend more money to locate the plant at
the Evander Andrews site?
MR. YOUNGBLOOD:ll go back to under
community support, this was an evaluation of non-price
attributes , so under community support, we were trying to
determine as a non-price attribute whether one site had
greater community support or less community support.
this case, the Evander Andrews site it was deemed had
greater community support than the (**Confidential**)
site.
The next area I'd like to discuss
actually the next section of your testimony.It begins
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on pages 14 through 19 and this is where you discuss
proj ect cost differentials.Who would be responsible for
this information?
MR. SAID:That depends on the question
posed.
Okay, and I'm also going to be referring
to the rebut tal Exhibit No.This has been referred to
several times already in this proceeding.Does everybody
have a copy of this?
MR. SAID:We do.
Have it handy?d like to spend some
time discussing this, Madam Chairman.My next section
will be a lengthy discussion of this.I can start it now
and just break wherever if you prefer.
COMMISSIONER SMITH:Well, I think we
should use up this next 15 minutes.
MR. WALKER:Okay.
COMMISSIONER SMITH:I mean , if you have
another group of questions that were shorter.
MR. WALKER:I think maybe we can get a
good introduction on to this exhibit.
BY MR. WALKER:If we look at the very
top
COMMISSIONER SMITH:And remind me what
re looking at.
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MR. WALKER:This would be the Company
rebuttal Exhibit No.It's a one-page spreadsheet.
BY MR. WALKER:Now , this page, it'
divided in thirds, would that be fair to say?
MR. SAID:Yes.
Okay, and let's start at the very top,
very left-hand side.This is, it says proj ect Costs as
Evaluated , so these would be the numbers that the
evaluation committee used and had before it?
MR. SAID:That's correct.
Okay, and the very first column there is
labeled Plant Cost.Now , would this be the contract
price for Evander Andrews and (**Confidential**) , is that
what that number is?
MR. SAID:It's the contract which is
$49,990,000 and then some additional cost.
Right, and it's reflected as 50 781 000
because there was a further discount after the award or
at some point after the committee evaluated it, but
that's the same number we re talking about, the contract
right, the bid amount?
MR. YOUNGBLOOD:This is the capital cost
of the plant.
Okay.'Now , there s no risk associated
with those numbers, is there?
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MR. SAID:That's correct.The risk is
reflected in non-price attributes.
Now , if we move to the next column , what'
the next column?
MR. SAID:The next column is Transmission
Cost.
Okay, and those amounts there , the
550 000 for Evander Andrews and the (**Confidential**)
for (**Confidential**) , is that the transmission cost
that the evaluation committee assumed for those two
proj ects?
MR. YOUNGBLOOD:That was the information
that had been given to us as estimates from our delivery
department , correct.
Okay, and so if we keep moving down our
chart here, the next one is the proj ect Cost; is that
correct?
MR. SAID:Yes , it's the sum of the first
two columns.
Okay, and then if we look down to the
number that's underlined there,(**Confidential**) ,
that's the difference in the two proj ect costs?
MR. SAID:Yes, that number is the same as
has been presented by Mr. Sterling.
Okay; so that's the number that Staff
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recommended for disallowance, would that be fair to
say?
MR. SAID:Yes.
Okay, and then the next column , what's the
MR. SAID:The next column is an
evaluation of the levelized cost of the project over a
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30-year period of time.
So like it says in the note at the bottom
is that number derived by levelizing the project cost
as described, is that where you get that
MR. SAID:Yes.
next column?
And the next column labeled Levelized
Fixed Operating Costs, how was that derived?
MR. SAID:Those amounts were quantified
by the evaluation team as costs in addition to capital
costs that were the differences between the two
Okay, and we ll get back to those in a
little bit, but what I s the next column?
MR. SAID:The last column is the Annual
Levelized Fixed Costs which include both capital and
So correct me if I'm wrong, but this
over years
number from?
proj ects.
operating costs.
388 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
number is the preceding two added together; is that
right?
MR. SAID:That's correct , and those
numbers were the basis of the team s evaluation for price
points.
Okay; so then if we move to the middle
third , that's called Equal Annual Levelized Fixed Cost;
~s that correct?
MR. SAID:Yes.
And this one, correct me if I'm wrong, but
we kind of have to start on the right-hand side when we
look at this one; right?
MR. SAID:That's correct.
And could you describe , start at the
right-hand side and take us through that calculation
describe what this does and what it shows?
MR. SAID:The attempt here is to take the
annual levelized fixed costs associated with the
(**Confidential**) proj ect and force the Evander Andrews
to an equal level by changing only the levelized cost of
capi tal associated with the s~me proj ects , so if you move
from the right-hand column to the next to the right-hand
column, you ll see that the levelized fixed operating
costs are the same as they are in the top third, and then
when you move to the levelized cost of capital , that
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remains the same for the (**Confidential**) project, but
is reduced at the Evander Andrews proj ect in order to
force an equal annual levelized fixed cost, and then the
final step ,is to convert that levelized cost of capital
into an equivalent project cost if the annualized fixed
costs of the two proj ects were identical.
Okay; so it's fair to say that if we make
the annual costs the same , this is trying to equate how
much cushion there was in price for Evander Andrews
compared to (**Confidential**) to make them equal; is
that another way to say that?
MR. SAID:Well , that's a way to say it.
Okay.
MR. SAID:What you re talking about is
the bottom third of the chart which looks at the true
Evander Andrews proj ect cost of 73 million and what the
proj ect cost would have needed to be in order to have the
same annual levelized fixed cost as (**Confidential**)
and you can see that the difference is
(**Confidential**) .
Okay; so just to make sure I'
understanding this correctly now , in order to pay the
same amount of annual levelized costs , the Evander
Andrews site had a cushion of about (**Confidential**)?
MR. SAID:If you re asking for the
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Idaho Power Company83676
difference between the (**Confidential**) as quantified
by Mr. Sterling and the (**Confidential**) as quantified
by the two of us , then what we say is that Mr. Sterling
overstated the difference in the cost of the two proj ects
by (**Confidential**) , correct.
Well , actually, what I was asking you
about was in the middle of the page, the proj ect cost,
the (**Confidential**) for (**Confidential**) and the
seventy million eight and some odd for Evander Andrews,
so if the Company pays the same amount of money on a
yearly basis , that's the equivalent capital expenditure
to make those equal; is that what that is?
MR. SAID:That's correct.
So the Company could pay, you know , my
math isn t that great , but (**Confidential**) more in
capi tal expenditures for Evander and because of the
operating costs , those would be equal?
MR. SAID:Tha t 's true.
Now , when we get down to the bottom on
this (**Confidential**) , isn t that the amount above that
(**Confidential**) cushion that the Company actually
would pay under the contracts and the process here?
MR. SAID:If the ultimate costs end up
exactly as quoted in the bidding process --
Okay, and if the --
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MR. SAID:-- then the Evander Andrews
project would be expected to cost (**Confidential**) more
than the (**Confidential**) proj ect on an investment.
So to kind of sum it up where up here on
the top where Staff says you paid (**Confidential**) too
much , here the Company says well, no, we really only paid
(**Confidential**) too much?
MR. SAID:We haven t paid any too much at
this point in time.
Well, over what they would have been at
equal?
MR. SAID:If the two plants could be
built at exactly the costs that they proposed, that would
be true.
Okay, that's fair.Let's go back up to
the top and look at the column called Levelized Fixed
Operating Costs, and that'(**Confidential**) ,
approximately, for Evander and (**Confidential**) for
(**Confidential**) .
MR. SAID:That's correct.
Okay.Now , what number -- let's look at
Evander Andrews first , the (**Confidential**).What
number was assumed for incremental fixed O&M at Evander
Andrews in this calculation?
MR. YOUNGBLOOD:Incremental over
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(**Confidential**) or incremental of Evander Andrews,
there was zero.
Okay, and for (**Confidential**) , what was
the number, the assumed number , for incremental fixed O&M
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in (**Confidential**)?
MR. YOUNGBLOOD:Approximately
(**Confidential**) per year.
Okay, and these were, as noted, they were
escalated for 30 years at 2.5 percent, is that correct,
in the calculation?
MR. YOUNGBLOOD:I don t recall if it was
5 percent, but, yes, they were escalated.
What do you get if you escalate zero for
MR. YOUNGBLOOD:Zero.
Isn I t the fixed O&M, is that mostly made
MR. YOUNGBLOOD:Yes.Well , there are --
A substantial portion of it is the labor
cost, would that be fair?
MR. YOUNGBLOOD:There s -- I don t know
what the portions were, yes , but there is labor, there is
additional supervision , additional vehicles, different
plant.I have that in my testimony.
30 years?
up of labor?
yeah.
393 SAID/YOUNGBLOOD (X-Reb)
Idaho Power Company83676
So with Evander Andrews having zero
incremental O&M, that assumes that there s no additional
labor cost whatsoever when adding this 170 megawatt plant
at an existing place?
MR. SAID:The attempt was to identify the
incremental cost above and beyond the Evander Andrews
site for the (**Confidential**) site, so you could have
added a base amount for Evander Andrews, you would have
added the same amount into (**Confidential**).
Well , now , isn t it true that 100 percent
of the costs used to operate the Danskin plant were
assigned as incremental fixed O&M escalated over 30 years
and added to the (**Confidential**) site?
MR. YOUNGBLOOD:Please restate that.100
percent of the -- please restate it.
Okay.100 percent of the -- you testified
that (**Confidential**) incremental fixed O&M was added
to the (**Confidential**) site.
MR. YOUNGBLOOD:Correct.
Okay.
MR. YOUNGBLOOD:That has nothing to do
wi th Dans kin.That is the incremental additional trucks,
buildings, wages, salaries that would be needed at the
(**Confidential**) site if the Company were to build a
plant at (**Confidential**).
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Idaho Power Company83676
So isn t it true that those numbers were
derived using historical cost data from the existing
Dans kin plant?
MR. YOUNGBLOOD:Probably some historical
data as well as just determination of what it would cost
to run an (**Confidential**) site.Supervision, there
addi tional supervision or there may be vehicle mileage
attributable to a supervisor going back and forth which
would not have historical basis, but , yes , those were
incremental costs to a site that would be built at the
Evander Andrews.
Okay; so I'm just trying to make sure
understand what numbers were included here, so you
saying that there would be zero incremental.There would
be zero additional labor or incremental fixed O&M at a
plant located at Evander Andrews , but yet, there would be
this (**Confidential**) escalated for 30 years added to
the (**Confidential**)?
MR. YOUNGBLOOD:That is correct.That is
not to say it's zero dollars to operate Evander Andrews
or zero dollars to operate the (**Confidential**) site.
The incremental difference would be an additional
(**Confidential**) more at the (**Confidential**) site.
So if we look at this levelized fixed
operating cost, this (**Confidential**) , that represents
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Idaho Power Company83676
taxes , depreciation, insurance and those -- that's the
only numbers represented there; is that correct?There
no labor or any other overhead attributed, reflected in
that (**Confidential **)
MR. YOUNGBLOOD:That is correct.That is
property tax, insurance.
COMMISSIONER SMITH:Mr. Walker , would
this be a good time to break?
MR. WALKER:Sure.
COMMISSIONER SMITH:I apologize doing
this to your cross, but I I m sorry, I have to go, so we
will reconvene at 1: 35.
(Noon recess.
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