20170925PAC to Staff 5-35.pdf

ROCKY MOUNTAINPOWER
A DIVISION OF PACIFICORP 1407 W North Temple,Suite 330
Salt Lake City,Utah 84116
September 25,2017
Diane Hanian
Idaho Public Utilities Commission
472 W.Washington
Boise,ID 83702-5918
RE:ID PAC-E-17-06
IPUC 2nd Set Data Request (5-35)
Please find enclosed Rocky Mountain Power's Responses to IPUC 2nd Set Data Requests 5-35.
Also provided are Attachments IPUC 6 -1 (Parts 1,2,and 3).Provided on the enclosed CD are
Confidential Attachments IPUC 6 -2,9,11 --(1-2),17,22,28,30 --(1-2),and 32 and Confidential
Response IPUC 17.Confidential information is provided subject to the terms and conditions of
the protective agreement in this proceeding.
If you have any questions,please feel free to call me at [phone].
Sincerely,
J.Ted Weston
Manager,Regulation
Enclosures
C.c.:Ronald L.Williams/PIIC [e-mail] (C)
Jim Duke/PIIC jduke@idaho_aan.co_m (C)(W)
Kyle Williams/PIIC [e-mail](C)(W)
Val Steiner/PIIC (C)(W)
Brian C.Collins/Brubaker &Associates [e-mail] (C)(W)
James R.Smith/Monsanto (C)(W)
Maurice Brubaker/Monsanto mbrubaker consultbai.com (C)(W)
Katie Iverson/Monsanto _rn (C)
Eric L.Olsen/IIPA elo@echohawk._co_m(C)
AnthonyYankel/IIPA t_ony@y_annkel.net (C)
Randall C.Budge/Monsanto [e-mail] (C)
Thomas J.Budge/Monsanto [e-mail] (C)(W)
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 5
IPUC Data Request 5
Please provide work papers,exhibits,tables,and any analysis supporting the
Company's filing in electronic format with formulae intact with references to
sources for all pasted values.Please consider this an ongoing request.
Response to IPUC Data Request 5
The work papers were provided on a CD in native format along with the filing
submitted on June 30,2017.
Recordholder:Jennifer Angell
Sponsor:Not applicable
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 6
IPUC Data Request 6
Please provide copies of all past and future data requests and responses received
by or sent from Rocky Mountain Power to any party in related applications
submitted in other state jurisdictions.Please include both formal and informal
responses.In addition to requests made in Idaho,please provide copies of
PacifiCorp's responses to wind repowering data requests submitted by all parties
in the states of Utah,Washington,Oregon,Wyoming,and California.This
response should include public and confidential data responses.Please provide all
future responses at,or shortlyafter,the time when the Company files its
responses to other parties'requests.As responses are provided,please include a
summary of the state name,organization and DR#s for the DRs contained within
each response.
Response to IPUC Data Request 6
Please refer to Attachment IPUC 6-1 and Confidential Attachment IPUC 6-2,
whichprovide copies of Rocky MountainPower's (RMP)responses in other
jurisdictionsto date.There are no repowering-specific proceedings pending in
California,Oregon or Washington.The Idaho Public Utilities Commission
(IPUC)was copied on all Idaho responses to date.
Going forward,the IPUC will continue to be copied on all outgoing responses in
other jurisdictionsas a supplement response to IPUC Data Request 6.
Confidential information is provided subject to the protective agreement in this
proceeding.
Recordholder:Kaley McNay
Sponsor:Not applicable
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 7
IPUC Data Request 7
Please provide a list of all regulatory authorizations required for the project.
Please identify the authorizations,if not obtained,that would cause the Company
to cancel or modify the project,and explain why it would affect the project and
specifically what action the Company would take.
Response to IPUC Data Request 7
The Company objects to this request as requiring speculation.Without waiving
this objection,the Company responds as follows:
The followingis a list of regulatory dockets seeking review of the repowering
projects and associated ratemaking treatment:
Case No.PAC-E-17-06-Applicationfor binding ratemaking treatment
for wind repowering before the Idaho Public Utilities Commission.
Docket 20000-519-EA-17-Applicationfor an order approving
nontraditional ratemaking related to wind repowering before the Wyoming
Public Service Commission.
Docket 17-035-39-Voluntaryrequest for approval of a resource decision
to repower wind facilities before the Public Service Commission of Utah.
The Company's decision to continue pursuing the opportunity without
authorization would depend,at least in part,on the findings and conclusions in
any applicable commission order,the opportunityto pursue traditional ratemaking
treatment for the projects,and the treatment of the mismatch of the costs and
benefits through any existing ratemaking mechanisms.
Recordholder:Ted Weston
Sponsor:Jeff Larsen
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 8
IPUC Data Request 8
Please provide all informationsince the last depreciation study supporting the
Company's basis for a 30-year depreciation life of the wind turbine generators
(i.e.,manufacturer data or studies).
Response to IPUC Data Request 8
The Company has not developed additional informationregarding the appropriate
depreciation life for the wind turbine generators since the last depreciation study.
However,the Company intends to complete studies to inform the Company's
depreciation study that will be filed with the Idaho Public Utilities Commission
(IPUC)in September 2018.
Recordholder:Kent Ipson
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 9
IPUC Data Request 9
Please detail all IRS requirements the Company has completed to date by project
site in order to qualify for 100%of the PTC's referenced by PAC-E-17-06.
Response to IPUC Data Request 9
Internal Revenue Code (IRC)section 45(a)provides for a current production tax
credit (PTC)for 2017 in the inflation adjusted amount of 2.4 cents per kilowatt-
hour (¢/kWh)of wind electricity produced for wind facilities for which
construction begins before January 1,2017.This is known as the 100-percent
PTC amount.IRS Notice 2013-29 Section 5 and 2016-31 Section 6 provide that
if five percent or more of the total cost of a repowered wind facility is incurred
before January 1,2017,then the wind facility will be deemed to be under physical
construction before January 1,2017,and will therefore qualify for the 100 percent
PTC.In December 2016,the Company procured wind turbine generator (WTG)
equipment of sufficientvalue to meet the five-percent safe-harbor requirement for
each repowering project.Please refer to Confidential Attachment IPUC 9,which
provides calculations of the five-percent safe-harbor requirement for each
repowered wind project.
Confidential informationis provided subject to the protective agreement in this
proceeding.
Recordholder:Jonathan Hale /Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 10
IPUC Data Request 10
Please detail all remaining IRS requirements by project site which the Company
has yet to complete in order to qualify for 100%of the PTC's referenced by
PAC-E-17-06.
Response to IPUC Data Request 10
Internal Revenue Service (IRS)Notice 2016-31 provides that the continuity
requirement of continuous physical construction must be met.Section 3 of the
Notice provides that the continuityrequirement will be met if the wind facilities
are placed in service no later than the end of the fourth calendar year following
the calendar year that physical construction began.Accordingly,all project sites
are using the five-percent safe harbor to establish that physical construction began
before January 1,2017.Therefore,to qualify for 100 percent of the production
tax credit (PTC)value underthe four-year safe harbor,the repowered wind
facilities must achieve commercial operations by December 31,2020.
Recordholder:Jonathan Hale /Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 11
IPUC Data Request 11
Please provide the documentation,by Wind Project,that shows the Company has
met the "start of construction"requirement,and the "safe harbor"requirement for
the PTCs.Include all source documents includingreceipts,journal entries,
emails,contracts,and any other documents for the purchases and acquisitions for
the Wind Repowering projects before December 31,2016.
Response to IPUC Data Request 11
Please refer to the Company's response to IPUC Data Request 9,which provides
the five-percent safe-harbor calculations for each repowering project,which all
exceed five percent.
Please refer to Confidential Attachment IPUC l1-1,which details the Company's
December 2016 safe-harbor purchase expenditure amounts.Please refer to
Confidential Attachment IPUC 11-2,which provides supporting documentation,
includingredacted confidential versions of the Company's appropriation requests
(APR)for the 2016 safe-harbor wind turbine purchases.
Additional source documents for the safe-harbor purchases made in December
2016 are considered commercially sensitive and highly confidential.The
Company requests special handling.Please contact Ted Weston [phone]
to make arrangements for review.
Confidential information is provided subject to the protective agreement in this
proceeding.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 12
IPUC Data Request 12
Please explain the Company's approach to meet IRS Safe Harbor eligibility
includingstart of construction,continuityand any other provisions.
Response to IPUC Data Request 12
The Company's proposed repoweredwind projects will meet the start-of-
physical-construction requirement through the use of the five-percent safe harbor
as set out in InternalRevenue Service (IRS)Notice 2013-29 Section 5 and IRS
Notice 2016-31 Section 6.
As described in the Company's response to IPUC Data Request 10,the Company
intends to the meet the requirement for continuous physical construction under the
continuitysafe-harbor provision of IRS Notice 2016-31 Section 3 by placing the
repowered wind facilities into service by December 31,2020.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 13
IPUC Data Request 13
If the Company does not meet the December 2020 completion project date,please
describe in detail the Company's contingency plans to obtain 100%eligibilityof
PTCs.
Response to IPUC Data Request 13
The Company expects the repowering projects to meet the December 2020
completion date,and has plannedthe repowering project construction schedule so
that more than 87 percent of the wind turbines that will be repowered (all projects
except Dunlap)are placed into service more than a year ahead of the deadline.
The Company has not developed specific contingency plans to obtain 100-percent
production tax credit (PTC)eligibilityif repowered wind turbines are not placed
in commercial operation by December 31,2020.
Internal Revenue Service (IRS)guidance provides certain provisions for wind
projects to demonstrate PTC eligibilityvia certain "start of construction"and
"continuous construction"parameters,which would be assessed by the IRS on a
case-by-case basis,but may also allow 100-percent PTC eligibilityto be
maintained with an in-service date beyond December 31,2020,as a contingency
consideration.
Recordholder:Jonathan Hale /Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 14
IPUC Data Request 14
The Company has provided economic analysis of the project assuming 100%
eligibilityand receipt of the PTCs.Please provide similar analysis of the project
if full receipt of the PTC is not met (i.e.80%,60%,and 40%).
Response to IPUC Data Request 14
The Company objects to this request on the basis that it does not have custody,
possession or control of the requested information.The request requires
development of a special study or information not maintained in the ordinary
course of business.Without waiving this objection,the Company responds as
follows:
The Company has identified the contribution of 100 percent of the production tax
credits (PTC)from the assumed repowering of 999 megawatts (MW)of wind
resources in its economic analysis.Please refer to the rows "PTCs"in Link
Exhibit No.10,which shows that 100 percent of the PTCs contribute $822
million in present-value benefits in each price-policy scenario.The effect of
reduced PTC benefits can be estimated by applying a percentage adjustment to the
PTC benefits included in the Company's economic analysis.
Recordholder:Randy Baker
Sponsor:Rick Link
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 15
IPUC Data Request 15
With respect to the previous question,please quantifythe likelihood of not
receiving 100%of the PTC.
Response to IPUC Data Request 15
The Company has not quantified the likelihood of not receiving 100 percent of the
production tax credits (PTC),but such a result is highly unlikely.The Company
intends to receive 100 percent of the PTCs by ensuring that the safe-harbor and
Internal Revenue Service (IRS)80/20 Rule requirements have been met and that
the projects have been placed in service by December 31,2020.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 16
IPUC Data Request 16
In order for customers to realize the full net benefits of the project as proposed by
the Company,the Company will need to execute its plan on schedule and under
proposed cost estimates.Below are three potential conditions that would put
ratepayer net benefits at risk.For each circumstance below,please describe how
the Company would ensure customers are compensated for lost benefits or
increased costs that are the Company's responsibility:
(a)Reduction in PTC Benefits related to non-attainment of IRS Safe Harbor
requirements (not meeting requirements necessary for 100%of PTC).
(b)Reduction in PTC,NPC,and wholesale wheeling revenue benefits related to
late schedule completion.
(c)Cost overruns due to construction,capital infrastructure cost,permitting,etc.
Response to IPUC Data Request 16
The Company objects to this request as vague,ambiguous,and speculative.
Without waiving these objections,the Company responds as follows:
(a)The Company fully expects it will successfully meet the requirements
necessary to ensure eligibilityof the 100 percent of the production tax credits
(PTC)and receive net power costs (NPC)benefits available through the
repoweredwind projects.The Company anticipates passing on to customers
all of the realized benefits.The Company is not proposing to provide
customers benefits greater than or less than those received by the Company.
(b)Please refer to the Company's response to subpart (a)above.Wholesale
wheeling revenue is not expected to be affected by wind repowering.
(c)The Company believesthat its projection of costs and benefits of wind
repowering are reasonable and achievable and,as stated beginning on page
two in the Direct Testimony of Company witness,Rick T.Link,"...net
benefits,which include federal PTC benefits,net power cost ("NPC")
benefits,other system variable-cost benefits,and system fixed-cost benefits,
more than outweigh net project costs."The Idaho Public Utilities
Commission will have the opportunityto review the construction costs and
implementation of the repoweredprojects and make a determination on the
prudence of the actual costs incurred.
Recordholder:Terrell Spackman
Sponsor:Rick Link
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 17
IPUC Data Request 17
Please provide the average yearly market price of wind RECs over the past five
years,and the projected value of these RECs over the next 10 years.
Confidential Response to IPUC Data Request 17
There is no published price index for renewable energy credit (REC)markets.
Most transactions are conducted as bilateral contracts between parties,and prices
are not reported.The REC market is not consistently active and is illiquid.There
is little price transparency in REC markets.Please refer to Confidential
Attachment IPUC 17,which provides the average yearlysale price of the RECs
sold by PacifiCorp.
Due to lack of transparency and liquidity in the REC markets,the Company
maintains only a one-yearforecast for REC sales.
Confidential information is provided subject to the terms and conditions of the
protective agreement in this proceeding.
Recordholder:Tuba Avcisert
Sponsor:Rick Link
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 18
IPUC Data Request 18
Please provide the Company's Project Plan including,but not limited to:
(a)A detailed schedule/Ganttchart reflecting all major activities on the critical
path.
(b)Any contingency plans the Company will implement to recover from delays.
(c)Project risks,the likelihood of these risks,and costs associated with those
risks.
Response to IPUC Data Request 18
(a)A project schedule/Ganttchart was provided with the Direct Testimony of
Company witness,Timothy J.Hemstreet,specifically Hemstreet Exhibit
No.5.
(b)The Company is implementing a strategy of ongoing engagement with
permitting agencies,turbine suppliers,and contractors to identify risks and
develop mitigation plans.Construction contracts will have guaranteed
milestones and liquidated damages included to motivate contractors to
complete the repowering projects on time.Contractors will be empowered to
use whichever method(s)they feel appropriate to recover from any schedule
delays.
(c)Case-by-case project risks will continuallybe identified,assessed,monitored
and mitigated to maintain project schedule and cost.Beyond consideration of
traditional project implementation risks in project development and planning
activities to date,no stand-alone quantification or probability analysis of
specific project risks has been completed.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 19
IPUC Data Request 19
Please list and quantifythe potential for schedule delay related to:
(a)Jurisdictional approval;
(b)Permitting;
(c)Procurement;
(d)Construction.
Response to IPUC Data Request 19
(a)The current procedural schedules that have been set by each commission
anticipate final orders in line with the Company's proposed timelines and
project implementation schedule.Additionally,the Wyoming Public Service
Commission (WPSC)determined in June 2017 that a Certificate of Public
Convenience and Necessity (CPCN)is not required for the repowering
projects to be implemented in Wyoming.
(b)Permitting requirements related to the repowering projects are minimal,
requiring no new siting,environmental or other permits.While county
conditional use permits and local buildingpermits will be necessary for some
projects,the Company does not anticipate any schedule delays associated with
permitting of the repowering projects.
(c)The Company's project schedule provides sufficienttime for the procurement
of the wind turbine generator equipment consistent with contractual
requirements,while also providing ample time for the Company to procure
turbine installation contracts where necessary.Assuming jurisdictional
approvals are obtained consistent with the procedural schedules set by the
commissions,the Company does not anticipate procurement issues delaying
the project schedule.
(d)The Company's construction schedule results in more than 87 percent of the
wind turbines being repoweredin 2019,more than a year before the
December 31,2020 deadline.In addition,the Company's proposed
construction schedule results in repowering activities taking place during the
spring,summer and early fall periods when weather and wind conditions are
most favorable for construction activities.The Company is unable to quantify
the potential for construction-related delays,which can be heavilyinfluenced
by weather conditions.
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 19
Recordholder:Ted Weston /Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 20
IPUC Data Request 20
Has the Company considered and quantified other locations for siting wind that
would qualify for the PTC and not require retirement of existing capital?If so,
please provide the analysis and the results.If not,why not?
Response to IPUC Data Request 20
The Company has considered other locations for siting wind resources that would
qualify for the production tax credit (PTC)but not require retirement of existing
capital.In 2016,the Company issued a request for proposals for renewable
resources (2016R RFP).In response,the Company received 19 wind project
proposals,all of which were evaluatedand determined to have higher costs for
customers than other alternatives.
Wind resources in Wyoming are expected to have superior generation
performance compared to the wind resources evaluatedin the 2016R RFP.The
2017 IntegratedResource Plan (IRP)identified new Wyoming wind resources as
part of PacifiCorp's least-cost,least-risk plan,and all of the resource portfolios
produced during the initial stages of the portfolio developmentphase of the 2017
IRP contained new Wyoming wind resources in 2021,which for modeling
purposes was used as a proxy on-line date for PTC-eligible wind resources in
commercial operation by the end of 2020.The Company is currentlysoliciting
proposals for those additional wind resources through the 2017 Renewable
Request for Proposals.PacifiCorp also filed an application with the Idaho Public
Utilities Commission (IPUC)on June 30,2017,seeking approval for the new
transmission and new wind resources identified in the 2017 IRP (Case PAC-E-17-
07).
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 21
IPUC Data Request 21
Please explain what the Company will do with the items procured to meet the 5%
safe harbor benchmark if the projects do not proceed.Will the Company request
customers pay these costs?
Response to IPUC Data Request 21
If cost recovery is not granted for the repowering equipment purchased in
December 2016,PacifiCorp will evaluate alternativesto identify best use.
Options could include repowering those units that experience a major component
failure requiring crane mobilization or selling the equipment to an entity that is
repowering or developing new wind resources.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 22
IPUC Data Request 22
Please provide a list of all contracts required to complete the wind repower
project.Please include the names of the contractor,the purpose of the contract,
and estimated cost amounts.
Response to IPUC Data Request 22
Please refer to Confidential Attachment IPUC 22,which provides a list of existing
and future anticipated contracts necessary to complete the repowering project.
The Company's estimates of costs associated with future contracts are considered
to be highly confidential and commercially sensitive.The Company requests
special handling.Please contact Ted Weston [phone] to make
arrangements for review.
Confidential information is provided subject to the protective agreement in this
proceeding.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 23
IPUC Data Request 23
In reference to Company witness Larsen,please provide all work papers that were
used to develop Exhibit 12 and Exhibit 13.
Response to IPUC Data Request 23
Mr.Larsen's work papers were provided on the CD submitted with the filing on
June 30,2017.
Recordholder:Kaley McNay and Terrell Spackman
Sponsor:Jeff Larsen
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 24
IPUC Data Request 24
Please provide the source documents that support the information in Larsen
Exhibits 12 and 13.
Response to IPUC Data Request 24
The confidential work papers supporting the Direct Testimony of Company
witness,Jeffrey K.Larsen,and used to develop Exhibit No.12 and Exhibit No.13
were provided with the June 30,2017 filing.The file name is "CONF JKL
Exhibits 12-14 Repower ID 6.28.17 Work Papers."
Confidential informationis provided subject to the terms and conditions of the
protective agreement in this proceeding.
Recordholder:Terrell Spackman
Sponsor:Jeff Larsen
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 25
IPUC Data Request 25
Please provide the estimated PVRR(d)for the project if there is a 1-year,2-year,
or 3-year slip to the project's completion.
Response to IPUC Data Request 25
The Company objects to this request as requiring developmentof a special study
or information not maintained in the ordinary course of business.Without
waiving this objection,the Company responds as follows:
PacifiCorp has not performed the requested analysis.
Recordholder:Randy Baker
Sponsor:Rick Link
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 26
IPUC Data Request 26
What is the breakevenpoint for continuing with the wind repowering in relation
to the PTCs?At what level of PTCs do the costs of the projects become
untenable?
Response to IPUC Data Request 26
The Company objects to this request as vague,ambiguous,and requiring
development of a special study or information not maintained in the ordinary
course of business.Without waiving these objections,the Company responds as
follows:
PacifiCorp has not developed the requested break-evenanalysis;however,the
Idaho Public Utilities Commission (IPUC)can estimate the level of production
tax credits (PTCs)that would cause the repowering projects to achieve break-even
economics using data contained in the Direct Testimony of Company witness,
Rick T.Link,specifically Link Exhibit No.10.This exhibit includes a line item
"PTCs"under Project Net Costs for each price-policy scenario.The present value
of revenue requirements differential (PVRR(d))for this line item can be
multipliedby a percentage that offsets the PVRR(d)for the "Net (Benefit)/Cost"
line item for any given price-policy scenario.
For instance,in the medium natural gas and medium carbon dioxide (CO2)price-
policy scenario,the PVRR(d)for wind repowering "PTCs"is $822 million,which
reflects the full value of PTCs.The PVRR(d)for the "Net (Benefit)/Cost"line
item is $359 million.If the PVRR(d)for the "PTCs"line item is multipliedby
approximately 56 percent,the "New Wind PTCs"line item would drop by
approximately $359 million,thereby causing the PVRR(d)for the "Net
(Benefit)/Cost"line item to be zero (i.e.,break-eveneconomics).
Recordholder:Dan Swan
Sponsor:Rick Link
PAC-E-17-06 /Rocky MountainPowerSeptember25,2017IPUC2ndSetDataRequest 27
IPUC Data Request 27
When did the Company first begin analyzing the PTCs after it was extended in thePATHActof2015?Specifically,when did the Company begin pursuingeligibilityforPTCfortheseprojects?
Response to IPUC Data Request 27
The Company began to review its options in May 2016,followingthe May 5,2016 release of the InternalRevenue Service (IRS)guidance clarifying therequirementsrelatedspecificallytoproductiontaxcredit(PTC)eligibilityandrepowering.The guidance also provided for a four-year safe harbor to satisfy thecontinuityrequirementofcontinuousphysicalconstruction.In November 2016,the Company concluded that repowering was technicallyfeasible on at least asubsetofitswindfacilitiesandbeganpursuingPTCeligibilityforrepoweringprojectsthroughsafe-harbor equipment purchases that were ultimatelycompletedinDecember2016,The IRS guidance (Notice 2016-31)can be accessed using thefollowingwebsitelink:
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 28
IPUC Data Request 28
Did the Company investigate claiming the Investment Tax Credit (ITC)in lieu of
the PTC?Please provide any analysis the Company did as it pertains to the ITC.
Response to IPUC Data Request 28
The repowering project will increase generation from the repowered wind projects
such that the present value of the production tax credit (PTC)benefits that can be
realized exceeds the value of the available investmenttax credit (ITC)for all
repowering projects.This is the case even without considering normalization
requirements associated with the ITC,which would furtherreduce benefits
associated with the ITC.Please refer to Confidential Attachment IPUC 28 for the
Company's analysis.
Confidential information is provided subject to the protective order in this
proceeding.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 29
IPUC Data Request 29
IRS Notice 2017-4 states in Section 3,"If a facility does not satisfy the Continuity
Safe Harbor,whether the facility satisfies the Continuous Construction or
Continuous Efforts Tests is determined by the relevant facts and Circumstances."
If it is determined that the Five Percent Safe Harbor is not met,what information
will the Company rely upon which will satisfy the Continuous Construction or
Continuous Efforts Tests?Is the Company compiling and retaining this
information at this time?
Response to IPUC Data Request 29
The five-percent safe harbor relates to the start of physical construction.The
continuityof physical construction still has to be met regardless of whether the
taxpayer uses the five-percent safe harbor or some other evidence of the start of
physical construction.If the five-percent safe harbor is not met for any wind
project,then the Company will need to complete its due diligence to determine
whether the claim that physical construction began before January 1,2017,to
secure 100 percent of the production tax credits (PTCs),and the Continuous
Construction or Continuous Efforts Tests can be supported.The five-percent is a
safe harbor and the deliveryof a significant amount of wind turbine components
for a wind project in 2016 could still qualify the project as being under
construction in 2016.Please refer to the Company's response to IPUC Data
Request 12 regarding the continuitysafe-harbor requirements of Internal Revenue
Service (IRS)Notice 2016-31 and IRS Notice 2017-4 Section 3.The Company
will retain project documents necessary to support potential claims related to
meeting the Continuous Construction or Continuous Efforts tests.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 30
IPUC Data Request 30
The expected cost of wind repowering is approximately $1.13 billion.
(a)Please provide a cost breakdown by item (blades,nacelle,etc.)and location
for the cost estimate totaling approximately $1.13 billion.
(b)Please provide the work papers,invoices,emails,and all other source
documents used to calculate the estimate.
(c)Please provide the work papers,invoices,contracts,etc.for the items that
have been purchased or contracted for through June 30,2017.Please provide
the information by wind facility,i.e.Glenrock I,Glenrock III.Please update
this monthlythroughoutthe remainderof the project.
Response to IPUC Data Request 30
(a)The cost breakdown of the capital costs for the wind repowering project are
considered to be highly confidential and commercially sensitive.The
Company requests special handling.Please contact Ted Weston (801)220-
2963 to make arrangements for review.
(b)The work papers used to develop the project capital cost estimates are
considered to be highly confidential and commercially sensitive.The
Company requests special handling.Please contact Ted Weston (801)220-
2963 to make arrangements for review.
(c)Please refer to the Company's response to IPUC Data Request 11,which
provides the contracts related to the 2016 safe-harbor equipment purchases.
Please also refer to Confidential Attachment IPUC 30-1,which provides the
contract payments related to wind turbine generator (WTG)equipment items
purchased in support of the repowering project.Please refer to Confidential
Attachment IPUC 30-2,which provides redacted invoices relatedto these
items.Non-redacted invoices are considered to be highly confidential and
commercially sensitive.The Company requests special handling.Please
contact Ted Weston [phone] to make arrangements for review.
Confidential information is provided subject to the protective order in this
proceeding.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 31
IPUC Data Request 31
Please provide the contracts with General Electric,Inc.and Vestas-American
Wind Technology,Inc.for the purchase of new WTG equipment.
Response to IPUC Data Request 31
The contract between PacifiCorp and General Electric International,Inc.(GE)
dated December 2,2016,is considered highly confidential and commercially
sensitive.The Company requests special handling.
The contract between PacifiCorp and Vestas American Wind Technology,Inc.
(Vestas)dated December 28,2016,is considered highly confidential and
commercially sensitive.The Company requests special handling.
Please contact Ted Weston at [phone] to make arrangements for review
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 32
IPUC Data Request 32
Please provide the ongoing depreciation expense calculation,and all other costs
currentlyin rates,by project,by year,for the recovery of the plant equipment that
is replaced due to the wind powering project.Does the Company anticipate that
these costs will continue to be recovered in the next general rate case?Does the
Company anticipate there is any salvage value in the replaced plant equipment?
If so,please quantify.
Response to IPUC Data Request 32
Please refer to Confidential Attachment IPUC 32,which details by wind project
the asset balances as of the project repowering date and projected annual
depreciation for the plant equipment that is to be replaced in wind repowering.
The Company proposes that the replaced investment be included in the next
depreciation filing and that depreciation rates be set to recover the undepreciated
wind investment in any subsequent general rate case.
The Company acknowledges that the potential for salvage value benefit may be
available for the replaced equipment.However,the Company has not quantified
the amount of salvage.To the extent that any salvage value is realized,the
Company would credit the accumulated depreciation reserve by that amount,thus
making that benefit available to customers.
Confidential information is provided subject to the terms and conditions of the
protective agreement in this proceeding.
Recordholder:Terrell Spackman
Sponsor:Jeff Larsen
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 33
IPUC Data Request 33
Please quantifythe reduced operating expenses by providing an estimate of the
O&M costs for the wind facilities as they are today,for the years 2020 through
2029,and the estimate of the O&M costs for the repowered wind facilities,for the
years 2020 through 2029.Please include any anticipated updated capital
investments to the existing wind facilities,including the corresponding
depreciation expense changes associated with any capital upgrades.
Response to IPUC Data Request 33
Please refer to the confidential work papers supporting the Direct Testimony of
Company witness,Rick T.Link,specifically "PAC-E-17-06 Link Exhibit No.6
CONF",which contains the capital cost of repowering as well as the increase or
(decrease)in run-rate capital and operations and maintenance (O&M)expense.
Please refer to the confidential work papers supporting Mr.Link's Direct
Testimony,specifically the folder "Wind Projects/Linked Repower",which
provide the capital cost of repowering as well as the increase or (decrease)in run-
rate capital and O&M expense for each wind plant.Changes in depreciation are
shown in tab "Generic"on line 1729.
Recordholder:Mark Paul
Sponsor:Tim Hemstreet
PAC-E-17-06 /Rocky Mountain Power
September 25,2017
IPUC 2nd Set Data Request 34
IPUC Data Request 34
Please provide and explain the costs associated with modifyingthe current
interconnection agreements.
Response to IPUC Data Request 34
To modify the existing large generator interconnection agreement (LGIA)limits,
system impact and facility studies are required to evaluate the effects of the
additional power output on the transmission system.The Company filed
generation interconnection applications for the additional generationat the
existing points of interconnection (POI)for the planned repowering projects
described in the application,except for Leaning Juniper and Goodnoe Hills.
PacifiCorp's transmission function is currentlyreviewing the applications and
preparing the required studies under PacifiCorp's Open Access Transmission
Tariff (OATT).These studies are currentlyon-going and will determine the final
system modification costs once completed.System impact studies are expected to
be completed in December 2017.The completed studies will provide information
on the transmission upgrades,if any,needed to accommodate the interconnection
request.
The Company expects to file generationinterconnection requests for Leaning
Juniper and Goodnoe Hills with the transmission provider (BonnevillePower
Administration)by October 27,2017.
Recordholder:Tim Hemstreet
Sponsor:Tim Hemstreet