20180118PAC to Staff UT_UAE Set 3 (1-2).pdf

1407 W.NorthTemple
ROCKY MOUNTAIN Salt Lake City,UT 84116
POWER
A DMSION OF PACIFICORP
January I1,2018
Gary A.Dodge
Phillip Russell
HATCH,JAMES &DODGE
10 West Broadway,Suite 400
Salt Lake City,Utah 84101
[e-mail] (C)
o_m (C )
Kevin Higgins
Neal Townsend
ENERGY STRATEGIES
215 S.State Street,#200
Salt Lake City,UT 84111
[e-mail] (C)
[e-mail](C)(W)
RE:UT Docket No.17-035-40
UAE 3rd Set Data Request (1-2)
Please find enclosed Rocky Mountain Power's Responses to UAE 3rd Set Data Requests 3.1-3.2.
Also provided is Attachment UAE 3.2-1.Provided on the enclosed Confidential CD is
Confidential Attachment UAE 3.2 -2.Confidential information is provided subject to Public
Service Commission of Utah (UPSC)Rules 746-1-602 and 603.
If you have any questions,please call me at [phone].
Sincerely,
Jana Saba
Manager,Regulation
Enclosures
C.c.Erika Tedder/DPU dpudatarequestCalutah.gov [e-mail](C)
Dan Kohler/DPU [e-mail](C)
Dan Peac/DPU dpeaco@j_aymarkea.com (C)(W)
Aliea Afnan/DPU [e-mail](W)
Philip Hayet/OCS phayet@j_kennn.com(C)
Béla Vastag/OCS [e-mail](C)
Sophie Hays/UCE [e-mail](C)
Kate Bowman/UCE [e-mail](C)(W)
Emma Rieves/UCE [e-mail](C)(W)
Lisa Tormoen Hickey/[e-mail] (C)
Mitch Longson/Interwest [e-mail] (C)
Nancy Kelly/[e-mail](C)
Jennifer Gardner/WRA [e-mail](C)
Penny Anderson/WRA [e-mail] (W)
Peter J.Mattheis/Nucor [e-mail] (C)
Eric J.Lacey/Nucor [e-mail] (C)(W)
William J.Evans/UIEC [e-mail]
Vicki M.Baldwin/UIEC [e-mail](W)
Chad C.Baker/UIEC [e-mail] (W)
17-035-40 /Rocky Mountain Power
January 11,2018
UAE Data Request 3.1
UAE Data Request 3.1
Regarding H.R.1,entitled "An Act to Provide for Reconciliation Pursuant to Titles II and
V of the Concurrent Resolution of the Budget for Fiscal Year 2017,"which became
Public Law No.115-97 and was signed into law on December 22,2017 (Tax Reform
Bill):
(a)For each Price-Policy Scenario,please update the analysis summarized in Table 2
(Page 6)to the August 31,2017 Supplemental Testimony of Rick T.Link in Docket
No 17-035-23,taking into consideration the impacts of the passage of the referenced
Tax Reform Bill.
(b)Please provide all work papers PacifiCorp used to develop the updated analysis in
response to the request in subparagraph (a),above.
(c)For the updated analysis requested in subparagraph (a),above,please provide a list of
each and every assumption and input that changed relative to PacifiCorp's August 31,
2017 analysis.
(d)Please provide a narrative explanation of how PacifiCorp expects the provisions in the
referenced Tax Reform Bill regarding the reduction of the marginal corporate tax rate
from 35%to 21%will impact the economic case for making the investment in the
Wind Projects and Transmission Projects,as contemplated in this matter (See Title 1,
Subtitle C,Part I).
(e)Please provide a narrative explanation of how PacifiCorp expects the provisions in the
referenced Tax Reform Bill allowingfor temporary 100-percent expensing for certain
business assets impact the economic case for making the investment in the Wind
Projects and Transmission Projects,as contemplated in this matter (See Title 1,
Subtitle C,Part III,Subpart A).
(f)Please provide a narrative explanation of how PacifiCorp expects the provisions in the
referenced Tax Reform Bill surrounding the Base Erosion Minimum Tax impact the
economic case for making the investment in the Wind Projects and Transmission
Projects,as contemplated in this matter (See §14401).
(g)Does PacifiCorp agree that the passage of the referenced Tax Reform Bill has the
potential to result in a Net Operating Loss Carryforward on PacifiCorp's balance
sheet?If no,please explain why PacifiCorp expects that there is no potential for such
an outcome.
(h)Does PacifiCorp agree that the passage of the referenced Tax Reform Bill has the
potential to result in Production Tax Credit Carryforwards on PacifiCorp's balance
sheet?If no,please explain why PacifiCorp expects that there is no potential for such
an outcome.
17-035-40 /Rocky Mountain Power
January 11,2018
UAE Data Request 3.1
(i)Please describe the incremental revenue requirement impact,if any,associated with
Net Operating Loss Carryforwards and Production Tax Credit Carryforwards that
PacifiCorp forecasts if the investments in the Wind Projects and Transmission
Projects are made,after considering the impacts of the referenced Tax Reform Bill.
(j)Does PacifiCorp agree that the Tax Reform Bill impacts the relative revenue
requirement impact of every resource alternative considered in the 2017 Integrated
Resource Plan?If no,please explain.
(k)Please identify the levelized fixed cost of the 2029 Simple Cycle Combustion Turbine
(SCCT)resource included in the 2017 Integrated Resource Plan (IRP)preferred
portfolio.
(1)Please recalculate the levelized fixed cost of the 2029 SCCT taking into consideration
the impacts of the referenced Tax Reform Bill.
(m)Please identify the levelized fixed cost of the 2033 Combined Cycle Combustion
Turbine (CCCT)resource included in the 2017 IRP preferred portfolio.
(n)Please recalculate the levelized fixed cost of the 2033 CCCT in the 2017 IRP
preferredportfolio taking into consideration the impacts of the referenced Tax
Reform Bill.
(o)Does PacifiCorp agree that,in order to continue to support its position that the Wind
Projects and Transmission Project are the least cost least risk resources followingthe
passage of the Tax Reform Bill,that it would be necessary to re-run the entire IRP?If
no,please explain.
(p)Does PacifiCorp expect the Tax Reform Bill to have an impact on natural gas prices?
Please explain.
Response to UAE Data Request 3.1
The Company objects to this request as overly broad,undulyburdensome,not reasonably
calculated to lead to the discovery of admissible evidence,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:
(a)The Company has not performed the requested analysis.Consistent with the
procedural schedule adopted for this proceeding,the Company will update its
economic analysis in its supplemental filing scheduled to be filed in mid-January
2018.
17-035-40 /Rocky Mountain Power
January I1,2018
UAE Data Request 3.1
(b)Please refer to the Company's response to subpart (a)above.
(c)Please refer to the Company's response to subpart (a)above.
(d)Please refer to the Company's response to subpart (a)above.
(e)The provisions in the Tax Reform bill allowing for a temporary expensing of 100
percent for certain business assets does not apply to public utilityproperty.
Accordingly,the temporary expensing of certain business assets will not apply to the
Wind Projects and Transmission projects and will therefore not be included in the
Company's updated economic analysis in its supplemental filing scheduled to be filed
in mid-January 2018.
(f)The Base Erosion Anti-Abuse Tax (BEAT)provisions in the Tax Reform Bill that
may limit the use of the production tax credit (PTC)to 80 percent of the BEAT tax
for certain United States (U.S.)multi-international corporations does not apply to
PacifiCorp.Accordingly,PacifiCorp will be able to use 100 percent of the PTCs and
there will be no impact of the BEAT tax on the economic case for making the Wind
Projects and Transmission Projects.
(g)No.There are no provisions in the Tax Reform Bill that PacifiCorp anticipates would
result in a material decrease to projected taxable income that would lead to an income
tax net operating loss that would result in an impact on the Company balance sheet.
As discussed in the Company's response to subpart (e)above,the 100-percent
expensingof certain business assets does not apply to the Company's public utility
property.There are no other material increases to income tax deductions that are
available to the Company that are included in the Tax Reform bill that would create
an income tax net operating loss.In addition,PacifiCorp is included in the federal
consolidated income tax income tax return of its ultimate parent corporation,
Berkshire Hathaway Inc.(BHI).The consolidated BHI income tax group has
sufficient projected taxable income to fully absorb and monetize any reasonably
anticipated taxable income loss that may be by generated by PacifiCorp.
(h)No.As discussed in the Company's response to subpart (g)above,PacifiCorp is
included in the federal consolidated income tax income tax return of its ultimate
parent corporation BHI.The consolidated BHI income tax group has sufficient
projected federal corporate income tax to fully absorb the PTC,which will allow
PacifiCorp to monetize any PTCs generated by PacifiCorp and not use against
PacifiCorp's corporate income tax.Accordingly,there will be no PTC carryforward
reflected in the PacifiCorp balance sheet.
(i)There will be no forecasted incremental revenue impact associated with Net
Operating Loss Carryforwards and PTC Carryforwards after considering the impacts
of the Tax Reform bill as discussed in the Company's responses to subparts (g)and
(h)above.
17-035-40 /Rocky Mountain Power
January 11,2018
UAE Data Request 3.1
(j)Yes.
(k)Please refer to the confidential work papers supporting the Direct Testimony of
Company witness,Rick T.Link,specifically:
Folder:SO Model Summary Reports
File:SO Portfolio RPCC-RPN-EGI-LM 1706042058.xlsm
Tab:PVRRbyStation -row 1057 -proposed station capital costs,and row 1059 -
proposed station fixed cost,column Q for resource "I UN_SC FRM,SCCT".For
example,levelized fixed costs in 2029 are $21.9 million.
(1)The Company has not performed the requested analysis.Consistent with the
procedural schedule adopted for this proceeding,the Company will update its
economic analysis in its supplemental filing scheduled to be filed in mid-January
2018.
(m)Please refer to the confidential work papers supporting Mr.Link's Direct Testimony,
specifically
Folder:SO Model Summary Reports
File:SO Portfolio RPCC-RPN-EGI-LM 1706042058.xlsm
Tab:PVRRbyStation row 1875 and
row¯Ï
883 -proposed station capital costs,and
row 1873 and row 1881 -proposed station fixed cost,column U for resource
"I DJ_CC Jl and I_DJ_CC_J1D".For example,levelized fixed costs in 2033 are
$100.6 million.
(n)The Company has not performed the requested analysis.Consistent with the
procedural schedule adopted for this proceeding,the Company will update its
economic analysis in its supplemental filing scheduled to be filed in mid-January
2018.
(o)No,PacifiCorp does not agree that it would be necessary to re-run the entire 2017
Integrated Resource Plan (IRP)to continue to demonstrate that the wind and
transmission projects are the least-cost,least-risk resources.These resources were
selected through the 2017 IRP process as least-cost and least-risk.PacifiCorp
continues to analyze the benefits of the projects as part of its action plan items from
the 2017 IRP.Updated economic analysis will be provided in the Company's
supplemental filing scheduled to be filed in mid-January 2018.
(p)PacifiCorp objects to this question as speculative.
17-035-40 /Rocky Mountain Power
January 11,2018
UAE Data Request 3.2
UAE Data Request 3.2
Regarding PacifiCorp's Official Forward Price Curve (OFPC)issued in the 4th quarter of
2017 on or around December 29,2017:
(a)Please provide a copy of the referenced price curve for gas and power markets where
PacifiCorp transacts and for all years where a forecast was developed.
(b)Please provide a description of how the long-term natural gas price forecast (i.e.
prices developedby 3rd party consultants used in the OFPC for periods extending
beyond 72 months)was developedin the referenced OFPC.
(c)Please describe any changes to the long-term natural gas forecasting methodology that
occurred in developing the referenced OFPC,relative to the OFPC that was used in
the August 31,2017 SupplementalTestimony of Rick T.Link in Docket No 17-035-
23
(d)Please provide any memoranda or documentation in PacifiCorp's possession
describing the methodologiesthe 3rd party consultants used to develop PacifiCorp's
long-term natural gas price forecast in the referenced OFPC.
(e)Please state when the long-term natural gas price forecasts used in the referenced
OFPC were developedby the 3rd party consultants.
(f)Please identifywhether the long-term price forecasts used to develop the referenced
OFPC include the impact of the passage of the Tax Reform Bill.
Response to UAE Data Request 3.2
The Company understands that the term "referenced OFPC"used throughoutthis request
is intended to reference the Company's December 2017 official forward price curve
(OFPC).Based on this understanding,the Company responds as follows:
(a)Please refer to Attachment UAE 3.2-1,which provides the Company's December
2017 OFPC.
(b)The December 29,2017 OFPC was developedusing 72 months of market forwards
followed by 12 months (months 73 through 84)of a forwards-fundamentals blend that
transitions to a pure fundamentals-based forecast starting in month 85.Blended prices
for months 73 through 84 are calculated as an average of the preceding year's forward
prices with the followingyear's fundamentals prices on a month-by-monthbasis.
The fundamentals-based portion of the OPFC,starting month 85,was developed by
an expert third-partyforecasting service and published in nominal dollars using
PacifiCorp inflation indices.The expert third-partyfundamentals forecast was
17-035-40 /Rocky Mountain Power
January 11,2018
UAE Data Request 3.2
supplied as part of the Company's ongoing subscription to receive multi-client "off-
the-shelf"fundamentals-based forecasts on a regular basis.
(c)The long-term natural gas forecasting methodology used by PacifiCorp to develop the
December 29,2017 OFPC is unchanged relative to the OFPC that was used in the
August 31,2017 SupplementalTestimony of Company witness,Rick T.Link in
Docket 17-035-23.
(d)Please refer to Confidential Attachment UAE 3.2-2.
(e)The long-term natural gas price forecast used in the December 2017 OFPC was
produced by an expert third-partyforecasting service,as part of its multi-client
subscription service,on November 21,2017.
(f)The impact of the Tax Reform Bill is not explicitly reflected in the gas price forecast,
which was issued before the Tax Reform Bill was passed or signed,used in the
December 2017 OFPC.
Confidential information is provided subject to Public Service Commission of Utah Rule
746-1-602 and 746-1-603.