20180529Technical Hearing Transcript Vol III part 2.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF PACIFICORP DBA ROCKY MOUNTAIN )CASE NO.PAC-E-17-07
POWER FOR A CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY AND )
BINDING RATEMAKING TREATMENT )
FOR NEW WIND AND TRANSMISSION )
EACILITIES )
BEFORE 95 ,C m
COMMISSIONER ERIC ANDERSON (Presiding)en
COMMISSIONER KRISTINE RAPER z
COMMISSIONER PAUL KJELLANDER
O
PLACE:Commission Hearing Room
472 West Washington Avenue
Boise,Idaho
DATE:May 10,2018
VOLUME III -Pages 1164 -1490
ORIGINAL CSB REPORTING
*Cert¢edShorthand Reporters
PostOfneeBox9774 Reporter:Boise,Idaho 83707 Constance Bucy,[e-mail] CSR
Ph:208-890-5198 Fax:[phone]
1 A PPE A R A NCES
2
3 For the Staff:Mk.Brandon Karpen
Deputy Attorney General
4 472 West Washington
Boise,Idaho 83720-0074
5
For Rocky Mountain Ms.Katherine A.McDowell
6 Power:and Mr.Adam Lowney
McDowell Rackner Gibson PC
7 419 SW 11th Avenue
Suite 400
8 Portland,Oregon 97205
9 For Idaho Irrigation Mr.Eric L.Olsen
Pumpers Association:Echo Hawk &Olsen PLLC
10 505 Pershing Avenue,Ste.100
PO Box 6119
11 Pocatello,Idaho 83205
12 For Monsanto Company:Mr.Randall C.Budge
and Thomas J.Budge013Racine,Olson,Nye &Budge
201 East Center
14 PO Box 1391
Pocatello,Idaho 83204-1391
15
For PIIC:Mt.Ronald L.Williams
16 Williams,Bradbury,P.C.
1015 West Hays Street
17 PO Box 388
Boise,Idaho 83701
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CSB REPORTING APPEARANCES
208.890.5198
1 I NDEX (Continued)
2 WITNESS EXAMINATION BY PAGE
3 James Dauphinais Mr.Budge (Direct)1164
(Monsanto)Direct Testimony 1166
4 Supplemental Testimony 1193
Mr.Budge (Direct Cont'd)1212
5 Mr.Budge (Redirect)1217
Mr.Karpen (Cross)1237
6 Commissioner Raper 1239
Mr.Budge (Redirect)1243
7
8 Nicholas Phillips Mr.Budge (Direct)1246
(Monsanto)Direct Testimony (Ms.Iverson)1250
9 Direct Testimony 1273
Supplemental Testimony 1340
10 Mr.Budge (Direct Cont'd)1447
Mr.Olsen (Cross)1457
11 Ms.McDowell (Cross)1460
Mr.Karpen (Cross)1485
12 Mr.Budge (Redirect)1487
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CSB REPORTING INDEX
208.890.5198
1 COMMISSIONER ANDERSON:Well,we're goingO2tomoveontoMonsantonext.Does anybody want to take a
3 break before we start into that process?We will go
4 ahead and you can call your witness.
5 MR.BUDGE:We'll call Mr.Dauphinais.
6
7 JAMES R.DAUPHINAIS,
8 produced as a witness at the instance of the Monsanto
9 Company,having been first duly sworn to tell the truth,
10 was examined and testified as follows:
11
12 DIRECT EXAMINATION
13
14 BY MR.BUDGE:
15 Q Mr.Dauphinais,would you please state
16 your name and business address on behalf the record,
17 please?
18 A My name is James R.Dauphinais,
19 D-a-u-p-h-i-n-a-i-s.My business address is 16690
20 Swingley Ridge Road,Suite 140,Chesterfield,Missouri,
21 63017.
22 Q Did you prefile testimony and exhibits on
23 behalf of Monsanto Company in this case?
24 A Yes.
25 Q Does that testimony consist of two
CSB REPORTING 1164 DAUPHINAIS (Di)
208.890.5198 Monsanto Company
1 portions,your direct testimony which was under date of
2 November 20th,2017,and also your supplemental direct
3 testimony under date of April 11th,2018?
4 A Yes.
5 Q And that testimony also included Exhibits
6 204 through 208,as well Exhibits 211 through 216?
7 A Yes.
8 Q And do you have any corrections to either
9 your prefiled testimony or exhibits?
10 A No.
11 Q And if I were to ask you the same
12 questions today as are contained in your testimony,would
13 your answers be the same?
14 A Yes.
15 MR.BUDGE:With that,we would move to
16 have Mr.Dauphinais'testimony and exhibits spread in the
17 record.
18 COMMISSIONER ANDERSON:Without objection,
19 we'll spread Mr.Dauphinais'testimony and exhibits
20 across the record.
21 (Monsanto Company Exhibit Nos.204-208 and
22 211-216 were admitted into evidence.)
23 (The following prefiled direct and
24 supplemental direct testimonies of Mr.James Dauphinais
25 are spread upon the record.)
CSB REPORTING 1165 DAUPHINAIS (Di)
208.890.5198 Monsanto Company
1 I.INTRODUCTION AND SUMMARY
2 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A.James R.Dauphinais.My business address is
4 16690 Swingley Ridge Road,Suite 140,Chesterfield,
5 Missouri 63017.
6 Q.WHAT IS YOUR OCCUPATION?
7 A.I am a consultant in the field of public
8 utility regulation and a managing principal with the firm
9 of Brubaker &Associates,Inc.,which specializes in
10 energy,economic,and regulatory consulting.
11 Q.PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND
12 EXPERIENCE.
13 A.A thorough description of my educational
14 background and experience is set forth in Exhibit No.
15 204.
16 Q.ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS
17 PROCEEDING?
18 A.I am testifying on behalf of Monsanto Company
19 ("Monsanto").Monsanto operates facilities within the
20 service territory of PacifiCorp d/b/a Rocky Mountain
21 Power ("RMP,""PacifiCorp,"or the "Company"),from whom
22 it purchases electricity and energy services.
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1166 Dauphinais,Di -1
Monsanto Company
1 Q.WHAT IS THE PURPOSE OF YOUR TESTIMONY?O 2 A.I respond to the Transmission Projectsi
3 portion of RMP's Combined ProjectS2 in this proceeding.
4 I specifically address the questions of the need and
5 risks associated with the proposed Transmission Projects.
6 My colleagues,Kathryn Iverson and Nicholas L.Phillips,
7 are also presenting direct testimony on behalf of
8 Monsanto regarding the ratemaking treatment and the
9 economic analysis of the Combined Projects.
10 My silence with respect to any position taken
11 by RMP in its application or direct testimony in this
12 proceeding should not be interpreted as an endorsement of
13 that position.
14 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS.
15 A.The Transmission Projects are not needed to
16 provide reliable electric service at lowest reasonable
17 cost.While RMP identified some potential reliability
18 and operational flexibility benefits from the
19 Transmission Projects,the Company also admits that those
20 benefits alone would not justify construction of the
21 Transmission Projects.As a result,the Transmission
22 Projects can only be justified if the forecasted net
23 benefits and risks associated with the Combined Projects
24 are such that pursuit of the Combined Projects is in the
25 public interest for RMP's retail customers in Idaho.
1167 Dauphinais,Di -2
Monsanto Company
1 I have identified several specific risksO2associatedwiththeTransmissionProjects,which are
3 factored into Mr.Phillips'conclusions and
4 recommendations with respect to the Combined Projects.
5 These include:
6 1.Risks to Transmission Project construction
costs or the receipt of Production Tax Credits
7 ("PTCs")for the Wind Projects due to the
incomplete nature of RMP's power system
8 analysis studies for the Transmission Projects;
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22 1 The "Transmission Projects"consist of the
Aeolus-to-Bridger/Anticline Line and 230 kV Network Upgrades pr.oposed
23 by RMP in this proceeding.
2 The "Combined Projects"consist of the Transmission Projects
24 and the four new Wyoming wind resources with a total capacity of 860
megawatts (collectively,the "Wind Projects")that RMP proposed in
25 this proceeding.
1168 Dauphinais,Di -2a
Monsanto Company
1 2.Risks to Transmission Project construction
costs or the receipt of PTCs due to incomplete
2 permitting of the Transmission Projects;
3 3.Risks to Transmission Project construction
costs or the receipt of PTCs due to
4 construction risks;and
5 4.Risks related to actually recovering a portion
of the revenue requirement associated with the
6 Transmission Projects from PacifiCorp'sthird-party transmission customers.
7
8 II.NEED FOR THE TRANSMISSION PROJECTS
9 Q.PLEASE DESCRIBE THE TRANSMISSION PROJECTS.
10 A.The Transmission Projects consist of the
11 "Aeolus-to-Bridger/Anticline Line"and certain "230 kV
12 Network Upgrades."The Aeolus-to-Bridger/Anticline Line
13 consists of the following three components:
14 *The 140-mile Aeolus-to-Anticline 500 kV
transmission line including new substations at
15 Aeolus and Anticline;
16 *The five-mile Anticline-to-Jim Bridger 345 kV
transmission line including modifications at the
17 existing Jim Bridger substation to connect the line
there;and
18
*Installation of a voltage control device at Latham
19 substation.3
20 The 230 kV Network Upgrades consists of:
21 *A new 16-mile 230 kV transmission line that would
parallel an existing 230 kV transmission line from
22 Shirley Basin substation to the proposed Aeolus
substation including modifications at the existing
23 Shirley Basin substation;
24 *The reconstruction of four miles of an existing 230
kV transmission line between the proposed Aeolus
25 substation and the Freezeout substation including
1169 Dauphinais,Di -3
Monsanto Company
1 modifications as required at the Freezeout
2
substation;and
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25 3 RMP Application at p.2.
1170 Dauphinais,Di -3a
Monsanto Company
1 *The reconstruction of 14 miles of an existing 230 kV
transmission line between the Freezeout substation
2 and the Standpipe substation including modifications
as required at Freezeout and Standpipe substations.4
3
4 RMP identified an estimated cost of (redacted)
5 for the Aeolus-to-Bridger/Anticline Line and (redacted)
6 for the 230 kV Network Upgrades.S The entire cost of
7 the Aeolus-to-Bridger/Anticline Line would be initially
8 paid for by RMP.6 The cost of the 230 kV Network
9 Upgrades would be re-assessed and assigned to the wind
10 resource facilities selected via RMP's 2017R Request for
11 Proposals ("2017R RFP")process under their respective
12 interconnection agreements.7 RMP expects to roll the
13 cost of the Transmission Projects into its formula
14 transmission rates under the Company's FERC-filed Open
15 Access Transmission Tariff ("OATT"),which would allow
16 RMP to recover a portion of the cost of the Transmission
17 Projects from its third-party transmission customers.8
18 RMP expects the proposed Transmission Projects will
19 increase transmission capacity across Wyoming by 750 MW
20 and allow RMP to interconnect approximately 1,270 MW of
21 wind resources,including the 860 MW of Wind Projects.9
22 In order to obtain the full benefits of PTCs for the Wind
23 Projects,the Transmission Projects needs to be in
24 service by no later than December 31,2020.10
25 Q.WOULD RMP NEED THE TRANSMISSION PROJECTS IF IT
1171 Dauphinais,Di -4
Monsanto Company
1 WERE NOT PURSUING THE WIND PROJECTS?O 2 A.No.RMP has not identified a reliability need
3 or an economic need that would justify the Transmission
4 Projects without the Wind Projects.To the contrary,
5 RMP's President and
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22 4 Id.
5 Direct Testimony of Rick A.Vail at p.12.
23 6 Id.
7 Id.at p.13.
24 8 Id.at pp.15-17.
9 Id.at p.4.
25 1o Id.at p.13.
1172 Dauphinais,Di -4a
Monsanto Company
1 Chief Executive Officer admits the Transmission Projects
2 and Wind Projects are mutually dependent on one another.11
3 The Wind Projects rely on the Transmission Projects for
4 interconnection to the transmission system and the
5 Transmission Projects are supported by the key attributes
6 of the Wind Projects.12 While RMP claims the
7 Transmission Projects alone would be beneficial in
8 reducing existing transmission congestion and reducing
9 capacity and energy losses during outage and non-outage
10 conditions,13 RMP admits the Transmission Projects are
11 not necessary for RMP to meet the NERC Standards for the
12 Bulk Electric System and WECC Regional Standards and
13 Criteria.14 Furthermore,RMP admits the Transmission
14 Projects are not economic without the Wind Projects.15
15 For all of the foregoing reasons,RMP has not
16 demonstrated that,without the Wind Projects,the
17 Transmission Projects are needed to provide reliable
18 electric service at lowest reasonable cost or would
19 otherwise be in the public interest.
20 Q.IN CONJUNCTION WITH THE WIND PROJECTS,HAS RMP
21 SHOWN THE TRANSMISSION PROJECTS ARE NECESSARY FOR THE
22 RELIABLE PROVISION OF ELECTRIC SERVICE AT LOWEST
23 REASONABLE COST?
24 A.No.To do so,RMP would have to demonstrate
25 that it needs to add the Wind Projects in order to
1173 Dauphinais,Di -5
Monsanto Company
1 provide reliable electric service at lowest reasonableO2cost.It has not done so.Instead,RMP is proposing the
3 Wind Projects essentially as an opportunity investment
4 under which retail customers would bear the rewards of
5 any net benefits and the risks of any net costs from the
6 Combined Projects,while paying RMP for the cost of the
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23 11 Direct Testimony of Cindy A.Crane at p.3.
12 78,
24 13 Direct Testimony of Rick A.Vail at pp.17-23.
14 Id.at pp.19 and 22-23.
25 15 Direct Testimony of Cindy A.Crane at p.10.
1174 Dauphinais,Di -5a
Monsanto Company
1 Combined Projects plus a regulated return.ThisO2disproportionatelyassignsrisktoRMP's retail customers
3 versus the risk to RMP from the Combined Projects.For
4 all of the foregoing reasons,and as discussed in more
5 detail by Mr.Phillips,a CPCN for the Combined Projects
6 should only be granted by the Commission if the
7 forecasted net benefits and risks associated with the
8 Combined Projects for RMP's retail customers in Idaho are
9 such that it is in the public interest to do so.Mr.
10 Phillips concludes that they do not do so.However,if
11 the Commission grants a CPCN for the Combined Projects,
12 Mr.Phillips recommends conditions to that approval to
13 increase the likelihood of net benefits for customers in
14 Idaho.
15
16 III.RISKS ASSOCIATED WITH THE TRANSMISSION PROJECTS
17 Q.PLEASE RESTATE THE RISKS ASSOCIATED WITH THE
18 TRANSMISSION PROJECTS THAT YOU HIGHLIGHTED AT THE OUTSET
19 OF YOUR TESTIMONY.
20 A.These risks include:
21 1.Risk to Transmission Project construction costs
or the receipt of PTCs for the proposed Wind
22 Projects in this proceeding due to theincompletenatureofRMP's power system
23 analysis studies for the Transmission Projects;
24 2.Risks to Transmission Project construction
costs or the receipt of PTCs due to the
25 incomplete permitting of the Transmission
1175 Dauphinais,Di -6
Monsanto Company
1 Projects;O 2 3.Risks to Transmission Project construction
costs or the receipt of PTCs due to
3 construction risks;and
4 4.Risk related to actually recovering a portion
of the revenue requirement associated with the
5 Transmission Projects from PacifiCorp'sthird-party transmission customers.
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1176 Dauphinais,Di -6a
Monsanto Company
1 A.Power System Analysis Study Risk
2 Q.WHAT POWER SYSTEM ANALYSIS STUDIES HAS
3 PACIFICORP PERFORMED FOR THE TRANSMISSION PROJECTS?
4 A.RMP has not completed the powerflow,dynamic
5 stability,stiffness factor analysis,Sub-Synchronous
6 Resonance,and voltage stability studies for the
7 Transmission Projects.In July 2017,RMP was asked to
8 provide a complete copy of all powerflow and dynamic
9 stability analyses and studies that PacifiCorp has
10 performed,or had performed on its behalf,to determine
11 the expected incremental transfer capability of 750 MW
12 and interconnection capability of 1,270 MW for the
13 Transmission Projects.6 In response,RMP provided a
14 WECC study from November 24,2010,and indicated that an
15 additional study was underway which would not be
16 completed until six months before the Transmission
17 Projects are projected to enter service in December 2020.
18 A copy of the response to WIEC 2.2 data request response
19 (excluding the appendices to the November 24,2010 WECC
20 study report)is provided in Exhibit 205.
21 Subsequently,during a September 25,2017,
22 Technical Conference held in the Wyoming New
23 Wind/Transmission Docket,RMP indicated that there were
24 additional transmission studies that will be conducted
25 which the Company thought were identified in RMP Exhibit
1177 Dauphinais,Di -7
Monsanto Company
1 RAV-10.However,RMP Exhibit RAV-10 did not identifyO2thoseadditionaltransmissionstudies.Following the
3 Wyoming technical conference,and in response to WIEC
4 Informal Data Request 1.1,RMP identified those
5 additional studies on October 12,2017.A complete copy
6 of that response is included as Exhibit 206.RMP's
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22 16 Wyoming Public Service Commission,Docket No.
20000-520-EA-17 ("Wyoming New Wind/Transmission Docket"),Data
23 Request WIEC 2.2.WIEC stands for "Wyoming Industrial Energy
Consumers."In Monsanto Data Request No.2 to RMP,Monsanto
24 requested a copy of all data requests and responses from the Wyoming
New Wind/Transmission Docket in discovery in this proceeding.
25
1178 Dauphinais,Di -7a
Monsanto Company
1 response indicates the projected completion dates forO2theseadditionaltransmissionstudiesrunfromOctober
3 31,2017,to November 24,2017,to January 31,2018,to
4 May 2018,to dates well into 2019.
5 Q.IN YOUR EXPERIENCE,IS IT UNUSUAL FOR A UTILITY
6 TO RELY ON A SEVEN YEAR OLD TRANSMISSION STUDY TO SUPPORT
7 THE TRANSFER AND INTERCONNECTION CAPABILITY OF A PROPOSED
8 TRANSMISSION PROJECT?
9 A.Yes.Based on my experience,if the original
10 study for a project is stale,such as the case with the
11 November 24,2010 WECC Study Report,refreshed studies
12 are usually completed before a CPCN application is made.
13 Q.HAS RMP PROVIDED ANY ADDITIONAL POWER SYSTEM
14 ANALYSIS STUDY RESULTS FOR THE TRANSMISSION PROJECTS
15 BESIDES THE NOVEMBER 24,2010 STUDY REPORT?
16 A.Yes.On October 13,2017,in response to Data
17 Request WIEC 7.1 in the Wyoming New Wind/Transmission
18 Docket,RMP provided a preliminary study report dated
19 October 2017 titled "Aeolus West Transmission Path
20 Transfer Capability Assessment."I have included a
21 complete copy of this response (excluding the appendices
22 to the preliminary study report and RMP's highly
23 confidential power flow models)in Exhibit 207.In
24 response to WIEC Informal Data Request 1.1,RMP provided
25 the following explanation with respect to why it had
1179 Dauphinais,Di -8
Monsanto Company
1 drafted the preliminary study report:O 2 "Due to interest shown by various stakeholders (via
data requests)to review the D.2 Project preliminary
3 study findings,a preliminary study report for the
project is currently being drafted.The report
4 should be available by October 13,2017."
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1180 Dauphinais,Di -8a
Monsanto Company
1 Q.WHAT DOES THE PRELIMINARY STUDY REPORT INDICATEO2WITHRESPECTTOTHEEXPECTED750MWOFINCREMENTAL
3 TRANSFER CAPABILITY AND 1,270 MW OF INTERCONNECTION
4 CAPABILITY FOR THE TRANSMISSION PROJECTS?
5 A.The study report indicates preliminary
6 powerflow studies demonstrate that east to west transfer
7 levels across Wyoming would effectively increase by 817.5
8 MW.However,the study report also indicated the need
9 for dynamic voltage support at Latham Substation and
10 three different Remedial Action Schemes ("RAS").While
11 these additional reinforcements were identified in RMP's
12 direct testimony in this proceeding,RMP has still not
13 completed its studies to determine the specifics of-these
14 reinforcements.In addition,the preliminary study
15 report provides no information with respect to the
16 expected 1,270 MW of additional interconnection
17 capability that RMP expects to receive from the
18 Transmission Projects.
19 Q.PLEASE EXPLAIN THE CONCERNS YOU HAVE WITH THE
20 STATUS OF RMP'S POWER SYSTEM ANALYSES STUDIES FOR THE
21 TRANSMISSION PROJECTS.
22 A.The incomplete nature of the studies exposes
23 RMP to the risk that something in the results of those to
24 be completed studies could lead to:(i)the expected 750
25 MW of incremental transfer capability and/or 1,270 MW of
1181 Dauphinais,Di -9
Monsanto Company
1 expect interconnection capability either not being
2 realized or delayed;or (ii)the Transmission Projects
3 having greater costs than forecasted by RMP.Failure or
4 delay in the full realization of the expected incremental
5 transfer capability and interconnection capability could
6 lead to the Wind Projects not receiving their full PTCs.
7 This could significantly reduce the forecasted
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1182 Dauphinais,Di -9a
Monsanto Company
1 gross economic benefit value of the Combined Projects.O 2 Additional costs for the Transmission Projects would
3 increase the total cost for the Combined Projects.In
4 either case,the forecasted net benefits of the Combined
5 Projects would be reduced -potentially down to a net
6 cost for RMP's retail customers.
7
8 B.Permitting Risks
9 Q.HAS RMP ACQUIRED ALL OF THE PERMITS IT NEEDS
10 FOR THE TRANSMISSION PROJECTS?
11 A.No.RMP has obtained a federal right-of-way
12 permit from the Bureau of Land Management.17 However,RMP
13 Has yet to receive a Wyoming Industrial Siting Permit or
14 a Conditional Use Permit from Carbon County.RMP will
15 not apply for the Wyoming Industrial Siting Permit until
16 August 2018.18 It will not apply for its Conditional Use
i
17 Permit form Carbon County until the second half of 2018.19
18 Q.PLEASE EXPLAIN THE CONCERNS YOU HAVE WITH THE
19 STATUS OF RMP'S PERMITTING FOR THE TRANSMISSION PROJECTS.
20 A.Like with the incomplete status of RMP's power
21 system analysis studies for the Transmission Projects,
22 the incomplete nature of the permitting process exposes
23 RMP to the risk that something unexpected may result in
24 the Transmission Projects having a greater than
25 forecasted cost or the Transmission Projects being
1183 Dauphinais,Di -10
Monsanto Company
1 delayed.As I have noted,a delay in the completion of
(Iþ 2 the Transmission Projects could lead to the Wind Projects
3 not receiving their full PTCs --significantly reducing
4 the forecasted gross economic benefit value of the
5 Combined Projects.And additional costs for the
6 Transmission
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22 17 Direct Testimony of Rick A.Vail at p.37.
18 Gateway Transmission and New Wind,Technical Conference,
23 (Wyoming PSC Docket No.20000-520-EA-2017),September 25,2017 at
Slide 19.
24 19 ye.
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1184 Dauphinais,Di -10a
Monsanto Company
1 Projects would increase the total cost for the Combined
2 Projects.Any unexpected increase in the cost of the
3 Transmission Projects or Combined Projects,or the loss
4 of the full PTC value,would reduce the forecasted net
5 benefits and could potentially result in a net cost for
6 RMP's retail customers.
7
8 C.Construction Cost Risks
9 Q.PLEASE EXPLAIN THE CONSTRUCTION COST RISKS
10 ASSOCIATED WITH THE TRANSMISSION PROJECTS.
11 A.In response to WIEC Data Request 7.3 in the
12 Wyoming New Wind/Transmission Docket,RMP identified that
13 the cost estimates for the Transmission Project have an
14 accuracy of +/-15%given the early nature of the
15 estimate and finalization of the scope and approach.The
16 upper end of this range would add (redacted)million to
17 the estimated costs of the Combined Projects.20 I have
18 provided a complete copy of this data request response in
19 Exhibit 208.As Mr.Phillips explains,upward deviations
20 in the cost of the Transmission Projects would reduce the
21 forecasted net benefit of the Combined Projects and could
22 result in a net cost for RMP's retail customers.
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24 D.Third-Party Transmission Customer Revenue Risk
25 Q.PLEASE EXPLAIN WHAT THIRD-PARTY TRANSMISSION
1185 Dauphinais,Di -11
Monsanto Company
1 CUSTOMER REVENUES ARE AND WHY THEY ARE OF CONCERN.
2 A.Third-party transmission customer revenues are
3 revenues that RMP collects from its unbundled wholesale
4 transmission customers under its OATT.RMP expects that
5 it will be permitted to roll the costs of the
6 Transmission Projects into its OATT rates as the projects
7 enter service through the annual update of the inputs of
8 its formula transmission
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24 20 (redacted)million =15%x ((redacted)million +(redacted)
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miiiion).
1186 Dauphinais,Di -lla
Monsanto Company
1 rate under its OATT.21 In total,RMP expects its
2 third-party transmission customers will cover
3 approximately 12%of the total revenue requirement of the
4 Transmission ProjectS22 and has factored the revenues it
5 expects to recover from these customers into is net
6 benefit analysis for the Combined Projects.
7 My concern is that there is a risk that one or
8 more of RMP's third-party transmission customers could
9 successfully challenge the rolling into RMP's OATT rates
10 of the cost of the Transmission Projects.The reason
11 this risk exists is that,while the Transmission Projects
12 would be fully integrated into RMP's transmission
13 network,they are only being pursued by RMP to integrate
14 and deliver power from the Wind Projects.RMP has
15 admitted it would not be pursuing the Transmission
16 Projects without the Wind Projects.Furthermore,the
17 incremental transfer capacity and interconnection
18 capability of the Transmission Projects will likely be
19 fully consumed by the Wind Projects.As a result,it
20 could be argued that the Transmission Projects will only
21 provide a benefit to RMP's native load customers,which
22 could in turn result in RMP being barred from rolling the
23 cost of the Transmission Projects into its OATT rates.
24 If that were to happen,RMP would not receive any
25 third-party transmission customer revenues for the
1187 Dauphinais,Di -12
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1 Transmission Projects and RMP might try to seek to
2 recover the revenues it was expecting from its
3 third-party transmission customers from its retail
4 customers instead.As Mr.Phillips explains,removing
5 the 12%OATT revenue assumption increases the likelihood
6 that the Combined Projects will result in a net cost for
7 RMP's retail customers.
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24 21 Direct Testimony of Rick A.Vail at pp.16-17.
22 Direct Testimony of Rick T.Link at p.24.
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1188 Dauphinais,Di -12a
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1 Q.RMP ARGUES THAT FERC PRECEDENT SUPPORTS ROLLING
2 THE COSTS OF THE TRANSMISSION PROJECTS INTO THE COMPANY'S
3 OATT RATES.HOW DO YOU RESPOND?
4 A.In general,FERC precedent supports rolling the
5 costs of networked transmission facilities into OATT
6 rates.However,there can be exceptions especially when
7 the network transmission upgrades are for the benefit of
8 the transmission provider's native load customers alone.
9 Specifically,in Northeast Utilities Service Company,62
10 FERC 61,294 (1993),the FERC did not permit Northeast
11 Utilities Service Company to include the cost of certain
12 transmission support payments principally associated with
13 its share of certain High Voltage Direct Current ("HVDC")
14 transmission facilities because they were dedicated to
15 providing the delivery of purchased power to the native
16 load customers of the Northeast Utilities Operating
17 Companies and not available for third-party use.In that
18 decision,the FERC indicated:
19 We agree generally with the intervenors on this
issue.NU proposes to include as a component of its
20 transmission cost of service payments it makes to
obtain third-party transmission service from other
21 utilities,e.g.,to transmit its purchases from the
Yankee companies and to support transmission
22 facilities used to import power from Canada.These
expenses are simply a cost of obtaining generation
23 resources that are located on the transmission grid
of another utility.Indeed,if the generation
24 seller obtains the necessary third-party
transmission services and includes these expenses as
25 part of the overall power sale price,there would be
1189 Dauphinais,Di -13
Monsanto Company
1 no controversy that these expenses should be fully
allocated to NU's own power sale customers.The
2 fact that NU,the power purchaser,separately
contracted for service over transmission facilities
3 owned and operated by third parties in order toimportremotegenerationresourcesprovidesno basis
4 for allocating these costs to NU's transmission
customers.Of course,if NU uses facilities owned
5 by third parties as an NU grid facility and uses
the facilities on a day-to-day basis to transmit
6 power for tariff customers,the third-party costs
would be allocable to tariff customers,e.g.,
7 payments to lease a line owned by a third party but
operated as part of NU's transmission grid.
8 However,as NU explains,most--if not all--of the
third party transmission costs at issue here involve
9 payments to import remote
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1190 Dauphinais,Di -13a
Monsanto Company
1 generating resources.Accordingly,these expenses
are not incurred in order to provide transmission
2 service to tariff customers and NU will be directed
to exclude the expenses from the formula rate.23
3
4 While RMP would own the Transmission Projects,it is
5 important to note that:(i)RMP has indicated it would
6 not being pursuing the Transmission Projects without the
7 Wind Projects;(ii)the incremental transfer capability
8 expected to be provided by the Transmission Projects is
9 less than the nameplate capability of the new Wind
10 Projects (750 MW versus 860 MW);and (iii)the
11 interconnection capability expected to be provided
12 Transmission Projects (1,270 MW)could potentially be
13 fully consumed by 2017R RFP results.As a result,the
14 Transmission Projects may leave nothing for third-party
15 transmission customers but a share of their costs.It is
16 this possibility that places RMP at risk with respect to
17 receiving those third-party transmission customer
18 revenues given FERC's precedent involving Northeast
19 Utilities Service Company.
20 Q.DO YOU HAVE ANY RECOMMENDATIONS REGARDING HOW
21 THESE RISKS SHOULD BE ADDRESSED IN ORDER TO PROTECT
22 CUSTOMERS?
23 A.If the Commission approves a CPCN for the
24 Combined Projects,that approval should include
25 protections to increase the likelihood that customers
1191 Dauphinais,Di -14
Monsanto Company
1 will benefit from the Company's proposal.The specific
2 protections recommended by Monsanto are discussed in
3 detail by Mr.Phillips.
4 Q.DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?
5 A.Yes,it does.
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24 23 Northeast Utilities Service Company,62 FERC ¶61,294
(1993)at Section IV.A.6
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1192 Dauphinais,Di -14a
Monsanto Company
1
2 I .INTRODUCTION AND SUMMARY
3 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
4 A.James R.Dauphinais.My business address is
5 16690 Swingley Ridge Road,Suite 140,Chesterfield,
6 Missouri 63017.
7 Q.WHAT IS YOUR OCCUPATION?
8 A.I am a consultant in the field of public
9 utility regulation and a managing principal with the firm
10 of Brubaker &Associates,Inc.,which specializes in
11 energy,economic,and regulatory consulting.
12 Q.ARE YOU THE SAME JAMES R.DAUPHINAIS WHO
13 PRE-FILED DIRECT TESTIMONY IN THIS DOCKET ON BEHALF OF
14 MONSANTO COMPANY ("MONSANTO")?
15 A.Yes,I am.
16 Q.WHAT IS THE PURPOSE OF YOUR SUPPLEMENTAL DIRECT
17 TESTIMONY?
18 A.I respond to the Supplemental and Second
19 Supplemental Direct Testimony of Rocky Mountain Power's
20 ("RMP,""PacifiCorp"or the "Company")witness Mr.Rick
21 A.Vail.
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1193 Dauphinais,Di-Supp -1
Monsanto Company
1 My silence with respect to any position takenO2byRMPinitssupplementalandsecondsupplementaldirect
3 testimony in this proceeding should not be interpreted as
4 an endorsement of that position.
5 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS.
6 A.Nothing in Mr.Vail's supplemental and second
7 supplemental direct testimony on behalf of RMP would lead
8 me to change my conclusions regarding the specific risks
9 associated with RMP's proposed Transmission Projects in
10 this proceeding:
11 1.Risks to Transmission Project construction
costs or the receipt of Production Tax
12 Credits ("PTCs")for the Wind Projects due
to the incomplete nature of RMP's power
O 13 system analysis studies for the
Transmission Projects;l
14
2.Risks to Transmission Project construction
15 costs or the receipt of PTCs due to incomplete
permitting of the Transmission Projects;
16
3.Risks to Transmission Project construction
17 costs or the receipt of PTCs due to
construction risks;and
18
4.Risks related to actually recovering a portion
19 of the revenue requirement associated with the
Transmission Projects from PacifiCorp's
20 third-party transmission customers.
21 Further,Mr.Vail's eleventh hour assertion in
22 his supplemental direct testimony that the
23 Aeolus-to-Bridger/Anticline line portion of the proposed
24 Transmission Projects will need to be constructed in the
25 near future even if the new Wind Projects are not
1194 Dauphinais,Di-Supp -2
Monsanto Company
1 constructed is unsupported and contrary to RMP's directO2testimonyinthisproceeding.As a result,the assertion
3 should be given no weight by the Idaho Public Utilities
4 Commission ("Commission").
5 Because the Transmission Projects are not
6 needed to provide reliable electric service at lowest
7 reasonable cost,and because the Transmission Projects
8 can only be
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23 1 The Wind Projects are TB Flats I &II,Cedar Springs,Ekola Flats,
and Uinta,totaling 1,311 MW of new capacity.The Transmission
24 Projects are the Aeolus-to-Bridger/Anticline line and network
upgrades required to interconnect the Wind Projects.
25
1195 Dauphinais,Di-Supp -2a
Monsanto Company
1 justified if the forecasted net benefits and risksO2associatedwiththeCombinedProjectsaresuchthat
3 pursuit of the Combined Projects is in the public
4 interest for RMP's retail customers in Idaho,I continue
5 to recommend that if the Commission approves a CPCN for
6 the Combined Projects,that approval should include
7 protections to increase the likelihood that customers
8 will benefit from the Company's proposal.
9 II.PACIFICORP'S UPDATES TO THE TRANSMISSION PROJECTS
10 Q.PLEASE BRIEFLY SUMMARIZE THE UPDATES MR.VAIL
11 PROVIDES IN HIS SUPPLEMENTAL DIRECT TESTIMONY WITH
12 RESPECT TO THE TRANSMISSION PROJECTS.
13 A.Mr.Vail provides updates on the status of:
14 Expected design and cost for the TransmissionProjectsbasedontheoutcomeofthe2017R RFP;
15 Engineering,Procurement and Construction
16 ("EPC")contracts;and
17 Required easements.
18 Based on the outcome of the 2017R RFP,the
19 estimated cost of the 230 kV and 138 kV Network Upgrades
20 portion of the Transmission Projects has increased over
21 150 percent,from approximately (redacted)million to
22 (redacted)million due to the selection of the Cedar
23 Springs and Uinta Wind Projects.2 Mr.Vail indicates
24 these increased estimated transmission costs have been
25 incorporated into RMP witness Link's updated economic
1196 Dauphinais,Di-Supp -3
Monsanto Company
1 analysis.3 Mr.Vail also indicates the additionalO2NetworkUpgradeswillnotdelaythecompletionof the
3 Transmission Projects as a whole and have not materially
4 changed RMP's timeline or process for finalizing EPC
5 contracts.4
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24 2 Supplemental Direct Testimony of Rick A.Vail at pp.3-5.
3 Id.at pp.4-5.
25 4 Id.at pp.5-6.
1197 Dauphinais,Di-Supp -3a
Monsanto Company
1 Q.PLEASE BRIEFLY SUMMARIZE THE ADDITIONAL UPDATEO2MR.VAIL PROVIDES IN HIS SECOND SUPPLEMENTAL DIRECT
3 TESTIMONY WITH RESPECT TO THE TRANSMISSION PROJECTS.
4 A.Mr.Vail provides an additional update with
5 respect to the makeup and estimated cost of the 230 kV
6 and 138 kV Network Upgrades portion of the Transmission
7 Projects as a result of RMP's restudy of the System
8 Impact Studies ("SIS")for several of the Wind Projects.
9 This restudy was triggered by RMP's plan to complete the
10 Energy Gateway Aeolus-to-Bridger/Anticline D.2
11 transmission segment in 2020.5 The additional update of
12 the Network Upgrades also reflects RMP's decision to
13 replace the McFadden Ridge II Wind Project with the Ekola
14 Flats Wind Project.Mr.Vail identifies that the
15 estimated cost of the 230 kV and 138 kV Network Upgrades
16 portion of the Transmission Projects has increased yet
17 again by another 11%-this time from (redacted)million
18 to (redacted)million.
19 Mr.Vail also reports that RMP has confirmed
20 there is sufficient transfer capability to interconnect
21 the 1,150 MW of the proposed Wind Projects that would be
22 interconnected behind the TOT4A/TOT4B constraint along
23 with a 240 MW Qualifying Facility that already has an
24 executed interconnection agreement.Specifically,Mr.
25 Vail indicates RMP's updated studies indicate it can
1198 Dauphinais,Di-Supp -4
Monsanto Company
1 interconnect 1,510 MW of incremental wind generationO2behindtheTOT4A/TOT4B constraint.6
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24 5 Second Supplemental Direct Testimony of Rick Vail at pp.1-4.
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1199 Dauphinais,Di-Supp -4a
Monsanto Company
1 Q.DO MR.VAIL'S UPDATES ALLEVIATE OR REDUCE THEO2RISKSTOTRANSMISSIONPROJECTCONSTRUCTIONCOSTSORTHE
3 RECEIPT OF PTCs DUE TO CONSTRUCTION RISK THAT YOU
4 DISCUSSED IN YOUR DIRECT TESTIMONY?
5 A.No.At best,they remain the same as they
6 were.For example,while Mr.Vail reported on
7 transmission right-of-way acquisition in his supplemental
8 direct testimony,7 in response to Data Request WIEC 22.2,8
9 RMP admitted that as of March 22,2018,it has only
10 acquired 2.8819 miles (or 2.8%)of the total right-of-way
11 necessary for the Transmission Projects.9 In addition,
12 based on RMP's response to Data Request WIEC 22.4,it is
13 clear RMP has a large list of regulatory approvals and
14 permits ahead of it for the Transmission Projects.1o
15 Finally,quite possibly,the risks associated
16 with the Transmission Projects may be greater due to the
17 additional Network Upgrades that have now been added to
18 the Transmission Projects.As a general principle,the
19 more expensive and complex a project is,the greater the
20 risks involved.
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1200 Dauphinais,Di-Supp -5
Monsanto Company
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7 Supplemental Direct Testimony of Rick A.Vail at p.6.
21 8 Wyoming Public Service Commission,Docket No.20000-520-EA-17
("Wyoming New Wind/Transmission Docket"),Data Request WIEC 19.2.
22 WIEC stands for "Wyoming Industrial Energy Consumers."In Monsanto
Data Request No.2 to RMP,Monsanto requested a copy of all data
23 requests and responses from the Wyoming New Wind/Transmission Docket
in discovery in this proceeding.
24 9 Monsanto Exhibit No.211
10 Monsanto Exhibit No.212.
25
1201 Dauphinais,Di-Supp -5a
Monsanto Company
1 Q.DOES MR.VAIL'S UPDATE WITH RESPECT TO RMP'SO2TECHNICALSTUDIESFORTHETRANSMISSIONPROJECTSALLEVIATE
3 YOUR DIRECT TESTIMONY CONCERNS WITH RESPECT TO THE
4 INCOMPLETE NATURE OF THOSE STUDIES AND THE RISKS THEY
5 POSE TO CONSTRUCTION COSTS AND THE RECEIPT OF PTCs?
6 A.No.In its let Supplemental Response to Data
7 Request WPSC 3.4,11 RMP provided a copy of its updated
8 study report of March 30,2018 regarding its Aeolus West
9 Transmission Path Transfer Capability Assessment.I have
10 included a copy of this updated study report as Monsanto
11 Exhibit No.213.The updated study report indicates that
12 RMP's updated power flow analyses could support 1,510 MW
13 of incremental wind generation behind the TOT4A/TOT4B
14 constraint and an incremental east to west transfer
15 capability across Wyoming of 951 MW.12 However,the
16 updated study report also indicates that RMP currently
17 has unresolved issues with the modeling of some of the
18 wind turbine models in its dynamic stability studies.13
19 While the Company believes it can resolve the issue with
20 the wind turbine manufacturer,the issue is nevertheless
21 still outstanding.
22 In addition,in Response to Data Request WIEC
23 22.3,RMP provided a March 22,2018 update to its
24 Response to WIEC Informal Data Request 1.1,14 which
25 summarized the additional technical studies that will
1202 Dauphinais,Di-Supp -6
Monsanto Company
1 need to be completed for the Transmission Projects.I
2 have provided a copy of this updated summary as
3 Confidential Monsanto
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22 11 Wyoming Wind/Transmission Docket 1st Supplemental Response to Data
Request WPSC 3.4.WPSC stands for Wyoming Public Service Commission.
23 12 Monsanto Exhibit No.213 at pp.12-14 and 17.
13 Monsanto Exhibit No.213 at 17.
24 14 RMP's Response to WIEC Informal Data Request 1.1 was provided in
Monsanto Exhibit No.206.
25
1203 Dauphinais,Di-Supp -6a
Monsanto Company
1 Exhibit No.214.The updated summary shows the initialO2transfercapabilityassessmentstudieswill(redacted)
3 and joint transfer capability assessment studies are
4 (redacted).The updated summary also shows that RMP's
5 Remedial Action Scheme ("RAS")studies will (redacted).
6 Moreover,it does not appear RMP has completed its study
7 for the Latham Dynamic Device.
8 The incomplete nature of all of the foregoing
9 studies exposes RMP to the risk that something in the
10 results of the studies when they are completed could lead
11 to:(i)the needed transfer capability and incremental
12 wind interconnection capability either not being realized
13 or delayed;or (ii)the Transmission Projects having
14 greater costs than forecasted by RMP.Failure or delay
15 in the full realization of the necessary incremental
16 transfer capability and wind interconnection capability
17 could lead to the Wind Projects not receiving their full
18 PTCs.This would significantly reduce the forecasted
19 gross economic value of the Combined Projects.
20 Additional costs for the Transmission Projects would
21 increase the total costs for the Combined Projects.In
22 either case,the forecasted net benefits of the Combined
23 Projects would be reduced -potentially down to a net
24 cost for RMP's retail customers.
25
1204 Dauphinais,Di-Supp -7
Monsanto Company
1 III .ADDITIONAL EXPECTED TRANSFER CAPABILITY CONCERNSO2Q.DO YOU HAVE ANY OTHER CONCERNS WITH RESPECT TO
3 THE EXPECTED TRANSFER CAPABILITY OF THE PROPOSED
4 TRANSMISSION PROJECTS BASED ON YOUR REVIEW OF MR.VAIL'S
5 SECOND SUPPLEMENTAL TESTIMONY?
6 A.Yes.According to Mr.Vail,RMP is targeting
7 1,510 MW of incremental wind interconnection capability
8 behind the TOT3B/TOT4B constraint.15 Mr.Vail notes this
9 is sufficient to cover the 1,150 MW of the Wind Projects
10 that would be behind the TOT3B/TOT4B constraint plus a
11 240 MW Qualifying Facility that already has a generation
12 interconnection agreement.However,this fails to
13 consider another 320 MW Qualifying Facility that executed
14 an interconnection agreement with RMP on June 22,2016,
15 which would be interconnected behind the TOT3A/TOT4A
16 constraint near Aeolus.Specifically,the Boswell Wind
17 Projects have a higher priority queue number (Q409-A
18 through Q409-D)and,according to their Final Facilities
19 Study,would require use of capacity on the Energy
20 Gateway Transmission Projects including the
21 Aeolus-to-Bridger/Anticline D.2 segment.I have provided
22 a copy of the Final Facilities Study for this Qualifying
23 Facility as Monsanto Exhibit No.215.The queue status
24 of this Qualifying Project may mean that RMP needs 1,710
25 of incremental wind interconnection capability behind the
1205 Dauphinais,Di-Supp -8
Monsanto Company
1 TOT4A/TOT4B constraint rather than 1,510 MW.O 2 Q.HAS ANY INQUIRY BEEN MADE TO RMP WITH RESPECT
3 TO THIS ISSUE?
4 A.Yes.In its Response to Data Request WIEC 17.7
5 (Monsanto Exhibit No.216),RMP claims that because other
6 elements of the Energy Gateway Projects would be needed
7 for the Boswell Wind Projects beside the Aeolus-to-
8 Bridger/Anticline line,RMP does not
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25 15 Second Supplemental Direct Testimony of Rick A.Vail at p.7.
1206 Dauphinais,Di-Supp -8a
Monsanto Company
1 need to reserve interconnection capability for the
2 Boswell Wind Projects on the Aeolus to-Bridger/Anticline
3 line.
4 Q.HOW DO YOU RESPOND TO THIS CLAIM?
5 A.My review of the Revised System Impact Study
6 and Final Facilities Study for the Boswell Wind Projects
7 shows that RMP never really examined whether they could
8 be interconnected with elements of the Gateway West alone
9 without Gateway South.As a result,in my opinion,a
10 restudy would be in order to examine whether their
11 interconnection would be feasible with only the Aeolus-
12 to-Bridger/Anticline Segment D.2 of the Gateway West
13 Projects added,despite the statement in the Final
14 Facilities Study that both Gateway West and Gateway South
15 are required for the Boswell Wind Projects.It makes
16 little sense that other wind interconnections near Aeolus
17 do not require Gateway South,but the Boswell Wind
18 Projects do.
19 If the Transmission Projects are constructed as
20 proposed,there is no assurance that RMP will have
21 sufficient capacity for the Wind Projects in light of QFs
22 such as the Boswell Wind Projects with potentially
23 superior queue positions.That could result in either:
24 (i)a need to potentially increase transfer and
25 interconnection capability beyond that provided by the
1207 Dauphinais,Di-Supp -9
Monsanto Company
1 Transmission Projects -presumably at ratepayer expense;
2 or (ii)a higher risk that the Wind Projects would need
3 to be curtailed,which in turn would result in lower
4 PTCs.This would further increase the risks associated
5 with construction costs of the Combined Projects and the
6 receipt of PTCs from the Wind Projects.
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1208 Dauphinais,Di-Supp -9a
Monsanto Company
1 IV.NEED FOR TRANSMISSION PROJECTS
2 Q.PLEASE SUMMARIZE MR.VAIL'S SUPPLEMENTAL DIRECT
3 TESTIMONY CLAIM WITH RESPECT TO THE NEED FOR THE
4 AEOLUS-TO-BRIDGER/ANTICLINE LINE PORTION OF THE PROPOSED
5 TRANSMISSION PROJECTS.
6 A.Mr.Vail claims,for the first time,that there
7 is a need for the Aeolus-to-Bridger/Anticline line,even
8 if the new Wind Projects are not constructed,because it
9 will improve system performance and reliability and
10 directly service customers.16 To support this claim,he
11 notes long-term transmission plans still call for
12 construction of the line by 2024.17
13 Q.HOW DO YOU RESPOND?
14 A.This "eleventh hour"claim of Mr.Vail should
15 be given no weight.First,as I discussed in my direct
16 testimony,18 RMP admitted in its direct testimony that the
17 Transmission Projects and Wind Projects are mutually
18 dependent on each other.19 RMP also admitted in direct
19 testimony that the Transmission Projects are not
20 necessary for RMP to meet NERC Standards for the Bulk
21 Electric System and WECC Regional Standards and
22 Criteria.2o Furthermore,RMP admitted in direct
23 testimony that the Transmission Projects are not economic
24 without the Wind Projects.21 With respect to long-term
25 transmission plans,at best they identify the line may be
1209 Dauphinais,Di-Supp -10
Monsanto Company
1 necessary at some point in the future.However,
2 long-term transmission plans are not evidence that the
3 line in fact will ultimately be needed.
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22 16 Supplemental Direct Testimony of Rick A.Vail at pp.6-7.
17 Id.
23 IS Direct Testimony of James R.Dauphinais at pp.4-6.
19 Direct Testimony of Cindy A.Crane at p.3.
24 20 Direct Testimony of Rick A.Vail at pp.19,22-23.
25
21 Direct Testimony of Cindy A.Crane at p.10.
1210 Dauphinais,Di-Supp -10a
Monsanto Company
1 Q.CAN YOU PROVIDE AN EXAMPLE TO ILLUSTRATE HOWO2LONG-TERM TRANSMISSION PLANS ARE NOT EVIDENCE OF NEED?
3 A.Yes,the Commission only needs to look at the
4 history of PacifiCorp's Energy Gateway project to find
5 that long-term transmission plans are not evidence of
6 need.In PacifiCorp's 2011 Integrated Resource Plan
7 ("IRP"),the Company identified planned in service dates
8 between 2015-2017 for Segment D of Energy Gateway.22
9 That did not happen.Then,in the Company's 2013 IRP,
10 the "scheduled"in-service dates for Segment D were moved
11 to 2019-2021.23 But,two years later,the window of
12 "scheduled"in service dates for Segment D was expanded
13 in the 2015 IRP to 2019-2024.24 Although these
14 "scheduled"in-service dates for the sub-segments of
15 Segment D did not change in the 2017 IRP,25 that does not
16 mean they will not change in the future (particularly if
17 they are not necessary for RMP to meet NERC Standards for
18 the Bulk Electric System and WECC Regional Standards and
19 Criteria).
20 Q.DOES THIS CONCLUDE YOUR SUPPLEMENTAL DIRECT
21 TESTIMONY?
22 A.Yes,it does.
23
22 PacifiCorp's 2011 IRP at p.291.Segment D includes the Aeolus-
24 to-Bridger/Anticline line.
23 PacifiCorp's 2013 IRP at p.74.
O 25 24 PacifiCorp's 2015 IRP at p.57.
25 PacifiCorp's 2017 IRP at p.71.
1211 Dauphinais,Di-Supp -11
Monsanto Company
1 (The following proceedings were had in
2 open hearing.)
3 MR.BUDGE:And with the Commission's
4 indulgence,we have a few live questions for Mr.
5 Dauphinais with respect to the settlement.We would take
6 those first.
7 COMMISSIONER ANDERSON:That's fine.
8
9 DIRECT EXAMINATION
10
11 BY MR.BUDGE:(Continued)
12 Q Mr.Dauphinais,have you had an
13 opportunity to review the settlement stipulation between
14 the Company and Staff,along with the supporting
15 testimony that was filed by the Company witnesses Joelle
16 Steward and Rick Link?
17 A Yes.
18 Q Do you have any testimony to offer today
19 in response to the stipulation and the settlement
20 testimony of the Company through these two witnesses?
21 A Yes,I have testimony to offer in response
22 to that stipulation and the settlement testimony of
23 Ms.Steward.My colleague Mr.Phillips will also later
24 today or later be offering testimony regarding the
25 stipulation as well and Ms.Steward's settlement
2
.REPORTI9NG 1212 MoDAUaPHINACmpaD
1 testimony,along with a response to the settlement
2 testimony of Mr.Link.
3 Q Would you go ahead and proceed and
4 identify what concerns you may have with respect to the
5 stipulation?
6 A Yeah,the stipulation would still leave
7 customers exposed to the transmission construction cost
8 overruns,production tax credit realization,and
9 third-party transmission revenue realization risks that I
10 identified in my direct and supplemental direct
11 testimony.Even if the Company acts in a prudent manner
12 with respect to the construction of the proposed
13 transmission projects,it could still experience
14 transmission construction cost overruns that would be
15 recoverable under the stipulation.
16 Similarly,even if the Company acts in a
17 prudent manner,there could still be issues with respect
18 to the in-service date of the transmission projects or
19 the transfer and interconnection capability provided by
20 the transmission projects.These issues could result in
21 production tax credits that have been forecasted not
22 being fully realized by customers,and finally,even if
23 the Company acts in a prudent manner,the risk remains
24 that customers may not realize the offsetting third-party
25 transmission revenues that the Company has forecasted
CSB REPORTING 1213 DAUPHINAIS (Di)
208.890.5198 Monsanto Company
1 that it would receive for the transmission projects under
2 its open access transmission tariff.The stipulation
3 does not protect customers with respect to any of the
4 these issues.
5 Q Do you have any concern going specifically
6 to the settlement testimony of Ms.Steward?
7 A Yeah,I do specifically with respect to
8 page 3 of her testimony and specifically,it's page 3,
9 lines 25 through 28 where she states,"Indeed,the
10 Company's economic analysis demonstrates that the
11 stipulated projects are an unprecedented and
12 time-sensitive opportunity to acquire much-needed
13 transmission resources and zero-fuel cost wind resources
14 while delivering all-in customer savings."
15 Now,I'll defer to my colleague Mr.
16 Phillips with respect to the Company's economic analysis
17 with respect to whether it's reasonable and what it
18 shows;however,I take issue with Ms.Steward's claim
19 that the proposed transmission projects are much needed.
20 Q Would you go ahead and explain,then,why
21 you take issue with Ms.Steward's settlement testimony
22 claim that the transmission projects proposed in this
23 proceeding are much needed?
24 A As I discussed in my direct and
25 supplemental testimony,the Company has not demonstrated
CSB REPORTING 1214 DAUPHINAIS (Di)
208.890.5198 Monsanto Company
1 the proposed transmission projects are necessary outside
2 of the context of pursuing the wind projects that have
3 been proposed in this proceeding.Specifically,the
4 Company has not --I'm sorry,the Company has admitted
5 the transmission projects are not needed without the wind
6 projects to meet reliability standards.
7 While the Company has identified various
8 transmission loss,generation interconnection,
9 transmission congestion benefits that could come from the
10 transmission projects,it's important to understand that
11 these are ancillary benefits that can only justify the
12 projects by themselves if the ancillary services provide
13 a benefit in excess of the costs of the transmission
14 projects.
15 In this respect,the Company has admitted
16 the proposed transmission projects are not economic,
17 except when pursued in conjunction with the proposed wind
18 projects;therefore,while the transmission projects are
19 necessary to support the wind projects if the latter are
20 pursued,it cannot be reasonably said that the
21 transmission projects on their own are much needed.
22 Q Do you have any other concerns with
23 respect to the other Company witnesses that have
24 testified in support of the stipulation?
25 A I do not,except to note that my silence
CSB REPORTING 1215 DAUPHINAIS (Di)
208.890.5198 Monsanto Company
1 with respect to any portion of the stipulation or theO2Company's settlement testimonies shouldn't be interpreted
3 as an endorsement of any position the Company has taken
4 with regard to the stipulation or settlement agreement.
5 Q Did you have an opportunity to review the
6 settlement testimony of Staff witness Carlock that was
7 handed out here recently?
8 A I have not yet.
9 MR.BUDGE:We would like to reserve an
10 opportunity to review that testimony and perhaps further
11 rebut it,but it was just handed out and this witness
12 hasn't reviewed it.
13 Q BY MR.BUDGE:Any other concerns that
14 should be raised at this point,Mr.Dauphinais?
15 A No.
16 MR.BUDGE:No further questions.
17 COMMISSIONER ANDERSON:Thank you.
18 Mr.Williams.
19 MR.WILLIAMS:No questions.
20 COMMISSIONER ANDERSON:Mr.Olsen.
21 MR.OLSEN:No questions.
22 COMMISSIONER ANDERSON:The Company?
23 MR.LOWNEY:Yes,the Company does have
24 some questions,and just before I get started,I'll be
25 referencing several cross-examination exhibits and just
CSB REPORTING 1216 DAUPHINAIS (Di)
208.890.5198 Monsanto Company
1 to ease the flow,we'll just distribute all of them now
2 and as we get to them,we can talk about them.
3 COMMISSIONER ANDERSON:Very good.
4 COMMISSIONER RAPER:New exhibits for the
5 record?
6 MR.LOWNEY:Yes,these will be new
7 exhibits,which by my count begin at Exhibit 70,I
8 believe,for the Company.
9 (Ms.McDowell distributing documents.)
10
11 CROSS-EXAMINATION
12
13 BY MR.LOWNEY:
14 Q Good afternoon,Mr.Dauphinais.
15 A Good afternoon.
16 Q Now,I'd like to follow-up on something
17 you just mentioned in your live rebuttal.You dispute
18 that there's a need for the transmission projects;
19 correct?
20 A I dispute there's a need for the
21 transmission projects by themselves at this time.
22 Q Okay,and you would agree that Mr.Vail
23 testified that the Company's transmission system in
24 Wyoming is currently operating at capacity;correct?
25 A He indicated it was operating at capacity,
CSB REPORTING 1217 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 but I'll be very clear that the Company has,and Mr.Vail
2 in particular has,identified that the projects are not
3 needed to meet NERC reliability standards in the absence
4 of the wind projects,so we're operating at capacity
5 means there is transmission congestion presence,which
6 means that your ideal,most ideal,economic transactions
7 on the system,power flow transactions,can't all flow,
8 so it means that it's inefficient.It may still be the
9 least cost situation,but it's inefficient.
10 Q And going back to you just mentioned
11 congestion,you would agree,then,that the transmission
12 projects if built will relieve the existing congestion on
13 that portion of the Company's system;correct?
14 A They will reduce the transmission
15 congestion.They will reduce transmission losses.They
16 will open up an opportunity for additional generation
17 interconnection due to system stiffness and voltage
18 concerns,but,again,the key with those are,they're all
19 ancillary benefits and whether you need a project for
20 those ancillary benefits is a question about whether the
21 cost savings provided by opening up those things and
22 relieving the congestion exceeds the cost of the
23 transmission project.
24 Q Well,if I could just direct your
25 attention to the document we just distributed that's from
CSB REPORTING 1218 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 the United States Energy Information Administration.
2 This is the Wyoming State Energy Profile they produced,
3 and if I could direct your attention,please,to page 9.
4 COMMISSIONER ANDERSON:Will this be
5 Exhibit 70?
6 MR.LOWNEY:This would be Cross Exhibit
7 70,yes.
8 (Rocky Mountain Power Exhibit No.70 was
9 marked for identification.)
10 THE WITNESS:Let me note I've never seen
11 this document before,so I'm not familiar with it.
12 Q BY MR.LOWNEY:Okay,fair enough.I just
13 want to ask you some questions about page 9.Under the
14 heading Renewable energy,it states that Wyoming has some
15 of the largest wind resources in the nation,especially
16 in the southeast corner of the state.Do you see that?
17 A Yes.
18 Q And the southeast corner of the state is,
19 generally speaking,where the three stipulated wind
20 projects are located;correct?
21 A Yes.
22 Q And if I could direct your attention to
23 the second full paragraph from the top that begins with
24 the word "Because,"and the second sentence in that
25 paragraph says,"High-voltage transmission lines carrying
CSB REPORTING 1219 DAUPHINAIS (X
208.890.5198 Monsanto Company
1 electricity from Wyoming often operate at maximum
2 capacity."Do you see that?
3 A Yes.
4 Q So the next sentence says,"Several major
5 interstate projects are in development to transmit more
6 electricity supplies from Wyoming to western population
7 centers."Now,would you agree that one of the outcomes
8 of constructing Aeolus-to-Bridger/Anticline transmission
9 line is that there will be an increase in transfer
10 capability east to west across Wyoming;correct?
11 A At a cost,the cost to construct the
12 transmission project,which may exceed the benefit
13 produced by opening up the transmission system.
14 Q And are you familiar with the fact that
15 this Commission has also indicated or recognized that
16 there is a need for additional transmission to allow for
17 the transfer of energy from Wyoming wind resources to
18 serve Idaho customers?
19 A I need something specific on that.
20 Q All right,if I could direct your
21 attention,please,to the document that will be labeled.
22 RMP Cross Exhibit 71.This is the Commission's Order
23 No.30657 and that was --the caption of that case is in
24 the application of Rocky Mountain Power for a certificate
25 of public convenience and necessity authorizing
CSB REPORTING 1220 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 construction of the Populous-to-Terminal 345 kV
2 transmission line project.
3 (Rocky Mountain Power Exhibit No.71 was
4 marked for identification.)
5 Q BY MR.LOWNEY:Now,Mr.Dauphinais,do
6 you have that in front of you?
7 A I do and this is another document that I'm
8 not familiar with.
9 Q Well,if I could direct your attention to
10 page 2 of that Order just so we can get a frame of
11 reference for this particular transmission line,it
12 indicates that the transmission line would connect to a
13 substation referred to as Populus,which is located near
14 the town of Downey,Idaho,and it's going to connect to
15 the terminal substation near Salt Lake City.Do you see
16 that on page 2,the third paragraph down that begins,"A
17 new substation"?
18 A It might be best to let me read the whole
19 paragraph,if I may.
20 Q Absolutely.
21 A All right.
22 Q And if I could turn your attention to page
23 5 of that Order under the Commission Decision and
24 Findings heading.
25 A Yes.
CSB REPORTING 1221 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 Q I believe the second sentence in itO2indicatesthattheCommissionhasreviewedPacifiCorp's
3 2007 IRP filing in order to ascertain whether the instant
4 filing is in conformity with the Company's stated
5 intention to integrate additional energy resources into
6 its system.Do you see that sentence?
7 A Yes.
8 Q And would you agree that the 2017 IRP that
9 was filed with this Commission includes the same stated
10 intention,to use the transmission projects to allow
11 interconnection of additional wind resources?
12 A I can't answer that.I have probably
13 looked at the IRP in the past,but I'm not familiar where
14 this would be supported.
15 Q Well,you would agree that the
16 transmission line is included as part of the preferred
17 portfolio in the Company's 2017 IRP?
18 A My understanding it is,yes.
19 Q And the Commission on this page also
20 acknowledged that the majority of viable wind projects
21 are located some distance from load centers and that
22 would be sort of the first sentence in the paragraph that
23 begins "Nevertheless."Do you see that?
24 MR.BUDGE:Mr.Chairman,I'm going to
25 object to this line of questioning.This witness has no
CSB REPORTING 1222 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 testimony with respect to this particular 2003 Order
2 relating to transmission line and it seems like this
3 cross is beyond the scope of his direct testimony.If
4 counsel could refer to somewhere in his direct testimony
5 that it relates to,then it may be appropriate.
6 MR.WILLIAMS:Mr.Chairman,I would also
7 object to this line of questioning.The witness said he
8 had never seen this Commission Order and now he's being
9 cross-examined and being given representations on what it
10 says,admitting that he's never seen it,and I just don't
11 think this is the right witness to be introducing this
12 exhibit.
13 MR.LOWNEY:And what I would say is that
14 Mr.Dauphinais testifies,as he said,about the need for
15 this transmission line.In his direct supplemental --
16 supplemental direct testimony filed in April,he
17 describes how this transmission line has been treated in
18 the Company's IRPs going back to the 2011 IRP.He makes
19 reference to how it was treated in the 2017 IRP and I'm
20 only asking him about this Order because it describes the
21 basis for the Commission's decision that this particular
22 transmission line met a resource need,and I'm trying to
23 draw parallels to the fact that this resource that we're
24 describing today,the Aeolus-to-Bridger/Anticline line,
25 meets the same standards that the Commission articulated
CSB REPORTING 1223 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 in this Order,and so the Order speaks for itself.I'mO2notaskinghimtoopineonwhattheOrderdoesordoesn't
3 mean.I'm asking him factual questions to draw parallels
4 between the transmission line that we're discussing today
5 and what the Commission's Order found when granting the
6 CPCN on this transmission line.
7 MR.WILLIAMS:Mr.Chairman,this is a
8 10-year old Order.I question its relevancy.
9 MR.LOWNEY:Well,there were questions
10 about the Populus to Terminal transmission line earlier
11 today,so I would offer that it's perfectly relevant.
12 COMMISSIONER ANDERSON:It seems like
13 you're almost introducing new testimony.I mean,this
14 witness has never seen these documents,I get that.If
15 you're trying to establish something,I follow that,but
16 if you can't find a solution,I will for you.I mean,do
17 you want to continue with this argument that you're on
18 right now?
19 MR.LOWNEY:No,I can move on.I'd be
20 happy to move on.
21 COMMISSIONER ANDERSON:It would probably
22 save you the ruling.
23 MR.LOWNEY:All right.
24 Q BY MR.LOWNEY:Mr.Dauphinais,if you
25 could turn to your direct supplemental testimony,please,
CSB REPORTING 1224 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 page 11.O 2 A Yes.
3 Q Now,on line --beginning on line 3 and
4 continuing on to line 13,you testify about how the
5 particular transmission line --actually,let me back up
6 so the record is clear.The Aeolus-to-Bridger/Anticline
7 line is also sometimes referred to as Subsegment D2 of
8 the Energy Gateway project;would you agree?
9 A Yes.
10 Q And so this portion of your testimony is
11 referring to it as Segment D,but it's describing how it
12 was treated in prior IRPs;correct?
13 A Yes.
14 Q And if I could turn your attention,
15 please,to RMP Cross Exhibit,I believe this would be,
16 72,this is Chapter 4 of the Company's 2017 IRP.This is
17 the document you reference on line 11,and this is the
18 chapter that describes transmission.
19 A It is a chapter that's titled Chapter 4 -
20 Transmission of the IRP.
21 Q Okay,and if you could turn to page 61,
22 please --I'm sorry,I misspoke,page 65 and at the
23 bottom of that page under the heading Planning
24 Initiatives,it states,"Energy Gateway is the result of
25 robust local and regional transmission planning efforts."
CSB REPORTING 1225 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 Do you see that?
2 A Yes.
3 Q And we just established that the
4 Aeolus-to-Bridger/Anticline line is a component of the
5 Energy West Project correct?
6 A Do you mean Energy Gateway project?
7 Q Energy Gateway project,yes.
8 A Yes,it's a component.
9 Q And on page 66 of the IRP,it describes
10 some of those transmission planning processes.It
11 mentions the Northwest Transmission Assessment Committee,
12 the Rocky Mountain Area Transmission Study,the Western
13 Governors'Association Transmission Task Force,the
14 Western Regional Transmission Expansion Partnership,and
15 the Northern Tier Transmission Group Planning Reports.
16 Do you see that?
17 A Yes.
18 Q And Mr.Vail in his testimony also
19 described the role that that Segment D2 plays in the NTTG
20 planning process.Do you recall that testimony from Mr.
21 Vail?
22 A Yes.
23 Q And Mr.Vail also testified that the
24 Company's --that the Segment D2 has been included in the
25 Company's annual reliability planning assessment required
CSB REPORTING 1226 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 by NERC and WECC.Do you recall that testimony?
2 A Can you repeat that question?I want to
3 make sure I hear it correctly.
4 Q Mr.Vail testified that the Aeolus-to-
5 Bridger/Anticline line has been included in the Company's
6 annual reliability planning assessment that's required by
7 NERC and WECC.I can point you to his testimony if you
8 would like to refresh your memory.
9 A If you could,that would be helpful.I do
10 not have a copy of his testimony with me in front here.
11 (Pause in proceedings.)
12 THE WITNESS:Which testimony of Mr.Vail?
13 Q BY MR.LOWNEY:So it's Mr.Vail's direct
14 testimony at page 20,lines 10 to 15.
15 A Well,it indicates that --he's indicating
16 that it's been included in the Company's annual TPL-001-4
17 assessment as part of its short-term and long-term plans
18 to dependably meet NERC and WECC reliability
19 requirements.That simply indicates that it has been in
20 the Company's plans and I certainly don't deny it's been
21 in the Company's plans or that it's been in regional
22 transmission plans.It doesn't mean it's necessarily
23 needed at this time.It doesn't mean it's necessarily
24 going to be needed in the future with certainty.It is a
25 plan at this point.
CSB REPORTING 1227 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 Q If I could direct your attention to theO2documentthatwillbe,I believe,RMP Cross Exhibit 73,
3 and this is testimony that you filed before the Indiana
4 Utility Regulatory Commission,and I assume you're
5 familiar with this testimony,although it is several
6 years old?
7 A Yes,I'd like a moment to refresh myself
8 on it,if I may.
9 Q Sure,and if you'd like,page 7 is where
10 I'm going to ask you a question.
11 A Okay.I'm ready now.
12 Q All right,if I could direct your
13 attention,please,to line 18 on page 7,you testified
14 there that while nobody can predict the future perfectly,
15 utility planning studies can yield important information
16 in regard to an expected outcome under a specific set of
17 defined assumptions.Now,while you testify here in this
18 Indiana testimony the planning studies can yield
19 important information,in this case you're fairly
20 dismissive of these numerous long-term transmission plans
21 that include this project as irrelevant to demonstrating
22 need;correct?
23 A No,that's not correct.You're making a
24 jump here,so I'm not saying that the studies,the
25 planning studies,and their indication of a potential
CSB REPORTING 1228 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 need for D.2 should be dismissed outright.I would agree
2 that there is in the plans an identification using the
3 assumptions,using those studies that the line may
4 eventually be needed.What I'm saying here in this
5 proceeding is that the Company has not made a
6 demonstration that the project is needed at this time or
7 with certainty will be needed in the future.There's
8 nothing inconsistent with that versus what's in this
9 testimony.
10 Q And you would agree that development of a
11 140-mile long transmission line requires a long lead time
12 to permit and construct;correct?
13 A It requires a lead time of a few years.
14 Q And so transmission planning must
15 necessarily occur in advance of need;correct?
16 A Correct.
17 Q And if the Company were to wait for an
18 imminent reliability issue,it may be too late;right?
19 A Well,now you're making a jump again.
20 Planning versus proceeding and seeking a certificate to
21 actually go forward and construct are two different
22 things.Planning you need to do in advance and there is
23 going to be a lead time to actually construct the project
24 and to get the permits,and you do need to make a
25 proposal or file an application,a certificate,in
CSB REPORTING 1229 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 sufficient time to allow the permitting and construction,
2 and you do have to do planning further back in time to
3 allow that as well,but the bottom line is when you're
4 ready to make an application,for it to be needed,a
5 project needs to be able to be demonstrated and in fact,
6 at that time when the application is being made that the
7 project is in fact needed,that you need it either to
8 meet the reliability standards and that includes a
9 demonstration it's the lowest reasonable cost project to
10 meet those reliability standards or it provides a
11 substantial economic benefit.It has a net economic
12 benefit by proceeding with the project.
13 Q If I could direct your attention,please,
14 to your supplemental direct testimony,page 6.Beginning
15 on line 6,you describe the Company's Aeolus West
16 Transmission Path Transfer Capability Assessment.Do you
17 see that?
18 A Yes.
19 Q And that study indicates that the Company
20 can interconnect up to 1,510 megawatts of new wind
21 capacity behind the constraint and increases the transfer
22 capability east to west by 951 megawatts;correct?
23 A Yes.
24 Q You also note that there's some ongoing
25 studies that won't be completed until after this case is
CSB REPORTING 1230 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 resolved;right?O 2 A That is correct.
3 Q And you testify that the incomplete
4 studies create a risk that the PTCs may not be realized
5 due to construction delays;correct?
6 A They may not be fully realized.
7 Q Now,you testified a few moments ago about
8 the stipulation in this case and wouldn't you agree that
9 the Company has assumed all risk associated with PTC
10 construction delays for issues within its control?
11 A I don't read that provision as dealing
12 with a situation with regard to those delays not
13 impinging on the ability for projects to qualify for
14 PTCs,but it appears that it may address that,but it
15 doesn't address the situation where you don't get the
16 full transfer capability from a project because a portion
17 of it is delayed,and so,therefore,the wind facilities
18 cannot operate at full capacity factor or expected
19 capacity factor,and so,therefore,the full PTCs aren't
20 provided.
21 Similarly,the later studies could
22 identify a problem which lowers the transfer capability
23 the projects are supposed to provide and that,too,can
24 have an effect in that you cannot fully utilize the wind
25 facilities,so it reduces your capacity factor and the
CSB REPORTING 1231 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 full PTCs will not be realized.
2 Q And you would agree,though,that if any
3 of these events are within the Company's control,the
4 Company has assumed that risk;correct?
5 A Whether they're in the Company's control
6 or not,the risk remains.I would have to re-look at the
7 specifics of the language of the stipulation to see
8 whether I would agree that the stipulation does make the
9 Company the party that's at risk to the extent it's
10 within their control.My reading that I have --had,
11 though,is that it essentially goes more to the question
12 of whether the wind projects would qualify for the
13 PTCs.
14 Q Now,going back to something you mentioned
15 in your prefiled testimony as well today,your position
16 is that the wind projects or,excuse me,the transmission
17 projects are not needed without the wind projects;
18 correct?
19 A The transmission projects are not needed
20 without the --the transmission projects are not needed
21 without the wind projects.The transmission projects are
22 specifically only needed if the wind projects are
23 pursued.
24 Q And if I could direct your attention to
25 your direct testimony on page 6.
CSB REPORTING 1232 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 A Yes.O 2 Q And if I could direct your attention to
3 beginning on line 3,you testify that a CPCN for the
4 combined projects should be granted only by the
5 Commission if the forecasted net benefits and risks
6 associated with the projects in Idaho are such that the
7 public interest --that it is in the public interest to
8 do so.Do you see that testimony?
9 A Yeah,you didn't state it quite the way
10 it's said here,though.
11 Q Feel free to clarify.I'm sorry,I was
12 intending to read it,but I very well may have misspoke.
13 A It says,"a CPCN for the combined projects
14 should only be granted by the Commission if the
15 forecasted net benefits and risks associated with the
16 combined projects for RMP's retail customers in Idaho are
17 such that it is in the public interest to do so."
18 Q Now,are you familiar with the settlement
19 testimony that was filed by Mr.Link?
20 A I'm less familiar --I have browsed that
21 testimony.I would have to defer to Mr.Phillips with
22 regard to the details of it.I haven't read it in depth.
23 My focus was on Ms.Steward's settlement testimony.
24 Q Well,and I guess I just want to ask you
25 about a top line,so you can accept it,subject to check,
CSB REPORTING 1233 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 that in Mr.Link's settlement testimony where he re-ranO2theeconomicanalysisremovingtheUintaproject,and
3 this is on page 8,Table 3-ST,he indicates that under
4 the low gas,zero CO2 scenario,there would be a
5 customer --excuse me,I'm looking at the wrong line.
6 Under the zero gas --low gas,zero CO2 scenario studied
7 through 2050,there would be a net customer cost of $154
8 million in that scenario.
9 A I'm going to have to defer to
10 Mr.Phillips.He testified with regard to economic
11 analysis for the combined projects.
12 Q Well,I just want to ask you about that
13 particular number in relation to the transmission
14 projects.
15 A I'm not the witness on that.
16 Q You're not the witness on the transmission
17 projects?
18 A Not the witness on the economic benefit of
19 the projects.
20 Q Well,I guess I just want to ask you,
21 would you agree that that number is substantially lower
22 than the cost to construct the transmission projects as
23 estimated by the Company?
24 A Please give me the reference to the page
25 number again.
CSB REPORTING 1234 DAUPHINAIS (X)
208.890.5198 Monsanto Company
1 Q It's page 8 of Mr.Link's settlement
2 testimony,Table 3-ST,and the number I'm looking at is
3 154 million,which is the modeled result without Uinta
4 through 2050 under the low gas,zero CO2 scenario.
5 A Again,I'm not comfortable making an
6 observation in regard to this table.This is an area
7 that Mr.Phillips has concentrated on.I have not
8 concentrated on it.
9 Q Well,I guess I could just ask you,you
10 would agree that 154 is less than the estimated cost of
11 the construction of the transmission projects which is
12 the subject of your testimony?
13 MR.BUDGE:I object to the question.The
14 witness has already said he doesn't know and it's a
15 proper question to ask Mr.Phillips who will be
16 testifying next.
17 MR.LOWNEY:I can rephrase.
18 Q BY MR.LOWNEY:Mr.Dauphinais,to your
19 recollection,how much money does it cost to construct --
20 what is the current cost estimate for the Aeolus-to-
21 Bridger/Anticline transmission line?
22 A That's a confidential number,I believe.
23 Q And do you agree that it's higher than
24 $154 million?
25 A It's higher than $154 million,yes.
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208.890.5198 Monsanto Company
1 Q And would you agree it's substantially
2 higher?I can point you to the number if we're going to
3 do this,but it would be easier if you would just --you
4 testified about the transmission projects;correct?You
5 know the cost or don't you?
6 A I know the cost.It's in the testimony of
7 Mr.Vail.The Company has identified it's a confidential
8 number.I don't think you want me to spout out a
9 confidential number unless we go in-camera.
10 Q Well,I don't want to ask you that.I'm
11 just asking you,it is substantially larger than $154
12 million?
13 A Yes.
14 Q And so in this case,even under the low,
15 gas,zero CO2 scenario,customers are paying under this
16 modeled result 154 million for over 1,000 megawatts of
17 wind and a transmission line that costs substantially
18 more than that;right?
19 A I'm not going to respond to that question,
20 because,again,you're really asking me to make a
21 comparison of what is meant by Table --in Table 3-ST and
22 I'm not the proper witness to make that comparison.
23 MR.LOWNEY:No further questions.
24 COMMISSIONER ANDERSON:Thank you.Staff.
25 MR.KARPEN:Thank you.
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1 CROSS-EXAMINATION
2
3 BY MR.KARPEN:
4 Q Good afternoon.
5 A Good afternoon.
6 Q You testified with regard to the
7 stipulation that there are three areas where customers
8 are left exposed;cost overruns,PTCs not being fully
9 realized due to in-service dates,and the offsetting of
10 third-party revenues;is that accurate?
11 A Yes.
12 Q You heard questioning earlier,and I won't
13 belabor it,but let me read to you the actual language of
14 the stipulation on page 6 with regard to the PTCs.It
15 says in paragraph 18,"The stipulating parties agree that
16 the Company will bear the risks related to any portion of
17 the wind projects that do not qualify for PTCs."It goes
18 on to state that the Company will impute any PTCs that
19 are not fully realized.You do not agree that the
20 Company bears the risks with regard to the PTCs being
21 fully realized by customers?
22 A What gives me concern,and it's great you
23 have pointed to specific language,is the first sentence
24 and the words "do not qualify,"so my problem is with
25 that first sentence and realize,I'm not a lawyer.I'm
CSB REPORTING 1237 DAUPHINAIS DC208.890.5198 Monsanto Company
1 only reading this based on this plain language.My
2 concern is that with the words "do not qualify"in the
3 first sentence,it could potentially be interpreted as
4 really a situation about whether the PTCs,you know,
5 whether they qualify or not,and if they don't qualify,
6 then you would impute what the full realization of the
7 PTCs would have been if they did qualify,so my concern
8 is that the way paragraph 18 is written,I'm concerned
9 that it only really goes to the question of whether a
10 project qualifies for PTCs or it doesn't qualify for
11 PTCs.It doesn't go to the question of whether there's
12 restricted transmission capability because either a
13 transmission project was delayed or because the studies
14 that haven't been completed result in lower transfer
15 interconnection capability than the Company has
16 forecasted.
17 Q Thank you.Also,with regard to your
18 concern regarding cost overruns,it's Staff's position
19 that the Commission impose an overall capital cost cap on
20 the stipulated projects,do you have a position on an
21 overall hard cap on the projects and do you believe that
22 an overall capital cost cap for the projects would cure
23 the deficiencies in the stipulation that you noted?
24 A I'm not prepared to answer that,in part
25 because that's really probably a better question for
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208.890.5198 Monsanto Company
1 Mr.Phillips than for me,because he's looking at the
2 overall economics of the projects and he would be a
3 better judge to answer that question.I do not whether
4 he will prepared to give an answer on that,but I think
5 he's the better witness than I am.
6 MR.KARPEN:Then I'll ask Mr.Phillips
7 that question,and with that,I'll tender this witness
8 for redirect.
9 COMMISSIONER ANDERSON:Any questions from
10 the Commission?
11 MR.KARPEN:After Commissioners'
12 questions,of course.
13
14 EXAMINATION
15
16 BY COMMISSIONER RAPER:
17 Q Good afternoon.
18 A Good afternoon.
19 Q I just want a little clarification.With
20 some of your first statements on the stand,you said that
21 the stipulation leaves customers exposed,so doesn't
22 anything but a hard cap leave customers exposed?
23 A A hard cap would limit the exposure,yes.
24 It would limit the exposure of the type I'm speaking of.
25 We certainly have --if the Company does something
CSB REPORTING 1239 DAUPHINAIS (Com)
208.890.5198 Monsanto Company
1 imprudent,they've got the burden to show it and that's
2 in the stipulation,but the concerns I'm raising is that
3 well,the Company could have done everything that is
4 prudent and yet,the risk still exists to these higher
5 costs and so hard cap would help to try to address that
6 by putting a limit on exposure and that's important,
7 because the nature of these projects are that they are
8 opportunity projects.
9 Sometimes we've heard some of the
10 witnesses refer to them as discretionary projects,and at
11 least my view,and I think some of those other witnesses,
12 is these projects are not needed for reliability either
13 on a resource adequacy standpoint or from a transmission
14 reliability standpoint,so this is an issue where there's
15 a possibility of economic benefits of significance for
16 customers,but there are certain risks on those benefits
17 being realized.
18 The Company,on the other hand,they're
19 not taking those risks,because what they would do is
20 they would build those projects and they would go into
21 the rate base and they'd earn a return on them and they
22 would earn that return whether they meet their goals on
23 capacity factor on the wind projects,regardless of what
24 natural gas prices might be at and wholesale market
25 prices are at in the future,so,therefore,the problem
CSB REPORTING 1240 DAUPHINAIS (Com)
208.890.5198 Monsanto Company
1 is that customers are taking on risk.They're being made
2 to make an investment,which is going to have some risk
3 associated with it,but the Company is going to make an
4 investment that is going to have much less risk
5 associated with it.
6 Q The Company's risk is that any expenses
7 that it incurs may or may not be recoverable,because
8 they've got to ask our permission to put those in rates.
9 A They have to ask your permission,but they
10 have to be given a reasonable opportunity to recover
11 those costs if they're prudent and they're used and
12 useful.
13 Q So to clarify one last question,it's not
14 your position that the wind is not in the better interest
15 of the customer in replacing the market transactions;
16 correct?It's different than that.I'm just trying to
17 get in my head where,and Mr.Karpen got to some of it,
18 where the difference lies in,you know,where you shoot
19 the gap on what you are testifying to being reasonable
20 and not reasonable.Is it your testimony,is it your
21 opinion that the replacement --that by utilizing these
22 wind projects,it replaces the market purchases and that
23 that is in the better interest of the customer?
24 A Mr.Phillips,my colleague,is better to
25 answer the question,because it's really ultimately an
CSB REPORTING 1241 DAUPHINAIS (Com)
208.890.5198 Monsanto Company
1 economic question.It's basically if you go and build
2 these projects,it creates one set of expected revenue
3 requirement for the Company in the future.If you don't
4 do that and you have the other alternative,it produces a
5 different revenue requirement.It's the difference
6 between those revenue requirements is what is really the
7 focus of this,you know,is there a net benefit from the
8 projects,so I'm not seeing --you know,from what I've
9 looked at and,again,Mr.Phillips is better to answer
10 this,these projects are not necessary in order to supply
11 the customers.They are an alternative that's available
12 to supply the customers versus using the transactions
13 they have been using or have been in the plans for Rocky
14 Mountain Power.
15 Q Final question,I promise,I think I said
16 that once already,in testifying that the stipulation
17 leaves customers exposed,couldn't that argument be made
18 of any CPCN application that any utility puts before any
19 commission unless a hard cap is placed,that if there's
20 going to be a build,it's going to take a planning
21 period.There's going to be some risk,because numbers
22 change for natural gas and other things.There's a risk
23 associated with that.Doesn't that always leave
24 customers exposed to some extent?
25 A Ah,but there's an important difference
CSB REPORTING 1242 DAUPHINAIS (Com)
208.890.5198 Monsanto Company
1 with this project versus a lot of other projects.If
2 it's a project that needs to be pursued to provide
3 reliable electric service at the lowest reasonable cost
4 that as they need to add a project or their system is not
5 going to be reliable either from a resource adequacy or
6 transmission reliability perspective,then that's a part
7 of the normal regulatory process and yes,customers
8 generally cover the risk of that,except for imprudence
9 or if the investment is not used and useful,but here we
10 have an investment that's not necessary for reliability.
11 It's an economic opportunity,a discretionary investment
12 and that is the difference.
13 COMMISSIONER RAPER:Thank you.I
14 appreciate that and that was my last question.
15 COMMISSIONER ANDERSON:Redirect?
16 MR.BUDGE:Thank you,Mr.Chairman,just
17 very briefly.
18
19 REDIRECT EXAMINATION
20
21 BY MR.BUDGE:
22 Q Mr.Dauphinais,the Company's counsel
23 initially asked you some questions about if the new
24 transmission lines were built,it would relieve some
25 congestion with increased transfer capabilities,you
CSB REPORTING 1243 DAUPHINAIS (ReDi)
208.890.5198 Monsanto Company
1 don't disagree with that,do you?O 2 A I do not disagree,but those are what I
3 would call ancillary benefits.They provide an economic
4 benefit and whether those justify the construction of the
5 transmission projects alone is a question of whether
6 those ancillary benefits provide an economic benefit that
7 exceeds the cost of the transmission line or transmission
8 projects I should say.
9 Q So if I understand your response,while
10 those item may be benefits,they would not be what you
11 would consider to be a necessity to building the
12 project?
13 A Correct.You might call them nice to
14 have.
15 Q Not something that's indispensable?
16 A Correct,and it's important to understand
17 that there are many transmission projects or generation
18 projects that could be pursued as investments and they
19 would have some incremental benefit in terms of reducing
20 fuel and purchased power cost or transmission losses or
21 have some incremental impact on improving transmission
22 reliability,but those aren't necessary to meet the
23 reliability standards,and so that when you judge those
24 additional incremental benefits,what you have to
25 consider is what is the net benefit to customers to
CSB REPORTING 1244 DAUPHINAIS (ReDi)
208.890.5198 Monsanto Company
1 making investments.O 2 Q Counsel also asked you some questions with
3 respect to the Chapter 4 transmission paragraph of the
4 2017 IRP.Do you still have that available?
5 Specifically,he asked you questions with respect to the
6 bottom of page 61,if you could turn to that.
7 A Yes.
8 Q And could you read that last sentence on
9 the bottom of page 61 that continues on to page 62?
10 A "The Aeolus-to-Bridger/Anticline
11 transmission line relieves existing congestion and
12 facilitates the addition of new wind resources in Wyoming
13 that can take full advantage of federal production tax
14 credits and maximize customer benefits."
15 Q Is my understanding correct that that
16 essentially means that justification is based on
17 economics,not based on any need or reliability?
18 A Yes.
19 MR.BUDGE:No further questions.
20 COMMISSIONER ANDERSON:Thank you very
21 much.
22 THE WITNESS:Thank you.
23 (The witness left the stand.)
24 COMMISSIONER ANDERSON:We will take a
25 10-minute break.
CSB REPORTING 1245 DAUPHINAIS (ReDi)
208.890.5198 Monsanto Company
1 (Recess.)O 2 COMMISSIONER ANDERSON:Okay,continue
3 with your witnesses.
4 MR.BUDGE:Thank you.
5
6 NICHOLAS L.PHILLIPS,
7 produced as a witness at the instance of the Monsanto
8 Company,having been first duly sworn to tell the truth,
9 was examined and testified as follows:
10
11 DIRECT EXAMINATION
12
13 BY MR.BUDGE:
14 Q Would you state your name and business
15 address for the record,please?
16 A Yes,it's Nicholas L.Phillips,spelled
17 N-i-c-h-o-1-a-s,last name is P-h-i-1-1-i-p-s;business
18 address is 16690 Swingley Ridge Road,Suite 140,
19 Chesterfield,Missouri,63017.
20 Q And are you here to sponsor the direct
21 testimony of Kathryn E.Iverson?
22 A Yes,that's correct.
23 Q And are you familiar with that
24 testimony?
25 A Yes,I am.
CSB REPORTING 1246 PHILLIPS (Di)
208.890.5198 Monsanto Company
1 Q And did you participate with respect to
2 the preparation of that testimony?
3 A I participated with the development and
4 reviewed it before it was filed.
5 Q And Ms.Iverson shares the same employer
6 and business address that you do,I believe.
7 A Technically,I think her business address
8 is different.She works out of a satellite office,but
9 it's the same employer.
10 Q The testimony of Ms.Iverson consists
11 of or contains,excuse me,also Exhibits 201,202,and
12 203,and she filed direct testimony only under date of
13 November 20,2017.Are you aware of any corrections or
14 changes to her testimony or exhibits?
15 A I do not believe there are any.
16 Q To the best of your knowledge,if the same
17 questions were asked today,would her answers and yours
18 that you're adopting be the same?
19 A Yes.
20 Q Did you also file testimony in this
21 matter?
22 A Yes,I did.
23 Q And did your testimony consist of direct
24 testimony that was also under date of November 20th,
25 2017,as well as supplemental testimony under date of
CSB REPORTING 1247 PHILLIPS (Di)
208.890.5198 Monsanto Company
1 April 2018?
2 A Yes.
3 Q And did you also sponsor Monsanto Exhibits
4 211 through 216 as a part of your direct testimony,as
5 well as Exhibits 209 and 210 --excuse me,let me double
6 check that --yes,Exhibits 209 and 210,and as a part of
7 your supplemental testimony additional Exhibits 217 and
8 218?
9 A That's correct.
10 Q And do you have any corrections or changes
11 you wish to make to either your testimony or your
12 exhibits?
13 A No,I do not.
14 MR.BUDGE:With that,we move to spread
15 Mr.Phillips'testimony and exhibits on the record and
16 tender him for cross-examination.
17 COMMISSIONER ANDERSON:Without objection,
18 we'll spread Mr.Phillips'testimony and exhibits across
19 the record and the sponsored testimony of Ms.Iverson?
20 MR.BUDGE:Pardon?
21 COMMISSIONER ANDERSON:And the sponsored
22 testimony of Ms.Iverson?
23 MR.BUDGE:Yes,if we can.
24 (Monsanto Company Exhibit Nos.201-203,
25 209-210,and 217-218 were admitted into evidence.)
CSB REPORTING 1248 PHILLIPS (Di)
208.890.5198 Monsanto Company
1 (The following prefiled direct testimony
2 of Ms.Kathryn Iverson,as sponsored by Mr.Nicholas
3 Phillips,and the prefiled direct and supplemental direct
4 testimonies of Mr.Nicholas Phillips are spread upon the
5 record.)
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CSB REPORTING 1249 PHILLIPS (Di)
208.890.5198 Monsanto Company
1 I .INTRODUCTION AND SUMMARY
2 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A.Kathryn E.Iverson,19540 N.Wessex Drive,
4 Surprise,Arizona 85387.
5 Q.WHAT IS YOUR OCCUPATION?
6 A.I am a consultant in the field of public
7 utility regulation with the firm of Brubaker &
8 Associates,Inc.,which specializes in energy,economic,
9 and regulatory consulting.Our main offices are at 16690
10 Swingley Ridge Road,Suite 140,Chesterfield,Missouri
11 63017.
12 Q.PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND
13 EXPERIENCE.
14 A.A description of my educational background and
15 experience is set forth in Exhibit 201.
16 Q.ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS
17 PROCEEDING?
18 A.I am testifying on behalf of Monsanto Company
19 ("Monsanto").Monsanto operates facilities within the
20 service territory of Rocky Mountain Power ("RMP,"
21 "PacifiCorp,"or the "Company"),from whom it purchases
22 electricity and energy services.
23 Q.WHAT IS THE PURPOSE OF YOUR TESTIMONY?
24 A.I introduce the Monsanto witnesses who have
25 conducted extensive analysis and are providing testimony
1250 Iverson,Di -1
Monsanto Company
1 in this proceeding on the 860 MW of new wind facilities
2 in eastern
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1251 Iverson,Di -la
Monsanto Company
1 Wyoming ("Wind Projects")and the 140-mile,500 kilovolt
2 Aeolus-to-Bridger Anticline transmission line and
3 accompanying transmission facilities (the "Transmission
4 Projects").1 I also address RMP's request for binding
5 ratemaking treatment of the Combined Projects.
6 Q.WHAT OTHER WITNESSES WILL BE TESTIFYING ON
7 BEHALF OF MONSANTO?
8 A.Monsanto is sponsoring testimony from the
9 following witnesses,both employed by Brubaker and
10 Associates,Inc.:
11 Mr.Nicholas L.Phillips provides testimony
12 regarding the Combined Projects and the associated
13 economic analysis presented and relied upon by RMP to
14 justify its proposal.Mr.Phillips'testimony discusses
15 the risks associated with RMP's proposal and illustrates
16 how the proposed economics evaporate under modest changes
17 to the assumptions.While Mr.Phillips'ultimate
18 recommendation is to deny RMP's request for a Certificate
19 of Public Convenience and Necessity ("CPCN"),he
20 identifies certain customer protections upon which the
21 Idaho Public Utilities Commission ("Commission")
22 condition its approval if the Commission instead chooses
23 to grant the CPCN requested by RMP.
24 Mr.James R.Dauphinais provides testimony
25 regarding the Transmission Projects portion of RMP's
1252 Iverson,Di -2
Monsanto Company
1 request.Mr.Dauphinais specifically questions the need
2 and identifies risks associated with the proposed
3 Transmission Projects.
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5
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24 1 The Wind Projects and Transmission Projects are referred
collectively as the "Combined Projects."
25
1253 Iverson,Di -2a
Monsanto Company
1 Q.TO THE EXTENT THAT YOUR TESTIMONY OR THEO2TESTIMONYOFTHEOTHERMONSANTOWITNESSESDOESNOT
3 ADDRESS AN ISSUE,SHOULD THAT BE INTERPRETED AS AN
4 ENDORSEMENT OF RMP'S POSITION?
5 A.No.Our silence with respect to any position
6 taken by RMP in its application or direct testimony in
7 this proceeding should not be interpreted as an
8 endorsement of that position.
9 Q.HAVE MONSANTO WITNESSES RELIED UPON DATA
10 RESPONSES PROVIDED BY THE COMPANY IN OTHER JURISDICTIONS?
11 A.Yes.Both Mr.Phillips and Mr.Dauphinais have
12 relied upon RMP responses to requests made in Docket No.
13 20000-520-EA-17 (Record No.14781)before the Wyoming
14 Public Service Commission ("Wyoming New Wind/Transmission
15 Docket").Monsanto requested these documents in its
16 Second Data Request to the Company in this proceeding.A
17 copy of Monsanto's request is included as Exhibit 202.
18 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS.
19 A.I offer the following conclusions and
20 recommendations:
21 1.Based on the Low Gas,Zero CO2 scenario
analysis of the Combined Projects,customers
22 will experience some nominal annual benefit for
the years 2024 through 2030,but would be worse
23 off every year thereafter.In the near term,
they are also worse off,and on a net present
24 value basis there is no cumulative benefit to
customers.As explained by Mr.Phillips,given
25 the lower expectations for natural gas prices,
1254 Iverson,Di -3
Monsanto Company
1 the absence of a federal CO2 emission policy,
and RMP's historical overestimation of natural
2 gas prices,Monsanto recommends using the Low
Gas,Zero CO2 as the primary reference point.
3
2.Based on Monsanto's review of RMP's economic
4 analysis,Monsanto recommends the CommissiondenyRMP's request for a CPCN for the Combined
5 Projects.Because the Combined Projects arediscretionary,uneconomical and pose
6 unacceptable risks to customers,bindingratemakingtreatmentisneitherreasonable or
7 necessary and should be denied.
8 3.If the Commission should choose to approve the
CPCN and grant binding ratemaking treatment,
9 then I recommend the creation of a new tariff
rider entitled Combined Projects Tracking
10 Mechanism ("CPTM")to separately track and bill
11 /
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1255 Iverson,Di -3a
Monsanto Company
1 customers for the Combined Projects.Under
this more transparent approach,customers can
2 clearly identify the cost impacts from thisuniqueandsignificantexpenditure,and
3 separately monitor the expected PTC benefits
and investment costs and expenses of the
4 Combined Projects.
5 4.Since Monsanto recommends the Commission place
conditions on the CPCN approval,these
6 conditions should be reflected in any tracking
mechanism approved for recovery.These
7 conditions include:(a)recovery only for
turbines that are commercially operational in
8 time to receive 100%of the PTC benefits they
are being constructed to capture;(b)a
9 specific cap on the recovery of the capital
cost of the Combined Projects from retail
10 ratepayers;(c)no recovery of costs may be
flowed through the CPTM if RMP ceases
11 construction of either the TransmissionProjectsortheWindProjectssincethe two are
12 inextricably linked;and (d)the CPTM willprovideIdahoratepayerstheirshareofthe
O 13 full PTC benefit assuming at minimum a 35%
federal corporate income tax rate and based
14 upon a net capacity factor (redacted)for the
Wind Projects.
15
16 II.PROPOSED RATEMAKING TREATMENT
17 Q.PLEASE DESCRIBE THE COMPANY'S YEAR-BY-YEAR
18 PROJECTED COSTS AND BENEFITS OF THE COMBINED PROJECTS.
19 A.Exhibit 25,and PacifiCorp's supporting
20 workpaper "Gateway Results Direct Testimony,"provides
21 the nominal annual costs and benefits of the Combined
22 Projects.Included in that exhibit are projected costs
23 and benefits as listed below:
24 /
25 /
1256 Iverson,Di -4
Monsanto Company
1 Costs Benefits
2 *Transmission and New Wind *Assumed wheelingCapitalRecovery(Return,revenues
3 Income Tax,Depreciation
and Property Tax)*Production Tax
4 Credit ("PTC")
*New Wind PPA (QF Project)benefits
5
*Reductions in
6 *Operation and maintenance Net Power Cost
(O&M)expenses ("NPC")
7
*Other variable costs.*Avoidance of
8 paying potential
federal CO2
9 emissions taxes
10 *Reductions in
future system fixed
11 costs
12 The net of these projected costs and benefits
13 are shown in Exhibit 203 in Column (1)on a year-by-year
14 basis.Page 1 presents PacifiCorp's results for the
15 Medium
16 /
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19
20 /
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1257 Iverson,Di -4a
Monsanto Company
1 Gas,Medium CO2 scenario,and page 2 presents the resultsO2oftheLowGas,Zero CO2 scenario.When costs exceed
3 benefits,the annual number is shown as positive number
4 (e.g.,years 2021 and 2022).When projected benefits
5 exceed costs,the total is shown as a negative number
6 (e.g.,years 2025 and 2016).Column (2)shows the
7 cumulative annual impacts,while Column (3)shows the
8 discounted annual impacts and Column (4)is the
9 cumulative net present value.For the period 2017
10 through 2050,the net present value for the Medium
11 Gas/Medium CO2 is a net benefit of $137 million,while
12 the net present value for the Low Gas/Zero CO2 is net
13 cost of $174 million.
14 Q.WHAT ARE CUSTOMERS PROJECTED TO EXPERIENCE ON A
15 YEAR-BY-YEAR BASIS?
16 A.With Low Gas prices (page 2)customers will
17 experience some nominal annual benefit for the years 2024
18 through 2030,but would be worse off every year
19 thereafter.In the near term (2021 through 2023),
20 customers are also worse off.On a net present value
21 basis,there is no cumulative benefit.In fact,the
22 highest cumulative net present benefit does not occur
23 until the year 2030 where it reaches a benefit of only
24 $20 million,compared to the $2.1 billion Combined
25 Projects investment.
1258 Iverson,Di -5
Monsanto Company
1 Q.IS THERE A REASON TO FOCUS ON THE LOW GAS,ZEROO2CO2SCENARIORATHERTHANTHEMEDIUMCASEPROPOSEDBYRMP?
3 A.Yes.As explained by Mr.Phillips,given the
4 lower expectations for natural gas prices,the absence of
5 a federal CO2 emission policy,and RMP's historical
6 overestimation of natural gas prices,Monsanto recommends
7 using the Low Gas,Zero CO2 as the primary reference
8 point.
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1259 Iverson,Di -5a
Monsanto Company
1 Q.PLEASE DESCRIBE THE RATEMAKING TREATMENT FORO2THECOMBINEDPROJECTSWHICHTHECOMPANYISSEEKING
3 COMMISSION APPROVAL.
4 A.The Company requests approval of its proposal
5 for binding ratemaking treatment for its investment in
6 the Combined Projects.In particular,RMP is proposing
7 that its current Energy Cost Adjustment Mechanism
8 ("ECAM")tariff be expanded to include a new Resource
9 Tracking Mechanism ("RTM")and that costs and benefits of
10 the Combined Projects be tracked through this RTM and
11 then included in the annual ECAM rate.
12 Q.SHOULD THE COMMISSION APPROVE THE BINDING
13 RATEMAKING TREATMENT FOR THE COMBINED PROJECTS?
14 A.No.Based on Monsanto's review of RMP's
15 economic analysis,and in particular the testimony of my
16 colleague,Mr.Phillips,Monsanto recommends the
17 Commission deny RMP's request for a CPCN for the Combined
18 Projects.Under the Company's proposal,the Combined
19 Projects present a high degree of risk that the claimed
20 customer benefits will not be realized,or that the
21 Combined Projects will result in increased costs for
22 customers rather than net savings.Since the Combined
23 Projects are discretionary and not designed to fulfill
24 any resource requirement or other needs,there must be a
25 high degree of confidence in achieving a positive outcome
1260 Iverson,Di -6
Monsanto Company
1 for customers.As proposed,the Combined Projects do not
2 meet that test.Because the Combined Projects are
3 discretionary,uneconomical and pose unacceptable risks
4 to customers,binding ratemaking treatment is neither
5 reasonable or necessary and should be denied.
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1261 Iverson,Di -6a
Monsanto Company
1 Q.IF THE COMMISSION SHOULD INSTEAD CHOOSE TO
2 GRANT A CPCN,WHAT ARE YOUR RECOMMENDATIONS FOR THE
3 BINDING RATEMAKING?
4 A.RMP proposes to incorporate the RTM in the
5 existing ECAM in order to have "only one tariff and a
6 single line item on customer bills."2 If the Commission
7 grants a CPCN,I recommend the Company's binding
8 ratemaking proposal be modified.
9 With an expected investment over $2.1 billion
10 for the Combined Projects,a special and independent
11 tracking mechanism is warranted if the Commission grants
12 the CPCN and approves binding ratemaking.Consequently,
13 I recommend the creation of a new tariff rider entitled
14 CPTM to separately track and bill customers for the
15 Combined Projects.Under this more transparent approach,
16 customers can clearly identify the cost impacts from this
17 unique and significant expenditure,and separately
18 monitor benefits,investment costs and expenses of the
19 Combined Projects until they are placed in base rates.
20 Q.HAS RMP REQUESTED BINDING RATEMAKING TREATMENT
21 FOR ITS WIND REPOWERING INVESTMENTS IN CASE NO.
22 PAC-E-17-06?
23 A.Yes.The Company is seeking Commission
24 approval for binding ratemaking treatment for wind
25 repowering through a RTM.As such,the Company proposes
1262 Iverson,Di -7
Monsanto Company
1 to use the same RTM as a component of the ECAM for bothO2itswindrepoweringandtheCombinedProjects.3
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24 2 Direct Testimony of Jeffrey K.Larsen,at p.7.
3 Case No.PAC-E-17-06 is still ongoing with no Commission
25 Order as of yet.
1263 Iverson,Di -7a
Monsanto Company
1 Q.DO YOU AGREE THAT BOTH THE WIND REPOWERING ANDO2THECOMBINEDPROJECTSTHATARETHESUBJECTOFTHIS
3 PROCEEDING BE RECOVERED THROUGH THE SAME TRACKING
4 MECHANISM?
5 A No.Given that the wind repowering is related
6 to existing generation,and that RMP proposes to
7 incorporate a surcharge cap on wind repowering,it seems
8 reasonable to retain the proposed RTM in Case No.
9 PAC-E-17-06 for wind repowering as a component of the
10 ECAM tariff.However,having both the wind repowering
11 and the Combined Projects tracked together in one single
12 RTM,and then lumped together in the ECAM as proposed by
13 RMP,would make unbundling and monitoring the impacts of
14 these two distinct projects (wind repowering and Combined
15 Projects)difficult,if not impossible.Consequently,it
16 would be better to establish up-front a new CPTM for the
17 express purpose of recovering these new generation and
18 transmission expenses if the Commission grants the CPCN
19 and binding ratemaking treatment.
20 Q.WHAT COSTS AND REVENUES WILL BE INCORPORATED IN
21 THE CPTM?
22 A.Similar to the list included in the testimony
23 of RMP witness Jeffrey Larsen,the deferral for the
24 Combined Projects in the CPTM will include the following
25 revenue components:
1264 Iverson,Di -8
Monsanto Company
1 *Plant Revenue Requirement,consisting of
capital investment,accumulated depreciation
2 reserve ("ADR"),accumulated deferred income
tax ("ADIT"),operation and maintenance
3 expense,depreciation expense,property taxes
and Wyoming wind tax.
4
*Wheeling revenues;
5
*Production Tax Credits ("PTCs);and
6
*Net Power Cost ("NPC")savings associated with
7 the shareholders 10%share.
8 /
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1265 Iverson,Di -8a
Monsanto Company
1 Q.HAS MONSANTO RECOMMENDED CONDITIONS ON THE CPCNO2APPROVALTHATSHOULDBECONSIDEREDINDESIGNINGTHECPTM?
3 A.Yes.First,the CPTM should only include
4 recovery for turbines that are commercially operational
5 in time to receive 100%of the PTC benefits they are
6 being constructed to capture.If a turbine fails to be
7 commercially operational in time to receive 100%of the
8 PTC benefits,it will be ineligible for inclusion in the
9 CPTM and those turbine costs,along with a capacity ratio
10 share of any interconnection,transmission,distribution,
11 and accumulated funds used during construction ("AFUDC")
12 costs will be disallowed.
13 Second,RMP's cost recovery on the capital cost
14 of the Combined Projects from retail ratepayers,
15 inclusive of the new generation and transmission
16 facilities,as well as any interconnection costs,network
17 upgrades,distribution costs,and AFUDC will be capped at
18 (redacted)million installed cost.Consequently at no
19 time will the CPTM track more than this capped amount.
20 Third,since the Transmission Projects and Wind
21 Projects are inextricably linked,no costs may be flowed
22 through the CPTM if RMP ceases construction of either.
23 For example,Transmission Project costs and expenses may
24 not be flowed through the CPTM unless the Wind Projects
25 are commercially operational.
1266 Iverson,Di -9
Monsanto Company
1 And fourth,the CPTM will provide Idaho
2 ratepayers their share of the full PTC benefit as
3 explained by Mr.Phillips,assuming at minimum a 35%
4 federal corporate income tax rate,and based on a net
5 capacity factor of at least (redacted)for the Wind
6 Projects.Furthermore,ratepayers should be guaranteed
7 receipt of the full grossed-up value of the production
8 tax credits without having to compensate RMP for return
9 on any
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1267 Iverson,Di -9a
Monsanto Company
1 deferred tax assets that may be created as a result ofO2RMP's inability to contemporaneously monetize PTCs to
3 full value.
4 Q.HOW LONG WILL THE CPTM REMAIN IN EFFECT?
5 A.The CPTM is a tariff rider strictly in place to
6 bridge the gap while Combined Project facilities come
7 on-line and before they are placed into rate base.For
8 the most part,the CPTM will operate similar to the wind
9 repowering RTM,that is,after each Combined Project wind
10 and transmission facility is brought on-line and meets
11 the conditions above,the Company will defer the full
12 amount of the capital investment,ADR,and ADIT related
13 to the facility in the CPTM.As explained by RMP witness
14 Jeffrey Larsen,once the Company transfers those
15 facilities to rate base through a future general rate
16 case,the amount in rates will become the base plant
17 balances,which will be subtracted from capital
18 investment in the CPTM.Once all Combined Projects are
19 moved into base rates,the CPTM will have served its
20 purpose,and will no longer be necessary.
21 Q.HOW WILL THE CPTM REFLECT PTC BENEFITS FROM THE
22 WIND PROJECTS?
23 A.While the Wind Projects deferred balances
24 remain in the CPTM,100%of their associated PTC benefits
25 will be included in the CPTM rather than in the ECAM.
1268 Iverson,Di -10
Monsanto Company
1 This will allow the CPTM to reflect both costs andO2clearlyidentifiablebenefitsoftheWindProjects.Once
3 the Wind Projects are transferred to rate base in a
4 general rate case,their PTC benefits will then be
5 tracked 100%in the ECAM just as all other wind turbines
6 are currently treated in Idaho.Any conditions placed
7 upon Combined Project PTC benefits (federal tax rate and
8 capacity factor as explained by Mr.Phillips)would
9 remain in place even after the Wind Projects'PTC
10 benefits are included in the ECAM.
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1269 Iverson,Di -10a
Monsanto Company
1 Q.HOW SHOULD THE NPC SAVINGS ASSOCIATED WITH THEO2WINDPROJECTSPORTIONOFTHECOMBINEDPROJECTSBEHANDLED
3 IN THE CPTM?
4 A.As Wind Projects add additional zero-fuel-cost
5 energy to the system,the total NPC will be reduced.
6 That lower NPC will flow through the ECAM,and 90%of the
7 NPC benefits will be credited to customers based on the
8 ECAM sharing mechanism.Nothing needs to be changed as a
9 result of this case in order for Idaho ratepayers to reap
10 the 90%of NPC benefits from the Wind Projects.
11 However,in order to fully match the costs and
12 benefits,the CPTM would also need to pass on 100 percent
13 of NPC benefits to customers in a manner similar to the
14 proposed RTM.To accomplish this,energy from the Wind
15 Projects would be valued using a monthly market price
16 less wind integration costs,and the CPTM would pass 10%
17 of that value through to customers.This 10%crediting
18 will continue until the Wind Projects are included in
19 base rates through a future general rate case.At that
20 time,for purposes of the NPC,the Wind Projects will be
21 treated as all other wind facilities are currently
22 treated in the ECAM.
23 Q.WOULD THE CPTM BE FILED ANNUALLY?
24 A.Yes.The CPTM would be filed with the
25 Commission each April 1,with a rate effective date of
1270 Iverson,Di -11
Monsanto Company
1 June 1.In its annual filing,the Company would include
2 information on facilities added during the year,and
3 would substantiate that all conditions are met for
4 inclusion in the CPTM.The filing would also include
5 information on revenues collected from the CPTM for the
6 previous year and a true-up for over-or under-collection
7 of the previous year's balance.
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1271 Iverson,Di -lla
Monsanto Company
1 Q.DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?
2 A.Yes,it does.
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1272 Iverson,Di -12
Monsanto Company
1 I.INTRODUCTION AND SUMMARY
2 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A.Nicholas L.Phillips.My business address is
4 16690 Swingley Ridge Road,Suite 140,Chesterfield,
5 Missouri 63017.
6 Q.WHAT IS YOUR OCCUPATION?
7 A.I am a consultant in the field of public
8 utility regulation and an Associate with the firm of
9 Brubaker &Associates,Inc.("BAI"),energy,economic and
10 regulatory consultants.
11 Q.PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND
12 EXPERIENCE.
13 A.A thorough description of my educational
14 background and experience is set forth in Exhibit 209.
15 Q.ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS
16 PROCEEDING?
17 A.I am testifying on behalf of Monsanto Company
18 ("Monsanto").Monsanto operates facilities within the
19 service territory of Rocky Mountain Power ("RMP,"
20 "PacifiCorp,"or the "Company"),from whom it purchases
21 electricity and energy services.
22 Q.PLEASE SUMMARIZE YOUR TESTIMONY IN THIS
23 PROCEEDING?
24 A.I address RMP's proposal to constructor procure
25 four new Wyoming wind resources with a total capacity of
1273 Phillips,Di -1
Monsanto Company
1 860 megawatts ("MW")(the "Wind Projects"),and the
2 Company's proposal to construct the Aeolus-to-Bridger/
3 Anticline Line and construct the 230 kV Network Upgrades
4 (the "Transmission Projects").Throughout my testimony I
5 refer to the Transmission Projects and the Wind Projects
6 collectively as the "Combined Projects."
7 /
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1274 Phillips,Di -la
Monsanto Company
1 Q.PLEASE SUMMARIZE YOUR TESTIMONY.
2 A.First,I will explain how the Combined Projects
3 are not proposed to meet a resource need but instead
4 represent an opportunity investment that PacifiCorp would
5 like to pursue.As an opportunity investment,I believe
6 the Combined Projects should be evaluated with the
7 understanding that the traditional regulatory compact
8 does not apply.As a result,ratepayers must have
9 reasonable assurance that they will be better off if the
10 Combined Projects are approved.This is particularly
11 true when PacifiCorp's shareholders are expected to
12 receive approximately four times the amount of benefits
13 that its customers are projected to receive.
14 Next,I analyze the costs and benefits of the
15 Combined Projects.Drawing from the experience of
16 organized markets,I demonstrate how the benefit-to-cost
17 ratio for the Combined Projects leaves very little
18 cushion before the Combined Projects result in a net cost
19 for ratepayers.Based on my analysis of the costs and
20 benefits in PacifiCorp's proposal,I recommend the Idaho
21 Public Utilities Commission ("Commission")deny the
22 request for a Certificate of Public Convenience and
23 Necessity ("CPCN")for the Combined Projects.
24 Finally,I review the Combined Projects and the
25 associated economic analysis presented by RMP to justify
1275 Phillips,Di -2
Monsanto Company
1 its proposal.I discuss the risks associated with RMP's
2 proposal and illustrate how the claimed economic benefits
3 evaporate under modest changes to PacifiCorp's
4 assumptions.Based on my review of RMP's economic
5 analysis,I recommend the Commission deny RMP's request
6 for a CPCN.However,I will also identify certain
7 ratepayer protections which should be included as
8 conditions if the Commission grants a CPCN for this
9 opportunity investment.
10 /
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1276 Phillips,Di -2a
Monsanto Company
1 My silence with respect to any position taken
2 by RMP in its application or direct testimony in this
3 proceeding should not be interpreted as an endorsement of
4 that position.
5 My colleagues,James R.Dauphinais and Kathryn
6 Iverson,are also presenting direct testimony on behalf
7 of Monsanto.Mr.Dauphinais specifically addresses the
8 question of the need and risks associated with the
9 Transmission Projects,and Ms.Iverson addresses the
10 Company's proposed ratemaking treatment of the Combined
11 Projects.
12 Q.HAVE YOU RELIED UPON DATA RESPONSES PROVIDED BY
13 THE COMPANY IN OTHER JURISDICTIONS?
14 A.Yes.I have relied upon RMP responses to
15 requests made in Docket No.20000-520-EA-17 (Record No.
16 14781)before the Wyoming Public Service Commission
17 ("Wyoming New Wind/Transmission Docket").These various
18 RMP responses are attached as Exhibit 210 to my
19 testimony.Monsanto requested these documents in its
20 Second Data Request to the Company in this proceeding.A
21 copy of Monsanto's request is included as Exhibit 202.
22 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS.
23 A.I offer the following conclusions and
24 recommendations:
25 /
1277 Phillips,Di -3
Monsanto Company
1 1.The Wind Projects are not being pursued by RMP
as a matter of need;rather,they are a
2 discretionary project predominately intended to
harvest tax credits and increase RMP's rate
3 base which might provide savings to ratepayers.
4 2.A discretionary proposal by a regulated utility
like RMP essentially flips the regulatory
5 compact and the Commission should apply itshigheststandardsandstrictestscrutinyto
6 determine if customers will benefit from the
investment.
7
3.RMP's economic analysis does not demonstrate
8 there is a reasonably high likelihood for
substantial net energy savings attributable
9 from the Combined Projects.For that reason,
the Commission should deny RMP's request for a
10 CPCN.
11 4.RMP's economic analysis fails to adequately
assess known risks,borne by ratepayers,that
12 must be considered.
13 /
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1278 Phillips,Di -3a
Monsanto Company
1 5.RMP's proposal is to collect approximately $4
in equity returns for its investors
2 (approximately $6 on a revenue basis)relative
to every $1 of potential,risk-laden savings
3 that might be passed on to ratepayers.
4 6.The Company's discretionary proposal fails toprovidereasonablyadequateassurancethat
5 customers will benefit from the CombinedProjects.For that reason,the Commission
6 should deny RMP's request for a CPCN for the
Combined Projects.
7
7.If the Commission approves the CPCN for the
8 Combined Projects,it is critical for thatapprovaltoincludeconditionswhichincrease
9 the chance that customers will actually benefit
from the Combined Projects.
10
11 Q.WHAT CONDITIONS DO YOU RECOMMEND IF THE
12 COMMISSION GRANTS A CPCN FOR THE COMBINED PROJECTS?
13 A.If the Commission grants a CPCN for the
14 Combined Projects,such approval should include the
15 following conditions:
16 1.Disallow rate based recovery for any turbines
that are not commercially operational in time
17 to receive 100%of the PTC benefits they arebeingconstructedtocapture,along with a
18 capacity ratio share of any interconnection,
transmission,distribution,and AFUDC costs.
19
2.Cap RMP's cost recovery on the capital cost of
20 the Combined Projects from retail ratepayers,
inclusive of the new generation and
21 transmission facilities,as well as any
interconnection costs,network upgrades,
22 distribution costs,and AFUDC to (redacted)
million installed cost.
23
3.Cap RMP's recovery of future O&M and capital
24 expenditures related to the Combined Projects,
QF Project cost recovery,and net fixed system
25 costs to those levels assumed in the Company's
1279 Phillips,Di -4
Monsanto Company
1 economic analysis.
2 4.For the life of the Wind Projects,RMP should
be required to include in its base rates and
3 Net Power Costs,at minimum,the full PTC
(assuming at minimum a 35%federal corporate
4 income tax rate)and energy benefits to
customers based on the assumed (redacted)net
5 capacity factor used in RMP's economicmodeling.1
6
5.Ratepayers should be guaranteed receipt of the
7 full grossed-up value of the PTCs withouthavingtocompensateRMPforreturnon any
8 deferred tax assets that may be created as a
result of RMP's inability to contemporaneously
9 monetize PTCs to full value.
10 /
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24
25 1 CONFIDENTIAL Direct Testimony of Rick T.Link at p.23.
1280 Phillips,Di -4a
Monsanto Company
1 6.If RMP ceases construction of the Combined
Projects,for whatever reason,no costs
2 incurred are recoverable from customers.
3 These conditions will increase the probability
4 that customers will benefit from the Combined Projects by
5 fixing recoverable capital costs upfront,and capping
6 future recovery of costs relating to the remaining
7 assumptions used by RMP in its economic analysis.
8 However,given customers cannot be protected from all of
9 the risk of increased costs from the Company's proposal,
10 it is essential that the Combined Projects be rigorously
11 evaluated to determine whether there is a high
12 probability that customers will be better off with the
13 Combined Projects than without them.
14
15 II.THE COMBINED PROJECTS
16 Q WHAT ARE THE COMBINED PROJECTS?
17 A.The Combined Projects are a combination of 860
18 MW of new Wyoming wind resources to be owned by
19 PacifiCorp along with the construction of the
20 Aeolus-to-Bridger/Anticline Transmission Line as well as
21 some 230 kV Network Upgrades that will enable
22 approximately 750 MW of new transfer capability.The
23 expected up-front capital costs associated with the
24 Combined Projects are (redacted)for the Wind Projects,
25 (redacted)million for the new transmission line,and
1281 Phillips,Di -5
Monsanto Company
1 (redacted)for the network upgrades.2 The Company also
2 included 320 MW of new qualifying facilities ("QF
3 Projects")in its analysis which are expected to cost an
4 additional (redacted)over the 20-year contract terms of
5 the PPAs.3 In total,the Combined Projects will require
6 an upfront investment of (redacted).Including the Net
7 Present Value ("NPV")liability of the PPA costs,the
8 total costs equate to (redacted).
9 /
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24 2 Id.
3 Id.and CONFIDENTIAL Workpaper of Rick Link "Gateway Results
25 Direct Testimony.xlsx."
1282 Phillips,Di -5a
Monsanto Company
1 The Combined Projects are mutually dependent
2 upon each other.4 The Wind Projects rely on the
3 Transmission Projects for interconnection into the
4 PacifiCorp transmission system.5 The Transmission
5 Projects rely on the economic attributes of the Wind
6 Projects.6 RMP's President and Chief Executive Officer
7 made it clear that PacifiCorp would not build one project
8 without the other.7
9 Q.ARE THE COMBINED PROJECTS NEEDED TO MEET AN
10 ENERGY OR CAPACITY NEED?
11 A.No,the Combined Projects are not needed to
12 meet RMP's capacity or energy needs over the next 10
13 years.While the Company included the Combined Projects
14 in its 2017 Integrated Resource Plan ("IRP")Preferred
15 Portfolio as part of a long-term least cost/least-risk
16 plan,8 PacifiCorp can meet its resource needs in the
17 front 10 years of its long-term resource plan with a
18 combination of demand-side management resources and front
19 office transactions.9 As one of the Company's witnesses
20 testified in a recent proceeding before the Commission,
21 the "Company has no need for additional resources for at
22 least the next decade."1o
23 When asked about this statement,the Company
24 responded that it was made prior to the completion of its
25 2017 IRP,and,at the time the statement was made,
1283 Phillips,Di -6
Monsanto Company
1 PacifiCorp
2 /
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17 4 Direct Testimony of Cindy A.Crane at p.3.
5 Id.
18 6 Id.
7 Direct Testimony of Cindy A.Crane at ,p.3.
19 8 This is not a low risk plan,as explained in Section IV of
this testimony.
20 9 Wyoming New Wind/Transmission Docket,RMP Response to Data
Request WIEC 4.1(a).WIEC stands for "Wyoming Industrial Energy
21 Consumers".Monsanto requested a copy of all data requests and
responses from the Wyoming New Wind/Transmission Docket in discovery
22 in this proceeding.See Monsanto Data Request No.2,a copy which
has been provided as Exhibit 202.
23 10 Direct Testimony of Paul Clements at p.3,11.21-22 in
Wyoming Public Service Commission Docket No 20000-481-EA-16 (Record
24 No.14220).
11 Wyoming New Wind/Transmission Docket,RMP Response to Data
25 Request WIEC 4.1(b).
1284 Phillips,Di -6a
Monsanto Company
1 did not have a capacity need,recognizing there were no
2 incremental generating resources in the then-current
3 preferred portfolio through the next decade.12 Yet the
4 same thing is true in PacifiCorp's 2017 IRP,which states
5 that "[w]ith continued load growth and assumed coal
6 retirements,summer margins drop over time,but remain
7 higher than the 13 percent target planning margin through
8 the first 10 years of the planning horizon."13
9 Similarly,regarding the winter load and resource
10 balance,the 2017 IRP provides that:
11 In response to stakeholder feedback from the 2015
IRP planning cycle,PacifiCorp developed a winter
12 load and resource balance for the 2017 IRP.Table
1.3 shows PacifiCorp's annual winter capacity
O 13 position from 2017 through 2026,with coal unit
retirement assumptions and incremental energy
14 efficiency savings from the 2017 IRP preferredportfoliobeforeaddinganyincrementalnew
15 generating resources.Accounting for available
market purchases,PacifiCorp substantially exceeds
16 its 13 percent target planning reserve margin over
the winter peak through this period.With continued
17 load growth and assumed coal unit retirements,
winter margins drop over time,but remain
18 significantly higher than the 13 percent target
planning margin.14
19
20 Furthermore,the 2017 IRP Preferred Portfolio adds new
21 dispatchable generation capacity in 2029 (one year later
22 than the 2015 IRP),15 and PacifiCorp recently revised its
23 load forecast further downward relative to its 2017 IRP.16
24 Q.IF THE COMBINED PROJECTS ARE NOT NEEDED TO MEET
25 CAPACITY AND ENERGY REQUIREMENTS,THEN WHY ARE THEY BEING
1285 Phillips,Di -7
Monsanto Company
1 PROPOSED?O 2 A.The Combined Projects are an opportunity
3 investment for RMP.Due to the extension of the Federal
4 PTC safe harbor deadlines,the otherwise uneconomic
5 Combined Projects
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22 12 Ig,
13 2017 IRP,p.10.
23 14 Id.at p.11.
15 Id.at p.7.
24 16 Pubiic service commission of Utah,Docket No.17-035-39,
Rebuttal Testimony of Rick Link at p.5.
25
1286 Phillips,Di -7a
Monsanto Company
1 could provide economic benefits to PacifiCorp's
2 customers,depending on future commodity markets,weather
3 conditions,and federal environmental policy.But if the
4 Combined Projects are approved as proposed,they will
5 certainly increase the Company's earnings.Given this
6 backward dynamic of need and cost recovery,it is
7 appropriate to apply the traditional regulatory compact
8 in reverse.
9 Q.CAN YOU EXPLAIN THIS CONCEPT IN MORE DETAIL?
10 A.Traditionally,when a utility seeks regulatory
11 approval to construct new facilities,it must demonstrate
12 a need as the first step of its proposal.This concept
13 is tied to the regulated utility's obligation to serve.
14 In order to provide reliable service,the utility must
15 have sufficient resources,including a reserve margin,to
16 be confident it can meet its obligation.In turn,the
17 utility receives a reasonable expectation of recovering
18 prudently-incurred costs through its rates,including a
19 regulated return on its capital.If there is a need for
20 a new resource,the economics of alternatives can be
21 compared to determine the best way to meet the need.
22 PacifiCorp's recent integrated resource plans
23 clearly demonstrate that the Company can meet its
24 obligation to serve over the next 10 years without new
25 generation or transmission facilities.Yet RMP seeks
1287 Phillips,Di -8
Monsanto Company
1 approval from the Commission to invest over (redacted)
2 billion in the Combined Projects with the expectation
3 that RMP will recover its investments at the Company's
4 authorized rate of return,plus the operating costs
5 associated with the new resources.Rather than need,the
6 Company's proposal is based solely on projected future
7 savings for its customers.Since RMP can meet its
8 obligations without this investment,the ratepayers must
9 have reasonable assurance that they will be better off if
10 the Combined Projects are approved.
11 /
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1288 Phillips,Di -8a
Monsanto Company
1 Q.WHAT ARE THE POTENTIAL ECONOMIC BENEFITS OF THEO2COMBINEDPROJECTSANDQFPROJECTS?
3 A.RMP projected approximately $137 million in NPV
4 energy savings ($3.17/MWh levelized NPV)over the life of
5 the new Wind Projects under the Company's base case
6 (Medium Gas,Medium CO2 price)assumptions.The $137
7 million benefit is the most frequently cited benefit by
8 the Company.17 I will sometimes refer to this as the
9 base case or base scenario.
10 However,RMP also estimates the Combined
11 Projects and QF Projects will result in a $174 million
12 NPV cost increase ($4.04/MWh levelized NPV)over the life
13 of the new Wind Projects under the Low Gas,Zero CO2
14 scenario.18
15 Q.IS THERE A PREDOMINANT FACTOR DRIVING THESE
16 POTENTIAL SAVINGS?
17 A.Yes.The current availability of federal PTCs
18 is the driving force that makes the Combined Projects
19 economic.The availability of the PTCs means that RMP
20 can potentially generate wind energy cheaper than it can
21 generate energy from coal or natural gas units.
22 Currently,the PTC is approximately $23 per MWh and this
23 value will escalate over time based on an IRS inflation
24 factor.However,this is not the full value to
25 customers.Because the PTC is a tax credit,it is
1289 Phillips,Di -9
Monsanto Company
1 grossed up to a revenue requirement value to produce theO2fullPTCcreditthatwilloffsetcostsincludedin
3 customer's bills.A PTC of $23 per MWh grossed up by the
4 federal corporate tax rate in effect (currently
5 /
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8
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10
11
12
13
14
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16
17
18
19
20
21
22
23 17 For example,RMP's President and CEO,Ms.Crane states,
"These projects represent an exciting opportunity for PacifiCorp's
24 customers,who expect to realize approximately $137 million over
25
time..."Direct Testimony ofRiCikndyA nCraneaabl 32.
p.38.
1290 Phillips,Di -9a
Monsanto Company
1 35%),will equate to customer bill credit of over $35 perO2MWhforallenergyproducedfromtheWindProjects.
3 Q.HAVE YOU DETERMINED THE FINANCIAL BENEFIT TO
4 PACIFICORP AS A RESULT OF THE COMBINED PROJECTS?
5 A.Yes,RMP provided an estimate of its equity
6 returns for the Combined Projects.Over the life of the
7 Wind Projects,RMP expects to recover approximately $533
8 million in NPV equity returns for its investors
9 (approximately $820 million grossed up for taxes).By
10 comparison,customers are projected to receive only $137
11 million in NPV benefits over the same timeframe (if the
12 Medium Gas,Medium CO2 scenario assumptions materialize).
13 This equates to approximately $4 to PacifiCorp investors
14 ($6 when grossed up for taxes)for every $1 in potential
15 benefits to customers.Thus,RMP has an obvious
16 financial incentive to pursue the Combined Projects.
17 Q.DOES MONSANTO DENY THAT THE COMPANY'S PROPOSAL
18 COULD RESULT IN NET ENERGY SAVINGS FOR CUSTOMERS?
19 A.No.However,Monsanto is concerned with the level
20 of customer risk embedded within RMP's proposal.
21 Monsanto believes that the risks borne by the customers
22 outweigh those borne by the Company,particularly in
23 light of the significant benefits to PacifiCorp's
24 shareholders from the Combined Projects.
25 /
1291 Phillips,Di -10
Monsanto Company
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23 19 Wyoming New Wind/Transmission Docket,RMP Response to WIEC
Data Requests 6.1 and 6.2.
24 20 This is not the full expected return as the economic life of
25
the Transmission Projects extends beyond the Wind Projects .
1292 Phillips,Di -10a
Monsanto Company
1 III.BENEFIT-TO-COST ANALYSISO2Q.HAVE YOU PREPARED A BENEFIT-TO-COST ANALYSIS
3 FOR THE COMBINED PROJECTS?
4 A.Yes.
5 Q.HOW IS A BENEFIT-TO-COST RATIO HELPFUL IN
6 EVALUATING THE COMBINED PROJECTS?
7 A.A benefit-to-cost ratio of less than 1.0
8 indicates that the Combined Projects will increase
9 customer costs over the life of the Wind Projects.A
10 result of exactly 1.0 would indicate an expected
11 break-even (that is,the costs are equal to the expected
12 benefits).A benefit-to-cost ratio greater than 1.0
13 indicates a net project benefit.
14 Q.WHAT ARE THE BENEFIT-TO-COST RATIOS RESULTING
15 FROM THE PROPOSED COMBINED PROJECTS AND QF PROJECTS BASED
16 ON RMP'S ANALYSIS?
17 A.Table NLP-1 below presents this information.
18 The ratios are calculated using the NPV of the capital
19 revenue requirements associated with the Combined
20 Projects and contractual revenue requirements QF
21 Projects'PPAs for the costs.The gross savings due to
22 reductions in NPC,PTC revenue,etc.are offset by
23 incremental O&M and other variable costs attributable to
24 the Combined Projects to calculate the net benefits used
25 in the ratios.
1293 Phillips,Di -11
Monsanto Company
2 TABLE NLP-1
3 Combined Projects and
QF Projects Benefit-to-Cost Ratios
4
5 Annual Revenue
Requirement
6 Price-Policy Scenario Benefit/Cost Eatio
7 Low Gas,Zero CO2 0.93
Low Gas,Medium CO2 0.96
8 Low Gas,High CO2 1.08
Medium Gas,Zero CO2 1.02
9 Medium Gas,Medium CO2 1.06
Medium Gas,High CO2 1.13
10 High Gas,Zero CO2 1.14
High Gas,Medium CO2 1.15
11 High Gas,High CO2 1.25
12
13 Q.MOST OF THE BENEFIT-TO-COST RATIOS IN TABLE
14 NLP-1 ARE GREATER THAN 1.0.DOES THIS INDICATE THAT THE
15 COMBINED PROJECTS ARE LIKELY TO LEAD TO CUSTOMER
16 BENEFITS?
17 A.No.There are a number of risks that are not
18 reflected in the benefit-to-cost ratios,and I will
19 discuss these risks in much greater detail later in this
20 testimony.However,what can be seen from the
21 benefit-to-cost ratios is that the majority of the ratios
22 (all but one)are less than or equal to 1.15,and all of
23 the ratios are less than or equal to 1.25.
24 Q.WHAT IS THE RELEVANCE OF BENEFIT-TO-COST RATIOS
25 LOWER THAN 1.15 OR 1.25?
1294 Phillips,Di -12
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1 A.Some Regional Transmission Organizations impose
2 minimum benefit-to-cost ratios of 1.15 or 1.25 when
3 assessing project economics.For example,ERCOT uses a
4 benefit-to-
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1 cost ratio threshold of 1.1521,and PJM uses a 1.25O2benefit-to-cost ratio threshold for economic-based
3 enhancements or expansions to its Regional Transmission
4 Expansion Plan.22 Similarly,MISO uses a benefit-to-cost
5 ratio of 1.25 for Market Efficiency Projects to increase
6 the probability that the project will result in a net
7 benefit for its members23,
8 Q.WHY DO THESE ORGANIZATIONS USE MINIMUM
9 BENEFIT-TO-COST RATIOS WHEN EVALUATING NEW INVESTMENTS?
10 A.When a project is not needed for reliability,
11 and is justified based on an economic basis,using a
12 minimum benefit-to-cost ratio threshold introduces some
13 conservatism in the analysis.While the costs to
14 construct a project can be estimated with reasonable
15 accuracy,many of the benefits are uncertain and based on
16 long-term commodity and other forecasts.The proposal
17 for consideration in this docket is no different.The
18 Combined Projects are not justified based on need and the
19 projected benefits are highly uncertain.
20 Q.BASED ON YOUR ANALYSIS OF THE COSTS AND
21 BENEFITS OF THE COMBINED PROJECTS,WHAT DO YOU RECOMMEND
22 WITH RESPECT TO RMP'S REQUEST FOR A CPCN?
23 A.The benefit-to-cost ratios show that PacifiCorp
24 has not sufficiently demonstrated that its customers will
25 be better off if the Combined Projects are approved.As
1296 Phillips,Di -13
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1 a result,I recommend that the Commission deny the
2 request for a CPCN for the Combined Projects.The
3 current proposal is one-sided,providing certain
4 financial return to
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22 21 http://www.ercot.com/content/wcm/key documents lists/
108880/EconomicTransmissionPlanninqPractices.pptx
23 22 PJM Manual 14B:PJM Region Transmission Planning Process,
Revision:39,Effective Date:September 28,2017.
24 23 MISO Tariff Attachment FF -Transmission Expansion Planning
Protocol Section II(B)(e).
25
1297 Phillips,Di -13a
Monsanto Company
1 PacifiCorp's investors approximately four times greater
2 than the highly uncertain benefits to customers.This is
3 particularly true given the risk of harm to RMP's
4 customers under the Company's proposal,which I discuss
5 further below.
6
7 IV.RISKS ASSOCIATED WITH PACIFICORP'S ECONOMIC ANALYSIS
8 Q.WHAT ARE MONSANTO'S CONCERNS WITH THE ECONOMIC
9 ANALYSIS PRESENTED BY PACIFICORP IN THIS PROCEEDING?
10 A.RMP clearly has an incentive to invest capital
11 and increase its rate base.So,while RMP offers this
12 proposal as an opportunity to save its customers money by
13 potentially avoiding fuel and purchased power costs,the
14 reality is this project represents an opportunity for RMP
15 to invest a large amount of capital and increase its rate
16 base when there is no stated need to do so.As a result,
17 it is essential that the Combined Projects be rigorously
18 evaluated to be certain that there is a high probability
19 that customers will be better off with the Combined
20 Projects than without them.
21 Monsanto is concerned that the Company's
22 economic modeling for the Combined Projects includes
23 significant risks for its customers.As I will explain
24 below,there are many critical assumptions which
25 determine the study results regarding potential customer
1298 Phillips,Di -14
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1 savings.If these assumptions are not realized,there
2 could be a significant adverse impact on the indicated
3 economics of the Combined Projects.As a result,RMP's
4 proposal exposes customers to considerable risk of
5 experiencing higher cost than if the Combined Projects
6 are not undertaken.Based on my analysis,I recommend
7 the Commission deny PacifiCorp's request for a CPCN for
8 the Combined Projects.However,if the Commission
9 believes that the project should be approved,that
10 approval should include conditions to increase the
11 likelihood of customer benefits.
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1299 Phillips,Di -14a
Monsanto Company
1 Q.WHAT ARE SOME OF THE KEY RISKS THAT
2 PACIFICORP'S ECONOMIC ANALYSIS FOR THE COMBINED PROJECTS-
3 POSE TO CUSTOMERS?
4 A.I have identified the following key risks to
5 customers,each of which will be discussed in more detail
6 later in my testimony:
7 1.The ability to place the Wind Projects
fully in service without any delay,so
8 that the full maximum value of the PTCs is
available.
9
2.The risk of market prices and fuel prices being
10 lower than assumed,with the result that the
projected NPC savings are not realized.
11
3.The risk associated with other,possibly more
12 economic,alternative generation resources that
would no longer be available due to such a
13 large investment in the new Wind Projects.
14 4.The ability for RMP to complete the WindProjectswithinthebudgetproposedinits
15 economic analysis.
16 5.The ability to achieve the (redacted)capacity
factor used in the economic evaluation with the
17 result that customers do not receive theprojectedPTCandenergybenefits.
18
6.The risk that the Company will not be able to
19 fully monetize the PTCs contemporaneous with
when they are earned,with the result that
20 customers do not receive the full projected
value of the PTCs.
21
7.The adverse impact on the Wind Projects if
22 federal corporate income tax rates are reducedduringthetimethatPTCsareexpectedtobe
23 generated.
24 8.The risk that the O&M expenses,property taxes
and insurance are higher than projected,such
25 that the benefits are less than projected.
1300 Phillips,Di -15
Monsanto Company
1 Q.TO PLACE THE SUBSEQUENT DISCUSSION INO2PERSPECTIVE,WHAT DOES RMP CLAIM FOR THE BENEFIT OF THE
3 COMBINED PROJECTS?
4 A.As I discussed earlier,RMP claims that the NPV
5 benefits of the Combined Projects are approximately $137
6 million,or on a levelized NPV basis,to a customer
7 benefit of $3.17 per MWh under its Medium Gas,Medium CO2
8 scenario.But many of the sensitivities and potential
9 differences in assumptions could significantly diminish,
10 or even reverse,this claimed outcome.For some of these
11 risks,there are conditions the
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1 Commission can impose to preserve the projected benefits
2 for customers.However,there are also some risks that
3 the Commission cannot protect customers from,and these
4 risks should be considered very carefully when
5 determining whether the Combined Projects are in the
6 public interest.
7
8 A.The Impact of a Delay in Project In-Service Dates
9 Q.WILL THE WIND PROJECTS BE ELIGIBLE FOR PTCS IF
10 THERE IS A DELAY IN PROJECT IN-SERVICE DATES?
11 A.The Wind Projects were selected by RMP in order
12 to maximize the PTC benefits.To meet the first IRS safe
13 harbor requirement,RMP had to comply with the beginning
14 construction requirement by December 31,2016.This was
15 the first step to reaching the 100%PTC benefit.
16 However,in order to actually realize the 100%PTC
17 benefits,the Wind Projects must be placed in-service and
18 be commercially operational by the end of 2020.This is
19 a bright-line threshold,because only turbines that are
20 commercially available by the end of 2020 will qualify
21 for the full PTC benefits.Given that the PTCs are the
22 cornerstone of the Wind Project's economics,failing to
23 meet this deadline could be catastrophic for customers if
24 RMP is allowed to recover its capital costs for turbines
25 which do not qualify for PTCs.
1302 Phillips,Di -16
Monsanto Company
1 Q.WHAT KNOWN RISKS COULD LEAD TO A DELAY IN THE
2 PROJECT IN SERVICE AND COMMERCIAL OPERATION DATES?
3 A.As Monsanto Witness Dauphinais discusses,RMP
4 has not completed all of the necessary power systems
5 analyses for the Transmission Projects,nor has it
6 received all of the required permits.Both of these
7 risks could lead to delays and potentially the loss of
8 the expected PTC benefits.
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1303 Phillips,Di -16a
Monsanto Company
1 Q.HOW SHOULD THE COMMISSION PROTECT CUSTOMERSO2FROMTHERISKASSOCIATEDWITHADELAYINTHECOMBINED
3 PROJECTS'IN SERVICE DATE?
4 A.The Commission should disallow rate based
5 recovery for any turbines that are not commercially
6 operational in time to receive 100%of the PTC benefits,
7 along with a capacity ratio share of any interconnection,
8 transmission,distribution,and AFUDC costs.
9
10 B.The Impact of More Economic Fuels &Alternative
11 Technologies
12 Q.HAS RMP INDICATED THE SOURCES OF NET ENERGY
13 SAVINGS?
14 A.Yes.Exhibit No.25 to Mr.Link's direct
15 testimony shows the cash flows resulting from the
16 economic analysis.This exhibit shows that under RMP's
17 base assumptions there are three major buckets of
18 savings:(i)PTCs;(ii)Net Power Cost ("NPC")savings24·
19 and (iii)reductions in system fixed costs.Under the
20 Medium Gas,Medium CO2 scenario,each of these three
21 components makes up approximately 33%of the benefits.
22 In other words,about 67%of the expected savings are
23 tied to the accuracy of natural gas and wholesale
24 electric power price forecasts and the net output of the
25 wind resources actually being achieved.If RMP's gas
1304 Phillips,Di -17
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1 forecast and/or the assumed wind output is too high,thenO2RMPhasoversoldthevalueoftheproject.Similarly,if
3 no federal CO2 tax is implemented,then RMP has also
4 oversold the value of the Combined Projects.
5 Q.HOW ARE THE BENEFITS IMPACTED IF NATURAL GAS
6 PRICES ARE LOWER THAN FORECASTED BY PACIFICORP?
7 A.RMP performed a low gas price sensitivity
8 analysis,and under its low gas price assumptions there
9 are no net savings under two of the three CO2 prices
10 assumptions.
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24 24 Emission savings are calculated separately from NPC savings,
but are only $84 million,or about 3%of the total gross savings
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1305 Phillips,Di -17a
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1 Compared to PacifiCorp's system without the Combined
2 Projected,the Low Gas,Zero CO2 and Low Gas,Medium CO2
3 cases result in higher costs to customers of $174 million
4 and $93 million respectively ($4.04 per MWh and $2.16 per
5 MWh a levelized NPV basis respectively).
6 I will not discuss the High CO2 sensitivities,
7 as those cases include a very aggressive CO2 price.This
8 high price on CO2 attributes a large benefit to the Wind
9 Projects when there is no Federal CO2 tax.
10 Q.HOW DID RMP DEVELOP ITS NATURAL GAS PRICE
11 ASSUMPTIONS?
12 A.To develop its natural gas price assumptions,
13 RMP used NYMEX Henry Hub Futures blended with proprietary
14 natural gas price forecasts provided by (redacted)and
15 (redacted),as well as a publically available forecast
16 developed by the U.S.Department of Energy's Energy
17 Information Administration.The base forecast (i.e.,
18 Medium Gas)is fully market-based for the first six years
19 and then transitions into the (redacted)forecast.25 The
20 Low Gas prices mainly reflect the (redacted)forecast.
21 Q.ARE THE COMPANY'S BASE CASE NATURAL GAS
22 ASSUMPTIONS REASONABLE?
23 A.When evaluating the Combined Projects,I
24 recommend the Low Gas case be considered the base case.
25 Current NYMEX expectations through 2029 demonstrate the
1306 Phillips,Di -18
Monsanto Company
1 Low Gas assumptions are even above the current NYMEX
2 markets expectations,26 as shown below in Figure NLP-1.
3 The NYMEX curve represents contracts that could be locked
4 in today for delivery in the future.Consequently,while
5 I believe RMP 's Medium Gas curve
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24 25 Direct Testimony of Rick T.Link at p.32.
2 5
2 6 (redacted)
1307 Phillips,Di -18a
Monsanto Company
1 represents a valid data point,the Low Gas curve is more
2 representative of current expectations.
3
4
5 Figure NLP-1
6 $11 -
7 slo -
$8 -
9
$7
10
$6
11 $5 --,g-
12 S4
13 $3
$214 o .
15
-H-Low Gas -Med Gas (April2017 OFPC)
1 6 Med Gas -4-High Gas
17
NYMEXas of 2017-11-06
18
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20
21 Q.IS THERE ANOTHER REASON TO FOCUS ON THE LOW GAS
22 PRICE SCENARIOS RATHER THAN THE MEDIUM CASE PROPOSED BY
23 RMP?
24 A.Yes.Over the last eight years,PacifiCorp has
O 25 been consistently revising its natural gas forecasts
1308 Phillips,Di -19
Monsanto Company
1 downward.Table NLP-2 shows the evolution of PacifiCorp
2 natural gas forecasts over time.Once again,just two
3 months ago,PacifiCorp revised its Official Forward Price
4 Curve downward.Given the lower expectations of the
5 NYMEX curve the absence of a federal CO2 emission policy,
6 and RMP's historical overestimation of natural gas
7 prices,I recommend using the Low Gas,Zero CO2 as the
8 primary reference point.
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1309 Phillips,Di -19a
Monsanto Company
1
2 Figure NLP-2
PacifiCorp Gas Forecasts Over Time
4 $14.00
5
$12.00 --2007 IRP
6 --October 2008
$10.00 --September 2009
--September 2010
$8.00 ---August 2011
--September 2012
-E $6.00 -December 2013E10Ë--September2014
$4.00 --December 2015
--October2016
,12 $2.00 -April 2017
13 --September2017
so.oo .........,
15
16
17 Q.ARE THERE ANY OTHER REASONS WHY THE LOW GAS
18 SCENARIO SHOULD BE THE BASE CASE FOR EVALUATING THE
19 COMBINED PROJECTS?
20 A.For the purposes of the net benefits analysis,
21 the Low Gas price assumption is a more conservative
22 assumption.Especially given the discretionary nature of
23 the Company's proposal,it is important to use
24 conservative assumptions because this will increase the
25 likelihood that customers will realize benefits if theO
1310 Phillips,Di -20
Monsanto Company
1 CPCN is granted.Recall that under the Low Gas,Zero CO2
2 and Low Gas,Medium CO2 assumptions,the result is a net
3 increase in costs to customers.
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1311 Phillips,Di -20a
Monsanto Company
1 Q.IS THERE A RISK WITH ALTERNATIVE GENERATION
2 TECHNOLOGIES THAT COULD BE MORE ECONOMIC?
3 A.Yes.By committing such a large amount of
4 capital to the Combined Projects now,especially relative
5 to the small amount of speculative savings relative to
6 the size of the investment required,PacifiCorp could be
7 forgoing the opportunity to procure more economic,
8 alternative generation resources in the future.
9 To this point,I understand the Utah Public
10 Service Commission suggested that PacifiCorp initiate a
11 request for proposals for new solar generation
12 facilities,which might show that solar resources could
13 be obtained at a lower cost than the Wind Resources.Of
14 course,it is important to remember that PacifiCorp does
15 not need new resources for at least 10 years.
16 Q.ARE YOU RECOMMENDING ANY CONDITIONS TO PROTECT
17 RATEPAYERS FROM THE RISKS ASSOCIATED WITH GAS PRICES AND
18 ALTERNATIVE GENERATION TECHNOLOGIES?
19 A.Yes.While there are risks associated with low
20 gas prices or cheaper electricity from alternative
21 generation technologies,it is impossible to completely
22 immunize ratepayers from these risks under the Company's
23 proposal.The Commission should carefully consider these
24 risks when determining whether the Combined Projects are
25 in the public interest.Such consideration should
1312 Phillips,Di -21
Monsanto Company
1 include focusing on the Low Gas,Zero CO2 scenario rather
2 than the Medium Gas,Medium CO2 scenario at the center of
3 the Company's analysis,and limiting capital recovery to
4 a level that will increase the likelihood of a minimum
5 level of savings under the Low Gas,Zero CO2 scenario
6 assumptions.
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1313 Phillips,Di -21a
Monsanto Company
1 C.The Importance of Capital Estimate
2 Q.WHAT IS THE ESTIMATED COST TO CONSTRUCT THE
3 COMBINED PROJECTS?
4 A.The expected up-front capital costs associated
5 with the Combined Projects are:(redacted)for the Wind
6 Projects,(redacted)million for the new transmission
7 line,and (redacted)for the network upgrades.27 The QF
8 Projects are expected to cost an additional (redacted)
9 over the 20-year contract terms of the PPAs.28 In tOtal,
10 the Combined Projects will require upfront investments of
11 (redacted).Including the NPV liability of the PPA
12 costs,the total costs equate to (redacted).
13 Q.HOW WOULD AN OVERRUN IN PROJECT COST IMPACT THE
14 OVERALL ECONOMICS?
15 A.It will have a significant negative impact on
16 the overall project economics.In response to WIEC
17 Discovery Request 5.11,RMP stated that an estimated
18 increase in capital costs for the Combined Projects of
19 just 7%would cause all of the expected savings under its
20 base case assumptions to vanish.Again,that is assuming
21 higher gas and CO2 prices than are reasonable based on
22 the information we have available today.
23 RMP was also asked to provide an estimate of
24 the change in savings under its nine policy-price
25 scenarios resulting from a 10%increase in capital costs.
1314 Phillips,Di -22
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1 RMP objected to this request,stating it does not have
2 the information being requested.29 I find it highly
3 irregular that RMP has not tested its economics against
4 changes to capital costs.However,I have estimated what
5 the results would be based on the method used to
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23 27 CONFIDENTIAL Direct Testimony of Rick T.Link at p.23
28 Id.and CONFIDENTIAL Workpaper of Rick T.Link "Gateway
24 Results Direct Testimony.xlsx".
29 Wyoming New Wind/Transmission Docket,RMP response to WIEC
25 Discovery Request 5.8.
1315 Phillips,Di -22a
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1 calculate the breakeven cost increase.The results areO2presentedinTableNLP-2 below.The results show that
3 under this sensitivity,only four of the nine policy
4 price scenarios remain economic,and two of the four are
5 High CO2 price scenarios.
6
7 TABLE NLP-2
8
9 Annual Revenue Requirement PVRR (d)With 10%Increase in Capital Costs
10 Price-Policy Scenario (Benefit)/Cost Levelized $/MWh
($million)
11
Low Gas,Zero CO2 370 $8.59
12 Low Gas,Medium CO2 289 $6.71
Low Gas,High CO2 2 $0.05
O 13 Medium Gas,Zero CO2 143 $3.32
Medium Gas,Medium CO2 59 $1.37
14 Medium Gas,High CO2 (121)-$2.81
High Gas,Zero CO2 (145)-$3.36
15 High Gas,Medium CO2 (155)-$3.61
High Gas,High CO2 (399)-$9.26
16
17 Q.ARE THERE ANY SPECIFIC CONCERNS WITH THE
18 CAPITAL COST ASSUMPTIONS INCLUDED WITHIN THE COMPANY'S
19 ECONOMIC ANALYSIS?
20 A.Aside from a general concern that cost overruns
21 do occur and RMP is operating on narrow margins under its
22 Medium Gas,Medium CO2 case (and the Low Gas cases are
23 already uneconomic),Monsanto is specifically concerned
24 with RMP's assumption that it will be able to recover 12%
25 of the capital costs associated with the Transmission
1316 Phillips,Di -23
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1 Projects from third-party customers through its OATT.30
2 These concerns are discussed in more detail by Mr.
3 Dauphinais who explains how the FERC's precedent might
4 not allow for the costs of the Transmission Projects to
5 be recovered via PacifiCorp's OATT.From an economic
6 perspective,if RMP is not able to recover any of the
7 transmission capital costs
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25 30 Direct Testimony of Rick T.Link,at p.24.
1317 Phillips,Di -23a
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1 allowable while providing ratepayers a reasonable
2 expectation of realizing the $137 million in benefits
3 under the Low Gas,Zero CO2 scenario.
4 Recall,that the $137 million in benefits is the
5 value the Company most often refers to as the expected
6 benefits of the Combined Projects.Therefore I
7 correspondingly
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24 32 (redacted)million =15%x ((redacted)million +(redacted)
25
miiiion).
1321 Phillips,Di -25a
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1 used this value as the required expected benefits under
2 the Low Gas,Zero CO2 scenario assumptions that the
3 ratepayers should receive.
4 Q.HOW WOULD CAPPING PACIFICORP'S CAPITAL RECOVERY
5 AT THIS LEVEL IMPACT THE PROJECTED RETURN TO THE
6 COMPANY'S SHAREHOLDERS?
7 A.If capital recovery from retail ratepayers is
8 capped at this level,the equity returns for the Company
9 will drop approximately 15%,along with the Company
10 absorbing approximately 15%of the capital cost
11 (approximately $311 million).If the $311 million is
12 assumed to be paid out of the equity returns,then the
13 expected returns to PacifiCorp investors is approximately
14 equal to the expected savings to customers,(i.e,$1 in
15 equity returns for every $1 in expected savings)under
16 the Low Gas,Zero CO2 scenario.
17
18 D.The Importance of Achieving the Assumed Capacity
19 Factor
20 Q.IF THE WIND PROJECTS DO NOT ACHIEVE THE
21 (REDACTED)CAPACITY FACTOR ASSUMED IN RMP'S ECONOMIC
22 ANALYSIS,HOW WOULD THAT IMPACT THE OVERALL ECONOMICS?
23 A.It will have a significant negative impact on
24 the overall project economics.RMP was asked to provide
25 a risk assessment for the changes in net capacity factor,
1322 Phillips,Di -26
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1 but the Company responded that it did not have theO2requestedinformation.I again find it highly irregular
3 that RMP would not have tested its economics against
4 changes to the net capacity factor ("NCF"),as the PTC's
5 generated and energy cost savings are directly related to
6 the output of the wind resources.
7 But,in response to WIEC discovery request 5.9 in
8 the Wyoming New Wind/Transmission Docket,rather than
9 providing a risk assessment,RMP attached the
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1323 Phillips,Di -26a
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1 actual achieved net capacity factors for its current
2 existing Wyoming wind projects.As shown in Table NLP-4
3 below,only one of the eight projects has sustained a
4 capacity factor above the (redacted)assumed in RMP's
5 economic analysis.RMP was also asked to provide a
6 breakeven NCF for some of its price policy assumptions,
7 but again RMP claimed it did not have the requested
8 information.However,it is worth noting that newer
9 technology turbines would be used in the proposed
10 projects,that holding all other factors constant (i.e.,
11 wind speed,etc)should yield a higher NCF than those in
12 service today.
13
TABLE NLP-414
McFadden Rolling Seven Mile Seven Mile15YearDunlapGlenrockGlenrockIllHighPlainsRidgeHillsHiilHill11
2012 39.8%36.6%35.6%36.3%37.8%34.0%39.6%42.3%
1 6 2013 42.2%39.8%39.0%39.4%41.6%35.9%43.0%45.5%
2014 39.5%37.0%36.6%37.5%-39.6%34.0%40.6%43.4%
17 2015 35.0%34.3%33.0%29.0%31.4%31.0%34.5%37.6%
2016 39.9%36.2%35.0%36.4%38.4%32.8%40.2%40.8%
18 Average 39.3%36.8%35.8%35.7%37.8%33.5%39.6%41.9%
19
20 Q.HAVE YOU BEEN ABLE TO ASSESS THE SENSITIVITY OF
21 THE COMBINED PROJECTS TO CHANGES IN NCF?
22 A.Yes.Using RMP's workpapers,I have tested the
23 effect of a 10%decrease in the net output of the Wind
24 Projects under the Medium Gas,Medium CO2 and Medium Gas,
25 Zero CO2 cases.The results demonstrate that a 10%
1324 Phillips,Di -27
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1 reduction in the net output makes the Combined ProjectsO2uneconomicunderthosetwoprice-policy scenarios.
3 Consequently,the breakeven capacity factor for these two
4 scenarios is likely a small (less than 10%)deviation
5 from the base assumption.
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1325 Phillips,Di -27a
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1 Q.HOW DID YOU ARRIVE AT THAT CONCLUSION?O 2 A.To test the effect of the 10%reduction in net
3 output,I first decreased the PTC revenue included in the
4 economic analysis by 10%.Under the Medium Gas,Zero CO2
5 case,this change alone was enough to cause the Combined
6 Projects to become uneconomic,resulting in $27 million
7 of increased costs to customers before any consideration
8 of replacement energy costs.
9 For the Medium Gas,Medium CO2 case,the 10%
10 decrease in PTC revenue reduced the $137 million in
11 estimated savings to $57 million.I then solved for the
12 net replacement energy cost on a per MWh basis (applied
13 to 10%of the new wind output and added to the NPC
14 impact)required to breakeven.I did not make any
15 changes to the emissions or system fixed cost savings for
16 the sake of conservatism.Nor did I alter the new wind
17 fixed O&M.The result shows that if the net output were
18 to drop by 10%,RMP would have to procure replacement
19 energy at a net cost of $12.24 per MWh (Real 2017
20 dollars,assuming 2.22%inflation)over the life of the
21 Wind Projects to break even.This would be virtually
22 impossible.
23 Q.IS THERE A WAY TO DETERMINE WHAT THE BREAKEVEN
24 NCF MIGHT BE?
25 A.Yes.Using a similar method as I just
1326 Phillips,Di -28
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1 described,but using the Medium Gas,Medium CO2 based
2 forward wholesale electric energy price curve as the net
3 replacement cost for the lost wind output,I can back
4 solve for the breakeven NCF.The result is a 5.5%
5 decrease in the net output will cause a breakeven for the
6 Medium Gas,Medium CO2 case.The represents a NCF of
7 (redacted).
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1327 Phillips,Di -28a
Monsanto Company
1 I have also performed the same analysis on the
2 Medium Gas,Zero CO2 case using the corresponding Medium
3 Gas,Zero CO2 based forward wholesale electric energy
4 price curve as the net replacement cost for the lost wind
5 output.Under this set of assumptions,the breakeven NCF
6 is (redacted),which equates to a mere 2.8%reduction in
7 net energy output.
8 Q.DO YOU BELIEVE THAT THERE IS A POSSIBILITY THAT
9 THE CAPACITY FACTOR WILL BE LESS THAN (REDACTED)?
10 A.Yes,I do.And so does RMP.In response to
11 WIEC Data Request 5.9 in the Wyoming New Wind/
12 Transmission Docket,PacifiCorp noted that "The Company
13 is aware of variability in capacity factors for wind
14 Wyoming wind resources,as demonstrated in the
15 operational history of its existing Wyoming wind
16 projects."33 While I have no doubt that the assumption
17 used by RMP in its economic analysis was prepared
18 objectively and in good faith,the fact remains that it
19 may not be realized.Accordingly,it is important to
20 test the economics of the project considering the
21 possibility that the actual capacity factor that is
22 achieved may be lower.
23 Q.WHAT HAS BEEN PACIFICORP'S TRACK RECORD IN
24 ESTIMATING NCF'S FOR WIND GENERATION CPCN APPROVAL
25 COMPARED TO ACTUAL OPERATION?
1328 Phillips,Di -29
Monsanto Company
1 A.This was the subject of WIEC Data Request 7.7
2 in the Wyoming New Wind/Transmission Docket.The
3 confidential table attached to the Company's response is
4 presented below as Table NLP-5.As Table NLP-5 shows,
5 PacifiCorp has overestimated its NCF by (redacted)on a
6 capacity-weighted average basis ((redacted)using a
7 simple average)with a standard deviation of (redacted).
8 This magnitude of forecast error
9 /
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15
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21
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23
24
25 33 See Table NLP-4.
1329 Phillips,Di -29a
Monsanto Company
1 applied to either the Medium Gas,Medium CO2 or Medium
2 Gas,Zero CO2 scenarios would result in a net cost
3 increase to customers.
4
5
6 TableNLP-5
7 Expected
Expected PSO Annual PSO Actual Net ActualNetCapacityEnergyCapacityAnnualNameplateFactor(NCF)(MWh)at Factor (NCF)EnergyCommercialCapacityatTimeofTimeofSince(MWh)SinceProjectNameOnlineDate(MW)DecWon*DecMon Inception Inception
10
11
12
13O14
15
16
17
18
19
20
21
22 Notes:
*Taken from Confidential Exhibit MRT-3R of testimony of Mark R.
23 Tallman,Wyoming Docket No.20000-405-ER-11
P50 Net Capacity Factor refers to the capacity factor estimated to
24 the reflect the 50 percent probability
**The Company share of the Foote Creek I project was 32.6 MW at the
25 time of construction and is now 32.2 MW.
1330 Phillips,Di -30
Monsanto Company
1 Q.HOW CAN THE COMMISSION PROTECT CUSTOMERS FROMO2THERISKOFNCFBEINGLOWERTHANASSUMEDBYPACIFICORP IN
3 ITS ECONOMIC ANALYSIS?
4 A.A key determinant of the economics of the
5 project is the physical output from the new facilities.
6 To provide assurance to customers that they will receive
7 benefits,I recommend that RMP be required to provide the
8 full PTC and energy benefits to customers based on
9 achieving a NCF not less than (redacted)from the Wind
10 Projects.To implement this,I recommend that at least
11 this level of zero fuel cost energy plus the associated
12 PTC's grossed up at the current federal corporate income
13 tax rate of 35%,assuming not less than the (redacted)
14 NCF,be included in RMP's Base Rates and NPC over the
15 expected life of the Wind Projects.I recommend this
16 treatment for all turbines in the Wind Projects that are
17 authorized for recovery through rate base.
18 Furthermore,while the Company does not expect
19 to be in a Net Operating Loss ("NOL")position while the
20 Wind Projects are expected to generate PTCs,I recommend
21 ratepayers should be guaranteed receipt of the full
22 grossed up value of the production tax credits without
23 having to compensate RMP for return on any deferred tax
24 assets that may be created as a result of RMP's inability
25 to contemporaneously monetize PTCs to full value if RMP's
1331 Phillips,Di -31
Monsanto Company
1 expectations on the NOL position are incorrect.34
2 To implement this protection in rates,I
3 recommend that the initial level of PTC's included in
4 base rates be set to the value corresponding to the net
5 energy output at the (redacted)NCF level,grossed up for
6 taxes at the current 35%federal corporate income tax
7 level.Each time base rates are set,this value should
8 be set to the higher of the (redacted)NCF or the actual
9 normalized output level of the facilities.This would
10 also provide
11 /
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17
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20
21
22
23
24 34 Wyoming New Wind/Transmission Docket,RMP Response to WIEC
25
Data Request 7.14
1332 Phillips,Di -31a
Monsanto Company
1 customers some protection against the risks associated
2 with a change in the federal income tax rate,which I
3 discuss next.
4 Similarly when setting the NPC and in the ECAM,
5 the zero cost energy should be initially set to the net
6 energy output level corresponding to the (redacted)NCF,
7 shaped by month to mimic the assumptions used in RMP's
8 economic modeling.Over time,just like when setting
9 base rates,these values should be adjusted to reflect
10 the greater of a normalized output and the (redacted)
11 assumption.
12
13 E.The Impact of a Lower Federal Corporate Income Tax
14 Rate
15 Q.WOULD A LOWER FEDERAL CORPORATE INCOME TAX RATE
16 IMPACT THE COMBINED PROJECTS'ECONOMICS?
17 A.Yes.A lower federal corporate income tax rate
18 would impact the Combined Project's economics in two
19 ways.First,a lower federal corporate income tax rate
20 would reduce the revenue requirement of the Combined
21 Projects.Second,a lower federal corporate income tax
22 rate would reduce the value of the PTCs.
23 Q.DO YOU HAVE EVIDENCE SHOWING THE IMPACT OF A
24 LOWER FEDERAL CORPORATE INCOME TAX RATE ON THE COMBINED
25 PROJECTS'ECONOMICS?
1333 Phillips,Di -32
Monsanto Company
1 A No.The Company was asked to provide the value
2 of the Combined Projects assuming that the federal
3 corporate income tax rate drops to 20%(as is currently
4 being considered by the present administration).RMP
5 objected to this request,noting they do not have the
6 requested information.35 However,it is likely the loss
7 in PTC value more than offsets the
8 /
9
10 /
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23
24 35 Wyoming New Wind/Transmission Docket,RMP Response to WIEC
25
Data Request 7.10
1334 Phillips,Di -32a
Monsanto Company
1 reduction in the Combined Projects'revenue requirementsO2resultinginanegativeimpacttotheCombinedProjects'
3 economics,which has been the case for other utilities.
4 Q.WHY IS IT LIKELY THAT THE LOSS IN PTC VALUE
5 MORE THAN OFFSETS THE REDUCTION IN THE COMBINED PROJECTS'
6 REVENUE REQUIREMENT?
7 A.In Utah Docket No.17-035-39,Rick Link
8 discussed the sensitivity of RMP's proposed wind
9 repowering project to a reduction of the Federal
10 corporate income tax rate to 25%rather than the 20%
11 under consideration by the current administration).36
12 The results showed that nearly all the claimed benefits
13 erode,dropping by approximately 80%.
14 Q.HAVE ANY OTHER UTILITIES PRESENTED EVIDENCE
15 DEMONSTRATING THE IMPACT OF A LOWER FEDERAL CORPORATE TAX
16 RATE ON A NEW WIND PROJECT?
17 A.Yes.Southwestern Public Service Company
18 ("SPS")is seeking approval of a new wind project before
19 the New Mexico Public Regulation Commission in Case No
20 17-00044-UT.In that case,the levelized net benefit
21 impact of a 20%Federal corporate income tax rate
22 associated with SPS's wind project,all other factors
23 held constant,was a reduction of $2.83 per MWh,or 25%,
24 from SPS's evaluation on a levelized NPV basis.37
25 Interstate Power and Light ("IPL"),a
1335 Phillips,Di -33
Monsanto Company
1 subsidiary of MidAmerican Energy,reported similar
2 findings.In Case No RPU-2017-0002 before the Iowa
3 Utilities Board,IPL provided evidence that reduction in
4 the Federal Corporate Income Tax Rate to 25%reduced the
5 levelized net benefit associated with the proposal by
6 22%.38
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22
23 36 Rebuttal testimony of Rick T.Link.
37 Direct Testimony of Nicholas L Phillips at pp.23-24 and LES
24 Exhibit NLP-15.
25
36 Direct Testimony of Maurice Brubaker at p.9.
1336 Phillips,Di -33a
Monsanto Company
1 Given that the Combined Projects'economics
2 depend on the value of the PTCs at the tax rate in effect
3 today,I expect a similar impact to the projected
4 benefits from the Combined Projects if corporate tax
5 rates are lowered.
6
7 F.Additional Ratepayer Protections
8 Q.ASIDE FROM THE RATEPAYER PROTECTIONS THAT YOU
9 DISCUSSED ABOVE,ARE THERE ANY OTHER CONDITIONS OR
10 PROVISIONS THAT SHOULD BE CONSIDERED IF THE COMMISSION
11 GRANTS A CPCN FOR THE COMBINED PROJECTS?
12 A.Yes.The benefits associated with the Combined
13 Projects depend on more assumptions than those evaluated
14 in my sensitivity analyses.As a result,I recommend the
15 Commission cap RMP's recovery of future Combined
16 Projects-related O&M,future capital expenditures related
17 to the Combined Projects,QF cost recovery,and net fixed
18 system costs to those levels assumed in the Company's
19 economic analysis.I also recommend that if construction
20 of the Combined Projects ceases,for whatever reason,
21 that no costs incurred are recoverable from customers.
22
23 V.CONCLUSION AND RECOMMENDATION
24 Q.AFTER PERFORMING YOUR REVIEW AND ANALYSIS,WHAT
25 IS YOUR CONCLUSION?
1337 Phillips,Di -34
Monsanto Company
1 A.Under the Company's proposal,the Combined
2 Projects present a high degree of risk that the claimed
3 customer benefits will not be realized,or that the
4 Combined Projects will result in increased costs for
5 customers rather than net savings.Since the Combined
6 Projects are discretionary and not designed to fulfill
7 any resource requirement or other
8 /
9
10 /
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1338 Phillips,Di -34a
Monsanto Company
1 needs,there must be a high degree of confidence inO2achievingapositiveoutcomeforcustomers.As proposed,
3 I do not believe that the Combined Projects meet that
4 test.
5 Q.WHAT IS YOUR RECOMMENDATION?
6 A.I recommend the Commission deny RMP's request
7 for a CPCN.However,if the Commission believes that the
8 Combined Projects should be undertaken,then the
9 conditions I described above should be included as part
10 of the Commission's approval in order to improve the
11 chance of a beneficial outcome for customers.
12 Q.DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?
13
14
15
16
17
18
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21
22
I
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25
1339 Phillips,Di -35
Monsanto Company
1 I .INTRODUCTION AND SUMMARY
2 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A.Nicholas L.Phillips.My business address is
4 16690 Swingley Ridge Road,Suite 140,Chesterfield,
5 Missouri 63017.
6 Q.WHAT IS YOUR OCCUPATION?
7 A.I am a consultant in the field of public
8 utility regulation and an Associate with the firm of
9 Brubaker &Associates,Inc.,which specializes in energy,
10 economic,and regulatory consulting.
11 Q.ARE YOU THE SAME NICHOLAS L.PHILLIPS WHO
12 PRE-FILED DIRECT TESTIMONY IN THIS DOCKET ON BEHALF OF
13 MONSANTO COMPANY ("MONSANTO")?
14 A.Yes,I am.
15 Q.WHAT IS THE PURPOSE OF YOUR SUPPLEMENTAL DIRECT
16 TESTIMONY?
17 A.I address Rocky Mountain Power's ("RMP"or "the
18 Company")updated proposal to construct or procure four
19 new Wyoming wind resources with a total capacity of 1,311
20 megawatts ("MW")(the "Wind Projects"),and the Company's
21 proposal to construct the Aeolus-to-Bridger/Anticline
22 Line and the 230 kV Network Upgrades (the
23
24
25
1340 Phillips,Di-Supp -1
Monsanto Company
1 "Transmission Projects").Throughout my testimony,I
2 refer to the Transmission Projects and the Wind Projects
3 collectively as the "Combined Projects."
4 Q.PLEASE PROVIDE A SUMMARY OF YOUR SUPPLEMENTAL
5 DIRECT TESTIMONY.
6 A.First,I will describe some of the background
7 of this proceeding leading up to this supplemental direct
8 testimony.Second,I will discuss issues associated with
9 how the Company changed its approach to modeling the
10 Combined Projects,as well as the differences in the
11 approaches to modeling used in this proceeding generally.
12 Then,I will describe issues associated with RMP's solar
13 RFP (the "2017S RFP")and how the Company's own analysis
14 of the benefits associated with new solar resources
15 indicates that the Combined Projects likely are not the
16 least-cost,least-risk plan for serving customers.Next,
17 I will address the Company's updated economic analysis
18 for the Combined Projects,based on the final shortlist
19 resulting from the RFP for new wind resources (the "2017R
20 RFP").Finally,although I recommend that the Commission
21 deny the requested certificate of public convenience and
22 necessity ("CPCN")for the Combined Projects,I also
23 recommend conditions that the Commission should include
24 to protect ratepayers if it approves a CPCN for the
25 Combined Projects.
1341 Phillips,Di-Supp -2
Monsanto Company
1 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS AND
2 RECOMMENDATIONS CONCERNING THE COMPANY'S REQUEST FOR A
3 CPCN FOR THE COMBINED PROJECTS.
4 A.The results of RMP's updated analysis reaffirm
5 my conclusion that the Combined Projects are simply too
6 risky and should not be approved.Furthermore,assuming
7 that the Company needs additional resources (an
8 assumption with which I strongly disagree),
9 /
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1342 Phillips,Di-Supp -2a
Monsanto Company
1 RMP's updated analysis actually demonstrates that theO2CombinedProjectslikelyarenotthe"least-cost,
3 least-risk"plan to serve customers given the results of
4 the 2017S RFP.Specifically,the Solar PPA Option
5 (without any new wind or transmission facilities)
6 provides (redacted)1 in net benefits in the Medium Gas,
7 Medium CO2 scenario,whereas the Combined Projects only
8 result in $167 million of projected benefits.2
9 Consequently,if the Commission is inclined to approve
10 any new resources acquisitions,instead of approving the
11 Combined Projects,the Commission should invite RMP to
12 demonstrate whether solar power purchase agreements
13 ("PPAs")would provide greater customer benefits than the
14 status quo.However,if the Commission ultimately
15 decides that the Combined Projects should be approved,I
16 offer certain conditions,which should be included on
17 such an approval in order to protect ratepayers.These
18 conditions include:
19 1.Disallowing rate based recovery for any
turbines that are not commercially operational
20 in time to receive 100%of the Production Tax
Credit ("PTC")benefits they are being
21 constructed to capture,along with a capacity
ratio share of any interconnection,
22 transmission,distribution,and AFUDC costs.
23 2.Capping RMP's cost recovery on the capital cost
of the Combined Projects from retail
24 ratepayers,inclusive of the new generation and
transmission facilities,as well as any
O 25 interconnection costs,network upgrades,
distribution costs,and AFUDC to $1,781.44
1343 Phillips,Di-Supp -3
Monsanto Company
1 million installed cost;a reduction of $468million,or approximately 21%,from the total
2 cost of the Combined Projects.
3 3.Capping RMP's recovery of future O&M andcapitalexpendituresrelatedtotheCombined
4 Projects,and net fixed system costs to those
levels assumed in the Company's updated
5 economic analysis.
6
7 /
8
9
10
11
12
13
14
15
16
17
18
19
20
1 RMP Witness Rick Link Confidential Workpaper,"EV2020 Second
21 Supp Results Summary File -VOM adjusted CONF.xlsx"as referenced in
response to WIEC Data Request 18.1(f)in Wyoming Public Service
22 Commission,Docket No.20000-520-EA-17 ("Wyoming New
Wind/Transmission Docket").WIEC stands for "Wyoming Industrial
23 Energy Consumers."In Monsanto Data Request No.2 to RMP,Monsanto
requested a copy of all data requests and responses from the Wyoming
24 New Wind/Transmission Docket in discovery in this proceeding.
25
2 RMP Witness Link's Confidential Workpapers (redacted)
1344 Phillips,Di-Supp -3a
Monsanto Conypany
1 4.Requiring RMP to include in its Base Rates and
Net Power Costs,at minimum,the full:(i)10
2 years of PTCs,assuming,at minimum,a 21%
federal corporate income tax rate,and (ii)
3 energy benefits to customers for the life of
the Wind Projects,both based on the assumed
4 net capacity factors used in RMP's updated
economic modeling.
5
5.Guaranteeing ratepayers receipt of the full
6 grossed up value of the PTCs without having to
compensate RMP for return on any deferred tax
7 assets that may be created as a result of RMP's
inability to contemporaneously monetize PTCs to
8 full value.
9 6.Ensuring that if RMP ceases construction of the
Combined Projects,for whatever reason,no
10 costs incurred are recoverable from customers.
11 II.RMP'S SUPPLEMENTALAND SECOND SUPPLEMENTAL
12 TESTIMONIES
13 Q.PLEASE DESCRIBE GENERALLY THE ROUNDS OF
14 TESTIMONY THAT HAVE BEEN FILED IN THIS PROCEEDING SINCE
15 YOU FILED YOUR DIRECT TESTIMONY.
16 A.Monsanto filed its Direct Testimony in this
17 proceeding on November 20,2017,in response to RMP's
18 initial application.On December 18,2017,RMP filed its
19 Rebuttal Testimony.
20 On January 16,2018,RMP filed its Supplemental
21 Direct Testimony,generally for the purpose of updating
22 its initial application to account for the results of its
23 2017R RFP and the Tax Cuts and Jobs Act that was passed
24 in December 2017.In that testimony,RMP announced that
25 the final shortlist of Wind Projects included TB Flats I
1345 Phillips,Di-Supp -4
Monsanto Company
1 and II,McFadden Ridge II,Cedar Springs,and Uinta.
2 Certain portions of this testimony were subsequently
3 corrected by the Company.
4 On February 16,2018,RMP filed its Second
5 Supplemental Direct Testimony,generally for the purpose
6 of updating the 2017R RFP final shortlist to reflect the
7 results of the interconnection restudy process and new
8 system impact studies.With the Second Supplemental
9 Direct Testimony,the Company removed the McFadden Ridge
10 II project
11 /
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13 /
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16
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18
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25
1346 Phillips,Di-Supp -4a
Monsanto Company
1 from its final shortlist,and replaced it with Ekola
2 Flats (another Company-owned benchmark project).This
3 change increased the capacity of the final shortlist Wind
4 Projects from 1,170 MW to 1,311 MW.
5 After the Second Supplemental Direct Testimony
6 was filed,the Company discovered that its Planning and
7 Risk ("PaR")model had not accurately captured certain
8 wind tax costs and wind integration costs,and,as a
9 result,the benefits of the Combined Projects reflected
10 in the Company's Second Supplemental Direct Testimony
11 were not accurate.Consequently,on February 23,2018,
12 RMP filed corrections to portions of Ms.Crane's Second
13 Supplemental Direct Testimony and portions of Mr.Link's
14 Second Supplemental Direct Testimony.
15 Q.DO YOU HAVE ANY OBSERVATIONS REGARDING THE
16 VARIOUS ITERATIONS OF RMP'S TESTIMONY?
17 .A.Yes.I am very concerned that RMP is
18 attempting to push through a $2.245 billion utility
19 investment -one that carries with it very high risks
20 that the Company is asking ratepayers to assume on its
21 behalf -without providing intervenors such as Monsanto
22 sufficient time to fully evaluate and scrutinize the
23 Combined Projects.I have attempted to evaluate RMP's
24 proposal,as it evolved over time,to the best of my
25 ability.However,RMP has modified and updated the
1347 Phillips,Di-Supp -5
Monsanto Company
1 details of its proposal more than once in recent weeks.
2 Furthermore,RMP has also designated a fair amount of
3 relevant information as "highly confidential,"making it
4 very difficult for parties to review and use that
5 information.Not only does this give me concern that RMP
6 has not thoroughly evaluated the Combined Projects for
7 which it seeks approval,but it also inhibits
8 intervenors'ability
9 /
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1348 Phillips,Di-Supp -5a
Monsanto Company
1 to fully vet the Combined Projects under the existing
2 timeframe.To the extent that RMP continues to modify or
3 correct its proposal,I may have additional testimony to
4 provide.
5 Q.THROUGHOUT THESE ITERATIONS,DID RMP ALSO
6 CHANGE THE WAY IT PERFORMED ITS ECONOMIC ANALYSIS?
7 A.Yes.In its Direct Testimony,RMP used a
8 "levelized"approach to model capital costs and PTCs
9 associated with project alternatives within the System
10 Optimizer ("SO")and PaR models.This is consistent with
11 the way RMP has performed its Integrated Resource Plan
12 ("IRP")analyses for many years.Once the SO model had
13 selected a least-cost plan and PaR had performed
14 additional production costs simulations,a full nominal
15 revenue requirements analysis was performed spanning the
16 full project life rather than just the first 20 years.
17 However,for its Supplemental Direct Testimony,
18 the Company altered this methodology.Rather than using
19 levelized costs for wind related PTCs,as it had
20 originally,for the first time RMP modeled these
21 nominally in the SO and PaR models.However,at the same
22 time,RMP continued to model capital costs on a levelized
23 basis in its Supplemental Direct Testimony.As a result,
24 RMP mixed and matched its modeling methods in its
25 Supplemental Direct Testimony.The result of this change
1349 Phillips,Di-Supp -6
Monsanto Company
1 in methodology is important because,holding all else
2 equal,it makes self-build or build-transfer ("BTA")wind
3 projects seem more economic compared to the original
4 methodology.Consequently,the SO model will be more
5 likely to include self-build/BTA wind projects in the
6 "least-cost"portfolio.In other words,the change in
7 modeling was self-serving.Once the least cost portfolio
8 was selected,the same full nominal revenue requirements
9 analysis spanning the life of the projects was performed.
10 /
11
12 /
13
14 /
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1350 Phillips,Di-Supp -6a
Monsanto Company
1 Q.WHY IS IT IMPORTANT FOR THE COMMISSION TO BE
2 AWARE OF THIS CHANGE?
3 A.What is important for the Commission to
4 remember is that the levelized approach is used when
5 modeling resource alternatives,specifically to allow for
6 equitable comparison when the full life of the resource
7 does not fit within the study horizon.However,it is
8 the nominal revenue requirements that most closely depict
9 how project costs and benefits will pressure customer
10 rates.The Company is aware of this reality,and RMP
11 performed a full nominal revenue requirements analyses
12 over the full project lives.The nominal revenue
13 requirements analyses provide a more reliable assessment
14 of the impact of project costs on rates and the risks
15 associated with the timing of costs and benefits compared
16 to the levelized approach.Consequently,the Commission
17 should weigh the results of the nominal revenue
18 requirements analysis much more heavily than the results
19 of a levelized approach.
20 Q.WHY DO THE RESULTS OF THE NOMINAL REVENUE
21 REQUIREMENTS ANALYSIS MORE CLOSELY ALIGN WITH THE
22 PRESSURE PLACED ON RATES BY NEW CAPITAL ADDITIONS TO RATE
23 BASE?
24 A.Simply put,this is how the revenue
25 requirements will actually occur and flow through to
1351 Phillips,Di-Supp -7
Monsanto Company
1 rates.The capital costs for self-build/BTA projects
2 will not be recovered from ratepayers on a levelized
3 basis.Instead,the revenue requirements are actually
4 greatest when the asset(s)are first placed into service,
5 and decline over time as the asset is depreciated.Even
6 RMP witness Joelle Steward recognizes that nominal,not
7 levelized,revenue requirements are the "best
8 representation:"
9 The revenue requirements that flow into Joelle
Steward's exhibits are calculated as nominal
10 revenue requirements.Using nominal revenue
11 /
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13 /
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1352 Phillips,Di-Supp -7a
Monsanto Company
1 requirement is the best representation of what
the actual revenue requirement costs and
2 benefits would be if the Combined Projects were
placed in base rates during the same period.
3 (Response to IPUC Data Request 80,emphasis
added)
4
5 As I just mentioned,the levelization approach
6 is merely a method used in economic models to compare
7 assets when the full asset lives do not fit into the
8 modeling horizon.This should not be mistaken for the
9 reality of how rates will be affected.In fact,RMP
10 admitted this when asked whether the Company was
11 proposing to recover the costs consistently with the way
12 the revenue requirements are modeled in its levelized
13 analysis.3 In its response,RMP stated,
14 "No,the Company is proposing to calculate the
nominal revenue requirements for recovery
15 through the resource tracking mechanism (RTM)
consistent with the methodology used in general
16 rate cases (DRC)."4
17 Consequently,the Commission should place no
18 weight on the intermediate results from the levelized
19 analysis when the Company has provided a full nominal
20 revenue requirements analysis that in the Company's own
21 words is consistent with the way RMP is proposing to
22 recover the costs.
23 Case in point,Figure NLP-SD-1 below presents
24 the rate base and revenue requirement estimates used by
25 Company Witness Ms.Joelle Steward in her RTM
1353 Phillips,Di-Supp -8
Monsanto Company
1 calculations.There is no doubt as to how the Company
2 intends to recover these costs from customers through
3 rates,and it most certainly is not consistent with the
4 levelized cost approach.
5 /
6
7 /
8
9 /
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24 3 Wyoming New Wind/Transmission Docket,response to WIEC Data
Request 21.4.
25 4 Im
1354 Phillips,Di-Supp -8a
Monsanto Company
FIGURE NLP-SD-1
3 Combined Projects System Cost Assumptions from RTM Proposal
4 COmbined Projects Cost Assumptions from
5 RTM Proposal
$4,000
$3,0W
10 '
$1,000
11 $0
12
13
--Net Rate Base ($Millions)--Revenue Requirement ($Thousands)
14 -
15 Confidential Figure NLP-SD-2 below presents a
16 comparison between the levelized cost assumptions
17 (extrapolated from 2037-2050 to equate the NPV through
18 2050)and the nominal cost assumptions over the life of
19 the Combined Projects (both with and without the PTC
20 revenues).In addition,Confidential Figure NLP-SD-3
21 below presents the nominal net project costs as
22 calculated by RMP for the Combined Projects,the Solar
23 PPA Option,and the Solar PPA Option with the Combined
24 Projects.I have not presented the levelized costs for
25 the three alternatives,because the levelized analysis
1355 Phillips,Di-Supp -9
Monsanto Company
1 distorts the rate impact of the projects and,as a
2 consequence,the focus should be the nominal costs of the
3 life cycle of the projects.
4 /
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6 /
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8 /
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1356 Phillips,Di-Supp -9a
Monsanto Company
1
2 NON-CONFIDENTIAL FIGURE NLP-SD-2
3 Comparison of Levelized/Hybrid Approach and
Nominal Net Project Costs for the Combine Projects
4
5
6
7
8
9
10
11
12 NON-CONFIDENTIAL FIGURE NLP-SD-3
6 13 Comparison of Nominal Net Project costs for the CombinedProjects,Solar PPA Option,and Solar
14 PPA Option with the Cambined Projects
(Both Capital Costs and PTCs)
15
16
17
18
19
20
21
22
23
24
25
1357 Phillips,Di-Supp -10
Monsanto Company
1 Q.ARE THERE ANY ADDITIONAL CONCERNS WITH THEO2COMPANY'S LEVELIZED MODELING APPROACH?
3 A.Yes.There are different levelization methods,
4 most notably uniform levelization and "real"levelized.
5 The Company appears to have used the "real"levelized
6 approach,which is completely opposite of how the project
7 revenue requirements associated with a self-build/BTA
8 project will actually affect rates.Figure NLP-SD-4
9 below illustrates this point,showing the increasing
10 costs over time via the levelization whereas the actual
11 way these costs will affect the revenue requirements and
12 rates are depicted in the nominal cost plot whereby costs
13 are greatest when the projects are placed into service
14 and depreciate over time.What should be evident from
15 this illustration is how the levelization of costs,
16 though useful for economic modeling,in no way aligns
17 with how new capital investments will affect rates.
18 Additionally,Figure NLP-SD-4 shows how the shift in the
19 levelization method with respect to PTCs has made these
20 projects seem much more attractive to the SO model (which
21 selects the least cost portfolio)when,in reality,the
22 nominal project costs (which will influence rates)have
23 not changed much.
24 As I indicated,the net effect of this change
25 will result in a higher likelihood of self-build/BTA
1358 Phillips,Di-Supp -11
Monsanto Company
1 projects being selected by the SO model,an outcome that
2 is highly favorable to the Company,as these projects
3 will result in the highest financial reward to RMP and
4 its shareholders through its rate of return.I will note
5 that in the nominal project costs I have excluded the
6 final year in order to make the plots easier to read and
7 the corresponding net present values ("NPVs")listed in
8 the legends are linked to the data shown in the plot.
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
1359 Phillips,Di-Supp -lla
Monsanto Company
1
2 NON-CONFIDENTIAL FIGURE NLP-SD-4
3 Comparison of Changes to Economic Modeling Assumptions
for the Combined Project's Costs
4 (Both Capital Costs and PTCs)
5
6
7
8
9
10
11
12
''13614
15
16
17
18
19 Q.DOES THE COMPANY'S REVISED ECONOMIC MODELING
20 BIAS THE ECONOMIC MODEL AND IN TURN THE LEAST-COST
21 PORTFOLIO IT SELECTS?
22 A.Yes.Combining a levelized capital cost with a
23 nominal PTC benefit distorts the value of the projects
24 within the economic model that is tasked with selecting
25 the least-cost portfolio.This is because the metricO
1360 Phillips,Di-Supp -12
Monsanto Company
1 used by the SO model to determine the least-cost
2 portfolio is to minimize the NPV of revenue requirements.
3 The Company changed how PTCs were modeled in its
4 analysis,moving from a levelized approach to a nominal
5 approach.The Company claims that this will better
6 reflect how the PTCs will affect rates,but this
7 explanation it misleading because the capital costs will
8 affect rates on a
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23
24
25
1361 Phillips,Di-Supp -12a
Monsanto Company
1 nominal basis,not a levelized basis.The Company has
2 mixed and matched the modeling methodologies,and this
3 mixing and matching will result in more emphasis being
4 placed on self-build/BTA options rather than on PPAs.
5 When levelizing costs,the NPV of the levelized cost
6 should be equal to the NPV of the nominal costs.5 An
7 easy to understand example is a mortgage loan
8 amortization,which is a cost levelization.The
9 levelization (amortization)of the loan keeps the
10 underlying NPV of the loan constant;it does not reduce
11 it.But,the Company's updated,or "hybrid,"method has
12 skewed the economics by reducing the NPV of the Combined
13 Projects.
14 Q.HOW CAN WE TELL THAT THE COMPANY'S HYBRID
15 APPROACH REDUCED THE NPV OF THE COMBINED PROJECTS
16 COMPARED TO NOMINAL APPROACH?
17 A.In Figure NLP-SD-4 (above),I presented plots
18 of the Combined Projects costs,as reported in the
19 Corrected Second Supplemental Testimony,on both a
20 levelized basis and a nominal basis.6 The difference in
21 the NPV over the first 20 years shows that the
22 levelization has reduced the NPV of the nominal series by
23 about 27%.Conversely,the levelization of the Combined
24 Projects costs in the Company's Direct Testimony is
25 within about 1%of the NPV of the 20 year nominal costs.
1362 Phillips,Di-Supp -13
Monsanto Company
1 In fact,RMP admitted in response to IPUC Data Request 75
2 that the PVRR impact of switching to the hybrid method
3 increased the updated net benefits by approximately $214
4 million.
5 Similarly,for the Solar PPA Option (which I
6 discuss below),the levelized costs are within less than
7 2%of the NPV of the 20 year nominal costs.Effectively,
8 the
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22 5 This is a fundamental economic principle for expressing the
same costs (or cash flows)in different ways,see for example
23 "Engineering Economy,"6th Ed.by Blank &Tarquin at Chapter 2.
6 Note that the "levelized"approach used by the Company in its
24 updated analysis presented in its supplementai Testimony is a hybrid
25
of levelized and nominal project costs.
1363 Phillips,Di-Supp -13a
Monsanto Company
1 outcome of the Company's updated economic modeling is
2 biased as the SO model picks resources based on lowest
3 NPV and the Company's approach made the Combined Projects
4 appear 27%cheaper to the model,when the reality is the
5 NPV of costs over the life of the Combined Projects have
6 hardly changed,as evidenced in the full nominal revenue
7 requirements analysis.
8 Q.WITH THAT UNDERSTANDING,PLEASE DESCRIBE THE
9 RESULTS OF THE 2017R RFP.
10 A.As I mentioned above,the Company announced the
11 final shortlist of Wind Projects on January 16,2018,and
12 subsequently modified that final shortlist in its Second
13 Supplemental Direct Testimony,provided on February 16,
14 2018.The modified final shortlist of Wind Projects is
15 as follows:
16 Ekola Flats,a 250 MW Company benchmarkproject;
17
TB Flats I and II (combined into single
18 project),a 500 MW Company benchmark project;
19 Cedar Springs,a 400 MW third-party
build-transfer project and PPA;and
20
Uinta,a 161 MW third-party build-transfer
21 project.
22 Q.THE VAST MAJORITY OF THE NEW CAPACITY WILL BE
23 COMPANY OWNED.WHAT RISKS DO COMPANY-OWNED PROJECTS POSE
24 TO RATEPAYERS THAT PURCHASE POWER AGREEMENTS WOULD NOT?
25 A.Only 200 MW of the total 1,311 MW of new wind
1364 Phillips,Di-Supp -14
Monsanto Company
1 capacity,or approximately 15%,will be purchased under a
2 PPA with a third-party.The remainder of the capacity
3 will come from the Company's benchmark projects and BTAs.
4 When the Company acquires additional energy and capacity
5 through PPAs,ratepayers are insulated from certain risks
6 /
7
8 /
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1365 Phillips,Di-Supp -14a
Monsanto Company
1 that they typically bear when RMP owns the generation.
2 Specifically,when the Company enters into PPAs,the
3 third-party provider takes on the capital cost risk,as
4 well as the risk of changes in the cost of equipment,
5 output,O&M costs,and PTCs through the life of the
6 agreement,among other things.As the Company's pro
7 forma PPA states:
8 Seller shall bear all risks,financial and
otherwise throughout the Term,associated with
9 Seller's or the Facility's eligibility to
receive PTCs,ITCs or other Tax Credits,or to
10 qualify for accelerated depreciation for
Seller's accounting,reporting or tax purposes.
11 The obligations of the Parties here under,including those obligations set forth
12 herein regarding the purchase and price for and
Seller's obligation to deliver Net Output,
O 13 shall be effective regardless of whether the
sale of Output or Net Output from the Facility
14 is eligible for,or receives,PTCs,ITCs or
other Tax Credits during the Term.7
15
16 With Company-owned projects,on the other hand,
17 ratepayers are expected to bear the burden of capital
18 costs (including cost overruns)and O&M costs,to the
19 extent that those costs are prudently incurred.8 This
20 is in contrast with the opportunity RMP identified to
21 purchase solar power under PPAs as a result of the 2017S
22 RFP,which I address next.
23 III.THE POTENTIAL RISKS AND BENEFITS OF SOLAR PPA OPTION
24 Q.PLEASE PROVIDE SOME BACKGROUND INFORMATION ON
25 THE COMPANY'S 2017S RFP.
1366 Phillips,Di-Supp -15
Monsanto Company
1 A.RMP's 2017R RFP was subject to the approval ofO2theUtahPublicServiceCommission("Utah PSC").9 After
3 RMP filed its application for approval of its
4 solicitation process on April 17,2017,parties
5 intervened and raised concerns that restricting the
6 proposed RFP
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21 7 The Independent Evaluator's Final Report On PacifiCorp's
2017R Request For Proposals,by Bates White Economic Consulting,
22 Presented to the Oregon Public Utility Commission,dated February 16,
2018 at pp.38-39 (available at:http://edocs.puc.state.or.us/efdocs/
23 HAH/um1845hahl21349.pdf).
8 This is completely true for Company self-build projects.The
24 capital cost risk could be reduced depending of the contractual
25
structurDe casesociatedw03th23TAs.
1367 Phillips,Di-Supp -15a
Monsanto Company
1 to wind projects would not produce results that would be
2 the lowest reasonable cost to customers.Parties argued
3 that the RFP should be opened up,and that RMP should
4 solicit bids from a greater variety of resources.
5 RMP resisted efforts to expand the RFP to
6 include non-wind and non-Wyoming resources,citing,in
7 part,the results of the 2017 IRP and its concern that a
8 broad RFP would impact the Company's ability to move
9 forward with the Combined Projects.Specifically,RMP
10 asserted:
11 While there may be opportunities to acquire new
renewable resources that can be delivered into
12 other parts of PacifiCorp's transmission
system,the 2017 IRP did not identify these
13 opportunities as part of PacifiCorp'sleast-cost,least-risk plan.All of the
14 resource portfolios produced during the initial
stages of the portfolio development phase of
15 the 2017 IRP contained new Wyoming wind
resources in 2021,which for modeling purposes
16 was used as a proxy on-line date for
PTC-eligible wind achieving commercial
17 operation by the end of 2020.None of the
resource portfolios developed during the
18 initial stages of the portfolio development
phase of the 2017 IRP indicated that renewable
19 resources delivered into other parts of
PacifiCorp's transmission system would provide
20 the economic benefits that are expected with
the new wind and transmission projects included
21 in the preferred portfolio.
22 ***
23 Consideration of this broader RFP can be vetted
through the on-going review of the 2017 IRP,
24 and if there is interest in pursuing a broader
renewable resource RFP,a second solicitation
25 process could be initiated in the first quarter
1368 Phillips,Di-Supp -16
Monsanto Company
1 of 2018.Because this broader solicitation
would not be dependent upon a critical-path
2 transmission investment,as is the case in the
proposed 2017R RFP,a second RFP process
3 initiated in early 2018 could target renewable
resources that can be placed in service by the
4 end of 2020,thereby maximizing opportunities
to procure projects that can leverage federal
5 income tax credits.The possibility ofprocuringadditionalrenewableresources does
6 not need jeopardize the significant opportunity
that is being pursued through the proposed
7 2017R RFP.If additional renewable resources
identified through a second solicitation
8 process provide all-in economic benefits for
customers,those
9
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24
25
1369 Phillips,Di-Supp -16a
Monsanto Company
1 opportunities can be pursued in addition to,
not in lieu of,the wind resource procurement
2 proposed in the 2017R RFP.10
3 Nevertheless,the Utah PSC issued an order
4 approving the 2017R RFP,but also suggesting certain
5 modifications.The order stated:
6 We are recommending that the RFP be modified to
include solar resources that can interconnect
7 at any point in PacifiCorp's system,rather
than accepting PacifiCorp's offer to execute a
8 second RFP for solar resources.We find that a
second and separate RFP for solar resources,
9 based on modeling inputs that would assume the
construction of the proposed wind resource,
10 would not accomplish the objective of comparing
the proposed solar resources against the wind
11 resources on an equal basis.Simply put,the
question is not whether solar resources should
12 be built in addition to the proposed wind
resources.Rather,we find that the more
O 13 relevant question is whether solar resources
should be built instead of,before,or in
14 conjunction with the proposed wind resources.
A separate,subsequent RFP cannot answer that
15 question due to the dynamic nature ofgenerationandtransmissionresource decisions.
16 Ultimately,without the benefit of conclusive
evidence regarding the current and actual costs
17 to build and connect utility scale solarprojectstoPacifiCorp's system,we believe the
18 market would provide the best comparative
results.While we are not making that
19 suggested modification mandatory for our
approval of the RFP,PacifiCorp's decision
20 about whether to accept the suggested
modification will be relevant in any docket
21 evaluating costs related to a winning RFP
bidder.PacifiCorp must make an operational
22 decision with respect to this issue and must be
prepared to defend it.(emphasis added)11
23
24 In response to this order,RMP filed a letter with the
25 Utah PSC stating that,"In order to act expeditiously to
1370 Phillips,Di-Supp -17
Monsanto Company
1 issue the 2017R RFP,the Company has not adopted the
2 Commission's suggested modification to expand the 2017R
3 RFP to include solar resources.Instead,the Company is
4 preparing to issue a separate solicitation for solar
5 resources,the 2017S RFP,in November 2017."12
6 /
7
8 /
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22 10 RMP's August 18,2017 Reply in Support of Application for
Approval of Solicitation Process at pp.9-12.
23 11 Application of Rocky Mountain Power for Approval of
Solicitation Process for Wind Resources,Docket No.17-035-23,Order
24 Approving RFP With Suggested Modifications at pp.9-10.
12 RMP's October 10,2017 letter in Utah PSC Docket No.
25 17-035-23.
1371 Phillips,Di-Supp -17a
Monsanto Company
1 Q.DO YOU HAVE ANY OBSERVATIONS ON THE GENESIS OF
2 THE 2017S RFP?
3 A.Yes.Absent the Utah PSC's order,I do not
4 believe that RMP would have issued the 2017S RFP.In
5 other words,absent the Utah PSC's order,I do not
6 believe RMP would have looked into a solar option to
7 assess whether the Combined Projects actually presented
8 the least-cost,least risk portfolio.And,in light of
9 the results of the 2017S RFP,RMP's assertion that the
10 2017 IRP did not identify any non-wind non-Wyoming
11 opportunities as part of RMP's least-cost,least-risk
12 plan raises serious concerns about the integrity of the
13 2017 IRP,which is the foundation of the Company's Energy
14 Vision 2020 project.
15 Q.DID RMP ADDRESS THE RESULTS OF THE 2017S RFP AS
16 PART OF THE COMPANY'S SUPPLEMENTAL AND SECOND
17 SUPPLEMENTAL TESTIMONY?
18 A.Yes.In his Supplemental Direct Testimony and
19 Second Supplemental Direct Testimony,Mr.Link described
20 sensitivity studies that RMP performed to analyze the
21 impact of the solar bids received in the 2017S RFP.13 In
22 this sensitivity,the SO model selected 1,122 MW of solar
23 PPA bids in the Low Gas,Zero CO2 scenario and 1,419 MW
24 of solar PPA bids in the Medium Gas,Medium CO2 scenario
25 (the "Solar PPA Option").14 The selected sizing of these
1372 Phillips,Di-Supp -18
Monsanto Company
1 projects is approximately the same as the 1,311 MW of the
2 Wind Projects proposed by the Company.However,the
3 Company failed to discuss the true results of its
4 analysis of the Solar PPA Option in its testimony.In
5 contrast to the information discussed by Mr.Link as part
6 of the "solar sensitivity"analysis,the Company's
7 workpapers and discovery responses provide more
8 compelling evidence
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23 13 Supplemental Direct Testimony of Rick T.Link at pp.33-36;
Second Supplemental Testimony of Rick T.Link at pp.20-24.
24 14 Second Supplemental Testimony of Rick T.Link at p.21,ll.
2-5.
25
1373 Phillips,Di-Supp -18a
Monsanto Company
1 demonstrating the Combined Projects are not in the public
2 interest,but instead serve as a vehicle to increase
3 investor earnings by forcing ratepayers to compensate
4 investors for an inferior project.
5 Q.WHAT DID THE COMPANY REPORT AS THE RESULTS OF
6 THE SOLAR SENSITIVITY IN ITS SECOND SUPPLEMENTAL
7 TESTIMONY?
8 A.The Company claims that,when analyzed in
9 isolation,the Solar PPA Option produced net benefits
10 that are lower than those expected from the Combined
11 Projects under the Medium Gas,Medium CO2 scenario and
12 approximately the same net benefits as the Combined
13 Projects under the Low Gas,Zero CO2 scenario.15 The
14 Company also argues that pursuing the Solar PPA Option
15 would leave significant benefits on the table,which
16 includes building the proposed Aeolus-to-Bridger/
17 Anticline Line.16 These arguments are misleading.
18 Q.PLEASE EXPLAIN.
19 A.Earlier in my testimony,I explained how the
20 Company's revised modeling (i.e.,the hybrid levelized
21 capital/nominal PTC approach)distorts the levelized NPV
22 of the Combined Projects and why the most relevant
23 analysis is the nominal revenue requirements analysis.
24 Again,the nominal revenue requirement analysis most
25 closely aligns with how costs/(benefits)will impact
1374 Phillips,Di-Supp -19
Monsanto Company
1 rates,and it has not been skewed by the Company's
2 revised levelization method.While the Company presented
3 the results of the nominal revenue requirements analysis
4 for the Combined Projects,the Company did not report
5 these results for the Solar PPA Option,even though it
6 performed this analysis and provided the results in its
7 workpapers.Notably,the results of this nominal revenue
8 /
9
10 /
11
12 /
13
14
15
16
17
18
19
20
21
22
23
24 15 Second Supplemental Testimony of Rick Link at p.21,l.17 -
p.22,l.9.
25 16 Id.
1375 Phillips,Di-Supp -19a
Monsanto Company
1 requirement analysis tell a much different story about
2 the Solar PPA Option and how it compares to the Combined
3 Projects.
4 Q.WHAT DO THE COMPANY'S WORKPAPERS SHOW IF THE
5 REVENUE REQUIREMENTS FOR THE SOLAR SENSITIVITY ARE SHOWN
6 ON A NOMINAL BASIS?
7 A.The Company's workpapers show the Solar PPA
8 Option provides substantially more benefits to customers
9 on a nominal basis compared to the Combined Projects.
10 The nominal revenue requirements analysis,which spans
11 the years 2017 through 2050,shows that the (redacted)
12 Solar PPA Option (without any new wind or transmission
13 facilities)provides (redacted)in net benefits in the
14 Medium Gas,Medium CO2 scenario,whereas the Combined
15 Projects only result in $167 million of projected
16 benefitS.17 This is a difference of (redacted),or about
17 a (redacted)increase in net benefits to ratepayers over
18 the Combined Projects.18
19 Q.HOW DID THE BENEFITS OF THE SOLAR PPA OPTION
20 COMPARE TO THE PROJECTED BENEFITS FROM THE COMBINED
21 PROJECTS IN THE LOW GAS,ZERO CO2 SCENARIO?
22 A.The contrast is even greater under the Low Gas,
23 Zero CO2 scenario.In this scenario,which Monsanto
24 believes represents the status quo,the Solar PPA Option
25 provides (redacted)in net benefits,whereas the Combined
1376 Phillips,Di-Supp -20
Monsanto Company
1 Projects actually result in a (redacted)increase in
2 costs to customerS.19
3 /
4
5 /
6
7 /
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22 17 RMP Witness Rick Link Confidential Workpaper,"EV2020 Second
Supp Results Summary File -VOM adjusted CONF.xlsx"as referenced in
23 response to WIEC Data Request 18.1(f)in the Wyoming New
Wind/Transmission Docket.
24 18 Id.
19 Id.
25
1377 Phillips,Di-Supp -20a
Monsanto Company
1 Q.HOW DO THE RISKS OF THE SOLAR PPA OPTION
2 COMPARE TO THE RISK OF THE COMPANY-OWNED COMBINED
3 PROJECTS?
4 A.First and foremost,there is no transmission
5 cost risk because the Solar PPA Option does not require
6 the proposed Aeolus-to-Bridger/Anticline Line.Second,
7 because the Solar PPA Option is not dependent on PTCs,
8 there is no PTC risk borne by customers.Third,because
9 the solar resources would be acquired through PPAs,
10 customers will only pay for power and energy actually
11 produced,rather than being held at risk for
12 underperformance.This is a significant difference,
13 given that the Company has not presented and quantified
14 the risk assessment associated with wind variability.
15 And,unlike the Combined Projects,the Solar PPA Option
16 does not require variable and output-dependent PTCs in
17 order to make the Transmission Projects economic.
18 Figure NLP-SD-5 compares the expected
19 incremental revenue requirements associated with the
20 Combined Projects and the Solar PPA Option under the
21 Medium Gas,Medium CO2 scenarios.Similarly,Figure
22 NLP-SD-6 contains the same information under the Low Gas,
23 Zero CO2 scenario.
24
25
1378 Phillips,Di-Supp -21
Monsanto Company
1
2 NON-CONFIDENTIAL FIGURE NLP-SD-5
3 Solar PPA Option vs Cambined Projects (Mid Gas ,Mid CO2)
(Benefit)/Cost ($millions of 2016 Dollars)
4
5
6
7
8
9
10
11 NON-CONFIDENTIAL FIGURE NLP-SD-6
12 Solar PPA Option vs Combined Projects (Low Gas ,Eero CO2)
(Benefit)/Cost ($millions of 2016 Dollars)
13O14
15
16
17
18
19
20
21
22
23
24
25
1379 Phillips,Di-Supp -22
Monsanto Company
1
2 Q.PLEASE DISCUSS FIGURES NLP-SD-5 AND NLP-SD-6.
3 A.These figures show both the annual and
4 cumulative NPV of incremental revenue requirements
5 resulting from the nominal revenue requirements analysis
6 associated with
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1380 Phillips,Di-Supp -22a
Monsanto Company
1 the Combined Projects and the Solar PPA Option under the
2 Medium Gas,Medium CO2 and Low Gas,Zero CO2 price-policy
3 scenarios.
4 The final value of the cumulative NPV in green
5 (read from the left axis)aligns with the NPVs the
6 Company has been reporting to assess the projects.The
7 Annual NPV in red (read from the right axis)added
8 together year by year over time make up the cumulative
9 NPV and provide additional insight on the timing of the
10 costs and benefits.The horizontal blue line shows the
11 crossover point of the cumulative NPV,which represents
12 when the project is expected to break even.Overall,
13 these figures provide additional insight into the
14 projects and the risks embedded in each approach.
15 When inspecting these figures,a few facts
16 become clear.First,the Solar PPA Option does not have
17 near the variability in costs.Second,the Solar PPA
18 Option produces net benefits under both price-policy
19 scenarios.Third,in the Medium Gas,Medium CO2
20 scenario,when both projects produce net benefits,the
21 breakeven occurs at near similar times,but the Solar PPA
22 Option has more than double the expected benefit and does
23 not include the large,risky,and speculative benefit in
24 2050 (which I address below).Fourth,the Solar PPA
25 Option produces greater benefits with lower upfront
1381 Phillips,Di-Supp -23
Monsanto Company
1 costs,leading to a lower risk project.Finally,in the
2 Low Gas,Zero CO2 scenario,the Combined Projects never
3 breakeven,resulting in increased cost to ratepayers,
4 whereas the Solar PPA Option still breaks even at
5 approximately the same time it did under the Medium Gas,
6 Medium CO2 scenario,resulting in over (redacted)20 in net
7 benefits by the end of the project life.
8 It is worth noting that the cost to customers
9 for the Solar PPA Option is approximately (redacted)
10 (with less than (redacted)in upfront capital)as
11 compared to
12 /
13
14 /
15
16 /
17
18
19
20
21
22
23
24
25 20 Ig
1382 Phillips,Di-Supp -23a
Monsanto Company
1 the $2.245 billion for the Combined Projects (which
2 requires over (redacted)in upfront capital).21 As I
3 just mentioned,for a roughly (redacted)22 Solar PPA price
4 tag,RMP's own analysis shows more customer benefits
5 compared to the Combined Projects (for less capital
6 expenditure)and the Solar PPA Option contains far less
7 risk.The risk reduction manifests in the plots above
8 via the consistent breakeven point across both the low
9 gas and medium gas scenarios and less variable annual NPV
10 of incremental revenue requirements.There are a number
11 of reasons why the Solar PPA Option is less risky for
12 customers.
13 Q.WHY IS THE SOLAR PPA OPTION LESS RISKY FOR
14 CUSTOMERS COMPARED TO THE COMBINED PROJECTS?
15 A.Simply put,the Solar PPA Option does not
16 require any upfront investment from RMP.Consequently,
17 all the risk associated with the completion of the
18 project remains with the project developer rather than
19 RMP and its customers.Unlike the Combined Projects,if
20 the solar projects are not completed in time to secure
21 tax credits,RMP's customers are indifferent.If the
22 projects fail to generate electricity in the amounts
23 assumed,RMP's customers do not pay both rate base costs
24 and replacement energy costs like they would with the
25 Combined Projects.Furthermore,the solar projects do
1383 Phillips,Di-Supp -24
Monsanto Company
1 not require the Aeolus-to-Bridger/Anticline Line or the
2 transmission upgrades associated with the Wind Projects,
3 completely alleviating the risk associated with
4 constructing and placing into service a new transmission
5 line in time to secure PTCs (which RMP admits are
6 required to make the transmission line economic).And,
7 because the Company would not receive PTCs from the solar
8 PPAs,the risk associated with the possibility of RMP not
9 being able
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24 21 Id.
25
22 Id.
1384 Phillips,Di-Supp -24a
Monsanto Company
1 to monetize the PTCs contemporaneously when they are
2 produced is completely eliminated.
3 Q.HAVE YOU PREPARED A NOMINAL REVENUE
4 REQUIREMENTS COMPARISON BETWEEN THE COMBINED PROJECTS AND
5 THE SOLAR PPA OPTION?
6 A.Yes.This is presented below in Figures
7 NLP-SD-7 and NLP-SD-8.As I have mentioned,this method
8 is the more realistic,and therefore preferred,way to
9 understand how the two project alternatives will impact
10 customer rates.
11
12 FIGURE NLP-SD-7
13 Solar PPA Optionvs Combined Projects (Mid Gas,Mid CO2)
14 (Benefit)/Cost ($million)
15 $100
16 $50
17 g
$0
::::($50)18 5
($100)a i19%I"-..,I
($150)4 ;20
($200)
22 ---Combined Projects ---Solar PPA
23
24
25
1385 Phillips,Di-Supp -25
Monsanto Company
FIGURE NLP-SD-8
Solar PPA Optionvs Combined Projects (Low Gas,Zero CO2)
(Benefit)/Cost ($million)
4 $100
($50)
($100)4.18
($150)
9
($200)
11 -combined Projects ---Solar PPA
12
13 Q.PLEASE DISCUSS HOW RMP'S SHAREHOLDERS STAND TO
14 BENEFIT UNDER THE COMBINED PROJECTS AS COMPARED TO THE
15 SOLAR PROJECTS.
16 A.Under the Combined Projects,the Company would
17 own the new transmission assets as well as the vast
18 majority of the new wind capacity.Accordingly,the
19 Company would be allowed the opportunity to earn a return
20 on these new Compan -owned assets.In contrast,the
21 Solar PPA Option is an all-PPA option that does not allow
22 for the Company to earn a return.
23
24
25
1386 Phillips,Di-Supp -26
Monsanto Company
1 Q.HAVE YOU QUANTIFIED THE VALUE OF EQUITY RETURNS
2 THE COMPANY EXPECTS TO REALIZE FROM THE COMBINED
3 PROJECTS?
4 A.Yes.In response to WIEC Discovery Request
5 18.l(c)and (d)in the Wyoming New Wind/Transmission
6 Docket,23 RMP provided the expected equity returns for its
7 shareholders with respect to the Combined Projects and
8 Solar PPA Option,respectively.In those responses,the
9 Company stated the following:"Total equity returns are
10 approximately $1.9 billion over the life of the assets"
11 for the Combined Projects and,"There are no equity
12 returns for a solar PPA."24
13 Q.HOW DO THESE RETURNS TO SHAREHOLDERS COMPARE
14 WITH THE PROJECTED BENEFIT TO CUSTOMERS?
15 A.By comparison,under the Medium Gas,Medium CO2
16 case,the Company only expects $167 million in NPV
17 benefits for customers for the Combined Projects.As I
18 discussed in my direct testimony,Monsanto is especially
19 concerned about the level of customer risk embedded
20 within RMP's proposal.Monsanto believes that the risks
21 borne by the customers outweigh those borne by the
22 Company,particularly in light of the significant
23 benefits to RMP's shareholders from the Combined
24 Projects.This risk is evidenced in Figures NLP-SD-5 and
25 NLP-SD-6,where one can see how the Combined Projects
1387 Phillips,Di-Supp -27
Monsanto Company
1 result in a net cost to customers in the Low Gas,Zero
2 CO2 scenario.And,unlike the potential benefits for
3 customers,the benefits to RMP's shareholders do not
4 depend on the output from the Wind Projects,or future
5 gas prices,market power prices,or level of CO2 prices.
6 /
7
8 /
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22 23 Wyoming New Wind/Transmission Docket,WIEC Exhibit No.
304.1.
23 24 The Company indicated there is no clear convention on the
appropriate discount rate for equity return but WIEC could perform
24 its own calculation.Using the same discount rate as used by RMP in
its economic analysis,the NPV of the equity returns is approximately
25 $741 miiiion.
1388 Phillips,Di-Supp -27a
Monsanto Company
1 By contrast,the Solar PPA Option provides significantly
2 greater benefits to customers in both scenarios,but
3 yields no equity returns to RMP.
4 Q.ARE YOU SAYING THAT THE COMPANY SHOULD PURSUE
5 THE SOLAR PPA OPTION?
6 A.No.Monsanto is not convinced that RMP needs
7 to acquire any new resources at this time.Additionally,
8 Monsanto disagrees with RMP's position that the question
9 is whether the Company should consider both opportunities
10 (consistent with the Utah PSC's decision,quoted above).
11 Furthermore,the Company did not request the Commission's
12 approval to enter into any solar PPAs in this proceeding.
13 The key takeaway is that RMP's own analysis raises
14 legitimate doubts regarding whether the Combined Projects
15 truly are the least-cost,least-risk resource portfolio
16 to serve customers given the updated economic analysis
17 provided in this proceeding.For that reason,the
18 Commission should deny RMP's request for a CPCN for the
19 Combined Projects.
20 Q.HAS THE COMPANY PERFORMED ANY ADDITIONAL RISK
21 ANALYSIS ASSOCIATED WITH THE SOLAR PPA OPTION?
22 A.Yes.In its Supplemental Rebuttal Testimony
23 filed in Wyoming New Wind/Transmission Docket on March
24 14,2018 ("Wyoming 3/14/2018 Supplemental Rebuttal")
25 regarding the same CPCN request,RMP produced a new
1389 Phillips,Di-Supp -28
Monsanto Company
1 sensitivity analysis to explore additional risks RMP
2 associates with the Solar PPA option.In addition to the
3 quantifications contained in the sensitivity analysis,
4 RMP also discusses some additional risks that it has not
5 quantified.
6 /
7
8 /
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1390 Phillips,Di-Supp -28a
Monsanto Company
1 Q.PLEASE SUMMARIZE.O 2 A.In the Wyoming 3/14/2018 Supplemental Rebuttal,
3 RMP responded to positions taken by WIEC and other
4 parties who demonstrated,using the Company's own
5 analysis,that the Solar PPA Option was superior to the
6 Combined Projects for ratepayers.25 RMP maintains that
7 the Solar resources are best viewed as an incremental
8 opportunity rather than an alternative to the Combined
9 Projects reasoning there are additional risks unique to
10 the procurement of solar resources and that RMP expects
11 additional cost declines for solar that would make them
12 even more attractive for customers following its 2019
13 IRP.26 The Company further claims that for this reason
14 there is no need to act now with respect to the solar
15 resources.In contrast,the Company asserts PacifiCorp
16 is required to act now in order to secure the PTCs that
17 make the proposed Combined Projects economically
18 feasible.27
19 Q.PLEASE EXPAND ON THE COMPANY'S NOTION THAT
20 FUTURE REDUCTIONS IN THE PRICE OF SOLAR RESOURCES PRESENT
21 A RISK TO RATEPAYERS.
22 A.The Company is stating that if it were to
23 pursue the solar resources now,it would be paying too
24 much because the price will be lower in the years to
25 come.I agree with the Company on this point.There is
1391 Phillips,Di-Supp -29
Monsanto Company
1 no reason to rush any decision with respect to solar
2 resources and the prudent decision is to reassess the
3 Company's resource requirements to determine if any
4 action is reasonable following its 2019 IRP and
5 Stakeholder process.Where the Company and I truly
6 disagree is the need for action now.Based on all the
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22
23 25 Wyoming 3/14/2018 Supplemental Rebuttal Testimony of Rick
Link,Wyoming Docket 20000-520-EA-17 at Page 2.
24 26 Wyoming 3/14/2018 Supplemental Rebuttal Testimony of Rick
Link,Wyoming Docket 20000-520-EA-17 at Page 2-3.
25 27 g.
1392 Phillips,Di-Supp -29a
Monsanto Company
1 evidence presented there is no demonstrable need forO2actionimmediatelywhetheritbesolarresourcesor the
3 Combined Projects.The facts of this case remain;the
4 Company's own analysis conclusively demonstrate that the
5 Solar PPA Option is a better alternative for ratepayers,
6 even under the new set of sensitivities performed by RMP
7 that were specifically designed by the Company to gauge
8 the "unique"risk profile of solar resources.
9 Consequently,solar is a superior alternative to the
10 Combined Projects.
11 Q.WHAT ADDITIONAL "UNIQUE"SOLAR RISKS DID THE
12 COMPANY ANALYZE?
13 A.Aside from the Company's claim that it expects
14 that the cost for solar resources will decrease in the
15 near future,and consequently it would not be in the
16 ratepayers'interest to actively pursue a solar resource
17 option at this time;the Company also quantitatively
18 evaluated hourly price-profile and capacity-contribution
19 risks.28 These risks sought to examine the potential that
20 on-peak wholesale market prices could be depressed due to
21 large volumes of solar energy being produced during those
22 times,as well as,the potential for greater loss-of-load
23 events during summer peak periods.29
24 Q.WHAT WERE THE RESULTS OF THIS ANALYSIS?
25 A.Similar to the way the Company reported its
1393 Phillips,Di-Supp -30
Monsanto Company
1 results for the base economic analysis conducted for the
2 solar resources,the Company chose to focus on its
3 intermediate results,i.e.,the results of its 20-year
4 levelized analysis,even though it performed a full life
5 cycle nominal revenue requirements analysis.The results
6 of the nominal revenue requirements analysis over the
7 full life cycle of the projects demonstrated that even
8 under these sensitivities,the Solar PPA Option was
9 superior to the Combined Projects in all cases
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24 28 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,
Wyoming Docket 20000-520-EA-17 at Page 31.
25 29 I
1394 Phillips,Di-Supp -30a
Monsanto Company
1 analyzed.As I discussed earlier and the Company hasO2confirmed,nominal revenue requirement is the analysis
3 that correctly aligns with the way these costs will
4 impact rates and is consistent with the way the Company
5 proposes to recover these costs.
6 Q.DO YOU HAVE A TABLE WHICH SUMMARIZES THE
7 COMPARISON OF THE SOLAR PPA OPTION WITH THE COMBINED
8 PROJECTS?
9 A.Table NLP-SD-1 presents a summary of these
10 results.
11
12 NON-CONFIDENTIAL TABLE NLP-SD-1
@ 13 Solar Only vs Combined Projects
Nominal Revenue Requirements Results
14 PYRR(d)2017-2050
Cost/(Benefit)($Millions)
15
16
17
18
19
20
21
22
23 Q.WHAT ARE THE ANNUAL REVENUE REQUIREMENTS OF THE
24 CASES PRESENTED IN TABLE NLP-SD-1?
25 A.Figures NLP-SD-9 &10 present the annual
1395 Phillips,Di-Supp -31
Monsanto Company
1 (nominal)revenue requirements and cumulative present
2 value of revenue requirements for the base economic
3 analysis under the medium gas,medium CO2 and Low Gas,
4 Zero CO2 price policy scenarios,respectively.
5 Similarly,Figures NLP-SD-11 &12 present the annual
6 (nominal)revenue requirements and cumulative present
7 value of revenue requirements for the capacity
8 contribution and hourly price profile sensitivity under
9 the medium gas,medium CO2 and Low Gas,Zero CO2 price
10 policy scenarios respectively.
11 /
12
13 /
14
15 /
16
17
18
19
20
21
22
23
24
25
1396 Phillips,Di-Supp -31a
Monsanto Company
1
FIGURE NLP-SD-92
3 Solar Onlyvs Combined Projects
Nominal Revenue Requirements Comparison 2017-2050
Medium Gas,Medium CO24BenchmarkCase(RMP 2nd Supplemental Direct)
5 Cost/(Benefit)
6
Increase/(Decrease)in Nom.Rev Req.Increase/(Decrease)Cumulative PVRR
7 sioo s2eo
9 .($200)
($100)
10 taiso,
($200)($500)
11
+Solar Only (Benchmark Case)-+-Wind Only (Benchmark Case)+Solar Only (Benchmark Case)-4-Wind Only (Benchmark Case)
12
13
FIGURE NLP-SD-10
O Solar Only vs Combined Projects14NominalRevenueRequirementsComparison 2017-2050
Low Gas,Zero CO215BenchmarkCase(RMP 2nd Supplemental Direct)
16 Cost/(Benefit)
17 increase/(Decrease)in Nom.Rev Req.Increase/(Decrease)Cumulative PVRR
$130 $300
($120)($250)
22
2 3
chmark Case)+So On (Benchmark Cam)+wind only (Benchmark Case)
24
25
1397 Phillips,Di-Supp -32
Monsanto Company
O 1
2 FIGURE NLP-SD-11
3 Solar Only vs Combined Projects
Nominal Reve ue Requirements Comparison 2017-2050
4 Medium Gas,Medium CO2HourlyPrice-Profile &Capacity Contribution Sensitivity
5 2nd Supplemental Rebuttal)
Cost/(Benefit)
6 Increase/(Decrease)in Nom.Rev eq Increase/(Decrease)Cumulative PVRR
9 ($100)
($7o)($150)
10 ($120)($200)
i 1 +Solar Only (Price Profie &Cap Cont)+WI Only (Price Profile)+Solar Only (Price Profile &Cap Cont)-+-Wincl Only (Price Profile)
12 FIGURE NLP-SD-12
13 Sdlar Only vs Combined Projects
14 Nominal Revènue Requirements Comparison 2017-2050
Low Gas,Zero CO2
15 HourlyPrice-Profile &Capacity Contribution Sensitivity
(RMP 2nd Supplemental Rebuttal)
16 Cost/(Benefit)
1 7
increase/(Decrease)in Nom.Rev eq.Increase/(Decrease)Cumulative PVRR
1 8 "'°"°°
$250sao
1 9 *2"
($120)($50)
2 2
-+-So ar only(Price Profile &Cap Cont)-+-Only (Price Profie)-+-SolerOnly (Price Profie &Cap Cont)*Wind Only (Price Proflie)
23
24
25
1398 Phillips,Di-Supp -33
Monsanto Company
1 Q.WHAT KEY INFORMATION IS CONTAINED IN THESE
2 FIGURES?
3 A.There are a number of key takeaways contained
4 in these figures.Beginning with the Company's base
5 economic analysis contained in Figures NLP-SD-9 &10 and
6 first focusing on the annual nominal revenue requirements
7 plotted on the left,notice first that the initial cost
8 increase to rates resulting from the Solar PPA option
9 versus the Combined Projects is lower over the first four
10 years of the project life.During the next seven years,
11 the Combined Projects show modest benefits over the solar
12 portfolio but both projects are expected to result in
13 customer benefits during that time.When the ten years
14 of PTC benefits expire in 2031,the Combined Projects
15 result in over a $100 million rate increase to customers
16 whereas the solar portfolio continues to provide large
17 benefits to customers.In fact,once the PTCs expire
18 through the end of the life of the 25 year Solar PPA
19 option,the solar portfolio on average will provide
20 approximately $100 million in annual benefits to
21 customers compared to the Combined Projects.
22 Furthermore,over the 25 year life of the solar
23 portfolio,it will either have lower costs or greater
24 benefits in 18 of the 25 years compared to the Combined
25 Projects.
1399 Phillips,Di-Supp -34
Monsanto Company
1 Then examining the cumulative present value of
2 revenue requirements on the right,there are two key
3 takeaways.First,both the Solar PPA Option and the
4 Combined Projects break even at approximately the same
5 time,around 2030-2031.However,the solar portfolio
6 provides greater total benefits by the time the PPAs
7 expire in 2045.By 2050,the net benefits appear closer
8 but this is solely due to a large terminal value benefit
9 assumed by the Company for the Combined Project in 2050.
10 In order for this large terminal value "benefit"to ever
11 materialize,however,another new project with a large
12 cost (not included in the analysis)would have to be
13 incurred and paid for by ratepayers.
14 /
15
16 /
17
18 /
19
20
21
22
23
24
25
1400 Phillips,Di-Supp -34a
Monsanto Company
1 Many of the same key takeaways are present in
2 Figure NLP-SD-10,the base economic analysis under the
3 Low Gas,Zero CO2 scenario with the most notable being
4 how much worse the Combined Projects perform compared to
5 the Solar PPA Option.Examination of the annual nominal
6 revenue requirements not only shows a larger cost
7 increase initially for the Combined Projects,but that
8 the Combined Projects would result in higher costs to
9 customers in 18 of the 25 years life of the solar
10 projects including a $120 million increase in rates when
11 the PTC's expire in 2031.On the other hand,the Solar
12 PPA Option is still projecting customer benefits for 18
13 years of the 25 years of the project life.Moreover,the
14 solar projects still result in a project breakeven around
15 2032 2033 timeframe and approximately $217 million in NPV
16 customer over the life of the project whereas the
17 Combined Projects never breakeven,resulting in
18 approximately $186 million in increased costs to
19 customers.However,the Company's shareholders still
20 stand to receive billions of dollars in equity returns in
21 this scenario even though customers are harmed by the
22 Combined Projects.
23 Q.DO THE RESULTS CHANGE UNDER THE COMPANY'S NEW
24 "UNIQUE"SOLAR RISK SENSITIVITY ANALYSIS?
25 A.No.As shown in Figure NLP-SD-11,in the
1401 Phillips,Di-Supp -35
Monsanto Company
1 medium gas,medium CO2 scenario,the takeaways are very
2 similar and the solar portfolio still outperforms the
3 Combined Projects over the life of the Projects,though
4 the gap between the two has slightly narrowed.Figure
5 NLP-SD-12 shows the sensitivity results under the Low
6 Gas,Zero Carbon scenario and once again,while the gap
7 is more narrow between the two portfolios,the solar
8 option still results in net customer benefits by the end
9 of the life of the project whereas the Combined Projects
10 are a detriment to customers.
11 /
12
13 /
14
15 /
16
17
18
19
20
21
22
23
24
25
1402 Phillips,Di-Supp -35a
Monsanto Company
\
1 Q.WHAT CAN YOU CONCLUDE FROM THIS ANALYSIS?O 2 A.While there may indeed be additional risks
3 unique to solar that should be studied further in the
4 2019 IRP,the Company's analysis still shows that if
5 there was a need to act immediately to fill a resource
6 gap (which there is not)the Solar Option,as presented,
7 is a more economic alternative for customers to the
8 Combined Projects under all scenarios and sensitivities
9 analyzed.Furthermore,the Solar PPA Option is less
10 risky than the Combined Projects.Given the fact that
11 there is no immediate resource need driving this proposal
12 combined with the superior economics and risk profile of
13 the Solar Option the only way to preserve the public
14 interest is for the Commission to deny RMP's request for
15 a CPCN.We can then re-evaluate the solar option during
16 the years to come when prices are expected to fall thus
17 further increasing the potential for customer benefit.
18 Q.DOESN'T THE COMPANY CLAIM THAT SOLAR OPTION IS
19 MORE RISKY THAN THE COMBINED PROJECTS.
20 A.Yes but through an examination of the Company's
21 testimony and analytics this claim is completely without
22 merit.Focusing on the data analysis alone,as I just
23 discussed,the Solar PPA Option out-performs the Combined
24 Projects in all scenarios and sensitivities that the
25 Company performed when analyzing the solar option.The
1403 Phillips,Di-Supp -36
Monsanto Company
1 Company has attempted to cloud this fact by offering
2 qualitative statements regarding risks,such as its claim
3 regarding its expectations that solar prices will
4 decrease.However,the potential for price decreases
5 when there is no need for immediate action with respect
6 to a resource need only further solidifies that the
7 prudent decision is to wait.In fact this is actually a
8 risk against the Combined Projects as additional analysis
9 and price decreases only serve to make solar more
10 attractive and further undermine the economics and
11 conclusions
12 /
13
14 /
15
16 /
17
18
19
20
21
22
23
24
25
1404 Phillips,Di-Supp -36a
Monsanto Company
1 regarding the Combined Projects.Perhaps this is why
2 when asked about the expectations and analysis
3 surrounding the expected price decreases the Company was
4 unable to produce any hard data.30
5 In a similar sense,the Company tries to
6 confuse the idea about the timing of benefits and risks
7 associated with them.On one hand,the Company claims
8 that longer-term benefits are more speculative (a point
9 with which I agree).31 On the other hand,when
10 confronted about the shift in the timing of benefits
11 associated with the Combined Projects,the Company does
12 not admit this is an increase in the risk profile of the
13 Combined Projects,but it is merely a different
14 net-benefit profile.32 The fact is that it cannot be
15 both.The Tax Cuts and Job Act made PTCs less valuable
16 and thus decreased the value of the Combined Projects and
17 increased its risk.
18 Q.HAVE YOU PREPARED A TABLE DEMONSTRATING THIS
19 FROM THE NOMINAL REVENUE REQUIREMENTS ANALYSIS?
20 A.Yes.Tables NLP-SD-2 &3 below present the
21 PVRR(d)for the Combined Projects as presented in the
22 Company's Direct Testimony and Second Supplemental
23 Rebuttal,along with the Solar PPA Option,and the Solar
24 Option plus the Combined Projects.What becomes obvious
25 from these tables is that the most beneficial and least
1405 Phillips,Di-Supp -37
Monsanto Company
1 risky of the alternatives is the Solar PPA Option alone.
2 It produces the highest net benefits through the first 20
3 years,indicating more benefits to costs earlier in the
4 project life.It is also the only option to produce a
5 net benefit in the Low Gas,Zero CO2 scenario.Table
6 NLP-SD-
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22 30 Wyoming New Wind/Transmission Docket,RMP response to WIEC
Data Requests 22.17 &22.18.
23 31 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,
Wyoming Docket 20000-520-EA-17 at Page 45.
24 32 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,
Wyoming Docket 20000-520-EA-17 at Page 21.
25
1406 Phillips,Di-Supp -37a
Monsanto Company
1 4 below presents the 20 PVRR (d)resulting from the
2 "unique"solar sensitivity cases analyzed by the Company.
3 Comparing this to Table NLP-SD-1 above (and repeated
4 below for convenience)reaffirms the conclusions.
5
6 NON-CONFIDENTIAL TABLE NLP-SD-2
7 Comparison of Net Project Nominal Revenue Requirements
8 PVRR(d)2017-2036
(Benefit)/Cost ($million)
9 CombinedCombinedCombinedSolarPPA-Projects &10 Price-Policy Scenario Projects -Pro2 2nd Solar PPA -
Direct Supplemental 2nd11SupplementalSupplemental
12 Low Gas,Zero CO2 96 156
Low Gas,Medium CO2 51 127
13 Low Gas,High CO2 (114)(30)
Medium Gas,Zero CO2 (38)(13)14 Medium Gas,Medium CO2 (93)(51)
15 Medium Gas,High CO2 (205)(141)
High Gas,Zero CO2 (241)(262)
16 High Gas,Medium CO2 (253)(297)
High Gas,High CO217
18
19
20
21
22
23
24
25
1407 Phillips,Di-Supp -38
Monsanto Company
21
3
4
5 NON-CONFIDENTIAL TABLE NLP-SD-3
6 Comparison of Net ProjectNominal Revenue Requirements
PVRR(d)2017-2050
7 (Benefit)/Cost ($million)
8 CombinedCombinedCombinedSolarPPA-Projects &Projects -Price-Policy Scenario Projects -2nd Solar PPA -9 2ndDirect Supplemental 2ndSupplementalSupplemental10LowGas,Zero CO2 174 184
11 Low Gas,Medium CO2 93 127
Low Gas,High CO2 (194)(147)
12 Medium Gas,Zero CO2 (53)(92)
Medium Gas,Medium CO2 (137)(167)6 13
Medium Gas,High CO2 (317)(304)
14 High Gas,Zero CO2 (341)(448)
High Gas,Medium CO2 (351)(499)15 High Gas,High CO2 (595)(635)
16
17 TABLE NLP-SD-4
18 Solar Only vs Combined Projects
Nominal Revenue Requirements Results
19 PVRR(d)2017-2050
Cost/(Benefit)($Millions)
2 0
Diff erenceSolar to
Price PoHcy scenario Sensitivity case Combined Projects SolarOnly Combined ProÎects21MedilunGas,Medana©2 R--Gud Supp Dmg ($168 ($363)($19
MediumGas,MedannCO2 HoudyPéce Sensitiny (2nd Supp Rebuna0 ($127)($254)($127)
Medium Gas,MediumCO Capacity Conidbutionand HoudyPrice Sensitivity(2nd Supp Rebuttal)($127)($149)($22)2 2 I.owGas,Zuo CO2 MQnd Supp DutcQ $184 ($196)($380}
1.ow Gas,Zero CO2 HoudyPäce Sensoidy (2nd Supp RebunaO $220 ($123)($343)
2 3 LowGas,Zuo CO2 Capacay Coubinsbonand HamlyEnce SenshinyQad Supp RebunaO $220 ($29)($249)
24 ¯¯
25
1408 Phillips,Di-Supp -39
Monsanto Company
2 TABLE NLP-SD-5
3 Solar Only vs Combined Projects
Nominal Revenue Requirements Results
4 PVRR(d)2017-2036
Cost/(Benefit)($Millions)
5
Difference Solarto
6 Price Policy scenario sensitivity case combined Projects Solar Only Combined Projects
MediumGas MediumCO2 Beachm=&(2nd Supp Direct)($51)($212)($162)
MediumGas,MediumCO2 Capacity Contahdion and HoudyPrice
SensitivityÇndSuppRebuttal)($22}($24)($2)
8
Low Gas,Zero g womn<tr (2nd Supp Direct)$156 ($87)($243)
9 Capacity Caninhum and MBLowGas.ZeroCO2
S $181 $61 ($120)
10
11
12 Q.IS IT APPROPRIATE TO CALCULATE PVRR(d)FROM THE
13 NOMINAL REVENUE REQUIREMENTS THROUGH 2036?
14 A.Yes.The Company has argued that this is not
15 appropriate because it does not capture any potential
16 benefits from capital investments beyond 2036;however,
17 this is an erroneous conclusion.33 First of all,the
18 nominal revenue requirement analysis performed for both
19 of these projects encompasses the full life cycle of both
20 projects and extends through 2050 so there is no
21 mismatching of projects with different lives,which is
22 the reason for the levelized analysis in the first place.
23 Second,the nominal revenue requirements analysis
24 perfectly matches the project costs and benefits as they
25 will flow through to ratepayers.While it is true that
1409 Phillips,Di-Supp -40
Monsanto Company
1 some benefits associated with the projects are not
2 captured in a PVRR(d)through 2036,neither are the
3 costs.However,both costs and benefits perfectly match
4 with how they will impact rates.On the other hand,the
5 20 year levelized analysis does not match project costs
6 with benefits according to how the
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22 33 Wyoming New Wind/Transmission Docket,RMP response to WIEC
Data Requests 22.7,22.8,22.11 &22.12
23
24
25
1410 Phillips,Di-Supp -40a
Monsanto Company
1 Company is proposing to recover those same costs and pass
2 along benefits.This is ultimately how both impact
3 rates.34
4 Q.THE COMPANY CONTINUES TO AFFIRM THAT THE SOLAR
5 OPTION SHOULD BE CONSIDERED AS AN INCREMENTAL OPPORTUNITY
6 TO THE COMBINED PROJECTS,AND NOT AN ALTERNATIVE.DO YOU
7 AGREE WITH THIS AFFIRMATION?
8 A.No.The basis of the Company's statement is
9 that the Solar PPA Option does not displace the economic
10 benefits of the Combined Projects.First,this reaffirms
11 what the Company has been saying since it filed the
12 Application;the Combined Projects are an economic
13 portfolio of mutually dependent wind and transmission
14 projects,neither of which can be justified without the
15 other.While the Company attempts an "eleventh hour"
16 claim that the transmission project is needed in 2024,
17 this claim is completely unsupported by any analysis.My
18 colleague Mr.James Dauphinais discusses the alleged need
19 for the transmission line throughout his testimonies.
20 While I discussed in my Direct Testimony the
21 reasons why the Company is not pursuing the Combined
22 Projects from the standpoint of generation capacity need,
23 the Company itself has also clearly stated that it does
24 not need generation capacity until 2028 and can meet its
25 resource needs between now and then with Front Office
1411 Phillips,Di-Supp -41
Monsanto Company
1 Transactions,Demand Side Management and energyO2efficiencymeasures.35 Furthermore,the
3 /
4
5 /
6
7 /
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23 34 Wyoming New Wind/Transmission Docket,RMP response to WIEC
Data Requests 21.4 and 21.5.
24 35 See my direct testimony as well as 3/14/2018 Supplemental
Rebuttal Testimony of Rick Link,Wyoming Docket 20000-520-EA-17 at
25 Page 51.
1412 Phillips,Di-Supp -41a
Monsanto Company
1 Company has also stated that uncommitted FOTs are still
2 generally lower cost than other resource alternatives.36
3 Finally,in terms of the amount of capacity and
4 energy delivered by the Solar PPA Option,it most
5 certainly meets the same requirements as does the
6 Combined Projects.PacifiCorp's modeling approach with
7 respect to its load forecast and constraints did not
8 change when it analyzed each of the portfolios,and both
9 were performed with reliability based capacity and energy
10 constraints with a planning reserve margin.It would be
11 perfectly reasonable to replace the Combined Projects
12 with the Solar PPA Option,if either was needed.
13 However,neither are needed at this time.The Company
14 can meet its near term needs with low cost FOTs,DSM and
15 Energy Efficiency measures while it further develops is
16 solar price assumptions and supporting analysis.
17 Moreover,even if the solar prices do not drop as the
18 Company expects but remain where they stand today,the
19 solar portfolio,as the Company has demonstrated,will be
20 a better choice for ratepayers.
21 IV.THE POTENTIAL RISKS AND BENEFITS OF THE COMBINED
22 PROJECTS
23 Q.HAS RMP UPDATED ITS ECONOMIC ANALYSIS TO
24 SUPPORT THE COMBINED PROJECTS?
25 A.Yes.RMP has updated its economic analysis to
1413 Phillips,Di-Supp -42
Monsanto Company
1 reflect the costs obtained via the 2017R RFP,along with
2 revising the analysis to reflect updated load,commodity,
3 and tax information.
4 /
5
6 /
7
8
9 /
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 Link Rebuttal Testimony,December 18,2017 at Page 12.
1414 Phillips,Di-Supp -42a
Monsanto Company
1 Q.HAS ANY OF THE INFORMATION CONTAINED WITHIN
2 RMP'S SECOND SUPPLEMENTAL TESTIMONY AND UPDATED ECONOMIC
3 ANALYSIS CAUSED YOU TO CHANGE ANY OF YOUR DIRECT
4 TESTIMONY RECOMMENDATIONS?
5 A.No.In fact the results of the updated
6 analysis reaffirm my direct testimony recommendation that
7 the Combined Projects are simply too risky and should not
8 be approved.
9 Furthermore,while RMP is still characterizing
10 the Combined Projects as the least-cost,least-risk plan,
11 I just described information that RMP provided with its
12 updated economic analysis which demonstrates that they
13 likely are not the least-cost,least-risk resources.
14 Simply put,the facts contained within RMP's own filing
15 contradict the premise for its requested CPCN and there
16 is no way the Commission can approve the CPCN consistent
17 with the public interest without imposing concrete
18 ratepayer protections to ensure the projected benefits
19 actually materialize.
20 Q.PLEASE SUMMARIZE THE CHANGES REFLECTED IN RMP'S
21 UPDATED ANALYSIS.
22 A.There were four broad categories of updates
23 incorporated into RMP's updated analysis.The models
24 were updated to reflect:(1)cost-and-performance
25 assumptions for the Wind Projects consistent with the
1415 Phillips,Di-Supp -43
Monsanto Company
1 winning bids selected to the 2017R RFP final shortlist asO2summarizedearlierinmytestimony;(2)current
3 load-forecast projections;(3)current price-policy
4 scenario assumptions;and (4)recent changes in federal
5 tax rate for corporations.37
6 /
7
8 /
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 37 Supplemental Direct Testimony of Rick Link at p.17.
1416 Phillips,Di-Supp -43a
Monsanto Company
1 In addition to updating the models with revised
2 capital cost assumptions and net capacity factors sourced
3 to the specific RFP responses selected,RMP also added a
4 new "benefit"that was not included in its original
5 modeling:terminal value benefits from projects that will
6 be owned by the Company.
7 Q.DID THE COMPANY ALSO CHANGE THE WAY IT MODELED
8 PTC BENEFITS IN THIS PROCEEDING?
9 A.Yes.As I discussed earlier in this testimony,
10 in its original filing,the Company modeled PTC benefits
11 on a levelized basis over the life of the asset.This is
12 the same way PTCs were modeled in the Company's 2017 IRP.
13 In its updated model,the Company modeled the PTCs on a
14 nominal basis.That is,the PTCs are modeled for 10
15 years until they expire.
16 Q.WHAT DOES THE COMPANY CLAIM THE RESULTS OF ITS
17 UPDATED ECONOMIC ANALYSIS SHOW?
18 A.RMP claims the results of its updated economic
19 analysis demonstrate that the Combined Projects provide
20 net customer benefits under all scenarios studied through
21 2036,and in seven of the nine scenarios through 2050.38
22 The Company further claims that the customer benefits
23 increase to $167 million in the Medium Gas,Medium CO2
24 case through 2050 (as compared to $137 million in the
25 original filing),and range from $357 million to $405
1417 Phillips,Di-Supp -44
Monsanto Company
1 million in the Medium Gas,Medium CO2 case through 2036.39
2 /
3
4 /
5
6 /
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24 38 Second Supplemental Direct Testimony of Rick Link at p.2.
39 Id.
25
1418 Phillips,Di-Supp -44a
Monsanto Company
1 Q.DO YOU AGREE WITH THE COMPANY'S CLAIM WITH
2 RESPECT TO THE UPDATED ECONOMIC ANALYSIS?
3 A.No.The results stated by the Company are
4 erroneous and misleading.When inspected more closely,
5 the economics of the Combined Projects are actually no
6 better than originally presented,and are arguably worse
7 than what the Company originally claimed.Furthermore,
8 the Company fails to discuss the fact that the updated
9 economic analysis reveals that the level of risk embedded
10 within the Combined Projects is greater than originally
11 reported in its original filing.Finally,the Company
12 failed to disclose to the Commission that,using the same
13 nominal revenue requirements analysis over the period
14 from 2017-2050 which it uses to support the Combined
15 Projects,the Solar PPA Option results in a superior
16 economic benefit at a lower cost and with less customer
17 risk compared to the Combined Projects.Consequently,
18 the Company's proposal suffers from the same deficiencies
19 I discussed in my direct testimony,and now contains new
20 pitfalls.
21 Q.PLEASE EXPLAIN.
22 A.First,the Company claims that the results of
23 its updated economic analysis demonstrate that the
24 Combined Projects provide net customer benefits under all
25 scenarios studied through 2036 and that these benefits
1419 Phillips,Di-Supp -45
Monsanto Company
1 range from $357 million to $405 million in the Medium
2 Gas,Medium CO2 case.These claims are based on the
3 Company's SO and PaR modeling,which incorporate
4 levelized capital costs for the Combined Projects and
5 nominal PTC cash flows.I have already discussed the
6 reasons why this "hybrid"approach is flawed.While
7 levelization of capital costs when done correctly can be
8 a reasonable method when selecting economic resource
9 alternatives with different lives and
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24
25
1420 Phillips,Di-Supp -45a
Monsanto Company
1 in-service dates,it does not accurately reflect how
2 these costs will flow through to customers.As a result,
3 the benefits produced from these analyses are
4 contradicted by the Company's updated nominal revenue
5 requirement analysis.The updated nominal revenue
6 requirement analysis produced the $167 million in NPV
7 customer benefits in the Medium Gas,Medium CO2 case (and
8 the $137 million in NPV benefits claimed in the original
9 filing).This analysis more accurately reflects the way
10 the actual costs and revenues of the projects will flow
11 through to customers.
12 Q.WHAT ARE THE 20 YEAR NPV SAVINGS THAT RESULT
13 FROM THE NOMINAL REVENUE REQUIREMENT MODELING?
14 A.The Medium Gas,Medium CO2 price policy
15 scenario actually shows only $51 million NPV of estimated
16 customer benefits.Said another way,only 30%of the
17 total claimed benefits for this scenario occur in the
18 first 20 years,while the remaining estimated benefits
19 occur in years 21-35.Furthermore,two of the scenarios
20 actually result in increased costs to customers.Table
21 NLP-SD-6 below presents the 20 year and 35 year NPV
22 benefits for all nine price-policy scenarios resulting
23 from the updated nominal revenue requirements analysis.
24
25
1421 Phillips,Di-Supp -46
Monsanto Company
1
2 TABLE NLP-SD-6
3 2017 Wind RFP Nominal Revenue Requirement
4 PVRR(d)
PacifiCorp's Updated Economic Analysis
5 (Benefit)/Cost ($million)
Price-Policy Scenario 20 Yr 35 Yr
Low Gas,Zero CO2 156 184
7 Low Gas,Medium CO2 127 127
Low Gas,High CO2 (30)(147)
8 Medium Gas,Zero CO2 (13)(92)
Medium Gas,Medium CO2 (51)(167)
Medium Gas,High CO2 (141)(304)
10 High Gas,Zero CO2 (262)(448)
High Gas,Medium CO2 (297)(499)
11 High Gas,High CO2 (388)(635)
12
13
14 Q.HOW DOES THIS COMPARE TO THE COMPANY'S ORIGINAL
15 ECONOMIC ANALYSIS?
16 A.In the Company's original analysis,the Medium
17 Gas,Medium CO2 scenario resulted in a 20 year NPV
18 benefit of $93 million,which was 68%of the total 35
19 year estimated benefit.Additionally,compared to the
20 Company's original analysis,seven of the nine scenarios
21 included in the updated analysis result in less favorable
22 economics over the first 20 years.For convenience,
23 Table NLP-SD-7 below presents that 20 year and 35 year
24 NPV benefits for the nine price policy scenarios that
25 resulted from the original analysis.
1422 Phillips,Di-Supp -47
Monsanto Company
1 TABLE NLP-SD-7
2 2017 Wind RFP Nominal Revenue Requirement
PVRR(d)
3 PacifiCorp's OriginalEconomic Analysis
(Benefit)/Cost ($million)
4
Price-Policy Scenario 20 Yr 35 Yr
5 Low Gas,Zero CO2 96 174
6 l»wees,Medwnco2 51 93
Low Gas,High CO2 (114)(194)
7 Medium Gas,Zero CO2 (38)(53)
Medium Gas,Medium CO2 (93)(137)
Medium Gas,High CO2 (205)(317)
High Gas,Zero CO2 (241)(341)
High Gas,Medium CO2 (253)(351)
10 High Gas,High CO2 (390)(595)
11 Q.WHAT DOES THIS IMPLY ABOUT THE RISK OF THE
12 COMBINED PROJECTS?
13 A.This reveals that the Combined Projects are
14 actually more risky for customers than the Company's
15 original analysis indicated.This is because,
16 originally,the majority of the benefits accrued earlier.
17 This can be seen by inspecting CORRECTED Figure 5-SD in
18 the Company's Supplemental Direct Testimony,which I have
19 included below for convenience (updated with the revised
20 revenue requirements contained in the Company's Second
21 Supplemental Direct Testimony).Notice the revenue
22 requirements associated with the updated economic
23 analysis contained with the Second Supplemental filing
24 are higher in the earlier years and lower in the later
25 years.
1423 Phillips,Di-Supp -48
Monsanto Company
1 CORRECTED Figure 5-SD
2 Updated Total-System Annual Revenue Requirement
With the Combined Projects (Benefit)/Cost ($million)
3
$80
4 $60
$40 -
5 $20
$06.($20)
7 ,,,($40)
($60)
8 ($80)
($100)
9 ($120)
oooooooooooooooooooooooooooooooooo10
2nd Supplemental ---Direct Testimony
ll
12 Additionally,the Company also failed to plot
13 an important data point,the 2050 year,for its updated
14 economic analysis.The NPV of the plot above,as
15 presented by RMP,is only $113 million,not the $167
16 million referenced by the Company.To get to the $167
17 million referenced by the Company,the Company's analysis
18 includes a large,terminal value benefit in 2050,which I
19 will discuss later.In Figure NLP-SD-13 below,I have
20 updated the modified version of the Company's CORRECTED
21 Figure 5-SR below to include the 2050 year.
22
23
24
25O
1424 Phillips,Di-Supp -49
Monsanto Company
i
1 FIGURE NLP--SD 13
2 Updated Total-System Annual Revenue Requirement
With the Combined Projects (Benefit)/Cost ($million)
3
$100
4
$0
5 ($100)---
6 .($200)-----------
($300)7 m
($400)
8 ($500)
9 ($600)
oooooooooooooooooooooooooooooooooo10
-e-2nd Supplemental ---Direct Testimony
ll -
12 As can be seen,the Company is relying heavily
13 on the 2050 year to demonstrate positive economic
14 benefit,in turn,placing significant risk exposure on
15 the ratepayers.It is well understood that the further
16 out in time an economic model extends,the more uncertain
17 it becomes.40 In the case of the Combined Projects,
18 during the first 10 years of the Wind Projects,an
19 additional benefit (the PTCs)is realized.After the
20 PTCs expire,the remaining benefits are primarily driven
21 by energy savings,which in turn depend heavily on
22 commodity forecasts.In my direct testimony,I discussed
23 the problems RMP has had accurately forecasting commodity
24 prices,and particularly its tendency over the last eight
25 years to overestimate future gas and power prices.If
1425 Phillips,Di-Supp -50
Monsanto Company
1 the commodity prices are overstated in the economic
2 modeling for the Combined Projects,customer benefits are
3 /
4
5 /
6
7 /
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22 40 As the Company said in its application in Docket No.
20000-481-EA-15 (Record No.14220)before the Wyoming Public Service
23 Commission:"While the Company's planning process is robust and
designed to reasonably capture a wide range of uncertainties,the
24 magnitude of various planning uncertainties grows further out into
the IRP 20-year planning horizon."
25
1426 Phillips,Di-Supp -50a
Monsanto Company
1 overstated and the likelihood that customers willO2experiencehighercostsasaresultoftheproposed
3 Combined Projects increases.
4 Q.WHAT CHANGES CAN EXPLAIN THE INCREASED RISK IN
5 THE COMBINED PROJECTS?
6 A.The primary driver of the increased risk is the
7 change in the federal corporate tax rate.While the
8 lower tax rate has made utility capital cheaper,it has
9 also reduced the value of the PTCs generated by the Wind
10 Projects.The PTCs are only generated during the first
11 10 years of eligible wind projects,and reducing the
12 value of the PTCs directly translates into higher initial
13 revenue requirements relative to the original analysis.
14 In addition to the reduced value of the PTCs,
15 there are other changes which make the Combined Projects
16 more risky.The Company reduced its load forecast and
17 its commodity forecasts,which also reduce the value of
18 the proposed projects.
19 Finally,there is the issue of the newly
20 assumed terminal value of the Wind Projects.
21 Q.PLEASE ELABORATE ON THE ISSUE WITH TERMINAL
22 VALUE.
23 A.As I mentioned earlier,the terminal value is a
24 new benefit never before modeled by the Company.
25 (Redacted)
1427 Phillips,Di-Supp -51
Monsanto Company
(Il '
2 (redacted).41 RMP argues that remaining life of
3 transmission assets required for interconnection could be
4 reused to reduce costs to interconnect new projects that
5 are developed at these existing sites in the future.42
6 Consequently,the value of this is highly speculative.
7 In order for the value to be realized,a new project must
8 be built at this site,which in turn would have
9 /
10
11 /
12
13 /
14
15
16
17
18
19
20
21
22
23 41 Wyoming New Wind/Transmission Docket,RMP response to WIEC
Data Request 12.5,Confidential Attachment Page 11 of 20.
24 42 Supplemental Direct Testimony of Rick Link at p.17,1.18 -
p.18,l.9.
25
1428 Phillips,Di-Supp -51a
Monsanto Company
1 additional costs which are not included in the Company's
2 analysis.The Company does not state why this benefit
3 was left out of the original analysis,but now the
4 Company is claiming a (redacted)43 (nominal)benefit for
5 all of its price-policy scenarios.
6 Absent this previously unquantified benefit,
7 the updated analysis would result in (redacted)44 less
8 benefits in the 35 year NPV for the Medium Gas,Medium
9 CO2 scenario compared to the original analysis provided
10 by RMP.In total,seven of the nine price-policy
11 scenarios would actually result in less favorable
12 economics relative to the original analysis filed by the
13 Company when excluding the terminal value.The
14 Commission should take extreme caution when considering
15 the claimed additional benefits resulting from the
16 updated economic analysis,because in large part they
17 depend on an assumption about a highly speculative
18 benefit that occurs 35 years in the future.Table
19 NLP-SD-7 below compares the updated economic analysis
20 excluding the terminal value assumption to the original
21 35 year analysis present by RMP.
22
43 RMP Witness Rick Link Confidential Workpaper,"EV2020 Second
23 Supp Results Summary File -VOM adjusted CONF.xlsx"as referenced in
Wyoming New Wind/Transmission Docket,RMP response to WIEC Data
24 Request 18.1(f).
44 Id.
25
1429 Phillips,Di-Supp -52
Monsanto Company
NON-CONFIDENTIAL TABLE NLP-SD-8
3 2017 Wind RFP Nominal Revenue Requirement
PVIGL(d)
4 Updated Economic Analysis ExcludingTerminal Value
and OriginalAnalysis
5 (Benefit)/Cost ($million)
6 35Yr35YearExcludingPrice-Policy Scenario Original Terminal7AmdysuVdue
lowcas,ZeroCO2 174
Low Gas,Medium CO2 93
9 Low Gas,High CO2 (194)
Medium Gas,Zero CO2 (53)10 Medium Gas,Medium CO2 (137)
11 Medium Gas,High CO2 (317)
High Gas,Zero CO2 (341)
12 High Gas,Medium CO2 (351)
High Gas,High CO2 (595)
13
14 Q.DID THE COMPANY UPDATE ITS ANALYSIS TO ASSESS
15 THE RISK ASSOCIATED WITH THE VARIABILITY OF WIND OUTPUT?
16 A.No.In WIEC Data Request 5.9 in the Wyoming
17 New Wind/Transmission Docket,WIEC asked for a risk
18 assessment related to the variability of wind output.46
19 The Company objected and indicated it would instead
20 perform this analysis later when the wind sites,
21 equipment,and layout were more certain.However,the
22 Company has yet to update its response and economic
23 analysis to provide an assessment of this risk.
24 In WIEC Data Request 18.2 in the Wyoming New
25 Wind/Transmission Docket,WIEC again asked about a risk
1430 Phillips,Di-Supp -53
Monsanto Company
1 analysis surrounding the variability of wind output.47O2RMPrespondedstatingthattheCompanyconsidered
3 wind-performance risk by
4 /
5
6 /
7
8 /
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23 45 Id.
46 Wyoming New Wind/Transmission Docket,WIEC Exhibit No.
24 304.1.
47 Id.
25
1431 Phillips,Di-Supp -53a
Monsanto Company
1 analyzing wind data for certain bids offered into theO22017RRFPhowever,the Company has still not quantified
3 the economic risk associated with variable wind output.
4 This is particularly concerning as the Combined Projects
5 economics rely upon generating PTCs which,in turn,
6 depend entirely upon the wind output in the first 10
7 years of operation.The Company admitted this is a risk
8 to customerS48 and also admitted that this risk is not
9 present if a PPA based project was pursued.49
10 Q.WHAT CAN CAUSE THE OUTPUT FROM THE FACILITIES,
11 AND THUS THE AMOUNT OF PTCS,TO BE LOWER THAN WHAT THE
12 COMPANY ASSUMED IN ITS MODELING?
13 A.A variety of factors,including curtailment.
14 RMP stated in response to WIEC Data Request 17.7 in the
15 Wyoming New Wind/Transmission Docket that a Qualifying
16 Facility ("QF")project with a cumulative total of 320 MW
17 of new capacity will interconnect to Segment D.2.
18 However,RMP also stated that the Company has not
19 reserved interconnection capacity for that 320 MW project
20 on that line because the project needs additional
21 transmission upgrades in order to come on line,which is
22 scheduled to occur in 2024,according to RMP's
23 interconnection queue.RMP's interconnection queue50
24 indicates the project (Q0409A-D)has a signed
25 interconnection agreement,and its PPAs are executed.
1432 Phillips,Di-Supp -54
Monsanto Company
1 If and when that QF project comes online,RMPO2mustpurchaseitspowerbecauseitisaQF.
3 Additionally,RMP must curtail its own Wind Projects
4 before it curtails a QF,because QFs are "must take"
5 resources that can only be curtailed in times of
6 emergency.
7 /
8
9 /
10
11 /
12
13
14
15
16
17
18
19
20
21
22 46 Wyoming New Wind/Transmission Docket,RMP response to WIEC
Data Request 18.3.
23 49 Wyoming New Wind/Transmission Docket,WIEC Exhibit No.304.1
and RMP response to 18.4.
24 50 Available at:http://www.oasis.oati.com/PPW/PPWdocs/
25
pacificorplqiaq.htm
1433 Phillips,Di-Supp -54a
Monsanto Company
1 Thus,this additional 320 MW of QF capacity,for whichO2RMPhasnotreservedinterconnectioncapacity,may impact
3 the generation of energy and PTCs from the Wind Projects.
4 Additionally,RMP has indicated that the Wind
5 Projects are currently in various stages of assessing
6 avian impacts,including data collection,initiation of
7 discussions with the appropriate agencies,and
8 development of mitigation plans.51 Furthermore,bidders
9 in the 2017R RFP did not submit a formal mitigation plan
10 as part of their bid package.As a result,avian issues
11 could require curtailment at any of the Wind Projects,
12 causing the output and related PTCs to be lower than
13 assumed in the Company's analyses.
14 Q.DID EITHER OF THE INDEPENDENT EVALUATORS
15 EXPRESS ANY CONCERN REGARDING WIND OUTPUT?
16 A.Yes.The Utah Independent Evaluator ("Utah
17 IE")stated in its conclusions:
18 A common occurrence in the wind industry has
been that the actual capacity factors of wind
19 projects have been lower than the projected
capacity factors.Such an occurrence for PPA
20 options is not a major issues since the PPA
project must conform to the contract
21 requirements for meeting generation required
levels or incur penalties.For BTA or
22 benchmark options,failure to meet the targetcapacityfactorisanissue.For one,the full
23 PTC benefits may not be realized if generation
is lower than projected.Failure to meet
24 projected generation levels for these resources
results in higher unit costs and raises the
25 question of whether these projects would have
1434 Phillips,Di-Supp -55
Monsanto Company
1 been selected if realistic generation profiles
were provided.While PacifiCorp retained
2 Sapere to conduct such an analysis to ensure
the generation levels and capacity factors are
3 reasonable,the IE feels there is some risk
associated with the (redacted)projects
4 based on the Sapere analysis regarding wake
losses.The IE feels that the generation
5 levels of the benchmark and BTA options should
be closely monitored to ensure they perform as
6 proposed.52
7 /
8
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22
23 51 Supplemental Direct Testimony of Rick T.Link at p.14,ll.
19-21 and RMP's response to WIEC Data Request 14.27 (WIEC Exhibit No.
24 304.1)in the Wyoming New Wind/Transmission Docket.
52 Confidential Exhibit No.304.2.
25
1435 Phillips,Di-Supp -55a
Monsanto Company
1 Excerpts of the Utah IE Report are attached as
2 Monsanto Exhibit No.218 to my Supplemental Direct
3 Testimony.
4 Q.DID THE COMPANY ASSESS THE RISK OF CAPITAL COST
5 OVERRUNS IN ITS UPDATED ECONOMIC ANALYSIS?
6 A.No.
7 Q.DID THE COMPANY PERFORM ANY SENSITIVITIES
8 REGARDING ITS LOAD FORECAST USED IN ITS UPDATED ANALYSIS?
9 A.No.
10 Q.WHAT DO YOU CONCLUDE FROM THE COMPANY'S RISK
11 ASSESSMENT?
12 A.The Company has not performed a reasonable
13 assessment of projects risks that under its proposal will
14 be borne by RMP customers.Absent this risk assessment,
15 there is no reasonable way to grant the Company's request
16 for a CPCN and preserve the public interest unless the
17 Commission's order contains concrete ratepayer
18 protections that address these risks.
19 Q.WHAT DO YOU CONCLUDE WITH RESPECT TO THE
20 COMPANY'S UPDATED ECONOMIC ANALYSIS?
21 A.Nothing contained within the Company's updated
22 economic analysis and supplemental testimony has changed
23 the conclusion and recommendations presented in my direct
24 testimony.In fact,when inspected more closely,the
25 results show that the Combined Projects are more risky
1436 Phillips,Di-Supp -56
Monsanto Company
1 than the Company's direct testimony indicated.
2 Furthermore,the Company has not performed any additional
3 risk analysis even though it has had ample time to do so.
4 Based on these facts alone,I recommend the Commission
5 deny RMP's request for a CPCN.
6 /
7
8 /
9
10 /
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1437 Phillips,Di-Supp -56a
Monsanto Company
1 Q.DO YOU HAVE ANY OTHER OBSERVATIONS REGARDINGO2THERISKSPOSEDTORATEPAYERSBYTHECOMBINEDPROJECTS
3 AND RATEPAYER PROTECTIONS?
4 A.Yes.In Oregon,the Independent Evaluator
5 ("IE")issued a report on RMP's 2017R RFP and
6 recommended,in part,certain ratepayer protections.
7 Specifically,the Oregon IE stated:
8 We have additional recommendations related to
the RFP to help protect ratepayers from bearing
9 undue risk.First,in order to protect
ratepayers and ensure that they receive the
10 benefits promised during this RFP we would
recommend that all selected resources to be
11 owned by the Company (i.e.,BTAs and Benchmark
resources)be held to their capital and
12 operations and maintenance ("O&M")costprojectionsasprovidedwiththebid.These
O 13 amounts should be considered a "hard"cap,meaning that there will be no opportunity for
14 the Company to collect additional costs even if
they believe such expenditures were prudent.
15 Doing so will help give the offers a risk
profile much closer to that of a PPA,requiring
16 the Company to take risks that typical wind
developers take,and insulate ratepayers from
17 the risk of cost overruns.Because the majority
of construction costs will be covered under the
18 BTA agreement or,in the case of Benchmarks,a
negotiated engineering,procurement,and
19 construction ("EPC")agreement,we feel this is
a reasonable requirement.
20
21 Second,ratepayers should not be harmed if
either PacifiCorp or the project developers
22 fail to acquire 100%of the value of the
Production Tax Credit ("PTC").PacifiCorp
23 should provide an unconditional guarantee
(i.e.,not subject to force majeure or change
24 in law)that ratepayers will receive the full
projected value of the Production Tax Credit.
25 This includes situations where (a)PacifiCorp
1438 Phillips,Di-Supp -57
Monsanto Company
1 cannot claim full PTC value or (b)PacifiCorp
does not have the taxable income to use the
2 full PTC value.Again,this is similar to what
is expected of a third-party developer.
3
4 Third,the Company should similarly be held to
their cost projections for the Aeolus-to-
5 Bridger D2 Segment.PacifiCorp's resource
acquisition strategy here -which includes
6 three projects that rely on the D2 Segment's
construction for economic viability -is based
7 on a certain cost promise for this segment and
the Company should be held to its promises.53
8 /
9
10 /
11
12 /
13
14
15
16
17
18
19
20
21
22
23
24 53 Available at:http://edocs.puc.state.or.us/efdocs/
25
HAH/um1845hahl21349.pdf
1439 Phillips,Di-Supp -57a
Monsanto Company
1 Q.WHAT IS YOUR RESPONSE TO THE OREGON IE'S
2 RECOMMENDATIONS?
3 A.First,I think it is significant that the
4 Oregon IE included these points in its evaluation at all.
5 It is telling that the Oregon IE would recognize the
6 risks the Combined Projects pose to ratepayers and
7 recommend to the Oregon PUC that it take action to
8 protect ratepayers.
9 That being said,I do not think the Oregon IE's
10 recommendations go far enough.While of these
11 protections align with those I recommended above and in
12 my direct testimony,the Oregon IE's recommendations
13 still leave ratepayers vulnerable to significant risk.
14 This is particularly true,since the Oregon IE did not
15 compare the Wind Projects against the potential benefits
16 associated with the Solar PPA Option.
17 Q.GIVEN THE NEW INFORMATION REGARDING THE SOLAR
18 PPA OPTION,ARE YOUR DIRECT TESTIMONY RECOMMENDATIONS
19 STILL SUFFICIENT TO PRESERVE THE PUBLIC INTEREST?
20 A.No.Given the new information and economic
21 benefits presented by the Company with respect to the
22 Solar PPA Option,I no longer believe the conditions I
23 recommended in my direct testimony are adequate to
24 protect ratepayers and maintain the public interest.
25 Consequently,while I maintain the prudent action is for
1440 Phillips,Di-Supp -58
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1 the Commission to deny RMP's request for a CPCN outright,
2 should the Commission decide to approve RMP's request,I
3 have a revised set of conditions that should be imposed
4 upon RMP in order to preserve the public interest.
5 Q.IS THERE ANY REASON TO CONSIDER PURSUING BOTH
6 THE SOLAR PPA OPTION AND THE COMBINED PROJECTS TOGETHER?
7 A.No.The best case scenario stemming from the
8 full nominal revenue requirements analysis as reported by
9 the Company is an incremental $11 million in NPV benefits
10 if the
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1441 Phillips,Di-Supp -58a
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1 $2.245 billion Combined Projects are layered on top ofO2theSolarPPAOption.On the other hand,in the worst
3 case scenario,the $217 million in solar benefits are
4 reduced by $424 million as a result of adding the
5 Combined Projects,resulting in a $208 million cost
6 increase to customers.Under no circumstances would
7 pursuing both the Combined Projects and the Solar PPA
8 Option be pursued simultaneously be in the public
9 interest.
10 V.RECOMMENDED CONDITIONS
11 Q.WHAT CONDITIONS DO YOU RECOMMEND IF THE
12 COMMISSION GRANTS A CPCN FOR THE COMBINED PROJECTS?
13 A.I recommend conditions similar to those
14 identified in my direct testimony,updated in light of
15 the results of the Solar PPA Option,which is less
16 costly,less risky,and provides greater net benefits
17 than the Combined Projects.Consequently,if the
18 Commission approves the Combined Projects,it should only
19 do so under the expressed conditions that ratepayers will
20 be no worse off than if RMP were to actually propose and
21 pursue the Solar PPA Option.Absent these conditions,a
22 finding that the Combined Projects are in the public
23 interest cannot be maintained.If the Commission grants
24 a CPCN for the Combined Projects,such approval should
25 include the following conditions:
1442 Phillips,Di-Supp -59
Monsanto Company
1 1.Disallow rate based recovery for any
turbines that are not commercially
2 operational in time to receive 100%of the PTC
benefits they are being constructed to capture,
3 along with a capacity ratio share of any
interconnection,transmission,distribution,
4 and AFUDC costs.
5 2.Cap RMP's cost recovery on the capital cost of
the Combined Projects from retail ratepayers,
6 inclusive of the new generation and
transmission facilities,as well as any
7 interconnection costs,network upgrades,
distribution costs,and AFUDC to $1,781.44
8 million installed cost;a reduction of $468
million,or approximately 21%,from the total
9 cost of the Combined Projects.
10 3.Cap RMP's recovery of future O&M and capital
expenditures related to the Combined Projects,
11 and net fixed system costs to those levels
assumed in the Company's updated economic
12 analysis.
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22
23
24
25
1443 Phillips,Di-Supp -59a
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1 4.RMP should be required to include in its Base
Rates and Net Power Costs,at minimum,the full
2 (i)10 years of PTCs,assuming at minimum a 21%
federal corporate income tax rate,and (ii)
3 energy benefits to customers for the life of
the Wind Projects,both based on the assumed
4 net capacity factors used in RMP's updated
economic modeling.
5
5.Ratepayers should be guaranteed receipt of the
6 full grossed up value of the PTCs withouthavingtocompensateRMPforreturnon any
7 deferred tax assets that may be created as a
result of RMP's inability to contemporaneously
8 monetize PTCs to full value.
9 6.If RMP ceases construction of the Combined
Projects,for whatever reason,no costs
10 incurred are recoverable from customers.
11 Establishing the recoverable capital costs
12 upfront,and capping future recovery of costs relating to
13 the remaining assumptions used by RMP in its updated
14 economic analysis,will increase the probability that
15 customers will receive at least the same benefits and
16 risk profile from the Combined Projects as they would
17 from the Solar PPA Option (i.e.,what appears to be the
18 truly least-cost,least-risk portfolio as evidenced by
19 RMP's own nominal analyses).However,given customers
20 cannot be protected from all of the risk of increased
21 costs from the Company's proposal,it is essential that
22 the Combined Projects be rigorously evaluated to
23 determine whether there is a high probability that
24 customers will be better off with the Combined Projects
25 than without them.
1444 Phillips,Di-Supp -60
Monsanto Company
1 Q IF THE COMMISSION WERE TO APPROVE THE CPCN WITH
2 CONDITIONS AS YOU HAVE RECOMMENDED,DO THE CONDITION NEED
3 TO BE THE EXACT CONDITIONS YOU HAVE RECOMMENDED?
4 A No.The conditions need not be exactly those
5 conditions I have recommended verbatim.So long as the
6 Commission conditions the approval of the CPCN with a
7 package of conditions such that there is sufficient
8 ratepayer protections that ensures customers will
9 /
10
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12
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14
15
16
17
18
19
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1445 Phillips,Di-Supp -60a
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1 not be worse off with the Combined Projects than without
2 them,under all the alternative resource portfolios and
3 price-policy scenarios analyzed.
4 VI.CONCLUSION
5 Q.AS CURRENTLY PROPOSED BY THE COMPANY,CAN THE
6 COMMISSION APPROVE RMP'S REQUEST FOR A CPCN WHILE
7 PROTECTING THE PUBLIC INTEREST?
8 A.No.
9 Q.WHAT DO YOU RECOMMEND WITH RESPECT TO THE
10 COMPANY REQUEST FOR A CPCN IN THIS PROCEEDING?
11 A.I recommend the Commission deny RMP's request
12 for a CPCN.However,if the Commission believes that the
13 Combined Projects should be undertaken,then conditions
14 should be included on the Commission's approval to ensure
15 the ratepayers are not burdened by paying for an inferior
16 project.Absent these conditions,the public interest
17 cannot be maintained.
18 Q.DOES THIS CONCLUDE YOUR SUPPLEMENTAL DIRECT
19 TESTIMONY?
20 A.Yes,it does.
21
22
23
24
25
1446 Phillips,Di-Supp -61
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1 (The following proceedings were had in
2 open hearing.)
3
4 DIRECT EXAMINATION
5
6 BY MR.BUDGE:(Continued)
7 Q Have you had an opportunity to review the
8 settlement stipulation between the Company and the
9 Staff?
10 A Yes,I have.
11 Q And have you also had an opportunity to
12 review the testimony that was filed in support of that
13 both by the Company witnesses as well Staff witness?
14 A Yes,I have.
15 Q Let's start first with the stipulation
16 itself and do you have a copy of that in front of you?
17 A No,I do not,but I'm relatively familiar
18 with it.
19 Q Okay,do you have any comments you wish to
20 make with respect to the terms of the settlement
21 agreement itself?
22 A I have some general comments to make that,
23 you know,follow in line what we said in my testimony or
24 what I said in my testimony in that from a matter of
25 need,we would disagree or I disagree that the project is
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1 needed in the sense of a reliability standpoint,and it's
2 truly a discretionary project and consequently,the
3 stipulation doesn't go far enough to adequately protect
4 the customers from this discretionary project and the
5 risks associated with it.
6 More specifically,while it's true that
7 the Company is picking up,as they've discussed,some of
8 the risks associated with the qualification of PTCs,
9 there's still no guarantee regarding the actual
10 generation of those PTCs,you know,ensuring that the
11 wind is going to blow and making sure that there's energy
12 actually coming out of wind projects.
13 Similarly,there's no way to guarantee,
14 there's nothing in the stipulation that covers the price
15 of natural gas or alternative resources that might become
16 available as more economic,you know,had this larger
17 investment not been made.
18 Finally,there's no cost overrun provision
19 within the stipulation.These are three of the main
20 risks and main conditions that I had recommended in my
21 testimony that should be a condition upon any CPCN
22 approval by the Commission in this case.
23 Q Any further questions on the terms of the
24 stipulation itself?
25 A No.If there are specific questions,I
CSB REPORTING 1448 PHILLIPS (Di)
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1 could get into those once I've got a copy of it in front
2 of me.Those are my general concerns with the
3 stipulation as it stands.
4 Q Let me turn to the supporting testimony
5 that was filed by the Company witnesses first.Ms.
6 Steward filed settlement testimony in support.Have you
7 had an opportunity to review her testimony?
8 A Yes,I have.
9 Q And do you have any concerns you wish to
10 address with respect to that testimony?
11 A Yes,as Mr.Dauphinais alluded to,I want
12 to discuss some of the economic-based concerns that she
13 had referenced,as well as her statement that this is an
14 unprecedented opportunity;however,she then
15 characterized a lot of our conditions as being
16 unprecedented and,you know,I think it's an even
17 matching from that standpoint.We have an unprecedented
18 opportunity,but it's also unprecedented not just because
19 of the timeliness of it,but because of the overall
20 nature of the project and that is discretionary.
21 The lights aren't going to go off if this
22 project is not pursued.It's really a hedge and I know
23 that Ms.Crane didn't want to characterize it this way,
24 but what this really is is a hedge against natural gas
25 price volatility and market price volatility.They're
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1 locking into the capital cost of these projects that will
2 offset front office transactions and the front office
3 transactions in the future may be more expensive,they
4 may be less expensive,and they're locking into this
5 price to avoid some of that,and I don't think we should
6 be going out there and putting all of the risk on the
7 backs of customers for a hedge.
8 You can delay this decision a couple of
9 years.The lights aren't going to go out.There was an
10 alternative portfolio put out there in Mr.Link's
11 testimony,that solar PPA option that was actually
12 greater benefits to customers for least cost and I viewed
13 it also as least --less risk,and so when we're talking
14 about well,what type of conditions do we need to provide
15 for the customers,yes,they might be unprecedented as
16 Ms.Steward characterized them,but it's necessary to
17 ensure that customers are going to get the value that
18 they are promised by the Company in their filing.That's
19 about what I had for Ms.Steward.
20 Q Nothing further on the testimony of
21 Ms.Steward?
22 A No.
23 Q What about the other Company witness that
24 presented the testimony,Mr.Link,do you have any
25 comments on his testimony?
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208.890.5198 Monsanto Company
1 A I do and a lot of what I would say aboutO2Mr.Link's testimony,I would echo what I just said in
3 response to the economic reference in Ms.Steward's
4 testimony is that what we really have here is a
5 discretionary project and it's an economic-based project.
6 We actually even heard that --maybe I'm going back a
7 second,you know,Ms.Steward said that if we were to
8 impose these unprecedented conditions,it would disincent
9 the Company in the future to go and pursue economic
10 opportunities.I mean,that's a flat-out
11 characterization.This is not a needed project.It's an
12 economic project,and so when we're looking at what the
13 economic opportunities are,we need to look at what all
14 of the various economic opportunities are under all the
15 various scenarios that have been presented.
16 In Mr.Link's testimony,he presented
17 evidence that there was a,you know,less cost,less
18 risk,higher benefit portfolio out there in the form of a
19 solar PPA option,and so we need to use that potentially
20 as the benchmark to compare the combined projects to,not
21 just the status quo,but if you're going to pursue
22 something,you know,why aren't you actually pursuing the
23 one with the most benefits and the least risk.
24 Furthermore,I would like to point out
25 something that was uncovered in Mr.Link's settlement
CSB REPORTING 1451 PHILLIPS (Di)
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1 testimony and that's if you take a look at his Table 3-ST
2 and you compare it to corrected Table 3-SS,what we see
3 is that they re-ran the simulation models to account for
4 the removal of the Uinta project and when you compare --
5 Q Let me just stop you,I apologize,just so
6 we have it correctly in the record,the tables you're
7 referring to are on page 6 or page 8 of Mr.Link's
8 testimony;is that the table you're referring to?
9 A The settlement testimony,yes,page 8,
10 Table 3-ST.I don't have a copy of his testimony in
11 front of me.I'm just going by memory and a little bit
12 of notes,and then on his second supplemental direct,I
13 think is what it was called,it was corrected Table
14 3-SS.
15 Q Thank you.Excuse me for interrupting.
16 Go ahead.
17 A And the observation I would like to point
18 out about this is if you compare the two cases that they
19 re-ran with the Uinta project where they actually did
20 their full revenue requirements analysis,nominal revenue
21 requirements analysis,when you look at the results of
22 the full nominal revenue requirements analysis,what you
23 can see is that in both the low gas,zero carbon case,as
24 well the mid gas,mid CO2 case,the Uinta project was
25 increasing costs to customers.When they took it out,
CSB REPORTING 1452 PHILLIPS (Di)
208.890.5198 Monsanto Company
1 net benefits in the mid carbon,mid CO2 case increased
2 and when they took it out of the low gas,low CO2 case,
3 the overall detrimental impact to the customers
4 decreased,and so it's a wonder why was this in the
5 portfolio at all to begin with,and I can't come up with
6 a good reason other than to enrich shareholders.It
7 wasn't providing benefits to customers,and so that's
8 something that we need to keep an eye on.
9 Q Do you have any additional testimony to
10 add regarding Mr.Link's testimony?
11 A No,I do not.
12 Q And I believe there was also testimony
13 filed by Staff witness Carlock.Have you had an
14 opportunity to review that?
15 A I've reviewed it very briefly.I could
16 offer a couple of quick comments.Perhaps if I'm back on
17 tomorrow,we could revisit it if I've had a better chance
18 to review it.
19 Q Have an opportunity to review that more
20 thoroughly and comment tomorrow is what you're asking
21 for?
22 A I can offer a couple quick comments now
23 and if I'm back on the stand tomorrow,I'd be happy to
24 offer additional ones if I have any.
25 Q Go ahead with what you have based on your
CSB REPORTING 1453 PHILLIPS (Di)208.890.5198 Monsanto Company
1 brief review.
2 A I mean,generally speaking,I would say
3 that it echoes a lot of the things that I said already is
4 that I don't think the stipulation goes far enough,and I
5 would also say that in particular,she characterizes an
6 availability guarantee as an operational guarantee and I
7 personally don't see it that way.When I think about the
8 operational guarantee that we would be looking for to
9 protect ratepayers,it's a guarantee on the output of the
10 facility.It's not a guarantee on whether they're going
11 to be available.The customers are provided no benefits
12 if the wind doesn't blow and especially if the wind
13 doesn't blow the right times.Now,there were
14 mischaracterizations earlier about the time of day and
15 that's not actually the case.It's very important that
16 the wind blows as much as expected or greater in the
17 first 10 years when PTCs are being generated.
18 If the wind doesn't blow as much during
19 the first 10 years,but blows more after that,the
20 economics are going to shift,because there's not any
21 PTCs associated with the production of wind after the
22 PTCs expire in 2030,and so I would say that if we're
23 talking about an operational guarantee that we would be
24 looking for in order to make sure that ratepayers are
25 sufficiently protected,it comes in the form of a net
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1 capacity factor guarantee,not an availability guarantee.
2 Q So the issue that has been left open in
3 the settlement agreement for the Commission to determine
4 is whether there should be a cost cap or not --
5 A Uh-huh.
6 Q --and if so,what that cost cap should
7 look at.The Staff position,as I understand it from the
8 testimony of Ms.Carlock filed in support,is consistent
9 with their testimony in the original case and that is
10 that there should be a fixed cap on all capital costs
11 based on the filing herein by the Company,so you
12 testified just a moment ago about the risks associated
13 with the PTCs if the wind doesn't blow,is that a risk
14 that would still remain with the customers even if there
15 were a fixed cap,hard cap,on all capital costs?
16 A That risk is still going to be there in
17 terms of the PTCs and the capital cost cap,even if it's
18 a hard cap,doesn't completely alleviate the cost risk,
19 because there are certain scenarios that were put forth
20 as we saw in Mr.Link's testimony,in particular the low
21 gas,low CO2 and the low gas,mid CO2 cases where there
22 were no net benefits even if the cost cap was set at what
23 was expected and everything else performed as expected.
24 You know,the projects would still lead to a rate
25 increase or a net detriment to customers,and so that's
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208.890.5198 Monsanto Company
1 another thing that I would like to talk about is thatO2todaywesitinaperiodoftimewherewehavelowand
3 expected to go lower gas prices.
4 The forward curves are continuing to fall.
5 We heard a lot about that.We don't have any federal CO2
6 tax or carbon policy at this point,and so what we're
7 talking about is today the low gas,no CO2 represents the
8 status quo and the cost cap at the filed estimate does
9 not protect ratepayers from a detrimental impact of the
10 projects under those conditions.
11 Q And if the Commission were to go further
12 than a fixed cost cap on capital costs,what type of
13 protections might be implemented to deal with these other
14 risks you've discussed?
15 A Those were all covered in my testimony.
16 Specifically,we'd be looking for an operational
17 guarantee in the form of a net capacity factor guarantee,
18 including if it falls below imputation of PTCs,including
19 a tax gross-up,as well as a cost cap that is going to be
20 below the filed estimate in order to ensure that the
21 ratepayers wouldn't be harmed under the low gas,low CO2
22 scenario,and even like I said earlier,the solar PPA
23 option really represents the benchmark of comparison if
24 you want to talk about something being done,which as
25 I've said,I don't think there's anything that needs to
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208.890.5198 Monsanto Company
1 be done today,but if you're going to do something,
2 that's the benchmark for comparison,but they haven't
3 asked to do that,so we can't say do that.
4 Q So am I hearing correctly that there isn't
5 anything in the settlement stipulation that would cause
6 you to change the recommendations that are in your
7 testimony?
8 A No,I think that the Company taking the
9 risk on the PTC qualifications was one of the conditions
10 I had said in my testimony,and so for that,it's a step
11 in the right direction,but it's just not a large enough
12 step.
13 MR.BUDGE:Thank you.No further
14 questions.
15 COMMISSIONER ANDERSON:Ms.Williams.
16 MR.WILLIAMS:No questions.
17 COMMISSIONER ANDERSON:Mr.Olsen.
18 MR.OLSEN:I have a couple of questions.
19
20 CROSS-EXAMINATION
21
22 BY MR.OLSEN:
23 Q Mr.Phillips,on page 8 of your direct
24 testimony --I'm sorry,I apologize,it's page 6 of your
25 direct testimony --
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1 A I'm sorry,could you repeat the reference,
2 please?
3 Q Yes,so it's page 6 on your direct
4 testimony.
5 A Okay,I'm there.
6 Q Now,you've heard testimony today of,I
7 guess,two different ways to interpret the Company's IRP
8 and its need.Here in line 8 you begin --it's your
9 contention,which you've already just said in your
10 comments prior to my question,that the projects aren't
11 based on need;is that correct?
12 A That's correct.They're not based on
13 satisfying an immediate reliability or planning need for
14 capacity today.
15 Q And Mr.Link has in his rebuttal
16 testimony,and I know you don't have that in front of
17 you,but if you recall --well,I'll refresh your
18 recollection.On his rebuttal testimony page 6,he took
19 issue with Mr.Louis'characterization between,the
20 distinction between,a resource need and a capacity need.
21 Do you agree with Mr.Link's characterization there?
22 A Maybe I even have my own view on that.
23 You know,the question I think that needs to be answered
24 is whether there's any action that needs to be taken
25 today from a capacity standpoint in order to,you know,
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1 reliably serve their customers,and the answer to that
2 question is no.There's no action that needs to be taken
3 because of the availability of front office transactions.
4 What's really being proposed is an optimization to their
5 portfolio that may or may not benefit customers,and
6 we've seen that in the results of Mr.Link's analysis.
7 There's risks that are associated with the proposal and
8 there's,you know,the potential to defer some capacity
9 that might be required in 2028,although the direction of
10 IRPs from past to now have always been deferring and
11 deferring more capacity later and later,so it's a really
12 big question as to whether or not there would even be a
13 need then.
14 MR.OLSEN:Further questions.
15 COMMISSIONER ANDERSON:Thank you.The
16 Company?
17 MS.McDOWELL:So I do have questions.Is
18 it your intention to go past 5:00?It's just I have more
19 than 10 minutes.
20 COMMISSIONER ANDERSON:We're going to go.
21 Yeah,go ahead.
22 MS.McDOWELL:So go ahead and finish my
23 exam today?
24 COMMISSIONER ANDERSON:Right.
25 MS.McDOWELL:Okay,thank you.So my
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1 colleague is going to be circulating a cross-examinationO2exhibitI'll be using later.
3
4 CROSS-EXAMINATION
5
6 BY MS.McDOWELL:
7 Q So Mr.Phillips,can you please turn your
8 attention to your supplemental direct testimony at page
9 59,and I just wanted to pick up on some of the comments
10 you just gave about conditions to the stipulated projects
11 that you have proposed and I believe your testimony on
12 the conditions begins on line 17.Do you see that?
13 A You're referring to the numbered bullets
14 there?
15 Q I am,so I'm beginning with the bullet
16 numbered 1,do you have that?
17 A Yes,I do.
18 Q And I think you just indicated that --
19 COMMISSIONER KJELLANDER:Excuse me,I
20 think you referred to a page number that may not have
21 been.
22 MS.McDOWELL:So I'm on the supplemental
23 direct,which is the April 18th testimony.
24 COMMISSIONER KJELLANDER:What page again?
25 MS.McDOWELL:I'm on page 59.
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1 COMMISSIONER KJELLANDER:Thank you.O 2 MS.McDOWELL:And I'm on line 17.
3 Q BY MS.McDOWELL:So your first condition
4 was to disallow cost recovery for turbines that don't
5 qualify for the PTC.Do you see that?
6 A Yes,I do.
7 Q And I believe that's a condition that you
8 said you agreed had been met in the stipulation;is that
9 correct?
10 A Well,if the Company is going to take that
11 risk,there would be no reason to disallow rate base
12 recovery for that reason,so yes,I would agree.
13 Q So I wanted to ask you about that
14 question.If you go to your fourth condition,which is
15 on page 60,lines 2 through 3,and there you indicate
16 that there's a condition where you should impute the
17 PTCs,assuming a minimum 21 percent corporate tax rate,
18 is that really the same condition that you just talked
19 about under condition 1?
20 A No,it is not.Condition 4 is dealing
21 with the operational output of the facilities where
22 condition 1 was dealing with the qualification for PTCs,
23 so condition 4 is meant to reflect that they should be
24 required to guarantee the net capacity factor,including
25 both energy and PTCs grossed up for taxes.
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1 Q But that issue is really dealt with in
2 No.2,that sub-bullet No.2,correct,and the sub 1,the
3 inclusion of 10 years of PTCs,isn't that the same thing
4 as your condition 1?
5 A No,I just said that it's not.
6 Q I'm just trying to understand.Are you
7 proposing to both disallow cost recovery for turbines
8 that don't qualify for the PTCs and impute a benefit
9 stream associated with those?
10 A Well,no,for turbines that are going to
11 qualify for PTCs,it's not just good enough that they
12 qualify,but if they qualify,they also need to guarantee
13 the output of the facilities.I mean,that's because of
14 the discretionary nature of the proposal.It's not just
15 good enough to say hey,the PTCs are available.It
16 doesn't do you any good if they're not generated.
17 Q So I guess your testimony,then,is that
18 the stipulation satisfies the first condition but not the
19 fourth?
20 A Correct.
21 Q And I take it because you did propose the
22 first condition and the stipulation satisfies that,you
23 would consider that a benefit of the stipulation?
24 A Yes,I would.
25 Q So under the fifth condition there on line
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1 6,page 60,there you indicate that there should be no
2 return on deferred tax assets that may be created if the
3 Company cannot fully monetize the PTCs,do you see that
4 condition?
5 A Yes,I do.
6 Q But that condition has been expressly
7 satisfied in the stipulation,also;correct?
8 A I believe you're right and I didn't
9 mention that before,but it has been my recollection it's
10 included in the stipulation.
11 Q Now,back to the condition we were just
12 talking about,condition No.4,I think as you explained
13 it,that relates to imputing energy benefits based on the
14 Company's assumed net capacity factors for the project?
15 A Yes,I mean,that's what it says,the last
16 line of that.It says based on the assumed net capacity
17 factor used in the updated economic modeling.
18 Q And it is true that the stipulation does
19 include an availability guarantee that will ensure that
20 basically the projects are available to serve for 97
21 percent of the time?
22 A Right.I mean,that's just saying that
23 they're going to be there and not on an outage
24 essentially or something along those lines,but it
25 doesn't say that they're actually going to be producing
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1 energy,so that's what I would draw the distinction to.
2 Q But that guarantee certainly will support
3 your concerns around output;correct?I mean,if they're
4 there and they're operating,presumably they have an
5 energy output;correct?
6 A Well,not if the wind is not blowing and
7 that's the whole point is that the Company's analysis
8 assumes a net capacity factor and the entire economics
9 are based upon it realizing that net capacity factor,and
10 to be more pointed about it,about realizing that net
11 capacity factor in each given year,and the value of the
12 energy production from the wind is not the same from year
13 to year.It's much more valuable when PTCs are being
14 generated,and so this is getting to the point that we
15 need to see the output as expressed by the Company
16 guaranteed,because the entire project economics rest
17 upon the output of the wind facilities,not just them
18 being available,but them producing energy.
19 Q And you'd agree that guaranteeing that the
20 wind will blow would be a condition outside of the
21 Company's control;correct?
22 A Yes,but other utilities have done it.
23 Q But certainly,the availability guarantee
24 that the Company has provided is within its control in
25 terms of the operational mechanics of the wind farms;
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1 correct?O 2 A More in their control,yes.I mean,they
3 can maintain it well enough.
4 Q So can you turn to page 31 of your direct
5 testimony?That's the testimony you filed this fall.
6 A I'm sorry,you said page 31?
7 Q That's correct.
8 A Okay,I'm there with you.
9 Q At the bottom of that page beginning on
10 line 19,there you have,I think,a description of this
11 condition basically asking that PTCs be set at the net
12 capacity factor level that was assumed at the time the
13 Company filed this case.Do you see that?
14 A Yes,I do.
15 Q And at line 23,the sentence beginning at
16 the end of the page and going on to the next page,you
17 justify that condition in part by saying,"This would
18 also provide customers some protection against the risks
19 associated with a change in the federal income tax rate."
20 Do you see that?
21 A I do.I'll wait for you --
22 Q Just to be clear,that risk is now
23 incorporated in the Company's economic analysis in this
24 case?
25 A Well,in order to understand the full
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1 context of what I was saying,I think we need to visit
2 the rest of what was included in that paragraph,and
3 included at line 21,I also reference grossed up for
4 taxes at the current 35 percent federal corporate tax
5 rate,which that was what we were unsure of,whether that
6 was going to stay or that was going to change,and in
7 fact,it did change.Now,when I wrote this testimony,I
8 referenced that it would provide protection against a
9 change in corporate federal tax rate ensuring that we
10 were going to have a gross-up of 35 percent and that was
11 subject to change in the future was that protection.
12 Q Now,on page 28 at the bottom of the
13 page --
14 A Are you still on my direct testimony?
15 Q I am,yes,so just a few pages back.I
16 still have a few more questions about this NCF question.
17 In there you calculated at the bottom of the page what
18 you indicated would be a breakeven NCF.Do you see that?
19 A Yes,I do.
20 Q And there you have a number,and I don't
21 want to speak the number out loud because it's
22 confidential,but do you see that number?
23 A Yes,I do.
24 Q Now,do you have a copy of Mr.Link's
25 settlement testimony?
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1 A Not in front of me,no.
2 MS.McDOWELL:Can I cause the witness to
3 be handed his testimony if you have it?
4 (Mr.Budge approached the witness.)
5 THE WITNESS:I have his testimony in
6 front of me.
7 Q BY MS.McDOWELL:Now,do you --can you
8 turn to page 2 of his testimony,please?
9 A I'm there.I will note that I've been
10 provided a redacted copy.
11 MS.McDOWELL:That's not going to do.
12 (Mr.Lowney approached the witness.)
13 Q BY MS.McDOWELL:So,again,can you turn
14 to page 2 of Mr.Link's testimony and I'd like to direct
15 your attention to line 16.
16 A Okay.
17 Q And that has the updated average annual
18 capacity factor of the stipulated projects.Do you see
19 that number?
20 A Yes,I do.
21 Q And that number is .6 percent of the
22 breakeven number you pointed to in your direct testimony;
23 isn't that correct?
24 A And it's based off of a different
25 portfolio that I had not gone through and calculated the
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1 breakeven on.I mean,I'll agree that your
2 representation is correct,but when I calculated the net
3 capacity factor,the breakeven for this net capacity
4 factor was using the proxy resources,all the economic
5 assumptions prior to the update that Mr.Link filed in
6 his supplemental direct and in these,so I don't know
7 that we can compare them.That's my point.
8 Q I understand;so capacity factors and
9 benefits can move in different directions;correct?
10 A Right.
11 Q So you really need to look at the whole
12 picture,not just the net capacity factor;correct?
13 A What I'm saying specifically about this is
14 that there were different assumptions that went into the
15 numbers that were used to create both of these.One was
16 based off of a proxy portfolio of 860 megawatts,a
17 different load forecast,different natural gas and market
18 price assumptions,than the number that's referenced in
19 Mr.Link's testimony,so we can't compare them.
20 Q Well,let me just ask you that.If you
21 take a look at Mr.Link's Table 8,there it shows in the
22 medium case,medium,medium case,which is the same case
23 you used for your --
24 A I'm sorry,did you say Table 8?
25 Q I'm sorry,page 8,Table 3-ST.
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1 A Okay.
2 Q So there it shows that the nominal
3 benefits in the medium case,the same case you used in
4 your direct case,are 174 million net benefits.Do you
5 see that?
6 A Yes,that's correct.
7 Q So basically at roughly the same capacity
8 factor that you pointed to as the breakeven capacity
9 factor in your direct case,we basically have that same
10 capacity factor and that produces $174 million of
11 benefits in the updated analysis with a different
12 portfolio;correct?
13 A Again,recognizing it's a different
14 portfolio and different assumptions,yes.I would also
15 note that's it's not the only breakeven capacity factor I
16 attempted to calculate.I also attempted to calculate
17 one on the low gas,low CO2 case,but it's impossible to
18 calculate it because it's already above cost.
19 Q So,again,back to page 31,line 22,so
20 your condition --do you have that?
21 A You're back on my direct testimony,page
22 31?
23 Q That's right,and there you say as a part
24 of your condition,"Each time base rates are set,this
25 value should be set to the higher of the assumed net
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1 capacity factor or the actual normalized output level of
2 the facilities."Do you see that testimony?
3 A Yes,I do.
4 Q So your proposal is to set the net
5 capacity factor at the higher of the assumed number or
6 the actual net capacity factor?
7 A Effectively my recommendation is to use
8 the Company's own estimate as a floor and that will
9 ensure that the ratepayers are going to get the benefits,
10 at least the benefits,that the Company is using to
11 justify the project.
12 Q Now,you've pointed to terms and
13 conditions of PPAs as a basis for arguing that certain of
14 these conditions are reasonable;correct?
15 A Can you explain further,please?
16 Q For example,in arguing for a cost cap,
17 you've indicated that a PPA would limit the cost exposure
18 of customers.Do you recall that testimony?
19 A So I want to make sure I understand it
20 right,are you referring to the statement I made earlier
21 about the solar PPA being used as a benchmark for
22 comparison or are you saying that a PPA-style approach to
23 the portfolio in general would have a different risk
24 profile?
25 Q Well,I think your testimony in discussing
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1 the stipulation indicated that you thought a PPA was a
2 lower risk assumption for customers;is that correct?
3 A Well,no,specifically,I said that the
4 solar PPA option as presented in Mr.Link's testimony
5 showed that there were greater benefits for lower
6 costs.
7 Q So let me get to my question here,which
8 is,isn't it true that no PPA would guarantee customers
9 either an assumed number,an assumed output,or actual,
10 whichever was greater?
11 A Well,it's up to the individual PPA and
12 the terms and conditions that are being negotiated of
13 such,but one of the key differences between that and
14 what the Company's proposal would do is under a PPA,you
15 only pay for the energy that you're actually receiving,
16 where in the Company's proposal,you have to pay rate
17 base costs no matter what and if the wind turbines don't
18 perform,you also have to pay for replacement energy.
19 Q But in addition,if the wind blows harder,
20 longer,better,the customers get the benefit of that
21 amount over the assumed net capacity factor;correct?
22 A That's right,but we want to limit the
23 downside to customers.If they get some benefits,that's
24 great,but we don't want them to face increased costs.
25 Q So I want to ask you a little bit more
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1 about your second condition,so maybe we can go back toO2your,it was your,supplemental direct testimony,your
3 April testimony,and that's back to page 59 where you're
4 discussing the conditions in there,and you have your
5 cost cap proposal on line 21.Do you have that?
6 A Yes,I do.
7 Q So it's true,isn't it,that between your
8 direct and your supplemental testimony,your cost cap
9 increased from a 15 percent disallowance of the Company's
10 estimate to a 21 percent disallowance of the Company's
11 estimate?
12 A Yes,and the reason for that was in the
13 Company's supplemental testimony,it presented evidence
14 that there was a solar PPA option that was going to
15 provide greater benefits,and as I explained,that should
16 be used as a benchmark,because we shouldn't be going
17 with an inferior portfolio.
18 Q So just to get those numbers right,your
19 cost disallowance increased from 311 million to 468
20 million,do those numbers sound right?
21 A Subject to going back and checking the
22 direct testimony,yes,it sounds right.
23 Q So can you turn back to Mr.Link's
24 settlement testimony at page 2?
25 A I'm there.
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1 Q So at lines 9 through 12,Mr.Link
2 discusses the fact that the in-service capital costs for
3 the stipulated projects have decreased.Do you see that?
4 It's specifically the sentence beginning line 10 to line
5 12.
6 A Yes,I see that.
7 Q And the actual number is confidential,so
8 I won't identify it,but his testimony is that the per
9 unit capital costs have decreased by more than 20
10 percent;is that correct?
11 A I would --I'll say yes,but I mean,what
12 we need to be clear here is that this not comparable one
13 bit,apples and oranges,to my recommendation.
14 Q Well,fair enough,but just to be clear,
15 the Company's costs have decreased by 20 percent or more
16 and your disallowance has increased from 311 million to
17 468 million?
18 A And fundamentally,the reason why,as I
19 just explained,why my cost cap is where it is is because
20 the Company presented evidence that there was a better
21 portfolio of resources out there,and so if I wanted to
22 go back and re-determine what my cost cap would be based
23 off of the revised stipulated project portfolio with
24 Uinta removed,we could go and do that,but the mechanics
25 would be the same.We need to compare what the net
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1 benefits are from the combined projects or the stipulated
2 projects versus what was presented as the more
3 beneficial,less costly,less risky portfolio,that being
4 the solar PPA.
5 Q So I want to stick with the cost cap here
6 for a little bit.Can you turn to your direct testimony
7 at page 23?
8 A I'm sorry,you said page 23?
9 Q That's correct.
10 A I'm there.
11 Q And your Table NLP-2,do you have that?
12 A Yes,I do.
13 Q And there you calculated a breakeven
14 analysis and it's titled PVRR(d)with 10 percent increase
15 in capital costs,do you see that?
16 A I see that,but it's not a breakeven
17 analysis.
18 Q Fair enough.Those were my words.I
19 don't see that they're yours,but you basically
20 calculated the impact of a 10 percent increase in capital
21 costs;correct?
22 A Holding all other variables constant,
23 yes.
24 Q And your exhibit here shows that in a
25 medium,medium case,that increase would show net costs
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1 in the medium,medium case;is that correct?
2 A Right,and I believe that was the same
3 results that Mr.Link had provided in a data request to
4 us that the breakeven under the original proxy portfolio
5 was seven percent,so,you know,this is right in line
6 with that.
7 Q So can you turn back to Mr.Link's
8 settlement testimony,please,this time page 10?
9 A Yes,I'm there.
10 Q I'm sorry,it's page 9.I've got the
11 wrong page.
12 A I'm there.
13 Q And isn't it true that according to Mr.
14 Link's updated analysis,capital costs would,even if
15 they increased by more than 10 percent,they would still
16 show,the Company would still show,benefits in the
17 medium,net benefits in the medium,natural gas?
18 A I have not checked his math,so subject to
19 check,I would agree that's what he's representing here,
20 and I would also state that that's only in the medium,
21 medium scenario where,as I've said,the status quo is
22 the low gas,no CO2,which still shows an impact to
23 customers in a negative way.
24 Q And it's true,isn't it,that you haven't
25 even considered the high case in your analysis,in any of
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1 your analyses?
2 A I mean,I've reviewed them.I've looked
3 at them,but I don't think they're a reasonable
4 representation of what we can expect going forward.
5 Q But isn't it true that if the Company's
6 natural gas curves were set in a conservative way,the
7 high gas case certainly could be a possible outcome for
8 the stipulated projects?
9 A Can you clarify by what you mean by the
10 Company's gas curves being set in a conservative way?
11 Q Well,let's just say you're just assuming
12 that the outcome is either medium or low,correct,in all
13 of your analyses?
14 A Based off of the information that I see in
15 the current market expectations,yes,that's right.
16 Q Well,let's say that the Company's gas
17 curve was set in a conservative way,so it's medium case,
18 actually understated,forward price curves.
19 A So hypothetically,we're saying high gas
20 prices occur?
21 Q Correct.
22 A Okay.
23 Q In that case,there are significant
24 benefits to customers,let's say,in the updated analysis
25 of Mr.Link,high gas,medium CO2,456 million in
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1 benefits.O 2 A Which table are you pointing me to?
3 Q Page 6 of Mr.Link's testimony.
4 A Which testimony?
5 Q I'm sorry,his settlement testimony.
6 A Page 6?
7 Q Uh-huh.
8 A I don't see a table in --oh,I'm sorry,
9 that's Joelle's,so,again,you're on which,the high
10 gas,medium?
11 Q High gas,medium CO2,so in that scenario,
12 you haven't considered customers would show --would
13 basically get the wind projects and the zero cost energy,
14 would get the transmission line and would see 456 million
15 in net benefits?
16 A In that hypothetical,yes,but I would
17 also like to point out that,you know,in both the mid
18 gas,mid CO2 and the low gas,zero CO2,the Company
19 presented results for the solar PPA option which showed
20 that those benefits were more than double what was being
21 presented for the combined projects.The Company didn't
22 present those for the same nominal revenue requirements
23 analysis for this,so we don't really have a benchmark
24 for comparison to say is this the right portfolio to look
25 at for that scenario.
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1 Q Well,in that case,that solar scenario,
2 customers certainly would not get a transmission line
3 with it.
4 A It does not require a transmission line
5 and that's one of the risks that are alleviated by the
6 solar portfolio.You don't have the completion risk,the
7 cost risk,or any of the risks associated with the
8 transmission facility.
9 Q And,also,one of the benefits that the
10 stipulated projects provide,correct,additional
11 reliability,the ancillary benefits that your colleague
12 talked about;correct?
13 A It provides the ancillary benefits,but
14 it's not a necessary line to work on right now and that's
15 what my colleague also testified to.
16 Q So I wanted to shift gears for a moment
17 and ask a little bit about some of the modeling issues in
18 the case.Now,you agree that in the Company's IRP,the
19 Company uses the SO and the PaR model?
20 A The system optimizer and planning and risk
21 models,yes.
22 Q And the Company uses those models working
23 with a 20-year planning horizon;correct?
24 A Yes,that's correct.
25 Q And in this case,the Company also
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1 provided,in addition to the IRP modeling results,a
2 nominal revenue requirement over the life of the
3 facilities?
4 A And I would encourage the Company to do
5 that for the IRP as well.It's valuable information
6 about how these projects will actually affect customer
7 rates.The 20-year planning horizon based off load
8 life's cost doesn't do that.
9 Q So basically you have a 20-year planning
10 model in this case and then a 33-year revenue requirement
11 model in this case.Those are the two economic analyses
12 that the Company provided?
13 A Yes.
14 Q And can you turn to your supplemental
15 direct testimony at page 8?
16 A I'm there.
17 Q There you indicate that the Commission
18 should place no weight on the intermediate results from
19 the levelized analysis when the Company has provided a
20 full nominal revenue requirements analysis.Do you see
21 that?
22 A Yes,I do.
23 Q So basically,your reference to the
24 intermediate results from the levelized analysis,is that
25 the IRP analysis you're referring to?
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1 A I'm referring to the 20-year system
2 modeling approach using system optimizer and planning and
3 risk,they should place no weight on it in the context of
4 this proceeding,because they provided a full nominal
5 revenue requirements analysis,which is the exact way the
6 benefits and costs will affect rates.The IRP is an
7 informative document and there's value to be gained from
8 it,but when you're talking about actually adding a
9 resource,you need to take that stuff further and look at
10 how costs will impact rates,not just a system modeling
11 approach.
12 Q Okay;so just to be clear,the Commission
13 should not even look at the IRP results,modeling
14 results,in this case?
15 A No,I just said that for the purposes of
16 this case when they're looking at making a decision about
17 the combined projects,they need to focus on the nominal
18 revenue requirements analysis.When they're looking at
19 the IRP and everything is done in that particular way and
20 you're looking at how the past might be for the future,
21 it's perfectly reasonable to look at that,but when
22 you're talking about making a decision adding a resource
23 that customers are going to pay for,you need to
24 understand how they will impact rates,not what is a
25 reasonable approach for modeling.
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1 Q So your view is that the 33-year look is
2 the look that the Commission should review here and place
3 no weight on the 20-year look;is that right?
4 A Yes.
5 Q So I handed you or I caused to be handed
6 you at the beginning of my cross a cross exhibit,which
7 is,I'll represent to you,Monsanto's IRP comments dated,
8 in the 2017 IRP dated,January 12th,2018.Do you have
9 that in front of you?
10 A I do.
11 MS.McDOWELL:And Commissioner,I'm not
12 quite sure what exhibit number we're on.73 is what I'm
13 informed.
14 Q BY MS.McDOWELL:So I'd like to direct
15 your attention to page 8 of those comments.
16 A I'm there.
17 MR.KARPEN:For clarification,I believe
18 that's 74.
19 MS.McDOWELL:I am now better informed
20 that we are on 74.
21 COMMISSIONER ANDERSON:Thank you.
22 Q BY MS.McDOWELL:So back to the page
23 reference,page 8,and these are comments I'll represent
24 to you that begin on section 4.It says concerns about
25 new transmission and new wind in the IRP.That would be
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1 the Company's EV 2020 projects;correct?
2 A I would believe so.I'll make a
3 representation first that this is the first time I've
4 seen this document and I was not consulted in the
5 development of these comments,so with that
6 understanding.
7 Q All right,I just wanted to ask you
8 because these are comments that your client filed earlier
9 this year,so there at just about two sentences in from
10 the first paragraph,it states,"To make the project look
11 beneficial in its IRP,PacifiCorp artificially extended
12 the planning life to 2050,creating a 33-year IRP view.
13 This has the effect of bringing the extended life
14 benefits of the wind repowering and making the new wind
15 and transmission investment cost effective based upon the
16 medium gas price projections.As a result,Monsanto
17 believes that benefits derived from extending the
18 analysis beyond a 20-year horizon are speculative and
19 should be given lesser weight in the IRP context."Do
20 you see those comments?
21 A Yes,I do.
22 Q So just to be clear,in January of this
23 year,Monsanto said that the 2050 view of the EV 2020
24 projects should be given lesser weight than the 2036
25 view,but in this case,your testimony is that the
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1 Commission should place no weight on the 2036 view and
2 rely exclusively on the 2050 view.
3 A And I can appreciate your point.The fact
4 is that I wasn't consulted on these and these don't
5 reflect my opinion.
6 Q Well,isn't it true that in the 2036
7 results in this case,the solar resources that you claim
8 are a better resource choice are less economic than the
9 stipulated projects?
10 A No,I disagree with that,because the 2036
11 modeling that you're referring to uses a levelization
12 approach for capital costs,and so what you have is a
13 misalignment of the way that costs flow through to
14 customers and the benefits flow through the customers,
15 but the nominal revenue requirement analysis perfectly
16 aligns costs and benefits,and so when you're looking at
17 what are the real economics,you have to look at the
18 nominal cash flows.
19 If you want to look at the nominal cash
20 flows going through 2036 or through 2050,you can do it
21 either way and I've actually got a table in my testimony
22 that compares that and shows that when you actually line
23 up the way the costs and the benefits flow through to
24 customers through 2036 or 2050,the solar project is more
25 economic and,in fact,I'll find that reference --
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1 Q But that's not the IRP look and that's not
2 my question.You have a different 2036 look.I'm asking
3 about the IRP look.Isn't is true that in the IRP look,
4 2036 model,the one you say the Commission should pay no
5 attention to now,the solar projects are less economic
6 than the stipulated projects?
7 A I'll represent that that's what Mr.Link
8 has in his testimony and his tables,but it doesn't align
9 costs and benefits and so it creates a distortion.
10 Q And isn't it true that once you saw that
11 analysis,Monsanto changed its position from supporting
12 the 2036 view in the IRP to saying it should be given no
13 weight at all in this case?
14 A Once again,I was not consulted in the
15 development of those comments and that's not my opinion
16 contained in those comments.I can't speak for,you
17 know,Monsanto and how they filed those.
18 MS.McDOWELL:That's all I have.
19 COMMISSIONER ANDERSON:Thank you.Staff?
20 MR.KARPEN:Thank you.
21
22
23
24
25
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1 CROSS-EXAMINATION
2
3 BY MR.KARPEN:
4 Q Good evening.
5 A Good evening.
6 Q It's evening now;right?
7 COMMISSIONER ANDERSON:Close.
8 MR.KARPEN:I'll be brief.
9 Q BY MR.KARPEN:Mr.Dauphinais --
10 COMMISSIONER RAPER:No,Mr.Phillips.
11 MR.KARPEN:No,I'm talking about Mr.
12 Dauphinais.I paused because I was questioning if I was
13 pronouncing it right.
14 THE WITNESS:I'm quite certain he
15 deferred some questions to me.
16 Q BY MR.KARPEN:Yes.He had mentioned in
17 his testimony that there were three large gaps in the
18 proposed settlement,partial settlement,that left
19 customers exposed;namely,those were cost overruns,
20 in-service dates that related to the PTCs,and offsetting
21 third-party revenue.Would you agree those are the
22 largest risk categories that are presented?
23 A I'll agree that that's what Mr.Dauphinais
24 testified to,but I won't agree that that's a complete
25 reconciliation of all the risks.You still have the
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1 output risk of the wind,as well as the market price
2 commodity risk associated with whether or not the --you
3 know,which scenario comes true in the future and we know
4 that some of the scenarios don't lead to benefits.
5 Q Certainly;so referring to your direct
6 supplemental testimony on page 59 to 60,I believe the
7 Company had asked you about the six recommendations that
8 you gave that would allow you to recommend granting CPCN,
9 and I believe that the Company has identified that some
10 of those have been achieved.I'm going to ask you,
11 hypothetically speaking,recognizing that this will not
12 satisfy all of these requirements,but,hypothetically
13 speaking,if Monsanto were to approach you today with the
14 same settlement stipulation,but it included a hard cap
15 of project estimates and a guarantee that the wind would
16 blow,would you recommend approval of the CPCN?
17 A So just to be clear,then,we would have a
18 hard cap at the filed estimates?
19 Q Yes.
20 A We would have a net capacity factor
21 guarantee at the filed estimates,including PTC gross-up
22 and imputation if it falls below that?
23 Q Yes.
24 A As well as all the other conditions
25 contained within the settlement?
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1 Q Yes.
2 A I still would struggle,because I don't
3 know that this is a needed project and I think there is
4 sufficient evidence in the record that the solar
5 alternative is a better alternative from an economic
6 perspective and may get even better in the future,but I
7 think it's something that we would seriously consider.
8 Q So if I asked you the same question and I
9 said exclude the guarantee that the wind would blow,you
10 would not consider that?
11 A No.My recommendation to my client would
12 be no.
13 MR.KARPEN:I will tender the witness for
14 Commission questions.
15 COMMISSIONER ANDERSON:Commissioners?
16 Redirect?
17 MR.BUDGE:Just a couple very brief ones,
18 if you would bear with me.
19
20 REDIRECT EXAMINATION
21
22 BY MR.BUDGE:
23 Q Mr.Phillips,when I asked you questions
24 about the stipulation,you were at a disadvantage because
25 you didn't have the document in front of you and now I'm
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1 at a disadvantage because I have given you my document,
2 but let me try to get the question --
3 COMMISSIONER RAPER:Everybody wants to
4 help you.
5 Q BY MR.BUDGE:You had --the question was
6 asked whether or not the recommended condition No.1 on
7 page 59 of your direct supplemental testimony relating to
8 the PTC guarantee was now satisfied and not a requirement
9 by reason of the terms of the settlement stipulation,and
10 what I'd like you to do is since you have a copy there,
11 turn to that settlement stipulation,if you would,and
12 paragraph 18 at the top of page 2 lists a couple of
13 exceptions.
14 A I'm sorry,can you give me the --you said
15 paragraph 18 of the stipulation?
16 Q Paragraph 18 --
17 A Which is on page 6?
18 Q Yes.
19 A Okay.
20 Q So if you start at the very bottom of page
21 6 on paragraph 18,it says,"The only exceptions are the
22 failure to qualify for PTCs as a result of either:a)a
23 change in the law;or b)a Force Majeure Event";so did
24 you have in mind those particular exceptions of a 100
25 percent guarantee when you previously testified that the
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1 settlement stipulation,paragraph 18,would fully satisfy
2 your recommended conditions No.1?
3 A No,I think the Company should take that
4 risk unconditionally and that was something that I
5 believe the Oregon IE's report also stated.
6 Q So with that particular exception relating
7 to the exceptions,then you believe your recommendations
8 would be satisfied by the settlement stipulation in
9 paragraph 18?
10 A Yes.
11 MR.BUDGE:No further questions.
12 COMMISSIONER ANDERSON:Thank you,Mr.
13 Budge.Thank you,Mr.Phillips.
14 THE WITNESS:Thank you.
15 (The witness left the stand.)
16 COMMISSIONER ANDERSON:You can call your
17 next --thank you,we're going to go ahead and not
18 adjourn,we're going to recess until tomorrow at 9:30
19 and,hopefully,we'll keep moving at a good pace,so
20 thank you very much for your diligence.
21 COMMISSIONER RAPER:What time?I'm
22 sorry.
23 COMMISSIONER ANDERSON:9:30.
24 COMMISSIONER RAPER:9:30?
25 COMMISSIONER ANDERSON:Isn't that what
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1 time it started today?
2 COMMISSIONER RAPER:Paul wanted 8:00,
3 but --
4 COMMISSIONER KJELLANDER:You make the
5 call.If you want to start early,it won't break my
6 heart.
7 COMMISSIONER ANDERSON:Is there any
8 objections from anybody to start at 8:30?8:30 it is,
9 then.
10 (The Hearing recessed at 5:40 p.m.)
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