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HomeMy WebLinkAbout20150728AVU to Staff 20 Attachment C.pdf Spokane River System Hydro Assessment Project Team Recommendation October 2012 Prepared by: Under Contract: R-36760 Staff_PR_020 Attachment C Page 1 of 23 SRA Project Team Recommendation Table of Contents Table of Contents   Executive Summary ...................................................................................................................... 1  1 Background ........................................................................................................................... 3  2 Evaluation ............................................................................................................................. 3  Phase II ..................................................................................................................................... 3  Phase III .................................................................................................................................... 4  Risk Evaluation ......................................................................................................................... 4  3 Results/Recommendation ..................................................................................................... 5  4 Recommended Alternative 5 Description .............................................................................. 6  Attachment A: Scoring Matrix ...................................................................................................... 8  Attachment B: Nine Mile Road Map ............................................................................................. 9  Attachment C: Alternative Assumptions ..................................................................................... 10  Attachment D: Task Group Summary Narratives ....................................................................... 13  Attachment E: Risk Evaluation ................................................................................................... 19  Staff_PR_020 Attachment C Page 2 of 23 October 2012 SRA Project Team Recommendation Page 1 Executive Summary Following the evaluation of potential alternatives to upgrade the existing Spokane River Project, the Spokane River Assessment (SRA) Project Team determined the only plant that warranted further evaluation was Nine Mile. The Project Team evaluated four alternatives at Nine Mile Hydroelectric Development. Three replaced the existing powerhouse with a new, higher capacity powerhouse. The fourth alternative consists of both an upgrade and a rehabilitation of the existing plant. The Project Team conducted a structured evaluation process to evaluate the upgrade alternatives at Nine Mile. One tool employed by the team was an evaluation matrix which considered specific objectives tailored to the Nine Mile site. The matrix was used to evaluate and provide numerical scores for the financial, operation and maintenance, environmental and permitting, and safety aspects of each alternative. As a result of the evaluation, the Project Team recommends moving ahead with Alternative 5, the planned upgrade of Units 1 and 2 as well as rehabilitation of Units 3 and 4. The Team also recommends modeling the project's sediment bypass system to identify modifications that can improve the system's reliability and efficiency. These modifications are required because the basis of the original design of the sediment bypass system will be changed by adding the higher hydraulic capacity turbines for units 1 and 2. The value of Alternative 5 is $68M higher than the new powerhouse alternative (Alternative 4). The Project Team agreed, based on the evaluation matrix that Alternative 4, a new powerhouse built in the footprint of the existing powerhouse structure ranked the highest of the new powerhouse alternatives. Figure 1 provides a summary of the results of the Project Team evaluation. Staff_PR_020 Attachment C Page 3 of 23 October 2012 SRA Project Team Recommendation Page 2 Figure 1. Results of the Nine Mile Alternative Evaluation Staff_PR_020 Attachment C Page 4 of 23 October 2012 SRA Project Team Recommendation Page 3 1 Background In early 2011, the turbine upgrade project for Units 1 and 2 at the Nine Mile hydroelectric development was well into the design procurement stage. However, in April of 2011, just as an equipment supply contract was to be executed, the Nine Mile Unit 4 turbine (installed in 1994) experienced a propagating fatigue failure of several of its runner blades resulting in the unit being taken out of service. The failure of Unit 4 raised concerns over investing over 40 million dollars in a facility that is 104 years old and has significant ongoing operations and maintenance issues. As a result, the Unit 1 and 2 Upgrade Project was put on hold and other options for upgrading the Nine Mile facility were developed and evaluated. This preliminary evaluation found that the best option from a net present value perspective would be construction of a new 3-unit, 60 MW powerhouse just downstream of the existing powerhouse. The assessment level cost of the new powerhouse was estimated to be roughly 125 million dollars. Given the considerable cost, Avista staff decided it was prudent to conduct a broader assessment of the entire Spokane River Project to determine if upgrading Nine Mile was the best use of capital, or if perhaps other developments within the Spokane River Project1 could be upgraded to provide an even better return on investment. This led to the Spokane River Assessment (SRA), which has historically been conducted about every decade. In October 2011, Avista launched the Corporate Strategic Refresh which led to a number or corporate- wide initiatives. As a result the Hydro Modernization Initiative (HMI) was developed to support responsible stewardship of our existing hydro generation assets. The purpose of the HMI is to develop a long-term strategy to assess and prioritize hydroelectric plant improvement opportunities2. To support the HMI, the Spokane River Assessment (SRA) evaluated current conditions of the Spokane River Project, evaluated potential improvements, and will be used to help prioritize the implementation of these improvements. The prioritization took into account multiple project and corporate goals and criteria. Following approval and adoption by Avista senior management, the SRA will eventually become the guide for future Spokane River hydro upgrades in the Integrated Resource Plan (IRP) while supporting the HMI. The SRA was conducted in three phases by an interdepartmental project team. Phase I established the framework of the SRA, including establishment of a project team, identification of goals and criteria, and development of the tools necessary to research, quantify, and evaluate the various upgrade alternatives during Phases II and III of the SRA. A summary report has been developed to communicate the results of the SRA. 2 Evaluation Phase II During Phase II of the SRA, alternatives for each of the Spokane River plants were developed and evaluated against the criteria identified by the Project Team. In the early stages of the project, financial criteria favored expanding capacity at most of the individual developments. However during the course of the evaluation, three factors dramatically lowered the power market forecast: 1 Includes Post Falls, Upper Falls, Monroe Street, Nine Mile, and Long Lake Hydroelectric Developments. 2 The HMI goals are: generate incremental energy to meet load growth, produce RECs to meet Renewable portfolio standards, increase plant efficiency through utilization of new technology, and reduce risk through improved reliability and environmental mitigation. Staff_PR_020 Attachment C Page 5 of 23 October 2012 SRA Project Team Recommendation Page 4 1. The recent significant declines in natural gas prices, 2. Removal from further consideration of the federal carbon cap and trade program (carbon tax), and 3. Passage of the biomass bill eliminated the need for Avista to acquire future hydro Renewable Energy Credits (RECs). In spite of the economics, the current plant conditions at Nine Mile warranted further evaluation of upgrade opportunities in Phase III of the SRA. The results of the Phase II analysis will be documented in the SRA Final Report. Phase III During Phase III, four alternatives were considered for Nine Mile; three involved construction of a new powerhouse and one consisted of rehabilitating the existing plant (Attachment C). The rehabilitation alternative was initially examined in two configurations (5a and 5b), one of which was proceeding with just the planned Unit 1 and 2 upgrade (5a) and the other (5b) included proceeding with the Unit 1 and 2 upgrade, addressing Units 3 and 4, modifying the sediment bypass system, and rehabilitation of the powerhouse building. In the process of evaluating these configurations, the team determined that 5a was not acceptable due to unresolved ongoing maintenance and sediment issues and decided to remove it from further consideration. Alternative Description New Powerhouse Alternative 1 3 Units, 60 MW Downstream Left Bank Alternative 3 5 Units, 60 MW Downstream Left Bank Alternative 4 5 Units, 60 MW Existing Location Rehab Alternative 5 Replace Units 1 and 2, rehab Units 3 and 4, and modify the Sediment Bypass System The Project Team evaluated the potential upgrade alternatives proposed for Nine Mile against the four criteria established in Phase I of the SRA (Attachment B). The team developed a scoring system for each criteria based on a five point Likert scale. The Project Team evaluated each alternative against the criteria and assigned a score (See Attachment A and D). The team also decided to provide relative weights for the criteria so a weighted average could be developed for each alternative and the final score would better reflect the importance of the criteria. The criteria and their assigned weighting are presented below: Criteria Weighting 1. Provide cost effective generation options to meet resource needs 40% 2. Increase plant efficiency 10% 3. Address environmental, community and permitting requirements/considerations 40% 4. Safety 10% Risk Evaluation A qualitative risk assessment was performed to evaluate risks associated with Alternative 4 and Alternative 5, the two top scoring alternatives. (Attachment E) Staff_PR_020 Attachment C Page 6 of 23 October 2012 SRA Project Team Recommendation Page 5 A significant risk associated with both Alternative 4 and Alternative 5 is the volatility of the energy market. Given the current historically low prices for natural gas, the cost of the additional power generated from a new, higher capacity hydro powerhouse is much higher than the gas turbine alternative. If gas prices and power market prices increase in the future recent norms, new powerhouse alternatives may be a viable option. Similarly if a carbon tax is imposed or more RECs are required in the future, the value of hydro power may be higher. A major risk for Alternative 4 is the ability to acquire the required Major Modified License from FERC in a feasible timeframe. For Alternative 5, the project team determined that sediment is a critical issue that has caused significant damage to equipment in the past. If a functional solution for dealing with the sediment is not identified and constructed, the lifespan of submerged mechanical equipment will be substantially shortened, resulting in a need for more frequent additional investments. 3 Results/Recommendation The final weighted average scores for each alternative are: Alternative 1 2.89 Alternative 3 2.91 Alternative 4 3.18 Alternative 5 4.18 Based on the four criteria used by the team to evaluate the Nine Mile Alternatives, Alternative 5 received the best score primarily due to project economics, likelihood of regulatory agency approval, permitting activities (many have already been completed to support the Unit 1 and 2 upgrade project previously considered for Nine Mile) and required water rights have been obtained. Results of the financial analysis are shown in the following table. Alt 1 Alt 3 Alt 4 Alt 5 Nominal Capital Cost ($ Millions) 212.0 196.7 192.7 70.8 Incremental aMW 12.8 12.0 12.0 5.2 30 Year Incremental NPV ($000) Compared to Alternative 5 -76,818 -67,949 -67,665 0 Levelized Rate Impact Compared to 2013 Estimated Revenue Requirements 1.24% 1.15% 1.15% 0.45% Of the new powerhouse alternatives, Alternative 4 received the highest score, primarily due to its more compact footprint. Building a new powerhouse downstream (Alternatives 1 and 3) would require Staff_PR_020 Attachment C Page 7 of 23 October 2012 SRA Project Team Recommendation Page 6 extensive excavation and likely be more difficult to move through the regulatory and permitting process. Acquiring the additional water rights for each of the new powerhouse alternatives would be challenging. 4 Recommended Alternative 5 Description Unit 1 and 2 Upgrade to Seagull Turbines, which includes the following:3  Turbines  Bulkheads  Hydraulic Governors  Generators  Static Excitation System  13.8 kV Switchgear  Station Service  Control and Protection Package  Powerhouse Ventilation Upgrade  Rehab Intake Gates and Trash Rack  GSU in Substation  Communications Upgrade (Westside-NM)  Yard Grounding  Cottage 3 Demolition  Warehouse Construction  Cottage 6 Rehabilitation Unit 3 and 4 Overhaul and Plant Rehab:  New Runners – Overhaul Quadrunners  New Thrust Bearings  Hydraulic Governors  Control and Protection Package  Switchgear  Static Excitation System  Rehab Intake Gates and Trash Rack  Sediment Bypass Rehab  Debris Handling System  Rehab Powerhouse Building At this point the team is assuming that Unit 3 will undergo an overhaul similar to Unit 4 rather than a turbine replacement like Units 1 and 2 (i.e., the financial evaluation uses costs for an overhaul rather than replacement). However, the Project Team suggests revisiting this decision for Unit 3 based on the actual performance of the new Seagull units, the overhauled Unit 4 and the sediment bypass system. This approach is reflected in the timing of the implementation of the proposed alternative. 3 This scope is consistent with the previously approved Unit 1 and 2 Upgrade Staff_PR_020 Attachment C Page 8 of 23 October 2012 SRA Project Team Recommendation Page 7 The Project Team proposes the following timeline for implementing the preferred alternative at Nine Mile:   2012 2013 2014 2015 2016 2017 2018 2019 2020 Upgrade Units 1,2 to  Seagull Turbines                           New Runners ‐  Overhaul Unit 4  Quadrunners4                         New Runners ‐  Overhaul Unit 3  Quadrunners4                          Additional Unit 3 and  4 Upgrades5                         Sediment Bypass  Rehab                          Debris Handling  System                           Rehab Powerhouse  Building                           4 Includes New Thrust Bearings and Hydraulic Governors 5 Includes control protection package, switchgear, static excitation system, and rehabilitation of the Unit 3 and 4 intake gates. Staff_PR_020 Attachment C Page 9 of 23 October 2012 SRA Project Team Recommendation Page 8 Attachment A: Scoring Matrix Alternative 1 Alternative 3 Alternative 4 Alternative 5 New Downstream 3 Units New Downstream 5 Units New in existing location Full Plant Upgrade Score Score Score Score 3.21 3.25 3.36 5.00 3.21 3.25 3.36 5.00 Goal One Weighting 40% 4.00 4.00 4.25 3.75 3.50 3.50 3.50 3.50 3.75 3.75 3.88 3.63 Goal Two Weighting 10% 2.42 2.42 2.67 3.45 2.66 2.66 2.78 3.22 2.00 2.00 2.32 4.50 2.25 2.25 2.50 4.00 2.33 2.33 2.57 3.79 Goal Three Weighting 40% 3.00 3.00 4.25 3.00 3.00 3.00 4.25 3.00 3.00 3.00 4.25 3.00 Goal Four Weighting 10% 12.29 12.33 14.05 15.42 2.89 2.91 3.18 4.18 Alternative 1 Alternative 3 Alternative 4 Alternative 5 New Downstream 3 Units New Downstream 5 Units New in Existing Location Full Plant Upgrade Relationships with key stakeholders ‐ NGOs Average Average Opportunities to improve hydro public safety Opportunities to improve dam safety Total Points Weighted Average Average Relationships with key stakeholders ‐ Agencies Nine Mile Alternatives - Summary Score Sheet Goal/Criteria 4. Safety - (NOTE: All Alternatives were assumed to Pass Applicable Safety Standards) Identify the options with the best customer value Improve overall plant reliability Ensure the design is flexible enough to meet current and  anticipated criteria. 2. Increase Plant Efficiency Assess likelihood of  approvals Assess time required to move through regulatory process 1. Provide cost effective generation options to meet resource needs 3. Address environmental, community and permitting requirements/considerations - Red flag if score below 2.25 Average Staff_PR_020 Attachment C Page 10 of 23 October 2012 SRA Project Team Recommendation Page 9 Attachment B: Nine Mile Road Map Staff_PR_020 Attachment C Page 11 of 23 October 2012 SRA Project Team Recommendation Page 10 Attachment C: Alternative Assumptions Rehabilitation Alternatives Alternative 5 (Configuration 5a) Assumptions:  New Units, 1 and 2 o Gutting powerhouse from concrete to substation o New turbines, bulk head, generator, hydraulic governor system, controls, excitation system, GSU in substation, station service upgrade (i.e., 13.8 kV switch gear), yard grounding, ventilation upgrade o Remove transformer from in front of the powerhouse Alternative 5 (Configuration 5b) Assumptions6:  Includes sediment bypass consideration  Includes efficient trash and debris handling system (for intakes and sediment bypass pipe)  Units 3 and 4: replacement of turbine runners, wicket gate bushings, stationary turbine seals, thrust bearing, and upgrade gate operating system  Replace damaged trash rack sections, as necessary.  Refurbish head gate hoists and gate wheels for 3 and 4  Voltage regulators and controls  Address the condition of the remaining building/infrastructure (i.e., roof, walls, grout, bricks, seal outer wall of spillway side, replace all windows and portholes) Risks (apply to both 5a and 5b):  Brick wall of powerhouse is leaking water and could cause the integrity of the wall to be compromised  Controlled passing water (limited hydraulic plant capacity, constrained maintenance period)  Life expectancy of existing plant (i.e., how long will this last?)  Ongoing sediment impacts to turbine, sediment loading should be a non-issue with the new trash and debris handling system.  Cost of power changes (i.e., gas prices go back up)  Age of concrete that remains  O&M funding risk if any of the scope is funded as part of O&M rather than capital o If repairs aren’t made/funded, the state of disrepair could put us out of compliance with the license 6 Alternative 5's "5b configuration" also includes the scope of configuration 5a Staff_PR_020 Attachment C Page 12 of 23 October 2012 SRA Project Team Recommendation Page 11 Rebuild Alternatives New Powerhouse Alternatives (1, 3 - Downstream)  Sediment Bypass fix is part of the intake structure factored in at design  Penstock structure is single penstock  Existing plant remains in operation for Construction Year 1, then shuts down Construction Year 2  Existing powerhouse remains as part of the dam, post-construction  FERC approval would be required for decommissioning, but structure remains  Intake debris handling system would have more capability  Intake gates (of existing plant) would require a permanent solution  Address the condition of the remaining building/infrastructure (i.e., roof, walls, grout, bricks, seal outer wall of spillway side, replace all windows and portholes) Risks:  Sediment loading (on old structure) would be a concern  What to do about sediment bypass during interim period of construction  Brick wall of powerhouse is leaking water and could cause the integrity of the wall to be compromised  Life expectancy of existing plant (i.e., how long will this last?)  Age of concrete that remains  Ongoing sediment impacts  Cost of power changes (i.e., gas prices go back up)  With a single intake and penstock, maintenance and inspections will require entire power house to be shut down.  Multiple regulatory/permitting risks: o Risk of not obtaining approvals for new license amendment and regulatory unknowns such as the time required to go through permitting/appeal processes and mitigation demands/requirements determined through the shorelines, 401 certification, HPA permitting, and FERC amendment processes o Potential dam removal alternative o Ability to obtain additional water rights o Downstream excavation (more than options 4 and 5) o Cultural mitigation extensive due to TCP site in canyon o Ability to follow NPS Rehabilitation standards for historic buildings o State Parks property on right side of channel and easement on right side downstream of the Charles Road Bridge. o Aesthetic concerns associated with the canyon excavation o Salmonid entrainment and spawning Staff_PR_020 Attachment C Page 13 of 23 October 2012 SRA Project Team Recommendation Page 12 Rebuild Alternatives (continued) New Powerhouse Alternative 4 (at Existing Location)  Sediment Bypass fix is part of the intake structure (including gate hoists, gate wheels, trash rack) factored in at design  Intake debris handling system would have more capability  Brick wall would be removed/replaced Risks:  What to do about sediment bypass during interim period of construction  Age of concrete that remains  Ongoing sediment impacts  Cost of power changes (i.e., gas prices go back up)  Multiple regulatory/permitting risks: o Ability to obtain additional water rights o Risk of not obtaining approvals for new license amendment / and regulatory unknowns such as the time required to go through permitting/appeal processes and mitigation demands/requirements determined through the shorelines, 401 certification, HPA permitting, and FERC amendment processes o Potential dam removal alternative o Cultural approval would be challenging due to demolishing the existing powerhouse o Downstream excavation (less than options 1 and 3 but more than option 5) o Aesthetic concerns associated with the new powerhouse o Salmonid entrainment and spawning Staff_PR_020 Attachment C Page 14 of 23 October 2012 SRA Project Team Recommendation Page 13 Attachment D: Task Group Summary Narratives Safety Task Group Meeting - Narrative Summary The Safety Task Group met Monday afternoon, September 10th. Meeting participants included: Dave Schwall, Bob Brandkamp, Jerry Cox, Steve Fry, John Hamill, Mac Mikkelsen, and Jeff Turner. From Sapere Consulting, Roger Purdom provided meeting facilitation and Jay Babbitt recorded the task group's findings. Alternative 1, 3 – Downstream Left Bank New Powerhouse The group agreed the distinctions between the two downstream alternatives (3 units vs. 5) were negligible and viewed them as a single alternative for the purposes of the safety evaluation. The group agreed this alternative could meet all applicable standards and was neutral on its opportunity to improve hydro public and dam safety. This alternative would provide an opportunity to provide better signage, improve the downstream warning system, fencing, gates, barriers, CCTV, and access security. The task group’s lingering concerns focused on the existing powerhouse, and with its decommissioning, sediment and debris will fill in behind this structure. Alternative 4 – New Powerhouse at Existing Location The task group agreed this alternative could meet all applicable standards and assumed that a new facility would improve hydro public and dam safety. The task group agreed this alternative would provide an opportunity to provide better signage, improve the downstream warning system, fencing, gates, barriers, CCTV, and access security. Alternative 5 (Configuration 5a) – Upgrade Units 1/2 of Existing Powerhouse The task group only directly evaluated Alternative 5b - the group assumed the Unit 1 & 2 Upgrade included all of the assumptions captured within Alternatives 5a and 5b. Alternative 5 (Configuration 5b) – Upgrade Units 1/2 + Sediment Bypass Considerations, and Unit 3/4 Overhaul The task group agreed this alternative could meet all applicable standards and was neutral on its opportunity to improve hydro public and dam safety. Safety Task Group Summary Analysis The task group’s safety questions primarily focused on the age and dated technology of the existing 1910-era design. The quad-runner wet pit configuration limits maintenance accessibility. While within applicable dam safety standards, the age and quality of the concrete and structural components (such as post-tensioned anchors) requires a higher standard of care. Each of the alternatives evaluated will meet all applicable hydro public and dam safety standards. Alternative 4 would provide the best overall opportunities for safety improvements. Of the powerhouse rehabilitation alternative configurations, configuration 5b is preferred.   Staff_PR_020 Attachment C Page 15 of 23 October 2012 SRA Project Team Recommendation Page 14 O&M Task Group Meeting - Narrative Summary This task group met Tuesday afternoon, September 11th. Meeting participants included: Dave Schwall, Bob Brandkamp, Jerry Cox, Steve Esch, John Hamill, Richard Maguire, Pat Maher and Jeff Turner. From Sapere Consulting, Roger Purdom provided meeting facilitation and Jay Babbitt recorded the task group's findings. Alternative 1, 3 – Downstream Left Bank New Powerhouse The group agreed the distinctions between the two downstream alternatives (3 units vs. 5) were negligible and viewed them as a single alternative for the purposes of the O&M evaluation. These alternatives were both considered to be likely to improve overall plant reliability, especially in the early years when the facilities are fresh and new. Alternative 4 – New Powerhouse at Existing Location This alternative was rated very likely to improve overall plant reliability. This alternative was scored higher because the old powerhouse would be removed and replaced. Alternative 5 (Configuration 5a) – Upgrade Units 1/2 of Existing Powerhouse The group agreed that this alternative will considerably improve the reliability of Units 1 & 2, which will be completely replaced with new, contemporary equipment. However, continued maintenance and repair of Units 3 & 4, sediment bypass and other remaining equipment and facilities will continue to present maintenance and reliability challenges. If the reliability of the sediment bypass system is not improved, the lifespan of all submerged equipment, including Units 1 and 2, will continue to be substantially shortened. Alternative 5 (Configuration 5b) – Upgrade Units 1/2 + Sediment Bypass Considerations, and Unit 3/4 Overhaul This configuration of Alternative 5 was considered more likely to improve overall plant reliability than the 5a configuration. While the basic structures remain in place, aging and worn components will be replaced or refurbished, including the sediment bypass system. O&M Task Group Summary Analysis Sediment is viewed as a key O&M issue. The capability of each alternative to effectively bypass sediment factors heavily into the expected lifespan of submerged equipment and introduces long term operational challenges for each alternative. Since O&M budgets are always under tight scrutiny, designing lowered O&M into an alternative will help assure that preventative O&M can be fully accomplished, though O&M expenditures will eventually increase as the equipment ages. Staff_PR_020 Attachment C Page 16 of 23 October 2012 SRA Project Team Recommendation Page 15   Regulatory/Environmental & Communications Task Group Meeting - Narrative Summary This task group met Tuesday morning, September 11th. The task group agreed the distinctions between the two downstream alternatives were negligible, for the purposes of its evaluation. Meeting participants included: Dave Schwall, Bob Brandkamp, Speed Fitzhugh, Steve Fry, and Jessie Wuerst. From Sapere Consulting, Roger Purdom provided meeting facilitation and Jay Babbitt recorded the task group's findings. The table below lists the regulatory requirements for the four alternatives: Regulatory Permitting Table Requirement Alt. 1, 3 Alt. 4 Alt. 5 - 5a config Alt. 5 - 5b config Covered in current FERC License No No Yes No Require a Major Modified License Yes Yes No No Additional Water Rights Yes Yes Obtained No New 401 Cert./ WQPP Yes Yes No No/Yes County Shoreline Permit Yes Yes No Yes HPA – WDFW Yes Yes No Yes State Parks property Yes Yes No No Spokane Tribe Consultation Yes Yes No No 404 Permit– USACE Yes Yes No Yes SHPO Yes Yes Yes Yes County Flood Plain Permit Yes Yes No Yes The table below is a general list of key stakeholders and the likely impact on that relationship for each of the alternatives, with 2-Negative, 3-Neutral, 4-Positive. Key Stakeholders Interest Table Key Stakeholder Alt. 1, 3 Alt. 4 Alt. 5 - 5a config Alt. 5 - 5b config Agencies Ecology 1 2 3 4 State Parks 2 3 3 3 WDFW 2 2 3 4 FERC 3 3 3 3 SHPO 2.5 2.5 3 4 Spokane County 2 2 3 4 US Fish & Wildlife 3 3 3 3 USACE 3 3 3 4 Health Department 3 3 Spokane Tribe 2 3 3 3 EPA 3 3 3 3 DNR 2.5 2.5 3 3 NGOs: Staff_PR_020 Attachment C Page 17 of 23 October 2012 SRA Project Team Recommendation Page 16 Key Stakeholder Alt. 1, 3 Alt. 4 Alt. 5 - 5a config Alt. 5 - 5b config Sierra Club 2 2 3 3 Center for Env. Policy 2 2 3 3 Shoreline Home Owners 3 3 3 4 GSI 4 4 4 4 Friends of Centennial Trail 3 3 3 3 Canoe & Kayak Club 3 3 3 3 Friends of Riverside State Park 2 3 3 3 Spokane Mountaineers 3 3 3 3 Riverkeeper 2 2 3 3 Alternative 1, 3 – Downstream Left Bank New Powerhouse This alternative would be the most challenging and time consuming of those under consideration. The downstream powerhouse expands the "footprint" of the project, encroaches on State Park lands and requires extensive left bank excavation for the powerhouse and access road. The visual alteration of the project area (including the downstream canyon) under this alternative is the most extensive. For these reasons, as well as the need to obtain additional water rights, this alternative faces the most challenging regulatory and permitting processes. Alternative 4 – New Powerhouse at Existing Location While this new powerhouse alternative has less of an impact on the project site than the downstream powerhouse alternatives, its characteristics still require a major modified license from FERC, an extensive consultation and regulatory process, and additional water rights. The critical factors in the 5 to 10 years predicted to obtain local, state and federal regulatory approval for the new powerhouse are the number of applications and/or permits that have to be completed and whether or not decisions in these various processes will be appealed. Appeals related to hydropower projects at the local state and federal levels are fairly common in Washington State. While we strive to maintain positive relationships with the regulatory agencies and stakeholders we cannot control the timeframe that they operate under, or the mitigation that they propose. This is because the agencies are easily influenced by other stakeholders (NOG’s) negative public opinion, etc., that often lead to appeals, settlement agreements and/or significant changes. Alternative 5 (Configuration 5a) – Upgrade Units 1/2 of Existing Powerhouse Required permits and approvals have already been obtained for this alternative. Alternative 5 (Configuration 5b) – Full Plant Upgrade While the Units 1 and 2 Upgrade project already has permits in hand, additional permitting would be required primarily for sediment bypass system improvements. The more positive ratings for this configuration of Alternative 5 reflects agency concerns about the levels and frequency of maintenance that have been required for the existing sediment bypass system and their expressed interest in a more effective system with less in-the-river maintenance. Task Group Summary Of the new powerhouse alternatives, Alternative 4 (replacing the existing powerhouse) would be the easier alternative. Of the two rehabilitation alternatives, Alternative 5's 5a configuration has already completed permitting. Alternative 5's, 5b configuration does require some additional permitting Staff_PR_020 Attachment C Page 18 of 23 October 2012 SRA Project Team Recommendation Page 17 primarily for sediment bypass system improvements, but these approvals should be relatively easy to secure. In general, regulatory processes will be challenging for any new powerhouse option. The downstream alternatives are more likely to face an uncertain outcome. The new powerhouse replacing the existing powerhouse probably could achieve approval, but the length of time required to get there could be lengthy and costly. Staff_PR_020 Attachment C Page 19 of 23 October 2012 SRA Project Team Recommendation Page 18 Financial Task Group Meeting - Narrative Summary The Financial Task group discussed the implications of investing in the asset versus investing in O&M activities and how that could potential impact both shareholders and rate payers. The NPV values also were developed using information from the ARMS model and there was discussion in how accurately the information from ARMS had been represented in the model. The team also agreed to rerun the analysis using the scope of the agreed upon rehabilitation alternative. Alternative 5's 5a configuration is the best alternative from a purely financial perspective, but was removed from further consideration by the Project Team. The team determined that only addressing Units 1 and 2 does not resolve serious ongoing maintenance and sediment issues and would not keep the plant operational and in compliance with the FERC license. A second Financial Task Group Meeting was held on September 26th to finalize the numbers based on the defined scope of Alternative 5. The team decided to re-score the alternatives based on a 1-5 score. The alternative with the best Levelized Net Value per MWh was scored a 5 the remaining projects received a score based on its relative percentage lower than the best alternative. Alternative 1– Downstream Left Bank New Powerhouse The 30-year NPV for Alternative 1 is -$76.8 M compared to plant rehabilitation and it received a score of 3.21. Alternative 3 – Downstream Left Bank New Powerhouse The 30-year NPV for Alternative 1 is -$67.9 M compared to plant rehabilitation and it received a score of 3.25. Alternative 4 – New Powerhouse at Existing Location The 30-year NPV for Alternative 4 was -$67.7M compared to plant rehabilitation and received a score of 3.36. Alternative 5 -- Plant Rehabilitation: Upgrade Units 1/2 + Sediment Bypass Considerations, and Unit 3/4 Overhaul This is the lowest cost viable alternative and received a score of 5. Further this alternative has a higher cost than continuing to operate the facility in its current condition by a cost of $46 million (30 year NPV). The following table summarizes the financial information discussed by the financial task group. Alt 1 Alt 3 Alt 4 Alt 5 Nominal Capital Cost ($ Millions) 212.0 196.7 192.7 70.8 Incremental aMW 12.8 12.0 12.0 5.2 30 Year Incremental NPV ($000) Compared to Alternative 5 -76,818 -67,949 -67,665 0 Levelized Rate Impact Compared to 2013 Estimated Revenue Requirements 1.24% 1.15% 1.15% 0.45% Staff_PR_020 Attachment C Page 20 of 23 October 2012 SRA Project Team Recommendation Page 19 Attachment E: Risk Evaluation Nine Mile Risk Identification: Alternative 4 (New Powerhouse) vs. Alternative 5 (Rehabilitated Powerhouse) Category Risk Description Alternative Potential Impact Potential Mitigation Risk Level Financial Energy/REC market volatility  The price of gas/value of RECs may increase in the future. Change in carbon regulations  A carbon tax is imposed on thermal generation resources Alternative Four Select the wrong alternative due to current financial assumptions (gas prices, REC values, carbon regulation assumptions). Sensitivity analysis evaluating:  Future gas prices  Future REC values  Carbon tax impacts Regulatory/ Financial Timeline for approval of a Major Modified License Amendment  The approval process could be longer than anticipated due to appeals (e.g., 401) Alternative Four  Lost revenue  Inability to meet future demand with the preferred resource  Could affect project economics due to changed interest rates, construction costs, inflation, etc. Develop a comprehensive Regulatory and Communication Strategy Risk Key    High    Moderate    Low  Staff_PR_020 Attachment C Page 21 of 23 October 2012 SRA Project Team Recommendation Page 20 Category Risk Description Alternative Potential Impact Potential Mitigation Risk Level Regulatory Impact on relationships (agencies, FERC, stakeholders)  A decision on Nine Mile has been delayed causing the relationship with agencies that have already approved the Unit 1 and 2 Non- capacity amendment to be strained Both Avista’s reputation with the agencies could be affected which could affect future permitting and licensing requests Develop a comprehensive Regulatory and Communication Strategy Financial/ Technical Sediment impact  The solution to dealing with the sediment load at Nine Mile is inadequate. Alternative Four The lifespan of submerged equipment is curtailed regardless of which alternative is chosen. Better understanding of the sediment issue including hydraulic modeling. Alternative Five Financial Choosing 5b but executing something closer to the 5a scope.  Budget constraints could impact the construction budget and timeline, affecting the ability to complete rehab of all the components included in the scope of 5b Alternative Five The scope of 5b would not be completed and there would continue to be chronic maintenance issues and costs Establish appropriate rehab program in the budget Staff_PR_020 Attachment C Page 22 of 23 October 2012 SRA Project Team Recommendation Page 21 Category Risk Description Alternative Potential Impact Potential Mitigation Risk Level Technical Ongoing maintenance challenges  The wetpit design provides maintenance and accessibility challenges Alternative Five The rehab would not address the inherent access and maintenance issues associated with the wetpit design Employee health precautions and proper training Technical The wetpit design  Potential breech of the bulkhead due to turbine or shaft failure Alternative Five Loss of generator floor equipment due to flooding Replace with contemporary design New turbine vibration monitoring system would allow alarm and trip capability Technical Life expectancy of concrete  Will the 100 year old concrete continue to be structurally sound through the life of the license?  Will the post-tensioned anchors be adequate through the life of the license? Alternative Five Increased maintenance evaluations and funds for remediation. Concrete and structural elements would need continued evaluation based on FERC’s dam safety program Staff_PR_020 Attachment C Page 23 of 23