20190610Thackston Direct.pdf

RECEIVED
l0:08
SION
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o DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BO)( 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220.37 27
TELEPHONE: (509) 49s-4316
FACSIMILE: (s09) 49s-88s 1
DAVID.MEYER@AVIS TACORP.COM
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC
SERVICE TO ELECTRIC CUSTOMERS
TN THE STATE OF IDAHO
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CASE NO. AVU-E-19-04
DIRECT TESTIMONY
OF
JASON R. THACKSTON
FOR AVISTA CORPORATION
(Electric)
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o 1 I. INTRODUCTTON
2 Q. Please state your name, employer and business address.
3 A. My name is Jason R. Thackston. I am employed as the Senior Vice President
4 of Energy Resources at Avista Corporation, located at 1411 East Mission Avenue, Spokane,
5 Washington.
6 Q. Would you briefly describe your educational and professional
7 background?
8 A. Yes. I graduated from Whitworth University in 1992 with a Bachelor of Arts
9 in lnternational Studies and an emphasis in Business Management and a Master of Business
10 Administration from Gonzaga University in 2000. I joined the Company in 1996 as a
11 Corporate Treasury Analyst. I have held several different positions at Avista, including roles
12 in Finance and Accounting, Intemal Audit, Risk Management, Power Supply, and Gas
13 Supply. I was appointed Vice President of Finance in June 2009 and have since held the roles
14 of Vice President of Energy Delivery and Vice President of Customer Solutions before
15 assuming my current role in January 2013. The Energy Resources group is primarily
16 responsible for producing or procuring the electricity and natural gas to serve our customers'
l7 needs, including the construction, operation, and maintenance of our generation facilities and
18 the optimization of those electric and natural gas facilities for the benefit of our customers.
19 a. What is the scope of your testimony in this proceeding?
20 A. My testimony provides an overview of the Company's 2019 generation capital
21 projects, including capital projects at Colstrip Units 3 and 4. ln addition, I provide an
22 overview of our recent April20I9 announcement regarding our "100oZ Clean Electricity Goal
23 by2045;'
Thackston, Di
Avista Corporation
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o A table of contents for my testimony is as follows:
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III.
IV.
Introduction
Generation Capital Projects for 2019
Colstrip Generation Capital Projects
100 Percent Clean Electricity by 2045 Goal
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a. Are you sponsoring any exhibits?
A. Yes. I am sponsoring Exhibit No. 6, Schedule 1 - Generation and
Environmental Capital Project Business Cases which includes the generation capital business
cases in 2019.
II. GENERATION CAPITAL PROJECTS FOR 2019
a. Please explain what the Company has included in this testimony with
regard to generation capital projects.
A. My testimony provides capital project information and further support for
generating projects in 2019. Company witness Ms. Schuh provides the Idaho-allocated
values, but for my testimony I discuss projects, and their costs, at a system level for 2019.
a. Please describe the capital planning process that Generation Production
and Substation Support conducts before generation capital projects are submitted to the
Capital Planning Group (described by Company witness Mr. Thies).
A. The capital planning process in Generation Production and Substation Support
(GPSS) consists of a long-range forecast, a five-year forecast, and an execution plan. The
Thackston, Di
Avista Corporation
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o I long-range forecasting uses Maximol as the central repository for projects and their associated
2 elements. Projects can be added to the long range forecast database in several ways:
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o Informal project requests;
o Input from asset life cycle, condition, needs assessment;
o Periodic reports from Maximo of open corrective maintenance work orders;
. Periodic reports from Maximo of scheduled preventive maintenance work orders;
. Annual maintenancerequirements;o Regulatory mandates;
o Project change requests, drop ins, budget changes, etc.;
o Formal project request applications; and
o Efficiency and IRP-related upgrades.
The GPSS management team meets bi-yearly to review the long-range forecast,
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14 confirm that it is up to date and close completed projects. New projects are highlighted and
15 noted. The impact of each additional project is reviewed. Any disagreement in the priority
16 of projects is discussed until a solution is found.
l7 The GPSS management team participates in an annual workshop in preparation for the
18 budget cycle to prioritize the projects included in the five-year horizon. The team utilizes a
19 formal ranking matrix to insure that the projects are prioritized consistently.
20 As projects for the next year are assigned, any capacity or budget constraints are
2l identified and project schedules are adjusted accordingly by the GPSS management
22 team. GPSS management and key stakeholders meet monthly at the Generation Coordination
23 Meeting, GPSS coordinated-team meetings, and specific program or project steering
24 committee meetings to discuss changes and progress of projects on the execution
25 plan. Adjustments and consensus take place at these meetings.
Thackston, Di
Avista Corporation
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I Maximo is an electric asset management software solution from IBM.
o a. Would you please provide a brief description of the generation-related
capital projects that are included in this case for 2019?
A. Yes. As shown in Table No. 1 below, the Company has included generation
projects totaling, on a system basis, $36.795 million. Details about these generation-related
capital projects are discussed below. Generation capital additions for Colstrip are also
discussed in my testimony.
Table No. 1: GeneratiaLtqapital Additions2
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Ge ne ration a nd Environme ntal Capital Additions
(System) In $(000's)
iness Case Narne 20r9
Coyote Sprinp 2 Capital Improvements
Nine Mile Redevelopment
Base Hydro
Regulating Hydro
Base t oad Thermal
Peaking Generation
Little Falls Powerhouse Redevelopment
[,ong Lake Plant Upgrades
Generation Direct Current Sryplied System Upgrade
Post Falls Redeveloprnent
Cabinet Gorge HED - Gantry Crane Replacement
Autornation Replacement
Cabinet Gorge HED Station Service Replacement
Cabinet Gorge HED - Replace Headgates
Noxon Rapids HED Spifuate Refi.nbishment
tnng Lake HED Stability Enhancement
Resource Metering Telemeffy, and Contols Upgrade
Hurnan Machine Interface Contol Software
Kettle Falls Boihr Tube Maintenance (Economizer section)
Kettle Falls Fuel Yard Equipnrent Replacement
Cabinet Gorge Protection & Control Upgrade
Environrnental Conpliance Blanket
Hydro Generation Minor Bhnket
Clark Fork License Irrplementation
Spokane River License Implementation
Total Planned Generation Capital Projects
$47
552
1,166
4,097
2,894
506
9,047
(101)
(80)
379
5,000
734
(264)
193
1,060
(146)
1,081
502
3ss
1,208
2,286
217
50
4,457
1,556
$ 36,795
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Thackston, Di
Avista Corporation
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o 2 HED : Hydroelectric Development
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Would you please explain the generation capital projects for 2019?
Yes. The 2019 capital projects include investments to replace assets based on
established asset management principles and strategies adopted by the Company, which are
designed to optimize the overall lifecycle value of the investment for our customers. Projects
in this investment category are identified in Table No. 1 above. Brief descriptions of each
project, the reasons for the projects, the risks of not completing the projects, and the timing of
the decisions follow. Additional details can be found in Exhibit No. 6, Schedule 1, Generation
and Environmental Capital Project Business Cases
Coyote Springs 2 Capital Improvements - $47,000
This capital project covers trailing charges for Coyote Springs 2 that were incurred in 2018,
but were not invoiced until early 2019.
Nine Mile Redevelopment - $552,000
The Nine Mile Redevelopment is a continuing capital project to rehabilitate and modemize
the Nine Mile Hydroelectric Dam. Previous projects include the complete upgrades of Units
I and 2 completed in 2016 and replacement of the Intake Deck and Debris System in 2017 .
The Sediment Bypass Enhancement, which included improvements to an existing passage for
increased sediment diversion, and the Cooling Water System to prevent forced outages caused
by excessive debris during runoff were completed in 2018. The 2019 capital projects for the
Nine Mile Redevelopment include the closeout of this project work.
Base Load Hydro - $1,166,000
The Base Load Hydro program covers the ongoing capital maintenance expenditures required
to keep the Upper Spokane River Plants (Post Falls, Upper Falls, Monroe Street, and Nine
Mile) operating at their current performance levels, as well as meeting FERC and NERC
mandated compliance requirements. This program focuses on ways to maintain compliance
and reduce overall O&M expenses while maintaining a reasonable level of unit availability.
Projects completed under this program include replacement of failed equipment and small
capital upgrades to plant facilities. Most of these projects are short in duration, and many are
reactionary to plant operations issues.
Regulating Hydro - $4,097,000
The Regulating Hydro program covers the capital maintenance expenditures required to keep
the Long Lake, Little Falls, Noxon Rapids and Cabinet Gorge plants operating at their current
performance levels. The program works to improve plant operating reliability so unit output
can be optimized to serve load obligations or sold to bilateral counterparties. Work is
prioritized according to equipment needs. Sustaining this asset management program is
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Avista Corporation
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crucial as these facilities age and are ramped more frequently to meet load fluctuations
associated with renewable energy integration and changing load dynamics. Additionally,
efforts in this program improve ancillary service capabilities from these generating assets.
The program also includes some elements of hydro license compliance as related to plant
operations and equipment.
Base Load Thermal - $2,894,000
The Base Load Thermal Plant program is an ongoing program necessary to sustain or improve
the operation of Avista's base load thermal generating plants, Coyote Springs 2 and Kettle
Falls. Capital projects include replacement of items identified through asset management
decisions and programs necessary to maintain reliable operations of these plants. The program
also includes initiatives associated with regulatory mandates for air emissions and monitoring,
and projects to meet NERC compliance requirements.
Peaking Generation - $506,000
The Peaking Generation program focuses on the ongoing capital maintenance expenditures
required to keep Boulder Park, the Rathdrum Combustion Turbines, and the Northeast
Combustion Turbine operating at or above their current performance levels. The purpose of
this program is for these plants to keep their operating expenses as low as possible and to
ensure start and operating reliability is achieved by providing funding for specific efforts to
allow the plants to accomplish that objective. Work includes replacement of items identified
through asset management decisions and programs necessary to maintain reliable and low
operating costs of these plants. The program includes initiatives to meet FERC, NERC and
EPA mandated compliance requirements.
Little Falls Powerhouse Redevelopment - $9,047,000
The Little Falls Modernization Program (LFMP) began in 2010 to replace equipment
associated with the generating units at the end of its useful life. From 2006 to 2010, the
number and duration of forced outages at Little Falls increased due to equipment failure. This
program was initiated to first replace the equipment responsible for the majority of the
outages, followed by preparing the plant for the large generation unit upgrades, and
concluding with projects structured to replace the majority of the generator's components.
The preparation work for the unit upgrade involved overhauling the crane to make it reliable,
constructing a warehouse for storage and staging of equipment, and upgrading the AC and
DC electrical distribution system in the plant to handle the new equipment. The unit upgrades
began in20l4 with four units being upgraded, one at a time. The last unit upgrade is scheduled
for completion in the Fall of 2019. Each unit upgrade includes the replacement of the generator
stators, generator cables, turbine shaft assembly, govemor system, unit control and protection
systems, re-babbiting of the bearings, reinsulating the field poles, and upgrades to the unit
water, oil and air systems. Additional plant work is also included in this program that either
directly or indirectly affects the generator units, such as lighting, backup generator, control
room upgrades, and other subsystem upgrades. The Little Falls Spillway System is not
included in this program.
Thackston, Di
Avista Corporation
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The Unit 2Modemization was completed and transferred to plant in June 2018 and the Backup
Generator Install in November 2018. The Unit 4 Modernization will be completed in fall
2019, and the Plant Sewer Sump Upgrades and Miscellaneous Projects are expected to be
finished by Jwe2020.
Unit 4 Modernization/Generator Upgrade is currently in process and is scheduled for
completion in fall 2019. The current estimate for this project is $8,357,253. There may be
additional trailing costs for work, invoices, materials, redlines, as-builts, and project closeout.
Unit 4 was the final generator upgrade that is part of LFMP.
The last project to be completed under the LFMP is the Plant Sewer Sump replacement with
an estimated cost of $690,000. This workwas originally scheduled to be completed in 2019,
however, after the revenue requirement was finalized in this case, it was determined that it,has
been deferred to June 2020. The Company will update these amounts during the pendency of
this case.
Long Lake Plant Upgrades - ($101,000)
The Long Lake Plant Upgrade is a multiyear project to replace and improve plant equipment
and systems that range from 20 to over 100 years old. The effort began with the project design
in2018 and expected project completion in2024. Increased O&M spending is expected to
maintain an upward trend due to aging equipment. Prior facility upgrades reached the end of
their useful life and place additional stress on the plant. There are also safety issues involved
with moving station service from one generator to the other that need addressing. This project
replaces the existing major unit equipment in kind including generators, field poles,
governors, exciters, and generator breakers. The generators are currently operated at their
maximum temperature which stresses the life cycle of the already 50 plus-year-old windings.
Inspections of other components of the generator show the stator core is "wavy", which is a
strong indication that higher than expected losses are occurring in the generator. Finally,
maintenance reports identified that the field poles on the rotor have shifted from their designed
position. The Generator Step Up (GSU) transformers are over 30 years old and operating at
the high end of their design temperature. The GSU's are approaching the end of their useful
life and need to be replaced proactively rather than waiting for a failure. The Company
inadvertently included the wrong capital addition amount for this project and will update to
the correct revenue requirement amount during the pendency of this case. Avista should have
included an increase on a system basis of approximately $408,000.
Generation DC Supplied System Upgrade - ($80,000)
The Generation DC Supplied System Upgrade is a multiyear project to update existing plant
DC systems to meet Avista's current Generation Plant DC System Standard. This program
makes compliance with the NERC PRC-005 Reliability Standard more tenable and
significantly reduces plant outage times required for periodic testing to meet the standard.
The project changes DC System configurations to more easily comply with the NERC
requirements for inspection and testing. It addresses battery room environmental conditions
to optimize battery life. The project replaces legacy UPS systems with an inverter system and
addresses auxiliary equipment based on its life cycle. The Company is currently addressing
Thackston, Di
Avista Corporation
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Battery Bank replacement based on the manufacturers recommended life cycle, which is based
on ideal operating conditions. For temperatures fifteen degrees F over the normal operating
temperature, the life cycle decreases 50 percent. Component failure, utilization from multiple
extended outages and manufacturer's quality are problems we have experienced on these
systems. The altemative approach ofreplacing components as they fail and gradually building
out to Avista's current standard may reduce program costs, but adds significant risk of
unpredictable full system failures leading to forced plant outages. This program covers both
thermal and hydro generation assets. Each planned project takes approximately 16 to 18
months to complete. Added complexity, cost, and time may be needed if extensive work is
required to address the temperature and other environmental issues with the location of each
new battery system. The Company inadvertently included the wrong capital addition omount
for this project and will update to the coruect revenue requirement amount during the
pendency of this case. Avista should have included an increase on a system basis of
approxim ately $ 2 5 0, 000.
Post Falls Redevelopment - $379,000
After the revenue requirement was finalized in this case, it was discovered that this project
has been deferued to 2020. Therefore, there should be $0 transferring in 2019. A business
case for this project is still included in Exhibit 6, Schedule l.
Cabinet Gorge HED Gantry Crane Replacement - $5,000,000
The Cabinet Gorge Gantry Crane Rehabilitation Project brings the sixty-seven year old
undersized crane up to current Crane Manufacturers Association of America (CMAA)
standards and increase the lifting capacity to 340 tons to accommodate the 330 ton lift required
for Unit 1. Even though concerns regarding the crane's functionality existed for years prior,
a more thorough investigation was deemed necessary following the crane's use in the Cabinet
Gorge Unit I refurbishment in September 2015. During the last lift performed by the crane
in September 2015, the mechanical team discontinued use of the main hoist motor due to
operational inconsistencies. A May 2017 inspection by Simmers Crane Design & Services
determined that the overall strucfural condition of the crane was very good, and therefore a
complete replacement of the crane was unnecessary. The reduction in scope reduced the
project budget from $7.3 million to $3.4 million. Subsequent change orders under the
Simmers contract have resulted in budget increases of roughly $1.6 million, for a total of $5.0
million to transfer into service in October of 2019. This project will deliver a state-of-the-art
crane capable of safely and reliably meeting plant needs. Alternatives ranging from total
replacement to refurbishment were considered. Construction will take over four months,
following dismantling of the existing crane and a year-long lead time to manufacture a new
crane.
Automation Replacement - $7341000
The Automation Replacement project systematically replaces the unit and station service
control equipment at our generating facilities with a system compatible with Avista's current
standards for reliability. Upgrading control systems within our generating facilities allows us
to provide reliable energy. The Distributed Controls Systems (DCS) and Programmable Logic
Controllers (PLC) are used to control and monitor Avista's individual generating units as well
Thackston, Di
Avista Corporation
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as each total generating facility. The DCS and PLC work is needed now to reduce the higher
risk of failure due to the aging equipment. The DCSs are no longer supported and spare
modules are limited. The modules in service have a high risk of failure as they are over 20
years old. The computer drivers that are needed to communicate to the DCSs will not fit in
new computers with Windows 10 operating systems, creating a cyber-security issue. The
software needed to view and modify the logic programs only runs on Windows 95. Avista
has a very limited supply of Windows 95 laptops and they also continue to fail. Replacing
aging DCSs and PLCs will reduce unexpected plant outages that require emergency repair
with like equipment. A planned approach allows engineers and technicians to update logic
programs more effectively and replace hardware with current standards.
Avista's hydro facilities were designed for base load operation, but are now called on to
quickly change output in response to the variability of wind generation, to adjust to changing
customer loads, and other regulating services needed to balance the system load requirements
and assure transmission reliability. The controls necessary to respond to these new demands
include speed controllers (governors), voltage controls (automatic voltage regulator a.k.a.
AVR), primary unit control system (i.e. PLC), and the protective relay system. In addition to
reducing unplanned outages, these new systems will allow Avista to maximize ancillary
services within its own assets on behalf of its customers rather than having to procure them
from other providers.
Cabinet Gorge HED Service Station Replacement - ($264,000)
After the reyenue requirement was finalized in this case, it was discovered that this project
has been deferred to 2020. Therefore, there should be S0 transferring in 2019. A business
casefor this project is still included in Exhibit 6, Schedule l.
Cabinet Gorge HED Replace Headgates - $193,000
The four intake headgates at Cabinet Gorge Dam are over 60 years old and are the original
headgates installed at the project. Headgates are critical equipment required to completely
block water flow through the penstock and turbine for equipment safety (runaway unit),
maintenance, repair, or replacement of the generating unit assembly. The last maintenance
on these gates occurred l0 years ago. Their current condition required a complete overhaul or
replacement to assure they remain reliable for operation and are safe for workers to work
behind during annual maintenance and other plant and penstock work.
Plans were developed to replace one gate per year at an estimated cost of $ 1,100,000 for each
gate. Planning for this efforts is anticipated to take one year with installation of one gate per
year to follow. New gates will include a welded design rather than the existing riveted
construction. lnspection of the integrity of welds versus rivets will be much easier and more
accurate over the long term. New wheel design will provide better baseline measures for
operation and much better confidence for emergency use. New seals designed and installed
with the new gate and analyzed for a more accurate fit in the gate slot will provide assurance
for a better seal when the gates are down and employees are working in the penstock or on a
generating unit behind the gate.
Thackston, Di
Avista Corporation
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The decision to replace the headgates considered power supply and overall system reliability.
For complete overhaul maintenance, the headgate would be completely out of the water and
above the deck for work access taking the gate and corresponding unit out of service for the
duration of the work. Replacing headgates allows for less generating unit outage time. The
gates are manufactured offsite and delivered for installation allowing more unit availability as
each unit will only need to be down about l0 weeks for removal and installation, instead of
l6 weeks for an overhaul.
Noxon Rapids HED Spillgate Refurbishment - $1,060,000
The eight original spillgates at Noxon Rapids HED are over 60 years old. Spillgates are
critical equipment needed to control the flow of water over the dam during spill conditions
when the water flowing in the river exceeds that which passes through the turbines in the
plant. They also protect the dam during high flow periods or if the plant or units trip to prevent
overtopping or flooding of the dam. The gates have been periodically maintained, but
corrosion and use have caused degradation to the point where they need to be removed and
completely rebuilt or replaced. Structural analysis revealed that the current gates may not be
designed to meet the loading requirements during operation due to seismic conditions. The
spillgate issues must be resolved in the near future for the safety and reliability of the plant
personnel and equipment. Fully functioning spillgates are a FERC requirement and part of
the Dam Safety program.
Long Lake HED Stability Enhancement - ($146,000)
After the revenue requirement was finalized in this case, it wos discovered that this project
has been deferred to 2020. Therefore, there should be $0 transferuing in 2019. A business
casefor this project is still included in Exhibit 6, Schedule l.
Resource Metering, Telemetry, and Controls Upgrade - $1,081,000
The CAISO EIM is an in-hour economic based regional resource dispatch program that allows
participants to lower energy costs by either dispatching less expensive resources to meet load
obligations or increase revenue through the bidding of excess energy into the market. Joining
the CAISO EIM, or any other sub hourly dispatch market, requires adherence to the market
operator metering and controls standards. The CAISO EIM dispatches resources in 5 minute
intervals and an EIM member will economically settle any generation imbalance to dispatch
request on a 5 minute basis. The EIM member entity is required to have accurate reliable
meter data, control equipment and telemetry to accurately account for the generation output
in each of these 5 minute dispatch increments. Avista does not currently meet all of the
required metering device types at all of its generators and interconnection points.
Avista is currently undertaking a long-term program to update all generation metering to the
SEL-735 Intermediate meter, which is an approved CAISO meter. This metering upgrade plan
accelerates the upgrading and replacement of metering to ensure Avista is prepared for
organized market entry in April2022. Once the full Meter Assessment and upgrade plan is
completed in 2019, additional funds will be requested for 2019-2022 to meet EIM entry
requirements.
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Avista Corporation
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HMI Control Software - $502,000
HMI Control Software is used to develop control screens that are used to control generating
systems within Avista Hydroelectric Developments and Thermal Generating facilities. They
allow an operator to run the station from a computer in a control room rather than from the
equipment on the generating floor. New HMI control software is needed now to prevent
limitations going forward that will introduce security risks. The existing HMI software runs
on Windows 7, which Microsoft will no longer be supporting after 2020. Not staying current
with supported operating systems increases cyber security risks which impacts system
reliability. Developing new controls screens on a new software platform modernizes control
screens and allows operators to carry out their responsibilities more effectively. A planned
approach to develop new control screens for each generating facility allows engineers and
technicians to develop screens over time to coordinate with control upgrades. Software
licenses were not procured in 2018 as previously planned and were moved to2019 due to
extended software contract negotiations.
KFGS Boiler Tube Maintenance (Economizer Section) - $355,000
The Kettle Falls Generating Station thermal plant is a wood-fired natural circulation boiler.
The wood is burned on a traveling grate system and the heat from the fire is transferred into
the boiler which consists of water walls, a superheater section, an economizer section and the
air heater. An annual outage inspection utilizing Non-Destructive Testing (NDT) is
performed on all areas of the boiler that can be accessed with scaffolding. The NDT results
are used to make repairs on the boiler.
During the combustion process, ash and sand is carried off the grate and into the flue gas
stream. The ash and sand is removed from the flue gas mechanically through a series of
aggressive flow changes, cyclone separation and electrostatic precipitation. The economizer
is positioned upstream of all the collection equipment. The abrasive nature of the sand and
ash has caused significant wear to the outside of the economizer tubes resulting in thinning
and leading to ruptures. There are not inspections or testing that can be performed to
determine when or where the next failure will occur. The unit will be subject to more forced
outages and employees will be at risk of being around the unit when the next rupture occurs.
Phase I ofthis project performs needed U-Bend repairs during the annual maintenance outage.
Phase 2 repairs and replaces the economizer section with the same configuration and size to
address both the U-Bend wear and the tube length failure. Performing boiler tube maintenance
on regular intervals minimizes employee exposure to hazards resulting from a tube rupture.
This project should reduce potential safety risk hazards and increase plant reliability.
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Avista Corporation
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Kettle Falls Fuel Yard Equipment Replacement - $1,208,000
The existing Kettle Falls fuel yard equipment system does not allow operation consistent with
safe best practices due to it being designed for smaller truck sizes than subsequently updated
trucking regulations allow for. The existing system does not meet environmental regulations
for visibility and particulate matter (PM) emissions for intermittent periods. All of the
equipment operates at or near its absolute limit and expected additional future output requires
a more robust fuel supply system. All of the equipment is over 35 years old and has reached
the end of its useful life.
After consideration of several options, this project will relocate new equipment to a different
location in the fuel yard to allow the current system to operate while the new system is
constructed and commissioned. The layout reduces crossing traffic issues with the semi-
trucks. A new longer inbound and separate outbound scales eliminates the scaling issue as
sensors would not allow a driver to scale in unless the truck was positioned correctly on the
scale. The two new larger truck dumpers allow the lifting of both the truck and the trailer to
reduce truck tumaround time and eliminatethehazard identified in a driver fatality. The new
dumpers will incorporate dust containments systems to reduce fugitive dust during the offload.
New larger conveyors will accommodate higher throughput. The higher capacity belt system
will reduce laborious shoveling of spilled fuel. The incline of the new belts will reduce winter
frozen fuel from sliding on the conveyor belts. The larger disc screen will provide better
screening efficiency and reduce hog operation to only oversized material. The upgraded stack
out fuel conveyor system will strategically move fuel to three locations reducing Caterpillar
dozer fuel consumption and yearly time based maintenance. A new control tower and power
supply will eliminate the electrical deficiencies with the current system.
Cabinet Gorge Protection and Control Upgrade - $2,286,000
Cabinet Gorge was designed for base load operation, but must also now quickly change output
in response to the variability of wind and solar generation, adjust to changing customer loads
and other regulating services needed to balance the system load requirements, and assure
transmission system reliability. The controls necessary to respond to these new demands
include speed controllers (governors), voltage controls (automatic voltage regulator a.k.a.
AVR), primary unit control system (i.e. PLC), and the protective relay system. tn addition to
reducing unplanned outages, these systems allow Avista to maximize these services from its
own assets on behalf of customers rather than having to procure them from other providers.
The key metric for these plants is their Equivalent Availability Factor or EAF. EAF measures
the amount of time that the Unit is able to produce electricity in a certain period, divided by
the amount of time in that period. In this case, Cabinet Gorge has averaged below 85% EAF
for the twelve month rolling period ending February of 2018. The internal company target
for this measure is 85%.
Some of the outages that cause the EAF to fall below the target include forced and
maintenance outages associated with the control and protection systems described above. An
additional problem with the existing governor (speed) control is the lack of response to a
system frequency event. Given the outdated unit control and governor technology,
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modifications cannot be made to programs and settings to reliably improve the frequency
response. Upgrading the unit to Avista's standard hydro unit control package will
immediately correct the lack of frequency response. There are several NERC Reliability
standards against which existing equipment performs at a sub-standard level.
To accomplish project objectives to improve unit response, operating flexibility, and
reliability, the following components on Unit 2 will be upgraded or replaced: governor and
governor controls, generator excitation system and AVR, protective relays, and unit controls.
The extended outage provides an opporlunity to address other issues including, insulating the
generator housing roof, cooling water upgrade unit flow meter and other items to improve
overall reliability. The objective is to ensure system compatibility with current standards and
improve system reliability.
Additional funds spent in 2019 procure equipment for Cabinet Gorge Units 3 & 4.
Engineering and design work will commence in2020.
Hydro Generation Minor Blanket - $50,000
The Hydro Generation Minor Blanket funds periodic capital purchases and projects to ensure
public safety at hydro facilities both on and off water, for FERC regulatory and license
requirements. The types of projects include barriers and other safety items like lights, signs
and sirens. Section 10(c) of the Federal Power Act authorizes the FERC to establish
regulations requiring owners of hydro projects under its jurisdiction to operate and properly
maintain such projects for the protection of life, health and property. Title 18, Part 12, Section
42 of the Code of Federal Regulations states that, "To the satisfaction of, and within a time
specified by the Regional Engineer an applicant, or licensee must install, operate and maintain
any signs, lights, sirens, barriers or other safety devices that may reasonably be necessary".
Hydro Public Safety measures includes projects as described in the FERC publication
"Guidelines for Public Safety at Hydropower Projects" and as documented in Avista's Hydro
Public Safety Plans for each of its hydro facilities.
Environmental Compliance Blanket - $217,000
This capital project covers Environmental Compliance requirements related to storm water
management, water quality protection, property cleanup and related issues. It also covers the
propff handling and disposal of hazardous waste, specifically oil-filled electrical equipment
governed by Resource Conservation and Recovery Act, Toxic Substances Control Act and
related State regulations. This funding covers all activities associated with the proper handling
and disposal of hazardous waste, specifically oil-filled electrical equipment as part ofthe asset
decommissioning process. This includes labor and equipment from when the equipment is
removed from service, transported back to the Spokane Waste and Asset Recovery Facility
where they are identified, investigated, inventoried, sampled, sorted, stored and/or shipped to
the proper waste vendor for proper disposal. These activities are accomplished by numerous
field personnel including two hazardous waste technicians. The handling of these materials is
mandated by state and federal rules.
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Clark Fork License Implementation- $4,4571000
This generation capital project covers certain required FERC license requirements for the
Clark Fork license and implementation of Protection, Mitigation and Enhancement (PM&E)
programs is the capital project for the license issued to Avista Corporation for a period of 45
years, effective March 1,2001, to operate and maintain the Clark Fork Project No. 2058. The
License includes hundreds of specific legal requirements, many of which are reflected in
License Articles 404-430. These Articles derived from a comprehensive settlement agreement
between Avista and over 20 other parties, including the States of Idaho and Montana, various
federal agencies, five Native American tribes, and numerous Non-Governmental
Organizations. We are required to develop, in consultation with the Management Committee,
a yearly work plan and report, addressing all PM&E measures of the License. In addition,
implementation of these measures is intended to address ongoing compliance with Montana
and Idaho Clean Water Act requirements, the Endangered Species Act (fish passage), and
state, federal and tribal water quality standards as applicable. License articles also describe
our operational requirements for items such as minimum flows, ramping rates and reservoir
levels, as well as dam safety and public safety requirements.
Spokane River Implementation (PM&E) - $1,556,000
This capital spending category covers the ongoing implementation of PM&E programs related
to the FERC License for the Spokane River including Post Falls, Upper Falls, Monroe Street,
Nine Mile and Long Lake. This includes items enforceable by FERC, mandatory conditioning
agencies, and through settlement agreements. The FERC License defines how Avista shall
operate the Spokane River Project and includes several hundred requirements that must be
met to retain this License. Overall, the License is issued pursuant to the Federal Power Act.
It embodies requirements of a wide range of other laws, including the Clean Water Act, the
Endangered Species Act, and the National Historic Preservation Act, among others. These
requirements are also expressed through specific license articles relating to fish, terrestrial
resources, water quality, recreation, education, cultural, and aesthetic resources at the Project.
In addition, the License incorporates requirements specific to a 50-year settlement agreement
between Avista, the Department of Interior and the Coeur d'Alene Tribe, which includes
specific funding requirements over the term of the License. Avista entered into additional
two-party settlement agreements with local and state agencies, and the Spokane Tribe; these
agreements also include funding commitments. The License references our requirements for
land management, dam safety, public safety and monitoring requirements, which apply for
the term of the License.
III. COLSTRIP GENERATION CAPITAL PROJECTS
a. How are Colstrip capital decisions made and managed by the Company?
A. Avista actively participates in the capital decision-making process at Colstrip.
Each year Talen, the plant operator, proposes a set of capital projects for Units 3 and 4, as
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Avista Corporation
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I well as for the plant-in-common. These projects are reviewed by one or more Avista
2 representatives on an individual basis and also as an ownership group. Additionally, Avista
3 and other Company representatives meet with Talen at least every other month to review plant
4 operations including capital projects. Projects may be added or subtracted throughout the year
5 as appropriate. While it is true that the ownership structure and operating agreement for
6 Colstrip do not provide a line item veto of individual capital projects, and Avista only has a
7 small ownership interest preventing it from stopping capital projects on its own, the Company
8 nevertheless actively exercises its ownership rights while projects are being discussed. It
9 should also be remembered that the compensation structure for the plant operator is cost-based
l0 and does not include a rate of return based on the capital spending at the plant. There is no
11 incentive for the plant operator to spend foolishly. In fact, quite the opposite is true. The
12 plant operator is an independent power producer that relies on low plant costs to ensure the
l3 plant is competitive in the market, so there is no financial incentive for them to spend needless
14 capital. The plant operator's financial interests to keep costs as low as possible while meeting
l5 all regulations, are the same as all of the Colstrip owners and their customers.
16 a. What is the overall reason for the on-going capital projects at Colstrip?
17 A. Continued capital projects are required in order to maintain a reliable
18 operational facility and to meet regulatory obligations and environmental compliance
19 requirements concerning overall site management. The Colstrip Generating Station consists
20 of Units I and2 - 333 (MW) that have each been operating since 1975, and are scheduled to
2l shut down by July 2022, and Units 3 and 4 - 805 MW each operating since 1983 and 1986.
22 The entire facility must manage water and waste according to the following:
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o The Site Certificate originally issued including the amended l2(d) stipulation
under the Major Facility Siting Act in Montana, Nov. 1975.
. Federal Coal Combustion Residual (CCR) Rule,40 Code of Federal Regulations
(CFR), April2015.o Administrative Order on Consent (AOC) Regarding Impacts Related to
Wastewater Facilities, MDEQ Quly 2012), Settlement agreement entered (2016).
These regulatory obligations and environmental compliance requirements, in addition to
maintaining a reliable, operational facility, requires a strategic approach to planning and
completing certain Capital projects in order to meet required deadlines.
a. How do the owners of Colstrip address regulatory obligations and
environmental compliance requirements?
A. The Colstrip owner's group does not approach its regulatory obligations and
environmental compliance requirements through a narrow perspective. The owners Eroup,
and specifically Avista, must always strategically manage the risk to both our customers and
shareholders for the known and possible regulatory obligations at both the federal and state
levels, while managing reliability and cost of all of our generating resources. The owners do
not take this responsibility lightly and exercise careful diligence in gathering information at
the point in time when strategic decisions must be made.
a. Will these projects need to be completed regardless if/when the Plant is
shut down?
A. Yes. The AOC has required an extensive evaluation process that included site
characterization, clean-up criteria, risk assessment that resulted in a remedy reports (draft) and
remedial action work plans. The draft and finalized documents can be found on the Montana
Department of Environmental Quality (MDEQ) website specific to the Plant groundwater
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Avista Corporation
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1 clean-up.3 h addition, the AOC actions must also meet Federal CCR requirements and
2 deadlines in the interim while maintaining reliable plant operation. The AOC remedial action
3 work plans and Federal CCR are both regulatory obligations and environmental compliance
4 requirements that must be met regardless of the Plant operational status. I will briefly discuss
5 the projects for 2019, below.
6 Q. Will the recently passed Washington legislation requiring elimination of
7 energy from Colstrip 3 and 4by 2025 impact any of the capital projects in this case?
8 A. No. As discussed above, the Company is required to meet several regulatory
9 obligations and environmental compliance requirements, in addition to maintaining a reliable,
l0 operational facility. This requires a strategic approach to planning and completing certain
1l capital projects in order to meet required deadlines. As such, we will continue to make the
12 capital investments necessary to meet these requirements some of which extend beyond the
13 operation of the plant. Put another way, the projects the Joint Partners have undertaken are
14 necessary, irrespective of new legislation.
15 a. Will you provide an update on the status of the Colstrip fuel supply?
16 A. Yes, the current coal supply contract for Units 3 and 4 expires at the end of
17 2019. The Company has been involved in negotiations to extend this contract, but
18 Westmoreland Coal, the owner and operator of the Rosebud Mine that supplies Colstrip, filed
19 for Chapter 11 bankruptcy in October 2018. A group of creditors purchased the Rosebud
20 Mine assets, and that group accepted the current contract and will honor it for the rest of 2019.
2l Negotiations with the creditors for a new contract are ongoing.
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3 http://deq.mt. gov/DEQAdmin/mfs/ColstripSteamElectricstation
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o a. Please discuss the Colstrip qeneration capital projects for 2019.
A. Table No. 2 below illustrates Avista's 15% ownership share of the total2019
Colstrip generation capital projects that are included in this filing:
Table No. 2: 2019 Colstrip Canital Additions (Svstem)
Proiect 2019
Colstrip Capital Additions $ 3,500,000
The totals above include multiple Colstrip generation capital projects for 2019. The
2019 Colstrip capital projects are all continuing support of the long-term management of coal
combustion residuals (CCR) as required by Federal and Montana State regulations. These
projects continue efforts to meet the Operational, and Regulatory and Environmental
requirements and deadlines. These capital projects will continue until completed and the
groundwater is clean, regardless of when or if the units are shut down. Each activity was
evaluated and deemed to be in compliance with the Montana Department of Environmental
Quality (MDEQ) AOC requirements. Altematives were evaluated and these projects were
ultimately mandated and approved to be in compliance with MDEQ requirements from 2016
through the closure of the Colstrip site.
a. Please describe the Water Management_System and Coal Combustion
Residual capital proj ect.
A. The CCR - B Cell Clearwell Units 3-4, Water Management System, and Coal
Combustion Residual should be considered building block projects that support the same
strategic goal - to meet our regulatory obligations and environmental compliance
requirements under the AOC and CCR. These projects are systematically replacing our
historical methods of water and waste management, resulting in multi-year capital projects
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that are on-going to address groundwater quality at the Colstrip site. As such, these have been
combined into one overall project for this testimony.
A high level process description begins with raw water that is piped from the
Yellowstone River to Castle Rock Lake, and ultimately to holding tanks at the plant site. This
water is used in boilers, cooling towers and scrubber systems. Fly ash from the scrubber
system is transported to the plants which then removes the excess water and deposits paste
into disposal cells. Once the water is clear, it is ultimately recirculated back to the plants for
reuse. All water is reused or lost through evaporation - this is a zero discharge facility.
Throughout the years, water has been lost through seepage from the ponds that has
contaminated the groundwater on the Colstrip site. The AOC is the primary Montana
regulatory mechanism to address the groundwater contamination. This is a multi-year project
due to the complexity and inter-related nature of the ponds.
Due to the significant amount of work required to meet these environmental
regulations, these projects will continue to have specific capital projects in each year through
the closure of the Colstrip site.
Iv. lOO PERCENT CLEAN ELECTRICITY BY 2045 GOAL
a. The Company recently announced a 100 percent clean electricity goal by
2045, and carbon neutral electricity supply by the end of 2027. Why is this important
to the Company?
A. The April 2019 announcement bolsters Avista's long-standing history of, and
well-established approach to, providing clean, reliable and affordable energy to the customers
and communities we serve. We believe that the 100 percent clean electricity goal is an
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important step forward in caring for our environment while continuing to meet the energy
needs of our customers and communities today and well into the future. Since Avista's
founding on clean, renewable hydro power in 1889, we've served our customers with an
electric generation resource mix that is over half renewable, allowing us to keep our carbon
emissions among the lowest in the nation. Further, the Company has always been committed
to balancing reliability and affordability while maintaining responsibility for our
environmental footprint, and our actions demonstrate these values. We've implemented three
renewable energy projects on behalf of our customers in the last three years. Our Community
Solar project in Spokane Valley, the Solar Select project in Lind, and the Rattlesnake Flat
Wind project in Adams County together have allowed us to add to the clean electricity we
already provide, meet the energy needs of our customers without increasing their bills, and
drive economic vitality in these communities.
a. Can you provide other examples of environmental stewardship?
A. Yes. Additional examples of Avista's record of environmental stewardship
include:
Forty years ago, Avista was one of the first utilities in the nation to establish
an energy efficiency program, and since this program started, customer electric
usage has been reduced by l5 percent.
In the 1980's, the Company built the first utility-scale biomass wood-fired
power plant, improving air quality where waste from the timber industry was
otherwise burned onsite without emissions controls.
Avista has enabled customers to switch from gasoline-fueled vehicles to
natural gas-fueled and electric vehicles, building infrastructure to supply a
cleaner fuel for vehicles and contributing to reductions in greenhouse gas
emissions from the transportation sector.
a. Why is Avista declaring an electric carbon neutral goal now?o
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o 1 A. We have seen a growing focus on clean electricity generation at the national,
2 regional, and local levels. Our customers and communities are increasingly expressing an
3 interest in knowing how Avista is positioned on this topic. While we have a strong and long
4 track record related to clean electric generation, we felt it was time to be clear about our path
5 forward. Reaching this goal, of course, will require further improvements in costs and
6 technologies associated with clean electric generation and energy storage, as well as
7 regulatory support. Going forward, we will track progress through our Integrated Resource
8 Plan, which is filed every two years.
9 Q. What does carbon neutral mean and what percent of Avista's load is
10 actually served with renewables?
1 I A. Carbon neutral means achieving an overall net-carbon footprint by meeting our
12 customers' annual electric needs through either utilizing non-carbon emitting resources, or
13 investing in or acquiring carbon offsets to net-out emissions created from carbon emitting
14 resources. An example of a carbon offset is acquiring renewable energy credits from a
15 renewable energy resource. Currently, over 60 percent of Avista's customers' annual electric
16 need is served from clean, non-carbon emitting resources.
17 a. What does this mean for Colstrip?
18 A. Colstrip has been an important source of generation in the region and for
19 Avista's customers for over 30 years. It is available to serve our customers when the wind
20 isn't blowing, the sun isn't shining, or there isn't enough water flowing down our rivers to
2l generate enough electricity to meet our customers' energy needs. As the costs and technology
22 of clean energy and energy storage continue to improve, and as other markets develop, we
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O I anticipate there will be a time when we no longer need Colstrip, and we continue to work with
2 our five co-owners related to the future of the plant.
3 Q. How does natural gas fit with the Company's clean energy goal?
4 A. Natural gas has been a key energy choice for Avista's customers for nearly 70
5 years. It is an affordable and less expensive heating option for customers, especially for many
6 large commercial and industrial customers who rely on it to run their business, provide jobs
7 for their employees and serve their communities. Natural gas is one of the cleanest burning
8 fuels and is an essential part of reducing carbon emissions, particularly when used directly by
9 customers in their homes rather than used to generate electricity to meet the same need.
10 Natural gas improves air quality when compared to wood, heating oil, and other fuels.
11 Additionally, the use of compressed natural gas (CNG) to fuel vehicles reduces carbon
12 emissions in the transportation sector, which is a leading contributor of emissions. Avista
l3 consistently engages customers to educate about natural gas efficiency, and offers natural gas
14 energy efficiency programs that also support lower emissions. In short, direct use of natural
l5 gas is efficient, creates less environmental impact than other fuels, and is an affordable option
l6 for customers.
17 a. How does energy efficiency play a role in this plan?
l8 A. Energy efficiency has been an important piece of our energy resource portfolio
19 for 40 years, and we will continue to partner with our customers to use electricity more
20 efficiently. Energy efficiency is good for the customers' energy use, and it reduces our need
2l to build additional generation, reducing the carbon intensity of our local economy.
22 a. Does this conclude your pre-filed direct testimony?
23 A. Yes it does.
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Avista Corporation
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