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Home My WebLink AboutTRIPPELr.pdfHECElVED 0 i:' 1... u 2unZ MJG -S PH 2: 48 coMMfJl~ldilfs Co'Ht,i/isIONBEFORE THE IDAHO PUBLIC UTILITIES IN THE MATTER OF THE INVESTIGATION OF THE CONTINUED REASONABLENESS OF CURRENT SIZE LIMITATIONS FOR PURPA QF PUBLISHED RATE ELIGIBILITY (i. e., 1 MW) AND RESTRICTIONS ON CONTRACT LENGTH (i. e. , 5 YEARS) CASE NO. GNR-E-O2-01 ,~,; c!' \ COURT REPORTER REBUTTAL TESTIMONY AND EXHIBITS OF STUART A. T. TRIPPEL ON BEHALF OF INDEPENDENT ENERGY PRODUCERS OF IDAHO TABLE OF CONTENTS INTRODUCTION AND OVERVIEW OF TESTIMONY. . . . . . . . . . . . . . . 2 NATURAL GAS PRICE FORECAST. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 CAPITAL CARRYING CHARGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 FIRST DEFICIT YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RATE IMPACTS ......................................... 7 SUMMARY AND CONCLUSIONS.............................. Trippel, Di-Reb Independent Energy Producers of Idaho ARE YOU THE SAME STUART TRIPPEL WHO PREVIOUSLY FILED DIRECT TESTIMONY BEHALF THE INDEPENDENT ENERGY PRODUCERS OF IDAHO IN THIS PROCEEDING? Yes. INTRODUCTION AND OVERVIEW OF TESTIMONY WHAT IS THE PURPOSE OF YOUR TESTIMONY? The purpose of my testimony is to (1)recommend an updated natural gas price forecast,in conjunction with David Hawk, who is also testifying in rebuttal testimony on behalf of the Independent Energy Producers of Idaho (IEPI), (2) recommend changes to the capital carrying charge used in the avoided cost rate model, and (3) comment on the proposal Plummer ProductsForest and Potlatch Corporation regarding first deficit year. NATURAL GAS PRICE FORECAST PLEASE SUMMARIZE YOUR POSITION ON NATURAL GAS PRICE FORECAST AS PRESENTED IN YOUR DIRECT TESTIMONY. In my direct testimony I presented two natural gas price forecast series from the Northwest Power Planning Council (NPPC)Draft Fuel Price for the 5thForecasts Northwest Conservation and Electric Power Plan,April 25 Trippel, Di-Reb Independent Energy Producers of Idaho 2002 (Council 2007 -07)(hereinafter the NPPCDocument Forecast" ) . series directThethatpresentedtwo testimony were the medium-high and the high.On direct testimony I recommended the medium-high series, although also testified that it would be entirely reasonable for the Commission adopt forecast serieshightheNPPC' (Trippel, Di, at 8, lines 21-23). YOU CONT INUE TO RECOMMEND THE MEDIUM-HIGH SERIES? In view of recent observations of changesNo. in the natural gas markets, as testified to on rebuttal by David Hawk, also on behalf of the IEPI in this proceeding, I believe that is more appropriate adopt the high, rather than the medium-high, series of natural gas prices. WHAT SPECIFICALLY IS YOUR CURRENT RECOMMENDATION REGARDING THE INITIAL-YEAR NATURAL GAS PRICE AND ANNUAL ESCALATION RATE? indicated Exhibi t 604,which accompanied my direct testimony, I now recommend an initial- year natural gas price of $3.91 per MMBtu and an escalation rate of 3.6 percent per year.This is consistent with the testimony of Mr. Hawk. Trippel , Di-Reb Independent Energy Producers of Idaho CAPITAL CARRYING CHARGE WHAT IS MEANING OF THE CAPITAL CARRYING CHARGE IN THE AVOIDED COST RATE MODEL? The capital carrying charge is used to compute the annualized plant cost in the avoided cost model.It is currently 12.424 percent for Idaho Power, 11.813 percent for Avista, and 12.600 percent for Pacificorp. WHAT THE PROBLEM WITH USING THESE CAPITAL CARRYING CHARGES AT THIS TIME? These capital carrying charges were developed at a time when it was considerably easier to obtaining funding for power plants in the financial markets.This longer the case. YOU HAVE ANY EVIDENCE THAT MORE DIFFICULT FOR UTILITIES TO FINANCE POWER PLANTS NOW THAN PREVIOUSLY? Yes.Idaho Power Company presented, connection with its proceeding before this Commlssion approve the Garnet Energy plant,an affidavit dated July 22, 2002, sworn to by Darrel Anderson, Vice President and Chief Financial Officer of IDACORP,Inc.,the parent company of Idaho Power.copy of this affidavit is included as my Trippel, Di-Reb Independent Energy Producers of Idaho Exhibi t No.In the affidavit, Mr. Anderson states as608. follows: At the time that Garnet entered into the (Power Purchase Agreement J with Idaho Power, the financial markets were willing to providefinancing for merchant power plants reasonable terms and conditions, and at thattime both IDACORP and Idaho Power reasonably concluded that financing for the GarnetFacility would be readily available reasonable terms. Since that time, the substantial turmoil in the financial marketsand the well-publicized problems with Enron, Dynergy, Reliant, and other large merchant power plant developers has made the financing of merchant power plants extremely difficult. (Exhibit No. 608, para. 3, emphasis added. WHAT DO YOU PROPOSE WITH RESPECT TO THE CAPITAL CARRYING CHARGES FOR THE UTILITIES? that Commission eachadj ustproposethe utili ty ' s capi tal carrying charge upwards by between two and four percent to reflect difficulty in obtaining financing for power plants in the current market.As noted by Mr. Anderson,financial markets are currentlythe substantial turmoil , " difficul t gauge specific figure.Nonetheless, two to four percent is within a range of reasonableness for adj usting the carrying charge. In the avoided cost figures that I present, below at the end of my testimony,adj ust each utility s capital carrying charge upwards by three percent, the figure in the middle of my recommended range. Trippel, Di-Reb Independent Energy Producers of Idaho FIRST DEFICIT YEAR HAVE YOU REVIEWED THE DIRECT TESTIMONY OF LARRY CROWLEY BEHALF PLUMMER FOREST PRODUCTS AND THE POTLATCH CORPORATION REGARDING FIRST DEFICIT YEAR? Yes.I have reviewed Mr. Crowley s testimony in which he recommends setting the first deficit year of Avista to the year 2000 (Crowley, Di , at 6, lines 4-6). DO YOU AGREE WITH MR. CROWLEY'S RECOMMENDATION? wi th Mr.andanalysisCrowleyYes,agree recommendation.Should the Commission decide to continue the difficul t calculatingandtimeconsumingtask individual first deficit years for the various utilities it regulates, then Mr. Crowley s methodology should be used by the Commission. DOES YOUR ANSWER SUGGEST YOU HAVE CHANGED YOUR POSITION ON ELIMINATING THE FIRST DEFICIT YEAR CALCULATION/ In my direct testimony I argued on behalfNo. of the IEPI that all three utilities should be deemed to be in deficit immediately with respect to any resource under 10 megawatts.Mr. Crowley favorably alludes to this concept at the end of his testimony (Crowley, Di, at 7 , lines 8-9). addi tion, Rick Sterling also supports this concept on behalf of Commission Staff (Sterling, Di, at 7 -11) . Trippel, Di-Reb Independent Energy Producers of Idaho RATE IMPACTS HAVE YOU UPDATED YOUR CALCULATION OF THE IMPACT OF YOUR RECOMMENDATIONS ON AVOIDED COST RATES? format testimony, Yes.Exhibi t same609,which in theNo. as my earlier Exhibit No.605,filed with direct includes an abbreviated form of the spreadsheet model used to calculate avoided cost non-fueled rates for the three utili ties.In each case,the only changes made were to the initial natural gas price (now $3.91 per MMBtu) the natural gas escalation rate (now 3.6 percent per year), the first immediately defici t (set utili tiesthattheyear are deficit)and the capi tal carrying charge (adj usted upwards by three percent for each utility) variables mode 1 , Other remain the they currently thesameare wi th the cosmetic adj ustments for purposes of this exhibi t that I described in my direct testimony. PLEASE SUMMARIZE THE RATES RESULTING FROM YOUR RECOMMENDATIONS. all ratesutilities,three resul tingForthe range from 56 mills/kWh (for a 2002 online date) to 66 or mills/kWh purposes, (for 2007 online For comparisondate) . the current rates would be 71-93 mills/kWh for Idaho Power, representing a decrease of 21-28 percent. Trippel , Di-Reb Independent Energy Producers of Idaho SUMMARY AND CONCLUSIONS PLEASE SUMMARIZE YOUR TESTIMONY AND CONCLUSIONS. view the testimony presented above, recommend that in setting avoided cost rates the Commission adopt a natural gas price of $3.91 for 2002, with a nominal escalation rate of 3.6 percent per year.continue to recommend that the Commission deem that, with respect to any QF of less than 10 megawatts, the purchasing utility will be considered to be deficit,and pa the fullresource avoided cost under that assumption.Finally,I recommend that in calculating avoided cost rates the Commission add fourtwo its discretionpercent,the capi tal carrying charge of each of the three Idaho utili ties who are parties to this proceeding. DOES THIS CONCLUDE YOUR TESTIMONY? Yes. Trippel, Di-Reb Independent Energy Producers of Idaho EXHIBIT NO. 608 AFFIDAVIT OF DARREL ANDERSON, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF IDACORP, INC. AFFIDAVIT STATE OF IDAHO : ss. County of Ada Darrel Anderson , being first duly sworn on oath , deposes and says: I am the Vice President and Chief Financial Officer of IDACORP Inc. IDACORP, Inc. is the corporate parent of Ida-West Energy Company and provides the credit support for Ida-West Energy and Ida-West' subsidiary, Garnet Energy, LLC (Garnet). Garnet Energy, LLC and Idaho Power Company are the signatories to the Power Purchase Agreement (PPA) which is the subject of IPUC Case No. IPC-O1-42. Under the PPA, Garnet has agreed to sell power to Idaho Power generated by a merchant power plant to be constructed , owned operated and maintained by Garnet (Garnet Facility). Because of the structure of the contract with Idaho Power, financing of the Garnet Facility must be accomplished as a merchant power plant because only a portion of the revenues required to support the plant's revenue stream will come from the PPA. At the time that Garnet entered into the PPA with Idaho Power, the financial markets were willing to provide financing for merchant power plants on reasonable terms and conditions, and at that time both IDACORP and Idaho Power reasonably concluded that financing for the Garnet Facility would be readily available on reasonable terms. Since that time , the substantial turmoil in the financial markets and the well-publicized problems with Enron, Dynegy, Reliant and other large merchant AFFIDAVIT, Page EXHIBIT NO. 608 Stuart Trippel Page 1 of 3 power plant developers has made the financing of merchant power plants extremely difficult. Within the past few weeks we have seen a further deterioration within the capital markets. A clear indication of this has been the rapid decline of IDACORP' common stock price. Companies much larger than IDACORP are having difficulty in financing all types of power plants. Because this deterioration has been so rapid and so severe, we have only recently been able to advise Idaho Power of the magnitude of the problem and our concern that Garnet may not be able to perform the PPA as it was presented to the Commission for approval. IDACORP and Garnet intend to expeditiously explore alternative financing arrangements which may make the Garnet Facility financeable under the existing PPA. However, this will take some additional time and, candidly, in today financial market environment may not be successful. IDACORP cannot, in good conscience, recommend that Idaho Power proceed with the hearing in this case in light of the significant possibility that the Garnet Facility cannot perform within the terms of the existing PP A without jeopardizing the financial health of IDACORP, Inc. This could also have an adverse affect on IDACORP's credit rating and cost of money for other purposes including the cost of money for Idaho Power Company. ~V/ Ua~ DARR ANDERSON AFFIDAVIT, Page 2 EXHIBIT NO. 608 Stuart Trippel Page 2 of 3 STATE OF IDAHO ) ss. County of Ada On this 22nd day of July, 2002 , before me, the undersigned, a Notary Public, personally appeared DARREL ANDERSON , known or identified to me to be the Vice President and CFO of IDACORP , Inc., the corporation that executed the within instrument, and acknowledged to me that such corporation executed the same as the free act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first hereinabove written. (NOTARIAL SEAL) .., """"",., .:1.~~ . 1l (; -", ~.( ~ :0. "'" ",aT A~ t.. ." \ . ~: * : -.- \. : * :: . . Pll \C -:. . .. 8 -:. ",. ~ 8 . .#. "". .. ,, "It..' ~" -f l' ......' ,.. ,'" J: OF \~ t:.. "........." AFFIDAVIT, Page 3 ~~ h--.Not Public for Idaho Residing at Boise, Idaho My Comm. Expires 0 - S -0 7 EXHIBIT NO. 608 Stuart Trippel Page 3 of 3 EXHIBIT NO. 609 AVOIDED COST RATES UNDER RECOMMENDATIONS AVOIDED COST CALCULATION MODEL 04-Aug- DATA IPCO TYPE DATA FIRST DEFICIT YEAR:2000 SURPLUS ENERGY COST (mil/kWh):19. SURPLUS COST BASE YEAR:1994 SAR" PLANT LIFE (YEARS): SAR" PLANT COST ($/kW):$667 BASE YEAR OF "SAR" COST:1994 350 SAR" CAPACITY FACTOR (%):92%Btu/kWh UTL TY WT'D COST OF CAPITAL (%):199% RATEPAYER DISCOUNT RATE (%):199%$3, SAR" FIXED O&M ($/kW):$7.43 per MMBtu SAR" VARIABLE O&M (mil/kWh): CURRENT YEAR FUEL COST (mil/kWh):28. BASE YEAR, O&M EXPENSES:1994 20-year K ESCALATION RATE; "SAR" (%):60%Levelized ESCALATION RATE; SURPLUS (%):50%56. ESCALATION RATE; O&M (%):21%58, ESCALATION RATE; FUEL (%):60%60.41 ADJUSTABLE PORTION (mil/kWh):62, CAPITAL CARRYING CHARGE (%):15.424 %64. LEVEL CARRYING COST (mil/kWh):15.67. TILTING" RATE (%):60%mills/kWh TYPE OF RATES:NON-FUELED CURRENT YEAR:2002 Online Year 2002 2003 2004 2005 2006 2007 EXHIBIT 609, Stuart Trippel Page 1 of 3 AVOIDED COST CALCULATION MODEL 04-Aug- DATA A VISTA TYPE DATA FIRST DEFICIT YEAR:2000 SURPLUS ENERGY COST (mil/kWh):19. SURPLUS COST BASE YEAR:1994 SAR" PLANT LIFE (YEARS): SAR" PLANT COST ($/kW):$667 BASE YEAR OF "SAR" COST:1994 350 SAR" CAPACITY FACTOR (%):92%Btu/kWh UTL TY WT'D COST OF CAPITAL (%):979% RATEPAYER DISCOUNT RATE (%):979%$3, SAR" FIXED O&M ($/kW):$7.43 per MMBtu SAR"VARIABLE O&M (mil/kWh): CURRENT YEAR FUEL COST (mil/kWh):28. BASE YEAR, O&M EXPENSES:1994 20-year K ESCALATION RATE; "SAR" (%):60%Levelized ESCALATION RATE; SURPLUS (%):50%55. ESCALATION RATE; O&M (%):21%57. ESCALATION RATE; FUEL (%):60%59. ADJUSTABLE PORTION (mil/kWh):61. CAPITAL CARRYING CHARGE (%):14,813%64. LEVEL CARRYING COST (mil/kWh):14.66.48 TILTING" RATE (%):60%mills/kWh TYPE OF RATES:NON-FUELED CURRENT YEAR:2002 Online Year 2002 2003 2004 2005 2006 2007 EXHIBIT 609 Stuart Trippel Page 2 of 3 AVOIDED COST CALCULATION MODEL 04-Aug- DATA PCP TYPE DATA FIRST DEFICIT YEAR:2000 SURPLUS ENERGY COST (mil/kWh):19. SURPLUS COST BASE YEAR:1994 SAR" PLANT LIFE (YEARS): SAR" PLANT COST ($/kW):$667 BASE YEAR OF "SAR" COST:1994 350 SAR" CAPACITY FACTOR (%):92%Btu/kWh UTL TY WT'D COST OF CAPITAL (%):10.270% RATEPAYER DISCOUNT RATE (%):10.270%$3. SAR" FIXED O&M ($/kW):$7.43 per MMBtu SAR" VARIABLE O&M (mil/kWh): CURRENT YEAR FUEL COST (mil/kWh):28. BASE YEAR, O&M EXPENSES:1994 20-year K ESCALATION RATE; "SAR" (%):60%Levelized ESCALATION RATE; SURPLUS (%):50%56. ESCALATION RATE; O&M (%):21%58. ESCALATION RATE; FUEL (%):60%60. ADJUSTABLE PORTION (mil/kWh):62.47 CAPITAL CARRYING CHARGE (%):15.600%64. LEVEL CARRYING COST (mil/kWh):15.41 67. TILTING" RATE (%):60%mills/kWh TYPE OF RATES:NON-FUELED CURRENT YEAR:2002 Online Year 2002 2003 2004 2005 2006 2007 EXHIBIT 609 Stuart Trippel Page 3 of 3