HomeMy WebLinkAbout20060417Said direct.pdf, , '
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR A
CERTIFICATE OF CONVENIENCE AND
NECESSITY FOR THE RATE-BASING
OF THE EVANDER ANDREWS POWER
COMPLEX EXPANSION PROJECT
CASE NO. IPC-O6-
IDAHO POWER COMPANY
DIRECT TESTIMONY
GREGORY W. SAID
Please state your name and business address.
My name is Gregory W. Said and my business
address is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what
capaci ty?
I am employed by Idaho Power Company as the
Manager of Revenue ' Requirement in the pricing and Regulatory
Services Department.
Please describe your educational background.
In May of 1975, I received a Bachelor of
Science Degree in Mathematics with honors from Boise State
Uni versi ty.In 1999, I attended the Public Utility
Executive s Course at the University of Idaho.
Please describe your work experience with
Idaho Power Company.
I became employed by Idaho Power Company in
1980 as an analyst in the Resource Planning Department.
1985, the Company applied for a general revenue requirement
increase.I was the Company witness addressing power supply
expenses.
In August of 1989, after nlne years in the
Resource Planning Department, I was offered and I accepted a
posi tion in the Company s Rate Department.Wi th the
Company s application for a temporary rate increase in 1992
my responsibilities as a witness were expanded.While I
SAID , DI
Idaho Power Company
continued to be the Company witness concerning power supply
expenses, I also sponsored the Company s rate computations
and proposed tariff schedules.
Because of my combined Resource Planning and
Rate Department experience, I was asked to design a Power
Cost Adjustment (PCA) which would impact customers ' rates
based upon changes in the Company s net power supply
expenses.I presented my recommendations to the Idaho
Public Utilities Commission in 1992 at which time the
Commission established the PCA as an annual adjustment to
the Company s rates.I have sponsored the Company s annual
PCA adjustment in each of the years 1996 through 2003.
In 1996, I was promoted to Director of
Revenue Requirement.At year-end 2002 , I was promoted to
Manager of Revenue Requirement.
During 1999 and 2000, I directed the
preparation of the Company s 2000 Integrated Resource plan
(IRP) .I managed the Request for Proposals (RFP) process
that resulted from the Near-Term Action plan identified in
that Resource Plan.I have also participated in the
preparation of subsequent IRPs and in several RFP processes.
I was the Company s principal witness in its applications
for a Certificate of Convenience and Necessi ty for both the
original Evander Andrews Power Plant Project and the Bennett
Mountain proj ect.
SAID , DI
Idaho Power Company
please outline the major topics you will
address in your testimony in this proceeding.
There are four maj or topics that comprise my
testimony.First, I will briefly describe the history that
preceded Idaho Power s issuance of the RFP on March 30,
2005.Second, I will describe the bid evaluation process
that led to selection of Siemens Power Generation, Inc.
(Siemens) as the winning bidder.Third, I will provide a
general description of the proposed expansion of the Evander
Andrews Power Plant (proj ect) .Finally, I will discuss the
Company s proposed ratemaking treatment of the costs
associated with the Project.
What were the major events that preceded the
selection of the Siemens proposal?
The maj or events leading up to the selection
of the Siemens proposal were the issuance of the 2004 IRP in
August 2004, the Commission s acceptance of the Company
2004 IRP for filing on April 22 , 2005 (Order No. 29762) and
issuance of the combustion turbine peaking resource RFP in
March 2005.The 2004 IRP is on file with the Commission
and , as such , Idaho Power requests that the Commission take
administrative notice of that document.
What drives the need for Idaho Power to
acquire additional resources?
Customer growth is the primary driving force
SAID, DI
Idaho Power Company
behind Idaho Power Company s need for additional resources.
The number of households in the Company s service territory
is expected to increase from about 320,000 at the time the
2004 IRP was prepared to over 380,000 by the end of the 10-
year planning period of that IRP.Idaho Power must acquire
addi tional physical resources to meet the electrical energy
demands of these additional customers.
please describe the major factor that formed
the basis of the 2004 IRP.
Idaho Power has an obligation to serve its
customers ' loads regardless of the water conditions that may
occur.The 2004 IRP was prepared by evaluating the adequacy
of the Company s resources to meet customer needs based upon
planning criteria that included 7 oth percentile water
conditions and 70~ percentile load conditions.This "worse-
than-median " level of water criteria received both public
input and regulatory support during the 2002 IRP process.
Use of these criteria lessens the Company s reliance on
market purchases during periods of low water and produces a
greater need for resource acquisition than pre-2002 analyses
that were based upon median water conditions.
Based upon this assumption, what did the
Company conclude was required to satisfy future loads in the
planning horizon?
Idaho Power examined 12 resource portfolios
SAID, DI
Idaho Power Company
as part of the 2004 Integrated Resource Plan.Five of those
portfolios were selected for additional risk analyses.
Ul timately, the Company, with the support of the IRP
Advisory Council , selected a balanced portfolio containing
renewable resources , demand-side measures and thermal
generation to meet the proj ected electric demands over the
next ten years.The 2004 IRP identified specific actions in
the Near-Term Action Plan to be taken by the Company prior
to the next IRP in 2006.
What specific actions did the 2004 IRP Near-
Term Action Plan recommend?
The 2004 IRP Near-Term Action plan called for
the issuance of RFPs for 200 MW of wind resource, for 100 MW
of geothermal resource, for 12 MW of Combined Heat and Power
resource and for 88 MW of a combustion turbine peaking
resource.In addition, the 2004 IRP called for proceeding
with the Borah-West transmission upgrade and designing and
developing demand-side measures in coordination with the
Energy Efficiency Advisory Group (EEAG) and the Public
Utili ty Commissions of Idaho and Oregon.
In addition to the combustion turbine peaking
resource RFP , has Idaho Power issued other RFPs consistent
with those recommendations?
Yes.Idaho Power issued an RFP for renewable
wind-powered generation on January 13, 2005.The Company
SAID , DI
Idaho Power Company
RFP evaluation team has notified the wind generation bidders
who have been selected for the short list.Information
concerning the transmission requirements of the short-listed
wind proposals has been solicited from those bidders.That
information will be used to further evaluate the proposals.
On January 18, 2006, the Company issued a
draft RFP for a geothermal-powered generation resource.
Idaho Power solicited comments concerning that geothermal
proposal and intends to issue a formal RFP for a geothermal
resource this spring.
The 2004 IRP Near-Term Action plan also
called for issuance of an RFP for 12 MW of a Combined Heat
and Power (CHP) resource.Has that RFP been issued?
No.The 2004 IRP envisioned , in the Near-
Term , acquisition of 12 MW of a CHP resource and, later
acquisi tion of an additional 36 MW of CHP-generated
electricity to be on-line in 2010.However , the Company is
presently negotiating with a cogenerator who proposes to
provide the Company with CHP-generated power in excess of
the amounts identified in the 2004 RFP.For that reason
the Company has not issued an RFP for this resource.
The 2004 IRP also stated that the Company
would proceed wi th upgrading the Borah-West transmission
line.What progress is the Company making in upgrading that
line?
SAID , DI
Idaho Power Company
Idaho Power is presently upgrading the
capacity of the Borah-West path.The transmission
improvements will increase the Borah-West transmission
capacity by 250 MW and are expected to be completed in May
2007.
What demand-side measures does the 2004 IRP
identify for the Company to pursue as part of the Near-Term
Action Plan?
In its 2004 IRP, the Company identified six
DSM resources to pursue as part of its Near-Term Action
Plan.These resources included two demand response programs
and four energy efficiency programs.Each of these programs
targeted summer peak loads.
please describe the progress that the Company
has made toward the implementation of these six DSM
programs.
The six DSM programs included in the
Company s 2004 IRP final resource portfolio were designed
wi th input from the EEAG and successfully implemented during
2005. Funding for these DSM efforts was provided through an
increased Energy Efficiency Rider, Schedule 91 , which became
effective June 1 , 2005.
Idaho Power launched the Irrigation Peak
Rewards and A/C Cool Credit programs in accordance with
Order Nos. 29665 and 29702, respectively.The two demand
SAID, DI
Idaho Power Company
response programs achieved a combined peak demand reduction
in 2005 of 43 MW at the meter level or 48.7 MW at the
generation level, which was approximately 124% of the 2004
IRP target for demand response resources in 2005.
The Company expanded and modified the
Irrigation Efficiency (now known as Irrigation Efficiency
Rewards) and Industrial Efficiency programs to acquire the
energy savings identified in the 2004 IRP for those two
The ENERGY STAR~ Homes Northwest Programcustomer classes.
was expanded to achieve the energy savings identified in
the 2004 IRP under the name Residential Efficiency (New
Construction) .
The Company launched the Building Efficiency
Program in 2005 to acquire the energy savings identified in
the 2004 IRP under the name Commercial Efficiency (New
Construction) In 2005, these four energy efficiency
programs achieved a combined energy savings of 13,946 MWhs
at the meter level or 15,466 MWhs at the generation level,
which was approximately 93% of the 2004 IRP target for
energy efficiency programs in 2005.
Has the Company filed with the Oregon Public
Utility Commission (OPUC) a request for authorization to
implement an energy efficiency tariff rider in Oregon?
Yes.The Company received authorization to
SAID , DI
Idaho Power Company
implement an Energy Efficiency Rider, Schedule 91 , in Oregon
effective August 31,2005.The Oregon Schedule 91 mirrors
the current Idaho Schedule 91.The Company has also
received authorization from the OPUC to operate the
Industrial Efficiency, Irrigation Peak Rewards, Irrigation
Efficiency Rewards, Building Efficiency and ENERGY STAR
Homes Northwest programs in Oregon.
Has the Company continued to assess the
potential for additional cost-effective DSM as an
alternative to supply-side resources beyond the resources
identified in the 2004 IRP analysis?
Yes.Based on the recommendation of the 2004
IRP Advisory Council, the Company commissioned an expanded
assessment of DSM resources beyond those that target the
summer peak within the residential and commercial customer
classes.Quantum Consulting Inc. completed the Idaho Power
Demand-Side Management Potential Study in the fall of 2004
and the Company filed the study with the Commission on
December 15, 2004 as a supplement to the 2004 IRP.The
results of this study will provide guidance in the design of
two DSM retrofit programs for the commercial and residential
customer classes.Both of the DSM retrofit programs will be
analyzed as part of the Company s 2006 IRP as potential
base-load demand-side resources.
Please describe the 2005 peaking resource RFP
SAID , DI
Idaho Power Company
issued by the Company.
Among the actions recommended by the 2004 IRP
was the acquisition of a targeted 88 MW simple-cycle,
natural gas-fired combustion turbine.Consistent with the
recommendations of the 2004 IRP, the peaking resource RFP
requested proposals for an 80 MW - 200 MW turnkey electric
generation resource located wi thin the Company s service
terri tory that would meet anticipated peak energy demands.
The flexibility in plant capacity permitted under the RFP
allowed the developers to respond to the RFP with their most
cost-effective proposals.The RFP directed respondents to
locate the proposed facility at either the Company s Evander
Andrews Power Complex or the Bennett Mountain Power Plant
si te or at a site of a respondent's choosing.
Please describe the response the Company
received to the peaking resource RFP.
The Company received 31 proposals from nlne
companies that offered generation units ranging in size
between 71 MW and 170 MW.The proposals included large and
small frame combustion turbines, aeroderivative combustion
turbines and reciprocating engines located at four proposed
si tes.Both new and secondary market machines were proposed
and evaluated by the Company.
Did the Company engage an independent third
party to review the Company s RFP and bid evaluation
SAID , DI
Idaho Power Company
process?
Yes, as in our previous RFP evaluations, the
Company utilized an independent third party to assist in the
development of the 2005 peaking resource RFP and evaluation
cri teria and to provide assistance in the review and
evaluation of bids.Power Engineers acted as independent
consul tant for this RFP.
please describe the process that resulted in
selection of the proposal from Siemens Power Generation,
Inc. as the successful RFP respondent.
The Idaho Power RFP team received all the
bids on or before the June 2, 2005 submission deadline.The
Company did not prepare a self-build proposal.On June 3,
2005, the RFP evaluation team opened the proposals and began
the initial screening process based on predetermined price
cri teria and non-price criteria established with the
assistance of Power Engineers.In September 2005, based
upon initial screening, the top fifteen proposals received
from four different companies were short-listed and face-to-
face meetings with representatives of the short-listed
enti ties were scheduled for October 2005.Prior to these
scheduled meetings, the Company sent a document to each
short-listed bidder summarizing the Company s understanding
of the bidder s proposal.
Whom did the Company ultimately select as the
SAID , DI
Idaho Power Company
preferred bidder?
Following the meetings with the short-listed
bidders, the RFP evaluation team selected Siemens as the
preferred bidder due to that company s ranking based upon
the pre-determined price and non-price criteria set out in
the Evaluation Manual developed for this RFP.The RFP
evaluation team made its recommendation to the Company
management on November 22 , 2005 and on March 16, 2006, the
Company s management recommended to the Idaho Power Board of
Directors that Siemens be selected as the preferred bidder.
Board authorization of the expenditure of funds for
construction of the new Evander Andrews Power Plant by
Siemens is expected next month.
Please give a general description of the
proj ect.
The proj ect will consist of a new Siemens-
Westinghouse SGT6-5000F simple-cycle, natural gas-fired
combustion turbine rated at 170 MW with ultra dry low NO
combustion system, together with typical balance of plant
facilities and equipment.The proj ect is currently
scheduled to begin generating in June of 2008.The Pro j ec t
will be located at the existing approximate forty (40) acre
Evander Andrews Power Complex located in Elmore County,
north of Mountain Home , Idaho.The site currently hosts two
45 MW gas-fired units owned by Idaho Power.
SAID, DI
Idaho Power Company
The Project will be interconnected to the
Company s 230 kv transmission system located approximately
seven miles from the Evander Andrews site.The combustion
turbine will connect to an existing gas line at the site for
fuel supply.Sufficient capacity exists in this gas line to
accommodate the requirements of the existing facilities and
the new Project and no upgrades are anticipated.
Water for generation will be pumped from an
existing well on the Evander Andrews premises.Both
substantial water supply capacity and prior water rights
exist for the existing and proposed facilities.The
Project's waste water will be discharged to an existing
waste water system located on the site.The Project will
operate in compliance with all appropriate DEQ air and water
quality standards.A map showing the location of the
Project is attached to the Company s Application for a
Certificate of Convenience and Necessity filed concurrently
with this testimony.
The Company s 2004 IRP Ten-Year Resource Plan
recommends that this Project be on-line in 2007.Why is the
Project delayed by one year to 2008?
Idaho Power must make significant additional
investment in its generating resources and its transmission
and distribution infrastructure over the 10-year planning
period covered in the 2004 IRP.Because of this increased
SAID , DI
Idaho Power Company
capi tal budget pressure, the Company evaluated the most
prudent use of its resources and determined that other
short-term alternatives other than this Project could meet
the proj ected peak energy needs for the summer of 2007.
The Company determined that an additional 50
megawatts of market purchases and associated transmission
could be made for heavy load hours during the summer of 2007
from the eastern side of Idaho Power s system.This firm
energy purchase enables the Company to delay the Proj ect for
one year while, at the same time, meeting the capacity
planning criteria established in the 2004 IRP.
This 50 megawatt east side purchase reduces
the overall projected peak-hour deficit to 61 megawatt which
falls within the 75 megawatt deficit limit established by
the planning criterion in the 2004 IRP.Based on this
analysis, the Company adjusted the on-line date of the
Project to 2008.
What is the firm contract price for the
Proj ect?
The firm contract price for the 170-megawatt
Project is $49,999,000.00.
Was this the only factor used to evaluate the
various bids?
No.All of the bids were evaluated on the
basis of price and non-price criteria that had been
SAID, DI
Idaho Power Company
identified prior to the bid opening.Included among the
cri teria were fuel costs assumptions, transmission costs and
bidder experience and financial strength.
What fuel cost assumptions were used in
evaluating the bids?
Forecasted natural gas prices from the 2004
IRP were used in the bid evaluation.Forecasted natural gas
prices have gone up substantially since the issuance of the
2004 IRP, but the same price forecast was utilized in the
evaluation of all of the natural gas-fired project proposals
and, as a result, projects with lower guaranteed heat rates
had lower fuel costs on a dollar per megawatt basis.
Were there other material considerations used
in evaluating the bids?
Yes.The selected bidder had to demonstrate
sufficient financial strength and experience to provide
Idaho Power with a high level of confidence that output from
the project would be available June 1 2008.
In the Company s opinion, does Siemens Power
Generation, Inc. have the financial strength and experience
to assure that the Proj ect will produce electricity by June
2008?
Yes.Idaho Power can rely on the financial
strength and experience of not only Siemens Power
Generation , Inc. but also of its parent company, Siemens
SAID, DI
Idaho Power Company
Corporation, to assure the performance of the agreement and
the successful completion of the Proj ect.
Would you please describe what you believe
are the significant provisions of the turnkey construction
arrangement with Siemens Power Generation , Inc. for
acquisi tion of the proj ect?
One of the most significant attributes of the
Siemens turnkey Project is that Siemens will furnish all of
the labor, equipment and materials and perform all of the
engineering and construction of the Proj ect.Unlike the
Bennett Mountain project, Siemens will work directly with
Idaho Power.As a result, the "middle man " project
coordinator has been eliminated with this proposal.
Completion of construction and all performance testing of
the Project, including guaranteed capacity and guaranteed
heat rate, are scheduled to be completed by April 1, 2008.
Project ownership will transfer to Idaho Power at that time
provided that all provisional Acceptance Criteria identified
in the agreement been satisfied.If that criteria is not
met, Idaho Power has the opportunity to assess liquidated
damages against Siemens.
Are there other attributes of the Project
that you believe are important to the Commission
consideration?
Yes, there are.The Proj ect is located at
SAID , DI
Idaho Power Company
the Company s Evander Andrews Complex near the Company
existing 230 kV transmission system.Al though the
transmission system will require additional investment in
order to integrate the Project, those improvements will
provide capacity during all seasons and improve the
reliabili ty of the Company s transmission system.
By selecting this Proj ect, the Company will
expand an existing site and benefit from the anticipated
economies of using the present staff to operate the new
facili ty.Operations, in effect, will be centralized.
Environmental compliance reporting is
anticipated to be simplified by expanding generation at an
existing plant versus development of the facility at an
entirely new location.Local approval and acceptance of the
Project at the Evander Andrews site is more likely since
combus tion turbines are a permi t ted use in thi s Elmore
County location and the Company will not be required to seek
approval of a Conditional Use permi t in order to construct
the new facility.
Will a new substation be constructed as part
of this proj ect?
Yes.A new 230kv substation will be built
adjacent to the existing 138 kv substation at the site.The
two substations will be interconnected.
Is the Company providing a "commitment"
SAID, DI
Idaho Power Company
estimate for the capital cost portion for the Project?
Yes.The Company is willing to commit to the
Commission that the total cost of the Project to be included
in the Company s rate base will not exceed $60 million
(Commitment Estimate) This amount includes the Siemens
contract amount, plus additional costs the Company knows it
will incur but cannot precisely quantify at this time.
These additional costs include, but are not limited to,
sales taxes, Allowances for Funds Used During Construction
(AFUDC), the cost of Idaho Power oversight of the project
and the cost of capitalized start-up fuel.The Commitment
Estimate amount also covers contingencies such as change
orders.However , the Commitment Estimate is subj ect
adjustment to account for documented legally-required
equipment changes and material changes in assumed escalation
ra tes .Transmission and substation costs are not included
in the Commitment Estimate.
Were transmission and substation costs
considered when evaluating the total cost of the Proj ect?
Yes.The total Proj ect costs, including
estimated transmission and substation costs, were evaluated
wi thin the selection process.However , transmission and
substation costs have not tradi tionally been included in the
Company s commitment estimates for power project since those
costs do not require issuance by the Commission of a
SAID , DI
Idaho Power Company
Certificate of Convenience and Necessity.While the Company
is satisfied that the approximately $22.8 million estimate
for transmission and substation costs associated with this
Project lS a reasonable upper limit estimate, no definitive
studies have been completed and the Company is not including
transmission costs in its Commitment Estimate.
How is fuel supply handled for the Proj ect?
Because the Project will ultimately be owned
operated and maintained by Idaho Power Company, the Company
will coordinate the fuel supply and transportation for the
Proj ect concurrently with the fuel supply and transportation
requirements of the existing Evander Andrews units and the
Bennett Mountain Power Plant.Idaho Power has purchased
firm fuel transportation rights that can be used for all of
the Evander Andrews uni ts .Idaho Power anticipates that
management of the fuel transportation and fuel supply will
be ei ther by Idaho Power personnel or by Idaho Power
personnel in conjunction with a third party such as IGI
Resources, Inc.
Why does the Company s request include
recovery of AFUDC?
Even though the Project will be owned by
Siemens until ownership is transferred to Idaho Power in
April 2008, AFUDC is appropriate for recovery as a Proj ect
cost because the Company is helping to finance the Project
SAID , DI
Idaho Power Company
by making progress paYffients during construction.Such
financing by the Company allows for a lower total cost to
customers than if Siemens were to finance the Proj ect in a
different manner.
How does the Company propose that the
Commission treat the costs associated with construction and
operation of the Project for ratemaking purposes?
Provided that the Project costs are less than
the Commitment Estimate of $60 million , Idaho Power Company
would expect the Commission to ultimately approve the total
Project investment to be included in the Company s rate base
for ratemaking purposes.Fuel costs should be approved for
PCA inclusion prior to full review of operational costs in a
general revenue requirement proceeding.
How do the total costs of the selected
Proj ect compare to other bids received by the Company in
response to the RFP?
The Siemens bid offered the lowest capital
cost per installed kilowatt of capacity of all the short-
listed bids.When proj ected transmission interconnection
costs and plant operating costs were considered, the Siemens
bid ranked lower, but competitively, with other bids in
terms of lowest capital cost.However, when consideration
of the non-price attributes of the bids were included, the
Siemens proposal received the best combined price and non-
SAID, DI
Idaho Power Company
price score.On that basis, the Siemens proposal was
determined to be the most attractive bid.
What non-price attributes contributed to the
Siemens proposal rising above other bids with somewhat lower
overall capital costs?
The Siemens proposal ranked significantly
higher than the other bids in terms of site and community
attributes.These non-price attributes consider factors
such as permit status, land ownership/control , location and
regulatory requirements and community support.The
Siemens proposal also ranked slightly higher than the other
bids in terms of plant operation efficiency and the impact
of required transmission improvements on the Company
transmission system.
The Company is requesting that the Commission
expedite its review of this Application.Please explain
why.
Siemens has located an existing, new
Generator Step-Up Transformer (GSU) that is available for
the proj ect at significant cost savings in comparison to
identical transformers that are being manufactured today.
Company personnel has examined the available GSU and
determined that it is suitable for the Project.In order to
take advantage of the cost savings, the Company must act
expedi tiously.Nonetheless, Idaho Power has advised Siemens
SAID , DI
Idaho Power Company
that a condition precedent to issuance of the Notice to
Proceed is receipt of an acceptable Certificate of
Convenience and Necessity from the Idaho Public Utili ties
Commission
Does this complete your testimony?
Yes.
SAID , DI
Idaho Power Company