20040609Kitz Direct.pdf

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Conley E. Ward (ISB No. 1683)
GIVENS PURSLEY LLP
601 W. Bannock Street
O. Box 2720
Boise, ID 83701-2720
Telephone: [phone]
Fax: [phone]
cew~givenspursley .com
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Attorneys for U.S. Geothermal, Inc.
S:\CLIENTS\6667\2\Kitz Testimony.doc
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
S. GEOTHERMAL, INC., an Idaho
corporation Case No. IPC-04-
Complainant
vs.
IDAHO POWER COMPANY, an Idaho
corporation
Respondent.
BOB LEWANDOWSKI ~d MARK
SCHROEDER Case No. IPC- E-04-1 0
Complainants
vs.
IDAHO POWER COMPANY Idaho
corporation
Respondent.
DIRECT TESTIMONY OF KEVIN KITZ
ON BEHALF OF U.S. GEOTHERMAL, INC.
June 9, 2004
ORIGINAL
A. IDENTIFICATION AND QUALIFICATIONS
PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
My name is Kevin Kitz and my business address is 1509 Tyrell Lane, Suite B, Boise, Idaho
83706.
WHAT IS YOUR OCCUPATION AND BY WHOM ARE YOU EMPLOYED?
I am the Vice-President of Project Development for U.S. Geothermal, Inc. I have held the
position ofVP of Project Development with U.S. Geothermal since May of2003.
responsibilities and objectives include securing a power sales agreement ("PSA") and
transmission access, field testing, ~d other activities. I have participated in the drafting of
the Firm Energy Sales Agreements that have been exchanged with Idaho Power Company.
PLEASE PROVIDE YOUR BACKGROUND AND EXPERIENCE.
I am a licensed Professional Mechanical Engineer in the state of California, and have
almost nineteen years of experience in the geothermal power industry. I have worked in a
variety of positions within the industry, including power plant design and construction
resource development design and construction, resources planning, transmission issues
contracts, operations, and maintenance. My resume is attached as Exhibit No.
MR. KITZ, WHAT IS THE PURPOSE OF YOUR TESTIMONY, AND HOW IS IT
ORGANIZED?
My testimony will provide:
1. A history of the Raft River Geothermal Project;
2. An explanation of why the proposed monthly generation is that of a 10 megawatts
geothermal power plant, and should be entitled to the published rates under the Idaho
Commission s PURP A guidelines pertaining to facilities of 10 megawatts or less
DIRECT TESTIMONY OF KEVIN KITZ - 2
IPUC Case Nos. IPC-O4-08 and IPC-O4-
including:
a. an examination of the definition of 10 megawatts, and
b. the method by which the monthly output of the 10 megawatts power plant was
calculated;
3. A discussion of contract terms related to the 10 megawatts size;
4. An analysis of Idaho Power s proposed performance penalties;
5. Recommendations for actions to be taken by the Idaho PUC.
B. OVERVIEW OF THE RAFT RIVER GEOTHERMAL PROJECT
Q. PLEASE EXPLAIN THE HISTORICAL DEVELOPMENT OF THE RAFT RIVER
GEOTHERMAL RESOURCE.
The geothermal resource at the Raft River site, located in southern Cassia County, was first
identified before 1950 at two shallow agricultural wells that produced boiling water.
1971 , the Raft River Rural Electric Cooperative began preliminary investigations into the
possibility of generating electric power from this resource. Reconnaissance geochemical
and geological work in 1972 by the U.S. Geological Survey indicated a resource
temperature of about 3000F. Supported by the U.S. Energy Research and Development
Administration ("ERDA"), the predecessor to the U.S. Department of Energy ("DOE"
investigations focused on using binary cycle technology (which was experimental at that
time) to generate electric power. In late 1973 , the U.S. Geological Survey ("GSA") began
an integrated geological, geophysical, geochemical and hydrological analysis of the Raft
River geothermal resource. Early drilling activities at Raft River included 34 auger holes of
00 foot depth and five core holes ranging in depth from 250 to ,423 feet. The next phase
DIRECT TESTIMONY OF KEVIN KITZ - 3
IPUC Case Nos. IPC-O4-08 and IPC-O4-
of drilling consisted of seven deep, full diameter wells that were completed during 1975 to
1978, and subjected to extensive testing.
Based on the drilling results, a 5 MW net (7MW gross) demonstration binary power
plant was constructed during 1979 to 1981. The plant was operated from September to
November 1981. Repairs and modifications were made, ~d the plant operated again from
March through June 1982. The output of the pl~t was about 4 MW net, and the project
confirmed the technical feasibility of binary plant operation with a geothermal fluid source.
After an expenditure of over $40 million dollars, the entire Raft River project was officially
shut down at the end of September 1982. ERDA clearly demonstrated that a binary power
plant was technically viable, and since then, binary power plants have been successfully
built and operated around the world.
Due to the cessation of funding for the project, the GSA sold the Raft River property
and assets to HYDRA-CO Enterprises, Inc. (a wholly owned subsidiary of Niagara Mohawk
Power Company of New York) in March 1984. HYDRA-CO relocated the Raft River
power pl~t to another geothermal field in Nevada where there was immediate market
for electricity sales and kept the Raft River property on a care and maintenance basis.
October 1993, HYDRA-CO sold the project to Vulcan Power Company of Bend, Oregon.
Q. WHEN DID U.S. GEOTHERMAL ACQUIRE THE RIGHTS TO DEVELOP THE RAFT
RIVER RESOURCE?
U. S. Geothermal Inc. ("USGEO") was formed as a private Idaho corporation on February
2002 for the express purpose of acquiring the Raft River geothermal project and
developing the geothermal resource to produce electric power. On March 28, 2002
USGEO entered into an agreement with Vulcan Power Comp~y to purchase 100% of Raft
DIRECT TESTIMONY OF KEVIN KITZ - 4
IPUC Case Nos. IPC-O4-08 and IPC-O4-
River. Since then, USGEO merged with a Delaware corporation and is now a public
company with an active listing in Canada and is currently seeking registration and a listing
on the NASD stock exchange.
As part of our due diligence on the Raft River project, GeothermEx, Inc., a world
recognized geothermal consulting engineering firm was retained to review the data from the
ERDA programs and render its opinion of the production potential at Raft River.
August 2002, GeothermEx produced a "Technical Report on the Raft River Geothermal
Resource, Cassia County, Idaho" in which it estimated the potential production from the
existing well field at 14-1 7 MW net.
Q. WHAT HAS U. S. GEOTHERMAL INVESTED IN THE RAFT RIVER GEOTHERMAL
PROJECT THUS FAR?
A. USGEO has made a significant investment for the acquisition, engineering, legal and G&A
costs associated with advancing the Raft River geothermal project toward the signing of a
power purchase agreement. As of April 30, 2004 , we have spent $795 843 directly on the
project, and, currently have in progress an approximate $700 000 well test program to work
over and flow test the existing wells at Raft River. The well test program is being
accomplished as part of a DOE Geothermal Resource Exploration and Development cost
share grant. In addition to these costs, we have spent an additional approximately $800 000
on legal, corporate, accounting, financial, engineering, marketing ~d other related costs
necessary to organize a public company for the purpose of developing the project.
Q. PLEASE DESCRIBE THE INFRASTRUCTURE IN PLACE AT RAFT RIVER.
A. The infrastructure on the site includes five production size geothermal wells, two injection
wells, wellheads, lined drilling sumps, seven groundwater monitoring wells, roads, security
DIRECT TESTIMONY OF KEVIN KITZ - 5
IPUC Case Nos. IPC-O4-08 and IPC-O4-
fencing, office/control building, a shop building with a 15 ton overhead cr~e, a 300 000
gallon water tank, and a warehouse. Road access and line power is installed at all seven
deep well sites. USGEO owns 560 acres ofl~d and has an additional 3 179 acres of
leased geothermal rights surrounding the property.
The Raft River Rural Electric Cooperative owns a 138 kV transmission line with a
capacity of 120 MW that runs along the northern boundary of the property. The Bonneville
Power Administration leases the capacity on the transmission line from the Co-op and has
an estimated 60 MW of excess transmission capacity available. USGEO has
interconnect study underway with the Bonneville Power Administration and has submitted a
point-to-point transmission request for 30 MW of capacity between the Raft River site and
the Minidoka Dam substation.
PLEASE DESCRIBE THE RAFT RIVER GEOTHERMAL POWER PLANT.
The planned Raft River Geothermal Power Pl~t ("RRGPP") uses geothermally heated
water to vaporize an org~ic working fluid. These types of plants are generally referred to
as organic rankine cycle plants, or simply "binary power plants." Hot geothermal water
extracted from the earth and supplied to the RRGPP by a number of wells using downhole
line shaft ~d submersible pumps. Once the geothermal water has had the necessary heat
extracted for the binary cycle use and the water has been cooled, it is injected back into the
geothermal reservoir. At the RRGPP, the combined production and injection pump load
(the "parasitic load") may be as much as 2.5 MW. The geothermal hot water passes through
heat exchangers, where it vaporizes the organic working fluid. The working fluid vapor is
injected into and turns the turbine to generate electricity and is then condensed. The
condenser technology uses air-cooling mechanical devices. The condensed organic
DIRECT TESTIMONY OF KEVIN KITZ - 6
IPUC Case Nos. IPC-O4-08 and IPC-O4-
working fluid is picked up from the condenser by the boiler feed pumps and delivered back
to the vaporizer in a closed circuit.
IS THE PLANT EXPERIMENTAL OR USING UNTESTED TECHNOLOGY?
Absolutely not. There are hundreds of megawatts of geothermal binary power plants
installed in the US and worldwide of the same or similar technology as will be installed at
Raft River. Binary power plants were commercialized in the mid 1980's and now have
roughly twenty years of solid perform~ce.
C. DEFINITION OF WHAT "10 MEGAWATTS" MEANS
IT HAS BEEN STATED THAT THE RAFT RIVER FACILITY WILL HAVE A
CAP ACITY RATING IN EXCESS OF TEN MEGAWATTS. WHY IS THIS THE CASE
IF YOU ARE ONLY SEEKING A TEN MEGA WATT CONTRACT WITH IDAHO
PO WER ?
There are two main reasons:
(1)First, any 10 megawatt thermal power plant, including geothermal power plants, must
produce more than 10 megawatts, in order to deliver 10 megawatts.
(2)Weare seeking a Power Sales Agreement limited to a maximum average annual
delivery of 10 megawatts to Idaho Power. This may actually be the total initial capacity of
the RRGPP. However, our intention is to build-out the power plant to greater than
megawatts, either initially or over time. While we would prefer to have a single contract for
more than 10 megawatts, economics do not allow new geothermal capacity to be built at the
Surplus Energy" rate that Idaho Power offers for deliveries greater than the 10 megawatts
even if such deliveries are firm. This leaves U.S. Geothermal no choice but to seek
additional power sales contracts with entities other than Idaho Power for sales in excess of
DIRECT TESTIMONY OF KEVIN KITZ - 7
IPUC Case Nos. IPC-O4-08 and IPC-O4-
10 megawatts. If we are ultimately able to generate more than 10 megawatts, then we will
deliver 10 megawatts to Idaho Power, and the rest to the other off-takers.
WILL THE RAFT RIVER GEOTHERMAL POWER PLANT GENERA TOR HAVE A 10
MEGAWATT NAMEPLATE?
The generator nameplate (or sum of the nameplate ratings) will be larger than
megawatts, even if it is only built as a 10 megawatt power plant. The generator must be
capable of supplying the summation of the following loads, thereby determining the actual
generator nameplate rating:
Contracted Load
Capacity for increased generation in cold winter months
Transformation Losses
Boiler feed pumps
Air condenser cooling fans
Other power plant loads
Production well pumps
Injection pumps
In the case of the Raft River Geothermal Power Pl~t, during the extreme heat of the
summer months, the generator nameplate could be as much as 17 MW, in order to supply
10 megawatts of annual average power to Idaho Power at the Minidoka substation.
ARE THE LOADS DESCRIBED ABOVE CONSTANT ONCE THE PLANT IS BUILT?
The actual auxiliary load of the power plant is a function of several factors that are either
unknown at this time, vary over the course of the year, or can even change over several
years. Some of the factors, and the loads they affect are listed below.
DIRECT TESTIMONY OF KEVIN KITZ - 8
IPUC Case Nos. IPC-O4-08 and IPC-O4-
Factor Affects these loads
Flowing well temperatures All auxiliary loads
Depth ~d number of production pumps Production pump load
Ease of injection of spent fluid Injection pump load
Air temperature All auxiliary loads
IS THE GENERATOR NAMEPLATE A RELEVANT MEASURE OF THE
CAP ABILITY OF THE POWER PLANT TO DELIVER THE CONTRACTED OUTPUT
TO IDAHO POWER?
The generator nameplate is not relevant to the contracted amount, and should not be used to
determine the size of the Idaho PURPA qualifying facility. My underst~ding is that the
Commission Staff has agreed with this position in prior cases.
IS THE POWER PLANT NAMEPLATE A RELEVANT MEASURE OF THE
CAP ABILITY OF THE POWER PLANT TO DELIVER THE CONTRACTED OUTPUT
TO IDAHO POWER?
There is no actual physical power plant "nameplate " only a power plant design "rating
The rating is the power plant output established at a very specific set of environmental
conditions, including temperature, elevation, relative humidity, etc. However, those design
conditions are actually met only a very small percentage of the time. The rest of the time
the output of the power plant is higher or lower, depending on the particular environmental
conditions at the time. The standard design point for the geothermal industry (and that
used in the preliminary design of the RRGPP) is to use the annual average temperature of
the site to arrive at the ~nual average power output of the plant.
IS THIS TRUE OF ALL POWER PLANTS?
For all thermal plants (e.g. gas turbine, coal-fired, biomass, or geothermal) it is true. The
effect is greater or less depending on the design of the power plant, and the type of fuel
DIRECT TESTIMONY OF KEVIN KITZ - 9
IPUC Case Nos. IPC-O4-08 and IPC-O4-
being used. Typically, thermal power plants are rated at a moderate temperature and
relative humidity, rather th~ at the extreme of either the summer high or the winter low.
However, regardless of the design point conditions, the electricity output goes up in the
winter as the temperature falls, and the electricity output decreases as summer temperatures
go up.
On the other hand, wind and hydro units tend to be rated at their maximum capacities.
For example a 30 MW wind project will produce the rated capacity at those times that the
wind is above a certain speed necessary to turn the windmills.
CAN YOU DESCRIBE THE EFFECT OF TEMPERATURE ON THE "SURROGATE
AVOIDED RESOURCE" ("SAR"
The Idaho "surrogate avoided resource
" ("
SAR") is a nominal approximately 270 MW gas-
fired combined cycle generating plant operating at an international Standards Organization
ISO") rating temperature (58OF), at an elevation of about 2 000 feet. The SAR is
assumed to produce the rated output at all hours of the year. This is physically impossible
but if the assumed standard operating temperature is a reasonable approximation of the
annual average temperature, then the annual average output will be approximately the same
as the rated capacity of the plant.
But the fact is that the Idaho SAR would vary considerably over the course of the
year as the temperature changes. The SAR would be unable to produce 270 MW
~y
time
the gas turbine inlet temperature is above the design point temperature. Although the Idaho
SAR is presumed to have a wet cooling system, many combined cycle plants are now being
built with air cooling because of the unavailability of cooling water. Air-cooled power
plants are much more sensitive to summer temperatures than water-cooled power plants
DIRECT TESTIMONY OF KEVIN KITZ - 10
IPUC Case Nos. IPC-04-08 and IPC-04-
because the cooling temperature is the drybulb temperature of the air, rather than the
wetbulb temperature. The difference between wetbulb and drybulb temperatures can be
25-35OF in Idaho in the summer. Thus, summer derating of an air-cooled Idaho plant
would be significant.
WHEN THE RATING OF A THERMAL POWER PLANT IS DISCUSSED, IS IT
GENERALL Y UNDERSTOOD TO BE THE MAXIMUM OUTPUT OF THE POWER
PLANT?
Because "rating" is not a rigorously defined term, it could theoretically mean the maximum
output of the plant (which would occur in the dead of winter). But generally the "rating" of
the power plant would more likely be closer to the average annual output, or at some
temperature somewhat higher than the annual average temperature.
MR. KITZ, IN YOUR OPINION, IF A GROUP OF POWER PLANT ENGINEERS
WERE ASKED WHAT THE OUTPUT FROM A "10 MW THERMAL PLANT"
WOULD BE, WHAT WOULD THEY SAY?
It is safe to say that very few, if any, would expect that "10 megawatts" would define the
maximum output of the plant. Almost certainly, most power professionals would expect
that a 10 megawatt thermal plant would produce more than 10 megawatts for part of the
year, and less than 10 megawatts for part of the year. Most professionals would agree that
the 10 megawatts would be produced over the course of the entire year, giving effect for
the summer and winter temperature differences.
THE PUC RULED THAT PURP A CONTRACTS ENTITLED TO PUBLISHED RATES
WERE TO BE 10 MW OR LESS FOR A MAXIMUM OF 20 YEARS. AS AN
ENGINEER, DO YOU FIND IDAHO POWER'S ASSERTION THAT THIS MEANS
DIRECT TESTIMONY OF KEVIN KITZ -
IPUC Case Nos. IPC-04-08 and IPC-04-
THAT A THERMAL POWER PLANT CAN NEVER PRODUCE MORE THAN 10 MW
IN ANY ONE HOUR TO QUALIFY FOR PURP A RATES REASONABLE?
No. Given the fact that the Commission used a SAR to develop the published avoided cost
rates, it is more reasonable to conclude that the Commission expected, and was willing to
see, those rates offered to a nominal 10 megawatt power pl~t. A nominal 10 megawatt
power plant would average 10 megawatts over the year, but would produce less than that in
the summer and more than that in the winter. This is exactly equivalent to the output
variation that forms the basis of the Idaho SAR.
WHAT WOULD BE THE CONSEQUENCE OF LIMITING THE IDAHO SAR TO A
MAXIMUM OUTPUT OF ITS RATED OUTPUT?
The higher winter generation from the SAR helps decrease the annual average cost of
power from the SAR. Without a doubt, limiting the SAR to it's rated output would raise
the cost of power from the SAR.
WHAT WOULD BE THE CONSEQUENCE OF DEFINING A 10 MEGA WATT PURPA
POWER PLANT AS LIMITED TO THE ABILITY TO PRODUCE NO MORE THAN 10
MEGAWATTS IN ANY HOUR?
That definition would effectively limit any thermal power plants to a rating of about 8.
, or less. This would allow the operator to make full use of the investment in
equipment and produce 10.0 megawatts in the winter, and less than 8.5 megawatts in the
summer.
However, the smaller the plant, the more challenging it is to develop an economically
viable project. In the power industry, economies of scale are very important to economic
viability ~d to the cost of power. Limiting the output of an Idaho PURP A thermal plant
DIRECT TESTIMONY OF KEVIN KITZ - 12
IPUC Case Nos. IPC-04-08 and IPC-04-
to an hourly output not to exceed 10 megawatts would create ~other significant economic
barrier to the development of Idaho s renewable energy resources.
WHY DO YOU THINK IDAHO POWER INSISTS THAT THE PUC MEANT FOR THE
10 MW PUBLISHED RATES CONTRACTS TO BE LIMITED TO 10 MW IN ANY
ONE HOUR?
Throughout our long contract negotiations, Idaho Power has insisted on defining the Idaho
PUC's 10 megawatts order as meaning no more th~ 10 megawatts in anyone hour. It has
acknowledged that this is a departure from previous contracts, but has offered the
explanation of "simplicity of contract administration." This does not ring true or make
sense to me. Daily, monthly or annual average output contracts are just as easily and
simply administered.
Idaho Power is well aware of the economies of scale of power plant construction.
is also well aware of the realities of the performance of thermal power plants as ambient
temperatures change. By limiting the output of PURP A plants to 10 megawatts in any
hour Idaho Power positions itself to buy only the absolute minimum amount of power
from QF facilities, individually and in the aggregate. I don t believe this is consistent with
the Commission s goal of encouraging additional PURP A facilities.
D. SIZING A 10 MW GEOTHERMAL POWER PLANT
PLEASE DESCRIBE THE SIZING OF A GEOTHERMAL POWER PLANT?
It is important to note that the final detailed design of the RRGPP has not yet been started.
There are many factors that are not yet fully defined, such as productivity of the production
wells, injectivity of the injection wells, the identity of equipment suppliers, etc., that will
have an effect on the exact parasitic loads of the plant and the response of the power plant
DIRECT TESTIMONY OF KEVIN KITZ - 13
IPUC Case Nos. IPC-04-08 and IPC-04-
to changing temperatures. Unfortunately, entering into a detailed design process without a
firm contract in hand is costly, risky and therefore not economically possible for U. S.
Geothermal. However, the performance of the actual RRGPP , once it is built, will be
similar to the generation forecasts made as part of the proposed Idaho Power contract, and
included in this testimony.
HOW DID YOU COME UP WITH THE MONTHLY FORECAST OF POWER PLANT
OUTPUT FOR A 10 MW RAFT RIVER GEOTHERMAL POWER PLANT?
There were three major steps in estimating the monthly output of the RRGPP.
Site-specific weather data was downloaded from the internet and analyzed.
Power Engineers, Inc., a worldwide leader in power plant engineering and design
located in Hailey Idaho, was hired to develop a computer model of a binary
geothermal power plant at Raft River, and to predict it's output over a range of
temperatures.
The Malta weather data, and the Power Engineers ' forecast were merged to estimate
the average monthly output from the power plant. This was then used to fill in the
monthly output forecast for the Idaho Power contract.
WHAT WAS THE SOURCE OF THE WEATHER DATA FOR THE ANALYSIS, AND
HOW WAS IT USED?
The weather data was downloaded from the USDA Agrimet weather site for the Malta
weather station, about 20 miles from the site of the RRGPP. The data is available in
several forms, including hourly data ~d monthly average data.
The prediction of the monthly generation for the Idaho Power contract is based on the
historical monthly average temperature over a four-year period, from October 1998 to
DIRECT TESTIMONY OF KEVIN KITZ - 14
IPUC Case Nos. IPC-04-08 and IPC-04-
September 2002. For example, the monthly average temperatures reported on the Agrimet
site from J~uary of 1999 2000, 2001 , ~d 2002, were averaged to arrive at the expected
J~uary temperature. The same process was used for all twelve months. The resulting
average temperatures are presented in the following table. The annual average temperature
based on these twelve values is 47.
TABLE 1: Monthly Average Temperature
Monthly Average Temperatures CF) Used for the Idaho Power Contract
Based on a 4-Year Average of the Monthly Average Temperatures
at the Malta USDA Agrimet Station
Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
28.31.2 38.4 45.54.63.71.4 69.58.47.35.26.
HOW WAS THE ANNUAL AVERAGE TEMPERATURE USED?
As discussed above, the rating of a power plant must be for a specific environmental
condition and for a specific elevation. The geothermal power plant model developed by
Power Engineers used an elevation of 4800 feet and the annual average temperature as the
design point. This is consistent with industry practice for air-cooled geothermal power
pl~ts. It is also consistent with our expectation that we would have a 10 megawatt
PURP A contract, and we therefore attempted to "model" the output of a plant that would
likely produce an annual average generation of approximately 10 megawatts.
WHY WOULD A POWER PLANT WITH A 10 MW RATING AT THE ANNUAL
VERAGE TEMPERATURE ONLY "LIKELY" PRODUCE AN ANNUAL AVERAGE
GENERATION OF 10 MW?
Neither the generation curve, nor the temperature distribution, above and below the design
point is absolutely symmetrical. Therefore the plant might not produce exactly 10
megawatts as an annual average. As with many other aspects of the power plant design
DIRECT TESTIMONY OF KEVIN KITZ - 15
IPUC Case Nos. IPC-04-08 and IPC-04-
this fact highlights the variability in the power plant output on a month-to-month and year-
to-year basis. For example, while the monthly average temperature in November used in
the forecast was 35.80 F the actual monthly average temperature over that four year period
alone ranged from 26.10 F to 40.90 F.
PLEASE DESCRIBE THE RAFT RIVER GEOTHERMAL POWER PLANT MODEL
CONSTRUCTED BY POWER ENGINEERS?
Power Engineers created a numerical computer model of the RRGPP for the annual
average temperature. The model included the following components:
a fixed assumed load for the production and injection pumps handling the
geothermal water;
boiler feed pumps to pump the butane from the condenser to the boiler;
heat exchangers (pre-heaters, boilers, and superheaters) between the geothermal
water and the working fluid;
piping and heat exchanger pressure losses;
turbine;
air-cooled condenser with performance related to ambient temperature.
Once the model had been calibrated to produce 10 megawatts at the design condition
the ambient temperature was varied over a range from 00 F to 1000 F. An estimate was also
made by Power Engineers of the maximum gross and net output, which looked like it
would occur somewhere around -200 F. The predicted output was interpolated between
00 F and -200 F.
WAS THIS POWER FORECAST USED IN THE CALCULATION OF POWER
DELIVERIES FOR THE IDAHO POWER CONTRACT?
DIRECT TESTIMONY OF KEVIN KITZ - 16
IPUC Case Nos. IPC-04-08 and IPC-04-
Essentially, but not exactly. Power Engineer s original model was based on a production
and injection pump parasitic load of over 4.5 MW, based on U.S. Geothermal's early
expectations of the pump load. Later estimates assume a parasitic load of 2.5 MW, more
consistent with other geothermal binary power plants. Therefore, U.S. Geothermal
recalculated the power plant output as a function of temperature with the 2.5MW load
instead of the original 4.5 MW load. However, other than this adjustment, the calculations
of the power plant's output as a function of ambient temperature is Power Engineers ' work
based on its experience designing similar power plants, ~d using its RRGPP computer
model. A sample of the table, is presented below.
Table 2: Plant Output vs. Drybulb Temperature
Sample of Predicted Output as a Function of the Drybulb Temperature
for a 10 MW Geothermal Power Plant at Raft River
Sample
Drybulb Gross Plant net
Production &NET to IPCoTem erature Inject. Pumps
17.45 15.19 12.
17.45 15.16 12.
17.45 15.12.
17.37 14.12.
17.14.12.
17.14.12.
15.12.10.
15.29 12.
11.89 6.48
11.61
11.32 8.43
DIRECT TESTIMONY OF KEVIN KITZ - 17
IPUC Case Nos. IPC-04-08 and IPC-04-
Sample
Drybulb Gross Plant net Production &NET to IPCoTemperatureiect. Pumps
9.43
6.32
100 3.49
HOW WERE THE TWO SETS OF DATA (MONTHLY AVERAGE TEMPERATURE
AND OUTPUT OF THE RRGPP AS A FUNCTION OF TEMPERATURE) USED IN
THE IDAHO POWER CONTRACT?
The two sets of data were combined and used in three ways in the contract.
Maximum Monthly Energy: This value was calculated by using the average
monthly temperature to find the expected average power pl~t output at that
temperature. The number of hours in the month was multiplied by the output of
the plant at that temperature.
Expected Monthly Energy: The Maximum monthly energy is multiplied by the
long-term expected annual capacity factor of 95%.
The Maximum Plant Output is simply the expected output of the plant in the
middle of winter. As the table above shows, that is approximately 12.7 MW.
IS IT REASONABLE TO EXPECT IDAHO POWER TO ACCEPT 12.7 MW OF
POWER FROM A 10 MW FACILITY?
It is reasonable, because that is what a 10 megawatt air-cooled geothermal power plant can
produce in the coldest hours of an Idaho winter. Just as Idaho Power is willing to accept
the full output of the RRGPP when the design temperature is above 48O , it is reasonable to
expect it to accept the full output of the power plant when the design temperature is below
48O , even though that happens to produce more th~ 10 megawatts. Capping the output of
DIRECT TESTIMONY OF KEVIN KITZ - 18
IPUC Case Nos. IPC-04-08 and IPC-04-
a 10 megawatt geothermal power plant at 10 megawatts in any hour would result in an
artificial contractual curtailment of the plant in every single month of the year (including
July and August). This is clearly constraining the development of geothermal power in a
manner I consider to be unreasonable.
What is the benefit to the developer in such a contractual arrangement? There is
none. In fact, it results in substantial lost revenue. What is the benefit to the ratepayers of
Idaho Power? There is none. What is the benefit to Idaho Power? There is none, unless it
has an explicit goal of limiting the amount of PURP A contract power it must purchase.
SINCE THE POWER PLANT MODEL AND THE WEATHER DATA ARE
A V AILABLE, CAN THE RRGPP BE GUARANTEED TO MEET THE MONTHLY
EXPECTED OUTPUT FROM THE PLANT?
Not really. Consider the point discussed above, that in a four-year period, there was a
range of average November temperatures from 26 to 410 F, with an average of 360 F. Now
suppose that there is a November with an average temperature of 430 F, then the power
plant will produce about 10.3 MW average, instead of the 10.9 MW average for 360 F.
Idaho Power is insisting on a 90/110 band on the monthly output from the pl~t.
the output is below 90%, then the developer is subject to penalties. For this hypothetical
month, the weather alone will have eaten up 5.5% (0.6/10.9 = 5.5%) of the total allowable
10% decrease from the forecasted output. This example shows one of many reasons why
Idaho Power s insistence on the 90/110 band is not reasonable. Idaho Power requires its
generation forecasts to be set up as much as two years in adv~ce. How would it be
possible to predict there is going to be a warm November, and the output of the power plant
will not be able to generate its predicted load even if there are no mechanical problems
DIRECT TESTIMONY OF KEVIN KITZ - 19
IPUC Case Nos. IPC-04-08 and IPC-04-
whatsoever? It is not. The 90/110 band is not reasonable for m~y reasons, including that
it makes no allowance for weather circumstances beyond the control of the operator.
WHAT ARE SOME OF THE OTHER ARGUMENTS AGAINST THE 90/110
MONTHLY BAND?
There are many sound arguments. Some of these are briefly described below.
The selection of a band of 90/11 0 appears arbitrary, and solely at the whim of Idaho
Power. Why not 75/125 or 70/130? Can Idaho Power provide a technical basis for
justifying a 90/110 band, especially on such small power plants? Its implicit argument
would seem to be that the failure of one plant to deliver as little as 1 MW over the course
of a month is somehow financially taxing to it and to the ratepayers. This is not a credible
argument. The hourly and monthly uncertainty in Idaho Power s served load is most
likely far greater th~ the entire output of the RRGPP, let alone the failure of a PURP
plant to deliver a mere one to two megawatts.
The band makes no allowance for the normal breakdown of equipment in a power
plant. Such breakdowns would be intrinsically part of the Idaho Surrogate Avoided
Resource (SAR) were it a real plant. Yet in the cost calculation of the SAR, there is no
inclusion of penalties for those times when the SAR cannot deliver it's presumed capacity.
In fact, it is just the opposite of the PURP A plant. The SAR would stay in the rate base
and continue to be paid off, even if it were unable to deliver power for several months.
The consumer would effectively double-pay for these failures, paying for both the asset
and for the replacement power. By contrast, under all of Idaho s existing PURP A
contracts, the ratepayer still pays for the replacement power, just like the SAR, but unlike
the SAR they pay nothing/or the PURPA asset that is/ailing to deliver power.
DIRECT TESTIMONY OF KEVIN KITZ - 20
IPUC Case Nos. IPC-04-08 and IPC-04-
Idaho Power has selected a "seasonal" approach to power pricing, yet the penalties
are monthly. If firmness is desired, it would be far more reasonable to use a "seasonal"
firming, rather than monthly firming, as over the course of the year this would much better
reflect the actual costs to the ratepayers of Idaho Power.
The only reason allowed, contractually, for failure to deliver would be "Force
Majeure." So the routine failure of one of the downhole production pumps, warmer than
normal weather, or a shutdown for scheduled maintenance one week early would all result
in the imposition of penalties.
There is no opportunity to "make-up" for power that is not delivered, as is common in
other firming contracts. This is especially onerous if Idaho Power is successful in its
contention that the power plant can never deliver more than 10 megawatts in anyone hour.
It is again worth noting that the PURP A plant is required to forecast its monthly
generation up to two years in advance, and if it fails to deliver its estimated power, then it
is penalized. If a firming contract is required, it would be much more reasonable for Idaho
Power to require the plant to forecast its output one to two months ahead, which would
then allow Idaho Power to use more up-to-date information in purchasing or selling power
to match its system requirements.
Lastly, In the May 21 , 2004 letter from Mr. Barton Kline of Idaho Power to the
counsel of U.S. Geothermal, Idaho Power has offered to cap the total liability of the U.
Geothermal under the 90/110 provision. But even with this concession in an extreme
power price scenario such as the one the Western United States experienced a few years
ago, a failure to deliver contract amounts for only a month or two could wipe out an entire
year of profits or even lead to bankruptcy. One has to wonder what would have happened
DIRECT TESTIMONY OF KEVIN KITZ -
IPUC Case Nos. IPC-04-08 and IPC-04-
to Idaho Power itself if it had been subject to the same proviso when the combination of
extreme drought ~d skyrocketing prices hit the Northwest. The ratepayer is not served by
such draconian consequences, and from a business perspective it is hard to imagine that
lenders would be eager to participate in contracts with such dire risks.
E. CONTRACT TERMS RELATED TO THE 10 MW SIZE
SOME OF THE RECENT PURP A CONTRACTS APPROVED BY THE COMMISSION
USE THE POSTED RATE FOR DELIVERIES UP TO TEN MEGA WATTS, AND A
DIFFERENT RATE FOR DELIVERIES IN EXCESS OF TEN MEGAWATTS. IS U.
GEOTHERMAL ASKING FOR THIS TYPE OF CONTRACT?
No. We are only seeking posted rates for the sale often average megawatts of power. We
are not asking Idaho Power to purchase "excess energy" above the ten average megawatts.
HAVE YOU MADE THIS POSITION CLEAR TO IDAHO POWER?
Yes. From the very beginning of our submittal of a first contract revision and discussions
in October 2003 , I believe Idaho Power has understood our position. While we disagree
on the definition of the 10 megawatt cap, all of our negotiations have been premised on the
mutual understanding that we were negotiating a power sales agreement priced at the non-
levelized posted rates, and that the plant would be capable of more than 10 megawatts at
peak, but approximately 9.5 megawatts on average. In additional concession to Idaho
Power, we have agreed to cap the annual output at 10 megawatts.
HAS IDAHO POWER RECENTLY CHANGED ITS POSITION ON THE RAFT RIVER
FACILITY'S ENTITLEMENT TO POSTED RATES?
Yes. On May 21 , 2004, Mr. Barton Kline sent a letter to U.S. Geothermal's counsel that
for the first time, stated that Idaho Power does not believe that U.S. Geothermal is entitled
DIRECT TESTIMONY OF KEVIN KITZ - 22
IPUC Case Nos. IPC-04-08 and IPC-04-
to posted rates because the facility will have a nameplate capacity in excess of 10
megawatts and will deliver more than 10 MW to Idaho Power during some hours. This
objection had never been raised in our prior 15 months of negotiations and discussions.
WHAT WOULD BE THE PRACTICAL EFFECT ON U. S. GEOTHERMAL IF IDAHO
POWER IS ALLOWED TO NOW CHANGE POSITION ON THIS CRITICAL ISSUE?
It would be both unfair, and potentially devastating. Our disagreement with Idaho Power
has always been over the amount of power it is required to purchase at the posted rates.
All of the draft contracts exchanged between the parties incorporate the posted rates in the
purchase price, and Idaho Power has never suggested that those rates would not apply.
good faith reliance on Idaho Power s original position, we have spent considerable time
energy, and money in negotiations with Idaho Power and all the other efforts necessary to
bring this project to fruition. In addition, we have supplied the draft contracts and their
posted rates to existing U. S. Geothermal investors, as well as potential investors and
lenders.
Now Idaho Power is suddenly taking the position that it will only buy from U.
Geothermal at some unknown modeled rate to be developed at some time in the indefinite
future. If Idaho Power is allowed to arbitrarily reverse direction in this manner, it could
potentially destroy our business plan and waste the nearly $1.5 million we have expended or
committed over the last 10-12 months. Moreover, it will damage our credibility with
potential lenders and investors, making the implementation of the project much more
difficult.
DIRECT TESTIMONY OF KEVIN KITZ - 23
IPUC Case Nos. IPC-04-08 and IPC-04-
F. RECOMMENDATIONS FOR PUC ACTION
Q. IN SUMMARY, WHAT ISSUES ARE YOU REQUESTING TO BE INCLUDED IN THE
COMMISSION RULINGS?
A. I have discussed three issues:
1. The engineering definition of a "10 megawatt" geothermal power plant;
2. Whether a geothermal plant with capacity that sometimes exceeds 1 0 megawatts
should nevertheless be eligible for published PURP A rates.
3. Whether the 90/110 performance penalty is fair and reasonable.
WHAT ACTIOIN ARE YOU ASKING THE COMMISSION TO TAKE IN DEFINING
THE 10 MW POWER PLANT THAT WOULD QUALIFY FOR THE IDAHO PURP
PUBLISHED RATES?
S. Geothermal is asking the Idaho PUC to rule that a 10 megawatt geothermal power
plant is defined by the ability to deliver no more than 10 megawatts as an annual average.
This should be interpreted to me~ that at the average design condition the power plant
will deliver no more than 10 megawatts, and at temperatures above the design point, the
generation will be lower. At temperatures below the design point, the output will be
higher. This is the traditional way of defining the output of a thermal plant and is totally
consistent with industry practice.
The use of 10 megawatts as the maximum hourly output to qualify for published
PURPA rates would result in the size of the RRGPP being reduced to only a power plant
rating of approximately 8 megawatts. This 20% reduction in the design rating would be
disastrous for the economic viability of our project. It is entirely possible that an 8 MW
project would not be economically feasible, and would have to be ab~doned.
DIRECT TESTIMONY OF KEVIN KITZ - 24
IPUC Case Nos. IPC-04-08 and IPC-04-
WHA T ARE THE REASONS FOR THE COMMISSION TO DISALLOW IDAHO
POWER'S DEMAND FOR A 90/110 BAND TO FIRM THE DELIVERY OF POWER
UNDER PURP A CONTRACTS.
The reasons described earlier in the testimony are briefly summarized below:
Idaho Power has not produced any supporting calculations that this band has not been
fished out of thin air. Nor has it shown how the failure to deliver as little as 1.1 MWover
the course of a month disrupts its load planning.
The cost (and value) of firming the delivery of power from the SAR is not included in
the calculated PURP A price. Idaho Power should not therefore be allowed to gain that
value for free in PURP A contracts.
Idaho Power s proposed PURP A contract is treated substantially and
disadvantageously differently than Idaho Power s own rate based plants, which are not in
any way subject to firm delivery penalties, and in fact are paid for, even when they fail to
deliver power.
There is no opportunity for make-up of shortfalls on either a monthly, or more
reasonably, a seasonal basis.
Forecasts must be made up to two years in advance and cannot be changed at any
time, nor is ~y allow~ce made for circumstances beyond the control of the operator, such
as warmer than normal weather, nor for occasional and inevitable normal short-term
breakdowns of equipment.
A final reason would appear to be the recommendations of the PUC Staff itself. The
Comments of the Commission Staff dated April 4, 2003 , regarding the Tiber Contract
(IPC-03-1) states: "Staff recommends... that those non-standard terms unique to the
DIRECT TESTIMONY OF KEVIN KITZ - 25
IPUC Case Nos. IPC-04-08 and IPC-04-
contract (i.e., measurement of the 10 MW rating, encouraging increased firmness, and
seasonality) not be viewed as precedential."
WHAT RULING ARE YOU ASKING THE COMMISSION TO MAKE ON THE
ELIGIBILITY OF THE PLANT FOR THE PUBLISHED PURP A RATES?
We are only asking that the Commission to decide this issue in accordance with the law
applicable Commission orders, and common sense. We are seeking posted, non-Ievelized
rates for the delivery often megawatts of power to Idaho Power. We have interpreted the
10 megawatt limit on eligibility for posted rates to mean 10 average megawatts
determined on an annual basis. From our point of view, this definition is fair, and based
on the actual physical performance of a 10 megawatts power plant.
However, if the Commission adopts another interpretation we will comply with it in
order to qualify for the posted rates. But under no circumstances should Idaho Power be
allowed to repudiate the entitlement to posted rates it has previously acknowledged, as
suggested in its letter of May 21 , 2004.
DOES THIS CONCLUDE YOUR TESTIMONY?
Yes, it does.
DIRECT TESTIMONY OF KEVIN KITZ - 26
IPUC Case Nos. IPC-O4-08 and IPC-O4-
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this day of June 2004, I caused to be served a
true and correct copy of the foregoing document by the method indicated below and addressed to
the following:
Jean Jewell
Idaho Public Utilities Secretary
472 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
S. Mail
H~d Delivered
Overnight Mail
Facsimile
Barton L. Kline
Idaho Power Comp~y
1221 W. Idaho Street
O. Box 70
Boise, ID 83707
S. Mail
Hand Delivered
Overnight Mail
Facsimile
Peter J. Richardson
Richardson & O'Leary
99 E. State Street, Ste. 200
O. Box 1849
Eagle, ID 83616
S. Mail
Hand Delivered
Overnight Mail
Facsimile
DIRECT TESTIMONY OF KEVIN KITZ - 27
IPUC Case Nos. IPC-04-08 and IPC-04-
KEVIN KITZ, P .
VICE PRESIDENT PROJECT DEVELOPMENT
S. GEOTHERMAL INC.
Currently, Mr. Kitz is the Vice President - Project Development
for U.S. Geothermal, Inc. He is responsible for the design and
evaluation of a geothermal power and direct use project. His
responsibilities include procuring power sales agreement. Evaluate
power technologies. Develop and implement drilling plans.
PREVIOUS EXPERIENCE
Power Plant Engineering Advisor, Unocal- Philippines
Project initiation and engineering support for operating, maintenance
and rehabilitation projects for 12 x 55 MW power plants and two
geothermal fields. Managing 2-10 engineers and consultants.
Project size to $25MM. 1995-2002
Production and Senior Production Engineer, Unocal- The Geysers
Project engineer for Geysers, Philippine, and Indonesia work.
Geysers operations engineer. Project-manager for major capital
and optimization projects in Philippines. 1991-1995
Production and Operations Engineer, Unocal- Salton Sea
Project engineer on design construction and start-up three
geothermal power plants (75 MW). Operations engineer for
crystallizer and acidification processes and power plants supplying
5 turbine designs. 1985-1991
PUBLICA TIONS/P A TENTS
1. Geothermal Steam Processing: US Patent numbers 6 223 535Bl
286 314, 6 332 320. Other US patents and foreign patents
pending, comprising over 100 pages with more than 200 claims.
Possible breakthrough waste minimization and circulating water
chemistry control technology. (Sole inventor)
2. Treatment of Geothermal Brine with Sulfur-Containing Acid.
Patent 08, 581 650. Concept: Conversion of Hz in NCGs to
Sulfurous Acid (HzSO3) to reduce silica scaling rates. (Joint
invention)
3. Method to Treat Geothermal Fluid Streams. US Patent No.
364 439. (Joint invention)
4. Method for Protecting Stainless Steel Pipe and the Like in
Geothermal Brine Service from Stress Corrosion Cracking, and
articles made thereby. US Patent No. 4 950 552. Concept: Spray
metal protection. (Joint invention)
5. Kitz, Kevin P.E. (2002) Low-Cost Separation of Contaminant-
Rich Turbine and Condenser Condensate For Operating and
Capital Cost Savings. Geothermal Resource Council Annual
Meeting (GRC).
EDUCA TION
University of California
Davis
BS - Mechanical
Engineering. and Material
Science(with honors)
Engineering Honors Society,
Tau Beta Pi
Humanities Honors Society,
Phi Beta Kappa
1995-2002
YEARS IN PROFESSION
18 Years
REGISTRA TIONS
Registered Professional Engineer:
California 1991-1995
AREAS OF EXPERTISE
Geothermal Power Plant;
1985-1991
evaluation
design
maintenance
rehabilitation
operations
Construction/Project
Management
Bidding/Contractor Selection
Regulatory Negotiations
Regulatory Compliance
Synergistic ActivitiesIdaho Geothermal Energy
Working Group (IGEWG). Mr.
Kitz services on the Geothermal
Electric Power Development
Subcommittee.
Exhibit No.
Case Nos. IPC-E-O4-O8 and IPC-E-O4-
K. Kitz, U.S. Geothermal
June 9, 2004