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UTILITIES COl lf\liSSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
BOB LEWANDOWSKI AND MARK
SCHROEDER
CASE NO. IPC-O4-IDAHO POWER COMPANY
Rebuttal Testimony of
Don C. Reading, Ph.
Ben Johnson Associates, Inc.
in behalf of
Mark Schroeder and Bob Lewandowski
August 19, 2004
Are you the same Dr. Reading who prefiled direct testimony in this docket?
Yes, I am.
What is the purpose of your rebuttal testimony?
I address the reply testimony filed by staff witness Sterling, Idaho Power witness Gale
and the direct testimony of the two intervenors in this matter, PacifiCorp and Avista
respectively. However, I should note that my response to A vista and PacifiCorp is not
comprehensi ve.
What do you mean
, "
not comprehensive
Avista and PacifiCorp raise several issues that are far removed from the scope of this
proceeding. Our complaint against Idaho Power is limited to a couple of very specific
issues. Raising new issues beyond the scope of our complaint at this late date seems
unfair; therefore, I intend to stay within the scope of our original complaint and
supporting testimony.
What do you mean
, "
unfair
I believe the new issues raised by A vista and PacifiCorp could have wide ranging
consequences and that others in the QF industry - in addition to just Mark Schroeder and
Bob Lewandowski - would definitely want to have an opportunity to respond. That is
what I mean by "unfair . In addition, given the extremely short time period we have to
respond to the Intervenor testimony - we simply don t have the requisite time to muster
the resources needed to address all of the implications necessary to respond to those
broad issues.
Are there other reasons you believe it is unfair for the commission to allow
PacifiCorp and A vista to expand the scope of this proceeding?
Direct Testimony of Don Reading, Ph.
On Behalf of Shennan County Court and
the 1. R. Simplot Company, Case No. UM 1129
Yes. It seems unfair to allow Intervenors to be permitted to dramatically expand the
scope of a proceeding initiated, not by them, at the eleventh hour. In my years working
for and before this Commission, I have learned that broadening issues beyond the initial
scope of a proceeding is not permissible.
How is your testimony organized?
There are only three basic issues at play in this case: (1) the 90%-110% band question;
(2) the threshold size at which a QF is entitled to published rates; and (3) the so-called
regulatory out' language.
Please proceed.
Over the last 20-plus years, the QF Industry, Idaho Power and the commission achieved
an equilibrium of sorts. Rates were set (and adjusted) to respond to changing markets on
a regular basis. As a consequence, Idaho Power has a stable of QF contracts providing
reliable and economic power. The State has benefited through new jobs, increased tax
base and a more efficient power system. Until these issues surfaced just last year, not
once did we hear from Idaho Power that a 90%-110% band was required. This case is not
about QFs seeking special treatment. This case is about Idaho Power s attempt to change
the status quo that this commission has crafted over the last two decades. I believe that
Idaho Power should be held to a very high standard before being allowed to so
dramatically upset the proverbial apple cart.
Have you reviewed Mr. Gale s reply testimony in this matter?
Yes.
Do you have any overall observations?
Direct Testimony of Don Reading, Ph.
On Behalf of Shennan County Court and
the J. R. Simplot Company, Case No. UM 1129
Yes. The underlying theme in Mr. Gale s testimony is that it is necessary to "better
integrate QF resources into its resource planning and acquisition process as firm
resources . Gale at p.4. Idaho Power plans to accomplish this resource planning goal by
forcing each individual QF to generate within a narrow band of its estimated monthly
production.
What is the problem with company-wide resource planning using individual QF
generating estimates?
It simply does not reflect how the company actually plans. Idaho Power s IRP lumps all
QFs together in planning for future years. True, the IRP provides a list of individual QF
contracts, but for resource planning purposes all QFs are essentially aggregated and
considered a single resource. Individual QFs are not individually modeled for resource
planning purposes.
What is the import of that fact?
It resolves all five reasons Mr. Gale identifies on p. 6 of his testimony, where he attempts
to justify treating each individual QF as if it were a separate major resource. Idaho Power
has 182 MW ofQF resources from 70 different QFs. That is an average QF size of about
5 MW each.
What does the fact that the average QF is so small mean with respect to Mr. Gale
five different rationales on page 6?
In reason number one, Mr. Gale recites the alleged requirement that wholesale markets
now have with respect to standardized contracts, creditworthy counter parties and the
like. But the fact is, wholesale markets almost never trade in blocks that are smaller than
Direct Testimony of Don Reading, Ph.
On Behal f of Mark Schroeder and Bob
Lewandowski
25 MW. So requiring QFs to meet the strict standards of to day s wholesale markets is
unreasonable.
What about Mr. Gale s point that Idaho Power is now capacity constrained and not
energy constrained?
Taken as a whole, Idaho Power s QF resource can be modeled and planned. Indeed
Idaho Power has planned on QF resource in its draft 2004 IRP, even though none of those
resources have been burdened with the 90%-110% band. The operating characteristics of
any individual QF are background noise - not the driver of the resource plan. The same
rationale applies to Mr. Gale s comments relative to the transmission system. The
company is well equipped to make needed transmission plans based on its aggregated QF
resourced - it is not reasonable to assume that Idaho Power makes transmission planning
decisions based on an individual resource being with 90% or 110% of2.5 MW. That
rationale suggests that Idaho Power makes transmission and resource decisions based, on
average, on swings in load of .75 of 1 MW. F or a system whose peak load is approaching
000 MW, that is not a reasonable planning criterion.
Do you have any comments on Mr. Gale s assertion that "the growing prominence
of intermittent generating technologies, such as wind and solar, require a new
approach in the company s PURP A contracting procedures
Yes. I am concerned that Idaho Power has unilaterally attempted to make a major policy
change ("new approach") without first consulting the commission. I believe Idaho
Power s concerns about so-called "intermittent technologies" are misplaced. However, in
order to show how and why they are misplaced, a major fact finding proceeding will have
Direct Testimony of Don Reading, Ph.
On Behalf of Mark Schroeder and Bob
Lewandowski
to be initiated by this commission. Slipping in a major change in its contracting policies
without first allowing this commission to thoroughly examine the underlying rationale is
inappropriate.
What about Mr. Gale s final rationale for altering the decades-old standard practice
by which Idaho Power has been required to purchase all of the output for a QF?
I am not sure it is a changed condition. The company has always used firm market
purchases to varying degrees to manage risk. This is not new and, frankly, I see little
connection between market purchases to hedge risk and QF contract terms.
Let's turn to the first issue you identified - the 900/0-110% band. Do you have any
comments on Mr. Sterling s recommendations?
Yes. Overall, Mr. Sterling has bought into Idaho Power s misguided attempt to
distinguish between "firm and non-firm energy". For a hydro-based electric utility to call
any generator with a capacity factor of less than 90% (or over 110%) as non-firm is akin
to the pot calling the kettle black. It is inconsistent that Idaho Power would demand a
level of "firmness" that it cannot itself possibly accomplish.
Rebuttal Testimony of Don Reading, Ph.
On Behalf of Mark Schroeder and Bob
Lewandowski
Isn t the SAR a gas resource, and how does that figure into your analysis of "firm
and non-firm" energy?
Let's be clear. This commission has never stated in any order I am aware of that QFs
seeking long-term contracts should be distinguished on a firm/non-firm basis. In
addition, the nature of Idaho Power s standard contract with QFs does not change when
the SAR changes. Nor should it. The QF rates produced by the SAR methodology are an
estimate of to day s cost of marginal energy. Specific contract terms for allowing QFs to
be paid are a function of how and whether this commission believes the QF industry
should be allowed to exist. In other words, the nature of the SAR provides guidance as to
price (or avoided cost rate) but has never strictly guided how those rates are applied in
contracts with the QF industry.
Do you have an example?
Yes; if QF contract terms were dictated by the nature of the SAR, then the contract term
would have to mirror the life of the SAR - 35 years. Also the threshold size would
mirror the size of the SAR - over 200 MW, etc., etc. So it is clear that just because the
current SAR may have a capacity factor of greater than 80% or 90%, that the QF contract
need not contain a similar capacity factor, not should it.
Why?
Because to adopt a bright line capacity factor for QFs without also adopting a 35-year
fixed term and 220 MW threshold, would be tantamount to allowing Idaho Power to call
heads you lose and tails I win
Do you have any specific comments on Mr. Sterling s recommendations with respect
Rebuttal Testimony of Don Reading, Ph.
On Behalf of Mark Schroeder and Bob
Lewandowski
to the 90%-1100/0 band concept?
Yes. Mr. Sterling proposes increasing the proposed band from 90%-110% to a band of
80%-120%. Although a small step in the right direction, neither Staff nor Idaho Power
have articulated a compelling reason to abandon 25 years of history in his
recommendation to adopt a band. As noted in my direct testimony, the risk of not being
paid is incentive enough to ensure the highest capacity factor possible from QFs.
Do you have any comments on Mr. Sterling s recommendation as to the frequency
at which a project owner may revise their monthly generation estimates?
Yes. Idaho Power recommends allowing the QF to adjust generation estimate every two
years. Mr. Sterling recommends such updates be permitted every six months. If the
commission adopts the band concept, allowing updates every six-months is reasonable
and should be adopted. Please understand, however, that I do not support the band that
requires the concept of re-estimates in the first place.
Do you have any comments on the grace period proposed by Staff for excusing
performance in the event of a forced outage?
Yes. Again, with the caveat that I am opposed to the entire band concept necessitating
this discussion, the 30 day grace period is much more reasonable than Idaho Power s very
limited 72 hour grace period.
Please summarize your rebuttal testimony.
Simply put, we are arguing for the status quo. This commission has a long history of
successfully implementing PURP A through power purchase agreements that require the
utility to pay for all output generated by all QFs at full avoided costs. Nothing has
Rebuttal Testimony of Don Reading, Ph.
On Behal f of Mark Schroeder and Bob
Lewandowski
changed that calls for a radical change in that policy.
Do you have any observations on the timing of Idaho Power s offer to limit the price
for shortfall energy to 150010 of Mid C?
Yes. The timing of Idaho Power s movement on this issue came only as a result of our
filing this complaint. It is indicative of their approach to QFs.
Does this conclude your testimony?
Yes.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 19th day of August, 2004, I caused a true and
correct copy of the foregoing REBUTTAL TESTIMONY OF DR. DON READING ON
BEHALF OF MARK SCHROEDER AND BOB LEWANDOWSKI to be served by the
method indicated below, and addressed to the following:
Jean Jewell
Idaho Public Utilities Commission
472 West Washington Street
Post Office Box 83720
Boise, Idaho 83720-0074
( ) U.S. Mail, Postage Prepaid
(X) Hand Delivered
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Overnight Mail
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Facsimile
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Electronic Mail
Monica B. Moen, Attorney II
Barton L. Kline, Seniior Attorney
Idaho Power Company
PO Box 70
Boise, ID 83707-0070
bklinecmidahopower. com
mmoen~idahopower.com
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Hand Delivered
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Facsimile
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Randy C. Allphin, Contract Admin.
Power Supply Planning
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
~hincmidahopower. com
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John Prescott
Vice-President - Power Supply
Idaho Power Company
Post Office Box 70
Boise, Idaho 83707-0070
jprescott~i dahopo w er. com
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Conley E. Ward
Givens Pursley LLP
601 West Bannock
Po Box 2720
Boise, Idaho 83701-2720
cew~ gi venspursl ey. com
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IPC-O4-10 & IPC-O4-
CERTIFICATE OF SERVICE -
Doug Glaspey
S. Geothermal
1509 TYrell Lane
Boise, Idaho 83706
dglaspey~us geothermal. com
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Signed~ CuAtts
Nina urtis
IPC-O4-10 & IPC-O4-
CERTIFICATE OF SERVICE - 2