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HomeMy WebLinkAbout20040819Reading Rebuttal.pdfFLCE.I\/EO :"""., LLJ "" ,..,- r'i ~'-, ; l...., 'co... '.. 1"" ,,--, p)jG I 9 Prii 3: 34 .. ,,, '' . ; : : i ' ).. :.' L. j ; ..... 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 ( ) Overnight Mail ( ) Facsimile ( ) 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 (X) U.S. Mail, Postage Prepaid ( ) Hand Delivered ( ) Overnight Mail ( ) Facsimile (X) Electronic Mail Randy C. Allphin, Contract Admin. Power Supply Planning Idaho Power Company Post Office Box 70 Boise, Idaho 83707-0070 ~hincmidahopower. com (X) U.S. Mail, Postage Prepaid ( ) Hand Delivered ( ) Overnight Mail ( ) Facsimile (X) Electronic Mail John Prescott Vice-President - Power Supply Idaho Power Company Post Office Box 70 Boise, Idaho 83707-0070 jprescott~i dahopo w er. com (X) U.S. Mail, Postage Prepaid ( ) Hand Delivered ( ) Overnight Mail ( ) Facsimile (X) Electronic Mail Conley E. Ward Givens Pursley LLP 601 West Bannock Po Box 2720 Boise, Idaho 83701-2720 cew~ gi venspursl ey. com (X) U.S. Mail, Postage Prepaid ( ) Hand Delivered ( ) Overnight Mail ( ) Facsimile (X) Electronic Mail IPC-O4-10 & IPC-O4- CERTIFICATE OF SERVICE - Doug Glaspey S. Geothermal 1509 TYrell Lane Boise, Idaho 83706 dglaspey~us geothermal. com (X) U.S. Mail, Postage Prepaid ( ) Hand Delivered ( ) Overnight Mail ( ) Facsimile (X) Electronic Mail Signed~ CuAtts Nina urtis IPC-O4-10 & IPC-O4- CERTIFICATE OF SERVICE - 2