20060913Affidavit of Jared Grover.pdf

Dean J. Miller ISB #1968
McDEVITT & MILLER LLP
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Boise, ill 83702
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ORIGINAL
IDAHO F\.idl Ie
UTILITIES COiWAiSSIOI\J
Attorneys Cassia Wind Gulch Park LLC and
Cassia Wind LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASSIA GULCH WIND PARK LLC AND
CASSIA WIND FARM LLC
Complainants
Case No. :LPC-db-~(
AFFIDAVIT OF JARED GROVER
IDAHO POWER COMPANY
Respondent
Jared Grover, being first duly sworn upon an oath, deposes and says:
I am a member of Cassia Gulch Wind Park LLC and Cassia Wind Farm LLC
(collectively, "Cassia ) and make this Affidavit in support of Cassia s Complaint, filed herewith.
I am over the age of 21 years, and make this Affidavit of my own knowledge.
The costs of "grid" or system upgrades that Idaho Power Company is requesting are
unbearable for small QF projects.
Costs associated with interconnecting wind projects to the Utility system are already very
high. This is largely due to the fact that windy locations are often not close to the heavy load-
centers. To be able to interconnect the wind projects to the grid, new feeder lines and substations
AFFIDAVIT OF JARED GROVER - 1
need to be built. For Cassia, these upgrades alone will cost several million dollars and will be
paid for completely by the projects.
Although substantial, these costs are necessary for the QFs, and in this case, do not
prevent the proj ects from being constructed. I think that these interconnection upgrades are
appropriately allocated to the QFs because they are necessary for the power from the projects to
reach the grid.
The second set of costs that are being allocated to the projects are much more expensive
and have a much more detrimental impact to the QFs. These System/Grid upgrades are to the
Idaho Power backbone transmission system. According to the System Impact Study report that
Cassia paid Idaho Power to prepare, Cassia would be responsible for up to $50-$60 million in
such upgrades, unless other projects would share in those costs.
These large upgrades have negative impacts on Cassia.
Unbearable Costs. The cost of a $55 million dollar upgrade is much more than the total
investment (including costs for Turbines, electrical collection system, local
interconnection costs, construction, road improvements, and local permits) of the Cassia
projects. Even if Cassia were responsible for 20% ofthe $55 to $60 million in upgrade
costs, that would still be a $10 to $12 million burden, on top of the multimillion direct
interconnection costs and the multi-million wind turbines and construction investment.
It is simply unbearable for a small QF to proceed with such a cost burden.
Unacceptable Risk & Return. It is possible that all of the millions of dollars of
System/Grid upgrade costs paid by Cassia will be refunded to Cassia in the future.
However, as of yet, I have not been able to find a lender/investor that will entertain the
idea oflending money to again lend to Idaho Power, in hopes of recouping it later. Also
ifthe projects are able to find a willing lender at a reasonable rate of9%, the carrying
cost of $55 million would be $4.95 million ($55 000 000 x 0.09 = $4 950 000) in interest
per year. That carrying cost alone is more than the total revenue of both projects in a
single year. Financially, the projects would be in the red before making any payments
on loans for turbines, maintenance, land leases etc. Even without these System/Grid
upgrade costs, the cost of turbines and construction make finances very tight for the first
10-15 years. Quite simply, Cassia can not afford to "carry" these costs until other
developers decide to build.
AFFIDAVIT OF JARED GROVER - 2
The need for expedited treatment
It is critical that we resolve this issue as soon as possible. Further delay might seem
insignificant to a utility such as Idaho Power, but delay is costing the projects dearly.
One of the major costs for Cassia are the turbines. Between the two projects there are 14
turbines. Cassia is scheduled to take delivery of the turbines this fall. If Cassia is delayed and
cannot take delivery, the cost is significant. The difference between the 2006 price and 2007
price is $50-$60 thousand more per turbine. That's a total of approximately $770 000 ($55 000
X 14).
Other equipment is also experiencing dramatic price increases. The cost of copper (for
lines between turbines) has risen by more than 30% in the last year. Fuel prices have also
continued to rise. As the Federal Production Tax Credit (PTC) is set to expire in 2007, a flurry of
projects will be competing for a limited supply of construction equipment and services. This
excessive demand will likely increase prices further. Along with rising equipment costs, each of
the Cassia projects has fixed costs associated with waiting, i.e. revenue for land leases, rent on
storage and office facilities etc.
The delay is affecting other Idahoans as well. The construction company has also hired a
fulltime local supervisor to be onsite during all construction. They continue to pay him through
the delays. Local school districts and Counties will miss out on tens of thousands of dollars in
property taxes associated with the turbines. Local farmers who are site lessors will also be
missing revenue they were counting on.
Because of the tight schedule, looming winter conditions, and the associated construction
difficulties, Cassia has continued to move ahead without knowing if the projects are still feasible.
Geotechnical work has been done, engineers hired, and civil (road, etc.) construction has begun
in hopes that resolution will allow Cassia to accept delivery of turbines this fall and keep its
AFFIDAVIT OF JARED GROVER - 3
Because of the tight schedule, looming winter conditions, and the associated construction
difficulties, Cassia has continued to move ahead without knowing if the projects are still feasible.
Geotechnical work has been done, engineers hired, and civil (road, etc.) construction has begun
in hopes that resolution will allow Cassia to accept delivery of turbines this fall and keep its
scheduled online date. However, Cassia is not able to make a commitment to receive turbines
until the issue of upgrading Idaho Power s backbone grid is resolved.
Dated this day of September, 2006.
ed
State of Idaho
County of Ma....
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On this Qt day of September, 2006, before me
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a notary public
personally appeared Jared Grover known or identified to me to be the person whose name is
subscribed to the within instrument, and acknowledged to me that he executed the same.
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CERTIFICATE OF SERVICE
I hereby certify that on the 13~day of September, 2006, I caused to be served, via the
methodes) indicated below, true and correct copies of the foregoing document, upon:
Jean Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
O. Box 83720
Boise, ID 83720-0074
i i ewell~puc.state.id. us
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Barton L. Kline
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise, ID 83707
BKline~idahopower.com
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AFFIDAVIT OF JARED GROVER - 5