20080617Bokenkamp direct.pdf

r"t:::; n,j
zaue JUr,f16 n.~"ff¡r . rtt 4: L,B
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER
COMPANY'S APPLICATION FOR AN
ACCOUNTING ORDER AUTHORIZING THE
INCLUSION OF POWER SUPPLY
EXPENSES ASSOCIATED WITH THE
PURCHASE OF CAPACITY AN ENERGY
FROM PPL ENERGY PLUS , LLC, IN THE
POWER COST ADJUSTMENT.
CASE NO. IPC-E-08-13
IDAHO POWER COMPANY
DIRECT TESTIMONY
OF
KAL BOKENKAP
1 Q.Please state your name and business address.
2 A.My name is Karl Bokenkamp and my business
3 address is 1221 West Idaho Street, Boise, Idaho.
4 Q.By whom are you employed and in what
5 capacity?
6 A.I am employed by Idaho Power Company as the
7 General Manager of Power Supply Operations and Planning.
8 Q.Please describe your educational background.
9 A.I received a Bachelor of Science Degree in
10 Mechanical Engineering from the University of Illinois at
11 Urbana-Champaign in 1980. In 1995, I earned a Master of
12 Engineering Degree in Mechanical Engineering from the
13 University of Idaho. I am a registered Professional
14 Engineer in the state of Arizona, and I have attended the
15 Stone & Webster Utility Management Development Program and
16 the University of Idaho's Utility Executive Course.
17 Q.Please describe your work experience wi th
18 Idaho Power Company.
19 A.I became employed by Idaho Power in 1995 as
20 the Director, and then Manager, of Thermal Production. In
21 this position I was responsible for managing Idaho Power's
22 Thermal Production Department. Primary responsibilities of
23 the department included oversight and control of Idaho
24 Power's ownership shares in its three jointly-owned coal-
BOKENKAP, DI 1
Idaho Power Company
1 fired generation resources, Bridger, Boardman, and Valmy,
2 and their associated fuel supplies. In 2001, I accepted a
3 new assignment as the Manager of Power Supply Planning and
4 was later promoted to General Manager of Power Supply
5 Planning. In this position, I was responsible for building
6 and managing Power Supply's Planning Department. This
7 department's responsibilities included operational
8 planning, load forecasting, stream flow forecasting,
9 integrated resource planning, cogeneration and small power
10 producer contract management, water management/river
11 operations, and gas and coal contract management.
12 In 2006, I was promoted to my current position of
13 General Manager, Power Supply Operations and Planning.
14 This position adds operational responsibilities, which
15 include asset optimization, wholesale electricity, and
16 natural gas transactions from real-time through multi-year
17 deals as well as real-time operations and scheduling.
18 Q.Please describe the purpose of your
19 testimony in this proceeding.
20 A. There are four major topics that comprise my
21 testimony. First, I will briefly summarize the events that
22 preceded the development of the Power Purchase Agreement
23 dated June 2, 2008, between the Company and PPL EnergyPlus,
24 LLC ("PPA" or "Confirmation Agreement"). Second, I will
BOKENKAP, DI 2
Idaho Power Company
1 describe the principle provisions of the PPA. Third, I
2 will explain why the PPA is advantageous to customers.
3 Finally, i will discuss the treatment of PPA expenses
4 within the Power Cost Adjustment.
5 Q.Will you please describe the events that led
6 to the development of the PPA.
7 A.In July of 2003, in Order No. 29286, the
8 Commission approved a fixed-term power purchase agreement
9 between Idaho Power and PPL Montana, LLC ("PPL Montana
10 Contract"). Since 2004, Idaho Power has been purchasing 83
11 megawatts of power under the PPL Montana Contract during
12 the heavy load hours of the months of June, July, and
13 August. The PPL Montana Contract expires at the end of
14 August 2009. Recognizing that the PPL Montana Contract
15 will expire at the end of the summer of 2009, in the spring
16 of 2008, Idaho Power issued a Request for Proposals ("RFP")
17 to consider offers for a new contract to replace the PPL
18 Montana Contract. PPL EnergyPlus, LLC ("PPL EnergyPlus")
19 was the successful bidder in the RFP.
20 Q.Has Idaho Power successfully negotiated a
21 firm wholesale power purchase with PPL EnergyPlus?
22 A.Yes. A copy of the agreement with PPL
23 EnergyPlus (the PPA) is attached as Exhibit 1 to my
24 testimony.
BOKENKAP, DI 3
Idaho Power Company
1 Q.Would you briefly describe why the Company
2 selected PPL EnergyPlus as the successful bidder?
3 A. PPL EnergyPlus is the marketing arm of PPL
4 Montana. As a result, it is able to utilize the generating
5 resources owned and operated by PPL Montana to provide the
6 energy and capacity called for in the PPA. PPL Montana
7 acquired most of the generating assets sold by the Montana
8 Power Company when the state of Montana restructured its
9 electric utility industry several years ago. Consequently,
10 PPL EnergyPlus has access to over 1,200 megawatts of
11 generation located in Montana to supply the PPA. PPL
12 EnergyPlus offered the least-cost, lowest risk proposal.
13 Q. What about PPL EnergyPlus' credit rating?
14 A. PPL EnergyPlus does not maintain a separate
15 credit rating. However, Idaho Power's transactions with
16 PPL EnergyPlus are financially guaranteed by PPL Energy
17 Supply LLC, which possess an investment grade credit
18 rating. As noted in Exhibit 1, the parties have agreed to
19 utilize the WSPP Credit Support Annex to provide credit
20 support for the agreement. These credit provisions are
21 consistent with electric utility standard procedures and
22 conditions. I believe PPL EnergyPlus' access to resources
23 and its good credit rating demonstrates that selection of
24 PPL EnergyPlus as a contracting counterparty was prudent.
BOKENKAP, DI 4
Idaho Power Company
1 Q.In your prior answer you referred to the
2 WSPP. In the first page of the PPA, the Confirmation
3 Agreement, there is a reference to the WSPP Agreement and
4 Service Schedule C and the WSPP Credit Annex dated March 1,
5 2003, and amended January 8, 2004. Please explain that
6 reference. .
7 A.WSPP stands for Western Systems Power Pool.
8 Western Systems Power Pool is a an umbrella organization
9 which includes dozens of energy industry participants
10 (including Idaho Power and PPL EnergyPlus) who engage in
11 wholesale power purchase and sale transactions in the
12 western United States and Canada. To facilitate those
13 transactions, the members of WSPP have negotiated and
14 published a model power purchase and sale agreement which
15 addresses the usual commercial terms and conditions that
16 are required for these types of transactions. The WSPP
17 agreement and the accompanying services schedules,
18 including Service Schedule C, have been filed with the FERC
19 and provide an umbrella agreement under which regulatory
20 filings can be facilitated at the FERC. In the
21 Confirmation Agreement, Idaho Power and PPL EnergyPlus,
22 have agreed that the terms and conditions contained in the
23 WSPP Agreement will be the general commercial terms and
24 conditions that will govern the PPA. The transaction-
BOKENKAP, DI 5
Idaho Power Company
1 specific arrangements are set out in the Confirmation
2 Agreement
3 Q.Could you briefly summarize the principles
4 provisions of the PPA?
5 A.The principle provisions of the PPA call for
6 PPL EnergyPlus to deliver 83 megawatts of firm power during
7 the heavy- load hours, six days a week (Monday through
8 Saturday), sixteen hours a day (6 x 16) in the months of
9 June, July, and August, except for NERC holidays. June,
10 July, and August are identified in the Company's 2006 IRP
11 as the months of Idaho Power's highest forecast peak-hour
12 loads. The term of the PPA is June 1 through August 31
13 beginning in 2010 and ending in 2011. The price to be paid
14 for this energy is $92.25 per megawatthour.
15 In addition to the cost of power in the PPA, Idaho
16 Power will purchase firm monthly transmission service
17 across Northwestern Energy's transmission system to the
18 Jefferson point of delivery. At current rates, set out in
19 Northwestern Energy's OATT, the maximum charge for the
20 monthly firm transmission service to Jefferson is $3.42
21 remove ul per kW of reserved capacity per month. Losses
22 are charged a 4 percent.
23 Q.How do the energy costs of $92.25 per
24 megawat thour in the PPA compare to other options the
BOKENKAP, DI 6
Idaho Power Company
1 Company might have?
2 A.The costs associated with this PPA are
3 competitive and favorable when compared to alternative
4 resource options. The current PPL Montana Contract ends in
5 2009 and the Idaho Power's next major resource is not
6 scheduled to be on-line until early 2012. Since a major
7 resource addition is planned for 2012, the most logical
8 supply side alternative for meeting forecasted summertime
9 loads between now and 2012 is with market purchases,
10 delivered to Idaho Power's east-side. The reason for the
11 specifying an east-side delivery is because, for planning
12 purposes, Idaho Power's import capacity from the Pacific
13 Northwest is assumed to be fully utilized.
14 Idaho Power and PPL EnergyPlus orally agreed to the
15 price of $92.25 per megawatt hour on May 28, 2008. On that
16 day, Idaho Power's heavy load forward price curve for Mid-
17 Columbia (Mid-C) averaged $84.24 per megawatt hour, and
18 Palo Verde (PV) averaged $100.42 per megawatt hour for
19 June, July, and August of 2010 and 2011. These prices do
20 not include costs for transmission service, or the losses
21 incurred, to deliver the energy to Idaho Power's system.
22 The forwards for Mid-C are slightly above the PPA contract
23 price. However, as I noted earlier, Idaho Power's import
24 capacity from the Pacific Northwest (Mid-C hub) is assumed
BOKENKAP, DI 7
Idaho Power Company
1 to be fully utilized during summertime peak- load hours.
2 Summertime heavy load purchases on Idaho Power's east-side
3 will typically trade at a premium to Mid-C prices.
4 The total cost of the PPA, after adjusting for
5 expected transmission costs and losses, results in a
6 delivered cost of approximately $101 per megawatt hour.
7 PPL EnergyPlus' proposal was selected through a competitive
8 solicitation, and the estimated delivered price is nearly
9 equal to Idaho Power's forward price curve for the PV
10 market (which does not include the cost of transmission or
11 losses to deliver the energy to Idaho power's east-side) .
12 To give the Commission an idea of current market
13 prices, in accordance with the Company's risk management
14 policy Idaho Power has already purchased heavy load energy
15 for August of 2008 at prices between $110 and $120 per
16 megawatt hour.
17 Q.Are there other resources, such as the
18 Company's gas-fired combustion turbines that provide a
19 reasonable comparison to the purchase prices under the PPA?
20 A.Not really. For planning purposes, Idaho
21 Power's peaking resources are expected to be operating
22 during the peak-load hours of June, July, and August.
23 Additionally, Idaho Power's 2006 Integrated Resource Plan
24 assumed that the PPL Montana Contract, or a similarly
BOKENKAP, DI 8
Idaho Power Company
1 structured replacement delivered to Idaho Power's east
2 side, would be in place throughout the planning period. In
3 effect, Idaho Power has planned to have its existing
4 peaking resources on-line and an east-side purchase of 83
5 megawatts in place to meet planned peak hour loads during
6 the summer of 2010 and 2011.
7 However, for reference, the estimated July 2010
8 operating costs of Idaho Power's gas-fired combustion
9 turbines used in preparation of the May 29, 2008, Operating
10 Plan were approximately $119 per megawatt hour for Danskin
11 units 2 and 3, $107 per megawatt hour for Bennett Mountain,
12 and $100 per megawatt hour for Danskin unit 1.
13 Q.Are there additional conditions of the PPA?
14 A.Yes. Usually power sellers are reluctant to
15 hold their prices firm for an extended period of time. To
16 accommodate Idaho Power's need for time to pursue the
17 Commission approval process, Idaho Power has paid a deposit
18 to PPL EnergyPlus in the amount of $100,000. Idaho Power
19 has sixty days from June 4, 2008, to obtain Commission
20 approval of the PPA. If the PPA is approved by the
21 Commission on or before August 4, 2008, PPL EnergyPlus will
22 refund the $100,000 deposit and the PPA shall remain in
23 effect. If the Commission does not approve the PPA within
24 the sixty-day period, then either party may terminate the
BOKENKAP, DI 9
Idaho Power Company
1 PPA and Idaho Power will forfeit the $100,000.
2 Q.In its final order acknowledging and
3 accepting the Company's 2002 IRP, the Commission directed
4 Idaho Power to consider the potential of cost effective DSM
5 as an alternative to supply-side resources. Is the PPA
6 compatible with available DSM options?
7 A.In my opinion, the PPA dovetails very well
8 with the Company's ongoing efforts to develop energy
9 efficiency programs targeting system peak loads. As noted
lOin the Company's 2006 IRP, the Company's peak load
11 requirements occur during summer months. The PPA is
12 specifically targeted at the heavy load hours during the
13 peak summer months. The PPL Montana Contract expires at
14 the end of the summer of 2009. The PPA commences at the
15 beginning of the summer of 2010 and runs through the summer
16 of 2011. The Company currently has an RFP in process for a
17 new base load resource to be online to meet the summer peak
18 load requirements in 2012.
19 As the Company has reported to the Commission in its
20 annual DSM reports, the Company has implemented a number of
21 peak~period demand reduction programs, including the Cool
22 Credit program, which cycles air-conditioning off during
23 heavy load hours in the June, July and August months. The
24 A/C Cool Credit had 13,692 participants at the end of 2007.
BOKENKAP, DI 10
Idaho Power Company
1 The 2008 A/C Cool Credit target is 16,000 new participants,
2 a significant increase in participation.
3 The Company has also changed the incentive structure
4 of the Irrigation Peak Rewards program. The program's
5 maximum summer peak reduction during 2007 was approximately
6 18 percent higher than it was during 2006, this increase in
7 peak-hour reduction was due primarily to the change in
8 program incentive structure.Irrigation and air-
9 conditioning loads represent a significant part of the
10 Company's peak summer load, and the Company continues to
11 incorporate forecasted peak-hour reductions from its energy
12 efficiency and demand response programs into its integrated
13 resource plan. In fact, if the load reductions anticipated
14 as a result of the Company's energy efficiency and demand
15 response programs are not achieved, Idaho Power's forecast
16 peak-hour deficits will increase. For all these reasons i I
17 believe the PPA is consistent with the Commissions'
18 expectations regarding consideration of DSM in conjunction
19 with the addition of new supply-side resources.
20 Q.How does the Company propose that the costs
21 associated with this PPA be treated in the Company's Power
22 Cost Adjustment ("PCA")?
23 A.I am advised by the Company's accounting
24 department that the cost associated with acquiring firm
BOKENKAP, DI 11
Idaho Power Company
1 monthly transmission service from Northwestern Energy's
2 transmission will be booked in FERC Account 565,
3 Transmission of Electricity by Others. These monthly
4 transmission costs are not currently included in the
5 Company's Power Cost Adjustment.
6 Idaho Power's cost for power acquired through this
7 PPA will be booked in FERC Account 555 , Purchase Power, and
8 will appropriately flow through the Company's PCA upon
9 contract approval by the Commission.
10 Q.Based on your testimony in this proceeding,
11 what is the Company's recommendation with regard to the PPL
12 EnergyPlus Power Purchase Agreement?
13 A.The Company recommends that the Commission
14 approve the PPL EnergyPlus Power Purchase Agreement for
15 rate making purposes and that the Commission authorize
16 Idaho Power to include the expenses associated with Power
17 Purchases under the PPA in the Company's PCA.
18 Q.Does this conclude your testimony?
19 A.Yes, it does.
BOKENKAP, DI 12
Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-08-13
IDAHO POWER COMPANY
KARL BOKENKAMP TESTIMONY
EXHIBIT NO.1
'~~JUN. 3. 200B 3:? IPM PPL 8UII~ 40b,33U2UI
45 Basin Crek Roa
But, MT 59701
(408) 530(40 5302 - fa
CONFIAtION
NU. 6339 l. 2. .. j, ,l. i
~~~U4~;:..
P.pIF~~ ..
~ 11
, .
Da:
seller:Purcha:.
Agrement
June 2, 20
PPL EnergPlus, LL
Idaho Poer copany i/ .wsp Agre and Seic SCule C ,/
Prce:
Tota Pric:
-This Cofirmtion is prvid to amftrm th oral agret ented Int beee Purease and seller on May
28, 2008; wher seller agr to sel and deliver to Purcasr and Purcse a9.~ to purcas and reve
f~m seller Firm C8padt/Energy sale or Exange 5et\ce, as descbed in WSPP !'rvce Scheule C ("finn
En, pursuant to the folloing te and condits: .
Cotn term: from th earlle of (ì)the diite of lPU approl of th final wr Confatn for this
trnsctn (the "Confrmatij or (10 th date of Purcas~ wri notication to selerof actance of th COnfrmn, ttn;ugh Augus 31, ioH. _.; i/ ." "" -
Delivery Term: June !)rough ~us 31 for yers 2010 !Jd 2011, Hour Emtrng (HEJJ100 thugh HE
22, Pëltic Prvailng llme (I'PT, Monáåy through satu~ay, exluaíng Sunday and
NERC Holidays.
$92.25 pe MWh..
$19,111,248 ./
Quanti: 83 MWh per hour'/
Toml Quantty 207,168 MWh ./
DeliverYPolnts: sellers ch int NorWes Energs trnsmission sym (NW...
Seller and Purchaser Bg~ to th abov trnson pursant to and in accnce wi the tes and
conditns of the WSPP Agrent and selæ Scdule C, as amended and efctve as of Apri 1, 2008
("Agrementj, the WSPP Crit Support Anne da Marc 25, 2003 and amended Janury 8, 204, and thse
adcfitonal tes and coitns prvided fo in Speal Proviions below.
Special Prions:
1. seller shall be reponsibl fo contnge rerves tht sati the reuireen of th WECC applicable
Tn th WECC-ærtfied Balandng Autii no to ~ce the sum of five pert of the Quntit prode
fJtm hydropor genetl and se pent of the Quantit proded frm thermal generati (fift
pernt of whic shall be spinning) ~nd of no difernt quality than currtl reuired.
2. Purchaser shall acuIre and pa fo transission serv fro the Deliv Points toJefr5n
("ransmision Secej. Suc obligaton indude paying for alllo in connecon with such
Transmissin Serv.
If seller holds finn TJãnsmin service for ãny poon of th Quantity tor th DeliV Ter in any
year during the Con Term, th Parties agre that seler shall ressign such finn Transmisson
Servce to Purcha and 'Purcase shll acc such reignment prior to the beinning of suc:h
Deivery Ter. Purchser will pay an co and expese at th acl tari ra for such Transmision
SeJÝìæ tht applie during the Deliv Term. The trnsission ressfnment wil be in a fo mutlly
. agre to bY the Part and wil be in aCtrdanc wi all FEC reuiremen.
By Ocber i of eah year (luring the Contrct Ter, Purdaser wil contct seile to detine seller's
intntn to rollove su TraÌ1miSion seic. If seler deerine it will not rolovr such
Transmission 5ece, seller wil noti Purchaser thref. Purcser ma ele at any time within 10
Busne Days af receipt of any such notice, to reques that Seller roUover such Transmision selVce
ldab.o 2010-2011 Jon Jul Aug 83MW wsp CoDf. Schee C (2) fi
Exhibit No. 1
Case No. IPC-E-08-13
K. Bokenkamp, IPC
Page 1 of2
NU. 6339 Y. 3. . ,.. , I. i.. \.!o!11 '...h...""
ppl t:::i.......;-....
,,~ 1'
..ì~.
.~"AJUN. -J. 10Uti J: ,tllM llL BU II t 40b,B020 I
45 Basn Creek Road
Bue, MT 59701
(40) 53:.770
[phone] - fa
and assign such Transisson serve to Purcaser for the enire tenn and entire quantity of the
rollover.
3. Within three Busine Days folowng execon of this Conntion pursant to the terms of th
Agent (the "FInal Agrement Date, Purcaser shall pay a depol: to seler in the amount of
$100,000. Purchasr shall thn have 60 days frm the Final Agreement Da (th "Approval Perodj to
se and obtin Idaho Public utilit COmmission (the "IPUC¡ approl of the Cofirmati. The
cofirmatin shall beme ef on the earlier of 1) the date the IPUC ises a final orr approvng
the ConfirmtTon as submit (or with mutall accble changes) witin th Approl Pe; or 2)
any date during th Apprval Period on which Purchaer noir Seler in wrti of Purdaser's efen
to confirm and accpt the COnfrmtion. Seller shll, wihin three Busines Days followng reipt of a
copy of such final order or Purchats acptnCl of th Cormtin, rend th $100,00 depo to
Purcaser.
If Purchaser has no aa:pte the ConfirmatIon and if th IPUC has not issued B final orer approvig
the Confirmtion as submit (or wit mutually aceptble chnge) within the Appl Pe, then
either Part may immedately teinate the Confirtion by proidng writt noCl I: the othe Part
witIn 5 Busine Day aft the en of the Approval Perio. If the cofirmatin is termina by ei
Part during suh tIme perio, Purchase wiD forf the $100,00 depos '
Notwthstnding any other proviion of this Agrent, in no even shall any inteupton or curtRment of
trnsmission servce resulting from or ariing out of any acton taken by or at the directon of any reliabil
coinator under or pursuant to th WEOCs Unsheduled Flow Mitgation Plan (or any replace or sucæ
plan) constit iin Unamtrolfable Forc for purpes of this Agreen, and in no event shall any Part be
enttl to clim Uncntrollable Forc to excuse Ðny failure to malæ avilble capac or delive or reive
energ as a relt of any suth intel'on or wrtilmen of trnsmisson seice. i
Upon reipt of this Connrmeti, Purcr shall notify ~11e of it appral by excung Dnd rerning this
Confirmation by fa to (406) 533-208 within fi (5) Busines Days. This Conliration shall be final and
binding, whether or not signe or c;nßmied by Purchasr, unle Purcha iidvles Seller in writil1 of any
inaceulëty within five (5) Busine Days following the recpt of this Conl'rmBtt. i
Purd'ase
Idaho Power Company
S1gnec:~ C- ~LNam~ c: &\\.tlTitle. ~v.~ ~0'f.pb'i
Date: J '-r\"E 'j , "Z-c:
Signed:
Name: Kimbey J. Treew
Title: Team leader -Trading Contros
Date: lp., 3-or
f:~=~~~J_..T~.~.æ!.2T
._.."1.. fi. #1.. _ ..._.~-!i i('..,...__._- ..... -_.-~""'.l
.._..... "',.."., .~lJt:!....~-1.; .:
Idaho 2010-2011 Iun I"i Aug 83MW WSPP CoDf ~ Sched C (2) fi
Exhibit No. 1
Case No. IPC-E-08-13
K. Bokenkamp, IPC
Page 2 of2