20100415Kesting Direct.pdf

--c:z-(!-0:a
D-!"~'C'j".: t :\../ !~~.. j
"Ill'" iDR i r A1~ \0: 06lu ¡lJ f\r \ ,,) M! i ~
Dean J. Miler (ISB No. 1968)
Chas. F. McDevitt (ISB No. 835)
McDEVITT & MILLER LLP
420 West Banock Street
P.O. Box 2564-83701
Boise, ID 83702
Tel: [phone]
Fax: [phone]
joe(!mcdevitt -miller. com
chas(fmcdevitt -miler. com
Attorneys for The New Energy Company LLC
and Western States Equipment Company, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
The New Energy Company LLC,
An Idaho Limited Liability Company, and
Western States Equipment Company, Inc.,
An Idaho Corporation,
Case No. IPC-E-IO-13
Complainants
v.
Idaho Power Company,
A Regulated Public Utility,
Respondent.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
DIRECT TESTIMONY OF JAY KESTING
I Q.Please state your name.
2 A.My name is Jay Kesting.
3 Q.By whom are you employed and in what capacity?
4 A.I am employed by Western States Equipment Company Inc., (Western States) in
5 the capacity of Engine Business Manager.
6 Q.Please describe Western States.
7 A.Western States is the authorized Caterilar dealer for Idaho, eastern Washington
8 and Oregon, western Montana and par of Wyoming. Our roots began in the
9 1930's as J.A. Terteling and Sons which grew into one of the largest construction
10 companies in the countr building dams, canals and projects like the Umatila
11 Ary Depot. After World War II we decided to exit the constrction business
12 rather than go international and we took on the Caterilar dealership for souther
13 Idaho. Over the past fifty years we have acquired five other Caterpilar dealers to
14 reach the footprint we have today.
15 Q.What are your duties in the capacity of Engine Business Manager?
16 A.My duties include the management of the sales of industral engines, generator
17 sets and associated equipment throughout the terrtory. I am involved in training
18 for our engine technicians and sales staff. I am also par of the executive staff and
19 am involved in the development and execution of our corporate strategy.
20 Q.Is Western States experienced in providing engines and generators for the
21 generation of electrc power?
22 A.Yes. We have been selling and servicing Cat powered gensets for emergency,
23 standby, prime and continuous applications for over forty years.
Kesting, J 1
The New Energy Company
1 Q.
2
3 A.
4
5
6 Q.
7
8
9 A.
10
11
12
13
14
15
16
17
18
19
20
21
22
Has Western States investigated the market for constrcting and operating electrc
generation facilities at dairies in southern Idaho?
Yes we have. We began researching this market about six years ago and have
been involved in the early development of several projects throughout our
terrtory.
In conjunction with The New Energy Company, has Western States developed a
business model for anaerobic digester electrical generation that you believe wil
make such projects feasible and sustainable? If so, please describe.
Yes. Our analysis showed that there were a variety of factors that caused dairy
digester projects to fail in North America. Low electrcity rates and a lack of
renewable incentives were certainly factors but the larger issue was the lack of a
long term commitment to the success of the project by the developer. Unlike a
landfill project, which is generally backed by a goverent entity or a large
corporation, the dairy digester was usually tued over to the dairy after
completion. The dairyan, often lacking the technical or financial capability to
maintain the system, became frstrated and ultimately would abandon it . Our
model is to create a "cradle to grave" approach where we take the project from
concept to decommissioning. The digester becomes an integral par of the dairy
operation but is run as an independent, focused business. An entity created by
Western States and New Energy would own and operate the projects through their
lifetime. The interest of the dairyan would be limited to contractual
arangements for property leases and fuel supply.
Kesting, J 2
The New Energy Company
1 Q.
2
3 A.
4
5
6
7
8
9
10 Q.
11
12 A.
13
14
15
16
17
18
19 Q.
20
21 A.
22
23
In addition to the generation of electrc power, do you believe such projects wil
be beneficial to the dairy industry?
Yes. First there are significant operational effciencies that are gained by the
dairy. The reduction in manure handling is a tremendous operational savings and
also frees up land for other useful purposes. The digester, when combined with an
effective wastewater management system, provides significant improvements in
nutrent management. Odors and flies are also significantly reduced. I believe that
the long term viability of the dairy industry in Idaho and other pars of our
terrtory wil be significantly enhanced by these projects.
In addition to the generation of electrc power, do you believe such projects wil
have a positive environmental effect?
Yes I do. Methane emissions from CAFO's are considered to be a major source of
greenhouse gas emissions worldwide. By converting this methane through
combustion we reduce the GHG emissions by a factor of21 times. This is
substantiated by verifiable carbon credits that are sold in exchange markets. In
addition, surface water and groundwater contamination, from nutrients such as
phosphorus, and the subsequent contamination of rivers are significantly reduced
in a more cost effective maner.
Is Western States working to implement the business model you have described at
dairies in southern Idaho?
Yes, as explained in the Direct Testimonies ofMs Leslie White and Ms. Laura
Knothe we are actively developing projects at the Rock Creek Dairy in Filer, the
Double B Dairy in Muraugh and the Swager Fars Dairy in Filer.
Kesting, J 3
The New Energy Company
1 Q.What is the nature of Western Sates financial commitment to these projects?
2 A.Western States has committed to equity paricipation and in conjunction with
3 New Energy has created a separate LLC to manage that paricipation. Weare also
4 working with Caterpilar Financial to provide the debt finance if we opt to use it.
5 Q.Does Western States have the financial strength to underake the project
6 investments you have descrbed?
7 A.Yes it does. We have the ability to fud these projects solely from our operating
8 capital if we choose.
9 Q.Was the business model you have described predicated on the PURP A published
10 avoided cost rates that were in effect prior to March 16,2010.
11 A.Yes it was. As noted previously, one of the causes of failures has been low rates
12 and lack of incentives. Our more sustainable model required those two factors to
13 come into a range of acceptable risk. At those rates the financial risk associated
14 with the projects was tolerable to Western States. The rates established by Order
15 No. 31025 create a much higher level of financial risk for the projects. It is
16 doubtful that the owners of Western States would be wiling to take on that much
17 higher level of risk.
18 Q.Does that conclude your testimony?
19 A.Yes it does.
Kesting, J 4
The New Energy Company