20090622Reading Direct.pdf

RECEIVED
20ngJUH '9 PM~: 36
lDf"HO PUB~JG
UTILITIES COMnHSSiON
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER'S )
APPLICATION FOR A CERTIFICATE OF PUBLIC)
CONVENIENCE AND NECESSITY FOR THE )
LANGLEY GULCH POWER PLANT. )
)
)
CASE NO. IPC-E-09-03
DIRECT TESTIMONY AND EXHIBITS OF
DR. DON READING
ON BEHALF OF
NORTHWEST & INDEPENDENT POWER PRODUCERS COALITION
JUNE 19,2009
1 Q. Please state your name, address, and affiliation.
2 A. My name is Don Reading. I am Vice President and Consulting Economist for
3 Ben Johnson Associates, 6070 Hil Road, Boise Idaho. My resume is attched as Exhibit 701.
4 Q. On whose behalf are you testifying?
5 A. The Nortwest & Intermountain Power Producers Coalition (NIPPC) asked me
6 to examine the competitive bidding aspects of Idaho Power's filing for a Certificate of
7 Convenience and Necessity (CPCN) for its Langley Gulch Power Plant. NIPPC is an association
8 of independent power producers established to actively pursue informal and formal (i.e., laws,
9 policies, rules and regulations) avenues and forus to promote competitive electric power supply
10 markets in the Pacific Northwest and Intermountan West. NIPPC supports a fully competitive
11 electric power supply marketplace. Among NIPPC's 15 full members are some of the major
12 independent energy producers in the country. The member companies' energy projects currently
13 on-line have a capacity of more than 3,500 MW in the Northwest.
14 Q. What is the purpose of your testimony?
15 A. My testimony will focus on the competitive bidding process that Idaho Power
16 used in its most recent Request for Proposals (RFP) for a new supply-side resource. The end
1 7 result of that competitively bid RFP was that Idaho Power selected itself as the winnng bidder.
18 Idaho Power (IPCO) issued its RFP on April 1, 2008 for competitive proposals for up to 600
19 MW of energy. In June 2008 the amount was reduced to approximately 300 MW.
20 Q. How is your testimony organized?
21 A. The testimony that follows contains four pars. First, I wil briefly review the
22 bidding process and provide a time-line with key dates. The second section will discuss what
23 aspects make up a transparent and competitive bidding process for utility resources that assures
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1 all bidders (the purchasing utilty and independent suppliers) have an equal opportunty to supply
2 power to the utilty seeking it. The third section wil look at Competitive Bidding Guidelines for
3 the state of Oregon where Idaho Power serves approximately 18,000 customers who use 700,000
4 MWh anually. I conclude this testimony by recommending the Commission deny a CPCN for
5 Langley Gulch at this time and adopt competitive bidding procedures before the Company
6 embarks upon a new RFP process in the futue.
7 Q. Dr. Reading could you briefly review the RFP process the Company used
8 that resulted in the selection of its self-build Langley Gulch project.
9 A. Company witness Bokenkamp discusses the Company's RFP procedure on
10 pages 5 through 13 from his direct testimony. The following description is based on that
11 testimony and the Company's responses to discovery requests. In September 2007 the Company
12 decided it would no longer pursue the conventional coal plant it had previously planed. Idaho
13 Power's 2008 Integrated Resource Plan Update (2008 IRP Update) published in June 2008
14 confirmed that decision. In its 2008 IRP Update the Company's analysis indicated a more cost
15 effective resource would be a combined cycle combustion turbine (CCCT) rather than a coal-
16 fired resource. IPC then issued a request for proposals (RFP) in April 2008 for 250 to 600 MW
1 7 dispatchable, physically delivered, firm, or unit contingent energy resource with an on-line date
18 of June 2012. The energy acquisition would be though a power purchase agreement (PPA), a
19 tolling agreement (TA) or a self-build facility. The Company excluded build-own-transfer
2 0 (BOT) proposals.
21
22 Q. How many responses did the Company receive?
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1 A. The Company received responses from six organizations. One proposal failed
2 to provide an intent to bid and thus the bid was retued unopened. The five remaining proposals
3 offered one PPA, nine TA's, two "hybrid" bids, along with the Company's own benchmark
4 resource. The thirteen alternatives contain a variety of different gas fired technologies. The
5 Company, through its screening process, vetted four offers from three bidders. The four short
6 listed gas plants, from three bidders, had significant variation in operational considerations. Two
7 of the facilities were combined cycle, including the Company's benchmark at Langley Gulch,
8 and two were combustion tubine. The thee short listed proposals, other than the self-build,
9 were tollng agreements.
10
11 Q. Dr. Reading, you have filed testimony before this Commission relating to
12 competitive bidding practices in another docket, GNR-E-08-03. How wil this direct
13 testimony differ for that filed in the generic competitive bidding docket?
14 A. In the generic competitive bidding docket, GNR-E-08-03, I addressed Idaho
15 Power's RFP process that resulted in the Commission issuing a CPCN for the Evander Andrews
16 gas plant at Mountain Home. The curent RFP process differs from the EvanderAndrews RFP
1 7 in several ways. In other ways the selection process used to select Langley Gulch parallels the
18 Evander Andrews RFP. Therefore, some of the same discussion points will be used here when
19 they are applicable to this docket.
20 Q. In your GNR-E-08-03 testimony you referenced a report by the Analysis
21 Group for NARUC that discusses recent trends in state policies as they relate to
22 competitive bidding practices and guidelines. (Competitive Procurement of Retail
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1 Electricity Supply: Recent Trends in State Policies and Utilty Practices, July 2008,
2 Analysis Group, Boston, Mass.) What did that report recommend?
3 A. As the Report title implies it contains a review of competitive procurement rules
4 and guidelines that have been implemented in various states. These bidding rules, as would be
5 expected, var among different states. The study provides a good sumar of the guidelines in
6 various states that includes the major elements the researchers found. The Executive Sumar
7 outlines the elements that lead to a robust and transparent competitive bidding process.
8 Q. Please summarie those elements.
9 A. First, the procurement process should be fair and objective. Second, the
10 procurement should be designed to encourage robust competitive offerings and creative
11 proposals from market paricipants. Third, the procurement should select winning offers based
12 on appropriate evaluation of all relevant price and non-price factors. Fourh, the procurement
13 should be conducted in an efficient and timely maner. Finally, when using a competitive
14 procurement process, regulators should align their own procedures and actions to support the
15 development of a competitive response.
1
16 Q. The five elements you just presented appear to be goals of a good bidding
1 7 process that almost everyone could agree with. Did the Report describe specific procedures
18 that can be used to achieve those goals?
19 A. Yes, the Executive Sumar describes what the researchers found.
20 The first key issue for incremental resource procurements is the design of safeguards
21 to prevent potential improper self-dealing by the utility. Because the utility may financially
lCompetitive Procurement of Retail Electricity Supply: Recent Trends in State Policies
and Utility Practices, July 2008, Analysis Group, Boston, Mass., p. ii.
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1 benefit from the selection of its own self-build offer or a proposal from an affiiate, safeguards
2 are necessar to ensure that the process is not improperly tilted toward the selection of such
3 offers. As the report describes, a varety of means are available to provide such safeguards,
4 including: The involvement of a third-par independent monitor ("1M") and/or independent
5 evaluator ("IE"); Measures to increase the transparency of the procurement process to market;
6 Providing potential bidders with detailed information needed to prepare competitive bids; Utility
7 codes of conduct to prohibit improper sharing of information that is valuable to utility affiliates
8 in their design of procurement offers and/or their competitiveness in other electricity markets;
9 and, Careful disclosure and review of how "non-price" factors are considered and evaluated by
10 the utility in weighing offers from third paries against self-build or affiliate offers.2
11 I think it is significant that the "first key issue" is that a utility may derive financial
12 benefit from building its own resources and that could "tilt" the utility issuing the RFP in its own
13 favor.
14 Q. Idaho does not have competitive bidding guidelines in place. However the
15 State of Oregon does have guidelines in place. Since Idaho Power serves 18,000 customers
16 in that state did the Company follow Oregon's guidelines in the Langley Gulch bidding
17 process?
18 A. No. Idaho Power did not follow Oregon's bidding rules despite the fact that it is
19 covered by those rules. In Oregon if an electrc utility plans to acquire a resource that is larger
20 than 100 MW, and with a duration greater than five years, then it must comply with that state's
21 competitive bidding rules. Although there are elements of the Company's bidding process that
22 appear would meet the Oregon Public Utility Commission Guidelines, while there are others that
23 did not. However, the Company has not sought a waiver from Oregon from compliance with
24 those rules.
2Ibid, p. v
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1
2 Q. What could be the consequences to the Company for not following the
3 Oregon guidelines?
4 A.Since Idaho Power derives approximately four percent of its revenue from its
5 Oregon jurisdictional operations it could potentially not be permitted to rate base four percent of
6 the cost of Langley Gulch. This would put the responsibilty for that portion of the plant on the
7 Company shareholders' shoulders.
8 Q. Do you know why the Company chose to ignore the requirement that they
9 meet the Oregon Guidelines?
10 A. No, I do not. Although in response to the Industrial Customers of Idaho
11 Power's discovery request Nos. 33 and 34, the Company states that it intends to file for rate
12 recovery in Oregon. It also stated that it believes that it has "substatially" complied with the
13 Oregon rules.
14 Q. You stated above that there were elements of the Langley Gulch bidding
15 process that seemed to meet the Oregon guidelines and other that did not. Could you
16 describe those guidelines?
17 A. In discussing the Company's RFP procedure the following testimony wil use
18 those Guidelines as a touchstone. (See attached, Guidelines Adopted, UM1182, Order No. 06-
19 446, August 10, 2006, Exhibit 702.) I am not assuming the Oregon guidelines would be the
20 same ones the Idaho Commission would approve if they open a generic docket on competitive
21 bidding. However, the Oregon guidelines do insure that the bidding process is fair and the
22 resulting selection was arrived at where all parties had an equal chance of selection.
23 Q. Could you discuss the first Oregon Competitive Bidding Guideline?
24 A. Oregon Guideline One states,
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1 RFP Requirement: A utilty must issue an RFP for all Major Resource
2 acquisitions identifed in its last acknowledged Integrated Resource Plan (IRP).
3 Major Resources are resources with durations greater than 5 years and
4 quantities greater than 100 MW
5 Idaho Power met this Oregon Guideline requirement originally requesting bids on a
6 resource from 250 to 600 MW. The size request was lowered to 300 MW two months after the
7 issuance of the original RFP.
8 Q. Could you discuss the second Oregon Guideline for Competitive Bidding?
9 A. Oregon Guideline 2 deals with the conditions for exempting a utility from the
10 competitive bidding requirements. There three conditions for an exemption: (1) Acquisition of a
11 Major Resource in an emergency or where there is a time-limited resource opportity of unique
12 value to customers, (2) Acknowledged IRP provides for an alternative acquisition method for a
13 Major Resource. (3) Commission waiver on a case-by-case basis.
14 None of these three conditions were met in Idaho Power's RFP process that resulted in
15 the Company selecting Langley Gulch. Therefore it seems that Idaho Power is not exempt from
16 following the Guidelines.
17 Q. Dr. Reading, are you aware of Idaho Power asking the Oregon Commission
18 for a waiver of its competitive bidding guidelines for any resource?
19 A. On June 2nd, 2009, Idaho Power filed a Petition for Partial Waiver of
20 Competitive Bidding Guidelines for 150 MW of wind generation to be added to the Company's
21 resources in 2012. (In the Matter of Idaho Power Company's Petition for Partial Waiver of
22 Competition Bidding Guidelines - 2012 Wind Resource UM 1433.) The Company states it needs
23 to act quickly to take advantage of a time-limited resource acquisition opportty. This short
24 time frame is the basis for the Company's request for a waiver.
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1 It is curous that the Company would ask for a waiver of Oregon's competitive
2 bidding guidelines for a 150 MW resource while it failed to either comply with the guidelines or
3 ask for a waiver for what was originally a 600 MW facilty. Langley Gulch will more than
4 double the wind resource and add significantly more to the Company's rate base. In addition,
5 Langley Gulch is not a time-limited resource that needs to be fast-tracked.
6 Q. Oregon Guidelines 3 and 4 are related, did the Company comply with those
7 two guidelines?
8 A. Guidelines 3 and 4 state:
9 "Affiliate Bidding: A utility may allow its affiliates to submit RFP bids. If affiliates
10 are allowed to bid, the utility must blind all RFP bids and treat affliate bids the same as all other
11 bids."
12 And:
13 "Utility Ownership Options: A utility may use a self-build option in an RFP to provide
14 a potential cost-based alternative for customers. A site-specific, self-build option proposed in this
15 way is known as a Benchmark Resource. A utility may also consider ownership transfers within
16 an RFP solicitation."
1 7 Idaho Power no longer has an affiiate that is involved in building generating resources
18 therefore Guideline 3 would not apply. A self-build Benchmark Resource was anounced as
19 being par of the RFP process and was ultimately selected as the winnng bid.
21
Q. Would you please discuss Guideline 5?
A. The fifth Oregon Guideline states that an Independent Evaluator must be used in
20
22 the RFP process and defines how the IE is to be selected.
23 "Independent Evaluator (IE): An IE must be used in each RFP to help ensure that all
24 offers are treatedfairly. Commission Staff with inputfrom the utilty and interested, non-bidding
25 parties, wil recommend an IE to the Commission, which wil then select or approve an IE for the
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1 RFP. The IE must be independent of the utilty and likely, potential bidders, and also be
2 experienced and competent to perform all IE functions identifed in these Guidelines. The IE wil
3 contract with and be paid by the utilty. The IE should confer with Commission staff as needed,
4 on the IE's duties under these Guidelines. The utilty may request recovery of its payments to the
5 IE in customer rates. "
6 The Company states that it did hire an "independent thrd-pary to review the
7 Company's RFP and bid evaluation process" (Bokenkamp, p. 6.) R W. Beck was selected to
8 aid the Company in the RFP process and Steven Stein of that firm has filed testimony in support
9 of his Letter Report attached to Company witness Bokenkamp's direct testimony.
10 Mr. Stein, in his Letter Report, reiterates Section 5.5 of the Company's RFP that
11 outlines five items the independent evaluator "may" perform to help ensure the RFP is
12 "conducted fairly and properly". Mr. Stein goes on to say Idaho Power asked his firm to perform
13 only three of the five criteria. RW. Beck was requested to consult with the Company in
14 preparng the RFP and evaluation criteria along with the evaluation of the proposals. In addition,
15 they were asked prepare reports including those to the Public Utilities Commissions of Idaho and
16 Oregon. The two items listed in Section 5.5 RFP that R W. Beck was not requested to undertake
1 7 was an independent scoring of all or a sample of the proposals to insure they were consistent
18 with the scoring criteria and compare their scoring results with that of the Company's to
19 reconcile and resolve any scoring differences.
20 Q. In what aspects did Idaho Power fail to meet the fifth Oregon Guideline?
A. RW. Beck was selected by Idaho Power, not Commission Staff, nor the firm21
22 approved by the Commission of either state. Aside from these specific criteria, the essence of
23 Guideline 5 is to insure that the IE is trly independent. It is clear the Company selected RW.
24 Beck and directed their responsibilities. Consulting with the utility and receiving direction from
25 it is different from being an independent thrd par approved by a Commission and operating
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1 under pre-established guidelines. This is not to say that RW. Beck may not have done a proper
2 job, given its limited role in this RFP process. What is important is what it was not asked to do -
3 to be a trly independent evaluator from star to finish. The conclusion of the Mr. Stein's Letter
4 Report states,
5 "Finally, based on our work with the Idaho Power RFP Evaluation Team as described
6 above, we believe that the Idaho Power 2012 Baseload RFP process was conducted fairly and
7 properly and that offers provided to Idaho Power as part of the RFP process, including the
8 Benchmark Resource, were treated objectively and consistently as set forth in Section 5.5 of the
9 RFP".
10 The key phase in RW. Beck's conclusion that the RFP process was conducted fairly
11 and properly is "based on our work". Section 5.5 of the RFP, as stated above, provides that the
12 Company "may" ask the IE to perform the given tasks. Any firm, or individual, hired to consult
13 on specified selected items in the RFP process while working under the directives of the hiring
14 utility canot be assumed to totally independent. This fact casts a cloud over the selection
15 process, especially when the results of the RFP process is the selection of the utility's own self-
16 build option.
17 Q. You just stated that pre-established guidelines are an important element in
18 the process because they establish the rules the IE must follow in the bidding process. Do
19 the Oregon Guidelines give direction to the selected IE?
20 A. Yes. The majority of the Guidelines outline specific actions the IE must follow.
21 Rule 6 establishes RFP design criteria:
22 "RFP Design: The utilty wil prepare a draft RFP and provide it to all parties and
23 interested persons in the utilty's most recent general rate case, RFP and IRP dockets. The utilty
24 must conduct bidder and stakeholder workshops on the draft RFP. The utilty wil then submit a
25 final draft RFP to the Commission for approval, as described in Guideline 7 below. The draft
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1 RFPs must set forth any minimum bidder requirements for credit and capabilty, along with bid
2 evaluation and scoring criteria. The utilty may set a minimum resource size, but Qualifing
3 Facilties larger than 10 MW must be allowed to participate. The final draft submitted to the
4 Commission must also include standard form contracts. However, the utilty must allow bidders
5 to negotiate mutually agreeable final contract terms that are diferent from ones in the standard
6 form contracts. The utilty wil consult with the IE in preparing the RFPs, and the IE wil submit
7 its assessment of the final draft RFP to the Commission when the utilty files for RFP approvaL. "
8 Many of the criteria described in the Oregon Guidelines were included in the RFP
9 used by Idaho Power. However, some of the most important guidelines that help insure the
10 imparially of the selection process were not. A draft RFP was not submitted for Commission
11 approval, nor did the Commission approve and direct the IE, nor did the IE submit its assessment
12 of the final draft RFP to the Commission. These facts cast serious doubt on the independence
13 and transparency ofthe competitive bidding process.
14 Q. Please comment on guideline 7.
15 A. Guideline 7 deals with Commission approval of the RFP.
16 Q. Didn't you state earlier the Company did not submit the RFP to either state
17 Commission?
18 A. That is correct. The Company did not submit either its draft or final RFP to
19 either Commission. Oregon Guideline 7 states:
20 "RFP Approval: The Commission wil solicit public comment on the utilty's final
2 1 draft RFP, including the proposed minimum bidder requirements and bid scoring and evaluation
22 criteria. Public comment and Commission review should focus on: (1) the alignment of the
23 utilty's RFP with its acknowledged IRP; (2) whether the RFP satisfies the Commission's
24 competitive bidding guidelines; and (3) the overall fairness of the utilty's proposed bidding
25 process. After reviewing the RFP and the public comments, the Commission may approve the
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1 RFP with any conditions and modifcations deemed necessary. The Commission may consider
2 the impact of multi-state regulation, including requirements imposed by other states for the RFP
3 process. The Commission wil target a decision within 60 days after the filing of the final draft
4 RFP, unless the utilty requests a longer review period when it submits the final draft RFP for
5 approval".
6 Idaho Power developed and issued the RFP with only RW. Beck providing input.
7 There were no independent third parities having input in the development of the RFP to insure it
8 was not constrcted in ways that would favor the utilties own self-build project.
9 Q. What is the focus of Guideline 8?
10 A. Guideline 8 establishes the rules for scoring the utilities Benchmark Resource, if
11 one has been par of the bidding process. Guideline 8 states:
12 "Benchmark Resource Score: The utilty must submit a detailed score for any
13 Benchmark Resource, with supporting cost information, to the Commission and IE prior to the
14 opening of bidding. The score should be assigned to the Benchmark Resource using the same bid
15 scoring and evaluation criteria that wil be used to score market bids. Information provided to
16 the Commission and IE must include any transmission arrangements, and all other information
1 7 necessary to score the Benchmark Resource. If during the course of the RFP process, the utilty,
18 with input from the IE, determines that bidder updates are appropriate, the utilty may also
19 update the costs and score for the Benchmark Resource. The IE wil review the reasonableness
20 of the scorers) for the Benchmark Resource. The information provided to the Commission and IE
21 wil be sealed and held until the bidding in the RFP has concluded"
2 2 The Company reports that it did make efforts to separate the bidding evaluation
2 3 process from the group within the Company that developed Benchmark Resource resulting in
2 4 Langley Gulch CCCT proposal. The Company formed a separate team to develop the
25 Benchmark Resource. The Benchmark Resource development team did not include any members
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1 of the RFP evaluation team. The RFP evaluation team treated the proposal presented by the
2 Benchmark Resource development team in an identical maner as it treated all other entities
3 submitting proposals in the RFP process. The Benchmark Resource development team received
4 no preferential communication or treatment and the Benchmark Resource proposal was
5 evaluated utilizing using the same evaluation manua and techniques as applied to the other
6 proposals (Application, pgs. 4, 5).
7 However, as pointed out above, there was no independent scoring by a Commission
8 approved IE. To insure the scoring process is transparent and fair, Guideline 8 specifies the
9 scoring of the Benchmark bid should be provided to the Commission and its IE. The Benchmark
10 scoring should then be sealed and held until the bidding of the RFP is concluded. The sealing
11 and holding of the scoring of the Benchmark bid may sound as if the utilty is not to be trusted in
12 scoring its own resource. It is really for the utility's benefit and protection because it removes
13 any hint of self dealing.
14 Q. Could you discuss Oregon Guideline 9?
15 A. Oregon Competitive Bidding Guideline 9 states,
16 "Bid Scoring and Evaluation Criteria:
1 7 Selection of an initial short-list of bids should be based on price and non-price
18 factors, and provide resource diversity (e.g., with respect to fuel type and resource duration).
19 The utility should use the initial prices submitted by the bidders to determine each bid's price
20 score. The price score should be calculated as the ratio of the bid's projected total cost per
21 megawatt-hour to forward market prices, using real-levelized or annuity methods. The non-price
22 score should be based on resource characteristics identifed in the utilty's acknowledged IRP
23 Action Plan (e.g., dispatchjlexibilty. resource term, portfolio diversity, etc.) and conformance to
24 the standardform contracts attached to the RFP.
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1 Selection of the final short-list of bids should be based, in part, on the results of
2 modeling the effect of candidate resources on overall system costs and risks. The portfolio
3 modeling and decision criteria used to select the final short-list of bids must be consistent with
4 the modeling and decision criteria used to develop the utilty's acknowledged IRP Action Plan.
5 The IE must have full access to the utilty's production cost and risk models.
6 Consideration of ratings agency debt imputation should be reserved for the selection
7 of the final bids from the initial short-list of bids. The Commission may require the utilty to
8 obtain an advisory opinion from a ratings agency to substantiate the utilty's analysis and final
9 decision. "
10 Idaho Power's IRP process met most of the criteria in ths ninth Guideline. The
11 Company used its AURORA model to evaluate the impact of the short-listed proposals on Idao
12 Power's system, including forward market prices as par of the input to AURORA. Debt
13 imputation was not factored in the valuation of the non-self build short-listed proposals. The
14 exclusion of estimated debt imputation would tend to favor the tolling and purchase power
15 proposals over the Company's self-build option. Company witness Lori Smith does discuss
16 imputed debt as relates to general financing issues facing Idaho Power in raising capital to build
1 7 Langley Gulch.
18 The Company's IRP does not specifically discuss non-price factors. The RFP does list
19 the non-price factors that were considered for the scoring of each short-listed proposaL. The
20 seven categories of non-price variables that were scored were: (1) project development; (2)
21 project characteristics; (3) product characteristics; (4) project location; (5) environmental; (6)
22 credit factors; and (7) financial strength. These non-price factors accounted for 40 percent of the
23 total with price variables accounting for the remaining 60 percent. The RFP contained additional
24 explanations as to the scoring for each factor along with their respective weightings. Ths
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1 additional scoring information was a significant improvement over the RFP for Evander
2 Andrews which did not provide information to bidders about how they were to be scored.
3 Q. What factors does Guideline 10 consider?
4 A. Guideline 10 outlines the roles of the utility that issues the RFP and IE. It
5 provides:
6 "Utilty and IE Roles in the RFP Process:
7 The utilty wil conduct the RFP process, score the bids, select the initial and final
8 short-lists, and undertake negotiations with bidders.
9 The IE wil oversee the RFP process to ensure that it is conducted fairly and properly.
10 if the RFP does not allow affliate bidding and does not include ownership options
11 (i.e., the utilty is not including a Benchmark Resource or considering ownership transfers), the
12 IE wil check whether the utilty's scoring of the bids and selection of the short-lists are
13 reasonable.
14 if the RFP allows affliate bidding or includes ownership options, the IE wil
15 independently score the utilty's Benchmark Resource (if any) and all or a sample of the bids to
16 determine whether the selections for the initial and final short-lists are reasonable. In addition,
1 7 the IE wil evaluate the unique risks and advantages associated with the Benchmark Resource (if
18 used), including the regulatory treatment of costs or benefits related to actual construction cost
19 and plant operation diferingfrom what was projectedfor the RFP.
20 Once the competing bids and Benchmark Resource (if used) have been scored and
21 evaluated by the utilty and the IE, the two should compare results. The utilty and IE should
22 attempt to reconcile and resolve any scoring difrences. if the two are unable to agree, the IE
23 should explain the diferences in its Closing Report ".
24 Since the IE was not asked to score the proposals, no reconciliation could occur (see
25 above Guideline 8 above). RW. Beck was also not asked to evaluate the unque risks and
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1 advantages that are associated with the Benchmark Resource. This is another example where
2 fairness and transparency would be improved and the utilties self-build resource could be held
3 above any acquisitions of self-dealing.
4 Q. What topics do the final three Oregon Guidelines cover?
5 A. Guidelines 11, 12, and 13 deal with reporting, confidentially, and Commission
6 acknowledgment:
7 IE Closing Report: The IE wil prepare a Closing Report for the Commission after the
8 utilty has selected the final short-list. In addition, the IE wil make any detailed bid scoring and
9 evaluation results available to the utilty, Commission staff and non-bidding parties in the RFP
10 docket, subject to the terms of a protective order.
11 Confidential Treatment of Bid and Score Information: Bidding information, including
12 the utilty's cost support for any Benchmark Resource, as well as detailed bid scoring and
13 evaluation results wil be made available to the utilty, Commission staff and non-bidding parties
14 under protective orders that limit use of the information to RFP approval and acknowledgment
15 and to cost recovery proceedings.
16 RFP Acknowledgment: The utilty may request that the Commission acknowledge the
1 7 utilty's selection of the final short-list of RFP resources. The IE wil participate in the RFP
18 acknowledgment proceeding. Acknowledgment has the same meaning as assigned to that term in
19 Commission Order No. 89-07. RFP acknowledgment wil have the same legal force and effect as
20 IRP acknowledgment in any future cost recovery proceeding. The utilty's request should discuss
21 the consistency of the final short-list with the Company's acknowledged IRP Action Plan. "
22 The Company is making available, under protective order, documents used in the RFP
23 process to interveners in this docket. However, as discussed above, there was no request to
24 provide a scoring critique. Mr. Stein ofRW. Beck has fied testimony support his Letter Report
25 and will be available for cross examination.
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1 Q. You stated above that following the Oregon Competitive Bidding
2 Guidelines would insure a bidding process that is fair and would result in the selection of a
3 resource where all parties had an equal chance of selection. Do you believe the Company
4 made sufficient efforts to conduct a fair competitive bidding process?
A. No. It is my belief the Company did not take enough precautions to insure that
6 the process did give all paries an equal chance. Idaho Power states the RFP process leading up
5
7 to the selection of Langley Gulch was competitive.
8 "The competitive RFP process allows the Company to access the broader power
9 supply market to obtain the best resource for our customers. It gives us access to a spectrum of
10 potential resources and resource developers. Use of a formal RFP process provides customers
11 and regulatory agencies with the assurance that the resource selection process was competitive,
12 all potential suppliers had an equal opportunity to participate, and that the best resource
13 alternative was selected".
14 (Bokenkamp direct testimony, p. 5)
15 An example of where the Company's RFP process failed to provide 'a spectru of
16 potential bidders' is contained in a letter sent to Idao Power by a potential bidder. (Exhibit 703)
17 *******************START CONFIDENTIAL*******************
18
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24
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Reading, Di
IPC-E-08-10
18
1
2 *******************END CONFIDENTIAL *****************************
3 Q. What are your recommendations for Commission in this docket?
4 A. I recommend the Commission deny the CPCN for Langley Gulch at this time.
5 In my testimony filed on behalf of the ICIP in this docket I show why the plant is not needed at
6 this time, and why a tolling agreement or power purchase may well serve the Company and its
7 ratepayers better. As I have outlined above, the bidding process has not been conducted in a fair
8 and transparent maner. Therefore, I recommend the Commission in its Order denying the
9 Langley Gulch CPCN include some conditions for the new issuing of an RFP. Specifically that
10 the Commission and Commission Staff and relevant stakeholders become involved with the
11 selection of the IE and establishing specific duties that the selected firm should follow.
12 Q. Are you recommending this Commission follow the Oregon guidelines?
13 A. Not necessarily. Although they are very workable. In the long term, I
14 recommend the Commission establish a set of its own guidelines that will apply to resource
15 acquisitions down the road. Competitive procurement rules should be embedded in the
16 Commission's regulations. After all, even the State of Idaho uses competitive bidding gudelines
1 7 when it purchases supplies for state governent. The regulated utilities in Idao should be
18 required to do the same.
19 Q. Does this complete you this testimony on June 19, 2009?
20
21
A. Yes it does.
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Reading, Di
IPC-E-08-10
19
Present position
Edue atio n
Honors and
awards
Prole ssio nal
and business
history
Don C. Reading
Don C. Reading
Vice President and Consulting Economist
B.S., Economics - Utah State University
M.S., Economics - Universiiy of Oregon
Ph.D., Economics - Utah State University
Omicron Delta Epsilon, NSF Felowship
Ben Johnson Associates, Inc.:
1989 Vice President
1986 ---- Con sultig Econ omist
Idaho Public Utilities Commission:
1981-86 Economist/Director of PoJi.cy and AdminÍ$trati.ori
'leaCb-irig:
1980~81 Associ.te professor, University of Hawaii-Hilo
1970.80 Associate and Assistant Professor, Id aho State University
1968.70 Assistant Professor, M idele 'Ie nnessee State University
Exp e rie .JiH pr. Readin. pr~vides e'Kpert testi ony con e.etning ec onomic and reguato ry issues.
He has testified on more than 35 occasions before utUty regutory coniissions in
Alaska, California, Colorado, the Distrct of Columbia, HaWaii, Idaho, Nevada,
North Dakota, Texas, Utah, Wyoming, and WashingtOri.
Dr. Reading has mote than 30 years experience in the field of economics. He has
paJticipate4in the development of ineUces reflectig economic trends, GNP groWt
rates, foreine'Kch~nge markets, the motley supply, stoCkmarket levels, and
inflation. He has analyzed such public policy issues as the minimum wage, federal
spending and taxation, and import! export balances. Dr. Reading is one of four
economists providing yearly forecasts of statewide personalincome to the State of
Idaho for purpses of establishing state personal income tax rates.
In the field of telecommunications, Dr. Reading has provided expert testimony on
the issues of maiginal cost, price elasticity, and measured service. Dr. Reading
prepared a state-specifc study of the ptice elasticity of demand for local telephone
sertice in Idaho and recently conducted tesearch for, and directed the preparation
of, a report to the Idaho legislature regarding the status of telecommunications
competition in that state.
Don C. Reading
Dr. Readings areas of expertise in the field of electric power include demand
forecasting, long-range planning, price elasticity, marginal and average cost pricing,
production-simulation modeling, and econometric modeling. Among his recent
cases was an electric rate design analysis for the Industrial Customers of Idaho
Power. Dr. Reading is currently a consultant to the Idaho Legislature's Committee
on Electric Restructuring.
Since 19990 r. Reading has been affliated with the Climate Impact Group (CIG) at
the University of Washington. His work with the CIG has involved an analysis of
the impact of Glob alWarming on the hydo facilities on the SnakeR.ver. It also
includes an investigaton into water markets in the NOrthwest and Florida. In
addition he has analyzed the economics of snowmakìng fOr ski area's impacted by
Global Warming.
Among Dr. Reading's recent projects are a FERC hydropower relicensing study (for
the Skokomish Indian Tribe) and an analysis of Northern States Power's North
Dakota rate design proposals affecting large industrial customers (for J.R. Simplot
Com pany). Dr. Reading has also performed analysis for the Idaho Governor's
Office 0 f the impact on the Nortwest Power Gdd of various plans to increase
salmon runs in the Columbia River Basin.
Dr. Reading has prepared econometric forecasts for the SOutheast Idaho Council of
Governments and the Revenue Projection Committee of the Idaho State Legislature.
He has also been a member of several Northwest PowetPlanning Council Statistical
Advisory Committees and was vice chairman of the Governor's Economic Research
Council in Idaho
While at Idaho State University, Dr. Reading performed demographic studies using a
cohort/ survival model and several economic impact studies using input/ output
analysis. He has also provided expert testimony in cases concerning loss of income
resulting from wrongfl death, injur, or employment discrimination. He is
currently a adjunct professor of economics at Boise State University (Idaho
economic history, urban/regional economics and labor economic.)
Dr. Readig has recently completed a public interest water righ ts transfer case. He is
currently a member of the Boise City Public Works Commission.
Don C. Re.ding
Pu blicatio n s "Enersizing Idaho", Idaho Issues Online, Boise State University, Fall 2006.
ww.b oisestate.eduj history jissueso nlinej fal2006 _issuesjind ex.html
The Economic Impact of the 2001 Salmon Season In Idaho, Idaho Fish and
Wildlife Foundation, April 2003.
The Economic Impact of a Restored Salmon Fishery in Idaho, Idaho Fish and
Wildlife Foundation, Apri~ 1999.
The Eco nom ic 1m pact 0 f Ste elhea d Fish ing and the Return of Salmon Fishi in
Idaho, Idaho Fish and Wildlie Foundation, September, 1997.
"Cost Savings from Nuclear Resources Reform: An Econometric Model" (with E.
Ray Canterbery and Ben Johnson) Southern Economic Journal, Spring 1996.
A Visitor Anaysis for a Birds of Prey Public Attraction, Peregrine Fund, Inc.,
November, 1988.
Investigation of a Capitaization Rate for Idaho Hydroelectric Projects, Idaho State
Tax Commission, June, 1988.
"Post-PURPA Views," In Proceedings of the N ARUC Biennial Regulatory
Conference, 1983.
An Input-Output Analysis of the Impact from Proposed Mining in the Challis Area
(with R. Davies). Public Policy Research Center, Idaho State University, February
1980.
Phosphate and Southeast: A S octo Economic Analsis (with J. Eyre, etal). Government
Research Institute of Idaho State University and the Southeast Idaho Coundlof
Governments, August 1975.
Estimatig General Fund Revenuer of the State ojIdaho (with S. Ghazanfar and D. Holley).
Center for Business and Economic Res.earch, Boise State Universit, June 1975.
"A Note on the Distribution of Federal Expenditres: An Interstate Comparison,
1933-1939 and 1961-1965." In The Amercan Econotnist,
VoL. XVII, No.2 (Fall 1974), pp. 125-128.
"New Deal Activity and the States, 1933-1939." In Journal ojEconotnic History, VoL.
XXXII, December 1973, pp. 792-810.
ORDER NO. 06
UM 1182Cowve 8I Ga
1. RF R.ul_t: A utiity mus is an RF for aU Ma Res
action idetified in its la acwledge IR. Major Resur ar ie withduon grer th 5 ye an quatities grer th i 00 MW.
2. Exeetii to RF R.u.t: A utiity is not reui to is an RF
un th followi ci:
a. Acquition of a Ma Res in an em or wh th is a tie-
limite re opty of un vaue to cus
b. Ackwledge IR prvides for analtemve acuisition met for a MaRes.
c. Comisson wave on a cay-ç bas.
With 30 days of a Major Resur acuisition W'er Substion (a) abve, th utty
mu file a rert with the Coon exla how th reuisite coadon have be
me fo ac outde of thRF reui. The re mu be se on all th
paes an inteed pe in th utlitys mo re rae ca RF an IR do.
Wh re a waiver un Subon (c) abve th utty mus file its re
with the Coon an see th reuet on al paes an intete pens in thutlitys mo ret ge ra ca RF an IR doet. Th Coon wi is
an or ad th waive reue with. 120 da~ tang su or an wrttco as it fi apat un th circstce.
3. Afte BIdia: A utlity may allow its afliate to suit RF bids. If
afliat ar allowed to bid, th utlity mus blin all RFP bids an tn affliae bids th
sa as al oth bids.
-t. Uti o. Op: A utlity may us a sef-buld op in an RF to
prvide a potetial cost-bas alteve for cu. A sitespfic, self-buld op
prose in ths way is knwn as a Becbmark Resur. A utility may also coide
ownp trfer within an RF solicitaon.
5. Iit Eva (I): An IE mus be us in ea RF to he enth al offer ar tred farly. Conuion st with in fr the utity an
in nobíddng paes will reen an IE to the Cosson which will
then selec or apve an IE for th RFP. The IE must be indept of the utlity an
liely, potetial bidd an also be expeen an cot to pe al. IE
fuon idtified in th Guelines. The IE win cotr with an be pa by th
1 APlX A
PAGE -' OF L.
ORDER NO. 06
utiity. The IE shuld confer with Coon staff as neeed on the IE's dutes un
th Guidelines. Th utty may reue rever of its paymts to th IE in cuome
raes.
6. RF Delp: The utiity will pr a drft RF an prvide it to aU paes an
inte pe in th utility's most ret gener ra ca, RFP an IR docket.
The utlity mus condct bidder an stlde worhos on th drft RFP. The utlity
wilt th sut a fi drft RPP to the Commisson for apval, as debe
in pa 7 below. The drft RFPs mu se fort any minimum bidder reents
for crt an caility, along wi bid evaluaon an scrig crtea. Th utity may
se a mimn reur siz but Quifyng Facties larger th 10 MW mus be
allowed to paicipa. Th fi drft suitt to the Commsson mus also includ
sta fonn contrs. However, the utiity must alow bidder to negtiat mutlyagrle fial contrac te th ar difft fr one in th st fon cotr.
Th utity win coult with th IE in prg th RFs. an th IE wil submt its
asent of th fi dr RF to th Cormssio whe th utlity fi for RFPapva.
7. RF Aprova: The Commision wi solicit public comment on th utlitys
fi dtRF.includng th propo minimum biddrequireents an bid scrig
an evaluaon crtera. Pulic commt an Comisson reew shuld fo on: (1) the
alignt orth utlit's RFP with its acwledge lR; (2) whe th RF satisfes
th Coison's cotive bidd gues an (3) th overl fa of th
utlits pr biddng pr. Aft re th RF an th public coents,
th Commisson may apve th RFP with any condtions an moificaon deeed
near. The Comon may coder the imac of multi. state reaton. inluding
reuients imposed by other st fo th RFP pr. The Commisson will taet adecsion with 60 days aft th filing of the fi dr RFP, unes th utlity reues a
longe reew peod wh it submts the fi drft RFP for apval.
8. Bet.ma Re.rt Sere: The utlity mus sut a deed scre for any
Be Resur with suppng co infoaton. to the Comssion an IE pror
to th openg of biddng. Th sc shd be asgn to the Bech Resur
using th same bid scring an evaluaon crtea th wil be used to scre maket bids.
Infonnon prvided to the Cosson an IE must incude any trssonargeents an all oter inatn ne to Si th Be Resur. It:
du th co of th RFP pr th utility, with in fr the IE, de thatbidd upte ar appr th utlit may also up th co an sc for th
Bear Resur. The IE will reew th reenes of th scres) fo the
Bechar Resur. The infonnon prvided to th Commion an IE will be
seed and held unti the biddig in the RFP ha concluded.
2 APIX "
PAGE.. OF .!
ORDER NO. 06
9. BW ~ri ndJivalaü Cri:
8. Selecion of an initial sh-li of bids shd be ba on pr an nocefa an prvide re diverty (e.g., with re to fu ty an
reur duon). The utlity shuld us th intial prce su by the
bidd to det ea bids prce scre. Th prce sc shoud be
cacu as th rao of th bids prje to co pe megawa-h to
forwar maet pr usg re-leeli or anty me. The no-pcesc sh be bas on re chcs idefied in th utli's
acwledge IRP Acton Plan (e.g., disch flexibility, re tepolio divety, et.) an coce to th st fo cotrathe to the RF.
b. Seec oftb fi short-list of bids shuld be ba in pa on th re ofmointhe ef of cada re on ovel sy CO an ri.Th pofoli mog an deon cr us to seec th fi sh-liofbi mus be cost with th mo an de crtea us to
develp th utity's acwleded IR Act PLan Th IE win have fu
ac to th utlitys prucon co an risk moels.
c. Codeon ofra ag deb imon shod be re fo th
seon of th fi bi fr th inti shrt-li of bi. Th utty shuldob an ad opi &o a rags ageo to substi its aran fi desion, if reue by th Cosson.
10. Udl uad IE Ro ia RFPr:
a. Th utitywi co thRFP pr, sc the bi selec th intial anfina sh-list an une netiat with bidd.
b. Th IE wil over th RF pr to en th it is co fay anprly.
c. If th RF do not allow amUate bidd an does not includ oWDp
opton (i.e., th utiity is not includng a Benar Resur or code
ownp trfer), th IE wil cb whet the utlity's scg of the bids
an seecon of th shrt-list ar rele.
d. If the RF allows afat bidd or inudes owrp opons th IE win
iny scre thutity'sBe Resur (if any) an al or a
sale of the bids todene whet the seecons for the intial an fina
sho-li ar rele. In adtion th IE will evuate th unqu rian adva as with th Be Res (if us). incud
th reat trt of co or beefts related to ac consn co
an pla opon differ &o wha was prjec fo th RF.
3 APIX APAGE -3 OF L
ORDER NO. 06-44
e. Once the compe bids and Benchk Resur (if us) have bee scre
an evàluate by th utlity and th IE the two shuld compa rets. The
utlity and IE should atempt to rencile an relve any scring differences.
If the two are unable to agr, the IE shuld explai th differce in its
Closing Rert.
i 1. IE ClosiD Report The IE wil prar a Closing Rep for the Commsson
af the utility has seleced the fina sh-list. In adtion, th IE wi make any detled
bid scrig and evaluaon rets avaílable to th utility, Comssion st, and non-
biddg paes in the RF doet sujec to th ters of a proteve order.
U. Confienti Tretmt of Bid aad Scre Inormati: Biddi inonntion,
includg th utlity's cost su for any Bench Resur, as well as detled bid
scring and evaluation rets will be mad avalale to the utlity, Commsson st and
non-biddg paes uner prtecve orer th liit use of the inonon to RFP
appval and acwledgmt an to cost rever procegs.
13. RF Aekowledgmot: Th utity may reue tht the Comion
acledge the utility's selecon of the fi short-lis ofRFP reur. The IE wil
parcipae in the RF acknowledgment prce Ackowledgment has the sae
meag as asgned to th te in Common Orer No. 89-501. RF
acwledgment wi have th sa lega fo an ef as IR acknwledgmen in any
fu cost rever pring. The uttys reue shuld discus the consstecy of
the fi shrt-list with the copay's acwledged IR Acton Plan.
4 ifIX ApÅGE~OF£.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 19th day of June, 2009, a true and correct copy of the within and
foregoing TESTIMONY OF DON READING ON BEHALF OF THE NORTHWEST & INDEPENDENT
POWER PRODUCERS COALITION OF IDAHO POWER was served in the maner shown to:
Ms. Jean Jewell (C)
Commission Secreta
Idaho Public Utilties Commission
472 W. Washington (83702)
PO Box 83720
Boise, ID 83720-0074
2L Hand Delivery
_U.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Lisa Nordstrom (C)
Baron L. Kline
Idaho Power Company
POBox 70
Boise, Idaho 83707-0070
lnordstrom~idahopower.com
bkline~idahopower.com
2L Hand Delivery
_U.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Scott Woodbur (C)
Deputy Attorney General
Idaho Public Utilties Commission
472 W. Washington
Boise ID 83702
Scott.woodbur~puc.idaho.gov
L Hand Delivery
_U.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Eric L. Olsen (C)
Racine, Olson, Nye, Budge & Bailey, Chtd.
201 E. Center
PO Box 1391
Pocatello, ID 83204-1391
elo~racinelaw .net
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Anthony Yankel
29814 Lake Road
Bay Vilage, OH 44140
tony~yankel.net
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Ken Miler
Clean Energy Program Director
Snake River Allance
PO Box 1731
Boise, ID 83701
kmiller~snakeriverallance.org
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Betsy Bridge
Idaho Conservation League
710 North Sixth Street (83702)
PO Box 844
Boise, ID 83701
bbridgeCfwildidaho.org
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Susan K. Ackerman
NIPPC
9883 NW Nottage Dr.
Portland OR 97229
Susan.k.ackermanCfcomcast.net
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Brad M. Purdy
2019 N. 17th Street
Boise ID 83702
bmpurdyCfhotmail.com
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Don Reading (C)
6070 Hil Rd
Boise ID 83703
dreadingCfmindspring.com
_ Hand Delivery
iU.S. Mail, postage pre-paid
Facsimile
Electronic Mail
Electronic Copies Only:
_ Hand Delivery
_U.S. Mail, postage pre-paid
Facsimile
X Electronic MailRobert Kahn
rkahnCfnippc.org
fkCè~J
Nina Curis
Administrative Assistat