HomeMy WebLinkAbout20131101DIRECT S. Wright.pdfPi{ 3: L3
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BEFORE THE TDAHO PUBLIC UTILITIES COMMISS]ON
IN THE MATTER OF THE APPLICATION
OE TDAHO POWER COMPANY EOR
AUTHORITY TO ESTABLISH A NEW BASE
LEVEL OF NET POI/IER SUPPLY EXPENSE
CASE NO. IPC-E-13-20
IDAHO POWER COMPANY
DIRECT TESTIMONY
OE
SCOTT I/{RIGHT
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O. Please state your name and business address.
A. My name is Scott Wright and my business
address is L227 West fdaho Street, Boise, Idaho 83702.
O. By whom are you employed and in what capacity?
A. I am employed by Idaho Power Company ("fdaho
Power" or "Company") as a Regulatory Analyst II in the
Requlatory Af f al-rs Department.
O.Please describe your educational background.
A. I received a Bachelor of Science degree in
Business Economics from Eastern Oregon University. I have
al-so attended the Center for Publ-ic Utilities "Practical
Skills for a Changing Electric Industry" course at New
Mexico State University in Albuquerque, New Mexico, the
Edison Electric Institute's "Electric Rate Advanced Course"
in MadJ-son, Wisconsin, and the NERA "Marginal Costing for
Electric Utilities", j-n Los Angeles, Californj-a.
0.
A.
PJ-ease describe your work experience.
In May 1998, I accepted a position as Research
Assistant with Idaho Power in the Regulatory Affairs
Department. In March 200'7 , T was promoted to a Regulatory
Analyst. In March 2010, T was promoted to a Regulatory
Analyst II. As a Regulatory Analyst II, I am responsible
for runnj-ng the AURORAxmp (*AURORA") model to cal-culate Net
Power Supply Expense (*NPSE") for ratemaking purposes,
preparing the Power Cost Adjustment ('PCA") filinqs in
WRIGHT, DI 1
Idaho Power Company
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Idaho and Oregon, as well as the marginal cost of energy
used in the Company's marginal cost analyses. I al-so
provide analytical support for other regulatory activities
within the Regulatory Affairs Department, as well as
providing testJ-mony in Company filings before the Idaho
Pub]ic Utilities Commlssion ("Commission") and the Public
Utility Commission of Oregon.
o.hlhat is the purpose of your testimony in this
proceedj-ng?
A. The purpose of my testimony is to describe the
quantification of 2073 base l-evel- NPSE as directed by Mr.
Timothy Tatum.
o.
contained in
A.
Please provide a summary of the sections
your testimony.
My testimony is divided into three sections.
In the first section of my testimony, I provj-de an overview
of the Commission-approved method for quantifying base
Ievel- NPSE. In the second section of my testj-mony, I
describe the update to base level NPSE that occurred in
2070 (*2010 Base Level NPSE"). In the third sectj-on of my
testi-mony, I describe the quantification of the Company's
updated base level- NPSE based on a 20L3 calendar year
(*2013 Base Level NPSE").
WRIGHT, DI 2
Idaho Power Company
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r.O\IERVIEW OF BASE POI{ER SUPPLY EXPENSE
O. Please describe the Commission-approved method
for the Company to quantify normal variab1e base power
supply expense.
A.Due to the high variability of power supply
expense, the Commi-ssion has historically approved a
normallzed power supply expense value for ratemaking
purposes. Since then, the Company has util-ized the AURORA
model to provide the Commission with a snapshot of what
"normal" expectations for variable power supply expenses
will be for a given test year.
O. Please define the term "variable power supply
expenses" as the Company and Commission have used the term
historically.
A. The Company and Commission have historically
used the term "variabl-e power supply expenses" as the sum
of fuel expenses (FERC Accounts 501 and 547) and purchased
power expenses (FERC Account 555) not including purchases
from qualifying facilities under the Public Utility
Regulatory Pol-icj-es Act of L918 (*PURPA"), mj-nus surplus
sales revenues (FERC Account 441). The AURORA model is
used to quantify these components which cumulatively are
referred to as NPSE. PURPA expenses are quantified outside
of AURORA; however, PURPA energy is modeled in the AURORA
simul-ation.
WRIGHT, DI 3
Idaho Power Company
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O. Does the Company include any other categories
of expense or revenue in the base level NPSE used for PCA
computations ?
A.Yes. In addition to the expense and revenue
categorj-es descrj-bed above, the base level NPSE included in
the Company's PCA computations al-so includes market
purchases to offset transmission l-osses (FERC Account 555),
third-party transmission expense (EERC Account 565), water
for power expense (EERC Account 536), and demand response
incentives (FERC Account 555). Like PURPA expenses, these
NPSE categories are quantified outside of AURORA.
o.Pl-ease explain how the Company arrives at a
"normalized" look at variable power supply expense for
ratemaking purposes.
A. In order to "normalize" variable power supply
expenses, the Company uses AURORA to model each water
conditj-on dating back to L928 using current loads and
current resources. At this time, 85 water conditions have
been evaluated to develop an average or normalj-zed NPSE.
This methodology was adopted by the Commission in 1981 and
has been used in general rate proceedings ever since.
II. 2O1O BASE TEVEL NPSE
0.
NPSE amount?
What is the currentl-y approved base level
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A. The currently approved 2010 Base Level NPSE is
$199 ,993,'7'18. It is comprj-sed of the following components:
95t Accounts (with 95t recovert'in PCA)
Account 5 01 , f uel- (coal ) $ 767 , 792 ,1 44
Account 536, water for power $1,828,640
Account 541 , fuel- (gas) $51,934,207
Account 555, purchased power (non-PURPA) $45r 510r 093
Account 565, third-party transmissj-on $8,262,000
Account 442, Hoku first block ($23,92L,466)
Account 447, surplus sal-es ($1241 916,153)
Net 95? Accounts
100t Accounts (with 100t recovery in PCA)
Account 555, purchased power (PURPA)
$125,890,059
$52,851,, 454
Account 555, purchased power (demand response) $11,252,265Total $199,993,778
O. When was the currently approved base level
NPSE establi-shed and approved by the Commission?
As described in greater detail by Mr. Tatum 1n
his testimony, the base level- NPSE was initially
established using a 201.0 test period. However, the 20L0
Base Level NPSE establ-ished by Order No. 31042 was later
modified by Order Nos. 32426 and 32585.
III. 2OL3 BASE LEVEL NPSE
a.Since the establ-ishment of the 20L0 Base Level
NPSE as establ-ished by Order No. 31042 and Iater modified
by Order No. 32426 and 32585, has the Company made any
modifications to the AURORA model that was used to develop
the 2073 Base Level- NPSE?
WRIGHT, DI 5
Idaho Power Company
A.
A. Yes. In order to quantify the 20L3 Base Level
2 NPSE, the Company util-ized a new AURORA version and
3 database, which refl-ect updated inputs for the entire
4 Western Electricity Coordinating Council (*WECC"). Along
5 with the WECC updates for non-Idaho Power resources, the
6 Company also updated the database to include current fuel
7 prices, heat rates, forced outage rates, maintenance
8 schedules, and plant capacities. These updated model
9 inputs and assumptions also align with those applied in the
10 20L3 Integrated Resource P1annJ-ng ("IRP") process.
11 O. Have there been any changes to the way PURPA
72 is modeled compared to the way it was modeled in the 20L0
13 Base Level NPSE?
t4 A. Yes. In prior normali-zed NPSE determinations,
15 energy from PURPA projects was aggregated and modeled in
L6 AURORA based on a monthly generation shape. For example,
L7 if the month of January was forecasted to include 200
18 average megawatts ("aMW") of PURPA generation, 200
79 megawatts of PURPA generation would be assumed for each
20 hour in January. This resul-ted in a flat bLock of PURPA
2L generation, with no hourly fluctuations within the month.
22 Eor the 201,3 Base Level- NPSE, the Company segmented PURPA
23 generation into two categorj-es, *PURPA Wind" and a1I other
24 PURPA. PURPA Wind was modeled by applying the 2012 hourly
25 actual hj-storical PURPA Wind generation shape to the
WRIGHT, DI 6
Idaho Power Company
1 monthly forecasted generation amounts. A11 other PURPA
2 resources were mode1ed on a monthly basis because hourly
3 fluctuations do not occur to as great an extent for those
4 resource types. The Company views the modification to be
5 an improvement that more accurately refJ-ects the variable
6 nature of wind into the hourly dispatch modeling in AURORA.
7 Q. Have you prepared an exhibit that presents the
8 normalization of variable power supply expenses consistent
9 with the changes you have described in your testj-mony?
10 A. Yes. Exhibit No. 1 shows the results of the
11 variable power supply expense normalization modeling for a
L2 2013 Base Level- NPSE. Page 1 of Exhibit No. 1 shows the
13 summary results containj-ng the 8S-year average variabl-e
L4 power supply generation sources and expenses.
15 O. Please summarize the sources and disposj-tion
16 of energy shown on Exhibit No. 1.
77 A. Hydro generation supplies 8.5 mil1ion
18 megawatt-hours ("MWh"), approximately 48 percent (8.5
19 million MWh / 71.6 mill-ion MWh:48 percent) of the
20 generation mix. Thermal generation supplj-es 5.7 million
27 MWh (Bridger 4.4, Boardman 0.3, Valmy 0.002, Langley Gulch
22 1.0), approximately 32 percent (5.7 million MWh / 71.6
23 million MWh : 32 percent) of the generation mix. Danskin
24 and Bennett Mountain are peaking units that supply energy
25 at times when resources and/or transmission lines are
wRrGHT, Df 1
Idaho Power Company
l- constrained; they are not included in the thermal
2 generation total- mentj-oned earlier. Purchases of power are
3 made up of short-term and longer-term market purchases and
4 PURPA. PURPA purchases are normalized and account for
5 nearly 2.2 million MWh. PURPA purchases are not included
6 on Exhibit No. L; however, when combined with market
7 purchases of 1.2 mil-lion MWh, total purchases amount to 3.4
8 mill-ion MWh (2.2 million MWh + 1.2 million MWh : 3.4
9 million MWh) or approximately 19 percent (3.4 million MWh /
10 1,1 .6 mi-l-l-ion MWh : 19 percent) of the generation mix. Of
11 the tl .6 million MhIh consumed, 15.3 million MWh are
72 util-ized for system loads while nearly 2.3 million MInIh are
13 sold as surplus.
74 O. Please describe Exhibit No. 1.
15 A. Exhibit No. 1 contains the quantified variable
16 power supply expense and revenue information limited to
77 FERC Accounts 501, FueI (coa1); 547, FueI (gas), 555,
18 Purchased Power (Non-PURPA) ; and 441 , Surplus Sal-es
79 revenue. Hydro generatj-on has no assumed fuel expense.
20 Coal- expenses of $108.5 miltion are comprised of Bridger at
2L $101.4 mi11ion, Valmy at $0.7 mi1]ion, and Boardman at $6.4
22 mil-l-ion. Gas expenses of $24.8 million are comprised of
23 Langley Gu1ch at $24.2 mi11ion, Danskln at $0.6 million and
24 Bennett Mountain at $0.007 mil-Iion. The fixed capacity
25 charge for gas transportation for all of the gas plants is
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$8.6 mi111on. Purchased power expenses (excTuding PURPA)
amount to $61.7 million, and surplus sales expense is
($51.7) m11Iion. The sum of these components sets the NPSE
amount at $151.9 miLlion (excLuding PURPA) (108.5 + 24.8 +
8.6 + 6r.l 51.7).
O. How have natural gas prices changed between
the time of quantification of the 20L0 Base Level NPSE and
the 2073 Base Level NPSE quantification?
A.For the 20\0 Base Level NPSE, natural gas
prices were assumed to be $5.79 per MMBtu for Henry Hub and
$5.50 per MMBtu for natural- gas delivered to the Company's
plants. Eor the 2073 Base Level NPSE, they are forecasted
to be $3.62 per MMBtu for Henry Hub and $3.68 per MMBtu for
natural gas del-lvered to the Company's plants.
O. Please describe the change in total coal
expenses between the 20LO Base Level NPSE and the 201-3 Base
Level NPSE quantification.
A. The total coal expenses quantified in the 2010
Base Level- NPSE were $167.2 million. For the 20l.3 Base
Level NPSE, total coal expenses are forecasted to be $108.5
million or a decrease of $58.7 million.
O. Does the decrease in forecasted coal expenses
suggest that coal generation has decreased?
A. Yes. The 2010 Base Leve1 NPSE was based upon
7.7 million MWh of coal generation, while the 2013 Base
WRIGHT, DI 9
Idaho Power Company
1 Level NPSE quantificatlon ref l-ects only 4.8 mj-Il1on MWh of
2 coaL generation.
3 Q. Why has total coal- generation decreased by 2.9
4 million MWh in the period of time from 20L0 to 20L3?
A. There are several reasons why coal generati-on
6 has decreased between 2070 and 2013. First, PURPA
7 generation has more than doubled, which as described
I earlier in my testimony, is reflected as a "must run"
9 resource in the AURORA mode1, meaning it is dispatched
10 before any other resource type. Second, l-ower natural gas
11 prices correlate to lower market prices in the AURORA
72 model. Eor example, for the 20L0 Base Level NPSE, the per
13 unit cost for surplus sales revenue was $36 per MWh. For
14 the 2073 Base Level NPSE, the per unit cost moved from $36
15 per MWh to $22 per MWh, a decrease of $14 per MWh.
L6 Additional PURPA generation combined with lower market
71 prices have reduced surplus sales from 3.5 mill-ion MWh for
18 the 2010 Base Level NPSE to 2.3 million MWh for the 2013
19 Base Level- NPSE. With an average per unit cost of $22 per
20 MWh for surplus sa1es, the opportunity to sel-I surplus
2L generation from coal generation has been reduced.
22 O. Have system l-oads changed between the 2010
23 Base Level NPSE and 2013 Base Level NPSE?
24 A. In the 20L0 Base Level NPSE, the annual
25 normal-ized l-oad was 15.3 MWh. The annual normal-ized load
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for the 2073 Base Level NPSE is projected to be 15.3
mil-Iion MWh, identical to the 2070 Base Level NPSE other
than the monthly shape.
O. Pl-ease describe any changes to PURPA contracts
since the 20]-0 Base Level NPSE.
A. The 2070 Base Level NPSE included 11,9 aMW of
available PURPA generation whereas the 2073 Base Level NPSE
anticipates 245 aMW wiII be available, an increase of L26
aMW.
o.
the 201-0 Base
A.
How has the annual PURPA expense changed from
Level NPSE to the 20]-3 Base Level NPSE?
As a result of the increase in PURPA
generation expected in 20L3, the annual PURPA expense for
the 201,3 Base Level- NPSE has changed from $62.9 mil-l-j-on to
$135.8 mi11ion, an increase of $72.9 million.
o.Does the Company propose to update the base
level NPSE accounts that are determined outside of AURORA
as part of this request?
A.Yes. The Company proposal refl-ects 2013 test
period level amounts for EERC Account 536, Water for Power
and FERC Account 565, Third-Party Transmission Expense.
Mr. Tatum directed me to leave the base level- amount for
FERC Account 555, Demand Response, dt the currently
approved level of $11.3 million for the reasons discussed
in his testimony.
WRIGHT, DI 11
Idaho Power Company
1 Q. How did the Company determine the 2013 Base
2 Level- amounts for EERC Account 536, Water for Power and
3 EERC Account 555, Third-Party Transmission Expense?
4 A. The 2073 test year amount used for EERC
5 Account 535, Water for Power, was derived. by using actual
6 water lease expense amounts for the January 20L2 through
7 December 201,2 period. The Company consj-dered using 201,3
8 actual expense,' however, water conditions were so poor in
9 2073 that leased water was not available. Because actual
10 2013 conditions were reflective of an atypical year, the
l-1 Company used 201,2 actual- water l-ease expense to refl-ect a
12 more real-istic expectation for a normalized level- of FERC
13 Account 536,, Water for Power expense.
14 The forecast used for FERC Account 565, Third-Party
15 Transmission Expense, was derived by using actual third-
16 party transmission expense for January 2013 through August
l7 2073 with forecasted amounts for September 2073 through
18 December 20L3 based on the Company's Operating Plan. The
79 forecast amounts are cal-culated based upon an estimate for
20 both purchased power and surplus sal-es. That is, an
2L estlmate of purchased power and surplus sales is used to
22 estimate the transmission that will be needed to transport
23 the power into or out of the Company's service area. The
24 transmission estimate is then averaged with the l-ast six
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years of actua1 third-party transmission expense to provide
a normalized vaIue.
o.
amounts ?
Have you quantified the 201-3 Base Level NPSE
A. Yes. The 2073 Base Level NPSE amounts as
proposed by the Company for Commission-approval are as
follows:
95t Accounts (with 95t recovery in PCA)
Account 501, fuel (coal)
Account 536, water for power
Account 547, fuel (gas)
Account 555, purchased power (non-PURPA)
Account 565, third-party transmission
$108,503,180
$2,380,597
$33,367 ,563
$62,606,593
$5,455,955
Account 447 , surplus sales ($51,735,153)
Net 95? Accounts
100t Accounts (with 100t recovery in PCB,)
Account 555, purchased power (PURPA)
$160 ,518,735
$133,853,869Account 555, purchased power (demand response) $11,252r265
Total $305,684,869
0. How do these 20L3 Base Level- NPSE amounts
compare with the 201,0 Base Level NPSE amounts?
A. The 20L3 Base Level NPSE total is
$305,684,869, dr increase of $105,69L,091 from the 2010
Base Level NPSE of $199,993,118.
a. Does this conclude your testimony?
A. Yes, it does.
WRIGHT, DI 13
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STATE OF IDAHO )
)
County of Ada )
T, Scott
truthfully, and
following:
ATTESTATTON OE' TESIIIrcNT
SS.
Wright, having been duly sworn to testify
based upon my personal knowledge, state the
I am employed by Idaho Power Company as a Regulatory
Analyst II in the Regulatory Affairs Department and am
competent to be a witness in this proceeding.
I declare under penalty of perjury of the laws of
the state of Idaho that the foregoing pre-fil-ed testimony
and exhj-bit are true and correct to the best of my
informati-on and belief
DATED this 1st day of November, 20L3.
Scott right
SUBSCRIBED
November, 2013.
AND SWORN to before me thj-s 1st day of
expires: (A 'a; ->,1'l
wRrGHT, Dr 1-4
Idaho Power Company
NotAry Publi for Idaho
Res j-ding at:
My commission
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BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
GASE NO. IPC.E.13.2O
IDAHO POWER GOMPANY
WRIGHT, DI
TESTIMONY
EXHIBIT NO.1
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Page 2 of 86
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Exhibit No. 1
Case No. IPC-E-13-20
S. Wright, IPC
Page 5 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 6 of 86
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Case No.|PC-E-1+20
S. Wright, IPC
Page 7 of 86
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Exhibit No. 1
Case No.lPC-E-1120
S. Wright, IPC
Page 8 of 86
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Case No. IPC-E-1$20
S. Wright, IPC
Page 9 of 86
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Case No.|PC-E-1+20
S. Wright, IPC
Page 10 of86
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Exhibit No. 1
Case No. IPC-E-13-20
S. Wright, IPC
Page 11 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 12 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 13of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 14 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 15of86
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Case No.|PC-E-1&20
S. Wright, IPC
Page 16 of86
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Exhibit No. 1
Case No. IPC-E-13-20
S. Wright, IPC
Page 17 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 18 of86
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Case No.|PC-E-1$20
S. Wright, IPC
Page 19of86
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Page 20 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 21 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 22 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 28 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page31 of86
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S. Wright, IPC
Page 32 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 34 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 35 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 36 of 86
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Case No.|PC-E-1$20
S. Wright, IPC
Page 37 of 86
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Exhibit No. 1
Case No. IPC-E-13-20
S. Wright, IPC
Page 38 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 39 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 40 of 86
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Case No. IPC-E-13-20
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Page 42 of 86
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Case No. IPC-E-13-20
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Page 49 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 51 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 52 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
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Case No.|PC-E-1320
S. Wright, IPC
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Case No. IPC-E-13-20
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Exhibit No. 1
Case No.|PC-E-1320
S. Wright, IPC
Page 65 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 66 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 67 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 68 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 69 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 70 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 71 of86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 72 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 77 of 86
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Case No. IPC-E-1&20
S. Wright, IPC
Page 78 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 79 of 86
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Case No. IPC-E-13-20
S. Wright, IPC
Page 80 of 86
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Case No. IPC-E-13-20
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Page 81 of86
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Case No. IPC-E-13-20
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Case No. IPC-E-13-20
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