20141222PAC Duvall Direct.pdf

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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OE THE APPLICATION )oF PACIFrCORP D/B/A ROCKY )
MOUNTA]N POWER AND IDAHO POWER ) CASE NO. IPC-E-14-41
CoMPANY FOR AN ORDER AUTHORTZTNG )
THE EXCHANGE OF CERTAIN ) CASE NO. PAC-E-14-11
TRANSMISSION ASSETS. )
)
PACIFICORP
DIRECT TESTIMONY
OF
GREGORY N. DUVALL
I. INTRODUCTION A}ID EXPERIENCE
O. Pl-ease state your name and business address.
A. My name is Gregory N. Duva11. My busj-ness
4 address is 825 NE Multnomah Street, Suite 600, Portland,
5 Oregon 91232.
O. In what position are you currently employed?
A. I am the Director, Net Power Costs for
8 PacifiCorp (the "Company").
0. Pl-ease describe your education and business
l-0 experience.
11 A. I recej-ved a degree in Mathematics from the
L2 University of Washington in 7976 and a Masters of Business
13 Administration from the University of Portland in 1,919. I
1,4 was flrst employed by PacifiCorp in 1916 and have held
15 various positions in resource and transmission planning,
76 regulation, resource acqui-sitions, and trading. Erom 7991
L1 through 2000, I l-ived in Australia where I managed the
18 Energy Trading Department for Powercor, a PacifiCorp
19 subsidiary at that time. After returning to Portland, I
20 was invol-ved in direct access issues i-n Oregon and was
27 responsible for directing the analytj-ca1 effort for the
22 Multi-State Process. Currently, I direct the work for the
23 load forecasting group, the net power cost group, and the
24 renewable compliance area.
O. What is the purpose of your testimony?
DUVALL, DI 1
PacifiCorp
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1 A. My testimony describes a number of customer
2 benefits provided by PacifiCorp Energy's1 new firm
3 transmission rights foll-owing the close of the asset
4 exchanger ds weII as other associated benefits.
5 O. Please summari-ze your testimony.
6 A. My testimony shows that the transactj-on will
7 resul-t in the following benefits to customers:
o The Company will- gain increased Open
9 Access Transmission Tariff ("OATT") -based rights and will
1-0 no longer need to rely on outdated and controversial legacy
11 agreements with Idaho Power Company ("Idaho Power"). This
!2 will provide the Company with greater transparency,
l-3 flexibility, and reliability with respect to system
L4 operations and minj-mize the potential for disputes;
15 o The Company's dynamic transfer rights from
16 Pacifj-Corp's east Balancing Authority Area ('PACE") to
L7 PacifiCorp's west Balancing Authority Area ("PACW") will
18 increase from 200 megawatts (\\MW") to 400 MW;
19 o The Company will galn increased
20 fl-exibility in deciding which resources can be transferred
27 across its entire 1r 600 MW of east-to-west transmission
22 rights each hour of the year;
23 o The Company will gain firm delivery rights
24 to del-j-ver power to the Bonneville Power Administration's
1 PacifiCorp Energy is the merchant function of PacifiCorp.
DUVALL, DI 2
PacifiCorp
1 ("Bonneville") La Grande substation, which in turn wil-I
2 improve the Company's ability to deliver power from the Jim
3 Brj-dger power plant ("Jim Bridger Plant") and other PACE
4 resources to meet its l-oads in PACW;
o The Company wil-I gain additional rights to
5 make firm power deliveries to PACW during line outage
7 conditions;
o The Company wiII gain more flexibil-ity to
9 meet its Goshen l-oads with firm servi-ce; and
10 o The Company will gain aI1 of the above-
11 described benefits in a manner that is financially neutral
1,2 to retail customers.
l3 These customer benefits, which will al,l-ow the
14 Company to meet its obligations to serve load more
15 efficiently, are in addition to the reliability and other
76 benefits described in the testimony of PacifiCorp witness
77 Mr . Richard A. Vail- .
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II. CUSTOMER BENEFITS OF TRAI{SACTION
O. PIease describe the proposed transaction.
A. As detailed in the Application of PacifiCorp
27 and Idaho Power (together, the "Parties") and in the
22 testimony of Mr. Vail, under the terms of the proposed
23 Joint Purchase and Sale Agreement ("JPSA"), the Parties
24 will acquire ownership interests j-n certain existing
25 transmission system assets and reall-ocate respective
DUVALL, DI 3
PacifiCorp
1 ownership interests in certain jointly-owned facilities.
2 Tn doing sor the Company wil-l- retain the same transfer
3 rights it prevlously possessed from the Jim Bridger Plant
4 to PACW, but those rights will be based on new ownership
5 rJ-ghts and OATT-based wheeling arrangements, rather than on
6 outdated and frequently problematic legacy agreements.
O. Pl-ease describe the challenges posed by
8 operation under the existing agreements.
A. Currently, the ownership and operation of the
10 jointly owned transmission facilities is governed under
11 various separate legacy agreements, a 1,969 Jim Bridger
72 Ownership Agreement titled the Restated Transmissi-on
13 Service Agreement (*RTSA"), and a 7969 Jim Bridger
L4 Operation Agreement titled the Restated and Amended
l-5 Transmission Facilities Agreement ("RATFA") (col-lectiveJ-y
76 the "Legacy Agreements"). These agreements were entered
77 into over a series of years, many before the advent of the
18 Federal Energy Regulatory Commission's ("EERC") open-access
79 poli-ci-es. They contain terms and conditions that are
20 outdated and frequently difficult to reconci-1e. PacifiCorp
27 and Idaho Power spend significant time and effort
22 reconciling differing interpretations of the Legacy
23 Agreements to operate their respective systems.
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DUVALL, DI 4
PacifiCorp
1 Q. Pl-ease describe the benefits associated with
2 Lhe termination of the Legacy Agreements and replacement
3 with OATT-based service.
4 A. Under the terms of the proposed JPSA, the
5 Partles will replace approximately 7,600 MW of transmission
6 services provided under the RTSA and RATFA with asset
7 ownership and purchases of point-to-point transmj-ssion
B services. As part of the JPSA, the Legacy Agreements will-
9 be terminated or amended and the ownershi-p and operational
10 provisions of the Legacy Agreements will be modernized and
11 consolidated into a single agreement.2 The ongoing
L2 maj-ntenance and ownership obligations are established in a
13 single agreement going forward, the Joint Ownership and
L4 Operatlng Agreement (*JOOA").
15 Going forward, the Parties will- rely on OATT-based
L6 transactions, rather than the Legacy Agreements, to define
tl their respective transmission rights. This wifl- increase
18 the consi-stency and transparency of system operations.
19 Relying on the Parties' respective OATTs, with their
20 transparent, EERC-approved conditions, wil-I permit more
2l flexibl-e, efficient use of assets, and will- ensure
2 The RATFA, RTSA, and Interconnection and Transmission Service
Agreement (*ITSA") are the primary agreements between the parties.
There are a number of related agreements which support or are directly
connected to the RATFA, RTSA, and ITSA. The RATFA, RTSA, ITSA, and
remaining agreements are collectively referred to as the "Legacy
Agreements. " A complete list of the Legacy Agreements that wil-I be
replaced, amended, or consolidated by the proposed transaction are
identified in Schedufes 1.1(S) and 1.1(h) to the JPSA.
DUVALL, DI
PacifiCorp
1 PacifiCorp is entitl-ed to benefits such as reassignment,
2 redirect, and rollover rights that were not always
3 contemplated by the Legacy Agreements. Rel-iance on a EERC-
4 approved OATT will ensure operations continue to be
5 governed by current reliability standards. ft will also
6 ensure that the Parties' respective obligations are written
7 in language that is commonly used in standard industry
8 practice and weII understood within the industry, rather
9 than in the antiquated and sometimes disputed language of
10 the Legacy Agreements. The termination of the Legacy
11 Agreements and the move to OATT-based transactions is a
L2 significant benefit of the transaction that will- l-imit
l-3 disputes between the Parties and al-Iow for more efficient
14 operation of the Partj-es' respective systems.
15 O. Please describe how the Company's need to move
1,6 generation east-to-west will- be met under the terms of the
77 proposed transaction.
18 A. PacifiCorp requires the ability to move 1,600
19 MW of generation east-to-west to serve loads in PACW. This
20 service is currently governed by the RTSA and the RATEA.
2l Under the new arrangements, PacifiCorp will purchase
22 5l-0 MW of firm transmission service under Idaho Power's
23 OATT, whlch represents a portion of the 1,600 MW needed to
24 meet the Company's operational needs, in place of the
25 current service under the RTSA and RATEA. This new
DUVALL, DI 6
PacifiCorp
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arrangement wiII align with EERC' s preference for OATT-
based transactions, with aII of the OATT benefits
prevJ-ousIy described.
As noted in Mr. VaiI's testimony, PacifiCorp will
meet its remaining capacity needs through acqulsitj-on of
ownership rights that will- allow PacifiCorp to meet its
remaining 1,090 MW of capacity needs.
O. Pl-ease describe PacifiCorp's increased right
to dynamic service under the proposed transaction.
A. As noted previously, PacifiCorp will have 400
MW of dynamic service between PACE and PACW after the cl-ose
of the transaction, a 200 MW increase in PacifiCorp's
current right to dynamic service. The additional 200 MW in
dynamic service wiII aIlow for increased flexibility in
system operatj-ons. This dynamic transfer can be used for
numerous purposes, including increased system integration
between PACE and PACW or for future Energy Imbalance Market
transfers.
o.Pl-ease describe current restrictions on east-
to-west transfers under the Legacy Agreements.
A. Currently, I,400 MW of the Company's east-to-
west transfer rights are tied specifical-Iy to the Jim
Bridger Plant generation or other transfers delivered to
Idaho Power over the Jim Bridger Plant transmj-ssion system.
DUVALL, DI
PacifiCorp
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o.Pl-ease describe the benefit of the proposed
transaction on these east-to-west transfers.
A.Upon approval of the transaction, PacifiCorp
will- be abl-e to make these east-to-west transfers without
restriction on the source of energy to be transferred. The
Company will enjoy a combination of point-to-point
transmission service rights over Idaho Power's system and
PacifiCorp network transfers on newly owned assets that
will a1low it to move any available resource east-to-west.
The ability to use any resource over these rights will
provide expanded, long-term system flexibility and economic
service to retail customers and wil-1 allow PacifiCorp to
more effectively utilize low-cost resource options to serve
load.
O.Please describe PacifiCorp's current ability
to make deliveri-es into the La Grande area.
A.Under current arrangements, PacifiCorp has a
limited ability to deliver generation to Bonnevill-e at La
Grande. Deliveries may only occur when outages restrict
schedulj-ng capability at Midpoint and Enterprise. Energy
delivered to Bonneville at La Grande is then wheeled by
Bonneville to PacifiCorp's Pendleton and Southern
Oregon/Northern Cal-ifornia load areas.
o.Please describe the benefits of the proposed
DUVALL, DT
PacifiCorp
transaction on these east-to-west transfers
1 A. With the combination of the 510 MW of firm
2 Lransmissj-on and the acquisition of assets, PacifiCorp will-
3 be able to more efficiently provide load service to its
4 loads in PACW because it wil-1 gain the ability to provide
5 firm delivery of generation to La Grande, in addition to
6 Midpoint and Enterprise. The addition of another point of
7 delivery will better align the Company's service needs with
8 existing useful firm system load delivery capabilities and
9 improve PacifiCorp's ability to serve l-oads in the west.
10 As noted above, the firm deliverj-es at La Grande align with
11 PacifiCorp's Bonnevllle wheeling rights for delivery to
72 Pendleton and Southern Oregon/Northern Cal-ifornia. The
13 firm del-iveries at Enterprise are wheeled by PacifiCorp to
14 Bonneville at McNary, then Bonnevil-l-e wheels the energy to
15 PacifiCorp's Albany, Santiam, and Southern Oregon/Northern
L6 California load areas.
77 O. Please describe PacifiCorp's current east-to-
18 west deJ-ivery capability during l-ine outage conditions.
L9 A. Under the Legacy Agreements, Idaho Power has a
20 priority right to the first 570 MW of Idaho Power's
21, northwest delivery capability during outage condj-tions.
22 PacifiCorp's rights to use this delivery capabllity during
23 outage conditions are therefore limited by Idaho Power's
24 current priority.
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DUVALL, DT
PacifiCorp
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o.Please describe the benefits of the
transaction to PacifiCorp's east-to-west delivery
capability during line outage conditions.
A.Under the terms of the proposed transaction,
PacifiCorp will obtain j-ncreased firm east-to-west delivery
capability durlng Iine outage conditlons. The new
agreements will provide PacifiCorp with firm point-to-point
transmission service in accordance with ldaho Power's OATT,
which will provi-de PacifiCorp with a pro rata share of the
fuIl northwest delivery capability during outage
conditions.
O.PIease describe how the proposed transaction
wiIl increase PacifiCorp's east-to-west flexibility.
A.Currently, Paci-fiCorp has 200 MW of east-to-
west Idaho Power OATT point-to-point service, with the
remainder of its east-to-west del-iveries met through Legacy
Agreements. The proposed transaction wil-I provide the
Company with 1r 090 MW of ownership rights, which translate
into OATT network service, ds well as 510 MW of east-to-
west Idaho Power OATT point-to-point service with OATT
attributes of reassignment, redirect, definitive term
length and rollover rights. These enhanced rights will-
provide increased short-term utj-l-ization and long-term
customization for future pIans.
DUVALL, DI 10
PacifiCorp
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III. WHEELING COSTS
o.What impact w111 the transaction have on
I\I. CLOSING
Does this concl-ude your direct testimony?
Yes.
DUVALL, DI
PacifiCorp
3 PacifiCorp's wheeling and use-of-facilities costs?
A.Under the current RTSA, RATFA and other
5 agreements, PacifiCorp has east-to-west rights across the
6 Tdaho Power transmj-ssion system of up to 1,600 MW and other
7 various rights at a projected 2016 cost of $20.8 million
8 per year escalating each year thereafter. This is made up
9 of firm and conditional firm service. Under the JPSA,
10 PacifiCorp will have rights under Idaho Power's OATT to use
11 510 MW of firm point-to-point east-to-west service across
12 the Idaho Power transmission system with an initial cost of
13 $17.1 million per year escalating each year thereafter in
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15 agreement, there will be no use of facility costs, and
1,6 services will be provided under the terms of Idaho Power's
1-7 0ATT.
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ATTESTATION OF TESTIMOI{Y
o RegaN
cc
WLtNotx4ll
I, Gregory N. Duva1l, having been duly sworn t.o
testify truthfully, and based upon my personal knowledge,
state the folLowing:
I am employed by PacifiCorp as the Director, NeL
Power Costs and am competent to be a witness in this
proceeding.
I declare under penalty of perjury of t.he laws of
the state of Idaho that the foregoing pre-fi1ed testimony
is true and correct to the best of my informat.ion and
belief.
t Gtl l,
DATED this I I day of December 20L4.
STATE OF
County of
SUBSCRIBED
Decernicer 2Ol4 -
AND SWORN to before
oFFrctAtSTAlp
$TEWAFTI{OIARYruA,F'mESOil
OOm$EoloN{ I'lO 930051
me rhis //*/t day or
DUVALL, DI
PacifiCorp
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