19901123Packwood Rebuttal.pdf

..
~,.cKt. EIVED m
FILED 0
90 NOll 23 pi~ 3 23
IDAHO PUBLIC
UTILITIES COMMISSlON
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR )
AUTHORITY TO RATE BASE THE )
INVESTMENT REQUIRED FOR THE )
REBUILD OF THE SWAN FALLS )HYDROELECTRIC FACILITY )
)
CASE NO. IPC-E-90-2
IDAHO POWER COMPANY
REBUTTAL TESTIMONY
OF
JAN B. PACKWOOD
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
Q.
A.
Q.
A.
..
Please state your name and business address.
My name is Jan B. Packwood and my business address
is 1220 W. Idaho street, Boise, Idaho.
Are you the same Jan B. Packwood that submitted
direct testimony in this proceeding?
Yes I am.
Are you in agreement with the analysis performed
by Mr. Thomas Faull concerning the estimated
annual O&M costs for the Swan Falls Project?
No. The method used by Mr. Faull was to look at
only 4 years of O&M costs. Also, Mr. Faull based
his estimated O&M cost on a curve of $/KW for
plants by size of plant and ignored the importance
of plant age on operating costs. This fails to
recognize the manpower required for operation of
the plant, which is a primary cost. New plants
such as Swan Falls are built so that the O&M cost
is lower because they do not need to be manned 24
hours per day.
Q.Mr. Faull notes that Idaho Power made many
decisions and commitments relative to the Swan
Falls project prior to its application in this
case. He further suggests that "It is only as a
result of chance that it now appears that those
decisions may have turned out to be marginally
Packwood, Reb 1
Idaho Power Company
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
..
prudent (at least as determined by my analyses)."
His recommendation is that if his analyses are in
error, then Idaho Power "should be imputed to have
known that the project was not cost effective" and
should be penalized. Do you agree with Mr.
Faull i s characterization?
No. Considerable planning and commitments are
required to bring a project to the construction
phase. Large hydroelectric projects involve
engineering design which must be customized to the
particular site. Idaho Power has been involved in
planning and analyses related to the development
of the Swan Falls Project for a number of years.
This has required and continues to require a firm
commi tment to the proj ect. It remains the
responsibility of the Company to fulfill this
role, but there comes a time in the planning
process, prior to the first major expenditure of
funds, when the Company must seek a Commission
determination that the decision to construct the
proj ect is reasonable and prudent and that such
construction is in the public interest. It is my
understanding that this procedure is consistent
with Commission requirements.
Q.Do you agree with Mr. Faull i s conclusion that the
Packood, Reb 2
Idaho Power Company
-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
Q.
A.
A.
..
Swan Falls project capacity is too small?
No. Mr. Faull i s conclusion that the Swan Falls
project capacity is too small is based upon a
capacity factor analysis which would be used only
in preliminary feasibility analyses. The designed
capacity factor should be high for the Swan Falls
plant because flows are fairly uniform through
most of the year.
How was the Swan Falls plant sized?
An economic' analysis of possible plant and unit
sizes was performed for the FERC License
Application phase of the project. This analysis
maximized the project i s generation per unit of
cost. The maximum flow of 14,700 CFS (7,350
CFSlunit) was selected as the project i s optimum
size. A flow in excess of this amount occurred
only 17 percent of the time based on 60 years of
daily flow records.
Q.Is hydro plant sizing subject to FERC
requirements?
Yes. Under the Electric Consumers Protection Act
(ECPA), FERC i S analysis of whether the resource is
being fully developed is a significant part of the
FERC process of determining whether, and to whom a
License should be issued. The FERC analysis of
Packwood, Reb 3
Idaho Power Company
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
..
plant sizing is a critical part of the licensing
process.
Please comment on Mr. Faull's understanding that
Idaho Power did not make a rigorous comparison
between vertical shaft Kaplin turbines and bulb-
type turbines.
Idaho Power did make a study in February, 1984,
for turbine-type selection and found the pit-type
bulb turbine plant was less expensive by 18
percent, for the same energy generation.
Q.Please comment upon Mr. Faull's analysis
concerning the use of a request for proposals and
negotiation process rather than the standard firm
bid process.
A.The "Foremost" reason he gives for his preference
is that the "design engineer is constrained to
'guessing' about the best combinations of size,
arrangement, and timing, with minimal input from
suppliers". Idaho Power experience as well as
that of major consultants in the hydroelectric
design field is not only beyond "guessing" at such
parameters but can make a much more detailed
analysis than could a developer or manufacturer
who could not even be assured of recovering his
bidding design costs. Idaho Power believes that
Packwood, Reb 4
Idaho Power Company
..
1 the detailed design and bid process has many
advantages over the single negotiated package2
3 procedure including:
1. Project design can be tailored to the4
5 needs of the owner rather than the developer's
6 contract.
7 2. contingencies to cover development risk
8 are not required because the purchase and
9 contracting is phased to the design progress.
10 3 . Developer markups on equipment purchased
from the manufacturers are eliminated.11
12 4. The owner retains control of the
13 combination and quality of equipment purchased by
buying major equipment separately and analyzing14
15 each component based on maximizing the benefit to
16 the project per dollar spent.
17 5. Changes to the proj ect can be made based
18 on site conditions without having to renegotiate
19 the proj ect development package.
20 6. Proposals received for the development or
21 any part of the package are competitive proposals
22 where bidders have eliminated contingency amounts
23 to cover later negotiation. Negotiations with a
preferred bidder do not give the bidder the24
25 competi ti ve incentive to improve his proposal.
Packwood, Reb 5
Idaho Power Company
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q.
A.
..
Would you comment on Mr. Faull's opinion that the
specified speed increaser may be a sole source
item, and that purchase through negotiations may
be more cost effective for an equal or better
product?
Yes. Regarding the speed increaser, the current
state of the art is the use of double-helical
epicyclic-gear drives because of the compact
design required by the limited space in the
generator pit. Several companies manufacture this
type of gear drive. Idaho Power did considerable
research into the gear drives to be certain of the
proper selection criteria. If the speed increaser
had not been specified and selection had been made
through negotiations, my opinion is that it would
have been more difficult, more time consuming, and
more costly for a speed increaser that would
provide the desired performance for 50 years.
Considerably more coordination with the primary
equipment suppliers would also be required since
the speed increaser fits wi thin the bulb and
connects directly to both turbine and generator.
Q.Would you comment on Mr. Faull's obj ection to the
limited number of bidders for the turbine,
generator, speed increaser, and governor and his
Packwood, Reb 6
Idaho Power Company
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A.
Q.
A.
A.
..
opinion that three of the four firms provided
courtesy bids?
Yes. Idaho Power did prequalify only four bidders
based on previous experience in the pit-type bulb
turbine. The four prequalified companies were the
only ones in the world with the experience in
similar type and size equipment. Two bids were
wi thin 1.8 percent of one another, and the third
and fourth bids were more than 30 percent above
the low bid. Idaho Power's procedures for
obtaining bids were appropriate and prudent.
In sumary, do you believe that the Company has
complied with the Commission's directives
concerning the rebuild of the Swan Falls project?
Yes.
Q.Does this complete your testimony.
Yes it does.
Packwood, Reb 7
Idaho Power Company