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HomeMy WebLinkAbout19910819Faull Direct.pdfo O #ataz l- r-r rt _*.,\ i .i i1--.-*i;'-J ..fj rr' r-^i..-.-l t I ;:iJ3 19 Pii 3 t5 i'.,.:,^, i-. jri,! tf\rLl1irV I ijUl-iUi ;::_:Tiis c0f,tl,;t5 : ; :, ;J BEFORE THE IDAI{O PI]BLIC IIIILITTES COMMISSION IN ITIE MATIER OF TEE APPIICATION Or. IDAIIO POWER COMPAIVT F1OR AP- PROVAL OF AN II\ITERCONNESIION TARIFT' FOR NON.TIIIIJTT GENERA. TION-SCIIEDI]LE 72 CA,SE NO. IPC-E-90-20) ) ) ) ) ) DIRECT IESTIMONT OF TIIOMAS FAI]I,L IDAHO PTIBIIC IINLrIIES COMNilISSIION AUGUST 19, 1991 o o 1 2 3 4 5 6 7 I 9 t0 I1 L2 13 14 15 I6 L7 l8 19 20 ZL 2Z 23 24 z5 rPC-E-9 0-20 B/ L9 /9L FAUT,L ( Di )Staff I a. address for A.My name is Thomas Faull and my business West Washington Street, Boise, Idaho. By whom are you employed and in what address is 472 cap ac i ty? A. I am enrployed by the Idaho Pub1ic Utilities Commission as a Public Utilities Engineer. a. Have you included a statement of your qualifications in this testimony? A. Yes. Exhibit No. I01 is a statement of my qualifications. a. Please summarize your testimony. A. My testimony cliscusses the extent to which interconnect costs were consiclered during Ltre administrative determination of avoided cost rates and conclurfes that Idaho's avoided cost raLes include reasonable interconnect costs as envisioned by the Public Utilities Regulatory Policy Act of L97B (PURPA). I also analyze the way in which Idaho Power Company (IPCo) applies its operation and maintenance (O&M) charges for interconnect facilities and conclude that IPCo should charge non-Ievel O&M rates rather than the level O&Itl rates currently inclurletl in Schedule 72. Please state your name and business the record. 0 o o 1 z 3 4 5 6 7 8 9 IO 1l L2 I3 14 I5 I6 L7 I8 I9 ZO ZL zz 23 Z4 z5 rPC-E-90-20 B/ L9 /9L FATTLL ( Di )Staff 2 INTERCONNECT COSTS INCLI'DED IN AVOIDED COST RATES: a. Were you the staff's primary wiLness in Cases Nos. U-1500-170 and IPC-E-89-l-t that established the avoided cost rates currently being used by IPCo for the purchase of power under PURPA? A. Yes. A. Do you believe that Tille 18 of the Code of Federal Regulations (CFR), Part 292, requires uLilities to pay the cost of interconnection for Qualifyinq Facilities (QFs)? A. No. 18 CFR 292 clearly lays the burden of paying interconnection costs on the QF. Interconnection costs . (a) Obligati.on to pay. Eachqualifyinq facility shall be obligatedto pay any interconnectiorr costs wtrichthe State regulatory authoril-y.. .mayassess against the qualifying facilityon a nondiscrj.nrinatory basis withrespect to customers with similar loadcharacteristics. (b) Reimbursement of interconnectioncosts. Each State regulatory aul-hority...straI1 determirre the manner forpaynrents of interconnection costs,which may inclr.rde reimbtrrsement over areasorrable period of time." IfB CFR 292.3061 'f nterconnecl-ion costs' means thereasonable cosLs of connection,switehing, metering, transmission,distribution, safeLy provisions and o o 1 Z 3 4 5 6 7 I 9 10 t1 L2 13 I4 I5 I6 L7 IB l9 20 ZL zz z3 24 25 rPC-E-90-20 B/L9/9L FAUr,l, (Di )Staff 3 adrninistrative costs incurred by t.heelectric utili.ty dir:ect1y related tothe installation and maintenance of thephysical facilities necessary to permitinterconnected operal-ions with thequalifying facility, to the exLent suchcosts are in excess of theeorresponcling cosLs which the el ectricutili ty wotrld have incrrrred if it hadnot engaged in interconnectedoperabiorrs, bul- instearl generated anequivalent anrount of electric energyitself or purchased an equivalent amounb of electric energy or capacity f rorn other sources. Inter:connectioncosts do not incl rrde any costs irrcludedin Lhe calculation of avoided costs.lra cFR 2e2.Lor (b) (7)l For QFs interconnecting with fPCo, the Commission "assesses" interconnection costs by approving contracts thal- include language requiring prepayment of those costs. The QF is reimbursed for: the inLerconnection costs thaL "...the electric utility would have incurred if it had not engaged in interconnected operations, but irrstead generated an equivalent amount of electric energy itself. . . " over Lhe life of the contract through that portion of avoided cost rates that results from including the avoidable interconnection costs associated wiLh the Surrogate Avoidable Resource (SAR) in ttre "calculation of avoided costs." [18 CFR 292.l-01 (b), above.] 0. In your opinion, are reasonable interconnect costs included in the administratively o o 1 2 3 4 5 6 7 I 9 IO II L2 I3 I4 I5 l6 L7 IB 19 zo 2L z2 23 z4 z5 determirred avoided cosL rates? A. Yes. Although subsequent research indicates that a smaII part of the interconnect costs associated with the Colstrip power plant were inadvertently left out of the avoided cost computations, it is calculated that the overlooked interconnect costs represent Iess than five percent (5%) of the interconnect costs ttrat are included in the avoided cost rates. Considering the fact that the reasonable range of inLerconnect costs considered in Case No. IPC-E-89-I1 was approximately pltrs-or-minus thirty percent (30e.) of the ordered amounL [Order No. 23357, pp. L7-L9), the inadvertent failure to consider a small portion of the Colstrip interconnect costs appears inconsequential. a. What are the interconnect costs that were overlooked in the avoided cost computations? A. In Case No. U-1500-I70 [Order No. 226361 the Commission determined that ttre Surrogate Avoidable Resource (SAR) would be a generic coal fired power plant located in the Powder River Basin of Wyoming. The method selected by the Commission to estimate the cost of the SAR was to blend the actual construction costs of the Colstrip plant in Montana and the Val.nry plant in Nevada (Order No. 22865, pp. 2-3 & 17). rPc-E-9 0-20 B/T9/9L FAUT,L (Di) 4Staff o o 1 z 3 4 5 6 7 I 9 IO 1I L2 I3 14 15 I6 L7 t8 t9 20 2L zz z3 z4 25 HistoricaIly, int,erconnection substation (step-up) costs have been included in power plant cosLs for avoided cost purposes irr Idaho. As shown in Exhibib No. L02, IPCo followed ttrat convention in providing Valmy costs. As discussed in my memorandum to l,lessrs. Woodbury and Purdy dated May 2, 1991 (attached as Exhibit No. 103), it appears that aIl parties to U-1500-170 [incltrding Washington Water Power (WWP)] believed that hMP was following the convention in providirrg the costs of the Colstrip plant . Ilowever, after becoming aware Lhat the issue of interconnecLion was significant in this case, staff asked WWP to double check its records pertaining to the issue. WWP did so and discovered that Lhe Colstrip interconnection substation cclsLs had been left out of Lhe computations. O. Do you believe that leaving the Colstrip substation costs out of avoided costs was inadvertent? A. Yes. The Federal Energy Regulatory Cornmission (FERC) Uniform System of Accourrts for Electric Utilities requires utilities to book interconnection substation accounts as transmission expenses rather than generation expenses. Therefore, I surmise ttrat WWP's accountants simply forgot to transfer the appropriate transmission accounts to the Colstrip generation accounts for purposes of rPC-E*90-20 B/L9/9L FAULL (Di) sStaff 1 2 3 4 5 6 7 I 9 IO II L2 I3 I4 I5 I6 L7 18 I9 20 2L ZZ 23 z4 25 o o estimating avoidable power plarrt construction costs. O. How signif icant was hlWP's oversight? A. Exhibit No. 104 is a copy of the results of an analysis $llalP did and inf ormally provided to staff to sht-rw the interconnection substation costs that WWP found to be associated with the Colstrip plant. They amount to approxirnaLely $tgZXw of Colstrip's installed capacity, in 1989 dollars. The totat SAR plant cost included in current avoided costs is $145}/kw in 1989 dollars, per Order No. 22865. That amount was determined by a simple averaging of the VaImy costs provided by IPCo ($148I/kw) and the Colstrip costs provided by wwP ($ran/kw), rounded up from $ra+9/kw. Thus, it would be reasonable to assume that the Commission miqht have found the SAR plant costs to be: $taag + fitgtz = $rasB.50 == $146o,/kw. This would indicate that the SAR plant costs are understaterl by approximately seven-tenths of a percent ( 0 .7e") . However, in Case No. IPC-E-89-II (Order No. 23428, pg. L2) the Commission determined that IPCo SAR inLerconnect costs also include transmission expenses of $ZfaZXw. Therefore, the error actually represents an understatement of less than six-tenths of a percent t$I0l($1a60+$2f3) = 0.6e"1. Again, considering the rPC-E-90-20 B/ L9 /9t FAUT,L ( Di )Staff 6 o o 1 2 3 4 5 6 7 8 9 IO 1I L2 13 14 I5 I6 L7 I8 19 20 2L z2 23 z4 z5 rPC-E-9 0-20 B/L9/9L FAUL,L ( Di )Staff 7 methodology employed to estimate total SAR capital costs, rounding techniques used throughout the process, and the reasonable ranges considered (especially for estimating transmission system costs), it appears that the overall interconnection costs included in the avoided cost rates are just and reasonable, even without Colstrip substation cosLs. 0. will you please summarize the irrLerconnections costs associated with IPCo's SAR? A. Yes. They are: Colstrip step-up costs VaJmy step-up costs:Transmission costs: $rg. 56/kw/2 = $g.sltuwtz = $ 9.28/kw $ 4.77 /kW $zrs. oolkw $zzt.ostlxw fi'-2]-_7-171*W TOTAL: Total included in avoided costs: O. How do the interconnection costs included in the avoided cost rates compare to the total interconnection costs actually paid to IPCo by QFs? A. As stated above, the interconnection costs included in avoided cost rates are $2IBlkW. The interconnection costs paid to IPCo by QFs range from $I,789,/kW for a I0kW QF to $rSZrW for a 14,000 kW QF. The maximurn inLerconnect cost for projects 50 kW and 1 Z 3 4 5 6 7 8 9 l0 tt L2 I3 14 I5 I6 L7 1B I9 20 ZL ZZ 23 z4 z5 o o larger has been $487lkw.The average project interconnection cost has been $fSOZXw. Ttre toLal of alI interconnection costs compared to the total of all QF capacity has been $43lkw. The Sunshine No. 2 QF had interconnection costs of about $IBf/kw. (The above estimates are based on a cornpilation of data available in the Commission's files. ISee Exhibit No. 1061) Therefore, it appears that the irrterconnecl-ion costs included in avoided cost rates generally exceeds the interconnection costs paid by QFs. In summary: Avoided Interconnect Costs z fi218lkW Maximum QF Interconnect Cost: $f,789/kw It{ax. Over 50 kW QF Cost: $487/kW Sunshine No. 2 IC Cost: $IBL/kW Average QF Project IC Cost $I50,/kW Cost to IC AtI QF Energy: $43/kW Minimum QE Interconnect Cost: $15/kW O. Shouldn't IPCo be requir:ed to pay the difference between the QF's interconnection costs and the avoidable interconnection costs when the former exceed the latter, based on the fact that IPCo controls the QF's interconnection costs? A. No. IPCo only controls the cost of the facilities that are required, and then only to the extent that it purchases efficiently or inefficiently rPC-E-90-208/L9/91 FAr-LL (Di )SLaff B o oo 1 z 3 4 5 6 7 I 9 IO I1 L2 l3 14 I5 I6 L7 t8 I9 zo 2l zz, z3 24 z5 within the marketplace. The major differences in the interconnection costs among QFs are (I) the distance f rom the QF's location arrd ttre p<-rirrt of interconnection and (2> the voltage on the IPCo side of the inter- connectj-on. Both of these factors are under the QF's control in that the QF selects the power plant site relative to IPCo's existing transmission and distribution systems. A. How significant would the changes to avoided cost rates be if the Conunission decided Lo recompute them with the overlooked interconnect costs inc luded? A. IPCo's avoided cosl rates would increase by amounts ranging from less than one-tenth of a nrill for short term contracts to slightly over three-tenths of a mill f or ttre longest term contracts coming on-Iine in I996. This represents rate changes of less than one-haIf of one percent. 0. Do you recommend that the Comrnission change avoided cost rates to include the overlooked interconnect cosLs? A. No. Cases Nos. U-1500-170, IPC-E-89-11, WWP-E-89-6, and PPL-E-89-3/UPL-E-89-5 were extremely complex proceedings involving analyses of several interrelated issues over a period of nearly four rPC-E-9 0-20 B/19/9L FATJLL ( Di )Staff 9 o o o 1 2 3 4 5 6 7 I 9 l0 1T L2 I3 I4 I5 I6 L7 IB 19 20 ZL zz 23 24 z5 r PC-E-9 0-20 B/ L9 /9L FAUT,L ( Di )Staff years, and resulted in carefully considered estimates of the resource costs avoidable by each major electric utility with an Iclaho service terriLory. To reopen those cases for the sake of an insignificarrt oversight in the development of the estimates would be unreasonable and courrter-productive. To simply make a mathematical adjustrnent would ignore the interrelated nature of the components of the variables that make up avoided cosLs. ClearIy, the administrative risks of tampering with those cases far exceeds any potential benefit of mathematical purity associated with correcting WWP's inadvertent oversight. A. Should IPCo be required to pay for part of Qualifying Facilities' (QFs') interconnectiorr facilities to correct for the oversight? A. No. As stated above, the avoiclable interconnect costs included in the avoided cost. rates are reasonable. 'Iheref ore, no action is necessary in response to the discovery of l^ll^lP's minor oversight. O&U CIIARGES FOR INTERCONNECT FACILITIES: O. Are operation and maintenance (O&Il) costs also included in the avoided cost rates? A. Yes. Intercorrnection O&lvI was included at the rate of $0.70,/kW-yr. lOrder No. 22357, 10 o o o 1 2 3 4 5 6 7 I 9 10 II L2 13 l4 I5 I6 L7 18 19 zo 2L 22 23 z4 z5 Appendix B.l That rate arnounts to about 0.03% per monlh of the SAR transmission investment cost. Although that is substantially less than the 0.4e" per month suggested as the appropriate rat-e for QF transmission plant O&M, the difference is reasonable because ttre transmission plant associated with the SAR is a 500 kV double circuit line rated at 2,000 I'lW, which will require substantially less O&M on a "per unit cost" basis than the lower voltage and lower capacity Iines typical of QFs. O. Have you reviewed IPCo's operation and maintenance (O&M) charges for QF interconnect facilities? A. Yes, although Staf f witness HaLtaway has done an extensive accounting analysis of the O&M charges included in Schedule 72, which he discusses in his testimony. I concur with Mr. Hattaway's conclusion that the methodology and results used by IPCo are reasonable. Therefore, my testimony on this subject is limited to the method of application of the O&M rates. SpecificaIly, my testimony is concerned with the relationship of cost inflation to the application of the rates. O. How does inf lation af f ect the O&IvI rates? A. As discussed by Mr. Hattaway, the O&Ivl rPC-E-90-20 B/ L9 /91 FAIJI'L ( ni )Staff II o o o 1 z 3 4 5 6 7 I 9 l0 1I L2 13 14 I5 I6 L7 1B t9 20 2L zz 23 z4 z5 rates are established by dividing appropriate O&M expenses by the gross plant associated with those expenses. Although O&III expenses are relatively current (i.e., include little inflation effect) the relaterf gross plant accounts include plant costs incurred for a period of over 30 years. Obviously, the amount irrcluded in the plant accourrL for investments made over 30 years ago vastly understate the replacement value of ttre assets they represent. Therefore, the rate established by IPCo's methodology is a levelized rate; applicable only over a period equal to ttre average plant life for each category of plant. O. Is using such a rate appropriate for determining O&M charges? A. Yes, provided the charges and the asset usage will continue for at least the average asset life used to determine the rate. However, if the QF interconnect plant usage is less than the average plant life the levelized methodology used by IPCo results in overpayment by the QF to IPCo in the same way that levelized avoicled cost rates can result in overpayment by IPCo to the QF in the evenl of premature reduction of the QF's leveI of generation. rPC-E-9 0-20 B/L9/9L FAIJT,L ( Di )Statf L2 o o o 1 z 3 4 5 6 7 8 9 l0 II L2 I3 14 I5 I6 L7 18 19 zo 2L 22 z3 z4 Z5 rPC-E-90-20 B/L9/9L FAULL (Di) Sbaff 0. significant cha rges ? Is it likely overpaymenls as that QFs wiII nrake a result of level O&M A. Yes. In cases where the QF contract is Iess than the average asseL 1ife, such overpayment is a certainLy. In other cases iL is a possibiliLy. 0. How do you recommend Lhat the Comrnission solve this problem? A. By requiring IPCo to de-levelize the O&M charge rate. The Consumer Price Index (CPI) over the past 30 years indicates that the average annual inflation rate is approximately 5.4% per year. Using that rate in conjunction with an IPCo weighted cost of capital of fl.45% per year as required by Order No. 23357 for avoided cost purposes yields the non-levelized O&t{ rates shown in Exhibit No. 105. Applying the Exhibit I05 non-Ievelized O&M rates to QF contracts would eliminate the overpayment requirement currently being thrust on QFs, would more accurately match IPCo's O&M revenues with its O&l!1 expenses, and would help errcourage the QF industry by reducing QF expenses during the early "debt service" years of t-he contract. I theref ore recommend that the Commission require that Exhibit I05 be the raLes included irr Schedule 72 rather than the 13 o o 1 2 3 4 5 6 7 I 9 IO 11 L2 I3 I4 15 l6 L7 IB 19 ZO 2L zz 23 24 z5 level rates proposed by IPCo. 0. Do you recommend that the Comrnission require IPCo to relroactively change levelized O&M rates in existing contracts? A. No. The Cornmission's authority to change contract rates is limited Lo cases where the contract rates would have a significant negative impact on the public inLerest if left unchanged. I do not believe that levelized O&tl rates for QF interconnection assets have such an impact. Theref ore, my recommendal ion i s interrdecl to apply only prospectively. a. Do you reconrmend that non-level rates be considerecl for O&M charges applied to interconnection assets used by fPCo's retail customers (e.9., Schedule 7L)? A. No. Retail customers' facilities are presumed to interconnect for periods exceedinrg the average life of the plant assets used to determine the O&M rate. Therefore, the levelized rate is appropriate for retail applications. A. Does this conclude your direct testimony in this case? A. Yes. rPC-E-9 0-20 B/L9/9L FATJL,L (Di )St-aff L4 o o o QUALIT"ICATIONSOF ITIOMAS G. FAT]LL, P.E. OF ITIE IDAI{O PT]BLIC TIIILTTIES COMMTSSION Mr. Faull received a Bachelor of Science degree from the University of Idaho in 1970. His major was Mechanical Engineering with emphasis on Nuclear Engineering and Stress Analysis. His minor was Business Administration with emphasis on Economics and Management. PROFESSilONAL REGISIRATIONS AI{D HONORSI: Mr. Faull is a member of Sigma Tau, the collegiate engineering honorary society. He has received registration to practice Professional Engineering in the following states: L97 4: r975: L977: L979: Idaho; MechanicaIColorado; General New Ittlexico; General Oregon; Civil He is also registered to practice before the U.S. Office of Patents and Trademarks as a Patent Agent. PROFESTIIONAL EEERIENCE: From 1970 through 1978, Mr. Faull worked for the U.S. Bureau of Reclamation in the capacities of Mechanical Engineer, Contract Administrator and Resident Engineer. As a Mechanical Engineer, he provided quality control for mechanical, electrical and civil works at major hydroelectric construction projects. As a Contract Administrator, he analyzed and made IDAHO POWER COMPANY Case No. IPC-E-91-20 Exhibit No. 101 T. Faul"1, Staff8lL9l9L Page 1 of 3 o o o recommendations pertaining to claims for additional compensation under contracts to build and supply equipment for major hydro- electric and irrigation projects, negotiated settlements thereto, and wrote contract addenda to reflect negotiated settlements. As a Resident Engineer, he supervised up to 50 engineers, surveyors and technicians providing quality control of electrical, mechanical and civil works of a I00,000 acre irrigation project; including roads, highways, canals, pumping plants, pipelines substations, ancl a 115kv transmission Iine. From I97B through 1986, Mr. Faull worked in various capacities of consulting engineering. As such, he did (or supervised) financial feasibitity analyses, design, construction management, construction, and start-up of chemical, water and energy projects, including PURPA hydro, coal, and MSW projects. He also did business development, biIIing, personnel manage- ment and hiring/firing. From I9B7 through the present, Mr. Faull has served as a Utilities Engineer at the Idaho Public Utilities Commission. In that capacity, he has analyzed Cogeneration and Sma1l Power Producers' (CSPPs') projects; developed computer models to represent utilities' Avoided Costs, power supplies, cash flows and other features; testified in electric avoided cost cases; authored Proposed Orders pertaining to avoided costs, CSPPs' security arrangements, utility surcharges, and utilities' conservation/Ieast-cost planning programs; and IDAHO POWER COMPANY Case No. IPC-E-91-20 Exhibit No. 101T. Fau11, Staff 8/19/9L Page 2 of 3 oo oo authored proposed Idaho comments to Federal Notices of Proposed Rulemaking. He has also attended several related training programs and conferences, including the NARUC I9B7 Western Utility Rate Seminar, the NARUC 1987 lgth Annual Williamsburg Regulatory Conference, the I9BB First AnnuaI Utility Least-Cost-PIanning Conference, the 6th NARUC Biennial Regulatory Information Conference, a NARUC Conference on Transmission Issues in Washington D.C., two privately sponsored conferences on CSPP regulation, and one privately sponsored conference on bidding for CSPP power. PUBLICATIONS: IvIr. Faull has authored and presented three papers that were published in the "Proceedings of the Sixth NARUC Bienniat Information Conference". The papers were entitled: "Irreconcilable Conflicts of InterestInherent in Vertically IntegratedElectric UtiIities", t 2 3 "solving the Overpayment DilemmaLevelized Rate PURPA Contracts",for and "Bid Price and Reserve Margin: Chicken and Egg? An Approach to Pricing Powerin the Post-Spiral WorId". IDAHO POWER COMPANY Case No. IPC-E-91-20Exhibit No. 101T. Faull, Staff8/1-9l9l. Page 3 of 3 o o Stcp-Up Eouipmcnt Station rquipnrnt o IOAHO POWER COMPANY VALIIY GENERATING STATIONlnvestment as of December 31, 1981 Total Ptant I PCo's 50 t S hare Number of Generatorslnstalled Capacity - Name Plate Rating- Name Plate Rating- Estimated tulaximum Capacity Cost per KW Estimated Maximum Capacity Cost per KW Name Plate Rating INVESTMENT Acct No Account Title Steam PlantEnd and lan d rights 308, 253, 253, I (,OO KVA 920 KW 920 KW I 54, 000 K VA 1 25, 950 KW 126,950 KW s982 s96Z 310 311 312 314 3r5 315 Structures and improvements Boiler plant cquipment Turbogencrator units Accessory elcctric equipment Misccltancous power plant equipmcnt Total Steam Plant Amount s {53, 448. 00 27,339,279.14 6't , 187, 31 8. 96 I 5, 899, 262.74 15,799 ,892. 3 5 1,502,977. t8 5122,182,178.37 -- s 2, {8f,259.80 312f,666,438. l7 12-1 I-81 353 Total lnvcstmcnt Commerical Operation Date: Unit I IDAHO POWER COMPANY Case No. IPC-E-90-20Exhibit No. L02T. Faul1 n Sraff8/19/9t o o o TO FROM: DATE: SUBJECT: WORKING FILE; WORKING FILE; SCOTT WOODBURY BRAD PURDY MEITIORANDT.|U rPC-E-90-20 IPC-E-9 L-02 TOM FAULL MAY 2, t99l Interconnect Costs in Avoided Cost Rates; A.W. Complaint i Review of the Records of Cases u- 15 0 0 - 17 0 , I PC-E- 8 9 - I t , PPL-E- 8 9 - 3 ,/UPL-E- I9 - 5 , WWP-E-89-6 at Scott's Request: B rown NoS . and In my review I was able to find only one specific reference that interconnec't costs are included in the avoided cost rates. However, I did find a statement by Prekages indicating that they were not specifically included in the transmission costs (attached). lly review of the FERC Uniform Standard of Accounts (USec) indicates that they should not have been included in the plant costs as reported in the FERC Form ls. Therefore, it appears that part of the interconnect costs may have been inadvertently left out of the avoided cost estimates. However, it is clear that it was the intent of all parties that interconnect costs be included in avoided costs. In conErast of Prekages statement that he did not know if step-up (Fau11; 05-02-91)I IDAHO POWER COMPANY Case No. IPC-E-90-20Exhibit No. 103T. Faul-1, Staff8/19/91 Page 1 of 6 o o o transformation was included in plant costs, Durick clear ly states in his Exhibit No. 5 (abtached) ttrat he believes they are so included. It is my vague recollection that I contacted someone at wwP (Norwood?) who confirmed informally that substation costs are included in plant costs. On Thursday (May 2, 1991) I cal1ed Dr. John Willmorth (IPCo) and Kelly Norwood (v{wP) to get their views on the issue. Dr. willmorth conf irmed that interconnect costs were definitely included in plant costs. Mr. Norwood did not specifically remember where the costs were included, but confirmed that it was wWP's intent and understanding that they grere included in either the plant costs or the transmission costs. He advised me that wWP could do the research necessary to determine whether the costs were actually included in the plant costs, but it would be difficult and time consuming. Historically, interconnect costs have been included as part of the SAR in Idaho and developers have paid for interconnection of their QF projects. Still, the step-up substaEion costs do not show up as line items in the plant costs, they are supposed to be recorded as transmission costs according to the USAc, and they were specifically excluded from the transmission costs included in the avoided cost calculation. Therefore, it is Lechnically feasible to argue thaE the costs nafr have been partiaTTy left out of the avoided costs. However, ds you may remember, IDAHO POWER COMPANY Case No. IPC-E-90-20Exhibit No. 103T. Faull, Staff8ll9/91 Page 2 of 6 o (Fau11; 05-02-9I)2 o o o the plant cost ($1,450/kw) included in avoided cost computations is a rounded off estimate of the average of Colstrip and VaImy costs, while IPCo's transmission costs ($ZS6/kW) was determined by multiplying a rough estimate of 475 miles of transmission times a rate selected from a "reasonable range" of between 62 and 36 mills per kW-mi1e. TypicaIly, substation costs for a large plant are about $fOZXw (my estimaEe, corroborated by a wwP transmission engineer via Norwood), or 0.61 of avoided capital costs. Using the authorized availability factor of 75\, this amounts to about 0.2 miIIs/kwh of avoided cost in 35 year contracts, and less in shorter contracts. (Note: Had the Commission selected an availability factor of 74?. rather than 75\, the 35 year carrying cost of the ordered SAR costs would have been reduced by 0.5 mi11s./kWh. ClearIy, the alleged failure to specifically include substation costs is negligible.) In Iight of the fact that it was the Commission's and parties' understanding that all interconnect costs were included in avoided costs, and that the magnitude of the alleged overlooked costs is insignificant in comparison to the estimabing accuracy involved in reaching those raEes, I believe it would be inappropriate to require IPCo to absorb interconnect costs or to adjust avoided costs to reflect their inclusion. However, of those two options I believe the latLer would be the most appropriate. Otherwise, it would be economically IDAHO POWER COMPAI.IY Case No. IPC-E-90-20Exhibit No. L03T. Faull, Staff8/19/91 Page 3 of 6 o (FauIl; 05-02-91)3 oo O o reasonable for a developer to build a sma11 plant in a remote area and to require IPCo to interconnect the plant at a cost exceeding the plant's cost. In summary, I believe that interconnect costs are included in avoided costs as part of the SAR plant costs. I further believe that this should be the Staff position in the A.w. Brown complaint action. However, even if these costs were inadvertently left out of one or both of the estimates, the practical effect on avoided costs is negligible (far less than many of the associated rounding errors) so no change in rates or policy should result. IDAHO POWER COMPANY Case No. IPC-E-90-20 Exhibit No. 103T. Faull, Staff8/L9/91 Page 4 of 6(Fau11; 05-02-91)4 a E !s included in th est lnates.'14 Do ycu o wha t YesI I t I t,h I I I t I t I I t A those are transmiss:on costs only; thar: is, towers. conductors, insulators' I added to those costs s60 mi11j.on to represent station equipnent that we would need to install on what we considered an appropriate nunber of stations. a Substation cqulPnent? A Substation Qquipnent, circuit breakers, reactors, shunt caPacltorl. Q AnY voltego luPPort cquiPnent? A The voltagc auPPort egulpment, thc rQactors and thc gcrics caprcltorr provide voltage controls. l.le did 95 o15 \7 I 18 19 20 2t 22 23 2l 25 HEDRICX COURI REPORTIIIG P.o. Box 5?8, Boi3a, lD 83?Ot PREXEGES (X) m{P 1 ) 3 4 5 6 7 8 9 10 11 t2 not includc transfornation and I dld not review the surrogate plant cost to see if those costs included step-up transfornatlon. We considcred step-down transfornation and consldcred that exl.stlng transfornatl.on was in place so that that would not ncad to be lncludod l,n thcse co3ts. Q And you rould agt.c thet those addarc that you Just aentloncd would hrvc to br concidGr.d? A ya!, thorc would bc prrt of trenlllsslon costs lor a klnd of rylt.n thtt wa propoood. For othcr klnds of ryttctlt, they would vary depcndtng on tha speclflcs and I brllcvo thc cortr w.rve lncludrd rr. .pDtoprlrta and adequrtr for thc nccdr. IDAHO POI^IER COMPANY Case No. IPC-E-90-20Exhibit No. 103T. Fau1l, Staff8/19/91 page 5 of 6 o o o SURROGATE AVOIOEO Porvder River 500 Cos OSI RESOURCE IRANSMISSION Iransmission System Cost i n Thousands KV I ) Powder River Substation A) Statron cost tnc'luded in gancration cost 8) Two 500 kV 200 Mvar shunt rcactors t 0 5 ,820 247,500 I I ,065 275 ,000 12 ,408 -----> 2 3 m4 P AI owder River - Jim Bridgcr 500 kV lincs 2 t 225 mtlcs of 500 kV transmission linc Tvo 500 kV 380 l{vrr slrics capacitors 351 compcnsation at 1500 llvr t 6,820 258,565 287 ,408 Erhtbit 1{o. 6 Crsr llo. IPC-E-89-tt Our ick. IPC Prgc 2 of 3 J AI c 0 E J A B m Bri Fivc Ivo Ivo 0nc 0nc dgcr Substation Mditions 500 kV povcr circuit brcakcrg 500 kV 200 Hvrr shunt rmctors 500 kV 225 Hvar shunt rcrctors 500/345 kV 1,500 Iva auto-transforncr 345 kV poror circuit brctkr Eridgcr - Eorrh 500 kY lincc 2 t 250 nilcs of 500 kV trtntnirsion linc Tvo 500 kV 420 llvr rrirs crp.citor3 351 conpcnrrtion rt 1500 l{vr 480 820 480 800 990 7 6 7 8 31,570 5) Borah Substatlon Addttions A) Thrcc 500 kV poutr circult br.rk.r38) Tvo 500 kY 225 llvrr shunt ructors 1 7 180 480 1 1 ,550 Iotal t 595,024 Thc cost p.r nilr for 500 kY trrnulsslon usod ln proprring thircstinrtr ir t560,000 pr rilo. IDAHO POWER COMPANY Case No. IPC-E-90-20 Bxhibit No. 103 T. Faull, Staff Sllglg1r Page 6 of 6 ( ( P.3o (oU) ai a ltt o|lroroot-' o'o,CE(\latO (OCtts@o)FFaD1,)6)O€o. o-F- @- !- !.atro(DGrPe,d'oo,rra?o<D OlO A c,'a (D o co E _o-lrLlJ .9(!o _E .e4-ac-o=fi=E6c€ei xr-(it O' rtt = .S xZo9.5.=5E= ElCE OE> =.=>6-P -Ed5(D ^6F= €Oo)rfr.€olU'. (r)O t,o Fj@tt o (\ra o,a,o- UIo O c)I 5.F|r9Ed.9G.SE \9o'nDI-cfdXa o n.36 .a CD(ti-@Ed9 t. A€=gosF ;Qbqee**aE888588:::Epp o$tFOO- '\C,NF(\,IGElla- C.J-€. @-O- 9.haDocrrOcr)0(+:T\CDOOO(''.E' O O aDo o6!r(oot(DO(r:rGlru-CDO-N-N_(a ('-O_ ao(oi(r)NrD@Fi, (i,' (r)(,la, oooooo N.(\l @GItf. ol OCt?Fdr(tN(Do- F. o- N.OeeUlro !t(lr+C'l(O(ri)cnO('attrO!6-J(OFOt-Nc\ijic\idFN (Doo?ocOOge-@N.-Jal crf!(oN(Do)aDaa(E(D6(DoaD€D6!Og|F-FFF' $$$tH$ ===Fs9 t"rn(llN(llat)COC6OOCO'DcD ct! cD 6 atr cDFFF??? ,\NaOctF(l,r*+ra(or\cvNAIN(\I(\I IDAHO POWER COMPANY Case No. IPC-E-90-20Exhibit No. 104T. 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N I' ,J',-.l'J',-..f .J,J U'J'J,:' u O ql O ql O'J Q tJ,J,-t,J'J J'J'J'J - -t J -''-.rt ? <l rl <l + (l + q * + t st + tr tl tl e e + !t + <l rt <t t (t + <l sl st (t st * sl oa6(D0(D0 {I,(D (D0 (Dc0 q,{D (D(D (Dotro08 (Da qraoo oo o o oic d i.l r, <l lr'l € N ql o,3 r N r, q !l { r. o I o i N r.'} <l rrl € i\ o o,? r l,l i.1 rl'J:< < I * - i I d i r N N e'l a.l a{ a't al Cl at N i/r rii l'1 14 rir'i l'. {.1.} : -i IDAHO POWER COMPANY Case No. IPC-E-90-20Exhibit No. 105T. FaulL, Staff8/19/9t o -1t ri l-1 ! \ },f .i q € o l, :.1 f { } - q \ :, f4 .\ < t o,.r \ fi \ iJl.i'r i"l'r :'.l a.l -1 f.]'."r'1 n q + s +.? ll ul lr'l .o € €'- : r. n x } } :, N r N l0 F\ t1 O 6 < Ul a O i l,l N e{ Ul N N .{t t N l/r il')r, {O N !: S !'4 { d n O Ul O Ul r N 14 a N q N O S q, 11 frn { € € \ !'\ O (D O (} O O r d N i4 f} !t u: S € N <did<<i<l<-t M d L1l ,! 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O N (D <t ON O Oa l"i { o a a o F. r/! r ,3o { r'r \ o r n ul N o.o m r q n tO Cl 6 6 a C.{ + N O o.,3,3 + r.'r r'.! € lr'l <l O r O U'l N C.{ lfl 1.1 f,1 ir'l d U'l O ln { O { l.l q A O F] q U'l ai l'"r } U'l i,i'l d q l^t $ t q {y'., lr b - c,l n N i s r- x + { f 1.. c.t e{ i \ <t t1 u'l t N I r/.' c:ljr'tC -t-T Nti i S<f +itSt s S 0iFri * S'$*riSrts srtt 1l s o o<rc{,f-{)o<to0{of{o{oNoN o<tr,oooF.OAOOOOSsdSiss r C.,i 1.1 <t !'l { N O O C. * 0{ 14 sl l/'l { N @ O'3 * N t1 I n { r'' O $ g d C'l t't I lfl - a < t I i i i i d C'l C'l C'l C{ e'{ C'l C'l e{ a'l e'i 14 F'J rr rr l{ fr IDAHO POWER COMPANY Case No. IPC-E-90-20 Exhibit No. 106 T. Faull, Staff8lI9l9L Page t of 2 F3.JJ: ! g i! P U ftil 4,oL UUa&H IJJAL z*=ZAjooUUlIuJuJ 'Io 4+)UCoo?CC+,oo.U.aa,.a ClauJ o>!.a 0J+sUOo0-ErI 2H E9AF - fEIfrzlElZFE6L, EH OH 43OfrHOr ot}*Otr{ r.a.a# LU.a O0la+Jo'.a Oo uE{lt!d FFUlr.l U l!lrl lrl iPrFJEoc3atr.z<f rLl! Lt5 o o U l"iiUJ4n .Jl iii ltiJiJl(I-iOJi4>ir: ltii .Q to\o \tio q q i ir'litl F-. i:' CB r o:,1 \ ir'l - \ 0\.c .il $ S € O + € O U'l + it'. {'O r- O{} i S €} H q d f"l r i a..i rr al i.] lr'l \.e i+si*f+ineii*&s .{{t{_"<{ ezzzzzzz + o r,:, $ a 4,,:,,3' a € a.r u'l o o,:, c, q u'l r,1,:,,:,,:,l.'r \ € lil t:! l.'r l.'r i r,:, O { ir'l ir'l t'r i,:, i,:'l qt .tr iJ'l O elf.l<i<drdi*< ,f,O,:,ON iIOClirt Ul O f.l (DC..i <t l':, ,\ d o' a |'\ r .o O NO € a fl { (.1 r fr N { C'l N { l'r st I,:, a.{ € N O t''r { <t O 6 O l'i lrl,3 { O ,:, O + a.{ C.l }ir O f O Ul,3 t-I + O r r.C.l C.l r i C.l { r C.{ I < Il 0.{ < < Ol <risrisessso6s*o**$ Nr-NNNr-NNNNT-S*-NNN!'l O q O ,3 !l lt't N e{ N i { 14 S N rIlr'l 14 D O i <f r lll <f tt Cl N <l C'l ll') O c.l sr !l O a{ O SO ir'l (t € d O,3,Dr A <t O O D D O l^1 N S c.l l'1 ul O N N Ci n $ O t d il <t st O Gl + { st tlst .O O O S l. € l'r S N'3 S O l'. U'l ll'l{}rig|{} !}C{t9if,r{liid0rs {rssf O N Ll !t'I U'l O C.{ l\ !'l ltl l'.sfq<NNl"rfOC,lOfiNO€14<l€O{OOlr') saiaoN@{,:'o!'16it*sissorrirFris, oo{oqq!lc{OOf'.F. i < l''.r O{ €trl f.. t'llt c.t o t, < tl q t,r ut tt - 14 tr,{ O O 1"1 .:,{ O,3 t":r N + r.l0.q<<lg€<,3r.o@,f, a.l 14 .3 ut s N e.r N r'1 0. !'l oC.lU']<C{rOri{}irr+*sts s* s om.{l!loqsc.{o..ONN$r o o<t<tC.lrirt*c (rmil^{Oo o o,D r.1rt^0tttNrstrt .{t {or,OG-e t € N O O O i N t4 sl ltl -0 N O O O < C.l t'1 rt I:l { r. o 14 14 t4 ?"t r? <f q <t t <f <t <t q <t Ul U'l U'l 'J'l Ul U') Ll Ul U'l IDAHO POWER COMPANY Case No. IPC-E-90-20 Exhibit No. 106 T. Faull, Staff 8tl9l9l Page 2 of 2 r3 -J4 i.LiiL +) U o6 {o* <t r':'i.l fr +)oF zi77O trJUUOlIHIJ !q ozF3<ZUI 1.UUNUUlI<t ul trl*H Lo tt')o Cl+ ;\: u')!') l1)UCoo?c C+)CcrU.aOJ.a Claul q i {oo >L,3 .aO- r3i uo6 6LoiI s moll'l o cSa a.r*'!+l !N.a.a O!i Ud+lO.rOAUEa$i! dY €FFErttdUUlljJ Lt, I!IDEoofa'&. z{L IJ,I( tLu) -3u] -i !iI IJIri +J U tfr ! '!IU- zz UUouHi!a& zt3ZA s.-oUUiItfi uJiL ltUCoo LIoo.U.dof, ol! o>L.ao+J3UOIt iLolI o(,|EC '!1, LraiUUi+JOrOUULlil (ti!d FFiIilJ u ulLri lJ,l tl1=.:=oo:AtEZ<t rLII tr(tl I i I I I I I I I I I I I oo )o J CERTIFICATE OF SERVICE I HEREBY CERTIFY that I have this 19th day of August, 1991, served the foregoing DIRECT TESTIMONY OF THOMAS FAULL, in Case No. IPC-E-90-20, by mailing a copy thereof via Federal Express or regular mail, to the following: BARTON L. KLINE, ESQ. LEGAL DEPARTMENT IDAHO POWER COMPANY P. O. BOX 70 BOISE, ID 83707-0070 LARRY D. RIPLEY, ESQ. LEGAL DEPARTMENT IDAHO POWER COMPANY P. O. BOX 70 BO|SE, tD 83707-0070 GARY A. DAHLKE R. BLAIR STRONG PAINE, HAMBLEN, COFFIN, BROOKE & MILLER 12OO WASHINGTON TRUST FINANCIAL CENTER SPOKANE, WA 99204 TOM DUKICH RATES & TARIFF ADMINISTRATION WASHINGTON WATER POWER COMPANY P. O. BOX3727 SPOKANE, WA 99220 A. W. BROWN A. W. BROWN COMPANY, INC. 3416 VIA LIDO, SUITE F NEWPORT BEACH, CA 92663 JOHN M. ERIKSSON UTAH POWER & LIGHT COMPANY 1407 NORTH WEST TEMPLE SALT LAKE CITY, UT 84140-OOO1 W. F. MERRILL MERRILL & MERRILL P. O. BOX 991 POCATELLO, tD 83201-0091 JAMES FELL, ESQ. STOEL, RIVES, BOLEY, JONES AND GRAY SUITE 23OO 9OO SW FIFTH AVENUE PORTLAND, OR 97204 GREGORY N. DUVALL UTAH POWER & LIGHT COMPANY 424 PUBLIC SERVICE BUILDING 920 SW SIXTH AVENUE PORTLAND, OR 97204 ROY L. EIGUREN, ESQ. PETER J. RICHARDSON, ESQ. DAVIS WRIGHT TREMAINE 7O2W IDAHO STREET, SUITE 7OO BOISE, tD 83702-8908 C. TOM ARKOOSH RODEN & ARKOOSH P. O. BOX 2110 BO|SE, tD 83701-2110 .b l CERT/173 ffi