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BEFORE THE IDAHO PUBLIC UTILmES COMMISsi6NES
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IN THE MATTER OF THE
APPLICA nON OF P ACIFICORP
FOR A VOIDED COST
METHODOLOGY FOR QUALIFYING
FACILITIES LARGER THAN 1 MW
Case No. IPC-95-
Rebuttal Testimony
Rodger Weaver
On Behalf of PacifiCorp
June 25, 1996
Please state your name, business address and present position with PacitiCorp (the
Company).
My name is Rodger Weaver. My business address is 485 Lloyd Center Tower
Portland, Oregon 97232. My present position is Regulatory Administration
Manager.
Are you the same Rodger Weaver who has already prefiled testimony in this
case?
Yes.
What is the purpose of your rebuttal testimony?
To present the Company s positions on avoided cost issues in response to the
testimony of Rick Sterling and Dr. Richard A. Slaughter.
Do you have any comments regarding Mr. Sterling s opinion on 20-year
contracts?
Yes. Utilities are not acquiring long-term (20 years or more) resources as they
have in the past prior to FERC's activities which have facilitated intense
competition in the wholesale generation market. These activities have culminated
in the recent issuance of Order No. 888. Presently, long-term in the market is
being defined as three to fi ve years and the predominant level of new transactions
are for one year or less. To continue to guarantee QF prices for a twenty-year
term is contradictory with market trends and will continue to subsidize the QF
industry when the costs utilities can avoid are being defined by the market.
It should be noted that the Company signed the contract to acquire
Hermiston resources in October, 1993 , significantly prior to introduction of such
pervasive competition into the marketplace.
On page 5 of Dr. Slaughter s testimony he characterizes the electric power
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industry over the last 50 years as having prolonged periods of rising and then
falling real prices. Do you agree that the current trend of declining prices is from
the same factors that inf1uenced the industry over the prior 50 years?
No. The prior trends occurred during periods of regulation much different from
today s regulatory environment. The impetus of current price declines in the
market is competition furthered by FERC Order No. 888. Without customers
drive for increased market access, FERC's open access policies and state
regulatory efforts to respond to the market, we would not have seen the price
decreases that we have seen since early 1995.
On pages 4 and 12 of Dr. Slaughter s testimony he asserts that shorter term
contracts will eliminate small producers from the market and destroy competition
to existing utilities. Have QFs really been competitive with the IOUs and
beneficial to their customers?
Perhaps early in the history ofPURPA QFs provided some competition.
However, as the market has become more competitive QFs have ceased to playa
competitive role. This is particularly true for PacifiCorp. Inclusion of high cost
QF rates in the price of electricity have made prices higher than they would have
otherwise been. During 1994 the Company s average price for all QF resources
was $69.29/MWH while the simple average cost of Company owned thermal
resources was $28.72/MWH and the simple average cost of Company hydro
facilities was $ 14.64/MWH. Existing QF resources have not been competitive
with other resources available in the market, including Company owned resources
and likely will never be in the future.
I would add that if QF's are truly competitive with utilities and other
sellers, they will survive in a competitive market and if they are not they will not
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survive, as should be the case.
In various sections of Dr. Slaughter s testimony he states that a reduction in the
term of QF contracts from twenty to five years will result in an increase in risk
that future energy price increases will be borne solely by customers and not by
shareholders. Do you agree with this line of reasoning?
No. Dr. Slaughter s hypothesis does not match the realities of existing QF prices
as discussed above and the fact that QF prices are artificially determined -- not
determined by the market. Under existing regulation, customers are already
burdened with paying for existing QF contract costs, not shareholders. A
reduction in the term of QF contracts wouldn t change that fact. Moreover. it
should substantially reduce price risk for customers because the prices will be
more commensurate with market prices -- the prices that customers should pay.
Do you have any comments on both Mr. Sterling s and Dr. Slaughter
recommendations that levelization should continue for twenty year QF contracts?
Yes. First, the Company is not opposed to levelization as a general concept.
However, as explained in my direct testimony, we are opposed to levelization of
twenty-year contracts. because they impose a cost on the utility that is not
otherwise imposed in the market today.
Relative to Mr. Sterling s comment that the Commission has already
reviewed the issue of levelization and therefore, the issue does not need further
review. I would point out that the orders referenced were issued prior to open
access policies and the tremendous level of competition that has exerted itself in
the market. Therefore. I would envision that the Commission would want to
review the appropriateness of levelization at this time. I consider such a review
much the same as current congressional review of the appropriateness of PURP A
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in today s environment.
What was FERC's proposed objective when they moved to facilitate competition
into the marketplace?
Clearly, FERC facilitated emerging market competition as the preferred approach
to securing maximum efficiency in the generation function and passing these
efficiencies through to customers in the form of lower prices. A continuation
existing policies regarding QF contract length and levelization will perpetuate the
existing disparity that we see between market prices and QF prices.
Do you agree with Dr. Slaughter s proposal to disallow non-deferrable resources
from the least cost planning stack of resources for the purpose of avoided cost
calculations?
No. Non-deferrable resources are part of the IRP process and therefore, should be
included in any determination of avoided costs that are IRP based. Exclusion
non-deferrable resources would be contrary to what IRP based avoided costs are
supposed to accomplish -- a more accurate representation of a utilities avoided
cost.
Can you elaborate on the Company s non-deferrable resource position?
Yes. A non-deferrable resource is part of a utility s base case. generally a least
cost option and requires acquisition at a certain point in time, otherwise it
becomes a lost opportunity. For example, turbine upgrades are generally
accomplished during major plant overhauls which occur every eight to nine
years. Failure to upgrade a turbine at the major overhaul would result in an
economic loss to the utility. Therefore , exclusion of a non-deferrable resource
would artificially increase avoided costs to a level higher than they should be.
Does this conclude your rebuttal testimony?
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PacifiCorp
Yes.
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PacifiCorp
CERTIFICATE OF SERVICE
I hereby certify that on the 24th day of June, 1996, a true and correct copy of the
foregoing Rebuttal Testimony of Rodger Weaver was sent via Federal Express to the
following:
Larry D. Ripley
Idaho Power Company
1220 West Idaho Street
Boise, Idaho 83702
Brad Purdy
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Thomas Dukich
Washington Water Power
E. 1411 Mission Avenue
Spokane, W A 99202
R. Blair Strong
Paine Hamblen Coffin
717 West Sprague Avenue, #1200
Spokane, W A 99204
Barton L. Kline
Idaho Power Company
1220 West Idaho Street
Boise, Idaho 83702
Peter J. Richardson
Davis Wright Tremaine
999 Main Street, #911
Boise, ID 83702
Ronald C. Barr
Earth Power Resources, Inc.
2534 East 53rd Street
Tulsa, OK 74105
Richard B. Burleigh
Hawley Troxell
877 Main Street, #1000
Boise, ID 83702
Owen H. Orndorff
Orndorff Peterson & Hawley
1087 West River Street, #230
Boise, ID 83702