20071026Widmer rebuttal.pdf

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2U07 OCT 26 MilO:
I. iDAHO PUBLIC
UTlUT/ ' CO"'~MJSS10r.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF ROCKY
MOUNTAIN POWER FOR APPROV AL )
OF CHANGES TO ITS ELECTRIC SERVICE SCHEDULES
CASE NO. PAC-07-
Rebuttal Testimony
of Mark T. Widmer
ROCKY MOUNTAIN POWER
CASE NO. PAC-07-
October 2007
Please state your name, business address and present position with the
Company (also referred to as Rocky Mountain Power).
My name is Mark T. Widmer, my business address is 825 N.E. Multnomah, Suite
800, Portland, Oregon 97232, and my present title is Director, Net Power Costs.
Are you the same Mark T. Widmer that previously submitted testimony in
this proceeding?
Yes.
Summary of Testimony
Will you please summarize your testimony?
I present an update to the Company s proposed net power costs. In addition, my
testimony:
Rebuts Mr. Timothy Shurtz s recommendation to update natural gas expense
and
Provides the net power cost impact of Mr. Michael Gorman s proposal to
remove generation assets that were or are planned to be placed in service
during calendar year 2007.
Net Power Cost Update
Please describe the updates proposed by the Company.
The Company proposes three updates to net power costs. Those updates include
the correction of a natural gas swap error, removal of demand side management
costs, and an adjustment to remove the Goodnoe Hills wind project. The impact
of these updates on revenue requirement in this case is provided in the rebuttal
testimony of Company witness Mr. Steven R. McDougal.
Widmer, Di-Reb -
Rocky Mountain Power
Please explain the natural gas swaps error?
Based on a review subsequent to our filing, the Company determined that natural
gas swap sales were incorrectly coded as purchases, due to a data system error.
The Company notified the Commission Staff and other parties of the error. As
correctly noted by Commission Staff in its testimony, correction of this error
reduces net power costs by approximately $34.7 million on a total Company basis
and $2.4 million on an Idaho basis.
Please explain the demand side management program adjustments.
During the discovery process the Company discovered that certain demand side
management expenses were double counted because they were included in net
power costs as well as FERC account 557, other power supply expense which is
not a component of net power costs. This adjustment removes the expense fTom
net power costs because the Company s actual accounting includes the expense in
account 557. This adjustment reduces net power costs by $1.0 million total
Company or $63 064 Idaho.
Please explain the Goodnoe Hills wind project adjustment?
As explained by Company witness Mr. McDougal , the Goodnoe Hills wind
project is being removed due to the uncertainty of the number of turbines that will
be placed in service prior to December 31 , 2007. This adjustment is consistent
with Staffs proposal to remove all resources that are not placed in service by
December 31 2007, and it increases net power costs by $2.5 million total
Company or $163 051 Idaho. This adjustment increases net power costs because
the zero cost Goodnoe energy is principally replaced with market purchases.
Widmer, Di-Reb - 2
Rocky Mountain Power
Shurtz Natural Gas Expense
Please explain Mr. Shurtz's natural gas expense concerns?
Mr. Shurtz is concerned that the Company has not reflected the market price
decline of natural gas that occurred subsequent to the Company s filing and
requests that the Commission determine whether the decline should be included in
the Company s results.
Do you agree with Mr. Shurtz's assumption that the decline in natural gas
market prices translates into a decline in the Company s net power costs?
No. Natural gas is hedged on a forward basis to insulate customers fTom exposure
to significantly higher net power costs as experienced by the Company during the
2000/2001 California energy crisis. While hedging protects customers fTom price
increases, it also prevents customers and the Company from benefiting fTom price
decreases.
Have you calculated the impact of updating natural gas prices?
Yes. The Company s original filing used market prices based on the Company
March 30, 2007 official forward price curve. Updating natural gas fuel prices to
the June 29 2007 official forward price curve actually increases net power costs
by $4.2 million on a total Company basis and $276 431 on an Idaho basis. This is
an example of the result when market prices drop below the hedge price.
Gorman Exclusion of 2007 Generation Plant
Did Monsanto calculate the net power cost impact of Mr. Gorman
recommendation to eliminate all 2007 plant additions?
No.
Widmer, Di-Reb - 3
Rocky Mountain Power
Have you calculated the net power cost impact of Mr. Gorman
recommendation?
Yes. The impact of removing the Lake Side combined cycle combustion turbine
Marengo wind project, and Blundell bottoming cycle increases net power costs by
$40.2 million on a total Company basis and $2.6 million on an Idaho basis. The
Goodnoe Hills wind project was excluded from this calculation because it is being
removed fTom the Company s filing as discussed above. If the Commission
adopts Mr. Gorman s recommendation to remove all plant additions placed in
service during 2007, net power costs must be updated by this amount to properly
match the costs and benefits related to new plant.
Does this conclude your rebuttal testimony?
Yes.
Widmer, Di-Reb - 4
Rocky Mountain Power