20100528Teply Direct.pdf

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20m Mß,Y 28 PMl2: 05
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE )
APPLICATION OF ROCKY )
MOUNTAIN POWER FOR )
APPROVAL OF CHANGES TO ITS )
ELECTRIC SERVICE SCHEDULES )
AND A PRICE INCREASE OF $27.7 )
MILLION, OR APPROXIMATELY )13.7 PERCENT )
CASE NO. PAC-E-10-07
Direct Testimony of Chad A. Teply
ROCKY MOUNTAIN POWER
CASE NO. PAC-E-10-07
May 2010
1 Q.Please state your name, business address and position with PacifiCorp
2 ("Company").
3 A.My name is Chad A. Teply. My business address is 1407 West Nort Temple,
4 Suite 210, Salt Lake City, Utah. My present position is Vice President of
5 Resource Development and Constrction for PacifiCorp Energy. I report to the
6 President of PacifiCorp Energy. Both Rocky Mountain Power and PacifiCorp
7 Energy are divisions of PacifiCorp.
S Qualifications
9 Q.Please describe your education and business experience.
10 A.I have a Bachelor of Science Degree in Mechanical Engineering from South
11 Dakota State University. I am a Registered Professional Engineer in the state of
12 Iowa. I joined MidAmerican Energy Company in November 1999 and held
13 positions of increasing responsibilty within the generation organization,
14 including the role of project manager for the 790- megawatt Walter Scott Energy
15 Center Unit 4 completed in June 2007. In April 200S, I moved to Nortern
16 Natual Gas Company as senior diector of engineering. In Februar 2009, I
17 joined the PacifiCorp team as Vice President of Resource Development and
is Construction, at PacifiCorp Energy. In my current role, I have responsibility for
19 development and execution of major resource additions and major envionmental
20 projects.
21 Q.What is the purpose of your testimony?
22 A.The purpose of my testimony is to provide the Commssion and paries with
23 information supporting the prudence of pollution control equipment and
Teply, Di - 1
Rocky Mountain Power
1 additional generation plant capital investments being placed in service durg the
2 test period.
3 Background
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Please provide a general description of desired outcomes from the pollution
control equipment and generation plant capital investments being placed in
service.
The pollution control equipment investments contemplated in this case primarly
result in the reduction of sulfur dioxide ("SOz"), nitrogen oxides ("NOx"), and
pariculate matter ("PM") emissions from the retrofitted facilties. The tubine
upgrade investments are intended to enhance the Company's overall generation
capabilty and cycle efficiency for the large thermal units being provided with this
equipment. The repai and replacement capital investments are intended to
13 support generation asset reliabilty via reduced risk of equipment/component
14 failures.
15 Description of Pollution Control Investments
16 Q.Please describe the Dave Johnston Unit 3 pollution control project and
17 associated equipment.
is A.The pollution control project at the Dave Johnston Unit 3 power plant is being
19 completed in conjunction with the Dave Johnston Unit 4 pollution control project
20 that wil be placed in service in 2012. The Dave Johnston Unit 3 pollution control
21 project wil upgrade and improve the unit's PM controls and install SOz controls.
22 The capital expenditue for the project durig the test period is $300 millon.
23 Construction began in 200S, and the project wil be operational by May 31, 2010.
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Rocky Mountain Power
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The new pollution control equipment is being tied into the existing unit durng a
scheduled plant maintenance outage. The project wil install a dr flue gas
desulfuzation ("DFGD") system with fabric fiter. A DFGD system injects lime
slurr in the top of an absorber vessel (scrubber) with a rapidly rotating atomizer
wheeL. The rapid rotation of the atomizer wheel causes the lime slur to separate
into very fine droplets that intermx with the flue gas. The SOz in the flue gas
reacts with the calcium in the lime slurr to form calcium sulfate in the form of
dr PM. The dr PM is then captued in the downstream baghouse along with fly
ash from the boiler. The DFGD system wil produce a nonhazardous dr waste
product suitable for landfil disposal. Other equipment to be installed as par of
the project includes induced draft fans, boiler reinforcement, new ductwork, lime
slurr reagent preparation systems, waste material handling systems, electrcal
infrastrcture, controls, and other miscellaneous appurtenances and support
systems.
Wil the Dave Johnston Unit 4 pollution control project also be placed in
service during the test period contemplated in this case?
No. The. Dave Johnston Unit 4 pollution control project, which is being
constrcted concurrently with the Dave Johnston Unit 3 pollution control project,
wil be placed in service during the next planned major maintenance outage for
that unit. The planned major maintenance outages for the Company's generation
assets are scheduled on a control area basis, considerig optimal frequency
between overhauls and to minimize the number of major units off line at anyone
time. The Company's Dave Johnston Unit 4 completed its most recent overhaul
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Rocky Mountain Power
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in 2009 and is scheduled for its next overhaul in the spring of 2012. The
Company's intent in establishing the tie-in schedules for the Dave Johnston Unit 3
and Dave Johnston Unit 4 pollution control equipment was to balance the
aggregated constrction costs and schedules for the pollution control equipment
projects against the established planned maintenance overhaul schedules, work
plans, and budgets for the respective units.
Are costs specific to Dave Johnston Unit 4 pollution control equipment
included in this case?
No. Costs contemplated in this case include only those costs that are specific to
Dave Johnston Unit 3 as well as the cost of all common facilities that are required
to be placed in service to allow prudent operation of either unit's new emission
control system. Common facilities include reagent preparation, waste disposal,
electrical supply, and ancilar utility systems, as well as site preparation and the
chimney; In the event one of the subject units. is retied in the futue, these
common facilities would not be retired since they must remain in service for the
remaining unit to operate.
Please describe the emissions improvements that wil be achieved with the
Dave Johnston Unit 3 pollution control project.
The Dave Johnston Unit 3 DFGD system and baghouse wil reduce SOzemissions
from the unit by approximately 90 percent, or approximately 6,600 tons per year.
In addition to reducing SOz emissions, the baghouse wil reduce the emissions of
PM. The PM emission limit wil be reduced from 0.20 pounds per millon British
Thermal Units to 0.015 pounds per millon British Thermal Units.
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Rocky Mountain Power
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Please describe the other major pollution control projects and associated
equipment contemplate in this case.
The other major pollution control projects undertaken by PacifiCorp in 2010
include: (1) the Huntington Unit 1 electrostatic precipitator to baghouse
conversion project; (2) the Huntington Unit 1 scrubber upgrade project; (3) the
Huntington Unit 1 low NOx burers installation project; (4) the Dave Johnston
Unit 3 low NOx burners installation project; (5) the Jim Bridger Unit 1 scrubber
upgrade project; and (6) the Jim Bridger Unit 1 10wNOx burers installation
project. The Huntington baghouse installation project wil replace the existing
electrostatic precipitator with a fabric fiter to captue dr PM from the flue gas
stream. The scope of work for this project also includes converting the existing
stack to wet operation to enable the scrubber bypass dampers to be removed. The
Huntington Unit 1 scrubber upgrade wil allow treatment of all the flue gas from
the unit. The project wil also provide new waste handlg equipment to manage
the increase in waste product from the higher removal efficiency of the scrubber.
The Jim Bridger Unit 1 scrubber upgrade wil replace internal scrubber pars
(trays, piping and nozzles). This work wil improve SOz removal effciency while
enabling the bypass dampers to bypass less flue gas. The low NOx burers
projects referenced above wil instal new burers that utilze improved
combustion characteristics and a separated over-fire air supply to the boiler to
reduce NOx emissions.
Do Huntington Unit 1 and Jim Bridger Unit 1 currently have scrubbers?
Yes. The scrubber upgrade projects primarly include the upgrade and
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replacement of existing pumps, spray headers, trays, and ancillar equipment to
improve the control of SOz emissions from the affected units.
Please describe the emisions improvements that wil be achieved with the
pollution control projects described above.
The pollution control equipment investments described above support the
Company's ongoing commtment to reduce SOz emissions from its generation
fleet by approximately 50 percent compared to 2005 levels. In addition to
reducing SOz emissions, the projects support the Company's ongoing
commtment to reduce NOxemissions from its generation fleet by approximately
40 percent compared to 2005 levels.
Have the costs of the projects been prudently managed?
Yes. The scrubber and baghouse projects have been contracted underlump-sum
tuey engineer, procure and constrct (EPC) contract terms which resulted from
competitive bidding processes. The burner replacement projects have been
contracted under multiple lump-sum contracts which resulted from competitive
bidding processes.PacifCorp management continues to provide oversight of the
projects and closely manages any project execution plan changes or potential
contract scope changes.
Are there additional operating costs that wil be incurred as a result of the
installation of the pollution control equipment?
Yes. Operation of the new pollution control equipment wil result in increased
operation and maintenance costs of $ 1.5 milion associated with reagent, waste
disposal, and equipment maintenance. These costs are summzed on page 4.6 in
Teply, Di - 6
Rocky Mountan Power
1 Exhibit 2 of Mr. Steven McDougal's Direct Testimony.
2 Q.How are the pollution control investment costs and associated operating costs
3 being treated in the revenue requirement?
4 A.The costs for the pollution control equipment have been included in this case as
5 explained in the revenue requirement testimony of Mr. McDougaL.
6 Justification of Pollution Control Investments
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What is the basis for these investments?
These investments were identified as par of the Company's response to
environmental regulations that govern the plants' operations. Though the 1977
amendments to the Clean Air Act, Congress set a national goal for visibilty to
remedy impaient from manmade emissions in designated national parks and
wì1derness areas; this goal resulted in development of the Regional Haze Rules,
adopted in 2005 by the Environmental Protection Agency. The first phase of
these rules trgger Best Available Retrofit Technology ("BART") reviews for all
coal-fired generation facilities built between 1962 and 1977 that emit at least 250
tons of visibility-impaing pollution per year. The units provided with the
pollution control equipment investments discussed above are subject to BART
reviews. BART reviews of the units have been completed and submitted to the
respective state deparments of environmental quality for final disposition.
The respective state deparents of environmental quality for the units
have incorporated the results of the above mentioned BART analyses into the
constrction permts and approval orders for the pollution control equipment
contemplated by this case.
Teply, Di - 7
Rocky Mountain Power
1 With respect to the Dave Johnston Unit 3 and Jim Bridger Unit 1 projects,
2 the Wyoming Deparment of Environmental Quality ("WY DEQ") issued BART
3 permts for those units on December 3 1, 2009, incorporating the equipment and
4 installation schedules recommended via the BART review and contemplated in
5 this case. The conditions of the BART permts wil be incorporated into the
6 Wyoming State Implementation Plan ("SIP") for Regional Haze in support of its
7 goals to reduce visibilty impairng emissions. The Wyoming SIP is subject to
8 U.S. Environmental Protection Agency ("EPA") review and approval. The WY
9 DEQhas also issued construction permts for the Dave Johnston Unit 3 and Jim
10 Bridger Unit 1 environmental improvement projects.
11 With respect to the Huntington Unit 1 project, the Utah Deparment of
12 Environmental Quality has incorporated the results of a BART review completed
13 for that facility into the Utah SIP. The Utah SIP is subject to EPA review and
14 approval. The state of Utah has also issued an Approval Order (i.e. a permt to
15 constrct) for the Huntington Unit 1 environmental improvement project.
16 In addition to the BART requirements, increasingly more stringent
17 National Ambient Air Quality Standads have been and are being adopted for
18 criteria pollutants, including SOz, nitrogen dioxide, ozone and PM.
19 Implementation of these projects assists in avoiding nonattainment of these
20 . standards. The environmental compliance activities discussed above form the
21 basis for these investments.
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Rocky Mountain Power
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What factors does the Company consider when determining which capital
investments to make in environmental equipment retrofit projects?
The Company takes several factors into consideration when.makg pollution
control equipment investments includig: evaluation of state and federal
environmental regulatory requirements and associated compliance deadlines;
review of emerging environmental regulations and rulemakng; and analyses of
alternate compliance options. As par of the BART review of each facilty, the
Company evaluated several technologies on their abilty to economically achieve
compliance and support an integrated approach to control criteria pollutants (e.g.
SOz, NOx, and PM for the facility), if it were to continue to operate and to bur
coaL. The BART analyses reviewed available retrofit emission control
technologies and their associated performnce and cost metrcs. Each of the
technologies was reviewed against its abilty to meet a presumptive BART
emission limit based on technology and fuel characteristics. The BART analyses
outlined the available emission control technologies, the cost for each and the
projected improvement in visibilty which can be expected by the installation of
the respective technology. Once the preferred BART technology was identified,
the Company moved forward with its competitive bidding process to evaluate and
ultimately select the preferred provider for the projects.
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Rocky Mountain Power
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Would the Company's decision to make this incremental investment in
environmental controls at these units change if limitations were placed on
carbon dioxide emissions, such as in the Waxman-Markey bil in the U.S.
House of Representatives or the Kerry-Lieberman bil in the U.S. Senate?
No. The Company is curently engaged in assessing its existing generation
resources, its planned supply and demand-side resources and its 10-year capital
budget regardig the impact of carbon dioxide emissions restrictions. While
planned investments in other units may change, the Company's plans regarding
these investments would not change due to carbon-emission restrctions. The
units have depreciation lives for ratemag purposes that provide sufficient
remaining time to depreciate the investments in the pollution controls.
12 Timing of Investment
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Why is PacifiCorp installing pollution control equipment at this time?
As discussed above, the Company is installng the pollution control equipment at
this time primarly to ensure compliance with Regional Haze Rules, but also in
response to a more strngent National Ambient Air Quality Standards and a
varety of existing and emerging emission reduction requirements. Final
instalation activities and tie-in of the pollution control equipment described
above can only be accomplished when the units are off-line. Meeting the timing
requirements of construction permts/approval orders and reducing plant outage
time necessitated completion of final installation activities and tie-in of the
pollution control equipment during the scheduled overhauls within this test
period. Installation of the pollution control equipment and associated systems
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Rocky Mountain Power
1 contemplated in this case represent a significant step for PacifiCorp's coal-fueled
2 power plant fleet toward meeting the SOz and NOx reductions required by the
3 Regional Haze Rules and established by the respective states' emissions reduction
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5 Customer Considerations
6 Q.What are the benefits to customers of installng the pollution control
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related to this project?
Customers directly benefit from the continued availabilty of low-cost generation
produced at the facilities while also achieving environmental improvements from
these resources, resulting in cleaner air. In addition, the tie-in of these necessar
controls is being accomplished durng planned maintenance outages, as opposed
to scheduling separate outages for this work, which reduces replacement power
costs. The Company has ten BART-eligible units in Wyoming and four in Utah.
The BART controls for each of these units must be installed as expeditiously as
possible, but no later than five years from the date the respective SIPs are
approved and prior to the compliance dates specified in the permts Postponing
instalation on these units to later planned maintenance outages would mae it
virally impossible for the Company to effectively ensure that all of its affected
units meet compliance deadlines and would place the Company at risk of not
having access to necessar capital, materials, and labor while attempting to
perform these major equipment installations in a compressedtimeframe.
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Rocky Mountain Power
1 Description of Turbine Upgrade Investments
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Please describe the turbine upgrade projects.
The Company has thee turbine upgrade projects totaling approximately $129
milion that wil be completed durng the test period. The projects include: (l) the
Hunter Unit 1 high pressure (HP)/intermediate pressure (IP)/low pressure (LP)
turbine sections replacement; (2) the Huntington Unit 1 HP/iP/LP tubine sections
replacement; and (3) the Jim BridgerUnit 1 HP/i turbine sections replacement.
The revenue requirement impact of this investment has been included in Exhibit
NO.2 of Mr. McDougal's Direct Testimony and the investment is summarzed on
page 8.6.2 of such exhibit.
Please describe the efficiency improvements that will be achieved with the
turbine upgrade projects described above.
The Company expects the Hunter Unit 1 tubine upgrade to allow more efficient
tubine performance without increasing emissions, such that an additional 15
megawatts of capacity can to be generated by the unit. The same principles apply
to the Huntington Unit 1 turbine upgrade and Jim Bridger Unit 1 turbine
upgrades, which are expected to provide efficiency improvements, without
increasing emissions, resulting in an additional 18 megawatts and an additional
four megawatts, respectively, of capacity to be generated by the units. Dr. Hui
Shu has annualized the incremental changes to these three units in her net power
cost analysis in her Dirct Testimony.
Teply, Di - 12
Rocky Mountain Power
1 Justification of Turbine Upgrade Investments
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What is the basis for these investments?
As par of the Company's efforts to meet the growing demand for generation, and
given the advancing technological improvements in steam tubine design and
manufacturig, the Company has initiated a tubine upgrade initiative. This
tubine upgrade initiative is intended to fuer enhance PacifiCorp's overall
generation capabilty and cycle efficiency for the large thermal units being
provided with this equipment.
What other generation plant capital investments are included in this
application?
Repair and replacement investments are the remaining projects contemplated in
this case. The projects fall within four major categories: (1) boiler section
replacements; (2) controls upgrades; (3) generator rewind; and (4) other.
How wil customers benefit from these capital expenditures?
These capital expenditues enable the Company to maintain overall reliabilty of
the aging fleet. The Company's plants produce energy at costs lower than market
prices, enabling the Company to serve its customers at some of the lowest retail
electrcity prices in the United States. Investment in the Company's existing
generating units increases the probabilty of continued safe and reliable operation
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21 Conclusion
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Please summarize your testimony.
Investment in pollution control equipment is required to meet the Regional Haze
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Rocky Mountain Power
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Rules enacted in 2005 by the EPA, and the resulting BART reviews and
permtting process. The Company's decision to install this pollution control
equipment would not change due to the enactment of carbon dioxide emission
reduction legislation. The investment allows for the continued operation of low-
cost coal-fired generation facilities while achieving significant environmental
improvements to air quality and regional haze issues.
Also, the Company is makng other prudent capital expenditures in its
existing generation fleet that wil benefit customers by mantaining safe, reliable,
efficient, cost-effective generating resources. The investments durng the test
period are reasonable and prudent, and the Company should be granted full cost
recovery for these investments.
Does this conclude your direct testimony?
Yes.
Teply, Di - 14
Rocky Mountain Power