20110711RNP Comments.pdf

RECEIVED
,,\\\11/1.,....Renewable
Northwest
Project
2011 JUt II PH 2: 56
917 SW Oak St, Suite 303 . Portland, OR 97205
phone: [phone] . fax: [phone] . www.RNP.org
July 11, 2011
BY EMAIL (to iean.;ewell(gpuc.daho.gov)
Commission Secretary
Idaho Public Utilties Commission
P.O. Box 83720
Boise, ID 83720-0074
Re: Case No. PAC.E.ll.l0
Renewable Northwest Project's Comments on Rocky Mountain Power
Company's 2011 Integrated Resource Plan
Honorable Commissioners:
Renewable Northwest Project (RNP) appreciates the opportunity to comment on
Rocky Mountain Power Company's ("the Company's") 2011 Integrated Resource Plan
(IRP), pursuant to the Modified Procedure described in Idaho Public Utilties Commission
("Commission") Order No. 32243. RNP is a coalition of public interest and industry groups
that seeks to promote the implementation of environmentally responsible renewable
energy resources across the Northwest.
RNP shares the Company's view that electric sector regulation wil continue to
prefer clean, renewable energy resources. (See, e.g., IRP, pages 82, 225.) Planning for a
regulatory environment that values low-carbon, renewable, clean and safe generating
technologies is in the best interests of the Company's customers. Short-term political shifts
notwithstanding, national political leaders wil continue to respond to the desire to lead in
the clean energy economy and to avoid environmental and safety issues associated with
risky and polluting technologies. In some parts of the IRP, the Company ultimately makes a
number of sensible decisions to plan toward that regulatory future by favoring investments
in transmission modernization (see IRP, page 82) and renewable energy resources (see
IRP, pages 225-228).
In particular, RNP applauds the Company's use of sophisticated transmission
investment analysis in Chapter 4 of its IRP and its recognition of the diverse benefits of
transmission investments (IRP, page 49). Given that the Company's analysis shows that
"economics do not drive a clear selection" (IRP, page 82), careful planning for a robust,
efficient transmission system wil be a good bet for customers in any future-and
especially in a future that prefers clean, renewable energy sources.
Case No. PAC.E.ll-l0 - RNP's Comments on RMP's 2011 IRP Page lof4
Yet, in other critical areas ofthe IRP analysis, the Company's path is inconsistent
with the very regulatory vision that it postulates. Most significantly, the Company fails to
provide any comprehensive, forward-looking economic analysis of continuing to upgrade
aging, ineffcient coal plants.i Those sizeable investments wil become a liabilty for
customers as diverse forms of regulation of coal plant pollution advance (see IRP, pages 30-
36). In this context, piecemeal justification of pollution control upgrades in rate cases is
not sufficient; the Company's IRP should be required to demonstrate that customer dollars
spent today to prop up aging coal plants are stil a good investment when viewed along
with a reasonable forecast of the compliance costs associated with likely future regulation.
The Company's coal retirement analysis, apparently limited to a "proof-of-concept"
evaluation of currently planned pollution control upgrades assuming various C02 and gas
prices (IRP, pages 168,180-181,236-40), does not evaluate the full picture of the ratepayer
investment required to keep individual coal plants on line. We recommend that the
Company undertake a robust analysis to evaluate whether, with the future pollution
controls reasonably likely to be required by clean air regulation, continued investment in
each of its plants makes economic sense for ratepayers when compared to alternatives.
Another poor fit with the Company's regulatory vision is that the only significant
near-term investments in new generating resources reflected in the IRP are two large
natural gas plants. Questionable modeling assumptions, stil being examined, may have
influenced the paucity of renewable resources in initial portfolio results and in the
Company's plans for near-term investment. To arrive at a level of investment in renewable
resources over the planning term that reasonably hedges regulatory risk, the Company had
to adjust the preferred portfolio based on post-hoc policy and business analysis. RNP
agrees with the Company that its initial modeling included too few renewable resources to
hedge policy risk, and that adding more wind resources is likely an appropriate adjustment.
Nonetheless, it is important to consider whether skewed assumptions about renewable
resources prevented the Company's model itself from reaching appropriate outcomes for
renewable energy.
Wind. For wind resources, capital costs were commensurate with those modeled in
the 2008 IRP,2 despite an explicit recognition that the cost of wind turbines has fallen (IRP,
1 Several PacifiCorp plants appear on a Western Grid Group/Synapse Energy study's list of the bottom 25
percent of economic merit within the western coal fleet, as compared with both new and existing gas
generation: Carbon 1-2 (UT, 172 MW), Dave Johnston 1-3 (WY, 437 MW), Naughton 1-2 (W, 370 MW).
Jeremy Fisher and Bruce Biewald, Synapse Energy Economics, Inc., "WECC Coal Plant Retirement Based On
Forward-Going Econimic Merit' Uanuary 10, 2011), available at
htt://ww.wecc.biz/committees/BOD /TEPPC/T AS/SWG /10March20 11 /Lists/Minutes 11 /WECC%20Coal
%20Retirement%20Criteria%201-10-2011 %20Final.pdf. Western Grid Group commissioned Synapse to
develop a model that generates a list of possible coal plant retirements based on forward-going economic
merit More background is available in a WECC staff presentation available at
htt://www.wecc.biz/committees/BOD /TEPPC/T AS/SWG /10March2 011 /Lists/Presentations/llWGG%20
Carbon%20Reduction%20Study%20Case.pdf.
2ln the 2008 PacifiCorp lRP, the Oregon wind's low cost estimate was $2378/kW in 2011 dollars. In 2011
those capital costs have risen to $2393/kW for Oregon sites that do not require new incremental
transmission. "2008 Integrated Resource Plan Volume 1." Pacificorp. Pg 103. Available at
http://ww.pacificorp.com/contentl dam lpacificorp / doc /EnvironmentlEnvironmental Concerns /Integrate
d Resource Planning 3.pdf.
Case No. PAC.E.ll.l0 - RNP's Comments on RMP's 2011 IRP Page 2 of4
page 112). High capital costs for wind resources were adjusted further upward (by 50 to
100 percent) by assigning additional construction costs without clear explanation or
justification. (See IRP, page 130 (Table 6.10).) Capacity factors for wind resources appear
low relative to other data.3 In addition, the Company relied upon wind integration costs
from a study that it completed without ever having responded to serious problems
identified by a broad range of stakeholders.4 Had stakeholder concerns in these areas been
evaluated seriously during development of the IRP, the Company may not have had to
insert additional wind resources at the end of its modeling. Furthermore, wind resource
additions may not have been delayed until the end of the planning period, when lower
capital costs and federal incentives may no longer be available to the Company.
GeothermaL. Of particular interest for Idaho is the IRP's treatment of geothermal
resources, given the state's rich endowment and the experience of Idaho utilties in
successfully contracting with geothermal generators. PacifiCorp has operating experience
with geothermal resources, and they can add important diversity to the portfolio if found to
be least cost, least risk. Indeed, most of IRP's initial portfolio results contained significant
geothermal resources, averaging around 300 MW. (IRP, pages 207 (Table 8.1), 208.) Yet,
because of a desire to obtain legislative cost-recovery guarantees, the Company eliminated
all consideration of geothermal resources. (IRP, page 224.) This justification appears to
assume that the utilty is only considering a self-build resource, and not PPAs from
geothermal developers. The Company's experience with geothermal resources makes self-
build a good option, but it is not clear that it is the only option. Other utilties, including
Idaho Power, appear to have contracted for geothermal resources. To justify excluding an
entire resource from consideration, particularly one favored by the model, the Company
should at least be required to demonstrate that it has made a strong effort to find least cost,
least risk geothermal resources through contracts and self-build opportunities.
Solar. RNP is pleased that the Company evaluated distributed generation resources,
including solar PV and solar hot water. It is notable that, with accurate cost assumptions,
the Company's model selected both as cost-effective resources for the Company's system.
The preferred portfolio includes 30 MW of solar hot water heating resources by 2020, and
we look forward to seeing the Company implement programs to capture this effcient
resource. (IRP, pages 230 (Table 8.16), 254.) For distributed solar PV, when sensitivity
cases 30 and 30a corrected the model to include only the utilty's buy-down cost for a Utah
solar PV incentive program (rather than the full installation cost, much of which is borne by
the customer), the model selected the full amount of distributed solar capacity it was
3 For example, the BPA Wind-Only Bubble in Table 6.10 lists a capacity factor of 29 percent (though
underlying data shows that the Company may actually have used 28 percent). Nortwest Power and
Conservation Council data demonstrate a historical average 30 percent wind capacity factor for projects
connected to BPA from 2007 to 2010. Ellot Mainzer (BPA), Ken Dragoon (NWPCC) "Wind Energy
Development in the Pacific Nortwest: Checking Facts, Connecting Dots" Uune 6, 2011), Slide 5, available at
http://www.bpa.govlcorporatelwindpowerldocslWIF SC Presentation 6-11.pdf.
4 Despite assurances in a September 1, 2010 email communication to study participants that "PacifiCorp wil
investigate substantive issues raised by stakeholders and respond appropriately during the course of the
remaining 2011lRP development schedule," no response to stakeholder concerns with the wind integration
study has been provided to date.
Case No. PAC-E.ll.l0 - RNP's Comments on RMP's 2011 IRP Page 3 of4
permitted to choose (1.2 MW per year). (IRP, pages 243-44.) This suggests that incentive
programs for distributed solar can be least cost supply-side resources when utilties pay
just a percentage of the installation cost, and the Company should be encouraged to pursue
the Utah program and consider expansion into Idaho.
Of the above issues, all of which should be addressed in future IRPs, one is so
significant that RNP urges the Commission to take action in this docket. The
Commission should require the Company to provide, as a supplement to its IRP, a
comprehensive regulatory analysis of past, present, and future investments in coal plants
on a plant-by-plant basis. The supplement should include a risk analysis that
comprehensively compares the regulatory compliance costs for each of these units with
alternative power supply options and examines the possibilty that regulatory compliance
costs wil be greater than those forecasted. If the planning process does not give regulators
a broader, forward-looking context within which to view continued requests for cost
recovery for pollution control upgrades, it wil be more difficult to make informed
decisions when individual investments come before the Commission in rate cases, such as
the one currently pending.
RNP appreciates the opportunity to comment, and to work with the Company
toward achieving a diverse portolio of generating resources that wil position customers
well for a regulatory future that favors clean, renewable resources.
Sincerely,
RENEWABLE NORTHWEST PROJECT
Megan Walseth Decker
Senior Staff Counsel
JiUi
Jimmy Lindsay
Power Systems Analyst
Cc: Ted Weston, RMP (by email toted.weston(gpacificorp.com)
Daniel Solander, RMP (by email todaniel.solander(gpacificorp.com)
Case No. PAC.E-ll.l0 - RNP's Comments on RMP's 2011 IRP Page 4 of4