20180213Reply Comments.pdf

Y ROCKY MOUNTAIN
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February 13,2018
VA OVERNIGHT DELIVERY
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Vice President, Regulation
Enclosures
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1407 North Temple, Suite 310
Salt Lake Ci$, Utah 84116
Idaho Public Utilities Commission
472West Washington
Boise, lD 83702
Attention: Diane Hanian
Commission Secretary
RE: PAC-E-17-03 - PACIFICORP'S APPLICATION FOR ACKNOWLEDGEMENT
OF THE 2OlT INTEGRATED RESOURCE PLAI\
Dear Ms. Hanian
Please find enclosed an original and nine (9) copies, of PacifiCorp's Reply Comments in the above
referenced matter.
Informal inquiries may be directed to Ted Weston, Idaho Regulatory Manager, at [phone]
Sincerely,
cc:Jim Yost, Idaho Governor's Office (without enclosures)
Benjamin Otto, Idaho Conservation League (without enclosures)
Mark Stokes, Idaho Power Company (without enclosures)
Teri Carlock, Idaho Public Utilities Commission staff (without enclosures)
Randall Budge, Monsanto (without enclosures)
Nancy Kelly, Western Resource Advocates (without enclosures)
Yvonne R. Hogle 0SB# 8930)
1407 West North Temple, Suite 320
Salt Lake City, Utah 841l6
Telephone No. [phone]
Facsimile No. [phone]
E-mail : [e-mail]
Attorneyfor RoclE Mountain Power
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF PACIFICORP DBA
ROCKY MOUNTAIN POWER'S
2017 INTEGRATED RESOURCE PLAI\I
) CASE NO. PAC-E-17-03
)
) REPLY COMMENTS OF
) ROCKY MOUNTAIN POWER
)
COMES NOW PacifiCorp, d/b/a Rocky Mountain Power ("RMP" or the "Company")
and, pursuant to Rules 56 and 256 of the rules of Procedure of the Idaho Public Utilities
Commission (the "Commission"), hereby submits reply comments in the above referenced
case.
INTRODUCTION
The Company filed its20l7 Integrated Resource Plan ("IRP") with the Commission on
April 4, 2017, in accordance with the Commission's rules and in compliance with Commission
Order No.22299 requiring utilities to file a Resource Management Report on a biennial basis.
In response to the Commission's Notice of Filing and Modified Procedure Order in this
docket, written comments were filed with the Commission by January 12, 2018 by
Commission Staff and Monsanto, collectively, the "Parties".
1
The Company appreciates the time and effort undertaken by the Parties to review and
provide comments on the 2017 IRP. The Company respectfully submits the following reply
comments for the Commission's consideration.
SUMMARY AND RECOMMENDATIONS
The Company supports Staff s recommendation that the Commission acknowledge the
2017 IRP. Staff s comments also include a detailed summary of the Company's 2017 IRP and
makes three recommendations for future IRPs. Staff further expresses support for the
Company's continued approach to modeling demand-side management resources as resources
that simultaneously compete against other supply-side resources to meet the Company's
capacity and energy deficits.
Staff and Monsanto express some concern with the 2017 IRP public input process and
the Company's analysis of the new wind, transmission and wind repowering projects selected
inthe20lT lRP preferred portfolio and action plan. Staff raises additionalconcerns regarding
the Company's modeling of coal plants and natural gas price forecast. The Company hopes to
alleviate these concerns through the following clarifications in support of its modeling
assumptions and resource strategy conclusions. The Company also attempts to correct certain
misconceptions with some of the information presented in the 2017 IRP.
REPLY TO COMMENTS
Energy Vision 2020 Projects
The20lT IRP and action plan comply with the Commission's Standards and Guidelines
for resource planning and identifies how the Company plans to provide reliable electricity
supply at a reasonable cost. The economic benefits of the near-term, time-limited Energy
Vision 2020 projects included inthe2017 IRP preferred ponfolio are bolstered by federal wind
2
production tax credits ("PTCs"). These heavily discounted resources will be used to partially
meet both near-term and long-terrn resource needs, are lower cost than near-term and long-
term resource alternatives, and will provide significant savings to customers. As supported by
extensive cost and risk analysis, the Energy Vision 2020 projects are a critical element of the
Company's least-cost, least-risk plan and are in the public interest.
The Company developed the 20l7IRP using the same approach to establish its least-
cost, least-risk resource plan as has been used in prior IRPs. The Company disagrees with
Monsanto's claim that the Company abandoned or deviated from that focus.l In fact, selection
of the2017 IRP preferred portfolio was supported by more than 200 Planning and Risk ("PaR")
studies. Each PaR study includes 50 iterations of system performance, which equates to over
10,000 simulations of potential 2}-year system dispatch outcomes.2 The 2017 IRP preferred
portfolio was selected after evaluating 39 different cases.3 The portfolios were developed from
88 different supply-side resource options, including thermal generation resources, a broad
spectrum of renewables, including wind, solar, and geothermal resources; and several different
types of storage resources. The Company also analyzed its ability to meet system load with
firm market transactions, and included robust transmission analysis when producing and
evaluating resource portfolios that can reliably and cost-effectively meet customer demand
with manageable risk.
Although the2017 IRP uses aZ}-year planning horizon, the action plan identifies the
specific resource actions the Company intends to undertake in the next two years and its
anticipated actions in the last two years of the four-year action plan horizon. The key resource
I See Comments of Monsanto Company, p. 3 (January 12,2018).
2 2017 IRP, Vol. I, p. 179 (April 4,2017).
3 Id., at203.
3
actions inthe 2017 IRP action plan include the following items that are the cornerstones of the
Company's proposed Energy Vision 2020 projects:
o Action Item la: PacifiCorp's plan to upgrade, or "repower," existing wind
resources because it provides net benefits to customers by increasing energy
production, reducing operating costs, and requalifuing PacifiCorp's existing
wind resources for PTCs, which expire l0 years after a facility's original
commercial operation date. To achieve the full PTC benefits, PacifiCorp must
complete the wind repowering project by the end of 2020.
o Action Items lc and 2a: The acquisition of at least 1,100 MW of new
Wyoming wind resources that will capture a time-limited resource opportunity
arising from the expiration of PTCs. The proposed wind resources will be
acquired in conjunction with a new 140-mile, 500 kV transmission line and
associated infrastructure running from the new Aeolus substation near
Medicine Bow, Wyoming, to a new annex substation, Bridger/Anticline, which
will be located near the existing Jim Bridger substation (Aeolus-to-
Bridger/Anticline line). The transmission project is necessary to relieve
existing congestion and will enable interconnection of the proposed wind
resources into PacifiCorp's transmission system. The proposed wind resources
net of PTC benefits, when combined with the transmission resource, are
expected to meet near- and long-term resource needs and provide economic
benefits for PacifiCorp's customers, if both resources are operational by the
end of 2020. The Company will undergo a competitive solicitation process for
the engineer, procure and construct contract for the transmission project which
4
should address Monsanto's concem that the company should have the
opportunity to compare to the market and ensure it is least-cost.a
Contrary to Monsanto's claim that the Energy Vision 2020 projects are not driven by
any need for a new resource, upon being placed in service, these resources will be used to meet
system load requirements and will continue to meet system load requirements through their
respective lives. While these resources, as system resources, will contribute to the Company's
ability to meet state renewable energy targets in Oregon, Washington, California, and Utah, as
well as meet the growing desire for renewable energy resources in local jurisdictions the
Company serves,s they are not required to comply with renewable energy policies as Monsanto
asserts.6 The Company's 20l7IRP preferred portfolio was developed without imposing any
requirements to meet state renewable energy targets.
Monsanto is correct however, that the economics of these projects benefit from federal
PTCs such that completion of these projects by the end of 2020 will ensure the repowered and
new wind resources will qualify for the full value PTCs that in turn displace higher-cost market
transactions in the near term and defer the need for other, higher-cost resource alternatives in
the long term. The Company's modeling indicates these resources represent the least-cost,
least-risk approach to serving customers as part of the 2017 IRP preferred portfolio.
Planning Timeframe
Parties' comments discuss the Company's application of extended benefits through
2050 for the wind repowering project in the 2017 IRP preferred portfolio selection process.
a See Comments of Monsanto Company, p.9.
5 Salt Lake City, Utah; Park City, Utah; Moab, Utah; Summit Counfy, Utah; Portland, Oregon; Multnomah
County, Oregon; and Hood River, Oregon have local ordinances, resolutions, or climate plans calling for
increases in the delivery ofelectricity from renewable energy resources.
6 See Comments of Monsanto Company, p. 2. See also the 2017 IRP, Volume I, Chapter 8, page 240-242which
shows the Company's renewable portfolio standards compliance position over the 20-year study period.
5
Staff states that it agrees that the wind repowering project has benefits beyond the planning
timeframe but that those benefits should be calculated in a separate analysis or by extending
the planning timeframe and modeling of portfolios so that they are on a common timeframe.
Staff suggests that the Commission recommend the Company only include costs and benefits
from the same planning timeframe when comparing portfolios in future IRP planning. The
Company clarifies that this is in fact precisely what the Company did in its 2017 IRP final
portfolio screening and selection process.
In the final portfolio screening and selection process, four portfolios were selected for
final screening and potential selection of the 2017 IRP preferred portfolio. Two of the
portfolios, OP-REP and OP-GW4, included the wind repowering project and extended
benefits. The Company incorporated feedback from stakeholders to also include the wind
repowering project with extended benefits as part of the other two portfolios eligible for the
final screening and selection process, specifically, the RE-1c and RE-2 cases.T By doing so the
Company assessed the wind repowering project consistently when evaluating relative cost and
risk differences among those portfolios considered during the final portfolio screening and
selection process.
With this consistent treatment of the wind repowering project, the Company's
economic analysis in the 2017 IRP demonstrates that wind repowering provides substantial
customer benefits. Conservatively, none of the benefit estimates assign any value to the
incremental renewable-energy credits ("RECs") that will be produced by the repowered wind
facilities. In addition, the Company analyzedthe wind repowering project under many different
scenarios, each with varying natural gas and COz policy assumptions. Importantly, in every
7 2017 IRP, Volume I, Chapter 8 - Modeling Results, p.210.
6
scenario analyzed, wind repowering provides customer benefits relative to scenarios that
exclude the wind repowering project. The economic benefits of wind repowering are bolstered
by the fact that the repowered facilities are able to requalifu for federal PTCs and were
appropriately modeled through 2050 to capture the full 3O-year life of the new equipment
installed on the repowered wind facilities.
Public Input Process
Staff recommends that for future IRPs, projects similar to Energy Vision 2020 be
introduced in the IRP public input process as soon as possible. The Company did so for the
2017 IRP, as explained below, and will continue to do so in future IRPs.
In December 2016, the Company concluded that repowering wind units could generate
cost savings if implemented on at least a subset of wind facilities in the fleet. To preserve the
repowering option for application at additional facilities and to preserve the option to qualiff
new wind facilities for the full value of PTCs, subject to further review and analysis, the
Company made safe harbor wind equipment purchases at that time.
The Company completed its additional review and expanded economic analysis of
wind repowering in early 2017, toward the end of the IRP's pre-filing process. In February
2017 , the Company finalized its IRP analysis of wind repowering. It incorporated repowering
into the IRP process as the portfolio option referred to as OP-REP. The Company rescheduled
the February 20 I 7 public input meeting to the first of March to enable the company to complete
and share its wind repowering analysis. The Company completed its analysis of the wind
repowering project for consideration in the 2017 IRP as soon as possible while simultaneously
finalizing analysis of 24 sensitivity cases and eight core cases initially presented in the January
2017 public input meeting.
7
Also in late 2016 and early 2017, the Company continued to study and refine its
resource portfolios, all of which contained new Wyoming wind resources. In reviewing these
resource portfolios, it became clear that the amount of Wyoming wind included in these
resource portfolios were limited by transmission constraints. The presence of the Wyoming
wind resources in these initial portfolios led the Company to assess whether additional wind
resources enabled by sub-segments of Energy Gateway West would further lower system costs.
Consequently, after the January public input meeting, the Company incorporated the Aeolus-
to-Bridger/Anticline line as a specific sensitivity case in its broader Energy Gateway sensitivity
analysis. In late February, the Company's modeling of four Energy Gateway transmission
sensitivities indicated there were potential benefits to including the Aeolus-to-
Bridger/Anticline line in the portfolio. At the March 2017 public input meeting, the Company
presented this analysis to stakeholders, along with next steps that communicated its intention
to further refine key assumptions for this sensitivity. Accordingly, Monsanto's claim that the
wind repowering project specifically, was not discussed as a resource until the Energy Vision
2020 Update filed by the Company on August 2,2017, is simply not accurate. The Company
also refutes Monsanto's claim that there are two separate processes-a public and a private
one. The fact is, the Company shared with2017 IRP stakeholders its analysis of Energy Vision
2020 opportunities as that analysis was being developed. In addition, the Company has not
executed any agreements committing it to move forward with development of the Energy
Vision 2020 projects other than the December 2016 purchases of wind turbine safe harbor
equipment to preserve the option of qualifying wind resources for the full value of federal
PTCs.
8
9
While the pre-filing stakeholder review process of Energy Vision 2020 projects was
necessarily limited by the timing of the Company's analysis, it was in customers' interest to
consider these resources in the 2017 IRP. Recognizing the need to be open and transparent, the
Company explicitly chose to share the results of its analysis with stakeholders as they were
being produced. Given the time-sensitivity of these resource opportunities, delaying the IRP
to allow additional pre-filing review was not a viable option. Instead, the Company
expeditiously completed the necessary analysis and shared it with IRP stakeholders in real
time.
Modeling of Coal Plants
Staff acknowledges the Company's effort to study coal plant retirement in the 2017
IRP and specifically an endogenous regionalhaze case (RH-6) that evaluated early retirement
versus installation of selective catalytic reduction equipment on the coal plants facing regional
haze compliance obligations. This regionalhaze case was analyzed among the same market
price and greenhouse gas policy assumptions applied to the Company's analysis of the other
six regionalhaze cases studied. Nonetheless, Staff expresses concern that the analysis was too
limited and should have been broadened across a larger set of cases and across all existing coal
plants. Staff further comments that by allowing certain plants to remain operational until a
defined date, the Company could limit introduction of new resources that may be more
economically competitive in the long run referencing the new wind, transmission and wind
repowering projects inthe 2017 IRP preferred portfolio as examples.
While the Company disagrees with Staff regarding the limitations of the extensive coal
analysis conducted in the 2017 IRP and discussed above, the Company has agreed to conduct
additional unit-by-unit analysis that will inform the 2019 IRP and be responsive to Staffs
recommendation that the Company identify least-cost coal plant retirement dates. These
studies will not give a complete, portfolio-level view of the economics of the Company's coal
portfolio nor capture system cost impacts that would result with early retirements at more than
one facility. However, this analysis, which will be completed by the end of June 2018 to align
with the beginning of the stakeholder process for the 2019 IRP, will inform subsequent analysis
in the 2019 IRP by providing coal-unit screening studies early in the public-input process.
Natural Gas Forecast
Staff suggests that the Company is underestimating natural gas prices over the 20-
year planning period and recommends that the Company provide additional justification for
what it believes to be the use of historically low natural gas prices in the baseline or
"medium" forecast in its 2019IRP. Conversely, Monsanto claims that the Company has
consistently overestimated future natural gas and power prices and also load growth. The
Company has reasonably developed its estimates of load growth and future natural gas and
power prices with continued updates in every IRP cycle. Regarding natural gas prices, Staff
states that the 2015 IRP cautioned that long-term natural gas price volatility may pose a long-
term risk but that the Company did not address that concern inthe 2017 IRP. The Company
disagrees. The Company included extensive discussion of natural gas price uncertainty in the
2017 IRP.8 Staff s concern that the "medium" gas forecast, or the Company's official
forward price curve inthe 2017 IRP, is excessively low relative to the U.S. Department of
Energy's Energy Information Administration low natural gas price forecast for I I years out
of the l9-year planning period.
8 2017 IRP, Volume I, Chapter 3 - The Planning Environment, pp.28-32.
10
Short-term price volatility is always a consideration due to asynchronous or
intermittent supply and demand cycles caused by short-term shocks such as weather or
pipeline outages. However extended asynchronous supply and demand cycles are not likely
due to massive, low-cost, and flexible domestic supply of natural gas. While there is upside
price risk, which the Company assessed inthe 2017 IRP, the Company's base natural gas
price assumptions are reasonable and align with current market fundamentals driven by
projections of supply and demand.
Staff correctly notese that the Company uses market forwards for the first72 months,
followed by a l2-month blend of forwards and fundamentals that segues into an expert third-
party fundamentals forecast, starting month 85. For the fundamentals-based component, the
Company subscribes to two expert third-party forecasting services to receive multi-client
"off-the-shelf'base and scenario forecasts, with supporting market fundamental data and
analysis, on a regular basis. Both forecasting services employ natural gas experts, have strong
reputations for energy market research and analytics, and service hundreds of clients. The
Company is merely one of many subscribers to these forecast services and has no influence
on the development of these forecasts.
For the 2017 IRP, the EIA's natural gas price forecasts, as published in its 2016
Annual Energy Outlook ("AEO"), were reviewed but not adopted because the AEO's
reference and scenario outlooks were outliers relative to other available forecasts. As seen in
the figure below, both "Expert l_Base" and "Expert _Adopted Base" sit well below the
2017 AEO base case and relatively close to each other.
e Comments of the Commission Staff (January 12,2018).
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Thus, the fundamentals component of the Company's OFPC is validated by two expert third-
party forecasters. In contrast, the2017 AEO reference case hovers an average of30 percent
above the averaged expert third-party forecasts from2024 through 2036. As such, the
adopted third-party forecast, represents a moderate long-term view since it reasonably
comports with another credible forecast.
CONCLUSION
The Company agrees with Staff that the 20l7IRP complies with Commission Order
No.22299 and believes it reflects a balanced consideration of customer interests, that is well-
supported by portfolio modeling and reasonable planning assumptions. The Company also
agrees with Staff s comments in support of its continued approach to modeling demand-side
management resources as resources that simultaneously compete against other supply-side
resources to meet the Company's capacity and energy deficits. The Company appreciates the
comments received, and continues to urge stakeholder participation throughout the IRP
t2
development process to foster constructive debate throughout it. The Company, like Staff,
recommends Commission acknowledgment of the Company's 2017 IRP.
DATED this February 13,2018.
RESPECTFULLY SUMITTED,
ROCKY MOUNTATN POWER
vonne R. Hogle
Attorney for Rocky Mountain Power
l3