20180117Cran Supplemental Direct.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.PAC-E-17-07
OF ROCKY MOUNTAIN POWER FOR A )CERTIFICATE OF PUBLIC )SUPPLEMENTAL DIRECT TESTIMONY
CONVENIENCE AND NECESSITY AND )OF CINDY A.CRANE
BINDING RATEMAKING TREATMENT )FOR NEW WIND AND TRANSMISSION )FACILITIES )
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ROCKY MOUNTAIN POWER
CASE NO.PAC-E-17-07
January 2018
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l Q.Are you the same Cindy A.Crane who previouslyprovided direct testimony in
2 this case on behalf of Rocky Mountain Power ("Company"),a division of
3 PacifiCorp?
4 A.Yes.
5 PURPOSE AND SUMMARY OF TESTIMONY
6 Q.What is the purpose of your supplemental direct testimony?
7 A.I support the Company's request that the Idaho Public Utilities Commission
8 ("Commission")grant certificates of public convenience and necessity ("CPCNs")to
9 construct and acquire new wind resources ("Wind Projects")construct the Aeolus-to-
10 Bridger/Anticline line and network upgrades ("Transmission Projects")(collectively,
11 the "Combined Projects")and approve the Company's proposal for binding ratemaking
12 treatment to capture the costs and benefits of these facilities.I provide overall policyO13supportfortheCompany's supplemental testimony describing the results of the
14 Company's 20l7R Request for Proposals ("2017R RFP").
15 Q.Please summarize your testimony.
16 A.The results of the 2017R RFP make the Combined Projects an increasingly attractive
17 resource opportunity for customers.The benefits are now greater and more certain,and
18 the risks have decreased.The Combined Projects will provide substantial near-term and
19 long-term customer benefits and represent the least-cost,least-risk strategy for meeting
20 the needs of Idaho customers.The Company's supplemental testimony demonstrates
21 the Company has recognized and mitigated all potential risks and concerns.
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l Q.Based on the results of the 2017R RFP and the Company's updated analysis of
2 benefits,costs,and risks,do the Combined Projects satisfy the public interest
3 standard?
4 A.Yes.The Combined Projects are the least-cost,least-risk path available to serve the
5 Company's customers by meeting both near-term and long-term needs for additional
6 resources.Mr.Rick T.Link's supplemental direct testimony and updated economic
7 analysis demonstrates increased customer benefits of $177 million in the medium case
8 through 2050 (as compared to $137 million in the original filing),and a range of
9 $311 million to $343 million in the medium case through 2036.As described further
10 by Mr.Link,the treatment of production tax credits ("PTCs")in the system modeling
11 scenarios extending out through 2036 has been changed to better reflect how the PTCs
12 will flow through to customers,which makes the treatment consistent with the nominal
13 revenue requirement results that extend out through 2050.Moreover,the updated
14 economic analysis demonstrates the Combined Projects provide net customer benefits
15 under all scenarios studied through 2036,and in seven of the nine scenarios through
16 2050.
17 The fact that the Combined Projects will provide customer benefits significantly
18 in excess of their costs is extraordinary.Customers will gain access to significant new
19 wind and transmission resources,with important environmental and system reliability
20 attributes,and still enjoy lower overall costs as a result of this investment.
21 Q.What evidence is the Company including in the supplemental direct filing to
22 demonstrate that the Combined Projects are in the public interest?
23 A.In addition to updating the Company's economic analysis,Mr.Link provides
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l information on the 2017R RFP,which generated robust and competitive responses from
2 market participants.Mr.Chad A.Teply describes the four Wind Projects,totaling
3 1,170 megawatts ("MW"),that were selected for the final shortlist through this
4 solicitation process:TB Flats I and II;McFadden Ridge II;Cedar Springs;and Uinta.
5 He also details the Company's extensive and ongoingefforts to minimize technical and
6 construction risk associated with the Wind Projects.Mr.Rick A.Vail updates the status
7 of the development of the Aeolus-to-Bridger/Anticline 500 kilovolt ("kV")
8 transmission line,and confirms that the costs of the line (which represents roughly 85
9 percent of the costs of the Transmission Projects)remain unchanged.Mr.Vail also
10 updates the network upgrade and interconnection facilities based on the outcome of the
11 2017R RFP.Ms.Nikki L.Kobliha describes the outcome of federal tax reform,and
12 discusses how tax-related risks have been resolved.Together,this evidence shows thatO13theCombinedProjectssatisfytheCommission's public interest standard.
14 Q.Is the Company's supplemental direct filing consistent with the procedure
15 proposed in the Company's request for resource approval and in the schedule
16 approved by the Commission?
17 A.Yes.The supplemental direct filing allows the Company to update its pending request
18 for resource approval to reflect the results of the 2017R RFP.This process allows for
19 full review of the Combined Projects,including review of the results of the 2017R RFP,
20 by April 2018,a schedule necessary to preserve for customers the time-sensitive
21 resource opportunity presented by the availability of PTCs for the Wind Projects.
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1 Q.Based on the results of the 2017R RFP,what modification is the Company making
2 to its application for CPCNs?
3 A.The Company's original application sought CPCNs for the construction or acquisition
4 of four new wind resources-three 250 MW facilities (Ekola Flats and TB Flats I and
5 II),and a fourth 100 MW facility (McFadden Ridge II)-for a total of 860 MW.These
6 were the benchmark facilities for the 20l7R RFP.
7 Based on the results of the 2017R RFP,the Company is now seeking CPCNs to
8 construct or procure four new Wyoming wind projects with a total capacity of
9 1,170 MW,including three of the benchmark facilities (TB Flats I and II,now
10 combined as a single project,and McFadden Ridge II),and two new facilities (Cedar
11 Springs and Uinta).Uinta is a build-transfer agreement ("BTA"),totaling 161 MW,
12 Cedar Springs is one-half BTA and one-half power purchase agreement ("PPA"),for a
13 total of 400 MW,and TB Flats I and II and McFadden Ridge II are Company-built
14 facilities,totaling 500 MW and 109 MW.respectively.Thus,the 2017R RFP will result
15 in 970 MW of Company-owned facilities,and a 200 MW PPA.
16 Q.Has any aspect of the Aeolus-to-Bridger/Anticlinetransmission line changed as a
17 result of the 2017R RFP?
18 A.No.The proposed route and facilities required for the construction of the Aeolus-to-
19 Bridger/Anticline line have not changed.The only change related to the line is the fact
20 that the costs are now more certain.
21 Q.Are there any modifications to the network upgrades included in the Company's
22 initial filing?
23 A.Yes,in addition to the network upgrades included in the Company s initial filing,there
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l are additional network upgrades required to interconnect McFadden Ridge II,Cedar
2 Springs,and Uinta.Mr.Vail provides a detailed description of these network upgrades
3 in his supplemental direct testimony.
4 Q.The Company's original filing contained a capital cost estimate of approximately
5 $2 billion for the Combined Projects.With additional wind resources and network
6 upgrades,have the total costs of the Combined Projects changed?
7 A.No.The overall capital cost ofthe Combined Projects remains the same-approximately
8 $2 billion.This is true even though the supplemental filing reflects 970 MW of
9 Company-owned resources,110 MW more than the original filing.As Mr.Link
10 explains,the per-unit capital cost for the benchmark wind projects in the initial filing
11 was $1,590/kW.As a result of the 2017R RFP,the costs of the Company-owned wind
O 12 projects decreased by roughly 17 percent to $l,320/kW.
13 Q.Please explain how the Company was able to acquire significant additional wind
14 resources for approximatelythe same overall cost.
15 A.The robust responseto the 2017R RFP process reduced costs and enabled the Company
16 to select the most optimal projects to maximize customer benefits,as described by
17 Mr.Link.The Company received 49 bid alternatives for 13 wind projects in Wyoming,
18 totaling 4,624 MW.The Company also received 15 bid alternatives for six non-
19 Wyoming wind projects,totaling 595 MW.
20 Q.Has the Company further mitigated customer risks associated with the Combined
21 Projects?
22 A.Yes.Three key risks associated with the Combined Projects have been either entirely
23 or substantially mitigated.First,as described by Ms.Kobliha,the uncertainty
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l surrounding federal tax reform has been resolved.The economic analysis in Mr.Link's
2 testimony accounts for the lower federal corporate income tax rate and demonstrates
3 that the overall cost reduction resulting from the 2017R RFP more than offsets the
4 impact of the lower tax rate.Moreover,the policy discussions surrounding tax reform
5 indicate that it is highly unlikely that PTCs will be extended beyond 2020-meaning
6 that the time to act is now or customers will lose out on substantial savings.
7 Second,the Company has addressed the price risk associated with long-term
8 forecasting by demonstrating the Combined Projects are expected to provide robust
9 customer benefits under all scenarios in the economic analysis through 2036,including
10 the scenario with low natural-gas prices and a zero carbon-dioxideprice.
11 Third,the costs and schedule of the Combined Projects are now more certain.
12 Based on the results of the 2017R RFP and the continued development efforts relatedO13totheTransmissionProjects,the Company is confident that it can deliver the expected
14 customer benefits.
15 Q.Based on the Company's updated economic analysis,has the Company updated
16 its forecast of the near-term rate impact to Idaho customers?
17 A.Yes.As explained in the testimony of Ms.Steward,the first-year revenue requirement
18 of the Combined Projects is reduced nearly 20 percent from the initial filing.The near-
19 term rate impact of the Combined Projects is now less than 1.6 percent in 2021,the
20 first full year of operation.
21 Q.Do the results of the 2017R RFP provide additional evidence supportingthe need
22 for the Aeolus-to-Bridger/Anticlinetransmission line?
23 A.Yes.Over 4,500 MW of new high-capacity-factorwind projects that bid into the 20 l 7R
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l RFP are behind the existing constraint,showing the need for new transmission capacity
2 in southeast Wyoming to give these potentialresources a chance to move forward.The
3 construction of the Aeolus-to-Bridger/Anticline line is a critical step to allow high-
4 capacity-factor wind resource development in this area.
5 In addition,as explained by Mr.Vail,even without the Wind Projects,the
6 Company plans to construct the Aeolus-to-Bridger/Anticline line in 2024 because it is
7 an integral component of both the Company's and the region's long-term transmission
8 plan.Thus,the issue is not ifthe Aeolus-to-Bridger/Anticline line will be constructed,
9 but when.Under the proposal here,the Company can construct the line by 2020 and
10 provide all-in net benefits to customers,rather than waiting until 2024 when PTC-
11 eligible wind is no longer availableto subsidize the line.
12 Q.Does this conclude your supplemental direct testimony?
13 A.Yes.
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