20180216Teply Direct.pdf

idaho Public Utilities Commission
Office of the SecretaryRECElVED
FEB 1 6 2018
Boise,Idaho
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 )SECOND SUPPLEMENTAL DIRECT
CONVENIENCE AND NECESSITY AND )TESTIMONY OF CHAD A.TEPLY
BINDING RATEMAKING TREATMENT )FOR NEW WIND AND TRANSMISSION )FACILITIES )
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ROCKY MOUNTAIN POWER
CASE NO.PAC-E-17-07
February2018
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l Q.Are you the same Chad A.Teply who previously submitted testimony in this
2 proceeding on behalf of Rocky Mountain Power ("the Company"),a division of
3 PacifiCorp?
4 A.Yes.
5 PURPOSE AND SUMMARY OF TESTIMONY
6 Q.What is the purpose of your second supplemental direct testimony in this
7 proceeding?
8 A.I address the limited change to the final shortlist of the Company's 20l7R Request for
9 Proposals ("2017R RFP")by updating my previous testimony to describe the new wind
10 resources ("Wind Projects")selected as final shortlist resources in the 2017R RFP and
11 explain how the Wind Projects compare to the original proxy-benchmark resources
12 incorporated into my direct testimony.
13 Q.Please summarize your testimony.
14 A.The Company has updated the final shortlist for the 2017R RFP and replaced the
15 McFadden Ridge II project with the Ekola Flats project,a benchmark included in the
16 Company's initial filing.The Ekola Flats project has remained substantively identical
17 to the project described in my direct testimony.The Company is on track to
18 successfully deliver the Combined Projects by year-end 2020 through timely
19 development,procurement,and implementation.All of the steps taken by the Company
20 ensure that the Wind Projects will qualify for production tax credits ("PTCs").
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l SECOND SUPPLEMENTAL DIRECT TESTIMONY
2 Q.Please describe any changes to the Wind Projects selected to the 2017R RFP final
3 shortlist since the Company's January 16,2018,supplemental filing.
4 A.There is one change to the final shortlist,the 109 MW McFadden Ridge II Company
5 benchmark project has been replaced by the 250 MW Ekola Flats Company benchmark
6 project.Thus,the Wind Projects selected to the 2017R RFP final shortlist are still four
7 facilities in Wyoming,which now total approximately 1,311 MW:
8 1.Ekola Flats -250 MW Company benchmark;
9 2.TB Flats I and II (combined into single project)-500 MW Company
10 benchmark;
11 3.Cedar Springs -400 MW third-party build-transfer and power purchase
12 agreement;andO134.Uinta -161 MW third-party build-transfer.
14 Q.How do these projects relate to the benchmark projects included in the initial
15 application?
16 A.The Ekola Flats and TB Flats I and II projects were benchmark projects included in the
17 Company's initial application.The Cedar Springs and Uinta projects were not included
18 in the Company's initial application,but were included in the Company's January 16,
19 2018,supplemental filing.
20 Q.Has the Ekola Flats project substantively changed since the Company provided
21 detailed information in its initial application?
22 A.No.The Ekola Flats project selected to the updated final shortlist is substantively
23 identicalto the project described in my direct testimony (Teply Direct,page 17 lines 4-
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l 6;Confidential Exhibit No.1.Ekola Flats is still a nominal 250 MW wind facility
2 located in Carbon County,Wyoming.It is currently being developed by a third-party
3 under a Development Transfer Agreement and will be delivered by the Company under
4 an engineer,procure,and construct ("EPC")contractual structure,with a turbine supply
5 agreement ("TSA")being the other major commercial agreement for the project.Ekola
6 Flats is expected to have approximately 64 2.3-MW-to-4.2-MW wind turbine
7 generators.The facility will consist of an electrical collection system,one (two,if more
8 economic)34.5-kilovolt ("kV")to 230-kV collector substation,230-kV breakers,and
9 230-kV infrastructure between the wind project and the point-of-interconnection
10 substation,meteorological towers,access roads,required communication and control
11 facilities (e.g.,metering,hardware,software,and associated communication circuits
12 and other equipment),and an operations and maintenance ("O&M")building.O 13 Q.What are the total updated costs for the Wind Projects?
14 A.The Wind Projects are estimated to cost $1.46 billion,based on their total nominal
15 capacity of 1,311 MW and recognizing the split procurement attributes of the Cedar
16 Springs facility.This compares to the Company's initial estimated costs of $1.37 billion
17 for 860 MW of nominal capacity described in my direct testimony (Teply Direct,page
18 5 line 13).
19 On a cost per kilowatt of installed capacity,the Wind Projects are estimated to
20 cost approximately $1,310 per kilowatt,again recognizing the split procurement
21 attributes of the Cedar Springs project.This amount is lower than the cost per kilowatt
22 estimate for the initial benchmark projects,as well as the original shortlist projects
23 included in the January 16,2018,supplemental direct testimony.Thus,the Wind
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1 Projects selected to the 2017R RFP final shortlist provide additional capacity while
2 continuing to deliver significant customer benefits.The overall costs of the Combined
3 Projects reflected in this filing are generally consistent with the costs included in the
4 initial filing.
5 Q.Does the Ekola Flats project rely on the Transmission Projects for
6 interconnection?
7 A.Yes.The Ekola Flats project relies on the construction of the Transmission Projects,
8 which will relieve existing congestion and allow interconnection of the Wind Projects.
9 In total,the benefits generated by the Wind Projects'zero-fuel-cost generation,which
10 lowers net power costs and provides 10 years of federal PTCs,continue to support cost-
11 effective development of the Transmission Projects.
12 Q.Does the Ekola Flats project meet the Internal Revenue Service's ("IRS")start-
13 of-construction criteria to qualify for PTCs?
14 A.Yes.The Ekola Flats project has sufYicient wind turbine generator equipment procured
15 before December 31,2016,to meet the start-of-construction definition for tax purposes.
16 The procurement transaction for Ekola Flats satisfies the safe-harbor requirements
17 under the PTC guidance issued by the IRS.
18 Q.How does the Company plan to continue to procure the Ekola Flats project?
19 A.The Company will continue to engage the Ekola Flats shortlisted EPC and TSA
20 counterparties in negotiations to finalize terms and conditions,with a target for
21 executable definitive agreements by April 16,2018,to align with the ongoing
22 regulatoryreview proceedings.
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l CONTINUED DEVELOPMENT,NEGOTIATIONS,AND IMPLEMENTATION
2 Q.Does re-introduction of the Ekola Flats project require additional landowner
3 notifications?
4 A.Yes.Under the Wyoming Certificate of Public Convenience and Necessity statute
5 applicable to wind and transmission facilities,additional landowner notifications are
6 required for the 230 kV interconnection infrastructure for the Ekola Flats project.
7 Notifications will be sent to landowners within 2,000 feet of any 230 kV transmission
8 infrastructure related to the project.This approach is consistent with notifications
9 providedto landowners when the Company filed supplemental direct testimony.
10 Q.Is an application with the Wyoming Industrial Siting Council ("ISC")for the
11 Ekola Flats project being prepared?
12 A.Yes.The ISC Permit Application for the Ekola Flats project is being developed and willO13befiledtimelytosupportyear-end 2020 in-service date now that the project has been
14 selected to the 2017R RFP fmal shortlist.Based upon a review of the shortlisted project
15 schedules,the Company expects the ISC review processes and hearings for the Ekola
16 Flats project will be completed in 2018,subject to updates identified during agency
17 coordination and development of a detailed project implementation plan.The ISC is
18 required to hold a hearing within ninety days of each applicationunder W.S.§35-12-
19 109.
20 Q.Has the Company performed preliminary evaluations of the wind potential at the
21 Ekola Flats project site?
22 A.Yes.The Company submitted a third-party wind potential assessment for Ekola Flats
23 as part of its 2017R RFP benchmark proposal.The Company's 2017 RFP evaluation
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l team also validated wind potential with a third-party wind resource evaluation firm as
2 part of the 2017R RFP process,as described in the Company's supplemental direct
3 testimony.Wind assessments for the Ekola Flats project indicate that the site has a
4 favorable wind regime suitable for a high performance wind resource.Due to its
5 proximity to the Company's existing Seven Mile Hill wind project,the Company is
6 confident in the anticipated performance of the Ekola Flats project on a net capacity
7 factor basis.
8 Q.Has the Company determined who will be responsible for construction of the
9 Ekola Flats project?
10 A.Not yet.The Company is negotiating with shortlisted EPC contractors that submitted
11 formal proposals for the Ekola Flats project in 2017.
12 Q.Has the Company determined who will supply the wind turbine generators for theO13EkolaFlatsproject?
14 A.Yes.The Company is finalizing negotiations with the shortlisted turbine suppliers that
15 submitted formal proposals for the Ekola Flats project follow-on turbines in 2017 and
16 as identified in its 2017R RFP benchmark proposal.The Company has acquired or has
17 rights to acquire safe-harbor wind turbine generator equipment which it proposes to use
18 at the Ekola Flats project as required to meet the IRS's start-of-construction criteria for
19 PTC eligibility.
20 Q.How did the Company generate the cost information for construction,operation,
21 and maintenance of the Ekola Flats project through its useful life?
22 A.As discussed in my supplemental direct testimony in this docket,the Company
23 prepared its capital cost estimates for the Wind Projects using information from a
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l variety of sources.
2 For its Ekola Flats benchmark project,the Company obtained wind turbine
3 costs from solicitations in 2016 to procure the Company's safe-harbor wind turbine
4 generator equipment,and in 2017 for follow-on wind turbine generator equipment.The
5 Company also obtained balance of plant engineering,procurement,construction,and
6 commissioning costs from a solicitation in 2017 to support final submittals in the
7 2017R RFP process.Transmission interconnection costs were estimated using
8 comparable wind facilitytransmission studies and prior project experience,and internal
9 project development,management and permitting costs were estimated based upon the
10 Company's experience with construction of past wind facilities and other recent
11 generation resource additions.The Company applied contingencies in various cost
12 categories to account for project uncertainties given the current stage of developmentO13oftheproject.O&M cost estimates were developed based upon the Company's
14 experience with wind resource O&M budgets and third-party contracts for the
15 Company's existing wind facilities.Ongoing capital costs were estimated based upon
16 the Company's experience and indicative costs provided by wind turbine generator
17 suppliers for critical capital components.
18 Q.Will the Company and third-party developers collaborate with the Wyoming
19 Game and Fish Department,the U.S.Fish and Wildlife Service,and other
20 environmental agencies to develop and implement the Ekola Flats project?
21 A.Yes.The Company and the third-party project developer have initiated discussions with
22 the Wyoming Game and Fish Department and the U.S.Fish and Wildlife Service
23 regarding developingand implementing the Ekola Flats project.The Company and the
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l third-party project developer have also begun pre-construction usage surveys for
2 various avian,bat,and wildlife species using recommendations from applicable state
3 and federal guideline documents,including the 2012 Land Based Wind Energy
4 Guidelines.The Company and the third-party project developer will coordinate with
5 county,state,and federal agencies that have jurisdiction over development,permitting,
6 and operations to ensure appropriate environmental and safety measures are
7 implemented throughout the life of all of the Wind Projects.The Company is
8 committed to establishing development and implementation schedules and protocols
9 that recognize the potential environmental impacts of all of the Wind Projects and strive
10 to mitigate negative impacts.
11 Q.Will the Ekola Flats wind turbine generators or associated infrastructure be built
12 in Wyoming's Greater Sage Grouse Core area?O 13 A.No.The Ekola Flats wind turbine generators and associated infrastructure will not be
14 located within the current boundaries of Wyoming's Greater Sage Grouse Core area.
15 Q.How will potential visual and lighting impacts from the Ekola Flats project be
16 addressed?
17 A.State and county permitting regulations contain requirements that recognize and
18 address potential visual and lighting impacts.The Company and the third-party
19 developer will incorporate those applicable measures into the siting,construction,and
20 operations of the Ekola Flats projects as part of the permitting process.Such measures
21 may include:down-shielded lighting on project infrastructure;Federal Aviation
22 Administration approved/recommended turbine lighting protocols;active aviationlight
23 management;and use of approved paint colors for turbines.
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1 Q.When will construction of the Ekola Flats project begin and end?
2 A.As described in detail in the exhibits attached to my testimony,site construction of the
3 Ekola Flats project will begin as soon as the second quarter of2019.The Company and
4 the third-party developer will not begin construction,however,until all of the necessary
5 regulatory approvals and applicable permits and authorizations from other local,state,
6 tribal or federal governmental agencies that have jurisdiction over the construction or
7 operation of the Ekola Flats project have been received,including approval from the
8 Wyoming ISC.The Company anticipates that substantial completion for the Ekola Flats
9 project,under normal construction circumstances,weather conditions,labor
10 availability and materials delivery,will be achieved by November 15,2020,or as
11 otherwise updated during detailed negotiation of project contracts,schedules,and
12 implementation plans.
13 Q.What is the expected operational life of the Ekola Flats project?
14 A.The anticipated operational life of the Ekola Flats project has been assessed at 30 years
15 in this filing,which aligns with the Company's currently approved depreciable life for
16 wind resources.The operational life may be reviewed and extended based on advances
17 in turbine technologies or improvements in maintenance processes (or both)through
18 the course of the Company's regular depreciation studies and filings.
19 Q.Will the Ekola Flats project be decommissioned or repowered at the end of its
20 operational life?
21 A.The Company may dismantle and reclaim the Ekola Flats project at the end of its
22 operational life based upon the requirements of the operating permit.Typically,county
23 and state agencies identify the decommissioning requirements during the permitting
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l process,including expected reclamation efforts and overall decommissioning costs and
2 security requirements.The Company may also consider replacing or upgrading the
3 existing infrastructure at the end of the operational life if conditions (i.e.,economics,
4 permitting,customer load needs,etc.)are conducive to reinvestment in the project.
5 Q.Has the Company provided information on the estimated costs for Ekola Flats?
6 A.Yes.Confidential Exhibit No.47 is a summary of estimated costs for the Ekola Flats,
7 TB Flats I and II,Cedar Springs,and Uinta Wind Projects.Company witness Mr.Rick
8 T.Link provides information including data and models used in the analysis of the
9 Combined Projects,and describes other cost information considered recoverable.
10 Q.Please describe the exhibits attached to this testimony for the nominal 250 MW
ll Ekola Flats facility.
12 A.Confidential Exhibit No.46 provides information for the nominal 250 MW Ekola FlatsO13project.Subparts to that exhibit include:
14 Confidential Exhibit No.46-1:Updated Wind Turbine Generator Site Layout
15 ConfidentialExhibit No.46-7:Updated Project Map
16 Confidential Exhibit No.46-14:Signed Large Generator Interconnection
17 Agreement
18 Confidential Exhibit No.46-16:Third-party Wind Assessments
19 Q.Please provide a summary of the capital expenditures required to construct the
20 Wind Projects.
21 A.Confidential Exhibit No.47 to my testimony includes the summary.
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l Q.Please describe the exhibits included with this testimony labeled Confidential
2 Exhibit No.31-4 and Confidential Exhibit No.32-1.
3 A.To clarify the locations of the 230 kilovolt transmission tie-in lines for the Cedar
4 Springs and the TB Flats I and II wind projects,Confidential Exhibit No.31-4 and
5 Confidential Exhibit No.32-1 filed with my supplemental testimony on January 16,
6 2018,were updated.These exhibits replace the original Confidential Exhibit No.31-4
7 for Cedar Springs and the original Confidential Exhibit No.32-1 for TB Flats in their
8 entirety.
9 CONCLUSION AND RECOMMENDATION
10 Q.What do you conclude in your second supplemental direct testimony?
ll A.The Combined Projects remain well positioned to provide customer benefits and are
12 being effectively developed concurrently with ongoing regulatory proceedings--O 13 including the 2017R RFP,procurement activities,and upcoming permitting--to
14 mitigate project risks and deliver desired outcomes.The Company continues to manage
15 project-development activities within a reasonable timeline to assess project risks,
16 incorporate those assessments into decision-making,and allow for changes in project
17 direction (i.e.,off-ramps),if necessary.The Company appreciates the parties'
18 engagement,and believes the Combined Projects will benefit from this rigorous
19 stakeholder review before the Company makes major commitments to the projects.
20 Q.Does this conclude your second supplemental direct testimony?
21 A.Yes.
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