20180226Crane Supplemental Direct - Corrected.pdf

O
Corrected Supplemental Direct Testimony
Cindy A.Crane
O
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 $151 million in the medium case
8 through 2050 (as compared to $137 million in the original filing),and a range of
9 $333 million to $349 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 nominalO13revenuerequirementresultsthatextendoutthrough2050.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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CORRECTED Crane,Di-Supp -2
Rocky Mountain Power
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 $-1-7-7_1_5_1 million in the medium
8 case through 2050 (as compared to $137 million in the original filing),and a range of
9 $-N-1-E million to $-½T3_4_9 million in the medium case through 2036.As described
10 further by Mr.Link,the treatment of production tax credits ("PTCs")in the system
11 modeling scenarios extending out through 2036 has been changed to better reflect how
12 the PTCs will flow through to customers,which makes the treatment consistent with
13 the nominal revenue requirement results that extend out through 2050.Moreover,the
14 updated economic analysis demonstrates the Combined Projects provide net customer
15 benefits under all scenarios studied through 2036,and in seven of the nine scenarios
16 through 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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Crane,Di-Supp -2
Rocky Mountain Power
O
Corrected Supplemental Direct Testimony
Rick T.Link
O
O
l the Company's customers by meeting both near-term and long-term needs for
2 additional resources.My supplemental direct testimony explains the following:
3 The Combined Projects provide net customer benefits under all scenarios
4 studied through 2036,and in seven of the nine scenarios through 2050.
5 Customer benefits increase to $151 million in the medium case through 2050
6 (as compared to $137 million in the original filing),and range from
7 $333 million to $349 million in the medium case through 2036.
8 The analysis reflects changes in federal tax law that were enacted in December
9 2017,and updated best-and-finalpricing from bidders received December 21,
10 2017,after the federal tax law changes were known.
11 The treatment of production tax credits ("PTCs")in the system modeling
12 scenarios extending out through 2036 has been changed to better reflect how
13 the PTCs will flow through to customers,which makes the treatment consistent
14 with the nominal revenue requirement results that extend out through 2050.
15 Sensitivity analysis shows substantial benefits of the Combined Projects persist
16 when paired with PacifiCorp's wind repowering project and are not displaced
17 when considering the potential procurement of solar PPA bids submitted into
18 the on-goingRFP for solar resources,the 2017S RFP.
19 2017R RFP RESULTS
20 Q.To recap the status of the 2017R RFP,when was it issued?
21 A.As described in my rebuttal testimony,PacifiCorp issued the 2017R RFP on September
22 27,2017,after it was approved by the Public Service Commission of Utah
23 ("Commission")on September 22,2017,and the Public Utility Commission of Oregon
CORRECTED Link,Di-Supp -2
Rocky Mountain Power
l CORRECTED Table 2-SD Updated SO Model and PaR PVRR(d)
(Benefit)/Cost of the Combined Projects ($million)
PaR Risk-
SO Model PaR Stochastic Adjusted
Price-Polic Scenario PVRR(d)Mean PVRR d PVRR(d
Low Gas,Zero CO2 ($145)($126)($131)
Low Gas,Medium CO2 $186)($146)($152)
Low Gas,Hi h CO2 ($297)($280)($294)
Medium Gas,Zero CO2 ($306)($268)($280)
MediumGas,Medium CO2 ($343)($333)($349)
MediumGas,High CO2 ($430)($409)($428)
High Gas,Zero CO2 ($619)($531)($557)
Hi h Gas,Medium CO2 ($636)($561)($588)
High Gas,High CO2 ($696)($627)($658)
2 Over a 20-year period,the Combined Projects reduce customer costs in all nine
3 price-policy scenarios.This outcome is consistent in both the SO model and PaR
4 results.Under the central price-policy scenario,assuming medium natural-gas prices
5 and medium CO2 prices,the PVRR(d)net benefits range between $333 million,when
6 derived from PaR stochastic-mean results,and $349 million,when derived from PaR
7 risk-adjustedresults.
8 Q.What trends do you observe in the modeling results across the different price
9 policy scenarios?
10 A.Projected system net benefits increase with higher natural-gas price assumptions,and
11 similarly,increase with higher CO2 price assumptions.Conversely,system net benefits
12 decline when low natural-gas prices and low CO2 prices are assumed.This trend holds
O CORRECTED Link,Di-Supp-27
Rocky Mountain Power
1 results shown in the table are provided as Exhibit No 41.
2 CORRECTED Table 3-SD.Updated Nominal Revenue RequirementPVRR(d)
(Benefit)/Cost of the Combined Projects ($million)
Annual
Revenue
Requirement
Price-Polic Scenario PVRR d
Low Gas,Zero CO2 $195
Low Gas,Medium CO2 $159
Low Gas,High CO2 ($79)
Medium Gas,Zero CO2 ($34)
Medium Gas,Medium CO2 ($151)
Medium Gas,Hi h CO2 ($275)
High Gas,Zero CO2 ($411)
High Gas,Medium CO2 ($453)
High Gas,High CO2 ($559)
3 When system costs and benefits from the Combined Projects are extended out
4 through 2050,covering the full depreciable life of the owned-windprojects includedin
5 the 2017R RFP final shortlist,the Combined Projects reduce customer costs in seven
6 out of nine price-policy scenarios.Customer benefits,range from $34 million in the
7 medium natural gas,zero CO2 SCOBRTIO ÍO $559 million in the high natural gas,high
8 CO2 Scenario.Under the central price-policy scenario,assuming medium natural-gas
9 prices and medium CO2 prices,the PVRR(d)benefits of the Combined Projects are
10 $151 million.The Combined Projects provide significant customer benefits in all price-
11 policy scenarios,and the net benefits are unfavorableonlywhen low natural-gas prices
12 are paired with zero or medium CO2prices.These results show that upside benefits far
13 outweigh downside risks.
CORRECTED Link,Di-Supp -30
Rocky Mountain Power
l O&M expenses,the Wyoming wind-production tax,and PTCs.The project costs are
2 netted against updated system impacts from the Combined Projects,reflecting the
3 change in NPC,emissions,non-NPC variable costs,and system fixed costs that are
4 affected by,but not directly associated with,the Combined Projects.
5 CORRECTED Figure 5-SD Updated Total-System Annual Revenue Requirement
With the Combined Projects (Benefit)/Cost ($million)
($60)
($80)
6 The data shown in this figure for the updated economic analysis have the same
7 basic profile as the data from the original economic analysis summarized in my direct
8 testimony.This profile shows that despite a reduction in PTC benefits associated with
9 changes in federal tax law,the reduced costs from winning bids from the 2017R RFP
10 continue to generate substantial near-term customer benefits,reduce the magnitude and
11 shorten the duration over which costs increase after federal PTCs for new wind
12 resources expire,and continue to contribute to customer benefits over the long-term.
13 The year-on-year reduction in net benefits from 2036 to 2037 is driven by the
14 Company's conservative approach to extrapolate benefits from 2037 through 2050
15 based on modeled results from the 2028 through 2036 timeframe.This leads to anOCORRECTEDLink,Di-Supp -32
Rocky Mountain Power
l Projects were evaluated without solar PPA bids.
2 CORRECTED Table 4-SD Solar Sensitivitywith Solar PPAs Included
in lieu of the Combined Projects (Benefit)/Cost ($million)
Sensitivity Benchmark Change in
PVRR(d)PVRR(d)PVRR(d)
Medium Gas,Medium CO2
SO Model ($334)($343)$9
PaR Stochastic Mean ($222)$333)$111
PaR Risk Adjusted ($233)($349)$116
Low Gas,Zero CO2
SO Model ($206)($145)($61)
PaR Stochastic Mean ($141)($126)($15)
PaR Risk Adjusted ($148)($131)($17)
3 In the medium natural gas,medium CO2 price-policy scenario,a portfolio with
4 the Combined Projects delivers greater customer benefits relative to a portfolio thatO5addssolarPPAbidswithouttheCombinedProjects.Customer benefits are greater
6 when the resource portfolio includes the Combined Projects without solar PPA bids by
7 $116 million in the medium natural gas,medium CO2 price-policy scenario based on
8 the risk-adjusted PaR results.In the low natural gas,zero CO2 price-policy scenario,
9 the portfolio with solar PPA bids and without the Combined Projects has higher net
10 customer benefits relative to a portfolio containing just the Combined Projects.The
11 increase in net benefits in the solar PPA portfolio is $17 million based on the risk-
12 adjusted PaR results.
13 Q.What were the results of the solar sensitivitywhere solar PPA bids are pursued
14 with the Combined Projects?
15 A.Table 5-SD summarizes PVRR(d)results for the solar sensitivity where solar PPA bids
O CORRECTED Link,Di-Supp -34
Rocky Mountain Power
1 are assumed to be pursued along with the proposed investments in the Combined
2 Projects.This sensitivity was developed using SO model and PaR simulations through
3 2036 for the medium natural gas,medium CO2 and the low natural gas,zero CO2 price-
4 policy scenarios.The results are shown alongside the benchmark study in which the
5 Combined Projects were evaluated without solar PPA bids.
6 CORRECTED Table 5-SD Solar Sensitivitywith Solar PPAs Included
With the Combined Projects (Benefit)/Cost ($million)
Sensitivity Benchmark Change in
PVRR(d)PVRR(d)PVRR(d)
Medium Gas,Medium CO2
SO Model ($602)($343)$259)
PaR Stochastic Mean ($482)($333)($149)
PaR Risk Adjusted ($504)($349)($155)
Low Gas,Zero CO2
SO Model ($286)($145)($141)
PaR Stochastic Mean ($217)($126)($91)
PaR Risk Adjusted ($227)($131)($96)
7 When the solar PPAs are pursued in addition to the Combined Projects,the total
8 benefits increase,but are diluted (i.e.,the aggregate net benefits are less than the sum
9 of the benefits for the cases where Combined Projects or solar PPAs are pursued
10 independently).
11 Q.What conclusions can you draw from these solar sensitivityanalyses?
12 A.These sensitivities demonstrate that should the Company choose to pursue solar bids
13 through the 2017S RFP,the resulting solar PPAs would not displace the Combined
14 Projects as an alternativemeans to deliver economic savings for customers.
15 While the sensitivity with a portfolio containing solar PPAs without the
CORRECTED Link,Di-Supp -35
Rocky Mountain Power
l Q.What were the results of the wind-repoweringsensitivity?
2 A.Table 6-SD summarizes PVRR(d)results for this wind-repowering sensitivity.This
3 sensitivity was developed using SO model and PaR simulations through 2036 for the
4 medium natural gas,medium CO2 and the low natural gas,zero CO2 price-policy
5 scenarios.The results are shown alongside the benchmark study in which the Combined
6 Projects were evaluated without wind repowering.
7 CORRECTED Table 6-SD Wind-Repowering
Sensitivity(Benefit)/Cost ($million)
Sensitivity Benchmark Change in
PVRR(d)PVRR(d)PVRR(d)
Medium Gas,Medium CO2
SO Model ($541)($343)($198)
PaR Stochastic Mean ($497)($333)($164)
O PaR Risk Adjusted ($520)($349)($171)
Low Gas,Zero CO2
SO Model ($313)($145)($169)
PaR Stochastic Mean ($277)($126)($152)
PaR Risk Adjusted ($290)($131)($159)
8 In the wind-repowering sensitivity,customer benefits increase significantly
9 when the wind repowering project is implemented with the Combined Projects in both
10 the medium natural gas,medium CO2 and the low natural gas,zero CO2 price-policy
11 scenarios.These results demonstrate that customer benefits not only persist,but
12 increase,if both the wind-repowering project and the Combined Projects are
13 completed.
14 Q.Please summarize the conclusion of your supplemental direct testimony.
15 A.The results of the 2017R RFP confirmed that the Combined Projects are the least-cost,
O CORRECTED Link,Di-Supp -37
Rocky Mountain Power
l the Company's customers by meeting both near-term and long-term needs for
2 additional resources.My supplemental direct testimony explains the following:
3 The Combined Projects provide net customer benefits under all scenarios
4 studied through 2036,and in seven of the nine scenarios through 2050.
5 Customer benefits increase to $4-771_5_1 million in the medium case through
6 2050 (as compared to $137 million in the original filing),and range from
7 $-M‡Œmillion to $3432 million in the medium case through 2036.
8 The analysis reflects changes in federal tax law that were enacted in December
9 2017,and updated best-and-final pricing from bidders received December 21,
10 2017,after the federal tax law changes were known.
11 The treatment of production tax credits ("PTCs")in the system modeling
12 scenarios extending out through 2036 has been changed to better reflect how
13 the PTCs will flow throughto customers,which makes the treatment consistent
14 with the nominal revenue requirement results that extend out through 2050.
15 Sensitivity analysis shows substantial benefits of the Combined Projects persist
16 when paired with PacifiCorp's wind repowering project and are not displaced
17 when considering the potential procurement of solar PPA bids submitted into
18 the on-going RFP for solar resources,the 2017S RFP.
19 2017R RFP RESULTS
20 Q.To recap the status of the 2017R RFP,when was it issued?
21 A.As described in my rebuttal testimony,PacifiCorp issued the 2017R RFP on September
22 27,2017,after it was approved by the Public Service Commission of Utah
23 ("Commission")on September 22,2017,and the Public Utility Commission of Oregon
Link,Di-Supp -2
Rocky Mountain Power
l CORRECTED Table 2-SD Updated SO Model and PaR PVRR(d)
(Benefit)/Cost of the Combined Projects ($million)
PaR Risk-
SO Model PaR Stochastic Adjusted
Price-Polic Scenario PVRR d)Mean PVRR(d PVRR d
|Low Gas,Zero CO2 ($145)($-M)4_1_26)($109131)
I Low Gas,Medium CO2 ($186)($‡24146)($4Ml5_2)
I Low Gas,High CO2 ($297)($-2-W28_0)($29-3 )
I Medium Gas,Zero CO2 ($306)($246 )($-2-W2 ))
I Medium Gas,Medium CO2 ($343)($¾-1-2)($32-7 )
|Medium Gas,High CO2 ($430)($3884 )($40642)
Hi h Gas,Zero CO2 ($619)($599 )($515m)
High Gas,Medium CO2 ($636)($5395)($-54-7588)
High Gas,High CO2 ($696)($605 )($6 465_8)O 2 Over a 20-year period,the Combined Projects reduce customer costs in all nine
3 price-policy scenarios.This outcome is consistent in both the SO model and PaR
4 results.Under the central price-policy scenario,assuming medium natural-gas prices
5 and medium CO2 prices,the PVRR(d)net benefits range between $¾-1-E million,
6 when derived from PaR stochastic-mean results,and $3443_4_9 million,when derived
7 from SG-modelPaR risk-adiusted results.
8 Q.What trends do you observe in the modeling results across the different price
9 policy scenarios?
10 A.Projected system net benefits increase with higher natural-gas price assumptions,and
11 similarly,increase with higher CO2 price assumptions.Conversely,system net benefits
12 decline when low natural-gas prices and low CO2 prices are assumed.This trend holds
O Link,Di-Supp -27
Rocky Mountain Power
l results shown in the table are provided as Exhibit No 41.
2 CORRECTED Table 3-SD.Updated Nominal Revenue RequirementPVRR(d)
(Benefit)/Cost of the Combined Projects ($million)
Annual
Revenue
Requirement
Price-Polic Scenario PVRR d
Low Gas,Zero CO2 $-1491
Low Gas,Medium CO2 $4-3Al_59
Low Gas,High CO2 ($-14579)
Medium Gas,Zero CO2 ($4034
Medium Gas,Medium CO2 ($4-7-7151)
Medium Gas,High CO2 ($3M275)
High Gas,Zero CO2 ($43-7411)
High Gas,Medium CO2 ($4794_53)
High Gas,High CO2 ($-WER)
3 When system costs and benefits from the Combined Projects are extended out
4 through 2050,coveringthe full depreciable life of the owned-wind projects included in
5 the 2017R RFP final shortlist,the Combined Projects reduce customer costs in seven
6 out of nine price-policy scenarios.Customer benefits,range from $60¾million in the
7 medium natural gas,zero CO2 Scenario to $-5M559 million in the high natural gas,high
8 CO2 SCCHRTiO.Under the central price-policy scenario,assuming medium natural-gas
9 prices and medium CO2 prices,the PVRR(d)benefits of the Combined Projects are
10 $N--7 million.The Combined Projects provide significant customer benefits in all
11 price-policy scenarios,and the net benefits are unfavorableonly when low natural-gas
12 prices are paired with zero or medium CO2 prices.These results show that upside
13 benefits far outweigh downside risks.
Link,Di-Supp -30
Rocky Mountain Power
l O&M expenses,the Wyoming wind-production tax,and PTCs.The project costs are
2 netted against updated system impacts from the Combined Projects,reflecting the
3 change in NPC,emissions,non-NPC variable costs,and system fixed costs that are
4 affected by,but not directly associated with,the Combined Projects.
5 CORRECTED Figure 5-SD Updated Total-System Annual Revenue Requirement
With the Combined Projects (Benefit)/Cost ($million)
$80
$60 '
6 The data shown in this figure for the updated economic analysis have the same
7 basic profile as the data from the original economic analysis summarized in my direct
8 testimony.This profile shows that despite a reduction in PTC benefits associated with
9 changes in federal tax law,the reduced costs from winning bids from the 2017R RFP
10 continue to generate substantial near-term customer benefits,reduce the magnitude and
11 shorten the duration over which costs increase after federal PTCs for new wind
12 resources expire,and continue to contribute to customer benefits over the long-term.
13 The year-on-year reduction in net benefits from 2036 to 2037 is driven by the
14 Company's conservative approach to extrapolate benefits from 2037 through 2050
15 based on modeled results from the 2028 through 2036 timeframe.This leads to an
Link,Di-Supp -32
Rocky Mountain Power
l Projects were evaluated without solar PPA bids.
2 CORRECTED Table 4-SD Solar Sensitivitywith Solar PPAs Included
in lieu of the Combined Projects (Benefit)/Cost ($million)
Sensitivity Benchmark Change in
PVRR(d)PVRR(d)PVRR(d)
Medium Gas,Medium CO2
SO Model ($334)($343)$9
PaR Stochastic Mean ($20422)$&lam)$WalE
PaR Risk Adjusted ($2B22)($32-7¾9)$-1441_1_6
Low Gas,Zero CO2
SO Model ($206)($145)($61)
PaR Stochastic Mean ($¾241_41)($-1941_26)($2215)
PaR Risk Adjusted ($-1-331_48)($W92)($24E)
3 In the medium natural gas,medium CO2 price-policy scenario,a portfolio with
4 the Combined Projects delivers greater customer benefits relative to a portfolio thatO5addssolarPPAbidswithouttheCombinedProjects.Customer benefits are greater
6 when the resource portfolio includes the Combined Projects without solar PPA bids by
7 $-1-‡41_\_6 million in the medium natural gas,medium CO2 price-policy scenario based
8 on the risk-adjusted PaR results.In the low natural gas,zero CO2 price-policy scenario,
9 the portfolio with solar PPA bids and without the Combined Projects has higher net
10 customer benefits relative to a portfolio containing just the Combined Projects.The
11 increase in net benefits in the solar PPA portfolio is $2417 million based on the risk-
12 adjusted PaR results.
13 Q.What were the results of the solar sensitivitywhere solar PPA bids are pursued
14 with the Combined Projects?
15 A.Table 5-SD summarizes PVRR(d)results for the solar sensitivity where solar PPA bids
O Link,Di-Supp -34
Rocky Mountain Power
1 are assumed to be pursued along with the proposed investments in the Combined
2 Projects.This sensitivity was developed using SO model and PaR simulations through
3 2036 for the medium natural gas,medium CO2 and the low natural gas,zero CO2 price-
4 policy scenarios.The results are shown alongside the benchmark study in which the
5 Combined Projects were evaluated without solar PPA bids.
6 CORRECTED Table 5-SD Solar Sensitivitywith Solar PPAs Included
With the Combined Projects (Benefit)/Cost ($million)
Sensitivity Benchmark Change in
PVRR(d)PVRR(d)PVRR(d)
Medium Gas,Medium CO2
SO Model ($602)($343)($259)
PaR Stochastic Mean ($442482)($-N-LE)($-1-Ml_4_9)
PaR Risk Adjusted ($464_55)($mg9)($m_l )
Low Gas,Zero CO2
SO Model ($286)($145)($141)
|PaR Stochastic Mean ($¾-5E7)($W4_1_¾)($¾91)
|PaR Risk Adjusted ($-1-952)($W91R)($¾_96)
7 When the solar PPAs are pursued in addition to the Combined Projects,the total
8 benefits increase,but are diluted (i.e.,the aggregate net benefits are less than the sum
9 of the benefits for the cases where Combined Projects or solar PPAs are pursued
10 independently).
11 Q.What conclusions can you draw from these solar sensitivityanalyses?
12 A.These sensitivities demonstrate that should the Company choose to pursue solar bids
13 through the 2017S RFP,the resulting solar PPAs would not displace the Combined
14 Projects as an alternativemeans to deliver economic savings for customers.
15 While the sensitivity with a portfolio containing solar PPAs without the
Link,Di-Supp -35
Rocky Mountain Power
l Q.What were the results of the wind-repoweringsensitivity?
2 A.Table 6-SD summarizes PVRR(d)results for this wind-repowering sensitivity.This
3 sensitivity was developed using SO model and PaR simulations through 2036 for the
4 medium natural gas,medium CO2 and the low natural gas,zero CO2 price-policy
5 scenarios.The results are shown alongside the benchmark study in which the Combined
6 Projects were evaluated without wind repowering.
7 CORRECTED Table 6-SD Wind-Repowering
Sensitivity(Benefit)/Cost ($million)
Sensitivity Benchmark Change in
PVRR(d)PVRR(d)PVRR(d)
Medium Gas,Medium CO2
SO Model ($541)($343)($198)
PaR Stochastic Mean ($4-½497)($¾+133)($164)
O PaR Risk Adjusted (5498520)($32-7249)($171)
Low Gas,Zero CO2
SO Model ($313)($145)($169)
PaR Stochastic Mean ($-3-422)($-14412_6)($152)
PaR Risk Adjusted ($-2M290)($19911]l)($159)
8 In the wind-repowering sensitivity,customer benefits increase significantly
9 when the wind repowering project is implemented with the Combined Projects in both
10 the medium natural gas,medium CO2 and the low natural gas,zero CO2 price-policy
11 scenarios.These results demonstrate that customer benefits not only persist,but
12 increase,if both the wind-repowering project and the Combined Projects are
13 completed.
14 Q.Please summarize the conclusion of your supplemental direct testimony.
15 A.The results of the 2017R RFP confirmed that the Combined Projects are the least-cost,
Link,Di-Supp -37
Rocky Mountain Power