20180430Vail Supplemental Rebuttal.pdf

RECElVED
20ll APR 30 AM 9:38
BEFORETHE IDAHO PUBLICUTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.PAC-E-17-07
OF ROCKY MOUNTAINPORTR FOR A )
CERTIFICATEOF PUBLIC )SUPPLEMENTALREBUTTAL
CONVENIENCEAND NECESSITYAND )TESTIMONYOF RICK A.VAIL
BINDINGRATEMAKING TREATMENT )
FOR NEW WIND AND TRANSMISSION )
FACILITIES )
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ROCKY MOUNTAlN POWER
CASE NO.PAC-E-17-07
APRIL 2018
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1 Q.Are you the same Rick A.Vail who previously provided testimony in this case on
2 behalf of RockyMountain Power ("Company"),a division of PacifiCorp?
3 A.Yes.
4 PURPOSE AND SUMMARY OF SUPPLEMENTAL REBUTTAL TESTIMONY
5 Q.What is the purpose of your supplementalrebuttal testimony in this proceeding?
6 A.My testimony supports the Company's application for certificates of public convenience
7 and necessity ("CPCNs")to construct the Aeolus-to-Bridger Anticline transmission line
8 and the network upgrades ("Transmission Projects")needed to construct or acquire the
9 Ekola Flats,TB Flats 1 and II,Cedar Springs,and Uinta projects,which are the four new
10 wind resources ("Wind Projects")included on the final shortlist for the 2017R Request
11 for Proposals ("RFP").Specifically,my testimony responds to the April 11,2018,
12 testimony filed by Mr.JamesR.Dauphinais,on behalfof Monsanto,and Mr.Bradley G.
13 Mullins,on behalf of PacifiCorp idaho Industrial Customers ("PflC")
14 Q.Please summarize your testimony.
15 A.First,many of the Transmission Projects risks have decreased over the course of this
16 case.Project costs are now more certain,and final contracting and construction is on-
17 schedule;the Company has made substantial progress scoping,developing,and
18 preparing the projects to submit the next round of permit applications necessary for
19 construction and operation;and the ongoing study process continues to affirm that the
20 Transmission Projects will deliver the expected benefits.Based on its extensive
21 experience developing comparable transmission resources,the Company is confidentthat
22 it can deliver the Transmission Projects on-time and at the cost estimates included in my
23 testimony.
24 Second,the Company did not mismanage its generator interconnection queue or
25 attempt to use its generator interconnection queue to bias the outcome ofthe 2017R RFP,
26 as certain parties assert.The Compañy's treatment of all projects in its generator
27 interconnection queue,whether bidders or not,was consistent with the terms and
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l conditions of its Open Access Transmission Tariff ("OKFT").
2 Third,the Company's estimated third-partytransmission revenues included in the
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3 economic analysis are reasonable and consistent with the ratemaking methodologies
4 employed by the Federal Energy Regulatory Commission ("FERC").
5 TRANSMISSION PROJECT RISK
6 Q.Mr.Dauphinais claims that the Transniission Projects risks have "quitepossibly"
7 increased since he filed direct testimonyon December 18,2017.(Dauphinais,Supp.
8 Direct,page 5,lines 1-15.)Do you agree?
9 A.No.Relyingon the additional network upgrades identified after the final shortlist was
10 established,Mr.Dauphinais claims "as a general principle,the more expensive and
11 complex a project is,the greater the risks involved."(Dauphinais,Supp.Direct,page 5,
12 lines 12---15.)But his testimony ignores several relevant facts that indicate decreasing
13 risk.
14 First,the Company confirmed through a competitive market solicitation that the
15 cost estimate for the Aeolus-to-Bridger/Anticline transmission line and associated
16 substations is valid.Because the cost of the Aeolus-to-Bridger/Anticline line is
17 approximately 85 percent ofthe total cost of the Transmission Projects,cost certainty for
18 that piece decreases the cost risk for the Transmission Projects as a whole.
19 Second,since December 18,2017,the Company completed all the
20 interconnection restudies required for the Wind Projects.Althoughthe restudies indicate
21 the need for additional network upgrades,there is now greater certainty-----and therefore
22 less risk--associated with the required facilities and their costs.The interconnection
23 restudies also confirm that the network upgrades are fairly routine projects that the
24 Company regularly performs in the ordinary course of business.
25 Third,the Company is steadily progressing through the process to acquire
26 necessary easements and rights-of-wayin parallel with the regulatory-approvalsprocess
27 and,based on the progress to date,remains on track to secure the necessary easements
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l and rights-of-wayto support the construction schedule.
2 Fourth,the Company performed additional transmission studies that confirm that
3 the construction ofthe Transmission Projects will allow the interconnection of all of the
4 Wind Projects,Indeed,as of today,the Company has completed nearly all of the
5 transmission studies that will occur,with the exception of the Western Electricity
6 Coordinating Council ("WECC")studies that are required to occur in the season before
7 the line becomes operational.
8 Fifth,the Company has made significant progress towards obtaining its
9 remaining permits and authorizations includingthe following:
10 The Company received notice to proceed from the Bureau of Land
i l Management ("BLM")for 30 percent of the Plan of Development
12 appendices required for construction.One additional group (Group 2)of
13 appendices have been through BLM review and are awaiting final
14 approval letter from BLM.The final group of appendices (remaining 20
15 percent)will be submitted for review and approval on schedule after
16 construction contractor selection and subsequent input to the remaining
17 appendices.
18 The Company submitted the Class 1H Cultural report to the BLM.This
19 requirement is on track for completion in accordance with the project
20 schedule.
21 The Company received confirmation of theAquatic Resources Inventory
22 from the U.S.Army Corps of Engineers regarding acquisition of the
23 required wetlands permits.This significant progress,in accordance with
24 the project schedule,mitigates most of the project permitting risk.
25 Mr.Dauphinais's simplistic assessment that the project risk increased just
26 because additional network upgrades are needed ignores the substantial progress that has
27 occurred over the last several months and the fact that the Company has been managing
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l and mitigating project risk from the beginning of this case.When examined holistically,
2 the costs and benefits of the Transmission Projects are now more certain and the
3 development risks continue to decrease.
4 TRANSMISSION LINE NEED
5 Q.Mr.Dauphinaistestifies that "for thefirst time,"the Companyclaims "that there is
6 a need for the Aeolus-to-Bridger/Anticlineline,even if the new Wind Projects are
7 not constructed,because it will improvesystem performance and reliability and
8 directlyservice customers,"and that this "eleventh hour"claim should be given no
9 weight.(Dauphinais Supp.Direct,page 2,lines 17-22.)Is this a fair characterization
10 of your testimony?
11 A.No.Mr.Dauphinais's testimony ignores the fact that the Company's direct and rebuttal
12 testimonies described extensivelywhythere is a need for the Aeolus-to-Bridger/Anticline
13 transmission line with or without the Wind Projects.In my direct testimony,1 explained
14 that the Aeolus-to-Bridger/Anticline line is necessary to relieve existing congestion on
15 the system,(Vail Direct,page 4,lines 2---5)and that without the new transmission line the
16 Company's ability to deliver resources to load will remain constrained.(Vail Direct,page
17 22,lines 20---21.)I further described how the North American Electric Reliability
18 Corporation's and WECC's standards and criteria influenced the need for the Aeolus-to-
19 Bridger/Anticlineline.(Vail Direct,page 4,line 20-23.)The Company made it clear that
20 the Aeolus-to-Bridger/Anticline line has been an integral component of the long-term
21 transmission plan for the region long before the Wind Projects were contemplated.(Vail
22 Direct,page 4,lines 14-23.)
23 I then reiterated these points in my rebuttai testimony,responding explicitlyto the
24 argument that there was no need for the Aeolus-to-Bridger/Anticline line.(Vail Rebuttal,
25 page 10,line 15 to page 14,line 9.)I testified that there is a need for the Aeolus-to-
26 Bridger/Anticline line independentof the Wind Projects because the linewill:(1)relieve
27 congestion and increase transmission capacity across Wyoming,allowing interconnection
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l of new generation resources and enabling more efficient and flexible dispatch and
2 management of existing resources;(2)provide critical voltage support to the
3 transmission system;(3)improve system reliability;and (4)reduce energy and capacity
4 losses.(Vail Rebuttal,page 12,lines 1-22.)As further explained in my supplemental
5 direct testimony,the Aeolus-to-Bridger/Anticline line and the Wind Projects are mutually
6 dependent on one another becausethe Wind Projects affect the timing of the construction
7 of the line,but not the need.(Vail Direct Supplemental,page 6,line 16 to page 7,line 2,)
8 Mr.Dauphinais ignores my testimony entirely and,in doing so,mischaracterizes the
9 record on this point,
10 Q.Mr.Dauphinais also argues that the fact the Aeolus-to-Bridger/Anticlineline is
11 identified in long-termtransmission plans does not mean that it will "ultimatelybe
12 needed."(Dauphinais Supp.Direct,page 10,lines 17-20.)How do you respond to
13 this claim?
14 A.I disagree.While it is true that long-term transmission plans evolve as circumstances
15 change over time,they remain the most important tool the Company has for deterrnining
16 the need for transmission resources,particularlybecause of the long lead time required
17 for permitting and construction of major transmission facilities.Mr.Dauphinais's casual
18 dismissal of transmission planning processes is contraryto well-establishedrequirements
19 from both this Commission and FERC,both of which require robust long-term planning
20 for transmission resources.
21 Q.Has the proposed timeline for construction of Segment D of the Energy Gateway
22 Project (which includes the Aeolus-to-Bridger/Anticlineline)changed as
23 dramaticallyas Mr.Dauphinaissuggests?(DauphinaisSupp.Direct,page 11,lines
24 1-13.)
25 A.No.In the 2015 Integrated Resource Plan ("IRP"),filed on March 31,2015,Segment D
26 was scheduled to be in-service by 2024.This timing was the same in the 2015 IRP
27 Update,filed on March 31,2016.In the 2017 IRP,the only change related to Segment D
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l involved the accelerated construction of Segment D.2 (the Aeolus-to-Bridge/Anticline
2 line)to take advantage of production tax credits by enabling the interconnection of
3 additional wind resources.
4 Q.Are there any other regional transmission plans that also indicate a need for the
5 Aeolus-to-Bridge/Antielineline exists?
6 A.Yes.The Aeolus-to-Bridger/Anticlineline is included in the most recent Regional
7 Transmission Plan prepared by the Northern Tier Transmission Group ("NTTG"),which
8 was published January 9,2018.
9 Q.Who is the NTTG?
10 A.The NTTG is a regional planning forum that fulfills the transmission planning
i l requirements of FERC Order 1000.NTTG members include regional utilities,consumer
12 groups,and regulators.The Idaho Public Utilities Commission is a member of NTTG.
13 Q.Why did the NTTG include the Aeolus-to-Bridger/Anticlineline in its most recent
14 Regional Transmission Plan?
15 A.NTTG concluded that the "NTTG area would be reliably served in the year 2026 only by
16 including"several proposed transmission projects,including the Aeolus-to-Bridger
17 Anticline line.While the NTTG plan is not intended to replace or supplant the
18 Company's more detailed integrated resource planning,the fact that the Aeolus-to-
19 Bridger/Anticlineline is included in the regional plan as a necessary resource provides
20 additional support for its construction.
21 INTERCONNECTION QUEUE
22 Q.Mr.Mullins claims that the Companyexcluded some least costs projects from the
23 2017R RFP because of the project'sinterconnection queueposition.(MullinsSupp.
24 Direct,page 9,line 15 to page 10,line 4.)How do you respond?
25 A.As requiredby FERC and PacifiCorp's OATT,PacifiCorp adheres to a sequential queue
26 process to evaluate generator interconnection applications.More specifically,under the
27 OATT,to properly identify a generator's interconnection requirements and determine
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1 cost responsibility for system improvements in an area with multipleproposed generator
2 interconnections,each project must be evaluatedat full output,in sequential order,and
3 with the assumption that projects that are higher in the interconnection queue and
4 projects with executed interconnection agreements are in-service.This is critical in
5 identifying the proper amperage and fault duty required for circuit breakers,circuit
6 switches,etc.,as well as amperage requirements for substation bus work and
7 transmission lines.To evaluate a project in isolation and out of sequential queue order
8 would not only be inconsistent with OATT requirements,but would also result in
9 deficient facility requirements and expose the Company and its retail customers to
10 considerable costs for infrastructure upgrades that are required to operate in a safe and
11 reliable manner.
12 in restudyingthe interconnectionqueue with the revised assumption that segment
13 D.2 would be in service by the end of 2020,the Company determined that projects
14 through queue position 0712 could reliably interconnect with the construction of segment
15 D.2 and without the need to construct other elements of the long-term transmission plan,
16 Beginning with the system impact study for queue position 0713,there is a need to
17 construct additional elements of the long-term transmission plan to allow reliable
18 interconnection of additional projects.
19 For example,the Q0713 system impact study identified multiple 230 kilovolt
20 ("kV")line overloads for loss of the 500 kV elements,even after employing the proposed
21 Aeolus West generation dropping scheme.Other significant improvements were
22 identified as welL The Q0713 project therefore triggers the need for substantial
23 mitigation in east Wyoming to interconnect.The study determined that a new line from
24 Aeolus to Clover,which is part of the Company's long-term transmission plan for this
25 area,is necessary to mitigate the 500 kV outages.Because these major system
26 improvements cannot be in-service by the 2020 timeframe identified in the RFP,Q0713
27 could not meet the basic criteria to be included in the final shortlist.
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1 Given the sequential nature of interconnection studies,all projects lower than
2 Q0713 in the interconnection queue that are located in the same constrained area as
3 Q0713 would require at least the Aeolus to Clover line and,like Q0713,could not be in-
4 service by 2020.
5 Finally,as discussed by Mr.Rick T.Link,both independent evaluators that
6 oversaw the 2017R RFP process agreed with the Company's assessment of the viability
7 of projects located lower in the interconnection queue than Q0712.
8 Q.Mr.Mullins claims that the Company never disclosed its "positionwith respect to
9 the interconnection queue"until January 31,2018.(MullinsSupp.Direct,page 10,
10 lines 5-10.)Is this true?
11 A.No.Mr.Mullins implies that the Company's treatment of the interconnection queue was
12 somehow novel or a change from prior practice and therefore the Company should have
13 provided earlier notice as part of the 2017R RFP.But there was nothing unusual about
14 how the Company treated its interconnection queue or performedthe restudies necessary
15 to identify interconnection network upgrades.As described above,the Company's
16 treatment of the queue was consistent with long-standing FERC precedent and the clear
17 terms of its OATT.
18 Q.Mr.Mullins further claims that he "was under the impression that all Wind RFP
19 bids would be scored or evaluated on the same basis.with the Company being able
20 to then either equalize or mitigatingthe bidding advantage otherwise available to a
21 bidder with a higher queue position."(MullinsSupp.Direct,page 13,lines 4-14.)Is
22 there any basis for Mr.Mullins's "impression"?
23 A.No.Mr.Mullins does not describe the basis for his impression,but,to be clear,the
24 Company cannot "equalize or mitigate"the fact that some projects are higher in the
25 interconnection queue than others.Such preferential treatment is prohibited by the terms
26 of the Company's ORTT,
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1 Q.Mr.Dauphinaisclaims the Revised System Impact Studyand Final Facilities Study
2 for the Boswell Wind Projects show that the Company never really examined
3 whether Boswell could he interconnected with elements of the GatewayWest alone
4 without Gateway South.(Dauphinais Supp.Direct,page 9,lines 3-6.)How do you
5 respond?
6 A.The Boswell Springs I--IV projects require additional transmission facilities beyond the
7 currentlyproposed Aeolus-to-Bridger expansion to be completed in 2020.Completion of
8 Energy GatewaySouth and the Aeolus-to-Populus portion of the Energy GatewayWest
9 expansion project will be required prior to interconnecting the Boswell Springs l--JV
10 projects.interconnection of the Boswell Springs I-4V projects prior to completion ofthe
11 listed incrernental transmission facilities would create system emergency conditions.
12 These transtnission projects,which represent several billion dollars of new capital,are
13 not planned to be in service until 2024.These costs were not included in the analysis;
14 however,the listed facilities are required to be in-service prior to Boswell Springs I--IV
15 project interconnection to maintain system reliability,
16 Q.Mr.Dauphinaistestimonystates:"Nothingin Mr.VaiPs supplementaland second
17 supplemental direct testimony on behalf of RMP would lead me to change my
18 conclusions regarding the specific risks associated with RMP's proposed
19 Transmission Projects in this proceeding."(DauphinaisSupp.Direct,page 2,lines
20 5-7).How do you respond to his assertions?
21 A.As stated above,the Company has made substantial progress in validating the project
22 cost elements of the project.With receipt of conditional CPCNs in Wyoming,and
23 progress in remaining permits and also negotiationswith landowners to obtain rights-of-
24 way,the risks to the project have declined significantlyin recent months.
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l Q.If the Commission approves the Combined Projects,Mr.Mullins recommends that
2 the Commission impose a condition to prohibit PaciflCorp from "recovery of any
3 costs associated with ongoing maintenance and capital replacement the
4 Transmission Projects,since those costs were not considered in the benefits
5 study...."(MullinsSupp.Direct,page 5 lines 1-5.)How do you respond?
6 A.The prernise of Mr.Mullins's proposed condition is incorrect------there are ongoing
7 maintenance costs for the transmission assets accounted for in the economic analysis.
8 The Company has a number of preventative and corrective maintenance programs to
9 extend the life of transmission assets.The new transmission assets will be maintained
10 and as appropriate,the Company should be allowed to recover the associated costs.The
11 Company currently operates and maintains 16,500 miles of transmission and over
12 1,000 substations.The addition of the transmission projects will not materiallyimpact
13 the overall capital maintenance budget for the system.The Company focuses on
14 identifyingetTiciencies and prioritizes spend within the capital maintenance program and
15 does not expect an increase to overall system costs associated with the new transmission
16 projects.
17 OATT REVENUES
18 Q.Mr.MuHins again questions the Company's assumption that the Company will
19 recover 12 percent of the revenue requirementof the Transmission Projects through
20 its OATT rates.(Mullins Supp.Direct,pages 28-30.)How do you respond?
21 A.In accordance with FERC policy,the actual costs of the transmission projects will flow
22 into the annual update of PaciflCorp's FERC formula rate once the projects are in
23 service.Mr.Mullins continues to focus on only the economics of the Transmission
24 Projects and ignores the system-wide beneñts providedto all transmission customers.As
25 described above,the Aeolus-to-Bridger/Anticline line will:(1)relieve congestion and
26 increase transmission capacity across Wyoming,allowing interconnectionand integration
27 of new generation resources and enabling more efficient dispatch of and greater
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1 flexibility in managing existing resources;(2)provide critical voltage support to the
2 transmission system;(3)improve system reliability;and (4)reduce energy and capacity
3 losses.
4 Q.Mr.Mullins claims,"Mr.Vail's description of PacifiCorp's formula rate overlooks
5 the way that costs get allocated between point to point and network integration
6 transmission customers."(Mullins Supp.Direct,page 28,lines 4-5.)Do you agree
7 with Mr.Mullins's argument?
8 A.No.Mr.Mullins's argument misunderstands how transmission rates are calculated.
9 Mr.Mullins's argument assumes that the construction of the Wind Projects will increase
10 the load served by network resources and therefore reduce the loads served by front
11 office transactions that rely on point-to-pointtransmission.He then speculates that this
12 would increase PacifiCorp's network service load but the Company would still have to
13 pay for the sarne amount of point-to-point transmission service used to deliver front
14 office transactions.
15 Q.Is this a valid assumption?
16 A.No.Transmission costs are based on customers'relative share of load at the time of the
17 transmission system peak plus long-term point-to-point capacity,Network transmission
18 capacity is measured monthly at time of system peak.Therefore,over time loads
19 typically grow or shrink dependingon many factors,including such items as population
20 change,business mix,and the effects of weather.The addition of generationcapacity by
21 itself does not change a customer's load share of the transmission costs.PacifiCorp
22 continuallymonitors and adjusts its transmission requirements,as do al other third-party
23 customers.PacifiCorp's relative share of transmission costs are dependent on its load
24 growth relative to third parties.Historically,allocation of PacifiCorp's use of
25 transmission has been around 12 percent.Recent trends indicate that the Company's
26 percent might be shrinking and the amount allocated to third parties increasing.Adding
27 generationcapacity is not expected to impact this trend.As a result,PacifiCorp's share of
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l additional transmission costs would not be expected to increase relative to third parties
2 based on just constructing additional generation and transmission assets.
3 Q.Mr.Mullins claims that the cost of the Transmission Projects maybe directly
4 assigned to PacifiCorp.(MullinsSupp.Direct,page 28,line 20 to page 29,line 2.)Is
5 this a material risk?
6 A.No.Once again,Mr.Mullins appears to misunderstand how the Company's OATT
7 formula rates are calculated.As mentioned above,PacifiCorp's transmission costs are
8 recovered through a formula rate mechanism approved by FERC,so the risk of these
9 costs being directly assigned is extremely low given how transmission costs are
10 incorporated into the formula rate.There is no precedent for directly assigning
11 transmission resource costs to the Company.
12 Q.Mr.Mullins states that the Wind Projects will cause the Company'sload to increase
13 by about 450 megawatts per month,which will increase the Company's relative
14 share of transmission costs.(Mullins Supp.Direct,page 29,lines 9-15.)Is this
15 correct?
16 A.No.As noted above,the addition of generation resources does not necessarily mean that
17 the Company will increase its share of the transmission usage.Mr.Mullins's own
18 testimony undermines his argument when he claims that PacifiCorp's peak loads are
19 forecasted to be down approximately 14 percent by 2026.(see Mullins Supp.Direct,
20 page 35,line 20 to page 36 line 2.)As previously described,transmission costs are
21 allocated by demand during the transmission system peak.Therefore,if peak loads are
22 decreasing,as Mr.Mullins claims,then the Company's share of transmission costs will
23 also decrease.Mr.Mullins cannot simultaneously argue that the new Wind Projects will
24 increase transmission costs paid by retail customers while also arguing that decreasing
25 load will decrease transmission costs paid by retail customers.The Company estimated
26 the third-partytransmission revenue based on historical data that accounts for the many
27 factors that impact the Company's share of transmission costs.Mr.Mullins's attempt to
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1 isolate the impact of individual changes in transmission usage,without also accounting
2 for offsetting changes,undermines the credibility of his conclusions.
3 Q.Does this conclude your supplementalrebuttal testimony?
4 A.Yes.
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