20180509Link Settlement Direct - Redacted.pdf

REGElvED
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.PAC-E-17-07
OF ROCKY MOUNTAINPOWER FOR A )
CERTIFICATEOF PUBLIC )SETTLEMENTTESTIMONYOF
CONVENIENCEAND NECESSITYAND )RICK T.LINK
BINDING RATEMAKING TREATMENT )REDACTED
FOR NEW WIND AND TRANSMISSION )
FACILITIES )
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ROCKY MOUNTAINPOWER
CASE NO.PAC-E-17-07
MAY 2018
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l Q.Are you the same Rick T.Link who previously provided testimony in this case on
2 behalf of Rocky Mountain Power,a division of PacifiCorp?
3 A.Yes.
4 PURPOSE AND SUMMARY OF TESTIMONY
5 Q.What is the purpose of your seitlement testimony?
6 A.I provide and describe the economic analysis that quantifies customer benefits with
7 removal of the Uinta project from the portfolio of new wind resources that were
8 identified in my second supplemental direct testimony.With removal of Uinta,the
9 company is seeking to construct and procure three new wind projects-TB Flats I and
10 II,Ekola Flats,and Cedar Springs-totaling1,150 megawatts ("MW")and seeking to
11 construct the Aeolus-to-Bridger/Anticlinetransmission line and the network upgrades
12 .associated with the three win.d projects.(collectively,the "Stipulated Projects").
13 Q.Please summarize your settlement testimony.
14 A.As described in the settlement testimony of company witness Joelle R.Steward,the
15 company has agreed to no longer seek a certificate of public convenience and necessity
16 for the 161-MW Uinta project in this case.My testimony summarizes the economic
17 analysis of the Stipulated Projects with the removal of Uinta and its associated
18 interconnection network upgrades,ThÌs arialysis demonstrates that even without Uinta,
19 the StipulatedProjects are expected to continue to provide substantial customer benefits
O 20 in all nine price-policy scenarios when studied through 2036 and in seven of nine
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O 1 scenarios when studied through 2050.This economic analysis continues to demonstrate
2 that the Stipulated Projects remain a critical element of PacifiCorp's least-cost,least-
3 risk plan to deliver reasonably priced and reliable service for its customers.Therefore,
4 the Idaho Public Utilities Commission should approve the stipulation because it is in
5 the public interest.
6 STIPULATED WIND PROJECTS
7 Q.Please summarize the cost-and-performanceattributes of the stipulated wind
8 projects.
9 A.With removal of the Uinta project,the total in-service capital cost for the remaining
10 wind projects is approximately $billion.Relative to the company's initial filing,the
11 per-unit capital cost of the stipulated wind projects is down percent from
12 .$1,5ÿ0/kilowatts ("kW")to $W.The.power-purchase agreement pricing for
13 50 percent of the output of the Cedar Springs project is unchanged from what was
14 described in my second supplemental direct testimony (Link Second Supp.Dir.,page 4,
15 lines 3-10.)And in aggregate,the stipulated wind projects are expected to operate at a
16 capacity-weighted average annual capacity factor of percent.
17 Q.What is the nominal value of federal production tax credits ("PTCs")relative to
18 the in-service capital cost of the stipulatedwind projects?
19 A.Over the first 10 years of operation,the stipulated wind projects that will be owned by
20 PacifiCorp will generate over $billion in PTC benefits,which is nearly 103 percent
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l of the in-service capital for these wind facilities.
2 ECONOMIC ANALYSIS OF STIPULATED PROJECTS
3 Q.Has the company updated the economic analysis based on the removal of the Uinta
4 project?
5 A.Yes.First,I performed a spreadsheet analysis to estimate the high-level economic
6 impact of removing the Uinta project.I performed this spreadsheet analysis for all nine
7 price-policy scenarios previously described in my testimony.Consistent with the
8 company's prior economic analysis,I provide these results based on the integrated
9 resource plan ("IRP")methodology through 2036 and using nominal revenue
10 requirement projections through 2050.
11 Q.Please describe how you performed the high-levelspreadsheet analysis.
12 A.Using data from the economic analysis presented .in my second supplementalilirect
13 testimony,Exhibit No.55 for results through 2036 and Exhibit No.56 for results
14 through 2050,I calculated the system benefits,including the Uinta Project,on a dollar-
15 per-megawatt-hour basis for each price-policy scenario.I then multipliedthese results
16 by the expected generation from the Uinta project to estimate the annual system
17 benefits associated with the Uinta project in total dollars.These system-benefit
18 estimates were then netted against the same project-specific costs for the Uinta facility
19 that were used in the economic analysis summarized in my second supplemental direct
O 20 testimony.This calculation results in an estimate of the marginal net benefit or cost of
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1 removing the Uinta project for each price-policy scenario.
2 Q.Did you also update the economic analysis using the company's models?
3 A.Yes.I also re-ran the company's IRP models to remove Uinta under the medium natural
4 gas,medium carbon dioxide ("CO2")and low natural gas,zero CO2 price-policy
5 scenarios.
6 Q.Did you update any of the other inputs used in the analysis?
7 A.No.Other than removing Uinta,all the other inputs used in the economic analysis are
8 the same as the inputs used in the company's second supplemental direct testimony
9 filed on February 16,2018.
10 Q.What is the high-level estimate of the economic impact of removing Uinta based
11 on results through 2036?
12 A.Table 1-ST reports the high-level estimate of the economic impact of removing Uinta
13 based on the results through 2036.These present-value revenue-requirement
14 differential ("PVRR(d)")results are shown alongside the results summarized in my
15 second supplemental direct testimony.The difference between the original results that
16 include Uinta and the high-level estimates without Uinta are an indicator of the
17 marginal net benefit or cost of the Uinta project.
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l Table 1-ST.Estimated Impactof RemovingUinta
PaR Stochastic Mean PVRR(d)(Benefit)/Cost($million)through2036
Second High-Level MarginalSupplementalPrice-Policy Scenario Estimate (Without (Benefit)/CostofDirectFiling(With Uinta)UintaUinta)
Low Gas,Zero CO2 ($150)($146)($4)
Low Gas,Medium CO2 ($179)($172)($7)
Low Gas,High CO2 ($337)($312)($25)
Medium Gas,Zero CO2 ($319)($296)($23)
Medium Gas,Medium CO2 ($357)($330)($27)
Medium Gas,High CO2 ($448)($410)($38)
High Gas,Zero CO2 ($568)($517)($51)
High Gas,Medium CO2 ($603)($548)($55)
High Gas,High CO2 ($694)($629)($66)
2 Q.What conclusions can you draw from the results provided in Table 1-ST?
3 A.The high-levelestimate based on results through 2036 shows that net benefits of the
4 .Stipulated Projects are reduced by between $4,milli.on and $66 million.In the medium
5 natural gas,medium CO2 price-policy scenario,net benefits are reduced by $27 million.
6 Considering that results from the IRP models were used to select winning bids in the
7 2017R Request for Proposals ("RFP"),these findings confirm that it was reasonable to
8 include Uinta in the 2017R RFP final shortlist,and that there could still be an
9 opportunity to pursue this project to deliver customer benefits outside of this
10 proceeding.Importantly,these results also show that the Stipulated Projects will
11 continue to deliver substantial net customer benefits with removal of the Uinta project.
12 With Uinta removed,the net benefits from the Stipulated Projects range between
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l $146 million and $629 million.In the medium natural gas,medium CO2 price-policy
2 scenario,the net benefits are estimated to be $330 million.
3 Q.What is the high-level estimate of the economic impact of removing Uinta based
4 on nominal revenue requirement results through 2050?
5 A.Table 2-ST reports the high-levelestimate of the economic impact of removing Uinta
6 based on the nominal revenue requirement results through 2050.These PVRR(d)
7 results are shown alongside the results summarized in my second supplemental direct
8 testimony.Like Table 1-ST above,the difference between the original results that
9 include Uinta and the high-level estimates without Uinta are an indicator of the
10 marginal net benefit or cost of the Uinta project.
11 Table 2-ST.Estimated Impact of RemovingUinta
Nominal PVRR(1)(Benefit)/Cost($million)through1050
Second
..High-Level.....MarginalSupplementalPrice-Policy Scenario .Estimate (Without (Benefit)/CostofDirectFiling(With Uinta)UintaUinta)
Low Gas,Zero CO2 $184 $146 $38
Low Gas,Medium CO2 $127 $97 $31
Low Gas,High CO2 ($147)($145)($2)
Medium Gas,Zero CO2 ($92)($97)$5
Medium Gas,Medium CO2 ($167)($162)($4)
Medium Gas,High CO2 ($304)($283)($20)
High Gas,Zero CO2 ($448)($411)($37)
High Gas,Medium CO2 ($499)($456)($43)
High Gas,High CO2 ($635)($576)($59)
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l Q.What conclusions can you draw from Table 2-ST?
2 A.The high-level estimate based on nominal revenue requirement results through 2050
3 shows that removal of Uinta reduces the net cost of the Stipulated Projects in three of
4 the nine price-policy scenarios and that the net benefits of the Stipulated Projects are
5 reduced in six of the nine price-policy scenarios.In the medium natural gas,medium
6 CO2 price-policy scenario,net benefits are reduced by $4 million.Importantly,when
7 the impact of net benefits are based on nominal revenue requirement results through
8 2050,these results show that the StipulatedProjects will continue to deliver substantial
9 net customer benefits with removal of the Uinta project.With Uinta removed,the net
10 benefits from the Stipulated Projects in the scenarios where they occur range between
11 $97 million and $576 million.In the medium natural gas,medium CO2 price-policy
12 scenario,the net.benefits are.estimated to be $162 million.
13 Q.What is the economic impact of removing Uinta based on updated results from
14 the IRP model runs?
15 A.Table 3-ST reports the high-levelestimate of the economic impact of removing Uinta
16 alongside the updated modeled results using the 2036 and 2050 calculation
17 methodologies.These results are presented for both the low natural gas,zero CO2 and
18 the medium natural gas,medium CO2 price-policy scenarios.The table also shows the
19 difference between the high-levelestimate and the modeled results.
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l Table 3-ST.Estimated Impactof RemovingUinta
Nominal PVRR(d)(Benefit)/Cost($million)through2050
PaR Stochastic Mean PVRR(d)(Benefit)/Cost($million)through 2036
High-Level Estimate Modeled Result Variance fromPrice-Policy Scenario (Without Uinta)(Without Uinta)Modeled Result
Low Gas,Zero CO2 ($146)($143)($3)
Medium Gas,Medium CO2 ($330)($338)$8
Nominal PVRR(d)(Benefit)/Cost($million)through 2050
.High-Level Estimate Modeled Result Variance fromPnce-Policy Scenario (Without Uinta)(Without Uinta)Modeled Result
Low Gas,Zero CO2 $146 $154 ($8)
Medium Gas,Medium CO2 ($162)($174)$12
2 Q.What conclusions can you draw from Table 3-ST?
3 A.First,the modeled results are similar to the high-levelestimates described above,and
4 consequently,the high-level estimates provide a reasonable representation of the
5 impact of removing Uinta.
6 Second,under the medium natural gas,medium CO2 price-policy scenario,the-
7 Stipulated Projects still provide net customer benefits when Uinta is removed.When
8 calculated from IRP model results through 2036,customer net benefits are $338 million
9 (down by $19 million from $357 million that was reported in my second supplemental
10 direct testimony).When calculated from the nominal revenue requirement results
11 through 2050,customer net benefits are $174 million (up by $7 million from the
12 $167 million that was reported in my second supplemental direct testimony).
13 Third,under the low natural gas,zero CO2 price-policy scenario,the Stipulated
14 Projects still provide net customer benefits with Uinta removed when the PVRR(d)is
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1 calculated from IRP model results through 2036.Based on this methodology,customer
2 net benefits are $143 million (down by $7 million from the $150 million benefit that
3 was reported in my second supplemental direct testimony).When calculated from the
4 nominal revenue requirement results through 2050,net costs are $154 million (down
5 by $30 million from the $184 million that was reported in my second supplemental
6 direct testimony).
7 Q.Have you calculated the change in capital costs that would have to occur to
8 eliminate net benefits in the medium natural gas,medium CO2 price-policy
9 scenario?
10 A.Yes.In my supplemental rebuttal testimony,I responded to Mr.Eldred's testimony on
11 the percentage increase in capital costs that would eliminate net benefits and testified
12 ..that in-service capital costs would have.to increase by 9.1 p.ercent (or.$205 million)to
13 eliminate net benefits in the medium natural gas price,medium CO2 price-policy
14 scenario.(Link Supp.Reb.,page 39,lines 16-19.)Removal of the Uinta project reduces
15 capital costs for the Stipulated Projects to $million.In-service capital costs would
16 have to increase by approximately 11.1 percent (or $million)to eliminate net
17 benefits in the medium natural gas,medium CO2 price-policy scenario.My updated
18 results reflect the same corrections to Mr.Eldred's calculations that were noted in my
19 supplemental rebuttal testimony.
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l Q.Do the Stipulated Projects without Uinta still provide overall customer net
2 benefits?
3 A.Yes.As set forth above,when using the IRP modeling,the Stipulated Projects still
4 provide robust customer net benefits under all nine price-policy scenarios.Although
5 the benefits have decreased slightly,they remain substantial.In addition,under the
6 nominal revenue requirement view,the net benefits remained fairly consistent,
7 increasing in some price-policy scenarios and decreasing in others.As I described in
8 my prior testimony,although neither view is dispositive,each of these views provides
9 important insight into how the StipulatedProjects are expected to impact the company's
10 revenue requirement.Taken together,each of these views indicate that the removal of
11 Uinta does not adversely impact the customer benefits and the acquisition of the
12 Stipulated Projects remains in.the public interest.
13 Q.Does this conclude your settlement testimony?
14 A.Yes.
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