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CASE NO. PAC.E-18.08IN TIIE MATTER OF THE APPLICATION
OF ROCKY MOUNTAIN POWERFOR
AUTHORTZATION TO CHANGE
DERECIATION RATES APPLICABLE TO
ELECTRIC PROPERTY
ROCKY MOUNTAIN POWER
DIRECT TESTIMOI\ry
OF TIMOTHY J. HEMSTREET
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CASE NO. PAC.E.18.O8
SEPTEMBER 11,2018
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Please state your name, business address, and present position.
My name is Timothy J. Hemstreet. My business address is 825 NE Multnomah Street,
Suite 1500, Portland, Oregon 97232. My present position is Director of Renewable
Energy Development. I am testifying on behalf of Rocky Mountain Power (the
"Company"), a division of PacifiCorp.
QUALIFICATIONS
Briefly describe your education and professional experience.
I hold a Bachelor of Science degree in Civil Engineering from the University of Notre
Dame in Indiana and a Master of Science degree in Civil Engineering from the
University of Texas at Austin. I am also a Registered Professional Engineer in the state
of Oregon. Before joining the Company in 2004, I held positions in engineering
consulting and environmental compliance. Since joining the Company, I have held
positions in environmental policy, engineering, project management, and hydroelectric
project licensing and program management. In 2016,I assumed the role of Director of
Renewable Energy Development, in which I oversee the development of renewable
energy resources.
Please explain your responsibilities as Director of Renewable Energy
Development.
The renewable energy development group is responsible for identifying and developing
Company-owned renewable generation resource options and effrciency improvements
-including wind, solar, and hydroelectric resources-to enhance or improve the
efficiency of the Company's renewable resources portfolio.
Hemstreet, Di - 1
Rocky Mountain Power
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I PURPOSE OF TESTIMONY
What is the purpose of your testimony?
My testimony:
. Provides an overview of the Company's recommended depreciable lives for its
renewable generating resources. The Company reviewed its hydro and wind
resource generating assets and perlormed an evaluation of depreciable lives in
support of this filing. Based on this assessment, the Company proposes certain
changes to the depreciable lives established in the previous depreciation study filed
in 2013.1
. Describes how the Company developed estimated plant economic lives for its wind
and hydro generation resources included in the Company's new depreciation study
submitted with Company witness Mr. John J. Spanos's testimony as Exhibit No. 2
(the "Depreciation Study") in this filing. My testimony also summarizes the
proposed changes in the depreciable plant lives of the renewable resources and the
basis therefor, including updated information regarding new and anticipated
hydroelectric operating licenses, the repowering of the Company's existing wind
fleet, as well as the assumed depreciation lives for new wind resources that will be
brought online in 2020.
Have you provided the Company's estimated plant economic lives for its
renewable generation assets?
Yes. Exhibit No. 7 contains a complete list of the Company's renewable generation
plants and their recommended depreciable lives.
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I In The Matter of Rocky Mountain Porver's Application For An Order Authorizing Changes In Depreciation
Rates Applicable To Electric Property, Case No. PAC-E-13-02.
Hemstreet, Di - 2
Rocky Mountain Power
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DEPRE CIABLE LIVES FOR HYDROE LECTRIC GENERATION RESOURCE S
What is the Company's general approach for developing the depreciable lives of
its hydroelectric generating facilities?
The Company's approach as reflected in the Depreciation Study is primarily based on
Federal Energy Regulatory Commission ("FERC") hydroelectric plant license
expiration dates. The vast majority - 33 out of 44 - facilities comprising 99 percent
of the Company's installed hydroelectric generating capacity - require a FERC license
to operate. The terms of the FERC license requirements largely determine the capital
expenditures required to make necessary improvements to the hydroelectric plant
during the license period to implement protection, mitigation and enhancement
measures. It is therefore appropriate for the term of the FERC license to set the
depreci able life of the hydroel ectri c generati on resource.
The status of the FERC relicensing processes for the Company's licensed
hydroelectric facilities was reviewed to determine any changes required by new
licensing information. These changes are due to either recent license issuances or the
Company's expectations of the term of new licenses based upon the scope of likely or
proposed protection, mitigation and enhancement measures that will be required during
a new license term, which FERC uses to assess the appropriate new license term in a
licensing order.
For its unlicensed hydroelectric facilities, the Company assessed the
depreciation lives based on the current operating conditions of the facilities as observed
since the last depreciation study and the estimated remaining life of the physical assets
as determined by the Company's hydro resources engineering staff.
Hemstreet, Di - 3
Rocky Mountain Power
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What major changes did the Company make regarding the depreciable lives of its
hydroelectric generating resources?
The major changes the Company made are driven primarily by changes in expected
license terms for FERC regulated projects that have either been recently issued a new
license or that the Company intends to relicense in the near future. FERC issued a new
4}-year license for the Wallowa Falls project in Oregon in January 2017, so the
Company extended the depreciable life of that project to 2057 to match the new license
term. Additionally, the Company expects FERC to issue a new 40-year license2 for the
Prospect No. 3 project in Oregon in late 2018, so the Company proposes extending the
depreciable life of the Prospect No. 3 facility to 2058. The Company also expects that
FERC will issue new 40-year licenses for the Weber and Cutler facilities in Utah when
their existing licenses expire rn2020 and2024, respectively Exhibit No. 7, "PacifiCorp
Estimated Plant Retirement, Lives - Renewable Resources" lists the estimated
retirement dates of the Company's hydro and wind generating resources and the
proposed changes to the existing depreciable lives.
Why does the Company assume that facilities it intends to relicense will be issued
4O-year licenses?
The Company's recent experience with new license terms for projects with moderate
changes or forwhich construction is required to comply with new license requirements,
like the Wallowa Falls project, is that FERC will issue a 4}-year license unless unique
conditions are met. This is consistent with FERC's recent "Policy Statement on
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I 2 The new license for Prospect No. 3 is available at l$Jtlll.riNil-q.iat\i$l:-.ru-$g.-itnsUh,d.ti1pq-11-i11!en:
ir-L1i.).i1i.c,-c.ltltr$J.:Lai--ir:ii::i.tcs.uscs,.i:..]-!].$.i:rdi.
Hemstreet, Di - 4
Rocky Mountain Power
1 Establishing License Terms for Hydroelectric Projects," issued in October 2Ol7 .3In the
policy statement, FERC adopted a default 4}-year license term for licensed hydro-
power projects at non-federal dams. FERC also articulated that projects with limited
new improvements or construction that are required under a new license could justify
a shorter license term of not less than 30 years. The Company estimates that moderate
infrastructure improvements will be necessary during new license terms for its
hydroelectric projects; thus, a 40-year depreciable life was viewed as appropriate.
Did the Company extend the depreciable life of any of its other hydro facilities for
reasons other than new or anticipated license terms?
Yes. The Company made slight adjustments to extend the depreciable lives of several
small hydro facilities with less than three megawatt capacity that are not licensed by
FERC. Small extensions of between four to eight years are proposed for the Paris,
Gunlock, Santa Clara, Veyo, Last Chance and Granite facilities to reflect their
continuing operational status and the estimated remaining life of their physical assets.
The Company also extended the depreciable lives for the Bend and Eagle Point
facilities 14 and 15 years, respectively, because these facilities will not be
decommissioned in the near-term and will continue to provide service to customers for
the new proposed depreciable life.
Did the Company reduce the depreciable life of any of its hydro facilities?
Yes. The depreciable life of the Viva Naughton hydroelectric facility a small 0.74
megawatt capacity hydroelectric facility located at the cooling water storage reservoir
for the Naughton steam generating facility in Wyoming-was reduced by I I years,
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Hemstreet, Di - 5
Rocky Mountain Power
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I from 2040 to 2029, to reflect the planned retirement date of the Naughton steam
generating station shown in Exhibit No. 5.
Has the Company proposed any changes to the estimated retirement date of its
Klamath hydroelectric assets?
No, the Company's estimated retirement dates for the Klamath hydroelectric facilities
are unchanged from the 2013 depreciation study and remain consistent with the timing
of decommissioning anticipated by the Klamath Hydroelectric Settlement Agreement.
Could environmental issues affect the estimated plant economic life of hydro
resources in the future?
Yes. While no new significant environmental compliance issues have emerged since
the 2013 depreciation study, the dynamic nature of evolving environmental stewardship
requirements and FERC licensing requirements, coupled with asset specific attributes
will continue to impact the Company's ability to economically achieve license
extensions or economically operate unlicensed hydro facilities for the benefit of
customers. For instance, assets that must mitigate project effects on species listed under
the Endangered Species Act may be subject to unique environmental stewardship
requirements, which can change based upon the status of the listed species. On the other
hand, long-term investments the Company is making to comply with its current license
requirements - such as the installation of fish passage measures at many of its newly
relicensed hydroelectric facilities - may positively influence the ability to relicense
these facilities in the future and continue economic operation. If conditions change as
a result of evolving requirements or unforeseen circumstances, the depreciable lives of
Hemstreet, Di - 6
Rocky Mountain Power
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I the Company's hydroelectric assets will be adjusted accordingly in a future
depreciation study.
DEPRECIABLE LIVES FOR NEW WIND GENERATING RESOURCES
a. Please describe the process the Company used to assess the depreciable lives of its
wind resources.
A. In the Company's 2013 Depreciation Study, the Company recommended, and the
Commission adopted, extending the 25-year depreciable life for wind-powered
generation resources to 30-years. The Company has assessed this depreciable life
against current industry trends for wind generation facilities and continues to believe
that a 30-year depreciable life is appropriate for such facilities whose wind turbine
generators are designed to meet industry standards and that are maintarned consistent
with manufacturer recommendations. New wind projects require a greater investment
per turbine due to the larger wind turbine size as compared to earlier turbine
technologies. Thus, some new utility-owned wind assets, for which ongoing generation
offtake and maintenance funding is more certain, have been considered for longer asset
lives of up to 40 years.
a. What asset life is the Company proposing for the new wind facilities that are
currently being developed and expected to enter service in2020?
A. The Company is currently developing 950 megawatts of new wind facilities in
Wyoming associated with Energy Vision 2020 that are expected to be commercially
operational in2020. The Company proposes a 3O-year asset life for these new facilities,
consistent with the 3O-year asset life for the Company's existing wind facilities that
was approved in the 2013 Depreciation Study.
Hemstreet, Di - 7
Rocky Mountain Power
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I a Is a 3O-year asset life consistent with how the Company evaluated proposed new
wind projects as part of its Energy Vision 2020 proposal?
Yes, in the Energy Msion 2020 cases, the Company assumed a 3O-year asset life for
new Company-owned wind assets as part of the new wind resources' economic
evaluation.
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DEPRECIABLE LIVES FOR REPOWERING WIND GENERATING RESOURCES
a Is the Company proposing changes to the depreciable lives of its existing wind
resources?
Yes. The Company is currently repowering the majority of its existing wind fleet, which
was constructed between 2006 and 2010, resulting in the replacement of the nacelles
and rotors with more modern equipment that includes longer blades and higher capacity
generatorsa.
Repowering of the Company's wind fleet will benefit customers by requalifying
the repowered facilities for the full value of available production tax credits when
brought online by the end of 2020, increasing zero-fuel cost generation from the
existing wind fleet by an average of approximately 26 percent, and extending the asset
lives of the repowered facilities. The Company plans to repower its existing wind
facilities in 2019 and 2020. The Company therefore recommends extending the
depreciable lives of the repowered facilities to provide for a 30-year asset life after the
repowering equipment upgrades are installed. This results in an extension of the
depreciable lives of the Company' s exi sting wind facilities by 1 0 to 2 I years, depending
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a The Company is also evaluating reporvering its Foote Creek I facility, which would involve the replacement of
the existing wind turbine generators installed in 1999 with new, modern equipment. The Company anticipates
that this facility will be reporvered in2020 if satisfactory arrangements are oblained and permits are received
that rvould allorv this facility to be repowered and provide benefits to customen as compared to the status quo.
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Rocky Mountain Power
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on the facility. The Company's proposed depreciable lives for its wind facilities are
shown in Exhibit No. 7.
What are the current asset lives of the wind facilities to be repowered?
All of the existing wind facilities are currently being depreciated assuming a 3O-year
asset life. The facilities the Company plans to repower or is evaluating for repowering
are currently scheduled to be retired between 2029 and2040. The retired assets from
repowering are treated as an interim retirement for accounting purposes and transferred
to the wind plant depreciation reserve.
Will repowering the wind facilities extend their useful operating lives beyond the
currently planned retirement dates?
Yes, the Company believes that repowering the wind facilities will extend their
operation 30 years from the repowering date, extending their useful lives by at least 10
years.
How will repowering extend the useful life for 30 years from the repowering date?
The repowering projects are being designed by the turbine equipment suppliers to meet
the same design requirements that apply to complete wind turbine generators used in
new wind facility construction. The wind turbine equipment suppliers will have their
wind turbine designs for the repowering projects certified by an independent third party
to ensure that they meet or exceed applicable International Electrotechnical
Commission design standards used in the wind turbine industry. These design standards
are intended to ensure that the equipment is appropriate for the site conditions and will
perform satisfactorily over the standard design life.
Hemstreet, Di - 9
Rocky Mountain Power
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What factors are independently reviewed to assess and certify the design of the
repowered wind facilities?
The third-party design assessment evaluates the site-specific load assumptions based
upon the climactic conditions at each facility and will assess the control and protection
systems for the wind turbine and their ability to meet the site design conditions. It will
also assess the electric components, the rotor blades, hub, machine components (i.e.,
drivetrain, main bearing and gearbox), and the suitability of the existing tower upon
which the new wind turbine equipment will be installed to meet the new design loads.
Does the Company have land rights that allow its repowered wind facilities to
operate for 30 years after repowering?
The Company reviewed its existing land rights for its existing wind generation facilities
and determined that nearly all projects have land rights that will allow the facilities to
operate for 30 years after repowering is completed. The Company will seek to prudently
extend lease terms beyond the initial period, as required, to support the longer
depreciable lives of its repowered wind resources.
Does this conclude your direct testimony?
Yes.
Hemstreet, Di - 10
Rocky Mountain Power
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