20210527Hemstreet Direct-Redacted.pdf

BEFORE THE IDAHO PTJBLIC UTILITIES COMMISSION
IN THE MATTER OF TIIE )
APPLTCATTON OF ROCKY )
MOITNTATN POWER FOR )
AUTHORTTY TO TNCREASE ITS )
RATES AIYD CHARGES IN IDAIIO )
AI\ID APPROVAL OF PROPOSED )
ELECTRTC SERVTCE SCEEDULES )
AND REGT'LATIONS )
ROCKY MOTINTAIN POWER
CASE NO. PAC-E-2I-07
Direct Testimony of Timothy J. Hemstreet
REDACTED
CASE NO. PAC.E-2I.07
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TABLE OF CONTENTS
INTRODUCTION AND QUALIFICATIONS
PURPOSE OF TESTIMONY.......
SUMMARY OF TESTIMONY ....
ENERGY VISION 2O2O NEW WIND PROJECT OVERVIEW AND
CONSTRUCTION ST4ruS............
DISPOSITION OF REPLACED EQUIPMENT REPORT...
coNCLUSrON...........
...... 1
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WIND REPOWERING PROJECT OVERVTEW AND PROJECT SCOPE ............... 1 8
FOOTE CREEK I REPOWERING PROJECT COSTS AND 8ENEFITS.................24
ur. REQUALTTCATTON FOR PTCS ............... 30
VItr.
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INCREASED ENERGY BENEFITS FOLLOWING REPOWERING .............. ........ 33
REDUCED ONGOING OPERATIONAL COSTS FOLLOWING REPOWERING. 36
PROJECT PERMITTING, CONSTRUCTION AND BUDGET ST4TUS................. 3 8
ATTACHED EXIIIBITS
Confidential Exhibit No. 2G-Wind Costs Comparison
Exhibit No. 2l- Major Components of a Wind Turbine Generator
Confidential Exhibit No. 22-Repowering Project Details and In-Service Dates
Exhibit No. 23-Site Plan Foote Creek I
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I. INTRODUCTION AND QUALIFICATIONS
Please state your name, business address, and present position with PacifiCorp.
My name is Timothy J. Hemstreet. My business address is 825 NE Multromah Sfieet,
Suite 1800, Portland, Oregon 97232. My title is Managing Director of Renewable
Energy Development for PacifiCorp. I am testifring for PacifiCorp d/b/a Rocky
Mountain Power ("PacifiCorp" or the "Company").
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 atAustin. I am also a Registered Professional Engineer in the state
of Oregon. Before joining PacifiCorp in 2004, I held positions in engineering
consulting at CH2M HILL (now Jacobs Engineering, Inc.) and environmental
compliance at RR Donnelley Norwest, Inc. Since joining PacifiCorp, I have held
positions in environmental policy and compliance, engineering, project management,
and hydroelectric project licensing and program management. ln 2016, I assumed a
role in renewable energy development, focusing on PacifiCorp's wind repowering
effort, and assumed my current role in June 2019, in which I oversee the development
of renewable energy resources that enhance and complement PacifiCorp's existing
renewable energy resource portfolio.
Have you testified in previous regulatory proceedings?
Yes. I have previously sponsored testimony in California, Idaho, Oregon, Utah,
Washington, and Wyoming.
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II. PURPOSE OF TESTIMONY
a. What is the purpose of your testimony in this proceeding?
A. The purpose of my testimony is trvo-fold. First, I provide an update on the construction
progress and expenditures for the wind energy components of the Company's energy
resource sffategy, Energy Vision 2020. These two components include repowering the
existing Company-owned wind fleet ("Repowering Projects") and constructing new
wind facilities ("New Wind Projects"). I will refer to the Repowering Projects andNew
Wind Projects collectively as the "Energy Vision 2020 Projects." The Idaho Public
Utilities Commission ("Commission") approved the New Wind Projects in Case No.
PAC-E-17-07, along with a new transmission line and transmission network upgrades,
which are discussed in the direct testimony of Mr. Richard A. Vail. r The Commission
approved the Repowering Projects in Case No. PAC-E-17-06.2
In my testimony and exhibits, I provide an update on the construction status and
expenditures for the New Wind Projects and Repowering Projects, describe changes in
the cost and performance of the Repowering Projects since they were previously
considered by the Commission, demonstrate that the Company has prudently managed
the construction of the New Wind and Repowering Projects, all but one of which has
been fully placed in service, and confirm that the remaining project will be placed in
service on time to achieve the full value of the federal production tax credits ("PTCs").
The Company's costs as filed in this case for the New Wind Projects and Repowering
I In the Matter of the Application of Rocley Mountain Power for Certificates of Public Need and Necessity and
Binding Ratemaking Treatment for Wind and Transmission Facililies, Case No. PAC-E-17-07, Order No. 34104
(July 20, 2018).
1 In the Matter of the Applicalion of Rocky Mountain Power for Binding Ratemaking Treatment for lfiind
Repowering, Case No. PAC-E-17-06, Order No. 33954 (Dec. 28,2017).
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I Projects are, in sum, less than the total project costs approved by the Commission. ln
total, the costs for the New Wind Projects and Repowering Projects are 0.7 percent
below the forecast costs filed in the respective cases in which these projects were
evaluated and approved, with the total costs of the New Wind Projects exceeding the
pre-approved amounts and the Repowering Projects completed at total costs that are
less than were approved by the Commission. My testimony demonstrates the
reasonableness of the increases in the individual projects over the approved costs.
Further, my testimony demonstrates that the Company has prudently managed the New
Wind Projects and Repowering Projects and the total investment should be included in
the Company's revenue requirement in this case.
Second, I demonstrate that PacifiCorp's upgrades to repower the Foote Creek I
wind facility-which was not subject to the Commission's prior order on repowering-
is prudent and in the public interest. My testimony provides the following information:
. The scope of the Foote Creek I repowering project;
. The financial benefits for customers of repowering resulting from the
qualification for federal PTCs;
. The increased energy benefits following repowering;
. The reduced ongoing operating costs following repowering;
. The extension of the wind facility asset life after repowering;
. Project implementation status and construction schedule; and
. The disposition of removed equipment.
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My testimony demonstrates that the Company's decision to repower the Foote
Creek I facility is reasonable and prudent, and should be included in the Company's
revenue requirement in this case.
IIL SUN{NIARY OF TESTIMOI\ry
a. Please summarize your testimony.
A. The costs incurred for the acquisition and construction of the New Wind Projects are
reasonable, align closely to the costs approved in the Commission's Order in Case No.
PAC-E-I7-07, and the construction projects have been prudently managed in the face
of very challenging conditions presented by the coronavirus pandemic. The Ekola Flats
and Cedar Springs II wind projects are now fully in service and serving customers and
the final project, TB Flats, is partially in service with 383 megawatts ("MW') of the
project now online. Due to construction impacts and delays resulting from the
pandemic, it was not possible to complete construction of TB Flats in 2020 and the
remainder of the TB Flats project will come online this summer. All New Wind Projects
will qualifu for the full value of PTCs given a one-year extension of the Internal
Revenue Service's qualification deadline under the continuous efforts safe harbor for
wind energy projects, which was issued in response to the extraordinary circumstances
caused by the coronavirus pandemic on wind energy project construction.
The coronavirus pandemic created severe challenges for construction of the
New Wind Projects and resulted in supply chain and logistics disruptions, equipment
delivery delays, parts and labor shortages, and productivity impacts associated with
adherence to worker safety protocols implemented in confornance with guidance
issued by the U.S. Centers for Disease Control and Prevention and other public health
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authorities. The Company worked diligently with its suppliers and contractors to
protect public and worker safety, mitigate project impacts to the degree possible, and
bring these beneficial projects online as soon as practicable while managing cost
impacts associated with the extended construction schedules resulting from the
disruptions caused by the coronavirus pandemic. To mitigate the impacts of
construction delays on customer benefits derived from these beneficial projects, the
Company placed the Ekola Flats and TB Flats projects in service in a phased approach.
On the date that interconnection and transmission service was available to allow the
energy to flow from the New Wind Projects to the transmission system, all wind turbine
generators ("WTG") on electrical circuits that were ready to be placed in service were
immediately brought into an operational status. In circumstances where not all WTGs
were ready to be placed in service on such date, the remaining WfCs have been and
will be placed in service on a circuit-by-circuit basis. This has allowed customers to
obtain the energy and PTC benefits of the New Wind Projects as soon as possible.
The Company has updated its costs for the New Wind Projects to reflect costs
associated with addressing the impacts of construction impacts caused by the
pandemic, as well as other cost changes that were outside the Company's control.
PacifiCorp continues to work with suppliers and contractors to complete construction
efforts at the projects including completing punch list items, site revegetation and
demobilization, and to implement revised schedules to complete the construction of the
TB Flats project in the most cost-effective manner this summer. My testimony supports
why the Commission should establish rates that will allow the Company to recover its
costs for the New Wind Projects that exceed the amounts previously approved by the
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Commission given the Company has prudently managed the projects and the cost
increases were outside the Company's control.
Similarly, the construction of the Repowering Projects has been prudently
managed by the Company. The Company was able to complete the majority of the
repowering work in 2019 at all but one of the Repowering Projects - Dunlap - before
the coronavirus pandemic began to disrupt construction efforts :.rl-2O2O. And at the
Dunlap project, equipment pre-deliveries were completed in January z0z0,which eased
subsequent construction efforts during 2020 since equipment supply chain and logistics
impacts experienced elsewhere did not affect the project. The construction costs for the
Repowering Projects have been prudently managed with the total project costs 6
percent less than the costs approved in Commission Order No.33954 in Case No. PAC-
E-17-06.
Following their review and approval by the Commission, the Repowering
Projects were subsequently enhanced with larger blades and higher capacity generators
at some facilities. This resulted in the incremental generation from the Repowering
Projects increasing from 19 percent to 26 percent - increasing the energy and PTC
benefits of the projects. Additionally, the Company negotiated full-service agreements
with the turbine suppliers that create greater certainty regarding ongoing operations
costs and provide equipment availability guarantees. Through its wind repowering
efforts, PacifiCorp has leveraged past investments in its wind fleet to enhance the future
value of these resources for the benefit of its customers.
Since the order in Case No. PAC-E-I7-06, the Company's repowering efforts
expanded to include all of its owned wind resources, including the Foote Creek I facility
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that was not subject to the Commission's order related to repowering. Foote Creek I is
the oldestresource inthe Company's wind fleet and the Company was able to complete
the necessary commercinl arangements and obtain approval from the Wyoming Public
Service Commission for a certificate of public convenience and necessity ("CPCI{') to
take advantage of the unique opportunity to repower this facility so customers will
benefit from the site for many more years. Through its wind repowering efforts, the
Company has been able to deliver its customers efficiency and reliability improvements
in wind generation technology and return the entirety of its wind fleet to like-new
condition, all while enhancing performance, reducing ongoing maintenance
expenditures, reducing customer costs, and extending the lives of the facilities by at
least 10 years.
Finally, my testimony supports why the Commission should establish rates that
will allow the Company to recover the costs for the Repowering Projects approved in
Case No. PAC-E-17-06. Further, the Commission should approve as prudent the
investment in, and allow cost recovery for, the repowering of the Foote Creek I wind
faciliry which will deliver customer benefits similar to the Repowering Projects
previously approved by the Commission.
ENERGY VISION 2O2O NEW WIND PROJECTS OVERVIEWAI{D
CONSTRUCTION STATUS
Please provide a brief overview of the projects that are included in Energy Vision
2020.
As I explain above, the Energy Vision 2O2O Projects consist of New Wind and
Repowering Projects, along with new transmission projects addressed by Mr.Vail. In
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I Case No. PAC-E-17-07, the Company received resource approvals for the New Wind
Projects, consisting of the following:
. Ekola Flas Wind Project - a nominal 250 MW wind facility located in Carbon
County, Wyoming and associated infrastructure;
. TB Flats Wind Project - a nominal 500 MW wind facility located in Carbon and
Albany County, Wyoming and associated infrastructure, and
. Cedar Springs Wind Project - a nominal 400 MW wind facility located in
Converse Counry Wyoming and associated infrastructure, of which a nominal
200 MW ("Cedar Springs II") is owned and operated by the Company and 200
MW ("Cedar Springs I") is being delivered to the Company under a power
purchase agreement ("PPA").
Did the Company seek approval from the Commission in advance of proceeding
with the New \ilind Projects?
Yes. On June 30, 2017, the Company sought CPCNs and approval for the New Wind
Projectp under Idaho's binding ratemaking treatment in accordance with Idaho Code
$ 6l-541. In its application that initiated Case No. PAC-E-17-07, the Company sought
approval for the New Wind and transmission facilities. [n support of the application,
the Company filed extensive testimony and economic analysis to demonstrate that the
resource decisions were in the public interest. The Company also included deailed,
proj ect-by-proj ect cost estimates.
Please discuss the applicable requirements for the new wind projects to qualify for
PTCs?
In Internal Revenue Code section 45, the Internal Revenue Service ("IRS") provides
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for PTCs at the 2021 fall rate of 2.5 cents per kilowatt-hour of electrical energy
production by a wind facility. The PTCs are available for a l0-year period that begins
when the facility is placed in service. The Protecting Americans from Tax Hikes Act of
2015 (the "PAIH Act") extended the availability of the PTCs for wind facilities under
construction before January 1,2020. The PATH Act extension, however, also provides
for a phase-out of the PTCs. Wind facilities that began consffuction before
January 1,2017, per IRS rules, will realize the full PTC credit, which is the case for
the Energy Vision 2020 wind projects. If a wind facility began construction in 2017,
the PTCs were reduced by 20 percent. The PTCS were reduced by 40 percent if
construction began in 2018, and by 60 percent if construction began in 2019. Under the
PATH Act, PTCs are not available for wind facilities that began construction after
December 31,2019.
The facilities must be placed into commercial operation by the end of the fourth
calendar year following the year in which construction began or otherwise meet
specific IRS requirements for demonstrating the "continuity requirement" throughout
the implementation timeline. To ensure customers receive the full value of PTCs the
new wind facilities included in Energy Vision 202Obegan construction before January
I , 2017 , with a plan to be placed in-service by year-end 2020, barring any changes to
the law or qualification under other IRS guidance.
Have there been changes to these qualification requirements relevant to the New
Wind and Repowering Projects since the PATH Act was enacted?
Yes. In recognition of the impact of the coronavirus pandemic on wind energy projects
across the United States, the lntemal Revenue Service issued a notice (Notice 2020-
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4l) providing for a one-year extension in the Continuity Safe Harbor such that wind
projects such as PacifiCorp's that began construction in 2016 must be in-service prior
to January 1,2022, in order to quali$, for the full value of PTCs.
Did the Commission approve the Company's request for resource approval in
Case No. PAC-E-17-07?
Yes. On July 20, 2018, the Commission issued its Order No. 34104 ("New Wind and
Transmission Order") approving the Company's request for approval of the resource
decisions that comprise the New Wind Projects and the ffansmission projects addressed
in the testimony of Mr. Vail.3 The New Wind and Transmission Order included
approval of a stipulation between the Company and Commission Staffthat resolved all
issues except whether there would be a cap on costs that may be recovered in rates
("New Wind and Transmission Stipulation").4
In approving the New Wind Projects, did the Commission find that they were in
the public interest?
Yes. The Commission found that the New Wind and Transmission Stipulation was just,
fair and reasonable, in the public interest, and in accordance with the law and regulatory
policy of this state. The Commission approved the requested CPCN pursuant to the
terms of the New Wind and Transmission Stipulation, and imposed an overall cost cap
as condition of the approval.
3 In the Matter of the Application of Roclqt Mountain Power for a Certificate of Public Convenience and
Necessity and Binding Ratemaking Trealmentfor New lTind and Transmission Facilities, Case No. PAC-E-17-
07, Order No. 34104 (Jul. 20, 2018).
3 In lhe Malter of lhe Application of Rocley Mountain Powerfor a Certifcate of Public Convenience and
Necessity and Binding Ratemaking Treatment for New Wind and Transmission Facilities, Case No. PAC-E- l7-
07, Order No. 34139 (Sep. 6, 2018), at p. l.
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REDACTED
Did the Commission make findings as to the projected costs for the New Wind and
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A. Yes. The Commission approved in total projected capital costs for the
New Wind and transmission projects. This total projected capial cost for the New Wind
Projects was comprised of the individual projects as set forth in Confidential Exhibit
No.20.
O. Since the New Wind and Transmission Order, have there been any adverse
changes in circumstances that materially affect the scope or economics of the New
Wind Projects or the Repowering Projects?
A. No. To date, there are no material changes in circumstances. As discussed below, an
issue did arise related to U.S. tariff impacts and other unfavorable market conditions,
which negatively impacted previously established WTG equipment supply pricing for
the New Wind Projects. The Company was able to manage the WTG equipment supply
pricing issue, however, in a way that minimized the negative impact on customer net
benefits. tn addition, impacts from the coronavirus pandemic resulted in construction
delays, reduced productivity, and increased costs as a result of the longer than
anticipated construction durations and construction activities being pushed into periods
with less favorable conditions. Despite the challenging conditions, the Company has
diligently managed construction of the New Wind Projects to minimize cost impacts
associated with the coronavirus pandemic and bring the projects into service as soon as
possible so they can begin providing benefits to customers.
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Have there been any changes to the Company's projected costs for the New Wind
Projects from those approved in the Commission's Order?
Yes. On a total-Company basis, the costs as filed in this case are an
increase of approximately , o.I, over the approved New wind
Project costs. The individual project costs and variances from Case No. PAC-E-17-07
are shown in Confidential Exhibit No. 20.
Is the Company seeking recoyery for the costs in excess of the approved project
costs in this case?
Yes. These costs were beyond the Company's confiol, the increases are relatively small,
and they do not materially change the net benefits associated with the New Wind
Projects. Additionally, the Company's 2019 Integrated Resource Plan ("IRP")
demonstrates a need for these projects on the basis of providing safe and reliable service
more clearly than when the project costs were initially approved by the Commission.
The Commission's approval was on the basis of the economic opportunity alone. Mr.
Link's testimony discusses the new information from the 2019 IRP that demonstrates
that there is a need for the projects on the basis of safe and reliable service in greater
detail. An update on the status of each project component follows below, along with an
explanation of the cost increases and why they are reasonable.
Before proceeding, did the Company obtain other state regulatory approvals for
the New Wind Projects?
Yes. To capture the substantial customer benefits resulting from this time-limited
opportunity and in accordance with applicable state regulatory statutes, the Company
also received CPCNs from the Wyoming Public Service Commission and regulatory
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approval from the Public Service Commission of Utah.s
Did the capital costs for TB Flats and Ekola Flats increase over the costs approved
in the Order because of the WTG issue?
Yes. An issue did arise related to U.S. tariff impacts and other unfavorable market
conditions, which negatively impacted previously established WTG equipment supply
pricing. Vestas-American Wind Technology, Inc. ("Vestas") was originally
competitively selected in the third quarter of 2Ol7 as the follow-on WTG supplier for
the Ekola Flats and TB Flats wind facilities. ln the fall of 2018, Vestas communicated
that it was unable to hold pricing for the WTGs due to new U.S. tariff impacts that
affected: (1) steel pricing risk; (2) tariffs on Chinese goods; and (3) increased
transportation costs. In response, the Company initiated a competitive market request
for proposal updates with all originally shortlisted WTG suppliers beginning on
November 15, 2018. The shortlisted suppliers from this update were asked to confirm
their positions on WTG pricing and availabiliry run rate operations and maintenance
("O&M") costs, and equipment perforrnance information in conformity with permit
conditions and constraints.
Final firm price proposals were received on January 21,2019. The Company
completed an assessment of life cycle costs associated with the updatedproposals. Both
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a In the Matter of the Amended Applicalion of Rocky Mountain Power for Cerlificates of Public Convenience
and Necessity and Nontraditional Ratemakingfor Mnd and Transmission Facilities, Wyoming Public Service
Commission, Docket No. 20000-520-EA-17 (Record No. 14781), Memorandum Opinion, Finding, and Order
Approving Stipulation (Oct. 8, 2018); Application of Rocky Mountain Powerfor Approval of a Significant
Energt Resource Decision and Yoluntary Request for Approval of Resource Decision, Utah Public Service
Commission, Docket No. l7-035-40, Order (June 22, 2018).
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2.* MW and 4.* MW6 WTG platform options from multiple WTG suppliers were
compared. Ultimately, the assessment concluded that the Ekola Flats and TB Flats
initial capial cost estimates for WTG supply would exceed the estimates included in
the Company's original filing. However, when considered in conjunction with updated
run rate O&M cost reductions included in the new proposals and remaining New Wind
Project contingencies, customer benefits remained intact even with the increased
capital costs. The Company compared the updated information to the originally
assessed life-cycle cost and benefit information, which confirmed that the competitive
market update and reassessment resulted in a slight increase in customer benefits when
compared to the Company's final economic analysis (i.e., February 2018 economic
analysis, as adjusted to remove the Uinta project). Updated analysis of the Energy
Vision 2020 project economics based on the as-filed capital cost of the New Wind
Projects is presented in Mr. Link's direct testimony.
What has been the effect of the WTG supply issue and the impacts of the
coronavirus pandemic on construction timing and costs for Ekola Flats and TB
Flats?
WTG component deliveries for all of the new wind facilities included in the Energy
Vision 2020 Projects began in spring 2020, but impacts from the pandemic on the
global wind turbine supply chain, transportation logistics, and production capacity
stretched out the equipment delivery period and resulted in inefficient delivery of wind
turbine components as they became available. This, coupled with delays to construction
5 The asterisk used in 2.* MW and 4.* MW is a common industry wildcard designation when referring to a
range of available WTGs capacities within turbine design platforms of various original equipment
manufacturers.
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productivity as a result of adherence to worker safety plans adopted to address
recommendations from public health authorities in response to the pandemic, pushed
construction efforts later into the year and into periods with less favorable wind
conditions for effrcient construction. Coupled with the WTG supply issue, the net result
is that the costs of both projects now exceed the amounts pre-approved by the
Commission, as shown in Confidential Exhibit No. 20. The costs shown in this exhibit
reflect the current estimate of the project costs when all consffuction activities are
completed, all WTGs are in service, and costs associated with addressing the impacts
of the pandemic on the projects are resolved. While the TB Flats project is not yet
complete, and construction activities remain this summer, I believe the forecasted costs
for the project accurately reflect the remaining work given the better understanding we
now have of construction productivity and costs with completion of the project in the
present challenging circumstances.
Have there been any non-material changes to the TB Flats and Ekola Flats wind
facilities since they were reviewed and approved by the Commission?
Yes. As a result of the re-assessment of WTG supply options considered in response to
increased turbine supply costs in early 2019, the number of WTGs at each project was
slightly reduced. At TB Flats, the number of WTGs was reduced by two, so the total
number ofWTGs at the project was reduced from 134 to 132. At Ekola Flats the number
of WTGs was reduced by one, so the total number of WTGs at the project was reduced
from 64 to 63. This reduction in WTGs was possible due to an increase in the nameplate
capacity of the follow-on WTGs from 4.2 MW to 4.3 MW. The reduction in turbine
numbers in combination with increased capacity maintained the planned capacity of
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the projects and reduced construction capital costs and ongoing operations and
maintenance costs while not materially impacting the annual energy production from
the facilities.
Are the costs for Cedar Springs II consistent with the costs approved in the Order?
Yes. Costs for Cedar Springs tI included in this filing are , as shown in
Confidential Exhibit No. 20, which is less than the amount approved by the
Commission.
a. Have there been any non-material changes to the Cedar Springs II facility since
the project was reviewed by the Commission?
A. Yes. In working with the project developer and the U.S. Fish and Wildlife Service to
consider and reduce potential avian risks associated with the faciliry the Company was
able to identifu the opportunity to similarly increase the nameplate capacity of the
follow-on WTGs that will be used at the facility, allowing WTGs that were sited in
areas of higher avian risk to be dropped from the site plan. The nameplate capacity of
the follow-on WTGs was increased from 2.52NNV to 2.82 MW, allowing a reduction
of 8 WTGs from the site plan so the project now consists of 72 total WTGs. This
reduction in WTGs also had no material impact to the overall energy production from
the facility, while reducing the cost of the project and the future cost of operating and
maintaining the project.
a. What is the current construction status of the TB Flats wind facility?
A. For the TB Flats wind facility, 104 of the 132 WTGs comprising total generation
capacity of 382.8 MW have been erected, commissioned, and are now serving
customers. Due to the turbine equipment delivery delays associated with the pandemic,
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28 WTGs were unable to be delivered to the site during the construction season in trme
to allow for their erection n 2020 prior to the onset of winter weather conditions and
high wind speeds that preclude efficient delivery consffuction, commissioning, and
maintenance activities. As a result, construction activities at the project were halted
during the winter so they could resume when weather conditions were more favorable.
Delivery of the remaining 28 turbines to the site is now underway and is anticipated to
be completed by May ls,zOzl,barring unforeseen weather conditions. Erection of the
remaining 28 WTGs will begin shortly following completion of deliveries.
What is the current construction status of the Ekola Flats wind facility?
All WTGs at the Ekola Flats wind facility were placed in-service on December 30,
2020, and the project has been producing energy and associated PTC benefits for
customers since that time. At this time, contractor punch list items, including site
restoration worh continues and will be completed this spring.
What is the current construction status of the Cedar Springs II wind facility?
All WTGs at the Cedar Springs II wind facility were placed in service on December 8,
2020. At this time, contractor punch list items, including site restoration work,
continues and will be completed this spring.
Is the Company confident that construction at TB Flats will be completed by year-
end,2021?
Yes. I currently anticipate that construction efforts at TB Flats will be completed by
mid-summer, well in advance of the high wind speed period that can slow construction
and well ahead of the extended year-end deadline. With the revised construction
schedule for the project we are no longer impacted by equipment delivery delays and
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WTG deliveries to the site are ongoing. With equipment standing by and logistics
schedules firmly in place, and with the knowledge and experience the consffuction
contractors now have with worker safety protocols and changed practices necessary
during the pandemic, I am confident that the TB Flats project will be completed by
mid-summer.
V. WIND REPOWERING PROJECT OVERVIEWAND PROJECT SCOPE
a. Please briefly describe what repowering a wind facility entails.
A. Repowering broadly describes the upgrade of an existing, operating wind facility with
new WTG equipment that can increase a facility's generating capacity and the amount
of electrical generation produced from the facility. Specifically, PacifiCorp's
repowering effort involved replacing the nacelle, hub, and rotor of the WTG at all
facilities, except the Foote Creek I facility, where repowering involved replacement of
the existing WTGs, including the foundations and towers, which were unable to be re-
used. Exhibit No. 2 I includes a depiction of a wind turbine and its various components.
a. Which facilities have been repowered?
A. PacifiCorp has repowered the facilities known as Dunlap, Foote Creek [, Glenrock I,
Glenrock [II, Goodnoe Hills, High Plains, Leaning Juniper, Marengo I, Marengo II,
McFadden Ridge, Rolling Hills, Seven Mile Hill I, and Seven Mile Hill II. Repowering
activities are complete at each of these facilities and the repowered facilities are now
in commercial operation and serving customers.
a. What repowering costs are the Company seeking to recover in this filing?
A. The Company is seeking to recover costs associated with the Repowering Projects
previously approved by the Commission to repower, as well as the costs related to the
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repowering of the Foote Creek I faciliry which included costs to acquire full ownership
of the project and purchase the wind energy lease rights for the project, and the costs
of repowering the facility. Similar to the treatment of replaced assets associated with
the Repowering Projects, the Company is seeking recovery of the replaced assets
associated with repowering Foote Creek I as part of rate base.
How many MW of installed wind capacity has PacifiCorp repowered?
PacifiCorp has repowered all of its 13 wind facilities, representing approximately
1,040 MW of installed wind capacity prior to repowering. After repowering, the
capacity of the repowered facilities has increased to approximately 1,066 MW due to
increased transmission interconnection capacity at the Marengo I and Marengo II
facilities, full utilization of the 41.4 MW interconnection capacity at Foote Creek I, and
minor increases at the Glenrock I and Rolling Hills projects. Detailed information about
the wind facilities that have been repowered is included in Confidential Exhibit No. 22.
Please explain why repowering is feasible for these wind facilities.
The wind facilities PacifiCorp has repowered began commercial operation between
1999 ard2010. Aside from the Foote Creek I facility, the facilities in PacifiCorp's wind
fleet were able to be economically repowered, or upgraded, with new technology that
will improve their efficiency and increase their generation output, without incurring the
cost to replace the existing towers, foundations, and energy collection systems, which
are of suffrcient design to accommodate more modern equipment now available. The
existing foundations and towers, although more than l0 years old in some instances,
are adequately designed to accommodate larger, more modern WTG equipment and
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still have a suffrcient remaining useful life to economically justifr the associated
investment.
Did the Company seek Commission approval in advance of proceeding with the
Repowering Projects?
Yes. On June 30, 2017, the Company filed Case No. PAC-E-17-06 requesting approval
for the Repowering Projects. In support of the application, the Company filed extensive
testimony and economic analysis to demonstrate that the resource decisions were in the
public interest. The Company also included detailed, project-by-project cost estimates.
Because PacifiCorp was unsure whether repowering could occur at the Foote Creek I
facility given the multiple entities involved in the previously co-owned project, Foote
Creek I was not included in the Company's application.
Did the Commission approve the Company's request to repower the wind facilities
in Case No. PAC-E-17-O6?
Yes. On December 28,2017,the Commission issued its Order No. 33954 approving an
all-party stipulation ("Repowering Stipulation") in support of the Repowering Projects,
which included Dunlap, Glenrock I, Glenrock III, Goodnoe Hills, High Plains, Leaning
Juniper, Marengo I, Marengo II, McFadden Ridge, Rolling Hills, Seven Mile Hill I,
and Seven Mile Hill [. In its order, the Commission determined that the repowering
projects, estimated to cost were fair, just, reasonable, and in the public
interest, approved the Resource Tracking Mechanism described in the Repowering
Stipulation, and approved continued rate recovery of and on the replaced assets
associated with the wind repowering project. I will discuss the status of the approved
projects later in my testimony.
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Did the Company continue to refine the Repowering Projects following their
approval by the Commission?
Yes. The Company worked with turbine suppliers and its engineering consultant, Black
& Veatch, to refine the designs for the Repowering Projects and increase value for
customers by increasing equipment performance, reducing project costs, and gaining
greater certainty with respect to future operating costs of the projects. Most of the
Repowering Projects were able to incorporate equipment with improved performance
specifications relative to the assumptions contained in the Company's application to
the Commission. At the projects built with General Electric turbines, a repowering
turbine with a higher nameplate capacity and a larger 9l-meter rotor was able to be
applied to the projects, increasing their generation benefits, while overall repowering
costs were reduced. At the Marengo I and II projects, the generation interconnection
limit was able to be increasedby 23.4 MW, allowing additional generation from the
higher capacity turbines to be delivered to customers. In addition, the Company was
able to negotiate long-term full-service agreements for all of the Repowering Projects
that provide greater cost certainty with respect to ongoing operations and maintenance
costs of the projects, while providing project availability guarantees that ensure the
project will attain high levels of availability following repowering, with liquidated
damages payable if conffactual availability targets are not attained.
What is the construction status of the Repowering Projects that were approved by
the Commission in Case No. PAC-E-17-06?
All of the projects are now in commercial operation and serving customers. Except for
the Dunlap project, substantial construction at the projects was completed in late 2019
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and the projects were online in the late 2019 or early 2020. The Dunlap project was
always planned to be completed in 2020 to allow as much of the existing PTCs from
the original project to be realized prior to repowering.
Was construction at the Dunlap project impacted by the coronavirus pandemic?
Although construction occurred in2O2O, the Dunlap project was spared many of the
impacts that affected and delayed consfuction activities at the New Wind Projects and
at the Foote Creek I repowering project. General Electric elected to pre-deliver
equipment for the Dunlap project in late 2Ol9 and early 2O2O in order to minimize
equipment supply and logistics constraints n 2020. This proved fortuitous and the
project benefitted by not being impacted by equipment delivery delays or parts delays.
In addition, General Electric's repowering crew came to the project after having already
had experience at another repowering project in the southern United States working
under coronavirus safety precautions. Thus, when work began at the Dunlap project in
June 2020 there were few unexpected delays associated with implementing coronavirus
worker safety practices and different work procedures.
What is the budget status for the Repowering Projects that were approved by the
Commission?
The Company was able to complete consffuction of the Repowering Projects at costs
below the amount approvedby the Commission in Case No. PAC-E-I7-
06. Final construction costs for the projects are ,of less
than originally estimated. On a project-by-project basis, 11 of the 12 projects were
completed at costs that are less than the capital costs estimated by the Company at time
of Commission approval. Please refer to Confidential Exhibit No. 20 for a comparison
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between the cost of the Repowering Projects estimated in Case No. PAC-17-06 and the
Company's capital costs by project as filed in this proceeding.
Do any of the projects have capital costs that exceed amounts presented in Case
No. PAC-E-17-06?
Yes. Capital costs at the Goodnoe Hills project exceeded the estimated amount for the
project presented in the Repowering Projects application. The costs for all other
projects were less than costs presented in the application.
What are the reasons for the cost increases at the Goodnoe Hills facility?
At the Goodnoe Hills project, the Company's cost estimate presented in its application
was developed based on estimated construction costs at the time of filing. Subsequent
engineering design of the project after Commission review resulted in changes to the
project that drove cost increases. Engineering analysis determined that the final turbine
design required an upgrade in the foundations at the project to meet the required design
load of the larger turbine rotors. These costs had not been included in the Company's
original estimate. Additionally, the desigu and cost of tower adapters was refined,
resulting in larger cranes needed to install the equipment, which increased construction
costs, and cultural resources surveys indicated the presence of cultural resources that
limited crane travel paths on the site, increasing construction costs due to more crane
breakdowns required to move cranes between work locations.
Did these cost increases at the Goodnoe Hills project significantly impact the
economic benefits of the project?
No. The need for foundation retrofits was factored into the project economics before
the Company initiated construction of the project. In the end, Goodnoe Hills project
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costs ended up exceeding the Company's final estimated amount for the project by
, which doesn't materially impact the favorable economics of the project.
VI. FOOTE CREEK I REPOWERING PROJECT COSTS AI\D BENEFITS
O. You mentioned earlier that the scope of repowering at Foote Creek I is different
than repowering at the Company's other wind facilities. Can you provide
additional background on the Company's decision to repower Foote Creek I?
A. Foote Creek I, the Company's oldest wind faciliry began commercial operation inApril
1999. The facility served as a demonstration project to evaluate the feasibility of utility-
scale wind energy. The facility was developed in partnership with the Eugene Water &
Electric Board ("EWEB") and the Bonneville Power Administration ("BPA"). As
developed, Foote Creek I was co-owned by EWEB (21.21 percent ownership) and
PacifiCorp (78.79 percent ownership), with BPA taking 37 percent of the facility's
output through aZl-year cost-based PPA. As the first utility-scale wind energy project
in Wyoming, Foote Creek I was sited at one of the most favorable wind sites in the
United States and enjoys the highest wind speeds of any of the Company's wind
projects. Unlike the remainder of the facilities the Company has repowered, the Foote
Creek I project is unique in that it was co-owned and also had a third-party PPA
associated with the resource.
Prior to repowering, the Foote Creek I facility consisted of 68 turbines, each
with a 600-kilowatt generating capacity, a rotor diameter of 42 meters, and towers that
supported a 40-meter hub height. Although employing the latest technology when
originally installed, the existing turbines had become costly to operate and maintain
relative to the Company's more modern turbines that have much higher nameplate
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capacities, larger rotor diameters, and taller towers. Accordingly, the operation and
maintenance costs of the Foote Creek I facility were the highest of the Company-owned
wind resources on a per-MW basis since the maintenance requirements for these
smaller turbines are similar to those of larger turbines, but the capacity of the Foote
Creek I turbines was much less.
The costs associated with continued operation of the existing turbines at Foote
Creek I for both the Company and EWEB were anticipated to increase after the
expiration of the BPA PPA inApril 2024 since 37 percent of these ongoing costs would
no longer be covered through the cost-based PPA. Similarly, BPA would have been
required to take higher cost energy from the project until the PPA expired. For these
reasons, PacifiCorp, EWEB, and BPA were all motivated to explore whether the
existing Foote Creek I project could be unwound in order to achieve an outcome more
favorable to customers as compared to continuing to operate the facility through its
planned 30-year asset life. Repowering the facility presented the opportunity to realize
this outcome for all customers.
Please explain what repowering at the Foote Creek I wind facility involved.
The WTG equipment at Foote Creek I had a low generating capacity (600 kilowatts)
per turbine and the towers and foundations supporting the nacelle and rotor did not
have the necessary height or design strength to accommodate the installation of modern
larger nacelles and rotors capable of generating a much greater amount of electricity
per WTG.
Due to the limitations of the older facility, repowering Foote Creek I required
complete removal and replacement of the old wind turbine equipment. The towers,
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foundations and energy collection system were replaced with new foundations to
support the larger towers and appropriately sized energy-collector circuits. Repowering
the Foote Creek I facility resulted in the replacement of the current 68 small-capacity
wind turbines at the site with 13 modem wind turbines. Given the improvements in
wind turbine technology since the construction of the project more than 20 years ago,
the project site is able to produce nearly 60 percent more energy with 80 percent fewer
turbines. A site plan for the Foote Creek I project showing the original and new
repowering turbines is shown in Exhibit No. 23.
What was necessary for the Company to repower the project?
Because of the very favorable wind conditions at the site, the Company was interested
in repowering the facility so that customers could benefit from the low-cost energy that
could be generated at the site with modern wind rurbine equipment qualified at
100 percent of the value of the PTCs. To achieve that, however, it was necessary for
the Company to acquire EWEB's ownership share of the facility and to terminate the
existing PPA with BPA. The Company negotiated a PPA termination agreement with
EWEB and BPA, and a purchase and sale agreement with EWEB for its interests in the
facility. The termination of the PPA was negotiated to be effective upon PacifiCorp's
acquisition of EWEB's interest in the project, and the closing of the purchase and sale
agreement with EWEB was contingent upon the Company obtaining necessary
regulatory and permitting approvals related to repowering as well as satisfactory
commercial arrangements for turbine supply and construction that ensured repowering
could occur.
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a. How much did the Company pay EWEB for its interests in the facility?
A. PacifiCorp paid EWEB approximat.trlfor its interests in the facility.
0. Did the Company incur costs to terminate the Foote Creek I PPA with BPA?
A. No. Under the termination agreement, BPA paid an early termination payment for the
facility in the amount of , of which I-the Company's
78.79 percent ownership share of the facility-was paid to the Company. This payment
to the Company and EWEB reflected the fact that BPA realizes savings by terminating
the PPA early and replacing the power with lower cost energ:y resources.
a. Were these amounts consistent with the Company's expectations?
A. Yes. These payments were consistent with the Company's economic analysis of the
Foote Creek I repowering project, which is described by Mr. Link.
a. Did the Company enter other commercial arrangements related to repowering at
Foote Creek I?
A. Yes. The Company executed a turbine supply agreement with Vestas and executed a
balance of plant construction contract with Thorstad Companies, Inc. Both contracts
were awarded following competitive solicitation processes. When these contracts were
finalized, the Company proceeded to close on the purchase of EWEB's interest in the
project and terminate the PPA. The Company also purchased the wind energy lease
rights for the Foote Creek I facility.
0. Why did the Company purchase the wind energy lease rights for Foote Creek I?
A. The Company was operating the Foote Creek t facility under land rights that were
subleased from Chandar Energy Land Associates, Inc. ("CELA"), which held the
masterwind energy lease rights with the ultimate property owners upon whose land the
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Foote Creek I turbines are located. Taking into account the high-value wind energy
resource at the site, the wind energy production-based lease payments owed to CELA
under the sublease were still more costly than what the Company pays for similar
production-based wind energy leases. The Company was able to negotiate the purchase
of the master wind energy leases from CELA at a cost that improved the economics of
the Foote Creek I repowering project relative to continuing to operate under the existing
sublease. Additionally, the master wind energy lease rights can be renewed for a total
term of up to 99 years, providing potential future customer benefits beyond the asset
life of the repowered Foote Creek I facility.
Were there unique permitting requirements related to Foote Creek I as compared
to the other repowering projects?
Yes. It was necessary for the Company to obtain approval of a new CPCN from the
Wyoming Public Service Commission related to repowering the facility and a new
Conditional Use Permit from Carbon County, Wyoming. The Company also had to
obtain concr[rence from the Bureau of Land Management ("BLM") that repowering
was consistent with the existing right of way grant from BLM for the faciliry and the
Company worked with the U.S. Fish and Wildlife Service to review the locations of the
new turbines on the existing project footprint to evaluate and minimize potential avian
impacts associated with the new turbine layout.
When did the Company finally approye repowering the Foote Creek I facility?
The Company approved repowering the facility on June 25,2019- The Company then
closed on the purchase of EWEB's interest in the facility on July 24, 2019, after
commercial arrangements to repower the facility were finalized. Following approval of
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the repowering project, the Company was able to negotiate the purchase of the master
wind leases and incorporated this change into the project scope. The Company
subsequently closed on the purchase of the master wind energy lease rights from CELA
onAugust 8,2019.
What benefits will customers realize from repowering Foote Creek I?
Repowering Foote Creek I re-qualifies it for PTCs, which are benefits that are passed
through to customers. Additionally, repowering increases the amount of zero fuel cost
energy produced from the repowered facilities given the much larger energy production
capability of the new turbines. Further, by replacing older WTG equipment, which is
subject to more failure and maintenance issues than newer equipment, repowering will
reduce PacifiCorp's ongoing operating costs. Finally, repowering the wind facilities
with new WTG equipment will extend the useful lives of the facilities by up to 2l years,
creating substantial energy and capacity benefits for customers in the future when this
wind facility would otherwise have been retired from service.
With the repowering of Foote Creek I added to the Company's repowering efforts,
what are the estimated generation benelits of repowering across the Company's
repowered wind fleet?
The Company's repowering effort has incorporated recent technical advances that
allow for installation of longer blades and nacelles with higher capacity generators,
and, with the recently completed repowering of Foote Creek I, is expected, on average,
to deliver an additional 814 additional gigawatt-hours ("GWh") of low-cost energy for
customers, or an increase of 27 percent across the entire wind fleet.
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VIL REQUALIFICATION FOR PTCS
How do the Repowering Projects qualifo for the PTC extension enacted in 2015?
The IRS guidance, which I discussed above in relation to the New Wind Projects,
establishes a "safe harbor" for taxpayers to demonstrate the year a facility will be
deemed to "begin consffuction," thereby setting the value of the PTC. If at least five
percent of the total project costs were incurred in 2016, then the facility qualifies under
the IRS safe harbor for the full value of the PTC, provided the taxpayer can demonsffate
"continuous efilorts" to complete construction. The IRS guidance on the now five
calendar year "safe harbor" with respect to the continuous-efforts standard that I
discussed in relation to the New Wind Projects also applies to the Repowering Projects.
Thus, as with the New Wind Projects, the Repowering Projects must be in service no
later than December 31,2021, to satisfr the continuous-efforts safe-harbor provisions
- given the one-year extension of the safe-harbor described earlier. If the New Wind or
Repowering Projects are not placed in service by December 31, 2021, the projects must
satisfu the potentially more challenging IRS requirements that continuous efforts were
expended to repower the facilities.
Is the full value of the PTC for the Repowering Projects the same as those for the
New Wind Projects?
Yes. During the 10-year period after the wind facility begins commercial operation, the
Repowering Projects will receive the same 2.5 cents per kilowatt-hour or $25 per
megawatt-hour, adjusted annually for inflation as the New Wind Projects.
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Do all of the Company's Repowering Projects, and the Foote Creek I repowering
project, quali$ for the full value of the PTC under these rules?
Yes. Consistent with IRS guidance, a facility owner can demonstrate that construction
of a facility has begun in the year in which at least five percent of the applicable project
costs are incurred. If wind turbine equipment is purchased and delivered in 2016, and
the equipment comprises at least five percent of the applicable project costs, a PTC
"safe harbor" is created for the wind facilities subsequently constructed. To meet this
requirement, PacifiCorp executed safe harbor equipment purchases with General
Electric Intemational, lnc. and Vestas in December 2016, and took delivery of
equipment with a value sufficient to give the Company the ability to repower its entire
wind fleet and qualifu the repowered wind facilities for 100 percent of the PTC value.
For the Foote Creek I facility, PacifiCorp used safe harbor equipment obtained from
Berkshire Hathaway Energy Renewables, a Berkshire Hathaway Energy subsidiary,
which made safe harbor equipment purchases from Vestas in December 2O16 that have
been used to qualifr the Foote Creek I project for 100 percent of the PTC value.
What other requirements must repowered projects satisfy to qualifr for the PTCs?
On May 5,2016, the IRS issued Notice 2016-31, which provides guidance on various
aspects of qualifuing for the PTCs and whether new tax credits can be claimed when
wind turbines are repowered or retrofitted. Notice 2016-31 generally provides that the
repowering costs must equal at least four times the fair market value of the equipment
that the owner retains from the original facility for the repowered turbines to qualifu
for new PTCs. Thus, 80 percent of the fair market value of the repowered WTG must
result from repowering project costs while the value of the retained components cannot
Hemstreet, Di - 31
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I exceed 20 percent of the fair market value of the new facility. This "80/20" test is
applied on a turbine-by-turbine basis. Each wind turbine-composed of a foundation,
tower, and machine head (including nacelle, hub, and rotor), is considered a separate
facility.
Do all of the Company's Repowering Projects pass this 80/20 test?
Yes. All of the Repowering Projects pass ttris test.
Is the Foote Creek I facitity subject to this 80/20 test?
No. The Foote Creek I facility was repowered without using any retained wind turbine
components. The tower and foundations of the existing turbines at the site were not
reused, unlike at PacifiCorp's other repowering projects. Because the Foote Creek I
project did not incorporate any retained wind turbine components, it is not subject to
the 80/20 test. [n other words, 100 percent of the fair market value of the Foote Creek
I turbines is the result of repowering costs.
Have recent changes to federal tax laws impacted the ability to qualify the
Company's repowered facilities for PTCs?
No. Neither the Tax Cuts and Jobs Act, enacted into law in December 2017 , nor the Tax
Extender and Disaster Relief Act of 2019 changed the qualification requirements that
allow all ofthe Company's repowered wind facilities to receive the full value of PTCs.
Have all of the Repowering Projects as well as the Foote Creek I repowering
project met the requirements described above in order to qualify for the full value
of PTCs?
Yes.
Hemsffeet, Di-32
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INCREASED EI\IERGY BENEFITS FOLLOWING REPOWERING
Once repowered, how do the enerry benefits of the Foote Creek I wind facitity
increase?
The Foote Creek I facility will employ entirely new wind turbines with new foundations
and taller towers. The new nacelles have generators with greater narneplate generating
capacity than the removed equipment. As a result of repowering, Foote Creek I, the
new turbines installed at the site will have generator nameplate ratings of 2.0 MW and
4.2 MW replacing existing turbines with a 0.6 MW nameplate rating. Details regarding
the proposed wind turbine upgrades, in-service dates, and resulting energy benefits are
shown in Confidential Exhibit No. 22.
In addition to the larger generators in the new turbines, the new turbines also
include larger blades, which will increase the rotor-swept area of the wind turbines. A
larger rotor-swept area allows more of the wind energy flowing past the wind turbine
to be captured and converted by the wind turbine into electricity. The new turbines that
will be used at Foote Creek I also have a higher hub height than the existing smaller
turbines at the site-ranging from 80 to 82 meters-as compared to the existing
turbines with a 4O-meter hub height.
Finally, the Foote Creek I repowering project-with the acquisition of
100 percent ownership of the facility-will result in all of the facility's ou@ut serving
the Company's customers as compared to approximately 47 percent under the earlier
co-ownership and PPA structure. With the entire output of Foote Creek I directed to the
Company's customers, and with the increased generation from the more effrcient
Hemstreet, Di - 33
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turbines, the amount of zero-fuel-cost energy provided to customers by the facility will
increase by more than! percent.
WiU the larger blades installed with repowering increase the potential for avian
impacts at the wind facilities?
Not necessarily. Although the larger blades will increase the overall risk zone (rotor-
swept area) of the repowered wind turbines, this does not necessarily correlate with an
increased risk of avian impacts at existing turbine sites. PacifiCorp performs monthly
monitoring at all of its wind facilities and reports all findings to state wildlife agencies
and the U.S. Fish and Wildlife Service. PacifiCorp will continue this monthly
monitoring to determine if the new turbine blades cause additional impacts to avian
species and will engage with the appropriate agency to discuss and, if prudent and
practicable, implement additional avoidance, minimization, or mitigation measures.
Are there other ways that the Company has worked to minimize avian impacts?
Yes. At the Foote Creek I faciliry the siguificant reduction in the number of turbines
possible with site repowering means that less of the overall project site area will be
covered by wind turbines. This has allowed the Company to adjust the layout of the
wind turbines at the project site to avoid areas of higher avian use, such as the edges of
Foote Creek Rim, minimizing potential avian impacts.
How did PaciliCorp determine the amount of additional generation that wilt be
produced from the repowered wind turbines at Foote Creek I?
At the Foote Creek I facility, the Company's consultant Black & Veatch evaluated
historical project generation and availability data from the existing Foote Creek I
turbines, local and project-specific meteorological information, and the new proposed
Hemstreet, Di-34
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turbine layout to model the anticipated energy output of the repowered wind project,
similar to the approach used by the Company to estimate the energy output from its
new wind projects now under construction.
Why was this approach most suitable for Foote Creek I?
This approach was most suitable because the turbine locations are changing at Foote
Creek I, as discussed above, and also because the turbine hub heights are increasing
from 40 meters to 80 meters. Due to the different location of turbines and turbine hub
heights, the wind speed, turbulence intensity, and wind inflow angle experienced by the
existing turbines may not be representative of what the new turbines will experience.
For these reasons, wind modeling was relied upon to develop the energy estimate for
Foote Creek I.
What are the major power production advantages of the new equipment that will
be used at Foote Creek I?
The larger rotor size and improvements in blade design of the new equipment generate
more power at all ranges of wind speeds. Additionally, the new turbines begin
producing power at a lower wind speed than the existing equipment; thus, the turbines
can produce energy during lower wind conditions in which the current equipment may
sit idle. Additionally, the new 4.2 MW capacity wind turbines have a higher cut-out
wind speed than the existing turbines, meaning they can continue producing power at
higher wind speeds in which the existing equipment at the site would shut down.
Because the new turbines will have an increased generator capacity, the turbines will
also produce more energy when wind speeds are high and the turbines are at their
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maximum output, allowing the facility to produce equivalent capacity with far fewer
turbines.
How much additional energy will the repowered wind facilities produce?
As shown in Confidential Exhibit No. 22, across the wind fleet, the repowered wind
facilities are estimated to increase generation by 814 GWh per year, an increase of
27.2 percent. With the enhancement to the Repowering Projects made since the time of
their review by the Commission, incremental generation from those projects has
increased from 19.2 percent to 25.8 percent.
IX. REDUCED ONGOING OPERATIONAL COSTS FOLLOWING
REPOWERING
Aside from increased generation and the associated PTC benefits, what other
benefits will be realized with the Foote Creek I repowering project?
The repowering project will lower the ongoing capital costs of operating the Foote
Creek I facility. PacifiCorp's turbine-supply contract for repowering, consistent with
wind industry standards for new equipment, includes a two-year warranty on the new
equipment. This will reduce capital costs associated with replacing or refi.rbishing
turbine components currently in service.
The repowering project will also result in more certainty related to ongoing
O&M costs of the facility. PacifiCorp will operate the repowered facility under a full
service agreement with the turbine equipment supplier who will be responsible for
operating and maintaining the new turbines for a fixed cost while attaining a guaranteed
availability of the turbines. Under this agreement, failure to meet the guaranteed
availabiliry if not the result of an excusable event defined in the conffact, will result in
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the payment of liquidated damages to the Company. Customers will benefit by having
operation and maintenance costs fixed for the term of the agreement. Thus, there is
greater cost certainty related to the run-rate capital expenditures and operation and
maintenance costs as compared to continued operation of older turbines that are near
the end of their useful life.
Does the new equipment address any other operational issues?
Yes. In addition to the reduced costs of operating the new equipment, repowering
addresses the issue of gearbox failures at the Foote Creek I facility, which have
experienced high failure rates relative to other gearboxes in the wind fleet. However,
the impact to the Company of these failures has been mitigated by an agreement that
was set to expire tn2024, at which point the cost of addressing failed gearboxes would
be borne entirely by the Company and EWEB. With just 5 years of operational life
remaining for the project after 2024, turbines that experienced a failed gearbox after
that time could not be economically returned to service given the limited remaining
generation anticipated from the existing turbines and the estimated cost to replace a
failed gearbox. Thus, repowering also addresses the likelihood of diminished
generation from the Foote Creek I facility after 2024.
\ilhat is the current asset life of the wind facilities?
All of the Company's existing wind facilities are currently being depreciated assuming
a 30-year asset life. Given the 1999 commercial operation date of Foote Creek I, the
depreciable life approved by the Commission for Foote Creek Iis2029.In anticipation
ofrepowering the facilities the Company proposed in the 2018 depreciation study, Case
No. PAC-E-I8-08, a new 30-year depreciable life following repowering that would
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extend the asset life of Foote Creek lby 2l years to 2050, similar to the other facilities
that have undergone repowering.T
PROJECT PERMITTING, CONSTRUCTION AND BT]DGET STATUS
What permits related to the Foote Creek I repowering project were necessary?
PacifiCorp received approval from the Federal Aviation Administration for the new
turbine locations inApril 2018, indicating the new turbine locations and heights would
not pose ahazardto air navigation. Carbon County, Wyoming issued a new Conditional
Use Permit for the repowered project in April 2019. The BLM, upon whose land
approximately half of the turbines are located, accepted the Company's revised plan of
development for the project in June 2019, reflecting the repowered project.
Did the Company proceed with the project after receiving these necessary
permits?
Yes. Immediately after receiving these authorizations, PacifiCorp, in July 2019,
executed contracts with Vestas for turbine supply and service and maintenance of the
new turbines and a construction conffact with Thorstad Companies, Inc. for
construction of the project.
Is construction complete at the Foote Creek I repowering project?
Yes. Major construction is complete and the 13 new turbines at the site were placed in
commercial operation on March 24,2021.
Did the pandemic impact construction at the Foote Creek I project?
Yes. Similar to the New Wind Project, repowering efforts at Foote Creek I also were
7 In the Matter of the Application of Rocky Mountain Powerfor Authorization to Change Depreciation Rates
Applicable to Electric Property, Case No. PAC-E-18-08, Order No. 34754 (Aug. 18, 2020).
Hemsffeet, Di - 38
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impacted by the coronavirus pandemic, with construction progress set back by turbine
equipment and parts delivery delays, logistics issues, and impacts to the labor force and
construction productivity as a result of adherence to coronavirus worker safety
precautions. The project was originally forecast to achieve commercial operation in
November l, 2020, but the project was not ultimately able to reach commercial
operation until March 24,2021, due to the many impacts of the pandemic on contractor
availabi lity, parts availab i liry and worker productivity.
Did these impacts from the pandemic and the extended construction schedule
result in increased project costs?
Yes. The project was approved at a total cost of but total project costs
have risen to
Do these increased costs significantly impact the economic benefits of the project?
No. The economics of the Foote Creek I repowering project, as Mr. Link describes in
his testimony, are very robust and the project will produce significant customer benefits
even with costs at their current level.
XI. DISPOSITION OF REPLACED EQUIPMENT REPORT
Did the Company agree to file a report on the disposition of replaced equipment
from the Repowering Projects?
Yes. The Company committed to file a report on the disposition of the assets replaced
by repowering and the salvage value or other customer benefits realized at the time of
the Company's first general rate case after repowering, or its application for approval
of the Energy Cost Adjustrnent Mechanism filed in 2021.
Hemstreet, Di - 39
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redeployment or as spare parts, what was assumed in the economic analysis for
the salvage value of the repowered equipment?
The Company did not assume any salvage value for the removed equipment in its
economic analysis.
How did PacifiCorp seek to obtain the highest salvage value from the existing
equipment that was removed from the repowered facilities?
In 2018, PacifiCorp issued a request for proposals related to the disposition of the
existing equipment in which the Company sought proposals for the purchase or
removal of the equipment that will be replaced as part of repowering the entirety of its
wind fleet. A number of wind industry participants involved in the operation and
maintenance of turbines of the type that were removed responded to the request for
proposals. In general, proposals received from this solicitation were not favorable as
compared to the equipment removal proposals offered by the consffuction contractors
that installed the new equipment.
Did PacifiCorp make efforts to maximize the salvage value of the equipment being
replaced at the repowered facilities?
Yes. In addition to the broad request for proposals that was issued for all of the
equipment removed with repowering, the Company also pursued inquiries from parties
that were interested in very specific equipment that was being removed. Unfortunately,
a significant number of turbines of all makes and models are currently being repowered
by PacifiCorp and other companies. This will likely continue to be the case before the
sunset of the PTCs available for wind energy projects in2o24.As a result, there is very
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little market for used turbines and the salvage value of the equipment is very low given
the large number of repowered turbines and associated spare parts that have become
available as a result of the significant repowering effort that the wind industry is now
undertaking. Some individual turbine component sales have resulted from PacifiCorp's
efforts to obtain the highest salvage value from the removed equipment at other
repowered projects, but this has been a de minimus amouot, with the salvage values
realized credited to the respective Repowering Projects. Except forjust these few sales,
the lowest cost altemative for the disposition of the old equipment was to allow the
construction contractors to retain the equipment so the scrap value offset their
equipment removal, handling, and transportation costs. That has also been the case at
Foote Creek I, where no used equipment sales have occurred. Given the relative
inefficiency of the replaced equipment compared to new equipment, it has not made
economic sense to redeploy the replaced equipment at other potential wind sites.
Does the Company's inability to achieve a salvage value for the replaced
equipment impact the Company's economic analysis of the Foote Creek I
repowering project?
No. Similar to the Repowering Projects, PacifiCorp did not assume any salvage value
for the replaced equipment in its economic analysis of the project. Thus, project
economics are not impacted by the fact that the old equipment was not able to be re-
sold by the Company after it was removed.
XII. CONCLUSION
Please summarize your recommendations.
The Company has prudently managed the implementation and costs of the New Wind
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Projects. Consistent with Commission Order No. 34104 in Case No. PAC-E-I7-07,
given that these projects will still deliver substantial customer net benefits, and that the
2019 IRP more clearly demonsffates a need for the resources beyond just those
economic benefits, the Commission should allow full recovery of the costs of these
projects, including the addition of t'wo additional turbines to the TB Flats project, which
will increase generation and benefit customers. Recovery of the full costs of these
projects is appropriate in light of the fact that increased costs have been driven by
factors outside the control of the Company and the extraordinary circumstances of the
coronavirus pandemic which resulted in very diffrcult construction conditions, delayed
project schedules and increased costs. Understanding that the TB Flats project remains
in construction, and final work to conclude the projects remains, the Company will
update, if necessary the costs of the TB Flats project in rebuttal testimony.
The Company's wind repowering efforts leverage past investments in
PacifiCorp's wind fleet to enhance the future value of these resources for the benefit of
its customers. By taking advantage of the unique opportunity to repower these facilities,
the Company has been able to deliver its customers efficiency and reliability
improvements in wind generation technology, extend their life by returning the wind
fleet to like-new condition, all while enhancing performance, reducing ongoing costs,
and re-qualifying these facilities for PTCs-all of which reduces customers'rates. The
Company has prudently managed the implementation and costs of the Repowering
Projects and costs in total are below the costs reviewed by the Commission in Case No.
PAC-E-17-06 and the energy and PTC benefits of the projects are greater. I recommend
that the Commission allow the Company to recover the costs incurred for all
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r€,powering projects. Finally, I recomme,nd that fte Commission detemine that the
Foote Creek I repowering project, and associated acquisition of the lease rights for the
facility, providesbenefitsto Idaho customers mdisthereforepnr&ntand in thepublic
interest, and that the Company be allorred to include the revenue requirement of this
projeot inrates approved in this case.
Doec this conclude your direct testimony?
Yes-
Hemstreeg Di-43
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