20171120Phillips Direct - Redacted.pdf

RECEIVED
2817 NOV 20 PM 3:30BEFORETHEIDAHOPUBLICUTILITIESCOMMISSION
OM MISSION
IN THE MATTER OF THE APPLICATION )
OF ROCKY MOUNTAIN POWER FOR A )CERTIFICATE OF PUBLIC )CASE NO.PAC-E-17-07
CONVENIENCE AND NECESSITY AND )BINDING RATEMAKING TREATMENT )FOR NEW WIND AND TRANSMISSION )
FACILITIES )
REDACTED Direct Testimony and Exhibits Of
Nicholas L.Phillips
On Behalf of
Monsanto Company
November 20,2017
Project 10465
CONFIDENTIAL
SUBJECT TO PROTECTIVE ORDER IN CASE NO.PAC-E-17-07
ORIGINAL
ROCKY MOUNTAIN POWER
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO.PAC-E-17-07
Table of Contents to the
Direct Testimony of Nicholas L.Phillips
I.INTRODUCTION AND SUMMARY ................................................................................l
I l.THECOMB INED PROJECTS ...........................................................................................5
I I I.B ENEF I T-TO -COST AN ALYSI S ....................................................................................1 1
IV.RISKS ASSOCIATED WITH PACIFICORP'S ECONOMIC ANALYSIS....................14
A.The Impact of a Delay in Project In-Service Dates..........................................................16
B.The Impact of More Economic Fuels &Alternative Technologies .................................17
C.The Importance of Capital Estimate .................................................................................22
D.The Importance of Achieving the Assumed Capacity Factor ..........................................26
E.The Impact of a Lower Federal Corporate Income Tax Rate ...........................................32
F.Additional Ratepayer Protections .....................................................................................34
V.CONCLUSION AND RECOMMENDATION.................................................................34
Exhibits:
Exhibit 209:Qualificationsof Nicholas L.Phillips
Exhibit 210:Various RMP Responsesto WIEC in Docket No.20000-520-EA-17of the
Wyoming Public Service Commission:
WIEC 4.1 (a)
WIEC 4.1 (b)
WIEC 5.8
WIEC 5.9
WIEC 5.11
WIEC 6.1
WIEC 6.2
WIEC 7.3
WIEC 7.4
WIEC 7.7
WIEC 7.10
WIEC 7.14
REDACTED Phillips,Di -i
Monsanto Company
l I.INTRODUCTION AND SUMMARY
2 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A.Nicholas L.Phillips.My business address is 16690 Swingley Ridge Road,Suite 140,
4 Chesterfield,Missouri 63017.
5 Q.WHAT IS YOUR OCCUPATION?
6 A.I am a consultant in the field of public utility regulation and an Associate with the firm of
7 Brubaker &Associates,Inc.("BAI"),energy,economic and regulatory consultants.
8 Q.PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND
9 EXPERIENCE.
10 A.A thorough description of my educational background and experience is set forth in
11 Exhibit 209.
12 Q.ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING?
13 A.I am testifying on behalf of Monsanto Company ("Monsanto").Monsanto operates
14 facilities within the service territory of Rocky Mountain Power ("RMP,""PacifiCorp,"or
15 the "Company"),from whom it purchases electricity and energy services.
16 Q.PLEASE SUMMARIZE YOUR TESTIMONY IN THIS PROCEEDING?
17 A.I address RMP's proposal to constructor procure four new Wyoming wind resources with
18 a total capacity of 860 megawatts ("MW")(the "Wind Projects"),and the Company's
19 proposal to construct the Aeolus-to-Bridger/Anticline Line and construct the 230 kV
20 Network Upgrades (the "Transmission Projects").Throughout my testimony I refer to
21 the Transmission Projects and the Wind Projects collectively as the "Combined Projects."
REDACTED Phillips,Di -1
Monsanto Company
1 Q.PLEASE SUMMARIZE YOUR TESTIMONY.
2 A.First,I will explain how the Combined Projects are not proposed to meet a resource need
3 but instead represent an opportunity investment that PacifiCorp would like to pursue.As
4 an opportunity investment,I believe the Combined Projects should be evaluated with the
5 understanding that the traditional regulatory compact does not apply.As a result,
6 ratepayers must have reasonable assurance that they will be better off if the Combined
7 Projects are approved.This is particularly true when PacifiCorp's shareholders are
8 expected to receive approximately four times the amount of benefits that its customers
9 are projected to receive.
10 Next,I analyze the costs and benefits of the Combined Projects.Drawing from
11 the experience of organized markets,I demonstrate how the benefit-to-cost ratio for the
12 Combined Projects leaves very little cushion before the Combined Projects result in a net
13 cost for ratepayers.Based on my analysis of the costs and benefits in PacifiCorp's
14 proposal,I recommend the Idaho Public Utilities Commission ("Commission")deny the
15 request for a Certificate of Public Convenience and Necessity ("CPCN")for the
16 Combined Projects.
17 Finally,I review the Combined Projects and the associated economic analysis
18 presented by RMP to justify its proposal.I discuss the risks associated with RMP's
19 proposal and illustrate how the claimed economic benefits evaporate under modest
20 changes to PacifiCorp's assumptions.Based on my review of RMP's economic analysis,
21 I recommend the Commission deny RMP's request for a CPCN.However,I will also
22 identify certain ratepayer protections which should be included as conditions if the
23 Commission grants a CPCN for this opportunity investment.
REDACTED Phillips,Di -2
Monsanto Company
1 My silence with respect to any position taken by RMP in its application or direct
2 testimony in this proceeding should not be interpreted as an endorsement of that position.
3 My colleagues,James R.Dauphinais and Kathryn Iverson,are also presenting
4 direct testimony on behalf of Monsanto.Mr.Dauphinais specifically addresses the
5 question of the need and risks associated with the Transmission Projects,and Ms.Iverson
6 addresses the Company's proposed ratemaking treatment of the Combined Projects.
7 Q.HAVE YOU RELIED UPON DATA RESPONSES PROVIDED BY THE
8 COMPANY IN OTHER JURISDICTIONS?
9 A.Yes.I have relied upon RMP responses to requests made in Docket No.20000-520-EA-
10 17 (Record No.14781)before the Wyoming Public Service Commission ("Wyoming
11 New Wind/Transmission Docket").These various RMP responses are attached as
12 Exhibit 210 to my testimony.Monsanto requested these documents in its Second Data
13 Request to the Company in this proceeding.A copy of Monsanto's request is included as
14 Exhibit 202.
15 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS.
16 A.I offer the followingconclusions and recommendations:
17 l.The Wind Projects are not being pursued by RMP as a matter of need;rather,they are
18 a discretionary project predominately intended to harvest tax credits and increase
19 RMP's rate base which might provide savings to ratepayers.
20 2.A discretionary proposal by a regulated utility like RMP essentially flips the
21 regulatory compact and the Commission should apply its highest standards and
22 strictest scrutiny to determine if customers will benefit from the investment.
23 3.RMP's economic analysis does not demonstrate there is a reasonably high likelihood
24 for substantial net energy savings attributable from the Combined Projects.For that
25 reason,the Commission should deny RMP's request for a CPCN.
26 4.RMP's economic analysis fails to adequately assess known risks,borne by ratepayers,
27 that must be considered.
REDACTED Phillips,Di -3
Monsanto Company
1 5.RMP's proposal is to collect approximately $4 in equity returns for its investors
2 (approximately $6 on a revenue basis)relative to every $1 of potential,risk-laden
3 savings that might be passed on to ratepayers.
4 6.The Company's discretionary proposal fails to provide reasonably adequate assurance
5 that customers will benefit from the Combined Projects.For that reason,the
6 Commission should deny RMP's request for a CPCN for the Combined Projects.
7 7.If the Commission approves the CPCN for the Combined Projects,it is critical for
8 that approval to include conditions which increase the chance that customers will
9 actually benefit from the Combined Projects.
10 Q.WHAT CONDITIONS DO YOU RECOMMEND IF THE COMMISSION
ll GRANTS A CPCN FOR THE COMBINED PROJECTS?
12 A.If the Commission grants a CPCN for the Combined Projects,such approval should
13 include the followingconditions:
14 1.Disallow rate based recovery for any turbines that are not commercially
15 operational in time to receive 100%of the PTC benefits they are being
16 constructed to capture,along with a capacity ratio share of any interconnection,
17 transmission,distribution,and AFUDC costs.
18 2.Cap RMP's cost recovery on the capital cost of the Combined Projects from retail
19 ratepayers,inclusive of the new generation and transmission facilities,as well as
20 any interconnection costs,network upgrades,distribution costs,and AFUDC to
21 million installed cost.
22 3.Cap RMP's recovery of future O&M and capital expenditures related to the
23 Combined Projects,QF Project cost recovery,and net fixed system costs to those
24 levels assumed in the Company's economic analysis.
25 4.For the life of the Wind Projects,RMP should be required to include in its base
26 rates and Net Power Costs,at minimum,the full PTC (assuming at minimum a
27 35%federal corporate income tax rate)and energy benefits to customers based on
28 the assumed net capacity factor used in RMP's economic modeling.'
29 5.Ratepayers should be guaranteed receipt of the full grossed-up value of the PTCs
30 without having to compensate RMP for return on any deferred tax assets that may
31 be created as a result of RMP's inability to contemporaneously monetize PTCs to
32 full value.
*CONFIDENTIAL Direct Testimony of Rick T.Link at p.23.
REDACTED Phillips,Di -4
Monsanto Company
l 6.If RMP ceases construction of the Combined Projects,for whatever reason,no
2 costs incurred are recoverable from customers.
3 These conditions will increase the probability that customers will benefit from the
4 Combined Projects by fixing recoverable capital costs upfront,and capping future
5 recovery of costs relating to the remaining assumptions used by RMP in its economic
6 analysis.However,given customers cannot be protected from all of the risk of increased
7 costs from the Company's proposal,it is essential that the Combined Projects be
8 rigorously evaluated to determine whether there is a high probability that customers will
9 be better off with the Combined Projects than without them.
10 II.THE COMBINED PROJECTS
11 Q WHAT ARE THE COMBINED PROJECTS?
12 A.The Combined Projects are a combination of 860 MW of new Wyoming wind resources
13 to be owned by PacifiCorp along with the construction of the Aeolus-to-
14 Bridger/Anticline Transmission Line as well as some 230 kV Network Upgrades that will
15 enable approximately 750 MW of new transfer capability.The expected up-front capital
16 costs associated with the Combined Projects are for the Wind Projects,
17 million for the new transmission line,and for the network
18 upgrades.2 The Company also included 320 MW of new qualifying facilities ("QF
19 Projects")in its analysis which are expected to cost an additional over the
20 20-year contract terms of the PPAs."In total,the Combined Projects will require an
21 upfront investment of .Including the Net Present Value ("NPV")liability
22 of the PPA costs,the total costs equate to
2
3 Id.and CONFIDENTIAL Workpaperof Rick Link "Gateway Results Direct Testimony.xlsx."
REDACTED Phillips,Di -5
Monsanto Company
l The Combined Projects are mutually dependent upon each other.4 The Wind
2 Projects rely on the Transmission Projects for interconnection into the PacifiCorp
3 transmission system."The Transmission Projects rely on the economic attributes of the
4 Wind Projects.6 RMP's President and Chief Executive Officer made it clear that
5 PacifiCorp would not build one project without the other.'
6 Q.ARE THE COMBINED PROJECTS NEEDED TO MEET AN ENERGY OR
7 CAPACITY NEED?
8 A.No,the Combined Projects are not needed to meet RMP's capacity or energy needs over
9 the next 10 years.While the Company included the Combined Projects in its 2017
10 Integrated Resource Plan ("IRP")Preferred Portfolio as part of a long-term
11 least-cost/least-risk plan,"PacifiCorp can meet its resource needs in the front 10 years of
12 its long-term resource plan with a combination of demand-side management resources
13 and front office transactions."As one of the Company's witnesses testified in a recent
14 proceeding before the Commission,the "Company has no need for additional resources
15 for at least the next decade."'°
16 When asked about this statement,the Company responded that it was made prior
17 to the completion of its 2017 IRP,"and,at the time the statement was made,PacifiCorp
4 Direct Testimonyof Cindy A.Crane at p.3.
*Id.
6 Id.
7 Direct Testimonyof Cindy A.Crane at ,p.3.
This is not a low risk plan,as explainedin Section IV of this testimony.
Wyoming New Wind/TransmissionDocket,RMP Response to Data Request WIEC 4.l(a).
WIEC stands for "Wyoming Industrial Energy Consumers".Monsanto requested a copy of all data
requests and responses from the Wyoming New Wind/TransmissionDocket in discovery in this
proceeding.See Monsanto Data Request No.2,a copy which has been providedas Exhibit 202.
to Direct Testimonyof Paul Clements at p.3,ll.21-22 in Wyoming Public ServiceCommission
Docket No 20000-481-EA-16(RecordNo.14220).
"Wyoming New Wind/TransmissionDocket,RMP Response to Data Request WIEC 4.l(b).
REDACTED Phillips,Di -6
Monsanto Company
1 did not have a capacity need,recognizing there were no incremental generating resources
2 in the then-current preferred portfolio through the next decade.12 Yet the same thing is
3 true in PacifiCorp's 2017 IRP,which states that "[w]ith continued load growth and
4 assumed coal retirements,summer margins drop over time,but remain higher than the 13
5 percent target planning margin through the first 10 years of the planning horizon."13
6 Similarly,regarding the winter load and resource balance,the 2017 IRP provides that:
7 In response to stakeholder feedback from the 2015 IRP planning cycle,
8 PacifiCorp developed a winter load and resource balance for the 2017 IRP.
9 Table 1.3 shows PacifiCorp's annual winter capacity position from 2017
10 through 2026,with coal unit retirement assumptions and incremental
11 energy efficiency savings from the 2017 IRP preferred portfolio before
12 adding any incremental new generating resources.Accounting for
13 available market purchases,PacifiCorp substantially exceeds its 13
14 percent target planning reserve margin over the winter peak through this
15 period.With continued load growth and assumed coal unit retirements,
16 winter margins drop over time,but remain significantly higher than the 13
17 percent target planning margin.14
18 Furthermore,the 2017 IRP Preferred Portfolio adds new dispatchable generation capacity
19 in 2029 (one year later than the 2015 IRP),"and PacifiCorp recently revised its load
20 forecast further downward relativeto its 2017 IRP.16
21 Q.IF THE COMBINED PROJECTS ARE NOT NEEDED TO MEET CAPACITY
22 AND ENERGY REQUIREMENTS,THEN WHY ARE THEY BEING
23 PROPOSED?
24 A.The Combined Projects are an opportunity investment for RMP.Due to the extension of
25 the Federal PTC safe harbor deadlines,the otherwise uneconomic Combined Projects
12Id
"2017 IRP,p.10.
14 Id.at p.11."Id.at p.7.
16 Public Service Commissionof Utah,Docket No.17-035-39,Rebuttal Testimonyof Rick Link
at p.5.
REDACTED Phillips,Di -7
Monsanto Company
1 could provide economic benefits to PacifiCorp's customers,depending on future
2 commodity markets,weather conditions,and federal environmental policy.But if the
3 Combined Projects are approved as proposed,they will certainly increase the Company's
4 earnings.Given this backward dynamic of need and cost recovery,it is appropriate to
5 apply the traditional regulatory compact in reverse.
6 Q.CAN YOU EXPLAIN THIS CONCEPT IN MORE DETAIL?
7 A.Traditionally,when a utility seeks regulatory approval to construct new facilities,it must
8 demonstrate a need as the first step of its proposal.This concept is tied to the regulated
9 utility's obligation to serve.In order to provide reliable service,the utility must have
10 sufficient resources,including a reserve margin,to be confident it can meet its obligation.
11 In turn,the utility receives a reasonable expectation of recovering prudently-incurred
12 costs through its rates,including a regulated return on its capital.If there is a need for a
13 new resource,the economics of alternatives can be compared to determine the best way
14 to meet the need.
15 PacifiCorp's recent integrated resource plans clearly demonstrate that the
16 Company can meet its obligation to serve over the next 10 years without new generation
17 or transmission facilities.Yet RMP seeks approval from the Commission to invest over
18 billion in the Combined Projects with the expectation that RMP will recover its
19 investments at the Company's authorized rate of return,plus the operating costs
20 associated with the new resources.Rather than need,the Company's proposal is based
21 solely on projected future savings for its customers.Since RMP can meet its obligations
22 without this investment,the ratepayers must have reasonable assurance that they will be
23 better off if the Combined Projects are approved.
REDACTED Phillips,Di -8
Monsanto Company
l Q.WHAT ARE THE POTENTIAL ECONOMIC BENEFITS OF THE COMBINED
2 PROJECTS AND QF PROJECTS?
3 A.RMP projected approximately $137 million in NPV energy savings ($3.17/MWh
4 levelized NPV)over the life of the new Wind Projects under the Company's base case
5 (Medium Gas,Medium CO2 priCC)RSsumptions.The $137 million benefit is the most
6 frequently cited benefit by the Company."I will sometimes refer to this as the base case
7 or base scenario.
8 However,RMP also estimates the Combined Projects and QF Projects will result
9 in a $174 million NPV cost increase ($4.04/MWh levelized NPV)over the life of the
10 new Wind Projects under the Low Gas,Zero CO2 SCenafÏO.
11 Q.IS THERE A PREDOMINANT FACTOR DRIVING THESE POTENTIAL
12 SAVINGS?
13 A.Yes.The current availability of federal PTCs is the driving force that makes the
14 Combined Projects economic.The availability of the PTCs means that RMP can
15 potentially generate wind energy cheaper than it can generate energy from coal or natural
16 gas units.Currently,the PTC is approximately$23 per MWh and this value will escalate
17 over time based on an IRS inflation factor.However,this is not the full value to
18 customers.Because the PTC is a tax credit,it is grossed up to a revenue requirement
19 value to produce the full PTC credit that will offset costs included in customer's bills.A
20 PTC of $23 per MWh grossed up by the federal corporate tax rate in effect (currently
17 For example,RMP's President and CEO,Ms.Crane states,"These projects represent an
exciting opportunity for PacifiCorp's customers,who expect to realize approximately $l37 million over
time..."Direct Testimonyof Cindy A.Crane at p.2."Direct Testimonyof Rick T.Link at Table3,p.38.
REDACTED Phillips,Di -9
Monsanto Company
l 35%),will equate to customer bill credit of over $35 per MWh for all energy produced
2 from the Wind Projects.
3 Q.HAVE YOU DETERMINED THE FINANCIAL BENEFIT TO PACIFICORP AS
4 A RESULT OF THE COMBINED PROJECTS?
5 A.Yes,RMP provided an estimate of its equity returns for the Combined Projects."Over
6 the life of the Wind Projects,RMP expects to recover approximately $533 million in
7 NPV equity returns for its investors (approximately$820 million grossed up for taxes).20
8 By comparison,customers are projected to receive only $137 million in NPV benefits
9 over the same timeframe (if the Medium Gas,Medium CO2 SCenafÎO RSsumptions
10 materialize).This equatesto approximately $4 to PacifiCorp investors ($6 when grossed
11 up for taxes)for every $1 in potential benefits to customers.Thus,RMP has an obvious
12 financial incentive to pursue the Combined Projects.
13 Q.DOES MONSANTO DENY THAT THE COMPANY'S PROPOSAL COULD
14 RESULT IN NET ENERGY SAVINGS FOR CUSTOMERS?
15 A.No.However,Monsanto is concerned with the level of customer risk embedded within
16 RMP's proposal.Monsanto believes that the risks borne by the customers outweigh
17 those borne by the Company,particularly in light of the significant benefits to
18 PacifiCorp's shareholders from the Combined Projects.
"Wyoming New Wind/TransmissionDocket,RMP Response to WIEC Data Requests 6.1 and
6.2.
20 This is not the full expected return as the economic life of the TransmissionProjects extends
beyond the Wind Projects.
REDACTED Phillips,Di -10
Monsanto Company
l III.BENEFIT-TO-COST ANALYSIS
2 Q.HAVE YOU PREPARED A BENEFIT-TO-COST ANALYSIS FOR THE
3 COMBINED PROJECTS?
4 A.Yes.
5 Q.HOW IS A BENEFIT-TO-COST RATIO HELPFUL IN EVALUATING THE
6 COMBINED PROJECTS?
7 A.A benefit-to-cost ratio of less than 1.0 indicates that the Combined Projects will increase
8 customer costs over the life of the Wind Projects.A result of exactly 1.0 would indicate
9 an expected break-even (that is,the costs are equal to the expected benefits).A benefit-
10 to-cost ratio greater than 1.0 indicates a net project benefit.
11 Q.WHAT ARE THE BENEFIT-TO-COST RATIOS RESULTING FROM THE
12 PROPOSED COMBINED PROJECTS AND QF PROJECTS BASED ON RMP'S
13 ANALYSIS?
14 A.Table NLP-1 below presents this information.The ratios are calculated using the NPV of
15 the capital revenue requirements associated with the Combined Projects and contractual
16 revenue requirements QF Projects'PPAs for the costs.The gross savings due to
17 reductions in NPC,PTC revenue,etc.are offset by incremental O&M and other variable
18 costs attributableto the Combined Projects to calculate the net benefits used in the ratios.
REDACTED Phillips,Di -ll
Monsanto Company
TABLE NLP-1
Combined Projects and
QF Projects Benefit-to-Cost Ratios
Annual Revenue
Requirement
Price-Policy Scenario Benefit/Cost Ratio
Low Gas,Zero CO2 0.93
Low Gas,Medium CO2 0.96
Low Gas,High CO2 1.08
Medium Gas,Zero CO2 1.02
Medium Gas,Medium CO2 1.06
Medium Gas,High CO2 1.13
High Gas,Zero CO2 1.14
High Gas,Medium CO2 1.15
High Gas,High CO2 1.25
1 Q.MOST OF THE BENEFIT-TO-COST RATIOS IN TABLE NLP-1 ARE
2 GREATER THAN 1.0.DOES THIS INDICATE THAT THE COMBINED
3 PROJECTS ARE LIKELY TO LEAD TO CUSTOMER BENEFITS?
4 A.No.There are a number of risks that are not reflected in the benefit-to-cost ratios,and I
5 will discuss these risks in much greater detail later in this testimony.However,what can
6 be seen from the benefit-to-cost ratios is that the majority of the ratios (all but one)are
7 less than or equal to 1.15,and all of the ratios are less than or equal to 1.25.
8 Q.WHAT IS THE RELEVANCE OF BENEFIT-TO-COST RATIOS LOWER THAN
9 1.15 OR 1.25?
10 A.Some Regional Transmission Organizations impose minimum benefit-to-cost ratios of
11 1.15 or 1.25 when assessing project economics.For example,ERCOT uses a benefit-to-
REDACTED Phillips,Di -12
Monsanto Company
l cost ratio threshold of 1.1521,and PJM uses a 1.25 benefit-to-cost ratio threshold for
2 economic-based enhancements or expansions to its Regional Transmission Expansion
3 Plan.22 Similarly,MISO uses a benefit-to-cost ratio of 1.25 for Market Efficiency
4 Projects to increase the probability that the project will result in a net benefit for its
5 memberS23
6 Q.WHY DO THESE ORGANIZATIONS USE MINIMUM BENEFIT-TO-COST
7 RATIOS WHEN EVALUATING NEW INVESTMENTS?
8 A.When a project is not needed for reliability,and is justified based on an economic basis,
9 using a minimum benefit-to-cost ratio threshold introduces some conservatism in the
10 analysis.While the costs to construct a project can be estimated with reasonable
11 accuracy,many of the benefits are uncertain and based on long-term commodity and
12 other forecasts.The proposal for consideration in this docket is no different.The
13 Combined Projects are not justified based on need and the projected benefits are highly
14 uncertain.
15 Q.BASED ON YOUR ANALYSIS OF THE COSTS AND BENEFITS OF THE
16 COMBINED PROJECTS,WHAT DO YOU RECOMMEND WITH RESPECT TO
17 RMP'S REQUEST FOR A CPCN?
18 A.The benefit-to-cost ratios show that PacifiCorp has not sufficiently demonstrated that its
19 customers will be better off if the Combined Projects are approved.As a result,I
20 recommend that the Commission deny the request for a CPCN for the Combined
21 Projects.The current proposal is one-sided,providing certain financial return to
21 http:un n.ercot.com content nem kes documents lists 108880 EconomicI ransmissionPlanninaPractices.pptx
22 PJM Manual 14B:PJM Region Transmission PlanningProcess,Revision:39,Effective Date:
September 28,2017.
23 MISO Tariff Attachment FF -Transmission Expansion PlanningProtocol Section II(B)(e).
REDACTED Phillips,Di -13
Monsanto Company
l PacifiCorp's investors approximatelyfour times greater than the highly uncertain benefits
2 to customers.This is particularly true given the risk of harm to RMP's customers under
3 the Company's proposal,which I discuss further below.
4 IV.RISKS ASSOCIATED WITH PACIFICORP'S ECONOMIC ANALYSIS
5 Q.WHAT ARE MONSANTO'S CONCERNS WITH THE ECONOMIC ANALYSIS
6 PRESENTED BY PACIFICORP IN THIS PROCEEDING?
7 A.RMP clearly has an incentive to invest capital and increase its rate base.So,while RMP
8 offers this proposal as an opportunityto save its customers money by potentially avoiding
9 fuel and purchased power costs,the reality is this project represents an opportunity for
10 RMP to invest a large amount of capital and increase its rate base when there is no stated
11 need to do so.As a result,it is essential that the Combined Projects be rigorously
12 evaluated to be certain that there is a high probability that customers will be better off
13 with the Combined Projects than without them.
14 Monsanto is concerned that the Company's economic modeling for the Combined
15 Projects includes significant risks for its customers.As I will explain below,there are
16 many critical assumptions which determine the study results regarding potential customer
17 savings.If these assumptions are not realized,there could be a significant adverse impact
18 on the indicated economics of the Combined Projects.As a result,RMP's proposal
19 exposes customers to considerable risk of experiencing higher cost than if the Combined
20 Projects are not undertaken.Based on my analysis,I recommend the Commission deny
21 PacifiCorp's request for a CPCN for the Combined Projects.However,if the
22 Commission believes that the project should be approved,that approval should include
23 conditions to increase the likelihood of customer benefits.
REDACTED Phillips,Di -14
Monsanto Company
l Q.WHAT ARE SOME OF THE KEY RISKS THAT PACIFICORP'S ECONOMIC
2 ANALYSIS FOR THE COMBINED PROJECTS POSE TO CUSTOMERS?
3 A.I have identified the following key risks to customers,each of which will be discussed in
4 more detail later in my testimony:
5 1.The ability to place the Wind Projects fully in service without any delay,so that the
6 full maximum value of the PTCs is available.
7 2.The risk of market prices and fuel prices being lower than assumed,with the result
8 that the projected NPC savings are not realized
9 3.The risk associated with other,possibly more economic,alternative generation
10 resources that would no longer be available due to such a large investment in the new
11 Wind Projects.
12 4.The ability for RMP to complete the Wind Projects within the budget proposed in its
13 economic analysis.
14 5.The ability to achieve the capacity factor used in the economic evaluation with
15 the result that customers do not receive the projected PTC and energy benefits.
16 6.The risk that the Company will not be able to fully monetize the PTCs
17 contemporaneous with when they are earned,with the result that customers do not
18 receive the full projected value of the PTCs.
19 7.The adverse impact on the Wind Projects if federal corporate income tax rates are
20 reduced during the time that PTCs are expected to be generated.
21 8.The risk that the O&M expenses,property taxes and insurance are higher than
22 projected,such that the benefits are less than projected
23 Q.TO PLACE THE SUBSEQUENT DISCUSSION IN PERSPECTIVE,WHAT
24 DOES RMP CLAIM FOR THE BENEFIT OF THE COMBINED PROJECTS?
25 A.As I discussed earlier,RMP claims that the NPV benefits of the Combined Projects are
26 approximately $137 million,or on a levelized NPV basis,to a customer benefit of
27 $3.17 per MWh under its Medium Gas,Medium CO2 scenario.But many of the
28 sensitivities and potential differences in assumptions could significantly diminish,or
29 even reverse,this claimed outcome.For some of these risks,there are conditions the
REDACTED Phillips,Di -15
Monsanto Company
l Commission can impose to preserve the projected benefits for customers.However,there
2 are also some risks that the Commission cannot protect customers from,and these risks
3 should be considered very carefully when determining whether the Combined Projects
4 are in the public interest.
5 A.The Impactof a Delay in Project In-Service Dates
6 Q.WILL THE WIND PROJECTS BE ELIGIBLE FOR PTCS IF THERE IS A
7 DELAY IN PROJECT IN-SERVICE DATES?
8 A.The Wind Projects were selected by RMP in order to maximize the PTC benefits.To
9 meet the first IRS safe harbor requirement,RMP had to comply with the beginning
10 construction requirement by December 31,2016.This was the first step to reaching the
11 100%PTC benefit.However,in order to actually realize the 100%PTC benefits,the
12 Wind Projects must be placed in-service and be commercially operational by the end of
13 2020.This is a bright-line threshold,because only turbines that are commercially
14 available by the end of 2020 will qualify for the full PTC benefits.Given that the PTCs
15 are the cornerstone of the Wind Project's economics,failing to meet this deadline could
16 be catastrophic for customers if RMP is allowed to recover its capital costs for turbines
17 which do not qualify for PTCs.
18 Q.WHAT KNOWN RISKS COULD LEAD TO A DELAY IN THE PROJECT
19 IN-SERVICE AND COMMERCIAL OPERATION DATES?
20 A.As Monsanto Witness Dauphinais discusses,RMP has not completed all of the necessary
21 power systems analyses for the Transmission Projects,nor has it received all of the
22 required permits.Both of these risks could lead to delays and potentially the loss of the
23 expected PTC benefits.
REDACTED Phillips,Di -16
Monsanto Company
l Q.HOW SHOULD THE COMMISSION PROTECT CUSTOMERS FROM THE
2 RISK ASSOCIATED WITH A DELAY IN THE COMBINED PROJECTS'
3 IN-SERVICE DATE?
4 A.The Commission should disallow rate based recovery for any turbines that are not
5 commercially operational in time to receive 100%of the PTC benefits,along with a
6 capacity ratio share of any interconnection,transmission,distribution,and AFUDC costs.
7 B.The Impactof More Economic Fuels &Alternative Technologies
8 Q.HAS RMP INDICATED THE SOURCES OF NET ENERGY SAVINGS?
9 A.Yes.Exhibit No.25 to Mr.Link's direct testimony shows the cash flows resulting from
10 the economic analysis.This exhibit shows that under RMP's base assumptions there are
11 three major buckets of savings:(i)PTCs;(ii)Net Power Cost ("NPC")savings;24and
12 (iii)reductions in system fixed costs.Under the Medium Gas,Medium CO2 SCenafÎO,
l 3 each of these three components makes up approximately 33%of the benefits.In other
14 words,about 67%of the expected savings are tied to the accuracy of natural gas and
15 wholesale electric power price forecasts and the net output of the wind resources actually
16 being achieved.If RMP's gas forecast and/or the assumed wind output is too high,then
17 RMP has oversold the value of the project.Similarly,if no federal CO2 ÍSX ÍS
18 implemented,then RMP has also oversold the value of the Combined Projects.
19 Q.HOW ARE THE BENEFITS IMPACTED IF NATURAL GAS PRICES ARE
20 LOWER THAN FORECASTED BY PACIFICORP?
21 A.RMP performed a low gas price sensitivity analysis,and under its low gas price
22 assumptions there are no net savings under two of the three CO2 priCOS assumptions.
24 Emission savings are calculated separately from NPC savings,but are only $84 million,or
about 3%of the total gross savings includedin the Medium Gas,Medium CO2 SCCHRTÎO.
REDACTED Phillips,Di -17
Monsanto Company
l Compared to PacifiCorp's system without the Combined Projected,the Low Gas,Zero
2 CO2 and Low Gas,Medium CO2 CSSes result in higher costs to customers of $174 million
3 and $93 million respectively ($4.04 per MWh and $2.16 per MWh a levelized NPV basis
4 respectively).
5 I will not discuss the High CO2 sensitivities,as those cases include a very
6 aggressive CO2 price.This high price on CO2 attributes a large benefit to the Wind
7 Projects when there is no Federal CO2 (RX.
8 Q.HOW DID RMP DEVELOP ITS NATURAL GAS PRICE ASSUMPTIONS?
9 A.To develop its natural gas price assumptions,RMP used NYMEX Henry Hub Futures
10 blended with proprietary natural gas price forecasts provided by and
11 ,as well as a publically available
12 forecast developed by the U.S.Department of Energy's Energy Information
13 Administration.The base forecast (i.e.,Medium Gas)is fully market-based for the first
14 six years and then transitions into the forecast.25 The Low Gas prices mainly
l 5 reflect the forecast.
16 Q.ARE THE COMPANY'S BASE CASE NATURAL GAS ASSUMPTIONS
17 REASONABLE?
18 A.When evaluating the Combined Projects,I recommend the Low Gas case be considered
19 the base case.Current NYMEX expectations through 2029 demonstrate the Low Gas
20 assumptions are even above the current NYMEX markets expectations,26as shown below
21 in Figure NLP-l.The NYMEX curve represents contracts that could be locked in today
22 for delivery in the future.Consequently,while I believe RMP's Medium Gas curve
25Direct Testimonyof Rick T.Link at p.32.
26
REDACTED Phillips,Di -18
Monsanto Company
1 represents a valid data point,the Low Gas curve is more representative of current
2 expectations.
Figure NLP-1
$11
$10
$9 e
$5 ,e#
$2
-G-Low Gas -Med Gas (April2017 OFPC)
Med Gas -4-High Gas
NYMEXasof2017-ll-06
3 Q.IS THERE ANOTHER REASON TO FOCUS ON THE LOW GAS PRICE
4 SCENARIOS RATHER THAN THE MEDIUM CASE PROPOSED BY RMP?
5 A.Yes.Over the last eight years,PacifiCorp has been consistently revising its natural gas
6 forecasts downward.Table NLP-2 shows the evolution of PacifiCorp natural gas
7 forecasts over time.Once again,just two months ago,PacifiCorp revised its Official
8 Forward Price Curve downward.Given the lower expectations of the NYMEX curve the
9 absence of a federal CO2 emission policy,and RMP's historical overestimation of natural
10 gas prices,I recommend using the Low Gas,Zero CO2 as the primary reference point.
REDACTED Phillips,Di -19
Monsanto Company
Figure NLP-2
PacifiCorp Gas Forecasts Over Time
$14.00
$12.00 -2007 IRP
-October 2008
$10.00 --Septem ber 2009
--September2010
$8.00 -¯-August 2011
-September 2012
.E $6.00 -December 2013Eoz-September 2014
$4.00 --December 2015
--October 2016
$2.00 --April 2017
--September 2017
$0.00 ,.......i....i..........i.
1 Q.ARE THERE ANY OTHER REASONS WHY THE LOW GAS SCENARIO
2 SHOULD BE THE BASE CASE FOR EVALUATING THE COMBINED
3 PROJECTS?
4 A.For the purposes of the net benefits analysis,the Low Gas price assumption is a more
5 conservative assumption.Especially given the discretionary nature of the Company's
6 proposal,it is important to use conservative assumptions because this will increase the
7 likelihood that customers will realize benefits if the CPCN is granted.Recall that under
8 the Low Gas,Zero CO2 and Low Gas,Medium CO2 RSSumptions,the result is a net
9 increase in costs to customers.
REDACTED Phillips,Di -20
Monsanto Company
l Q.IS THERE A RISK WITH ALTERNATIVE GENERATION TECHNOLOGIES
2 THAT COULD BE MORE ECONOMIC?
3 A.Yes.By committing such a large amount of capital to the Combined Projects now,
4 especially relative to the small amount of speculative savings relative to the size of the
5 investment required,PacifiCorp could be forgoing the opportunity to procure more
6 economic,alternative generation resources in the future.
7 To this point,I understand the Utah Public Service Commission suggested that
8 PacifiCorp initiate a request for proposals for new solar generation facilities,which might
9 show that solar resources could be obtained at a lower cost than the Wind Resources.Of
10 course,it is important to remember that PacifiCorp does not need new resources for at
11 least 10 years.
12 Q.ARE YOU RECOMMENDING ANY CONDITIONS TO PROTECT
13 RATEPAYERS FROM THE RISKS ASSOCIATED WITH GAS PRICES AND
14 ALTERNATIVE GENERATION TECHNOLOGIES?
15 A.Yes.While there are risks associated with low gas prices or cheaper electricity from
16 alternative generation technologies,it is impossible to completely immunize ratepayers
17 from these risks under the Company's proposal.The Commission should carefully
18 consider these risks when determining whether the Combined Projects are in the public
19 interest.Such consideration should include focusing on the Low Gas,Zero CO2 scenario
20 rather than the Medium Gas,Medium CO2 SCCHafiO at the center of the Company's
21 analysis,and limiting capital recovery to a level that will increase the likelihood of a
22 minimum level of savings under the Low Gas,Zero CO2 SCCHafiO RSsumptions.
REDACTED Phillips,Di -21
Monsanto Company
1 C.The Importance of CapitalEstimate
2 Q.WHAT IS THE ESTIMATED COST TO CONSTRUCT THE COMBINED
3 PROJECTS?
4 A.The expected up-front capital costs associated with the Combined Projects are:
5 for the Wind Projects,million for the new transmission line,and
6 for the network upgrades.27 The QF Projects are expected to cost an
7 additional over the 20-year contract terms of the PPAs.28 In total,the
8 Combined Projects will require upfront investments of .Including the NPV
9 liability of the PPA costs,the total costs equate to
10 Q.HOW WOULD AN OVERRUN IN PROJECT COST IMPACT THE OVERALL
11 ECONOMICS?
12 A.It will have a significant negative impact on the overall project economics.In response to
13 WIEC Discovery Request 5.11,RMP stated that an estimated increase in capital costs for
14 the Combined Projects of just 7%would cause all of the expected savings under its base
15 case assumptions to vanish.Again,that is assuming higher gas and CO2 prices than are
16 reasonable based on the information we have available today.
17 RMP was also asked to provide an estimate of the change in savings under its
18 nine policy-price scenarios resulting from a 10%increase in capital costs.RMP objected
19 to this request,stating it does not have the information being requested.29 I find it highly
20 irregular that RMP has not tested its economics against changes to capital costs.
21 However,I have estimated what the results would be based on the method used to
27CONFIDENTIAL Direct Testimonyof Rick T.Link at p.23
28 Id.and CONFIDENTIAL Workpaperof Rick T.Link "Gateway Results Direct
Testimony.xlsx".
29 Wyoming New Wind/TransmissionDocket,RMP response to WIEC Discovery Request 5.8.
REDACTED Phillips,Di -22
Monsanto Company
l calculate the breakeven cost increase.The results are presented in Table NLP-2 below.
2 The results show that under this sensitivity,only four of the nine policy price scenarios
3 remain economic,and two of the four are High CO2 price scenarios.
TABLE NLP-2
Annual Revenue Requirement PVRR(d)With 10%Increase in Capital Costs
Price-Policy Scenario (Benefit)/Cost ($million)Levelized $/MWh
Low Gas,Zero CO2 370 $8.59
Low Gas,Medium CO2 289 $6.71
Low Gas,High CO2 2 $0.05
Medium Gas,Zero CO2 143 $3.32
Medium Gas,Medium CO2 59 $1.37
Medium Gas,High CO2 (121)-$2.81
High Gas,Zero CO2 (145)-$3.36
High Gas,Medium CO2 (155)-$3.61
High Gas,High CO2 (399)-$9.26
4 Q.ARE THERE ANY SPECIFIC CONCERNS WITH THE CAPITAL COST
5 ASSUMPTIONS INCLUDED WITHIN THE COMPANY'S ECONOMIC
6 ANALYSIS?
7 A.Aside from a general concern that cost overruns do occur and RMP is operating on
8 narrow margins under its Medium Gas,Medium CO2 CSSe (and the Low Gas cases are
9 already uneconomic),Monsanto is specifically concerned with RMP's assumption that it
10 will be able to recover 12%of the capital costs associated with the Transmission Projects
11 from third-party customers through its OATT.3°These concerns are discussed in more
12 detail by Mr.Dauphinais who explains how the FERC's precedent might not allow for
13 the costs of the Transmission Projects to be recovered via PacifiCorp's OATT.From an
14 economic perspective,if RMP is not able to recover any of the transmission capital costs
ao Direct Testimony of Rick T.Link,at p.24.
REDACTED Phillips,Di -23
Monsanto Company
l via its OATT,the Combined Projects capital cost need only increase by a mere 2.7%
2 under the Medium Gas,Medium CO2 CRSC fOr the expected benefits to disappear.Table
3 NLP-3 below shows the effect of removing the 12%OATT revenue assumption,while
4 holding all other factors equal.Under this sensitivity,the Medium Gas,Zero CO2 TOSUÌÍS
5 in cost increases to customers,and the base case benefits have dropped approximately
6 60%.And under the Low Gas,Zero CO2 SCenarÏO,customers are projected to pay for
7 $256 million in increased costs:
TABLE NLP-3
Annual Revenue Requirement PVRR(d)Without 12%OATT Revenue
Price-Policy Scenario (Benefit)/Cost ($million)Levelized $/MWh
Low Gas,Zero CO2 256 $5.94
Low Gas,Medium CO2 175 $4.06
Low Gas,High CO2 (112)-$2.60
Medium Gas,Zero CO2 29 $0.67
Medium Gas,Medium CO2 (55)-$1.28
Medium Gas,High CO2 (236)-$5.46
High Gas,Zero CO2 (259)-$6.01
High Gas,Medium CO2 (270)-$6.26
High Gas,High CO2 (513)-$11.91
8 Q.HAS RMP PROVIDED ANY INFORMATION REGARDING THE CERTAINTY
9 OF ITS CAPITAL COST ESTIMATES?
10 A.As discussed by Mr.Dauphinais,RMP identified that the cost estimates for the
11 Transmission Projects have an accuracy of+/-15%given the early nature of the estimate
12 and finalization of the scope and approach."The upper end of this range would add
13 million to the estimated costs of the Combined Projects,bringing the total capital
31 Wyoming New Wind/TransmissionDocket,RMP Response to WIEC Data Request 7.3.
REDACTED Phillips,Di -24
Monsanto Company
l for the Transmission Projects to million.32 Furthermore,12%of this
2 million is million,which means that if the Transmission Projects alone
3 reach the upper end of the range provided by RMP and the third-party OATT revenues
4 are not realized,the total project cost to retail customers will have increased by
5 million or .If the same range is applied to the million wind capital
6 costs,a 15%overrun on only the Wind Projects would increase the total cost of the
7 Combined Projects by million or .Either of these outcomes would cause the
8 Combined Projects to become a net cost increase to customers under the Medium Gas,
9 Medium CO2 SCenariO.
10 Q.CAN THE COMMISSION PROTECT CUSTOMERS FROM COST OVERRUNS
11 AND THE RISK ASSOCIATED WITH PACIFICORP RECOVERING COSTS
12 FOR THE TRANSMISSION PROJECTS FROM THIRD-PARTY CUSTOMERS
13 UNDER ITS OATT?
14 A.Yes.The Commission should cap RMP's cost recovery on the capital cost of the
15 Combined Projects from retail ratepayers,inclusive of the new generation and
16 transmission facilities,as well as any interconnection costs,network upgrades,
17 distribution costs,and AFUDC,to million installed cost.This is an estimate of
18 the maximum capital recovery allowable while providing ratepayers a reasonable
19 expectation of realizing the $137 million in benefits under the Low Gas,Zero CO2
20 scenario.
21 Recall,that the $137 million in benefits is the value the Company most often
22 refers to as the expected benefits of the Combined Projects.Therefore I correspondingly
32
_million ~l 5%x (million +million).
REDACTED Phillips,Di -25
Monsanto Company
l used this value as the required expected benefits under the Low Gas,Zero CO2 SCenariO
2 assumptions that the ratepayers should receive.
3 Q.HOW WOULD CAPPING PACIFICORP'S CAPITAL RECOVERY AT THIS
4 LEVEL IMPACT THE PROJECTED RETURN TO THE COMPANY'S
5 SHAREHOLDERS?
6 A.If capital recovery from retail ratepayers is capped at this level,the equity returns for the
7 Company will drop approximately 15%,along with the Company absorbing
8 approximately 15%of the capital cost (approximately$31l million).If the $311 million
9 is assumed to be paid out of the equity returns,then the expected returns to PacifiCorp
10 investors is approximately equal to the expected savings to customers,(i.e,$1 in equity
11 returns for every $1 in expected savings)under the Low Gas,Zero CO2 SCCHafiO.
12 D.The Importance of Achievingthe Assumed Capacity Factor
13 Q.IF THE WIND PROJECTS DO NOT ACHIEVE THE CAPACITY
14 FACTOR ASSUMED IN RMP'S ECONOMIC ANALYSIS,HOW WOULD THAT
15 IMPACT THE OVERALL ECONOMICS?
16 A.It will have a significant negative impact on the overall project economics.RMP was
17 asked to provide a risk assessment for the changes in net capacity factor,but the
18 Company responded that it did not have the requested information.I again find it highly
19 irregular that RMP would not have tested its economics against changes to the net
20 capacity factor ("NCF"),as the PTC's generated and energy cost savings are directly
21 related to the output of the wind resources.
22 But,in response to WIEC discovery request 5.9 in the Wyoming New
23 Wind/Transmission Docket,rather than providing a risk assessment,RMP attached the
REDACTED Phillips,Di -26
Monsanto Company
l actual achieved net capacity factors for its current existing Wyoming wind projects.As
2 shown in Table NLP-4 below,only one of the eight projects has sustained a capacity
3 factor above the assumed in RMP's economic analysis.RMP was also asked to
4 provide a breakeven NCF for some of its price policy assumptions,but again RMP
5 claimed it did not have the requested information.However,it is worth noting that newer
6 technology turbines would be used in the proposed projects,that holding all other factors
7 constant (i.e.,wind speed,etc)should yield a higher NCF than those in service today.
TABLE NLP-4
McFadden Rolling Seven Mile Seven Mile
Year Dunlap Glenrock Glenrock111 High Plains Ridge Hills Hill Hill 11
2012 39.8%36.6%35.6%36.3%37.8%34.0%39.6%42.3%
2013 42.2%39.8%39.0%39.4%41.6%35.9%43.0%45.5%
2014 39.5%37.0%36.6%37.5%39.6%34.0%40.6%43.4%
2015 35.0%34.3%33.0%29.0%31.4%31.0%34.5%37.6%
2016 39.9%36.2%35.0%36.4%38.4%32.8%40.2%40.8%
Average 39.3%36.8%35.8%35.7%37.8%33.5%39.6%41.9%
8 Q.HAVE YOU BEEN ABLE TO ASSESS THE SENSITIVITY OF THE COMBINED
9 PROJECTS TO CHANGES IN NCF?
10 A.Yes.Using RMP's workpapers,I have tested the effect of a 10%decrease in the net
11 output of the Wind Projects under the Medium Gas,Medium CO2 and Medium Gas,Zero
12 CO2 CRSes.The results demonstrate that a 10%reduction in the net output makes the
13 Combined Projects uneconomic under those two price-policy scenarios.Consequently,
14 the breakeven capacity factor for these two scenarios is likely a small (less than 10%)
15 deviation from the base assumption.
REDACTED Phillips,Di -27
Monsanto Company
l Q.HOW DID YOU ARRIVE AT THAT CONCLUSION?
2 A.To test the effect of the 10%reduction in net output,I first decreased the PTC revenue
3 included in the economic analysis by 10%.Under the Medium Gas,Zero CO2 case,this
4 change alone was enough to cause the Combined Projects to become uneconomic,
5 resulting in $27 million of increased costs to customers before any consideration of
6 replacement energy costs.
7 For the Medium Gas,Medium CO2 case,the 10%decrease in PTC revenue
8 reduced the $137 million in estimated savings to $57 million.I then solved for the net
9 replacement energy cost on a per MWh basis (applied to 10%of the new wind output and
10 added to the NPC impact)required to breakeven.I did not make any changes to the
11 emissions or system fixed cost savings for the sake of conservatism.Nor did I alter the
12 new wind fixed O&M.The result shows that if the net output were to drop by 10%,RMP
13 would have to procure replacement energy at a net cost of $12.24 per MWh (Real 2017
14 dollars,assuming 2.22%inflation)over the life of the Wind Projects to break even.This
15 would be virtuallyimpossible.
16 Q.IS THERE A WAY TO DETERMINE WHAT THE BREAKEVEN NCF MIGHT
17 BE?
18 A.Yes.Using a similar method as I just described,but using the Medium Gas,Medium CO2
19 based forward wholesale electric energy price curve as the net replacement cost for the
20 lost wind output,I can back solve for the breakeven NCF.The result is a 5.5%decrease
21 in the net output will cause a breakeven for the Medium Gas,Medium CO2 case.The
22 represents a NCF of
REDACTED Phillips,Di -28
Monsanto Company
l I have also performed the same analysis on the Medium Gas,Zero CO2 CSSC USing
2 the corresponding Medium Gas,Zero CO2 based forward wholesale electric energy price
3 curve as the net replacement cost for the lost wind output.Under this set of assumptions,
4 the breakeven NCF is ,which equates to a mere 2.8%reduction in net energy
5 output.
6 Q.DO YOU BELIEVE THAT THERE IS A POSSIBILITY THAT THE CAPACITY
7 FACTOR WILL BE LESS THAN ?
8 A.Yes,I do.And so does RMP.In response to WIEC Data Request 5.9 in the Wyoming
9 New Wind/Transmission Docket,PacifiCorp noted that "The Company is aware of
10 variability in capacity factors for wind Wyoming wind resources,as demonstrated in the
11 operational history of its existing Wyoming wind projects.""While I have no doubt that
12 the assumption used by RMP in its economic analysis was prepared objectively and in
13 good faith,the fact remains that it may not be realized.Accordingly,it is important to
14 test the economics of the project considering the possibility that the actual capacity factor
15 that is achieved may be lower.
16 Q.WHAT HAS BEEN PACIFICORP'S TRACK RECORD IN ESTIMATING NCF'S
17 FOR WIND GENERATION CPCN APPROVAL COMPARED TO ACTUAL
18 OPERATION?
19 A.This was the subject of WIEC Data Request 7.7 in the Wyoming New
20 Wind/Transmission Docket.The confidential table attached to the Company's response
21 is presented below as Table NLP-5.As Table NLP-5 shows,PacifiCorp has
22 overestimated its NCF by on a capacity-weighted average basis (using a
23 simple average)with a standard deviation of .This magnitude of forecast error
*See TableNLP-4.
REDACTED Phillips,Di -29
Monsanto Company
l applied to either the Medium Gas,Medium CO2 or Medium Gas,Zero CO2 SCenariOS
2 would result in a net cost increase to customers.
Table NLP-5
Expected
Expected P50 Annual P50 Actual Net Actual
Net Capacity Energy Capacity Annual
Nameplate Factor (NCF)(MWh)at Factor (NCF)Energy
Commercial Capacity at Time of Time of Since (MWh)Since
Project Name Online Date (MW)Decision*Decision Inception Inception
Notes:*Taken from Confidential Exhibit MRT-3R of testimony of Mark R.Tallman,Wyoming Docket No.20000-405-
ER-1 1
P50 Net Capacity Factor refers to the capacity factor estimated to the reflect the 50 percent probability**The Company share of the Foote Creek I project was 32.6 MW at the time of construction and is now 32.2
MW.
REDACTED Phillips,Di -30
Monsanto Company
l
1 Q.HOW CAN THE COMMISSION PROTECT CUSTOMERS FROM THE RISK
2 OF NCF BEING LOWER THAN ASSUMED BY PACIFICORP IN ITS
3 ECONOMIC ANALYSIS?
4 A.A key determinant of the economics of the project is the physical output from the new
5 facilities.To provide assurance to customers that they will receive benefits,I recommend
6 that RMP be required to provide the full PTC and energy benefits to customers based on
7 achieving a NCF not less than from the Wind Projects.To implement this,I
8 recommend that at least this level of zero fuel cost energy plus the associated PTC's
9 grossed up at the current federal corporate income tax rate of 35%,assuming not less than
10 the NCF,be included in RMP's Base Rates and NPC over the expected life of the
11 Wind Projects.I recommend this treatment for all turbines in the Wind Projects that are
12 authorized for recovery through rate base.
13 Furthermore,while the Company does not expect to be in a Net Operating Loss
14 ("NOL")position while the Wind Projects are expected to generate PTCs,I recommend
15 ratepayers should be guaranteed receipt of the full grossed up value of the production tax
16 credits without having to compensate RMP for return on any deferred tax assets that may
17 be created as a result of RMP's inability to contemporaneously monetize PTCs to full
l8 value if RMP's expectations on the NOL position are incorrect.
19 To implement this protection in rates,I recommend that the initial level of PTC's
20 included in base rates be set to the value corresponding to the net energy output at the
21 NCF level,grossed up for taxes at the current 35%federal corporate income tax
22 level.Each time base rates are set,this value should be set to the higher of the
23 NCF or the actual normalized output level of the facilities.This would also provide
34 Wyoming New Wind/TransmissionDocket,RMP Response to WIEC Data Request 7.14
REDACTED Phillips,Di -31
Monsanto Company
1 customers some protection against the risks associated with a change in the federal
2 income tax rate,which I discuss next.
3 Similarly when setting the NPC and in the ECAM,the zero cost energy should be
4 initially set to the net energy output level corresponding to the NCF,shaped by
5 month to mimic the assumptions used in RMP's economic modeling.Over time,just like
6 when setting base rates,these values should be adjusted to reflect the greater of a
7 normalized output and the assumption.
8 E.The Impactof a Lower Federal Corporate Income Tax Rate
9 Q.WOULD A LOWER FEDERAL CORPORATE INCOME TAX RATE IMPACT
10 THE COMBINED PROJECTS'ECONOMICS?
11 A.Yes.A lower federal corporate income tax rate would impact the Combined Project's
12 economics in two ways.First,a lower federal corporate income tax rate would reduce
13 the revenue requirement of the Combined Projects.Second,a lower federal corporate
14 income tax rate would reduce the value of the PTCs.
15 Q.DO YOU HAVE EVIDENCE SHOWING THE IMPACT OF A LOWER
16 FEDERAL CORPORATE INCOME TAX RATE ON THE COMBINED
17 PROJECTS'ECONOMICS?
18 A No.The Company was asked to provide the value of the Combined Projects assuming
19 that the federal corporate income tax rate drops to 20%(as is currently being considered
20 by the present administration).RMP objected to this request,noting they do not have the
21 requested information.36 However,it is likely the loss in PTC value more than offsets the
"Wyoming New Wind/TransmissionDocket,RMP Response to WIEC Data Request 7.10
REDACTED Phillips,Di -32
Monsanto Company
l reduction in the Combined Projects'revenue requirements resulting in a negative impact
2 to the Combined Projects'economics,which has been the case for other utilities.
3 Q.WHY IS IT LIKELY THAT THE LOSS IN PTC VALUE MORE THAN OFFSETS
4 THE REDUCTION IN THE COMBINED PROJECTS'REVENUE
5 REQUIREMENT?
6 A.In Utah Docket No.17-035-39,Rick Link discussed the sensitivity of RMP's proposed
7 wind repowering project to a reduction of the Federal corporate income tax rate to 25%
8 rather than the 20%under consideration by the current administration).36 The results
9 showed that nearly all the claimed benefits erode,dropping by approximately80%.
10 Q.HAVE ANY OTHER UTILITIES PRESENTED EVIDENCE DEMONSTRATING
11 THE IMPACT OF A LOWER FEDERAL CORPORATE TAX RATE ON A NEW
12 WIND PROJECT?
13 A.Yes.Southwestern Public Service Company ("SPS")is seeking approval of a new wind
14 project before the New Mexico Public Regulation Commission in Case No l7-00044-UT.
15 In that case,the levelized net benefit impact of a 20%Federal corporate income tax rate
16 associated with SPS's wind project,all other factors held constant,was a reduction of
17 $2.83 per MWh,or 25%,from SPS's evaluation on a levelized NPV basis."
18 Interstate Power and Light ("IPL"),a subsidiary of MidAmerican Energy,
19 reported similar findings.In Case No RPU-2017-0002 before the Iowa Utilities Board,
20 IPL provided evidence that reduction in the Federal Corporate Income Tax Rate to 25%
21 reduced the levelized net benefit associated with the proposal by 22%.
Rebuttal testimony of Rick T.Link.
37 DÎTOCt TCStimony of Nicholas L Phillips at pp.23-24 and LES Exhibit NLP-15.*Direct Testimony of Maurice Brubakerat p.9.
REDACTED Phillips,Di -33
Monsanto Company
l Given that the Combined Projects'economics depend on the value of the PTCs at
2 the tax rate in effect today,I expect a similar impact to the projected benefits from the
3 Combined Projects if corporate tax rates are lowered.
4 F.Additional Ratepayer Protections
5 Q.ASIDE FROM THE RATEPAYER PROTECTIONS THAT YOU DISCUSSED
6 ABOVE,ARE THERE ANY OTHER CONDITIONS OR PROVISIONS THAT
7 SHOULD BE CONSIDERED IF THE COMMISSION GRANTS A CPCN FOR
8 THE COMBINED PROJECTS?
9 A.Yes.The benefits associated with the Combined Projects depend on more assumptions
10 than those evaluated in my sensitivity analyses.As a result,I recommend the
ll Commission cap RMP's recovery of future Combined Projects-related O&M,future
12 capital expenditures related to the Combined Projects,QF cost recovery,and net fixed
13 system costs to those levels assumed in the Company's economic analysis.I also
14 recommend that if construction of the Combined Projects ceases,for whatever reason,
15 that no costs incurred are recoverable from customers.
16 V.CONCLUSION AND RECOMMENDATION
17 Q.AFTER PERFORMING YOUR REVIEW AND ANALYSIS,WHAT IS YOUR
18 CONCLUSION?
19 A.Under the Company's proposal,the Combined Projects present a high degree of risk that
20 the claimed customer benefits will not be realized,or that the Combined Projects will
21 result in increased costs for customers rather than net savings.Since the Combined
22 Projects are discretionary and not designed to fulfill any resource requirement or other
REDACTED Phillips,Di -34
Monsanto Company
l needs,there must be a high degree of confidence in achieving a positive outcome for
2 customers.As proposed,I do not believe that the Combined Projects meet that test.
3 Q.WHAT IS YOUR RECOMMENDATION?
4 A.I recommend the Commission deny RMP's request for a CPCN.However,if the
5 Commission believes that the Combined Projects should be undertaken,then the
6 conditions I described above should be included as part of the Commission's approval in
7 order to improve the chance of a beneficial outcome for customers.
8 Q.DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?
9 A.Yes,it does.
RDoc\Shares\ProlawDocsa1ED\l0465Conñdential\Testimony-BAI\333609docx
REDACTED Phillips,Di -35
Monsanto Company
Monsanto Exhibit No.209
Case No.PAC-E-17-07
Page 1 of4
QUALIFICATIONSOF NICHOLAS L.PHILLIPS
1 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
2 A.Nicholas L.Phillips.My business address is 16690 Swingley Ridge Road,Suite 140,
3 Chesterfield,MO 63017.
4 Q.PLEASE STATE YOUR OCCUPATION.
5 A.I am a consultant in the field of public utility regulationand an Associate with the firm of
6 Brubaker&Associates,Inc.("BAI"),energy,economic and regulatory consultants.
7 Q.PLEASE STATE YOUR EDUCATIONAL BACKGROUND AND
8 PROFESSIONAL EMPLOYMENT EXPERIENCE.
9 A.I graduated from the Washington University in St.Louis/University of Missouri-St.Louis
10 joint engineering program in 2010 where I received a Bachelor of Science degree in
11 Electrical Engineering.In 2012 I received the degree of Master of Engineering in
12 Electrical Engineering with a concentration in Electric Power and Energy Systems from
13 Iowa State University of Science and Technology.In 2015 I received a Master of
14 Science Degree in Computational Finance and Risk Management from the University of
15 Washington Seattle.I am a member of the Power and Energy Society of the Institute of
16 Electrical and Electronics Engineers.
17 I joined BAI as an intern in 2009 and upon graduation,I accepted a position with
18 BAI as an Associate Engineer.In January of 2012,I was promoted to the position of
19 Associate Consultant,in January of 2013 I was promoted to the position of Consultant at
20 BAI,in January of 2014 I was promoted to my the position of Senior Consultant at BAI,
21 and in January of 2016 I was promoted to my current position of Associate at BAI.
22 While at BAI,I have been involved with numerous regulated and competitive electric
Monsanto Exhibit No.209
Case No.PAC-E-17-07
Page 2 of 4
1 service issues.These have included transmission planning,resource planning,electric
2 price forecasting,load forecasting,cost of service,combined heat and power steam costs
3 and power procurement.This has involved the performance of power flow,production
4 cost,transmission line routing,cost of service and other analysis to addressthese issues.
5 Prior to joining BAI,through the department of Electrical and Computer
6 Engineering and the Medical School at Washington University in St.Louis,I aided in
7 preliminary research focusing on the use of ultrasound as a mechanism for in vitro
8 localized thermometry.
9 BAI and its predecessor firm have participated in more than 700 regulatory
10 proceedings in 40 states and Canada.
11 BAI provides consulting services in the economic,technical,accounting,and
12 financial aspects of public utility rates and in the acquisition of utilityand energy services
13 through RFPs and negotiations,in both regulated and unregulated markets.Our clients
14 include large industrial and institutional customers,some utilities and,on occasion,state
15 regulatory agencies.We also prepare special studies and reports,forecasts,surveys and
16 siting studies,and present seminars on utility-related issues.
17 In general,we are engaged in energy and regulatory consulting,economic
18 analysis and contract negotiation.In addition to our main office in St.Louis,the firm
19 also has branch offices in Phoenix,Arizona and Corpus Christi,Texas.
20 Q.WHAT ADDITIONAL EDUCATIONAL,PROFESSIONAL EXPERIENCE AND
21 AFFILIATIONS HAVE YOU HAD?
22 A.I have attended seminars concerned with rate design,cost of service,and wind
23 integration.My completed coursework includes classes in Power &Energy System
Monsanto Exhibit No.209
Case No.PAC-E-17-07
Page 3 of 4
1 Planning,Power System Operation &Control (Steady State Analysis),Economic
2 Systems for Electric Power Planning,Power System Dynamics,Electromechanical Wind
3 Energy Conversion &Grid Integration,Nuclear Engineering &Radiation Theory,
4 Reliability,Linear System Theory,System Engineering Analysis,Allocation
5 Mechanisms,Capital Markets and Data for Computational Finance,Investment Science,
6 R Programming for Quantitative Finance,Quantitative Risk Measurement,Portfolio
7 Benchmarking &Analysis,Credit Risk Management,Options &Derivatives,Financial
8 Risk Management,Fixed Income Analytics,Portfolio Optimization,Monte Carlo
9 Methods,Energy Markets &Derivatives,and Optimization Methods.
10 Topics covered by these classes include but are not limited to Economic Dispatch,
ll Unit Commitment,Production Cost Modeling,Capacity Expansion Planning,
12 Transmission Planning,Power Flow Analysis,Security Constrained Optimal Power
13 Flow,Transient and Dynamic Stability,Wholesale Electricity Markets,Nuclear Energy,
14 Reliability Studies as well as experience with PLEXOS,an industry leading combined
15 production cost and capacity/transmission expansion model.Additionally,MISO
16 professionals presented a series of nine lectures discussing their approach to the planning
17 process and use of production costing,capacity/transmission expansion planning,and
18 other software including PSS/E,PROMOD IV,Strategist,MARS,and EGEAS.
Monsanto Exhibit No.209
Case No.PAC-E-17-07
Page 4 of 4
1 Q.HAVE YOU PREVIOUSLY FILED TESTIMONY WITH A REGULATORY
2 COMMISSION?
3 A.Yes.I have filed testimony with the Public Service Commissions of Kansas,Michigan,
4 Missouri,Wisconsin,the New Mexico Public Regulation Commission,the Nevada
5 Public Utilities Commission and the Federal Energy Regulatory Commission,in
6 numerous proceedings concerning production cost modeling,net fuel costs,purchase
7 power expense,off-system sales,coal commodity and transportation contracts,cost of
8 service,rate base,unit costs,pro forma operating income,appropriate class rates of
9 return,revenue requirements,integrated resource planning,power plant operations,fuel
10 cost recovery,regulatory issues,environmental compliance,cost recovery,economic
11 dispatch,capacity markets,wholesale market structure,and various other items.
\\Doc\SharesProlawDocs\MED\l0470\Testimony-BAI\332532.docx
Monsanto Exhibit No.210
Case No.PAC-E-17-0720000-520-EA-17/Rocky Mountain Power Page 1 of 11
September 1,2017
WIEC Data Request 4.1
WIEC Data Request 4.1
In Wyoming Public Service Commission Docket No.20000-481-EA-16(Record No.
14220),Rocky Mountain Power witness Mr.Paul Clements stated in his August 26,2015
Direct Testimony (at page 3,lines 21-22):
"The Company has no need for additionalresources for at least the next decade".
(a)Please admit that this statement remains true as of the date of Rocky Mountain
Power's filing of its Application in this proceeding.If the answer is anythingother
than an unqualified admission,please explain your answer.
(b)Please admit that this statement was made in reference to both energy and capacity
needs.If the answer is anythingother than an unqualifiedadmission,please explain
your answer in detail.
(c)Please explainany changes to the Company's forecasted load over the next decade
since this statement was made.Please explain your answer.
(d)Please identify any changes in the Company's resource mix over the next decade
since this statement was made.Please explain your answer.
Response to WIEC Data Request 4.1
(a)As discussed in PacifiCorp's 2017 Integrated Resource Plan (IRP),PacifiCorp can
meet its resource needs in the front 10 years of its long-term resource plan with a
combination of demand-side management (DSM)and front office transactions (FOT).
However,PacifiCorp has included in its 2017 IRP preferred portfolio new wind and
transmission assets as part of its long-term plan to meet customer load on a least-cost,
least-risk basis.
(b)The statement was made before PacifiCorp completed its 2017 IRP filed on April 4,
2017.At the time the statement was made,PacifiCorp did not have a capacity need,
recognizing there were no incremental generating resources in the then-current
preferred portfolio through the next decade.
(c)PacifiCorp's load forecast was updated in the 2017 IRP.Please refer to Volume II,
Appendix A of the 2017 IRP available at the followingweb link:
http://www.pacificorp.com/es/irp.html
(d)Please refer to PacifiCorp's 2017 IRP,Volume I,Figure 8.70,Figure 8.71,and Table
8.17.PacifiCorp has not reconciled changes from the 2017 IRP preferred portfolio
relative to the preferred portfolio at the time the statement was made.
Respondent:Shay LaBray
Monsanto Exhibit No.210
Case No.PAC-E-17-07
20000-520-EA-17/Rocky Mountain Power Page 2 of 11
September 25,2017
WIEC Data Request 5.8
WIEC Data Request 5.8
Please provide an updated version of Table 2 found on Page 35 in the Direct Testimony
of Mr.Link that assumes capital costs for the combined projects increase by 10%,i.e.,
there is a 10%overrun when constructing the combined projects.
Response to WIEC Data Request 5.8
The Company objects to this request on the basis that the Company does not have
custody,possession or control of the information being requested.The request requires
development of a special study or information not maintained in the ordinary course of
business.Without waiving this objection,the Company responds as follows:
The Wyoming Industrial Energy Consumers (WIEC)have the information required to
perform this analysis.Please refer to the confidential work papers provided with the
Direct Testimony of Company witness,Rick T.Link,specifically folder "Other Summary
Reports",the file "Gateway_IRPData.xlsx".
Real levelized costs,in dollars,for the Aeolus-to-Bridger/Anticline project are located in
column Q of the worksheet named "Gateway".
Real levelized costs,in millions of dollars,for the 230 kilovolt (kV)upgrades are
included in column Q of the worksheet named "Summary All Wind".
Real levelized costs,in dollars,for the proxy wind benchmark resources are located in the
column N of the worksheet named "Summary All Wind".
The net present value (NPV)of each of these streams of data calculated over the period
2017 through 2036 assuming a 6.57 percent discount rate represents the present value of
revenue requirements (PVRR)associated with the capital for the combined projects
incorporated into Table 2 of Mr.Link's Direct Testimony.This figure can be multiplied
by 10 percent to capture the incremental increase in cost that would be associated with an
assumed 10 percent cost overrun that can be added as a positive value to all of the
numbers in Table 2 of Mr.Link's Direct Testimony.The value would not change among
the price-policy scenarios.
Respondent:Rick Link
Witness:Rick Link
Monsanto Exhibit No.210
Case No.PAC-E-17-07
20000-520-EA-17/Rocky Mountain Power Page a of 11
September 25,2017
WIEC Data Request 5.9
WIEC Data Request 5.9
Please provide a probability distribution of net capacity factor for the wind site.If the
Company did not assess the risk of the wind blowing via probability distribution,please
provide the risk assessment for the wind site analyzed by the Company.If this
assessment does not exist,please discuss in detail why the Company did not assess the
risk of the wind.
Response to WIEC Data Request 5.9
The Company objects to this request on the basis that it does not have custody,
possession or control of the requested information.Specifically,it does not have a
probability distribution of net capacity factor for the various wind sites.This assessment
will be performed once the wind turbine equipment supply has been secured and the wind
turbine layout has been finalized.
Please refer to Attachment WIEC 5.9,which summarizes the annual capacity factors at
the Company's existing wind projects.The Company is aware of variability in capacity
factors for Wyoming wind resources,as demonstrated in the operational history of its
existing Wyoming wind projects.
Respondent:Ian Andrews
Witness:Chad Teply
Monsanto Exhibit No.210
Case No.PAC-E-17-0720000-520-EA-17/Rocky Mountain Power Page 4 of 11
September 25,2017
WIEC Data Request 5.11
WIEC Data Request 5.11
Please provide the break even percentage increase in capital costs for the combined
projects under the medium gas zero CO2 and medium gas medium CO2 cases.
Response to WIEC Data Request 5.11
The Company objects to this request on the basis that it does not have custody,
possession or control of the requested information.The request requires development of
a special study or information not maintained in the ordinary course of business.Without
waiving this objection,the Company responds as follows:
The Wyoming Industrial Energy Consumers'(WIEC)can estimate the level of capital
costs that would cause the Combined Projects to achieve break-even economics using
data contained in the Direct Testimony of Company witness,Rick T.Link,specifically
Exhibit RMP_(RTL-5).This exhibit includes these line item "Transmission Project
Capital Recovery"plus "Incremental Transmission Revenue"+"New Wind Capital
Recovery"under Project Net Costs for each price-policy scenario.The present value of
revenue requirements differential (PVRR(d))for these line items can be multiplied by a
percentage that offsets the PVRR(d)for the "Net (Benefit)/Cost"line item for any given
price-policy scenario.
For instance,in the medium natural gas and medium carbon dioxide (CO2)priCC SCCESTiO,
the PVRR(d)for "Transmission Project Capital Recovery"plus "Incremental
Transmission Revenue"+"New Wind Capital Recovery"is $1,959 million,which
reflects the value of capital cost recovery for transmission and new wind.The PVRR(d)
for the "Net (Benefit)/Cost"line item is $137 million.If the PVRR(d)for the combined
transmission plus new wind line item is multiplied by approximately107 percent,the
capital cost recovery for transmission and new wind line items would drop by
approximately$137 million,thereby causing the PVRR(d)for the "Net (Benefit)/Cost"
line item to be zero (i.e.,break-even economics).
The capital costs for transmission,$717.5 million,and new wind,$1,369 million,are
provided in Mr.Link's Direct Testimony,specifically Confidential Exhibit RMP_(RTL-
1)and total $2,086.5 million.Multiplyingthe $2,086.5 by 107 percent would equal the
capital investment of $2,232.6 million for the breakeven.
Respondent:Dan Swan
Witness:Rick Link
I
Monsanto Exhibit No.210
Case No.PAC-E-17-0720000-520-EA-17/Rocky Mountain Power Page s of 11
October 9,2017
WIEC Data Request 6.1
WIEC Data Request 6.1
With regard to the incremental additions to PacifiCorp's generation rate base associated
with the proposed wind repowering projects,from an annual revenue requirement
perspective (as opposed to an actual earned return perspective to the extent that may be
different),please identify the total return on equity that would be associated with that
incremental increase in rate base each year assuming the plant is added as PacifiCorp
proposes,depreciated as PacifiCorp proposes,and using the currently authorized rate of
return on equity and capital structure from the Company's last Wyoming general rate
case.Please begin in the first year in which plant is proposed to be brought into service
and continue until the proposed generation plant is fully depreciated.
Response to WIEC Data Request 6.1
The Company assumes that the request for "wind repowering projects"was intended to
refer to "new wind projects".Based on the foregoing assumption,the Company responds
as follows:
Please refer to Attachment WIEC 6.1 for the annual cost of equity on incremental rate
base associated with the new wind projects.
Respondent:Mark Paul/Terrell Spackman
Witness:Jeff Larsen
Monsanto Exhibit No.210
Case No.PAC-E-17-0720000-520-EA-17/Rocky Mountain Power Page 6 of 11
October 9,2017
WIEC Data Request 6.2
WIEC Data Request 6.2
With regard to the incremental additions to PacifiCorp's transmission rate base associated
with the proposed transmission projects,from an annual revenue requirement perspective
(as opposed to an actual earnedreturn perspective to the extent that may be different),
please identify the total return on equity that would be associated with that incremental
increase in rate base each year assuming the plant is added as PacifiCorp proposes,
depreciated as PacifiCorp proposes,and using the currently authorized rate of return on
equity and capital structure from the Company's last Wyoming general rate case.Please
begin in the first year in which plant is proposed to be brought into service and continue
until the proposed transmission plant is fully depreciated.
Response to WIEC Data Request 6.2
Please refer to Attachment WIEC 6.2 for the annual cost of equity on incremental rate
base associated with the proposed transmission projects.
Respondent:Mark Paul/Terrell Spackman
Witness:Jeff Larsen
Monsanto Exhibit No.210
Case No.PAC-E-17-07
20000-520-EA-17/Rocky Mountain Power Page 7 of 11
October 13,2017
WIEC Data Request 7.3
WIEC Data Request 7.3
Please identify all contingency amounts that RMP has included in its cost estimates for its
proposed transmission line project in this proceeding and identify the specific contingency
being addressedby each contingency amount.
Response to WIEC Data Request 7.3
In developingthe transmission project estimate the Company has presented the estimate
as a +/-15 percent accuracy given the early nature of the estimate and finalization of the
scope and approach.The estimate values used historical pricing from previous projects
(inflationadjusted as necessary),the historical pricing units were from engineer,procure
and construct (EPC)contracts and contained contractor contingencies representing such
risks as soils,production rates,weather,environmental constraints and the like.In
addition the Company prepared a risk evaluation to determine potential cost and/or
schedule risks,the values determined from this process identified that the risk profile was
within the overall accuracy of the project cost estimate.
Respondent:Todd Jensen/Stuart Smith
Witness:Rick Vail
Monsanto Exhibit No.210
Case No.PAC-E-17-07
20000-520-EA-l7 /Rocky MountainPower Page a of 11
October 13,2017
WIEC Data Request 7.4
WIEC Data Request 7.4
For all Company capital projects in the last 15 years for which a certificate of public
convenience and necessity or its equivalent was required,please name the project,
indicate the estimated costs for the project at the time the certificate of public
convenience and necessity was issued (including,if applicable,any margin of error
associated with the estimated costs),and the actual cost for the project as placed into
service.
Response to WIEC Data Request 7.4
The Company assumes WIEC is requesting cost information for projects that were
requested by the Company to serve all customers and not for projects that were built to
serve new customers or to serve an increased load from existing customers.Based on that
assumption,please refer to Confidential Attachment WIEC 7.4,which provides cost
information for a list of the Certificate of Public Convenience and Necessity (CPCN)
applications for projects the Company completed.
Confidential information is provided subject to the terms and conditions of the protective
agreement in this proceeding.
Respondent:Stacy Splittstoesser
Witness:Jeff Larsen
Monsanto Exhibit No.210
Case No.PAC-E-17-07
20000-520-EA-17/Rocky Mountain Power Page 9 of 11
October 13,2017
WIEC Data Request 7.7
WIEC Data Request 7.7
For each Company-owned wind generation facility,please identify the facility and
provide:
(a)the forecasted annual net MWh production and net capacity factor over the then
anticipated life of the facility at the time at which the project received its certificate of
public convenience and necessity (CPCN)or its equivalent authorization for
construction or acquisition,and
(b)the actual average annual net MWh production and net capacity factor since the
project was placed into service.
If the facility did not obtain a CPCN prior to being placed into service,please provide the
forecast annual net MWh production and net capacity factor at the time it was placed into
rates.
With regard to the forecasted information,please provide a citation to the testimony or
work papers in the applicable CPCN proceeding where that information can be found.
Response to WIEC Data Request 7.7
(a)Please refer to Attachment WIEC 7.7,which provides the expected annual net
megawatt-hours (MWh)production and net capacity factor (NCF)for the Company's
owned wind resources prior to construction or acquisition.
(b)Please refer to Attachment WlEC 7.7,which provides actual annual net MWh
production and NCF for the Company's owned wind resources since each wind
resource was placed into service.
Respondent:Cathy Wright /Devin Hutchinson /Ken Clark
Witness:Chad Teply
Monsanto Exhibit No.210
Case No.PAC-E-17-07
20000-520-EA-17/Rocky Mountain Power Page io of 11
October 16,2017
WIEC Data Request 7.10
WIEC Data Request 7.10
Please provide the value of the proposed projects under the Medium Gas -No CO2 and
Medium Gas -Medium CO2 cases assuming the federal corporate income tax rate drops
to 20%.
Response to WIEC Data Request 7.10
The Company objects to this data request on the basis that it requires development of a
special study or information not maintained in the ordinary course of business.
Respondent:Dan Swan
Witness:Rick Link
Monsanto Exhibit No.210
Case No.PAC-E-17-0720000-520-EA-17/Rocky Mountain Power Page 11 of 11
October 16,2017
WIEC Data Request 7.14
WIEC Data Request 7.14
To the extent that RMP and/or PacifiCorp and/or Berkshire Hathaway is in a net
operating loss (NOL)position,please explainhow the PTC will be accounted for and to
the extent that there are any costs to customers that would not occur in the absence of an
NOL position,pleasequantify by year RMP's best current estimate of the additional cost
to customers.
Response to WIEC Data Request 7.14
The Company and Berkshire Hathaway are not currently in a net operating loss (NOL)
position nor do any of their forecasts anticipate that they will be in an NOL position
during the production tax credit (PTC)period.
Respondent:Jonathan Hale
Witness:To be determined