20180411Phillips Supplemental Direct - Redacted.pdf

RECEiVED
E APR ll PM 4:33
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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 Supplemental Direct Testimony and Exhibits Of
Nicholas L.Phillips
On Behalf of
Monsanto Company
April 11,2018
Project 10465
CONFIDENTIAL
SUBJECT TO PROTECTIVE ORDER IN CASE NO.PAC-E-17-07
ROCKY MOUNTAIN POWER
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO.PAC-E-17-07
Table of Contents to the
Supplemental Direct Testimony of Nicholas L.Phillips
I.INTRODUCTION AND SUMMARY....................................................l
II.RMP'S SUPPLEMENTAL AND SECOND SUPPLEMENTAL TESTIMONIES..............4
III.THE POTENTIAL RISKS AND BENEFITS OF SOLAR PPAS .....................................15
IV.THE POTENTIAL RISKS AND BENEFITS OF THE COMBINED PROJECTS...........42
V.RECOMMENDED CONDITIONS.....................................................59
VI.CONCLUSION...................................................61
Exhibits:
Exhibit 217:RMP's Responses to Discovery Requests:
WIEC 12.5
WIEC 17.7
WIEC 21.4
WIEC 21.5
WIEC 22.7
WIEC 22.8
WIEC 22.11
WIEC 22.12
WIEC 22.17
WIEC 22.18
IPUC 75
IPUC 80
Exhibit 218:Utah Independent EvaluationExcerpt
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Monsanto Company
ROCKY MOUNTAIN POWER
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO.PAC-E-17-07
Supplemental Direct Testimony of Nicholas L.Phillips
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.,which specializes in energy,economic,and regulatory
8 consulting.
9 Q.ARE YOU THE SAME NICHOLAS L.PHILLIPS WHO PRE-FILED DIRECT
10 TESTIMONY IN THIS DOCKET ON BEHALF OF MONSANTO COMPANY
11 ("MONSANTO")?
12 A.Yes,I am.
13 Q.WHAT IS THE PURPOSE OF YOUR SUPPLEMENTAL DIRECT TESTIMONY?
14 A.I address Rocky Mountain Power's ("RMP"or "the Company")updated proposal to
15 construct or procure four new Wyoming wind resources with a total capacity of
16 1,311 megawatts ("MW")(the "Wind Projects"),and the Company's proposal to
17 construct the Aeolus-to-Bridger/Anticline Line and the 230 kV Network Upgrades (the
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l "Transmission Projects").Throughoutmy testimony,I refer to the Transmission Projects
2 and the Wind Projects collectively as the "Combined Projects."
3 Q.PLEASE PROVIDE A SUMMARY OF YOUR SUPPLEMENTAL DIRECT
4 TESTIMONY.
5 A.First,I will describe some of the background of this proceeding leading up to this
6 supplemental direct testimony.Second,I will discuss issues associated with how the
7 Company changed its approach to modeling the Combined Projects,as well as the
8 differences in the approaches to modeling used in this proceeding generally.Then,I will
9 describe issues associated with RMP's solar RFP (the "2017S RFP")and how the
10 Company's own analysis of the benefits associated with new solar resources indicates
11 that the Combined Projects likely are not the least-cost,least-risk plan for serving
12 customers.Next,I will address the Company's updated economic analysis for the
13 Combined Projects,based on the final shortlist resulting from the RFP for new wind
14 resources (the "2017R RFP").Finally,although I recommend that the Commission deny
15 the requested certificate of public convenience and necessity ("CPCN")for the Combined
16 Projects,I also recommend conditions that the Commission should include to protect
17 ratepayers if it approves a CPCN for the Combined Projects.
18 Q.PLEASE SUMMARIZE YOUR CONCLUSIONS AND RECOMMENDATIONS
19 CONCERNING THE COMPANY'S REQUEST FOR A CPCN FOR THE
20 COMBINED PROJECTS.
21 A.The results of RMP's updated analysis reaffirm my conclusion that the Combined
22 Projects are simply too risky and should not be approved.Furthermore,assuming that the
23 Company needs additional resources (an assumption with which I strongly disagree),
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l RMP's updated analysis actually demonstrates that the Combined Projects likely are not
2 the "least-cost,least-risk"plan to serve customers given the results of the 2017S RFP.
3 Specifically,the Solar PPA Option (without any new wind or transmission facilities)
4 provides I in net benefits in the Medium Gas,Medium CO2 scenario,
5 whereas the Combined Projects only result in $167 million of projected benefits.2
6 Consequently,if the Commission is inclined to approve any new resources acquisitions,
7 instead of approving the Combined Projects,the Commission should invite RMP to
8 demonstrate whether solar power purchase agreements ("PPAs")would provide greater
9 customer benefits than the status quo.However,if the Commission ultimately decides
10 that the Combined Projects should be approved,I offer certain conditions,which should
11 be included on such an approval in order to protect ratepayers.These conditions include:
12 1.Disallowing rate based recovery for any turbines that are not commercially
13 operational in time to receive 100%of the Production Tax Credit ("PTC")
14 benefits they are being constructed to capture,along with a capacity ratio share of
15 any interconnection,transmission,distribution,and AFUDC costs.
16 2.Capping RMP's cost recovery on the capital cost of the Combined Projects from
17 retail ratepayers,inclusive of the new generation and transmission facilities,as
18 well as any interconnection costs,network upgrades,distribution costs,and
19 AFUDC to $1,781.44 million installed cost;a reduction of $468 million,or
20 approximately21%,from the total cost of the Combined Projects.
21 3.Capping RMP's recovery of future O&M and capital expenditures related to the
22 Combined Projects,and net fixed system costs to those levels assumed in the
23 Company's updated economic analysis.
'RMP Witness Rick Link Confidential Workpaper,"EV2020 Second Supp Results Summary
File -VOM adjusted CONF.xlsx"as referencedin response to WIEC Data Request 18.l(f)in Wyoming
Public Service Commission,Docket No.20000-520-EA-17 ("Wyoming New Wind/Transmission
Docket").WIEC stands for "Wyoming Industrial Energy Consumers."In Monsanto Data Request No.2
to RMP,Monsanto requested a copy of all data requests and responses from the Wyoming New
Wind/TransmissionDocket in discovery in this proceeding.
2 RMP Witness Link's Confidential Workpapers
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l 4.Requiring RMP to include in its Base Rates and Net Power Costs,at minimum,
2 the full:(i)10 years of PTCs,assuming,at minimum,a 21%federal corporate
3 income tax rate,and (ii)energy benefits to customers for the life of the Wind
4 Projects,both based on the assumed net capacity factors used in RMP's updated
5 economic modeling.
6 5.Guaranteeing ratepayers receipt of the full grossed up value of the PTCs without
7 having to compensate RMP for return on any deferred tax assets that may be
8 created as a result of RMP's inability to contemporaneously monetize PTCs to
9 full value.
10 6.Ensuring that if RMP ceases construction of the Combined Projects,for whatever
11 reason,no costs incurred are recoverable from customers.
12 II.RMP'S SUPPLEMENTAL AND SECOND SUPPLEMENTAL TESTIMONIES
13 Q.PLEASE DESCRIBE GENERALLY THE ROUNDS OF TESTIMONY THAT
14 HAVE BEEN FILED IN THIS PROCEEDING SINCE YOU FILED YOUR
15 DIRECT TESTIMONY.
16 A.Monsanto filed its Direct Testimony in this proceeding on November 20,2017,in
17 response to RMP's initial application.On December 18,2017,RMP filed its Rebuttal
18 Testimony.
19 On January 16,2018,RMP filed its Supplemental Direct Testimony,generally for
20 the purpose of updating its initial applicationto account for the results of its 2017R RFP
21 and the Tax Cuts and Jobs Act that was passed in December 2017.In that testimony,
22 RMP announced that the final shortlist of Wind Projects included TB Flats I and II,
23 McFadden Ridge II,Cedar Springs,and Uinta.Certain portions of this testimony were
24 subsequently corrected by the Company.
25 On February 16,2018,RMP filed its Second Supplemental Direct Testimony,
26 generally for the purpose of updating the 2017R RFP final shortlist to reflect the results
27 of the interconnection restudy process and new system impact studies.With the Second
28 Supplemental Direct Testimony,the Company removed the McFadden Ridge II project
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l from its final shortlist,and replaced it with Ekola Flats (another Company-owned
2 benchmark project).This change increased the capacity of the final shortlist Wind
3 Projects from 1,170 MW to 1,311 MW.
4 After the Second Supplemental Direct Testimony was filed,the Company
5 discovered that its Planning and Risk ("PaR")model had not accurately captured certain
6 wind tax costs and wind integration costs,and,as a result,the benefits of the Combined
7 Projects reflected in the Company's Second Supplemental Direct Testimony were not
8 accurate.Consequently,on February 23,2018,RMP filed corrections to portions of Ms.
9 Crane's Second Supplemental Direct Testimony and portions of Mr.Link's Second
10 Supplemental Direct Testimony.
11 Q.DO YOU HAVE ANY OBSERVATIONS REGARDING THE VARIOUS
12 ITERATIONS OF RMP'S TESTIMONY?
13 A.Yes.I am very concerned that RMP is attempting to push through a $2.245 billion utility
14 investment -one that carries with it very high risks that the Company is asking
15 ratepayers to assume on its behalf -without providing intervenors such as Monsanto
16 sufficient time to fully evaluate and scrutinize the Combined Projects.I have attempted
17 to evaluate RMP's proposal,as it evolved over time,to the best of my ability.However,
18 RMP has modified and updated the details of its proposal more than once in recent
19 weeks.Furthermore,RMP has also designated a fair amount of relevant information as
20 "highly confidential,"making it very difficult for parties to review and use that
21 information.Not only does this give me concern that RMP has not thoroughly evaluated
22 the Combined Projects for which it seeks approval,but it also inhibits intervenors'ability
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l to fully vet the Combined Projects under the existing timeframe.To the extent that RMP
2 continues to modify or correct its proposal,I may have additionaltestimony to provide.
3 Q.THROUGHOUT THESE ITERATIONS,DID RMP ALSO CHANGE THE WAY
4 IT PERFORMED ITS ECONOMIC ANALYSIS?
5 A.Yes.In its Direct Testimony,RMP used a "levelized"approach to model capital costs
6 and PTCs associated with project alternatives within the System Optimizer ("SO")and
7 PaR models.This is consistent with the way RMP has performed its Integrated Resource
8 Plan ("IRP")analyses for many years.Once the SO model had selected a least-cost plan
9 and PaR had performed additional production costs simulations,a full nominal revenue
10 requirements analysis was performed spanning the full project life rather than just the
11 first 20 years.
12 However,for its Supplemental Direct Testimony,the Company altered this
13 methodology.Rather than using levelized costs for wind related PTCs,as it had
14 originally,for the first time RMP modeled these nominally in the SO and PaR models.
15 However,at the same time,RMP continued to model capital costs on a levelized basis in
16 its Supplemental Direct Testimony.As a result,RMP mixed and matched its modeling
17 methods in its Supplemental Direct Testimony.The result of this change in methodology
18 is important because,holding all else equal,it makes self-build or build-transfer ("BTA")
19 wind projects seem more economic compared to the original methodology.
20 Consequently,the SO model will be more likely to include self-build/BTA wind projects
21 in the "least-cost"portfolio.In other words,the change in modeling was self-serving.
22 Once the least cost portfolio was selected,the same full nominal revenue requirements
23 analysis spanning the life of the projects was performed.
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l Q.WHY IS IT IMPORTANT FOR THE COMMISSION TO BE AWARE OF THIS
2 CHANGE?
3 A.What is important for the Commission to remember is that the levelized approach is used
4 when modeling resource alternatives,specifically to allow for equitable comparison when
5 the full life of the resource does not fit within the study horizon.However,it is the
6 nominal revenue requirements that most closely depict how project costs and benefits
7 will pressure customer rates.The Company is aware of this reality,and RMP performed
8 a full nominal revenue requirements analyses over the full project lives.The nominal
9 revenue requirements analyses provide a more reliable assessment of the impact of
10 project costs on rates and the risks associated with the timing of costs and benefits
11 compared to the levelized approach.Consequently,the Commission should weigh the
12 results of the nominal revenue requirements analysis much more heavily than the results
13 of a levelized approach.
14 Q.WHY DO THE RESULTS OF THE NOMINAL REVENUE REQUIREMENTS
15 ANALYSIS MORE CLOSELY ALIGN WITH THE PRESSURE PLACED ON
16 RATES BY NEW CAPITAL ADDITIONS TO RATE BASE?
17 A.Simply put,this is how the revenue requirements will actually occur and flow through to
18 rates.The capital costs for self-build/BTA projects will not be recovered from ratepayers
19 on a levelized basis.Instead,the revenue requirements are actually greatest when the
20 asset(s)are first placed into service,and decline over time as the asset is depreciated.
21 Even RMP witness Joelle Steward recognizes that nominal,not levelized,revenue
22 requirements are the "best representation:"
23 The revenue requirements that flow into Joelle Steward's exhibits are
24 calculated as nominal revenue requirements.Using nominal revenue
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l requirement is the best representation of what the actual revenue
2 requirement costs and benefits would be if the Combined Projects were
3 placed in base rates during the same period.(Response to IPUC Data
4 Request 80,emphasis added)
5 As I just mentioned,the levelization approach is merely a method used in
6 economic models to compare assets when the full asset lives do not fit into the modeling
7 horizon.This should not be mistaken for the reality of how rates will be affected.In
8 fact,RMP admitted this when asked whether the Company was proposing to recover the
9 costs consistently with the way the revenue requirements are modeled in its levelized
10 analysis.3 In its response,RMP stated,
11 "No,the Company is proposing to calculate the nominal revenue
12 requirements for recovery through the resource tracking mechanism
13 (RTM)consistent with the methodology used in general rate cases
14 (DRC)."4
15 Consequently,the Commission should place no weight on the intermediate results
16 from the levelized analysis when the Company has provided a full nominal revenue
17 requirements analysis that in the Company's own words is consistent with the way RMP
18 is proposing to recover the costs.
19 Case in point,Figure NLP-SD-1 below presents the rate base and revenue
20 requirement estimates used by Company Witness Ms.Joelle Steward in her RTM
21 calculations.There is no doubt as to how the Company intends to recover these costs
22 from customers through rates,and it most certainly is not consistent with the levelized
23 cost approach.
*Wyoming New Wind/TransmissionDocket,response to WIEC Data Request 21.4.
4
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Monsanto Company
FIGURE NLP-SD-1
Combined Projects System Cost Assumptions from RTM Proposal
Combined Projects Cost Assumptions from
RTM Proposal
$8,000 --
0
$5,000
$4,000
$3,000
$2,000
$1,000
--Net Rate Base ($Millions)--Revenue Requirement ($Thousands)
1 Confidential Figure NLP-SD-2 below presents a comparison between the
2 levelized cost assumptions (extrapolated from 2037-2050 to equate the NPV through
3 2050)and the nominal cost assumptions over the life of the Combined Projects (both with
4 and without the PTC revenues).In addition,Confidential Figure NLP-SD-3 below
5 presents the nominal net project costs as calculated by RMP for the Combined Projects,
6 the Solar PPA Option,and the Solar PPA Option with the Combined Projects.I have not
7 presented the levelized costs for the three alternatives,because the levelized analysis
8 distorts the rate impact of the projects and,as a consequence,the focus should be the
9 nominal costs of the life cycle of the projects.
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NON-CONFIDENTIAL FIGURE NLP-SD-2
Comparison of Levelized/HybridApproach and
Nominal Net Project Costs for the Combined Projects
NON-CONFIDENTIAL FIGURE NLP-SD-3
Comparison of Nominal Net Project Costs for the Combined Projects,Solar PPA Option,
and Solar PPA Option with the Combined Projects
(Both Capital Costs and PTCs)
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l Q.ARE THERE ANY ADDITIONAL CONCERNS WITH THE COMPANY'S
2 LEVELIZED MODELING APPROACH?
3 A.Yes.There are different levelization methods,most notably uniform levelization and
4 "real"levelized,The Company appears to have used the "real"levelized approach,
5 which is completely opposite of how the project revenue requirements associated with a
6 self-build/BTA project will actually affect rates.Figure NLP-SD-4 below illustrates this
7 point,showing the increasing costs over time via the levelization whereas the actual way
8 these costs will affect the revenue requirements and rates are depicted in the nominal cost
9 plot whereby costs are greatest when the projects are placed into service and depreciate
10 over time.What should be evident from this illustration is how the levelization of costs,
ll though useful for economic modeling,in no way aligns with how new capital investments
12 will affect rates.Additionally,Figure NLP-SD-4 shows how the shift in the levelization
13 method with respect to PTCs has made these projects seem much more attractive to the
14 SO model (which selects the least cost portfolio)when,in reality,the nominal project
15 costs (which will influence rates)have not changed much.
16 As I indicated,the net effect of this change will result in a higher likelihood of
17 self-build/BTA projects being selected by the SO model,an outcome that is highly
18 favorable to the Company,as these projects will result in the highest financial reward to
19 RMP and its shareholders through its rate of return.I will note that in the nominal project
20 costs I have excluded the final year in order to make the plots easier to read and the
21 corresponding net present values ("NPVs")listed in the legends are linked to the data
22 shown in the plot.
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NON-CONFIDENTIAL FIGURE NLP-SD-4
Comparison of Changes to Economic Modeling Assumptions
for the Combined Project's Costs (Both Capital Costs and PTCs)
*Note that all costs associated with the projects (Wind,Transmission and Network Upgrade Capital
as well as PTC benefits)are included in each plot.Given the virtually identical NPV associated with
the nominal projects costs,one would expect the NPV of the levelized costs to also be virtually
identical.
1 Q.DOES THE COMPANY'S REVISED ECONOMIC MODELING BIAS THE
2 ECONOMIC MODEL AND IN TURN THE LEAST-COST PORTFOLIO IT
3 SELECTS?
4 A.Yes.Combining a levelizedcapital cost with a nominal PTC benefit distorts the value of
5 the projects within the economic model that is tasked with selecting the least-cost
6 portfolio.This is because the metric used by the SO model to determine the least-cost
7 portfolio is to minimize the NPV of revenue requirements.The Company changed how
8 PTCs were modeled in its analysis,moving from a levelized approach to a nominal
9 approach.The Company claims that this will better reflect how the PTCs will affect
10 rates,but this explanation it misleading because the capital costs will affect rates on a
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l nominal basis,not a levelized basis.The Company has mixed and matched the modeling
2 methodologies,and this mixing and matching will result in more emphasis being placed
3 on self build/BTA options rather than on PPAs.When levelizing costs,the NPV of the
4 levelized cost should be equal to the NPV of the nominal costs."An easy to understand
5 example is a mortgage loan amortization,which is a cost levelization.The levelization
6 (amortization)of the loan keeps the underlying NPV of the loan constant;it does not
7 reduce it.But,the Company's updated,or "hybrid,"method has skewed the economics
8 by reducing the NPV of the Combined Projects.
9 Q.HOW CAN WE TELL THAT THE COMPANY'S HYBRID APPROACH
10 REDUCED THE NPV OF THE COMBINED PROJECTS COMPARED TO
ll NOMINAL APPROACH?
12 A.In Figure NLP-SD-4 (above),I presented plots of the Combined Projects costs,as
13 reported in the Corrected Second Supplemental Testimony,on both a levelized basis and
14 a nominal basis.6 The difference in the NPV over the first 20 years shows that the
15 levelization has reduced the NPV of the nominal series by about 27%.Conversely,the
16 levelization of the Combined Projects costs in the Company's Direct Testimony is within
17 about 1%of the NPV of the 20 year nominal costs.In fact,RMP admitted in response to
18 IPUC Data Request 75 that the PVRR impact of switching to the hybrid method
19 increased the updated net benefits by approximately$214 million.
20 Similarly,for the Solar PPA Option (which I discuss below),the levelized costs
21 are within less than 2%of the NPV of the 20 year nominal costs.Effectively,the
*This is a fundamental economic principle for expressing the same costs (or cash flows)in
different ways,see for example "Engineering Economy,"6th Ed.by Blank &Tarquin at Chapter2.
6 Note that the "levelized"approach used by the Companyin its updated analysis presented in its
Supplemental Testimony is a hybrid of levelized and nominalproject costs.
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l outcome of the Company's updated economic modeling is biased as the SO model picks
2 resources based on lowest NPV and the Company's approach made the Combined
3 Projects appear 27%cheaper to the model,when the reality is the NPV of costs over the
4 life of the Combined Projects have hardly changed,as evidenced in the full nominal
5 revenue requirements analysis.
6 Q.WITH THAT UNDERSTANDING,PLEASE DESCRIBE THE RESULTS OF THE
7 2017R RFP.
8 A.As I mentioned above,the Company announced the final shortlist of Wind Projects on
9 January 16,2018,and subsequently modified that final shortlist in its Second
10 Supplemental Direct Testimony,provided on February 16,2018.The modified final
11 shortlist of Wind Projects is as follows:
12 Ekola Flats,a 250 MW Company benchmark project;
13 TB Flats I and II (combined into single project),a 500 MW Company benchmark
14 project;
15 Cedar Springs,a 400 MW third-party build-transferproject and PPA;and
16 Uinta,a 161 MW third-party build-transferproject.
17 Q.THE VAST MAJORITY OF THE NEW CAPACITY WILL BE
18 COMPANY-OWNED.WHAT RISKS DO COMPANY-OWNED PROJECTS
19 POSE TO RATEPAYERS THAT PURCHASE POWER AGREEMENTS WOULD
20 NOT?
21 A.Only 200 MW of the total 1,311 MW of new wind capacity,or approximately 15%,will
22 be purchased under a PPA with a third-party.The remainder of the capacity will come
23 from the Company's benchmark projects and BTAs.When the Company acquires
24 additional energy and capacity through PPAs,ratepayers are insulated from certain risks
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1 that they typically bear when RMP owns the generation.Specifically,when the
2 Company enters into PPAs,the third-party provider takes on the capital cost risk,as well
3 as the risk of changes in the cost of equipment,output,O&M costs,and PTCs through the
4 life of the agreement,among other things.As the Company's pro forma PPA states:
5 Seller shall bear all risks,financial and otherwise throughout the Term,
6 associated with Seller's or the Facility's eligibility to receive PTCs,ITCs
7 or other Tax Credits,or to qualify for accelerated depreciation for Seller's
8 accounting,reporting or tax purposes.The obligations of the Parties
9 hereunder,including those obligations set forth herein regarding the
10 purchase and price for and Seller's obligation to deliver Net Output,shall
11 be effective regardless of whether the sale of Output or Net Output from
12 the Facility is eligible for,or receives,PTCs,ITCs or other Tax Credits
13 during the Term.'
14 With Company-owned projects,on the other hand,ratepayers are expected to bear
15 the burden of capital costs (including cost overruns)and O&M costs,to the extent that
16 those costs are prudently incurred."This is in contrast with the opportunity RMP
17 identified to purchase solar power under PPAs as a result of the 2017S RFP,which I
18 address next.
19 III.THE POTENTIAL RISKS AND BENEFITS OF SOLAR PPA OPTION
20 Q.PLEASE PROVIDE SOME BACKGROUND INFORMATION ON THE
21 COMPANY'S 2017S RFP.
22 A.RMP's 2017R RFP was subject to the approval of the Utah Public Service Commission
23 ("Utah PSC").After RMP filed its application for approval of its solicitation process on
24 April 17,2017,parties intervened and raised concerns that restricting the proposed RFP
7 The IndependentEvaluator's Final Report On PacifiCorp's 2017R Request For Proposals,by
Bates White Economic Consulting,Presented to the Oregon Public Utility Commission,dated February
16,2018 at pp.38-39 (availableat:http://edocs.puc.state.or.us/efdocs/HAH/uml845hahl21349.pdf).
*This is completely true for Company self-build projects.The capital cost risk could be reduced
dependingof the contractual structure associated with BTAs.
Docket No.17-035-23.
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l to wind projects would not produce results that would be the lowest reasonable cost to
2 customers.Parties argued that the RFP should be opened up,and that RMP should solicit
3 bids from a greater variety of resources.
4 RMP resisted efforts to expand the RFP to include non-wind and non-Wyoming
5 resources,citing,in part,the results of the 2017 IRP and its concern that a broad RFP
6 would impact the Company's ability to move forward with the Combined Projects.
7 Specifically,RMP asserted:
8 While there may be opportunities to acquire new renewable resources that
9 can be delivered into other parts of PacifiCorp's transmission system,the
10 2017 IRP did not identify these opportunities as part of PacifiCorp's least-
11 cost,least-risk plan.All of the resource portfolios produced during the
12 initial stages of the portfolio development phase of the 2017 IRP
13 contained new Wyoming wind resources in 2021,which for modeling
14 purposes was used as a proxy on-line date for PTC-eligible wind
15 achieving commercial operation by the end of 2020.None of the resource
16 portfolios developed during the initial stages of the portfolio development
17 phase of the 2017 IRP indicated that renewable resources delivered into
18 other parts of PacifiCorp's transmission system would provide the
19 economic benefits that are expected with the new wind and transmission
20 projects included in the preferred portfolio.
21 ***
22 Consideration of this broader RFP can be vetted through the on-going
23 review of the 2017 IRP,and if there is interest in pursuing a broader
24 renewable resource RFP,a second solicitation process could be initiated in
25 the first quarter of 2018.Because this broader solicitation would not be
26 dependent upon a critical-path transmission investment,as is the case in
27 the proposed 2017R RFP,a second RFP process initiated in early 2018
28 could target renewable resources that can be placed in service by the end
29 of 2020,thereby maximizing opportunities to procure projects that can
30 leverage federal income tax credits.The possibility of procuring
31 additional renewable resources does not need jeopardize the significant
32 opportunity that is being pursued through the proposed 2017R RFP.If
33 additional renewable resources identified through a second solicitation
34 process provide all-in economic benefits for customers,those
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l opportunities can be pursued in addition to,not in lieu of,the wind
2 resource procurement proposed in the 2017R RFP.'°
3 Nevertheless,the Utah PSC issued an order approving the 2017R RFP,but also
4 suggesting certain modifications.The order stated:
5 We are recommending that the RFP be modified to include solar resources
6 that can interconnect at any point in PacifiCorp's system,rather than
7 accepting PacifiCorp's offer to execute a second RFP for solar resources.
8 We find that a second and separate RFP for solar resources,based on
9 modeling inputs that would assume the construction of the proposed wind
10 resource,would not accomplish the objective of comparing the proposed
11 solar resources against the wind resources on an equal basis.Simolv put,
12 the question is not whether solar resources should be built in addition
13 to the proposed wind resources.Rather,we find that the more
14 relevant question is whether solar resources should be built instead of,
15 before,or in conjunction with the proposed wind resources.A
16 separate,subsequent RFP cannot answer that question due to the dynamic
17 nature of generation and transmission resource decisions.Ultimately,
18 without the benefitof conclusive evidence regarding the current and actual
19 costs to build and connect utility scale solar projects to PacifiCorp's
20 system,we believe the market would provide the best comparative results.
21 While we are not making that suggested modification mandatory for our
22 approval of the RFP,PacifiCorp's decision about whether to accept the
23 suggested modification will be relevant in any docket evaluating costs
24 related to a winning RFP bidder.PacifiCorp must make an operational
25 decision with respect to this issue and must be prepared to defend it.
26 (emphasis added)"
27 In response to this order,RMP filed a letter with the Utah PSC stating that,"In order to
28 act expeditiously to issue the 2017R RFP,the Company has not adopted the
29 Commission's suggested modification to expand the 2017R RFP to include solar
30 resources.Instead,the Company is preparing to issue a separate solicitation for solar
31 resources,the 2017S RFP,in November 2017."l2
io RMP's August 18,2017 Reply in Support of Application for Approval of Solicitation Process
at pp.9-12."Application of Rocky Mountain Power for Approval of Solicitation Process for Wind
Resources,Docket No.17-035-23,OrderApproving RFP With Suggested Modifications at pp.9-10.
12 RMP's October 10,2017 letter in Utah PSC Docket No.17-035-23.
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Monsanto Company
l Q.DO YOU HAVE ANY OBSERVATIONS ON THE GENESIS OF THE 2017S RFP?
2 A.Yes.Absent the Utah PSC's order,I do not believe that RMP would have issued the
3 2017S RFP.In other words,absent the Utah PSC's order,I do not believe RMP would
4 have looked into a solar option to assess whether the Combined Projects actually
5 presented the least-cost,least risk portfolio.And,in light of the results of the 2017S
6 RFP,RMP's assertion that the 2017 IRP did not identify any non-wind non-Wyoming
7 opportunities as part of RMP's least-cost,least-risk plan raises serious concerns about the
8 integrity of the 2017 IRP,which is the foundationof the Company's Energy Vision 2020
9 project.
10 Q.DID RMP ADDRESS THE RESULTS OF THE 2017S RFP AS PART OF THE
11 COMPANY'S SUPPLEMENTAL AND SECOND SUPPLEMENTAL
12 TESTIMONY?
13 A.Yes.In his Supplemental Direct Testimony and Second Supplemental Direct Testimony,
14 Mr.Link described sensitivity studies that RMP performed to analyze the impact of the
15 solar bids received in the 2017S RFP.13 In this sensitivity,the SO model selected 1,122
16 MW of solar PPA bids in the Low Gas,Zero CO2 scenario and 1,419 MW of solar PPA
17 bids in the Medium Gas,Medium CO2 Scenario (the "Solar PPA Option").14 The
18 selected sizing of these projects is approximatelythe same as the 1,311 MW of the Wind
19 Projects proposed by the Company.However,the Company failed to discuss the true
20 results of its analysis of the Solar PPA Option in its testimony.In contrast to the
21 information discussed by Mr.Link as part of the "solar sensitivity"analysis,the
22 Company's workpapers and discovery responses provide more compelling evidence
la Supplemental Direct Testimony of Rick T.Link at pp.33-36;Second Supplemental Testimony
of Rick T.Link at pp.20-24.
14 Second Supplemental Testimony of Rick T.Link at p.21,11.2-5.
REDACTED Phillips,Di-Supp -18
Monsanto Company
l demonstrating the Combined Projects are not in the public interest,but instead serve as a
2 vehicle to increase investor earnings by forcing ratepayers to compensate investors for an
3 inferior project.
4 Q.WHAT DID THE COMPANY REPORT AS THE RESULTS OF THE SOLAR
5 SENSITIVITY IN ITS SECOND SUPPLEMENTAL TESTIMONY?
6 A.The Company claims that,when analyzed in isolation,the Solar PPA Option produced
7 net benefits that are lower than those expected from the Combined Projects under the
8 Medium Gas,Medium CO2 scenario and approximately the same net benefits as the
9 Combined Projects under the Low Gas,Zero CO2 Scenario."The Company also argues
10 that pursuing the Solar PPA Option would leave significant benefits on the table,which
11 includes building the proposed Aeolus-to-Bridger/Anticline Line.16 These arguments are
12 misleading.
13 Q.PLEASE EXPLAIN.
14 A.Earlier in my testimony,I explained how the Company's revised modeling (i.e.,the
15 hybrid levelized capital/nominal PTC approach)distorts the levelized NPV of the
16 Combined Projects and why the most relevant analysis is the nominal revenue
17 requirements analysis.Again,the nominal revenue requirement analysis most closely
18 aligns with how costs/(benefits)will impact rates,and it has not been skewed by the
19 Company's revised levelization method.While the Company presented the results of the
20 nominal revenue requirements analysis for the Combined Projects,the Company did not
21 report these results for the Solar PPA Option,even though it performed this analysis and
22 provided the results in its workpapers.Notably,the results of this nominal revenue
"Second Supplemental Testimony of Rick Link at p.21,1.17 -p.22,1.9.
16
REDACTED Phillips,Di-Supp -19
Monsanto Company
l requirement analysis tell a much different story about the Solar PPA Option and how it
2 compares to the Combined Projects.
3 Q.WHAT DO THE COMPANY'S WORKPAPERS SHOW IF THE REVENUE
4 REQUIREMENTSFOR THE SOLAR SENSITIVITY ARE SHOWN ON A
5 NOMINAL BASIS?
6 A.The Company's workpapers show the Solar PPA Option provides substantially more
7 benefits to customers on a nominal basis compared to the Combined Projects.The
8 nominal revenue requirements analysis,which spans the years 2017 through 2050,shows
9 that the Solar PPA Option (without any new wind or transmission facilities)
10 prg___in net benefits in the Medium Gas,Medium CO2 SCCHRTiO,whereas
11 the Combined Projects only result in $167 million of projected benefits."This is a
12 difference of ,or about a increase in net benefits to ratepayers over the
13 Combined Projects.'"
14 Q.HOW DID THE BENEFITS OF THE SOLAR PPA OPTION COMPARE TO THE
15 PROJECTED BENEFITS FROM THE COMBINED PROJECTS IN THE LOW
16 GAS,ZERO CO2 SCENARIO?
17 A.The contrast is even greater under the Low Gas,Zero CO2 Scenario.In this scenario,
18 which Monsanto believes represents the status quo,the Solar PPA Option provides
19 in net benefits,whereas the Combined Projects actually result in a
20 increase in costs to customers."
17 RMP Witness Rick Link Confidential Workpaper,"EV2020 Second Supp Results Summary
File -VOM adjusted CONF.xlsx"as referenced in response to WIEC Data Request 18.l(f)in the
Wyoming New Wind/TransmissionDocket.
*Id
"Id.
REDACTED Phillips,Di-Supp -20
Monsanto Company
l Q.HOW DO THE RISKS OF THE SOLAR PPA OPTION COMPARE TO THE
2 RISK OF THE COMPANY-OWNED COMBINED PROJECTS?
3 A.First and foremost,there is no transmission cost risk because the Solar PPA Option does
4 not require the proposed Aeolus-to-Bridger/Anticline Line.Second,because the Solar
5 PPA Option is not dependent on PTCs,there is no PTC risk borne by customers.Third,
6 because the solar resources would be acquired through PPAs,customers will onlypay for
7 power and energy actually produced,rather than being held at risk for underperformance.
8 This is a significant difference,given that the Company has not presented and quantified
9 the risk assessment associated with wind variability.And,unlike the Combined Projects,
10 the Solar PPA Option does not require variable and output-dependent PTCs in order to
11 make the Transmission Projects economic.
12 Figure NLP-SD-5 compares the expected incremental revenue requirements
13 associated with the Combined Projects and the Solar PPA Option under the Medium Gas,
14 Medium CO2 scenarios.Similarly,Figure NLP-SD-6 contains the same information
15 under the Low Gas,Zero CO2 SCCHRTiO.
REDACTED Phillips,Di-Supp -21
Monsanto Company
NON-CONFIDENTIAL FIGURE NLP-SD-5
Solar PPA Option vs Combined Projects (Mid Gas,Mid CO2)
(Benefit)/Cost ($millions of 2016 Dollars)
NON-CONFIDENTIAL FIGURE NLP-SD-6
Solar PPA Option vs Combined Projects (Low Gas,Zero CO2)
(Benefit)/Cost ($millions of 2016 Dollars)
1 Q.PLEASE DISCUSS FIGURES NLP-SD-5 AND NLP-SD-6.
2 A.These figures show both the annual and cumulative NPV of incremental revenue
3 requirements resulting from the nominal revenue requirements analysis associated with
REDACTED Phillips,Di-Supp -22
Monsanto Company
l the Combined Projects and the Solar PPA Option under the Medium Gas,Medium CO2
2 and Low Gas,Zero CO2 price-policy scenarios.
3 The final value of the cumulative NPV in green (read from the left axis)aligns
4 with the NPVs the Company has been reporting to assess the projects.The Annual NPV
5 in red (read from the right axis)added together year by year over time make up the
6 cumulative NPV and provide additional insight on the timing of the costs and benefits.
7 The horizontal blue line shows the crossover point of the cumulative NPV,which
8 represents when the project is expected to break even.Overall,these figures provide
9 additional insight into the projects and the risks embedded in each approach.
10 When inspecting these figures,a few facts become clear.First,the Solar PPA
ll Option does not have near the variability in costs.Second,the Solar PPA Option
12 produces net benefits under both price-policy scenarios.Third,in the Medium Gas,
13 Medium CO2 SCenüTiO,when both projects produce net benefits,the breakeven occurs at
14 near similar times,but the Solar PPA Option has more than double the expected benefit
15 and does not include the large,risky,and speculative benefit in 2050 (which I address
16 below).Fourth,the Solar PPA Option produces greater benefits with lower upfront costs,
17 leading to a lower risk project.Finally,in the Low Gas,Zero CO2 SCCESTiO,the
18 Combined Projects never breakeven,resulting in increased cost to ratepayers,whereas
19 the Solar PPA Option still breaks even at approximately the same time it did under the
20 Medium Gas,Medium CO2 SCenariO,TCSUlting in OVCT 20 in net benefits by
21 the end of the project life.
22 It is worth noting that the cost to customers for the Solar PPA Option is
23 approximately (with less than in upfront capital)as compared to
20 Id
REDACTED Phillips,Di-Supp -23
Monsanto Company
1 the $2.245 billion for the Combined Projects (which requires over in upfront
2 capital).21 As I just mentioned,for a roughly 22 Solar PPA price tag,RMP's
3 own analysis shows more customer benefits compared to the Combined Projects (for less
4 capital expenditure)and the Solar PPA Option contains far less risk.The risk reduction
5 manifests in the plots above via the consistent breakeven point across both the low gas
6 and medium gas scenarios and less variable annual NPV of incremental revenue
7 requirements.There are a number of reasons why the Solar PPA Option is less risky for
8 customers.
9 Q.WHY IS THE SOLAR PPA OPTION LESS RISKY FOR CUSTOMERS
10 COMPARED TO THE COMBINED PROJECTS?
11 A.Simply put,the Solar PPA Option does not require any upfront investment from RMP.
12 Consequently,all the risk associated with the completion of the project remains with the
13 project developer rather than RMP and its customers.Unlike the Combined Projects,if
14 the solar projects are not completed in time to secure tax credits,RMP's customers are
15 indifferent.If the projects fail to generate electricity in the amounts assumed,RMP's
16 customers do not pay both rate base costs and replacement energy costs like they would
17 with the Combined Projects.Furthermore,the solar projects do not require the Aeolus-
18 to-Bridger/Anticline Line or the transmission upgrades associated with the Wind
19 Projects,completely alleviating the risk associated with constructing and placing into
20 service a new transmission line in time to secure PTCs (which RMP admits are required
21 to make the transmission line economic).And,because the Company would not receive
22 PTCs from the solar PPAs,the risk associated with the possibility of RMP not being able
REDACTED Phillips,Di-Supp -24
Monsanto Company
i
1 to monetize the PTCs contemporaneously when they are produced is completely
2 eliminated.
3 Q.HAVE YOU PREPARED A NOMINAL REVENUE REQUIREMENTS
4 COMPARISON BETWEEN THE COMBINED PROJECTS AND THE SOLAR
5 PPA OPTION?
6 A.Yes.This is presented below in Figures NLP-SD-7 and NLP-SD-8.As I have
7 mentioned,this method is the more realistic,and therefore preferred,way to understand
8 how the two project alternatives will impact customer rates.
FIGURE NLP-SD-7
Solar PPA Option vs Combined Projects (Mid Gas,Mid CO2)
(Benefit)/Cost ($million)
$100
$50
($100)\
($150)
($200)
-CombinedProjects ---Solar PPA
REDACTED Phillips,Di-Supp -25
Monsanto Company
FIGURE NLP-SD-8
Solar PPA Option vs Combined Projects (Low Gas,Zero CO2)
(Benefit)/Cost ($million)
$100
($100)4./
($150)
($200)
-Combined Projects ---Solar PPA
1 Q.PLEASE DISCUSS HOW RMP'S SHAREHOLDERS STAND TO BENEFIT
2 UNDER THE COMBINED PROJECTS AS COMPARED TO THE SOLAR
3 PROJECTS.
4 A.Under the Combined Projects,the Company would own the new transmission assets as
5 well as the vast majority of the new wind capacity.Accordingly,the Company would be
6 allowed the opportunity to earn a return on these new Company-owned assets.In
7 contrast,the Solar PPA Option is an all-PPA option that does not allow for the Company
8 to earn a return.
REDACTED Phillips,Di-Supp -26
Monsanto Company
l Q.HAVE YOU QUANTIFIED THE VALUE OF EQUITY RETURNS THE
2 COMPANY EXPECTS TO REALIZE FROM THE COMBINED PROJECTS?
3 A.Yes.In response to WIEC Discovery Request 18.l(c)and (d)in the Wyoming New
4 Wind/Transmission Docket,23 RMP provided the expected equity returns for its
5 shareholders with respect to the Combined Projects and Solar PPA Option,respectively.
6 In those responses,the Company stated the following:"Total equity returns are
7 approximately $1.9 billion over the life of the assets"for the Combined Projects and,
8 "There are no equity returns for a solar PPA."24
9 Q.HOW DO THESE RETURNS TO SHAREHOLDERS COMPARE WITH THE
10 PROJECTED BENEFIT TO CUSTOMERS?
11 A.By comparison,under the Medium Gas,Medium CO2 CSSe,the Company only expects
12 $167 million in NPV benefits for customers for the Combined Projects.As I discussed in
13 my direct testimony,Monsanto is especially concerned about the level of customer risk
14 embedded within RMP's proposal.Monsanto believes that the risks borne by the
15 customers outweigh those borne by the Company,particularly in light of the significant
16 benefits to RMP's shareholders from the Combined Projects.This risk is evidenced in
17 Figures NLP-SD-5 and NLP-SD-6,where one can see how the Combined Projects result
18 in a net cost to customers in the Low Gas,Zero CO2 scenario.And,unlike the potential
19 benefits for customers,the benefits to RMP's shareholders do not depend on the output
20 from the Wind Projects,or future gas prices,market power prices,or level of CO2 prices.
23 Wyoming New Wind/TransmissionDocket,WIEC Exhibit No.304.1.
24 The Company indicatedthere is no clear convention on the appropriatediscount rate for equity
return but WIEC could perform its own calculation.Using the same discount rate as used by RMP in its
economic analysis,the NPV of the equity returns is approximately$741 million.
REDACTED Phillips,Di-Supp -27
Monsanto Company
l By contrast,the Solar PPA Option provides significantly greater benefits to customers in
2 both scenarios,but yields no equity returns to RMP.
3 Q.ARE YOU SAYING THAT THE COMPANY SHOULD PURSUE THE SOLAR
4 PPA OPTION?
5 A.No.Monsanto is not convinced that RMP needs to acquire any new resources at this
6 time.Additionally,Monsanto disagrees with RMP's position that the question is whether
7 the Company should consider both opportunities (consistent with the Utah PSC's
8 decision,quoted above).Furthermore,the Company did not request the Commission's
9 approval to enter into any solar PPAs in this proceeding.The key takeaway is that
10 RMP's own analysis raises legitimate doubts regarding whether the Combined Projects
11 truly are the least-cost,least-risk resource portfolio to serve customers given the updated
12 economic analysis provided in this proceeding.For that reason,the Commission should
13 deny RMP's request for a CPCN for the Combined Projects.
14 Q.HAS THE COMPANY PERFORMED ANY ADDITIONAL RISK ANALYSIS
15 ASSOCIATED WITH THE SOLAR PPA OPTION?
16 A.Yes.In its Supplemental Rebuttal Testimony filed in Wyoming New Wind/Transmission
17 Docket on March 14,2018 ("Wyoming 3/14/2018 Supplemental Rebuttal")regarding the
18 same CPCN request,RMP produced a new sensitivity analysis to explore additional risks
19 RMP associates with the Solar PPA option.In addition to the quantifications contained
20 in the sensitivity analysis,RMP also discusses some additional risks that it has not
21 quantified.
REDACTED Phillips,Di-Supp -28
Monsanto Company
l Q.PLEASE SUMMARIZE.
2 A.In the Wyoming 3/14/2018 Supplemental Rebuttal,RMP responded to positions taken by
3 WIEC and other parties who demonstrated,using the Company's own analysis,that the
4 Solar PPA Option was superior to the Combined Projects for ratepayers.26 W
5 maintains that the Solar resources are best viewed as an incremental opportunity rather
6 than an alternative to the Combined Projects reasoning there are additional risks unique
7 to the procurement of solar resources and that RMP expects additional cost declines for
8 solar that would make them even more attractive for customers following its 2019 IRP.26
9 The Company further claims that for this reason there is no need to act now with respect
10 to the solar resources.In contrast,the Company asserts PacifiCorp is required to act now
ll in order to secure the PTCs that make the proposed Combined Projects economically
12 feasible.27
13 Q.PLEASE EXPAND ON THE COMPANY'S NOTION THAT FUTURE
14 REDUCTIONS IN THE PRICE OF SOLAR RESOURCES PRESENT A RISK TO
15 RATEPAYERS.
16 A.The Company is stating that if it were to pursue the solar resources now,it would be
17 paying too much because the price will be lower in the years to come.I agree with the
18 Company on this point.There is no reason to rush any decision with respect to solar
19 resources and the prudent decision is to reassess the Company's resource requirements to
20 determine if any action is reasonable following its 2019 IRP and Stakeholder process.
21 Where the Company and I truly disagree is the need for action now.Based on all the
25 Wyoming 3/14/2018 Supplemental Rebuttal Testimonyof Rick Link,Wyoming Docket 20000-
520-EA-17 at Page 2.
26 Wyoming 3/14/2018 Supplemental Rebuttal Testimonyof Rick Link,Wyoming Docket 20000-
520-EA-17 at Page 2-3.
27 Id
REDACTED Phillips,Di-Supp -29
Monsanto Company
l evidence presented there is no demonstrable need for action immediately whether it be
2 solar resources or the Combined Projects.The facts of this case remain;the Company's
3 own analysis conclusively demonstrate that the Solar PPA Option is a better alternative
4 for ratepayers,even under the new set of sensitivities performed by RMP that were
5 specifically designed by the Company to gauge the "unique"risk profile of solar
6 resources.Consequently,solar is a superior alternative to the Combined Projects.
7 Q.WHAT ADDITIONAL "UNIQUE"SOLAR RISKS DID THE COMPANY
8 ANALYZE?
9 A.Aside from the Company's claim that it expects that the cost for solar resources will
10 decrease in the near future,and consequently it would not be in the ratepayers'interest to
11 actively pursue a solar resource option at this time;the Company also quantitatively
12 evaluated hourly price-profile and capacity-contribution risks.28 These risks sought to
13 examine the potential that on-peak wholesale market prices could be depressed due to
14 large volumes of solar energy being produced during those times,as well as,the potential
15 for greater loss-of-load events during summer peak periods.29
16 Q.WHAT WERE THE RESULTS OF THIS ANALYSIS?
17 A.Similar to the way the Company reported its results for the base economic analysis
18 conducted for the solar resources,the Company chose to focus on its intermediate results,
19 i.e.,the results of its 20-year levelized analysis,even though it performed a full life cycle
20 nominal revenue requirements analysis.The results of the nominal revenue requirements
21 analysis over the full life cycle of the projects demonstrated that even under these
22 sensitivities,the Solar PPA Option was superior to the Combined Projects in all cases
28 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,Wyoming Docket 20000-520-EA-
17 at Page 31.
29
REDACTED Phillips,Di-Supp -30
Monsanto Company
l analyzed.As I discussed earlier and the Company has confirmed,nominal revenue
2 requirement is the analysis that correctly aligns with the way these costs will impact rates
3 and is consistent with the way the Company proposes to recover these costs.
4 Q.DO YOU HAVE A TABLE WHICH SUMMARIZES THE COMPARISON OF
5 THE SOLAR PPA OPTION WITH THE COMBINED PROJECTS?
6 A.Table NLP-SD-1 presents a summary of these results.
NON-CONFIDENTIAL TABLE NLP-SD-1
Solar Only vs Combined Projects
Nominal Revenue Requirements Results
PVRR(d)2017-2050
Cost/(Benefit)($Millions)
7 Q.WHAT ARE THE ANNUAL REVENUE REQUIREMENTSOF THE CASES
8 PRESENTED IN TABLE NLP-SD-l?
9 A.Figures NLP-SD-9 &10 present the annual (nominal)revenue requirements and
10 cumulative present value of revenue requirements for the base economic analysis under
11 the medium gas,medium CO2 and Low Gas,Zero CO2 price policy scenarios,
12 respectively.Similarly,Figures NLP-SD-11 &12 present the annual (nominal)revenue
13 requirements and cumulative present value of revenue requirements for the capacity
14 contribution and hourlyprice profile sensitivity under the medium gas,medium CO2 and
15 Low Gas,Zero CO2 price policy scenarios respectively.
REDACTED Phillips,Di-Supp -31
Monsanto Company
FIGURE NLP-SD-9
Solar Only vs Combined Projects
Nominal Revenue Requirements Comparison 2017-2050
Medium Gas,Medium CO2
Benchmark Case (RMP 2nd Supplemental Direct)
Cost/(Benefit)
Increase|(Decrease)in Nom.Rev.Reg.Increase/(Decrease)Cumulative PVRR
$100 $200
($200)($500)
Solar Only (Benchmark Case)-+-Wind Only (Benchmark Case)Solar Only (Benchmark Case)-Wind Only (Benchmark Case)
FIGURE NLP-SD-10
Solar Only vs Combined Projects
Nominal Revenue Requirements Comparison 2017-2050
Low Gas,Zero CO2
Benchmark Case (RMP 2nd Supplemental Direct)
Cost/(Benefit)
Increase/(Decrease)in Nom.Rev.Req.Increase/(Decrease)Cumulative PVRR
$130 $300
$250
($70)($150)
($200)
($120)($250)
Solar Only (Benchmark Case)w-Wind Only (Benchmark Case)Solar Only (Benchmark Case)-+-Wind Only (Benchmark Case)
REDACTED Phillips,Di-Supp -32
Monsanto Company
FIGURE NLP-SD-11
Solar Only vs Combined Projects
Nominal Revenue Requirements Comparison 2017-2050
Medium Gas,Medium CO2
Hourly Price-Profile &Capacity Contribution Sensitivity
(RMP 2nd Supplemental Rebuttal)
Cost/(Benefit)
Increase/(Decrease)in Nom.Rev Req.Increase/(Decrease)Cumulative PVRR
$13o $150
$80
$100
sso230
($150)
($120)($200)
Solar Only (Price Profile &Cap Cont)-+-Wind Only (Price Profile)Solar Only (Price Profile &Cap Cont)e-Wind Only (Price Profile)
FIGURE NLP-SD-12
Solar Only vs Combined Projects
Nominal Revenue Requirements Comparison 2017-2050
Low Gas,Zero CO2
Hourly Price-Profile &Capacity Contribution Sensitivity
(RMP 2nd Supplemental Rebuttal)
Cost/(Benefit)
Increase/(Decrease)in Nom.Rev Reg Increase/(Decrease)Cumulative PVRR
($70)
($120)($50)
Solar Only (Price Profile &Cap Cont)-+-Wind Only (Price Profile)Solar Only (Price Profile &Cap Cont)+Wind Only (Price Profile)
REDACTED Phillips,Di-Supp -33
Monsanto Company
l Q.WHAT KEY INFORMATION IS CONTAINED IN THESE FIGURES?
2 A.There are a number of key takeaways contained in these figures.Beginning with the
3 Company's base economic analysis contained in Figures NLP-SD-9 &10 and first
4 focusing on the annual nominal revenue requirements plotted on the left,notice first that
5 the initial cost increase to rates resulting from the Solar PPA option versus the Combined
6 Projects is lower over the first four years of the project life.During the next seven years,
7 the Combined Projects show modest benefits over the solar portfolio but both projects are
8 expected to result in customer benefits during that time.When the ten years of PTC
9 benefits expire in 2031,the Combined Projects result in over a $100 million rate increase
10 to customers whereas the solar portfolio continues to provide large benefits to customers.
11 In fact,once the PTCs expire through the end of the life of the 25 year Solar PPA option,
12 the solar portfolio on average will provide approximately$100 million in annual benefits
13 to customers compared to the Combined Projects.Furthermore,over the 25 year life of
14 the solar portfolio,it will either have lower costs or greater benefits in 18 of the 25 years
15 compared to the Combined Projects.
16 Then examining the cumulative present value of revenue requirements on the
17 right,there are two key takeaways.First,both the Solar PPA Option and the Combined
18 Projects break even at approximatelythe same time,around 2030-2031.However,the
19 solar portfolio provides greater total benefits by the time the PPAs expire in 2045.By
20 2050,the net benefits appear closer but this is solely due to a large terminal value benefit
21 assumed by the Company for the Combined Project in 2050.In order for this large
22 terminal value "benefit"to ever materialize,however,another new project with a large
23 cost (not included in the analysis)would have to be incurred and paid for by ratepayers.
REDACTED Phillips,Di-Supp -34
Monsanto Company
l Many of the same key takeaways are present in Figure NLP-SD-10,the base
2 economic analysis under the Low Gas,Zero CO2 scenario with the most notable being
3 how much worse the Combined Projects perform compared to the Solar PPA Option.
4 Examination of the annual nominal revenue requirements not only shows a larger cost
5 increase initially for the Combined Projects,but that the Combined Projects would result
6 in higher costs to customers in 18 of the 25 years life of the solar projects including a
7 $120 million increase in rates when the PTC's expire in 2031.On the other hand,the
8 Solar PPA Option is still projecting customer benefits for 18 years of the 25 years of the
9 project life.Moreover,the solar projects still result in a project breakeven around
10 2032-2033 timeframe and approximately$217 million in NPV customer over the life of
11 the project whereas the Combined Projects never breakeven,resulting in approximately
12 $186 million in increased costs to customers.However,the Company's shareholders still
13 stand to receive billions of dollars in equity returns in this scenario even though
14 customers are harmed by the Combined Projects.
15 Q.DO THE RESULTS CHANGE UNDER THE COMPANY'S NEW "UNIQUE"
16 SOLAR RISK SENSITIVITY ANALYSIS?
17 A.No.As shown in Figure NLP-SD-11,in the medium gas,medium CO2 Scenario,the
18 takeaways are very similar and the solar portfolio still outperforms the Combined
19 Projects over the life of the Projects,though the gap between the two has slightly
20 narrowed.Figure NLP-SD-12 shows the sensitivity results under the Low Gas,Zero
21 Carbon scenario and once again,while the gap is more narrow between the two
22 portfolios,the solar option still results in net customer benefits by the end of the life of
23 the project whereas the Combined Projects are a detriment to customers.
REDACTED Phillips,Di-Supp -35
Monsanto Company
l Q.WHAT CAN YOU CONCLUDE FROM THIS ANALYSIS?
2 A.While there may indeed be additional risks unique to solar that should be studied further
3 in the 2019 IRP,the Company's analysis still shows that if there was a need to act
4 immediately to fill a resource gap (which there is not)the Solar Option,as presented,is a
5 more economic alternative for customers to the Combined Projects under all scenarios
6 and sensitivities analyzed.Furthermore,the Solar PPA Option is less risky than the
7 Combined Projects.Given the fact that there is no immediate resource need driving this
8 proposal combined with the superior economics and risk profile of the Solar Option the
9 only way to preserve the public interest is for the Commission to deny RMP's request for
10 a CPCN.We can then re-evaluate the solar option during the years to come when prices
11 are expected to fall thus further increasing the potential for customer benefit.
12 Q.DOESN'T THE COMPANY CLAIM THAT SOLAR OPTION IS MORE RISKY
13 THAN THE COMBINED PROJECTS.
14 A.Yes but through an examination of the Company's testimony and analytics this claim is
15 completely without merit.Focusing on the data analysis alone,as I just discussed,the
16 Solar PPA Option out-performs the Combined Projects in all scenarios and sensitivities
17 that the Company performed when analyzing the solar option.The Company has
18 attempted to cloud this fact by offering qualitative statements regarding risks,such as its
19 claim regarding its expectations that solar prices will decrease.However,the potential
20 for price decreases when there is no need for immediate action with respect to a resource
21 need only further solidifies that the prudent decision is to wait.In fact this is actually a
22 risk against the Combined Projects as additional analysis and price decreases only serve
23 to make solar more attractive and further undermine the economics and conclusions
REDACTED Phillips,Di-Supp -36
Monsanto Company
\
l regarding the Combined Projects.Perhaps this is why when asked about the expectations
2 and analysis surrounding the expected price decreases the Company was unable to
3 produce any hard data.3°
4 In a similar sense,the Company tries to confuse the idea about the timing of
5 benefits and risks associated with them.On one hand,the Company claims that longer-
6 term benefits are more speculative (a point with which I agree).3 On the other hand,
7 when confronted about the shift in the timing of benefits associated with the Combined
8 Projects,the Company does not admit this is an increase in the risk profile of the
9 Combined Projects,but it is merely a different net-benefit profile.32 The fact is that it
10 cannot be both.The Tax Cuts and Job Act made PTCs less valuable and thus decreased
11 the value of the Combined Projects and increased its risk.
12 Q.HAVE YOU PREPARED A TABLE DEMONSTRATING THIS FROM THE
13 NOMINAL REVENUE REQUIREMENTSANALYSIS?
14 A.Yes.Tables NLP-SD-2 &3 below present the PVRR(d)for the Combined Projects as
15 presented in the Company's Direct Testimony and Second Supplemental Rebuttal,along
16 with the Solar PPA Option,and the Solar Option plus the Combined Projects.What
17 becomes obvious from these tables is that the most beneficial and least risky of the
18 alternatives is the Solar PPA Option alone.It produces the highest net benefits through
19 the first 20 years,indicating more benefits to costs earlier in the project life.It is also the
20 only option to produce a net benefit in the Low Gas,Zero CO2 SCenariO.Table NLP-SD-
30 Wyoming New Wind/Transmission Docket,RMP response to WIEC Data Requests 22.17 &
22.18.
3 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,Wyoming Docket 20000-520-EA-
17 at Page 45.
32 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,Wyoming Docket 20000-520-EA-
17 at Page 21.
REDACTED Phillips,Di-Supp -37
Monsanto Company
l 4 below presents the 20 PVRR(d)resulting from the "unique"solar sensitivity cases
2 analyzed by the Company.Comparing this to Table NLP-SD-1 above (and repeated
3 below for convenience)reaffirms the conclusions.
NON-CONFIDENTIAL TABLE NLP-SD-2
Comparison of Net Project Nominal Revenue Requirements
PVRR(d)2017-2036
(Benefit)/Cost ($million)
CombinedCombinedCombinedSolarPPA-Projects &
Price-Policy Scenario Projects -Pro2nects-2nd Solar PPA -
Direct Supplemental 2ndSupplementalSupplemental
Low Gas,Zero CO2 96 156
Low Gas,Medium CO2 51 127
Low Gas,High CO2 (114)(30)
Medium Gas,Zero CO2 (38)(13)
Medium Gas,Medium CO2 (93)(51)
Medium Gas,High CO2 (205)(141)
High Gas,Zero CO2 (241)(262)
High Gas,Medium CO2 (253)(297)
High Gas,High CO2 (390)(388)
REDACTED Phillips,Di-Supp -38
Monsanto Company
NON-CONFIDENTIAL TABLE NLP-SD-3
Comparison of Net Project Nominal Revenue Requirements
PVRR(d)2017-2050
(Benefit)/Cost ($million)
CombinedCombinedCombinedSolarPPA-Projects &
Price-Policy Scenario Projects -Pro2nects-2nd Solar PPA -
Direct Supplemental 2ndSupplementalSupplemental
Low Gas,Zero CO2 174 184
Low Gas,Medium CO2 93 127
Low Gas,High CO2 (194)(147)
Medium Gas,Zero CO2 (53)(92)
Medium Gas,Medium CO2 (137)(167)
Medium Gas,High CO2 (317)(304)
High Gas,Zero CO2 (341)(448)
High Gas,Medium CO2 (351)(499)
High Gas,High CO2 (595)(635)
TABLE NLP-SD-4
Solar Only vs Combined Projects
Nominal Revenue Requirements Results
PVRR(d)2017-2050
Cost/(Benefit)($Millions)
Difference Solar to
Price Policy Scenario Sensitivity Case Combined Projects solar Only combined Projects
11edium Gas.11edium CO:Benchmatk ÇndSupp Dueet);516 7)(536 3 ($196)
liedium Gas.NIedtum CO:Hourts Pnce Sensitivity(2nd Supp Rebuttal)i 5127)(5254 i $127)
iledium Gas.Niedium CO:Capacitv Contributionand HoudvPuce Sensinvits (2nd Supp Rebuttal)S127 |5149 i 522)
LowGas.ZeroCO:BenchmarkOndSuppDtrect)$184 ¿SIS6 (5180)
LowGas.Zero CO:HourivPace SensinvitvGnd Supp Rebuttal)S220 <5123 (5343;
LowGas,Zero CO:Capacity ConuibutionandHoudvPnce SensitmtvGud Supp Rebuttal)$220 (S29 (5249
REDACTED Phillips,Di-Supp -39
Monsanto Company
TABLE NLP-SD-5
Solar Only vs Combined Projects
Nominal Revenue Requirements Results
PVRR(d)2017-2036
Cost/(Benefit)($Millions)
Difference Solar to
Price Policy Scenario Sensitivity Case Combined Projects Solar Only Combined Projects
Medium Gas.Medium CO,Benchmark (2nd SuppDirect)(SS1 (5212)(5162)
Capacity Contribution and Hourly PriceMediumGas.Medium CO,Sensitivity (2nd SuppRebuttal)($22 ($24)($2)
Low Gas.Zero CO:Benchmark (2nd SuppDirect)$156 ($87)($243)
Capacity Contribution and Hourly PriceLowGas.Zero CO:Sensitivity(2ndSuppRebuttal)$181 $61 ($120)
1 Q.IS IT APPROPRIATE TO CALCULATE PVRR(d)FROM THE NOMINAL
2 REVENUE REQUIREMENTSTHROUGH 2036?
3 A.Yes.The Company has argued that this is not appropriate because it does not capture
4 any potential benefits from capital investments beyond 2036;however,this is an
5 erroneous conclusion.33 First of all,the nominal revenue requirement analysis performed
6 for both of these projects encompasses the full life cycle of both projects and extends
7 through 2050 so there is no mismatching of projects with different lives,which is the
8 reason for the levelized analysis in the first place.Second,the nominal revenue
9 requirements analysis perfectly matches the project costs and benefits as they will flow
10 through to ratepayers.While it is true that some benefits associated with the projects are
11 not captured in a PVRR(d)through 2036,neither are the costs.However,both costs and
12 benefits perfectly match with how they will impact rates.On the other hand,the 20 year
13 levelized analysis does not match project costs with benefits according to how the
33 Wyoming New Wind/TransmissionDocket,RMP response to WIEC Data Requests 22.7,22.8,
22.11 &22.12.
REDACTED Phillips,Di-Supp -40
Monsanto Company
l Company is proposing to recover those same costs and pass along benefits.This is
2 ultimatelyhow both impact rates.34
3 Q.THE COMPANY CONTINUES TO AFFIRM THAT THE SOLAR OPTION
4 SHOULD BE CONSIDERED AS AN INCREMENTAL OPPORTUNITY TO THE
5 COMBINED PROJECTS,AND NOT AN ALTERNATIVE.DO YOU AGREE
6 WITH THIS AFFIRMATION?
7 A.No.The basis of the Company's statement is that the Solar PPA Option does not
8 displace the economic benefits of the Combined Projects.First,this reaffirms what the
9 Company has been saying since it filed the Application;the Combined Projects are an
10 economic portfolio of mutuallydependent wind and transmission projects,neither of
11 which can be justified without the other.While the Company attempts an "eleventh
12 hour"claim that the transmission project is needed in 2024,this claim is completely
13 unsupported by any analysis.My colleague Mr.James Dauphinais discusses the alleged
14 need for the transmission line throughout his testimonies.
15 While I discussed in my Direct Testimony the reasons why the Company is not
16 pursuing the Combined Projects from the standpoint of generation capacity need,the
17 Company itself has also clearly stated that it does not need generation capacity until 2028
18 and can meet its resource needs between now and then with Front Office Transactions,
19 Demand Side Management and energy efficiency measures.35 Furthermore,the
34 Wyoming New Wind/Transmission Docket,RMP response to WIEC Data Requests 21.4 and
21.5.
"See my direct testimony as well as 3/14/2018 Supplemental Rebuttal Testimony of Rick Link,
Wyoming Docket 20000-520-EA-17at Page 51.
REDACTED Phillips,Di-Supp -41
Monsanto Company
l Company has also stated that uncommitted FOTs are still generally lower cost than other
2 resource alternatives.36
3 Finally,in terms of the amount of capacity and energy delivered by the Solar PPA
4 Option,it most certainly meets the same requirements as does the Combined Projects.
5 PacifiCorp's modeling approach with respect to its load forecast and constraints did not
6 change when it analyzed each of the portfolios,and both were performed with reliability
7 based capacity and energy constraints with a planning reserve margin.It would be
8 perfectly reasonable to replace the Combined Projects with the Solar PPA Option,if
9 either was needed.However,neither are needed at this time.The Company can meet its
10 near term needs with low cost FOTs,DSM and Energy Efficiency measures while it
11 further develops is solar price assumptions and supporting analysis.Moreover,even if
12 the solar prices do not drop as the Company expects but remain where they stand today,
13 the solar portfolio,as the Company has demonstrated,will be a better choice for
14 ratepayers.
15 IV.THE POTENTIAL RISKS AND BENEFITS OF THE COMBINED PROJECTS
16 Q.HAS RMP UPDATED ITS ECONOMIC ANALYSIS TO SUPPORT THE
17 COMBINED PROJECTS?
18 A.Yes.RMP has updated its economic analysis to reflect the costs obtained via the 2017R
19 RFP,along with revising the analysis to reflect updated load,commodity,and tax
20 information.
Link Rebuttal Testimony,December18,2017 at Page 12.
REDACTED Phillips,Di-Supp -42
Monsanto Company
l Q.HAS ANY OF THE INFORMATION CONTAINED WITHIN RMP'S SECOND
2 SUPPLEMENTAL TESTIMONY AND UPDATED ECONOMIC ANALYSIS
3 CAUSED YOU TO CHANGE ANY OF YOUR DIRECT TESTIMONY
4 RECOMMENDATIONS?
5 A.No.In fact the results of the updated analysis reaffirm my direct testimony
6 recommendation that the Combined Projects are simply too risky and should not be
7 approved.
8 Furthermore,while RMP is still characterizing the Combined Projects as the least-
9 cost,least-risk plan,I just described information that RMP provided with its updated
10 economic analysis which demonstrates that they likely are not the least-cost,least-risk
11 resources.Simply put,the facts contained within RMP's own filing contradict the
12 premise for its requested CPCN and there is no way the Commission can approve the
13 CPCN consistent with the public interest without imposing concrete ratepayer protections
14 to ensure the projected benefits actually materialize.
15 Q.PLEASE SUMMARIZE THE CHANGES REFLECTED IN RMP'S UPDATED
16 ANALYSIS.
17 A.There were four broad categories of updates incorporated into RMP's updated analysis.
18 The models were updated to reflect:(1)cost-and-performance assumptions for the Wind
19 Projects consistent with the winning bids selected to the 2017R RFP final shortlist as
20 summarized earlier in my testimony;(2)current load-forecast projections;(3)current
21 price-policy scenario assumptions;and (4)recent changes in federal tax rate for
22 corporations.37
37 Supplemental Direct Testimonyof Rick Link at p.17.
REDACTED Phillips,Di-Supp -43
Monsanto Company
l In addition to updating the models with revised capital cost assumptions and net
2 capacity factors sourced to the specific RFP responses selected,RMP also added a new
3 "benefit"that was not included in its original modeling:terminal value benefits from
4 projects that will be owned by the Company.
5 Q.DID THE COMPANY ALSO CHANGE THE WAY IT MODELED PTC
6 BENEFITS IN THIS PROCEEDING?
7 A.Yes.As I discussed earlier in this testimony,in its original filing,the Company modeled
8 PTC benefits on a levelized basis over the life of the asset.This is the same way PTCs
9 were modeled in the Company's 2017 IRP.In its updated model,the Company modeled
10 the PTCs on a nominal basis.That is,the PTCs are modeled for 10 years until they
11 expire.
12 Q.WHAT DOES THE COMPANY CLAIM THE RESULTS OF ITS UPDATED
13 ECONOMIC ANALYSIS SHOW?
14 A.RMP claims the results of its updated economic analysis demonstrate that the Combined
15 Projects provide net customer benefits under all scenarios studied through 2036,and in
16 seven of the nine scenarios through 2050."The Company further claims that the
17 customer benefits increase to $167 million in the Medium Gas,Medium CO2 CSSC
18 through 2050 (as compared to $137 million in the original filing),and range from $357
19 million to $405 million in the Medium Gas,Medium CO2 CSSe through 2036."
"Second Supplemental Direct Testimonyof Rick Link at p.2.
"Id.
REDACTED Phillips,Di-Supp -44
Monsanto Company
l Q.DO YOU AGREE WITH THE COMPANY'S CLAIM WITH RESPECT TO THE
2 UPDATED ECONOMIC ANALYSIS?
3 A.No.The results stated by the Company are erroneous and misleading.When inspected
4 more closely,the economics of the Combined Projects are actually no better than
5 originallypresented,and are arguably worse than what the Company originally claimed.
6 Furthermore,the Company fails to discuss the fact that the updated economic analysis
7 reveals that the level of risk embedded within the Combined Projects is greater than
8 originally reported in its original filing.Finally,the Company failed to disclose to the
9 Commission that,using the same nominal revenue requirements analysis over the period
10 from 2017-2050 which it uses to support the Combined Projects,the Solar PPA Option
11 results in a superior economic benefit at a lower cost and with less customer risk
12 compared to the Combined Projects.Consequently,the Company's proposal suffers
13 from the same deficiencies I discussed in my direct testimony,and now contains new
14 pitfalls.
15 Q.PLEASE EXPLAIN.
16 A.First,the Company claims that the results of its updated economic analysis demonstrate
17 that the Combined Projects provide net customer benefits under all scenarios studied
18 through 2036 and that these benefits range from $357 million to $405 million in the
19 Medium Gas,Medium CO2 CSSe.These claims are based on the Company's SO and PaR
20 modeling,which incorporate levelized capital costs for the Combined Projects and
21 nominal PTC cash flows.I have already discussed the reasons why this "hybrid"
22 approach is flawed.While levelization of capital costs when done correctly can be a
23 reasonable method when selecting economic resource alternatives with different lives and
REDACTED Phillips,Di-Supp -45
Monsanto Company
l in-service dates,it does not accurately reflect how these costs will flow through to
2 customers.As a result,the benefits produced from these analyses are contradicted by the
3 Company's updated nominal revenue requirement analysis.The updated nominal
4 revenue requirement analysis produced the $167 million in NPV customer benefits in the
5 Medium Gas,Medium CO2 CRSe (and the $137 million in NPV benefits claimed in the
6 original filing).This analysis more accurately reflects the way the actual costs and
7 revenues of the projects will flow through to customers.
8 Q.WHAT ARE THE 20 YEAR NPV SAVINGS THAT RESULT FROM THE
9 NOMINAL REVENUE REQUIREMENT MODELING?
10 A.The Medium Gas,Medium CO2 price policy scenario actually shows only $51 million
11 NPV of estimated customer benefits.Said another way,only 30%of the total claimed
12 benefits for this scenario occur in the first 20 years,while the remaining estimated
13 benefits occur in years 21-35.Furthermore,two of the scenarios actually result in
14 increased costs to customers.Table NLP-SD-6 below presents the 20 year and 35 year
15 NPV benefits for all nine price-policy scenarios resulting from the updated nominal
16 revenue requirements analysis.
REDACTED Phillips,Di-Supp -46
Monsanto Company
TABLE NLP-SD-6
2017 Wind RFP Nominal Revenue Requirement
PVRR(d)
PacifiCorp's Updated Economic Analysis
(Benefit)/Cost ($million)
Price-Policy Scenario 20 Yr 35 Yr
Low Gas,Zero CO2 156 184
Low Gas,Medium CO2 127 127
Low Gas,High CO2 (30)(147)
Medium Gas,Zero CO2 (13)(92)
Medium Gas,Medium CO2 (51)(167)
Medium Gas,High CO2 (141)(304)
High Gas,Zero CO2 (262)(448)
High Gas,Medium CO2 (297)(499)
High Gas,High CO2 (388)(635)
1 Q.HOW DOES THIS COMPARE TO THE COMPANY'S ORIGINAL ECONOMIC
2 ANALYSIS?
3 A.In the Company's original analysis,the Medium Gas,Medium CO2 scenario resulted in a
4 20 year NPV benefit of $93 million,which was 68%of the total 35 year estimated
5 benefit.Additionally,compared to the Company's original analysis,seven of the nine
6 scenarios included in the updated analysis result in less favorable economics over the
7 first 20 years.For convenience,Table NLP-SD-7 below presents that 20 year and
8 35 year NPV benefits for the nine price policy scenarios that resulted from the original
9 analysis.
REDACTED Phillips,Di-Supp -47
Monsanto Company
TABLE NLP-SD-7
2017 Wind RFP Nominal Revenue Requirement
PVRR(d)
PacifiCorp's Original Economic Analysis
(Benefit)/Cost ($million)
Price-Policy Scenario 20 Yr 35 Yr
Low Gas,Zero CO2 96 174
Low Gas,Medium CO2 51 93
Low Gas,High CO2 (114)(194)
Medium Gas,Zero CO2 (38)(53)
Medium Gas,Medium CO2 (93)(137)
Medium Gas,High CO2 (205)(317)
High Gas,Zero CO2 (241)(341)
High Gas,Medium CO2 (253)(351)
High Gas,High CO2 (390)(595)
1 Q.WHAT DOES THIS IMPLY ABOUT THE RISK OF THE COMBINED
2 PROJECTS?
3 A.This reveals that the Combined Projects are actually more risky for customers than the
4 Company's original analysis indicated.This is because,originally,the majority of the
5 benefits accrued earlier.This can be seen by inspecting CORRECTED Figure 5-SD in
6 the Company's Supplemental Direct Testimony,which I have included below for
7 convenience (updated with the revised revenue requirements contained in the Company's
8 Second Supplemental Direct Testimony).Notice the revenue requirements associated
9 with the updated economic analysis contained with the Second Supplemental filing are
10 higher in the earlier years and lower in the later years.
REDACTED Phillips,Di-Supp -48
Monsanto Company
CORRECTED Figure 5-SD
Updated Total-System Annual Revenue Requirement
With the Combined Projects (Benefit)/Cost ($million)
$80
$60
$40
$20
$0
($20)
($40)
($60)
($80)
($100)
($120)
0000000000000000000000000000000
-e-2nd Supplemental ---Direct Testimony
1 Additionally,the Company also failed to plot an important data point,the 2050
2 year,for its updated economic analysis.The NPV of the plot above,as presented by
3 RMP,is only $113 million,not the $167 million referenced by the Company.To get to
4 the $167 million referenced by the Company,the Company's analysis includes a large,
5 terminal value benefit in 2050,which I will discuss later.In Figure NLP-SD-13 below,I
6 have updated the modified version of the Company's CORRECTED Figure 5-SR below
7 to include the 2050 year.
REDACTED Phillips,Di-Supp -49
Monsanto Company
FIGURE NLP-SD 13
Updated Total-System Annual Revenue Requirement
With the Combined Projects (Benefit)/Cost ($million)
$100 ?"
$0
($100)
.($200)
($300)
($400)
($500)
($600)
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2nd Supplemental ---Direct Testimony
1 As can be seen,the Company is relying heavily on the 2050 year to demonstrate
2 positive economic benefit,in turn,placing significant risk exposure on the ratepayers.It
3 is well understood that the further out in time an economic model extends,the more
4 uncertain it becomes.40 In the case of the Combined Projects,during the first 10 years of
5 the Wind Projects,an additional benefit (the PTCs)is realized.After the PTCs expire,
6 the remaining benefits are primarily driven by energy savings,which in turn depend
7 heavily on commodity forecasts.In my direct testimony,I discussed the problems RMP
8 has had accurately forecasting commodity prices,and particularly its tendency over the
9 last eight years to overestimate future gas and power prices.If the commodity prices are
10 overstated in the economic modeling for the Combined Projects,customer benefits are
40 As the Company said in its application in Docket No.20000-481-EA-l5 (Record No.14220)
before the Wyoming Public Service Commission:"While the Company'splanning process is robust and
designed to reasonably capture a wide range of uncertainties,the magnitude of various planning
uncertainties grows further out into the IRP 20-yearplanning horizon."
REDACTED Phillips,Di-Supp -50
Monsanto Company
l overstated and the likelihood that customers will experience higher costs as a result of the
2 proposed Combined Projects increases.
3 Q.WHAT CHANGES CAN EXPLAIN THE INCREASED RISK IN THE
4 COMBINED PROJECTS?
5 A.The primary driver of the increased risk is the change in the federal corporate tax rate.
6 While the lower tax rate has made utility capital cheaper,it has also reduced the value of
7 the PTCs generated by the Wind Projects.The PTCs are only generated during the first
8 10 years of eligible wind projects,and reducing the value of the PTCs directly translates
9 into higher initial revenue requirements relative to the original analysis.
10 In addition to the reduced value of the PTCs,there are other changes which make
11 the Combined Projects more risky.The Company reduced its load forecast and its
12 commodity forecasts,which also reduce the value of the proposed projects.
13 Finally,there is the issue of the newly assumed terminal value of the Wind
14 Projects.
15 Q.PLEASE ELABORATE ON THE ISSUE WITH TERMINAL VALUE.
16 A.As I mentioned earlier,the terminal value is a new benefit never before modeled by the
17 Company.
18 .41 MP
19 argues that remaining life of transmission assets required for interconnection could be
20 reused to reduce costs to interconnect new projects that are developed at these existing
21 sites in the future.42 Consequently,the value of this is highly speculative.In order for
22 the value to be realized,a new project must be built at this site,which in turn would have
41 Wyoming New Wind/Transmission Docket,RMP response to WIEC Data Request 12.5,
Confidential Attachment Page 11 of 20.
42 Supplemental Direct Testimonyof Rick Link at p.17,l.18 -p.18,1.9.
REDACTED Phillips,Di-Supp -51
Monsanto Company
l additional costs which are not included in the Company's analysis.The Company does
2 not state why this benefit was left out of the original analysis,but now the Company is
3 claiming a 43 (ROminal)benefit for all of its price-policy scenarios.
4 Absent this previously unquantified benefit,the updated analysis would result in
5 44 10SS benefits in the 35 year NPV for the Medium Gas,Medium CO2
6 scenario compared to the original analysis provided by RMP.In total,seven of the nine
7 price-policy scenarios would actually result in less favorable economics relative to the
8 original analysis filed by the Company when excluding the terminal value.The
9 Commission should take extreme caution when considering the claimed additional
10 benefits resulting from the updated economic analysis,because in large part they depend
11 on an assumption about a highly speculative benefit that occurs 35 years in the future.
12 Table NLP-SD-7 below compares the updated economic analysis excluding the terminal
13 value assumption to the original 35 year analysis present by RMP.
43 RMP Witness Rick Link Confidential Workpaper,"EV2020 Second Supp Results Summary
File -VOM adjusted CONF.xlsx"as referenced in Wyoming New Wind/Transmission Docket,RMP
response to WIEC Data Request 18.l(f).
*Id.
REDACTED Phillips,Di-Supp -52
Monsanto Company
NON-CONFIDENTIAL TABLE NLP-SD-8
2017 Wind RFP Nominal Revenue Requirement
PVRR(d)
Updated Economic Analysis ExcludingTerminal Value
and Original Analysis
(Benefit)/Cost ($million)
35 Yr35Year
Price-Policy Scenario Original Excluding
.TerminalAnalysisValue45
Low Gas,Zero CO2 174
Low Gas,Medium CO2 93
Low Gas,High CO2 (194)
Medium Gas,Zero CO2 (53)
Medium Gas,Medium CO2 (137)
Medium Gas,High CO2 (317)
High Gas,Zero CO2 (341)
High Gas,Medium CO2 (351)
High Gas,High CO2 (595)
1 Q.DID THE COMPANY UPDATE ITS ANALYSIS TO ASSESS THE RISK
2 ASSOCIATED WITH THE VARIABILITY OF WIND OUTPUT?
3 A.No.In WIEC Data Request 5.9 in the Wyoming New Wind/Transmission Docket,WIEC
4 asked for a risk assessment related to the variability of wind output.46 The Company
5 objected and indicated it would instead perform this analysis later when the wind sites,
6 equipment,and layout were more certain.However,the Company has yet to update its
7 response and economic analysis to provide an assessment of this risk.
8 In WIEC Data Request 18.2 in the Wyoming New Wind/Transmission Docket,
9 WIEC again asked about a risk analysis surrounding the variability of wind output.47
10 RMP responded stating that the Company considered wind-performance risk by
45
46 Wyoming New Wind/TransmissionDocket,WIEC Exhibit No.304.1.
47 Id.
REDACTED Phillips,Di-Supp -53
Monsanto Company
l analyzing wind data for certain bids offered into the 2017R RFP however,the Company
2 has still not quantified the economic risk associated with variable wind output.This is
3 particularly concerning as the Combined Projects economics rely upon generating PTCs
4 which,in turn,depend entirely upon the wind output in the first 10 years of operation.
5 The Company admitted this is a risk to customers48 and also admitted that this risk is not
6 present if a PPA based project was pursued49
7 Q.WHAT CAN CAUSE THE OUTPUT FROM THE FACILITIES,AND THUS THE
8 AMOUNT OF PTCS,TO BE LOWER THAN WHAT THE COMPANY
9 ASSUMED IN ITS MODELING?
10 A.A variety of factors,including curtailment.RMP stated in response to WIEC Data
11 Request 17.7 in the Wyoming New Wind/Transmission Docket that a Qualifying Facility
12 ("QF")project with a cumulative total of 320 MW of new capacity will interconnect to
13 Segment D.2.However,RMP also stated that the Company has not reserved
14 interconnection capacity for that 320 MW project on that line because the project needs
15 additional transmission upgrades in order to come on line,which is scheduled to occur in
16 2024,according to RMP's interconnection queue.RMP's interconnection queue'°
17 indicates the project (Q0409A-D)has a signed interconnection agreement,and its PPAs
18 are executed.
19 If and when that QF project comes online,RMP must purchase its power because
20 it is a QF.Additionally,RMP must curtail its own Wind Projects before it curtails a QF,
21 because QFs are "must take"resources that can onlybe curtailed in times of emergency.
48 Wyoming New Wind/TransmissionDocket,RMP response to WIEC Data Request 18.3.
49 Wyoming New Wind/Transmission Docket,WIEC Exhibit No.304.1 and RMP response to
18.4.
so Available at:http://www.oasis.oati.com/PPW/PPWdocs/pacificorpleiaq.htm
REDACTED Phillips,Di-Supp -54
Monsanto Company
l Thus,this additional 320 MW of QF capacity,for which RMP has not reserved
2 interconnection capacity,may impact the generation of energy and PTCs from the Wind
3 Projects.
4 Additionally,RMP has indicated that the Wind Projects are currently in various
5 stages of assessing avian impacts,including data collection,initiation of discussions with
6 the appropriate agencies,and development of mitigation plans.Furthermore,bidders in
7 the 2017R RFP did not submit a formal mitigation plan as part of their bid package.As a
8 result,avian issues could require curtailment at any of the Wind Projects,causing the
9 output and related PTCs to be lower than assumed in the Company's analyses.
10 Q.DID EITHER OF THE INDEPENDENT EVALUATORS EXPRESS ANY
11 CONCERN REGARDING WIND OUTPUT?
12 A.Yes.The Utah Independent Evaluator("Utah IE")stated in its conclusions:
13 A common occurrence in the wind industry has been that the actual
14 capacity factors of wind projects have been lower than the projected
15 capacity factors.Such an occurrence for PPA options is not a major
16 issues since the PPA project must conform to the contract requirements
17 for meeting generation required levels or incur penalties.For BTA or
18 benchmark options,failure to meet the target capacity factor is an issue.
19 For one,the full PTC benefits may not be realized if generation is lower
20 than projected.Failure to meet projected generation levels for these
21 resources results in higher unit costs and raises the question of whether
22 these projects would have been selected if realistic generation profiles
23 were provided.While PacifiCorp retained Sapere to conduct such an
24 analysis to ensure the generation levels and capacity factors are
25 reasonable,the IE feels there is some risk associated with the
26 _projects based on the Sapere analysis regarding wake losses.The IE
27 feels that the generation levels of the benchmark and BTA options should
28 be closely monitored to ensure they perform as proposed.52
*Supplemental Direct Testimony of Rick T.Link at p.14,11.19-21 and RMP's response to
WIEC Data Request 14.27 (WIEC Exhibit No.304.1)in the Wyoming New Wind/TransmissionDocket.
52 Confidential Exhibit No.304.2.
REDACTED Phillips,Di-Supp -55
Monsanto Company
l Excerpts of the Utah IE Report are attached as Monsanto Exhibit No.218 to my
2 Supplemental Direct Testimony.
3 Q.DID THE COMPANY ASSESS THE RISK OF CAPITAL COST OVERRUNS IN
4 ITS UPDATED ECONOMIC ANALYSIS?
5 A.No.
6 Q.DID THE COMPANY PERFORM ANY SENSITIVITIES REGARDING ITS
7 LOAD FORECAST USED IN ITS UPDATED ANALYSIS?
8 A.No.
9 Q.WHAT DO YOU CONCLUDE FROM THE COMPANY'S RISK ASSESSMENT?
10 A.The Company has not performed a reasonable assessment of projects risks that under its
11 proposal will be borne by RMP customers.Absent this risk assessment,there is no
12 reasonable way to grant the Company's request for a CPCN and preserve the public
13 interest unless the Commission's order contains concrete ratepayer protections that
14 addressthese risks.
15 Q.WHAT DO YOU CONCLUDE WITH RESPECT TO THE COMPANY'S
16 UPDATED ECONOMIC ANALYSIS?
17 A.Nothing contained within the Company's updated economic analysis and supplemental
18 testimony has changed the conclusion and recommendations presented in my direct
19 testimony.In fact,when inspected more closely,the results show that the Combined
20 Projects are more risky than the Company's direct testimony indicated.Furthermore,the
21 Company has not performed any additional risk analysis even though it has had ample
22 time to do so.Based on these facts alone,I recommend the Commission deny RMP's
23 request for a CPCN.
REDACTED Phillips,Di-Supp -56
Monsanto Company
1 Q.DO YOU HAVE ANY OTHER OBSERVATIONS REGARDING THE RISKS
2 POSED TO RATEPAYERS BY THE COMBINED PROJECTS AND
3 RATEPAYER PROTECTIONS?
4 A.Yes.In Oregon,the Independent Evaluator("IE")issued a report on RMP's 2017R RFP
5 and recommended,in part,certain ratepayer protections.Specifically,the Oregon IE
6 stated:
7 We have additional recommendations related to the RFP to help protect
8 ratepayers from bearing undue risk.First,in order to protect ratepayers
9 and ensure that they receive the benefits promised during this RFP we
10 would recommend that all selected resources to be owned by the
11 Company (i.e.,BTAs and Benchmark resources)be held to their capital
12 and operations and maintenance ("O&M")cost projections as provided
13 with the bid.These amounts should be considered a "hard"cap,meaning
14 that there will be no opportunity for the Company to collect additional
15 costs even if they believe such expenditures were prudent.Doing so will
16 help give the offers a risk profile much closer to that of a PPA,requiring
17 the Company to take risks that typical wind developers take,and insulate
18 ratepayers from the risk of cost overruns.Because the majority of
19 construction costs will be covered under the BTA agreement or,in the
20 case of Benchmarks,a negotiated engineering,procurement,and
21 construction ("EPC")agreement,we feel this is a reasonable requirement.
22 Second,ratepayers should not be harmed if either PacifiCorp or the project
23 developers fail to acquire 100%of the value of the Production Tax Credit
24 ("PTC").PacifiCorp should provide an unconditional guarantee (i.e.,not
25 subject to force majeure or change in law)that ratepayers will receive the
26 full projected value of the Production Tax Credit.This includes situations
27 where (a)PacifiCorp cannot claim full PTC value or (b)PacifiCorp does
28 not have the taxable income to use the full PTC value.Again,this is
29 similar to what is expected of a third-party developer.
30 Third,the Company should similarly be held to their cost projections for
31 the Aeolus-to-Bridger D2 Segment.PacifiCorp's resource acquisition
32 strategy here -which includes three projects that rely on the D2
33 Segment's construction for economic viability -is based on a certain cost
34 promise for this segment and the Company should be held to its
35 promises.63
"Availableat:http://edocs.puc.state.or.us/efdocs/HAH/um1845hahl21349.pdf
REDACTED Phillips,Di-Supp -57
Monsanto Company
l Q.WHAT IS YOUR RESPONSE TO THE OREGON IE'S RECOMMENDATIONS?
2 A.First,I think it is significant that the Oregon IE included these points in its evaluationat
3 all.It is telling that the Oregon IE would recognize the risks the Combined Projects pose
4 to ratepayers and recommend to the Oregon PUC that it take action to protect ratepayers.
5 That being said,I do not think the Oregon IE's recommendations go far enough.
6 While of these protections align with those I recommended above and in my direct
7 testimony,the Oregon IE's recommendations still leave ratepayers vulnerable to
8 significant risk.This is particularly true,since the Oregon IE did not compare the Wind
9 Projects against the potentialbenefits associated with the Solar PPA Option.
10 Q.GIVEN THE NEW INFORMATION REGARDING THE SOLAR PPA OPTION,
11 ARE YOUR DIRECT TESTIMONY RECOMMENDATIONS STILL
12 SUFFICIENT TO PRESERVE THE PUBLIC INTEREST?
13 A.No.Given the new information and economic benefits presented by the Company with
14 respect to the Solar PPA Option,I no longer believe the conditions I recommended in my
15 direct testimony are adequate to protect ratepayers and maintain the public interest.
16 Consequently,while I maintain the prudent action is for the Commission to deny RMP's
17 request for a CPCN outright,should the Commission decide to approve RMP's request,I
18 have a revised set of conditions that should be imposed upon RMP in order to preserve
19 the public interest.
20 Q.IS THERE ANY REASON TO CONSIDER PURSUING BOTH THE SOLAR PPA
21 OPTION AND THE COMBINED PROJECTS TOGETHER?
22 A.No.The best case scenario stemming from the full nominal revenue requirements
23 analysis as reported by the Company is an incremental $11 million in NPV benefits if the
REDACTED Phillips,Di-Supp -58
Monsanto Company
l $2.245 billion Combined Projects are layered on top of the Solar PPA Option.On the
2 other hand,in the worst case scenario,the $217 million in solar benefits are reduced by
3 $424 million as a result of adding the Combined Projects,resulting in a $208 million cost
4 increase to customers.Under no circumstances would pursuing both the Combined
5 Projects and the Solar PPA Option be pursued simultaneously be in the public interest.
6 V.RECOMMENDED CONDITIONS
7 Q.WHAT CONDITIONS DO YOU RECOMMEND IF THE COMMISSION
8 GRANTS A CPCN FOR THE COMBINED PROJECTS?
9 A.I recommend conditions similar to those identified in my direct testimony,updated in
10 light of the results of the Solar PPA Option,which is less costly,less risky,and provides
11 greater net benefits than the Combined Projects.Consequently,if the Commission
12 approves the Combined Projects,it should only do so under the expressed conditions that
13 ratepayers will be no worse off than if RMP were to actually propose and pursue the
14 Solar PPA Option.Absent these conditions,a finding that the Combined Projects are in
15 the public interest cannot be maintained.If the Commission grants a CPCN for the
16 Combined Projects,such approval should include the followingconditions:
17 1.Disallow rate based recovery for any turbines that are not commercially
18 operational in time to receive 100%of the PTC benefits they are being
19 constructed to capture,along with a capacity ratio share of any interconnection,
20 transmission,distribution,and AFUDC costs.
21 2.Cap RMP's cost recovery on the capital cost of the Combined Projects from retail
22 ratepayers,inclusive of the new generation and transmission facilities,as well as
23 any interconnection costs,network upgrades,distribution costs,and AFUDC to
24 $1,78 1.44 million installed cost;a reduction of $468 million,or approximately
25 21%,from the total cost of the Combined Projects.
26 3.Cap RMP's recovery of future O&M and capital expenditures related to the
27 Combined Projects,and net fixed system costs to those levels assumed in the
28 Company's updated economic analysis.
REDACTED Phillips,Di-Supp -59
Monsanto Company
l 4.RMP should be required to include in its Base Rates and Net Power Costs,at
2 minimum,the full (i)10 years of PTCs,assuming at minimum a 21%federal
3 corporate income tax rate,and (ii)energy benefits to customers for the life of the
4 Wind Projects,both based on the assumed net capacity factors used in RMP's
5 updated economic modeling.
6 5.Ratepayers should be guaranteed receipt of the full grossed up value of the PTCs
7 without having to compensate RMP for return on any deferred tax assets that may
8 be created as a result of RMP's inability to contemporaneously monetize PTCs to
9 full value.
10 6.If RMP ceases construction of the Combined Projects,for whatever reason,no
ll costs incurred are recoverable from customers.
12 Establishing the recoverable capital costs upfront,and capping future recovery of
13 costs relating to the remaining assumptions used by RMP in its updated economic
14 analysis,will increase the probability that customers will receive at least the same
15 benefits and risk profile from the Combined Projects as they would from the Solar PPA
16 Option (i.e.,what appears to be the truly least-cost,least-risk portfolio as evidenced by
17 RMP's own nominal analyses).However,given customers cannot be protected from all
18 of the risk of increased costs from the Company's proposal,it is essential that the
19 Combined Projects be rigorously evaluated to determine whether there is a high
20 probability that customers will be better off with the Combined Projects than without
21 them.
22 Q IF THE COMMISSION WERE TO APPROVE THE CPCN WITH CONDITIONS
23 AS YOU HAVE RECOMMENDED,DO THE CONDITION NEED TO BE THE
24 EXACT CONDITIONS YOU HAVE RECOMMENDED?
25 A No.The conditions need not be exactly those conditions I have recommended verbatim.
26 So long as the Commission conditions the approval of the CPCN with a package of
27 conditions such that there is sufficient ratepayer protections that ensures customers will
REDACTED Phillips,Di-Supp -60
Monsanto Company
l not be worse off with the Combined Projects than without them,under all the alternative
2 resource portfolios and price-policy scenarios analyzed.
3 VI.CONCLUSION
4 Q.AS CURRENTLY PROPOSED BY THE COMPANY,CAN THE COMMISSION
5 APPROVE RMP'S REQUEST FOR A CPCN WHILE PROTECTING THE
6 PUBLIC INTEREST?
7 A.No.
8 Q.WHAT DO YOU RECOMMEND WITH RESPECT TO THE COMPANY
9 REQUEST FOR A CPCN IN THIS PROCEEDING?
10 A.I recommend the Commission deny RMP's request for a CPCN.However,if the
11 Commission believes that the Combined Projects should be undertaken,then conditions
12 should be included on the Commission's approval to ensure the ratepayers are not
13 burdened by paying for an inferior project.Absent these conditions,the public interest
14 cannot be maintained.
15 Q.DOES THIS CONCLUDE YOUR SUPPLEMENTAL DIRECT TESTIMONY?
16 A.Yes,it does.
\\Doc\Shares\ProlawDocs\MED\l0465\Testimony-BAI\342833.docx
REDACTED Phillips,Di-Supp -61
Monsanto Company
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 1 of 16
20000-520-EA-17/Rocky MountainPower
January 30,2018
WIEC Data Request 12.5
WIEC Data Request 12.5
Please describe in detail the criteria the Company used to evaluate and select the 2017R
RFP final shortlist.
Response to WIEC Data Request 12.5
Please referto Section 6 of the 2017R Request for Proposals (2017R RFP)main
document,which providesa description of the process and methodology for the selection
of the 2017R RFP final shortlist.The 2017R RFP main document is publicly available
and can be accessed using the following website link:
http://www.pacificorp.com/sup/rfps/20l7-rfp.html
Please referto ConfidentialAttachment WIEC 12.5,which provides the presentation on
the process and methodology providedto the independent evaluators in August 2017.
Confidentialinformationis providedsubject to the protectiveorder issued in this
proceeding.
Respondent:Bruce Griswold
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-l7-07
Page 2 of 16
NON-CONFIDENTIAL
MONSANTO EXHIBIT NO.217
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 3 of 16
20000-520-EA-17 /Rocky Mountain Power
February 28,2018
WIEC Data Request 17.7
WIEC Data Request 17.7
Please referto the Supplemental Direct Testimony of Mr.Rick Link at page 7,lines 5-14.
(a)Please identify the referenced qualifying facilities,including the project
interconnection queue numbers.
(b)Are there any other qualifying facilities that have identified a point of interconnection
on Segment D.2 that are higher in the queue than those wind facilities identified in the
Final Short List?If so,please identify the project interconnection queue numbers,
indicate the capacity of each project (MW),and explain how the Company has
accounted for the transmission capacity necessary to bring such qualifying facilities
online.
(c)Are there any other qualifying facilities that have identified a point of interconnection
on Segment D.2 that have signed interconnection agreements,but that have not yet
come online?If so,please identify the project interconnection queue numbers,
indicate the capacity of each project (MW),and explain how the Company has
accounted for the transmission capacity necessary to bring such qualifying facilities
online.
Response to WIEC Data Request 17.7
(a)Mud Springs Project LLC,Horse Thief Project LLC,and Pryor Caves Project LLC.
The project interconnection queue numbers are Q0542A,Q0542B,and Q0542C.
(b)Yes.Project interconnection queue numbers Q0409A,Q0409B,Q0409C,and
Q409D.Each project associated with the identified queue numbers is 80 megawatts
(MW).The system impact studies (SIS)for these qualifying facility (QF)projects
require elements of Energy Gateway beyond just the Aeolus-to-Bridger/Anticline
Segment D.2.Consequently,the Company does not need to reserve interconnection
capacity enabled by the Aeolus-to-Bridger/AnticlineSegment D.2 line for these
specific QF projects.
(c)Please referto the Company'sresponse to subpart (b)above.
Respondent:Bruce Griswold
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 4 of 16
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March 15,2018
WIEC Data Request 21.4
WIEC Data Request 21.4
Is the Company proposing to recover the costs associated with the Combined projects
consistently with the way the revenue requirements are modeled in its levelizedanalysis?
If not please explain why not.
Response to WIEC Data Request 21.4
No,the Company is proposing to calculate the nominal revenue requirement for recovery
through the resource tracking mechanism (RTM)consistent with the methodologyused
in general rate cases (GRC).
The system modelingresults providea view of economic analysis that is consistent with
the planning period and approach used to identify a least-cost,least-risk preferred
portfolio in the Integrated Resource Plan (IRP).This type of analysis was used to identify
new wind and transmission projects as an element of PacifiCorp'sleast-cost,least-risk
plan in the 2017 lRP and has been used to evaluate past resource acquisitions and plant
investments.
Respondent:Terrell Spackman
Witness:Joelle Steward
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 5 of 16
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March 15,2018
WIEC Data Request 21.5
WIEC Data Request 21.5
How are the revenue requirements that flow into Joelle Steward's analysis modeled,
using levelizedrevenue requirements or nominal revenue requirements?Please explain
the rationale for this approach in detail.
Response to WIEC Data Request 21.5
The revenue requirements that flow into Joelle Steward's exhibits are calculated as
nominal revenue requirements.
Respondent:Terrell Spackman
Witness:Joelle Steward
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 6 of 16
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March 20,2018
WIEC Data Request 22.7
WIEC Data Request 22.7
Admit that the results of the nominal revenue requirements analysis performed in
conjunction with Mr.Link's second supplemental direct testimony demonstrate that the
Solar PPA option without the Combined Projects provides greater ratepayer benefits
through 2036 in the medium gas,medium CO2 scenario compared to The Combined
Projects only,or the combination of the Combined Projects with the Solar PPA.If the
response to this request is anything other than a simple,unqualified admission please
explain your response in detail and include the PVRR(d)resulting from the nominal
revenue for each of the three alternatives under the medium gas,medium CO2 case
through 2036.
Response to WIEC Data Request 22.7
The Company denies that the nominal revenue requirement analysis demonstrates that the
solar power purchase agreements (PPA)associated with bids submitted into the 2017
Solar Request for Proposals (2017S RFP)provide greater customer benefits through 2036
when compared to the Combined Projects through 2036.
The comparative results of these sensitivity studies vary by year.For instance,the
Combined Projects produce a change in annual revenue requirement that is more
favorablerelative to the solar PPA bids in some years,and in other years,this trend is
reversed.Further,any present value of revenue requirements differential (PVRR(d))
calculated off of the nominal revenue requirement results through 2036 is not appropriate
because it does not capture any potentialbenefits from capital investments beyond 2036.
Finally,the solar sensitivity studies summarized in the second supplemental direct
testimony of Company witness,Rick T.Link,were performed before the bid-evaluation
and selection process for the 2017S RFP was completed.
As summarized in Mr.Link's supplemental rebuttal testimony,this bid-evaluationand
selection process has now been completed.Based on valuation risks unique to solar
resources that are not factored into the solar sensitivities summarized in Mr.Link's
second supplemental direct testimony,continued availability of investment tax credits
(ITC)for solar resources,and anticipated price reductions for solar projects,the
Company has not selected any of the solar PPA bids that were offered into the 2017S
RFP to the final shortlist.
Respondent:Rick Link
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 7 of 16
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March 20,2018
WIEC Data Request 22.8
WIEC Data Request 22.8
Admit that the results of the nominal revenue requirements analysis performed in
conjunction with Mr.Link's second supplemental direct testimony demonstrate that the
Solar PPA option without the Combined Projects provides greater ratepayer benefits
through 2036 in the low gas,zero CO2 scenario compared to the Combined Projects only,
or the combination of the Combined Projects with the Solar PPA.If the responseto this
request is anything other than a simple,unqualified admission please explainyour
response in detail and include the PVRR(d)resulting from the nominal revenue for each
of the three alternatives under the low gas,zero CO2 case through 2036.
Response to WIEC Data Request 22.8
Please refer to the Company's responseto WIEC Data Request 22.7.
Respondent:Rick Link
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
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March 20,2018
WIEC Data Request 22.11
WIEC Data Request 22.11
Admit that the results of the nominal revenue requirements analysis performed in
conjunction with Mr.Link's March 14,2018 supplemental rebuttal testimony
demonstrate that the Solar PPA option without the Combined Projects provides greater
ratepayer benefits through 2036 in the medium gas,medium CO2 scenario compared to
the Combined Projects only.If the response to this request is anythingother than a
simple,unqualified admission please explain your response in detail and include the
PVRR(d)resulting from the nominal revenue for both alternatives under the medium gas,
medium CO2 case through 2036.
Response to WIEC Data Request 22.11
The Company denies that the nominal revenue requirement analysis demonstrates that the
solar power purchase agreements (PPA)associated with bids submitted into the 2017
Solar Request for Proposals (2017S RFP)provide greater customer benefits through 2036
when compared to the Combined Projects through 2036.
The comparative results of these sensitivity studies vary by year.For instance,the
Combined Projects produce a change in annual revenue requirement that is more
favorablerelative to the solar PPA bids in some years,and in other years,this trend is
reversed.Further,any present value of revenue requirements differential (PVRR(d))
calculated off of the nominal revenue requirement results through 2036 is not appropriate
because it does not capture any potential benefits from capital investments beyond 2036.
Finally,the solar sensitivity studies summarized in the second supplemental direct
testimony of Company witness,Rick T.Link,were performed before the bid-evaluation
and selection process for the 2017S RFP was completed.
As summarized in Mr.Link's supplemental rebuttal testimony,this bid-evaluationand
selection process has now been completed.Based on valuation risks that are unique to
solar resources that are not fully factored into the solar sensitivities summarized in Mr.
Link's supplemental rebuttal testimony,continued availability of investment tax credits
(ITC)for solar resources,and anticipated price reductions for solar projects,the
Company has not selected any of the solar PPA bids that were offered into the 2017S
RFP to the final shortlist.
Respondent:Rick Link
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 9 of 16
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March 20,2018
WIEC Data Request 22,12
WIEC Data Request 22.12
Admit that the results of the nominal revenue requirements analysis performed in
conjunction with Mr.Link's March 14,2018 supplemental rebuttal testimony
demonstrate that the Solar PPA option without the Combined Projects provides greater
ratepayer benefits through 2050 in the medium gas,medium CO2 scenario compared to
the Combined Projects only.If the responseto this request is anythingother than a
simple,unqualified admission please explain your response in detail and include the
PVRR(d)resulting from the nominal revenue for both alternatives under the medium gas,
medium CO2 case through 2050.
Response to WIEC Data Request 22.12
The Company denies that the nominal revenue requirement analysis demonstrates that the
solar power purchase agreements (PPA)associated with bids submitted into the 2017
Solar Request for Proposals (2017S RFP)provide greater customer benefits through 2050
when compared to the Combined Projects through 2050.
The comparative results of these sensitivity studies vary by year.For instance,the
Combined Projects produce a change in annual revenue requirement that is more
favorablerelative to the solar PPA bids in some years,and in other years,this trend is
reversed.The present value of revenue requirements differential (PVRR(d))calculated
off of the nominal revenue requirement results through 2050 for the Combined Projects,
when calculated using nominal carbon dioxide (CO2)price assumptions and when
accounting for potential price-profile risks is $127 million.The PVRR(d)for the solar
PPA bids,when calculated using nominal CO2 price assumptions and when accounting
for price-profile and capacity-contributionrisks calculated off of the nominal revenue
requirement results through 2050 is $149 million.
Based on valuationrisks that are unique to solar resources that are not factored into the
solar sensitivities summarized in Mr.Link's second supplemental direct testimony,
continued availability of investment tax credits (ITC)for solar resources,and anticipated
price reductions for solar projects,the Company has not selected any of the solar PPA
bids that were offered into the 2017S RFP to the final shortlist.
Respondent:Rick Link
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
Page 10 of 16
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March 20,2018
WIEC Data Request 22.17
WIEC Data Request 22.17
At Page 2 of Mr.Link's March 14,2018 supplemental rebuttal testimony,Mr.Link states
that "During the evaluationof bids in the 2017S RFP,PacifiCorp analyzed valuation risks
that are unique to the procurement of solar resources and determined that solar resource
costs are likely to continue to fall.Giventhese solar resource-valuation risks,expected
cost declines,and availability of the 30-percent investment tax credit (ITC)for solar
projects coming online as late as 2021,PacifiCorp does not need to act now and has
decided not to select any of the solar power-purchase agreement (PPA)bids to the 2017S
RFP final shortlist."
Please provide the company's expectation of future solar prices for each year through
2021.
Response to WIEC Data Request 22.17
The Company has not established a definitive projection of solar prices at this time.The
referenced statement in the supplemental rebuttal testimony of Company witness,Rick T.
Link,is based on trends in solar pricing and a recent market environment characterized
by uncertainties in tariff and tax-reform risks (see Confidential Exhibit RMP (RTL-
2SR,page 25).
Respondent:Rick Link
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
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March 20,2018
WIEC Data Request 22.18
WIEC Data Request 22.18
Has the Company explored the economics of pursuing a solar PPA option (without the
combined projects)based on its expected lower future solar pricing?If yes,please
provide a full and detailed discussion of the analysis and all results and supporting work
papers.If not,please explain in detail why not.
Response to WIEC Data Request 22.18
No.The Company has chosen not to pursue solar power purchase agreement (PPA)bids
at this time for a number of reasons,as stated in the second supplemental rebuttal
testimony of Company witness,Rick.T.Link (Link Sup.Rebuttal,page 2 lines 17-page
3,line 1,page 30-page 31,line 19,and Confidential Exhibit RMP (RTL-2SR),page
26).PacifiCorp has not analyzed sensitivities specific to future solar pricing because
there are other valuation risks that can be considered in the 2019 Integrated Resource
Plan (IRP)with full stakeholder engagement.
Respondent:Rick Link
Witness:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-l7-07
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March 12,2018
IPUC 7*Set Data Request 75
IPUC Data Request 75
Please providea levelizedPVRR(d)analysis for all price policy scenarios using
levelizedPTC benefits in the Cost of Project similar to the levelizedPVRR(d)
analysis submitted in the Company's original Application.
Response to IPUC Data Request 75
Please refer to ConfidentialAttachment IPUC 75.The example providedis the
final shortlist medium gas,medium carbon dioxide(CO2)case (P_RI7-FSLW-
MM),howeverthe same estimated present valueof revenue requirements (PVRR)
impact (approximately $214 million increased cost)can be applied to all price-
policy scenarios.
Confidentialinformationis providedsubject to the terms and conditions of the
protectiveagreement in this proceeding.
Recordholder:Randy Baker
Sponsor:Rick Link
NON-CONFIDENTIAL Monsanto Exhibit No.217
Case No.PAC-E-17-07
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MONSANTO EXHIBIT NO.217
NON-CONFIDENTIAL Monsanto Exhibit No.217
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MONSANTO EXHIBIT NO.217
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I
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March 16,2018
IPUC 7th Set Data Request 80
IPUC Data Request 80
How are the revenue requirements that flow into Joelle Stewards analysis
modeled,using levelizedrevenue requirements or nominal revenue requirements?
Please explain the rationale for this approach in detail?
Response to IPUC Data Request 80
The revenue requirements that flow into Joelle Steward's exhibits are calculated
as nominal revenue requirements.Using nominal revenue requirements is the best
representation of what the actual revenue requirement costs and benefits would be
if the Combined Projects were placed in base rates during that same period.
Recordholder:Terrell Spackman
Sponsor:Joelle Steward
NON-CONFIDENTIAL Monsanto Exhibit No.218
Case No.PAC-E-17-07
Page 1 of 5
HIGHLY CONFIDENTIAL
Rocky Mountain Power
Exhibit RMP__(RTL-SSS)Page 144 of 196
Docket No.20000-520-EA-17
Witness Rick T Link
'HIGHLY CONFIDENTIAL --SUBJECTTO UTAH PUBLIC SERVICECOMMISSION RULES
R746-1-602 AND 603"
HighlyConfidential/Proprietary Information
Final Report of Merrimack Energy Group,Inc.
To
Utah Public Service Commission
PacifiCorp Renewable Requestfor Proposals
(2017RRFP)
Short List Report
Docket No 17-035-23
February 2018
Merrimack
nergy
NON-CONFIDENTIAL Monsanto Exhibit No.218
Case No.PAC-E-17-07
Page 2 of 5
HIGHLY CONFlDENTIAL
Rocky Mountain Power
Exhibit RMP__(RTL-5SS)Page 145 of 196
Docket No.20000-520-EA-17
Wtness Rick T.Link
"HIGHLY CONFIDENTIAL --SUBJECTTO UTAH PUBLICSERVICECOMMISSION RULES
R746-1-602 AND 603"
Table of Contents
I.Introduction ....................................................................2
II.Background ...................................................................5
III.Bid Submission and Bid Evaluation Process .........................14
IV.Conclusions .................................................................50
Appendices (All Appendices are Confidential)
Appendix A:InputAssumptions
Appendix B:Notice of Intent to Bid Summary
Appendix C:Summary of Proposals Submitted
Appendix D:Summary of Proposal Evaluation Results
Appendix E:Shortlist Presentation -Wyoming Bids
Appendix F:Shortlist Presentation -Non-Wyoming Bids
Appendix G:Final Shortlist Presentation (January 8,2018)
Appendix H:Comments of Utah IE on Shortlist Evaluation and Selection
Appendix I:Revised Final Shortlist Presentation (January 19,2018)
Appendix J:Updated Final Shortlist Presentation (February 12,2018)
Merrimack Energy Group,Inc.1
NON-CONFIDENTIAL Monsanto Exhibit No.218
Case No.PAC-E-17-07
Page 3 of 5
HIGHLY CONFIDENTIAL
Rocky Mountain Power
Exhibit RMP__(RTL-5SS)Page 194 of 196
Docket No.20000-520-EA-17
Witness:Rick T.Link
"HIGHLY CONFIDENTIAL --SUBJECTTO UTAH PUBLIC SERVICECOMMISSIONRULES
R746-1-602AND 603"
The results of this assessment illustrate that the value of the PTC benefits to customers on
a nominal dollar basis are expected to be approximately $1.42 billion over the 10-year
period.
IV.Conclusions
Merrimack Energy has identified a number of conclusions associated with the bid
evaluation results and initial and final shortlist selection proposed by PacifiCorp.Our
conclusions include the following:
The response to the 2017R RFP for wind resources was very robust with.14
bidders (including PacifiCorp's benchmark resources)submitting over 70
different bid alternatives.As a result,the amount of capacity submitted
significantly exceeded the amount of capacity requested (up to 1,270)by a factor
of nearly 5.5 to 1;
Bidders submitted a mix of Power Purchase Agreements ("PPA")and Build
Transfer Agreements ("BTA").In addition,bidders offered other creative product
solutions as part of the proposals submitted,such as combined BTA/PPA options,
different pricing options for the same PPA projects such as fixed pricing and a
base price times escalation,and BTAs for the same project with different turbines;
PacifiCorp has conformed to the requirements of Rule R746-420 based on the
amount of information provided by the benchmark resources,the level of detail
provided for this information relative to all other proposals,and the methodology
for calculating the cost and value of the benchmark proposals.The IE found that
the benchmark proposals provided the same general information as all other
proposals and were evaluated using the same methodology and input assumptions;
The results of the SO and PaR evaluation on the final regsed and updated
shortlists illustrate that the pursuit of these wind project to take advantage of the
Production Tax Credits ("PTC")should result in significant benefits for
customers.The resulting bid pricing and capital costs overall were lower than the
costs included in PacifiCorp's IRP cases,resulting in additional benefits relative
to costs than PaciflCorp included in its IRP cases or subsequent assessment.
Furthermore,since PacifiCorp intends to flow through all PTC benefits to
customers over the first 10 years of the project,the near-term benefits to
customers should be significant,with total nominal dollar PTC benefits estimated
to be approximately $1.42 billion;
PacifiCorp generally followed its proposed evaluation and selection process as
outlined in the RFP.The primary deviation from the proposed evaluation and
selection process was the addition of a third revision to bid pricing to reflect the
implications of the federal Tax Bill passed in late December,2017.PacifiCorp
used the pricing provided in response to this request to revise prices as a result of
Merrimack Energy Group,Inc.50
NON-CONFIDENTIAL Monsanto Exhibit No.218
Case No.PAC-E-17-07
Page 4 of 5
HIGHLY CONFIDENTIAL
Rocky Mountain Power
Exhibit RMP_(RTL-5SS)Page 195 of 196
Docket No.20000-520-EA-17
Witness Rick T.Link
"HIGHLY CONFIDENTIAL --SUBJECTTO UTAH PUBLICSERVICECOMMISSION RULES
R746-1-602 AND 603"
the tax bill or the most recent pricing proposed as the basis for the final evaluation
results;
PacifiCorp required all bidders,including the benchmark resources,to be subject
to the same information requirements and conducted a consistent evaluation
process with all proposals treated equally in terms of the evaluation methodology
and information required of each bidder;
The IE found that the revised final evaluation and selection was reasonable based
on the bid pricing submitted by the benchmark resources and other bidders.The
IE recognized that a small change in proposal pricing could have an impact on
final project ranking given how close the shortlisted bidders were relative to one
another;
The selection of the benchmark options,notably the selection of the
ro ects,poses several risks that need to be scrutinized.The cost of the
roject is significantly lower (on a SikW basis)than a comparable proposal
submitted for the same ct bv a so histicated wind ect
devel
The lE had already
concluded that the benchmark cost for this project appeared low when compared
to market benchmarks in the IE report on the benchmark resources.In the end,the
project capital cost was low compared to actual proposals,with the benchmarks
being the lowest cost options proposed by any bidder by a significant margin.
Since this project is a cost of service option,the IE suggests that the actual cost of
the project be closely scrutinized;
A common occurrence in the wind industry has been that the actual capacity
factors of wind projects have been lower than the projected capacity factors.Such
an occurrence for PPA options is not a major issue since the PPA project must
conform to the contract requirements for meeting generation required levels or
incur penalties.For BTA or benchmark options,failure to meet the target capacity
factor is an issue.For one,the full PTC benefits may not be realized if generation
is lower than projected.Failure to meet projected generation levels for these
resources results in higher unit costs and raises the question of whether these
projects would have been selected if realistic generation profiles were provided.
While PacifiCorp retained Sapere to conduct such an analysis to ensure the
generation levels and ca.t .or ,re reasonable,the IE feels there is some
risk associated with the projects based on the Sapere analysis
regarding wake losses.The IE feels that the generation levels of the benchmark
and BTA options should be closely monitored to ensure they perform as
proposed;
On the other hand,PacifiCorp has claimed that the O&M costs associated with the
larger turbines that it has proposed will incur much lower O&M costs than the
Merrimack Energy Group,Inc.51
NON-CONFIDENTIAL Monsanto Exhibit No.218
Case No.PAC-E-17-07
Page 5 of 5
HIGHLY CONFIDENTIAL
Rocky Mountain Power
Exhibit RMP_(RTL-SSS)Page 196 of 196
Docket No.20000-520-EA-17
Wilness Rick T.Link
"HIGHLY CONFIDENTIAL --SUBJECTTO UTAH PUBLIC SERVICECOMMISSION RULES
R746-1-602 AND 603"
O&M costs estimated for the benchmark option.The IE rejected PacifiCorp's
proposal to include lower O&M costs for those projects which were using larger
wind turbines because the IE felt PacifiCorp did not provide adequate support to
base its claim regarding the magnitude of the O&M cost reduction.However,this
is an area where PacifiCorp could experience lower costs than projected;
While the IEs suggested that PacifiCorp include another PPA on the final
shortlist,PacifiCorp made a compelling case that the queue position of the PPA in
question would result in very high interconnection and network upgrade costs for
this project to achieve interconnection to the grid.PacifiCorp indicated that this
project could not interconnect to the Aeolus-to-Bridger/Anticline since there were
so many projects ahead of it in the queue and that the timing to be interconnected
could be substantial.PacifiCorp's conclusion was that this project
would require construction of the Gateway West and Gateway
South transmission projects.At the end of the process,the fmal selection decision
was based on the position of the projects in the interconnection queue,with any
projects with a queue position of Q07l3 or lower effectively being eliminated
from consideration.As a result,only the TB Flats 1 &II projects (PacifiCorp and
Invenergy),TB Flats I (PaciflCorp and Invenergy),Ekola Flats (PacifiCorp and
Invenergy)and the NextEra Cedar Springs project had a high enough queue
position to have a chance of being selected.The Invenergy Uinta project was
selected but this project did not interconnect to the Aeolus-to-Bridger/Anticline
transmission line.The only two other proposals which could have been selected
did not connect to the Aeolus-to-Bridger/Anticline transmission line and these
projects had negative economic benefits;
The IE found that PacifiCorp's Base spreadsheet model was cumbersome to
review and evaluate given the large number of tabs and integration between tabs.
The IE recommends that PacifiCorp consider simplifying this model.
Merrimack Energy Group,Inc.52