20171120Mullins Direct - Redacted.pdf

WILLIAMS ·BRADBURY
ATTORNEYS AT LAW RECEIVED
2017 NOV 20 PM 3:55
BUCNovember20,2017 COMMISSION
HAND DELIVERED
Ms.Diane Hanian
Commission Secretary
Idaho Public Utilities Commission
472 W.Washington
Boise,ID 83702
Re:IPUC Case No.PAC-E-17-07
Dear Ms.Hanian:
Please find enclosed for filing the original and nine copies of the testimony and
exhibits of Bradly G.Mullins,on behalf of the PacifiCorp Idaho Industrial Customers,in the
above referenced case.The "Redacted"testimony and exhibits are for the case file.The
yellow"confidential"testimony pages and exhibits should held under seal pursuant to
Commission Rule and the Non-Disclosure Agreement between the Company,Staff and
Parties.
Electronic copies have been served pursuant to the attached Notice of Service.
Thank you for your assistance in this matter.Please feel free to give me a call should
you have any questions.
Sincerely,
Ronald L.Williams
RLW
Enclosures
P.O.Box 388 -Boise,ID 83701
Phone:[phone] -www.williamsbradbury.com
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 20th day of November ,2017,I caused to be
served a true and correct copy of the Testimony of Brad Mullins upon the following individuals in
the manner indicated below:
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Attorney for Monsanto Company
PIIC TESTIMONY OF B.MULLINS,Page 1
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Ronald L.Williams
PIIC TESTIMONY OF B.MULLINS,Page 2
BEFORE THE RECENED
IDAHO PUBLIC UTILITIES COMMISSION 1 Î NÛ
In the Matter of The Application Of Rocky )Case No.PAC-17-E-07
Mountain Power For A Certificate Of Public )ConvenienceAnd Necessity And Binding ).
Ratemaking Treatment For New Wind And )
Transmission Facilities )
DIRECT TESTIMONY OF BRADLEY G.MULLINS
ON BEHALF OF THE PACIFICORP IDAHO INDUSTRIAL CUSTOMERS
November 20,2017
REDACTED
TABLE OF CONTENTS TO THE
DIRECT TESTIMONY OF BRADLEY G.MULLINS
I.Introduction and Summary .....................................................................................................1
II.Background on the Proposal..................................................................................................3
III.The New Wind and Transmission Resources Are Not Necessary..........................................8
IV.There Are Many Risks PacifiCorp Has Not Considered ......................................................12
V.Impact of Forecast Market Prices .........................................................................................16
a.PacifiCorp's Forward Price Curve Systematically Overstates
Future Market Prices ....................................................................................................18
b.Previous Bets on PacifiCorp's Forward Price Curve Have Been
Detrimental to Ratepayers.......................................................................................23
VI.The Economic Case Is Not Compelling..............................................................................25
a.Supplemental GRID Studies .........................................................................................26
b.Wholesale Transmission Revenues ............................................................................29
c.Cost Assumptions.......................................................................................................31
d.Wind Integration Cost ..................................................................................................32
e.Potential Impacts of Tax Reform ...............................................................................33
f.Summary of Economic Case ....................................................................................34
VII.Single Issue Rate Making Should Be Avoided....................................................................35
EXHIBIT LIST
Mullins Exhibit No.301:Regulatory Appearances of Bradley G.Mullins
Mullins Exhibit No.302 (Conf.):Company Responses to Data Requests
Mullins Exhibit No.303 (Conf.):Forward Curve Forecast Error Analysis (2007 -2016)
Mullins Exhibit No.304 (Conf.):Forward Curve Forecast Error Analysis (2010 -2016)
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PacifiCorp Idaho Industrial Customers
l I.INTRODUCTION AND SUMMARY
2 Q.PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A.My name is Bradley G.Mullins,and my business address is 333 SW Taylor Street,Suite
4 400,Portland,Oregon 97204.
5 Q.PLEASE STATE YOUR OCCUPATION AND ON WHOSE BEHALF YOU ARE
6 TESTIFYING.
7 A.I am an independentenergy and utilities consultant representing large energy consumers
8 throughoutthe United States,with a focus in the West.I am testifyingon behalf of the
9 PacifiCorp Idaho Industrial Customers ("PIIC"),a trade association whose members
10 consist of large electric customers served by Rocky Mountain Power ("PacifiCorp")in
11 Idaho.
12 Q.PLEASE SUMMARIZE YOUR EDUCATION AND WORK EXPERIENCE.
13 A·I have a Master of Accounting degree from the Universityof Utah.After obtaining my
14 Master's degree,I worked at Deloitte in San Jose,California,where I specialized in
15 performing research and developmenttax credit studies.I later worked at PacifiCorp as
16 an analyst involved in power supply cost forecasting and began working independently as
17 an energy and utilities consultant in 2013.I currentlyprovide services to utility
18 customers on matters such as power costs,utility planning,revenue requirements,rate
19 spread,and rate design.A list of cases where I have submitted testimony can be found in
20 Mullins Exhibit No.301.This is the first testimony I have submitted before the Idaho
21 Public Utilities Commission.
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PacifiCorp Idaho Industrial Customers
l Q.WHAT IS THE PURPOSE OF YOUR RESPONSE TESTIMONY?
2 A.The purpose of my testimony is to respond to PacifiCorp's proposal to construct or
3 procure 860 MW of wind resources (collectively,the "Wind Projects").'I also respond
4 to PacifiCorp's proposal to construct the "Aeolus-to-Bridger/AnticlineLine"and
5 associated network upgrades (the "Transmission Projects").2 I refer to the Wind Projects
6 and Transmission Projects collectivelyas "Energy Vision 2020."
7 PacifiCorp's filing has proposed the Wind Projects and the Transmission Projects
8 as largely inseparable investments.Subsequent to it filing testimony in this matter,
9 however,PacifiCorp has modified its ongoing request for proposal ("RFP")for the Wind
10 Projects,pursuant to an Order from the Utah Public Service Commission.3 One of the
11 modifications was to allow the RFP to consider procuring wind resources in geographic
12 locations that do not require construction of the associated Transmission Projects.4 This
13 is a source of ambiguity in PacifiCorp's proposal,since it is not clear how the
14 Commission might consider the public convenience and necessity if it is possible that
15 PacifiCorp might procure resources other than the Wyoming wind resources described in
16 its application.
17 Q.WHAT WAS THE SCOPE OF YOUR REVIEW?
18 A.I reviewed the confidential,and non-confidential,filing and workpapers of PacifiCorp.I
19 also conducted discovery,and reviewed PacifiCorp's responses to discovery requests
i REDACTED Link,Direct at 2:ll-15.
2 Id
3 ApplicationofRocky Mountain Powerfor ApprovalofSolicitation Process for Wind Resources,Ut.PSC
Docket No.17-035-23,Order ApprovingRFP with Suggested Modificationat 7 (Sep.22,2017).
4 Id
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PacifiCorp Idaho Industrial Customers
l submitted in this matter.Responses to data requests relevant to my testimony may be
2 found in Mullins Exhibit No.302.Finally,I conducted a number of supplemental
3 analytics surrounding the economics of Energy Vision 2020,such as an analysis
4 reviewing of the accuracy of previouslyissued official forward price curves.
5 Q.WHAT IS YOUR RECOMMENDATION?
6 A.Based on my review,I recommend the Commission find that the proposed Energy Vision
7 2020 resources are neither useful nor for the convenience and necessity of Idahoans
8 receiving service in this State.I also recommend the Commission find that Energy
9 Vision 2020 is not in the public interest,and reject the argument that Energy Vision 2020
10 might provide financial benefits to Idahoans,beyond mere speculation.Based on my
11 review,the case that Energy Vision 2020 might provide actual ratepayerbenefits is
12 marginal at best,and accordingly,it is would be unwise to proceed with such a
13 significant,g billion investment.
14 Energy Vision 2020 is not a project necessary for reliability purposes.It is being
15 justifiedprimarily in relation to PacifiCorp's forecasts of future power and gas prices.
16 My analysis shows that PacifiCorp has historicallyoverestimated prices in its forward
17 price curve.My review also shows that PacifiCorp's economic analysis contains a
18 number of speculative assumptions that have material impacts on the economic case for
19 making the investment.
20 II.BACKGROUND ON THE PROPOSAL
21 Q.HOW DOES PACIFICORP'S PROPOSAL RELATE TO ENERGY GATEWAY?
22 A.The Transmission Projects include sub-segment D2 of Energy Gateway.The Energy
23 Gateway was a notion discussed at least as far back as PacifiCorp's 2008 Integrated
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PacifiCorp Idaho Industrial Customers
l Resource Plan ("IRP").6 The idea behind the Energy Gateway was to rely on a 'hub and
2 spoke'configuration,to efficiently integrate transmission lines with resources and loads
3 centers.It was designed to "facilitate needed infrastructure to integrate and deliver large
4 volumes of renewable energy in the west.'96 Subsequent to the Energy Gateway proposal,
5 many stakeholders have questioned the need to make such significant transmission
6 additions.
7 Q.HAVE PARTS OF THE ENERGY GATEWAY HAVE BEEN CONSTRUCTED?
8 A.Yes.Both the 'Populous to Terminal'and 'Sigurd to Red Butte'Energy Gateway
9 segments have been constructed.Both were expensive and raised significant
10 controversy.In PacifiCorp's 2010 general rate case,for example,the Commission
11 reviewed the Populous to Terminal Energy Gateway segment.'The record in that case
12 established that the Populous to Terminal line was originally estimated to cost $78
13 million,but in fact cost $801 million,the amount requested by PacifiCorp for inclusion in
14 rate base."In that 2010 case the Commission determined that 27%of the line,or
15 $216.4 million,was not used and useful,and was plant held for future use.
16 Q.WHEN DID PACIFICORP FIRST ANNOUNCE ITS PROPOSAL TO BUILD
17 ENERGY GATEWAY SUB-SEGMENT D2?
18 A.The idea was introduced late in the public process leading up the 2017 IRP.Over the
19 course of the 2017 IRP process,parties were given the impression no further Energy
20 Gateway segments would be proposed to be built in the 2017 IRP action plan.In the
5 See PacifiCorp,2008 Integrated Resource Plan at 60-66 (May 28,2009).
6 Id.at 63.
7 Case No.PAC-E-10-07
Id.See Order No.32196,p.35
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PacifiCorp Idaho Industrial Customers
l January 26-27,2017 General Public Meeting,for example,the preferred regional haze
2 portfolio did not include any Energy Gateway additions,and there was no discussion
3 indicating that PacifiCorp was still considering the inclusion of additional Energy
4 Gateways segments in the 2017 IRP.
5 It was not until the last General Public Meeting on March 2-3,2017,held
6 approximately one month prior to issuing the 2017 IRP,when PacifiCorp announced its
7 intention to include construction of Energy Gateway sub-segment D2 in the action plan,
8 in conjunctionwith 1,100 MW of new wind resources."This timing was surprising to
9 many because much of the financial commitment underlyingthe newly proposed wind
10 resources was made in December 2016,in order to qualify for the production tax credit.
11 Q.DID PACIFICORP UPDATE ITS ANALYSIS OF ENERGY VISION 2020 AFTER
12 THE IRP?
13 A.Yes.Around July 28,2017,PacifiCorp updated its analysis of Energy Vision 2020.The
14 July update contained supplemental studies that further considered the economic benefits
15 of Energy Vision 2020,using the System Optimizer ("SO")and Planning and-Risk
16 ("PaR")dispatch models.The results were summarized in Table 2 of Mr.Link's Direct
17 Testimony.PacifiCorp also noted in discovery that it performed some supplemental
18 analysis in its Rebuttal Testimony in Utah Public Service Commission Docket No.17-
19 035-23;I have not reviewed the results of that analysis.
9 Note that PacifiCorp'srequest in this matter is limited to 860 MW,since at least 240 MW ofnew QF wind
resources have already been acquired.The 860 MW included in PacifiCorp's request in this matter is also
differentthan the total capacity included in its RFP of approximately 1,270 MW.These varied capacities
are a source of uncertainty with respect to PacifiCorp'srequest.
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PacifiCorp Idaho Industrial Customers
l Q.WHAT CHANGES DID PACIFICORP MAKE IN ITS UPDATED ANALYSIS
2 A.PacifiCorp filed a summary in Oregon that detailed the specific changes in the July28,
3 2017 analysis,relative to the 2017 IRP.I°These changes included incorporating new
4 modelling adjustments in order to improve the forecast economics of Energy Vision
5 2020.These outside-the-model adjustments were designed to account for energy
6 imbalance market ("EIM")benefits,line losses benefits,and reliability benefits.
7 PacifiCorp confirmed in discovery that,in the 2017 IRP,it had made these additional
8 outside-the-model adjustments in a way that increased the benefits it estimated for
9 Energy Vision 2020,but has since incorporated those adjustments into the System
10 Optimizer and Planning and Risk modelsli
11 Q.WHAT WERE THE RESULTS OF THE SUPPLEMENTAL STUDIES?
12 A.The supplemental studies suggested that the Energy Vision 2020 projects might produce
13 a wide range of economic outcomes,dependingon uncertain future market prices and
14 carbon price assumptions.The analysis suggested there was a $530 million range of
15 potential economic outcomes,between (-)$121 million and $409 million,depending on
16 the market price and carbon assumptions used in PacifiCorp's analysis.After
17 considering some of the speculative modeling assumptions that went into developing
18 studies,however,it is clear that the potential for a detrimental outcome is much greater
19 than PacifiCorp represents.
10 See In re PacifiCorp,dba Pacific Power,2017 IntegratedResource Plan,Or.PUC Docket No.LC 67,
PacifiCorp's 2017 IRP InformationalFiling (Jul 28,2017).
11 Mullins Exhibit No.302 at 9-10 (PacifiCorp'sResponse to PIIC Data Request ("DR")10).
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PacifiCorp Idaho Industrial Customers
l Q.HOW MUCH CAPITAL WOULD PACIFICORP DEPLOY WITH RESPECT TO
2 ENERGY VISION 2020?
3 A.PacifiCorp's proposal would represent a staggering commitment of ratepayers capital of
4 over g billion.Confidential Table 1 details the overnight capital cost of the respective
5 aspects of the Energy Vision 2020 project.
CONFIDENTIAL TABLE 1
Energy Vision 2020 Capital Investment Detail ($000)
Gateway Sub-segmentD $
Network Upgrades
McFadden II
TB Flats I
TB Flats II
Total Network Upgrades
Wind Resources
Ekola Flats
McFadden II
TB Flats
TB Flats II
Total Wind
Total Capital $
6 Q.DOES PACIFICORP HAVE AN INCENTIVE TO DEPLOY THIS CAPITAL?
7 A.Yes.It has been widely documented that utilities subject to rate of return regulation have
8 an incentive to over-invest in capital in order to increase earnings.12 This phenomenon is
9 often referred to as the Averch-Johnson Effect-based on the economists who first
10 developed the model to describe it back in the 1960s-and has a real and significant
12 &HarveyAverch&Leland L.Johnson,Behaviorofthe Firm Under Regulatory Constraint,52 AM.
ECON.REv.996,1052 (1962).
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PacifiCorp Idaho Industrial Customers
1 impact on how utility operations are managed.As the saying goes,the utility earns on
2 what it builds.Accordingly,when considering the capital investments identified in
3 Confidential Table 1,it is important to recognize that shareholders have the potential to
4 benefit hugelyif it is deployed.
5 Q.WHY DO RATEPAYERS OPPOSE THE PROJECT?
6 A.The renewable aspects of Energy Vision 2020 are appealing.Notwithstanding,ratepayer
7 advocates throughoutthe system generally view Energy Vision 2020 to be a very risky
8 investment proposal.There might be scenarios where Energy Vision 2020 might
9 produce some economics benefits,but from a ratepayer perspective,it appears more
10 likelythat Energy Vision 2020 will result in harm than benefit.If Energy Vision 2020
11 was based on a demonstrated resource need,it might provide a better justification for
12 taking on the additional risks of the investment.However,the Energy Vision 2020
13 project is discretionary and not necessary,based largely on speculative assumptions of
14 future prices.In the past,bets like Energy Vision 2020 have worked against ratepayers,
15 and for that reason,most ratepayer advocates,includingmyself,recommend against
16 proceeding with the proposed investment.
17 III.THE NEW WIND AND TRANSMISSION RESOURCES ARE NOT NECESSARY
18 Q.WHY IS THE ISSUE OF RESOURCE NEED CENTRAL TO DETERMINING
19 WHETHER ENERGY VISION 2020 IS IN THE PUBLIC INTEREST?
20 A.Fundamental to public utility regulation is the concept that ratepayers should be required
21 to pay only for utility plant necessary to provide utility services.The concept was
22 recognized over a decade ago,"that the basis of all calculations as to the reasonableness
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PacifiCorp Idaho Industrial Customers
l of rates to be charged ...must be the fair value of the property being used by it for the
2 convenience of the public."l3
3 Q.HOW HAS NOTION OF RESOURCE NECESSITY BEEN EMBODIED IN
4 PUBLIC UTILITY REGULATION IN IDAHO?
5 A.Yes.My understanding is Idaho has a relativelystrong used and useful standard.
6 Statutorily,Idaho Code §61-502A prohibits the Commission from setting rates for a
7 utility that grants a return for property that is not used and useful in providing utility
8 service,unless the Commission makes an "explicitfinding"to the contrary.In addition,
9 Idaho Code §61-526 requires that the present or future "necessity"be proven by the
10 utility,before it can construct the transmission line and generation facilities.Finally,I
11 would note that PacifiCorp has requested "binding ratemaking treatment"for its
12 investment in these assets,pursuant to Idaho Code Section 61-541.As I understand,this
13 particular code section creates an even higher burden on a utility of having to prove,or
14 "describe,"the need for a project than does section 61-526,as well as requiring the utility
15 to address and mitigate risks associated with a proposed project.The higher standard of
16 "necessity"is warranted under section 61-526,given that ratebasing is essentially
17 guaranteed.
18 Q.IS ENERGY VISION 2020 PROPERLY CHARACTERIZED AS ADDRESSING A
19 RESOURCE NEED?
20 A.No.Table 5.14 of the 2017 IRP shows available front office transactions of 1,670 MW
21 exceed the system position by a wide margin through the first ten years of the study
22 period.14 In 2026,PacifiCorp expects that currentlyavailable resources and front office
13 Smyth v.Ames,169 U.S.547 (1989).
14 Paci/JCorp 2017 IRP,Volume I at 91.
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PacifiCorp Idaho Industrial Customers
l transactions will exceed total requirements,includinga 13%planning reserve,by
2 approximately 447 MW.This means that,without acquiring any new generating
3 resources or transmission lines,PacifiCorp will continue to be capable of providing
4 adequate services to customers in Idaho.Based on this distinction,the proposal cannot
5 be reasonably characterized as addressing a resource need,and is more reasonably
6 characterized as an economic opportunity,based the current relationship between
7 projected forward prices and the projected costs of the new resources.
8 Q.WHY IS THE ISSUE OF RESOURCE NEED IMPORTANT,WHEN
9 CONSIDERING SUCH SIGNIFICANT UTILITY INVESTMENTS?
10 A.When a legitimate resource need has been established,a resource must be acquired,
11 irrespective of whether the resource produces financial benefits to ratepayers,or increases
12 overall financial risk to ratepayers.Thus,when a resource need has been established,the
13 pertinent inquiry is to determine which type of resource best fulfills the resource need at
14 the least cost,and least risk to ratepayers.In the case of a project justifiedon the basis of
15 a resource need,ratepayers appropriately take on the risk that the project might be
16 uneconomic,since the project must be completed in order for the utility to continue to
17 provide adequate utility service.
18 In contrast,in the absence of a resource need,a potential resource acquisition
19 might appropriately be considered a utility investment,but only to the degree that it
20 clearlyproduces economic rents to ratepayer through reduced rates,commensurate with
21 the risk of the investment.From this perspective,the decision of whether to proceed with
22 a resource acquisition is fundamentallydifferent from a ratepayer perspective,depending
23 on whether a resource need has been established,or not.This means that,in the case of
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1 an economic project,the threshold for proceeding with the investment must be
2 sufficiently high,and should not be speculative,to ensure ratepayers will recognize
3 positive economic rents associated with the project.
4 Q.CAN YOU PROVIDE AN ANALOGY TO ILLUSTRATE YOUR POINT?
5 A.The distinction between a resource constructed to fulfill a resource need,versus an
6 economic project,can be analogized to the considerations one might make when deciding
7 whether to acquire a home as a primary residence,versus acquiring a home as a rental
8 property.When making the decision to acquire a home as a primary residence,there are
9 many risks that are not necessary to consider,simply because one needs a place to live.
10 In contrast,when considering whether to invest in a rental property,one performs a
11 fundamentallydifferent analysis.One must determine,for example,whether the rents
12 forecasted to be received are sufficient to cover the costs and risks,with a reasonable
13 margin to justifythe investment.In addition,one only would only proceed with a rental
14 property if it has sufficient capital and the timing is right,etc.
15 Q.DOES DISPLACEMENT OF FRONT OFFICE TRANSACTIONS REPRESENT
16 THE FILLING OF A RESOURCE NEED?
17 A.No.Front office transactions are market resources that customers have access to today,
18 and not without cost.Customers have invested significantlyin the transmission system in
19 order to have access to bilateral markets.The fact that these markets exist is
20 representativeof the fact that there is surplus power in the West.Surplus power exists
21 because there is load diversity between the utilities,allowing the utilities to buy and sell
22 among each other.There is also a large amount of independentpower and qualifying
23 facilities contributing to surplus power available in bilateral markets.When accessing
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PacifiCorp Idaho Industrial Customers
1 these markets,little to no incremental ratepayersupplied capital is required,and for that
2 reason,it is preferred from a ratepayer perspective that PacifiCorp rely on front office
3 transactions,rather than making significantlymore risky capital investments.The risk of
4 deploying the capital is great,particularlywhen one considers weaknesses in the
5 underlyingeconomics.Finally,to the extent that PacifiCorp does not rely on the supply
6 of energy in bilateral markets,and instead acquires its own resources,that will have the
7 effect of increasing regional supply,reducing market prices,and reducing the economics
8 of its proposed resources.
9 Q.IS THE IRP AN APPROPRIATE FRAMEWORK FOR EVALUATING
10 ECONOMIC RESOURCE ACQUISITIONS?
11 A.No.The IRP analysis may be useful for selecting among available resources when a
12 clear resource need has been established.Since the IRP is designed to determine which
13 resource is best to fill an established resource need,however,it can ignore many of the
14 risks associated with acquiring new resources.If a resource is necessary,many risks
15 must be assumed irrespective of the resource acquired.When dealing with a
16 discretionary,economic investment,however,there are a number of additional risks that
17 must be considered,which PacifiCorp has not adequatelyaddressed in its analysis.
18 IV.THERE ARE MANY RISKS PACIFICORP HAS NOT CONSIDERED
19 Q.WHAT ADDITIONAL RISKS ASSOCIATED WITH ENERGY VISION 2020 HAS
20 PACIFICORP NOT CONSIDERED?
21 A.Four specific risks that I have identified with the Energy Vision 2020 investments
22 include:1)the current status of the Multi-State Protocol;2)forecasted oversupply
23 conditions;3)the movements towards regionalized transmission;and,4)pending tax
24 reform.There are many more of these types of risk,which are not normallyconsidered
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PacifiCorp Idaho Industrial Customers
l in the context of an IRP analysis,but are appropriately considered in the context of a
2 discretionary economic investment.
3 Q.WHAT IS THE CURRENT STATUS OF THE MULTI-STATE PROCESS?
4 A.The 2017 Protocol will expire on December 31,2019,and stakeholders are currentlyin
5 the process of trying to develop a replacement interjurisdictionalallocation methodology.
6 In place of the current framework,PacifiCorp has proposed sweeping changes to the way
7 that the cost of generationwill be allocated amongst the states.PacifiCorp's current
8 proposal is to split up the system,assign each state a fixed allocation of existing
9 resources,and move to a subscription based method for assigning new resources to each
10 state.
11 Within the context of the Multistate Process,it's not yet clear how the Energy
12 Vision 2020 would fit within a fixed allocation or subscription framework,and this
13 source of uncertainty is a real risk to ratepayers.It can hardly be considered wise,from a
14 ratepayer perspective,to begin making significant,irreversible financial decisions
15 immediately prior to splitting up the system into a subscription model.It is akin to a
16 couple buying an expensive house after they have decided to divorce.It makes the
17 allocation of assets and risks much more complicated.
18 Q.WHAT ABOUT OVERSUPPLY CONDITIONS IN THE WEST?
19 A.One of the more pressing issues of the time affecting electric utilities in the West has to
20 do with persistent oversupply conditions.Most are aware of the implications of the
21 "duck curve,"and the impact that surplus renewables are having on supply;e.g.,reducing
22 prices in bilateral markets.It is important to recognize that PacifiCorp is not the only
23 entity in the West aware of the low cost for renewable resources,with the thoughtof
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PacifiCorp Idaho IndustrialCustomers
l building them.Given current price trajectories for renewables,it is reasonable to expect
2 that oversupply conditions will get worse,not better.For example,PacifiCorp has
3 indicated in presentations to large customers that it is already experiencing negative EIM
4 prices in Wyomingand there should be an expectation that this negative pricing will
5 persist if PacifiCorp constructs the Wind Projects.PacifiCorp has not considered this
6 risk,and at a minimum,the potential for oversupply is a reason to put greater weight on
7 the low price scenarios in the economic analysis.
8 Q.DO CURRENT QUALIFYING FACILITY DEVELOPMENTS REFLECT THESE
9 OVERSUPPLY CONDITIONS?
10 A.Yes.In its 2017,Q2 avoided cost update filing with the Utah Public Service Commission,
11 PacifiCorp identified that it has potential qualifying facility ("QF")resources amounting
12 to total nameplate capacity of approximately 5,775 MW,with total contribution to
13 capacity of approximately 2,920 MWh."When added to the approximate 860 MW of
14 new wind proposed in this case,Idaho ratepayers might be looking at paying for several
15 thousand megawatts of renewable and QF resource additions.It is noteworthythat the
16 influx of QF resources is not being driven by the policies of Idaho,but the policies of
17 surrounding states.This can be noted from that fact that only 5.6 MW of these new QF
18 resources are being developed in Idaho.16 In any instance,PacifiCorp's analysis does not
19 consider how the dramatic influx of QF contracts might impact its proposal,another risk
20 which weighs against constructing the Energy Vision 2020 resources at this time.
15 Rocky Mountain Power's 2017 AvoidedCost Input Changes QuarterlyCompliance Filing,Ut.PSC Docket
No.17-035-37,Rocky Mountain Power Q2 Compliance Filing at 6.
16 Id.at 4-6 ("BYU-ID OF"is the only QF resource identifiedin the list of new and potential QF resources
located in Idaho).
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PacifiCorp Idaho Industrial Customers
1 Q.HOW MIGHT FURTHER REGIONALIZATION OF THE TRANSMISSION
2 SYSTEM IMPOSE RISKS WITH RESPECT TO ENERGY VISION 2020?
3 A.The recent regionalization efforts undertakenthrough the CAISO appear to have ended
4 suddenly,and might be forgotten as quickly as GridWest was.Notwithstanding,it is
5 reasonable to expect continued movement towards regionalization of the transmission
6 system.The Energy Gateway was a controversial aspect of recent regionalization efforts,
7 as PacifiCorp insisted on being able to complete the projects,outside of the CAISO's
8 regional transmission planning process.Many parties were not supportive of
9 PacifiCorp's proposal to build the Energy Gateway outside of regional planning process,
10 which would otherwise require competitive bidding with respect to new transmission
11 investments.
12 In addition,Under Order 1000,FERC has expressed a preference for utilities to
13 perform inter-regional transmission planning.From an inter-regional perspective,
14 segment D2 of the Energy Gateway may not be the best solution for addressing
15 transmission needs in the West.Ratepayer capital would be better deployed for the
16 purpose of improving reliability throughout the West,not for the purpose of pursuing
17 transmission investments driven by economics.
18 Q.WHAT RISKS MIGHT TAX REFORM POSE ON THE ENERGY VISION 2020
19 INVESTMENT?
20 A.Changes to the tax code have the potential to produce dramatic impacts on the economic
21 benefits of the Energy Vision 2020 project.The current House Bill has provisions that
22 would more than eliminate any potential for economic benefits with respect to Energy
23 Vision 2020 by reducing corporate tax rates and eliminating inflationaryescalators on the
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PacifiCorp Idaho Industrial Customers
l production tax credit.The potential impacts of these potential changes will be discussed
2 further below.
3 Q.AFTER CONSIDERING THESE RISKS,ARE THE ENERGY VISION 2020
4 PROJECTS IN THE PUBLIC INTEREST?
5 A.No.Since the Energy Vision 2020 project is driven by economic,not reliability
6 concerns,there should be an overwhelming case presented by PacifiCorp for making the
7 investment.PacifiCorp has failed to meet this burden of proof.In fact,after one
8 considers the speculative nature of many of PacifiCorp's assumptions,it is likelythat the
9 economics will not be favorable resulting in great harm to ratepayers.
10 V.IMPACT OF FORECAST MARKET PRICES
11 Q.WHAT IMPACT DO MARKET PRICE ASSUMPTIONS HAVE ON
12 PACIFICORP'S ANALYSIS?
13 A.The economic case underlyingthe proposed Energy Vision 2020 investment is
14 dependent,almost entirely,on PacifiCorp's assumptions related to future natural gas and
15 power prices.Under PacifiCorp's analysis,if prices are high,the Energy Vision 2020
16 project could prove to be beneficial.If prices do not increase in the way PacifiCorp
17 forecasts,however,Energy Vision 2020 will not be beneficial.As a result,the case for
18 Energy Vision 2020 can be viewed largely as speculation in future market prices.Market
19 prices are a key assumption in PacifiCorp's proposal,and for that reason,it is important
20 to have a clear understanding of the likely accuracy of PacifiCorp's forecast.
21 Q.HOW ACCURATELY HAS PACIFICORP FORECAST MARKET PRICES IN
22 THE PAST?
23 A.There should be little expectationthat anyone might be able to predict future market
24 prices with any degree of accuracy,particularlyas far as 20 or 30 years into the future.It
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PacifiCorp Idaho Industrial Customers
1 should not be surprising therefore,that PacifiCorp has not done a very good job in the
2 past at predicting future prices.In fact,the analysis I discuss below demonstrates that
3 PacifiCorp has systematically over-forecast market prices in the past.
4 Q.DO THE SAME CONCERNS ABOUT THE FORWARD PRICE CURVE APPLY
5 TO A PROJECT BUILT BASED ON A RELIABILITY NEED?
6 A.No.When a project is constructed for reliability purposes,based upon a defined resource
7 need,the accuracy of the long-term price forecast is less impactful because the price
8 forecast affects which specific type of resource should be build,but not whether a
9 resource is built at all.Thus,the accuracy of the forward price curves are of greater
10 importance in the case of an investment driven by economic factors.
11 Q.WHAT ANALYSES HAVE YOU PERFORMED SURROUNDING
12 PACIFICORP'S PRICE FORECASTING?
13 A.PacifiCorp issues periodic Official Forward Price Curves ("OFPCs").These OFPCs are
14 usuallyissued on a quarterly basis,although at times they are issued at more frequent
15 intervals.The OFPCs contain a schedule of escalating forecast market prices sometimes
16 more than thirty to forty years in the future.I have performed an analysis to consider the
17 accuracy of previously issued OFPCs.My analysis demonstrates that PacifiCorp's
18 forecast has tended to overstate future prices,and by significant margins.In addition,I
19 also discuss PacifiCorp's 2012 long term gas hedge,a contract that was similarlyjustified
20 based on forecast market prices,but has proved to be detrimental to ratepayers.
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PacifiCorp Idaho Industrial Customers
l a.PacifiCorp's Forward Price Curve Systematically
2 Overstates Future Market Prices
3 Q.PLEASE PROVIDE AN OVERVIEW OF THE ANALYSIS YOU PREPARED
4 WITH RESPECT TO PACIFICORP'S PREVIOUSLY ISSUED OFPCS.
5 A-In Mullins Exhibit No.303 and Mullins Exhibit No.304,I present an analysis exploring
6 the accuracy of PacifiCorp's previously issued OFPCs.Mullins Exhibit No.303
7 examines the accuracy of OFPCs issued over the period 2007 through2016.Mullins
8 Exhibit No.304 examines the accuracy of OFPCs issued over the period 2010 through
9 2016.Mullins Exhibit No.304 considers a shorter period of 2010 through2016 in order
10 to determine whether structural changes in natural gas and power markets-which
11 occurred generally in the period 2008 through 2010,as a result of fracking and other
12 factors-mighthave contributed to the over-forecasting observed in the longer-term
13 analysis presented in Mullins Exhibit No.303.
14 Q·WHAT DOES YOUR ANALYSIS SHOW?
15 A.The analysis in Mullins Exhibit No.303 shows that,over the period 2007 to 2016,
16 PacifiCorp has historicallyoverestimated future forward prices,and that the magnitude of
17 the over-estimation tended to be greater the further out the forecast was made.In
18 addition,the same pattern of over estimation can be observed when considering onlythe
19 curves issued over the shorter period of 2010 through 2016 in Mullins Exhibit No.304.
20 This indicates that PacifiCorp's over-forecasting cannot be explained by the unexpected,
21 rapid decline in natural gas prices that occurred between 2008 and 2010.
22 The analysis for the Henry Hub market has been reproduced in Confidential
23 Figure 1,below,based on OFPCs issued over the period 2007 through2016.
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PacifiCorp Idaho Industrial Customers
CONFIDENTIAL FIGURE 1
Henry Hub Forecast Error Henry Hub,
For OFPCs Issued 2007 to 2016
1 Similarly looking figures may be found in Mullins Exhibit No.303 for other
2 power and gas markets.In addition,Mullins Exhibit No.304 also contains similarly
3 looking figures over,although the slope of the median error line tended to be reduced
4 slightly when the analysis was performed over the shorter period.
5 Q.PLEASE DESCRIBE THE DATA PRESENTED IN CONFIDENTIAL FIGURE 1.
6 A.Confidential Figure 1 is a plot of the percentage forecast error associated with forward
7 prices included in forward price curves issued by PacifiCorp over the period 2017 the end
8 of 2016.Each dot in the figure represents the percentage difference between a price that
9 was forecast in a forward curve and the ultimate spot price for the given prompt month.
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PacifiCorp Idaho Industrial Customers
l To the extent that the error is positive,it means that the price in the forward curve
2 exceeded the ultimate spot price.To the extent that the error is negative,it means that the
3 price in the forward curve was less than the ultimate spot price.Along the x-axis,the set
4 of forecast errors were separated by the number of months before the prompt month for
5 which the forward price was calculated.Thus,a forecast error further to the right
6 indicates the forecast error associated with a price that was forecast further in advance of
7 the prompt month.Similarly,a forecast error on the left side of the x-axis represents a
8 price that was forecast nearer to the prompt month.Overlaid on the figure is the median
9 forecast error based on the number of months in advance of the prompt month that the
10 forward prices were calculated,as well as the interquartile range of the forecast errors.
11 Q.HOW CAN THE DATA PRESENTED IN CONFIDENTIAL FIGURE 1 BE USED
12 TO DETERMINE PACIFICORP'S ABILITY TO PREDICT FORWARD
13 PRICES?
14 A.If the OFPCs are reasonably accurate,one would expect PacifiCorp's price forecast to be
15 an unbiased expectation of future spot prices.That is,forward prices would exceed the
16 ultimate spot price 50%of the time and be less than the spot price 50%of the time.That
17 is clearly not the case.
18 Q.COULD THE ABOVE ANALYSIS ALSO BE USED TO DETERMINE IF THERE
19 IS A RISK PREMIUM EMBEDDED IN THE FORWARD PRICE CURVE?
20 A.Another way to look at PacifiCorp's over forecasting is as a risk premium,an additional
21 amount above the spot market price that PaciflCorp is willingto pay in order to lock in a
22 fixed price.If there is no risk premium embedded in the OFPC,the median forward
23 curve forecast error should be zero.If,however,the median forecast error exceeds zero,
24 that is an indication of a risk premium.It makes sense that there might be a risk premium
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PacifiCorp Idaho Industrial Customers
l built into forward prices,based on the fact that the curves are always upsloping,having
2 the attributes of a contango market
3 Q.WHAT DOES THE DATA IN YOUR ANALYSIS CONFIRM ABOUT THE
4 EXISTENCE OF RISK PREMIUMS IN PACIFICORP'S FORECASTS?
5 A-The empirical analysis in Confidential Figure 1 indicates that there have been risk
6 premiums embedded in the forward curves and that those risk premiums have been
7 substantial.For a transaction executed more than one year in advance of the prompt
8 month,the expected forecast error for Henry Hub was approximately %.This means
9 that each time PacifiCorp purchases a financial gas swap more than one year in advance
10 of the prompt month,ratepayers should statistically expect ultimatelyto pay an amount
ll that is %greater than the actual spot price of natural gas.
12 Similar risk premiums may be observed in power markets.As can be identified in
13 Mullins Exhibit No.303,the risk premium observed in PacifiCorp's Palo Verde market
14 was approximately %for transactions executed more than one year in advance.For
15 transactions executed more than 5 years in advance,the observed risk premium rose to
16 approximately %,meaning that,if a transaction were executed more than five years in
17 advance based on the Palo Verde Market,ratepayers would be required to pay nearly
18 the spot rate for power.These are considerable premiums,with many troubling
19 implications extending beyondjustthe Energy Vision 2020 investment.
20 Q·HOW SHOULD THE ABOVE ANALYSIS BE CONSIDERED WHEN
21 EVALUATING THE ECONOMIC CASE FOR ENERGY VISION 2020?
22 A·In the case of Energy Vision 2020,the economics rely on forward prices extending 40
23 years into the future in some of its analyses.The analyses in Mullins Exhibit No.303
24 and Mullins Exhibit No.304 only detail forecast errors for prices forecast five to seven
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PacifiCorp Idaho Industrial Customers
l years in advance of the prompt month,due to the availabilityof data.Based on the
2 analysis,however,it is reasonable to assume that PacifiCorp will over-estimate forward
3 prices by even greater magnitudes when estimated 20 to 40 years into the future.
4 Ratepayers throughout PacifiCorp's system are not comfortable taking on the risk that
5 PacifiCorp's price forecast might be overstated.Since PacifiCorp has historically
6 overstated market prices,and by significant margins,little weight should be given to the
7 economics in medium and high-priced gas scenarios.In fact,even the prices in the low
8 priced scenario are probably overstated based on the magnitude of risk premium observed
9 in PacifiCorp's historical curves.
10 Q.HAS THE COMMISSION RECOGNIZED THE INHERENT DIFFICULTY
11 ASSOCIATED WITH LONG-TERM PRICE FORECASTING?
12 A.Yes.The Commission has recently expressed similar skepticism regarding long-term
13 price forecasts used to develop for QF avoided costs,in agreeing with PacifiCorp and
14 other investor owned utilities and granting them the right to reduce the length of QF
15 contracts for wind and solar projects from 20 years,down to two years.As experienced
16 in the recent past,previous attempts to execute long term transactions justifiedbased on
17 the prices in PacifiCorp's OFPC have not worked in ratepayers favor due to the observed
18 forecast errors,and there should be little expectation that Energy Vision 2020 might
19 produce any different result.
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PacifiCorp Idaho Industrial Customers
l b.Previous Bets on PacifiCorp's Forward Price
2 Curve Have Been Detrimental to Ratepavers
3 Q.HAS PACIFICORP ENTERED INTO AN RECENT LONG-TERM
4 TRANSACTION JUSTIFIED ON THE BASIS OF ITS PRICE FORECAST?
5 A.Yes.In 2012,PacifiCorp entered into a pair of long-term gas hedging contract.The
6 execution of those contract was discussed in Utah Public Service Commission Docket
7 No.12-035-102.Execution of the long-term contracts was subject to a provision that the
8 levelized price of the contract not exceed the forward market prices in PacifiCorp's
9 forecast.The stipulation in that matter required that "refreshed pricing yields a market
10 ratio below 100 percent calculated from PacifiCorp's most current forward price curve at
11 the time bid prices are refreshed"IT
12 Q.DID PACIFICORP EXECUTE A CONTRACT PURSUANT TO ITS GAS
13 HEDGING CONTRACTS?
14 A.PacifiCorp entered into two contracts with J Arron,the Commodities trading division of
15 Goldman Sacs.I have reviewed the terms of those contracts,and previouslycontested
16 them in a Wyoming proceeding on the basis that they constituted affiliate transactions.
17 At the time of the transaction as Berkshire Hathaway possessed warrants on Goldman
18 Sacs equating to beneficial ownership of about 8.4%.I am not contesting the transactions
19 in this matter,but merely pointing out how detrimental they have been to ratepayers,
20 having been justified on the basis of PacifiCorp's official forward price curve similar to
21 Energy Vision 2020.
17 In the Matter ofthe Voluntary Request ofRocky Mountain Power for ApprovalofResource Decision to
Acquire Natural Gas Resources,Ut.PSC Docket No 12-035-102,Settlement Stipulation,¶5
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PacifiCorp Idaho Industrial Customers
l Q.HOW DETRIMENTAL HAVE THE LONG-TERM GAS HEDGING
2 CONTRACTS BEEN TO RATEPAYERS?
3 A.From a ratepayer perspective,the contracts have not been beneficial and have resulted in
4 significant and unnecessary costs.Confidential Figure 2,below,shows the historical
5 settlements,as well as the future mark-to-market cost,associated with the long term gas
6 hedging contracts.
CONFIDENTIAL FIGURE 2
Benefit /(Cost)of J.Arron Long-term Gas Hedging Contracts ($millions)
7 Q.WHAT DOES CONFIDENTIAL FIGURE 2 SHOW?
8 A.Confidential figure 2 shows that PacifiCorp has a record of losing when making bets on
9 PacifiCorp's official forward price curve.Based on current forward prices forecasts,
10 which themselves may be overstated,ratepayers are poised to incur approximately g
11 million in cost with respect to the above long-term gas hedging contract.
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PacifiCorp Idaho Industrial Customers
l Q.WHAT IS YOUR CONCLUSION REGARDING FORECASTING RISKS AND
2 THE PROPOSED PROJECTS?
3 A.In total,the Energy Vision 2020 proposals will likely cost ratepayers several billion
4 dollars,and similar to the above long-term gas hedging contracts,PacifiCorp purports
5 that the Energy Vision 2020 investment would be justified primarily based on its
6 expectation surrounding future market prices.Yet,PacifiCorp's price curves have
7 historically failed to reasonably estimate future prices,and the experience with respect to
8 the long-term gas hedging contracts shows how significant the impact of these inaccurate
9 assumptions can be.Based on the experience with the long-term gas hedge,it is not
10 reasonable for PacifiCorp to make long-term bets on the accuracy of its forward price
11 curve,particularlybets of the magnitude contemplated with Energy Vision 2020.
12 VI.THE ECONOMIC CASE IS NOT COMPELLING
13 Q.WHY DO YOU BELIEVE THAT PACIFICORP HAS OVERSTATED THE
14 POTENTIAL FOR BENEFITS ASSOCIATED WITH ENERGY VISION 2020?
15 A.Even if one were to ignore PacifiCorp's pattern of over-forecasting future prices,the
16 economic case for Energy Vision 2020 is not compelling.Upon examination of the
17 assumptions PacifiCorp used to inform its analysis,it is apparent that there is not an
18 overwhelmingeconomic case for deploying the significant amount of capital underlying
19 Energy Vision 2020.In fact,the data suggests that it is more likelythat these projects
20 will end up costing ratepayer greatly in the long run.In Confidential Table 2,below,I
21 detail the impact of peeling away some of the speculative assumptions in PacifiCorp's
22 analysis.
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PacifiCorp Idaho Industrial Customers
CONFIDENTIAL TABLE 2
Net Present Value Revenue Requirement ("NPVRR")
Impact of Speculative Assumptions ($million)
Company Identified Benefit /(Cost)(Low Gas Med CO2)$(32)-$(73)
Impact of SpeculativeAssumptions:
SupplementalGRID Study Adjustments (65)
Wholesale TransmissionRevenues
Transmission Costs
Wind Integration Costs (105)
Tax Reform (211)
Total (544)
Potential Harm to Ratepayers $(576)-$(617)
1 With forecast ratepayer NPVRR cost of $32 million to $73 million under the low
2 gas price scenario,the potential for Energy Vision 2020 to result in harm to ratepayers is
3 great.After considering these speculative assumptions,Energy Vision 2020 could end up
4 costing ratepayers approximately $576 million to $617 million on an NPVRR basis.
5 These are not the characteristics of a project that PacifiCorp should be pursuing as a
6 utility investment.
7 a.SupplementalGRID Studies
8 Q.WHAT SUPPLEMENTAL GRID STUDIES DID PACIFICORP PERFORM
9 WHEN DEVELOPING THE ECONOMIC CASE FOR ENERGY VISION 2020?
10 A.As a part of the initial economic analyses surrounding Energy Vision 2020,PacifiCorp
11 performed supplemental GRID studies where it quantified additional projected benefits of
12 approximately $64.5 million,on a NPVRR basis,over a 20-year period.The studies
13 were used to quantifythe certain aspects of PacifiCorp's proposal related to reduced line
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PacifiCorp Idaho Industrial Customers
l losses,reliability benefits,and EIM benefits,which PacifiCorp believed would be
2 additive to the economics calculated using the IRP models.
3 Q.HAVE THESE MODELING ADJUSTMENTS BEEN INCORPORATED INTO
4 THE IRP MODELS?
5 A.Yes.PacifiCorp confirmed that it has subsequently incorporated the adjustments
6 underlyingthe supplemental GRID studies into the System Optimizer and Planning and
7 Risk models.Those adjustments,however,have little basis in reality,yet are a key driver
8 in the economic benefits that PacifiCorp purports with respect to Energy Vision 2020.
9 Q.WHAT ADDITIONAL CLAIMED BENEFITS DID PACIFICORP INCLUDE
10 WITH RESPECT TO LINE LOSSES?
11 PacifiCorp believes that the new transmission line will have a positive impact on line
12 losses,and modeled the line losses by quantifyingthe power cost impacts of reducing
13 loads in Wyoming.Notwithstanding,I expects that the addition of new resources in
14 remote areas of Wyoming would actuallyincrease line losses,in contrast to resources at
15 locations nearer to loads.While the lines themselves may have improved loss ratings,
16 adding more resources to remote locations on PacifiCorp's system causes more power to
17 flow over long distances,subjecting more power to transmission level losses.For
18 example,a study performed by Steve Knudson in the Utah proceeding on the ongoing
19 RFP showed that locating new resources in Wyoming far from load would result in
20 materially higher real system power losses in critical winter and summer peak conditions.'"
21 In addition,ratepayers have no way to ensure that the line loss reductions are actually
22 achieved.
18 In re the ApplicationofRocky Mountain Power for ApprovalofSolicitation Process of Wind Resources,
Ut.PSC Docket No 17-035-23,Prefiled Testimony of F.Steven Knudsen at l2:245-247.
Mullins,Di -27
PacifiCorp Idaho Industrial Customers
l Q.WHAT ADDITIONAL CLAIMED BENEFITS DID PACIFICORP INCLUDE
2 WITH RESPECT TO THE EIM?
3 A.With respect to the additional claimed EIM benefits,I am concerned with this aspect of
4 PacifiCorp's analysis because the benefits associated with the EIM are being modeled in
5 a way that is completely different than the way that EIM benefits are established when
6 setting power costs in general rate cases,and other similar dockets.In its economic
7 analysis of Energy Vision 2020,PacifiCorp modeled the entrance of Idaho Power into the
8 EIM by increasing the transfer capability between Jim Bridger and Walla Walla by 300
9 MW,even though no actual increase to transfer capability will occur as a result of the
10 EIM.Thus,PacifiCorp's models were configured to allow additional phantom transfers
11 of power from Jim Bridger into the Northwest,even though PacifiCorp does not have
12 transmission rights to accommodate those transfers.Such an assumption has no basis in
13 the way that the EIM actually operates,as the EIM does not allow a utility to rely on the
14 system of another utility in order to effectuate firm transfers of power in excess of firm
15 rights.Attempting to use the EIM to effectuate firm transfers in the manner
16 contemplated by PacifiCorp is a prohibited practice and would violate many provisions of
17 the EIM.To accomplish the additional firm transfers,PacifiCorp would basically have to
18 manipulate its hour-ahead schedules,with the expectation that EIM would redispatch its
19 resources in order to serve loads in the Northwest.
20 In contrast,the EIM will likelyrepresent an additional cost associated with the
21 Wind Projects,which PacifiCorp has not considered in its economic analysis.The Wind
22 Projects will be subject to uninstructed imbalance charges,and the cost of those charges
Mullins,Di -28
PacifiCorp Idaho Industrial Customers
1 are not reflected in PacifiCorp's analysis.Due to transmission constraints in eastern
2 Wyoming,I expect the uninstructed imbalance charges to be material.
3 Q.ARE THESE MODELING ADJUSTMENTS APPROPRIATELY USED TO
4 JUSTIFY SUCH MAJOR RESOURCE ADDITIONS?
5 A.No.These supplemental analyses are hardly a sound basis to justify such significant
6 resource additions and ratepayer risks.Notwithstanding,these modeling adjustments
7 would comprise nearly the entirety of the benefits forecast in the medium gas and CO2
8 scenario in PacifiCorp's analysis.Effectively,ratepayers are dealing with a risky
9 marginal project that would clearly not be forecast to be economic in the absence of these
10 modeling adjustments.Ratepayers and regulators should not be comfortable making
11 significant resource additions based on these types of aggressive modeling assumptions.
12 b.Wholesale Transmission Revenues
13 Q.WHAT HAVE YOU IDENTIFIED WITH RESPECT TO PACIFICORP'S
14 ASSUMPTIONS SURROUNDING WHOLESALE TRANSMISSION REVENUES?
15 A.PacifiCorp assumes that,in connection with the Aeolus to Bridger segment,it will
16 receive about g million,on a NPVRR basis,of associated incremental transmission
17 revenues over the 20-year period.19 PIIC performed discovery with respect to these
18 claimed incremental benefits in Data Request 11.In response to that data request,
19 PacifiCorp describes these additional claimed benefits as the amount by which projected
20 incremental revenue received from other transmission customers will offset the revenue
21 requirement for these transmission investments.20
19 Calculated from PacifiCorp'sconfidential workpaper "Energy Gateway GM 2017 03 13 w Bonus",Tab
"Gateway",Column "G."
20 Mullins Exhibit No.302 at 11:12 (PacifiCorp'sResponse to PIIC DR l1).
Mullins,Di -29
PacifiCorp Idaho Industrial Customers
l Q.DO YOU AGREE WITH PACIFICORP'S ASSUMPTION?
2 A.No.PacifiCorp's analysis was highly simplified,and does not represent the way that the
3 formula rates will actuallywork.PacifiCorp simply assumed that 12%of the new
4 investment would be funded by Open Access Transmission Tariff ("OATT")customers,
5 based upon the historical percentages of transmission revenue requirement that was
6 funded by OATT customers.But,PacifiCorp did not perform a rigorous analysis of how
7 the amount of costs allocated to OATT customers will change as a result of the project.
8 Q.DOES PACIFICORP PROPERLY ACCOUNT FOR THE WAY THAT THE
9 PROJECT MIGHT FLOW THROUGH FORMULA RATES?
10 A.No.PacifiCorp's analysis fails to account for the fact that when the Energy Vision 2020
11 project is constructed,it will require PacifiCorp's merchant operations to maintain
12 additional transmission capacity in order to utilize the wind facilities.When this
13 additional capacity is acquired,it will dilute the percentage of costs allocated to OATT
14 customers,resulting in additional cost being allocated to retail customers.The amount of
15 this benefit is comparable to the overall amount of benefits expected under the base case
16 scenario.
17 Notwithstanding,this 12%assumption was made with little rigor and is
18 fundamentallyinconsistent with how the new project will impact the costs borne by retail
19 customers.Once again,this assumption is hardly a basis to justifythe significant
20 investment that PacifiCorp proposes,yet the preponderance of alleged benefits could be
21 attributed solely to this assumption.
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PacifiCorp Idaho Industrial Customers
1 L Cost Assumptions
2 Q.HOW MUCH CERTAINTY DO RATEPAYERS HAVE WITH RESPECT TO
3 PACIFICORP'S COST ASSUMPTIONS?
4 A.The total capital required for the Aeolus to Bridger/Anticlinetransmission project is
5 forecast to be about g million.21 Given this large magnitude,even small changes to
6 this cost assumption can have the effect of eliminating the claimed positive economics of
7 the project.
8 Q.DOES PACIFICORP RECOGNIZE THAT THERE IS A GREAT DEAL OF
9 UNCERTAINTY SURROUNDING ITS COST ASSUMPTIONS?
10 A.Yes.In response to PIIC Data Request 15,PacifiCorp estimated the accuracy of its
11 transmission cost assumption to be within plus,or minus,15%of actual spending.22 That
12 is a range of approximately $97 million above and below PacifiCorp's estimate.That
13 magnitude of error would eliminate any claimed favorable economics associated with the
14 project,under the medium price scenarios.
15 Q.HAS PACIFICORP MADE OTHER QUESTIONABLECOST ASSUMPTIONS?
16 A.PacifiCorp also makes some assumptions regarding operating expenses.In response to
17 PIIC Data Request 14 for example,PacifiCorp identifies an assumption in its model to
18 include $1 million of incremental operations and maintenance expenses associated with
19 the new transmission project.23 When requested to substantiate this estimate,PacifiCorp
20 noted that it had no supporting workpapers for the estimate,and therefore,no basis to
21 refute that incremental operating expenses might be substantially higher than its estimate.
21 See PacifiCorp'sconfidential workpaper "Energy Gateway GM 2017 03 13 w Bonus",Tab "Summary",
Cell "G26"
22 Mullins Exhibit No.302 at 18:19 (PacifiCorp'sResponse to PIIC DR 15).
23 Mullins Exhibit No.302 at 17 (PacifiCorp's Response to PIIC DR 14).
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PacifiCorp Idaho Industrial Customers
l d.Wind IntegrationCost
2 Q.WHAT LEVEL OF WIND INTEGRATION COSTS DID PACIFICORP
3 INCLUDE IN ITS ANALYSIS?
4 A.PacifiCorp includes integration costs of approximately $0.63/MWh in this case.
5 However,PacifiCorp's currentlyapproved wind integration charge in Idaho is
6 $3.06/MWh.PacifiCorp also has an application pending before the Commission in Case
7 No.PAC-E-17-11 to reduce its wind integration charge from $3.06 to $0.57/MWh.It
8 seems that the higher wind integration charge was justfine for PacifiCorp in the context
9 of its reducing avoided cost payments to independentQF projects,but now seems too
10 high with respect to the new Wyoming wind projects.PacifiCorp's manipulation of wind
11 integration charges is obviouslyand patently self-serving.Of great concern in this case is
12 PacifiCorp's blatant manipulation of the wind integration charge to justifythe economics
13 of the new Wyoming wind.I would also note that this Commission has yet to approve
14 PacifiCorp's new proposed wind integration charge,and until changed,PacifiCorp is
15 obligated to evaluate the new wind resources with the wind integration charge on file and
16 approved by this Commission.
17 Q.WHAT WIND INTEGRATION VALUES HAS PACIFICORP USED
18 PREVIOUSLY?
19 A.Based on the 2014 Wind Integration Study,PacifiCorp estimated intra-hour wind
20 integration costs of approximately $2.35/MWh-almost four times as much as is
21 assumed for the new wind in this docket.24 In addition,PacifiCorp has previously
247 See e.e.,In The Matter of the Application of Rocky Mountain Power for Authority of a General Rate
Increase in Its Retail Electric Utility Service Rates in WVomine of $32.4 Million Per Year or 4.5 Percent,
Wy.PSC,Docket No.20000-469-ER-l5,Direct Testimony of Bradley G.Mullins at 63,Table BGM-6.
Mullins,Di -32
PacifiCorp Idaho Industrial Customers
l identified inter-hour wind integration costs of approximately 0.75/MWh,25yet the
2 economic analysis for Energy Vision 2020 includes no inter-hour wind integration costs.
3 Q.WHAT IS THE IMPACT OF USING THIS WIND INTEGRATION
4 ASSUMPTION?
5 A.I estimate that if the 2014 Wind Integration Study results were used,including inter-hour
6 wind integration,it would reduce PacifiCorp's claimed economics of the Energy Vision
7 2020 project by approximately $104.9 million.
8 Q.IS IT POSSIBLE TO VERIFY THAT THIS SAVINGS IN WIND INTEGRATION
9 COSTS WILL BE ACHIEVED?
10 A.No.Generally,it is not possible in actual operations to determine the amount of actual
11 wind integration costs that PacifiCorp might incur with respect to the Wind Projects.If
12 the actual wind integration costs are higher than PacifiCorp expects it will reduce the
13 economics of the project,yet it is not possible to verify whether wind integration costs
14 will ultimatelybe in line with PacifiCorp's assumptions in this matter.
15 e.Potential Impacts of Tax Reform
16 Q.WHAT IMPACT MIGHT TAX REFORM HAVE ON THE PROJECT
17 ECONOMICS?
18 A.Much of the projected benefits of PacifiCorp's proposed strategy come in the form of
19 expected tax benefits.Notwithstanding,if reduced corporate tax rates are approved,the
20 benefits of favorable tax provisions will be diminished.This is a significant risk
21 associated with the project and,in response to PIIC Data Request 13,PacifiCorp
22 estimated that,if tax reform is approved,it will reduce the project economics by
23 approximate $93 million.Thus,any projected benefits in the medium gas and CO2 case
25 Mullins Exhibit No.302 at 15:16 (PacifiCorp'sResponse to PIIC DR 13).
Mullins,Di -33
PacifiCorp Idaho Industrial Customers
1 could be entirelyeliminated if congressional efforts associated with tax reform are
2 advanced.
3 Q.ARE THERE OTHER POTENTIAL TAX REFORM PROVISION THAT MIGHT
4 IMPACT THE ECONOMICS?
5 A.Yes.The proposed House Bill would eliminate the inflationaryescalator applied to
6 production tax credits,which would similarlyreduce the project economics.PacifiCorp's
7 analysis,however,assumes 2%per year inflationaryescalation for production tax credits.
8 I estimate that removing the escalation assumption on production tax credits reduces the
9 NPVRR economics of Energy Vision 2020 by approximately $116.4 million.Thus in
10 total,tax reform has the potential to reduce the already questionable economics of the
11 Energy Vision 2020 project by $209.4 million on a NPVRR basis.
12 £Summary of Economic Case
13 Q.PLEASE SUMMARIZE WHY YOU BELIEVE THE ECONOMIC CASE FOR
14 ENERGY VISION 2020 IS NOT COMPELLING.
15 A.Taking all of the speculative assumptions into consideration,it is clear that the Energy
16 Vision 2020 project is hardly a slam-dunk,as PacifiCorp would imply.If these
17 speculative assumptions are stripped away,the project cannot be viewed as being
18 economic for ratepayers.Based on these assumptions,it is clear that there are a great
19 number of risks associated with the project that cannot be reasonably captured in the
20 probabilistic analysis that PacifiCorp performed.Risk such as the possibility of changing
21 tax provisions,make economic projects inherentlymore risky to ratepayers,than a
22 project justifiedbased on a demonstrated resource need.For that reason,there needs to
23 be an overwhelmingcase presented in order to pursue an economic project.Yet,in this
Mullins,Di -34
PacifiCorp Idaho Industrial Customers
l case,there is not an overwhelmingeconomic case,and in fact,it appears more likelythat
2 the project will cost ratepayers significantly.
3 VII.SINGLE ISSUE RATE MAKING SHOULD BE AVOIDED
4 Q.HOW HAS PACIFICORP PROPOSED TO RECOVER THE COSTS OF
5 ENERGY VISION 2020?
6 A.The ratemaking proposal of PacifiCorp in this matter was described in the Direct
7 Testimony of Mr.Larsen.Prior to PacifiCorp's next general rate case,PacifiCorp
8 proposes to use a Resource Tracking Mechanism ("RTM"),as a component of Energy
9 Cost AdjustmentMechanism,to recover costs associated with the New Wind and New
10 Transmission investments.26
11 Q.IS PACIFICORP'S RATEMAKING PROPOSAL APPROPRIATE?
12 A.No.PacifiCorp's proposal would constitute single issue ratemaking,which is inherently
13 unfair to ratepayers and should generally be avoided.
14 Q,WHY IS SINGLE ISSUE RATEMAKING UNFAIR TO RATEPAYERS?
15 A.When utility regulatory commissions determine the appropriateness of a cost that a utility
16 seeks to recover from its customers,the standard practice is to review and consider all
17 relevant factors as part of a general rate case,rather than justcertain factors in isolation.
18 Isolation of a single issue,as PacifiCorp requests with respect to the RTM,is disfavored
19 as a matter of policy because it distorts the fundamental "matching principle"of
20 traditional ratemaking.While under traditional ratemaking,revenues and costs are
21 balanced at a common point in time,single issue ratemaking often isolates only those
22 costs expected to increase,without recognizing counterbalancing savings in another area.
26 Larsen,Direct at 2:5-22.
Mullins,Di -35
PacifiCorp Idaho Industrial Customers
l As a result,single issue ratemaking often results in over-earning by the utility and over-
2 paying by the customer.Accordingly,the Commission should view the ratemaking
3 proposal surrounding the RTM with great caution.
4 Q.HOW SHOULD AN INVESTMENTS SUCH AS ENERGY VISION 2020 BE
5 INCORPORATED INTO RATES?
6 A.From a ratepayer perspective,it is more appropriateto consider investments of the scope
7 contemplated with Energy Vision 2020 in a general rate case.This will allow all aspects
8 of utility's costs to be considered.In a general rate case,ratepayers can be assured to
9 receive credit from other aspects of PacifiCorp's results,which might have trended
10 favorably.
11 Q.DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?
12 A.Yes.
Mullins,Di -36PacifiCorpIdahoIndustrialCustomers
Ronald L.Williams,ISB No.3034
P.O.Box 388,802 W.Bannock Street,Suite 900
Boise,ID 83702
Telephone:[phone]
Email:[e-mail]
Attorneysfor PacifiCorp Idaho Industrial Customers
BEFORE THE IDAHO PUBLIC UTILITES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
ROCKY MOUNTAIN POWER FOR )CERTIFICATESOF PUBLIC CONVENIENCE )Case No.PAC-E-17-07
AND NECESSITY AND BINDING )RATEMAKING TREATMENT FOR WIND )AND TRANSMISSION FACILITIES )
EXHIBIT )01
l Q.PLEASE PROVIDE A LIST OF YOUR REGULATORY APPEARANCES.
2 A.I have sponsored testimony in the followingregulatory proceedings:
3 In re Avista Corporation Request for a General Rate Revision,Wa.UTC,Docket No.UE-
4 170485 (Cons.).
5 .Application of Nevada Power Company d/b/a NV Energy for Authority to Adjust its
6 Annual Revenue Requirement for General Rates Charged to All Classes of Electric
7 Customers and For Relief Properly Related Thereto,Nv.PUC,Docket No.17-06003
8 (Cons.).
9 In the Matter of PacifiCorp,dba Pacific Power,2016 Power Cost Adjustment
10 Mechanism,Or.PUC,Docket No.UE-327.
11 In re the 2018 General Rate Case of Puget Sound Energy,Wa.UTC,Docket No.170033
12 (Cons.).
13 In re PacifiCorp,dba Pacific Power,2018 Transition Adjustment Mechanism,Or.PUC,
14 Docket No.UE 323.
15 In re Portland General Electric Company,Request for a General Rate Revision,Or.PUC,
16 Docket No.UE 319.
17 In re Portland General Electric Company,Application for Transportation Electrification
18 Programs,Or.PUC,UM 1811.
19 In re Pacific Power &Light Company,Application for Transportation Electrification
20 Programs,Or.PUC,Docket No.UM 1810.
21 In re the Public Utility Commission of Oregon,Investigation to Examine PacifiCorp,dba
22 Pacific Power's Non-Standard Avoided Cost Pricine,Or.PUC,Docket No.UM 1802.
23 In re Pacific Power &Light Co.,Revisions to Tariff WN U-75,Advice No.16-05,to
24 modify the Company's existing tariffs governing permanent disconnection and removal
25 procedures,Wa.UTC,Docket No.UE-161204.
26 In re Puget Sound Energy's Revisions to Tariff WN U-60,Adding Schedule 451,
27 Implementinga New Retail Wheeling Service,Wa.UTC,Docket No.UE-161123.
28 2018 Joint Power and Transmission Rate Proceedine,Bonneville Power Administration,
29 Case No.BP-18.
30 In re Portland General Electric Company Application for Approval of Sale of Harborton
3 l Restoration Project Property,Or.PUC,Docket No.UP 334 (Cons.).
Exhibit No.301
Case No.PAC-E-17-07
B.Mullins,PIIC
p.1 of 4
l In re An Investigation of Policies Related to Renewable Distributed Electric Generation,
2 Ar.PSC,Matter No.16-028-U.
3 .In re Net Metering and the Implementation of Act 827 of 2015,Ar.PSC,Matter No.16-
4 027-R.
5 .In re the Application of Rocky Mountain Power for Approval of the 2016 Energy
6 Balancing Account,Ut.PSC,Docket No.16-035-01
7 In re Avista Corporation Request for a General Rate Revision,Wa.UTC,Docket No.UE-
8 160228 (Cons.).
9 In re the Application of Rocky Mountain Power to Decrease Current Rates by $2.7
10 Million to Recover Deferred Net Power Costs Pursuant to Tariff Schedule 95 and to
11 Increase Rates by $50 Thousand Pursuant to Tariff Schedule 93,Wy.PSC,Docket No.
12 20000-292-EA-16.
13 In re PacifiCorp,dba Pacific Power,2017 Transition Adjustment Mechanism,Or.PUC,
14 Docket No.UE 307.
15 .In re Portland General Electric Company,2017 Annual Power Cost Update Tariff
16 (Schedule 125).Or.PUC,Docket No.UE 308.
17 .In re PacifiCorp,Request to Initiate an Investigation of Multi-Jurisdictional Issues and
18 Approve an Inter-Jurisdictional Cost Allocation Protocol,Or.PUC,UM 1050.
19 In re Pacific Power &Light Company,General rate increase for electric services,
20 Wa.UTC,Docket No.UE-152253.
21 .In The Matter of the Application of Rocky Mountain Power for Authority of a General
22 Rate Increase in Its Retail Electric Utility Service Rates in Wyoming of $32.4 Million Per
23 Year or 4.5 Percent,Wy.PSC,Docket No.20000-469-ER-15.
24 In re Avista Corporation,General Rate Increase for Electric Services,Wa.UTC,Docket
25 No.UE-150204.
26 In re the Application of Rocky Mountain Power to Decrease Rates by $17.6 Million to
27 Recover Deferred Net Power Costs Pursuant to Tariff Schedule 95 to Decrease Rates by
28 $4.7 Million Pursuant to Tariff Schedule 93,Wy.PSC,Docket No.20000-472-EA-15.
29 Formal complaint of The Walla Walla Country Club against Pacific Power &Light
30 Company for refusal to provide disconnection under Commission-approved terms and
31 fees,as mandated under Company tariff rules,Wa.UTC,Docket No.UE-143932.
Exhibit No.301
Case No.PAC-E-17-07
B.Mullins,PIICp.2of4
l In re PacifiCorp,dba Pacific Power,2016 Transition Adjustment Mechanism,Or.PUC,
2 Docket No.UE 296.
3 .In re Portland General Electric Company,Request for a General Rate Revision,Or.PUC,
4 Docket No.UE 294.
5 .In re Portland General Electric Company and PacifiCorp dba Pacific Power,Request for
6 Generic Power Cost Adjustment Mechanism Investigation,Or.PUC,Docket No.UM
7 1662.
8 .In re PacifiCorp,dba Pacific Power,Application for Approval of Deer Creek Mine
9 Transaction,Or.PUC,Docket No.UM 1712.
10 In re Public Utility Commission of Oregon,Investigation to Explore Issues Related to a
11 Renewable Generator's Contribution to Capacity,Or.PUC,Docket No.UM 1719.
12 In re Portland General Electric Company,Application for Deferral Accounting of Excess
13 Pension Costs and Carrying Costs on Cash Contributions,Or.PUC,Docket No.UM
14 1623.
15 2016 Joint Power and Transmission Rate Proceeding,Bonneville Power Administration,
16 Case No.BP-16.
17 .In re Pueet Sound Energy,Petition to Update Methodologies Used to Allocate Electric
18 Cost of Service and for Electric Rate Design Purposes,Wa.UTC,Docket No.UE-
19 141368.
20 .In re Pacific Power &Light Company,Request for a General Rate Revision Resulting in
21 an Overall Price Change of 8.5 Percent,or $27.2 Million,Wa.UTC,Docket No.UE-
22 140762.
23 In re Puget Sound Energy,Revises the Power Cost Rate in WN U-60,Tariff G,Schedule
24 95,to reflect a decrease of $9,554,847in the Company's overall normalized power
25 supply costs,Wa.UTC,Docket No.UE-141141.
26 In re the Application of Rocky Mountain Power for Authority to Increase Its Retail
27 Electric Utility Service Rates in Wyomine Approximately$36.1 Million Per Year or 5.3
28 Percent,Wy.PSC,Docket No.20000-446-ER-14.
29 In re Avista Corporation,General Rate Increase for Electric Services,RE,Tariff WN U-
30 28,Which Proposes an Overall Net Electric Billed Increase of 5.5 Percent Effective
31 January 1,2015,Wa.UTC,Docket No.UE-140188.
Exhibit No.301
Case No.PAC-E-17-07
B.Mullins,PIICp.3of4
l In re PacifiCorp,dba Pacific Power,Application for Deferred Accounting and Prudence
2 Determination Associated with the Energy Imbalance Market,Or.PUC,Docket No.UM
3 1689.
4 In re PacifiCorp,dba Pacific Power,2015 Transition Adjustment Mechanism,Or.PUC,
5 Docket No.UE 287.
6 .In re Portland General Electric Company,Request for a General Rate Revision,Or.PUC,
7 Docket No.UE 283.
8 In re Portland General Electric Company's Net Variable Power Costs (NVPC)and
9 Annual Power Cost Update (APCU),Or.PUC,Docket No.UE 286.
10 .In re Portland General Electric Company 2014 Schedule 145 Boardman Power Plant
11 Operating Adjustment,Or.PUC,Docket No.UE 281.
12 .In re PacifiCorp,dba Pacific Power,Transition Adjustment,Five-Year Cost of Service
13 Opt-Out(adopting testimony of Donald W.Schoenbeck),Or.PUC,Docket No.UE 267.
Exhibit No.301
Case No.PAC-E-17-07
B.Mullins,PIICp.4of4
Ronald L.Williams,ISB No.3034
P.O.Box 388,802 W.Bannock Street,Suite 900
Boise,ID 83702
Telephone:[phone]
Email:[e-mail]
Attorneys for PacifiCorp Idaho Industrial Customers
BEFORE THE IDAHO PUBLIC UTILITES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
ROCKY MOUNTAIN POWER FOR )
CERTIFICATES OF PUBLIC CONVENIENCE )Case No.PAC-E-17-07
AND NECESSITY AND BINDING )RATEMAKING TREATMENT FOR WIND )AND TRANSMISSION FACILITIES )
REDACTED
EXHIBIT g02
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 5
PIIC Data Request 5
Please provide copies of each official forward price curve that the Company has
issued since December 31,2016,including the official forward price curve issued
on,or around,September 30,2017.
Response to PIIC Data Request 5
Please refer to Attachment PIIC 5,which provides the Company's official
forward price curves (OFPC)issued:
March 31,2017
April 26,2017
June 23,2017 (an abbreviatedOFPC produced for the Oregon 2017 July
Update Transition Adjustment Mechanism (TAM))
June 30,2017
September 29,2017
Recordholder:Connie Clonch
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PllC
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PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 6
PIIC Data Request 6
Reference the Company's October 2,2017 Q2 Avoided Cost Compliance filing in
Docket No.17-035-37before the Utah Public Service Commission:
(a)Please provide copies of the GRID model studies used to develop the
reference filing.
(b)Please provide fully functional net power cost templates,with all macros and
links intact,that were used to calculate avoided costs in the referenced filing.
(c)Please provide the Demand,Energy Charge,Fuel Price,Delivery Point,and
Market Capacity GRID work papers files,in Excel format,with all formulas
and links retained.
(d)Please provide the Partial Displacement,Wind,and Wind Shaping work
papers relied upon in the referenced filing.
Response to PIIC Data Request 6
The Company objects to this request on the basis that it is not reasonably
calculated to lead to the discovery of admissible evidence.Without waiving this
objection,the Company responds as follows:
In Docket No.17-035-37,the Company's 2017.Q2 Avoided Cost InputChanges
QuarterlyCompliance Filing for Schedule 38,submitted to the Public Service
Commission of Utah on October 2,2017:
(a)The Company is in the process of providing Bradley Mullins of MW
Analytics,(consultant to the PacifiCorp Idaho Industrial Customers (PIIC))
access to the Generation and Regulation Initiative Decision Tool (GRID)via
the internet and access to the GRID project(s)/scenario(s)supporting the
above-referencedstudies.
Access to GRID and its inputs are provided subject to the terms and
conditions of the protective agreement in this proceeding and may only be
disclosed to qualified persons as defined in that agreement.
(b)Please refer to Confidential Attachment PIIC 6-1 and Attachment PIIC 6-2.
(c)Please refer to Confidential Attachment PIIC 6-3.
(d)Please refer to Confidential Attachment PIIC 6-3.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
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PAC-E-17-07 /Rocky MountainPower
November 2,2017
PIIC 2nd Set Data Request 6
Confidential information is provided subject to the nondisclosure agreements in
place in this docket.
Recordholder:Dan MacNeil
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.3 of 26
PAC-E-17-07 /Rocky MountainPower
November 2,2017
PIIC 2nd Set Data Request 7
PIIC Data Request 7
With respect to the official forward price curve issued on,or around,
September 30,2017,please provide the following:
(a)The hourly market price file input into the GRID model,including 30 years of
prices.
(b)Updated Fuel Price GRID work paper,including30 years of prices.
(c)Updated Energy Charge work paper,as used in the partial displacement
deferred revenue requirement model,with Front Office Transactions and other
contracts based on the reference price curve.
(d)The GRID Market Price work paper based on the referenced curve.
(e)Any other GRID work papers relied upon for calculating avoided costs that
are sensitive to the forward price curve.
Response to PHC Data Request 7
The Company objects to this request on the basis that it is not reasonably
calculated to lead to the discovery of admissible evidence and requiring
development of a special study or informationnot maintained in the ordinary
course of business.Without waivingthese objections,the Company responds as
follows:
Referring to Docket No.17-035-37,the Company's 2017.Q2 Avoided Cost Input
Changes QuarterlyCompliance Filing for Schedule 38,submitted to the Public
Service Commission of Utah (UPSC)on October 2,2017,then updated to reflect
the September 29,2017 official forward price curve (1709 OFPC):
(a)The Company is in the process of providing Bradley Mullins of MW
Analytics,(consultant to the PacifiCorp Idaho IndustrialCustomers (PIIC))
access to the Generationand Regulation Initiative Decision Tool (GRID)via
the internet and access to the GRID project(s)/scenario(s)supporting the
above-referencedstudies.
Access to GRID and its inputs are provided subject to the terms and
conditions of the protective agreement in this proceeding and may only be
disclosed to qualified persons as defined in that agreement.
(b)Please refer to the Company's response to PIIC Data Request 6,specifically
Confidential Attachment PIIC 6-3.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
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PAC-E-17-07 /Rocky MountainPower
November 2,2017
PIIC 2nd Set Data Request 7
(c)Other than the GRID project for which access has been provided as noted in
subpart (a)above,the Company has not prepared the requested supporting
work papers.
(d)Please refer to the Company's response to subpart (c)above.
(e)Please refer to Confidential Attachment PIIC 7.
(f)The Company has not prepared any subsequent analysis.
(g)Please refer to the Company's 2017.Q2 Avoided Cost InputChanges
QuarterlyCompliance Filing for Schedule 38,submitted to the UPSC on
October 2,2017 (Docket No.17-035-37).The filing can be accessed by
utilizingthe followingwebsite link:
https://psc.utah.gov/2017/06/22/docket-no-17-035-37/
The only change between the October 2,2017 submittal to UPSC (and the
subject of PIIC Data Request 6)and to the scenario provided in this response
(PIIC Data Request 7)is the update to the 1709 OFPC.
Confidential information is provided subject to the nondisclosure agreement in
place in this docket.
Recordholder:Dan MacNeil
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PilC
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November 2,2017
PIIC 2nd Set Data Request 8
PIIC Data Request 8
If not reflected in the Company's Q2 Avoided Cost Compliance filing,please
provide the GRID Retail Load file,in .csv format,corresponding to the most
recent load forecast that Company has completed,including30 years of load data.
Response to PIIC Data Request 8
The Company objects to this request on the basis that it is not reasonably
calculated to lead to the discovery of admissible evidence.Without waivingthis
objection,the Company responds as follows:
The Company's 2017.Q2 Avoided Cost InputChanges QuarterlyCompliance
Filing for Schedule 38 (Docket No.17-035-37),filed with the Public Service
Commission of Utah on October 2,2017,included the Company's most recent
load forecast.
Recordholder:Dan MacNeil
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
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PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 9
PIIC Data Request 9
Please provide the Company's best estimate of the impact of updating its analysis
regarding the economics of its propose projects to be based on the September 30,
2017 official forward price curve,and provide work papers supporting the
Company's estimate.
Response to PIIC Data Request 9
The Company objects to this request on the basis that it is vague,speculative,
requiring development of a special study or information not maintained in the
ordinary course of business,and not reasonably calculated to lead to the discovery
of admissible evidence.
PacifiCorp assumes the PacifiCorp Idaho Industrial Customers'(PIIC)reference
to "proposed projects"is to Energy Vision 2020 as defined in the Company's
2017 Integrated Resource Plan (IRP)-Energy Vision 2020 Update,filed with the
Idaho Public Utilities Commission (IPUC)on July 28,2017.Based on this
assumption,the Company responds as follows:
The Company has not produced an updated economic analysis of Energy Vision
2020 isolating the impact of updating to the September 2017 official forward
price curve (OFPC).The Company refreshed its economic analysis of its
proposed wind repowering project,one element of Energy Vision 2020,with
several modeling updates,includingupdated market price assumptions that are
based on the September 2017 OFPC.This analysis was prepared in support of the
Company's rebuttal testimony filed with the Public Service Commission of Utah
(UPSC)on October 19,2017,in Docket No.17-035-39.In this filing,the
updated economic analysis,which includes updated assumptions beyond the
OFPC (i.e.,cost-and-performance updates for repowered wind facilities)shows
that the present-valuerevenue requirement (PVRR)benefits of the wind
repowering project have increased from $359 million as reported in the July 28,
2017 Update (Table 3.2)to $471 million assuming medium natural gas prices and
medium carbon dioxide (CO2)priC€S through 2050.
The Company has not completed a similar update for its proposed new wind and
transmission projects,which are also elements of Energy Vision 2020.
Based on the relativelyminor changes between the September 2017 OFPC and
the April 2017 OFPC,as shown in the figure below,the updated OFPC
assumptions would not materially alter the present value of revenue requirements
differentialbenefits of Energy Vision 2020.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.7 of 26
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 9
Nominal Henry Hub Natural Gas Prices ($/MMBtu)
$8
$7
$6
$5
$4
$3
$2
----Med Gas (September OFPC)--Med Gas (April 2017 OFPC)
Recordholder:Dan Swan
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.8 of 26
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 10
PIIC Data Request 10
Reference the GRID studies provided to Mr.Mullins in response to ICNU Data
Request 10 in Oregon Docket No.LC 67:Please identify how the results of those
studies are incorporated into the economics of the Company's proposal as
developedusing the IRP work papers.
Response to PIIC Data Request 10
The line loss,transmission system derate,and energy imbalance market (EIM)
transfer benefit adjustments identified in the Company's response to ICNU Data
Request 0010 (inserted below for other parties'reference)are incorporated into
the 2017 Integrated Resource Plan (IRP)results.These adjustments are made out
of the model and input into the "SO Model Summary Report"on tab "New FOM
Adjustments".Please refer to pages 220 and 221 of Volume I of the 2017 IRP,
Chapter 8 (ModelingResults).
The Company's 2017 IRP is publicly available and can be accessed by utilizing
the followingwebsite link:http://www.pacificorp.com/es/irp.html
For the economic analysis supporting the new wind and transmission projects
proposed in this proceeding,the line loss,transmission derate,and EIM transfer
benefits were incorporated into the System Optimizer model and the Planning and
Risk model.Please refer to the Direct Testimony of Company witness Mr.Rick T.
Link (pg.24 line 19 through pg.26 line 12).
ICNU Data Request 0010
Please provide ICNU consultant,Brad Mullins,with access to all Generation
and Regulation Initiative Decision Tools (GRID)model studies and analysis
that the Company has performed with respect to new wind resources in the
Company's 2017 IntegratedResource Plan,including:
(a)The GRID project files;
(b)The GRID model conversion wizard;
(c)Any GRID input files in Excel format;
(d)Any GRID model work papers,with the same level of detail as provided
in Transition Adjustment Mechanism filing;
(e)Any GRID model scenario files,fully intact,with all functioningmacros;
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.9 of 26
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 10
(f)Any subsequent analysis performed using the GRID model scenarios;and
A narrative description of all the major GRID molding assumptions,using a
format similar to the quarterly report that the Company files in Utah,
documenting its avoided cost pricing methodology.
Recordholder:Dan MacNeil
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
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PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 11
PIIC Data Request 11
Reference the incremental wholesale transmission volumes and revenues that the
Company has assumed in connection with completing the Aeolus to Bridger
transmission segment:
(a)Please identify the amount of the referenced incremental transmission
revenues assumed in the Company's analysis.
(b)Please provide work papers supporting the referenced incremental wholesale
transmission volumes and revenues.
(c)Please explain how the referenced transmission segment will allow the
Company to make more wholesale wheeling transactions.
(d)Does the Company have any existing requests for wholesale transmission
service that it is unable to fulfill in the absence of the referenced transmission
segment.If yes,please identify all such requests.
Response to PIIC Data Request 11
The Company objects to this data request on the basis that it is undulyvague to
the extent it fails to mention which document PacifiCorp Idaho Industrial
Customers (PIIC)is referencing in its statement in its first sentence,starting with
"the Company has assumed ...".The Company does not know whether PIIC is
referencing the testimony in the current case or some other document.Without
waiving the objection,based on the assumption that Mr.Mullins copied this set of
data requests from those data requests he issued in the Oregon docket as a
representativeof the Industrial Customers of Northwest Utilities (ICNU),
PacifiCorp assumes the PIIC reference to "wholesale transmission volumes and
revenues"is to the Company's discussion of transmission-revenuecredits related
to the proposed Aeolus-to-Bridger/Anticlinetransmission line as discussed in the
Company's 2017 Integrated Resource Plan (IRP)-Energy Vision 2020 Update
filed with the Idaho Public Utilities Commission (IPUC)on July28,2017 (pages
12-13).Based on this assumption,the Company responds as follows:
(a)Please refer to Attachment E to the 2017 IRP -Energy Vision 2020 Update,
specifically the rows "Incremental Transmission Revenue,"which are the
same for each price-policy scenario.
(b)Please refer to Attachment PIIC 0011,which provides the derivation of the
range of percentages that served as the basis for the Company assuming
transmission revenue credits tied to 12 percent of transmission revenue
requirement.The calculation of revenue credits based the 12 percent
assumption is provided in the confidential work papers supporting the 2017
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PilC
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PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 11
IRP -Energy Vision 2020 Update,specifically folder "Transmission
Projects",file "Energy Gateway GM 2017 03 13 w Bonus.xlsm",tab
"Gateway".
(c)The Company has not assumed the Aeolus-to-Bridger/Anticlineline will
allow the Company to make more wholesale wheeling transactions nor does
the Company anticipate that the proposed line will increase wheeling
transactions.
(d)No,the Company does not have any pending third-partyrequests for
wholesale transmission service that rely on the new transmission segment.
There are,however,third-partyrequests for interconnection service that
cannot be accommodated without significant investments in the transmission
system,includingthe proposed Aeolus-to-Bridger/Anticlinetransmission line.
Recordholder:Shay LaBray /Randy Baker
Sponsor:Rick Vail
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
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PAC-E-17-07 /Rocky MountainPower
November 2,2017
PIIC 2nd Set Data Request 12
PHC Data Request 12
Reference the integration costs assumed with respect to the Company's new wind
proposal:
(a)Please identify the integration costs that the Company assumed in its analysis
on a $/MWhbasis.
(b)Please provide work papers supporting the integration cost assumptions used
in the Company's analysis.
(c)Please identify the $/MWh cost of inter-hour wind integration included in the
Company's Julyupdate in Docket UE 323,the 2018 Transition Adjustment
Mechanism Filing,before the Oregon Public Utility Commission.
(d)Please identify the $/MWh cost of intra-hour wind integration included in the
Company's July update in Docket UE 323,the 2018 Transition Adjustment
Mechanism Filing,before the Oregon Public Utility Commission.
Response to PHC Data Request 12
The Company objects to this request on the basis that it is vague to the extent it
fails to identify which document it references when it says "reference the
integration costs assumed with respect to the Company's new wind proposal."
Without waiving the objection and assuming Mr.Mullins copied this set of data
requests from the set that he issued on behalf of the Industrial Customers of
Northwest Utilities (ICNU)in the Oregon IntegratedResource Plan (IRP)docket
which are nearly identical to this set,the Company assumes Mr.Mullins is
referring to the integration costs assumed in the 2017 IRP and states as follows:
(a)The wind integration cost is $0.57 per megawatt-hour ($/MWh),as reported in
Volume II of PacifiCorp's 2017 IRP,Chapter F (Flexible Resource Study),
page 133,Table F.22 (2017 FRS Flexible Resource Costs as Compared to
2014 WIS Costs,$/MWh).
(b)Please refer to the public data disks that accompanied the 2017 IRP,
specifically:Data Disk l_PUBLIC\Chapters Appendix -Public.zip\Chapters
Appendix\Appendix F -Flexible Reserve Study\,file "2017 Flexible Reserve
Study Results.xlsx",which provide the supporting work papers.
(c)In Oregon Docket UE 323 (2018 Transition Adjustment Mechanism (TAM)),
the inter-hourwind integration cost is $0.75/MWh,based on Volume II of
PacifiCorp's 2015 IRP,Chapter H (Wind Integration Study),page 100,Table
H.3 (Wind Integration Cost,$/MWh),then adjusted for inflation rate.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.13 of 26
PAC-E-17-07 /Rocky MountainPower
November 2,2017
PIIC 2nd Set Data Request 12
(d)The Company is not able to explicitlycalculate intra-hour wind integration
cost.The Generation and Regulation Initiative Decision Tool (GRID)reflects
perfëctly optimized costs for an hourly period assuming load net of wind and
solar generationremains unchanged at a single level for the whole hour.The
GRID result does not include these additional within-hour costs because it
does not include the within-hour variation in requirements or the constrained
set of resources available to accommodate those changes.
Recordholder:Dan Swan /Teresa Tang
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.14 of 26
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 13
PIIC Data Request 13
Has the Company performed any analysis to quantifythe potential impacts of tax
reform on the economics of its resource proposal?If yes,please provide all work
papers supporting its analysis.If no,please explain why the Company believes that it
is not necessary to consider such impacts.
Response to PIIC Data Request 13
The Company performed a tax-policysensitivity that is summarized in the rebuttal
testimony of Company witness,Rick T.Link,in Utah Docket No.17-035-39.The
sensitivitystudy assumes the current federal tax corporate income tax rate is reduced
from 35 percent to 25 percent.Assuming a marginal state income tax rate of
4.54 percent less a federal deductibilitybenefit of 1.135 percent,the assumed net state
tax rate is 3.405 percent.Based on these inputs,the effective combined federal and
state income tax rate assumed for this sensitivity is 28.405 percent.
The table below summarizes the results of the sensitivity relative to an updated
benchmark case,which reflects updated transmission,load forecast,price curve,and
cost-and-performance assumptions.To assess the potential impact of a change in the
federal corporate tax rate,the present-value revenue requirement differential
(PVRR(d))results were calculated through 2036 based on the System Optimizer
model (SO model)and the Planning and Risk (PaR)model results.The sensitivity
results reflect updated medium natural gas and medium carbon dioxide (CO2)pflCC-
policy assumptions.
Tax Policy Sensitivity
(Benefit)/Costof Wind Repowering(5 million)
BenchmarkModelSensitivityPVRR(d)PVRR(d)Changein PVRR(d)
SO Model ($45)($138)$93
PaR Stochastic Mean ($23)($115)$93
PaR Risk Adjusted ($24)($121)$97
Althoughthe overall benefit of the wind repowering project is reduced by between
$93 million to $97 million,the wind repowering project still produces net economic
benefits for customers.
Please refer to Confidential Attachment PIIC 13,which provides the SO and PaR
study results related to this sensitivity.
Confidential information is provided subject to the protective agreement in this
proceeding.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.15 of 26
PAC-E-17-07 /Rocky Mountain Power
Novernber 2,2017
PIIC 2nd Set Data Request 13
Recordholder:Dan Swan
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.16 of 26
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 14
PIIC Data Request 14
Please identify the amount of incremental operations and maintenance expense
that the Company has assumed with respect to the new transmission segment,and
provide work papers supporting the assumed amounts.
Response to PIIC Data Request 14
The Company assumes incremental operations and maintenance (O&M)expense
for the Aeolus-to-Bridger/Anticlinetransmission line of $1 million per year in
2017 dollars.The Company does not have supporting work papers as this estimate
is based on management judgment.Maintenance activities include:
Line safety inspections
Line detail inspections
Corrective line maintenance
Tower inspections
Substation inspections
Substation equipment maintenance:relay testing,breaker inspections
Corrective substation maintenance
Recordholder:Mark Paul
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.17 of 26
PAC-E-17-07 /Rocky MountainPower
November 2,2017
PIIC 2nd Set Data Request 15
PIIC Data Request 15
Reference the capital cost of the proposed Aeolus to Bridger transmission segment:
(a)Please identify the total amount of capital cost that the Company has assumed
with respect to the referenced transmission segment.
(b)Please provide an explanation of how the Company derived its capital cost
estimate.
(c)Please provide work papers supporting its capital cost estimate,including
itemization of each identified component of the estimated capital costs.
(d)Please identify any contingency that the Company has included in its estimate.
(e)Please identify any risks that the Companyhas considered which might cause the
actual capital costs associated with building the referenced transmission segment
to exceed the estimates the Company used in its analysis.
Confidential Response to PIIC Data Request 15
(a)The Com an estimates a total ca ital cost of -for the Aeolus-to-Bridger/Anticline
500/345 kilovolt (kV)transmission line.
(b)The Company developedthe estimate using quantitymodels from the preliminary
transmission-line design with historical unit pricing from previous projects
(adjusted for inflation as necessary).Substation estimates were derived from
models of substation components and equipment based on conceptual one-line
diagrams.Construction costs were estimated using historical unit prices and
major equipment prices were evaluatedby requesting budgetary quotes from
manufacturers.
(c)The cost studies for the project contain commercially sensitive information and
are considered highly confidential.The Company requests special handling.
Public disclosure of this information before completion of the competitive bidding
process in 2018 could negatively impact the responses from bidders with potential
for the company to not secure the most cost-efficient proposal.Please contact Ted
Weston at [phone] to make arrangements for review.
(d)The Company has presented the transmission cost estimate with a plus or minus
15 percent accuracy given the early nature of the estimate and pending
finalization of the scope and approach.The estimate values used historical pricing
from previous projects (adjusted for inflation as necessary),and the historical
pricing units were from engineer,procure and construct (EPC)contracts and
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.18 of 26
PAC-E-17-07 /Rocky Mountain Power
November 2,2017
PIIC 2nd Set Data Request 15
containedcontractor contingencies representing such risks as soils,production
rates,weather,environmental constraints.In addition,the Company prepared a
risk evaluation to determine potential cost and schedule risks;the values
determined from this process identified that the risk profile was within the overall
accuracy of the project cost estimate.
(e)The risk/uncertaintyassessments correlate closely to the cost study data and
therefore could also impact the competitive bidding process if made public at this
time.The Company considers this information commercially sensitive and highly
confidential.The Company requests special handling.Please contact Ted
Weston at [phone] to make arrangements for review.
Confidential informationis provided subject to the terms of the protective agreement
in this proceeding.
Recordholder:Todd Jensen
Sponsor:Rick Vail
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.19 of 26
PAC-E-17-07 /Rocky Mountain Power
November 17,2017
PIIC 3rd Set Data Request 16
PIIC Data Request 16
Reference the accuracy of Company's Official Forward Price Curve (OFPC):
(a)Has the Company ever performed an analysis to quantifythe forecast error
associated with previously-issued long-term official forward price curves?If
yes,please provide any such analyses.
(b)Please provide each OFPC the Company issued over the period December
2006 through January 2017 (inclusive),including all power and natural gas
hubs where the Company transacts.Please include forward prices for each
month and year for which the forecast was prepared.Please provide this data
in format similar to the Company's response to ICNU Data Request 001 in
OR.PUC Docket No.UE 307.
(c)Please provide actual spot market prices,on a monthlybasis over the period
January 2007 through September 2017 (inclusive),includingall power and
natural gas hubs where the Company transacts.
(d)When evaluating the forecast error associated with previouslyissued Official
Forward Price Curves,does the Company agree that such an analysis may be
reasonably performed using price curves issued over the period 2007 through
2017?If no,please identify the period which the Company believes would
provide the most reasonable basis for measuring the forecast error associated
with previously issued OFPCs.
(e)If the Company believes that the forecast error associated with its OFPCs
would be more reasonably measured over a longer period of time than 2007
through2017,please provide each OFPC issued and monthlyspot market
prices,in the same manner as identified subparts (b)and (c)to this request,
over the period the Company believes would be more reasonable for
measuring the forecast error of previously issued OFPCs.
Response to PIIC Data Request 16
(a)No,PacifiCorp has not conducted this type of analysis.
(b)The Company objects to this request on the basis that it is overlybroad and
undulyburdensome.Without waiving the objection,the Company generally
issues its official forward price curve (OFPC)on a quarterly basis.In addition,
for the Oregon transition adjustment mechanism (TAM)indicative and final
filings,the Company develops two 10-year forward price curves (starting in
Oregon Docket UE 296)or three-yearforward price curves.These 10-year
curves or three-yearcurves are then used to supersede the initial years of the
most recent quarterly OFPC.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.20 of 26
PAC-E-17-07 /Rocky MountainPower
November 17,2017
PIIC 3rd Set Data Request 16
Please refer to Attachment PIIC 16-1,which provides the quarterly OFPCs
and the final TAM OFPCs covering December 2006 through January 2017.
(c)The Company objects to this request on the basis that it is overlybroad and
undulyburdensome.Without waiving the objection,please refer to
Attachment PIIC 16-2,which provides the monthlyaverage market prices
derived from the day-ahead price from archived proprietary sources (where
available)for each month covering January 2007 through September 2017.
(d)The Company objects to the request on the basis that it assumes facts not in
evidence.Please refer to the Company's response to subpart (a)above.
(e)Please refer to the Company's response to subpart (d)above.
Recordholder:Connie Clonch /Debi Baker /Cecil Nembhard
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PilC
p.21 of 26
PAC-E-17-07 /Rocky Mountain Power
November 17,2017
PIIC 3rd Set Data Request 17
PIIC Data Request 17
Reference the long-term gas contracts executed pursuant to the Company's 2012
Gas RFP,as discussed in UT.PSC Docket 12-035-102:
(a)Does the Company agree that it ultimatelyexecuted two gas transaction
pursuant to the referenced 2012 Gas RFP?If yes,please provide a brief
overview of these transactions.
(b)Please identify the counterparty associated the referenced transactions.
(c)Does the Company agree that the referenced transactions were subject to a
requirement that the levelized price of the gas contracts not exceed the
levelized market price in the Company's forward price curve (just as the
economics of the Company's Energy Vision 2020 project are highly
dependent upon the prices in the Company's OFPC)?
(d)How accurate has the OFPC that the Company relied upon when executing the
referenced transactions been?
(e)Please identify the OFPC the Company relied upon when executing the
referenced transactions,and if not already provided in response to another
request,please provide a copy of the OFPC.
(f)Please provide the actual monthlysettlements data associated with the
referenced transactions over the period 2013 (includingthe earliest month
where settlements were made)through the most recent month with available
settlement data.Please provide the settlement data in the same format as
provided in "Attach ECAM MFR 3 -3 CONF"in the ongoing Energy Cost
Adjustment Mechanism Proceeding before the Wyoming Public Service
Commission (Docket No.20000-514-EA-17).
(g)Please provide the deal tracking data from the Company's energy trading
system over the period August 2017 through the term of the referenced
agreements (based on a ten-year term,approximately 2023).Please provide
the deal tracking data in a manner substantially similar to the Company's
GRID modeling Gas Swaps work paper (See e.g."ORTAMl8w_GasSwaps
(1612)FEBl7 CONF").
(h)If not readily apparent from the data provided in response to this request
please identify the monthlyfixed prices associated with the referenced
transactions over the term of the transactions.
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.22 of 26
PAC-E-17-07 /Rocky Mountain Power
November 17,2017
PIIC 3rd Set Data Request 17
Confidential Response to PIIC Data Request 17
The Company objects to this request on the basis that the requested information
will not likelylead to the discovery of admissible evidence and is beyond the
scope of this case.Without waiving the objection,the Company states as follows:
(b)Please refer to the Company's response to subpart (a)above.
(c)Please refer to Attachment PIIC 17-1 for the order in the referenced docket.
The order provides requirements ordered by the Public Service Commission
of Utah.
(d)The Company's official forward price curve (OFPC)is updated and validated
by the Company's risk management group within the energy supply
management (ESM)business unit against other published price curves at the
end of each quarter (with the exception of the two OFPCs issued specifically
for the Company's annual Oregon Transition Adjustment Mechanism (TAM))
to assure its accuracy at that given point in time.The OFPC is an indication to
where parties could reasonablytrade for a specific term and price as of the
date the OFPC is produced.In addition to the quarterly OFPC,the Company
produces a daily forward price curve (FPC)that is an indication of where
parties could reasonablytrade for a specific term and price as of the date the
FPC is produced.The Company monitors the daily exposure of all fixed price
deals against a daily produced FPC,which is an accurate representationof
forward prices at a given point in time.
(e)At the time of the transaction execution,the Company relied on the daily FPC
of August 12,2013 and the daily FPC of August 22,2013 for the two
identified transactions executed as a result of the 2012 Natural Gas RFP).
Please refer to Confidential Attachment PIIC 17-2.
(f)Please refer to Confidential Attachment PIIC 17-3,which provides actual
monthlysettlements data from September 1,2013 through September 30,
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.23 of 26
PAC-E-17-07 /Rocky Mountain Power
November 17,2017
PIIC 3rd Set Data Request 17
2017 for transaction 1250444 and transaction 1256734 (the natural gas swap
transactions executed as a result of PacifiCorp's 2012 Natural Gas RFP).
(g)Please refer to Confidential Attachment PIIC 17-4,which provides the deal
tracking data from the Company energy trading system (ETS)record over the
period August 2017 through August 2023.
Confidential information is provided subject to the protective agreement in this
proceeding.
Recordholder:Stephen Fendrich /John Akiyama /Teresa Tang
Sponsor:To Be Determined
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.24 of 26
PAC-E-17-07 /Rocky Mountain Power
November 17,2017
PIIC 3rd Set Data Request 18
PIIC Data Request 18
Reference the Company's wind shaping methodology:
(a)When modeling the new wind resources in the System Optimizer and PaR
models,did the Company use the same hourlywind shaping methodology that
it uses in the GRID model for forecasting net power costs in general rate case,
and other related,proceedings?
(b)Please provide a description of how the hourly wind profiles for the new wind
resources were modeled in the SO and PaR models.
(c)Please provide the hourly wind profiles for each of the new wind resources as
input into the System Optimizer and PaR models.
Response to PIIC Data Request 18
(a)In general rate cases (GRC),the Company uses a wind shaping methodology
based on a single calendar year of hourly energy output from each owned and
purchased wind facility.The actual generation levels are scaled up or down so
that the average output over the course of a day and a month is the same as the
forecasted level.This methodology is applied to all wind resources for which
data is available during the historical period.The proposed wind resources do
not have historical data so this methodology would not apply.
The Company recognizes that a reasonablycorrelated hourly shape is
important to evaluate wind resources,particularlywhen theyare constrained
areas.To this end,an hourly shape for new wind resources is prepared based
on a blend of the hourly output of two existing wind projects.The two
existing projects which are closest to the new resource's location are used,but
smaller existing projects are excluded as the reported hourly output is rounded
to the nearest megawatt (MW)and thus has less precision.This also
eliminates duplicative results,as many of the small existing resources are next
to larger existing resources.
The historical hourly shapes of the two closest existing wind resources are
blended together,with the hourly shape of the closer resource receiving a
higher weighting,based on their relative distances.The un-repowered shapes
are used because repowering capacity and large generator interconnection
agreement (LGIA)limits may not be aligned.The adjusted rather than actual
shape is used because it has been aligned with the characteristic week used in
the Planning and Risk (PaR)model.The resulting hourly shape is adjusted
such that the result matches the 12-month by 24 hour (12x24)generation
profile of the future wind resource.This adjustment is comparable to that
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.25 of 26
PAC-E-17-07 /Rocky MountainPower
November 17,2017
PIIC 3rd Set Data Request 18
performed to align historical hourly shapes with median generation forecasts
for existing resources.
(b)The wind profiles for new wind resources are modeled in the System
Optimizer model (SO model)and the PaR model as an index,using annual
hourlypattern data (365 days by 24 hours).The annual pattern represents the
hourlycapacity factor.
The SO model internallycalculates "time of day"blocks from the hourly data,
representing summer and winter peak,off-peak and super-peak patterns.SO
model generation is reported in gigawatt hours (GWh).
PaR is similar to SO except a sample week is selected each month to
determine wind generationlevels,which is then scaled within PaR for the
relevant month.To eliminate the unintended distortion of monthlywind
shapes due to relyingon a sample week,the PaR inputs are recast such that
every week of a given month has the same pattern but preserves the expected
monthlyand annual generation.PaR generationis also reported in GWh.
(c)Please refer to Confidential Attachment PIIC 18,which provides the hourly
new wind profiles referenced in the Company's response to subpart (b)above.
Confidential information is provided subject to the protective agreement in this
proceeding.
Recordholder:Dan MacNeil and Dan Swan
Sponsor:Rick Link
REDACTED
Exhibit No.302
Case No.PAC-E-17-07
B.Mullins,PIIC
p.26 of 26