Professional Documents
Culture Documents
Energy
REBUTTAL
TESTIMONY AND EXHIBITS
OCTOBER 2014
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BLEAU J . LAFAVE
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TABLE OF CONTENTS
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Description
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Witness Information
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Purpose of Testimony
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Exhibits
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BJL- I
Exhibit_ (BJL-07)
Witness Information
2
Q.
A.
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5
Q.
A.
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Q.
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Are you the same Bleau J. LaFave who submitted prefiled direct
testimony in this docket?
A.
Yes.
13
Purpose of Testimony
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15
Q.
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A.
17
LLC witnesses Mr. Martin Wilde and Dr. Don Reading in their prefiled
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cost NorthWestern customers can avoid by purchasing the output from the
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BIL-2
internal generation . The avoided cost equals the price of any avoided
purchases and/or the variable cost for any avoided internal generation.
This avoided cost must then be reduced by any increased cost derived
from the connection , delivery, and supporting service for the interm ittent
Greenfield project.
As shown in the example below, in any hour, the avoided cost may
10
generation portfolio.
(Illustration Purposes Only)
Daily Profile Example
load Forecut
_ Operating Gen
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900
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500
<00
300
200
100
0
HEl
HE2
HB
HE4
HES
HE6
HE7
HE8
HE9 HEIO HEll HE12 HE13 HEl4 HEl5 HE16 HE17 HEl8 HE19 HEW HEll HEl2 HEl3 HE24
BJL-3
Q.
Are you familiar with the Prefiled Direct Testimony of Martin Wilde
("Wilde Direct Testimony") in this docket and are you also familiar
with Mr. Wilde's efforts to develop the Greenfield Wind project and
A.
Yes.
Q.
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II
12
("PPA") is executed?
13
A.
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deliver the energy would result in damage payments for not completing
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the project or not delivering on time. The process described in the Wilde
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unless all other additional circum stances meet their satisfaction . His
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BJL-4
Q.
A.
inherit the risks of the services not being delivered including energy
Q.
Mr. Wilde claims on page MHW-6 of his testimony that there were
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correct?
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A.
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BJL-5
O.
Mr. Wilde a basis for establishing a price reflecting past years as Mr.
A.
have not. The limits on the size of projects qualifying for QF-1 rates would
not have allowed Mr. Wilde to develop a project of this size outside of a
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finalist proving that the project was not financially competitive at the price
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Greenfield for the same size projects were offered and executed.
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O.
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develop, and operate a CREP project" than a regular OF. Was the
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price offered by Greenfield under the 2013 CREP RFP process higher
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A.
BJL-6
requested for this regular QF project in this docket are much higher than
what Mr. Wilde submitted for this project in the 2013 RFP.
Q.
5
6
A.
offered at the same rate by Mr. Wilde, was selected as a finalist because it
appeared to have less transmission risk at that time. When the Crazy
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Mountain project failed to meet the Montana Public Service Commission 's
II
12
his bid proposal. Greenfield eventually backed out of its 2013 CREP bid
13
that was the same as the Crazy Mountain bid with the exception that, for
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associated with these transmission costs that did not exist with Crazy
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Q.
Does the rate in the PPA referenced in the Wilde Direct Testimony on
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BIL-7
A.
generation project are not the same as the rates for a larger project.
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Q.
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A.
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never asked for a price until after this filing was made. Greenfield
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the QF resource).
BJL-8
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Mr. Wilde, he first would secure the contract and then shop it
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Q.
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agree?
BJL-9
A.
a small OF project at any time during the period identified by Mr. Wilde.
The maximum size for a OF-1 rate would have been 10 MW until recently
projects located in this area, bid into RFPs with various projects, and
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1I
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Q.
On page MHW-19 Mr. Wilde testifies that he was told the avoided
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you agree?
20
A.
Yes. I estimated the avoided cost for energy and capacity to be around
21
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BlL-IO
4
5
Q.
indicative rate for the avoided cost for the Greenfield project. Do you
agree?
A.
No. As Mr. Wilde stated in his testimony. he did not request the indicative
pricing until the day NorthWestern filed with the Commission to review this
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filing and served the filing on Mr. Wilde by mail the same day it was
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15
available to him on the Commission's website no later than the day after
16
he requested the information , and he received the filing in the mail shortly
17
thereafter.
18
Rebuttal of Prefiled Direct Testimony of Don Reading
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20
Q.
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Are you familiar with the Prefiled Direct Testimony of Don Reading in
this docket?
A.
Yes.
23
B1L-l1
Q.
approved?
A.
Yes. The same method for calculating avoided cost was approved by
the South Dakota Public Utilities Commission in Order EL 11-006.
Q.
10
11
On page OCR-5, Dr. Reading testifies that the Option 1(c) Schedule
QF-1 rate is the appropriate rate for Greenfield. Do you agree?
A.
12
less. The avoided energy and capacity costs, regulation costs, ancillary
13
costs, and transmission costs are all significantly affected by the size and
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customers to pay more under the Option 1(c) rate than could be avoided
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Q.
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Greenfield?
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A.
B1L-12
the forecasted first-of-month market prices that include both energy and
capacity value.
Q.
A.
10
11
Q.
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agree?
14
A.
No. The Greenfield methodology does not include the effect of the
15
16
for the amount of regulation required to serve a large wind project nor
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18
long and the avoidable cost for NorthWestern customers is the price of
19
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Q.
On page DCR-9 Dr. Reading testifies that NorthWestern did not use
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23
BJL-13
A.
Yes. The DRR method as defined by Dr. Reading does not calculate the
DRR method that calculates the appropriate avoided cost. Avoided cost
electric utility of electric energy or capacity or both which , but for the
10
II
12
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needed to serve customer load . Providing a fixed market price for energy
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Q.
On page DCR-14 Dr. Reading testifies that the forecast used for the
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Spion Kop Wind Generation Asset was different than what was
20
used for Greenfield. Do you agree? If so, what was used for
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Greenfield?
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A.
Yes. The forecast used for Greenfield is not equal to the forecast used for
Spion Kop. The forecast for the Greenfield project must be based on the
BIL-14
NorthWestern's actual avoided cost, the forecasts will not be the same.
Even if a LEO were established earlier this year due to FERC certification
10
11
Q.
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rate?
14
A.
NorthWestern is not required to file for rates other than for small OFs
15
under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). Large
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Q.
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BIL-IS
A.
No . Since filing its petition, NorthWestern has reviewed another option for
2.1 % per year ($4.14 per MWH levelized over 25 years starting in 2016)
as modeled in ExhibiUBJL-07).
8
9
Q.
10
11
A.
12
$47,861 per month levelized over 25 years. This estimate was based on
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operational costs of the existing units were used as a proxy for the
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BJL-1 6
3. That the zonal rates for the additional wind are applicable.
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assumptions:
1.
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with a fourth unit. Wind 's share of the installation and operational
l3
cost of the existing units were blended with the fi xed and variable
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regulation rate of $23,944 per month escalating at 2.1 % per year. The
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BIL-l?
and
3. That the zonal rates for the additional wind would apply.
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10
Q.
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12
What was the reason for the three iterations of proposed regulation
costs for Greenfield?
A.
13
reliable service for its customers at just and reasonable rates. The
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capital cost of an expansion at DGGS, which wasn 't available for the first
17
option . The final proposal applies incremental costing and follows the
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19
wind resources.
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21
Q.
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EJL-1 8
A.
customers must only pay for costs that can be avoided. Greenfield will
receive all the value associated with the project from the retained
renewable credits.
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10
Q.
II
12
A.
Yes.
Q.
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agree?
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A.
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calculations.
B1L-1 9
Q.
On page DCR-6 and DCR-7 Dr. Reading testifies that the avoided cost
A.
No. FERC has ruled that sales are not to be included in the avoided cost
the costs to serve customer load and are not to be included in the avoided
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II
12
future costs over the market comparison. If the CCCT is included in the
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14
artificially high price for future power. Under an economic dispatch model ,
15
the plant would not be running because the market price is lower. The
16
only cost that could be avoided by customers under this scenario is the
17
market price.
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19
Q.
20
A.
Yes, it does.
BJL-20
Page 1 of 5
Greenfield
w.li
Name Plate Capacity (MW)
Zonal Percentage
Zonal Regulation Capacity (MW)
Regulation Rate (Per MW)
Annual Regulation Cost
$
$
$
$
$
Cost
2016
25
5%
1.3
220,719
281,417
23,451
$
$
$
38.23%
83,735
3.36 $
2018
2017
25
5%
1.3
225,355
287,327
23,944
25
5%
1.3
$
$
$
38.23%
83,735
3.43 $
4.14
230,087
293,361
$
$
$
24,447
38.23%
83,735
3.50
2019
25
5%
1.3
234,919
299,522
24,960
$
$
$
38.23%
83,735
3.58 S
2021
2020
25
5%
1.3
239,852
305,811
25,484
25
5%
1.3
$
$
$
38.23%
83,735
3.65
244,889
312,234
26,019
$
$
$
38.23%
83,735
3.73
2022
25
5%
1.3
250,032
318,790
26,566
38.23%
83,735
3.81
$
$
$
255,282
325,485
27,124
3.89
$
$
$
260,643
332,320
27,693
he inflationilryescilliltion rate used in the 2013 Plan was 2.1% (Vol 1, Ch 6. p. 6-25).
7.14%
2.1%
'odd
25
5%
1.3
5%
1.3
$
$
$
38.23%
83,735
3.97 $
Guldseth, Todd
nt: Monday, July 14,2014 1:03 PM
0 : Steve lewiS <:slewis@landsenergy.com> (s)ewls@landsenergy.com)
: laFave, Bleau; Fine, David E
ubject: RE: Rate
r,e us ed NWE's m a rgi n a l cost o f capital re la te d to th e h yd ro acqui s it ion o f 7.14% to lev elize re sou rces in
he 2013 Pl an, so I wo uld sugges t usi n g th a t .
2026
2025
25
!Bleau,
25
5%
1.3
38.23%
83,735
2024
2023
25
5%
1.3
266,117
339,299
28,275
$
$
$
38.23%
83,735
4.05
271,705
346,424
28,869
$
$
$
38.23%
83,735
4.14
2027
25
5%
1.3
277,411
353,699
29,475
25
5%
1.3
$
$
$
38.23%
83,735
4.22
283,237
361,127
30,094
38.23%
83,735
4.31
Greenfield
Name Plate Capacity (MW)
Zonal Percentage
Zonal Regulation Capacity (MW)
Regulation Rate (Per MW)
Annual Regulation Cost
Rate in Contract ( per Month)
Forecasted Capactiy Factor
Forecasted Output (MWh)
Forecasted Reg Cost (S/MWh)
25 Year Levelized (Regulation)
Avoided Energy/Capacity Cost
Discount Rate
Escalation (Regulation Rate)
25
5%
1.3
S
$
$
2030
1Q12
25
5%
289, 185
368,710
30,726
1.3
S
$
$
38.23%
83,735
4.40 $
295,258
376,453
31,371
25
5%
1.3
1.3
$
$
$
38.23%
83,735
4.50 $
2031
25
5%
301,458
384,359
32,030
$
$
$
38.23%
83,735
4.59 $
307,789
392,430
32,703
38.23%
83,735
4.69 $
314,252
400,671
33,389
5%
1.3
S
S
$
38.23%
83,735
4.79 $
320,851
409,086
34,090
2037
25
5%
25
1.3
S
S
2034
1Ql2
25
5%
25
5%
1.3
S
$
$
38.23%
83,735
4.89 $
327,589
417,676
34,806
25
50'
1.3
S
S
$
38.23%
83,735
4.99 $
334,469
426,448
35,537
38.23%
83,735
5.09 $
34 1,493
435,403
36,284
38.23%
83,735
5.20 $
348,664
444,546
37,046
S
$
$
38.23%
83,735
5.31
25
5%
1.3
1.3
S
S
2040
fQJ2
25
5%
5%
1.3
$
$
$
2038
25
355,986
453,882
37,823
25
5%
1.3
$
$
38.23%
83,735
5.42 $
363,462
463,413
38,618
1.3
$
S
$
38.23%
83,735
553 $
371,094
473,145
39,429
38.23%
83,735
5.65
NWE bisting Wind Facilities Under Contract and Required Regulation Capacity
per QF-1 Wind Integration Zonal Rates
Required
Regulation as
Nameplate
Regulation
% 01
Capacity
Capacity
Nameplate
Capacity
Facility
Zone
(MW)
(MW)
Judith Gap
Horseshoe Bend
Small QF Projects 2.
Gordon Butte
Spion Kop
Musselshell
Musselshell 2
Fairfield
Two Dot Wind Farm
Existing Wind Total
Inc.
Additional Wind
Greenfield
Greycliff
New Colony
New Wind Total
3
2
3
1
3
2
2
Total
DGGSWind
135
27.1%
36.5
Integration
5.1%
0.5
Fixed Costs
4.0
9.6
40
10
10
10
9.7
237.3
14.0%
S.1%
14.0%
38.0%
5.1%
38.0%
2S
20.4
2S
. 70.4
5.1%
14.0%
14.0%
307.7
1.3
2.0
1.4
3.8
0.5
3.7
49.8
1.3
2.9
3.5
7.6
57.4
_-.:I,..kw_
IINMd ...
l2-poice ..
....
/l.
u poo P!C-OD2I.l ul!Md Z. &I_ye_
".200-1InI_T_Z.-a.ood .. Z.1lt.:poo_ ..... _
42
45
87
18
105
Exhibit_IBJl-07)
Page 4 of 5
Wind Power
Scenario
Capaci ty
Name
IMW)
144
C1
154
C2
154
C3
154
01
194
02
194
03
194
of 94% CPS2
of 92% CPS2
110
96
69
59
113.8
97.1
108.7
92.6
109.2
94.6
136
117
112
97
120
101
120
101
105
95
209
181
149
130
163
144
144
126
132
114
223
194
04
194
05
194
Gap
El
294
E2
294
E3
294
E4
294
E5
294
594
Sensitivity 1
294
114
98
Sensitivity 2
294
114
94
Sensitivity 3
294
GENIVAR
119
100
June 1, 2011
NorthWestern Energy
Estimated Additional Regulation Costs
(Pat DiFronzo)
Split
50% Avista
50% Powerex
12,419
7.62
kw-month
6,209
47,315
Energy
23.65
Mwh
2,235
52,866
Transmission Losses
24.65
67 $
1,653
2.00
kw-month
6,209
12,419
11 4,252
KW Caeacitll
kw-month
6,209
49,674
9,320
28,622
87,617
15.00
93,140
14. 11
1$
87,617
23.65
Mwh
1,123 1 $
26,549 1
Total Charge
1$
114, 166 1
[$ -
228,419 1
1$
2,741,627)
I$
220,719
(a)
Capacity
BPA Transmission
BCHA Tranmission Services
Total Capacity Cost
$
$
$
$
8.00
1.501
4.610
14.1106
(b)
Maximum Rate
(c)
Energy Charge
$
$
-I
50,000
750,000
227,263 1 30.30%1
977,263
_______
2
3
4
5
6
7
8
9
10
DAVID E. FINE
ON BEHALF OF NORTHWESTERN ENERGY
11
12
TABLE OF CONTENTS
13
14
Description
15
Witness Information
16
Purpose of Testimony
17
18
10
19
11
20
Witness Information
21
22
Q.
23
A.
24
25
26
Q.
DEF-l
A.
3
4
Q.
A.
10
11
12
obligations.
13
14
Q.
IS
A.
16
17
18
19
20
21
22
23
DEF-2
7
8
Purpose of Testimony
Q.
10
A.
11
12
(ii) rebut certain statements and assertions contained in the Prefiled Direct
13
14
15
16
Are you familiar with the Prefiled Direct Testimony of Martin Wilde in
17
this docket and with Mr. Wilde 's efforts to develop the Greenfield
18
19
A.
Yes.
Q.
What have you concluded with regard to Mr. Wilde's accounts of his
20
21
22
DEF-3
direct testimony?
A.
project rates for projects that clearly did not meet the conditions necessary
10
11
12
13
14
15
16
17
18
19
20
21
22
("CREP") contracts.
23
DEF-4
Q.
From the second quarter 2010 through 2012 when NorthWestern was
into its supply contracts, including any such contract that it might enter into
with Mr. Wilde. The development of the commercial terms was viewed as
10
11
12
13
14
their obligations.
15
16
Q.
Mr. Wilde states that he sought 10-MW long-term, fixed rate QF wind
17
contracts for both Fairfield Wind, LLC (" Fairfield") and Greenfield.
18
19
A.
20
21
22
a 10-MW contract for the Greenfield project would have exceeded the
23
DEF-5
long-term fixed rate contract for Greenfield or any other 10-MW QF wind
project that would cause the 50-MW cap to be exceeded. In this regard
Greenfield was being treated the same as other developers who no longer
had the opportunity to enter into a contract under the long-term, fixed rate
option.
6
7
Q.
Mr. Wilde indicates that Fairfield was "pressured" into entering into a
10
A.
No. NorthWestern believes the pressure described by Mr. Wilde was the
11
12
13
would not have an opportunity to seek a long-term , fixed rate for a 10-MW
14
15
regarding the 50-MW cap. Anyone with knowledge of the QF-1 Tariff at
16
17
18
that the installed contract capacity available for projects was on a first-
19
20
21
Q.
22
Wilde states that a second contract for Fairfield Wind was signed.
23
DEF-6
A.
allow Mr. Wilde additional time (60 days) to post a delay security deposit
After Fairfield failed to post delay security NorthWestern exercised its right
owners will meet their contractual obligations under conditions of finan cial
10
11
12
13
14
15
Q.
16
17
Was Mr. Wilde pressured into executing the second Fairfield contract
following the termination of the first agreement?
A.
18
19
20
21
fully executed on March 28, 2012 -- less than a month following the
22
23
DEF-7
Q.
A.
defended its position regarding the QF-1 Tariff provision, which, at the
for the QF-1 Tariff beginning in May 2010 and extending through 2013.
10
During this time NorthWestern was never in the position to waive or ignore
11
12
13
Q.
14
15
Did Greenfield offer to sell the project to NorthWestern as a buildtransfer? If it did, how did NorthWestern respond?
A.
Yes. Following the execution of the first Fairfield QF contract in the first
16
17
18
19
20
21
22
23
Wilde's request.
DEF-8
Q.
Mr. Wilde states on page MHW-12 lines 11-14 that "NorthWestern has
consistently taken the position that the developer must take the risk
10
A.
II
12
13
CREP eligibility risk nor should it be charged with defending and arguing a
14
15
16
17
18
and has its financial interests to protect. Except for its own resources,
19
20
21
22
23
project as CREP.
DEF-9
1
2
Q.
statements?
10
A.
11
12
13
14
support his claim , Dr. Reading also suggests that in other parts of the
15
16
17
18
19
20
21
5% for Montana wi nd resources and the fact that the Commission has
22
23
DEF-I O
1
2
A.
10
11
12
13
14
The market rates used by NorthWestern and Ascend Analytics, LLC in the
15
calculation of avoided costs have not been discounted to account for the
16
lower capacity value of the wind energy. In this case, Greenfield enjoys a
17
high implied capacity value by virtue of the market purchases for which it
18
19
20
21
22
Q.
DEF-II
A.
No, it would not be reasonable to consider Dr. Reading 's assertion . In the
was anticipating and planning for the addition of the hydroelectric assets
10
II
12
Q.
13
14
NorthWestern consider a
15
16
A.
17
18
19
20
21
22
Q.
23
A.
Yes it does.
DEF-1 2
GWD-l
Table of Contents
I: Witness Infomlation ........................................... ........ ........... .................................................. ... 3
List of Figures
Figw'e 1. Average Avoided Costs .......... .. .................................................................. .. ...... .... ...... 14
Figure 2. Wind generation allocation between market sales and purchases ................................ 15
Figure 3. Total portfo lio net position with and without Greenfield .......................... ...... .... .... .... . 16
List of Tables
Table 1. Avoided Cost of Capacity in $1MWh ............ .. .. ........ .. ................................. .... .............. 17
Exhibits
Exhibit GWD-l - Illustrations of Avoided Cost Scenarios
Exhibit GWD-2 - Avoided Cost Summary Table
Exhibit GWD-3 - Curriculum Vitae of Gary W. Dorris
GWD-2
I: Witness Information
1
2
Q.
A.
LLC. Our headquarters are at 1877 Broadway Street, Suite 706, Boulder, CO 80302. We
have additional offices at 222 E. Main, Suite 201, Bozeman, MT 59715 and 440 Grand
7
8
Q.
A.
Ascend
10
II
economic, financial, and technology solutions for the energy industry, particularly in the
12
13
quantitative modeling, and complex litigation. I have led the growth of Ascend to one of
14
the foremost energy analytic companies in the country, providing software solutions to
15
three of America's top five largest utilities to address portfolio management, risk
16
17
18
I have been involved in the energy industry for over 25 years and have extensive
19
expenence
20
management strategies, and risk management. I have also provided independent expelt
21
reports to support the valuation and frnancing of over $5 billion in electric generating
22
assets. I have written and delivered expert testimony regarding risk management, energy
23
procurement, trading practices, asset valuation, market power, and emissions trading. I
rn counseling corporations
GWD-3
have also led the analytic architecture of over ten analytic software products used by 30
3
4
Before founding Ascend Analytics, I served as CEO and Chief Model Architect for e-
directed the development of the analytic infrastructure and risk management policies for
the launching of the tradi..og floors of Entergy Solutions, Duke Solutions, The Energy
Authority, and Consolidated Edison, and led the development of the analytic
i..ofrastmcture solutions for portfolio and risk management solutions at over a dozen other
10
utilities. I have traded power and structured power sales contracts and completed one of
11
I have also
12
13
I was also a faculty member at Comel! University in 1996, where I taught a doctoral-level
14
cowse i..o modeliog competitive energy markets, and have been adjunct faculty at
15
University of Colorado's Leeds Business School from 1997 to 2007. I have published
16
papers on energy trading and risk management i..o peer-reviewed scholarly journals, and
17
18
19
economics and finance from Comell University and both a BS i..o mechanical engi..oeeri..og
20
and a BA i..o economics with Magna Cum Laude disti..oction from Cornell University.
21
Futther details on my qualifications are set fOlth in my CutTiculum Vitae (Exhibit GD-3).
22
23
I reserve the right to update and supplement my expert testimony as may be necessary.
GWD-4
Q.
A.
Q.
A.
calculations for Greenfield and its consistency with PURPA and FERC regulatory
results, I will rebut the testimony of Dr. Don C. Reading concerning the appropliateness
10
of the methodology and use of PowerSinun software. In paJiicular, I will address the
11
following issues:
12
13
I) The economic constmct of the differential revenue requirements approach and its
suitability to determine the avoided cost of energy to serve load.
14
2) The flawed economic reasoning in Dr. Reading's argument that the avoided cost of
15
16
17
18
19
from:
20
FERC's ratepayer neutrality principal by leaving customers worse off with the QF
21
purchase, and c) use of the marginal unit of generation for 25 successive years to
22
GWD-5
The economIC arguments and analysis presented below fully substantiate the
3
4
Q.
A.
Section III provides an overview of my analysis to determine the avoided cost of energy
and capacity. Section IV presents results of the avoided cost analysis for Greenfield.
Section V discusses the risks to ratepayers related to contracting with Greenfield. Section
10
11
12
Q.
13
A.
I have perfonned an economic analysis to detennine the avoided cost of energy to serve
14
15
PowerSilmn software under the same assumptions and inputs used to evaluate the
16
Hydros. These assumptions were inclusive of the cost of carbon on NorthWestem's own
17
generation and market prices, load, fuel prices, and the inclusion of the Hydros in
18
19
20
Plan").
I applied the
21
22
23
Q.
Why did you apply PowerSimm and the same modeling construct to determine
Greenfield's avoided cost rates as was used to evaluate the Hydros?
GWD-6
A.
We performed the analysis of Greenfield 's avoided cost rates directly after completing
the 2013 Plan. Leveraging the modeling framework of the Plan was in accordance with
best practices because the Plan established a credible set of long-term modeling
assumptions and had undergone a ligorous set of validation exercises. Subsequent to our
analysis of Greenfield 's avoided cost rates, the PowerSirnm modeling framework
Economics. I
8
9
Q.
10
A.
Ascend applied economic analysis that would fall under FERC's Di ffe rential Revenue
II
12
13
were able to determine the avoided cost to serve NorthWestem load on an hourl y basis.
14
For each hour, we determined avoided costs to serve load as the maxinmm of: i) the
15
marginal cost of the highest cost available generating unit to serve load or ii) the market
16
price of energy purchased to serve load. The maximum hourly cost between these two
17
components detennines marginal cost of production for each hour and the avoided cost of
18
19
20
Q.
Is the hourly avoided cost approach the same as the DRR approach to serve load?
Evergreen Economics, "Review of NorthWestern 's Application to Purchase Hydroelectric Facilities," page ii.
GWD-7
A.
Yes, the DRR approach looks at the difference between the cost to serve load with and
instead of a more simplified model constmct of load duration curves, we can determine
the avoided cost on an hourly basis by utilizing the hourly generation output. In addition,
oppOltunities to buy and sell power. To determine the avoided cost to serve load during
surplus conditions, the mruginal cost of production is the marginal cost unit in
10
II
Q.
12
13
Would it be possible under the DRR approach applied here for the avoided cost to
be higher with the inclusion of an additional resource?
A.
No, the addition of a combined cycle ("CC") plant or any other plant would
14
unconditionally leave the avoided costs received by Greenfield the same or lower.
15
Exhibit GWD-I provides six cases, consisting of t1uee cases where NorthWestern sells
16
17
Exhibit GWD-I demonstrate that Greenfield would receive the same or a lower avoided
18
The illustrations of
19
20
For example, ifNOIthWestern was selling power, the avoided cost remains the marginal
21
cost of generation serving load. The addition of a new unit with a marginal cost higher
22
than Colstrip would not change the cost of serving load. The addition of a new unit with
:2 Mathematically, the approach taken is akin to determining the slope of a line through a first derivative point
estimate versus the difference between two x and y values around the point estimate.
GWD-8
a lower marginal cost than Colstrip would decrease the cost of serving load. As an
additional example, ifNOIthWestem was buying power from the market, the avoided cost
could be lower if the new plant could offset market purchases with a marginal cost of
production less than the market price. If the new plant had a cost of production higher
than the market price, the avoided cost would remain unchanged and NOIthWestem
7
8
Under no circumstance would the avoided cost be higher with the addition of a new
generating plant. If a higher avoided cost was produced by adding a generating resource,
10
then it would suggest the economic analysis did not optimize the generation dispatch
11
effectively. The cUlTent avoided cost methodology provides the maximum hourly price
12
to selve load. The addition of a new generating unit will apply downward pressure on the
13
14
15
Q.
energy?
16
17
How would utilizing an optimal capacity expansion plan impact the avoided cost of
A.
The use of an optimal capacity expansion plan hearkens back to the earlier days of
18
PURP A when competitive power markets did not exist. Under today's construct where
19
the market provides the avoided cost of energy, there is no need to provide an optimal
20
capacity expansion plan because of the existence of a market price forecast. In order for
21
NOIthWestem to add a resource, it must improve upon the economics over market
22
23
capacity expansion plan will lower the avoided cost of energy to selve load. Whether the
GWD-9
resource addition follows an optimal capacity expansion plan or has been arbitrarily
selected, the economics of optimal dispatch to serve load will not increase the avoided
cost of energy to serve load. The economic rationale for this conclusion follows the
principals discussed in the question above and the analysis shown in Exhibit GWD-I.
5
6
Q.
Does the price forecast for power include both an energy and a capacity cost?
A.
Yes, the price forecast for power is constlUcted of two pa11s: 1) near-term fOlward market
prices and 2) long-term fundamentally forecasted prices. Both price forecast components
contain a capacity component. The fOlward market binds energy and capacity together
10
through contractual tem1S requiring finn delivery of energy with liquidated damage
II
penalties for failure to deliver. The long-tenn forecasts of the forward curve for power is
12
developed to adhere to long-nm equilibrium conditions based on the variable and fixed
13
costs of a new CC plant. Long-run equilibrium conditions are maintained through adding
14
a new CC plant to the p0l1folio after the end of the visible p0l1ion of the fOlward curve
15
for power is available. Long-lUn equilibrium conditions are measured by checking the
16
CC' s gross margin revenues realized from economic dispatch against the plant's
17
18
should on average over a ten-year period cover the fixed operating expenses of the CC.
19
Equilibrium conditions are satisfied when on average the gross margin revenues yields a
20
21
22
23
Q.
GWD-JO
A.
No, capacity provides for physically fum delivery of energy. The value of capacity is
measured as the levelized fixed cost for a relatively inefficient plant that operates at a
relatively high marginal operating cost but has low capital cost. We have used the fixed
cost of a CT because it provides the least cost fOlm of capacity. In power markets with
more active options trading, capacity can be valued as the option premium for an out-of-
the-money daily call option (i.e., a call option with a strike price generally higher than the
cUITent forward price). The value of these call options have varied over time but have
averaged out to be consistent with the fixed cost of a CT. Basing the capacity payment
on a higher capital cost resource has the effect of shifting value disproportionately and
10
inappropriately away from energy to capacity. The effect of such a shift of payments
II
away from energy and toward capacity would generally be detrimental to wind projects.
12
Because wind generators have limited ability to deliver physically fum power, they will
13
be impaired most severely through receiving a small fraction of the available capacity
14
component.
15
16
Q.
17
18
A.
No, NorthWestern operates in a competitive power market. New energy resources should
19
only be added to NOlthWestern's pOltfolio to the extent that the resource economically
20
outperfolTlls market purchases. The market becomes the de-facto avoided cost for energy
21
purchases. Furthermore, the power market creates a ceiling price for energy purchases
22
that establishes the conditions where the addition of a new resource to NOlthWestern's
23
GWD-Il
Q.
2
3
Is Dr. Reading's testimony flawed in his assertion that Greenfield would receive a
higher avoided cost value with the addition of a new generating resource?
A.
Yes, Dr. Reading has incorrectly concluded that Greenfield would receive a higher
avoided cost. He argues that the avoided cost of energy and capacity under the DRR
method used here would be higher if North Western undel100k optimal capacity
claim ignores two critical facts: I) N0!1hWestern would only add generation resources
that improve upon the cost of energy from the market and 2) the avoided cost of energy
10
11
Q.
the CC in 2033?
12
13
Why did the avoided cost rate increase in the QF-l filing with the introduction of
A.
In the QF-I filing, we applied the DRR method through 2032 and then switched gears for
14
the last five years to the long-run cost of service for a CC plant.
15
16
proxy unit in 2033 conflates methodologies mid-stream and results in overstating the
17
avoided costs and effectively imposing sub-optimal dispatch and full capacity credit of
18
the CC to the wind resource. As demonstrated in the above discussion, the introduction
19
of a CC in 2033 (or another year) would only serve to lower the avoided cost of energy
20
The change in
21
22
23
Q.
How does the economic construct you have applied to calculate avoided costs fit
within PURPA and FERC rulings?
GWD-12
A.
The economic constlUct for PURP A requires determination of the avoided cost to the
utility to be the incremental costs for energy or capacity that a utility would othelwise
incur through its own generation or market purchases. The DRR approach ofFERC
creates the criteria of the marginal cost to serve load. FERC has provided strong
guidance that when the utility is in surplus conditions, the "purchase rate should only
include payment for energy or capacity which the utility can use to meet its total
system.,,3 This FERC Order mateIializes itself as the marginal cost generating unit to
serve load during periods of power sales. FERC filI1her reinforces this point about
measUIing cost with respect to serving load and explicitly excludes any obligation to
10
11
purchasing utility to deliver unusable energy or capacity to another utility for subsequent
12
sale.,,4 Our modeling approach follows this constlUct and produces maximum hourly
13
pIice to serve load by identifying the marginal generating resource for each hour.
14
IV.
15
Results
16
Q.
17
A.
The results for the average annual avoided cost are shown in Figure I below along with
18
supporting details in Exhibit GWD-2. The long dashed grey line in the middle of Figure
19
I conesponds to the average avoided cost inclusive of the cost of carbon. The yellow
20
line on top conesponds to the avoided cost of energy purchases, which follows the
21
market price of energy. The short dashed grey line cOITesponds to the average avoided
See FERC Order 69, 45 Fed. Reg. 12, 219 (Feb 25, 1980).
4 Ibid.
GWD-13
cost to serve load when NorthWestern is selling power, which follows the marginal cost
2
of Colstrip. The sharp rise in the avoided costs shown in 2021 reflects the cost of carbon
$120
$100
---
$80
.<:
;;:
....::;:
$60
<I>
$40
$20
-- -----0
I
--- ---. . . . . . ..
...... .......
.............
........
.....................
........... .
- - --- ..:'
...........................
$M
N
N
N
N
0
N
m
N N
a a
N
N
N
w
N
a
N
N
0
N
00
N
N
mOM
N M M
0
a
N N N
N
M
N
m
00 m
m m M m m m m
a a a a a a a
N
Q.
A.
The allocation of wind generation toward market sales and purchases is reflected in
Figure 2 with offset purchases as the yellow shaded area and the grey shaded area
economic generation to serve load that is in turn to be sold in the market. Greenfield
10
steadily increases its contribution to serve NorthWestern load through 2039 when 80% of
JJ
GWD-14
120,000
100,000
80,000
60,000
40,000
20,000
00
M
M
M
M
W
M
00
M
mOM
M
N
N
M
N
Q.
How does the Greenfield project impact NorthWestern's net energy position?
A.
For the [n'st year of the analysis, Greenfield exacerbates NorthWestern's long position,
but after the Kerr hydro project leaves the NorthWestern system, Greenfield reduces the
generation only exceeds 50% offset of market purchases after 2020. This suggests that
the pattern of Greenfield generation is not coincident with periods when NorthWestern is
GWD-15
.<=
(500,000)
::;:
,,!\ j
oj
r<
'"r<
r<
::0:
"a
"'
N
a
N
'"
a
N
r<
m
m
"'am
N
"am
N
m
'"
a
N
r<
"
"a
N
n; (1,000,000)
t:
t:
..: (1,500,000)
(2,000,000)
(2,500,000)
(3,000,000)
- - Current+
- - Current+
Q.
A.
Yes, 100% of Greenfield delivered energy receives a capacity credit. The avoided cost
calculations are predicated on the delivery of physically film obligations that bind energy
and capacity together. Standard practice has been to reduce the avoided cost calculations
Greenfield, 95% of the capacity portion should be deducted from the cost of power as
shown in Table I
GWD-16
In the case of
2015
2016
2017
2018
2019
2020
2021
2022
$9.74
$9.76
$9.79
$9.82
$9.85
$9.89
$9.92
$9.95
$9.98
2023
2024
2025
2026
2027
2028
2029
2030
2031
$10.02
$10.05
$10.09
$10.12
$10.16
$10.20
$10.24
$10.27
$10.31
2032
2033
2034
2035
2036
2037
2038
2039
2040
$10.36
$10.40
$10.44
$10.48
$10.53
$10.57
$10.62
$10.67
$10.72
2041
2042
2043
$10.76
$10.81
$10.87
v.
Ratepayer Risk
Q.
Does the current proposed Greenfield avoided cost rate pose a risk to ratepayers?
A.
Yes, the avoided costs included a 100% credit for wind capacity instead of a 5% credit
for wind capacity. The 25-year levelized avoided cost for capacity is $ 10.17/MWh.
This puts NOithWestern's customers at risk by paying for a product they are not
capacity delivered violates FERC's ratepayer neutrality principal by leaving the utility
customer worse off with the QF purchase. Dr. Reading concurs 5 with Commissioner
10
Kavulla' s conclusion in Order No. 7199d that "a 5% capacity contribution established by
II
the Commission adequately accounts for wind' s intermittency." Paying for undelivered
12
capacity is more than risky for ratepayers; it is damaging and economically indefensible.
13
14
Q.
5
Reading, pp 8 In 1-6.
GWD-17
A.
Yes, the ORR approach assumes that Greenfield is perpetually the marginal cost resource
on NorthWestern's system. With utility owned generation, the resource is typically not
the marginal cost source of supply for the life of the asset.
4
5
Q.
ratepayers?
6
7
Does the front loading of a levelized cost payment to Greenfield pose a risk to
A.
Yes, the use of a levelized cost structure front loads payments in excess of the near-tenn
third-palty developer and has no rights to receive the long-tenn benefits for making these
10
upfi'ont payments. Furthennore, the ratepayer carries the lisk that Greenfield defaults on
II
delivery after the first 15 years to seek better oppOltunities with another buyer.
12
13
Q.
14
A.
Yes, NorthWestern has a net shOlt position starting in 2016, but less than half of
15
Greenfield generation goes to reduce market purchases until 2020. Greenfield produces
16
non-dispatchable power when it is needed least. This can lead to select hours dwing the
17
18
constraints. Projecting a regional system analysis to the NOIthWestern resow'ce mix, the
19
Company would benefit most fi'om a highly flexible resource with the ability to quickly
20
GWD-18
VI:
2
Q.
A.
Yes, Ascend has offered to accommodate Greenfield's interest in learning more about
PowerSimm, developing new and custom studies, and providing comprehensive access to
"cooperatively with Greenfield for the proper execution of studies and access to output
10
results stored in the PowerCube.,,6 This was communicated both in writing and over a
11
12
to cover external software license fees and set-up costs of $5,000 and the cost of our time
13
14
15
Q.
16
A.
Greenfield responded negatively to the offer and the requirement that they cover
17
Ascend's costs. Greenfield objected to having to pay the estimated $10,000 on the
18
September 17 conference call. Recognizing that Ascend was unwilling to grant access,
19
perform training, execute new studies, and deliver new results at no cost, Greenfield then
20
21
GWD-19
Q.
a license?
A.
No, it is usually incumbent on the intervening party to obtain their own license or develop
their own analysis to support their case. Ascend has broken with standard industry
license fees and looking to only cover our costs. This collaborative spirit of sharing
information and access was met with legal motions from Greenfield.
9
10
Q.
Do the studies Greenfield has requested through adding generation units or optimal
II
12
13
A.
No, Dr. Reading appears to have a misunderstood the economic construct ofDRR
14
modeling when working with an established market rate for power purchases. With the
15
16
generator to N0l1hWestern's supply stack will only decrease the avoided cost of energy.
17
This point is well established in Section III of my testimony and illustrated through
18
Exhibit GWD-l.
19
VII: Conclusions
20
21
Q.
Can you please conclude your testimony with a summary of your key points?
22
A.
My testimony rebuts the assertions of Dr. Reading that the avoided cost of power would
23
increase with the addition of a CC plant or with optimal capacity expansion planning. I
GWD-20
substantiate the fault in his econOllliC logic that when a market alternative exists to
pW'chase power, under no circumstance would the avoided cost be higher with the
detelmine Greenfield's avoided cost rates has been shown to be consistent with FERC
rulings.
6
7
Greenfield poses risk to ratepayers under the current construct to the extreme extent as to
violate FERC' s ratepayer neutrality principal and leave the utility' S customers worse off
10
delivers only 5%, ratepayers are paying for a product they are not receiving. In addition,
II
ratepayers bear additional risk through a fixed and levelized payment str'eam detelmined
12
at the avoided cost of power for 25 consecutive years. Nonetheless, with an appropriate
13
adjustment to capacity payments, the avoided costs developed for Greenfield comport
14
with FERC's guidelines for detennination of avoided costs to serve load and ratepayer
15
neutrality and should be considered reflective of the 25-year avoided cost of power by
16
17
18
Q.
19
A.
Yes, it does .
GWD-2l
Case 1. In this case, NorthWestern has load of 650 MW and sells excess economic energy of 100
MW at a market price for power of $63/MWh. Colstrip Unit 4 at $53 /MWh is the avoided cost to
selve load . Greenfield receives $53/MWh .
Figure E I-I: Case / Supply Stack alld Demand Where North Western Sells Ecollomic Energy
68
_____
:2 58
.3'"
CC
____________
Co lstrip 3
QI
:0
.!:!! 28
18
8
Renewable
-2
100
200
Hydros
300
Greenfield Wind
400
500
600
Capacity (MW)
700
800
900
1000
Case 2. In this case, NorthWestern has load of 890 MW and sells excess economic energy of 100
MW at a market price for power of $70/MWh. The CC at $65/MWh is the avoided cost to serve
load. Greenfield receives $65/MWh.
Figure E1-2: Case 2 Supply Stack and Demand Where North Western Sells Economic Energy
-"
!:
:2
......
0
u'"
'"
:0
'"
'c
58
48
CC ot $65/MWh
38
28
18
8
-2
IExistir,. Renewable
0
100
200
Hydros
300
Greenfield Wind
400
500
600
Capacity (MW)
700
800
900
1000
Case 3. In this case, NOlthWestem has load of 680 MW and sells excess economic energy of300
MW at a market price for power of $70/MWh. Colstrip Unit 4 at $53/MWh is the avoided cost to
serve load. Greenfield receives $53/MWh.
Figure E1 -3: Case 3 Supply Stack alld Demand Where North Western Sells Economic Energy
Load
P =$70/MWh
68
:;:-
58
:2
-....
48
:;:
Colstrip 3
Avoided cost to serve load is
ColStrip 4 at $53/MWh
0
u'" 38
.
(I)
:c
.;:;
28
1)
18
I Existi,,. Renewable
-2 0
100
200
Hydros
300
Greenfield Wi nd
400
500
600
Capacity (MW)
800
900
1000
Case 4. In this case, NorthWestern has load of 850 MW and purchases economic energy ofiOO
MW at a market price for power of $63 /MWh. The market price of $63/MWh is the avoided cost
to serve load. Greenfield receives $631MWh.
Figure E1-4: Case 4 Supply Stack and Demand Where NorthWestern Purchases Energy
_ _________________ ....."......... cc
_____
::c 58
Colstrip 3 Colstrip 4
3:
8 38
QJ
:0
28
18
Existine Renewable
-2 0
100
200
Hydras
300
400
500
Capacity (MW)
600
700
800
900
1000
Case 5. In this case, NorthWestem has load of 1090 MW and purchases economic energy of 100
MW at a market price for power of $701MWh. The market price of $70/MWh is the avoided cost
to serve load. Greenfield receives $70IMWh.
Figure E1 -5: Case 5 Supply Stack and Demalld Where NorthWestern Purchases Energy
load
p = $70/MWh
-------------------------------
68
:2
58
Co lstrip 3 Colstrip
48
V>
0
u 38
Q)
:0
.;;: 28
"'
18
8
-2
Re newable
Hydros
100
300
200
Wind
400
500
600
Capacity (MW)
700
800
900
1000
1100
Case 6. In this case, NorthWestern has load of 630 MW and purchases economic energy of 100
MW at a market price for power of $201MWh. The market price of $20/MWh is the avoided cost
to serve load. Greenfield receives $20/MWh.
Figure E1-6: Case 5 Supply Stack and Demand Where North Western Purchases Energy
Load
68
Colstrip
8'"
..
Colstrip 4
38
:0
.!! 28
-!!:
P =$20/MWh
18
-----------------------
----
Existing Renewable
-2 0
100
200
Hydros
300
Greenfield Wind
400
SOO
600
Capacity (MW)
700
800
900
1000
EMPLOYMENT HISTORY
President & Founder
Ascend Analytics
Boulder, CO (2002-present)
CEO and Chief Model Architect e-A cumen (Acquired ji-0/11 Stratus) Boulder, CO (2000-200 I)
Director ofEnergy Practice
Boulder, CO (1998-1999)
Hagler Bailly
Boulder, CO (1997-1998)
Faculty
Cornell University
Ithaca, NY (1996)
Boston, MA (1990-1991)
Exeter, NH (1988-1990)
Barker, NY (1987)
SUMMARY
Developed a suite of industry-leading analytic products that SUppOIt physical and financial ri sk
management, and trading. Sold to 30 of top 100 energy companies. Grewe-Acumen to leader
in energy trading and risk analytics with 60 people before sale of company. Has grown Ascend
to a 30+ person company with reputation as an industry leader for pOItfolio management
analytics.
Chief model architect and engagement director to implement solutions for portfolio risk
management and trading analytic infrastlUcture at AES, ACES Power Marketing, BC Hydro,
Dayton Power and Light, Duke Solutions, Entergy Solutions, Essent, Exelon, InterGen, PG&E,
Puget Sound Energy, Riverside Public Utilities, The Energy Authority, Tri -State G&T, NRG,
Tennessee Valley Authority, Pennsylvania Power & Light, and American Electric Power.
o Developed and deployed solutions to capture the financi al and physical dynamics of
energy markets and operations including: 1) derivative instlUment valuation, 2)
asset valuation, 3) risk management and pOItfolio optimization, 3) forward and spot
prices, 4) transmission/transportation, 5) load, 6) gas storage, and 7) credit risk.
o Developed energy supply procmement and trading risk repOIts, policies, and
procedmes to compliment risk management software.
PerfOImed numerous independent market assessments for financial structure and valuation of
electric generating assets and gas storage facilities:
- Assessments for flllancing of over $5 billion in generating and gas storage assets.
- Valuations perfOImed for leading energy developers, banks, and S&P and Moody's.
EDUCATION
Cornell University, Ph.D., Applied Economics and Finance, 1996
Comell University, B.S., Mechanical Engineering, B.A., Economics, Magna cum Laude 1988
Page 2
PROFESSIONAL EXPERIENCE
Gary Dorris has pioneered innovative solutions for energy portfolio planning, risk management,
and asset valuation for over two decades. His expertise with large-scale physical and fmancial
risk modeling has proved hi s company, Ascend Analytics, and its resource planning and
pOltfolio management solution to be indispensable to over SO energy companies throughout the
US and Europe. Industry leaders have appealed to Dr. Dorris for his delivery of expert testimony
regarding resource planning, lisk management, energy procurement, trading practices, asset
valuation, market power, rate design, and emi ssions trading. He has also provided independent
expelt reports to support utility acquisition of rate based generation assets and the fmancing of
merchant generation of over $S billion in electlic generating assets. Plior to founding Ascend,
he served as CEO and Chief Model Architect for e-Acumen, a 60 person energy consultancy and
software analytics firm t!:rat he successfully grew and has been sold. He directed the
development of the analytical and risk infrastructure for the launching of the trading floors of
Entergy Solutions, Duke Solutions, The Energy AuthOlity, and ConEdison. Before e-Acumen,
he founded and directed the energy practice at Stratus Consulting and was a manager at Hagler
Bailly.
Before joining Hagler Bai lly in 1997, he was a faculty member at Cornell University, where he
taught a doctoral-level course in modeling competitive energy markets. Dr. Donis actively
publishes research alticles and speaks on resource planning, portfolio management, risk analysis,
and modeling of competitive energy markets. He has been honored in 2001 by the International
Petroleum Exchange for his innovations and contributions to the field of energy risk
management.
Dr. Dorris holds a PhD in applied economics and finance from Cornell University and both a BS
in mechanical engineering and a BA in economics with Magna Cum Laude distinction from
Cornell University.
EXPERT TESTIMONY
EXHIBIT
Page 3
1988-2013
Resource Planning:
Developed one of the nation's first integrated "risk based" energy supply resource
plans for Xcel Energy in Colorado (2004) and PG&E (2003). Analysis included
portfolio assessment of multiple resource options with respect to the expected costs
and costs at risk.
Currently leading the resource planning analysis, repOit development, and providing
facilitation support for the stakeholder process and expert testimony.
Provided thought leadership to the development of Ascend's PowerSimm software
applied at over a dozen electric utilities for portfolio management, resource planning
and asset valuation.
Provided supply portfolio analysis for NOith Carolina Electric Membership
Cooperative, Southern Maryland Electric Cooperative, and Old Dominion Electric
Cooperative Oglethorpe Power Corporation
Power Trading:
Executed of over 100 short-term and long-ternl power sale agreements for both
utilities and IPPs.
Performed one of (if not) the first above cost electricity transaction in the US in 1988.
Marketed and structured complex long-term tolling contracts.
Page 4
1998-2004
Asset Valuation:
Developed independent expelt reports on the value and acceptable financial structure for
valuing power generation and gas storage assets for the following clients:
Developers
AES Corporation
Columbia Electric
Mosbacher Power
PP&LGlobal
Edison International
Enron
Xcel Energy
Sempra Energy
Tampa Electric Co.
Select Energy
EI Paso
Energetix
Financial Institutions
Investment Banks
- CS First Boston
- Lehman Brothers
Commercial Banks
- GE Capital
- Bank of Tokyo
- Citibank
Risk Managelllent: Developed and implemented risk management policy and procedures for
fow' trading floors.
Sarbanes Oxley: Performed internal audits, implemented policies and procedures, defmed
corporate structure governance, and implemented software solutions
Supply Procurement:
Developed least cost resource plan filing with risk analysis for PG&E.
Executed energy supply procurement for UNITIL Power Corp .
Trading from Fundamental: Trained power traders on short-telm trading strategies and
identification of hedging str'ategies based on real-time market fundamentals. Clients
included: Duke, DCU, PP&L, ConEd, Coral, EI Paso, Reliant, CMS, and BP.
Page 5
Market Power:
Estimated HHI and Lerner index for PJM deregulation initiatives. Filed results as
prut of market design report to state commission.
Capacity Market Design: Drafted design of a capacity market for the CAlSO.
1988-2004
Resource Planning: Developed one of the nation' s first integrated "lisk based" energy
supply resource plans for Xcel Energy in Colorado (2004). Analysis included pOitfolio this
is assessment of multiple resource options with respect to the expected costs and costs at risk.
Power Trading:
Executed of over 100 short-tellli and long-tenn power sale agreements for both
utilities and IPPs.
PerfOillied one of (if not) the first above cost electricity transaction in the US in 1988.
Marketed and structured complex long-tenn tolling contracts.
Trading from Fundamental: Trained power traders on short-tellli trading strategies and
identification of hedging strategies based on real-time market fundamentals. Clients
included: Duke, TXU, PP&L, ConEd, Coral, El Paso, Reliant, CMS, and BP.
Market Power:
Estimated HHI and Lerner index for PJM deregulation initiatives. Filed results as
prut of market design report to state conurussion.
1990-2004
Retail Offerings: Developed a suite of retail product offerings for open market
competition in Texas, PJM, and California.
Retail Time Pricing: Developed retail time price offerings in competitive offerings and
for regulated companies.
Risk Based Pricing: Developed and implemented a system of risk based pricing for
competitive retail offelings.
Page 6
1998-2002
Asset Valuation:
Developed independent expert rep011s on the value and acceptable [mancial structure for
power generation and gas storage assets for the following clients:
Developers
AES Corporation
Columbia Electric
Mosbacher Power
PP&LGlobal
Edison International
Emon
Xcel Energy
Sempra Energy
Tampa Electric Co.
Select Energy
El Paso
Energetix
Financial Institutions
1l1ves tment B a11 ks
- CS First Boston
- Lelunan Brothers
Commercial Banks
- GE Capital
- Bank of Tokyo
- Citibank
Credit Rating Agencies
-S&P
- Moody's
2002-2005
Portfolio Analysis: Developed corporate strategy for P011folio lisk analysis and capital
investment allocation for a large oil field service company.
TXU
Pinnacle West
TECOEnergy
Page 7
DISTRESSED UTILITIES
1990-2004
PG&E: Developed energy supply pOltfolio analysis for commission filings and credit
risk mitigation for the bankrupt utility. Implemented energy risk management policies
and software solutions.
Cajun Electric COOP: Economic SUppOlt for bankruptcy trustee including workout
scenarios, power purchasing strategy, and preparation of expert testimony.
Colorado Utah: Sold excess generation to mitigate losses and maintain operations.
PSNH: Developed counter party protective measures to continue supply trading.
1997-2013
Developed a suite of analytic software products for energy risk management, asset decision
analysis, and energy trading that were sold to 30 of the 100 energy companies. After merging
his business activities and software from Stratus with e-Acumen, he served as CEO and Chief
Model Architect. Since founding Ascend, he has developed a second generation suite of analytic
products which include:
PowerSillllll: Monte Carlo simulation of physical assets and financial instrument for
energy costing, pOltfolio management, risk measurement, and deal analysis.
LoadSimlll: Simulates system load, indusll'ial customer load, or load profile demand.
Gas Val: Values gas storage assets that address the new dynamics of gas market spot and
fOlward prices combined with the physical operating dynamics of storage assets.
DataScrubber: An automated data cleaning system that analyzes analytic data, reviews it
for accuracy, and identifies and remedies errors or omissions in the data.
OptiollModeler: A seri es of option models from complex regime switching and jump
diffusion with mean reversion to Black's standard model.
2000-200 1
Page 8
ENVIRONMENTAL ANALYSISIDAMAGES
1994-1999
Dr. Dorris developed the Regional Economic Model for Air Quality (REMAQ), an integrated
framework to assess the costs and air quality implications of different emission trading strategies.
He has also applied REMAQ to assess the joint benefits of air quality regulations and been used
to evaluate regulations of NOx emissions from power plants and address critical environmental
policy question about electric utility restructuring . He was the principal investigator for the
expert report to evaluate the air quality impacts and cost effectiveness of EPA ' s SIP Call for NO x
point sources, the most expensive environmental legislation for the state of New York, illinois,
North Carolina, the province of Ontario Canada, wide emission standards, and has been central
to the development of trans boundary emission policy between the US and Canada. In addition,
his environmental analysis of emission markets and regulations has been used by numerous
electIic generators for development of compliance strategy and the financing of over $15 billion
in generation.
INSTRUCTION
1996-2004
Academic:
Taught a cow-se in Risk Management at the Leeds Business School of University
of Colorado
Taught a cow-se at Cornell University on Modeling Competitive Energy Markets
in Spring of 1996.
Teaching assistant for advanced doctoral course in econometI'ics at Cornell
University.
IndustlY:
Lead instlUctional seminars regarding:
Financial Risk Management
Portfolio Optimization
Techniques for Forward Curve Development
Energy Supply Planning
Trading Electricity from Fundamental
Option Pricing and Stochastic Process
Page 9
1986-1991
At Citizens Power & Light, Dr. Don'is conducted electric power transactions and developed
strategies for power sales; managed intemational project feasibility studies in Poland,
Czechoslovakia, the Dominican Republic, and India. He directed project development for a
$700 million power plant in Poland. He negotiated conditions for a joint venture with the
national oil refinery and a power sales agreement with Polish National Power grid, and pursued
project fmancing with the World Bank and EBRD.
At UNITIL, he negotiated power purchase contracts with independent power developers and
utilities, and was responsible for the technical and economic analysis of new power projects.
Conducted short-tenn power procurement and sales and was responsible for production costing
and NEPOOL regulatory affairs.
At EPRI, Dr. Dorris perfOirued pilot testing of spray dryer scrubbers for coal power plants. He
also developed and coordinated a pH negative corrosion test program.
HONORS AND PROFESSIONAL AFFILIATIONS
Page 10
SELECTED PUBLICATIONS
1) "Application of Backwardation to Natural Gas Futures" with Sean Burrows and Vena
Kostroun, Energy Risk. August 2006.
2) "Risk Based Retail Pricing" with Sean Burrows, Public Utilities Fortnightly, March
2004.
3) "Energy Risk Management, Making Risk Management an Affirmative Tool to Provide
Stable Returns on Investment," with Andy Dunn, Energy & Power Risk Management and
the New Frontiers supplement, December, 2001.
4) "Using Modem Risk Measurement Techrllques to Understand the Risk Exposure of an
Energy Company," Energy & Power Risk Management, February 2001.
5) "Making the Shift to Earnings at Risk," with Andy Dunn, Electric Light & Power,
October, 2001.
6) "Evaluating Generation Using Modem Energy Risk Management," with Andy Dunn,
Power IndustlY Development, August 2001.
7) "Portfolio Optimization Technology and Techniques: Making Risk Management an
Affirmative Tool for Adding Value to the Bottom Line," with Andy Dunn, Energy &
Power Risk Management, July, 200 I.
8) "Using Modem Energy Risk Management," with Andy Dunn, Global Energy Business,
May/June 2001.
9) "Electricity Pricing: How to Make EleclIicity Plicing Models More Accurate by
IncOIporating Price Spike," with R. Ethier, Energy & Power Risk Management,
July/August 1999.
10) "Behavioral Transportation Controls Impact on Air Quality," with John Kim,
Transportation, October, 1999.
11) "Power Purchase Contracts and the Cost of Debt," Th e Fortnightly, May, 1996.
12) "Rethinking Power Contracting: Implications of Dispatchable Power Purchase
ConlI'acts," with Timothy Mount, Energy Journal, 15(4): 167-187.
13) "Cogeneration Implication for Pollutant Reduction and Energy Conservation," with
Timothy Mount, Comell University, Department of Agricultural, ResoUTce and
Managerial Economics, Working Paper, December, 1991.
Page 11
3) "Portfolio and Risk Management: California Carbon Policy hnpacts on Western Power
Markets," Electric Utilities Consultants, San Francisco, CA, January 27-28, 20 14.
4) "Fast Ramp and Intra-hour Market Incentives," Electric Utilities Consultants, San
Francisco, CA, January 29-30, 20 14.
5) "California Power Markets and the West: hnplications for Electricity Trade between
California and the NW Panel Discussion," Symposium. o/Northwest Power Coordinating
and Conservation Council, P0I11and, OR, September 12, 2013.
6) "Hydro Optimization: Realizing Maximum Value from Generation," Hydro Vision
International, Denver, CO, July 24, 2013.
7) "Review of Resource Planning Model" Northwest Power and Conservation Council,
June 2013.
8) "Resource Planning: IRP, Asset Valuation and Power Modeling," Electric Utilities
Consultants, Westminster, CO, May 20-21,2013.
9) "Resource Planning Under Uncertainty," Electric Utilities Consultants, Boulder, CO,
March 21, 2013.
10) "hnproving Settlement Processes for Organization Markets," Electric Utilities
Consultants, Dallas, TX, February 20-21 , 2013.
11) "POIlfolio Management: Operational & Intermediate Telm Best Practices," Electric
Utility Consultants, Houston, TX, December 10-11 , 2012.
12) "Decision Analysis for Convelling Coal to Gas," Electric Utilities Consultants, Charlotte,
NC, October 22-23 , 2012.
13) "Resource Planning: A Practitioner' s Toolkit for Current Issues," Electric Utlities
Consultants, POilland, OR, May 15-16,2012.
14) "Best in Breed and Best in Show Resource Planning," Proceedings: Electric Utilities
Consultants, POilland, OR, March 8, 2012.
Page 12
15) "Hydropower's Evolving Role in Western Power Grid Reliability," Electric Utilities
Consultants, Sacramento, CA, December 12-13, 2011.
16) "Case Studies in Hedge Optimization: Hedging Strategies to Increase Cash Flow and
Minimize Risk," SNL 's Power Risk Analysis Workshop, New York, NY, November 9-10,
2011.
17) "Hedge Optimization to Increase Cash Flow and Minimize Risk," Energy Central, New
York, NY, June 8-9, 2011.
18) "Building a Resource Plan that Addresses the Five Questions Regulators Want to Know,"
Electric Utilities Consultants, Atlanta, GA, May 16, 2011.
19) "Hedge Optimization to Increase Cash Flow and Minimize Risk," Electric Utilities
Consultants, Chicago, IL, May 4, 20 II.
20) "Hedge Flow to Increase Cash Flow and Minimize Risk," PGS, Houston, TX, March 9,
2011.
21) "Electricity Storage: Business and Policy Drivers," Electric Utilities Consultan.ts,
Houston, TX, January 24,2011.
22) "What Techniques Work in a High Renewables and Demand-Side Resources
Environment," Electric Utilities Consultants, San Francisco, CA, November 1-3 , 2010.
23) "Mixing Financial and Physical Simulations through Time," European Energy Trading
Summit, London, England, September 23 -24, 2010.
24) "Optimization Strategies to Increase Cash Flow and Minimize Risk," Energy Risk USA ,
Houston, TX, May 25 , 20 I O.
25) "Making Your Scenario Analyses More Robust: Meaningful Uncel1ainty in Price
Simulations," Electric Utilities Consultants, Denver, CO, May 6, 2010.
26) "Hedge Optimization Strategies to Increase Cash Flow and Minimize Risk," Electric
Utilities Consultants, Denver, CO, May 5, 2010.
27) "Forward Curve Generation and Data Management," Electric Utilities Consultants
Webinar, April 20, 2010.
28) "Selection of Optimal Resource Plan in an Uncertain World," Electric Utilities
Consultants, San Francisco, CA, April 12, 2010.
Page 13
29) "Software and Consulting Solutions for the Energy Industry," Marcus Evans CFO
Summit, Gold Coast, Australia, February 20, 20 10.
30) "An Integrated Monte Carlo Simulation Framework," Energy Risk Europe, London,
England, October 13-15 ,2009.
31) "Resource Planning and Risk Analysis: Dealing with Renewable Resources," Electric
Utilities Consultants Webinar, October 1, 2009.
32) "Resource Planning and Risk Analysis: Dealing with Demand Side Resources," Electric
Utilities Consultants Webinar, September 3,2009.
33) "Integrated Physical and Financial Risk Management: Using an Integrated Simulation
Framework," Proceedings: Electric Utilities Consultants, Boulder, CO, March 6, 2008.
34) "Using Measures of Hedge Effectiveness to Design Retail Rates," Proceedings: Electric
Utilities Consultants, Denver, CO, February 28,2008.
35) "Best Practices for Addressing FERC Order 2004," Proceedings: Electric Utilities
Consultants, San Antonio, TX, February 28, 2008.
36) "Building a No Regrets Energy Supply Portfolio," Proceedings: Electric Utilities
Consultants, Austin, TX, January 28 , 2008.
37) "Balancing Energy Portfolios Physical and Financial Risks," Proceedings: Electric
Utilities Consultants, New York, NY, August 3, 2006.
38) Retrospective of Electricity Regulations and Markets," Proceedings: Electric Utilities
Consultants, Denver, CO, May 18, 2006.
39) "Estimating Unceltainties for Volumetric Risk: Using an Integrated Simulation
Framework," Electric Utilities Consultants, Denver, CO, March 2, 2006. (conference
chair)
40) "Merchant Wind Financing: Maximizing the Value of Wind Generation" Denver, CO,
February 27, 2006. (conference chair)
41) "Developing a No Regrets Energy Supply POitfolio," San Diego, CA, January 31, 2006.
42) "Building a Hedge Portfolio to Mitigate Earnings Volatility,"Proceedings: Electric
Utilities Consultants, Boston, MA, August 10, 2005. (conference co-chair)
43) "Managing Earnings Volatility," Proceedings: Electric Utilities Consultants, Denver,
CO, February 24, 2005. (conference chair)
Page 14
Page 15
59) "Design and Operation of Combined Cycle Turbo Expanders for Gas Distribution
Companies," Proceedings of the New England Gas Association, March, 1990.
Page 16
8) "Application of Option Models for Electricity," Prepared for The Energy Authority, July,
1997.
9) "Estimating Emission Weights for the Greater Chicago Metropolitan Area," Prepared for
Illinois EPA, July 1997.
10) "Measwing Value at Risk," Prepared for the Energy Authority, August, 1997.
II) "Development of a FOlward Price Curve for Electricity," Prepared for The Energy
Authority, Jun 1997.
12) "Least Cost Solutions for Ozone Attainment in the Greater New York Metropolitan
Area," Prepared for Niagra Mohawk Power Corp., with Timothy Mount and S.T. Rao,
August, 1997.
13) "Capital Investment and risk ofP11vate Sector Energy development in Egypt," Prepared
for the Egyptian Electricity Authority by Althor Anderson, August, 1996.
14) "Least Cost Strategies for Ozone Attainment," Prepared for New York Deprutment of
Environmental Conservation, with Timothy Mount, S.T. Rao, G. Sisla, P. Brandford,
and Kwvila John, March, 1995.
1
2
3
4
5
6
7
8
10
TODD A. GULDSETH
ON BEHALF OF NORTHWESTERN ENERGY
11
12
TABLE OF CONTENTS
13
14
Description
15
Witness Information
16
Purpose of Testimony
17
18
19
PowerSimm Transparency
20
Witness Information
21
22
Q.
23
A.
24
25
26
Q.
TAG-l
A.
Q.
A.
such as variations in load; resource stack, and other items that could
10
II
Q.
12
A.
13
14
15
16
17
18
19
20
21
Purpose of Testimony
Q.
T AG-2
A.
10
The Cost of Spion Kop
11
12
Q.
On page DCR-S of his direct testimony Mr. Reading states that the
13
14
IS
A.
16
of Order No. 71591 in Docket No. D2011.5.41 , but I do not agree with the
17
context in which Mr. Reading applies the value, which is that this is the all-
18
19
approved for Spion Kop. The $68.77/MWh was for illustrative comparative
20
purposes only, as evidenced by the fact that the same integration cost of
21
22
were used for all alternative wind projects and/or resources so that they
23
TAG-3
comparison table that Mr. Reading refers to reflects that the illustrative
cost of Spion Kop is higher than only one market alternative, not "several"
7
8
Q.
A.
10
(Docket No. 02011.5.41 , Order No. 71591, page 41, paragraph 8). Adding
11
12
$2.27/MWh (Docket No. 02011 .5.41, Order No. 71591, page 29,
13
14
15
$55.42/MWh.
16
17
18
Q.
On page DCR-14 of his direct testimony Mr. Reading testifies that the
19
forecasts used for Spion Kop are different from those used for
20
21
to be the reason that the avoided cost rate for Spion Kop calculated
22
23
TAG-4
1 A.
No. Although I agree that the forecasts used for Spion Kop and
Greenfield are different, I do not agree that the forecast differences are
the main driver of a higher avoided cost rate for Spion Kop. A long-
additions of resources into the energy supply portfolio. Spion Kop was
evaluated under the framework of the 2009 Plan , two planning cycles
10
ago. The main reason that the value of Spion Kop was higher at the
11
12
13
14
15
generation will occur when the supply portfolio is long versus the
16
company's operating reality three to four years ago. Yes, the forecasts
17
and models have changed , but the primary difference in value between
18
Spion Kop and Greenfield is that more of Spion Kop's generation was
19
20
21
TAG-5
1
2
PowerSimm Transparency
Q.
A.
Excel file containing all of the avoided cost inputs including market price
produced market purchases and sales for the portfolios, along with all of
10
11
12
calculations were performed, and the location of all key inputs was also
13
14
15
Q.
16
A.
17
18
19
20
21
va riable cost of CU4, which is the resource identified that can be backed
22
23
TAG-6
market purchases and sales for the two portfolios. PowerSimm did not
10
II
routine that produced market purchases and sales detail that could be
12
13
14
15
falls into at various times: the offset purchases bucket when the supply
16
17
excess sales bucket when the supply portfolio is long (equal to the
18
difference in market sales). Formulas in the Excel file then multiply the
19
20
21
22
cost within each bucket. Both the market purchase price forecast and the
23
TAG-7
The actual calculation of the avoided cost contained within the Excel file is
simple and transparent. The PowerSimm model inputs and outputs have
Q.
Did you receive any questions from Greenfield on the Excel file used
10
11
explaining the file that you provided in the response to Data Request
12
Greenfield-014?
A.
No.
15
Q.
16
A.
Yes it does.
13
14
TAG-8
I
2
3
4
5
6
7
8
10
CASEY E. JOHNSTON
11
12
TABLE OF CONTENTS
13
14
Description
15
Witness Information
16
Purpose of Testimony
17
18
19
20
Witness Information
21
Q.
22
A.
23
24
25
Q.
26
A.
27
Grid Operations.
CEJ-l
Q.
A.
10
11
Q.
12
A.
13
14
15
16
17
18
have worked in the electric and natural gas utility industry for 37 years,
19
20
21
22
23
administration.
CEJ-2
Purpose of Testimony
2
Q.
A.
Greenfield Wind, LLC 's ("Greenfield") project and the incremental cost of
regulation for the Greenfield project and to rebut Don Reading's testimon y
9
10
Q.
11
12
A.
13
that are owned or contracted for by NorthWestern with the Dave Gates
14
15
16
resources .
17
18
Q.
19
20
21
A.
22
23
CEJ-3
3
4
Q.
5
6
A.
8
Incremental Regulation Service Cost
10
Q.
11
stated that the cost to provide regulation service for the Greenfield
12
13
14
15
costs?
16
A.
17
18
19
20
21
in Docket No. D2012 .1.3, Final Order No. 7199d . I do not disagree with
22
23
CEJ-4
Q.
In his prefiled direct testimony, Dr. Reading suggests that the WI-1
rate for the Greenfield project is $6,600 per month. Do you agree
A.
I cannot agree or disagree with this amount as I do not know how the
amount was determined.
7
8
Q.
9
10
A.
Yes.
Q.
11
12
13
14
Yes, I believe it is. Mr. LaFave has applied the zonal rate method to
15
16
17
Gap and Horseshoe Bend projects, both of which were on line prior to the
18
order, based upon the GENIVAR study. The GENIVAR Study allocated
19
20
21
percentage of nameplate basis, for those projects than if the zonal rate
22
were applied .
23
eEJ -S
Q.
2
3
A.
No, the total output of DGGS is needed to integrate the existing wind
6
7
Q.
A.
Yes , it does.
CEJ-6
1
2
3
4
5
6
7
8
9
10
CHELSEA C. LOOMIS
11
12
TABLE OF CONTENTS
13
14
Description
15
Witness Information
16
Purpose of Testimony
17
18
Mitigation Costs
19
20
Witness Information
21
Q.
22
A.
23
24
25
Q.
26
A.
27
CCL-l
Queue.
Q.
A.
10
11
12
13
Tech. During that time, I was also a Math and/or Electrical Engineering
14
15
16
17
18
19
Purpose of Testimony
20
Q.
21
A.
22
between the time that NorthWestern filed its petition in this docket on April
CCL-2
23, 2014 and today and how those changes impact the Greenfield Wind,
3
4
Q.
A.
10
11
12
13
and as such , there is a natural queue order that develops for transmission
14
service based on the date of the receipt of the TSRs. The Transmission
15
16
17
18
Network Customer obtain the ability to serve Network Load . Once the
19
NITS request is made, then it falls into the same FERC timelines as a TSR
20
21
22
23
Q.
CCL-3
A.
Q.
Please explain the difference between the TSR Queue and the
2
3
4
5
A.
electric energy and capacity from the Generating Facility at the point of
10
11
12
13
14
15
16
17
18
Q.
19
20
21
22
23
A.
Yes.
CCL-4
Q.
Please describe the changes in the TSR Queue since April 23, 2014.
A.
TSR Queue that would have been senior to Greenfield. had Greenfield
applied for transmission service at that time. Since April, 100 MW of those
remainder of the requests have been removed from the TSR Queue due
8
Mitigation Costs
9
10
Q.
11
12
A.
Yes.
Q.
13
14
15
16
A.
Yes. The costs were derived from the 2012 TSR studies for transmission
service.
17
18
19
Q.
20
21
22
A.
CCL-S
Q.
does not require mitigation based on the current TSR Queue, will
A.
yet to apply for firm transmission service and there is no way of predicting
if any other project would apply for transmission service before Greenfield.
senior in the TSR Queue to any requests that share the same
transmission path, then yes , it is true that Greenfield will not require
10
mitigation to move its power on a firm basis based on what we know today
11
12
13
Q.
14
A.
Yes, it does.
CCL-6
CERTIFICATE OF SERVICE
I hereby certify that a copy of NorthWestern Energy's Rebuttal Testimony in Docket No.
D2014.4.43 has been hand delivered to the Montana Public Service Commission and to the
Montana Consumer Counsel this date. It will be e-filed on the PSC website, emailed to counsel
of record, and served by mailing a copy thereof by first class mail, postage prepaid to the service
list in this Docket.
D2014.4.43
Robert Nelson
Montana Consumer Counsel
III N. Last Chance Gulch Ste 1B
Helena MT 59620
AI Brogan
NorthWestern Energy
208 N . Montana Ave Suite 205
Helena MT 59601
Sarah Norcott
NorthWestern Energy
208 N. Montana Ave Suite 205
Helena MT 59601
Joe Schwartzenberger
NorthWestern Energy
40 E. Broadway
Butte MT 59701
Ryan R. Shaffer
Meyer, Shaffer, & Stepans, PLLP
405 S. First St. West
Missoula, MT 59801
Mike Uda
UDA Law Firm, P.C.
601 S. Montana Ave.
Helena MT 59601
Gregory Adams
Richardson Adams, PLLC
515 N 27th St.
Boise, ID 83702
Trina J. Wolf
LEO Wind, Inc
1215 W. Alderson
Bozeman MT 59715