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OF AN IRP BASED AVOIDED COST                      Docket No. 03-035-14


       Pioneer Ridge, LLC hereby submits the prefiled Rebuttal Testimony of Roger J. Swenson in

this Docket.

       Dated this 8th day of September 2005.

                                    Roger J. Swenson
                                    Consultant for Pioneer Ridge, LLC
                        PREFILED REBUTTAL TESTIMONY


                                ROGER J. SWENSON

                            On behalf of Pioneer Ridge LLC

In the Matter of the Application of PacifiCorp for Approval of an IRP Based Avoided Cost
                   Methodology for QF Projects Larger than 1 Megawatt

                                 Docket No. 03-035-14

                                  September 8, 2005
 1                                        Background

 2   Q.   Please state your name and business address.

 3   A.   Roger J. Swenson, 1592 East 3350 South, Salt Lake City, Utah 84106.

 4   Q.   By whom are you employed and in what capacity?

 5   A.   I am an independent utility and energy consultant.

 6   Q.   Have you filed testimony in this docket on previous occations?

 7   A.   Yes. I filed direct testimony in this specific docket on July 29, 2005.

 8   Q.   Can you summarize your rebuttal testimony in this proceeding?

 9   A.   Yes. It is clear to me that there is no direct evidentiary basis for many of the

10        pricing determinations for wind projects that Parties in this case suggest.

11        Specifically there are issues concerning determinations of integration costs and the

12        capacity contributions that wind projects make. I am also still somewhat confused

13        about the methodology proposed by Parties to calculate the energy pricing to

14        which the capacity contribution would be added and the integration cost

15        subtracted from. I believe that the only non-subjective actual evidence that the

16        Commission has in order to make a determination over what the avoided cost

17        should be for wind QF projects, is the last non-QF wind contract enter into by

18        Pacificorp. This market benchmark methodology is indisputable and provides a

19        means to give the wind QF developer a true market signal. The risks that Parties

20        talk about in testimony concerning setting the price too low and not encouraging

21        development is reduced since if one developer can make it happen then others

22        should be able to follow. It also follows that the pricing has not been set too high

23        since the utility has gone to the market to find the best project.

 1   Q.   Does the CCS have a position that clearly states what capacity credit a wind

 2        project should receive in its rate determination?

 3   A.   It states in witness Philip Hayet’s testimony that the appropriate capacity credit

 4        level is difficult to determine. (CCS-1D Philip Hayet pg 22 line 6) He then goes

 5        on to discuss many studies that have been completed that yields results from 10%

 6        to 33.75% depending on certain factors. The CCS testimony on page 24 lines 10

 7        and 11 say that the Commission may want to consider establishing a capacity

 8        value between 20% and 30%. There is no clear evidentiary basis for establishing

 9        any of the numbers. We should use more than a subjective range to establish a

10        pricing methodology.

11   Q.   What does the CCS witness say about integration costs?

12   A.   The committee witness states on page 26 lines 11 and 12 that “this is a subject of

13        significant debate in the wind energy community.” He states that there are experts

14        that believe the impacts are small and there are examples of integration pricing of

15        about $5.00/MWH. The witness then states that the Committee believes that

16        $4.64 is a reasonable estimate of Pacificorp’s integration costs but they would like

17        to model integration costs within the production cost modeling capabilities of

18        GRID. It is clear we do not have anything but estimates and we are searching for

19        more ways to ascertain what that integration cost is. We do not have a clear

20        determination based on any evidence to what the integration costs truly are.

21   Q.   What answer do you have to this issue of not having good evidentiary basis

22        for the cost determination?

23   A.   I recommend that we use pricing of the last non-QF wind contract price that was

 1        entered by Pacificorp as the market based methodology to set the wind QF rate in

 2        order to avoid the problems with subjective pricing determinations. The

 3        Committee itself on page 17 lines 16 and 17 states that “A market based approach

 4        will ensure that Pacificorp will not overpay for large QF resources.” I agree that it

 5        will keep the utility from overpaying for any size resource.

 6   Q.   How does the market based approach for wind pricing protect ratepayers?

 7   A.   The likely winners of any RFP and final negotiations with Pacificorp will be the

 8        lowest cost wind resource Pacificorp can find at that time. Using this market

 9        based approach will by its very nature solve the issues with subjective integration

10        cost determination and the questions concerning capacity cost contribution as they

11        are incorporated in the price, not manufactured by assumption.

12   Q.   Does this market based approach match up with concerns that were

13        expressed in the DPU testimony of witness Coon?

14   A.   Yes. As she states on lines 107-109 of her testimony, “ the Division believes that

15        offering very large QFs pricing that is not necessarily market based may result in

16        the ratepayer indifference standard not being satisfied.” Therefor from the

17        perspective of the Division, a market-based approach helps to make sure that the

18        ratepayer indifference standard is met with QF pricing determinations. I believe

19        the Division is suggesting this approach for large QFs because it is important to

20        get the pricing right for large QFs. I would suggest that it is important for any size

21        QF and again the market-based approach avoids all the subjective determinations

22        required in other methodologies.



 2   Q.   What does the Division say about the inclusion of capacity values?

 3   A    The Division witness Abdinasser M. Abdulle states that the Pacificorp inclusion

 4        of a capacity credit of 20% is a move in the right direction, but that the calculation

 5        is based on limited data. He states that it is important to continue to obtain more

 6        information to determine the capacity credit. I believe this again says that we do

 7        not have any true evidentiary basis to accept the subjective basis of the method to

 8        calculate QF rates for wind projects.


10   Q.   Do you believe that using the market based approach that you are suggesting

11        may require some adjustments?

12   A.   Yes, the specific location of a project relative to load should be taken into account

13        in the market based contract approach. Also the capacity factor the market based

14        contract purchase and the wind QF requesting avoided cost pricing needs to be

15        taken into account in some manner.

16   Q.   Can you provide an example?

17   A.   Yes. Suppose that the last non-QF contract for wind that Pacificorp has entered is

18        a wind project in Canada for $35/MWH. We would want to adjust the value for

19        the transmission costs in delivering the power to Pacificorp. Suppose that the

20        transmission cost is $20/MWH taking into account the many transmission systems

21        and losses associated with delivering the power to the Utah bubble. If the wind

22        project that has requested a price for sales to Pacificorp is located in the Utah

23        bubble then that price should be $55/MWH. If the project in Canada has a

1        production profile that produces more wind in the off peak periods then that needs

2        to be taken into account and price so adjusted for the off peak and on peak period.

3        (These prices are for illustrative purposes only and do not represent any specific

4        pricing or project known at this time.)


6   Q.   Does this conclude your testimony?

7   A.   Yes it does


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