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NorthWestern

Energy

Before The Public Service Commission


Of the State of Montana

DOCKET NO. D2014.4.43


Petition of North Western Energy
for the Commission to Set
Terms and Conditions of Contract
between NorthWestern and Greenfield Wind, LLC

REBUTTAL
TESTIMONY AND EXHIBITS

OCTOBER 2014

Department of Public Service Regulation


Montana Public Service Commission
Docket No. D2014.4.43
Greenfield Wind, LLC Petition
NorthWestern Energy

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PREFILED REBUTTAL TESTIMONY OF

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BLEAU J . LAFAVE

11

ON BEHALF OF NORTHWESTERN ENERGY

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TABLE OF CONTENTS

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14

Description

Starting Page No.

15

Witness Information

16

Purpose of Testimony

17

Rebuttal of Prefiled Direct Testimony of Martin Wilde

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Rebuttal of Prefiled Direct Testimony of Don Reading

11

19

Rebuttal of Prefiled Supplemental Testimony of Don Reading

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20
21

Exhibits

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Regulation Calculation - Incremental Contracts

23

BJL- I

Exhibit_ (BJL-07)

Witness Information
2

Q.

Please state your name and business address.

A.

My name is Bleau J. LaFave. My business address is 3010 West 69 th


Street, Sioux Falls, South Dakota 57108.

4
5

Q.

By whom are you employed and in what capacity?

A.

I am NorthWestern Energy's ("NorthWestern") Director of Long Term


Resources ..

10

Q.

11
12

Are you the same Bleau J. LaFave who submitted prefiled direct
testimony in this docket?

A.

Yes.

13

Purpose of Testimony

14
15

Q.

What is the purpose of your rebuttal testimony?

16

A.

The purpose of my testimony is to rebut claims made by Greenfield Wind,

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LLC witnesses Mr. Martin Wilde and Dr. Don Reading in their prefiled

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direct testimonies and by Dr. Reading in his prefiled supplemental

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testimony concerning the application , structure, and timing of

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NorthWestern's avoided cost. Avoided cost for Greenfield is simply the

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cost NorthWestern customers can avoid by purchasing the output from the

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Greenfield Wind project to serve customers' load. In any given hour,

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NorthWestern supplies its customers' load by market purchases and/or

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

rep resent the offset of purchases or NorthWestern portfolio generation

depend ing on the amount of system load as it relates to the current

10

generation portfolio.
(Illustration Purposes Only)
Daily Profile Example
load Forecut

_ Load ServIng Gen

_ Operating Gen

1000

900

800

OF Offset Purchase Cost

700

600

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

Rebuttal of Prefiled Direct Testimony of Martin Wilde

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

seek contracts with NorthWestern?

A.

Yes.

Q.

Does the project development process described on page MHW-3

7
8
9

line 20 through MHW-4Iine 15 in the Wilde Direct Testimony obligate,

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as referenced on page MHW-6 line 11, the project to provide energy

II

for NorthWestern's customers once the Power Purchase Agreement

12

("PPA") is executed?

13

A.

No. If Greenfield "obligated" itself to NorthWestern, Greenfield would be

14

obligated to deliver the energy to NorthWestern in accordance with

15

NorthWestern's avoided cost for a specific time and term . Failure to

16

deliver the energy would result in damage payments for not completing

17

the project or not delivering on time. The process described in the Wilde

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Direct Testimony describes a type of nonbinding agreement under which

19

developers have no obligation to provide the services under the contract

20

unless all other additional circum stances meet their satisfaction . His

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process provides no protection to NorthWestern customers from contract

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flipping , non-delivery, loss of regulatory requirements, out-of-pocket

23

development costs , and integration expenses.

BJL-4

Q.

Does the project development process described on page MHW-3

line 20 through MHW-41ine 15 in the Wilde Direct Testimony obligate

NorthWestern customers once the PPA is executed?

A.

Yes. Once NorthWestern executes a PPA its customers are obligated to

purchase the output from the generator, and NorthWestern's customers

inherit the risks of the services not being delivered including energy

planning, market fluctuations , and portfolio planning.

Q.

Mr. Wilde claims on page MHW-6 of his testimony that there were

10

communications with NorthWestern prior to March of 2014 regarding

II

a Greenfield project for a 25 MW Qualifying Facility (nQF"). Is he

12

correct?

13

A.

No . The first time Mr. Wilde discussed or even mentioned a 25 MW

14

Greenfield QF project was his email receivedinMarchof2014.Mr. Wilde

15

has unsuccessfully participated in many NorthWestern Requests for

16

Proposals ("RFP") and discussions concerning projects near or on this

17

location, but none of these efforts directed NorthWestern to a 25 MW

18

Greenfield QF project. NorthWestern was never asked to provide a price

19

or notified that Greenfield was interested in a 25 MW QF project PPA prior

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to this time frame.

21

BJL-5

O.

Does the creation of a 25 MW Greenfield OF project in 2014 provide

Mr. Wilde a basis for establishing a price reflecting past years as Mr.

Wilde has described on pages MHW-7 and MHW-8?

A.

No, as mentioned above, Mr. Wilde has historically presented smaller

projects on and near this location in multiple configurations through

various formats. Some of these projects have been successful; some

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

competitive solicitation . This exact project, a 25 MW Greenfield project,

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was submitted unsuccessfully in a competitive solicitation for Community

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Renewable Energy Projects ("CREP") in 2013. It was not selected as a

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finalist proving that the project was not financially competitive at the price

13

offered . Two other contracts at and below the rates submitted by

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Greenfield for the same size projects were offered and executed.

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16

O.

On page MHW-12 starting on line 23 and continuing to MHW 131ine

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4, Mr. Wilde indicates that "it is significantly more difficult to finance,

18

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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than what he has requested in this docket?

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22

A.

No, the 25 MW Greenfield project was offered by Mr. Wilde at a rate


equivalent to $50.91 per MHW levelized from 2015 to 2039. The rates

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.

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6

Was this project selected in the 2013 CREP RFP process as a


finalist?

A.

As I noted above, this project was not selected as a finalist. It was

selected as a shortlisted project. The Crazy Mountain project, which was

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

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("Commission") definition of CREP, Mr. Wilde offered Greenfield to fulfill

12

his bid proposal. Greenfield eventually backed out of its 2013 CREP bid

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that was the same as the Crazy Mountain bid with the exception that, for

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Greenfield, transmission costs were identified. The additional risks

15

associated with these transmission costs that did not exist with Crazy

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Mountain were assigned to the developer. Several weeks after

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discussions of the project as a CREP terminated, Greenfield then

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reinstated its OF request from March of 2014.

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20

Q.

Does the rate in the PPA referenced in the Wilde Direct Testimony on

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page MHW-14 starting on line 18 that was signed by Mr. Wilde

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represent the avoided cost for a large QF of 25 MW?

BIL-7

A.

No . As is explained throughout the docket, the rates for a smaller

generation project are not the same as the rates for a larger project.

Larger projects will have greater impacts on the amount of ancillary

services, integration costs, and offsets to purchases and internal

generation . The rates identified by Mr. Wi lde also do not reflect

NorthWestern's existing portfolio obligations at the time Mr. Wilde

requested the 25 MW QF Greenfield project. Each one of these factors

impacts the avoided cost for various types of large QF projects.

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Q.

On page MHW-17 Mr. Wilde testifies that the contract that he

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executed with NorthWestern contained sufficient guarantees to

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ensure performance during the term of the contract. Do you agree?

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A.

No. As Mr. Wilde provides on page MHW-16 of his testimony, the

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Commission order requires:

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1) Price term consistent with the utility's avoided costs. (Greenfield

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never asked for a price until after this filing was made. Greenfield

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offered a price that was significantly above the costs that

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NorthWestern can avoid by purchasing energy from Greenfield.

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The avoided costs include offsetting purchases and the variable

20

cost of internal generation, reduced to account for any increase in

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integration, operation, and system upgrade costs associated with

22

the QF resource).

BJL-8

2) Sufficient guarantees to ensure performance during the term of


2

the contract. (Greenfield's suggested letter of credit of $500,000

is significantly below the risk of the cost to NorthWestern's

customers because of the front loading of the levelized avoided

cost and the amount of any integration costs including regulation

and possible transmission upgrades that would need to be

contracted for or built beginning at the execution of the agreement

as identified in my prefiled direct testimony in this docket. Nor

would it cover the default risk associated with contracts for

10

additional ancillary services. In addition, this developer has

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defaulted on several previous contracts adding additional risks to

12

the executed agreements and leaving NorthWestern short of its

13

CREP requirement as a result of the latest default.)

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3) Demonstration of an unconditional commitment. (As described by

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Mr. Wilde, he first would secure the contract and then shop it

16

around to see if he could feasibly complete the project. This does

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not represent an unconditional obligation of Greenfield to provide

18

the project's output. )

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20

Q.

On page MHW-18 Mr. Wilde testifies that Greenfield is entitled to

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historical QF-1 prices because NorthWestern earlier refused to

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negotiate on other configurations of the Greenfield project. Do you

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agree?

BJL-9

A.

No. First, the Greenfield 25 MW OF project would have never qualified as

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

when it was lowered to 3 MW.

Second , Mr. Wilde has continued to negotiate with NorthWestern for

projects located in this area, bid into RFPs with various projects, and

restructured agreements associated with projects located in this area.

This effort has resulted in Mr. Wilde being successful in executing

10

contracts on at least three occasions.

1I

12

Third, after Mr. Wilde requested a 25 MW OF for the Greenfield project

13

with NorthWestern, NorthWestern filed with the Commission to seek

14

approval for a OF contract larger than 3 MW at NorthWestern's avoided

15

cost consistent with Montana statutes.

16

17

Q.

On page MHW-19 Mr. Wilde testifies that he was told the avoided

18

cost for the Greenfield project was around $50/MWH levelized. Do

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you agree?

20

A.

Yes. I estimated the avoided cost for energy and capacity to be around

21

$50/MWH . The analysis ended up at $48.78 as calculated using the

22

avoided energy and capacity costs from the projected output of

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Greenfield. As I explained to Mr. Wilde, the price would then be adjusted

BlL-IO

in accordance with the estimated costs of ancillary services to ensure that

NorthWestern customers would not see increased costs due to the

addition of the Greenfield project.

4
5

Q.

On page MHW-19 Mr. Wilde testifies that he did not receive an

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

10

request. NorthWestern. in accordance with its tariffs, is unable to

11

negotiate a long-term bilateral contract with a QF larger than 3 MW that

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was not successful in a competitive solicitation. NorthWestern efiled the

13

filing and served the filing on Mr. Wilde by mail the same day it was

14

delivered to the Commission . Therefore, the avoided cost rate was

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

19

20

Q.

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22

Are you familiar with the Prefiled Direct Testimony of Don Reading in
this docket?

A.

Yes.

23

B1L-l1

Q.

On page OCR-4, Dr. Reading testifi es about the methods used by

state public utility commissions to determine avoided cost. Has

NorthWestern ever used the method used for Greenfield in

determining the avoided cost for a large QF project? If so, was it

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.

No. The QF-1 rate is for projects with nameplate capacity of 3 MW or

12

less. The avoided energy and capacity costs, regulation costs, ancillary

13

costs, and transmission costs are all significantly affected by the size and

14

location of the Greenfield project, which would cause NorthWestern

15

customers to pay more under the Option 1(c) rate than could be avoided

16

by buying the output frorn Greenfield.

17

18

Q.

On page OCR-7, Dr. Reading testifies that capacity should be

19

included in NorthWestern's avoided cost calculation for Greenfield.

20

Does NorthWestern include a capacity value in the offer to

21

Greenfield?

22

23

A.

Yes. As described in the Prefiled Rebuttal Testimony of Gary Dorris,


NorthWestern actually included 100% of the capacity value when using

B1L-12

the forecasted first-of-month market prices that include both energy and

capacity value.

Q.

Do you believe a 5% capacity value would be appropriate?

A.

NorthWestern believes the capacity cost that can be avoided for

NorthWestern's customers by intermittent wind resources actually

approaches zero . However, NorthWestern concedes that 5% has been

directed by the Commission . The offered avoided cost could be reduced

to reflect the 5% consistent with the Commission 's previous order.

10

11

Q.

On page DCR-S, starting on line 7, Dr. Reading testifies that the

12

price methodology chosen by Greenfield is conservative. Do you

13

agree?

14

A.

No. The Greenfield methodology does not include the effect of the

15

hydroelectric assets in NorthWestern's portfolio . It also does not account

16

for the amount of regulation required to serve a large wind project nor

17

does it properly account for times when the NorthWestern portfolio is

18

long and the avoidable cost for NorthWestern customers is the price of

19

variable generation used to serve load.

20
21

Q.

On page DCR-9 Dr. Reading testifies that NorthWestern did not use

22

the Differential Revenue Requirement ("ORR") method as he

23

defines it. Do you agree?

BJL-13

A.

Yes. The DRR method as defined by Dr. Reading does not calculate the

actual avoided cost for NorthWestern's customers as described by the

Federal Energy Regulatory Commission ("FERC"). NorthWestern used a

DRR method that calculates the appropriate avoided cost. Avoided cost

as defined in 18 C.F.R. 292.101(b)(6) "means the incremental cost to an

electric utility of electric energy or capacity or both which , but for the

purchase from the qualifying facility or qualifying facilities, such utility

wou ld generate itself or purchase from another source." (Emphasis

added.) Customers must be indifferent to whether or not the QF is in the

10

portfolio. QF contracts lack the benefits to customers of cost-ba sed rates

II

that are reviewed by the Commission periodically and subject customers

12

to increased market risks. NorthWestern customers cannot be put into the

13

position of guaranteeing a 25-year market price of energy that is not

14

needed to serve customer load . Providing a fixed market price for energy

15

sales effectively makes NorthWestern a broker for a QF and places the

16

associated market risk on customers.

17
18

Q.

On page DCR-14 Dr. Reading testifies that the forecast used for the

19

Spion Kop Wind Generation Asset was different than what was

20

used for Greenfield. Do you agree? If so, what was used for

21

Greenfield?

22
23

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

later of the time at which an LEO is established or a large QF PPA is

approved by the Commission . Since there is no established LEO and

Commission approval has not been completed, and because Greenfield

has no obligation to provide NorthWestern output from its project at

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

of Greenfield and the contract delivered to NorthWestern by Greenfield,

the NorthWestern portfolio which includes the hydroelectric assets has

changed significantly since Spion.

10
11

Q.

On page DCR18 Dr. Reading testifies that NorthWestern has not

12

filed a large QF rate. Why has NorthWestern not filed a large QF

13

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

16

OF avoided costs vary greatly depending on location, interconnect,

17

resource attributes, system impacts, portfolio impacts, and ancillary costs.

18

19

Q.

On page DCR19 Dr. Reading testifies that NorthWestern filed a

20

proxy estimate for incremental regulation costs to fulfill the added

21

regulation capacity that will be needed for Greenfield. Is this the

22

most costeffective solution available to NorthWestern?

BIL-IS

A.

No . Since filing its petition, NorthWestern has reviewed another option for

providing regulation for Greenfield. During 2012, NorthWestern executed

two contracts for regulation services. Reflecting the cost of these

contracts, zonal integration rates, and the project's nameplate capacity,

Greenfield's regulation rate would be $23,944 per month escalating at

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

NorthWestern has proposed three different regulation costs


including the proposed cost above. Please describe each offer.

A.

In its original petition , NorthWestern submitted a regulation cost of

12

$47,861 per month levelized over 25 years. This estimate was based on

13

the following three assumptions.

14

1. That the Dave Gates Generating Station ("DGGS") is not able to

15

provide additional regulation above the current capacity while

16

continuing to meet CPS2 requirements;

17

2. That the next available regulation resource would be the

18

expansion of DGGS with a fourth unit. The installation and

19

operational costs of the existing units were used as a proxy for the

20

costs of the additional unit. Greenfield is allocated costs for its

21

regulation requirement; and

BJL-1 6

3. That the zonal rates for the additional wind are applicable.

Greenfield is in zone 3 with a zonal rate of 5.1 % of nameplate for

regulation capacity required.

4
5

In response to Data Request PSC-19 in this docket, NorthWestern

submitted another proposal for regulation costs at $138,354 per month

levelized over 25 years. This estimate was based on the following

assumptions:

1.

That DGGS is not able to provide additional regulation above the

10

current capacity while continuing to meet CPS2 requirements ;

11

2. The next available regulation resource is the expansion of DGGS

12

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

14

costs of the additional unit.; and

15
16

3. That the allocation to any new intermittent generation would be


based on 18% of the nameplate capacity.

17

18

Now as illustrated in Exhibit_(BJL-07), NorthWestern proposes a

19

regulation rate of $23,944 per month escalating at 2.1 % per year. The

20

key assumptions are as follows:

21

1. That DGGS is not able to provide additional regulation above the

22

current capacity while continuing to meet CPS2 requirements;

BIL-l?

2. That the next available regulation resource is regulation from the

market. The incremental cost is based on contracts under which

NorthWestern recently purchased regulation from the market.

New intermittent generation would receive the incremental cost;

and

3. That the zonal rates for the additional wind would apply.

Greenfield is in zone 3 with a zonal rate of 5.1% of nameplate (the

lowest zonal rate) regulation capacity required .

9
10

Q.

11
12

What was the reason for the three iterations of proposed regulation
costs for Greenfield?

A.

NorthWestern periodically evaluates resources in order to provide

13

reliable service for its customers at just and reasonable rates. The

14

original proposal attempted to match long-term QF contracts with a long-

15

term regulation resource. The second option incorporated the estimated

16

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

18

Commission 's guidance on the application of zonal rates for regulation of

19

wind resources.

20
21

Q.

On page DCR-24 Dr. Reading testifies that although Greenfield has

22

selected to keep the renewable energy credits ("REC " ), Greenfield

23

should get some credit for being "Green". Do you agree?

EJL-1 8

A.

No. If Greenfield keeps the RECs, NorthWestern customers will be paying

for intermittent brown power from Greenfield. There would be no green

attributes to be offset for NorthWestern customers and no benefits to

NorthWestern customers. As identified in PURPA, NorthWestern

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.

8
9
10

Rebuttal of Prefiled Supplemental Testimony of Don Reading

Q.

Reading in this docket?

II

12

Are you familiar with the Prefiled Supplemental Testimony of Don

A.

Yes.

Q.

On pages DCR-5 and DCR-6, Dr. Reading testifies that NorthWestern

13

14
15

is required to use the ORR method as he as defined it. Do you

16

agree?

17

A.

No. NorthWestern is responsible for calculating the costs that can be

18

avoided for load service to its customers. Th is cost is easily and

19

transparently calculated by the amount of offset purchases and offset

20

generation minus additional costs incurred due to the specific project. No

21

other cost can be avoided by purchasing output from Greenfield . By

22

definition , that is what must be considered in the avoided cost

23

calculations.

B1L-1 9

Q.

On page DCR-6 and DCR-7 Dr. Reading testifies that the avoided cost

price should include opportunity sales and a future inclusion of a

combined cycle combustion turbine (UCCCT") in NorthWestern's

portfolio. Do you agree?

A.

No. FERC has ruled that sales are not to be included in the avoided cost

calculation . If this were allowed , NorthWestern customers would become

a risk broker for any wind project regardless of the needs of

NorthWestern . As discussed above, the off-system sales are not part of

the costs to serve customer load and are not to be included in the avoided

10

cost calculation. Additionally, the future CCCT that Dr. Reading is

II

requesting to be included in the model, according to him, increases the

12

future costs over the market comparison. If the CCCT is included in the

13

model as Dr. Reading suggests, NorthWestern customers will pay an

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.

18
19

Q.

Does this conclude your testimony?

20

A.

Yes, it does.

BJL-20

Docket No. 02014.4.43


Exh ibit_(BJL-07)

Page 1 of 5

Greenfield
w.li
Name Plate Capacity (MW)
Zonal Percentage
Zonal Regulation Capacity (MW)
Regulation Rate (Per MW)
Annual Regulation Cost

Rate in Contract ( per Month)

$
$
$

Forecasted Capactiv Factor


Forecasted Output (MWh)

Forecasted Reg Cost (S/MWh)

25 Year Levelized (Regulation)

$
$

Avoided Energy/Capacity Cost


Discount Rate
Escalation (Regulation Rate)

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,

50.91 12016 thru 2040

$46.77 12016 thru 2040

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

Docket No. 02014.4.43


Exhibi t_(BJL-07j
Page20f5

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)

ITotol Avoided Cost

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

Docket No. 02014.4.43


Exhibit_(BJL-07)
Page30fS

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

NorthWestern Energy - Dave Gates Generating Station


Wind Integration I Fixed Cost Rate

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

Supply Load Integration Capacity (MW)


Supply Wind Integ ration Capacity (MW)
Total Supply Integration Capacity (MW)

3.8
0.5
3.7
49.8

Transmission Load Integration Capacity (MW)


Total Integration Capacity at eGGS (MW)

1.3
2.9
3.5
7.6

57.4

Note 1- Based on Genivar Study: Senario (A-B)


Note 2 - Included in system data in the Genivar Study
[N THE MATTER OF the NorthWes tern Energy's
Application for Approval of Avoided Cost TarifTfor
New Quali fying Facilities

REGULATORY DIVI SION

Table 6. Approved long-term wind integration rates

_-.: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

DOCKET NO. 0 20 12.1.3


ORDER NO. 7 199d

18
105

Docket No. 02014.4.43

Exhibit_IBJl-07)
Page 4 of 5

Required Regulating Reserve Range

Wind Power
Scenario

Capaci ty

Name

IMW)

144

C1

154

C2

154

C3

154

01

194

02

194

03

194

for Targeted Performa nce (MW)


Scenario Description

Existing wind resources for the historical study period:


135 MW at Judith Gap and 9 MW at Horseshoe Bend

All wind resources removed


cenario A with one 10 MW project added near Judith
Gap in Wheatland County
cenario A with one 10 MW project added distant from

udith Gap in Madison County


Scenario A with one 10 MW project added distant from
udith Gap in Glacier County

:Scenario A with one 50 MW project added near Judith


Gap in Wheatland County
Scenario A with one 50 MW project added distant from
udith Gap in Madison County

A with one SO MW project added distant from


udith Gap in Glacier County

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

Scenario A with one 17.s MW project added in Madison

04

194

County, one 17.5 MW project added in Wheatland


County, and one 15 MW project added in Glacier
County
A with four 10 MW projects and four 2.5 MW

05

194

projects diversified from each other and from Judith

Gap
El

294

E2

294

E3

294

E4

294

E5

294

cenario A with one 150 MW project added near Judith

Gap in Wheatland County


cenario A with one 150 MW project added distant
rom Judith Gap in Madison County
cenario A with one 150 MW project added distant
rom Judith Gap in Glacier County
cenario A with a 50 MW project added in each of the
ollowing counties: Madison, Wheatland, Glacier
cenario A with one 50 MW project, two 25 MW
projects, and five 10 MW projects diversified from each
other and from Judith Gap
Scenario A with two 150 MW projects, one 50 MW
project, three 2S MW projects, and two 12.5 MW

594

Sensitivity 1

294

E5 wind with 30-minute wind forecasting

114

98

Sensitivity 2

294

E5 wind with wind curta ilment

114

94

Sensitivity 3

294

GENIVAR

projects diversified from each other and from Judith

fScenario E5 wind with intra-hour supply adjustment

119

100
June 1, 2011

Docket No. 0 2014.4.43


Exhibit_ (61L-07)
Pa ge 5 of 5

NorthWestern Energy
Estimated Additional Regulation Costs
(Pat DiFronzo)

Split
50% Avista
50% Powerex

12,419

Based on A vista Contract in Year 2012


Avista Contract up to 15MW
Capacity

7.62

kw-month
6,209

47,315

Energy

23.65

Mwh
2,235

52,866

Transmission Losses

24.65

67 $

1,653

Point to Point Transmission Service

2.00

kw-month
6,209

Total Monthly Cost

12,419

11 4,252

KW Caeacitll

March 2012 Invoice

Based on Powerex Contract;n Year 2012

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

Total Costs for both Contracts (Monthly)

[$ -

228,419 1

Total Costs for both Contracts (Annually)

1$

2,741,627)

Cost Per MW (Annually)

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)

Capacity Charge Enter the Lesser of (a) or (b) rate

Energy Charge

$
$

-I

50,000

750,000

227,263 1 30.30%1

977,263

_______

Department of Public Service Regulation


Montana Public Service Commission
Docket No. 02014.4.43
Greenfield Wind, LLC Petition
NorthWestern Energy

2
3

4
5
6
7

8
9

PREFILED REBUTTAL TESTIMONY OF

10

DAVID E. FINE
ON BEHALF OF NORTHWESTERN ENERGY

11
12

TABLE OF CONTENTS

13

14

Description

Starting Page No.

15

Witness Information

16

Purpose of Testimony

17

Rebuttal of Prefiled Direct Testimony of Martin Wilde

18

Rebuttal of Prefiled Direct Testimony of Don Reading

10

19

Rebuttal of Prefiled Supplemental Testimony of Don Reading

11

20
Witness Information

21

22

Q.

Please state your name and business address.

23

A.

My name is David E. Fine and my business address is 40 East Broadway

24

Street, Butte, Montana, 59701.

25

26

Q.

By whom are you employed and in what capacity?

DEF-l

A.

I am employed by NorthWestern Energy ("NorthWestern") as Director of


Energy Supply Planning.

3
4

Q.

What are your responsibilities and duties in your current position?

A.

My areas of responsibility include a variety of energy supply and planning

functions including the preparation of the electricity supply resource

procurement plan and associated analysis, load and resource analysis,

load forecasting, and other supply portfolio planning and management

functions performed by planning staff. In addition , I am involved in

10

regulatory matters associated with the electricity supply portfolio ,

11

resources, contracts, and NorthWestern's retail electricity supplier

12

obligations.

13
14

Q.

Please describe your educational background and experience.

IS

A.

I earned a Bachelor of Arts degree in Geology from the University of

16

Montana and have worked in the energy industry since 1979.

17
18

I began employment with the utility in 1982 with an unregulated subsidiary

19

of the Montana Power Company. I have worked in energy exploration and

20

development, mining, energy resource evaluations, economic evaluations,

21

business development, and technical evaluations associated with energy

22

production and power generation. Since 2003 I have worked in the

23

Energy Supply area where I currently oversee planning activities including

DEF-2

tasks such as the preparation of the electricity supply resource

procurement plan and other long-term procurement planning and analysis.

As an employee of NorthWestern I have previously provided information

and testimony on energy and utility-related matters before the Montana

Public Service Commission ("Commission").

7
8

Purpose of Testimony

Q.

What is the purpose of your testimony in this proceeding?

10

A.

The purpose of my testimony is to (i) rebut certain statements and

11

assertions contained in the Prefiled Direct Testimony of Martin Wilde, and

12

(ii) rebut certain statements and assertions contained in the Prefiled Direct

13

and Prefiled Supplemental Testimonies of Don Reading.

14
15
16

Rebuttal of Prefiled Direct Testimony of Martin Wilde


Q.

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

wind project and seek contracts with NorthWestern?

19

A.

Yes.

Q.

What have you concluded with regard to Mr. Wilde's accounts of his

20
21
22

efforts to secure a long-term Qualifying Facility (" QF " ) w ind resource

DEF-3

Power Purchase Agreement ("PPA") as described in his prefiled

direct testimony?

A.

Beginning on page MHW-6 Mr. Wilde describes a series of events and

certain (but not all) communications between NorthWestern and

Greenfield Wind, LLC ("Greenfield"). Mr. Wilde's recounting of events

confirms that NorthWestern consistently and correctly administered the

then-current Commission approved OF-1 tariffs. NorthWestern acted

appropriately when Mr. Wilde requested standard long-term OF wind

project rates for projects that clearly did not meet the conditions necessary

10

under the approved and then-applicable tariff schedules.

11
12

Mr. Wilde portrays NorthWestern as "blocking" all attempts by Greenfield

13

to obtain a OF wind contract. He includes statements such as being in

14

"continuous contact" with NorthWestern since 2010 and refers to "that

15

thick exhibit of correspondence" as evidence of NorthWestern 's lack of

16

responsiveness or willingness to process the Greenfield OF contract

17

submissions. Contrary to Mr. Wilde's assertion that NorthWestern was

18

uncooperative, the voluminous communications, and exchanges of

19

information establish NorthWestern's cooperation and reasonableness.

20

NorthWestern acted within its responsibility to address Mr. Wilde's

21

inquiries regard ing both OF and Community Renewable Energy Project

22

("CREP") contracts.

23

DEF-4

Q.

exchanging PPA proposals as described by Mr. Wilde, what was

From the second quarter 2010 through 2012 when NorthWestern was

NorthWestern seeking to accomplish through the exchanges?


A.

NorthWestern was seeking to incorporate commercially reasonable terms

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

necessary to standardize contracts by using industry standard practices

and conditions not only for QF contracts but to maintain standards of

acceptable commercial performance across all supply sources. Mr. Wilde

10

describes his efforts as attempting to obligate NorthWestern to a contract

11

with Greenfield . NorthWestern was fi rm in presenting commercial terms

12

that would uphold reasonable standards of performance for both parties

13

and to ensure that contracted resources, including Greenfield , would meet

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

Did his request result in an executed contract(s)?

19

A.

Yes. However, at the time the Fairfield agreement was executed ,

20

NorthWestern was obligated under the terms of the Commission-approved

21

QF-1 Tariff not to exceed 50 MW of new QF-1 wind capacity. Execution of

22

a 10-MW contract for the Greenfield project would have exceeded the

23

50-MW cap and therefore NorthWestern was no longer able to offer a

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

PPA. Did NorthWestern pressure or somehow try to compel Mr.

Wilde to enter into a contract?

10

A.

No. NorthWestern believes the pressure described by Mr. Wilde was the

11

knowledge by developers, including Mr. Wilde, that if a developer did not

12

acquire a contract prior to NorthWestern reaching the 50-MW cap, they

13

would not have an opportunity to seek a long-term , fixed rate for a 10-MW

14

QF project with NorthWestern until terms of the QF-1 Tariff changed

15

regarding the 50-MW cap. Anyone with knowledge of the QF-1 Tariff at

16

that time was aware of the 50-MW cap. NorthWestern clearly

17

communicated to developers interested in developing QF wind projects

18

that the installed contract capacity available for projects was on a first-

19

come, first-served basis until the cap was met.

20
21

Q.

Following the execution of the original Fairfield Wind contract Mr.

22

Wilde states that a second contract for Fairfield Wind was signed.

23

Why was a second contract necessary?

DEF-6

A.

The first contract was terminated by NorthWestern for Fairfield's breach of

the contract. Prior to terminating the contract NorthWestern agreed to

allow Mr. Wilde additional time (60 days) to post a delay security deposit

of $200,000. NorthWestern made this concession as a good faith gesture.

After Fairfield failed to post delay security NorthWestern exercised its right

to terminate which gave Fairfield an additional 1O-day period to cure the

breach of contract. Delay security is an example of a commercial term

used by NorthWestern to provide assurance that developers and project

owners will meet their contractual obligations under conditions of finan cial

10

penalty if they fail to perform . If no security is posted by a developer in

11

conjunction with its contractual obligations, then the developer is free to

12

violate the terms of the agreement without penalty or recourse by

13

NorthWestern, just as Fairfield did with its original contract.

14

15

Q.

16

17

Was Mr. Wilde pressured into executing the second Fairfield contract
following the termination of the first agreement?

A.

No. Notice of termination was sent on March 5, 2012. Notice of available

18

OF wind contract capacity under the 50-MW cap was distributed to

19

potential OF developers, including Mr. Wilde, on March 8, 2012.

20

Following redlined document exchanges, a second PPA with Fairfield was

21

fully executed on March 28, 2012 -- less than a month following the

22

termination of the first agreement. This re-established Fairfield Wind as

23

the last 10-MW OF wind project under the 50-MW cap.

DEF-7

Q.

Mr. Wilde describes NorthWestern as blocking Greenfield attempts to

obtain a 10-MW long-term QF wind contract. Do you agree? If you do

not agree, please explain.

A.

No I do not agree with Mr. Wilde's assertions that NorthWestern attempted

to block or impede Greenfield. NorthWestern has presented and

defended its position regarding the QF-1 Tariff provision, which, at the

time, limited new QF wind contracts to 50 MW of installed nameplate

capacity. This is clearly shown in Exhibit MHW-03 containing schedules

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

the QF-1 Tariff and offer a 10-MW contract to Greenfield .

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

quarter of 2012, Mr. Wilde asked NorthWestern to consider purchasing the

17

project as a turnkey CREP project. During the course of discussions with

18

Mr. Wilde, NorthWestern communicated the need to use competitive

19

solicitations for CREP acquisitions to ensure that least-cost, least-risk

20

resources are acquired. At no time did NorthWestern offer to purchase

21

the project using a bilateral process. NorthWestern simply reviewed

22

project materials to gain a better understanding of the project at Mr.

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

of approval of the CREP structure even though MPSC Staff has

informed us on several occasions that the administrative rules

require NorthWestern to petition for certification of the CREP project

prior to the execution of the PPA." He goes on to say on lines 15-16

that this is "another example of how NorthWestern consistently uses

its bargaining power to place unreasonable risks on project

developers." Are Mr. Wilde's complaints valid? Please explain.

10

A.

CREP eligibility is a developer risk regardless of whether the CREP

II

certification petition for the project is submitted to the Commission by

12

NorthWestern or by the developer/owner. NorthWestern will not take

13

CREP eligibility risk nor should it be charged with defending and arguing a

14

CREP project developer's potentially complex ownership structure before

15

the Commission. In the case where NorthWestern has selected a project

16

to help meet its CREP obligations, it is appropriate to place the CREP

17

eligibility responsibility on the developer who exercises ownership control

18

and has its financial interests to protect. Except for its own resources,

19

NorthWestern exercises no control over the ownership of CREPs.

20

Additionally, NorthWestern exercises no control over the Commission in

21

terms of it determining whether or not a project is CREP eligible, and

22

therefore has no bargaining power to assert concerning the approval of a

23

project as CREP.

DEF-9

1
2

Rebuttal of Prefiled Direct Testimony of Don Reading

Q.

Dr. Reading concurs with Commissioner Travis Kavulla's conclusion

in Order No. 7199d , Docket No. 02012.1.3 that "a 5% capacity

contribution established by the Commission adequately accounts for

wind's intermittency." But then Dr. Reading goes on to state that

using only a 5% capacity factor due to wind's intermittency produces

a low avoided cost rate that could reasonably be higher under

different reasonable assumptions. Do you agree with these

statements?

10

A.

I agree that a 5% capacity contribution was determined as appropriate for

11

Montana wind resources eligible for standard offer contracts by the

12

Commission. I do not agree, as Dr. Reading suggests, that a higher

13

capacity value should somehow be attributed to the Greenfield project. To

14

support his claim , Dr. Reading also suggests that in other parts of the

15

country the capacity contribution of wind resources is higher than 5% but

16

offers no specific evidence as to why a Montana wind resource should

17

receive higher capacity credit. His statement concerning a higher avoided

18

cost rate "that could reasonably be higher under different reasonable

19

assumptions" is not supported by any evidence provided in this docket.

20

Based on a clear lack of evidence to justify a capacity valu e in excess of

21

5% for Montana wi nd resources and the fact that the Commission has

22

previously ordered a 5% wind capacity contribution for some OF projects,

23

assumption of a higher capacity value is not justified.

DEF-I O

1
2

Rebuttal of Prefiled Supplemental Testimonv of Don Reading


Q.

Dr. Reading references a Federal Energy Regulatory Commission

decision, Hydrodynamics, 146 FERC 1161,193 (2014) regarding the

utility obligation to purchase any capacity which is made available

from a QF at a rate that, at the QF's option, is a forecasted avoided

cost rate. What capacity does NorthWestern understand that

Greenfield is proposing to sell?

A.

It is NorthWestern's understanding that Greenfield will sell the full output

of the facility as a bundled energy-capacity product to the extent a nominal

10

capacity contribution exists. A capacity value in excess of what is already

11

being included in the Greenfield Wind QF rate is not justifiable. The

12

calculation of avoided costs for Greenfield includes the price of offset

13

market purchases which have a substantial associated capacity value.

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

is displacing and receiving credit. Any additional wind capacity

19

consideration is not appropriate.

20
21
22

Q.

Dr. Reading states that it would be reasonable for the Commission to


consider the supply portfolio at times prior to 2014 and to somehow

DEF-II

incorporate this information into its deliberations concerning the


Greenfield rate. Is this appropriate? If not, please explain.

A.

No, it would not be reasonable to consider Dr. Reading 's assertion . In the

absence of the Hydros, the addition of a combined cycle combustion

turbine ("CCCT") may have been plausible as early as 2018. However, in

April of 2014, when Greenfield asserted it had created a legally

enforceable obligation for a 25-MW project, and after the submission of

the 2013 Electricity Supply Resource Procurement Plan , NorthWestern

was anticipating and planning for the addition of the hydroelectric assets

10

and was not planning for the addition of a CCCT in 2018 .

II
12

Q.

Dr. Reading argues that the addition of a

eeeT should be included

13

for consideration in the calculation of avoided cost rates. Should

14

NorthWestern consider a

15

addition of a wind resource?

16

A.

eeeT to be avoidable compared to the

No . These two resource types have completely different attributes that

17

must be taken into consideration. A wind project provides intermittent

18

energy and a minimal capacity contribution. A CCCT provides load-

19

serving capacity and dispatchability. For load-serving and resource

20

planning purposes a wind resource could not be reasonably substituted for

21

a CCCT that provides capacity, dispatchability, and flexibility.

22

Q.

Does this conclude your testimony?

23

A.

Yes it does.

DEF-1 2

Department of Public Service Regulation


Montana Public Service Commission
Docket No. D2014.4.43
Greenfield Wind, LLC Petition
NorthWestern Energy

Prefiled Rebuttal Testimony of


Gary W. Dorris
on Behalf of NorthWestern Energy

GWD-l

Table of Contents
I: Witness Infomlation ........................................... ........ ........... .................................................. ... 3

II: Overview of Testimony ............................ .................... .......... .................................................... 5


III: Overview Of Analysis Detennining Greenfield's Avoided Cost Rates ................................... 6
IV. Results .................................. ................. ......... ... ........ .............................................................. 13
V. Ratepayer Risk .. ......... ..... .. ...... ......................... ..... ....... .... ...... ....... .... ...................... ... ............. 17
VI: Greenfi eld Access to 'PowerSimm .. ................................ .. ...................... .... ........... .......... ...... . 19
VII: Conclusions .... .................. ................... .............................. ... ..... .. ........ ........ .................. ........ 20

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.

Please state your name, occupation, and address.

A.

My name is Gary W. Dorris. I am the Chief Executive Officer of Ascend Analytics,

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

Avenue, Suite 360, Oakland, CA 94610.

7
8

Q.

Please summarize your educational and professional background.

A.

I am founder and Chief Executive Officer ("CEO") of Ascend Analytics.

Ascend

10

Analytics is an energy analytics software and consulting company that provides

II

economic, financial, and technology solutions for the energy industry, particularly in the

12

area of portfolio risk management, energy supply procurement, asset valuation,

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

analytics, and planning strategies.

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

rn complex decision analysis, portfolio

GWD-3

have also led the analytic architecture of over ten analytic software products used by 30

of the top 100 energy companies.

3
4

Before founding Ascend Analytics, I served as CEO and Chief Model Architect for e-

Acumen, a 60 person energy consultancy and software analytics fmn.

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

the first above cost power transactions in the U.S. in 1988.

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

have spoken at over 50 conferences on resource planning, portfolio management, risk

18

analysis, and modeling of competitive energy markets.

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).

I hold a PhD in applied

22
23

I reserve the right to update and supplement my expert testimony as may be necessary.

GWD-4

II: Overview of Testimony


2

Q.

On whose behalf are you testifying in this proceeding?

A.

I am testifying on behalf of NorthWestern Energy ("NorthWestern" or "the Company").

Q.

Please summarize your testimony.

A.

My testimony substantiates the economic constmct to detelmine the avoided cost

calculations for Greenfield and its consistency with PURPA and FERC regulatory

guidelines. Through substantiating the economic constmct and presentation of modeling

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

energy would increase by utilizing an optimal capacity expansion plan or adding a

16

combined cycle plant in some future year to NorthWestem's portfolio.

17

3) The consistency of the modeling approach with FERC mlings.

18

4) The lisk to ratepayers related to the purchase of Greenfield generation stenuning

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

establish avoided costs of energy.

a) 95% excess payment for capacity not delivered and b) violation of

GWD-5

The economIC arguments and analysis presented below fully substantiate the

determination of avoided costs for Greenfield.

3
4

Q.

Please outline the remainder of your testimony.

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

VI reviews Ascend offers to collaboratively support Greenfield's modeling interest

through access to PowerSi.J.mn. Section VII provides concluding remarks.

10

III: Overview Of Analysis Determining Greenfield's Avoided Cost Rates

11
12

Q.

What analysis have you done that supports your testimony?

13

A.

I have perfonned an economic analysis to detennine the avoided cost of energy to serve

14

N011hWestem's customer load through the purchase of Greenfield.

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

NorthWestem's supply portfolio. Additional detail on the modeling assumptions can be

19

found in N011hWestem's 2013 Electricity Supply Resource Procurement Plan ("2013

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

received "best practices" designation from a critical peer review by Evergreen

Economics. I

8
9

Q.

How exactly was the avoided cost rate calculated?

10

A.

Ascend applied economic analysis that would fall under FERC's Di ffe rential Revenue

II

Requirement ("ORR") approach to detennine the avoided cost of energy to serve

12

NorthWestem load. Because PowerSimm applies a chronological dispatch model, we

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

energy to serve load.

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

without the asset in question 2

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,

PowerSimm automatically optimizes generation to serve load with respect to market

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

NorthWestern' s supp ly stack to serve load.

mruginal unit serving NorthWestern ' s load is invariably Colstrip Unit 4.

Because we rue applying cluonological dispatch logic

During conditions of export sales, the

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

power, and three cases where NorthWestern purchases power.

17

Exhibit GWD-I demonstrate that Greenfield would receive the same or a lower avoided

18

cost of energy with the introduction of an additional generating resource.

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

would continue to purchase energy from the market.

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

calculated avoided cost to selve load.

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

purchases (and reduce risk and increase reliability).

23

capacity expansion plan will lower the avoided cost of energy to selve load. Whether the

GWD-9

The development of an optimal

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

levelized fixed operating costs.

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

"normal" return on capital for the plant.

The gross margin revenue from economic dispatch

21
22
23

Q.

Would it be appropriate to modify the avoided cost of capacity from a generic


combustion turbine ("CT") to a generic CC?

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

Does NorthWestern need to provide an optimal capacity expansion plan to


determine the avoided cost of energy?

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

supply stack only reduces the cost to serve load.

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

expansion planning or added a combined cycle generator in 2033 . His unsubstantiated

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

does not increase with the addition of a new generating resource.

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

methodology from the market-based perspective of differential revenue requirements to a

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

under the DRR approach.

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

market Greenfield's power by stating "These lUles impose no requirement on the

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.

What were the results of your analysis?

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

impacting the cost of power.


Figllre 1. Average Avoided Costs

$120

Average Avoided Cost Components


Including CO 2 Penalty

$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

......... Average Colstrip Avoided Cost ($/MWh)


- - Average Offset Purchase Price ($/MWh)
- - - Average Avoided Cost ($/MWh)

Q.

How are market sales and purchases reflected?

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

corresponding to offset generation. In 2015, Greenfield begins by offsetting only 15% of

market purchases and leaving 85% of Greenfield generation as offsetting existing

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

the generation serves load.

GWD-14

Figure 2. Wind generation allocation between market sales and purchases

Wind Generation Allocation

120,000
100,000
80,000
60,000
40,000
20,000

00

M
M

M
M

Offset Generation (MWh)

W
M

00
M

mOM
M

N
N

M
N

Offset Purchases (MWh)

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

net shOlt position starting in 2016.

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

short economic energy.

However, the value and timing of Greenfield

GWD-15

Figure 3. Total portfolio net position with and without Greenfield

Total Portfolio Net Position Comparison


1,000,000
500,000

.<=

(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.

Did you include a capacity credit for Greenfield?

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

by subtracting off the value of the capacity portion not delivered.

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

Table I. Avoided Cost a/Capacity ill $/MWh


2014

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.

With a 5% credit, Greenfield is receiving $9.66/MWh more in value than it is delivering.

This puts NOithWestern's customers at risk by paying for a product they are not

receiving. For NorthWestern to remunerate Greenfield at 95% in excess of the actual

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

Does the DRR approach provide distinct economic benefit to Greenfield?

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

marginal cost of supply. The ratepayer is effectively investing in an asset owned by a

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.

Does the timing of Greenfield generation pose a risk to NorthWestern?

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

spring when NOIthWestem faces dump power conditions because of must-lUn

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

start-up and shut-down at a negligible cost.

GWD-18

VI:
2

Q.

Greenfield Access to PowerSimm

Has Ascend Analytics offered to support Greenfield with access to PowerSimm

software, training, execution of standard studies, and delivery of results at an

estimated cost of $10,OOO?

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

results. At every tum we have pursued a conciliatory approach to meet Greenfield' s

needs. Ascend proposed a two-day working session where we would work

"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

recorded conversation on September 17, 2014. Effectively, Ascend sought compensation

12

to cover external software license fees and set-up costs of $5,000 and the cost of our time

13

at approximately $2,500 per day.

14
15

Q.

How did Greenfield respond to this offer?

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

filed a legal motion to compel.

21

Memo RE: Greenfield Access to PowerSimm, September J J, 20J4.

GWD-19

Q.

Is it standard industry practice for an intervening party in a utility regulatory

proceeding to have access to operate third-party licensed software without obtaining

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

practice and tried to be as cooperative and accommodating as possible by not charging

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

capacity expansion planning further Greenfield's objective of establishing a higher

12

avoided cost under the differential revenue requirement to serve load?

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

market as the avoided cost of power, the addition of an economic or uneconomic

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

addition of a new generating plant.

detelmine Greenfield's avoided cost rates has been shown to be consistent with FERC

rulings.

Furthelmore, the economic construct utilized to

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

with the QF purchase.

By receiving 100% payment for capacity when Greenfield

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

both the utility and Greenfield.

17
18

Q.

Does this conclude your testimony?

19

A.

Yes, it does .

GWD-2l

Docket No. 02014.4.3


Exhibit_(GWD-1 )
Page 1 of 7

Note regarding Exhibit GWD-l:


This exhibit illustrates the impact on avoided costs of inserting a generic combined cycle ccq
plant of 239 MW under 6 different load and price conditions in 2030. These illustrations serve to
demonstrate that the avoided cost of energy can't increase by adding a resource to
NorthWestem' s supply stack. The supply stack reflects the marginal cost of energy production
for each plant. The solid vertical grey line represents NorthWestem load. The horizontal dashed
line represents the market ptice of electricity. NorthWestem minimizes costs to serve load and
only operates generation when the plant' s marginal cost of production are less than the market
price of energy.
Although the supply stacks are a simplistic representation of asset characteristics and the
dynamic optimization routines used in PowerSimm to determine optimal dispatch, they provide a
reasonable illustration of the operating economics. The first three cases present conditions where
NorthWestem has excess economic energy and sells this economic excess energy into the power
market. In Cases I through 3, the avoided cost to serve load is the marginal cost of
NorthWestem's generation. The second three cases present conditions where NorthWestem is
economically short energy and purchases energy from the power market. In Cases 4 through 6,
the avoided cost to serve load is the market ptice of energy.
Definition: Avoided cost is marginal unit to serve load.

Docket No. D2014.4.3


Exhibit_(GWD-1 )
Page 2 of 7

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

2030 Supply Stack - Case 1


78
Load

68

_____

:2 58

.3'"

CC

____________
Co lstrip 3

Avoided cost to serve load is


ColStri p 4 at $53/MWh
38

QI

:0

.!:!! 28
18
8

Renewable
-2

100

200

Hydros
300

Greenfield Wind
400

500
600
Capacity (MW)

700

800

900

1000

Docket No. D2014.4.3


Exhibit_IGWD-1)
Page 3 of 7

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

2030 Supply Stack - Case 2


78
P=$70/MWh
68

-"

!:
:2
......
0
u'"

'"

:0

'"

'c

58

Cots trip 3 Colstrip 4

48

Avoided cost to serve load is

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

Docket No. 02014.4.3


Exhibit_(GWD-l )
Page 4 of 7

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

2030 Supply Stack - Case 3


78

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

Docket No. 02014.4.3


Exhibit_(GWD-1 )
Page 5 of 7

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

2030 Supply Stack - Case 4


78
68

_ _________________ ....."......... cc

_____

::c 58

Colstrip 3 Colstrip 4

3:

Avoided cost to serve load is

the market price at $63/MWh

8 38
QJ

:0

28
18

Existine Renewable
-2 0

100

200

Hydras
300

400

500

Capacity (MW)

600

700

800

900

1000

Docket No. 02014.4.3


Exhibit_(GWD-1 )
Page 6 of 7

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

2030 Supply Stack - Case 5


78

load

p = $70/MWh

-------------------------------

68

:2

58

Co lstrip 3 Colstrip

Avoided cost to serve load is

48

the market price .t $70/MWh

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

Docket No. D2014.4.3


Exhibit_(GWD-1 )
Page 7 of 7

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

2030 Supply Stack - Case 6


78

Load
68

Colstrip

Avoided cost to serve load is


the market price lit $20/MWh

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

Docket No, 020 14.4.43


Page 1 of 1

Exhibit GWD-2. Detailed avoided cost results.

Docket No. 02014.4.43

Exhibit GWD-3 Curriculum Vitae of Gary W. Dorris

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

Stratus (Hagler Bailly spinoiJ)

Boulder, CO (1998-1999)

Manager and Senior Associate

Hagler Bailly

Boulder, CO (1997-1998)

Faculty

Cornell University

Ithaca, NY (1996)

Power Marketing Manager

Citizens Power & Light

Boston, MA (1990-1991)

Power Supply Supervisor

UN1TIL Power COIP

Exeter, NH (1988-1990)

Project Engineer: CO-OP

Electric Power Research 1nst.

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.

Perfonned one of the first above cost electricity transaction in US in (1988) .


Developed methods and systems to measure and price volumetric risk for competitive
wholesale and retail providers of electricity and gas.

EDUCATION
Cornell University, Ph.D., Applied Economics and Finance, 1996
Comell University, B.S., Mechanical Engineering, B.A., Economics, Magna cum Laude 1988

Docket No. 02014.4.43

EXHIBIT GWD-3 - CV OF GARY DORRIS

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

R esource Planning and Asset Valuation


North Western Energy's Application to Purchase the PPLM Hydro Assets. Montana Public
Selvice Conunission, Docket No. D2013.12.8S.
Risk Management and Trading
Merrill Lynch v. Em'on Shareholder. Federal District Comt of Texas, Case Nos. H-01-3624.
Asset Valuation and Hydro Productioll
Montrose Energy Partners (Sithe Energy) v. Trout Unlimited. Colorado Water Cowt, Case Nos.
4-2002CW204 and 4-2002CW20S.
COII/modity Hedgillg, Risk Management alld Derivative Accounting
Owens Corning v. Dennis Mangan. Federal Banlauptcy Court, District of Delaware, 2004.
Case Nos. 00-3837 (JKF), Claim No. 6923.

Docket No. 02014.4.43

EXHIBIT

GWD-3 - CV OF GARY DORRIS

Page 3

Energy Risk Management and Trading Practices


Nevada Power v. MGM Grand. Nevada Regulatory Proceeding, 2002. PUCN Docket No. 0111029.
Asset Valuation and Emissions Trading
AES Corp. v. Allegheny Power. Pennsylvania Arbitration Proceeding, 2000. Arbitration No.
71 1980000400.
Environmental Damages
US EPA v. Mid-west Ozone Group, Washington D.C. Federal Court, 1998 (expert report used in
proceedings).
ENERGY COSTING AND SUPPLY PROCUREMENT

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

Energy Costing and Supply Procurement:


Developed methodology and software system for cost of supply analysis for
competitive retail offerings of Duke Solutions and Entergy Solutions.
Executed energy supp ly procurement for UNITIL Power Corp.

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.

Trading Floor LaulI.ches:


Launched the trading floors ofEntergy Solutions, Duke Solutions, The Energy
Authority, and ConEdison including top to bottom analytics and trading/supply
procurement practices.
Supplied major risk management and deal analysis infrastructure for Entergy, TXU,
PZ Oil, ACES Power Marketing, PG&E, Arizona Public Service, and BC Hydro.

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS


ELECTRIC MARKET ANALYSIS

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

Credit Rating Agencies


-S&P
- Moody' s

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.

Docket No. 02014.4.43

EXHIBIT GWD-3 - CV OF GARY DORRIS

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.

ENERGY RISK AND POWER TRADING

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.

Energy Costing and Supply Procurement:


Developed methodology and software system for cost of supply analysis for
competitive retail offerings of Duke Solutions and Entergy Solutions.
Developed least cost resource plan filing with risk analysis for PG&E.
Executed energy supply procurement for UNITIL Power COJp.

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 Floor Laultches:


Launched the trading floors ofEntergy Solutions, Duke Solutions, The Energy
Authority, and ConEdison including top to bottom analytics and trading/supply
procurement practices.
Supplied major risk management and deal analysis infrastmcture for.

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.

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS


RET AIL PROGRAMS

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.

PROJECT FINANCE ANALYSIS

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

OIL AND GAS MARKET ANALYSIS

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.

Market Assessment and Gas Storage Valuation:


Dr. Donis developed Gas Val to captW'e the full value of storage assets for project analysis,
mark to market energy accounting, and deal structuring. With the use of state-space
modeling to captW'e the underlying dynamics of gas market behavior, his market analysis and
asset valuations have been perfOlmed for industry leaders in gas storage including:

TXU
Pinnacle West
TECOEnergy

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS

Page 7

Energy Cycle Forecasting:


Forecasting of rig counts for Halliburton and Baker Hughes Cluistensen
Development of Pasche price index and index forecast for energy services

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.

ANALYTIC SOFTWARE DEVELOPMENT

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.

PowerSilll1ll Planner: PerfOlms resource planning with the inclusion of unceltainty.


Automatic resource selection based on market dynamics and planning constraints.

HydroOps: Optimization of hydro generation assets.

CurveDeveloper: Provides complete monthly forward curves using no-arbitrage Sllip


reduction along with volatilities and con-elations.

WeatherSillllll : Simulates climatic variables temporally and spatiall y to integrate with


HydroSimm, LoadSimm, and PriceSinml.

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.

INTELLECTUAL PROPERTy/ BuSINESS VALUATION

2000-200 1

Conducted a number of business transactions as CEO of e-Acumen involving the


valuation of a business and acquisition of intellectual property.

Docket No. D2014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS

Page 8

Provided expert support concerning intellectual propelty ownership.

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

Docket No. D2014.4.43

EXHffiIT GWD-3 - CV OF GARY DORRIS


RELATED WORK EXPERIENCE

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

Intemational Petroleum Excbange (IPE) recognition for developments of "Eamings at


Risk", a conceptual framework for measuring fmancial and physical risk (2001).
Second person in history of Depaltment of Applied Economics and Management to
receive special exemption from Master thesis requirement, Comell University (1992).
Who ' s Who
Graduated Magna cum Laude, Comell University, 1988
Nation Association of Business Economists
American Economic Association
Intemational Association of Energy Economists
General Association of Risk Professionals

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS

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.

Docket No. D2014.4.43

EXHIBIT GWD-3 - CV OF GARY DORRIS

Page 11

SELECTED CONFERENCE PROCEEDINGIWORKING PAPERS/PRESENTA TlONS

1) "Innovations in Stochastic Modelling: Weather Conditions and the hnpact on Modelling


Integrated Physical and Financial Energy Portfolios," Energy Risk USA, Houston, TX,
May 20-22,2014. (pre-conference workshop)
2) "Utility Resource Planning: Integrated Decision Analysis for Resource Selection,
Conversion and Retirement," Electric Utilities Consultants, Chicago, IL, May 13-14,
2014. (pre-conference workshop)

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.

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS

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.

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS

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)

Docket No. D2014 .4.43

EXHffiIT GWD-3 - CV OF GARY DORRIS

Page 14

44) "Techniques fDr Portfolio Optimization," Proceedings: Electric Utilities Consultants,


Denver, CO, September 29, 2004. (conference co-chair)
45) "Maximizing the Value of Wind Generation," Proceedings: Electric Utilities
Consultants, Denver, CO, September 24, 2004.
46) "Developing Risk Based Rates," Proceedings: Electric Utilities Consultants, Denver,
CO, September 22,2004. (conference co-chair)
47) "Building a No Regrets Energy Supply POitfolio," Proceedings: Electric Utilities
Consultants, Denver, CO April 29, 2004. (conference chair)
48) "New Techniques for Developing Forward Price Curves, " Proceedings: Energy Central,
Denver, CO, March 25, 2004.
49) "Avoiding Regulatory Disallowances," Proceedings : Energy Central, Denver, CO, June
10, 2003.
50) "POltfo1io Management for Shareholder Value," Proceedings: SunGard World, New
Orleans, LA, October 23 , 2002.
51) "Poltfolio Management As An Affumative Business Tool," Proceedings: Ente/prise
Wide Risk Management by EUCI, Denver, CO, September 19, 2002.
52) "POltfolio Optinuzation: An Affirmative Tool to Maintain Earnings and Maxinlize
Value," Proceedings: Portfolio Optimization by Infocast, Houston, TX, November 1416, 200 1.
53) "Tirne2Trade: Trading Power from Fundamentals," Proceedings: Power Trading by eAcumen, New York, NY, June 20, 2001.
54) "POItfolio Optin1ization to Reduce Risks and Increase Profits," Proceedings: Electric
Utility Consultants, Wasllington, D.C. May 5-7, 200 1.
55) "Mininlizing Earnings at Risk," Proceedings: Electric Utility Consultants, Denver, CO,
March 17- 18, 2001.
56) "Risk Measurement and Analysis," Proceedings: Risk Conference, April, 2000.
57) "Poltfolio Optinlization under Uncertainty," Proceedings: Portfolio Risk Management
and Analysis by Infocast, Houston, Texas, February, 2000.
58) "Utility Capital Structure and Non-Utility Power Purchase Agreements," Proceedings of
the Cornell University Worksh op, August, 1992

Docket No. 02014.4.43

EXHmIT GWD-3 - CV OF GARY DORRIS

Page 15

59) "Design and Operation of Combined Cycle Turbo Expanders for Gas Distribution
Companies," Proceedings of the New England Gas Association, March, 1990.

60) "Developing Dispatchable Cogeneration Facilities: A Case Study," Proceedings of the


Joint Power Conference, ASME Publication, October, 1990.
61) "Clean Power Supply through Cogeneration," Cornell University, Undergraduate Honors
Thesis, June 1988.
62) "A Time-Dependent Endowment of Emission Allowances," Proceedings of the Ozone
Transport Assessment Group, JanualY 17, 1997.
63) "Least Cost Solutions for Ozone Attainment," Proceedings of the Ozone Transport
Assessment Group. May 8, 1997
64) "An Application of the Regional Economic Model for Ozone Compliance for the
Northeast," Federal AdvisOlY Committee Act. July 27, 1997.
65) "Utility Capital StlUcture and Non-Utility Power Purchase Agreements," Proceedings of
the Cornell Utility Workshop, August, 1992.

SELECTED TECHNICAL REPORTS AS PRINCIPAL INVESTIGATOR

1) "Comparative Market Design Analysis," Prepared for California Independent System


Operator, April, 2002.
2) "Evaluation of US EPA SIP Call for NO, Point sources," Prepared for US EPA,
September, 1999.
3) "Environmental Analysis of Arizona Public Service Generating Assets," Prepared for
Sempra Energy Resources, September, 1999.
4) "Economic and Air Quality Analysis of Episodic Controls to Reduce Ozone
Concentrations in the State of Illinois," Prepared for Illinois department of Conunerce
and Community Affairs, October, 1998 .
5) "Development ofa Multivariate Ozone Response Surface," Prepared of Electric Power
Research Institute, FeblUary, 1999.
6) "Least Cost Steps to Reduce Ozone in the Northeast Urban Corridor," Prepared for New
York State Energy Research Development Authority, with Timothy Mount and S.T. Rao,
November, 1998.
7) "ExploratOlY Analysis of Power Plant Retirements and Auctions," Prepared of US EPA,
May 1998.

Docket No. 02014.4.43

EXHffiIT GWD-3 - CV OF GARY DORRIS

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.

Department of Public Service Regulation


Montana Public Service Commission
Docket No. D2014.4.43
Greenfield Wind, LLC Petition
NorthWestern Energy

1
2
3
4
5

6
7
8

PREFILED REBUTTAL TESTIMONY OF

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

Clarification of the Cost of Spion Kop

18

Value Difference between Spion Kop and Greenfield

19

PowerSimm Transparency

Starting Page No.

20
Witness Information

21

22

Q.

Please state your name and business address.

23

A.

I am Todd A. Guldseth , and my business address is 40 East Broadway,

24

Butte, Montana 59701.

25
26

Q.

By whom are you employed and in what capacity?

TAG-l

A.

I am employed by NorthWestern Energy ("NorthWestern") as a Senior


Planner in Energy Supply.

Q.

What are your responsibilities and duties in your current position?

A.

My duties include assisting in the development of the biennial resource

procurement plan, analyzing potential energy resources for addition to

NorthWestern's supply portfolio, and modeling the impact of variables

such as variations in load; resource stack, and other items that could

affect the supply portfolio.

10
II

Q.

Please describe your educational background and experience.

12

A.

I graduated from Montana Tech in 1990 with a Bachelor of Science

13

degree in Business Administration and from the University of Montana in

14

1992 with a Master's degree in Business Administration. In September

15

2005, I earned the right to use the Chartered Financial Analyst

16

designation. I joined NorthWestern in July 2003 as a Financial Analyst in

17

the Financial Planning and Analysis Group. In November 2008, I

18

transferred to the Energy Supply Group as a Planner.

19
20
21

Purpose of Testimony

Q.

What is the purpose of your testimony in this proceeding?

T AG-2

A.

The purpose of my testimony is to rebut certain portions of the Prefiled

Direct Testimony of Don C. Reading ("Reading Direct Testimony") filed on

behalf of Greenfield Wind, LLC regarding:

1. The cost of NorthWestern's Spion Kop Wind Generation Asset ("Spion


Kop");

2. Why different forecasts and assumptions were used in determining the

values of Spion Kop and Greenfield, and

3. Transparency concerns with the PowerSimm modeling program and

the avoided cost determination method used by NorthWestern.

10
The Cost of Spion Kop

11

12

Q.

On page DCR-S of his direct testimony Mr. Reading states that the

13

Spion Kop plant's all-in costs were estimated at $6S.77/MWh. Do you

14

agree with this assessment?

IS

A.

No. I acknowledge that $68.77/MWh is presented in the table on page 13

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

in cost that the Montana Public Service Commission ("Commission")

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

$14.99/MWh and Renewable Energy Credit ("REC") value of $7.48/MWh

22

were used for all alternative wind projects and/or resources so that they

23

could be compared on an apples-to-apples basis. The integration cost

TAG-3

was based on an energy supply planning wind integration price signal

used to compare alternative resources in NorthWestern's 2009 Electricity

Supply Resource Procurement Plan ("2009 Plan"). Further, the

comparison table that Mr. Reading refers to reflects that the illustrative

cost of Spion Kop is higher than only one market alternative, not "several"

as Mr. Reading suggests in his testimony on page OCR-8 .

7
8

Q.

What was the final approved rate for Spion Kop?

A.

Spion Kop was approved at an energy plus RECs rate of $53.15/MWh

10

(Docket No. 02011.5.41 , Order No. 71591, page 41, paragraph 8). Adding

11

in the Commission-calculated 25-year levelized wind integration cost of

12

$2.27/MWh (Docket No. 02011 .5.41, Order No. 71591, page 29,

13

paragraph 118), which assumes an 18% integration factor applied to the

14

nameplate capacity, results in an approved all-in cost for Spion Kop of

15

$55.42/MWh.

16

Value Difference between Spion Kop and Greenfield

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

Greenfield. He goes on to testify that he would expect this difference

21

to be the reason that the avoided cost rate for Spion Kop calculated

22

using the Differential Revenue Requirement method is higher than

23

for Greenfield. Do you agree with his analysis?

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-

standing fundamental aspect of NorthWestern's energy supply planning

and procurement activity is reliance on the inputs, assumptions,

realities, results, and timing of its resource plans to provide the

framework in which to evaluate decisions and options including

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

time it was evaluated as an energy supply portfolio resource candidate

12

is that the supply portfolio was substantially short compared to the

13

framework under which potential resources are evaluated today. With

14

the addition of the hydros, a greater portion of candidate resources'

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

projected to offset market purchases due to the short nature of the

20

supply portfolio at the time.

21

TAG-5

1
2

PowerSimm Transparency
Q.

Starting on page DCR-10 Mr. Reading suggests that there is a

transparency issue with the way NorthWestern calculated the

avoided costs for Greenfield. Do you agree?

A.

No. The calculation of Greenfield's avoided cost is transparent. The

Excel file containing all of the avoided cost inputs including market price

forecasts, Colstrip Unit 4 ("CU4") variable costs, and PowerSimm-

produced market purchases and sales for the portfolios, along with all of

the calculations deriving the avoided cost value, was provided to

10

Greenfield as the response to Data Request Greenfield-014. A detailed

11

description of how to maneuver through the Excel file, how the

12

calculations were performed, and the location of all key inputs was also

13

included in the response.

14
15

Q.

Please explain how Greenfield's avoided cost was determined.

16

A.

Greenfield's avoided cost is based on when it is generating electricity: If it

17

is generating when NorthWestern's energy supply portfolio is short, that

18

generation receives the market purchase price for electricity that

19

NorthWestern would otherwise be subject to; if it is generating when

20

NorthWestern's supply portfolio is long, that generation receives the

21

va riable cost of CU4, which is the resource identified that can be backed

22

down in order to make room for Greenfield's generation.

23

TAG-6

Determining what "bucket" (market purchases bucket vs. excess sales

bucket) Greenfield's generation falls into is accomplished by comparing

market purchases and sales of a supply portfolio with Greenfield to a

portfolio without Greenfield. The portfolio without Greenfield, the Current

+ Hydro portfolio, is the preferred portfolio identified in NorthWestern's

2013 Electricity Supply Resource Procurement Plan ("2013 Plan").

Greenfield was then layered on to the Current + Hydro portfolio and

modeled in PowerSimm. PowerSimm modeling output contains the

market purchases and sales for the two portfolios. PowerSimm did not

10

"calculate" the avoided cost rate; it simply performed a portfolio dispatch

II

routine that produced market purchases and sales detail that could be

12

copied into an Excel file.

13
14

Formulas in the Excel file determine what bucket Greenfield's generation

15

falls into at various times: the offset purchases bucket when the supply

16

portfolio is short (equal to the difference in market purchases), and the

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

volumes in the offset purchases bucket by the corresponding market

20

purchase price and volumes in the excess sales bucket by the

21

corresponding CU4 variable cost in order to calculate the total avoided

22

cost within each bucket. Both the market purchase price forecast and the

23

CU4 variable cost forecast were included in the 2013 Plan.

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

been provided to Greenfield, and the PowerSimm modeling has

undergone rigorous validation efforts as part of the 2013 Plan and, as

described in the Prefiled Rebuttal Testimony of Gary Dorris, received best

practices verification from the Commission's th ird-party consultant in the

Hydros docket, Docket No. 02013 .12.85.

Q.

Did you receive any questions from Greenfield on the Excel file used

10

to calculate the avoided cost rate or the detailed description

11

explaining the file that you provided in the response to Data Request

12

Greenfield-014?

A.

No.

15

Q.

Does this conclude your testimony?

16

A.

Yes it does.

13

14

TAG-8

Department of Public Service Regulation


Montana Public Service Commission
Docket No. D2014.4.43
Greenfield Wind, LLC Petition
NorthWestern Energy

I
2
3

4
5

6
7
8

PREFILED REBUTTAL TESTIMONY OF

10

CASEY E. JOHNSTON

11

ON BEHALF OF NORTHWESTERN ENERGY

12

TABLE OF CONTENTS

13

14

Description

Starting Page No.

15

Witness Information

16

Purpose of Testimony

17

NorthWestern's Regulation Service Capacity

18

Incremental Regulation Service Cost

19

20

Witness Information

21

Q.

Please state your name and business address.

22

A.

I am Casey E. Johnston , and my business address is 40 East Broadway,

23

Butte, Montana 59701 .

24
25

Q.

By whom are you employed and in what capacity?

26

A.

I am employed by NorthWestern Energy ("NorthWestern") as Director of

27

Grid Operations.

CEJ-l

Q.

What are your responsibilities and duties in your current position?

A.

I am responsible for the 24/7 dispatch operations and energy

management systems and transmission services functions of

NorthWestern's electric system in Montana. I am also responsible for the

activities related to transmission and transportation contracts,

interconnection agreements, procurement of ancillary services products,

and ensuring compliance with the applicable Federal Energy Regulatory

Commission regulations and North American Electric Reliability

Corporation ("NERC") reliability and security standards.

10
11

Q.

Please describe your educational background and experience.

12

A.

I graduated from Montana State University ("MSU") in Bozeman with a

13

Bachelor of Science degree in Electrical Engineering in 1989 and from

14

MSUIMontana Tech of the University of Montana with a Master's degree

15

in Project Engineering and Management in 1999. I have been a NERC-

16

Certified System Operator for 12 years. I am a registered Professional

17

Engineer in the State of Montana and a Montana Master Electrician . I

18

have worked in the electric and natural gas utility industry for 37 years,

19

first employed in a small electrical contracting business, then by The

20

Montana Power Company, and now by NorthWestern. My experience is

21

primarily in the areas of transmission operations, maintenance,

22

construction, generation interconnection , and tariff and contract

23

administration.

CEJ-2

Purpose of Testimony
2

Q.

What is the purpose of your testimony?

A.

The purpose of my testimony is to explain , from the Balancing Authority's

("BA") perspective, how NorthWestern would provide regulation service to

Greenfield Wind, LLC 's ("Greenfield") project and the incremental cost of

regulation for the Greenfield project and to rebut Don Reading's testimon y

regarding these issues.

NorthWestern's Regulation Service Capacity

9
10

Q.

wind generating resources .

11
12

Please explain how NorthWestern provides regulation service for

A.

NorthWestern provides regulation service for wind generating resources

13

that are owned or contracted for by NorthWestern with the Dave Gates

14

Generating Station ("DGGS") regulating plant. There are currently 45 MW

15

of capacity allocated to integration of NorthWestern Energy Supply wind

16

resources .

17
18

Q.

If Greenfield requires 5.1 % of its nameplate capacity, or 1.3 MW, does

19

NorthWestern currently have resources to provide regulation service

20

for the Greenfield project?

21

A.

Based on Exhibit_(BJL-07) submitted with the Prefiled Rebuttal

22

Testimony of Bleau LaFave ("LaFave Rebuttal Testimony"),

23

NorthWestern estimates th at there is no remaining regulation capacity at

CEJ-3

DGGS . As a result, there would not be regulation from DGGS available to

provide regulation service for the Greenfield project.

3
4

Q.

5
6

How, then, would NorthWestern provide regulation service for the


Greenfield project if it is built?

A.

NorthWestern would likely need to acquire additional regulation from the


market.

8
Incremental Regulation Service Cost

10

Q.

In his prefiled direct testimony in this proceeding, Bleau LaFave

11

stated that the cost to provide regulation service for the Greenfield

12

project would be $47,861 per month. In response to Data Request

13

PSC019, NorthWestern stated that the revised monthly regulation

14

service cost would be $138,534. Do you agree with either of these

15

costs?

16

A.

The LaFave Rebuttal Testimony describes the various assumptions that

17

went into each of these regulation cost estimates. In addition, the

18

LaFave Rebuttal Testimony presents and explains an estimate of the

19

regulation cost for Greenfield based on the zonal rate method

20

prescribed by the Montana Public Service Commission ("Commission")

21

in Docket No. D2012 .1.3, Final Order No. 7199d . I do not disagree with

22

any of these various calculations under the assumptions used in

23

developing each of them .

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

that NorthWestern could provide regulation service for the

Greenfield project for $6,600 per month?

A.

I cannot agree or disagree with this amount as I do not know how the
amount was determined.

7
8

Q.

9
10

Do you agree with Exhibit_(BJL-07) accompanying the LaFave


Rebuttal Testimony?

A.

Yes.

Q.

Is Exhibit_(BJL-07) consistent with the Commission zonal rate

11
12
13
14

method in Final Order No. 7199d?


A.

Yes, I believe it is. Mr. LaFave has applied the zonal rate method to

15

existing wind plants that came on line subsequent to Final Order No .

16

7199d. He has assigned regulation service requirements to the Judith

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

approximately 37 MW of required regulation capacity to the Judith Gap

20

and Horseshoe Bend wi nd generation plants, which is less, on a

21

percentage of nameplate basis, for those projects than if the zonal rate

22

were applied .

23

eEJ -S

Q.

the DGGS plant based on the calculation in Exhibit_(BJL-07)?

2
3

Can NorthWestern provide regulation for the Greenfield project from

A.

No, the total output of DGGS is needed to integrate the existing wind

resources in the NorthWestern BA. The amount of regulation based on

the zonal model is represented in Exhibit_(BJL-07).

6
7

Q.

Does this conclude your testimony?

A.

Yes , it does.

CEJ-6

Department of Public Service Regulation


Montana Public Service Commission
Docket No. D2014.4.43
Greenfield Wind, LLC Petition
NorthWestern Energy

1
2
3
4
5

6
7

8
9

PREFILED REBUTTAL TESTIMONY OF

10

CHELSEA C. LOOMIS

11

ON BEHALF OF NORTHWESTERN ENERGY

12

TABLE OF CONTENTS

13

14

Description

Starting Page No.

15

Witness Information

16

Purpose of Testimony

17

NorthWestern 's Transmission Service Request Queue

18

Mitigation Costs

19

20

Witness Information

21

Q.

Please state your name and business address.

22

A.

My name is Chelsea C. Loomis. My business address is 9 West Granite,


Butte, MT 59701 .

23

24
25

Q.

By whom are you employed and in what capacity?

26

A.

My employer is NorthWestern Energy ("NorthWestern"). I am

27

NorthWestern's Manager of Regional Electric Transmission Planning . My

CCL-l

responsibilities include, but are not limited to , overseeing the Generation

Interconnection Queue and the Transmission Service Request ("TSR")

Queue.

Q.

Please summarize your educational and employment history.

A.

I earned a Bachelor of Science degree in Pure Mathematics from Montana

Tech in 2002. I earned a Master of Science degree in Applied Statistics

from Oregon State University in 2004 and a Master of Science degree in

Electrical Engineering (E.E.) from Montana Tech in 2011. I was an Upper

10

School Math Instructor at Charles Wright Academy in Tacoma,

11

Washington, from fall 2004 through spring 2008. While pursuing my

12

second master's degree, I was a Graduate Teaching Assistant at Montana

13

Tech. During that time, I was also a Math and/or Electrical Engineering

14

Tutor at the Montana Tech Learning Center. Upon graduation, I was

15

employed as an Electric Transmission Planning Engineer for

16

NorthWestern. I have been in my current position as manager since

17

September 15, 2014.

18
19

Purpose of Testimony

20

Q.

What is the purpose of your testimony?

21

A.

The purpose of my testimony is to explain the changes in the TSR Queue

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,

LLC ("Greenfield") project's ability to move its power on a firm basis.

3
4

NorthWestern's Transmission Service Request Queue

Q.

What is NorthWestern's Transmission Service Request Queue?

A.

As defined by NorthWestern 's Open Access Transmission Tariff ("OAD"),

Point-to-Point Transmission Service is for the receipt of capacity and

energy at designated Point(s) of Receipt and the transfer of such capacity

and energy to designated Point(s) of Delivery. The TSR Queue

10

represents the order in which TSRs are received by NorthWestern. Upon

11

receipt of a TSR, NorthWestern has very specific timelines to follow that

12

are govemed by the Federal Energy Regulatory Commission ("FERC"),

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

Service Queue accounts for both Point to Point requests , as described

16

above, and applications for Network Integration Transmission Service

17

("NITS"). With a NITS designation request, Energy Supply requests that a

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

and as such is part of the TSR Queue.

21
22
23

Q.

Is the TSR Queue the same as the Generation Interconnection


Queue?

CCL-3

A.

No. The queues are different from one another.

Q.

Please explain the difference between the TSR Queue and the

2
3
4
5

Generation Interconnection Queue.

A.

According to Attachment M of the OATT, Interconnection Service shall

mean the service provided by the Transmission Provider associated with

interconnecting the Interconnection Customer's Generating Facility to the

Transmission Provider's Transmission System and enabling it to receive

electric energy and capacity from the Generating Facility at the point of

10

Interconnection . The difference between the two queues is that with

11

Generation Interconnection, the customer merely applies to be

12

interconnected to the transmission system whereas with Transmission

13

Service, the customer applies to move power from a Point of Receipt to a

14

Point of Delivery on the transmission system . This moving of energy can

15

be done under either Point to Point Transmission Service or Network

16

Integration Transmission Service.

17

18

Q.

Exhibit_(BJL-03) attached to the Prefiled Direct Testimony of Bleau

19

LaFave in NorthWestern's petition estimates the costs of upgrades

20

required to provide transmission service to Greenfield based on the

21

then-existing TSR Queue. Has the TSR Queue changed since

22

Exhibit_(BJL-03) was filed on April 23, 2014?

23

A.

Yes.

CCL-4

Q.

Please describe the changes in the TSR Queue since April 23, 2014.

A.

In April 2014. there were 430 MW of requested transmission service in the

TSR Queue that would have been senior to Greenfield. had Greenfield

applied for transmission service at that time. Since April, 100 MW of those

requests have been signed as firm transmission service and the

remainder of the requests have been removed from the TSR Queue due

to the election of the potential customer.

8
Mitigation Costs

9
10

Q.

11
12

Exhibit (BJL-03) is an email from John Leland to Bleau LaFave. Are


you familiar with that email?

A.

Yes.

Q.

Did you assist Mr. Leland in calculating the high-level estimate of

13

14

mitigation costs for the Greenfield project and senior-queued TSRs?

15
16

A.

Yes. The costs were derived from the 2012 TSR studies for transmission
service.

17
18
19

Q.

With the changes in the TSR Queue, would providing transmission

20

service to the Greenfield project require mitigation to relieve

21

transmission congestion and reliability issues?

22

A.

No, not at this time with the current TSR Queue.

CCL-S

Q.

While the provision of transmission service to the Greenfield project

does not require mitigation based on the current TSR Queue, will

that be true in the future?

A.

Not necessarily. Greenfield, or Energy Supply on Greenfield's behalf, has

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.

In the instance that Greenfield applies for transmission service and is

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

about the transm ission system.

12
13

Q.

Does this conclude your testimony?

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.

Date: October 21,2014

Tracy Lo ney Killoy


Administrative Assistant
Regulatory Affairs

D2014.4.43

Docket Service List

Robert Nelson
Montana Consumer Counsel
III N. Last Chance Gulch Ste 1B
Helena MT 59620

Kate Whitney, Administrator


MT Public Service Commission
1701 Prospect Box 20260 I
Helena MT 59620-2601

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

Greenfield Wind, LLC


c/o WINData, LLC
Attn: Marty Wilde
1943 US Highway 408
Fairfield, MT 59436

Joe Schwartzenberger
NorthWestern Energy
40 E. Broadway
Butte MT 59701

Tracy Lowney Killoy


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