BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA PACIFICORP. Chapter 2. Direct Testimony of Joseph P. Hoerner and Shayleah J.

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1 Investigation No Exhibit No. Witnesses: Joseph P. Hoerner and Shayleah J. LaBray BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA PACIFICORP Chapter Direct Testimony of Joseph P. Hoerner and Shayleah J. LaBray November 0

2 CHAPTER PACIFICORP OPERATIONS AND PLANNING Joint Testimony of Joseph P. Hoerner and Shayleah J. LaBray 0 A. INTRODUCTION This joint testimony addresses Issue identified in the Scoping Memo. Issue seeks information regarding whether PacifiCorp engages in least-cost planning and dispatch on a system-wide basis or a control area basis. The joint testimony provides a high level overview of PacifiCorp s operations and addresses each of the specific questions identified in the Scoping Memo, specifically: ) To what extent does PacifiCorp operate its generation and transmission system as an integrated six-state system in which customer loads are served from a common pool of resources? a. What are PacifiCorp s different transmission control areas? b. Which generation and transmission resources exist in each control area, and what are their operational characteristics? c. To what extent do transmission constraints limit PacifiCorp from functioning on a fully integrated basis? d. Which resources outside of PacifiCorp s Western control area provide quantifiable benefits to California electric customers? ) Which currently in-service PacifiCorp transmission and generation resources in the Western and Eastern control areas pre-date PacifiCorp s merger with Utah Power, and which have been added to service since then? -

3 0 0 B. PACIFICORP SYSTEM OPERATIONS PacifiCorp operates its system on an integrated basis across its six-state territory. The resource mix that PacifiCorp operates is very diverse with large levels of hydro, wind, solar, coal, natural gas and geothermal generation to meet its peak demand of over,00 Megawatts (MW). Between 00 and 00, PacifiCorp added approximately MW of company-owned wind generation. PacifiCorp s most recent company-owned generation facility is the Lakeside II combined-cycle natural gas plant, which began commercial operation on June, 0. In addition, PacifiCorp has over 00 interconnections with other balancing authority areas (BAAs) and transmission operators, including the California Independent System Operator (CAISO). For system balancing purposes, PacifiCorp relies on regional energy market hubs for wholesale energy transactions. The primary market hubs in the PacifiCorp west BAA (PACW) are Mid-Columbia (Mid-C) and California-Oregon Border (COB). In PacifiCorp s east BAA (PACE), the primary market hubs are Mona, Four- Corners, and Palo Verde. PacifiCorp also joined the EIM in 0, which, as of October 0, is comprised of the CAISO, Arizona Public Service Company, Portland General Electric, Puget Sound Energy, and Nevada Energy. PacifiCorp currently has,00 MW of transmission rights, east to west, connecting its PACE and PACW BAAs. This includes 0 MW of Idaho Power Company transmission and,00 MW of PacifiCorp transmission. These transmission rights have allowed PacifiCorp to serve load in PACW without building additional resources in PACW. It also allows PacifiCorp to maintain reserves on its PACE generation resources, rather than Future entrants include: Idaho Power Company in spring of 0, followed by Seattle City Light, Los Angeles Department of Water & Power and the Balancing Authority of Northern California/Sacramento Municipal Utility District in 0, and Salt River Project in 00. -

4 0 0 duplicate reserve obligations in both BAAs. Further, PACE provides the blackstart capability required for both BAAs, reducing operational costs. PacifiCorp s geographic footprint allows it to take advantage of efficiencies and economies from both a planning and operational perspective due to retail load characteristics, variable resource diversity and wholesale power market opportunities. This diversity of load and variable resources is capable through the network of transmission capability and the Jim Bridger facility s ability to export to the PACE BAA or deliver its energy into the PACW BAA. The Jim Bridger plant is a coal facility that provides PacifiCorp the flexibility to utilize markets in the Pacific Northwest to serve load in PACE and avoid higher priced market purchases during the heat of the summer. Additionally, during the winter period when prices are higher in the Pacific Northwest, PacifiCorp is able to deliver its PACE resources to the PACW BAA for both energy and ancillary services and avoid higher priced market purchases. PacifiCorp s dispatchable generation resources in the PACW BAA are large hydro units on the Lewis river, smaller hydro units on the Klamath river and other smaller river systems, two combined-cycle gas units (Chehalis and Hermiston), coal facilities (Colstrip Units and and Jim Bridger Units,, and ). PacifiCorp s dispatchable generation resources in the PACE BAA include smaller hydro units, three combined cycle gas units (Lakeside I, Lakeside II, and Current Creek), peaking gas units (Gadsby Units,, and ) and single-cycle gas units (Gadsby Units,, and ) and coal facilities (Hunter Units,, and, Huntington Units and, Cholla Unit, Dave Johnston Units,,, and, A blackstart is the process of restoring an electric power station or a part of an electric grid to operation without relying on the external electric power transmission network. The Jim Bridger facility is physically located in Wyoming, but pseudo-tied to PACW. -

5 Naughton Units,, and, Wyodak, Craig Units and, and Hayden Units and ). PacifiCorp also manages over,00 MW of variable resources, including wind and solar, that are owned resources as well as power purchase agreements through qualifying facility contracts and third-party agreements. Exhibit PAC/00 provides a list of PacifiCorp owned and contracted generation resources identified by: 0 Plant Name; Unit Name; Entitlement Type (i.e. owned, purchased or exchange); Total Plant Capacity; PacifiCorp Ownership Percentage Entitlement Start Date (i.e. commercial operation or power purchase date); PacifiCorp Controlled Capacity; Plant State; Plant BAA; and Pre/Post-Merger Identification. 0 Exhibit PAC/00 identifies owned transmission lines over 00 kv and Exhibit PAC/000 identifies owned transmission lines less than 00 kv. Due to the diversity of its dispatchable resource fuel mix (hydro/gas/coal) across its BAAs, PacifiCorp is able to effectively manage price exposure to natural gas spikes, as well as market fluctuations that may be due to low hydro years or low periods of variable resource generation. This type of diversity benefit is only capable through the management of both BAAs on an integrated basis. While PacifiCorp does have extensive transmission capability throughout its service territory, in the past there may have been times where the system was transmission constrained to provide additional power from PACE to PACW. However, the introduction of the EIM and the capability to wheel power through the CAISO from PACE, as well as the spring 0 entrance of Idaho Power Company into the EIM provides PacifiCorp the ability to improve its intra-hour delivery of energy from the east to the west, including additional renewable energy from Wyoming. -

6 0 0 As the EIM has grown, and provided a significant benefit to customers, it has also provided PacifiCorp the ability to enhance the integration of its system across both BAAs due to the enhanced dispatch on a five-minute basis, and, more importantly, due to the availability of additional transmission capability. The PACE BAA has been an integral part of providing EIM benefits to California customers in its ability to decrement its coal fleet and receive imports from the ISO during times in the day when solar production is high in California. These imports from California carry the additional benefit of offsetting coal emissions and allow the company to meets its load using low cost renewable power. During the spring time, when California is more likely to be in over-supply conditions due to lower loads across the state, PacifiCorp s hydro facilities are less able to decrement to receive the low priced imports due to stream flow management at the facilities. The PACE BAA, with its large operating range across its coal fleet, contains the more nimble resources that are able to decrement to very low operating levels to maximize the amount of renewable energy that can be allowed on the system, both internally and externally through the EIM. The benefit of importing low cost power through the EIM is a direct benefit to California customers through lower net power costs, as well as the environmental benefit of displacing the thermal emissions. C. PACIFICORP S INTEGRATED RESOURCE PLANNING PROCESS The overarching question set forth in the Scoping Memo for Issue is whether PacifiCorp engages in least-cost planning and dispatch on a system-wide basis or a control area basis. PacifiCorp engages in least-cost planning on a system-wide basis. The Integrated Resource Plan (IRP) presents the company s plans to provide reliable and reasonably priced See Exhibit PAC/00, CAISO November, 0 News Release identifying $0 million in total gross benefits to PacifiCorp s customers since the market launched on November, 0. -

7 0 service to its customers across its multi-jurisdictional service territory. The analysis supporting this plan helps PacifiCorp, its customers, and its regulators understand the effect of both near-term and long-term resource decisions on customer costs, the reliability of electric service PacifiCorp customers receive, and changes to emissions from the generation sources used to serve customers. The primary objective of the IRP is to identify the best mix of resources system-wide to serve customers in the future. The best mix of resources is identified through analysis that measures cost and risk. The least-cost, least-risk resource portfolio (Preferred Portfolio), is the portfolio that can be delivered through specific action items at a reasonable cost and with manageable risks, while considering customer demand for clean energy and ensuring compliance with state and federal regulatory obligations. PacifiCorp prepares the IRP on a biennial basis and files the IRP with its six state commissions. The preparation of the IRP is done in an open public process, defined as the public input process, with consultation between all interested parties, including commissioners and commission staff, customers, and other stakeholders. This public input process provides parties with a substantial opportunity to contribute information and ideas in the planning process, and also serves to inform all parties on the planning issues and approach for a current IRP cycle. The public input process for PacifiCorp s most recent 0 IRP, is described in Volume I, Chapter (Introduction), as well as Volume II, In California, PacifiCorp files its IRP in the Renewables Portfolio Standard docket R to satisfy the renewable portfolio standard procurement plan requirements. The company is currently participating in the Commission s proceeding to develop an integrated planning process for California, R PacifiCorp s 0 IRP included five state-specific meetings and seven public input meetings (most spanning two days) from June 0 through March 0. -

8 0 0 Appendix C (Public Input Process) and fully complies with IRP Standards and Guidelines as defined by PacifiCorp s state commissions. The IRP provides a framework and plan for future actions to ensure PacifiCorp continues to provide reliable and least-cost electric service to its customers. Specifically, the IRP evaluates, over a twenty-year planning period, the future loads of PacifiCorp s customers and the resources required to meet this load. To fill any gap between changes in loads and existing resources, while taking into consideration potential early retirement of existing coal units as an alternative to investments that achieve compliance with environmental regulations, the IRP evaluates a broad range of available resource options, as required by PacifiCorp s state commission s rules. These resource alternatives include supply-side, demand-side, and transmission alternatives. The IRP describes how PacifiCorp meets requirements to evaluate resource alternatives and includes the impact to system costs, system operations, supply and transmission reliability, and the impacts of various risks, uncertainties and externality costs that could occur. The evaluation of the alternatives in PacifiCorp s most recent 0 IRP are detailed in Volume I, Chapter (Modeling and Portfolio Evaluation Approach) and Chapter (Modeling and Portfolio Selection Results). To perform the analysis and evaluation, PacifiCorp employs a suite of models that simulate the complex operation of the PacifiCorp system and its integration within the Western Interconnection. In particular, PacifiCorp uses the System Optimizer (SO) model and the Planning and Risk (PaR) model to develop resource portfolios and to forecast dispatch of system resources for portfolio comparison purposes. The SO model is used to develop resource portfolios with sufficient capacity to achieve a target planning reserve -

9 0 margin. The PaR model is used to develop a chronological unit commitment and dispatch forecast of the resource portfolio generated by the SO model, accounting for operating reserves, volatility and uncertainty in key system variables. The models allow for a rigorous testing of a reasonably broad range of commercially feasible resource alternatives available to PacifiCorp on a consistent and comparable basis. The IRP analysis is designed to define a resource plan that is least cost, after consideration of risks and uncertainties. To test resource alternatives and identify a leastcost, risk adjusted plan, portfolio resource options are developed and tested against each other. This testing includes examination of various tradeoffs among the portfolios, such as average cost versus risk, reliability, customer rate impacts, and average annual CO emissions. PacifiCorp s IRP includes a near-term, two-to-four year action plan (Action Plan). The Action Plan details near-term actions necessary to ensure PacifiCorp continues to provide reliable and least-cost electric service after considering risk and uncertainty. The Action Plan also provides a progress report on action items contained in the prior IRP and IRP Update. The 0 IRP and related Action Plan are filed with each commission. As previously noted, in California the IRP is filed in the Renewables Portfolio Standard docket, R.-0-00, to satisfy the requirements for a Renewable Portfolio Standard procurement plan. In PaR captures volatility and uncertainty in its unit commitment and dispatch forecast by using Monte Carlo sampling of stochastic variables, which include load, wholesale electricity and natural gas prices, hydro generation, and thermal unit outages. The IRP Update is filed with PacifiCorp s state commissions March on even numbered years with the IRP filed March on odd numbered years. The IRP Update includes certain updated assumptions such as and updated load forecast and official forward price curve and will conduct a more limited updated portfolio analysis following commission orders on the previous IRP. -

10 0 0 Washington and Wyoming the Commissions accept the filing. In Idaho, Oregon, and Utah the Commissions issue acknowledgement orders. Either acceptance or acknowledgment means that a commission recognizes the IRP as meeting all regulatory requirements at the time of acceptance or acknowledgment. In the case where a commission acknowledges the IRP in part or not at all, PacifiCorp works with the commission to modify for future IRPs and/or re-file an IRP that meets their acknowledgment standards. State commission acknowledgment orders or letters typically stress that an acknowledgment does not indicate approval or endorsement of IRP conclusions or analysis results. Similarly, an acknowledgment does not imply that favorable ratemaking treatment for resources proposed in the IRP will be given. Recent IRPs and public input meeting materials can be located on PacifiCorp s website at the following location: D. CONCLUSION PacifiCorp plans for and operates its system on an integrated basis, providing quantifiable benefits to the company s California customers. PacifiCorp s diverse resource portfolio and transmission system ensures reliable electric service to the company s retail customers in all six-state service territories. Without the integrated system, PacifiCorp customers in California would face additional cost risk to procure west-side resources for service to load, the provisions of reserves, and blackstart capability. The company s transmission system provides access to PacifiCorp s diverse resource portfolio, including high capacity factor renewable generation in Wyoming that contributes to PacifiCorp s compliance to the California Renewables Portfolio Standard. PacifiCorp s interconnections -

11 to other utilities across the west have also facilitated participation in the EIM, producing over $0 million in benefits to customers. -0