BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO PROCEEDING NO. A- E IN THE MATTER OF THE APPLICATION OF BLACK HILLS/COLORADO ELECTRIC UTILITY COMPANY, LP FOR () APPROVAL OF ITS 0 ELECTRIC RESOURCE PLAN, AND () APPROVAL OF ITS 0-0 RES COMPLIANCE PLAN. DIRECT TESTIMONY OF Colorado PUC E-Filings System ERIC M. EGGE ON BEHALF OF BLACK HILLS/COLORADO ELECTRIC UTILITY COMPANY, LP June, 0
Table of Contents SECTION PAGE I. INTRODUCTION AND QUALIFICATIONS... II. PURPOSE OF TESTIMONY... III. PLANNING RESERVE MARGIN... IV. AVAILABILITY OF SEASONAL FIRM MARKET POWER... V. AVAILABILITY OF ECONOMY ENERGY... VI. COLORADO JOINT DISPATCH...
DIRECT TESTIMONY OF ERIC M. EGGE I. INTRODUCTION AND QUALIFICATIONS Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. A. My name is Eric M. Egge. My business address is Plant Street, Rapid City, South Dakota 0-0. Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? A. I am employed as the Director of Generation Dispatch and Power Marketing for Black Hills Power. My educational background, employment history and 0 0 expertise are provided in Appendix A. Q. ON WHOSE BEHALF ARE YOU TESTIFYING? A. I am testifying on behalf of Black Hills/Colorado Electric Utility Company, LP, d/b/a Black Hills Energy ( Black Hills or the Company ). Q. PLEASE DESCRIBE YOUR RESPONSIBILITIES AS DIRECTOR OF GENERATION DISPATCH AND POWER MARKETING. A. As the Director of Generation Dispatch and Power Marketing, I lead a group of employees all with the ultimate goal of providing reliable low cost power for Black Hills Energy South Dakota; Black Hills Energy Wyoming; and Black Hills. We provide generation dispatch and load following operations for these utilities in a -hour -day operation center. I am also responsible for providing energy marketing services for Black Hills Energy South Dakota, Black Hills and Black Hills Wyoming, LLC (Black Hills Corporation s unregulated, independent power producing subsidiary).
II. PURPOSE OF TESTIMONY Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? A. The purpose of my testimony is to support the planning reserve margin used in the Company s 0 Electric Resource Plan (ERP) and the assumptions regarding the availability of seasonal firm market power for the Company s system. III. PLANNING RESERVE MARGIN 0 0 Q. WHAT IS THE PLANNING RESERVE MARGIN USED IN THE COMPANY S 0 ERP? A. The 0 ERP assumes a % planning reserve margin. Q. WHAT IS THE PURPOSE OF PLANNING RESERVE? A. Planning reserve is the amount of capacity that an electric utility holds in reserve above its peak load requirements. A planning reserve margin is a percentage applied to the expected peak load to determine the minimum additional capacity that an electric utility should plan for to ensure that it will meet its peak load obligations in the event of an unforeseen loss of generating resources, extreme weather, or other unexpected conditions. Q. WHAT WAS THE PLANNING RESERVE MARGIN THE COMPANY USED IN ITS 0 ERP? A. The Company used a % planning reserve margin in its 0 ERP.
0 Q. HAS THE COMPANY HAD A RESERVE MARGIN STUDY CONDUCTED SINCE ITS 0 RESOURCE PLAN? A. No. The Company conducted a study in 00 that concluded that the appropriate reserve margin to use for planning purposes was between 0 and 0 percent. However, for purposes of the 0 ERP the Company used a planning reserve margin of % that was approved by the Commission in the Company s 0 ERP proceeding (Proceeding No. A-0E). The Company believes a % reserve margin is appropriate. The Company s peak requirement is expected to be approximately 00 MW in 0 and its largest single outage risk is 00 MW. As a member of the Rocky Mountain Reserve Group (RMRG), the Company has the ability to rely on the RMRG for up to two hours after a forced outage of any of its generating units. Thereafter, the Company will be required to replace the lost capacity and, as I discuss in my testimony, there is currently capacity available in the market to address that situation. 0 IV. AVAILABILITY OF SEASONAL FIRM MARKET POWER Q. WHAT IS SEASONAL FIRM MARKET POWER? A. Seasonal firm market power is firm energy supply that may be available in the market from time to time. It is considered firm because the supply is nonrecallable and, if the supply is interrupted, the buyer will be compensated by the seller for all reasonable costs to replace the interrupted energy.
0 0 Q. WHAT ARE THE ASSUMPTIONS USED IN THE 0 ERP REGARDING THE AVAILABILITY OF SEASONAL FIRM MARKET POWER? A. The 0 ERP assumes capacity is available for seasonal firm market purchase for hours per day, six days a week, in MW blocks, up to MW through 0, then adjusted to 0 MW through the remainder of the planning period. Q. WHY IS MW THROUGH 0 A REASONABLE ASSUMPTION FOR THE COMPANY? A. It is a reasonable assumption based upon the WECC 0 Power Supply Assessment. The Assessment shows a reserve margin deficit for the Rocky Mountain and Southwest areas beginning in 0; therefore, it is reasonable to assume that MW would be available in the Rocky Mountain area up until the reported reserve margin deficit in 0. Q. WHAT ARE THE TRANSMISSION LIMITATIONS WITH REGARD TO DELIVERING POWER TO THE COMPANY? A. The primary transmission limitation is the import capacity available to the Company. While the Company has been successful in procuring energy at Midway, the direct interconnection to the transmission grid directly north of the Company s system, there is a limit to the volume of energy available at that location. Midway is the trading hub for this area, and is a well-used interconnection with direct access to Public Service Company of Colorado, Colorado Springs Utilities, the WAPA-Colorado River Storage Project, Tri-State Generation and Transmission Association, Inc., and Black Hills.
0 0 Q. WHAT OTHER FACTORS INFLUENCE THE SELECTION OF MW AS A REASONABLE ASSUMPTION FOR SEASONAL FIRM MARKET POWER? A. The Company is a small utility with a peak demand of approximately 00 MW. The Company believes that MW of seasonal firm market power, which represents almost 0 percent of its peak load and which exceeds its reserve margin, is a reasonable assumption that limits the risk associated with relying on seasonal firm market power. Finally, as discussed earlier in my testimony, the % planning reserve margin covers 0 MW of capacity. Therefore, while we believe the MW assumption is reasonable, we do not believe a higher assumption would be prudent for the Company. Q. WHY IS 0 MW STARTING IN 0 A REASONABLE ASSUMPTION FOR THE COMPANY? A. Again, referring to the 0 WECC Power Supply Assessment, it reported limited planning reserves beginning in 0 for the Rocky Mountain area. However, the assessment also reported a planning reserve surplus in the Northwest, indicating availability of seasonal firm market power, but at lower anticipated volumes assuming limited transmission availability from the Northwest area to the Rocky Mountain area.
0 Q. WHAT CONTINGENCIES ARE ASSOCIATED WITH ASSUMING THE AVAILABILITY OF SEASONAL FIRM MARKET POWER? A. There are two contingencies: availability and price. As supplies tighten, price will go up. Therefore, we can use price as an advance indicator of tightening availability. Q. DOES THE 0 ERP PREFERRED PLAN RELY UPON SEASONAL FIRM MARKET PURCHASES DURING THE RAP? A. No. Black Hills Preferred Plan does not include the addition of any new capacity resources, seasonal firm or conventional, during the RAP; therefore, a contingency plan for the acquisition of new resources or replacement resources in the event that resources are not developed in accordance with a Commissionapproved plan is not required. Consequently, Black Hills is seeking a waiver from this requirement. 0 V. AVAILABILITY OF ECONOMY ENERGY Q. WHAT IS ECONOMY ENERGY AND HOW IS IT DIFFERENT FROM SEASONAL FIRM MARKET POWER? A. Seasonal firm market power provides capacity; economy energy does not. Economy energy is energy (sold without capacity) that may be available in the market from time-to-time and which is more economical to purchase than the incremental cost of a utility s own resources. Economy energy is not firm energy. The selling party may recall an economy energy transaction at any time and,
0 therefore, the buying party must maintain sufficient contingency reserve to replace recalled supply. Q. PLEASE DESCRIBE THE ASSUMPTIONS IN THE MODELING FOR THE AVAILABILITY OF ECONOMY ENERGY. A. The model was allowed to purchase non-firm or economy energy up to 0 MW from the marketplace. The price for that economy energy was based on ABB s WECC 0 Fall Reference Case forecast for the CO-East and Palo Verde (PV) spot markets. Q. WHY IS THE ASSUMPTION OF THE AVAILABILITY OF 0 MW OF ECONOMY ENERGY APPROPRIATE? A. The Company has adequate quick start resources in the Pueblo area to back up 0 MW of economy energy purchases. These resources include 0 MW of utility-owned generation resources at the Pueblo Airport Generating Station. As mentioned previously, economy energy is not firm energy and, therefore, the selling party may recall an economy energy transaction at any time. Thus, the Company may be required to cover the amount of the economy energy purchase in a short period of time in the event it is recalled with little notice. 0 Q VI. COLORADO JOINT DISPATCH WHAT IS THE JOINT DISPATCH AGREEMENT? A. The Joint Dispatch Agreement ( JDA ) is an arrangement between the Company, Public Service Company of Colorado and Platte River Power Authority for the purposes of balancing the combined sub-hourly demand utilizing the most
0 economic resources among the parties. Each party is still required to enter the operating hour with sufficient resources to supply their own load, either with their own generating resources or market purchases. In addition, JDA energy is nonfirm and utilizes the lowest priority transmission service and cannot be counted as capacity or used to make a reserve call should it be curtailed. The parties to the JDA are currently in the process of implementing the systems necessary to administer and operate the agreement. Q. WILL THE JOINT DISPATCH AGREEMENT IMPACT THE 0 ERP RESULTS? A. No. Because the service only is utilized for economic dispatch within the operating hour, it doesn t impact the Company s long-term resource planning with respect to the transmission system or generating supply. Further, as the JDA is a non-firm energy product utilizing lowest priority transmission service, it cannot be counted as capacity. Q. DOES THIS CONCLUDE YOUR TESTIMONY? A. Yes.
Appendix A Statement of Qualifications Eric Egge Mr. Egge graduated from North Dakota State University in 000 with a Bachelor of Science degree in Electrical Engineering. He is a Registered Professional Engineer in the State of South Dakota. Mr. Egge has years of electric utility industry experience in the areas of transmission operations, regional reliability coordination, long-range transmission planning, NERC and FERC regulatory compliance, and wholesale power markets including years with Black Hills Corporation. He was promoted to his current position Director of Generation Dispatch & Power Marketing in January 0.