MidAmerican Energy argues for higher cost cap for Wind X projects

MidAmerican Energy, based on a settlement with parties to the case, on Aug. 17 told the Iowa Utilities Board that it should approve the 552-MW Wind X project development program and not approve a suggested lower cap on project costs from board staff.

“The testimony and exhibits of MidAmerican’s six (6) witnesses, as well as those of the Office of Consumer Advocate (‘OCA’) and the Environmental Law and Policy Center/Iowa Environmental Council, offer substantial evidence that the Wind X project: (1) will provide additional economic energy, while avoiding any degradation of the adequacy, reliability, or operating flexibility of the existing transmission system from a regional or a local perspective; (2) is consistent with the policy objectives of Iowa Code §476.53 (2015); (3) represents an additional step of obtaining renewable generation consistent with state law encouraging such generation in Iowa; (4) is projected to be constructed and operated at no net cost to MidAmerican’s retail customers due to MidAmerican’s ability to generate supplemental revenue streams and realize avoided costs from Wind X; (5) is environmentally sound; and (6) provides substantial benefits to Iowa’s economy,” said the Aug. 17 brief.

“As a consequence, all parties in this docket are in accord and have either joined the Settlement Agreement or stated they have no objection to it. This state of affairs reflects an evidentiary record supporting the conclusion that the Settlement Agreement, including the prescribed Cost Cap and the Customer Revenue Credit ratemaking principles, is reasonable, consistent with law and in the public interest.

“The evidentiary record demonstrates that the agreed cost cap ($1.638 million/MW) is reasonable, in the public interest and consistent with law. The testimony of Thomas B. Specketer and Adam L. Wright demonstrates that the agreed cost cap is the breakeven point at which MidAmerican projects the Wind X project will result in no net costs to its customers. Delivery of up to 552 MW of new wind generation, and all its benefits, at no net cost to customers is unique, with the exception of MidAmerican’s prior wind power projects.”

MidAmerican added that there is nothing in the evidentiary record to support a conclusion that the cost cap, as agreed to in the Settlement Agreement, is unreasonable, not in the public interest, or not consistent with law.

Board staff’s comments, at the Aug. 11 decision meeting, sought to justify staff’s proposed reduction to the agreed cost cap by observing that MidAmerican can simply pursue a later prudency review for recovery of Wind X costs that are in excess of the staff’s alternative cost cap ($1.610 million/MW). “MidAmerican respectfully submits to the Board that reliance on an after-the-fact prudence review, regarding recovery of generation construction costs, is in direct conflict with the legislative intent behind the advance ratemaking principles statute. It was the legislature’s intent to create greater certainty for a rate-regulated public utility by allowing it to obtain advanced approval of ratemaking principles. That this was the legislature’s intent is supported by provisions in the statute which make approved principles ‘binding [. . .] in any subsequent rate proceeding.'”

MidAmerican added: “It is particularly difficult to understand why the Board would want to add uncertainty to this wind project when, as here, completion of Wind X at the agreed cost cap ($1.638 million/MW) would yield substantial customer benefits at no net cost to customers.”

The 552 MW of capacity would be at two sites

MidAmerican Energy said May 1 that it has filed plans with the Iowa board for the development of up to 552 MW of new wind generation in Iowa, which would be under the tenth iteration of its wind development program. MidAmerican is obtaining necessary permits and easements for the construction of wind farms at two new sites. Pending board approval, the company plans to begin construction in spring 2016, with completion scheduled for the end of 2016. Total cost of the project is approximately $900 million.

Since 2004, MidAmerican Energy has invested approximately $5.8 billion building wind projects in Iowa, placing the company far ahead of all other rate-regulated utilities in the nation in terms of wind ownership. With the addition of the two projects announced May 1, MidAmerican Energy’s wind assets will include approximately 2,000 turbines, more than 4,000 MW of wind capacity and a total investment of approximately $6.7 billion.

MidAmerican is seeking from the Iowa board approval of ratemaking principles for its Wind X Iowa Project. MidAmerican contemplates building this generation at sites in Ida and O’Brien counties, Iowa. MidAmerican would commence construction quickly after obtaining acceptable ratemaking principles and would plan to place all Wind X generation into service prior to the end of 2016 to assure the project’s qualification for federal production tax credits (PTC).

Adam L. Wright, the Vice President-Wind Generation and Development for MidAmerican Energy, said in April 30 supporting testimony: “I managed the development and construction of the final 406.9 MW of MidAmerican’s Wind VII project, and I am currently managing the 1,050-MW Wind VIII and 162-MW Wind IX projects that were approved by the Iowa Utilities Board (‘Board’) in August 2013 and January 2015, respectively. MidAmerican is now proposing to construct additional economic wind generation—the Wind X Iowa Project (‘Wind X’ or ‘Project’), under a new, but mostly similar, set of proposed ratemaking principles, to be located at two Iowa sites discussed later in my testimony. We are targeting up to 552 MW (nameplate capacity) of new wind generation assets under Wind X.”

Notable is that exact site information, and details of existing agreements to obtain project equipment, are redacted from the public version of his testimony.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.