PacifiCorp provides updated economic analysis in relation to 2017 IRP in Idaho

PacifiCorp d/b/a Rocky Mountain Power on Aug. 2 filed with the Idaho Public Utilities Commission an informational filing regarding the company’s 2017 Integrated Resource Plan (IRP) that provides an updated economic analysis supporting the wind repowering, new transmission and new wind investments (collectively, the Energy Vision 2020 projects) identified in the 2017 IRP.

According to the document, the updated economic analysis was developed to support a series of concurrent regulatory filings made with the Wyoming Public Service Commission, the Utah Public Service Commission, and the Idaho Public Utilities Commission on June 30. The updated economic analysis was prepared to ensure that those filings were supported using the most currently available information and is being provided to IRP stakeholders so that all parties have access to the same analysis as they move forward with their ongoing review of the 2017 IRP, the company added in its document.

Since filing its 2017 IRP in April, PacifiCorp filed with Wyoming regulators on June 30 applications for certificates of public convenience and necessity (CPCNs), as well as an application seeking approval of its proposed ratemaking treatment for the wind repowering project.

Concurrent with those filings, PacifiCorp filed separate applications for the Energy Vision 2020 projects, seeking approval of its proposed ratemaking treatment with Utah and Idaho regulators, the company added.

There are existing rate-recovery mechanisms in Oregon and Washington for investments in renewable resources that provide a path for cost recovery closer in time to project completion, the company noted, adding that in California, it is required to file a general rate case in 2019, which may include the costs and benefits of Energy Vision 2020 investments. Alternatively, California’s post-test year adjustment mechanism may be used to recover costs after the 2019 general rate case, the company said.

The company noted that wind repowering involves installation of new rotors with longer blades and new nacelles with higher capacity generators. Those plant upgrades significantly increase energy output without changing the footprint, towers, and foundations of the wind facilities, the company noted.

Together, the new rotor and nacelles are estimated to increase generation from the repowered turbines by 13% to 35%, resulting in an overall average increase in generation of 19% – or 21% if new interconnection agreements are executed, the company said.

Congress in December 2015 enacted changes to the federal Internal Revenue Code that extended the full value of production tax credits (PTCs) for wind energy facilities that began construction in 2015 and 2016, the company noted, adding that the Internal Revenue Service has issued guidance that establishes “safe harbor” for taxpayers to demonstrate the year a facility will be deemed to “begin construction,” thereby setting the value of the PTC.

PacifiCorp said that repowering its wind fleet now will allow the resources to requalify for PTCs, which will expire 10 years from the original commercial operation date of the resource – expiration dates range from 2016 through 2020. To maximize the PTC benefit, PacifiCorp in December 2016 contracted with General Electric and Vestas-American Wind Technology for the purchase of new wind-turbine generator equipment. Those safe-harbor equipment purchases allow the repowered facilities to qualify for 100% of available PTC benefits if they are commercially operational within four calendar years – or by the end of 2020, PacifiCorp added.

The company noted that its purchases last year were important because wind facilities that begin construction after 2016 and come online after 2020 will receive a 20% decrease in the tax benefits that can be passed on to customers each year. Thus, a delay in acquiring safe-harbor equipment would have made the economics of repowering less attractive and deprived customers of the substantial benefits that can be achieved if repowering is completed by the end of 2020, the company said.

To meet the 2020 deadline, PacifiCorp said that it plans to order the necessary equipment and execute the necessary contracts in early 2018, and complete much of the construction in 2019.

The company noted that it analyzed nine different scenarios, each with varying natural gas and carbon dioxide price assumptions, and all nine scenarios show customer benefits ranging from $41m when assuming low natural gas and zero CO2 prices to $589m when assuming high natural gas and high CO2 prices. With medium natural gas price and CO2 price assumptions, wind repowering results in customer benefits of $359m, the company said.

PacifiCorp said that the new wind and transmission projects in the 2017 IRP preferred portfolio are central to the company’s current plans to use opportunities presented by the extension of the federal PTC to make major investments that provide significant savings to customers over the lives of the resources. The new wind and transmission projects are mutually dependent on one another, the company said.

The Aeolus-to-Bridger/Anticline transmission line is a sub-segment of PacifiCorp’s Energy Gateway West transmission project, and is an integral component of the long-term transmission plan for the region, the company said. The new line will relieve congestion on the current transmission system in eastern Wyoming, provide voltage support to the Wyoming transmission network, improve overall reliability of the transmission system, enhance PacifiCorp’s ability to comply with mandated reliability and performance standards, reduce line losses, and create the potential for further increases to the transfer capability across the Aeolus-to-Bridger/Anticline transmission line with the construction of additional segments of the Energy Gateway project, the company said.

Timing is critical for the new wind and transmission projects, which must achieve commercial operation by the end of 2020 to qualify for the full benefits of the PTCs and maintain favorable economics, the company said.

PacifiCorp said that because of the time-sensitivity of the new wind and transmission projects, it is conducting its 2017R request for proposals (RFP) process simultaneously with its CPCN applications and ongoing review of those investments by parties participating in PacifiCorp’s 2017 IRP process.

To allow the new wind and transmission projects to move forward, PacifiCorp said that it has pursued specific wind projects that will be benchmark resources in the 2017 RFP, including three 250-MW facilities – referred to as Ekola Flats, TB Flats I, and TB Flats II – and a fourth 110-MW facility – McFadden Ridge II – all located in Wyoming. Those proxy resources, in addition to 320 MW of qualifying facility (QF) resources enabled by the new transmission investment, are included in the updated economic analysis of the new wind and transmission projects.

The company added that it will update its economic analysis to reflect the specific resources selected to the 2017R RFP final shortlist, which the company plans to establish in early January 2018.

The new transmission investment includes six major elements:

  • The 140-mile, Aeolus-to-Anticline 500-kV line, which includes construction of the new Aeolus and Anticline substations
  • The five-mile Anticline to Jim Bridger 345-kV line, which includes modifications at the existing Jim Bridger substation to allow termination of the 345-kV line
  • Installation of a voltage control device at the Latham substation
  • A new 16-mile, 230-kV transmission line parallel to an existing 230-kV line from the Shirley Basin substation
  • The reconstruction of four miles of an existing 230-kV line between the proposed Aeolus substation and the Freezeout substation, including modification as required at the Freezeout substation
  • The reconstruction of 14 miles of an existing 230-kV transmission line between the Freezeout substation and the Standpipe substation, including modifications as required at the Freezeout and Standpipe substations

The company said that the benefits of the transmission project fall into three broad categories – first, the new project will relieve congestion in eastern Wyoming; second, the new transmission will provide critical voltage support to the transmission system in southeastern Wyoming; and third, the transmission projects will increase reliability, reduce capacity and energy losses on the transmission system, and provide greater flexibility to manage existing generation resources.

The company said that when using medium natural gas and CO2 price assumptions, PacifiCorp’s updated economic analysis shows a present-value reduction in revenue requirement due to the new wind and transmission projects of $137m.

In updating and refining its analytics for the Energy Vision 2020 projects, PacifiCorp said that it relied upon the same modeling tools used to develop and analyze resource portfolios in its 2017 IRP. Those modeling tools calculate system present value revenue requirement (PVRR) by identifying least-cost resource portfolios and dispatching system resources over a 20-year forecast period – 2017-2036.

Net customer benefits are calculated as the present-value revenue requirement differential (PVRR(d)) between two simulations of PacifiCorp’s system, with one simulation including the relevant components of the Energy Vision 2020 projects and the other one excluding those investments, the company added.

Customers are expected to realize benefits when the system PVRR with the Energy Vision 2020 projects is lower than the system PVRR without those investments. Conversely, customers would experience increased costs if the system PVRR with Energy Vision 2020 projects were higher than the system PVRR without them, the company added.

Among other things, PacifiCorp noted that it used the System Optimizer (SO) model and the Planning and Risk model (PaR) to develop resource portfolios, as well as to forecast dispatch of system resources in simulations with and without the Energy Vision 2020 projects. The SO model is used to develop resource portfolios with sufficient capacity to achieve a target planning-reserve margin, while PaR 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 company said.

About Corina Rivera-Linares 3235 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.