99

1 STATE OF MICHIGAN

2 BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

3 In the matter, on the Commission's Own Motion regarding the regulatory reviews, Case No. U-18231 4 revisions, determinations, and/or approvals necessary for Consumers Energy 5 Company to fully comply with Public Volume 4 Act 295 of 2008. 6 ______/

7 CROSS-EXAMINATION

8 Proceedings held in the above-entitled matter

9 before Jonathan F. Thoits, Administrative Law Judge

10 with MAHS, at the Michigan Public Service Commission,

11 7109 West Saginaw, Lake Michigan Room, Lansing, Michigan,

12 on Thursday, May 31, 2018, at 9:02 a.m.

13 APPEARANCES :

14 ANNE M. UITVLUGT, ESQ. Consumers Energy Company 15 One Energy Plaza, Room EP11-223 Jackson, Michigan 49201 16 On behalf of Consumers Energy Company 17 JENNIFER UTTER HESTON, ESQ. 18 Fraser Trebilcock Davis & Dunlap, P.C. 124 West Allegan, Suite 1000 19 Lansing, Michigan 48933

20 On behalf of Cypress Creek Renewables LLC

21 TIMOTHY J. LUNDGREN, ESQ. Varnum LLP 22 201 N. Washington Square, Suite 810 Lansing, Michigan 48933 23 On behalf of Independent Power Producers Coalition 24 of Michigan and Geronimo Energy

25 (Continued) Metro Court Reporters, Inc. 248.360.8865 100

1 APPEARANCES Continued :

2 THOMAS J. WATERS, ESQ. Fraser Trebilcock Davis & Dunlap, P.C. 3 124 West Allegan, Suite 1000 Lansing, Michigan 48933 4 On behalf of Cadillac Renewable Energy LLC, Genesee 5 Power Station LP, Grayling Generating Station LP, Hillman Power Company LLC, TES Filer City Station 6 LP, Viking Energy of Lincoln Inc., Viking Energy of McBain Inc. 7 DON L. KESKEY, J.D. 8 Public Law Resource Center, PLLC 333 Albert Avenue, Suite 425 9 East Lansing, Michigan 48823

10 On behalf of Great Lakes Renewable Energy Association 11 SPENCER A. SATTLER, 12 Assistant Attorney General 7109 West Saginaw Highway, Floor 3 13 Lansing, Michigan 48917

14 On behalf of Michigan Public Service Commission Staff 15

16

17

18 - - -

19

20

21

22 REPORTED BY: Lori Anne Penn, CSR-1315

23

24

25 Metro Court Reporters, Inc. 248.360.8865 101

1 I N D E X

2 WITNESS : PAGE

3 MARC R. BLECKMAN

4 Testimony Bound In 111

5 EUGENE M.J.A. BREURING

6 Testimony Bound In 138

7 TERESA E. HATCHER

8 Testimony Bound In 144

9 YONG F. KEYES

10 Testimony Bound In 179

11 MARGARET J. LOWE

12 Testimony Bound In 195

13 HEATHER L. RAYL

14 Testimony Bound In 215

15 KEITH G. TROYER

16 Testimony Bound In 225

17 TERI L. VanSUMEREN

18 Testimony Bound In 252

19 MERIDETH A. HADALA

20 Testimony Bound In 267

21 KATIE TRACHSEL

22 Testimony Bound In 274

23 WILLIAM F. STOCKHAUSEN

24 Testimony Bound In 280

25 Metro Court Reporters, Inc. 248.360.8865 102

1 I N D E X

2 WITNESS : PAGE

3 CASEY JAMES MAY

4 Testimony Bound In 291

5 BETSY ENGELKING

6 Testimony Bound In 306

7 GEOFFREY C. CRANDALL

8 Testimony Bound In 319

9 THOMAS V. VINE

10 Testimony Bound In 332

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 103

1 E X H I B I T S

2 NUMBER DESCRIPTION MRKD OFRD RECD

3 A-1 (MRB-1) Calculation of Incremental 107 110 110 Costs of Compliance 4 A-2 (MRB-2) Regulatory Liability Balance 107 110 110 5 A-3 (EMB-1) Electric Retail Sales 107 137 137 6 Forecast

7 A-4 (EMB-2) Forecasted Customer Count & 107 137 137 Number of Lights Used For Renewable 8 Portfolio Surcharge Development

9 A-5 (TEH-1) Renewable Energy Plan 107 143 143 Summary 10 A-6 (YFK-1) Calculation of Renewable 107 178 178 11 Energy Credit Portfolio Targets for 2012 - 2029 12 A-7 (YFK-2) Quantity of RECs to be 107 178 178 13 Received in 2025 toward the 35% goal

14 A-8 (YFK-3) REVISED New Renewable Energy 107 178 178 Historical and Projected Renewable 15 Energy Credit Production

16 A-9 (YFK-4) REVISED Renewable Energy 107 178 178 Credit Portfolio for Sales to 17 Jurisdictional and Non-Jurisdictional Customers 18 A-10 (YFK-5) REVISED Renewable Energy 107 178 178 19 Credit Portfolio for Jurisdictional Compliance 20 A-11 (YFK-6) REVISED Renewable Energy 107 178 178 21 Plan Renewable Energy Credit Inventory Costs 22 A-12 (YFK-7) REVISED Renewable Energy 107 178 178 23 Credits Forecast by Technology Mix and Program Type 24

25 Metro Court Reporters, Inc. 248.360.8865 104

1 E X H I B I T S

2 NUMBER DESCRIPTION MRKD OFRD RECD

3 A-13 (MJL-1) REVISED Renewable Energy 107 194 194 Capacity by Technology at Year 4 Beginning

5 A-14 (MJL-2) REVISED New Renewable Energy 107 194 194 Capacity – Purchase Power and 6 Programs and Owned

7 A-15 (MJL-3) REVISED Historical and 107 194 194 Projected New Renewable Resource 8 Adequacy Capacity

9 A-16 (MJL-4) REVISED New Renewable 107 194 194 Historical and Projected Electric 10 Production

11 A-17 (MJL-5) Renewable Energy Plan 107 194 194 Historical and Projected Transfer 12 Cost

13 A-18 (MJL-6) Renewable Energy Plan 107 194 194 Transfer Price Calculation 14 A-19 (HLR-1) Calculation of the Revised 107 214 214 15 Renewable Energy Plan Rate Design Target ($000) 16 A-20 (HLR-2) Revised Tariff Sheet 107 214 214 17 A-031.00-Technical Terms and Abbreviations 18 A-21 (HLR-3) Revised Tariff Sheet 107 214 214 19 C-44.00-Rule C10 Renewable Energy Plan (REP) 20 A-22 (HLR-4) Revised Tariff Sheet 107 214 214 21 C-48.62-Rule C10.5 Pilot Solar Program 22 A-23 (TLV-1) Get a Glimpse into your 107 251 251 23 Solar Gardens Experience

24 A-24 (MRB-3) Calculation of Incremental 107 110 110 Costs of Compliance 25 Metro Court Reporters, Inc. 248.360.8865 105

1 E X H I B I T S

2 NUMBER DESCRIPTION MRKD OFRD RECD

3 A-25 (MRB-4) Regulatory Liability Balance 107 110 110

4 A-26 (TEH-2) Renewable Energy Plan 107 143 143 Summary 5 A-27 (MJL-7) Renewable Energy Plan 107 194 194 6 Historical and Projected Transfer Cost 7 A-28 (MJL-8) Renewable Energy Plan 107 194 194 8 Transfer Price Calculation

9 A-29 (HLR-5) Calculation of the Revised 107 214 214 Renewable Energy Plan Rate Design 10 Target ($000)

11 A-30 (TEH-3) Existing QF REC Forecast 107 143 143 without RE Plan -- Build 12 A-31 (TEH-4) Existing QF REC Forecast 107 143 143 13 with RE Plan Build

14 - - -

15 IPP-1 Discovery Response CCR-CE-54 107 279 279

16 - - -

17 CCR-1 Discovery Response 18231-CCR-CE-52 107 290 290

18 CCR-2 Discovery Response 18231-CCR-CE-53 107 290 290

19 CCR-3 Discovery Response 18231-CCR-CE-54 107 290 290

20 CCR-4 Discovery Response 18231-CCR-CE-56 107 290 290

21 CCR-5 Discovery Response 18231-CCR-CE-57 107 290 290

22 CCR-6 Discovery Response 18231-CCR-CE-58 107 290 290

23 CCR-7 Renewable Energy Projects 107 290 290

24 CCR-8 Discovery Response 18231-CCR-CE-60 107 290 290

25 - - - Metro Court Reporters, Inc. 248.360.8865 106

1 E X H I B I T S

2 NUMBER DESCRIPTION MRKD OFRD RECD

3 GER-1 Discovery Response CCR-CE-54 107 305 305

4 - - -

5 GLR-1 Resume of Geoffrey C. Crandall 107 318 318

6 - - -

7 BMP-1 2017 Consumers Energy Annual Report 107 331 331

8 BMP-2 2016 Consumers Energy Annual Report 107 331 331

9 BMP-3 2015 Consumers Energy Annual Report 107 331 331

10 BMP-4 Discovery Response 107 331 331 18231-BMPs-GLREA82(i) 11 BMP-5 Excel spreadsheet calculating the 107 331 331 12 respective costs of solar and biomass energy based upon the data in 13 Attachment 1 to the MPSC's November 21, 2017 Order in U-18090, as modified by 14 the MPSC in its February 22, 2017 Order to reflect a change in ICE 15 BMP-6 Selected data from the United States 107 331 331 16 Energy Information Administration’s EIA-923 Report 17 BMP-7 Attachment to Discovery Response 107 331 331 18 18231-BMP-CE-61

19 BMP-8 Discovery Response 18231-BMP-CE-62 107 331 331

20 - - -

21

22

23

24

25

Metro Court Reporters, Inc. 248.360.8865 107

1 Lansing, Michigan

2 Thursday, May 31, 2018

3 At 9:02 a.m.

4 - - -

5 (Hearing resumes following adjournment of Tuesday,

6 March 13, 2018.)

7 (Documents marked for identification by the Court

8 Reporter as Exhibit Nos. A-1 through A-7, A-8

9 REVISED through A-16 REVISED, A-17 through A-31;

10 IPP-1; CCR-1 through CCR-8; GER-1; GLR-1; BMP-1

11 through BMP-8.)

12 JUDGE THOITS: Let's go on the record.

13 Good morning, everyone. This is a hearing scheduled in

14 Case No. U-18231, titled In the matter, on the

15 Commission's own motion, regarding the regulatory

16 reviews, revisions, determinations, and/or approvals

17 necessary for Consumers Energy Company to fully comply

18 with Public Act 295.

19 My name is John Thoits, I am the

20 administrative law judge assigned to this case pursuant

21 to an order of reassignment dated May 22, 2018.

22 Why don't we start with appearances, and

23 start with Consumers Energy.

24 MS. UITVLUGT: Good morning, your Honor.

25 Anne Uitvlugt appearing on behalf of Consumers Energy Metro Court Reporters, Inc. 248.360.8865 108

1 Company.

2 JUDGE THOITS: Thank you. The Public

3 Service Commission Staff.

4 MR. SATTLER: Good morning, your Honor.

5 Spencer Sattler appearing on behalf of the Michigan

6 Public Service Commission Staff.

7 JUDGE THOITS: Great Lakes Renewable

8 Energy Association.

9 MR. KESKEY: Good morning, your Honor.

10 Don Keskey appearing on behalf of the Great Lakes

11 Renewable Energy Association.

12 JUDGE THOITS: Geronimo Energy and

13 Independent Power Producers.

14 MR. LUNDGREN: Good morning, your Honor.

15 Tim Lundgren appearing on behalf of the Independent Power

16 Producers Coalition and Geronimo Energy.

17 JUDGE THOITS: Cypress Creek Renewables.

18 MS. HESTON: Good morning, your Honor.

19 Jennifer Heston of law firm of Fraser, Trebilcock, Davis

20 & Dunlap appearing on behalf of Cypress Creek Renewables,

21 LLC.

22 JUDGE THOITS: And here's a group,

23 Cadillac Renewable Energy, Genesee Power Station,

24 Grayling Generating Station, Hillman Power Company, TES

25 Filer City Station, Viking Energy of Lincoln, and Viking Metro Court Reporters, Inc. 248.360.8865 109

1 Energy of McBain.

2 MR. WATERS: Good morning, your Honor.

3 Tom Waters, also of Fraser, Trebilcock, on behalf of that

4 group, which is otherwise known as the Biomass Merchant

5 Plants, or the BMPs.

6 JUDGE THOITS: All right. Thank you.

7 Any appearances for Renewables? (No response.)

8 Midland Cogeneration Venture Limited

9 Partnership? (No response.)

10 Environmental Law & Policy Center or

11 Michigan Environmental Council? (No response.)

12 Apparently not.

13 This is the time and place scheduled for

14 the cross-examination of witnesses. I understand the

15 parties have agreed to waive cross-examination for all

16 witnesses and instead bind in testimony and exhibits. Is

17 that still the understanding?

18 MR. SATTLER: Yes, your Honor.

19 MS. UITVLUGT: Yes, your Honor.

20 MS. HESTON: Yes, your Honor.

21 MR. WATERS: Yes, your Honor.

22 JUDGE THOITS: Well, good. You're being

23 very kind to your substitute teacher today. Why don't we

24 start with the Company. Ms. Uitvlugt, am I pronouncing

25 that correctly? Metro Court Reporters, Inc. 248.360.8865 110

1 MS. UITVLUGT: That's pretty good.

2 JUDGE THOITS: Well, I don't want to be

3 pretty good, I want to be right.

4 MS. UITVLUGT: It's Uitvlugt.

5 JUDGE THOITS: Uitvlugt. All right. Why

6 don't you proceed.

7 MS. UITVLUGT: Thank you, your Honor. By

8 agreement of the parties, the Company would wish to move

9 in the direct and supplemental testimony of Company

10 Witness Marc R. Bleckman. Mr. Bleckman also sponsored

11 Exhibits A-1, Exhibit A-2, Exhibit A-24, and Exhibit

12 A-25, and I would move for their admission.

13 JUDGE THOITS: Are there any objections

14 to binding in the testimony of this witness or the

15 exhibits mentioned? (No response.)

16 Hearing none, the testimony of Witness

17 Marc Bleckman is bound into the record, and Exhibits A-1,

18 A-2, A-24, and A-25 are admitted.

19 (Testimony bound in.)

20 - - -

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 111

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

MARC R. BLECKMAN

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017 112 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Marc R. Bleckman, and my business address is One Energy Plaza, Jackson,

3 Michigan, 49201.

4 Q. By whom are you employed and in what capacity?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”) as the Director of Financial Analysis in the Financial Forecasting and

7 Planning Department.

8 Q. What are your current responsibilities?

9 A. My responsibilities include preparation of the monthly forecasts, annual budgets, and

10 long-term financial plans for Consumers Energy and CMS Energy. As a part of my role,

11 I conduct financial analyses and studies required for making various strategic decisions

12 such as equity issuance, sale of businesses, and new investments. I assist the Chief

13 Financial Officer in preparing the presentations for Board of Directors meetings,

14 quarterly earnings calls, investor meetings, and industry conferences. My responsibilities

15 also include preparation of the Renewable Energy Plan (“RE Plan”) forecast model,

16 which is a responsibility I have continued to assume from a previously held position.

17 Q. Please describe your educational background and describe any positions held prior to

18 your current position.

19 A. I received the degree of Masters of Business Administration with a Finance concentration

20 from the Katz Graduate School at the University of Pittsburgh in 2002. Upon receiving

21 this degree in May 2002, I joined (“Ford”) as a Financial Analyst.

22 During my seven years of employment at Ford, I worked in various finance roles

23 throughout the company, including Assembly Operations, Powertrain Operations, Ford

te0917-mrb 1 113 MARC R. BLECKMAN DIRECT TESTIMONY 1 Motor Credit, and the General Auditor’s Office. My responsibilities within these

2 organizations included, but was not limited to, forecasting of and variance reporting on

3 all Income Statement and Balance Sheet line items, as well as business process auditing.

4 In July 2009, I left Ford to join Consumers Energy as a Principal Financial Analyst in the

5 Company’s Risk, Strategy and Financial Advisory Services group. My responsibilities in

6 this role included, but were not limited to, supporting the financial analysis and

7 forecasting of the Company’s renewable energy development plans as well as conducting

8 the Company’s Enterprise Risk Management Program. In September 2012, I took on the

9 role of Manager of Earnings Analysis in the Company’s Financial Forecast and Planning

10 Group. I assumed my current position as the Director of Financial Analysis in the

11 Financial Forecasting and Planning Department in February 2016.

12 Q. Have you previously testified before any regulatory agencies?

13 A. Yes. I provided testimony in:

14 • Michigan Public Service Commission (“MPSC” or the “Commission”) Case 15 No. U-16581, the Company’s 2011 Application for biennial review of the RE 16 Plan;

17 • MPSC Case No. U-16543, the Company’s 2011 Application to Amend the RE 18 Plan;

19 • MPSC Case No. U-17301, the Company’s 2013 Application for biennial 20 review of the RE Plan;

21 • MPSC Case No. U-17752, the Company’s 2015 Application to Amend the RE 22 Plan; and

23 • MPSC Case No. U-17792, the Company’s 2015 Application for biennial 24 review of the RE Plan.

te0917-mrb 2 114 MARC R. BLECKMAN DIRECT TESTIMONY 1 PURPOSE OF DIRECT TESTIMONY

2 Q. What is the purpose of your direct testimony?

3 A. I am sponsoring testimony which will address the economic parameters regarding, and

4 calculation of the costs of, compliance (total and incremental) of Consumers Energy’s

5 2017 RE Plan, as defined in Section 47(2) of Public Act 295 of 2008 (“PA 295”).

6 Q. Are you sponsoring any exhibits?

7 A. Yes. I am sponsoring:

8 Exhibit A-1 (MRB-1) Calculation of Incremental Costs of Compliance; 9 and

10 Exhibit A-2 (MRB-2) Regulatory Liability Balance.

11 Q. Were these exhibits prepared by you or under your direction or supervision?

12 A. Yes.

13 INCREMENTAL COSTS OF COMPLIANCE

14 Q. Please describe the Incremental Costs of Compliance (“ICC”) calculation.

15 A. Section 47 of PA 295 defines the ICC. Based on my understanding of the definition, I

16 have calculated the ICC in Exhibit A-1 (MRB-1) as the sum of the costs in lines 2

17 through 6, less the sum of the cost offsets in lines 8 through 13 and 15.

18 Q. Is the calculation of the ICC for this filing performed in the same manner as it was for the

19 approved 2015 RE Plan in MPSC Case No. U-17792?

20 A. Yes.

21 Q. Please describe how the costs in Exhibit A-1 (MRB-1), line 2, are calculated.

22 A. The calculation is the result of summing the projected financing and capital costs

23 (including a Return on Common Equity (“ROE”) investment), depreciation expense,

24 general taxes, and Operation and Maintenance (“O&M”) expenses associated with the

te0917-mrb 3 115 MARC R. BLECKMAN DIRECT TESTIMONY 1 Company’s investment to build renewable energy systems as part of its RE Plan to

2 comply with PA 295, as amended by 2016 PA 342 (“PA 342”).

3 Subtracted from these costs is the Company’s estimated pro-rata share of sales to

4 non-jurisdictional customers resulting from Consumers Energy’s RE Plan. Further

5 discussion of non-jurisdictional sales can be found in the direct testimony and exhibits of

6 Company witness Yong F. Keyes.

7 Q. Please describe how the forecasted return on investment associated with the Company’s

8 investment in renewable energy systems is calculated.

9 A. The Company forecasts the annual capital expenditures it expects will be required to

10 achieve its plan to build, own, and operate new renewable energy systems as part of its

11 RE Plan. The resulting average annual balances for the Company’s Construction Work

12 in Progress (“CWIP”) and net plant in service for new renewable energy systems are

13 summed and multiplied by the Company’s pretax Weighted Average Cost of Capital

14 (“WACC”).

15 Consistent with Section 47(1) of PA 295, these average balances will be

16 multiplied each month by the pretax authorized WACC from the prevailing electric rate

17 case order, adjusted for the following:

18 (1) The authorized Long-Term Debt and Common Equity amounts are revised to 19 maintain the debt/equity ratio from the Order in MPSC Case No. U-15245, 20 which was the Order in effect when the Company’s RE Plan was approved on 21 May 26, 2009; and

22 (2) The authorized ROE portion of the WACC will remain fixed at 10.70%, 23 which was the ROE authorized by the Commission in its Order in MPSC Case 24 No. U-15245 that established the general rates in effect when the Company’s 25 RE Plan was originally approved:

26 • A modified WACC of 9.55%, as approved in MPSC Case No. U-15245, 27 was multiplied by average CWIP balances from July 2008 to 28 December 2009;

te0917-mrb 4 116 MARC R. BLECKMAN DIRECT TESTIMONY 1 • A modified WACC of 10.04%, based on MPSC Case No. U-15645, was 2 multiplied by average CWIP balances from January 2010 to October 2010;

3 • A modified WACC of 9.80%, based on MPSC Case No. U-16191, was 4 multiplied by average CWIP balances from November 2010 to June 2012;

5 • A modified WACC of 9.61%, based on MPSC Case No. U-16794, was 6 multiplied by average CWIP balances from July 2012 to December 2015;

7 • A modified WACC of 8.94%, based on MPSC Case No. U-17735, was 8 multiplied by average CWIP balances from December 2015 to 9 March 2017; and

10 • A modified WACC of 8.70%, based on MPSC Case No. U-17990, was 11 multiplied by average CWIP balances from March 2017 through the 12 remainder of the RE Plan period.

13 Q. Have you included Allowance for Funds Used During Construction (“AFUDC”) in the

14 CWIP balances?

15 A. No. AFUDC cost recovery is not required as PA 295 allows for recovery of financing

16 costs on CWIP balances.

17 Q. How did the Company calculate the forecasted capital expenditures for new renewable

18 energy systems?

19 A. The Company’s capital forecast is based on its plan to build, own, and operate up to

20 856.8 MW of wind facilities as well as up to 106 MW of solar facilities located in the

21 state of Michigan. The first project, Lake Winds Energy Park (“Lake Winds”), is a

22 100.8 MW, 56 turbine wind facility that commenced commercial operation in November

23 2012. The total cost of the contracts and other development costs related to Lake Winds

24 were approximately $235 million, or approximately $2,330/kW of installed nameplate

25 capacity. Lake Winds is projected to have a levelized cost of approximately $110/MWh.

26 The Company’s second renewable project, Cross Winds Energy Park (“Cross

27 Winds”), is a 111.0 MW, 62 turbine wind facility that commenced commercial operation

te0917-mrb 5 117 MARC R. BLECKMAN DIRECT TESTIMONY 1 in December 2014. Capital costs for the Cross Winds project were approximately

2 $251 million, or approximately $2,261/installed kW. Cross Winds is projected to have a

3 levelized cost of approximately $59/MWh.

4 The Company is expanding on Cross Winds by building Cross Winds Energy

5 Park, Phase II (“Cross Winds II”) and Cross Winds Energy Park, Phase III (“Cross

6 Winds III”). Construction began in 2017 on Cross Winds II, which will be a 44 MW,

7 19 turbine wind facility. Commercial operation will commence in early 2018. Cross

8 Winds III will add an additional 76 MW with commercial operation commencing in

9 2020. These two phases replace the Company’s previous plan for a 100 MW expansion

10 in 2022. Levelized costs for the two expansions are projected to be approximately

11 $45/MWh and $46/MWh, respectively.

12 The Company has also initiated its Solar Gardens Program, for which the

13 Company may develop, construct, and own up to 10 MW of solar facilities. Construction

14 of the first two of these facilities was completed in 2016. The Grand Valley State

15 University Solar Garden facility is a 3 MW, 11,200 solar panel facility covering 17 acres.

16 The Solar Garden facility on the campus of Western Michigan University is a 1 MW,

17 3,900 solar panel facility covering almost 10 acres. The first two facilities were

18 completed at a total cost of $11.7 million, or approximately $2,925/installed kW. The

19 Company expects to complete the remainder of the program, as well as potential

20 distributed energy pilot projects, as discussed further in the direct testimony of Company

21 witness Teresa E. Hatcher.

22 Additionally, the Company is also investing $2.3 million for a 0.5 MW distributed

23 rooftop solar facility located within the development project called Circuit West in Grand

te0917-mrb 6 118 MARC R. BLECKMAN DIRECT TESTIMONY 1 Rapids. The ICC for this facility is included as part of research and development costs in

2 the RE Plan and has added approximately $0.2 million of ICC per year. Further detail on

3 this distributed rooftop solar facility can be found in the direct testimony of Company

4 witness Hatcher.

5 In order to address the new 15% standard, as adopted in PA 342, the Company

6 plans to add up to 525 MW of wind and 100 MW of solar. As a proxy until contracts are

7 signed with developers, or internal development commences, the Company is assuming

8 three 175 MW wind projects – all going commercial in 2019 and 2020 and each costing

9 approximately $273 million ($1,560/installed kW). The Company assumes 26.5% net

10 capacity factor for each project and a levelized cost of $58.37/MWh. All of these

11 assumptions are based on the results of the wind Request for Proposal (“RFP”) issued this

12 year. The Company is also proposing to add up to two 50 MW solar facilities, both to

13 commence operations between 2024 and 2025. The Company projects to spend

14 approximately $79 million for each facility, based on a cost of $1,572/installed

15 kW. These facilities are projected to have a net capacity factor of 17.0%. Projections for

16 these facilities are based on the RFP process completed in 2017. The 2024 and 2025

17 installation timing of these facilities is due to several factors including, but not limited to,

18 the following:

19 • Timing of when additional generation is needed to maintain the 15% standard 20 and maintenance of a Renewable Energy Credit (“REC”) reserve margin;

21 • Solar technology’s apparent economic disadvantage in Michigan based upon 22 comparison of RFP bids received; and

23 • A low projected regulatory liability balance from 2020 through 2022, which is 24 discussed in greater detail later in this testimony.

te0917-mrb 7 119 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. How do the Company’s proposed total capital costs compare to costs in the Company’s

2 RE Plan approved in MPSC Case No. U-17792?

3 A. Proposed total capital costs are estimated to be approximately $1,718 million,

4 approximately $937 million higher than the estimated $781 million of capital costs

5 included in the Company’s current approved RE Plan. Capital cost increases are

6 primarily due to the addition of up to 525 MW of wind projects for approximately

7 $819 million and 100 MW of solar projects for approximately $157 million. The

8 Company also reduced planned capital cost in the RE Plan by approximately $40 million

9 by pulling ahead Cross Winds expansion from 2022.

10 Q. How did the Company calculate the forecasted recovery of capital invested for new wind

11 energy systems?

12 A. The Company calculated the forecasted recovery of its wind project capital by

13 multiplying the projected in-service plant by the Federal Energy Regulatory Commission

14 account by the agreed-upon depreciation rate for that account.

15 Q. Has the depreciation rate for wind facilities changed from the rate assumed in the

16 Company’s RE Plan approved in MPSC Case No. U-17792?

17 A. Yes. The composite rate of 3.58% is higher than the composite rate of 3.39% in the

18 current approved RE Plan and is based on the composite rate for the Company’s existing

19 Lake Winds and Cross Winds facilities.

20 Q. What depreciation rate does the Company propose to utilize for the solar facilities?

21 A. The Company projects to recover its investment in the solar facilities by utilizing a

22 4.35% straight-line depreciation rate. This is the solar depreciation rate the Company

23 utilizes for its existing solar facilities. It is the same rate ordered for DTE Electric

te0917-mrb 8 120 MARC R. BLECKMAN DIRECT TESTIMONY 1 Company in MPSC Case No. U-16991, Depreciation Rates for Renewable Energy

2 Facilities.

3 Q. How did the Company estimate O&M costs for new renewable energy systems?

4 A. The O&M projections are based primarily on the Company’s experience in operating

5 Lake Winds and Cross Winds, as well as projections of future costs by subject matter

6 experts at Consumers Energy. Project site-specific cost estimates have also been applied

7 to applicable line items. For example, property taxes for Cross Winds are estimated

8 based on current millage rates in the counties of the planned build area.

9 The Company’s estimated O&M cost also includes $0.5 million per year in 2017

10 through 2029 for renewable research funding. Further details regarding these research

11 O&M costs are provided in the direct testimony of Company witness Hatcher.

12 Q. How do proposed O&M costs compare to the O&M costs in the Company’s RE Plan

13 approved in MPSC Case No. U-17792?

14 A. Total O&M costs forecast to occur during the RE Plan period are approximately

15 $556 million. This is approximately $256 million higher than the O&M costs forecast in

16 MPSC Case No. U-17792. The higher O&M forecast is primarily driven by the

17 additional Company-owned wind and solar facilities proposed to be added into the

18 Company’s RE Plan.

19 Q. Please describe how the costs in Exhibit A-1 (MRB-1), line 3, are calculated.

20 A. The values in this line are related to the Company’s plans to either externally purchase or

21 internally transfer RECs. From 2009-2014, the Company transferred 802,806 surplus

22 credits from the Renewable Resource Program (also known as the Green Generation

23 Program) into the RE Plan for a total transfer amount of approximately $3.4 million.

te0917-mrb 9 121 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. How do the values in Exhibit A-1 (MRB-1), line 3, compare to those in the Company’s

2 RE Plan approved in MPSC Case No. U-17792?

3 A. The total of approximately $3.4 million has not changed from the prior RE Plan.

4 Q. Please describe how the costs in Exhibit A-1 (MRB-1), line 4, are calculated.

5 A. The values in this line include the Company’s forecasted costs associated with contracts

6 for long-term renewable under Renewable Energy Purchase Agreements

7 (“REPAs”). These costs are incurred as revenue requirements when the associated

8 generation is used for PA 295 compliance. Any costs that remain in REC inventory at

9 the end of the RE Plan are not included as RE Plan costs and would be recovered via

10 general rates once the existing RE Plan period ends. Also included in this line is the

11 return on the REC inventory balance. The contracts and REC inventory balance are

12 discussed further in the direct testimony and exhibits of Company witness Keyes.

13 Subtracted from these costs is the Company’s estimated pro-rata share of sales to

14 non-jurisdictional customers resulting from Consumers Energy’s REPA Purchase

15 Program.

16 Q. How do the values in Exhibit A-1 (MRB-1), line 4, compare to those in the Company’s

17 RE Plan approved in MPSC Case No. U-17792?

18 A. Total costs proposed are approximately $1.7 billion, which is largely unchanged from the

19 prior RE Plan.

20 Q. Please describe how the costs in Exhibit A-1 (MRB-1), line 5, are calculated.

21 A. These costs are an estimate of the fees required to be paid in order to access and utilize

22 the Michigan Renewable Energy Certification System (“MIRECS”). These costs are

23 discussed further in the direct testimony and exhibits of Company witness Keyes.

te0917-mrb 10 122 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. How do the values in Exhibit A-1 (MRB-1), line 5, compare to those in the Company’s

2 RE Plan approved in MPSC Case No. U-17792?

3 A. The forecast for MIRECS fees is approximately $3 million, which is largely unchanged

4 from the prior RE Plan.

5 Q. Please describe how the costs in Exhibit A-1 (MRB-1), line 6, are calculated.

6 A. This line includes estimated costs associated with the Company’s Advanced Renewable

7 Tariff, as part of the Company’s Experimental Advanced Renewable Program

8 (“EARP”)-Solar and EARP-Anaerobic Digestion (“EARP-AD”), and is discussed in the

9 direct testimony of Company witness Margaret J. Lowe.

10 Q. How do the values in Exhibit A-1 (MRB-1), line 6, compare to those in the Company’s

11 RE Plan approved in MPSC Case No. U-17792?

12 A. The proposed RE Plan forecasts approximately $41 million in costs related to the

13 Company’s EARP, which is approximately $11 million lower than the $52 million in the

14 prior RE Plan. This decrease is due to lower actual 2015-2016 and projected generation,

15 primarily in the Company’s EARP-AD Program.

16 Q. Please describe how the revenues in Exhibit A-1 (MRB-1), line 8, are calculated.

17 A. This line includes the estimated revenues from potential sales of RECs. The Company

18 would multiply the projected number of RECs sold against the current or projected

19 market rate.

20 Q. How do the values in Exhibit A-1 (MRB-1), line 8, compare to those in the Company’s

21 RE Plan approved in MPSC Case No. U-17792?

22 A. There has been no change since the RE Plan approved in MPSC Case No. U-17792 as the

23 Company has not made and does not project any future REC sales.

te0917-mrb 11 123 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. Please describe how the values in Exhibit A-1 (MRB-1), line 9, are calculated.

2 A. This line includes the estimated value of federal tax credits designed to promote the

3 development of renewable energy. The tax benefits reflected in line 9 are grossed up for

4 taxes in order to be a true offset to customer pre-tax revenue requirements.

5 Q. Has the Company received, or does the Company expect to receive, any federal tax

6 credits or incentives?

7 A. Yes. As approved in MPSC Case No. U-16581, the Company elected to receive the

8 Section 1603 Cash Grant (“Cash Grant”) in lieu of tax credits for the 2012 Lake Winds

9 project. In December 2010, Congress extended the Cash Grant Program by one year, to

10 be available to projects for which physical construction commenced in 2011 and

11 commercial operation began by December 31, 2012. The Lake Winds construction and

12 commercial operation schedule met these new timing requirements and a Cash Grant was

13 received from the United States Treasury Department in January 2012 in the amount of

14 approximately $69.2 million.

15 The Company also elected to receive federal Production Tax Credits (“PTC”) for

16 Cross Winds and Cross Winds II and received a federal Investment Tax Credit (“ITC”)

17 for the solar facilities in the RE Plan. In addition, the Company expects to receive federal

18 PTCs for Cross Winds II and III, as well as the three additional wind facilities assumed in

19 this plan, as they are all expected to commence operations within the parameters

20 established in the existing federal wind tax credit legislation. The Company also projects

21 to receive 10% ITC for the solar facilities assumed in this RE Plan, added in 2024 and

22 2025.

te0917-mrb 12 124 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. How do the values in Exhibit A-1 (MRB-1), line 9, compare to those in the Company’s

2 RE Plan approved in MPSC Case No. U-17792?

3 A. Federal incentives passed on to customers during the RE Plan period are projected to be

4 approximately $838 million. This is approximately $625 million higher than the

5 $213 million projected in the prior RE Plan. The increase is due to the additional wind

6 and solar facilities included in the RE Plan.

7 Q. Please describe how the values in Exhibit A-1 (MRB-1), line 10, are calculated.

8 A. This line includes the portion of the total costs of compliance that the Company has

9 included as part of its transfer rate forecast and expects to recover as part of its Power

10 Supply Cost Recovery (“PSCR”) Plan cases. This is calculated by multiplying the

11 projected energy generated from the Company’s proposed projects and REPAs by the

12 calculated Transfer Prices. Further discussion of these costs, including calculation of the

13 Transfer Prices, can be found in the direct testimony and exhibits of Company witness

14 Lowe.

15 Q. How do the values in Exhibit A-1 (MRB-1), line 10, compare to those in the Company’s

16 current approved RE Plan in MPSC Case No. U-17792?

17 A. The PSCR transfer costs in this filing are estimated to be approximately $3.2 billion.

18 This is approximately $0.5 billion higher than the approximately $2.7 billion of PSCR

19 transfer costs in the prior RE Plan. This is primarily due to the addition of up to 525 MW

20 of wind and 100 MW of solar facilities included in the proposed RE Plan. Partially

21 offsetting this increase are PSCR transfer decreases associated with PSCR transfer rates

22 for Company-owned facilities, which are now being capped at the levelized cost of

23 energy for the associated project as ordered in MPSC Case No. U-17792. Further

te0917-mrb 13 125 MARC R. BLECKMAN DIRECT TESTIMONY 1 analysis of PSCR transfer rates and costs is provided in the direct testimony of Company

2 witness Lowe.

3 Q. Please describe how the revenues in Exhibit A-1 (MRB-1), line 11, are calculated.

4 A. This line includes the projected revenue from wholesale renewable energy sales. The

5 Company has not changed its plan for this and is forecasting no revenue, consistent with

6 all prior approved plans.

7 Q. Please describe how the revenues in Exhibit A-1 (MRB-1), line 12, are calculated.

8 A. This line refers to any additional revenue considered by the Commission to be

9 attributable to renewable energy standards. The Company utilizes this line to forecast the

10 subscription payments received from participating customers in the Company’s Solar

11 Gardens Program and for customers that will subscribe to purchase energy from the

12 Large Customer Renewable Energy Pilot Program (“LC-REP Program”). The Company

13 projects approximately $72 million of revenue from subscription payments in the plan

14 period, which will reduce the ICC required to be collected from all of the Company’s

15 bundled electric customers. This amount is approximately $57 million higher than the

16 prior RE Plan, and the increase is attributed to the addition of subscription payments from

17 the LC-REP Program. The projections are based on 6 MW of solar facilities which the

18 Company projects to be 90% subscribed and 44 MW at Cross Winds II which is

19 projected to be 70% subscribed.

20 Q. Please describe how the revenues in Exhibit A-1 (MRB-1), line 13, are calculated.

21 A. This line refers to RE Plan-related revenues that were mistakenly recovered in general

22 rates. As part of the 2010 Renewable Energy Cost Reconciliation, MPSC Case No.

23 U-16301, it was identified that approximately $23 million of RE Plan CWIP was also

te0917-mrb 14 126 MARC R. BLECKMAN DIRECT TESTIMONY 1 included in general rate base in MPSC Case No. U-16191. This created an inadvertent

2 double booking of return on CWIP from the period of July 22, 2010 through the

3 self-implementation of the next rate case on December 7, 2011. To offset this double

4 booking, a $3.660 million credit to 2011 RE Plan revenue requirements has been

5 included in this filing. This credit will remain in the Company’s RE Plan costs for the

6 duration of the plan.

7 Q. How do the values in Exhibit A-1 (MRB-1), line 13, compare to those in the Company’s

8 RE Plan approved in MPSC Case No. U-17792?

9 A. This credit is unchanged from the prior RE Plan.

10 Q. Please describe how the values in Exhibit A-1 (MRB-1), line 15, are calculated.

11 A. The values in this line include the Company’s forecast of interest cost on projected

12 regulatory liability balances as included on Exhibit A-2 (MRB-2), line 3. Interest on the

13 regulatory liability balance is charged at the Company’s short-term average borrowing

14 rate. The Company projects its average short-term borrowing rate for 2017 to be 1.06%,

15 which is equal to the year-to-date actual through August. The projected average

16 short-term borrowing rates for 2018 through 2021 are based on the Company’s forecast

17 of the 3-month London Interbank Offered Rate, plus 10 basis points. This is consistent

18 with the borrowing rate the Company currently and historically receives on some of its

19 short-term facilities. The projected short-term borrowing rate from 2022 through 2029 is

20 4.10%.

21 Q. Please describe the regulatory liability associated with the Company’s RE Plan.

22 A. In the early years of the Company’s RE Plan, the annual revenue collected through

23 application of the proposed levelized surcharge for the ICC exceeded the annual RE Plan

te0917-mrb 15 127 MARC R. BLECKMAN DIRECT TESTIMONY 1 revenue requirements or costs. This accumulation of funds in advance of revenue

2 requirements results in a reserve or regulatory liability being created. This reserve is then

3 drawn upon later in the RE Plan when the annual ICC exceeds the annual amount of

4 revenue being collected. Any balance in this regulatory liability earns interest at the

5 Company’s average short-term borrowing rate. The estimated revenue collection, ICC,

6 and regulatory liability balance for each year of the Company’s plan is shown in Exhibit

7 A-2 (MRB-2).

8 Q. How does this proposed RE Plan impact the projected regulatory liability balance?

9 A. The current projected regulatory liability balance at the end of the RE Plan period is

10 approximately $68 million, which is approximately $112 million lower than the

11 approximately $180 million projected in the Company’s prior RE Plan. The decrease can

12 be attributed to the March 29, 2016 Order in MPSC Case No. U-17792, in which the

13 Commission limited the PSCR transfer rates on Company-owned facilities to the

14 levelized cost of the project. This change in plan reduces PSCR transfer cost, thus

15 increasing ICC, which reduces the projected liability balance. This can most clearly be

16 seen with regard to Cross Winds, which has a levelized cost of $59/MWh, much lower

17 than the approved Transfer Price schedule for the project. Notably, the additional wind

18 facilities added to the RE Plan reduces the ICC in the RE Plan, thus increasing the

19 liability balance. This is due to PTCs, which serve to lower costs in the first ten years of

20 a facility below the lifetime levelized cost of the facility. Overall, the impact of limiting

21 the PSCR transfer rates to the levelized cost reduces the liability balance by more than

22 the PTCs on the new facilities increase the balance, thus a net decrease from the prior

23 plan.

te0917-mrb 16 128 MARC R. BLECKMAN DIRECT TESTIMONY 1 While the liability balance projects to be approximately $68 million at the end of

2 the RE Plan, the balance does approach a regulatory asset position from 2020 through

3 2022. This balance puts the Company’s RE Plan at risk of needing to institute a

4 surcharge, despite the projection to hold a strong liability position by the end of the RE

5 Plan.

6 Q. How will the Company address this balance?

7 A. The Company, in its future filings, will review and revise its RE Plan in order to both

8 minimize any regulatory liability balance at the end of the 20-year plan period, as well as

9 ensure the balance does not changeover to an asset position. As a result of the regulatory

10 liability being under $10 million for the time period of 2020 through 2022, small

11 variances to key assumptions, including the actual amount of MWh generation and

12 required spending, could result in a regulatory asset balance. In such a circumstance, and

13 to be in compliance with the law, a surcharge would likely need to be instituted prior to

14 reaching a regulatory asset position. Any regulatory liability balance that exists at the

15 end of the 20-year period will be refunded to customers following approval of the

16 Commission.

17 Q. How do the values in Exhibit A-1 (MRB-1), line 15, compare to those in the Company’s

18 RE Plan approved in MPSC Case No. U-17792?

19 A. Interest on regulatory liability is estimated to be approximately $17 million. This is

20 approximately $59 million lower than the approximately $76 million in the current

21 approved RE Plan. This decrease is primarily due to the lower regulatory liability

22 balance over the RE Plan period, for reasons described above.

te0917-mrb 17 129 MARC R. BLECKMAN DIRECT TESTIMONY 1 Q. Please describe how the values in Exhibit A-1 (MRB-1), line 16, are calculated.

2 A. Line 16 is the incremental costs of compliance for the proposed RE Plan. It is the sum of

3 all costs in lines 2 through 6, less the sum of all cost offsets in lines 8 through 13 and line

4 15.

5 Q. How do the values in Exhibit A-1 (MRB-1), line 16, compare to those in the Company’s

6 current approved RE Plan in MPSC Case No. U-17792?

7 A. Total incremental costs of compliance are estimated to be approximately $142 million.

8 This is approximately $112 million higher than the approximately $30 million included in

9 the current approved RE Plan. This increase is primarily due to the limit of PSCR

10 transfer rates on Company-owned facilities to the levelized cost of the project, as

11 discussed above.

12 Q. How do the total costs of compliance (PSCR transfer costs + incremental costs) compare

13 to those in the Company’s current approved RE Plan in MPSC Case No. U-17792?

14 A. The resulting impact of all proposed changes in this RE Plan is that total costs of

15 compliance, excluding interest on the regulatory liability (line 15), are estimated to be

16 approximately $3.5 billion, which is $0.7 billion higher than the $2.8 billion in the

17 current approved RE Plan. This increase is due to: (i) the up to 525 MW of additional

18 wind facilities and (ii) the up to 100 MW of additional solar facilities the Company is

19 proposing to add to its RE Plan.

20 Q. Does this complete your direct testimony?

21 A. Yes, it does.

te0917-mrb 18 130

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers energy Company ) to fully comply with Public Act 295 of 2008 ) )

SUPPLEMENTAL TESTIMONY

OF

MARC R. BLECKMAN

ON BEHALF OF

CONSUMERS ENERGY COMPANY

March 2018

131 MARC R. BLECKMAN SUPPLEMENTAL TESTIMONY

1 Q. Please state your name and business address.

2 A. My name is Marc R. Bleckman, and my business address is One Energy Plaza, Jackson,

3 Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. What is your position at Consumers Energy?

8 A. I am the Executive Director of Financial Forecasting and Planning.

9 Q. Are you the same Marc R. Bleckman who submitted direct testimony in this case?

10 A. Yes.

11 Q. Are you sponsoring exhibits with your supplemental testimony?

12 A. Yes, I am sponsoring the following exhibits:

13 Exhibit A-24 (MRB-3) Calculation of Incremental Costs of Compliance; 14 and

15 Exhibit A-25 (MRB-4) Regulatory Liability Balance.

16 Q. Were these exhibits prepared by you or under your supervision?

17 A. Yes.

18 Q. What is the purpose of your supplemental testimony?

19 A. The purpose of my supplemental testimony is to identify the impact of revisions made to

20 the Company’s Renewable Energy Plan (“RE Plan”) costs. This includes the total costs

21 of compliance, Power Supply Cost Recovery (“PSCR”) transfer costs, Incremental Costs

22 of Compliance (“ICC”), and surcharge collectible.

ste0318-mrb 1 132 MARC R. BLECKMAN SUPPLEMENTAL TESTIMONY

1 Q. Why is it necessary to revise Exhibit A-1 (MRB-1)?

2 A. Exhibit A-24 (MRB-3) revises Exhibit A-1 (MRB-1) to reflect the change in the total

3 costs of the Company’s RE Plan resulting from the federal Tax Cuts and Jobs Act of

4 2017 (“tax reform”).

5 Q. What are the RE Plan impacts of tax reform?

6 A. The Tax Cut and Jobs Act, signed into law on December 22, 2017, lowered the

7 Company’s federal income tax rate from 35% to 21% and has three impacts on the RE

8 Plan as originally filed. First, the Company’s Weighted Average Cost of Capital

9 (“WACC”), as used to calculate RE Plan costs of capital, needed to be lowered so the

10 Company would not over-collect tax expense from customers. Therefore, in January

11 2018, the Company began using a WACC of 7.49% in lieu of the 8.70% WACC, which

12 had been utilized since Case No. U-17990. The lower WACC, as a result of the revised

13 revenue multiplier, lowers RE Plan customer costs. The revised revenue multiplier

14 utilized here is the same multiplier provided in Case No. U-18494, where the Company

15 filed its proposal for tax reform adjustments to general rates.

16 Second, tax reform lowered the gross up factor utilized to apply tax credits, such as

17 Production Tax Credits (“PTCs”), to pre-tax revenue requirements. This calculation

18 relied on the revised revenue multiplier and had the effect of increasing RE Plan

19 customer costs. Third, the Levelized Cost of Energy (“LCOE”) calculations for the

20 proxy plant assets in this case were also adjusted for these tax impacts. The proxy wind

21 assets went from an LCOE of $58.37 to $57.75, slightly lowering their projected PSCR

22 transfer rates since they are capped at the LCOE. The LCOE of the proxy solar facilities

23 also decreased, but did not have an economic impact on the RE Plan as those LCOEs are

ste0318-mrb 2 133 MARC R. BLECKMAN SUPPLEMENTAL TESTIMONY

1 greater than the projected PSCR transfer rates in both filings. The net impact of these

2 changes is a decrease to customer costs over the RE Plan period of approximately

3 $20 million.

4 Q. Were there any other changes to the RE Plan capital structure in this supplemental filing?

5 A. No. However, tax reform will have additional impacts to the Company’s capital

6 structure. It will reduce the amount of deferred income taxes due to the lower income tax

7 rate and elimination of bonus depreciation. These impacts will be included in future

8 general electric rate cases and will impact the RE Plan as future MPSC orders are

9 received.

10 Q. Are there any other changes included in this supplemental filing?

11 A. Yes. A correction to the previously filed RE Plan was incorporated to appropriately

12 account for federal tax credits for Cross Winds Energy Park, Phase II (“Cross Winds II”).

13 In the September 2017 filing, tax credits were only calculated on the unsubscribed

14 portion of Cross Winds II, which was 30% of the project. The Company will be able to

15 recognize tax credits on the entirety of the project’s production, regardless of how much

16 is subscribed to as part of the Company’s Voluntary Large Customer Renewable Energy

17 Pilot Program. Correcting the tax credit calculation to be based on 100% of the

18 production, in lieu of just the 30% of the project assumed to be unsubscribed, lowers

19 costs by approximately $62 million over the RE Plan period. This is the largest driver of

20 the higher RE Plan-ending balance on the regulatory liability as compared to the original

21 September 29, 2017 filing. Additionally, this supplemental filing updates Operations and

22 Maintenance (“O&M”) expenses associated with the new proxy wind projects to better

23 align with each project’s start of commercial operations. There were also changes related

ste0318-mrb 3 134 MARC R. BLECKMAN SUPPLEMENTAL TESTIMONY

1 to the distributed solar pilot project facility, as testified to by Company witness Teresa E.

2 Hatcher, but these had an impact of less than $1 million to the RE Plan.

3 Q. What line items of Exhibit A-1 (MRB-1) have been revised and are reflected in

4 Exhibit A-24 (MRB-3)?

5 A. There are five line items affected in the supplemental filing. They are the following:

6 • Line 2 – Sec. 47 (2)(a)(i,ii,iii,iv) – Capital, O&M, ROE, Financing, 7 Interconnect & Substation, & Ancillary;

8 • Line 4 - Sec. 47 (2)(a)(v)(B) - Costs of PPA Contracts;

9 • Line 9 – Sec.47 (2)(b)(iii) – Tax Credits to Promote Renewable Energy;

10 • Line 10 - PA295 Reference Sec. Sec. 47 (2)(b)(iv) - Cost Recovered under the 11 PSCR (Transfer Rate); and

12 • Line 15 – Sec. 47 (2)(a)(ii) – Interest on Regulatory Liabilities.

13 Q. How do the values in Exhibit A-24 (MRB-3) line 2 compare to Exhibit A-1 (MRB-1)

14 line 2?

15 A. The total capital, O&M, and other costs of approximately $2.5 billion are approximately

16 $138 million lower than the $2.6 billion in the originally filed RE Plan. The difference is

17 primarily driven by the lower costs of capital due to the lower WACC as a result of tax

18 reform.

19 Q. How do the values in Exhibit A-24 (MRB-3) line 4 compare to Exhibit A-1 (MRB-1)

20 line 4?

21 A. The total PPA costs of approximately $1.7 billion were largely unchanged. These costs

22 were reduced by approximately $1 million due to the lower WACC utilized in calculating

23 return on the Company’s average renewable energy credit inventory balance.

ste0318-mrb 4 135 MARC R. BLECKMAN SUPPLEMENTAL TESTIMONY

1 Q. How do the values in Exhibit A-24 (MRB-3) line 9 compare to those in Exhibit A-1

2 (MRB-1) line 9?

3 A. The total tax credit value of approximately $754 million is approximately $84 million

4 lower than the $838 million in the originally-filed RE Plan. This change is attributed to

5 the impact of the lower federal tax rate on the value of federal tax credits in the RE Plan.

6 The reduction in the value of federal tax credits is partially offset by correcting

7 Exhibit A-1 (MRB-1) to appropriately account for federal tax credits for all of Cross

8 Winds II, as discussed previously in this testimony.

9 Q. How do the values in Exhibit A-24 (MRB-3) line 10 compare to those in Exhibit A-1

10 (MRB-1) line 10?

11 A. The total PSCR transfer costs of $3.3 billion are approximately $2 million lower than the

12 amount in Exhibit A-1 (MRB-1) line 10. This change is primarily due to the lower

13 LCOEs for the three proxy wind facilities in the originally-filed RE Plan as a result of

14 federal tax reform, as discussed previously in this testimony. The LCOEs for the proxy

15 solar facilities also changed slightly, but did not have an economic impact on the RE Plan

16 as those LCOEs are greater than the projected PSCR transfer rates in both filings.

17 Q. How do the values in Exhibit A-24 (MRB-3) line 15 compare to those in Exhibit A-1

18 (MRB-1) line 15?

19 A. The interest on regulatory liabilities of $25 million is $8 million higher than $17 million

20 in Exhibit A-1 (MRB-1) line 15. This increase can be attributed to the projection of a

21 higher regulatory liability balance over the remaining life of the RE Plan, primarily due

22 to the correction related to Cross Winds II tax credits, as previously discussed in this

23 supplemental testimony.

ste0318-mrb 5 136 MARC R. BLECKMAN SUPPLEMENTAL TESTIMONY

1 Q. Have the ICC changed?

2 A. Yes. As shown on Exhibit A-24 (MRB-3), the ICC of $82 million has decreased by

3 $60 million from the $142 million in the originally filed RE Plan in Case No. U-18231.

4 As discussed previously, this change is primarily due to the Cross Winds II PTC value

5 correction.

6 Q. Are there any other changes reflected on Exhibit A-24 (MRB-3)?

7 A. No.

8 Q. Is the regulatory liability balance affected by the supplemental filing?

9 A. Yes. The projected regulatory liability of $128 million, as shown in Exhibit A-25

10 (MRB-4), is $60 million higher than the $68 million projected in the originally filed

11 RE Plan. Approximately $20 million of this change represents the impact of federal tax

12 reform with the remainder attributed to the other corrections discussed in this testimony.

13 Q. Is the surcharge collectible affected by the supplemental filing?

14 A. No. A surcharge is still not considered necessary under the supplemental filing.

15 However, consistent with the originally filed RE Plan, the projected regulatory liability

16 balance approaches a regulatory asset positon from 2020 through 2022. This continues to

17 put the Company’s RE Plan at risk of needing to institute a surcharge, despite the

18 projection to hold a strong liability position by the end of the RE Plan.

19 Q. Does this conclude your supplemental testimony?

20 A. Yes.

ste0318-mrb 6 137

1 MS. UITVLUGT: Thank you, your Honor. At

2 this time the Company would also move to bind in the

3 testimony of Eugene M. Breuring. Mr. Breuring sponsored

4 direct testimony in this case. Additionally, I would

5 move for the admission Mr. Breuring's exhibits, Exhibit

6 A-3 and Exhibit A-4.

7 JUDGE THOITS: Are there any objections

8 to the binding in of this testimony or the exhibits

9 mentioned? (No response.)

10 Hearing none, the testimony of Witness

11 Eugene Breuring is bound into the record, and Exhibits

12 A-3 and A-4 are admitted.

13 (Testimony bound in.)

14 - - -

15

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 138

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

EUGÈNE M.J.A. BREURING

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017 139 EUGÈNE M.J.A. BREURING DIRECT TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Eugène M.J.A. Breuring and my business address is One Energy Plaza,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed and in what capacity?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”) as a Senior Rate Analyst II in the Planning, Budgeting, & Analysis Section

7 of the Rates & Regulation and Quality Department.

8 Q. Please describe your curriculum vitae.

9 A. In 1992, I graduated from Grand Valley State University with a Bachelor of Business

10 Administration in Accounting. In 1996, I graduated from Thunderbird School of Global

11 Management with a Master of Business Administration International Management. I

12 have also attended trade-specific conferences and seminars related to Michigan and

13 United States economies, Michigan economic forecasts, as well as regression modeling.

14 Prior to joining Consumers Energy in 2013, I worked at the Kellogg Company,

15 Tecumseh Products Company, and Stryker Corporation, mostly in a financial planning,

16 budgeting, and forecasting capacity. In January of 2013, I accepted the position of Senior

17 Rate Analyst II, which is my current position at Consumers Energy. In this capacity, I

18 am responsible for preparing the Company’s official electric and natural gas sales and

19 customer forecasts, sponsoring the sales and customer forecast testimony and exhibits,

20 industry research, and various economic studies. Also, I am responsible for creating the

21 Company’s revenue forecast related to the gas and electric business.

te0917-emb 1 140 EUGÈNE M.J.A. BREURING DIRECT TESTIMONY 1 Q. Have you sponsored testimony in any previous cases before the Michigan Public Service

2 Commission (“MPSC” or the “Commission”)?

3 A. Yes, I have presented the Company’s electric and gas sales forecasts in the following

4 cases:

5 U-17771 2016 – 2017 Energy Optimization Plan;

6 U-17990 2016 General Electric Rate Case;

7 U-18142 2017 Power Supply Cost Recovery Plan;

8 U-18261 Amended Energy Optimization Plan; and

9 U-18322 2017 General Electric Rate Case.

10 Q. Please explain the purpose of your direct testimony in this proceeding.

11 A. The purpose of my testimony in this Renewable Energy Plan (“RE Plan”) review

12 proceeding is to: (i) present the Company’s actual and forecasted electric retail sales for

13 use in calculating the renewable energy compliance targets; and (ii) present the

14 Company’s estimate of customers expected to be billed the Renewable Energy Surcharge

15 over the remainder of the 20-year RE Plan Period1 (“RE Plan Period”).

16 Q. Are you sponsoring any exhibits in support of your direct testimony in this case?

17 A. Yes. I am providing the following two exhibits:

18 Exhibits Description

19 A-3 (EMB-1) Electric Retail Sales Forecast; and

20 A-4 (EMB-2) Forecasted Customer Count & Number of Lights 21 Used For Renewable Portfolio Surcharge 22 Development.

1 The RE Plan Period is the 20-year period beginning September 2009.

te0917-emb 2 141 EUGÈNE M.J.A. BREURING DIRECT TESTIMONY 1 Q. Were these exhibits prepared by you or under your direct supervision?

2 A. Yes.

3 Q. Please describe your first exhibit.

4 A. Exhibit A-3 (EMB-1) is a single-page exhibit that summarizes the historical and

5 forecasted electric sales used in calculating the RE Plan renewable energy compliance

6 targets.

7 Q. Please describe the Company’s methodology for calculating its RE Plan compliance

8 targets.

9 A. The Company uses a three-year moving average of electric retail sales during the prior

10 three years to establish its renewable energy compliance targets for each of the years

11 beginning in 2012.

12 Q. How is electric retail sales defined for purposes of the RE Plan?

13 A. In MPSC Case No. U-15800, the Commission defined electric retail sales as bundled

14 sales to residential, commercial, industrial, street lighting, and interdepartmental classes.

15 As defined, retail sales exclude electric sales for wholesale, intersystem, and electric

16 customer choice classes. Both the historical and forecasted electric sales shown in

17 Exhibit A-3 (EMB-1) exclude these latter classes.

18 Q. Please describe your second exhibit.

19 A. Exhibit A-4 (EMB-2) is a single-page exhibit that contains the annual 2017 to 2029

20 forecasted customer count and number of lights used in calculating the renewable energy

21 Surcharges. In addition, the monthly allocation of forecasted customer counts and

22 number of lights is provided for years 2017 and 2029. The customer counts in this

23 exhibit correspond to the electric retail sales shown in Exhibit A-3 (EMB-1). Consistent

te0917-emb 3 142 EUGÈNE M.J.A. BREURING DIRECT TESTIMONY 1 with previous RE Plan cases, however, the municipal pumping and standby generation

2 customer counts are removed from forecasted levels since both are exempt from paying

3 the Renewable Energy Surcharges.

4 Q. Does this conclude your testimony?

5 A. Yes.

te0917-emb 4 143

1 MS. UITVLUGT: Thank you, your Honor.

2 The Company would also move to admit the testimony of

3 Teresa E. Hatcher. Ms. Hatcher sponsored direct,

4 supplemental, and rebuttal testimony in this matter. I

5 would also for the admission of Ms. Hatcher's exhibits,

6 which is Exhibit A-5, Exhibit A-26, Exhibit A-30, and

7 Exhibit A-31.

8 JUDGE THOITS: Are there any objections

9 to the binding in of this testimony or the admission of

10 these exhibits? (No response.)

11 Hearing none, the testimony of Teresa

12 Hatcher is bound into the record, and Exhibits A-5, A-26,

13 A-30, and A-31 are admitted.

14 (Testimony bound in.)

15 - - -

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 144

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

TERESA E. HATCHER

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017

145 TERESA E. HATCHER DIRECT TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Teresa E. Hatcher, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed and in what capacity?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”) as Director of Renewable Energy in the Wholesale Settlements and

7 Transactions Section of the Energy Supply Operations Department.

8 I. QUALIFICATIONS

9 Q. Please describe your educational background and business experience.

10 A. I received a Bachelor of Science degree in Mechanical Engineering from Worcester

11 Polytechnic Institute in 1997 and a Master of Business Administration degree from the

12 Ross School of Business in 2007. From July 1997 to

13 December 1999, I was employed by Consumers Energy as a system engineer, responsible

14 for the Air Ejector, Condensate, and Radioactive Waste Gas Systems’ health at Palisades

15 Nuclear Power Plant. From December 1999 to November 2007, I was employed by CMS

16 Enterprises; I held positions as a project engineer responsible for the design and

17 construction of a chemical process facility, and was promoted to Senior Plant Engineer

18 for an 800 MW independent gas combined cycle power station. I was then promoted to

19 the position of Asset Manager, responsible for partnership and contract management for

20 biomass, coal/biomass, and hydro independent power stations. Finally, I was promoted

21 to the position of Production Manager for an 800 MW independent power gas combined

22 cycle power station. From November 2007 to December 2008, I was employed as an

23 associate consultant for a management consulting firm in their energy practice area.

te0917-teh 1 146 TERESA E. HATCHER DIRECT TESTIMONY 1 From January 2009 to January 2011, I was employed as a Technical Development

2 Manager responsible for evaluating potential power plant acquisitions and validating

3 operating and maintenance costs of those acquisitions. Plant fuel types included gas

4 (simple cycle and combined cycle), coal, wind, and biomass. In 2011, I rejoined

5 Consumers Energy. From February 2011 to February 2014, I held the position of

6 Principle Field Leader responsible for the Gas Transmission and Storage Planning and

7 Scheduling organization, and in October 2012, the position responsibilities were

8 expanded to include planning and scheduling for Gas Distribution and Service. In 2014, I

9 accepted the position of Corporate Strategic Planner responsible for Distribution,

10 Operations, Engineering, and Transmission organization and business strategy. In 2015,

11 I was promoted to Director of Strategic Initiatives, and in July 2017, I transitioned to

12 Director of Renewable Energy, where I am responsible for the development of strategies

13 to manage the Company’s Renewable Energy Plan (“RE Plan”), Renewable Energy

14 Credits (“RECs”), and renewable energy programs.

15 Q. What is the purpose of your direct testimony?

16 A. I am sponsoring testimony and an exhibit relating to the Company’s RE Plan, which was

17 originally approved in MPSC Case No. U-15805. Specifically, my testimony provides an

18 overview of the Company’s proposals contained within this RE Plan, which include

19 proposed new renewable generation investment, risks to the proposals, and a discussion

20 of research and development in support of the implementation of the RE Plan.

21 Q. Are you sponsoring any exhibits?

22 A. Yes. I am sponsoring the following exhibit:

23 Exhibit A-5 (TEH-1) Renewable Energy Plan Summary.

te0917-teh 2 147 TERESA E. HATCHER DIRECT TESTIMONY 1 Q. Was this exhibit prepared by you or under your direct supervision?

2 A. Yes.

3 II. OVERVIEW OF THE AMENDED RE PLAN

4 Q. Please describe the amendments included in the Company’s RE Plan.

5 A. The Company is making the following amendments to its previously-approved RE Plan:

6 • Modify the RE Plan to include up to 525 MW of new wind facilities , with the 7 potential for three 175 MW wind projects to support meeting an REC 8 Portfolio Standard (“RPS”) of 12.5 % by 2019 and 15% by 2021, as mandated 9 by Public Act 342 of 2016 (“Act 342”). One such project is planned to enter 10 service in 2019, with the second and third projects planned to enter service in 11 2020.

12 • Modify the RE Plan to include up to 100 MW of new solar facilities, with the 13 potential for two 50 MW projects to support meeting the RPS, address the 14 REC reserve margin at the end of the plan period, as well as support 15 renewable energy technology diversity. One project is planned to enter 16 service in 2024, with the second project planned to enter service in 2025;

17 • Update the amount of RECs expected to be available based on actual 18 production of the applicable generators, as discussed by Company witness 19 Yong F. Keyes in her direct testimony;

20 • Update the amount of RECs expected to be available based on forecasted 21 production of applicable generators, including the projected addition of up to 22 525 MW of new wind facilities and up to 100 MW of new solar facilities, as 23 discussed by Company witness Keyes;

24 • Summarize the amount of RECs that will be obtained toward the 35% goal. 25 This is discussed by Company witness Keyes;

26 • Summarize the final amount of capacity installed under the Experimental 27 Advanced Renewable Program (“EARP”)-Solar Program as further discussed 28 by Company witnesses Margaret J. Lowe and Keith G. Troyer in their direct 29 testimonies;

30 • Update to the Transfer Price Model to include the three planned new 175 MW 31 wind projects, implemented as the projects enter service in 2019 and 2020; 32 and to include the two planned new 50 MW solar projects implemented as 33 they enter service in 2024 and 2025, as discussed by Company witness Lowe;

te0917-teh 3 148 TERESA E. HATCHER DIRECT TESTIMONY 1 • Modify the Incremental Cost of Compliance (“ICC”) and the annual revenue 2 requirement necessary to maintain a minimum regulatory liability of zero, as 3 discussed by Company witness Marc R. Bleckman in his direct testimony;

4 • Update and provide a detailed resource plan including a forecast mix of 5 technologies and project ownership, as discussed by Company witness Lowe, 6 and forecast of RECs by program type and technology as discussed by 7 Company witness Keyes;

8 • Provide a discussion on the expected amount to be spent on research to 9 support the implementation of the RE Plan and propose a research and 10 development capital investment to further development of distributed 11 renewable energy, specifically distributed solar within existing urban 12 infrastructure; and

13 • Propose extending the pilot period of the Company’s previously approved 14 Solar Gardens Program, as discussed by Company witness Teri L. 15 VanSumeren in her direct testimony.

16 III. OVERVIEW OF PRESENTATION OF DIRECT TESTIMONY

17 Q. How is your direct testimony organized?

18 A. In my testimony, I address:

19 A. The status of implementation of the current RE Plan;

20 B. Proposed amendments to the Company’s RE Plan including the proposed 21 addition of up to 525 MW of new wind facilities and up to 100 MW of new 22 solar facilities;

23 C. Discussion of certain costs associated with the proposed amendments to the 24 RE Plan;

25 D. Potential risks to the proposed amendments to the RE Plan;

26 E. Forecast of RECs projected to be obtained to support a 35% goal;

27 F. Technology diversity; and

28 G. Proposal and purpose of funding for certain research and development.

te0917-teh 4 149 TERESA E. HATCHER DIRECT TESTIMONY 1 A. Implementation Of The Company’s RE Plan

2 Q. Please describe the Company’s execution of its Renewable Energy Purchase Agreements

3 (“REPAs”).

4 A. As of September 2017, the Company has executed all of its currently planned REPAs.

5 By the end of 2017, all 13 major suppliers1 under the RE Plan are expected to have

6 completed construction of their facilities and initiated deliveries of renewable energy and

7 RECs to the Company. While no new REPAs are planned, the Company will continue to

8 evaluate REPAs that may provide benefits to our customers. Company witness Troyer

9 provides a further discussion of the Company’s REPAs in his direct testimony.

10 Q. Please describe the Company’s EARP-Solar Program.

11 A. In its EARP-Solar Program, the Company awarded agreements through 35 phases. Of

12 these phases, 18 were residential phases, 11 were commercial phases, 2 were not

13 specifically designated as residential or commercial, and 4 were designated as developer

14 phases but were not used. All customers participating in the EARP-Solar Program

15 completed construction of their systems by December 31, 2016. The total operational

16 capacity in the EARP-Solar Program is 6.4 MW, with 379 participants. This program is

17 now complete and closed with the Company administering the program through the end

18 of the RE Plan period.

19 Q. Please describe the Company’s EARP-Anaerobic Digestion (“AD”) Program.

20 A. The EARP-AD Program is complete with three agreements with total contracted capacity

21 of 1.8 MW.2 The contracts were approved in MPSC Case No. U-17792.

1 See Exhibit A-14 (MJL-2), columns (b) through (l), (o), and (p), for a list of the 13 major suppliers. 2 Exhibit A-14 (MJL-2) column (t).

te0917-teh 5 150 TERESA E. HATCHER DIRECT TESTIMONY 1 Q. Please describe the Company’s progress in developing the Lake Winds Energy Park and

2 Cross Winds Energy Park projects.

3 A. The Company has completed construction of the Lake Winds Energy Park project and the

4 Cross Winds Energy Park Phase I project. These facilities have begun supplying energy

5 to the Company’s customers. The Company has commenced construction of Phase II of

6 the Cross Winds Energy Park, adding an additional 44 MW to the park, with an expected

7 commercial operation date of January 1, 2018. Cross Winds Phase III is planned to add

8 an additional 76 MW. In MPSC Case No. U-18345, the Commission approved the

9 Company’s request to accelerate construction of Cross Winds Phase III from 2022 to

10 2019. Commercial operation is projected to begin in 2020.

11 Q. Please describe the Company’s progress in developing Renewable Customer programs.

12 A. The Company currently administers the EARP Program, the Solar Gardens Pilot

13 Program, and the provisionally-approved Large Customer Renewable Energy Pilot

14 (“LC-REP”) Program under the current RE Plan. The Company views the RE Plan as an

15 effective channel for piloting and implementing existing or future customer-facing

16 renewable energy programs such as these.

17 The EARP-Solar and EARP-AD Programs are no longer available to new

18 customers. The Company will continue to administer both the EARP-Solar Program and

19 the EARP-AD Program through the term of the agreements.

20 The Company’s Solar Gardens Pilot Program has developed and commissioned

21 4 MW of the approved 10 MW of the program with facilities located at Grand Valley

22 State University (“GVSU”) and Western Michigan University (“WMU”). The GVSU

23 facility was constructed in the spring of 2016 and generates up to 3 MW of electricity.

te0917-teh 6 151 TERESA E. HATCHER DIRECT TESTIMONY 1 The WMU facility was constructed in the summer of 2016 and generates up to 1 MW of

2 electricity. The Company is requesting the Commission approve extending the life of the

3 pilot program an additional three years beyond the current expiration date of May 14,

4 2018. Company witness VanSumeren further discusses the Solar Gardens Pilot Program

5 in her direct testimony. Unsubscribed portions of the Solar Gardens Program are

6 forecasted in the exhibits of Company witnesses Lowe and Keyes. The current

7 projections assume a 90% subscription rate for 6 MW of installed solar (out of the

8 10 MW approved) by 2020.3

9 The Company has received provisional-approval, in MPSC Case No. U-18393, of

10 the originally proposed Option A of the LC-REP Program. Further discussion on the

11 LC-REP Program is provided by Company witness VanSumeren in her direct testimony.

12 Company witness Lowe’s Transfer Cost exhibits and Company witness Keyes’ REC

13 exhibits represent the unsubscribed portion of the program’s projected capacity,

14 generation, and REC contribution.

15 B. Proposed Amendments To The Company’s RE Plan

16 Q. Why does the Company’s RE Plan propose to build new wind and solar facilities?

17 A. To meet the new RPS of 12.5% by 2019 and 15% by 2021, the Company reviewed its

18 current supply of renewable energy, which is 10% of its retail sales.4 Using the forecast

19 of retail sales for the Company as described in Company witness Eugène M.J.A.

20 Breuring’s direct testimony and exhibits,5 the compliance obligation to be met through

21 RECs was then forecasted at 12.5% in 2019 and 15% from 2021 through the end of the

3 Exhibit A-14 (MJL-2) through A-17 (MJL-5), column (w). 4 Exhibit A-6 (YFK-1), line 8. 5 Exhibit A-3 (EMB-1).

te0917-teh 7 152 TERESA E. HATCHER DIRECT TESTIMONY 1 RE Plan period.6 This forecast was then compared to current and planned available

2 renewable generation and the available REC bank inventory. Calculating the projected

3 new RECs that would be needed to achieve a 12.5% RPS and then further a 15% RPS

4 through the plan period demonstrated that if no new renewable generation was identified,

5 the Company’s REC inventory would be depleted by the year 2022. Therefore, the

6 Company determined the amount of new renewable generation to maintain a 15%

7 standard after 2022 and maintain a reserve margin in the REC inventory. The Company

8 issued a Request for Proposals (“RFP”)7 for new wind and solar generation in preparation

9 for this RE Plan filing. The purpose of the RFP was to gather an overview of potential

10 new renewable generation in Michigan as well as provide updated cost information for

11 the RE Plan. Utilizing a capacity factor of 26.5%, as further discussed in Company

12 witness Troyer’s direct testimony, the Company is planning for up to 525 MW of new

13 wind facilities to support meeting the 15% RPS through the end of the plan period in

14 2029. The timing of the addition of the planned wind projects, one 175 MW wind facility

15 in 2019 and two 175 MW in 2020, assumes 100% Production Tax Credits (“PTCs”) are

16 available to the facilities. To maintain a reserve margin of approximately 20% within the

17 Company’s REC bank, up to an additional 100 MW of solar resources was added to the

18 RE Plan, including 50 MW in 2024 and 50 MW in 2025. The addition of the solar

19 installation provides further technology diversity to the Company’s renewable energy

20 supply. Additionally, based on the Regulatory Liability Balance (“RLB”) in the years

21 2020 through 2023, as discussed further in Company witness Bleckman’s direct

6 Exhibit A-6 (YFK-1) column (d). 7 2017 RFP process and outcomes are described in Company witness Troyer’s direct testimony.

te0917-teh 8 153 TERESA E. HATCHER DIRECT TESTIMONY 1 testimony, the Company’s RLB is better positioned for additional solar in the 2024 to

2 2025 time period.

3 C. Costs Associated With The Proposed Amendments To The RE Plan

4 Q. Does the Company plan to own the new wind and solar facilities proposed in this

5 amendment?

6 A. Yes, the RE Plan costs are based on the facilities being owned and operated by the

7 Company. The Company has gained experience and expertise in constructing and

8 operating wind and solar facilities located in varied geographies in Michigan, which will

9 be beneficial in evaluating, selecting, and operating projects within the state. Building

10 and owning wind projects within the state can create new green energy jobs and new

11 generating capacity within the state.

12 Q. How do these proposals affect the costs of the Company’s RE Plan?

13 A. The primary proposed change to the cost of the RE Plan is the addition of up to 525 MW

14 of new wind resources and up to 100 MW of new solar resources, as discussed in greater

15 detail in the direct testimonies of Company witnesses Lowe, Troyer, Bleckman, and

16 Keyes.

17 The wind addition is represented in the plan by up to three 175 MW wind

18 facilities, with one wind facility commencing commercial operation in 2019 and the

19 remaining two facilities commencing commercial operation in 2020, in order to take

20 advantage of available PTCs. These three facilities are each currently estimated to cost

21 an additional $273 million ($1,560/installed kW).

22 The 100 MW of additional solar is represented in the RE Plan as two 50 MW

23 solar arrays commencing commercial operations in 2024 and 2025, respectively. The

te0917-teh 9 154 TERESA E. HATCHER DIRECT TESTIMONY 1 Company projects to spend approximately $79 million for each facility based upon a

2 $1,572/installed kW cost. An additional change to the RE Plan costs include the proposal

3 to invest up to $2.3 million to install and operate a distributed solar pilot project to

4 develop and establish a process for installing distributed solar within the electric

5 distribution system and integrating distributed solar within existing infrastructure.

6 Q. How do the costs of the RE Plan presented in this filing compare to the costs of the RE

7 Plan as most recently approved by the Commission in MPSC Case No. U-17792?

8 A. The total cost of this RE Plan is approximately $3.5 billion, compared to the total cost of

9 approximately $2.8 billion currently approved in the RE Plan. The total amount

10 recovered through the PSCR process for this RE Plan is expected to be approximately

11 $3.2 billion, compared to the PSCR expense of approximately $2.7 billion in the

12 currently approved RE Plan. The change in cost is primarily driven by the addition of up

13 to 525 MW of wind facilities and up to 100 MW of solar facilities. This amended RE

14 Plan reflects an increase in the ICC of $140 million, compared to the ICC of $30 million

15 in the RE Plan approved in MPSC Case No. U-17792. The magnitude of this change is

16 primarily driven by the methodology to limit the PSCR transfer rate on Company-owned

17 facilities to the levelized cost of the project. This is discussed in further detail in

18 Company witness Bleckman’s direct testimony

19 D. Potential Risks To Proposed Amendments

20 Q. What are the risks associated with projecting the addition of up to 525 MW of wind

21 facilities and up to 100 MW of solar facilities?

22 A. Risks associated with implementation of both solar and wind facilities within the plan

23 include negotiating risk, such as acquisition of land, easements, and landowner

te0917-teh 10 155 TERESA E. HATCHER DIRECT TESTIMONY 1 agreements. In addition to negotiating risk, operating risks once projects are developed

2 include variations in actual versus forecasted wind speed for wind facilities, or cloud

3 coverage and shadow effects for solar, as well as unanticipated major maintenance due to

4 potential equipment malfunction for components associated with wind or solar facilities.

5 Federal or state legislative changes between the filing of this RE Plan and the end of the

6 plan period can also pose a risk to implementation of wind, solar, or both within the plan,

7 such as future treatment of tax credits for renewables (including those associated with

8 wind and solar projects) in the future. Lastly, customer sentiment and environmental

9 conditions can vary over time, limiting the areas available for development of renewable

10 energy through renewable moratoriums, or potential limitations due to environmental

11 conditions such as United States Fish and Wildlife regulations regarding migratory routes

12 for wildlife as an example for wind projects, or changes to threatened or endangered lists

13 of wildlife as it may apply for wind or solar facilities.

14 E. Forecast Of RECs Supporting The 35% Goal

15 Q. How many RECs does the Company anticipate obtaining in 2025 to count toward the

16 35% goal described in Act 342?

17 A. The Company expects to receive 4,688,707 RECs in 2025 toward achieving the 35%

18 goal. This is discussed in detail in Company witness Keyes’ direct testimony and

19 exhibits.8

8 Exhibit A-7 (YFK-2).

te0917-teh 11 156 TERESA E. HATCHER DIRECT TESTIMONY 1 F. Technology Diversity

2 Q. How does the Company address diversity of technology and diversity of ownership?

3 A. Diversity of technology and ownership are discussed within the direct testimonies of

4 Company witnesses Lowe and Keyes.

5 G. Research And Development

6 Q. Please describe the Company’s efforts to perform research and development in support of

7 implementing the RE Plan.

8 A. The Company has allocated $500,000 per year in ICC funding to conduct research

9 necessary to develop future projects involving renewable energy resources under the RE

10 Plan. The premise of Research and Development (“R&D”) is to educate and further the

11 Company’s knowledge and ability to implement the RE Plan as well as respond to

12 changes in the cost and technology landscape of renewable energy. R&D has the

13 potential to incorporate new technologies and operating practices for the Company to

14 reduce future costs to customers who desire access to greater quantities and types of

15 renewable energy. Potential examples of research areas include: (i) studies of distributed

16 renewable generation feasibility and potential impacts to future supply or infrastructure;

17 (ii) preliminary engineering and design to determine feasibility of potential renewable

18 technologies within the Company’s service territory; (iii) wind or solar capacity studies

19 informing the Company on future project costs, potential capacity factors, or other

20 technical data in support of increasing renewable deployment; (iv) renewables enabled by

21 batteries or integration of renewables with future micro grid infrastructures; or

22 (v) membership dues or fees.

te0917-teh 12 157 TERESA E. HATCHER DIRECT TESTIMONY 1 In addition to renewable energy R&D through the remainder of the RE Plan

2 period, the Company is proposing an R&D capital investment for a distributed, roof-top

3 solar installation of $2.3 million in order to develop understanding and expertise on the

4 impacts of small into existing urban infrastructures. The proposed

5 R&D investment would: (i) determine the feasibility of high-density panel installation;

6 (ii) develop installation processes and procedures for building orientation, solar panel

7 orientation, structural improvements, and shadow elimination; (iii) investigate the use of

8 micro inverters to reduce cost of installation and reduce roof dead loads; (iv) understand

9 and develop scalable processes for overcoming physical constraints of canopy-style

10 installations; and (v) compare and contrast production (capacity factor) of the distributed

11 installation to the Solar Gardens Program. The R&D facility is proposed to be owned by

12 the Company and would be connected to the Company’s distribution infrastructure. The

13 costs of the proposed project are also discussed in Company witness Bleckman’s direct

14 testimony.

15 IV. CONCLUSION

16 Q. Please summarize your direct testimony.

17 A. In this testimony supporting the RE Plan, I have presented:

18 • A description of the progress made in implementing the Company’s RE Plan;

19 • An overview of the proposed amendments to the RE Plan, including the 20 proposed completion or purchase of approximately 625 MW of new 21 renewable resources which, in conjunction with the Company’s other 22 renewable resources and an inventory of RECs can allow for the Company to 23 attain Michigan’s existing 10% RPS as well as 12.5% in 2019 and 15% from 24 2021 through the end of the RE Plan period. In addition, the Company 25 proposes to extend the Solar Gardens Pilot Program by three years;

26 • Discussion of certain costs associated with the proposed amendments to the 27 RE Plan and potential risks to the proposed amendments to the RE Plan;

te0917-teh 13 158 TERESA E. HATCHER DIRECT TESTIMONY 1 • Forecast of RECs to be obtained to support the 35% goal;

2 • Technology diversity; and

3 • Proposal and purpose of funding for certain research and development.

4 Q. Does this complete your direct testimony?

5 A. Yes.

te0917-teh 14 159

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

SUPPLEMENTAL TESTIMONY

OF

TERESA E. HATCHER

ON BEHALF OF

CONSUMERS ENERGY COMPANY

March 2018 160 TERESA E. HATCHER SUPPLEMENTAL TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Teresa E. Hatcher, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed and in what capacity?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”) as Director of Renewable Energy in the Wholesale Settlements and

7 Transactions Section of the Energy Supply Operations Department.

8 Q. Are you the same Teresa E. Hatcher who provided direct testimony in this proceeding?

9 A. Yes.

10 PURPOSE OF SUPPLEMENTAL TESTIMONY

11 Q. What is the purpose of your supplemental testimony?

12 A. I am sponsoring supplemental testimony relating to the Company’s Renewable Energy

13 Plan (“RE Plan”), addressing the implications of the recent federal Tax Cuts and Jobs Act

14 of 2017 on the forecasted costs of the proxy wind and solar units within the RE Plan, and

15 the implications upon the total costs of the RE Plan. Additionally, my supplemental

16 testimony will also address a change in forecasted costs for the Company’s proposal to

17 install and operate a distributed solar pilot project to develop and establish a process for

18 installing distributed solar within the electric distribution system, and integrating

19 distributed solar within existing infrastructure. This project is referred to as the Solar

20 Research and Development (“R&D”) Project known as Circuit West.

21 Q. Are you sponsoring any exhibits?

22 A. Yes. I am sponsoring the following exhibit:

23 Exhibit A-26 (TEH-2) Renewable Energy Plan Summary.

ste0318-teh 1 161 TERESA E. HATCHER SUPPLEMENTAL TESTIMONY 1 Q. Was this exhibit prepared by you or under your direct supervision?

2 A. Yes.

3 Q. Please explain the revisions to the RE Plan Summary, originally provided in Exhibit A-5

4 (TEH-1), that are reflected in Exhibit A-26 (TEH-2).

5 A. Lines 12, 13, 14, 23 through 27, 30, 31, and 49 have each been updated to reflect changes

6 associated with federal tax reform, as discussed further in Company witness Marc R.

7 Bleckman’s supplemental testimony. The revisions reflected in Exhibit A-26 (TEH-2)

8 are discussed further in Company witness Margaret J. Lowe’s and Yong F. Keyes’

9 supplemental testimonies.

10 Q. How does federal tax reform affect the Company’s estimated Levelized Cost of Energy

11 (“LCOE”) for proxy wind and solar units proposed in the RE Plan?

12 A. The estimated LCOE for the wind proxy units changed from $58.37/MWh to

13 $57.75/MWh. The estimated LCOE for the solar proxy units changed from $135/MWh

14 to $126/MWh. These costs are discussed in additional detail by Company witnesses

15 Lowe and Bleckman in their supplemental testimonies.

16 Q. How does federal tax reform affect the total costs of the Company’s RE Plan?

17 A. As discussed in Company witness Bleckman’s supplemental testimony, federal tax

18 reform impacts the total costs of the RE Plan as follows:

19 • The total capital, O&M, and other costs of approximately $2.5 billion are 20 approximately $138 million lower than the $2.6 billion in the originally-filed 21 RE Plan;

22 • The total Power Purchase Agreement costs are reduced by approximately 23 $1 million due to the lower weighted average cost of capital utilized in 24 calculating return on the Company’s average renewable energy credit 25 inventory balance;

26 • The total tax credit value of approximately $754 million is approximately 27 $84 million lower than the $838 million in the originally-filed RE Plan;

ste0318-teh 2 162 TERESA E. HATCHER SUPPLEMENTAL TESTIMONY 1 • The total transfer costs of $3.3 billion are approximately $2 million lower than 2 the amount in the originally-filed RE Plan;

3 • Interest on regulatory liabilities of $25 million is $8 million higher than the 4 $17 million in the originally-filed RE Plan;

5 • The Incremental Cost of Compliance of $82 million has decreased by 6 $60 million from the $142 million in the originally-filed RE Plan; and

7 • The projected regulatory liability of $128 million is $60 million higher than 8 the $68 million projected in the originally-filed RE Plan.

9 Q. What are the forecasted changes in capital costs for the Company’s proposed Solar R&D

10 Project?

11 A. The Company’s original projected costs were based on preliminary conceptual

12 engineering estimates. Since the filing of the RE Plan, detailed design engineering

13 commenced, resulting in the forecasted capital costs of the project to increase from

14 $2.3 million to $3.1 million.

15 Q. What was the basis for the Solar R&D Project cost projection?

16 A. The target budget and project forecast is based on:

17 • Structural upgrades of the parking structure;

18 • Estimated increased cost of solar panels based upon import tariffs applied to 19 the procurement of the solar panels; and

20 • Engineering / Design revisions.

21 Q. Please describe the cause for the increased projected costs for the Solar R&D Project.

22 A. As development of the Solar R&D Project continued, the Company was required to

23 increase the initial scope and cost of the project to ensure the existing infrastructure that

24 the solar panels are being installed upon can accommodate the installation and meet

25 building design criteria. The most significant structural work needed, is for the addition

26 of a canopy structure for the intended parking deck installation.

ste0318-teh 3 163 TERESA E. HATCHER SUPPLEMENTAL TESTIMONY 1 Q. With its initial involvement in urban distributed solar installation, since the filing of its

2 RE Plan, has the Company learned any lessons that will provide benefits to customers?

3 A. Yes. Listed below is a summary of the lessons learned so far by the Company. These,

4 and future learnings, will be utilized in future customer requests for increased distributed

5 renewables within the Company’s system:

6 • Early input into the design and engineering of the facility intended for solar 7 installation will maximize the output as well as minimize cost. For example, 8 design foundations and structure to handle the additional load of the panels, 9 racking, combiners, and inverters when possible;

10 • Take into consideration the fire safety (i.e., access to perimeter) requirements 11 in the layout. This may vary depending on municipal permitting 12 requirements;

13 • Optimize parapet wall height;

14 • Minimize screening wall heights;

15 • Aggregate roof vents to minimize interferences;

16 • Place Heating, Ventilation, and Air Conditioning units on north side of 17 building roof;

18 • Allow for additional electrical equipment such as transformers and 19 disconnects in the building electrical room;

20 • The solar panels require a low level tilt angle installation to eliminate wind 21 impact (sail effect), while this is not the most efficient tilt angle for power 22 output it does allow for a more closely packed solar array in order to optimize 23 the generation that can be produced from the panels for areas of limited space, 24 such as a roof;

25 • Allow for electrical chases to bring power cables to electrical rooms;

26 • Allow for roof top access to bring panels and equipment to the roof for 27 maintenance and repair; and

28 • Solid state inverters are an emerging technology which we have incorporated 29 into the design for the first time. These inverters minimize the weight/roof 30 loading and are intended to make the installation more efficient and cost 31 effective.

ste0318-teh 4 164 TERESA E. HATCHER SUPPLEMENTAL TESTIMONY 1 The Solar R&D Project is a potential model for generation and grid technology for future

2 brown field development in an urban setting. This demonstration project was a customer

3 driven request, and as the Company continues to see increased customer demand for

4 renewable solutions, the Company expects to leverage the learnings from this project to

5 drive down costs and deliver cost effective renewable solutions to customers.

6 CONCLUSION

7 Q. Please summarize your supplemental testimony.

8 A. In this supplemental testimony supporting the RE Plan, I have presented:

9 • An update of LCOEs and other costs as further described in Company 10 witnesses Bleckman, Lowe, and Keyes’ supplemental testimonies; and

11 • An update of the Solar R&D Project costs.

12 Q. Does this complete your supplemental testimony?

13 A. Yes.

ste0318-teh 5 165

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

REBUTTAL TESTIMONY

OF

TERESA E. HATCHER

ON BEHALF OF

CONSUMERS ENERGY COMPANY

May 2018 166 TERESA E. HATCHER REBUTTAL TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Teresa E. Hatcher, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. Are you the same Teresa E. Hatcher that testified previously in this case?

8 A. Yes.

9 PURPOSE OF REBUTTAL TESTIMONY

10 Q. What is the purpose of your rebuttal testimony?

11 A. The purpose of my rebuttal testimony is to address Michigan Public Service Commission

12 (“MPSC” or the “Commission”) Staff (“Staff”) concerns regarding Circuit West

13 Distributed Rooftop Solar Research and Development Project (“Circuit West Project”)

14 and certain Research and Development allocations as discussed in the direct testimony

15 provided by Staff witness Merideth A. Hadala. Additionally, I will rebut testimony

16 provided by Geoffrey C. Crandall on behalf of the Great Lakes Renewable Energy

17 Association (“GLREA”) regarding Mr. Crandall’s assertions on the 35% Goal under

18 2016 PA 342. Finally, my rebuttal testimony will address the Company’s Renewable

19 Energy Credit (“REC”) forecasts as questioned by witnesses William F. Stockhausen on

20 behalf of the Independent Power Producers Coalition of Michigan (“IPPC”); Betsy

21 Engelking on behalf of Geronimo Energy; Casey James May on behalf of Cypress Creek

22 Renewables, LLC (“Cypress Creek”); and Thomas V. Vine on behalf of Viking Energy

rte0518-teh 1 167 TERESA E. HATCHER REBUTTAL TESTIMONY 1 of McBain, LLC, Viking Energy of Lincoln, LLC, and Hillman Power Company, LLC

2 (“BMPs”).

3 Q. Are you sponsoring any exhibits with your rebuttal testimony?

4 A. Yes. I am sponsoring:

5 Exhibit A-30 (TEH-3) Existing QF REC Forecast without RE Plan Build; 6 and

7 Exhibit A-31 (TEH-4) Existing QF REC Forecast with RE Plan Build.

8 Q. Were these exhibits prepared by you or under your supervision?

9 A. Yes.

10 STAFF’S POSITION

11 Q. On page 3 of her direct testimony, Staff witness Hadala recommends approval of the

12 Company’s Circuit West Project with reporting to the Commission. Do you agree with

13 this recommendation?

14 A. Yes. The Company is appreciative of Staff’s support on this project and is agreeable to

15 providing updates on lessons learned, as well as demonstrating how this project provides

16 value for future solar development.

17 Q. What does the Company recommend as the timing for the proposed reporting?

18 A. The Company proposes to file a report 90 days after the solar installation is declared

19 operational. The Company will also provide an additional update during the 2018

20 Renewable Energy Cost Reconciliation that will be filed in 2019.

rte0518-teh 2 168 TERESA E. HATCHER REBUTTAL TESTIMONY 1 Q. On page 4 of her direct testimony, Staff witness Hadala discusses the Company’s

2 inclusion of research and development funding in the Renewable Energy Plan (“RE

3 Plan”). Ms. Hadala indicates that Staff is concerned about the lack of sufficient

4 information regarding how the money would be allocated. Do you agree with

5 Ms. Hadala’s concerns regarding the request for $500,000 per year in research funding?

6 A. No, Consumers Energy believes that the inclusion of research and development funding

7 is reasonable in the RE Plan. In Case No. U-17792, the Commission approved the

8 Company’s RE Plan, which included $2.3 million to fund renewable energy research on a

9 variety of potential topics, including: (i) the effect of increased wind resources;

10 (ii) utility-scale battery storage; (iii) distributed generation effects and opportunities; and

11 (iv) biomass fueling at natural gas generation plants. However, in an effort to minimize

12 differences with Staff, the Company will withdraw the request for $500,000 per year in

13 research funding as part of this proceeding. Instead, Consumers Energy will follow

14 Staff’s recommendation of filing for approval of research opportunities under the RE

15 Plan amendment process, or through the Renewable Energy Cost Reconciliation case, if

16 appropriate.

17 GLREA’S POSITION

18 Q. On page 2 of his direct testimony, GLREA witness Crandall states that the Company’s

19 RE Plan, Integrated Resource Plan (“IRP”), Public Act 304 of 1982, and general rate case

20 proceedings should be “closely coordinated.” How do you respond?

21 A. It is not clear what is specifically contemplated by Mr. Crandall’s recommendation that

22 these separate proceedings should be “closely coordinated.” Consumers Energy will

23 participate in each of the identified proceedings pursuant to the statutory requirements

rte0518-teh 3 169 TERESA E. HATCHER REBUTTAL TESTIMONY 1 and Commission direction that apply to those cases. However, Consumers Energy does

2 not agree that the particular requirements for the individual proceedings should

3 necessarily also apply in all of those proceedings.

4 Q. On page 5 of his direct testimony, GLREA witness Crandall raises concerns regarding the

5 lack of discussion by the Company regarding the goal to meet Michigan’s electric needs

6 through a combination of Energy Waste Reduction (“EWR”) and renewable energy by

7 2025. Do you believe a discussion of the 35% goal is appropriate in the RE Plan?

8 A. No. The Company’s RE Plan must: (i) explain how the electric provider intends to meet

9 required renewable capacity and renewable energy targets; (ii) estimate the costs

10 associated with meeting those targets; and (iii) propose cost recovery mechanisms,

11 including a Transfer Price mechanism, and a 20-year levelized surcharge to recover the

12 Incremental Cost of Compliance. While the Company’s Renewable Energy Supply

13 contributes to meeting the 35% Goal, this case is focused on the Company’s Renewable

14 Energy Credit Standard Portfolio (“RPS”). The Company’s IRP will include information

15 regarding both the forecasted Renewable Energy Supply and EWR plans and, as such, the

16 IRP will discuss the interplay of RECs and EWR in regards to progress toward the 35%

17 Goal.

18 Q. Why does the Company’s RE Plan contain a discussion on the forecasted number of

19 RECs to be used to meet the 35% Goal?

20 A. The Company included this discussion to meet one of the filing requirements for the RE

21 Plan. The filing requirements, as outlined in Case No. U-18409, stated that the Company

22 should:

rte0518-teh 4 170 TERESA E. HATCHER REBUTTAL TESTIMONY 1 “Outline the quantity of RECs the Company forecasts it will obtain 2 in 2025 to be counted toward the 35% goal. (PA 295 of 2008 3 Section 1(3)).”

4 By showing the that the Company will receive 4,688,707 RECs in 2025, as shown in

5 Exhibit A-6 (YFK-1) and Exhibit A-7 (YFK-2), the Company has forecasted the quantity

6 of RECs the Company expects to receive in 2025 to be counted toward the 35% Goal.

7 This is the first step in progressing towards meeting the 35% Goal. Since the 35% Goal

8 is a combination of both RECs and EWR, the number of RECs that would be used to

9 meet the RPS is a different calculation and thus a different number (4,988,396 RECs per

10 Exhibit A-6 (YFK-1), line 17). The RPS is not able to be combined with EWR and, as

11 such, is not an appropriate reference when discussing the 35% Goal.

12 GERONIMO ENERGY’S POSITION

13 Q. On page 3 of her direct testimony, Geronimo Energy witness Engleking concludes that

14 the Company has not demonstrated that its plan to construct 575 MW of new wind

15 (which should be 525 MW) and 100 MW of solar is reasonable because Consumers

16 Energy has not evaluated the availability and cost of utilizing additional third party

17 unbundled RECs. Do you agree?

18 A. No. Exhibit GER-1 (BE-1) is a forecast that the Company performed of potential RECs

19 from Qualifying Facilities (“QFs”) with existing contracts with the Company per the

20 Public Utility Regulatory Policies Act of 1978, as amended (“PURPA”), however, per the

21 Commission’s May 31, 2017 Order in Case No. U-18090, as discussed by Company

22 witness Keith G. Troyer, Consumers Energy is not entitled to the RECs associated with

23 contracts under PURPA. Because of this, coupled with the position that the Company

24 must create a reasonable and prudent set of assumptions regarding planned RECs in order

25 to acquire the appropriate number of RECs to meet the RPS, the Company did not

rte0518-teh 5 171 TERESA E. HATCHER REBUTTAL TESTIMONY 1 assume that RECs were available past the initial term of current existing PURPA

2 contracts.

3 Q. Did the Company perform any further analysis concerning the impact of receiving RECs

4 from existing PURPA facilities through the RE Plan period?

5 A. Yes, in preparing this rebuttal testimony, the Company forecasted two scenarios each

6 assuming the procurement of 80% of the RECs produced by PURPA QFs with existing

7 contracts as if the contracts were never to expire and the Company was to continue to

8 receive the RECs generated. The estimate of 80% of the RECs produced was chosen as a

9 reasonable assumption since this is the number of RECs the Company currently receives

10 from the existing QFs and the Company has no control over the QFs, or their future

11 production over time. These forecasts were included as Exhibits A-30 (TEH-3) and A-31

12 (TEH-4). Exhibit A-30 (TEH-3) assumes the Company receives 80% of generation

13 RECs from existing QFs through 2040, and does not build new wind or solar as proposed

14 in the RE Plan. The result of this scenario shows the Company would fall below the 15%

15 RPS target in 2024 and therefore would have to add 525 MW of wind and 100 MW of

16 solar as currently requested in the proposed plan in order to maintain a 15% RPS target

17 through the end of the RE Plan period.

18 Exhibit A-31 (TEH-4) provides a scenario that maintains all assumptions

19 currently in the RE Plan and assumes the extension of all current existing QFs, with the

20 procurement of 80% of the RECs produced from those facilities. In that scenario, the

21 Company would forecast to maintain the 15% RPS target through 2035.

22 The scenarios depicted in Exhibits A-30 (TEH-3) and A-31 (TEH-4) were created

23 as an estimate of potential unbundled RECs that might be available for purchase in the

rte0518-teh 6 172 TERESA E. HATCHER REBUTTAL TESTIMONY 1 future. Consumers Energy does not have any rights to RECs associated with new

2 contracts under PURPA per the May 31, 2017 Order in Case No. U-18090, as discussed

3 by Company witness Troyer.

4 Q. Did the Company forecast the purchase of unbundled RECs from additional third parties,

5 or associated with the potential development of QFs?

6 A. No. In order to comply with the RPS, the Company must acquire the appropriate number

7 of RECs and must create a reasonable and prudent set of assumptions regarding planned

8 RECs. Per the Commission’s May 31, 2017 Order in Case No. U-18090, as discussed by

9 Company witness Keith Troyer, Consumers Energy is not entitled to the RECs associated

10 with contracts under PURPA.

11 Q. Could the Company reasonably forecast the number of unbundled RECs available for

12 purchase from additional third parties or associated with the potential development of

13 QFs?

14 A. No. The Company cannot reasonably forecast the number of unbundled RECs available

15 for purchase from additional third parties, or associated with the potential development of

16 QFs. This forecast cannot be relied on for REC supply due to the uncertainty associated

17 with third party development decisions by QFs in Michigan. Further, irrespective of

18 future projects by QFs, the Company is not entitled to the RECs associated with contracts

19 under PURPA, meaning that a QF has full control of the RECs generated from their

20 facilities.

rte0518-teh 7 173 TERESA E. HATCHER REBUTTAL TESTIMONY 1 CYPRESS CREEK’S POSITION

2 Q. On page 5 of his direct testimony, Cypress Creek witness May expresses concerns with

3 the Company’s RE Plan indicating that the Company failed to consider purchasing

4 bundled or unbundled RECs from developing QFs. Mr. May stated that Cypress Creek

5 would convey RECs generated by its projects to Consumers Energy, under certain

6 conditions. Does this have an impact on the Company’s RE Plan?

7 A. No. As I stated above, the Company cannot reasonably forecast the number of unbundled

8 RECs available for purchase from additional third parties, or associated with the potential

9 development of QFs. While Cypress Creek offers the ability to potentially acquire its

10 RECs, there is still a significant amount of uncertainty surrounding the potential REC

11 availability. As stated earlier in this rebuttal testimony, Consumers Energy has no

12 control over QF project development, the risks associated with development, or the final

13 nameplate capacity and output of any future facilities. This level of uncertainty prevents

14 the Company from creating a reasonable forecast of unbundled RECs available to apply

15 to a Michigan RPS.

16 Q. On page 7 of his direct testimony, Mr. May criticizes the Company for not maintaining a

17 long-term REC price forecast. Can the Company reasonably develop such a forecast?

18 A. A reasonable long-term price forecast for RECs is not available for reasons similar to the

19 reasoning for the lack of unbundled REC forecasts. First, the Company relies on

20 the Michigan Renewable Energy Certification System to verify compliance with the

21 Michigan RPS and keep track of all relevant information about renewable energy

22 produced and delivered in Michigan. This system used by the Company only contains

23 REC production and volume information and does not provide market prices for

rte0518-teh 8 174 TERESA E. HATCHER REBUTTAL TESTIMONY 1 Michigan RECs. The available information on REC prices that the Company refers to is

2 current, short-term market prices. Additionally, there is continued uncertainty as to the

3 volume and availability of future RECs in Michigan because the Company has no control

4 over QF project development in the Company’s service territory or in the state of

5 Michigan, the risks associated with development, or the final nameplate capacity and

6 output of any future facilities. This level of uncertainty prevents the Company from

7 creating either a reasonable forecast of unbundled RECs or a reasonable forecast of

8 long-term REC price projections.

9 The below chart represents a simple linear forecast of potential Michigan

10 unbundled REC prices based upon Clear Energy Brokerage and Consulting LLC’s

11 (“Clear Energy”) Midwest Market Notes and a 2.32% increase year over year based upon

12 the Bureau of Labor Statistics series “CWUR0000SA0.” However, given the

13 uncertainties discussed in this rebuttal testimony, the accuracy of the forecast using this

14 very simple methodology is not known. See the below chart:

rte0518-teh 9 175 TERESA E. HATCHER REBUTTAL TESTIMONY

MI RPS RECs Pricing Forecast 2018 through 2023 assuming 2.32% increase year over year source: U.S. Bureau of Labor Statistics, series "CWUR0000SA0" 1.000

0.980

0.960

0.940

0.920

0.900 $ $ per REC

0.880

0.860

0.840

0.820 2018 2019 2020 2021 2022 2023

MI RPS RECs Pricing Forecast

1 Q. Is the Company generally aware of the price of RECs on the market?

2 A. Yes, the Company is aware of a range of pricing and subscribes to Midwest Market Notes

3 provided by Clear Energy. The Company is unaware of what RECs other entities are

4 providing to the market or whether any future projects in the state of Michigan will be

5 selling RECs into the Michigan Market or other available REC markets. The Company

6 will continue to consider the opportunity to negotiate unbundled RECs from facilities that

7 it has PURPA-based contracts with and anticipates that, in the event it chooses to pursue

8 the purchase of unbundled RECs, it would do so pursuant to a competitive bid process.

9 Below is a historical graph of prices based on the Company’s determination of the pricing

10 from the Midwest Market Notes:

rte0518-teh 10 176 TERESA E. HATCHER REBUTTAL TESTIMONY

Michigan RPS RECs Trade Pricing Trends Source: the Quarterly "Midwest REC Market Notes" by Clear Energy

$1.40

$1.20

$1.00

$0.93 $0.93 $0.90 $0.88 $0.83 $0.88 $0.80 $0.80 $0.75 $0.78 $0.75 $0.75

Price Price per REC $0.60

$0.45 $0.40 $0.45

$0.20

$0.00

trends

1 The Midwest Market Notes contain a bid, ask, and trade price. The Company determines

2 a price by averaging the bid and ask prices if no trade price is available.

3 Q. Did the Company consider all reasonable renewable energy alternatives to comply with

4 the 15% RPS?

5 A. Yes. Consumers Energy requested competitive proposals for renewable energy sources

6 and found wind to be the most cost-competitive choice for the current proposed RE Plan.

7 The Company assumed continuing all contracts through their initial term and included

8 solar generation in our RE Plan after the wind build timeframe to enable a practical

9 glidepath for development and to allow for solar prices to decline to a point that may be

10 more advantageous to our customers.

rte0518-teh 11 177 TERESA E. HATCHER REBUTTAL TESTIMONY 1 BMPs’ POSITION

2 Q. Do you agree with Mr. Vine’s criticisms of the Company’s amended RE Plan in this case,

3 specifically the Company’s decision not to forecast the future renewal of contracts with

4 the BMP facilities and purchase of bundled RECs?

5 A. No, in order to comply with the mandated RPS, the Company must acquire the

6 appropriate number of RECs and must create a reasonable and prudent set of assumptions

7 regarding planned RECs. Per the Commission’s May 31, 2017 Order in Case No.

8 U-18090, as discussed by Company witness Keith Troyer, Consumers Energy no longer

9 is entitled to the RECs associated with new contracts under PURPA, therefore the RE

10 Plan did not forecast the receipt of RECs from existing PURPA QFs beyond their initial

11 term. The Company will continue to consider the opportunity to negotiate unbundled

12 RECs from facilities that it has PURPA-based contracts with and anticipates that, in the

13 event it chooses to pursue the purchase of unbundled RECs, it would do so pursuant to a

14 competitive bid process.

15 Q. Does this complete your rebuttal testimony?

16 A. Yes, it does.

rte0518-teh 12 178

1 MS. UITVLUGT: Thank you. I would also

2 move for the admission of the direct and supplemental

3 testimony of Yong F. Keyes. Ms. Keyes sponsored a number

4 of exhibits: Exhibit A-6, Exhibit A-7, Exhibit A-8

5 Revised, Exhibit A-9 Revised, Exhibit A-10 Revised,

6 Exhibit A-11 Revised, and Exhibit A-12 Revised.

7 JUDGE THOITS: Thank you. Are there any

8 objections to the binding in of this testimony or the

9 admission of these exhibits? (No response.)

10 Hearing none, the testimony of Yong Keyes

11 is bound into the record, and Exhibits A-6, A-7, A-8

12 Revised, A-9 Revised, A-10 Revised, A-11 Revised, and

13 A-12 Revised are admitted.

14 (Testimony bound in.)

15 - - -

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 179

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

YONG F. KEYES

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017

180 YONG F. KEYES DIRECT TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Yong F. Keyes, and my business address is 1945 W Parnall Rd, Jackson,

3 Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. In what capacity are you employed?

8 A. I am a Senior Renewable Energy Analyst in the Transactions and Wholesale Settlements

9 Section of the Electric Supply Operations Department.

10 QUALIFICATIONS

11 Q. Please describe your educational background and business experience.

12 A. I earned a Bachelor of Science degree in Information Engineering Technology from the

13 University of Cincinnati in 2002. In April 2002, I joined Consumers Energy as a

14 Programmer Analyst developing Lotus Notes databases. From September 2004 through

15 March 2010, I was a Technical Analyst for Business Services, responsible for managing

16 the Real Estate Department’s document management systems and performing System

17 Administrator functions. In December 2009, I earned the degree of Master of Business

18 Administration from Eastern Michigan University with a concentration in Finance. In

19 April 2010, I accepted a position as a Business Support Consultant in the Wholesale

20 Settlement section of Energy Supply Operations, responsible for monthly forecasts for

21 the Company’s Transmission and Midcontinent Independent System Operator (“MISO”)

22 market expenses. In December 2015, I joined the Renewable Energy Section of Energy

te0917-yfk 1 181 YONG F. KEYES DIRECT TESTIMONY 1 Supply Operations where I am responsible for Renewable Energy Credits (“RECs”)

2 Management and Administration.

3 Q. Have you previously provided testimony before the Michigan Public Service

4 Commission (“MPSC” or the “Commission”)?

5 A. Yes. I provided direct testimony in:

6 • MPSC Case No. U-18241 (direct), Consumers Energy’s 2016 Renewable 7 Energy Cost Reconciliation.

8 PURPOSE OF TESTIMONY

9 Q. What is the purpose of your direct testimony?

10 A, My direct testimony will address:

11 • The amount of RECs forecasted through 2029 to comply with 2016 PA 295 12 (“PA 295”), as amended by 2016 PA 342 (“PA 342”); and

13 • The amount of RECs forecasted through 2029 categorized by technology 14 source and program type.

15 Q. Are you sponsoring any exhibits?

16 A. Yes. I am sponsoring the following exhibits:

17 Exhibit A-6 (YFK-1) Calculation of Renewable Energy Credit Portfolio 18 Targets for 2012 - 2029;

19 Exhibit A-7 (YFK-2) Quantity of RECs to be Received in 2025 toward 20 the 35% goal;

21 Exhibit A-8 (YFK-3) New Renewable Energy Historical and Projected 22 Renewable Energy Credit Production;

23 Exhibit A-9 (YFK-4) Renewable Energy Credit Portfolio for Sales to 24 Jurisdictional and Non-Jurisdictional Customers;

25 Exhibit A-10 (YFK-5) Renewable Energy Credit Portfolio for 26 Jurisdictional Compliance;

27 Exhibit A-11 (YFK-6) Renewable Energy Plan Renewable Energy Credit 28 Inventory Costs; and

te0917-yfk 2 182 YONG F. KEYES DIRECT TESTIMONY 1 Exhibit A-12 (YFK-7) Renewable Energy Credits Forecast by Technology 2 Mix and Program Type.

3 Q. Were these exhibits prepared by you or at your direction?

4 A. Yes.

5 REC PORTFOLIO TARGETS FOR 2012 - 2029

6 Q. In MPSC Case No. U-17792, the Company presented its forecast of jurisdictional REC

7 portfolio targets for the years 2012 and beyond. Does the Company propose any change

8 to the targets?

9 A. Yes. Using the actual electric retail sales for years 2009 through 2016 and forecasted

10 demand for years 2017 through 2029, a forecast of REC compliance obligations and

11 targets for electric sales to jurisdictional customers for the years 2017 through 2029 has

12 been calculated and is shown in Exhibit A-6 (YFK-1), “Calculation of Renewable Energy

13 Credit Portfolio Targets for 2012 – 2029.” The target is approximately 5.7% of retail

14 sales for 2012; approximately 6.4% of retail sales for 2013; approximately 7.3% of retail

15 sales for 2014; approximately 10% of retail sales for 2015 through 2018; approximately

16 12.5% of retail sales for 2019 and 2020; and approximately 15% of retail sales for

17 calendar years 2021 through 2029.

18 Consumers Energy has elected to calculate its REC portfolio obligation based on

19 the average number of retail sales for the previous three years in accordance with

20 MCL 460.1028(2)(b)(ii). The compliance requirement for years 2017 and 2018 is

21 equivalent to the Company’s 2015 and 2016 requirements of 3,318,873 RECs. To meet

22 the new Renewable Energy Credit Portfolio Standards (“RPS”) as outlined in PA 342, the

23 Company forecasts a requirement to retire 4,160,395 RECs for 2019; 4,139,280 RECs for

24 2020; and 4,972,614 RECs for 2021. I have also calculated the amount of RECs that

te0917-yfk 3 183 YONG F. KEYES DIRECT TESTIMONY 1 could be retired to maintain the 15% level from 2022 through 2029. This level is

2 forecasted to exceed 4.9 million RECs annually for the years 2022 through 2029.

3 Q. What is the Company’s REC portfolio forecast for 2017 through 2029?

4 A. In the Company’s original Renewable Energy Plan (“RE Plan”) presented in MPSC Case

5 No. U-15805, the Company elected to utilize the average amount of electricity sold to

6 retail customers by the electric provider annually during the previous three years as the

7 basis for determining the amount of electricity used in the calculation of the REC

8 obligation. Exhibit A-6 (YFK-1) illustrates the calculation of the Company’s REC

9 compliance targets.

10 Q. How many RECs does the Company plan to receive in 2025 toward the 35% goal of

11 Energy Waste Reduction (“EWR”) and renewable energy?

12 A. Under the proposed RE Plan, the Company plans to obtain 4,688,707 RECs in 2025

13 toward the combined 35% goal of EWR and renewable energy. See Exhibit A-7

14 (YFK-2). 4,688,707 RECs includes RECs obtained in 2025 alone. The forecasted EWR

15 savings will be addressed in separate EWR proceedings.

16 REC FORECAST

17 Q. How did the Company forecast the number of RECs that are required?

18 A. The Company developed the estimate of the RECs expected to be received based on the

19 amount of renewable energy forecasted to be either generated or acquired. Exhibit A-8

20 (YFK-3), page 1, “New Renewable Energy Historical and Projected Renewable Energy

21 Credit Production – Summary of RECs from REPA Resources,” shows the estimated

22 RECs expected to be generated from Renewable Energy Purchase Agreement (“REPA”)

23 resources through 2029.

te0917-yfk 4 184 YONG F. KEYES DIRECT TESTIMONY 1 Exhibit A-8 (YFK-3), page 2, “New Renewable Energy Historical and Projected

2 Renewable Energy Credit Production – Summary of RECs from Build Resources,” shows

3 the estimated RECs expected to be generated from Company-owned renewable energy

4 systems through 2029.

5 Q. Will the Company generate or acquire RECs from new renewable energy systems in

6 2017 and beyond?

7 A. Yes. At the end of June 2017, the Company had executed REPAs with a total of 379

8 customer-owned solar generation facilities that are operating as part of the Experimental

9 Advanced Renewable Program (“EARP”)-Solar Pilot Program. All contracts with

10 renewable energy systems associated with the original EARP-Solar Program are included

11 in EARP-Solar Phases 1 and 2 shown on Exhibit A-8 (YFK-3), page 1, column (r).

12 Contracts associated with the 2011 expansion of the EARP-Solar Program are included

13 in EARP-Solar Phases 3 through 35 shown on Exhibit A-8 (YFK-3), page 1, column (s).

14 Exhibit A-8 (YFK-3), page 2, shows the anticipated RECs associated with the

15 addition of 525 MW of Company-owned wind in columns (g) through (i), and the

16 addition of 100 MW of Company-owned solar in columns (j) and (k) as discussed in the

17 testimony of Company witness Teresa E. Hatcher.

18 A portion of Cross Winds Energy Park Phase II is forecasted to be utilized as a

19 resource for the Company’s Large Customer Renewable Energy Pilot (“LC-REP”)

20 Program. The RECs associated with the forecasted unsubscribed portion of Cross Winds

21 Energy Park Phase II is shown in column (e). The anticipated RECs associated with

22 Cross Winds Energy Park Phase III are shown in column (f).

te0917-yfk 5 185 YONG F. KEYES DIRECT TESTIMONY 1 Q. Does the Company anticipate any RECs expiring from the REC bank inventory for years

2 2017 through 2029?

3 A. No.

4 REC PRODUCTION AND INVENTORY

5 Q. Please explain Exhibit A-9 (YFK-4), page 1.

6 A. The Company plans to meet the renewable energy targets through a combination of:

7 (i) RECs produced by resources existing prior to enactment of PA 295 (“Existing”);

8 (ii) RECs provided by new renewable capacity built, owned, and operated by the

9 Company; (iii) RECs provided pursuant to REPAs, EARP-Solar, and EARP-AD, as

10 approved or proposed in prior cases; and (iv) RECs resulting from the conversion of

11 surplus Energy Optimization (“EO”) credits and the transfer of surplus Renewable

12 Resource Program (“RRP”) credits from years 2009 through 2029.

13 For REC forecasting and inventory purposes, the surplus EO credits and surplus

14 RRP RECs are included in the Existing Renewables category and the EARP-Solar and

15 EARP-AD RECs are grouped in the REPA category.

16 The purpose of Exhibit A-9 (YFK-4), page 1, is to provide a summary of the

17 aforementioned types of RECs over the 20-year RE Plan period. The REC portfolio

18 summary presented in Exhibit A-9 (YFK-4) has been updated to incorporate actuals

19 through June of 2017, as well as a revised forecast for Existing, Build, and REPA

20 resources based on the various changes that have been made to each of the categories, as

21 described throughout my testimony and in the testimony of Company witnesses Teri L.

22 VanSumeren, Teresa E. Hatcher, and Keith G. Troyer. Columns (b), (h), and (k) show

23 the annual RECs generated in each year from Existing, Build, and REPA renewable

te0917-yfk 6 186 YONG F. KEYES DIRECT TESTIMONY 1 facilities, respectively. Columns (c), (d), (i), and (l) show the annual Michigan incentive

2 RECs resulting from the Existing, Build, and REPA renewable facilities. Columns (e)

3 and (f) show the surplus EO credits and the Market Purchase of RRP RECs, respectively.

4 The total of all generated RECs, Michigan incentive RECs, surplus EO credits, and

5 Market Purchases from the RRP in each year is shown in column (n). The Company did

6 not generate or acquire energy from Advanced Cleaner Energy Systems (“ACECs”) in

7 2017 and expects to receive no ACECs for the years 2017 through 2029.

8 Q. Please explain Exhibit A-9 (YFK-4), page 2.

9 A. The total number of RECs resulting from Existing (except surplus EO credits), Build, and

10 REPA resources are split on a pro rata basis between jurisdictional and non-jurisdictional

11 customers based on the Company’s estimated sales made to jurisdictional and

12 non-jurisdictional customers. Surplus EO credits are entirely jurisdictional and not

13 subject to the pro rata split between jurisdictional and non-jurisdictional customers. The

14 purpose of Exhibit A-9 (YFK-4), page 2 is to summarize how those total RECs are split

15 on a year-by-year basis. The annual RECs in column (b) correspond to the totals

16 previously shown in column (n) on page 1 of this exhibit. Column (c) shows the surplus

17 EO credits listed on column (e) of page 1 of this exhibit. Column (d) represents the total

18 RECs subject to the pro rata split between jurisdictional and non-jurisdictional sales.

19 Only the jurisdictional RECs from column (e) can be used to satisfy the annual

20 compliance targets identified in Exhibit A-10 (YFK-5).

21 Q Please explain Exhibit A-10 (YFK-5).

22 A. Exhibit A-10 (YFK-5), “Renewable Energy Credit Portfolio for Jurisdictional

23 Compliance,” details the RPS for each year in column (b); the REC compliance target

te0917-yfk 7 187 YONG F. KEYES DIRECT TESTIMONY 1 associated with the RPS in column (c); the number of RECs generated or purchased in

2 each compliance year in column (d); the number of RECs used to meet the compliance

3 target from the current year in column (e); the number of RECs expected to be withdrawn

4 from the REC bank inventory used to meet the compliance target in each year in column

5 (f); the anticipated total RECs used to meet the compliance target in each year in column

6 (g); the number of RECs either sold or purchased in column (h); and the anticipated

7 cumulative REC bank inventory at the end of each compliance year in column (i).

8 REC COSTS

9 Q. Are there costs associated with the REC inventory?

10 A. Yes. Exhibit A-11 (YFK-6), “Renewable Energy Plan Renewable Credit Inventory

11 Costs,” details the anticipated costs associated with RECs for the plan period through

12 2029. Column (b) represents the number of RECs in each year from column (e) of

13 Exhibit A-9 (YFK-4), page 2. Column (c) shows the cost of RECs acquired in the current

14 year. Columns (d) and (e) illustrate the number of RECs purchased or sold in each

15 calendar year and the costs associated with that purchase or sale. Column (f) represents

16 the weighted average REC cost. Column (g) represents the cumulative REC bank

17 inventory that is carried forward to the next calendar year. Column (h) illustrates the cost

18 associated with the cumulative REC bank inventory at year end. Column (i) illustrates

19 the two-year average of the cost associated with the cumulative REC bank inventory.

20 Column (j) represents the total RECs used for compliance in each calendar year.

21 Column (k) indicates the cost associated with the RECs used for compliance. Column (l)

22 indicates the annual change in the cost of the REC inventory.

te0917-yfk 8 188 YONG F. KEYES DIRECT TESTIMONY 1 Q. In what way are the costs associated with generating or purchasing non-jurisdictional

2 RECs determined?

3 A. The inventory cost of RECs and the Incremental Cost of Compliance will be prorated in

4 proportion to the allocation of RECs. The value of energy and capacity generated or

5 purchased from renewable energy systems is allocated between jurisdictional sales and

6 non-jurisdictional sales as part of the Power Supply Cost Recovery (“PSCR”) process.

7 The non-PSCR costs associated with deliveries from provider-owned renewable energy

8 systems in commercial operation prior to the effective date of PA 295 are allocated

9 between jurisdictional sales and non-jurisdictional sales as part of the normal ratemaking

10 process.

11 Q. Please describe Exhibit A-12 (YFK-7), “Renewable Energy Credit Summary.”

12 A. Pursuant to the Commission’s RE Plan filing requirements, Exhibit A-12 (YFK-7) shows

13 the Company’s portfolio of anticipated RECs, either owned or purchased, by technology

14 mix and by program type.

15 CUSTOMER PROGRAM RECS

16 Q. Please describe how RECs associated with the Solar Gardens and LC-REP programs will

17 be administered.

18 A. The RECs that are produced and associated with the subscribed portion of the Solar

19 Gardens Program are either retired on behalf of the customers, or liquidated and credited

20 to customers. The RECs that are produced and associated with the unsubscribed portion

21 of the programs are available for use in meeting the jurisdictional retail sales compliance

22 obligations.

te0917-yfk 9 189 YONG F. KEYES DIRECT TESTIMONY 1 Q. Does this complete your direct testimony?

2 A. Yes, it does.

te0917-yfk 10 190

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

SUPPLEMENTAL TESTIMONY

OF

YONG F. KEYES

ON BEHALF OF

CONSUMERS ENERGY COMPANY

March 2018

191 YONG F. KEYES SUPPLEMENTAL TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Yong F. Keyes, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. In what capacity are you employed?

8 A. I am a Senior Renewable Energy Analyst in the Transactions and Wholesale Settlements

9 Section of the Electric Supply Operations Department.

10 Q. Are you the same Yong F. Keyes who submitted direct testimony in this case?

11 A. Yes.

12 Q. Are you sponsoring exhibits with your supplemental testimony?

13 A. Yes. I am sponsoring the following exhibits:

14 Exhibit A-8 (YFK-3) (Revised) New Renewable Energy Historical and 15 Projected Renewable Energy Credit 16 Production;

17 Exhibit A-9 (YFK-4) (Revised) Renewable Energy Credit Portfolio for Sales 18 to Jurisdictional and Non-Jurisdictional 19 Customers;

20 Exhibit A-10 (YFK-5) (Revised) Renewable Energy Credit Portfolio for 21 Jurisdictional Compliance;

22 Exhibit A-11 (YFK-6) (Revised) Renewable Energy Plan Renewable Energy 23 Credit Inventory Costs; and

24 Exhibit A-12 (YFK-7) (Revised) Renewable Energy Credits Forecast by 25 Technology Mix and Program Type.

26 Q. Were these exhibits prepared by you or under your supervision?

27 A. Yes.

te0318-yfk 1 192 YONG F. KEYES SUPPLEMENTAL TESTIMONY 1 Q. What is the purpose of your supplemental testimony?

2 A. The purpose of my supplemental testimony is to discuss the impact of changes and

3 corrections that are proposed in this supplemental filing of the Renewable Energy Plan

4 (“RE Plan”) on the Renewable Energy Credit (“REC”) production, REC portfolio

5 compliance, REC inventory costs, and RECs forecast by technology mix and program

6 type.

7 Q. What revisions are proposed in this supplemental filing?

8 A. The Company made a number of minor revisions to its direct case as part of this

9 supplemental filing.

10 Circuit West Solar RECs

11 As part of its RE Plan, the Company included a Research and Development proposal to

12 install and operate a distributed solar pilot project to develop and establish a process for

13 installing distributed solar within the electric distribution system and integrating

14 distributed solar within existing infrastructure. This is commonly referred to as the

15 Circuit West Solar Project (“Circuit West”). Originally, Circuit West was modeled

16 within the Solar Gardens Program. This supplemental filing removes Circuit West from

17 the Solar Gardens Program and models it separately.

18 Solar Gardens Pilot Program RECs

19 Consumers Energy updated the 2 MW projected expansion of the Solar Gardens Pilot

20 Program to properly reflect the incentive RECs calculated under Public Act 342 of 2016.

te0318-yfk 2 193 YONG F. KEYES SUPPLEMENTAL TESTIMONY 1 Voluntary Large Customer RE Program

2 The supplemental filing made revisions to the modeling associated with the Voluntary

3 Large Customer RE Program. Originally, the unsubscribed (30%) RECs dedicated to the

4 Program for the plan period, and the subscribed RECs, were incorrectly entered. In this

5 filing, the correct amount is entered for each year.

6 Pumping Incentive RECs

7 In the original filing, Exhibit A-12 (YFK-7) considered the Pumping Incentive RECs as

8 “Incentive Purchased.” In this filing, the Pumping Incentive RECs are included as

9 “Incentive Owned.” This correction decreases the amount of line 31 “Incentive

10 Purchased” RECs for each year in the plan period and increases the amount of “Incentive

11 Owned” RECs for each year in the plan period by the same quantity of RECs. The result

12 of this correction does not affect the total.

13 Q. Does this complete your supplemental testimony?

14 A. Yes, it does.

te0318-yfk 3 194

1 MS. UITVLUGT: Thank you. The Company

2 would move to bind in the direct and supplemental

3 testimony of Margaret J. Lowe. Ms. Lowe also sponsored a

4 number of exhibits with her testimony, which is Exhibit

5 A-13 Revised, A-14 Revised, A-15 Revised, A-16 Revised,

6 A-17, A-18, A-27, and A-28, and I would move for the

7 admission of these exhibits.

8 JUDGE THOITS: Are there any objections

9 to the binding in of this testimony or the admission of

10 these exhibits? (No response.)

11 Hearing none, the testimony of Witness

12 Margaret Lowe is bound into the record, and Exhibits A-13

13 Revised, A-14 Revised, A-15 Revised, A-16 Revised, A-17,

14 A-18, A-27, and A-28 are admitted.

15 (Testimony bound in.)

16 - - -

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 195

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

MARGARET J. LOWE

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017

196 MARGARET J. LOWE DIRECT TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Margaret J. Lowe, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. In what capacity are you employed?

8 A. I am a Senior Business Support Analyst, Project Management, in the Wholesale

9 Settlements and Transactions Section of the Electric Supply Department.

10 QUALIFICATIONS

11 Q. Please describe your educational background and business experience.

12 A. I received a Bachelor of Arts Degree in Management and Organizational Development

13 from Spring Arbor University in 2001. I began my employment at Consumers Energy in

14 1985 as a part-time junior office clerk in the Power Resources and System Planning

15 Department. This position involved data input and graphing for load flow studies for the

16 Company.

17 From 1988 through 1992, I was employed as a billing analyst in the Purchase and

18 Interchange Power Department of Hydro and System Operations. This position involved

19 the programming, implementation, and settlement of Power Purchase and Interconnection

20 Agreements with municipalities and Non-Utility Generators.

21 From 1993 through 1996, I was employed as a Power Controller and System

22 Dispatcher in Power Control and Transmission Operations. In this role, I was responsible

23 for the dispatch of Consumers Energy generation assets and the switching and tagging of

te0917-mjl 1 197 MARGARET J. LOWE DIRECT TESTIMONY 1 transmission assets for system restoration and field work.

2 From 1997 through 2003, I was employed as a Merchant Operations Controller

3 and Sr. Technical Analyst in the Fuels and Power Transaction Department, with positions

4 of increasing responsibility. These responsibilities included the start-up of the Merchant

5 Operations Center as an entity separate from Transmission functions, training of the

6 Merchant Operators in the implementation of various Tariffs and Contracts, performing

7 Day Ahead buying and selling, and as a team member for the purchase and

8 implementation of various software packages to complete transmission and contractual

9 bilateral settlements.

10 From 2004 through September of 2014, I was the Director of the Wholesale

11 Settlements section of Electric Supply and its predecessor departments. In that position, I

12 oversaw and was responsible for the implementation of settlements for the Markets

13 operated by Midcontinent Independent System Operator, Inc. (“MISO”), MISO

14 Transmission and bilateral contracts, the submission of various governmental reports,

15 implementation of Power Purchase Agreement settlements, the purchase and

16 implementation of various software packages, the calculation and submittal of Renewable

17 Energy Credit (“REC”) information to the Michigan Renewable Energy Certification

18 System (“MIRECS”), and assistance with the development of various contracts and rates.

19 In September 2014, I transferred to my current position in Electric Supply. In this

20 position, I am responsible for special projects and emerging business including the

21 re-entry of Consumers Energy as a Transmission Owner, Wholesale Distribution Service

22 Tariff implementation, miscellaneous contract negotiations, and the calculation of the

23 Transfer Price associated with renewable energy.

te0917-mjl 2 198 MARGARET J. LOWE DIRECT TESTIMONY 1 Q. Have you previously provided testimony before the Michigan Public Service

2 Commission (“MPSC” or the “Commission”)?

3 A. Yes. I provided direct testimony in:

4 • MPSC Case No. U-17095-R regarding the reconciliation of Biomass 5 Merchant Plants (“BMPs”) and non-MISO settlements for calendar year 2013; 6 and

7 • MPSC Case No. U-17317-R regarding the reconciliation of BMPs and 8 non-MISO settlements for calendar year 2014.

9 Q. What is the purpose of your direct testimony in this case?

10 A. My direct testimony provides the projected amount of new renewable capacity to be built

11 by the Company or secured under contract through August 2029, and a summary of the

12 Transfer Cost calculated to estimate the value of the capacity and energy associated with

13 the projected renewable energy generation.

14 Q. Are you sponsoring any exhibits as part of your testimony?

15 A. Yes. I am sponsoring:

16 Exhibit A-13 (MJL-1) Renewable Energy Capacity by Technology at Year 17 Beginning;

18 Exhibit A-14 (MJL-2) New Renewable Energy Capacity – Purchase Power 19 and Programs and Owned;

20 Exhibit A- 15 (MJL-3) Historical and Projected New Renewable Resource 21 Adequacy Capacity;

22 Exhibit A- 16 (MJL-4) New Renewable Historical and Projected Electric 23 Production;

24 Exhibit A-17 (MJL-5) Renewable Energy Plan Historical and Projected 25 Transfer Cost; and

26 Exhibit A-18 (MJL-6) Renewable Energy Plan Transfer Price Calculation.

te0917-mjl 3 199 MARGARET J. LOWE DIRECT TESTIMONY 1 RENEWABLE ENERGY CAPACITY

2 Q. What is the projected nameplate capacity of renewable generation resources through

3 2029?

4 A. In accordance with the Renewable Energy Plan (“RE Plan”) filing requirements approved

5 in MPSC Case No. U-18409, Exhibit A-13 (MJL-1), page 1, details the anticipated

6 Company portfolio of all purchased and owned renewable capacity through 2029 by

7 technology type at year beginning: wind; solar; hydroelectric; and biomass units by their

8 primary fuel type (anaerobic digester, wood, landfill gas, and solid waste).

9 Exhibit A-13 (MJL-1) excludes: (i) non-renewable energy portfolio units fueled

10 with gas, oil, coal, and nuclear, and (ii) energy only contracts as further discussed in

11 Company witness Keith G. Troyer’s testimony. The exhibit also excludes the forecasted

12 subscribed portion of the Company-owned Cross Winds Energy Park II (“Cross Winds

13 II”) facility to illustrate the Voluntary Large Customer Renewable Energy Pilot Program.

14 Exhibit A-13 (MJL-1), page 2, details the anticipated Company portfolio of all

15 purchased and owned renewable capacity through 2029 by program type. The exhibit

16 details both the anticipated, subscribed and unsubscribed, portions of the Company

17 programs or feed-in tariffs that are currently available.

18 Exhibit A-14 (MJL-2) provides details of the historical and forecasted nameplate

19 capacity of units that are projected to be on-line at year end as part of the Company’s RE

20 Plan. Renewable Energy Purchase Agreement (“REPA”) nameplate capacity is shown in

21 columns (b) through (q), Renewable Energy Program nameplate capacity in columns (r)

22 through (u), and the total nameplate capacity of those two categories in column (v).

23 Company-Owned Renewable Energy systems are shown in columns (w) through (ag), the

te0917-mjl 4 200 MARGARET J. LOWE DIRECT TESTIMONY 1 total nameplate capacity of Renewable Energy Owned systems in column (ah), and the

2 grand total nameplate capacity of all sources in column (ai).

3 Exhibit A-15 (MJL-3) outlines the Annual Average Resource Adequacy Capacity

4 for REPAs and approved Renewable Energy Programs in columns (b) through (v),

5 Company-Owned resources in Columns (w) through (ah), and the grand total in column

6 (ai). Company witness Troyer provides further discussion in his testimony on resource

7 capacity.

8 RENEWABLE ENERGY GENERATION

9 Q. How many Renewable Energy systems included in the Company’s RE Plan are expected

10 to produce renewable generation through 2029?

11 A. There are several categories of Renewable Energy systems that potentially can produce

12 renewable generation through 2029. They include:

13 1. Purchases of energy, capacity, and RECs through REPAs;

14 2. Provider Owned Renewable Energy Systems;

15 3. Renewable Energy Systems for which Commission authorization was 16 previously obtained; and

17 4. Provider Owned Renewable Energy Systems for which Commission 18 authorization is being sought in this filing.

19 The Transfer Price, as described and discussed further below, is only applied to:

20 (i) purchases of energy, capacity, and RECs through REPAs; (ii) production from

21 Provider Owned Renewable Energy systems; and (iii) production from Commission-

22 authorized Renewable Energy systems. In 2017, the Company anticipates costs

23 associated with: (i) 13 REPAs supplying energy, capacity, and RECs in accordance with

24 MCL 460.1047; (ii) four Provider Owned Renewable Energy resources supplying energy,

te0917-mjl 5 201 MARGARET J. LOWE DIRECT TESTIMONY 1 capacity, and RECs constructed in accordance with MCL 460.1047;1 and (iii)

2 Commission-authorized Renewable Energy systems that participate in either

3 Experimental Advanced Renewable Program (“EARP”)-Solar or EARP-Anaerobic

4 Digestion (“EARP-AD”). Costs for Renewable Energy systems for which recovery in

5 electric rates was approved as of October 6, 2008 (the effective date of Public Act 295

6 (“PA 295”)) are recovered as part of power supply costs and general rates and are not

7 considered in calculating Transfer Costs.

8 In response to Public Act 342 of 2016 (“PA 342”), effective April 20, 2017, the

9 Company is proposing to expand the Company-Owned Renewable Energy systems that

10 utilize wind and solar technology through the addition of up to:

11 • 175 MW of wind capacity by the end of 2019;

12 • 350 MW of wind capacity by the end of 2020;

13 • 50 MW of solar capacity in 2024; and

14 • 50 MW of solar capacity in 2025.

15 Company witness Teresa E. Hatcher discusses these additional wind and solar facilities in

16 greater detail.

1 In 2009, the Company completed an upgrade to the Hardy Hydro Unit 3. That upgrade meets some of the requirements to be considered as a new provider-owned RE system in accordance with former MCL 460.1033(1)(a). In accordance with the Commission Order in MPSC Case No. U-16300, costs associated with the upgrade will continue to be recovered through electric rates and deliveries associated with the upgrade will be treated as if delivered from a new provider-owned RE system.

te0917-mjl 6 202 MARGARET J. LOWE DIRECT TESTIMONY 1 TRANSFER COST

2 Q. Has the Company included a portion of the costs incurred in implementing its RE Plan in

3 the Company’s 2018 Power Supply Cost Recovery (“PSCR”) Plan proceeding?

4 A. Yes. MCL 460.1047(2)(b)(iv) provides that the Renewable Energy costs included in the

5 PSCR Plan shall be considered “a booked cost of purchased and net interchanged power

6 transactions under section 6j of 1939 Public Act 3, MCL 460.6j.” These are the costs

7 expected to be recovered through the PSCR mechanism that is discussed in the

8 Company’s RE Plan (referred to as the “Transfer Price” or the “Transfer Cost”).

9 Q. What is the Transfer Cost?

10 A. The Transfer Cost is the total cost that the Company will transfer to power supply costs

11 in accordance with MCL 460.1047(2)(b)(iv) that is associated with renewable generation

12 obtained in accordance with MCL 460.1047.

13 Q. How much renewable generation, for which the Transfer Price applies, is anticipated for

14 delivery through 2029?

15 A. Exhibit A-16 (MJL-4), “New Renewable Historical and Projected Electric Production,”

16 pages 1 through 3, provides details of the historical and projected annual on-peak,

17 off-peak, and total electric production of renewable generation that are applicable to the

18 Transfer Price. Page 1 summarizes the on-peak generation; page 2 shows the off-peak

19 generation; and page 3 calculates the total generation.

20 On each page, column (v) represents the total energy from REPAs, EARP-AD,

21 EARP-Solar, and the subscribed portion of the Solar Gardens Program; column (ah)

22 shows the unsubscribed portion of the Solar Gardens Program and the total energy from

23 Provider-Owned Renewable Energy systems; and column (ai) shows the total of all

te0917-mjl 7 203 MARGARET J. LOWE DIRECT TESTIMONY 1 MWhs of Transfer Price-applicable renewable generation. Only the anticipated

2 unsubscribed portion of the Cross Winds II facility is included in column (ah) in Exhibit

3 A-16 (MJL-4).

4 The forecasted generation shown in Exhibit A-16 (MLJ-4), pages 1 through 3, is

5 also summarized in Exhibit A-18 (MJL-6) which details the RE Plan Historical and

6 Projected Transfer Price calculation that is discussed later in this testimony.

7 Q. How is the expected energy from these facilities calculated?

8 A. For REPAs, the estimates of future energy production are based on the lesser of: (i) the

9 amount of on-peak and off-peak electric production needed to produce the maximum

10 amount of RECs allowed under the REPAs; and (ii) the annual average of previous

11 historical generation when the maximum amount of RECs allowed under the contracts

12 has not consistently been achieved. The forecasted EARP-Solar energy production is

13 based on the historical annual average production. EARP-AD production is estimated

14 using the aggregate maximum amount of energy allowed under the three individual

15 EARP-AD agreements. Company-owned generator production is estimated by the

16 Company’s forecast of generator performance.

17 Q. Please describe Exhibit A-17 (MJL-5), “Renewable Energy Plan Historical and Projected

18 Transfer Cost,” page 1

19 A. Exhibit A-17 (MJL-5), page 1, is the calculation of the total amount of historical

20 and projected actual transfer costs expected from renewable generation delivered through

21 2029. The projected REPA and approved Renewable Energy program transfer costs are

22 shown in columns (b) through (v). The projected transfer costs of Company-owned

23 facilities and the unsubscribed portion of the Solar Gardens project are shown in columns

te0917-mjl 8 204 MARGARET J. LOWE DIRECT TESTIMONY 1 (w) through (ah), and the grand total of all sources is shown in column (ai). This exhibit

2 details the amount expected to be recovered through the PSCR mechanism.

3 Q. Please describe Exhibit A-XX (MJL-5), “Transfer Cost Limits – New Renewable

4 Historical and Projected Total Cost & Levelized Cost of Energy Limits,” page 2.

5 A. Exhibit A-17 (MJL-5), page 2, outlines the maximum amount of Transfer Cost that can

6 be booked for each source. For REPAs and EARP-Solar, the Transfer Cost is limited to

7 the total amount paid to each counterparty for the energy, capacity, and RECs anticipated

8 to be booked.

9 For new Company-owned facilities, the Transfer Cost is limited to the total

10 calculated by multiplying the Levelized Cost of Energy for each facility by its total

11 generation.

12 Q. How were the cost estimates for REPAs and Renewable Energy Programs derived?

13 A. The capacity price is established in all of the REPAs except for the Company’s contract

14 with Apple Blossom Wind, LLC., formerly Geronimo Huron Wind, LLC., (“Apple

15 Blossom”) which does not have an explicit capacity component. To estimate the capacity

16 costs, I applied the forecast of the capacity credit shown in Exhibit A-15 (MJL-3) to the

17 corresponding contract capacity price for each month of expected operation.

te0917-mjl 9 205 MARGARET J. LOWE DIRECT TESTIMONY 1 The REC price is also established in all of the REPAs except for the contract with

2 Apple Blossom. To estimate the REC costs, I applied the forecast of RECs shown in

3 Exhibit A-8(YFK-3), page 1, to the contract REC prices to arrive at the cost for RECs.

4 The forecasted energy costs associated with REPA’s were determined by applying the

5 contract prices to the forecast of energy production shown in Exhibit A-16 (MJL-4).

6 The Company Power Purchase Agreements with Apple Blossom, EARP-Solar,

7 and EARP-AD Agreements provide for payments based solely on energy production.

8 The costs associated with Apple Blossom, EARP-Solar, and EARP-AD were determined

9 by applying the contract rate to the forecasted energy production shown in Exhibit A-16

10 (MJL-4).

11 SOLAR GARDENS PROGRAM 12 13 Q. Does the Company plan to continue recovering a portion of the expenses associated with

14 the Solar Gardens Program as Transfer Cost?

15 A. Yes. The Solar Gardens Program is comprised of two different portions: subscribed and

16 unsubscribed. For the subscribed portion, the Company recovers the costs to develop,

17 construct, operate, and maintain the facilities via the subscription payments from

18 participants. The Company calculates the projected Transfer Cost for the subscribed

19 portion utilizing the applicable Transfer Price schedule and the generation booked for the

20 subscribed portion of the program on a monthly basis. The annual transfer cost limit is

21 based on the total booked credits paid to subscribers for the year, similar to the REPAs

22 and EARP.

23 For the unsubscribed portion, the Company calculates the Transfer Cost utilizing

24 the applicable Transfer Price schedule and the generation booked for the unsubscribed

te0917-mjl 10 206 MARGARET J. LOWE DIRECT TESTIMONY 1 portion of the program on a monthly basis. The annual transfer cost limit is based on the

2 total of the Levelized Cost of Energy for the program multiplied by the generation

3 booked for the unsubscribed portion of the program.

4 TRANSFER PRICE

5 Q. What is the Transfer Price?

6 A. The Transfer Price is the price at which the cost of renewable energy is recovered

7 through the Company’s PSCR clause. The Transfer Price was defined in the

8 Commission’s December 4, 2008 Order in MPSC Case No. U-15800, pages 25 and 26.

9 On pages 25 and 26 of that Order, the Commission stated:

10 “4. Calculation of the incremental cost of compliance via the 11 transfer price to be recovered through the PSCR clause.

12 “A provider whose rates are regulated by the Commission shall 13 include in its renewable energy plan an estimate over the 20-year 14 plan-period of the revenues derived from the sale of energy and 15 capacity generated by renewable energy systems owned by the 16 provider. Energy and capacity produced by these systems may be 17 sold into the wholesale market, or may be sold directly to the 18 provider’s customers.

19 “Section 47 requires the Commission to annually set the price per 20 megawatt hour to be transferred to retail customers through the 21 regulated provider’s power supply cost recovery (PSCR) clause. 22 Section 49 requires the transfer price to be established in the 23 context of an annual renewable cost reconciliation proceeding. 24 Because the 2009 renewable energy plan proceeding will precede 25 the first annual renewable energy reconciliation, the plan filings 26 will need to estimate the transfer prices over the 20-year plan 27 period. All renewable engineering, procurement, and construction 28 contracts, or contracts for renewable energy systems that have been 29 developed by third parties for transfer of ownership to an electric 30 provider, that have been reviewed and approved by the 31 Commission in a particular year will have the transfer price 32 established as a floor for the lifecycle of the project. Provider- 33 owned projects will have transfer prices set in vintages. Doing so 34 ensures that the economic viability of projects that have been 35 committed to will not be jeopardized by transfer prices that change 36 in future years.

te0917-mjl 11 207 MARGARET J. LOWE DIRECT TESTIMONY 1 “In a renewable energy plan, PSCR transfer revenues are 2 subtracted from the total cost of compliance, as determined by 3 Section 47(2)(a). The transfer price is a primary determinant of the 4 incremental cost of compliance. The PSCR transfer price:

5 “(a) is unique to each provider;

6 “(b) reflects the value of long-term capacity and energy;

7 “(c) is not the current MISO market price of energy, but 8 may use historical MISO prices as a starting point for a 9 20-year projection of the value of renewable energy and 10 capacity;

11 “(d) need not be tied to the avoided price of a new 12 conventional coal-fired facility; and

13 “(e) other factors determined relevant by the 14 Commission.

15 “The transfer price may be separately calculated for differing 16 renewable technologies to reflect availability and the value of 17 capacity; e.g., the capacity value of a landfill gas facility may differ 18 from the capacity value of a wind farm.

19 “The PSCR transfer price may be adjusted by an hourly 20 distribution curve to yield an hourly price per megawatt hour for 21 the 8,760 hours per year.”

22 Q. How did the Company calculate the Transfer Price?

23 A. To determine the Transfer Price, the Company calculated the total Transfer Costs during

24 the period (as shown in column (h) of Exhibit A-18 (MJL-6)), and divided the Transfer

25 Cost by the corresponding Transfer Price applicable renewable energy quantity (as shown

26 in column (e) of Exhibit A-18 (MJL-6)) delivered during the period.

27 CONCLUSION

28 Q. Please summarize your direct testimony.

29 A. In this direct testimony, I have presented evidence related to the expected:

30 • Expenses to be incurred through August 2029 associated with the Company’s 31 RE Plan;

te0917-mjl 12 208 MARGARET J. LOWE DIRECT TESTIMONY 1 • Calculation of the Transfer Price associated with renewable energy generated 2 in accordance with the Company’s RE Plan through August 2029; and

3 • The new renewable capacity obtained by the Company through August of 4 2029.

5 Q. Does this complete your direct testimony?

6 A. Yes, it does.

te0917-mjl 13 209

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

SUPPLEMENTAL TESTIMONY

OF

MARGARET J. LOWE

ON BEHALF OF

CONSUMERS ENERGY COMPANY

March 2018

210 MARGARET J. LOWE SUPPLEMENTAL TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Margaret J. Lowe, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. In what capacity are you employed?

8 A. I am a Senior Business Support Analyst, Project Management, in the Wholesale

9 Settlements and Transactions Section of the Electric Supply Department.

10 Q. Are you the same Margaret J. Lowe who submitted direct testimony in this case?

11 A. Yes.

12 Q. Are you sponsoring exhibits with your supplemental testimony?

13 A. Yes. I am sponsoring the following exhibits:

14 Exhibit A-13 (MJL-1) (Revised) Renewable Energy Capacity by Technology 15 at Year Beginning;

16 Exhibit A-14 (MJL-2) (Revised) New Renewable Energy Capacity – 17 Purchase Power and Programs and Owned;

18 Exhibit A-15 (MJL-3) (Revised) Historical and Projected New Renewable 19 Resource Adequacy Capacity;

20 Exhibit A-16 (MJL-4) (Revised) New Renewable Historical and Projected 21 Electric Production;

22 Exhibit A-27 (MJL-7) Renewable Energy Plan Historical and 23 Projected Transfer Cost; and

24 Exhibit A-28 (MJL-8) Renewable Energy Plan Transfer Price 25 Calculation.

26 Q. Were these exhibits prepared by you or under your direct supervision?

27 A. Yes.

ste0318-mjl 1 211 MARGARET J. LOWE SUPPLEMENTAL TESTIMONY 1 Q. What is the purpose of your supplemental testimony?

2 A. The purpose of my supplemental testimony is to discuss the impact of changes and

3 corrections made in this supplemental filing of the Renewable Energy Plan (“RE Plan”)

4 to the projected amount of new renewable capacity to be built by the Company or

5 secured under contract through August 2029 and the Transfer Cost calculated to estimate

6 the value of the capacity and energy associated with the projected renewable energy

7 generation.

8 Q. Please describe the revisions made in the Company’s supplemental filing.

9 A. The Company made a number of minor revisions to its direct case as part of this

10 supplemental filing.

11 Circuit West Solar Modeling

12 As part of its RE Plan, the Company included a Research and Development proposal to

13 install and operate a distributed solar pilot project to develop, and establish, a process for

14 installing distributed solar within the electric distribution system, and integrating

15 distributed solar within existing infrastructure. This is commonly referred to as the

16 Circuit West Solar Project (“Circuit West”). Originally, this was modeled within the

17 Solar Gardens Program. This supplemental filing removes Circuit West from the Solar

18 Gardens Program and models it separately. This change requires updating the Levelized

19 Cost of Energy (“LCOE”) and Transfer Schedule attributable to the project. The LCOE

20 for Circuit West is modified to $486/MWh and the Transfer Price Schedule utilized was

21 modified to the Transfer Price Schedule proposed by the Michigan Public Service

22 Commission (“MPSC” or the “Commission”) Staff in Case No. U-18241.

ste0318-mjl 2 212 MARGARET J. LOWE SUPPLEMENTAL TESTIMONY 1 Solar Gardens Pilot Program Modeling

2 In Case No. U-17752, the Commission approved up to 10 MW for the Company’s Solar

3 Gardens Pilot Program. Currently, the Solar Gardens Pilot is 4 MW and the Company is

4 adding a 2 MW expansion in this RE Plan. Although part of the same program, in this

5 filing, the modeling was separated into two portions to provide clarity and insight into the

6 Program and costs.

7 During this modeling update, it was discovered that the Solar Gardens Pilot

8 Program generation was understated by 28,450 MWh due to a formula error that omitted

9 the projected 2 MW expansion of the Solar Gardens Pilot Program beginning in 2020.

10 This correction will increase the delivered energy by that amount as shown on

11 Exhibit A-16 (MJL-4) (Revised) and the Resource Adequacy Capacity as shown in

12 Exhibit A-15 (MJL-3) (Revised).

13 Proxy Wind Projects LCOE

14 As part of its RE Plan, the Company discussed its plans to add three 175 MW wind

15 projects – with commercial operation dates in 2019 and 2020 – with a projected LCOE of

16 $58.37. In this supplemental filing, the LCOE was reduced to $57.75 for these units as a

17 result of the projected effect of the federal Tax Cuts and Jobs Act of 2017 (“tax reform”),

18 as explained by Company witness Mark R. Bleckman.

19 Proxy Solar Projects LCOE

20 As part of its RE Plan, the Company proposed the addition of up to two 50 MW solar

21 facilities, both to commence operations between 2024 and 2025 – with a projected LCOE

22 of $135.10. As a result of the projected effect of the tax reform, the projected LCOE of

ste0318-mjl 3 213 MARGARET J. LOWE SUPPLEMENTAL TESTIMONY 1 these units was reduced to $126.35 and $126.71 respectively, as explained by Company

2 witness Bleckman in his supplemental testimony.

3 Proxy Wind and Solar Projects Transfer Price Schedules

4 In the original filing, the three proxy wind projects utilized a Transfer Price Schedule that

5 was approved by the Commission in Case No. U-18081 and the two proxy solar projects

6 used a Transfer Price Schedule that was approved by the Commission in Case

7 No. U-17631, similar to the Solar Gardens Program. In this supplemental filing, these

8 five proxy units are modeled using the most recent proposed Transfer Price Schedule in

9 Case No. U-18241.

10 In light of the specific changes detailed in this supplemental testimony, changes

11 made to projected renewable energy production will also affect the Renewable Energy

12 Credit projections, as explained by Company witness Yong F. Keyes.

13 Q. Does this complete your supplemental testimony?

14 A. Yes, it does.

ste0318-mjl 4 214

1 MS. UITVLUGT: Thank you. At this time I

2 would move to bind in the direct and supplemental

3 testimony of Company Witness Heather L. Rayl. Ms. Rayl

4 also sponsored Exhibits A-19, A-20, A-21, A-22, and A-29,

5 and I would move for their admission.

6 JUDGE THOITS: Are there any objections

7 to the binding in of this testimony or the admission of

8 these exhibits? (No response.)

9 Hearing none, the testimony of Witness

10 Heather Rayl is bound into the record, and Exhibits A-19,

11 A-20, A-21, A-22, A-29 are admitted.

12 (Testimony bound in.)

13 - - -

14

15

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 215

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

HEATHER L. RAYL

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017 216 HEATHER L. RAYL DIRECT TESTIMONY

1 Q. Please state your name and business address.

2 A. My name is Heather L. Rayl, and my business address is One Energy Plaza, Jackson,

3 Michigan 49201.

4 Q. By whom are you employed and in what capacity?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”) as a Senior Rate Analyst II in the Rates and Regulation Department.

7 Q. Would you please state your educational background?

8 A. In August 1993, I graduated from Michigan State University’s Program in Professional

9 Accounting and received both a Bachelor of Arts degree in Accounting and a Master’s

10 degree in Business Administration.

11 Q. Please describe your business experience.

12 A. From September 1993 to February 1995, I was employed as a Staff/Senior Auditor at

13 Ernst & Young, LLP – , Michigan. My responsibilities included the planning,

14 execution, and completion of financial statements and compliance audits for a variety of

15 health care and financial service clients. In February 1995, I joined M-CARE, a

16 non-profit Health Maintenance Organization and a wholly-owned subsidiary of the

17 University of Michigan, as a Senior Financial Analyst in the Finance Department. My

18 responsibilities included financial statement preparation and analysis, general ledger

19 analysis, special projects, and preparation of M-CARE’s incurred but not recorded claim

20 liability.

21 In April 2004, I joined Consumers Energy as a Senior Accounting Analyst in

22 Accounting Research and External Financial Reporting. My responsibilities included the

23 research and documentation of numerous technical accounting topics for departmental

te0917-hlr 1 217 HEATHER L. RAYL DIRECT TESTIMONY

1 clients, including United States Generally Accepted Accounting Principles (“GAAP”),

2 United States Securities and Exchange Commission (“SEC”), and utility/regulatory

3 issues. In October 2005, I joined FinCor Holdings, Inc. (“FinCor”), a medical

4 malpractice insurance company, as a Senior Financial Analyst. My primary

5 responsibilities included the management and coordination of the monthly close process

6 and the preparation of GAAP and statutory financial statements and disclosures,

7 including Regulation S-X compliant financials and Management’s Discussion and

8 Analysis of Financial Condition and Results of Operations. In September 2007, I was

9 promoted to External Financial Reporting Manager where my primary responsibility was

10 the preparation of FinCor’s Form S-1.

11 In October 2009, I rejoined Consumers Energy as a Senior Accounting Analyst in

12 the Accounting Policy and External Financial Reporting Section. My responsibilities

13 included the preparation and documentation of numerous disclosures in the Company’s

14 Forms 10-K and 10-Q, with a primary focus in regulatory matters and business outlook. I

15 was also responsible for the research and documentation of technical accounting topics

16 for departmental clients, including United States GAAP, SEC, and regulatory issues. In

17 March 2013, I was promoted to the position of Senior Rate Analyst II in the Revenue

18 Requirements and Analysis Section of the Rates and Regulation Department. In

19 December of 2016, I joined the Pricing and Rate Design Section of the Rates and

20 Regulation Department as a Senior Rate Analyst II.

21 Q. What are your duties as a Senior Rate Analyst II?

22 A. My current responsibilities include electric and gas rate designs, reconciliation filings,

23 analyses for Senior Management, and customer specific rate analyses.

te0917-hlr 2 218 HEATHER L. RAYL DIRECT TESTIMONY

1 Q. Have you previously filed testimony with the Michigan Public Service Commission

2 (“MPSC” or the “Commission”)?

3 A. Yes. I have sponsored testimony in the following cases:

Case Number Description

U-16924-R 2012-2013 GCR Reconciliation;

U-17133-R 2013-2014 GCR Reconciliation;

U-17334 2014-2015 GCR Plan;

U-17334-R 2014-2015 GCR Reconciliation;

U-17693 2015-2016 GCR Plan;

U-17693-R 2015-2015 GCR Reconciliation;

U-17943 2016-2017 GCR Plan;

U-18151 2017-2018 GCR Plan; and

U-18367 Gas Revenue Decoupling Reconciliation.

4 Q. What is the purpose of your direct testimony in this case?

5 A. I am sponsoring the development of the Renewable Energy Plan (“RE Plan”) surcharges

6 needed to collect the Company’s revised Incremental Cost of Compliance (“incremental

7 costs”) in accordance with 2008 Public Act (“PA”) 295 and as amended by the 2016

8 amendatory act, PA 342.

9 Q. Are you sponsoring any exhibits as part of your direct testimony?

10 A. Yes, I am presenting the following exhibits:

11 Exhibit A-19 (HLR-1) Calculation of the Revised Renewable Energy Plan 12 Rate Design Target ($000);

13 Exhibit A-20 (HLR-2) Revised Tariff Sheet A-031.00-Technical Terms 14 and Abbreviations;

te0917-hlr 3 219 HEATHER L. RAYL DIRECT TESTIMONY

1 Exhibit A-21 (HLR-3) Revised Tariff Sheet C-44.00-Rule C10 Renewable 2 Energy Plan (REP); and

3 Exhibit A-22 (HLR-4) Revised Tariff Sheet C-48.62-Rule C10.5 Pilot 4 Solar Program.

5 Q. Were these exhibits prepared by you or under your supervision?

6 A. Yes.

7 Q. Please identify the proposed revenue target needed to collect the customer portion of

8 Consumers Energy’s incremental costs.

9 A. Consumers Energy witness Marc R. Bleckman is sponsoring incremental costs of

10 $159.2 million to fulfill the requirements of PA 342. In comparison, the RE Plan

11 surcharge revenues collected to date, as well as the expected interest accrued on reserve

12 funds accumulated in advance of expenditures, reduce the revenue design target to $0, as

13 reflected on line 24, column (c), of Exhibit A-19 (HLR-1). At this level, the revised

14 design target would result in a regulatory liability of $68 million at the end of the plan

15 period as reflected in the exhibit and direct testimony of Company witness Bleckman.

16 Q. What is the Company’s proposal relative to the RE Plan surcharge rate design?

17 A. The Company proposes to maintain the current RE Plan surcharge at $0 for all rate

18 classes.

19 Q. What is the current regulatory liability balance?

20 A. The regulatory liability balance is projected to be $62.6 million at year-end 2017 as

21 reflected in the exhibit and direct testimony of Company witness Bleckman.

te0917-hlr 4 220 HEATHER L. RAYL DIRECT TESTIMONY

1 Q. Please describe Exhibits A-20 (HLR-2), A-21 (HLR-3), and A-22 (HLR-4).

2 A. Exhibit A-20 (HLR-2) shows proposed tariff sheet number A-031.00-Technical Terms

3 and Abbreviations. This tariff sheet lists the technical terms and abbreviations associated

4 with the Company’s RE Plan, among other things.

5 Exhibit A-21 (HLR-3) shows proposed tariff sheet number C-44.00-Rule C10 Renewable

6 Energy Plan (REP). This tariff sheet lists rules and regulations specific to the Company’s

7 RE Plan.

8 Exhibit A-22 (HLR-4) shows proposed tariff sheet number C-48.62-Rule C10.5 Pilot

9 Solar Program. This tariff sheet discusses the Company’s Pilot Solar Program. These

10 changes are sponsored by Company witness Teri L. VanSumeren.

11 Q. Are you proposing any language changes to tariff sheet numbers A-031.00, C-44.00, and

12 C-48.62?

13 A. Yes. I have proposed several changes to revise the terminology used in Sheets A-031.00,

14 C-44.00, and C-48.62. These proposed changes incorporate the amendments associated

15 with PA 342 as it applies to the Company’s Technical Terms and Abbreviations,

16 RE Plan, and Pilot Solar Program. The proposed changes are shown using strikethroughs

17 and insertions on Exhibits A-20 (HLR-2), A-21 (HLR-3), and A-22 (HLR-4).

18 Q. Does this conclude your direct testimony?

19 A. Yes.

te0917-hlr 5 221

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

SUPPLEMENTAL TESTIMONY

OF

HEATHER L. RAYL

ON BEHALF OF

CONSUMERS ENERGY COMPANY

March 2018 222 HEATHER L. RAYL SUPPLEMENTAL TESTIMONY

1 Q. Please state your name and business address.

2 A. My name is Heather L. Rayl, and my business address is One Energy Plaza, Jackson,

3 Michigan 49201.

4 Q. By whom are you employed and in what capacity?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”) as a Senior Rate Analyst II in the Rates and Regulation Department.

7 Q. Are you the same Heather L. Rayl who submitted direct testimony in this case?

8 A. Yes.

9 Q. What is the purpose of your supplemental testimony in this case?

10 A. I am sponsoring the development of the surcharges needed in order to collect the

11 Company’s revised Incremental Cost of Compliance (“incremental costs”) as a result of

12 changes proposed in this supplemental filing of the Renewable Energy Plan (“RE Plan”).

13 Q. Are you sponsoring any exhibits as part of your supplemental testimony?

14 A. Yes, I am presenting the following exhibit:

15 Exhibit A-29 (HLR-5) Calculation of the Revised Renewable Energy Plan 16 Rate Design Target ($000).

17 Q. Was this exhibit prepared by you or under your supervision?

18 A. Yes.

19 Q. Why is it necessary to revise the RE Plan rate design target originally presented in

20 Exhibit A-1 (HLR-1)?

21 A. The revisions to the amounts in Exhibit A-1 (HLR-1), as shown on Exhibit A-29

22 (HLR-5), reflect the change in total cost of the Company’s RE Plan resulting from the

23 federal Tax Cuts and Jobs Act of 2017, as discussed in the supplemental testimony of

24 Consumers Energy witness Marc R. Bleckman.

ste0318-hlr 1 223 HEATHER L. RAYL SUPPLEMENTAL TESTIMONY

1 Q. Please identify the proposed supplemental revenue target needed to collect the customer

2 portion of Consumers Energy’s incremental costs.

3 A. Company witness Bleckman is sponsoring incremental costs of $106.6 million to fulfill

4 the requirements of Public Act 342 of 2016. The RE Plan surcharge revenues collected

5 to date, as well as the expected interest accrued on reserve funds accumulated in advance

6 of expenditures, reduce the revenue design target to $0, as reflected on line 24,

7 column (c), of Exhibit A-29 (HLR-5). At this level, the revised design target would

8 result in a regulatory liability of $128.1 million at the end of the plan period as reflected

9 in the exhibit and supplemental testimony of Company witness Bleckman.

10 Q. What is the Company’s proposal relative to the RE Plan surcharge rate design as a result

11 of this supplemental filing?

12 A. The Company proposes to maintain the current RE Plan surcharge at $0 for all rate

13 classes.

14 Q. Are there any changes to the current regulatory liability balance as a result of the changes

15 proposed in this supplemental filing of the RE Plan?

16 A. No. The projected regulatory liability balance is still to be $62.7 million at year-end

17 2017, as reflected in the exhibit and supplemental testimony of Company witness

18 Bleckman.

19 Q. Does this conclude your supplemental testimony?

20 A. Yes.

ste0318-hlr 2 224

1 MS. UITVLUGT: Thank you. I would

2 further move for the admission of the direct and rebuttal

3 testimony of Keith G. Troyer, and Mr. Troyer did not

4 sponsor any exhibits in this proceeding.

5 JUDGE THOITS: Are there any objections

6 to the binding in of this testimony? (No response.)

7 Hearing none, the testimony of Witness

8 Keith Troyer is bound into the record.

9 (Testimony bound in.)

10 - - -

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 225

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

KEITH G. TROYER

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017 226 KEITH G. TROYER DIRECT TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Keith G. Troyer, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. In what capacity are you employed?

8 A. I am a Senior Engineer in the Transactions and Wholesale Settlements, Electric Contract

9 Strategy Section of the Energy Supply Operations Department.

10 QUALIFICATIONS

11 Q. Please describe your educational background and business experience.

12 A. I received the degree of Bachelor of Science in Engineering with a specialty in Civil

13 Engineering from Michigan State University in 2008. In 2015, I became a Registered

14 Professional Engineer in the State of Michigan. I am currently pursuing a Master of

15 Business Administration (“MBA”) through Michigan State University’s Executive MBA

16 Program and expect to graduate in March 2018.

17 In July 2009, I joined Consumers Energy as an Electric System Owner at the

18 Battle Creek Service Center. In January 2011, I accepted a position as an Engineer in the

19 Transactions and Resource Planning section of Energy Supply. In that role, I was

20 responsible for administration and coordination of the Company’s Experimental

21 Advanced Renewable Program (“EARP”)-Solar, part of the Company’s Renewable

22 Energy Plan (“RE Plan”). I was involved in the development and implementation of the

23 EARP expansion in 2011. In June 2013, I began taking on additional responsibilities

te0917-kgt 1 227 KEITH G. TROYER DIRECT TESTIMONY 1 associated with the RE Plan, including the calculation of the Transfer Price associated

2 with RE and capacity and the tracking of Renewable Energy Credits (“RECs”). In 2014,

3 I was also responsible for supervision of the implementation of the EARP-Anaerobic

4 Digestion (“EARP-AD”) pilot. In December 2016, I transitioned to a new role where my

5 supervisory and direct responsibilities include administering Power Purchase Agreements

6 (“PPAs”), issuing solicitations for energy and capacity, and managing the Company’s

7 capacity position with the Midcontinent Independent System Operator, Inc. (“MISO”).

8 Q. Have you previously provided testimony before the Michigan Public Service

9 Commission (“MPSC” or the “Commission”)?

10 A. Yes. I provided testimony in:

11 • MPSC Case No. U-17095-R (direct), the Company’s 2013 Power Supply Cost 12 Recovery (“PSCR”) Reconciliation Case, regarding 2013 RE Plan expenses 13 recovered through PSCR;

14 • MPSC Case No. U-17631 (direct), the Company’s 2013 RE Reconciliation 15 Case, regarding 2013 RE Plan expenses recovered through PSCR, RE 16 compliance, and new renewable capacity compliance;

17 • MPSC Case No. U-17317-R (direct), the Company’s 2014 PSCR 18 Reconciliation Case, regarding 2014 RE Plan expenses recovered through 19 PSCR;

20 • MPSC Case No. U-17792 (direct and rebuttal), the 2015 biennial review of 21 the Company’s RE Plan, regarding RE Plan expenses recovered through the 22 PSCR, renewable energy compliance, new renewable capacity compliance, 23 and renewable energy programs;

24 • MPSC Case No. U-17803 (direct), the Company’s 2014 Renewable Cost 25 Reconciliation Case, regarding 2014 RE Plan expenses recovered through 26 PSCR, renewable energy compliance, and new renewable capacity 27 compliance;

28 • MPSC Case No. U-17678-R (direct), the Company’s 2015 PSCR 29 Reconciliation Case, regarding 2015 RE Plan expenses recovered through 30 PSCR;

31 • MPSC Case No. U-17918 (rebuttal), the Company’s 2016 PSCR Plan and

te0917-kgt 2 228 KEITH G. TROYER DIRECT TESTIMONY 1 5-year forecast, regarding the impacts of net electric metering on energy 2 supply;

3 • MPSC Case No. U-18081 (direct and revised), the Company’s 2015 4 Renewable Reconciliation case, regarding 2015 RE Plan expenses recovered 5 through PSCR, renewable energy compliance, and new renewable capacity 6 compliance;

7 • MPSC Case No. U-18090 (direct, rebuttal, reopened rebuttal, and second 8 reopened rebuttal), the Company’s 2016 Public Utilities Regulatory Policy 9 Act case to establish a method and calculation for avoided costs;

10 • MPSC Case No. U-17918-R (direct), the Company’s 2016 PSCR 11 Reconciliation Case, regarding 2016 RE Plan expenses recovered through 12 PSCR; and

13 • MPSC Case No. U-18241 (direct), the Company’s 2016 Renewable Energy 14 Cost Reconciliation Case, regarding 2016 RE Plan expenses recovered 15 through PSCR.

16 PURPOSE OF DIRECT TESTIMONY

17 Q. What is the purpose of your direct testimony?

18 A. My direct testimony will address: (i) the Company’s Request for Proposal (“RFP”)

19 process for new resources; (ii) the cost of new renewable energy resources included in

20 this RE Plan; (iii) the treatment of the capacity and RECs from PPAs in this RE Plan; and

21 (iv) the risks that may drive performance to vary, associated with these topics.

22 Q. Are you sponsoring any exhibits?

23 A. No.

24 RFP PROCESS

25 Q. Are you familiar with the Company’s RFP process to obtain new resources?

26 A. Yes. My responsibilities include direct involvement in, and oversight of, some RFPs that

27 the Company issues to obtain new generation resources, long-term PPAs, as well as

28 procuring energy and capacity through reverse auctions.

te0917-kgt 3 229 KEITH G. TROYER DIRECT TESTIMONY 1 Q. Has the Company issued any RFPs for new renewable resources in 2017?

2 A. Yes. On June 5, 2017, the Company issued a solicitation for proposals of new wind or

3 solar resources in preparation of this RE Plan filing. This RFP was later amended to

4 allow battery storage to be included as an option in the respondant’s proposal.

5 Q. Please explain the June 5, 2017 RFP.

6 A. As part of the Company’s revised RE Plan submitted in this proceeding, the Company is

7 proposing to increase its wind and solar generation. The RFP sought to purchase up to

8 450 MW of wind generation and up to 100 MW of solar generation within Michigan.

9 Wind projects were requested to be between 100 MW and 200 MW of nameplate

10 capacity with solar projects between 10 MW and 100 MW. When the RFP was amended,

11 respondants were permitted to include battery storage with their wind and solar proposals

12 at their option. Storage was not required for a proposal to be considered.

13 Q. What is the status of the RFP at the time of this filing?

14 A. Currently, the Company is completing due diligence reviews on the proposals that were

15 received by the July 28, 2017 deadline. Preliminary economic evaluations have been

16 completed on many of the projects to provide supporting cost information projected for

17 the three wind projects and two solar projects included in this filing. By using

18 preliminary cost information from the RFP for wind and solar projects, the Company is

19 utilizing reasonable cost projections in this RE Plan based on the most recent available

20 information.

21 COST OF NEW RENEWABLE RESOURCES

22 Q. What costs were utilized from the RFP for modeling the future wind and solar facilities?

23 A. Based on information provided from the wind proposals, the Company expects each

te0917-kgt 4 230 KEITH G. TROYER DIRECT TESTIMONY 1 175 MW wind facility to cost $1,560 per kW in capital expenditures and achieve a

2 capacity factor of approximately 26.5%. It is anticipated that the three proposed wind

3 facilities will receive 100% of the production tax credit available. Using this

4 information, the Company has projected an expected levelized cost of energy of

5 $58.37 per MWh for each 175 MW wind facility.

6 Based on information obtained from the solar proposals, the Company expects

7 each 50 MW solar facility to cost $1,572 per kW in capital expenditures and achieve a

8 capacity factor of approximately 17.0%. Using this information, the Company has

9 projected a levelized cost of energy of $135.10 per MWh for each 50 MW solar facility.

10 TREATMENT OF PPAS

11 Q. Please describe the Company’s renewable energy PPAs.

12 A. The Company has many long-term PPAs with renewable resources that are represented in

13 this RE Plan. As discussed in the direct testimony of Company witness Margaret J.

14 Lowe, as part of the RE Plan, the Company currently has 13 Renewable Energy Purchase

15 Agreements (“REPAs”) with suppliers, three PPAs with customers participating in the

16 EARP-AD, and 379 PPAs with customers participating in the EARP-Solar. These

17 REPAs, and the EARP-AD and EARP-Solar contracts, were approved in the most recent

18 RE Plan in MPSC Case No. U-17792. The Company also has six PPAs with suppliers as

19 part of its Renewable Resource Program (“RRP”), also known as the Green Generation

20 Program. The Company has 281 PPAs with renewable facilities administered under the

21 Public Utility Regulatory Policies Act of 1978 (“PURPA”) for the purchase of energy

1 The PPAs with two of these suppliers expired on July 31, 2017. In accordance with the Commission’s July 12, 2017 Order in MPSC Case No. U-17891, the Company continues to make payments to the suppliers under terms of the contracts that were in place at that time.

te0917-kgt 5 231 KEITH G. TROYER DIRECT TESTIMONY 1 and capacity. Consumers Energy has two PPAs in effect with renewable resources for

2 the purchase of energy only. Additionally, the Company has a PPA for capacity and

3 energy with Boyce Hydro Power, LLC (“Boyce”) that was executed prior to the

4 implementation of PURPA.

5 Q. How is the nameplate capacity associated with these PPAs represented in this RE Plan?

6 A. The nameplate capacity associated with the REPAs, EARP-AD, and EARP-Solar are part

7 of the most recently-approved RE Plan. They are included in Exhibit A-13 (MJL-1),

8 page 1, rows 3, 6, 10, 19, and 28 through the term of each individual agreement. The

9 nameplate capacity associated with the EARP-AD and EARP-Solar are also shown in

10 Exhibit A-13 (MJL-1), page 2, rows 4 through 6. The nameplate capacity associated with

11 the RRP PPAs is included in Exhibit A-13 (MJL-1), page 1, row 31 and in Exhibit A-13

12 (MJL-1), page 2, row 13 through the term of each individual agreement. The nameplate

13 capacity associated with the PURPA-based PPAs is included in Exhibit A-13 (MJL-1),

14 page 1, rows 13, 16, 19, and 28 and in Exhibit A-13 (MJL-1), page 2, row 1. The

15 nameplate capacity of the energy-only contracts is not shown in this RE Plan because the

16 Company is not purchasing capacity under those contracts. The nameplate capacity of

17 the Boyce PPA is included in Exhibit A-13 (MJL-1), page 1, row 28.

18 Q. Does the Company expect to execute new PPAs with any renewable resource?

19 A. Yes. In accordance with PURPA, the Company has an obligation to purchase energy and

20 capacity from qualifying facilities up to 20 MW in size that are capable of delivering

21 such energy and capacity to the Company. As discussed in the Company’s 2018 PSCR

22 Plan case, the Company expects that many of the contracts previously discussed will

23 enter into new PURPA-based PPAs at the termination of their existing contracts. The

te0917-kgt 6 232 KEITH G. TROYER DIRECT TESTIMONY 1 nameplate capacity expected from these new PURPA-based PPAs, as included in the

2 Company’s 2018 PSCR Plan case, is shown on Exhibit A-13 (MJL-1), page 1, rows 13,

3 16, 19, and 28 and in Exhibit A-13 (MJL-1), page 2, row 1.

4 Q. How are the RECs associated with the Company’s renewable PPAs represented in this

5 RE Plan?

6 A. The forecast of RECs associated with the REPAs, EARP-AD, and EARP-Solar are part

7 of the most recently approved RE Plan. They are included in Exhibit A-12 (YFK-7),

8 rows 3, 6, 10, 19, 28, and 31 through the term of each individual agreement. The forecast

9 of RECs from the EARP-AD and EARP-Solar programs are also included in Exhibit

10 A-12 (YFK-7), rows 39 through 41. The Company does not forecast receipt of RECs

11 from RRP PPAs for use to comply with the Renewable Energy Credit Portfolio Standard

12 discussed by Company witness Yong F. Keyes. The RECs procured from RRP PPAs are

13 used to comply with the Company’s Green Generation Program. The Company’s RE

14 Plan only obtains surplus Green Generation RECs through MPSC approval in its

15 Renewable Energy Cost Reconciliation cases. The forecast of RECs entitled to the

16 Company that is associated with the PURPA-based PPAs is included in Exhibit A-12

17 (YFK-7), rows 10, 13, 16, 19, 28, 31, and 36 through the term of the agreements. The

18 Company does not receive any RECs from the energy-only PPAs, therefore, none are

19 shown in this RE Plan. The Company is not entitled to the RECs produced by Boyce,

20 therefore, none are shown in this RE Plan.

te0917-kgt 7 233 KEITH G. TROYER DIRECT TESTIMONY 1 Q. Does the Company expect to receive RECs from any new PURPA-based PPAs

2 previously discussed?

3 A. No. For existing PURPA PPAs, the Company is entitled to 80% of the RECs produced

4 as provided in MCL 460.1035(1)(a). In accordance with the Commission’s May 31,

5 2017 Order in MPSC Case No. U-18090, Consumers Energy is not entitled to any RECs

6 that are produced by facilities with which the Company executes a new PURPA-based

7 PPA.

8 GREEN GENERATION PROGRAM

9 Q. Do any of the costs included in this filing relate to the RRP PPAs?

10 A. No. All costs associated with the Company’s RRP PPAs, are addressed in accordance

11 with the Commission’s April 28, 2005 Order in MPSC Case No. U-14471 and are not

12 included in this plan filing.

13 Q. Do any of the costs included in this filing relate to the PURPA-based PPAs, energy-only

14 PPAs, or Boyce?

15 A. No. The expenses related to PURPA-based PPAs, energy-only PPAs, and Boyce are

16 recovered through the PSCR.

17 RISKS TO PERFORMANCE

18 Q. Do you believe there are any risks associated with topics addressed in your direct

19 testimony?

20 A. Yes.

te0917-kgt 8 234 KEITH G. TROYER DIRECT TESTIMONY 1 Q. Please explain these risks to performance as they relate to the RFP that you have

2 presented in your direct testimony.

3 A. The costs associated with the preliminary RFP results have been used to allocate costs

4 and performance expectations for the potential inclusion of three new wind facilities and

5 two new solar facilities included in this RE Plan. The actual costs and performance of

6 any specific project that will be built or acquired in the future as part of this RE Plan will

7 based on the specific characteristic of that individual generation resource. Since the RFP

8 evaluations and project selection have not been finalized at this time, the Company is

9 using the best available information in its forecast. The final evaluations and project

10 selection may result in changes to the projected cost, schedule, and performance of these

11 facilities. The capacity factors assumed for the new facilities are an input for the

12 projected production tax credit and transfer cost, as discussed by Company witness

13 Marc R. Bleckman.

14 Q. Please explain any risks to performance as they relate to the PPAs that you have

15 presented in your direct testimony.

16 A. Many of the Company’s PPAs include annual performance requirements on behalf of the

17 supplier. In accordance with the terms of each individual PPA, if the performance

18 requirements are not met, the Company has the ability to either: (i) terminate the PPA or

19 (ii) reduce the rates paid to the supplier in later billing periods. Several of the Company’s

20 PPAs allow the Company to terminate the agreement if the seller fails to deliver energy

21 for an extensive period of time. Even with PPA performance obligations, there will be

22 levels of variability year-to-year from generation resources as a result of weather,

23 economics, and fuel availability. The performance of new PURPA-based PPAs,

te0917-kgt 9 235 KEITH G. TROYER DIRECT TESTIMONY 1 energy-only PPAs, and Boyce are not expected to impose any risk on this RE Plan since

2 there are no costs recovered through the RE Plan, and they are not expected to provide

3 RECs to meet the Company’s compliance obligations.

4 SUMMARY

5 Q. Please summarize your direct testimony.

6 A. My direct testimony explains: (i) the Company’s RFP process for new resources;

7 (ii) how the preliminary RFP results were utilized to inform this RE Plan; (iii) the cost of

8 new renewable energy resources included in this RE Plan; and (iv) the treatment of the

9 capacity and RECs associated with PPAs in this RE Plan.

10 Q. Does this complete your direct testimony?

11 A. Yes, it does.

te0917-kgt 10 236

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

REBUTTAL TESTIMONY

OF

KEITH G. TROYER

ON BEHALF OF

CONSUMERS ENERGY COMPANY

May 2018

237 KEITH G. TROYER REBUTTAL TESTIMONY 1 Q. Please state your name and business address.

2 A. My name is Keith G. Troyer, and my business address is 1945 West Parnall Road,

3 Jackson, Michigan 49201.

4 Q. By whom are you employed?

5 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

6 “Company”).

7 Q. Are you the same Keith G. Troyer who previously provided testimony in this proceeding?

8 A. Yes.

9 PURPOSE OF REBUTTAL TESTIMONY

10 Q. What is the purpose of your rebuttal testimony in this proceeding?

11 A. The purpose of my rebuttal testimony is to address the direct testimonies of:

12 (i) Merideth A. Hadala, who submitted testimony on behalf of the Michigan Public

13 Service Commission (“MPSC” or the “Commission”) Staff (“Staff”); (ii) William F.

14 Stockhausen, who submitted testimony on behalf of the Independent Power Producers

15 Coalition of Michigan (“IPPC”); (iii) Thomas V. Vine, who submitted testimony on

16 behalf of Viking Energy of McBain, LLC, Viking Energy of Lincoln, LLC, and Hillman

17 Power Company, LLC (“BMPs”); (iv) Casey James May, who submitted testimony on

18 behalf of Cypress Creek Renewables, LLC (“Cypress Creek”); and (v) Betsy Engelking,

19 who submitted testimony on behalf of Geronimo Energy.

20 Specifically, my rebuttal testimony will address the following:

21 • Ms. Hadala’s conclusions regarding treatment of renewable capacity and the 22 Company’s Renewable Energy Plan (“RE Plan”) and the capacity of 23 Qualifying Facilities (“QFs”) related to the Public Utility Regulatory Policies 24 Act of 1978, as amended (“PURPA”);

25 • Mr. Stockhausen’s position regarding the use of new Power Purchase 26 Agreements (“PPAs”);

rte0518-kgt 1 238 KEITH G. TROYER REBUTTAL TESTIMONY

1 • Mr. Vine’s positions regarding (i) the advantages of utilizing existing 2 resources and (ii) contract renewal of BMP PPAs;

3 • Mr. May’s proposal to utilize Renewable Energy Credits (“RECs”) from QFs; 4 and

5 • Ms. Engelking’s conclusions regarding the relationship between PURPA and 6 the Company’s RE Plan.

7 Q. Are you sponsoring any exhibits with your rebuttal testimony?

8 A. No.

9 STAFF’S POSITION

10 Q. Staff witness Hadala states on page 5 of her direct testimony that Staff does not believe

11 this case should address whether or not the Company should make the renewable

12 capacity proposed in this RE Plan available to QFs. Do you agree with Ms. Hadala

13 regarding this position?

14 A. Yes. The Company’s PURPA obligations are being addressed in other ongoing cases and

15 are not the focus of this RE Plan. The Company’s RE Plan focuses on RECs, and the

16 future resources that the Company has included in this filing to provide enough RECs

17 that will allow the Company to meet the Renewable Energy Credit Portfolio Standards

18 (“RPS”). The primary driver for adding the future wind and solar resources in this RE

19 Plan proceeding is for the production of RECs. The Company’s plans for future energy

20 and capacity needs will be addressed in its upcoming Integrated Resource Plan (“IRP”)

21 that is expected to be filed in June.

rte0518-kgt 2 239 KEITH G. TROYER REBUTTAL TESTIMONY 1 IPPC’S POSITION

2 Q. IPPC witness Stockhausen states on page 5 of his direct testimony, “The refusal to fully

3 evaluate REPAs in the current 2018 RE Plan is extremely detrimental to customers in

4 several regards and does not meet the Legislature’s intent in PA 342.” Do you agree with

5 Mr. Stockhausen?

6 A. No. I do not agree with IPPC’s conclusion. There are two methods to obtain approval of

7 PPAs for energy, capacity, and RECs in an RE Plan. The Company can enter into these

8 PPAs through a competitive solicitation or an unsolicited proposal that provides

9 opportunities that may not otherwise be available or commercially practical. Most of the

10 existing contracts included in the Company’s RE Plan were competitively bid. Based on

11 estimated Levelized Cost of Energy (“LCOE”) from the competitively bid wind proxy

12 plants included in this filing, it seems unlikely that the renewable energy generators with

13 existing PPAs would choose to pursue new PPA contracts in the RE Plan. Most of the

14 expiring RE Plan contract facilities will be eligible to pursue PURPA-based contracts at a

15 higher rate than the LCOE of wind included in this filing. It is not reasonable to assume

16 that the existing contracts would choose to compete with new wind in the RE Plan

17 because a more lucrative option is expected through PURPA.

18 Q. Do you agree with Mr. Stockhausen that the Company “is forgoing opportunities to

19 create a less costly, more diversified, and more reliable RE Plan”?

20 A. No, I do not agree with Mr. Stockhausen. With regard to the existing contracts under

21 discussion, the Company can only rely on them for RECs through the term of the existing

22 contracts. Since these contracts are being entered into under PURPA, in accordance with

23 the Commission’s May 31, 2017 Order in Case No. U-18090, the Company is not entitled

rte0518-kgt 3 240 KEITH G. TROYER REBUTTAL TESTIMONY 1 to the RECs under these contracts. If IPPC is suggesting that these are to be REPAs as

2 contemplated under the RE Plan, there is no current indication to the Company that the

3 counterparties with expiring agreements are willing to negotiate contracts at rates lower

4 than what is currently projected for the 525 MW of wind that the Company is proposing

5 to build in this RE Plan. Additionally, the 100 MW of solar build included in 2024 and

6 2025 will increase the diversity of the RE supply for which Mr. Stockhausen is

7 advocating.

8 Q. Are there other opportunities for contracts to be entered into with IPPC’s members?

9 A. Yes. As Mr. Stockhausen points out, IPPC’s members are comprised of renewable

10 energy generators, each with a nameplate of no more than 20 MW. Most of IPPC’s

11 members, with the exception of Elk Rapids Hydroelectric Power LLC, and Boyce Hydro

12 Power LLC, currently have long-term PURPA contracts based on the Company’s avoided

13 costs. The Company has an obligation under PURPA to execute new contracts with QFs

14 less than 20 MW in size at the Company’s new avoided costs, which are currently stayed

15 in Case No U-18090. It is unlikely that IPPC’s members will be willing to sign new

16 contracts at any rates less than what the Company will be obligated to pay them under the

17 PURPA obligation. Even though these contracts are not the lowest cost option, the

18 Company’s customers will be required to pay the avoided cost rates set by the

19 Commission to IPPC’s members regardless of whether or not they are included in the RE

20 Plan.

rte0518-kgt 4 241 KEITH G. TROYER REBUTTAL TESTIMONY 1 Q. If the Company is obligated to buy from IPPC’s members, why has the Company not

2 included their RECs in its RE Plan?

3 A. The Company currently receives 80% of the RECs from existing PURPA-based

4 contracts. However, in accordance with the Commission’s May 31, 2017 Order in Case

5 No. U-18090, when new PURPA-based contracts are signed, the QF is entitled to the

6 RECs produced by the facility. As IPPC members’ contracts expire and new PURPA-

7 based contracts are executed, the Company will receive the energy and capacity, but not

8 the RECs. Therefore, the RECs produced by IPPC’s facilities under new PURPA

9 contracts would be treated as unbundled RECs. It is possible that these RECs will be

10 made available to purchase by the Company, but the volume available and associated

11 pricing for unbundled RECs are unknown. As explained in the rebuttal testimony of

12 Company witness Teresa E. Hatcher, the Company will continue to evaluate the purchase

13 of unbundled RECs as one of the methods to procure RECs in the future.

14 Q. Mr. Stockhausen states on page 6 of his direct testimony that “IPPC’s facilities are

15 baseload, not intermittent.” Do you agree with this classification?

16 A. Not entirely. Some of the facilities are considered baseload, such as Kent County’s

17 municipal solid waste generator; however, the Midcontinent Independent System

18 Operator, Inc. classifies run-of-river hydroelectric generators as intermittent resources.

19 Therefore, many of IPPC member’s facilities are considered intermittent resources.

20 Regardless, whether or not the IPPC members’ facilities are baseload or intermittent is

21 irrelevant to the RE Plan.

rte0518-kgt 5 242 KEITH G. TROYER REBUTTAL TESTIMONY 1 Q. Mr. Stockhausen believes that the Company is aware of nearly 8 million RECs available.

2 Do you agree?

3 A. The Company is aware that there could be approximately 8 million RECs available for

4 purchase from QFs with existing contracts between 2018 and 2029. The Company did

5 not contact these entities to verify if these RECs are, or would be, available for purchase,

6 or at what price. Further, the information provided by the Company, included as

7 Mr. Stockhausen’s Exhibit IPPC-I (WS-1), is not an exhaustive list.

8 Q. Do you agree with Mr. Stockhausen’s belief that the Company’s RE Plan includes new

9 facilities that may be costlier than purchasing RECs from PURPA QFs?

10 A. No. Mr. Stockhausen’s view on this topic appears to be looking only at the cost for

11 RECs, which is not a complete picture of the situation. If the Company buys RECs from

12 a QF in addition to the energy and capacity that it may be obligated to buy under PURPA,

13 there will be some amount of cost associated with that purchase. However, when looking

14 at the cost of RECs associated with the new facilities included as part of the Company’s

15 RE Plan, one should calculate the cost of the REC by netting the value of the generation

16 from the total cost. If the value of the energy and capacity produced by one of the

17 proposed windfarms exceeds the cost of the windfarm, the RECs are provided to the

18 Company at no additional cost, which is less than the cost of buying unbundled RECs

19 from QFs.

20 The following examples are provided for illustration:

21 • Example 1: Assume that a QF receives $65/MWh for its energy and capacity 22 and the Company negotiates a price of $1/MWh for the RECs. The QF will 23 receive $66/MWh and the cost charged to the RE Plan will be $1/MWh for the 24 RECs.

rte0518-kgt 6 243 KEITH G. TROYER REBUTTAL TESTIMONY 1 • Example 2: Assume that the Company’s proposed proxy wind farms have an 2 LCOE of $58/MWh. The cost of the RECs could be viewed as the difference 3 between the cost of the wind farm and the market value of the products it 4 produces. If the market value of the energy, capacity, and RECs is $62/MWh, 5 customers would actually benefit from the proxy wind farm because they 6 received more value than the amount they paid for the facility.

7 In Example 2, there would be no added cost for RECs and the proxy wind farm

8 would actually save the customers money. It is an oversimplification to assume that the

9 QF’s RECs will be cheaper because the energy and capacity is already paid for through

10 the Power Supply Cost Recovery. The potential to purchase RECs from QFs will

11 continue to be evaluated as the Company implements the RE Plan.

12 Q. Mr. Stockhausen believes that utilizing IPPC members’ facilities will improve diversity.

13 Do you agree?

14 A. IPPC has some member facilities that use technology the Company does not own.

15 However, the Company anticipates that the IPPC members may sign new PURPA

16 contracts, thus potentially providing the value of diversity from an energy and capacity

17 standpoint. As shown in Exhibit A-13 (MJL-1), the contract capacity associated with

18 IPPC members’ facilities is included as part of the Company’s generation supply

19 portfolio, even though the facilities were not expected to be included in the cost or REC

20 supply of the RE Plan in the future.

21 Q. Mr. Stockhausen states that the Company’s “RE Plan is not consistent with PA 342.” Do

22 you agree?

23 A. No, the Company’s RE Plan meets the statutory requirements as indicated by Staff

24 witness Hadala.

rte0518-kgt 7 244 KEITH G. TROYER REBUTTAL TESTIMONY 1 Q. Overall, Mr. Stockhausen appears to believe that the Company should consider

2 purchasing the RECs from IPPC’s members. Do you agree?

3 A. The Company believes that buying unbundled RECs is one of the options available to

4 meet the requirements and goal of 2016 PA 342 (“PA 342”). As discussed in the rebuttal

5 testimony of Company witness Hatcher, the Company will continue to evaluate this

6 option as a potential method to implement its RE Plan.

7 BMPs’ POSITION

8 Q. Mr. Vine lists several advantages that the BMP facilities provide to the local

9 communities. Do you believe this is relevant to the Company’s RE Plan filing?

10 A No, I do not. The three facilities discussed by Mr. Vine are all eligible to enter into

11 contracts with the Company based on PURPA avoided costs. As discussed previously in

12 this rebuttal testimony, the Company has an obligation to execute contracts with QFs up

13 to 20 MW in size, and these obligations are being addressed in other ongoing

14 proceedings. The benefits discussed by Mr. Vine that may arise through the new PURPA

15 contracts should not be afforded special consideration in this case.

16 Q. Mr. Vine appears to support the Company’s RE Plan filing if the three BMP facilities

17 have their contracts renewed. What is your response?

18 A. The Company will execute contracts with these facilities in accordance with PURPA,

19 Federal Energy Regulatory Commission, and MPSC requirements. It is not clear why

20 Mr. Vine is concerned about the future contracts, given the Company’s PURPA

21 obligation to purchase from these generators. Currently, the avoided cost rates are stayed

22 in Case No. U-18090 so no new PURPA contracts are being executed at this time,

23 however, the Company intends to move forward with executing new contracts pursuant

rte0518-kgt 8 245 KEITH G. TROYER REBUTTAL TESTIMONY 1 to the determinations that will be made in the separate PURPA proceedings. Existing

2 PURPA contracts will be paid at the rates specified within the contract until the

3 expiration of the agreement.

4 Q. Mr. Vine expects that the three BMP facilities will be able to successfully negotiate

5 contracts at or below the cost anticipated by the Company’s RE Plan including the

6 transfer of RECs to the Company. What is your response regarding this expectation?

7 A. As discussed previously in this rebuttal testimony and the rebuttal testimony of

8 Ms. Hatcher, the Company will continue to consider the opportunity to purchase

9 unbundled RECs from facilities that it has PURPA-based contracts with as part of its RE

10 Plan.

11 CYPRESS CREEK’S POSITION

12 Q. Mr. May states that purchasing RECs (bundled or unbundled) is an option available to the

13 Company to meet the statutory requirements of PA 342. Do you agree?

14 A. Yes. Buying RECs is one of the methods available to meet the statutory requirements of

15 PA 342.

16 Q. Mr. May claims that the Company’s RE Plan is unreasonable and imprudent because of

17 the Company’s “failure to include QF offers to sell renewable energy, capacity, and

18 RECs.” Do you agree?

19 A. No, I do not. As Mr. May points out, RECs remain the property of the QF. Therefore,

20 the Company cannot assume it is entitled to any amount of RECs produced by these

21 renewable energy generators. RECs produced by solar facilities currently under

22 development by Cypress Creek have several markets available. For example, the RECs

23 can be sold to a Michigan utility, used for voluntary renewable energy programs, or sold

rte0518-kgt 9 246 KEITH G. TROYER REBUTTAL TESTIMONY 1 into the Ohio REC market. Due to the wider market opportunity for new solar RECs, I

2 would expect them to demand a higher premium compared to RECs from older facilities

3 such as IPPC members or BMPs.

4 Q. Why would Cypress Creek be willing to give away the RECs to the Company if they

5 have a greater intrinsic value?

6 A. I expect that Cypress Creek will be able to build new solar facilities at a cost less than the

7 avoided cost rates that the Company is obligated to pay under Case No. U-18090. As

8 long as they can receive the higher capacity rate ($140,505/ZRC-year), the projects do

9 not appear to require an REC payment to be economic.

10 Q. Cypress Creek is proposing to give the RECs to the Company if it gets the full capacity

11 payment from Case No. U-18090. Does this provide a good deal for the Company’s

12 customers?

13 A. No. At present, the Commission has stayed the implementation of Consumers Energy’s

14 avoided costs rates, and the Company and its customers are only obligated to buy

15 150 MW of capacity from new PURPA QFs at the full avoided cost rate.1 Cypress

16 Creek’s proposal to receive the full capacity rate could result in unnecessary expense for

17 the Company’s customers if it increases the amount of capacity that the Company is

18 obligated to buy at the full avoided cost rate in Case No. U-18090.

19 Q. Can the Company choose to offer the 150 MW of PURPA capacity to Cypress Creek in

20 exchange for the free RECs being offered in the direct testimony of Mr. May?

21 A. No. The Commission’s February 22, 2018 Order stated that the 150 MW of new PURPA

22 capacity was to be offered to the new QFs in the PURPA queue. Unfortunately, there is

1 See MPSC Case No. U-18090, February 22, 2018 Order.

rte0518-kgt 10 247 KEITH G. TROYER REBUTTAL TESTIMONY 1 some ambiguity regarding what is required for a project to be in the PURPA queue. The

2 Company does not appear to have the discretion to determine who will receive the full

3 avoided cost rate associated with the 150 MW of new PURPA capacity. If Cypress

4 Creek is awarded a project or several projects as part of the 150 MW, the Company’s

5 customers will benefit from the free RECs that Cypress Creek will be providing. I do not

6 know if other QF developers are willing to give the Company their RECs for free as well.

7 Q. Mr. May states that the Company did not include new QFs as an option for meeting the

8 REC portfolio standard. Do you agree?

9 A. As stated previously in my rebuttal testimony and pointed out by Mr. May, the

10 Commission’s May 31, 2017 Order in Case No. U-18090 entitled the QFs to the RECs.

11 At the time this RE Plan was filed, there was no reason for the Company to believe that it

12 was going to receive a specified amount of unbundled RECs at a predetermined price.

13 Additionally, I expect most of the new PURPA contracts to be with solar QFs, which

14 produce the most valuable RECs, as I discussed above. As I detailed in my response to

15 IPPC’s position above, the Company is willing to evaluate the future purchases of

16 unbundled RECs through the RE Plan.

17 Q. On page 8 of his direct testimony, Mr. May argues that the cost of the Company’s new

18 50 MW solar proxy plants is unreasonable, because it exceeds the PURPA avoided cost

19 rates that are expected to be paid to new QFs. Do you agree that utilizing PURPA

20 contracts is better for customers than the proposed proxy solar plants?

21 A. No. As detailed in my direct testimony, the Company issued a Request for Proposal

22 (“RFP”) last year and utilized the pricing information provided by the proposals to

23 calculate the cost of the proxy facilities. The Company is optimistic that these costs will

rte0518-kgt 11 248 KEITH G. TROYER REBUTTAL TESTIMONY 1 come down in the future and through negotiations with the developers. Entering into new

2 contracts under the RE Plan at this time increases the likelihood of requiring a renewable

3 energy surcharge. The Company does not expect that the current plan will require a

4 renewable energy surcharge as discussed in the direct testimony of Company witness

5 Marc R. Bleckman. If the Company elected to pursue the option of a long-term purchase

6 of solar energy, capacity, and RECs from a developer, it prefers to do so through a

7 competitive solicitation to ensure that the customers are receiving the most economic

8 solar energy. The Company intends to issue future renewable RFPs for any solar

9 capacity that it elects to pursue under PPAs.

10 Q. Mr. May states that “Consumers can achieve full compliance with Michigan’s REC

11 standard at a lower cost than Consumers proposed REP.” Do you agree with this

12 conclusion?

13 A. No, I do not. Mr. May is failing to consider the avoided cost rate as an expense to the

14 Company’s customers. If RECs are given to the Company at no cost as Mr. May has

15 proposed, I agree that the RE Plan would have a lower cost. If cost is the only

16 consideration, wind is currently the lowest cost option for customers. The levelized cost

17 of $57.75/MWh included for the 525 MW of wind in this proceeding is significantly less

18 than the $99.38/MWh that the Company previously estimated for solar at the new

19 avoided cost rate. Lastly, if PPAs are more economic, it would be prudent for the

20 Company to acquire them through a competitive solicitation versus paying the avoided

21 cost rate.

rte0518-kgt 12 249 KEITH G. TROYER REBUTTAL TESTIMONY 1 GERONIMO ENERGY’S POSITION

2 Q. Geronimo Energy witness Engelking references the letters issued to the Company to

3 request new PURPA contracts. Are you familiar with these letters?

4 A. Yes. As the supervisor of the Electric Contract Strategies group at the Company, my

5 team is responsible for negotiating, executing, and administering PPAs with independent

6 power producers.

7 Q. Are these projects relevant to this proceeding?

8 A. No. First, the Company’s RE Plan was filed before these letters were received.

9 Secondly, the letters were received prior to the Commission’s February 22, 2018 Order in

10 Case No. U-18090 that continued the stay of the new avoided cost rates and directed the

11 Company to execute 150 MW of new PURPA-based contracts. At the time that the

12 Company filed its RE Plan, the only clear direction about new PURPA facilities was that

13 the Company was not entitled to the RECs; therefore, the Company did not include the

14 RECs from any new PURPA contract in its RE Plan.

15 Q. Ms. Engelking states that “purchasing QF RECs will result in lower RPS compliance

16 costs.” Do you agree?

17 A. No, I do not. For the reasons discussed above, there is uncertainty surrounding the

18 purchase of QF RECs. The Company does not have the ability to project the number of

19 RECs available or at what price the RECs would be purchased.

20 Q. Ms. Engelking recommends that “Consumers be required to evaluate the availability and

21 cost of purchasing unbundled RECs.” Do you agree?

22 A. No, I do not. The Company will continue to evaluate the purchase of unbundled RECs as

23 one of the methods to achieve compliance with the RPS under the RE Plan. A

rte0518-kgt 13 250 KEITH G. TROYER REBUTTAL TESTIMONY 1 “requirement” to perform this evaluation is unnecessary. The Company believes that this

2 information will be gathered as it begins negotiating new PURPA-based contracts after

3 the rate stay is lifted in Case No. U-18090.

4 Q. Does this complete your rebuttal testimony?

5 A. Yes, it does.

rte0518-kgt 14 251

1 MS. UITVLUGT: And lastly, your Honor,

2 the Company would move for the admission of the direct

3 testimony of Teri L. VanSumeren. Ms. VanSumeren also

4 sponsored Exhibit A-23 in this proceeding.

5 JUDGE THOITS: Any objections to the

6 binding in of this testimony or the admission of this

7 exhibit? (No response.)

8 Hearing none, the testimony of Witness

9 Teri VanSumeren is bound into the record, and Exhibit

10 A-23 is admitted.

11 (Testimony bound in.)

12 - - -

13

14

15

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 252

S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) )

DIRECT TESTIMONY

OF

TERI L. VANSUMEREN

ON BEHALF OF

CONSUMERS ENERGY COMPANY

September 2017

253 DIRECT TESTIMONY TERI L. VANSUMEREN 1 Q. Please state your name and business address.

2 A. My name is Teri L. VanSumeren, and my business address is One Energy Plaza, Jackson,

3 Michigan, 49201.

4 QUALIFICATIONS

5 Q. By whom are you employed and in what capacity?

6 A. I am employed by Consumers Energy Company (“Consumers Energy” or the

7 “Company”) as Executive Director of Energy Efficiency & Renewable Resources. I am

8 responsible for the Company’s Energy Waste Reduction plans – encompassing Energy

9 Efficiency and Residential Demand Response programs – and the Company’s Solar

10 Gardens and Voluntary Large Customer Renewable Energy Pilot (“LC-REP”) programs.

11 Q. Please describe your education and professional experience.

12 A. I earned a bachelor’s degree in engineering science from Michigan State University. In

13 1983, I accepted the position of Graduate Load Research Analyst in the Marketing

14 Research and Pricing Department with Consumers Power Company (later Consumers

15 Energy). In 1990, I was promoted to Supervisor of Load Monitoring & Analysis in the

16 Research & Rate Administration Department, which included supervising the Company’s

17 load research. In 1991, I was promoted to Energy Research & Evaluation Supervisor in

18 the Customer Program Services Department, which included supervising the evaluation

19 of the Company’s demand-side management and energy conservation programs. In

20 1997, I was promoted to Director of Customer Research in which I was responsible for

21 the Company’s residential and business customer marketing research. In 2009, I was

22 asked to oversee the Company’s Energy Optimization (“EO”) Plan as Manager of Energy

23 Efficiency Solutions. My responsibilities increased in 2013 to include the Company’s

te0917-tlv 1 254 DIRECT TESTIMONY TERI L. VANSUMEREN 1 Residential Demand Response programs, and my title was revised to Director of Smart

2 Energy Efficiency Solutions. In 2016, I was promoted to my current position, and my

3 responsibilities increased to include overseeing the Company’s customer facing

4 renewable energy programs.

5 Q. Have you previously testified before the Michigan Public Service Commission (“MPSC”

6 or the “Commission”)?

7 A. Yes, I have sponsored testimony in the following Commission cases:

8 U-10544 Demand-Side Management Reconciliation Case;

9 U-10755 System-wide Gas Load Study;

10 U-15290 Approval of Consumers Energy’s Balanced Energy Initiative and Other Relief;

11 U-16566 Reconciliation of the Electric Pilot Revenue Decoupling Mechanism;

12 U-16736 2011 EO Plan Reconciliation;

13 U-16988 Reconciliation of the Electric Pilot Revenue Decoupling Mechanism;

14 U-17138 2012 – 2015 Biennial EO Plan;

15 U-17351 2014 – 2017 Biennial EO Plan;

16 U-17429 Certification of Necessity for the Thetford Generating Plant;

17 U-17771 2016 – 2017 Biennial EO Plan;

18 U-18250 Palisades Securitization;

19 U-18345 Amended Renewable Energy Plan (“RE Plan”); and

20 U-18393 Voluntary Large Customer Renewable Energy Pilot.

te0917-tlv 2 255 DIRECT TESTIMONY TERI L. VANSUMEREN 1 PURPOSE OF TESTIMONY

2 Q. What is the purpose of your testimony in this case?

3 A. The purpose of my testimony is to: (i) explain why it is important to offer customer

4 facing renewable energy programs and the benefits of leveraging the RE Plan to continue

5 developing and advancing renewable energy resources in Michigan beyond the minimum

6 requirements established in 2016 PA 342 (“Act 342”); and (ii) describe the Company’s

7 existing customer facing renewable energy programs.

8 Q. Are you presenting any exhibits in this case?

9 A. Yes, I am sponsoring Exhibit A-23 (TLV-1).

10 Q. Was this exhibit prepared by you or under your direction or supervision?

11 A. Yes.

12 IMPORTANCE OF CUSTOMER PROGRAMS & BENEFITS OF THE RE PLAN

13 Q. Why does the Company believe it is important to offer customer facing renewable energy

14 programs in Michigan?

15 A. The Company believes that offering customer facing renewable energy programs are an

16 integral component in its commitment to the continued development and advancement of

17 renewable energy resources in Michigan. Absent these programs, customers have

18 relatively few alternatives to support renewable energy. However, customers have

19 different renewable energy objectives. While there is generally uniform support from

20 customers for having and promoting renewable energy in Michigan, the level of

21 commitment – e.g., size and duration – and the type of renewable energy solution being

22 sought by customers is quite varied. That is, not all customers are interested in only

23 having an established percentage of their energy needs being supplied by a particular

te0917-tlv 3 256 DIRECT TESTIMONY TERI L. VANSUMEREN 1 renewable resource. For instance, some customers may prefer 100% of their energy

2 needs are matched by renewable energy generated from wind resources for many years,

3 while other customers may prefer having 20% of their energy needs matched by

4 renewable energy generated from solar resources for only a few years, and vice versa.

5 This highlights the importance of having flexibility when experimenting and designing a

6 portfolio of renewable energy solutions for customers.

7 Q. Please explain why it is beneficial to use the RE Plan in offering these programs to

8 customers.

9 A. Being able to use the RE Plan allows the Company to design a portfolio of utility scale

10 renewable energy solutions for customers by experimenting with new renewable energy

11 programs through pilots and to cost-effectively implement various forms of renewable

12 energy programs once proven desirable by customers. In particular, it provides Michigan

13 with a solution in overcoming the upfront investment barriers often experienced when

14 developing and building utility scale renewable resources. Absent this ability to use the

15 RE Plan, utility scale projects would be much smaller and have longer lead times.

16 Q. Does the passage of Act 342 alter or restrict the Company from continuing to use the RE

17 Plan for its customer facing renewable energy programs?

18 A. No. While the Company is required to offer to its customers the opportunity to

19 participate in a voluntary green pricing program, it is not prevented from continuing to

20 use the RE Plan as an effective method for piloting and implementing existing or future

21 customer facing renewable energy programs. In addition, as long as customers enrolling

22 in a voluntary green pricing program are paying the additional costs of the program and

23 obtaining the additional savings, and the renewable energy from a program under Section

te0917-tlv 4 257 DIRECT TESTIMONY TERI L. VANSUMEREN 1 61 of Act 342 (“Section 61”) is not counted toward the renewable energy credit portfolio

2 requirement, the Company should be permitted to use RE Plan projects (or portions of

3 those projects) as the renewable energy resource in a voluntary green pricing program.

4 EXISTING CUSTOMER FACING RENEWABLE ENERGY PROGRAMS

5 Q. Please describe the Company’s existing Solar Gardens Pilot Program.

6 A. On May 14, 2015, the Commission approved the Company’s request to install up to

7 10 Megawatts (“MW”) of community solar energy under a three-year pilot. The intent of

8 this pilot program is to provide interested customers, who may not have the ability or

9 willingness to invest in their own systems, an opportunity to participate in, and benefit

10 from solar energy. Since being approved, the Commission has granted the Company’s

11 request to modify the pilot in order to incorporate new learnings gained during

12 implementation. To date, the Company has 4 MW of solar energy installed and is in the

13 beginning phase of conducting marketing and customer research to identify

14 complementary program designs – such as urban community solar – and advance its

15 understanding of customer interests.

16 Q. Please describe the solar facilities used in the Solar Gardens Pilot Program.

17 A. The Company currently has a solar facility located at Grand Valley State University

18 (“GVSU”) and a second solar facility located at Western Michigan University (“WMU”).

19 The GVSU facility was constructed in the spring of 2016 and includes approximately

20 11,000 solar panels, generating up to 3 MW of electricity. The WMU facility was

21 constructed in the summer of 2016 and includes approximately 3,900 solar panels,

22 generating up to 1 MW of electricity. As of June 30, 2017, the Company had enrolled

te0917-tlv 5 258 DIRECT TESTIMONY TERI L. VANSUMEREN 1 1,844 customers and subscribed 81% (6,506 Solar Blocks out of 8,000 Solar Blocks) of

2 the electricity from these facilities.

3 Q. Who is eligible to participate in the Solar Gardens Pilot Program?

4 A. The program is open to all residential and business full-service electric customers in the

5 Company’s service territory. Currently, when a customer enrolls in the program, they

6 can choose to pay either a single up-front subscription charge, a three-year subscription

7 charge, a seven-year subscription charge, or a 25-year subscription charge. As shown in

8 the following histogram, the majority of customers have opted for the 25-year option to

9 minimize the upfront expense of promoting renewable energy. One of the benefits of

10 providing various pricing options is that it makes the program available to all interested

11 participants. In particular, these various options are made possible by leveraging the RE

12 Plan to finance the upfront construction and amortizing the recovery of the costs over

13 more manageable time periods for customers.

Solar Gardens Enrollments (June 2017 - 90 Day Report)

1733

24 25 62

Up front @ 3 Years @ 7 Years @ 25 Years @ $1,339/Block $42/Block $21/Block $10/Block

te0917-tlv 6 259 DIRECT TESTIMONY TERI L. VANSUMEREN 1 Q. Please describe the customer benefits from participating in the Solar Gardens Pilot

2 Program.

3 A. In exchange for enrolling in the program, customers receive a monthly solar energy credit

4 based on the amount of energy produced at the GVSU and WMU facilities. An

5 illustration of the customer experience is depicted in my Exhibit A-23 (TLV-1).

6 Q. Does the Company provide customers with additional insights into the amount of

7 electricity generated from these solar facilities?

8 A. Yes. The Company provides daily, weekly, monthly, and yearly solar production

9 information online at www.consumersenergy.com/solargardens for both facilities

10 separately and in aggregate. The purpose of providing this information online is to

11 provide a platform to engage and educate customers about the production characteristics

12 of solar energy. For instance, customers can actively interact with the website to

13 compare and contrast the amount of solar energy produced during various periods since

14 the facilities became operational. The chart below provides an example of the daily

15 information made available to customers on the Company’s Solar Gardens website.

te0917-tlv 7 260 DIRECT TESTIMONY TERI L. VANSUMEREN 1 Q. What are some of the additional customer benefits from participating in the Solar

2 Gardens Pilot Program?

3 A. Apart from receiving the solar energy credits, customers who participate in the program

4 are also helping improve the Michigan environment. In particular, the environmental

5 benefits from the Company’s Solar Gardens Pilot Program are equivalent to:

6 Q. What are the cumulative capital costs of offering this pilot program?

7 A. The cumulative capital costs through June of 2017 are as follows:

8 Development $233,750

9 Engineering 727,832 Project Management 1,184,604 10 Equipment 5,460,049 11 Construction 3,914,762 12 Owners Cost 203,238 $11,704,137

13 Q. Are you recommending any changes to the Company’s Solar Gardens Pilot Program in

14 this case?

15 A. Yes. I am recommending the Commission approve extending the life of the pilot

16 program an additional three years beyond the current expiration date of May 14, 2018.

17 As mentioned above, the Company is in the beginning phase of its research, which it

18 anticipates will be complete by the middle of 2018. The Company intends to use the

te0917-tlv 8 261 DIRECT TESTIMONY TERI L. VANSUMEREN 1 findings from this research to inform and develop future solar programs for the remaining

2 6 MW of the Solar Gardens Program. In addition, the Company proposes to replace the

3 90-day Solar Gardens reporting with an alternative reporting cadence that will be

4 addressed in its Section 61 filing on October 18, 2017.

5 Q. Please describe the Company’s LC-REP Program.

6 A. On August 23, 2017, the Commission provisionally approved Option A of the

7 Company’s LC-REP Program. Customers who choose to participate in the LC-REP

8 Program will remain on their current full service tariff, and in addition, pay a per-kWh

9 subscription fee and receive a per-kWh energy and capacity credit based upon their

10 respective subscription level and electric usage for that billing period. Under the

11 LC-REP Program, customers voluntarily enroll and elect the amount of their electrical

12 usage to be attributed to renewable energy generated. Once enrolled, customers elect a

13 subscription level between 20% and 100% of their load, in 5% increments, to be

14 attributed to a renewable energy resource, and can adjust the level of energy matched

15 annually to align with their individual corporate renewable energy goals. This design

16 gives customers the ability to customize their experience, while remaining

17 administratively manageable for the Company. The LC-REP Program’s renewable

18 energy is limited to 115,000 MWh annually.

19 Q. Please describe how a customer’s subscription payment is determined.

20 A. The subscribed generation amount for each enrolled customer will be calculated each

21 billing period and will be based on the customer’s energy usage for that billing period

22 and the customer’s elected renewable energy percentage. Customers will pay a

23 $0.045 per kWh renewable energy subscription charge for the level of load they intend to

te0917-tlv 9 262 DIRECT TESTIMONY TERI L. VANSUMEREN 1 match with renewable energy. The subscription charge covers the cost of construction,

2 operation and maintenance, return on equity, financing, property taxes, insurance, and

3 substation costs.

4 Q. Please describe how the wind energy and capacity credits are determined.

5 A. Customers will receive a wind energy and capacity credit each month associated with the

6 renewable energy generated. The Company will offer the designated wind facility into

7 the Midcontinent Independent System Operator, Inc. (“MISO”) energy and capacity

8 markets at the generator commercial pricing node. The Company will then calculate each

9 customer’s share of the energy and capacity market revenues based on their subscription

10 level and monthly energy usage.

11 The monthly wind energy and capacity credits will be based on the MISO Real

12 Time Locational Marginal Price (“LMP”) and MISO Annual Capacity Auction Clearing

13 Price for that planning year. The energy portion of the credit will be calculated monthly

14 based on the amount of renewable energy generated under the LC-REP Program, the

15 monthly Real Time LMP revenue assigned - expressed as the average Real Time LMP -

16 at that facility, and the level of energy subscribed in the LC-REP Program. The capacity

17 portion of the credit will be calculated monthly based on the MISO Capacity Auction

18 Clearing Price, the capacity calculated by the Company, and the level of energy

19 subscribed in the LC-REP Program. On an annual basis, the Company will review and

20 reconcile any over- or under-recovery of the wind energy and capacity revenues credited

21 to customers participating in the LC-REP Program with the actual settled Day-Ahead and

22 Real-Time LMP revenue assigned to the designated facility by MISO. At the end of each

23 LC-REP Program year, the Company will also review and reconcile the amount of energy

te0917-tlv 10 263 DIRECT TESTIMONY TERI L. VANSUMEREN 1 subscribed with the amount of energy generated by the renewable energy facility. In the

2 event there is a shortfall between the energy generated and amount of energy subscribed,

3 the active participants may request the Company provide them with Renewable Energy

4 Credits (“RECs”) to cover the shortfall. The Company will refund the corresponding

5 portion of the customer subscription payment, less the cost to the Company of obtaining

6 the RECs. The LC-REP Program subscription fees and credits are designed so that

7 customers who elect to participate are paying for the entirety of the LC-REP Program’s

8 costs incurred and receiving any savings obtained. The Company will account for the

9 energy and capacity credits issued to participants similar to the process used in the

10 Company’s Solar Gardens Pilot Program. That is, the revenues from selling the

11 renewable energy and capacity into the MISO markets, and booked in the Power Supply

12 Cost Recovery (“PSCR”), will be offset by the credits paid to participating customers.

13 Q. Will customers retain the environmental attributes associated with their subscriptions?

14 A. Yes. Customers participating in the LC-REP Program will retain their subscribed portion

15 of the renewable energy and environmental attributes while active in the LC-REP

16 Program. The Company will transfer, or retire, RECs associated with customer

17 participation. To the extent portions of the LC-REP Program are unsubscribed, the

18 Company will use any unsubscribed RECs and environmental attributes that are produced

19 by the renewable facility toward meeting with the REC portfolio standard.

20 Q. Please explain the Market Index Provision in the LC-REP Program.

21 A. The market index provision will allow large customers familiar with hourly energy

22 pricing to exchange the average variable energy component of their standard rates with

23 the real time energy price at the CONS.CETR commercial pricing node. Netting the real

te0917-tlv 11 264 DIRECT TESTIMONY TERI L. VANSUMEREN 1 time energy prices against the wind energy credits will lock a customer’s energy rate near

2 the subscription charge of $0.045 per kWh. This is primarily achievable because both the

3 wind energy credits and market index provision are based on the real time energy prices

4 in the Company’s service territory. For example, if the real time energy price at both the

5 renewable energy facility node and CONS.CETR node averaged $0.035 per kWh for the

6 month, then the customer would receive a wind energy credit near $0.035 per kWh and

7 would pay for energy at something near $0.035 per kWh. The net energy price being

8 equal to the subscription charge since the real time energy price paid under the market

9 index provision equals the wind energy credit received. By locating the renewable

10 facility within the Company’s service territory, any deviations between the wind energy

11 credit and market index provision price should be minimal.

12 For administrative purposes, the Company is limiting the market index provision

13 to customers subscribing to match 100% of their energy usage and that are taking service

14 under the Company’s General Primary Demand Rate Schedule GPD. The Company’s

15 LC-REP Program is designed in such a way that the customers who voluntarily enroll in

16 the LC-REP Program are paying for the costs of the renewable energy subscribed. As the

17 cost for the LC-REP Program’s renewable energy facility being utilized for this pilot has

18 already been approved for recovery in the RE Plan, the subscription fees collected will be

19 treated as revenue, offsetting the costs included in the RE Plan, and the PSCR transfer

20 price will not be applied to the subscribed portion of the renewable energy facility. To

21 the extent portions of the LC-REP Program are unsubscribed, then that portion of energy

22 and capacity will be transferred to the PSCR from the RE Plan through the normal

23 transfer price mechanism.

te0917-tlv 12 265 DIRECT TESTIMONY TERI L. VANSUMEREN 1 Q. Are you recommending any changes to the LC-REP Program in this case?

2 A. No.

3 Q. Please explain how the Company accounts for the subscription payments it receives from

4 the Solar Gardens and Large Customer Renewable Energy Pilot programs.

5 A. The Company uses the subscription payments from these programs to offset the annual

6 revenue requirements of its RE Plan. These payments are included in line 12 of

7 Company witness Marc R. Bleckman’s Exhibit A-1 (MRB-1).

8 Q. Does the Company intend to file its Solar Gardens and LC-REP renewable energy

9 programs as part of its Section 61 filing on October 18, 2017?

10 A. Yes.

11 Q. Does this conclude your testimony?

12 A. Yes.

te0917-tlv 13 266

1 MS. UITVLUGT: Thank you, your Honor.

2 That concludes the Company's case in this proceeding.

3 JUDGE THOITS: And did we get all of the

4 exhibits, as you understand it?

5 MS. UITVLUGT: Yes, your Honor.

6 JUDGE THOITS: All right. Thank you.

7 Doesn't matter to me what order we go in.

8 I have the Public Service Commission next.

9 MR. SATTLER: Thank you, your Honor.

10 According to the stipulation of the parties, I would move

11 to bind in the testimony of Merideth Hadala, consisting

12 of a cover page and five pages of questions and answers.

13 Ms. Hadala did not sponsor any exhibits in connection

14 with her testimony.

15 JUDGE THOITS: All right. Is there any

16 objection to the binding in of this testimony? (No

17 response.)

18 Hearing none, the testimony of Merideth

19 Hadala is bound into the record.

20 (Testimony bound in.)

21 - - -

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 267

S T A T E OF M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

* * * *

In the matter of the application of ) Consumers Energy ) regarding the regulatory reviews, revisions, ) Case No. U-18231 determinations, and/or approvals necessary ) to fully comply with Public Act 295 of 2008 ) ______)

QUALIFICATIONS AND DIRECT TESTIMONY OF

MERIDETH A. HADALA

MICHIGAN PUBLIC SERVICE COMMISSION

April 20, 2018 268 QUALIFICATIONS OF MERIDETH A. HADALA CASE NUMBER U-18231 PART I

1 Q. Please state your full name, business address and occupation.

2 A. My name is Merideth A. Hadala and my business address is 7109 West Saginaw,

3 Lansing, MI 48917. I am employed as a department analyst in the Renewable

4 Energy Section of the Electric Reliability Division at the Michigan Public Service

5 Commission (MPSC or Commission).

6 Q. Please describe your educational background.

7 A. In 2002 I earned a Bachelor of Science degree in Packaging from Michigan State

8 University. In 2009 I earned a Master of Business Administration from DeVry

9 University.

10 Q. What is your professional work experience?

11 A. I have worked for the Commission since 2011. From 2011 until November 2016,

12 I worked in the Access Restructuring Fund Section of the Telecommunications

13 Division. My primary responsibility was to maintain the Access Restructuring

14 Mechanism fund for the State of Michigan, disbursing over $1 million per month

15 to ensure continued telecommunications services to the customers of Michigan.

16 In the latter part of 2016, I was transferred into the Renewable Energy

17 Section and became involved in the Commission’s administrative activities

18 related to 2008 PA 295 (Act 295), focusing on electric providers’ renewable

19 energy plan filings, annual renewable portfolio standard compliance reviews, Act

20 295 contract review filings, renewable reconciliation, and Public Utility

21 Regulatory Policies Act of 1978 (PURPA) cases.

22 Q. Have you filed testimony in any other proceedings before the Commission?

23 A. Yes. During my work at the MPSC, I have filed testimony in the following cases:

1

269 QUALIFICATIONS OF MERIDETH A. HADALA CASE NUMBER U-18231 PART I

1 - Case No. U-18082 (DTE Renewable Energy Cost Reconciliation Case)

2 - Case No. U-18089 (Alpena Power Avoided Cost Case)

3 - Case No. U-18092 (Indiana Michigan Power Avoided Cost Case)

4 - Case No. U-18093 (Northern States Power Avoided Cost Case)

5 - Case No. U-18094 (Upper Peninsula Power Avoided Cost Case)

6 - Case No. U-18095 & U-18096 (Wisconsin Public Service Corporation and

7 Wisconsin Electric Power Company Avoided Cost Case)

8 - Case No. U-18236 (UMERC Renewable Energy Plan Case)

9 - Case No. U-18237 (WEPCo Renewable Energy Plan Case)

10 - Case No. U-18242 (DTE Reconciliation Case)

11 - Case No. U-18243 (I&M Reconciliation Case)

2

270 DIRECT TESTIMONY OF MERIDETH A. HADALA CASE NUMBER U-18231 PART II

1 Q. What is the purpose of your testimony?

2 A. The purpose of my testimony is to recommend Commission approval of

3 Consumers Energy’s Renewable Energy Plan.

4 Q. Are you sponsoring any exhibits in this proceeding?

5 A. No.

6 COMPANY’S RE PLAN

7 Q. Does Consumers meet the filing requirements for Renewable Energy Plans (REP)

8 for Michigan Investor-Owned Retail Rate-Regulated Electric Utilities?

9 A. Yes, Consumers meets the filing requirements of 2008 PA 295 (Act 295).

10 Q. Do you recommend Commission approval of the REP?

11 A. Overall yes, but I will address Staff’s concerns with the REP below.

12 CIRCUIT WEST

13 Q. Did you identify any issues related to Consumers’ Solar R&D Project, referred to

14 as Circuit West?

15 A. Yes. In the testimony of witness Margaret J. Lowe, the Levelized Cost of Energy

16 (LCOE) for Circuit West is $486/MWh. Later in Ms. Lowe’s testimony, she

17 states that the LCOE is $126.35/MWh and $126.71/MWh for two future

18 company-owned solar facilities. Staff understands this is a demonstration project

19 that could provide the Company with valuable experience but is concerned with

20 the discrepancy between the cost of this project and the cost at which the

21 Company could build company-owned solar.

22 Q. Do you recommend approval of the Circuit West funding?

3

271 DIRECT TESTIMONY OF MERIDETH A. HADALA CASE NUMBER U-18231 PART II

1 A. Yes, but Staff recommends that the Commission require the Company to regularly

2 file reports related to Circuit West that include updates on lessons learned and

3 demonstrate how this experience has provided value for future solar development.

4 RESEARCH AND DEVELOPMENT

5 Q. Does Staff have concerns with the Company’s request for $500,000 per year in

6 research funding?

7 A. Yes. Consumers has proposed allocating $500,000 per year in Incremental Cost

8 of Compliance (ICC) funding to conduct research necessary to develop future

9 projects. While staff supports renewable energy research, there is not sufficient

10 information regarding how this $500,000 will be spent. A Commission order

11 dated December 20, 2011, in Case No. U-16582, denied a similar request from

12 DTE Electric Company for Research and Development funding. This denial was

13 based on a lack of sufficient information about how the money would be

14 allocated. DTE was instructed to propose additional research activities in the

15 future, provided that adequate support was included.

16 Q. What is Staff’s recommendation regarding this request?

17 A. Staff recommends that the Commission either reduce or deny the $500,000 per

18 year request and require the Company to request specific research funding as it

19 arises. These requests could potentially take place in an ex parte amended REP if

20 it would not cause the Company to reinstate a surcharge; or it could take place in

21 a proactive request through a Renewable Cost Reconciliation Case.

22 ADDITIONAL ISSUES

4

272 DIRECT TESTIMONY OF MERIDETH A. HADALA CASE NUMBER U-18231 PART II

1 Q. Some potential QFs have intervened in the case and they make the argument that

2 the renewable capacity in the REP that the Company plans to build should be

3 made available to them as PURPA QF capacity. Does Staff believe that this

4 should be addressed in this REP?

5 A. No. This issue, along with some additional matters, is being considered in Case

6 No. U-20095.

7 Q. Does this conclude your testimony?

8 A. Yes, it does.

5

273

1 MR. SATTLER: Thank you. Staff's second

2 and final witness is Katie Trachsel, who sponsored

3 testimony consisting of a cover page and four pages of

4 questions and answers. Ms. Trachsel did not file any

5 exhibits in connection with her testimony.

6 JUDGE THOITS: Is there any objection to

7 the binding in of this testimony? (No response.)

8 Hearing none, the testimony of Katie

9 Trachsel is bound into the record.

10 (Testimony bound in.)

11 - - -

12

13

14

15

16

17

18

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 274

S T A T E OF M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

* * * *

) In the matter of the Commission’s own motion, ) Case No. U- 18231 Regarding the regulatory reviews, revisions, ) Determinations and/or approvals necessary for ) Consumers Energy Company to fully comply ) with Public Acts 295 of 2008. ) ______)

QUALIFICATIONS AND DIRECT TESTIMONY OF

KATIE TRACHSEL

MICHIGAN PUBLIC SERVICE COMMISSION

April 20, 2018

275 QUALIFICATIONS OF KATIE TRACHSEL CASE NUMBER U-18231 PART I

1 Q. Please state your name, address and present position.

2 A. My name is Katie Trachsel. My business address is within Lansing, Michigan. I

3 am a Michigan Public Service Commission (MPSC) Staff auditor, employed in

4 the Renewable Energy Section of the Electric Reliability Division.

5 Q. Please briefly describe your professional qualifications and educational

6 background.

7 A. I am a Certified Public Accountant, licensed in the State of Michigan. In addition,

8 I received a Bachelor of Science Degree in Political Science, Public

9 Administration Emphasis, with minors in Accounting and American Ethnic

10 Studies from Central Michigan University. I furthered my education during 2009

11 and 2010 by taking various accounting, economic, management and taxation

12 classes through Baker College. Throughout my academic career I have been

13 commended for high academic performance, having graduated with honors from

14 Central Michigan University and placed on the Dean’s and President’s lists at

15 Baker College. I have also taken numerous continuing professional education

16 courses. These courses include both the Introductory and Advanced Public Utility

17 Accounting Courses offered jointly by the Edison Electric Institute and American

18 Gas Association and both the Introductory and Advanced Regulatory Studies

19 Programs offered by the Michigan State University Institute of Public Utilities.

20 Q. Please briefly describe your professional experience.

21 A. In 2002 and 2003 I was employed by PriceWaterhouseCoopers, LLP as an

22 Associate within the Business Compliance Services division of the Tax

23 Department. My responsibilities included preparing corporate, not-for-profit, and

1 276 QUALIFICATIONS OF KATIE TRACHSEL CASE NUMBER U-18231 PART I

1 partnership tax returns. In 2003 I began employment at a private business and

2 performed various accounting, analytical, and operational tasks. These tasks

3 included preparation and consolidation of financial statements for multiple

4 companies, managing all aspects of the general ledger including detailed analysis,

5 coordinating the yearly budgets and forecasts, and then performing analysis of the

6 variances to actual, serving as a liaison to external auditors from government,

7 financial and banking industries, establishing and maintaining internal controls,

8 assisting with the development of strategic plans and focusing greatly on process

9 improvements including teaching courses, reducing general ledger closing process

10 time, automating reports and developing a documentation process company wide.

11 In 2006, I was hired as an Accounting Analyst by Consumers Energy Company,

12 working in the General Accounting Department. At Consumers Energy I focused

13 primarily on the electric business segment. For this segment I performed Sarbanes

14 Oxley and application functionality testing, prepared monthly and quarterly

15 reports for governmental agencies (including the Power Supply Cost Recovery 45

16 Day Report to the MPSC Staff), served as a liaison to financial and governmental

17 auditors, provided analysis of variances to budget and forecast, oversaw the

18 inventory of Clean Air Allowances and performed the accounting functions of

19 preparing journal entries and reconciling general ledger accounts and sub ledgers.

20 Also in this capacity, I assisted in creating several exhibits for the following

21 Power Supply Cost Recovery Cases: Case No. U-14701-R, U-15001-R and U-

22 15415-R, the Consumers Energy Company PSCR Reconciliation Cases for 2006,

23 2007 and 2008 respectively. Outside of the electric business segment I created

2 277 QUALIFICATIONS OF KATIE TRACHSEL CASE NUMBER U-18231 PART I

1 monthly and annual forecasts and budgets for various divisions of the company

2 including executive compensation, Board of Directors’ expenses and the reserve

3 of uncollectible revenue. Further, I was the financial participant within the

4 company’s renewable energy team which managed renewable energy plans

5 including the voluntary program, involuntary surcharge refund and Green-e and

6 marketing costs. In 2009 I began employment with the Michigan Public Service

7 Commission. I am the lead auditor for matters pertaining to renewable energy and

8 2008 Public Act 295. My work responsibilities include reconciliation and

9 compliance audits, the review of utility contracts and request for proposals,

10 examination of rates and tariffs created within Public Act 295 of 2008, monitoring

11 proposed and passed Michigan and national renewable energy legislation,

12 resolving inquires on financial and taxation matters, being the Staff contact for

13 matters related to Great Lakes offshore wind and and

14 interconnection, and representing the MPSC Staff at various meetings and

15 performing community outreach through presentations at these events. I am also

16 the Program Manager of the Michigan Renewable Energy Certification System

17 (MIRECS).

18 Q. Have you previously filed testimony?

19 A. Yes. I filed testimony in numerous renewable energy reconciliation cases.

3 278 DIRECT TESTIMONY OF KATIE TRACHSEL CASE NUMBER U-18231 PART II

1 Q. What is the purpose of your testimony?

2 A. The purpose of my testimony is to advise of Staff’s finding of the Company’s

3 supplemental testimony regarding the impacts to the renewable energy plan from

4 the Tax Cuts and Jobs Act signed into law on December 22, 2017.

5 Tax Reform Impact

6 Q. What does the Company propose in its supplemental testimony will be the impact

7 to the renewable energy plan of the Tax Cuts and Jobs Act of 2017?

8 A. In his supplemental testimony, Company witness Marc Bleckman describes the

9 impacts of the tax reform as: 1) reducing the weighted average cost of capital

10 within the renewable energy plan, 2) lowing the gross up factor utilized by the

11 Company to apply tax credits to pre-tax revenue requirements and 3) adjusting the

12 levelized cost of energy calculations to incorporate the lowered federal income

13 tax rate.

14 Q. What is Staff’s finding of reasonableness of the Company’s proposal?

15 A. Staff finds these three impacts of the tax reform to be reasonable.

16 Q. Please explain.

17 A. In reaching this determination, Staff reviewed Mr. Bleckman’s testimony, the

18 Company’s comments within Case No. U-18494, consulted with various other

19 Staff members who have tax expertise and attended an in-person tax training and

20 numerous webinars explaining the affects of the Tax Cuts and Jobs Act of 2017.

21 Based on this work, Staff finds the Company’s representation of these impacts to

22 be reasonable.

4 279

1 MR. SATTLER: Thank you, your Honor.

2 That's all of Staff's witnesses.

3 JUDGE THOITS: Again, doesn't matter to

4 me, anybody want to go, or I have Independent Power

5 Producers Coalition next.

6 MR. LUNDGREN: Certainly, your Honor.

7 Pursuant to the stipulation of the parties, I would move

8 for the binding in of the direct testimony of William F.

9 Stockhausen on behalf of Independent Power Producers

10 Coalition, consisting of a cover page and nine pages of

11 questions and answers, and a single exhibit consisting of

12 two pages.

13 JUDGE THOITS: And is that Exhibit IPP-1?

14 MR. LUNDGREN: It is, your Honor.

15 JUDGE THOITS: Is there any objection to

16 the binding in of this testimony or the admission of this

17 exhibit? (No response.)

18 Hearing none, the testimony of William

19 Stockhausen is bound into the record, and Exhibit IPP-1

20 is admitted.

21 (Testimony bound in.)

22 - - -

23

24

25 Metro Court Reporters, Inc. 248.360.8865 280

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) ______)

DIRECT TESTIMONY OF WILLIAM F. STOCKHAUSEN ON BEHALF OF THE INDEPENDENT POWER PRODUCERS COALITION OF MICHIGAN

281 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.

2 A. My name is William F. Stockhausen and my business address is 218 W. Dunlap Street,

3 Northville, Michigan.

4

5 Q. BY WHOM AND IN WHAT CAPACITY ARE YOU EMPLOYED?

6 A. I am employed by Michiana Hydroelectric Co. and Elk Rapids Hydroelectric Power

7 L.L.C as Principal Agent for both companies.

8

9 Q. PLEASE BRIEFLY DESCRIBE YOUR PLANTS.

10 A. The Michiana Hydroelectric Co. plant is a restored 1854, 5-story, grist mill that is

11 registered on the National Registry of Historic Places. It has two hydroelectric units with

12 a total nameplate capacity of 60 kW, operating with a 10-foot head from the Battle Creek

13 in Bellevue, Michigan, and has been operating continuously since 1982. Elk Rapids

14 Hydroelectric Power L.L.C is a 1916 plant that was abandoned by Consumers in 1965

15 and rehabilitated in 1984. It has two units with a total nameplate capacity of 700 kW

16 operating with a nominal head of 10 feet from the Elk River in Elk Rapids, Michigan.

17 We have been responsible for the plant's operation for the past 10 years. Both plants are

18 family run businesses and are certified as Qualifying Facilities (“QFs”) under the Public

19 Utilities Regulatory Policy Act of 1978 ("PURPA").

20

21 Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND BUSINESS

22 EXPERIENCE.

23 A. After 38 years, I retired in 2006 from Ford Motor Co., Scientific Research Laboratories

1

282 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 as a Staff Technical Specialist in Engine and Powertrain Technologies, which primarily

2 focused on combustion, emissions, performance and efficiency development and

3 improvement. From 2007 to the present, my family and I have focused on renewal of the

4 Federal Energy Regulatory Commission ("FERC") license for the Elk Rapids plant, as

5 well as rehabilitating and upgrading its equipment and operational efficiency.

6

7 I hold a Bachelor of Science degree from Marquette University in Mechanical

8 Engineering and a Master of Science degree from University of Michigan, also in

9 Mechanical Engineering.

10

11 Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THE MICHIGAN PUBLIC

12 SERVICE COMMISSION?

13 A. Yes. On three prior occasions I have testified before the Michigan Public Service

14 Commission ("Commission") in Case No. U-18090 on behalf of the Independent Power

15 Producers Coalition ("IPPC"): on June 19, 2017, I submitted Rebuttal Testimony; on June

16 26, 2017, I submitted Revised Rebuttal Testimony; and on April 11, 2018, I submitted

17 Direct Testimony on the third remand.

18

19 Q. ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING?

20 A. I am testifying on behalf of the IPPC.

21

22 Q. PLEASE EXPLAIN THE IPPC’S BACKGROUND.

2

283 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 A. The IPPC is a coalition of Michigan independent power producers and, for purposes of

2 this proceeding, includes among its members the following: Kent County, Michigan; City

3 of Beaverton, Michigan; Boyce Hydro Power, L.L.C; White’s Bridge Hydro Co.; Black

4 River, L.P.; Tower Kleber L.P.; Michiana Hydroelectric Co.; Energy Developments f/k/a

5 Granger Energy Services; and Elk Rapids Hydroelectric Power, L.L.C. IPPC members

6 each own and operate small renewable energy power generation facilities that each

7 produce 20 megawatts (“MW”) of electricity or less, and have been certified as

8 Qualifying Facilities (“QF”) within the meaning of sections 201 and 210 of the Public

9 Utilities Regulatory Policy Act of 1978 (“PURPA”) by the Federal Energy Regulatory

10 Commission (“FERC”).

11

12 Q. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY?

13 A. The purpose of my Direct Testimony is to respond to Consumers Energy Company’s

14 (“Consumers” or "Company") September 29, 2017 Application to the Commission, along

15 with supporting testimony (“Application”), as amended with Supplemental Testimony on

16 March 8, 2018, pursuant to 2008 PA 295 (“Act 295”), as amended by 2016 PA 342 (“Act

17 342”), for approval of its 2018 Renewable Energy Plan (“RE Plan”). I also point out that

18 Consumers has an obligation under current Commission orders as well as federal law to

19 continue to contract for the purchase of capacity and energy from IPPC facilities, that

20 these facilities meet the requirements of PA 295, and that the facilities are an eligible and

21 likely an optimal source of Renewable Energy Credits ("RECs") for meeting Consumers'

22 renewable energy requirements.

23

3

284 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 Q. ARE YOU SPONSORING ANY EXHIBITS?

2 A. Yes, I am sponsoring the following exhibit:

3  Exhibit IPP-1 (WS-1): Consumers Discovery Response CCR-CE-54

4

5 Q. WHAT IS YOUR UNDERSTANDING OF CONSUMERS’ 2018 RE PLAN?

6 A. Consumers has proposed certain amendments to its previously approved RE Plans dating

7 back to 2009, and most specifically, its most recent biennial RE Plan that was approved

8 by the Commission in 2016, as well as RE Plan amendments made in 2016 and 2017.

9 MPSC Order dated March 29, 2016, Case No. U-17792; MPSC Order on Rehearing,

10 dated June 9, 2016, Case No. U-17792; MPSC Order dated December 20, 2016, Case No.

11 U-15805; MPSC Order dated June 15, 2017, Case No. U-18345; and MPSC Order dated

12 August 23, 2017, Case No. U-18393. Consumers’ 2018 RE Plan details how it intends to

13 meet the new statutory renewable energy targets contained in PA 342; the requested cost

14 recovery for its 2018 RE Plan; and the proposed cost recovery mechanism for it to recoup

15 the RE Plan’s costs.

16

17 Q. DO YOU AGREE WITH HOW CONSUMERS INTENDS TO MEET THE NEW

18 STATUTORY RENEWABLE ENERGY TARGETS CONTAINED IN PA 342?

19 A. Not entirely. Consumers’ RE Plan seeks to include up to 525 MW of new wind facilities

20 and up to 100 MW of new solar facilities that will be owned by the utility and used to

21 help meet the Renewable Energy Credit Portfolio Standard ("RPS") pursuant to PA 342.

22 These requirements include a mandate of 12.5% by 2019, 15% by 2021, and a "goal" of

23 not less than 35% of a combination of energy waste reduction and renewable energy by

4

285 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 2035. The utility-owned wind addition contains up to three 175 MW wind facilities, with

2 one wind facility commencing commercial operation in 2019 and the remaining two

3 facilities commencing commercial operation in 2020 at an estimated cost of $273 million

4 per facility ($1,560/installed kW). The proposed additional utility-owned solar projects

5 consist of two solar arrays of 50 MW each, commencing commercial operations in 2024

6 and 2025, each to cost $79 million ($1,572/installed kW). Application, pp. 4-5; Direct

7 Testimony of Marc R. Bleckman, p. 7. While Consumers could continue to use

8 Renewable Energy Purchase Agreements ("REPAs") to meet these new statutory RPS

9 requirements, the Company states that it will "continue to evaluate REPAs that may

10 provide benefits" to its customers, but has not included any new REPAs in its 2018 RE

11 Plan and states that "no new REPAs are planned." Direct Testimony of Teresa E.

12 Hatcher, p. 5. The refusal to fully evaluate REPAs in the current 2018 RE Plan is

13 extremely detrimental to customers in several regards and does not meet the Legislature's

14 intent in PA 342.

15

16 Q. HOW DOES THE EXCLUSION OF REPAs HARM CUSTOMERS?

17 A. First, I should note that I am one of the few existing PURPA facilities that was included

18 in Consumers' RE Plan. Elk Rapids, the hydroelectric facility that I operate, has been

19 included since 2009. See. Exhibit A-8 (YFK-3)(Revised). However, Consumers' RE

20 Plan assumes that my REPA for Elk Rapids will not be renewed beginning in 2020. The

21 absence of Elk Rapids, and any other existing PURPA facility, means that Consumers is

22 choosing to forgo the opportunity to meet its RPS requirements through use of existing

23 renewable energy facilities in the state with which it is already required to contract, in

5

286 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 favor of new renewable facilities that it will build, own and operate. In doing this,

2 Consumers is forgoing opportunities to create a less costly, more diversified, and more

3 reliable RE Plan for customers.

4

5 Q. HOW WOULD INCLUDING EXISTING PURPA FACILITIES BE LESS

6 COSTLY FOR CUSTOMERS?

7 A. Consumers' total Power Supply Cost Recovery ("PSCR") transfer costs for its 2018 RE

8 Plan are $3.3 billion. Supplemental Testimony of Marc R. Bleckman, p. 5. This is a

9 significant cost for renewable energy that comes primarily from intermittent resources.

10 In contrast, the IPPC's facilities are baseload, not intermittent facilities, with proven track

11 records of reliability and system benefits that add value for ratepayers. Among the many

12 examples of the costlier aspects of utilizing Consumers' proposed new intermittent

13 facilities are the cost of capital, O&M, ROE, financing, interconnect and substation, and

14 ancillary costs that alone will cost $100.4 million in 2019. Exhibit A-24 (MRB-3), March

15 2018, p. 1. As independent owners and operators of existing renewable energy facilities,

16 our costs for these items are either non-existent (i.e., no ROE or financing), or minimal

17 compared to Consumers, and in any event are borne by the Qualified Facility ("QF") and

18 not by Consumers' ratepayers. Consumers filed exhibit shows zero (0) costs for REC

19 purchases beginning in 2015. Consumers Exhibit A-24 (MRB-3), March 2018, p. 1. It

20 does not appear that Consumers has considered that it could purchase the RECs from

21 existing PURPA QFs much less expensively than building new intermittent generating

22 resources to obtain RECs, and then requiring ratepayers to pay the full costs for such

23 facilities, as well as undertake the operational risks.

6

287 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 Q. HOW WOULD INCLUDING EXISTING PURPA FACILITIES MORE

2 APPROPRIATELY COMPLY WITH PA 295?

3 A. Consumers' 2018 RE Plan is centered around the amount of RECs the Company believes

4 it must own in order to meet the new RPS requirements and goals. The Company states

5 that "Calculating the projected new RECs that would be needed to achieve a 12.5% RPS

6 and then further a 15% RPS through the plan period demonstrated that if no new

7 renewable generation was identified, the Company's REC inventory would be depleted

8 by the year 2022." Direct Testimony of Teresa E. Hatcher, p. 8 (emphasis added). But

9 PA 342 does not require that only "new renewable generation" needs to be built and

10 owned by the Company in order to meet an RE Plan. It is also apparent from the utility's

11 filing that it has not considered purchasing RECs from PURPA QFs whose contracts will

12 be expiring during this period, even though it is obligated to renew those contracts.

13 These contracts are obvious options for obtaining RECs, as can be seen from the limited

14 use of REPAs that the Company has made in the past and continues to make to meet its

15 prior and current RE Plan requirements. Likewise, the wording of the statute itself is clear

16 on this point, as PA 342's purpose, in part, is to "promote the development and use of

17 clean and renewable energy sources," including to "provide greater energy security

18 through the use of indigenous energy resources available within the state." MCL

19 460.1001(1), (2)(b) (emphasis added). Consumers would not have to look far to

20 "identify" the "use" of "indigenous" energy resources available in the state. The IPPC

21 facilities, consisting of long-term, existing hydroelectric, waste-to-energy and landfill gas

22 provide the very "use" of indigenous, existing renewable energy that Consumers has

23 neglected to consider in its updated RE Plan. The discovery response provided by

7

288 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 Consumers, which I have attached as Exhibit IPP-1 (WS-1), indicates that while

2 Consumers is aware that there are literally nearly 8 million RECs available to it between

3 2017 and 2030 from existing projects, they have not analyzed whether purchasing any of

4 these would be more reasonable and prudent than building new projects to produce

5 RECs. For these reasons, the RE Plan is not consistent with PA 342.

6

7 Q. HOW WOULD INCLUDING EXISTING PURPA FACILITIES BE A MORE

8 RELIABLE SOURCE OF RENEWABLE ENERGY TO MEET THE 2018 RE

9 PLAN?

10 A. The net capacity factor for Consumers' proposed wind and solar facilities is 26.5% and

11 17.0%, respectively. Direct Testimony of Keith Troyer, p. 5. This compares with a

12 capacity factor of the IPPC facilities of 90% or greater. 2 TR 75-76. Although some of

13 the IPPC member QFs are small, all are baseload facilities. As the Commission has

14 noted, " . . . some QFs may be able to provide overall system support, black start service,

15 emergency power supply, voltage support, or the ability to quickly ramp up or down,

16 among other significant benefits. See e.g., 18 CFR 292.304(e)." Order No. U-18090,

17 November 21, 2017, at pp. 2; 24. Utilizing IPPC members' facilities in Consumers' 2018

18 RE Plan would not only provide a truly diverse RE Plan, but one that includes baseload

19 renewable energy resources, instead of simply relying on more costly intermittent

20 facilities.

21

22 Furthermore, IPPC-member facilities have had decades of operational experience and

23 history, and therefore have a known track record of reliable operations and use proven

8 289 WILLIAM STOCKHAUSEN DIRECT TESTIMONY

1 technologies. While there is nothing wrong with incorporating new facilities and new

2 technologies into the RE Plan, Consumers has relied entirely on the development of new

3 facilities to augment its portfolio of RECs. A more prudent approach would be to make

4 use of the existing, proven, reliable facilities already in place, and then to supplement

5 with new facilities as needed. It is certainly clear that Consumers has an abundance of

6 such existing RECs from which to draw, as evidenced in the Company's attached

7 Estimated Renewable Energy Credits Available from Existing Counterparties. See

8 Exhibit IPP-1 (WS-1).

9

10 Q. DOES THIS CONCLUDE YOUR TESTIMONY?

11 A. Yes.

12

13463455_1.docx

9 290

1 JUDGE THOITS: Cypress Creek Renewables.

2 MS. HESTON: Thank you, your Honor.

3 Pursuant to the agreement of the parties, I move to

4 admit -- or to bind into the record the prefiled direct

5 testimony of Casey James May on behalf of Cypress Creek

6 Renewables. Mr. May's prefiled testimony consists of a

7 cover page, a table of contents, eleven pages of

8 questions and answers, and a one-page appendix marked as

9 Appendix A. I also move to admit into evidence Mr. May's

10 prefiled exhibits, which are numbered sequentially and

11 have been marked by the court reporter as Exhibits CCR-1

12 through CCR-8.

13 JUDGE THOITS: Is there any objection to

14 the binding in of this testimony or the admission of

15 these exhibits? (No response.)

16 Hearing none, the testimony of Casey May

17 is bound into the record, and Exhibits CCR-1 through

18 CCR-8 admitted.

19 (Testimony bound in.)

20 - - -

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305

1 MS. HESTON: Thank you, your Honor.

2 JUDGE THOITS: Thank you. Geronimo

3 Energy.

4 MR. LUNDGREN: Thank you, your Honor.

5 Pursuant to the stipulation of the parties, at this time

6 I would move to bind in the direct testimony of Betsy

7 Engelking on behalf of Geronimo Energy, consisting of a

8 cover page and six pages of questions and answers, and

9 also a single exhibit, consisting of two pages labeled

10 GER-1, and the rebuttal testimony of Betsy Engelking,

11 consisting of a cover page and four pages of questions

12 and answers.

13 JUDGE THOITS: Is there any objection to

14 the binding in of this testimony or the admission of this

15 exhibit? (No response.)

16 Hearing none, the testimony of Betsy

17 Engelking is bound into the record, and Exhibit GER-1 is

18 admitted.

19 (Testimony bound in.)

20 - - -

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 306

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) ______)

DIRECT TESTIMONY OF BETSY ENGELKING ON BEHALF OF GERONIMO ENERGY 307 BETSY ENGELKING DIRECT TESTIMONY

1 Q. Please state your name and business address.

2 A. My name is Betsy Engelking. My business address is 7650 Edinborough Way, Suite 725,

3 Edina, MN 55435.

4

5 Q. By whom and in what capacity are you employed?

6 A. I am currently Vice President of Strategy and Policy for Geronimo Energy, LLC.

7 Geronimo is a wind and solar energy developer operating in Michigan, along with other

8 states in the upper Midwest and elsewhere.

9

10 Q. Please describe your educational background and business experience.

11 A. I obtained a BS in biology from the College of William and Mary in Virginia, and a

12 MBA in finance and economics from the Carlson School of Business at the University of

13 Minnesota. I spent ten years as a principal adviser to the Minnesota Public Utilities

14 Commission, working on issues such as utility rates, energy efficiency, integrated

15 resource planning, renewable energy standards and competitive markets. Thereafter, I

16 joined , a large G&T Cooperative, where I worked on Transmission

17 Service Agreements and later managed GRE’s Resource Planning and Acquisition group.

18 Prior to joining Geronimo, I served as Director of Resource Planning and Bidding for

19 Xcel Energy, a large investor-owned utility with operating companies in the upper

20 Midwest, Colorado and the Southwest.

21

22

23

1

308 BETSY ENGELKING DIRECT TESTIMONY

1 Q. Please describe your job responsibilities.

2 A. As VP of Strategy and Policy, I lead Geronimo’s legislative and regulatory efforts at both

3 the state and federal level. I also direct the analysis of markets and programs to develop

4 strategies for growth, and assist with energy sales and contract negotiation.

5

6 Q. Have you previously testified before the Michigan Public Service Commission?

7 A. No. However, over my career I have testified on utility and energy matters in over 100

8 proceedings before the Minnesota Public Utilities Commission, the North Dakota Public

9 Service Commission, the South Dakota Public Utilities Commission, the Colorado Public

10 Utilities Commission and the Federal Energy Regulatory Commission.

11

12 Q. On whose behalf are you submitting your testimony in this proceeding? 13 A. I am submitting testimony on behalf of Geronimo Energy, LLC.

14

15 Q. What is the purpose of your testimony?

16 A. The purpose of my testimony is to discuss the reasonableness of Consumers Energy’s

17 Renewable Energy Plan and the relationship between the plan and Qualifying Facilities

18 (“QFs”) from which Consumers will be required to purchase energy and capacity

19 pursuant to the Public Utilities Regulatory Policy Act (“PURPA”).

20

21 Q. Are you sponsoring any exhibits?

22 A. Yes, I am sponsoring the following exhibit: Exhibit GER-1 (BE-1), Consumers

23 Discovery Response CCR-CE-54

2

309 BETSY ENGELKING DIRECT TESTIMONY

1 Q. Based on your evaluation of Consumers’ Renewable Energy Plan, do you believe

2 that Consumers has demonstrated that its plan to construct and own 575 MW of

3 new wind and 100 MW of new solar is reasonable?

4 A. No. According to its response to Cypress Creek’s data request 18231-CCR-CE-53,

5 which I have attached as Exhibit GER-1 (BE-1), Consumers has not evaluated the

6 availability and cost of utilizing additional third party unbundled RECs, especially

7 those RECs generated by QFs that are already selling capacity and energy to the

8 Company under PURPA, to meet its renewable energy credit portfolio standard. The

9 failure to consider this important source of RECs raises questions as to whether the

10 costs of Consumers’ plan are reasonable.

11

12 Q. Has Geronimo publicly proposed any solar energy development projects in

13 Consumers’ service territory?

14 A. Yes. Geronimo has proposed six solar projects in Consumers’ service territory:

15

16 Q. Have you communicated to Consumers your intent to sell energy and capacity the

17 utility during the period covered by this Renewable Energy Plan, i.e., though 2029?

18 A. Yes. We sent letters to Consumers regarding our intent provide the output of four solar

19 generating projects, all of which are certified PURPA QFs, pursuant to the utility’s

20 obligations to purchase under PURPA and state law. Those letters were sent on

21 December 1, 2017. We sent letters to Consumers on the remaining two projects on

22 February 22, 2018.

23

3 310 BETSY ENGELKING DIRECT TESTIMONY

1 Q. Does Geronimo intend to make the Renewable Energy Credits from these projects

2 available for purchase by Consumers?

3 A. Yes. We expect that there will be approximately 190,000 RECs available annually to

4 Consumers to purchase from these projects and we have explicitly offered those to

5 Consumers.

6

7 Q. Where are the proposed locations of these projects?

8 A. The projects are located in the following counties:

9 Bingham Solar – Clinton County 10 Temperance Solar – Monroe County 11 White Pine Solar – St Joseph County 12 Burlington Solar – Branch County 13 Sandstone Creek Solar – Eaton County 14 Genesee Solar – Genesee County 15

16 Q. Does the sale of power and renewable energy credits from these facilities encourage

17 private investment in the state by Geronimo?

18 A. Yes. Geronimo intends to invest approximately $140 million in the state to develop the

19 six projects.

20

21 Q. Will the purchase of renewable energy credits help Consumers diversify the

22 resources used to reliably meet the energy needs of consumers in this state?

23 A. Yes. These RECs will be generated from solar projects that will also be delivering

24 energy and capacity to Consumers. The purchase will diversify the resources from both a

25 fuel standpoint and an economic standpoint, in that it will introduce resources into the

4

311 BETSY ENGELKING DIRECT TESTIMONY

1 Renewable Energy Plan that are owned and operated by third parties rather than the

2 utility.

3

4 Q. Who will undertake the operational and performance risks if Consumers enters into

5 PPAs for the power and RECs from these facilities?

6 A. The owner and operator of the generating facility ordinarily is subject to the risks of

7 operational failure. That is one of the advantages of an independently owned and

8 operated generating facility over one which is owned and operated by the public utility.

9 With independently owned facilities, ratepayers are much more insulated from risk than

10 they are when the utility owns and operates the generating facilities, as Consumers has

11 proposed to do here.

12

13 Q. In your experience with PURPA contracts, do ratepayers pay any risk premium for

14 purchasing under a PURPA PPA, such as the 10.7% return that the utility receives

15 for the risks it takes when it invests in its own projects?

16 A. No. PURPA PPAs allow for energy and capacity sales at no more than the utility’s

17 avoided cost; that is, the cost that they would have paid for the energy and capacity from

18 other sources but for the availability of the QF.

19

20 Q. How will ratepayers benefit from Consumers purchasing RECs from Geronimo’s

21 QFs rather than building new utility-owned renewables?

22 A. Consumers notes that its purpose for procuring new renewables is for the most part to

23 obtain the RECs needed to meet its expanded renewable energy standard. Ratepayers

5

312 BETSY ENGELKING DIRECT TESTIMONY

1 should not have to pay for the construction of new facilities for this purpose when low-

2 cost RECs are already available from QFs that are selling capacity and energy to

3 Consumers. Purchasing QF RECs will result in a lower RPS compliance cost and will

4 avoid over-procurement of capacity and energy in order to obtain sufficient RECs to meet

5 the RPS.

6

7 Q. What recommendations do you make regarding Consumers’ Renewable Energy

8 Plan?

9 A. I recommend that Consumers be required to evaluate the availability and likely cost of

10 purchasing unbundled RECs, in particular from QFs proposing to operate in its service

11 territory, to determine whether this strategy would improve the cost and risk profile of its

12 Renewable Energy Plan.

13

14 Q. Does this conclude your testimony?

15 A. Yes it does.

12647265_3.docx

6

313

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) Case No. U-18231 necessary for Consumers Energy Company ) to fully comply with Public Act 295 of 2008 ) ______)

REBUTTAL TESTIMONY OF BETSY ENGELKING ON BEHALF OF GERONIMO ENERGY 314 BETSY ENGELKING REBUTTAL TESTIMONY

1 Q. Please state your name and business address.

2 A. My name is Betsy Engelking. My business address is 7650 Edinborough Way, Suite 725,

3 Edina, MN 55435.

4

5 Q. By whom and in what capacity are you employed?

6 A. I am currently Vice President of Strategy and Policy for Geronimo Energy, LLC.

7 Geronimo is a wind and solar energy developer operating in Michigan, along with other

8 states in the upper Midwest and elsewhere.

9

10 Q. Are you the same Betsy Engelking who provided Direct Testimony in this 11 proceeding?

12 A. Yes, I am.

13

14 Q. What is the purpose of your rebuttal testimony?

15 A. In my rebuttal testimony, I respond to the Direct Testimony of MPSC Staff.

16

17 Q. Staff has suggested in their Direct Testimony that all issues relating to QFs and

18 PURPA be dealt with in Case No. U-20095. Do you agree with this statement?

19 A. No. Case No. U-20095 is focused on determining the role of the IRP process in setting a

20 utility's capacity need with respect to PURPA and the utility's must purchase obligation,

21 as well as when a legally enforceable obligation should be determined to have been

22 established. U-20095 is thus looking forward to the utility IRP filings, not examining the

23 role of QF RECs in a utility's PA 295 panning process. While it is true that the

1 315 BETSY ENGELKING REBUTTAL TESTIMONY

1 Commission did request comments in U-20095 on one question about how QF capacity

2 and energy fit into the utility’s energy portfolio under 2008 PA 295, I do not believe that

3 the Commission should wait for the disposition of that docket to address the question of

4 how QF resources can supply RECs to Consumers for PA 295 compliance. These issues

5 are before the Commission now in this proceeding and it is inappropriate to make QFs sit

6 on the sidelines while the utility plans to meet all its need for RECs from utility-owned

7 resources.

8

9 Q. Why do you believe that it is appropriate for the Commission to consider RECs

10 from QFs in this docket?

11 A. First, Consumers’ Renewable Energy Plan proposes new renewable resources to meet its

12 entire need under the expanded RPS. By the time the Commission concludes the U-

13 20095 proceeding, or acts through the upcoming IRP proceedings, many of those

14 resources could be well-developed or even under construction, which would foreclose the

15 use of QF RECs to meet the RPS even if the Commission ultimately finds that to be the

16 best solution. Second, as noted by other witnesses to this proceeding, it is in the public’s

17 best interests to provide for a diverse portfolio of generating resources. Diversity in type,

18 operating characteristics and ownership will help reduce risk to Consumers and its

19 customers. As QF contracts are PPAs rather than utility-owned facilities, they come with

20 general protections that prevent customers from paying for a project in the event of non-

21 performance or default of the QF, thus reducing risk for ratepayers. Finally, because

22 Consumers is already required to purchase energy and capacity from QFs, also acquiring

23 the RECs from these projects for a small premium will be a less costly RPS compliance

2 316 BETSY ENGELKING REBUTTAL TESTIMONY

1 strategy than constructing duplicative new renewable facilities in order to obtain

2 RECs. It is not in the public interest to require the ratepayers to support the cost of new

3 facilities when other, lower cost strategies are available. But if the Commission does not

4 act in this proceeding, the opportunities to acquire RECs from these facilities may be

5 foreclosed.

6

7 Q. Has the Commission already contemplated utilizing PURPA facilities to aid

8 Consumers in complying with its RPS?

9 A. Yes. The Commission’s February 22, 2018 Order in Docket U-18090 stated the

10 following:

11 “[T]he Commission finds it appropriate to limit payment of the full 12 avoided capacity cost to the first 150 MWs of new QF capacity in the 13 queue. This amount is approximately 25% of the renewables that 14 Consumers will need to add to meet the 15% renewable capacity 15 requirement under Act 295, as amended by 2016 PA 342.” 16

17 In this finding, the Commission appears to be allocating approximately 25% of the

18 renewable capacity that Consumers will need to meet its expanded RPS to QFs. Based

19 on this finding, it is probable that the Commission intends that Consumers use the RECs

20 from those QFs to help meet the expanded RPS.

21

22 Q. Is Consumers’ REP compatible with the Commission’s finding?

23 A. No. Consumers is proposing to fulfill its expanded RPS fully with new company-owned

24 resources. This would be inconsistent with the Commission’s reasoning in U-18090.

25

26

3 317 BETSY ENGELKING REBUTTAL TESTIMONY

1 Q. What is your recommendation regarding Consumers’ REP?

2 A. My recommendation is that the Commission direct Consumers to further explore the cost

3 and quantity of RECs that will be available from new QFs and revise its REP to include

4 those resources to the extent that they would reduce the cost of the plan to ratepayers.

5

6 Q. Does this conclude your rebuttal testimony?

7 A. Yes it does.

8 13558539_2.docx

4 318

1 JUDGE THOITS: Great Lakes Renewable

2 Energy Association.

3 MR. KESKEY: Your Honor, pursuant to a

4 stipulation of the parties, I move that the prefiled

5 testimony of Geoffrey C. Crandall be admitted into the

6 record, this consists of a cover page and 11 pages of

7 questions and answers. I also move that the Exhibit

8 GLREA-1, consisting of a cover page and 21 pages, be

9 admitted into the record.

10 JUDGE THOITS: Thank you.

11 MR. KESKEY: That would complete our

12 case.

13 JUDGE THOITS: Are there any objections

14 to the binding in of this testimony or the admission of

15 this exhibit? (No response.)

16 Hearing none, the testimony of Geoffrey

17 Crandall is bound into the record, and Exhibit GLREA-1 is

18 admitted.

19 (Testimony bound in.)

20 - - -

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 319

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the Matter, on the Commissions own motion, regarding the regulatory reviews, revisions, determinations, and/or approvals necessary for Case No. U-18231 Consumers Energy Company to fully comply with Public Act 295 of 2008 ______

DIRECT TESTIMONY AND EXHIBITS OF GEOFFREY C. CRANDALL

On Behalf of The

Great Lakes Renewable Energy Association

April 20, 2018

320

1 Q. What is your name and business address?

2 A. My name is Geoffrey C. Crandall. My business address is MSB Energy Associates, Inc.,

3 6907 University Avenue #162, Middleton, Wisconsin 53562.

4 Q. On whose behalf are you testifying today?

5 A. I am testifying on behalf of Great Lakes Renewable Energy Association.

6 Q. Please describe your background and experience in the field of gas and electric

7 utility regulation.

8 A. I am a principal and the Vice President of MSB Energy Associates, Inc. I have over 40

9 years of experience in utility regulatory issues, including resource planning, restructuring,

10 mergers, fuel, purchase power and gas cost recovery and planning analysis, energy

11 efficiency, conservation and load management impacts, program design and other issues.

12 I have provided expert testimony before more than a dozen public utility regulatory

13 bodies throughout the United States. I have provided expert testimony before the United

14 States Congress on several occasions and have previously filed testimony in numerous

15 cases before the Michigan Public Service Commission.

16 My experience includes over 15 years of service on the Staff of the Michigan Public

17 Service Commission (Commission). In my tenure at the Commission, I served as an

18 analyst in the Electric Division (Rates and Tariff section) involving rate as well as fuel

19 and purchase power cases. I also served as the Technical Assistant to the Chief of Staff,

20 supervisor of the energy conservation section (involving residential and commercial

21 energy efficiency programs). I also served as the Division Director of the Industrial,

- 1 -

321

1 Commercial and Institutional Division. In that capacity, I was Director of the Division

2 that had responsibility for the energy efficiency and conservation program design,

3 funding, and implementation of Michigan utility and DOE-funded private company

4 implemented programs and initiatives involving Industrial, Commercial and Institutional

5 gas and electric customers throughout Michigan.

6 In 1990, I became employed by MSB Energy Associates, Inc. and have served clients

7 throughout the United States on numerous projects related to system planning, fuel,

8 purchase power and gas cost recovery assessments, energy efficiency and load

9 management program development, electric restructuring, customer impact analyses, and

10 other issues. My vita is attached as Exhibit GLREA-1 (GCC-1).

11 II. DIRECT TESTIMONY

12 Q. What is the purpose of your testimony?

13 A. The purpose of my testimony in this docket is to review the Consumers Energy

14 Company’s (CECO) amended Renewable Energy Plan (REP) and to recommend

15 modifications and improvements to the REP or Plan development process.

16

17 Q. What is your opinion regarding the proposed Renewable Energy Plan and filing

18 submitted by CECO in support of its proposed Renewable Energy Plan?

19 A. CECO’s Renewable Energy Plan is flawed, incomplete and needs modification. The

20 REP should be closely coordinated with the Act 304, Integrated Resource Planning

21 processes as well as general rate proceedings as is discussed later in this testimony.

- 2 -

322

1 Q. Why do you assert that CECO in its REP (and its Act 304 PSCR filings) fails to fully

2 adhere to and promote the objectives and purposes of Act 295 (2008 PA 295), Act

3 304 (1982 PA 304), and Act 342 (2016 Public Act 342)?

4 A. Act 295, Act 304 and Act 342 should be administered and enforced in a consistent and

5 harmonious fashion. All three are energy resource planning statutes, and provide for

6 input through contested case procedures from intervenor parties to evaluate and

7 determine a diversified and reasonable cost diversified plan covering present and future

8 periods of time.

9 To further the synergy between Act 342, Act 295 and Act 304, CECO should be required

10 to sponsor a witness in its upcoming PSCR plan case, and subsequent Act 304 cases, to

11 discuss solar and renewable energy resource issues and opportunities for the 5-year plan,

12 forecast, programs or pilot programs that CECO is proposing or developing, the impact

13 of said programs on other Act 304 costs, and how solar and renewable resources may

14 ameliorate peak power costs or provide other benefits, and demonstrates CECO progress

15 with the increased reliance on and inclusion of renewable energy resources and in

16 meeting Act 342 renewable energy targets for 2019, 2021 and 2025. .

17 Act 342, Act 295 and Act 304 should be viewed as fully compatible. Commission

18 reviews and exercise of authority under each Act can complement the scope, objectives,

19 and purposes of the Acts. CECO under Act 304 has a duty to present a reasonable five

20 year PSCR plan and 5-year forecast. CECO also has a duty to minimize the fuel and

21 purchase power cost of electricity, as stated in Sections 6j(3) and 6j(6) of Act 304. Act

22 304, Sections 6j(4) and (7), MCL 460.6j(4) and (7) also state:

- 3 -

323

1 (4) In order to implement the power supply cost recovery 2 clause established pursuant to subsection (2), a utility shall file, 3 contemporaneously with the power supply cost recovery plan 4 required by subsection (3), a 5-year forecast of the power supply 5 requirements of its customers, its anticipated sources of supply, 6 and projections of power supply cost in light of its existing sources 7 of electrical generation and sources of electrical generation under 8 construction. The forecast shall include a description of all 9 relevant major contracts and power supply arrangements entered 10 into or contemplated by the utility, and such other information as 11 the commission may require. 12 * * * * 13 (7) In its final order in a power supply and cost review, the 14 commission shall evaluate the decisions underlying the 5-year 15 forecast filed by a utility pursuant to subsection (4). The 16 commission may also indicate any cost items in the 5-year forecast 17 that, on the basis of present evidence, the commission would be 18 unlikely to permit the utility to recover from its customers in rates, 19 rate schedules, or power supply cost recovery factors established in 20 the future.

21 Under these Act 304 provisions, the 5-year forecast must include “its anticipated sources

22 of supply”… “and power supply arrangements entered into or contemplated by the utility,

23 and such other information as the Commission may require.” The Commission in

24 Section 6j (7) is also required to “evaluate the decisions underlying the 5-year forecast

25 filed by a utility pursuant to subsection 4.”

26 Under the provisions, CECO is obligated to file adequate information concerning the 5-

27 year forecast. The scope of the forecast filing must be a forward looking forecast

28 whereby CECO in an open and transparent way reveals and analyzes contemplated and/or

29 forward looking sources and cost impacts of existing sources or categories of generation

30 and power. Solar and renewable resources are an existing resource for energy generation.

31 Act 342 and Act 295 statutory provisions contemplate higher limits and the increased use

32 of this resource compared to present levels.

- 4 -

324

1 The Act 304 5-year forecast case is the proceeding wherein historically the Commission

2 as well as interested PSCR customers and interveners are afforded the opportunity to

3 examine the many resource choices that are available in constructing a five-year resource

4 plan. This review includes consideration of and the weight given to resource options

5 regarding diversity of supply, risk mitigation, costs, and other factors. Energy and

6 capacity forecasts are an essential element of the planning process.

7 In a complementary and consistent manner, Act 342 and Act 295 provides for a biennial

8 renewable energy plan which requires CECO to re-evaluate and modify its renewable

9 energy plan based upon updated circumstances. The Act 342 and Act 295 duties should

10 be administered and enforced commensurate with Act 304's objectives.

11 Q. What additional concerns do you have regarding CECO’s proposed REP as

12 presented in this proceeding?

13 A. While CECO has shown how it will comply with the Act 342 renewable target of 12.5 %

14 in 2019 and the 15% 2021 target, the more robust 2025 goal of 35% compliance plan and

15 methodology has not been included in this filing. Witness Hatcher indicates that CECO

16 expects to receive 4,688,707 REC’s in 2025, which would be used towards the 35% goal.

17 Witness Hatcher makes reference to Witness Keyes direct testimony and exhibits A-6

18 (YFK-1) and A-7 (YKF-2). On Exhibit A-6, line 17 the 2025 compliance level needed to

19 comply with Act 342 is 4,988,396. Exhibit A-7, line 1 shows the quantity of REC’s

20 expected to be received in 2025 towards the 35% goal. The REC’s listed on line 1 is

21 4,688,707 which is less than the statutory goal. On page 4, line 14 and 15, Witness

22 Keyes referred to the energy waste reduction program (EWR) and indicated, “The

- 5 -

325

1 forecasted EWR savings will be addressed in separate EWR proceedings”. CECO has

2 put forth estimates of compliance with the 12.5% 2019 and the 15% 2021 goals but not

3 the 2025 goal. The record is now incomplete as to whether and how CECO will comply

4 with the Act 342 statutory renewable target of 35%.

5

6 Q. Why are solar resources relevant in an Act 295, Act 342 as well as an Act 304 review

7 process?

8 A. Solar and renewable resources comprise significant value because they reduce the need

9 for capacity and energy. Hot, sunny, high-moisture periods in Michigan are generally the

10 conditions when electric system strain is the most acute. These are the conditions that are

11 optimal for solar system production and output. The more solar resources that are in

12 place and providing production output the greater the reduction in customer demand and

13 ultimately greater the reduction in the reliance on more expensive generating plants and

14 purchased power. Again, this is a result of MISO economic dispatch of available

15 resources priced at the next least-expensive variable production cost above the prevailing

16 price, at that point in time.

17 The Act 342, Act 295 and Act 304 PSCR regulatory mechanisms and the supply resource

18 selection processes are predicated on optimizing economic opportunity by minimizing

19 variable production costs. Since solar systems operation does not consume fossil fuels

20 the variable production costs are minimal to non-existent. For purposes of Act 342, Act

21 295, and the Act 304 process, solar resources are an economically superior resource

22 choice. There is a natural synergy here for solar technology, which matches electric

23 system peak load stress with the operational prime time and conditions for the operation

- 6 -

326

1 and contribution from solar systems. Related purchase power and other costs would be

2 reduced by increased reliance and customer use of solar systems.

3 Q. Why do you believe the Act 342, Act 295 plan case, as well as the Act 304

4 proceedings, is the appropriate place to review the selection of resource choices and

5 deciding on an optimal resource plan as opposed to development of a plans in a

6 separate, isolated manner?

7 A. The Commission has an obligation and duty to “do all things necessary” to prevent the

8 waste of energy (including wasting fuels that could be avoided but are instead used for

9 the generation of electricity). The Legislature directed the Commission to reduce the

10 wasteful use of energy, which includes strategies affiliated with load control, peak

11 shifting and peak mitigation as well as reliance on alternative resources, energy

12 efficiency strategies, etc. The Legislature has established the IRP, REP, and the Act 304

13 process, which was enacted in 1982, and reconfirmed in both Act 295 (2008) and Act 342

14 (2016). Therefore, the Commission cannot properly ignore or diminish the energy

15 planning implications of Act 304, Act 342 or Act 295. Instead, the Commission should

16 ensure that all statutes are fully administered in an effective, harmonious and consistent

17 fashion.

18 In this REP proceeding, CECO, the Commission, ratepayers and interveners are afforded

19 the opportunity to examine the many renewable resources options and available

20 renewable resources to assemble a two-year renewable energy resource plan.

- 7 -

327

1 Q. What problems need to be addressed in this case regarding coordination of resource

2 planning activities in multiple dockets?

3 A. In Act 342 the Michigan Legislature established the Integrated Resource Planning

4 requirement for large utilities operating in Michigan. In Section 6t of Act 342, the

5 Michigan Legislature established the Integrated Resource Planning process for large

6 utilities whose rates are regulated by the Commission. These utilities must submit IRP’s

7 to the Commission for review and approval.

8 Act 304 has been in effect since 1983 and also has a five-year forecast planning

9 component and a PSCR Plan and retrospective reconciliation process. The Renewable

10 Energy Plan was initiated by Act 295. , we have three distinctly different energy

11 resource planning processes in the state of Michigan (not including the general rate case

12 process which has a projected test year forecast component as well). The Renewable

13 Energy Plan (REP), which was initiated by Act 295 and was amended by Public Act 342

14 of 2016 also has a two-year plan component.

15 Q. What are you recommending to facilitate coordination of multiple planning

16 processes?

17 A. In its Consumers Energy Company Order U-17918 (See page 23) issued before the

18 adoption of Act 342, the Commission deferred the request by the Great Lakes Renewable

19 Energy Association to undertake the examination of solar resources (including customer–

20 owned renewable resources) in the context of a PSCR plan proceeding. The Commission

21 cited concerns about the then-existing uncertainties introduced by the Michigan

22 legislature discussion and consideration of resource planning by electric utilities. The

23 Commission expressed reluctance to accept the GLREA proposal because of those

- 8 -

328

1 discussions and the possible impact on resource planning and pricing implications for

2 customer-owned generation and related resource planning issues.

3 Q. With the passage of Act 342, do those legislative uncertainties continue to persist?

4 A. No. They do not.

5 Q. That being the case, what do you recommend the Commission do to enhance

6 resource planning in Michigan?

7 A. The Commission can readily integrate and coordinate the multiple planning processes

8 that the Legislature has imposed on the Commission and utilities. Act 342 established a

9 comprehensive integrated resource planning process. The typical IRP Process has a long

10 planning horizon typically lasting 20 years. That long term planning horizon is essential

11 since certain resources take many years to design, develop, obtain operational permits,

12 secure environmental approvals, and get operational. IRP resource portfolios are decided

13 on the basis of longer term planning scenarios are data and resource intensive and a

14 comprehensive and planning process.

15 The PSCR planning process requires the utility to prepare an annual PSCR plan and five-

16 year forecast, and also to file a retrospective reconciliation review process.

17 The Renewable Energy Plan process requires a two-year planning horizon limited to

18 renewable resources. This process requires CECO to formulate three (possibly four if

19 rate cases are included) different resource plans.

- 9 -

329

1 Q. Can the MPSC readily undertake a coordinated resource planning process utilizing

2 its power under all statutes, including Act 304, Act 295, and Act 342?

3 A. Yes. The ratepayers will be well served if the Commission and utilities coordinate and

4 harmonize these planning processes. For example if the IRP process identified a

5 considerable magnitude of relatively low-cost solar PV resource potential but that

6 resource magnitude and cost estimate was not used in developing the PSCR five year

7 plan, the PSCR and five-year forecast would be out of synch with the IRP process and

8 development of a preferred/optimal resource portfolio. This would similarly be true if a

9 two-year REP were developed independently, separate and apart from the IRP or the

10 PSCR process and conflicted with the IRP preferred plan portfolio. CECO’s rate case

11 process could also further complicate planning activities and could result in the utility

12 adopting a less than optimal resource portfolio designed to ensure a reasonable level of

13 resources available to satisfy customer needs. There is a likelihood that conflicts and

14 omissions will occur in the planning processes if they are not carefully coordinated. The

15 Commission should direct CECO to use the parameters and assumptions identified and

16 carry that information and analysis into the PSCR, REP development process, as well as

17 general rate case proceedings.

18 Q. What are your recommendations concerning this case?

19 A. CECO has not explained in this Application and filing whether or not or how it is

20 intending to satisfy the Act 342 statutory requirement of achieving not less than 35% of

21 CECO’s electric needs by a combination of energy waste reduction and renewable

22 energy. CECO should provide an explanation of their intent to comply with this

23 important statutory requirement.

- 10 -

330

1 The Commission should require that CECO closely coordinate its forecasting and the

2 Integrated Resource Planning, PSCR planning, and Renewable Energy Planning

3 processes in upcoming IRP, PSCR, REP and general rate case proceedings to enhance

4 their effectiveness.

5 Q. Does this complete your testimony?

6 A. Yes.

- 11 -

331

1 JUDGE THOITS: Biomass Merchant Plants.

2 MR. WATERS: Thank you, your Honor.

3 Pursuant to the agreement of the parties, I move that the

4 direct testimony of Tom Vine, consisting of a cover page

5 and pages 2 through 9 of questions and answers, and the

6 revised rebuttal testimony of Thomas Vine, consisting of

7 a cover page and pages 2 through 8 of questions and

8 answers, be bound into the record. I also move that

9 Exhibits BMP-1, 2, 3, 4, 5, 6, 7, and 8 be admitted into

10 evidence.

11 JUDGE THOITS: Is there any objections to

12 the binding in of this testimony or the admission of

13 these exhibits? (No response.)

14 Hearing none, the testimony of Thomas

15 Vine is bound into the record, and Exhibits BMP-1 through

16 BMP-8 are admitted.

17 (Testimony bound in.)

18 - - -

19

20

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 332

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) necessary for CONSUMERS ENERGY ) Case No. U-18231 COMPANY to fully comply with ) Public Act 295 of 2008. ) )

DIRECT TESTIMONY

OF

THOMAS V. VINE

ON BEHALF OF

VIKING ENERGY OF MCBAIN, LLC,

VIKING ENERGY OF LINCOLN, LLC

&

HILLMAN POWER COMPANY, LLC

333

1 INTRODUCTION

2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.

3 A. My name is Thomas V. Vine and my business address is 6751 W. Gerwoude Drive,

4 McBain, Michigan.

5

6 Q. BY WHOM AND IN WHAT CAPACITY ARE YOU EMPLOYED?

7 A. I am employed by ENGIE NA as Plant Manager for Viking Energy of McBain, LLC.

8 ENGIE NA is owner and operator of Viking Energy of McBain, LLC and Viking

9 Energy of Lincoln, LLC, also known as McBain Power Station and Lincoln Power

10 Station, respectively.

11

12 Q. PLEASE BRIEFLY DESCRIBE THE PLANTS ON WHOSE BEHALF YOU

13 ARE TESTIFYING.

14 A. The McBain, Lincoln and Hillman facilities are biomass power plants that produce

15 electricity from renewable resources. The McBain and Lincoln Power Stations are

16 merchant plants consisting of electric generating equipment and associated facilities,

17 each with a nameplate capacity of 16.3 MWe (megawatts electric) net. With good

18 management practices and our experience with the equipment, we are able to achieve

19 an actual capacity up to 18 MWe at the plants. Hillman Power Station is a merchant

20 plant consisting of electric generating equipment and associated facilities with a

21 capacity of approximately 18 MWe net. The Viking plants are located in McBain &

22 Lincoln, Michigan, the Hillman plant is located in Hillman, Michigan. None of the

2

334

1 three plants are owned or operated by an electric utility. All three are certified as

2 Qualifying Facilities (“QFs”) under PURPA.

3

4 Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND

5 BUSINESS EXPERIENCE.

6 A. I have held the position of Plant Manager at Viking Energy of McBain from July 2008

7 until the present. Between 2005 and 2008, I was the Maintenance Manager for the

8 University of Iowa Power Plant. From 1981 to 2005, I worked in the commercial

9 nuclear power field holding various positions including Manager, Engineering

10 Programs; Supervisor, Radwaste; Project Engineer, Spent Fuel Storage; and Principal

11 Engineer. I hold Bachelor of Science degrees from Temple University in Architecture

12 and Civil Engineering & Construction Technology. I have also completed graduate

13 courses in Engineering at the Pennsylvania State University.

14

15 Q. PLEASE DESCRIBE YOUR JOB RESPONSIBILITIES.

16 A. I am responsible for the operation and maintenance of the McBain Power Station.

17 Additionally, I am responsible for certain asset management functions for both the

18 McBain and Lincoln Power Stations.

19

20 Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THE MICHIGAN PUBLIC

21 SERVICE COMMISSION?

22 A. Yes. I testified in Consumers Energy Company's ("Consumers") 2009 PSCR

23 reconciliation proceeding, MPSC Case No. U-15675-R, its 2010 PSCR reconciliation

3

335

1 proceeding, MPSC Case No. U-16045-R, its 2011 PSCR reconciliation proceeding,

2 MPSC Case No. U-16432-R, its 2012 PSCR reconciliation proceeding, MPSC Case No.

3 U-16890-R, its 2013 PSCR reconciliation proceeding, MPSC Case No. U-17095-R,

4 2014 PSCR reconciliation proceeding, MPSC Case No. U-17317-R, its 2015 PSCR

5 reconciliation proceeding, MPSC Case No. U-17678-R, its 2016 PSCR reconciliation

6 proceeding, MPSC Case No. U-17981-R, and MPSC Case No. U-18090.

7

8 Q. ON WHOSE BEHALF ARE YOU SUBMITTING YOUR TESTIMONY IN THIS

9 PROCEEDING?

10 A. My testimony is on behalf of Viking Energy of McBain and Viking Energy of Lincoln.

11 I am also testifying on behalf of Hillman Power Company, LLC.

12

13 Q. DO YOU HAVE ANY CONCERNS WITH THE PROPOSED RENEWABLE

14 ENERGY PLAN AS PRESENTED?

15 A. Yes, the renewable energy options presented in Consumers' plan are viable; however,

16 there are alternatives available to supply a portion of the desired new renewable capacity

17 that would offer advantages for the ratepayers of Michigan. Inclusion of other options

18 for a portion of the requested renewable capacity would add diversity of generation

19 resources, operating characteristics, and risk profiles.

20

21 Q. PLEASE EXPLAIN WHAT YOU MEAN BY 'OTHER OPTIONS.'

22 A. There are existing renewable energy assets within the State of Michigan that are

23 available for contract that would offer significant benefits to the ratepayer and the State,

4

336

1 including McBain, Lincoln and Hillman. Many of these available assets are baseload

2 or dispatchable sources, as opposed to the solely intermittent sources being proposed.

3 They exist currently and therefore do not carry with them the inherent risks associated

4 with developing new projects, which include regulatory (i.e. permitting), economic, and

5 construction-related uncertainties. These available alternative assets also offer direct

6 and indirect benefits related to the electricity they produce, and at a comparable or lower

7 price to that proposed by the utility in this plan. These existing renewable energy

8 resources also have a proven record of reliability and service. They provide the

9 additional benefit that their owners bear the financial and operational risk, rather than

10 burdening the ratepayer with those obligations.

11

12 Q. WHAT ARE SOME OF THE BENEFITS THESE EXISTING RENEWABLE

13 ENERGY PROVIDERS BRING TO THE RATEPAYERS AND OTHERS IN

14 THE STATE OF MICHIGAN?

15 A. Speaking only for the facilities on whose behalf I am testifying, Viking Energy of

16 Lincoln, LLC and Viking Energy of McBain, LLC and Hillman Power Company, LLC,

17 these facilities not only supply reliable renewable energy with availability and capacity

18 factors that far exceed those of wind and solar options, they do so while having a long

19 term beneficial economic impact on the communities where they operate. They provide

20 77 full-time well-paying jobs and hundreds more indirect jobs in economically

21 disadvantaged rural communities.

22

5

337

1 Q. WHAT OTHER BENEFITS DO THESE EXISTING RENEWABLE ENERGY

2 PROVIDERS BRING TO THE STATE OF MICHIGAN?

3 A. They support the timber industry by creating an economic outlet for

4 approximately 30% of the harvest that has no other beneficial use for energy production.

5 This process has significantly reduced the number of forest fires in Michigan, unlike

6 states without an effective means of reducing fire loading in their forests which have

7 experienced significant wildfires. Michigan did have such a wildfire problem prior to

8 the existence of the state's biomass power plants.

9 The biomass power plants are also the only proven, reliable beneficial use outlet

10 for Michigan’s scrap tires. Just these three facilities consume over 34,000 tons of used

11 tires as fuel annually. This equates to approximately 3.4 Million passenger car tires

12 each year, according to data published by the Michigan Department of Environmental

13 Quality - Scrap Tire Council. No other beneficial use of used tires has proven to be as

14 effective or reliable. Disposal of used tires is a significant environmental problem that

15 has been solved, that can re-occur without these BMPs operating into the future.

16 Additionally, Lincoln and McBain facilities are helping to solve the significant

17 problem of used railroad crosstie disposal. All used railroad crossties replaced in

18 Michigan can be sent to these two facilities at no cost. Additionally, many crossties

19 from outside Michigan are brought to these facilities to be used as fuel. According to

20 the railroad industry, approximately 29 million railroad crossties are replaced annually

21 through routine maintenance. There are few options available to deal with this volume

22 of material. In 2017 alone, the McBain facility consumed over 42,000 tons of crossties

6

338

1 as fuel. That is almost 600,000 used railroad crossties that would have likely ended up

2 in landfills if not for this option for beneficial reuse.

3 Wind and Solar, while effective renewable energy options, do not provide these

4 benefits. They provide very few long-term jobs in these economically disadvantaged

5 rural communities, and they do not have the lasting economic impact in the communities

6 where they are located. They do not offer the opportunities for beneficial reuse of

7 materials that would likely otherwise be landfilled, creating environmental and health

8 hazards or adding to already stressed landfills.

9 There are also many benefits that biomass facilities bring that are of direct

10 benefit to utility ratepayers. They provide local, distributed generation, close to the

11 loads they serve. They provide voltage and reactive power support that inverter-based

12 technologies such as wind and solar cannot provide efficiently. The Viking facilities

13 have the ability to runback and islandize upon a loss of the electric grid, and thereby

14 remain in standby to immediately re-tie to the grid as soon as it is restored by the utility.

15 This has the same impact as having Black-start capability. They can also be easily

16 retrofitted to add Black-start capabilities if desired. They have the ability to be

17 dispatched on demand and are not reliant on favorable conditions, such as wind

18 velocities and sunlight intensity to produce the required power to meet a given load.

19

20 Q. DO YOU BELIEVE THAT THE PROPOSED RENEWABLE ENERGY PLAN

21 SHOULD BE ADOPTED?

22 A. Yes, so long as the existing QFs (including Lincoln, McBain and Hillman) have their

23 contracts renewed. The principal reason for doing so is that Consumers Energy is

7

339

1 already relying upon the power from these three projects in its resource planning. As

2 the Commission noted in MPSC Case No. U–18090, the "existing QFs with expiring

3 contracts should have their contracts renewed at full avoided costs rate, whether or not

4 the company forecasts a capacity shortfall over the planning horizon. [T]he capacity

5 and energy supplied by these QFs is already taken into account in the Company's

6 determinations about future capacity additions.” (May 31, 2017 Order, p.18; See also,

7 November 21, 2017 Order, p. 3; and February 22, 2018 Order, p 18).

8

9 Q. WHAT DO YOU PROPOSE?

10 A. I propose that Consumers Energy’s Renewable Energy Plan be approved so long as the

11 existing QFs (including Lincoln, McBain and Hillman) have their contracts renewed.

12 Even if the 56 MWe of capacity from Lincoln, McBain and Hillman were to be counted

13 against the 625MWe of capacity proposed in Consumers' proposed Renewable Energy

14 Plan, and the above Commission Order would not seem to contemplate doing so, that

15 amount of capacity is less than 10% of the total proposed capacity addition. I expect

16 that Lincoln, McBain and Hillman, which are all highly reliable renewable energy

17 facilities, will be able to negotiate contracts with rates at or below the cost anticipated

18 by Consumers Energy’s Renewable Energy Plan and that those contracts would include

19 the transfer of Renewable Energy Credits to Consumers Energy. This proposal is

20 entirely consistent with Consumers Energy’s Renewable Energy Plan.

21

8

340

1 Q. DOES THIS COMPLETE YOUR TESTIMONY IN THIS PROCEEDING?

2 A. Yes.

9

341

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter, on the Commission’s own ) motion, regarding the regulatory reviews, ) revisions, determinations, and/or approvals ) necessary for CONSUMERS ENERGY ) Case No. U-18231 COMPANY to fully comply with ) Public Act 295 of 2008. ) )

REVISED REBUTTAL TESTIMONY

OF

THOMAS V. VINE

ON BEHALF OF

CADILLAC RENEWABLE ENERGY, LLC, GENESEE POWER STATION LIMITED PARTNERSHIP, GRAYLING GENERATING STATION LIMITED PARTNERSHIP, HILLMAN POWER COMPANY, LLC, TES FILER CITY STATION LIMITED PARTNERSHIP, VIKING ENERGY OF LINCOLN, LLC & VIKING ENERGY OF MCBAIN, LLC

342 THOMAS V. VINE REBUTTAL TESTIMONY

1 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.

2 A. My name is Thomas V. Vine and my business address is 6751 W. Gerwoude Drive,

3 McBain, Michigan.

4

5 Q. BY WHOM AND IN WHAT CAPACITY ARE YOU EMPLOYED?

6 A. I am employed by ENGIE NA as Plant Manager for Viking Energy of McBain, LLC.

7 ENGIE NA is owner and operator of Viking Energy of McBain, LLC and Viking

8 Energy of Lincoln, LLC, also known as McBain Power Station and Lincoln Power

9 Station, respectively.

10

11 Q. DID YOU PROVIDE DIRECT TESTIMONY IN THIS MATER?

12 A. Yes.

13

14 Q. ON WHOSE BEHALF ARE YOU TESTIFYING?

15 My testimony is on behalf of Cadillac Renewable Energy, LLC, Genesee Power Station

16 Limited Partnership, Grayling Generating Station Limited Partnership, Hillman Power

17 Company, LLC, TES Filer City Station Limited Partnership, Viking Energy of Lincoln,

18 LLC and Viking Energy of McBain, LLC.

19

20 Q. WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY?

21 A. My testimony responds to a portion of the direct testimony of Geoffrey C. Crandall who

22 is testifying on behalf of the Great Lakes Renewable Energy Association.

23

2

343 THOMAS V. VINE REBUTTAL TESTIMONY

1 Q. ARE YOU SPONSORING ANY EXHIBITS?

2 A. Yes. I am sponsoring Exhibits BMP-1, BMP-2, BMP-3, BMP-4, BMP-5, BMP-6 and

3 BMP-7.

4

5 Q. WHAT ARE THESE EXHIBITS?

6 A. Exhibits BMP-1, BMP-2, and BMP-3 are portions of Consumers Energy Company’s

7 ("Consumers") publicly-available Annual Reports from 2017, 2016 and 2015. Exhibit

8 BMP-4 is Mr. Crandall's response to BMP discovery request 18231-BMPs-GLREA-

9 2(i) on behalf of the Great Lakes Renewable Energy Association. Exhibit BMP-5 is an

10 Excel spreadsheet calculating the respective costs of solar and biomass energy that was

11 prepared under my supervision and direction. It is based upon the data in Attachment 1

12 to the MPSC's November 21, 2017 Order in U-18090, as modified by the MPSC in its

13 February 22, 2017 Order to reflect a change in ICE. Exhibit BMP-6 is selected data

14 from the United States Energy Information Administration’s EIA-923 Report, which is

15 publicly available online at https://www.eia.gov/electricity/data/eia923/ BMP-7 is a

16 discovery response from Consumers in this case.

17

18 Q. WHAT IS THE FIRST PORTION OF MR. CRANDALL'S TESTIMONY TO

19 WHICH YOU WISH TO RESPOND?

20 A. In his testimony, page 6, lines 9 through 10, Mr. Crandall states that "Hot, sunny, high-

21 moisture periods in Michigan are generally the conditions when electric system strain

22 is the most acute. These are the conditions that are optimal for solar system production

23 and output.”

3

344 THOMAS V. VINE REBUTTAL TESTIMONY

1 Q. WHAT IS YOUR VIEW OF THIS TESTIMONY?

2 A. While Mr. Crandall's testimony makes some valid points, it is incomplete with

3 respect to properly valuing various forms of energy and capacity, especially renewable

4 energy and capacity. His testimony indicates that Consumers is a summer-peaking

5 utility and that its need for capacity and energy is greatest during the summer when solar

6 facilities are at their peak availability. This is only partially true. Mr. Crandall fails to

7 recognize that Consumers' winter electric load is also very high, and that solar facilities

8 in Michigan are at their lowest availability during those winter months. Mr. Crandall

9 also fails to recognize that Consumers' monthly gigawatt hours sales are significant and

10 relatively consistent in February, March, April, May, June, September, October and

11 November. Consumers' load requirements are reflected in my Exhibits BMP-1, BMP-

12 2, BMP-3 and BMP-7. Those exhibits reflect the total gigawatt hour sales for each

13 month of the past three years.

14 Mr. Crandall is judging the value of solar generating principally by narrowly

15 looking at Consumers' absolute peak load. He seemingly ignores the fact that even

16 during Consumers' peak load period in July and/or August, solar projects have a

17 capacity factor of less than 30%, and ignores their diminished availability during the

18 remainder of the year, including during Consumers' winter peak load period. Mr.

19 Crandall also fails to recognize that there is an offset between the solar peak and the

20 peak electric load on a daily basis, which requires some sort of storage capability to

21 effectively shift the available solar capacity to match the electric peak. If a pumped

22 storage facility such as Consumers Ludington plant is used for this purpose, then

23 approximately 25% of the energy generated by the solar resource is lost due to the

4

345 THOMAS V. VINE REBUTTAL TESTIMONY

1 inherent inefficiency of this type of storage system. These factors must be considered

2 in analyzing which resources are best suited to meet energy and capacity requirements

3 and cannot simply be glossed over with generalized statements.

4

5 Q. IS THERE ANOTHER PORTIONS OF MR. CRANDALL'S TESTIMONY YOU

6 WISH TO RESPOND TO?

7 A. Yes. On pages 6 and 7 of his testimony, Mr. Crandall states that: “For purposes of Act

8 342, Act 295, and the Act 304 process, solar resources are an economically superior

9 resource choice. There is a natural synergy here for solar technology, which matches

10 electric system peak load stress with the operational prime time and conditions for the

11 operation and contribution from solar systems." (emphasis added) Mr. Crandall offers

12 no economic or financial analysis to support the claim in the first sentence. Indeed, in

13 his discovery response attached as Exhibit BMP-4, he admits that he "did not develop

14 or utilize financial calculations or workpapers to support his statement that "solar

15 resources are an economically superior resource choice." Moreover in reaching his

16 conclusion, Mr. Crandall reviewed and considered information from Nevada and no

17 similar information from Michigan. Exhibit BMP-4. Nevada's meteorological

18 conditions are significantly different from Michigan's and should not be relied upon to

19 draw conclusions regarding the value of in Michigan.

20

21

5

346 THOMAS V. VINE REBUTTAL TESTIMONY

1 Q. IS SOLAR GENERATION AN ECONOMICALLY SUPERIOR RESOURCE

2 CHOICE?

3 A. No. Under the avoided cost construct that is currently before the MSPC (U-18090) and

4 which is still subject to appeal, the levelized cost of generation from a solar facility

5 would be approximately $100/MWh, which significantly exceeds the cost of biomass

6 power. Exhibit BMP-5. The foregoing price of solar power is a function of the fact that

7 a solar facility will receive ZRCs for 50% of nameplate capacity under MISO Resource

8 Adequacy Rules, but only generate approximately 15% capacity factor in Michigan.

9 Exhibit BMP-5. With regards to Mr. Crandall’s assertion in the second sentence

10 regarding a supposed natural synergy for solar technology, solar output is actually

11 highest around 12 pm, but the MISO System Peak for 2017 was during Hour Ending

12 17. Often, solar output is only 10%-20% of nameplate capacity during Hour Ending 17.

13 Thus, this technology does not “match” peak load stress.

14

15 Q. CAN YOU IDENTIFY THE CAPACITY AND AVAILABILITY FACTORS FOR

16 THE BIOMASS FUELED GENERATION FACILITIES?

17 A. Yes. Hillman, Lincoln, McBain and TES Filer City are operated as baseload generating

18 plants. Their average capacity factors for the past three years, as measured against

19 generator nameplate ratings, were as follows: Hillman's average capacity factor was

20 84.16%, Lincoln's average capacity factor was 100.86%, McBain's average capacity

21 factor was 100.9%, and TES Filer City Station's average capacity factor was 94.92%.

22 23

6

347 THOMAS V. VINE REBUTTAL TESTIMONY

1 Q. WHAT ABOUT THE OTHER BIOMASS FUELED GENERATION

2 FACILITIES?

3 A. Cadillac, Genesee and Grayling are dispatchable generating plants. Cadillac's

4 availability factor for the past two years averaged 95.93%. Genesee's availability factor

5 for the past two years averaged 94.55%. Grayling's availability factor averaged 92.24%

6 during the same time period.

7

8 Q. WHAT IS THE EXPECTED ANNUAL CAPACITY FACTOR FOR A SOLAR

9 PROJECT?

10 A. EIA 923 reports output for six existing solar facilities in Michigan, operated by either

11 Consumers or DTE: Dominos Farms, Ford World Headquarters, Greenwood Solar

12 Farm, Western Michigan Solar Gardens, Grand Valley Solar Gardens, and Demille

13 Solar Farm. In 2017, the annual capacity factor of these facilities ranged between 10%

14 and 18%, with an average of 14.5%. Exhibit BMP-6.

15

16 Q. WHAT CONCLUSIONS DO YOU DRAW FROM THE ABOVE?

17 A. Generally, I conclude that each form of renewable energy has attributes that meet

18 different system needs. While solar resources do contribute towards summer peak

19 loads, they have limitations. In many ways, baseload renewable energy or dispatchable

20 renewable energy is more valuable than any intermittent form of renewable energy.

21 This does not mean that intermittent renewables such as solar and wind generators are

22 not valuable. It is to say, however, that intermittent renewable generation is not a

23 substitute for baseload or dispatchable renewable generation fueled by biomass or

7

348 THOMAS V. VINE REBUTTAL TESTIMONY

1 landfill gas. These facilities offer fuel diversity from locally sourced fuels that can be

2 stored on-site. They are not reliant on favorable meteorological conditions to generate

3 power, nor is their price determined by large commodities markets. Moreover, I reject

4 Mr. Crandall's unsupported conclusion that "solar resources are an economically

5 superior resource choice" for all of the reasons stated above.

8

349

1 JUDGE THOITS: Is there any other

2 testimony or exhibits anyone wishes to offer? (No

3 response.)

4 Hearing none, it appears we've covered

5 all that. Is there anything else anyone would like to

6 offer today? (No response.)

7 All right. Thank you, all. I appreciate

8 it. And I'm not sure what we have next, but I don't

9 think there's another hearing after this that I'm aware

10 of.

11 MS. HESTON: No. The next time in the

12 case schedule is filing of initial briefs.

13 JUDGE THOITS: O.K. I appreciate that.

14 Thank you. We are adjourned.

15 MR. WATERS: Thank you, your Honor.

16 MS. HESTON: Thank you, your Honor.

17 MS. UITVLUGT: Thank you.

18 MR. SATTLER: Thank you.

19 JUDGE THOITS: Thank you.

20 (At 9:18 a.m., the hearing concluded.)

21 - - -

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865 350

1

2

3 C E R T I F I C A T E

4 I, Lori Anne Penn, do hereby certify that I

5 reported in stenotype the proceedings had in the

6 within-entitled matter, that being Case No. U-18231,

7 before Jonathan F. Thoits, Administrative Law Judge with

8 MAHS, at the Michigan Public Service Commission, Lansing,

9 Michigan, on Thursday, May 31, 2018; and do further

10 certify that the foregoing transcript, consisting of

11 Volume 4, is a true and correct transcript of my

12 stenotype notes.

13

14

15 ______

16 Lori Anne Penn, CSR-1315 33231 Grand River Avenue 17 Farmington, Michigan 48336 [email protected] 18

19

20 Dated: May 31, 2018

21

22

23

24

25 Metro Court Reporters, Inc. 248.360.8865