STATE OF IOWA DEPARTMENT OF COMMERCE BEFORE THE IOWA STATE UTILITIES BOARD __________________________________________________________________ IN RE: : : APPLICATION OF MIDAMERICAN : DOCKET NO. RPU-2013- ENERGY COMPANY FOR A : DETERMINATION OF : RATEMAKING PRINCIPLES : ____________________________________:______________________________ DIRECT TESTIMONY OF O. DALE STEVENS, II 1 Q. Please state your name and business address for the record. 2 A. O. Dale Stevens, II, 4299 Northwest Urbandale Drive, Urbandale, Iowa 50322. 3 Q. By who are you employed and in what position? 4 A. I am employed by MidAmerican Energy Company as Manager, Market 5 Assessment. 6 Q. Please describe your responsibilities as Manager, Market Assessment. 7 A. I am responsible for overseeing the electric market price forecasts, fuel market 8 projections, resource planning and evaluation, electric transmission analyses and 9 environmental modeling. 10 Q. Please describe your education and business experience. 11 A. I graduated from the University of Missouri at Rolla with a Bachelor of Science 12 degree in Electrical Engineering in 1972. Since that time, I have been employed 13 by MidAmerican Energy Company (“MidAmerican” or “Company”), its 14 predecessors, or its affiliates, in a variety of planning and managerial positions. I 15 joined Iowa Power and Light Company, a predecessor of the Company, in 1972 16 as a Scheduler. During my career, I have worked in System Planning (1974- 1 1980), Operational Planning (1980-1986), Rates (1986-1995) and Market 2 Assessment (1995-present). In 1991, I was promoted to manager of the Electric 3 Rate Department for Midwest Power Systems Inc., a predecessor of the Company. 4 In 1995, I assumed the role of manager of Market Assessment for MidAmerican, 5 the position I hold today. PURPOSE OF TESTIMONY 6 Q. What is the purpose of your prepared direct testimony? 7 A. The purpose of my testimony is to address various aspects of MidAmerican’s 8 application for a determination of ratemaking principles (“Ratemaking Principles 9 Application”) concerning the Company’s proposal to develop up to 1,050 MW of 10 new wind power generation—the Wind VIII Iowa Project (“Wind VIII”). In the 11 course of my testimony, below, I address the topics covered by the following 12 Board “subrules”: 13 ¾ Projected typical annual hours of operation, output and capacity factors for 14 Wind VIII in response to subrule 41.3(1)“c”; 15 ¾ Impact on Electric Supply Reliability in response to subrule 41.3(4); 16 ¾ Impact on Fuel Diversity and Use of Non-traditional Supply Sources, in 17 Iowa, in response to subrule 41.3(4); and 18 ¾ MidAmerican’s consideration of Other Long-Term Supply Options in 19 response to subrule 41.3(6). 20 I will also describe the analysis performed, under my direction, of MidAmerican’s 21 power production costs that MidAmerican witness Mark Yocum uses to conduct 22 his customer impact analysis. (Please note: The above references to “subrules” 23 actually refer to the Iowa Utilities Board’s proposed Chapter 41 rules that the 2 1 Iowa Utilities Board did not adopt, but that remain available for utilities to 2 consider in formulating ratemaking principles filings.) PROJECTED HOURS OF OPERATION FOR WIND VIII 3 Q. Please describe the projected hours of operation for Wind VIII. 4 A. Exhibit __ (ODS-1), Schedule 1 contains a projection of Wind VIII’s annual 5 hours of operation, energy output and capacity factor, based on a projected 1,050 6 MW of new wind generation. This Schedule is in response to paragraph “c” of 7 the proposed Iowa Utilities Board (“Board”) subrule 41.3(1). The actual hours of 8 operation, output and capacity factor will depend on factors such as the final 9 location of Wind VIII turbines. Based on the above projection, and our 10 experience at MidAmerican’s existing wind power projects, I expect all of the 11 Wind VIII sites will operate over 7,000 hours annually at an expected overall 12 average capacity factor of about 36.0% when fully developed.1 13 Wind-powered generation is largely dependent on the wind as a fuel source, 14 and hence, is not dispatchable in the traditional sense of conventional generation.2 15 (Historically “dispatchable” referred to a utility’s ability to increase or decrease 16 energy production without tripping the unit offline as demand for energy varied.) 17 Therefore, the operating characteristics for each Wind VIII site must be estimated 1 The operation of a wind turbine will vary from one year to another based on the wind resource, scheduled maintenance, forced outages, possible transmission system operating guides and economics. 2 To address concerns with the intermittency of the wind resource, the Midwest Independent Transmission System Operator (“MISO”) developed a Dispatchable Intermittent Resource (“DIR”) methodology that allows intermittent resources such as wind to be managed in a manner that regional system requirements can be optimized. Wind generators are allowed to submit a bid offer stating that the unit(s) would be dispatched economically as the intermittent resource permits. 3 1 from meteorological data applied to the wind turbine power curve,3 and then 2 adjusted for the wind power projected losses.4 3 The process of modeling the above-mentioned projections for Wind VIII 4 differs from similar projections for non-intermittent, dispatchable electric 5 generating units (e.g., coal or gas-fired). While the Midwest Independent 6 Transmission System Operator (“MISO”) allows intermittent resources (e.g., 7 wind generation) to be economically dispatched, wind generation is dependent on 8 the level of wind resource available above a base threshold, whereas, the operator 9 of traditional generation has control of the full resource. Therefore, the process of 10 modeling wind is based on dispatching an expected wind-based output profile 11 against a price curve with the dispatch prices as the only limitation to operation. WIND VIII - MEETS CUSTOMER NEEDS 12 Q. Why do you believe construction of Wind VIII is a reasonable step for 13 MidAmerican to undertake? 14 MidAmerican is a state rate-regulated utility with a service obligation to provide 15 for its customers electric needs. That obligation includes prudently planning to 16 provide reasonable and adequate electric service and facilities to its customers, as 17 measured by a variety of customer needs, at just and reasonable rates. 18 MidAmerican engages in a number of prudent measures to ensure that it meets 3 The wind turbine power curve is the relationship of the generator output to the wind speed. This relationship is uniquely defined for each individual type of wind turbine based on its design. 4 Operating characteristics for a wind power project include wake and array losses (i.e., the impact one wind turbine has on another as a result of the direction of the wind and the relative positions of the turbines), icing and blade degradation, electrical losses (collector system, generator step-up transformer and interconnection line), parasitic losses (FAA lighting, project lights, cold weather heaters, etc.), power curve losses, availability (scheduled and forced outages), high speed hysterisis, high speed shutdown, cold weather impacts, control losses, collector substation maintenance, and other events. 4 1 customer needs both in the short and long term. These needs of customers 2 include, without limitation, the following: 3 • Environmental compliance needs: increasing the supply of zero-emissions 4 electricity to meet expected future legislative and regulatory requirements 5 limiting carbon and other emissions; 6 • Customer pricing needs: Providing revenue streams that are likely to 7 offset the costs of generation and/or provide a reasonably priced energy 8 source necessary to displace energy from carbon-based generation 9 resources; 10 • Fuel diversity needs: Reducing customer exposure to volatile cost sources 11 of energy; 12 • Economic development needs: Promoting economic development in 13 Iowa; 14 • Iowa energy policy needs: Supporting Iowa’s role as a renewable energy 15 leader; 16 • Energy needs: increasing the supply of low cost energy; and 17 • Capacity needs: Deferring projected capacity deficits. 18 The proposed Wind VIII project is expected to meet all of these customer needs. 19 Environmental Compliance. Wind VIII offers potential environmental 20 benefits including: 1) supports full compliance with current and projected 21 environmental regulation requirements, 2) mitigates federal regulations that 22 implement greenhouse gasses (“GHG”) permit limits based on post-control 23 installation criteria, 3) assistance with potential regional haze restriction 24 requirements, 4) assistance with potential New Source Performance Standards 5 1 (“NSPS”) limits of 1,000 lbs/MWh for all new coal and natural gas-fueled electric 2 generating plants, and 5) assistance with potential limits on GHG emissions from 3 existing fossil-fueled electric generating plants. Witness Jennifer McIvor will 4 address the environmental benefits more fully in her testimony. 5 Customer Pricing. Wind VIII can be developed at a reasonable cost 6 when compared to other feasible alternative sources of supply. As MidAmerican 7 witness Yocum testifies, MidAmerican projects that it will be able to provide 8 customers with Wind VIII at no net cost. 9 Fuel Diversity. Wind VIII also enhances MidAmerican’s fuel diversity 10 while reducing dependence on fossil fuel resources and fuel transportation. Wind 11 VIII increases MidAmerican’s renewable energy mix in its generation portfolio. 12 Economic Development. In addition, wind generation promotes 13 economic development and provides value to rural areas. Witnesses Dean Crist 14 and Adam Wright will address these benefits further in their testimony. 15 Supports Energy Policy. Moreover, Wind VIII is in line with Iowa’s 16 stated public policy to encourage renewable energy resource development in 17 Iowa, as indicated by MidAmerican witness Dean Crist. 18 The state of Iowa, with 5,137 MW, is currently third behind only Texas 19 (12,212 MW) and California (5,549 MW) in the amount of nameplate wind 20 capacity installed as of the fourth quarter of 2012.