Docket No. UE 296 Exhibit PAC/100 Witness: Brian S. Dickman BEFORE THE PUBLIC UTILITY COMMISSION OF OREGON PACIFICORP ___________________________________________________________ Direct Testimony of Brian S. Dickman April 2015 PAC/100 Dickman/i DIRECT TESTIMONY OF BRIAN S. DICKMAN TABLE OF CONTENTS QUALIFICATIONS ........................................................................................................... 1 PURPOSE AND SUMMARY OF TESTIMONY ............................................................. 1 SUMMARY OF PACIFICORP’S 2016 TAM FILING ..................................................... 2 DETERMINATION OF NPC............................................................................................. 5 DISCUSSION OF MAJOR COST DRIVERS IN NPC ..................................................... 6 EIM COSTS AND BENEFITS .......................................................................................... 9 Summary and Background .............................................................................................. 9 Inter-Regional Dispatch Benefits .................................................................................. 16 Flexibility Reserve Benefits .......................................................................................... 19 GRID MODELING CHANGES TO IMPROVE NPC FORECAST ACCURACY ........ 21 Day-Ahead and Real-Time Balancing Transactions .................................................... 22 Thermal Plant Forced Outages ..................................................................................... 30 Start-Up Energy ............................................................................................................ 35 Hourly Regulation Reserve Requirement ..................................................................... 37 Avian Compliance ........................................................................................................ 39 Wind Power Purchase Agreements ............................................................................... 40 CHANGES TO THE COMPANY’S RESOURCE PORTFOLIO ................................... 41 COMPLIANCE WITH TAM GUIDELINES .................................................................. 44 ATTACHED EXHIBITS Exhibit PAC/101—Oregon-Allocated Net Power Costs Exhibit PAC/102—Net Power Costs Report Exhibit PAC/103—Update to Other Revenues Exhibit PAC/104—Energy Imbalance Market Costs Confidential Exhibit PAC/105—Energy Imbalance Market Import and Export Summary Exhibit PAC/106—List of Expected or Known Contract Updates UE 296—Direct Testimony of Brian S. Dickman PAC/100 Dickman/1 1 Q. Please state your name, business address, and present position with 2 PacifiCorp d/b/a Pacific Power (PacifiCorp or Company). 3 A. My name is Brian S. Dickman. My business address is 825 NE Multnomah 4 Street, Suite 600, Portland, Oregon 97232. My title is Director, Net Power Costs. 5 QUALIFICATIONS 6 Q. Briefly describe your education and professional experience. 7 A. I received a Master of Business Administration from the University of Utah with 8 an emphasis in finance and a Bachelor of Science degree in accounting from Utah 9 State University. Before joining the Company, I was employed as an analyst for 10 Duke Energy Trading and Marketing. I have been employed by the Company 11 since 2003, including positions in revenue requirement and regulatory affairs. 12 I assumed my current role managing the Company’s net power cost group in 13 March 2012. 14 Q. Have you testified in previous regulatory proceedings? 15 A. Yes. I have filed testimony in proceedings before the public utility commissions 16 in Oregon, California, Idaho, Utah, and Wyoming. 17 PURPOSE AND SUMMARY OF TESTIMONY 18 Q. What is the purpose of your testimony in this proceeding? 19 A. I present the Company’s proposed 2016 Transition Adjustment Mechanism 20 (TAM) net power costs (NPC). Specifically, my testimony: 21 Summarizes the content of the filing; UE 296—Direct Testimony of Brian S. Dickman PAC/100 Dickman/2 1 Defines NPC and describes the NPC increase in the 2016 TAM compared 2 to the final NPC in the Company’s previous TAM, docket UE 287 3 (2015 TAM);1 4 Discusses the Company’s treatment of its participation in an energy 5 imbalance market (EIM) with the California Independent System Operator 6 Corporation (CAISO) and the expected incremental benefits relative to the 7 optimized NPC forecast produced by the Generation and Regulation 8 Initiative Decision Tools model (GRID); 9 Describes several modeling changes to improve NPC forecast accuracy; 10 Describes changes to the Company’s resource portfolio since the 2015 11 TAM; and 12 Describes how the filing is consistent with the TAM Guidelines. 13 Q. Please identify the other Company witnesses supporting the 2016 TAM. 14 A. Three additional Company witnesses provide testimony supporting the 15 Company’s filing. Mr. Frank C. Graves, principal at The Brattle Group, provides 16 testimony supporting the Company’s NPC modeling change to more accurately 17 account for the price impact of system balancing transactions. Mr. Stephen A. 18 Larsen, Vice President, Interwest Mining & Fuels, provides testimony supporting 19 the coal costs included in the 2016 TAM. Ms. Judith M. Ridenour, Regulatory 20 Specialist, Pricing & Cost of Service, presents the Company’s proposed prices 21 and tariffs and provides a comparison of existing and estimated customer rates. 22 SUMMARY OF PACIFICORP’S 2016 TAM FILING 23 Q. Please provide background on the Company’s 2016 TAM filing. 24 A. The TAM is the Company’s annual filing to update its NPC in rates. The updated 25 NPC are used to set the transition adjustments for direct access customers and, in 1 In the Matter of PacifiCorp, d/b/a Pacific Power, 2015 Transition Adjustment Mechanism, Docket No. UE 287, Order No. 14-331 (Oct. 1, 2014). UE 296—Direct Testimony of Brian S. Dickman PAC/100 Dickman/3 1 this case, become effective in base rates on January 1, 2016. The Company is 2 filing the 2016 TAM on a stand-alone basis without a general rate case at this 3 time. Exhibit PAC/101 shows that the 2016 TAM results in an increase to 4 Oregon rates of approximately $11.8 million (unless otherwise specified, 5 references to NPC throughout my testimony are expressed on an Oregon-allocated 6 basis). As explained in Ms. Ridenour’s testimony, the 2016 TAM results in an 7 overall average rate increase of approximately 0.9 percent. 8 Q. What are the estimated NPC in the TAM for calendar year 2016? 9 A. As shown on Exhibit PAC/101, the forecasted normalized NPC for calendar year 10 2016 are $374.5 million.2 This is approximately $10.8 million higher than the 11 NPC of $363.7 million in the 2015 TAM. On a total-company basis, the 12 normalized NPC for calendar year 2016 are $1.537 billion, which is 13 approximately $64.8 million higher than the $1.473 billion reflected in the 2015 14 TAM. Details of the 2016 total-company NPC are provided in Exhibit PAC/102. 15 Q. Does the Company’s initial filing include the benefits and costs associated 16 with participation in the EIM during the 2016 test year? 17 A. Yes. The Company’s initial filing complies with the stipulation resolving the 18 2015 TAM, in which the Company agreed to address EIM-related costs and 19 benefits in the 2016 TAM filing. 20 Q. Does the proposed rate increase for the 2016 TAM reflect changes in Oregon 21 load since the 2015 TAM? 22 A. Yes. The 2016 load forecast used in the Company’s calculation of NPC reflects 2 PAC/101, Dickman/1, line 39. UE 296—Direct Testimony of Brian S. Dickman PAC/100 Dickman/4 1 an increase in Oregon load compared to the 2015 forecast loads in the 2015 TAM. 2 Due to the increased Oregon load, the Company anticipates it will collect 3 $0.8 million more for NPC based on the rates approved in the 2015 TAM, 4 reducing the overall rate change for the 2016 TAM. 5 Q. Have Oregon’s allocation factors changed since the 2015 TAM? 6 A. Yes. Despite the increase in projected Oregon load, higher load in other states 7 served by the Company caused a decrease in Oregon’s allocation factors and the 8 corresponding share of total-company NPC allocated to Oregon compared with 9 the 2015 TAM. This reduction in allocation factors is reflected in the Company’s 10 requested rate increase. 11 Q. Because this is a stand-alone TAM filing, did the Company include an update 12 to Other Revenues for certain items related to NPC, as stipulated in docket 13 UE 216? 14 A. Yes. Exhibit PAC/103 shows the update to “Other Revenues” compared to the 15 level set in the 2015 TAM. Other Revenues are expected to decrease in 2016 due 16 to the termination of the Bonneville Power Administration (BPA) South Idaho 17 Exchange in June 2016 and the termination of the James River Royalty Offset in 18 December 2015. This is partially offset by an increase in revenue from an 19 ancillary services contract with Seattle City Light for the Stateline wind farm. 20 Projected Other Revenues are approximately $2.3 million lower in 2016, causing 21 a corresponding increase in the TAM rate change. UE 296—Direct Testimony of Brian S. Dickman PAC/100 Dickman/5 1 DETERMINATION OF NPC 2 Q. Please explain NPC. 3 A. NPC are defined as the sum of fuel expenses, wholesale purchase power expenses 4 and wheeling expenses, less wholesale sales revenue. 5 Q. Please explain how the Company calculates NPC. 6 A. NPC are calculated for a future test period based on projected data using GRID. 7 GRID is a production cost model that simulates the operation of the Company’s