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Docket No.

20000-___-ER-10
Witness: John A. Cupparo

BEFORE THE WYOMING PUBLIC SERVICE


COMMISSION

ROCKY MOUNTAIN POWER

____________________________________________

Direct Testimony of John A. Cupparo

November 2010
1 Q. Please state your name, business address and present position with

2 PacifiCorp dba Rocky Mountain Power (the “Company”).

3 A. My name is John A. Cupparo. My business address is 825 NE Multnomah, Suite

4 1600, Portland, Oregon, 97232. My position is Vice President of Transmission for

5 PacifiCorp.

6 Qualifications

7 Q. Please describe your education and business experience.

8 A. I have a Bachelor of Science degree in Computer Information Systems from

9 Colorado State University. My experience spans 24 years in the energy industry,

10 including oil and, gas and electric utilities. The majority of my experience has

11 been in information technology supporting natural gas pipelines, energy

12 commodity trading and end-to-end electric utility operations. I have been

13 employed at PacifiCorp since September 2000. Prior to assuming my current

14 position in August 2006, I was Chief Information Officer for PacifiCorp. My

15 responsibilities have covered supporting many aspects of utility operations

16 including; commercial and trading, outage management, customer service,

17 transmission scheduling and regulatory issues. I am responsible for all aspects of

18 PacifiCorp’s main grid transmission investment strategy, customer service, main

19 grid planning, contract administration and tariff management. I am the co-chair of

20 the Northern Tier Transmission Group (“NTTG”), which coordinates

21 transmission planning, transmission expansion, and project reviews with sub-

22 regional and regional planning organizations within the Western Electricity

23 Coordinating Council (“WECC”). I am also an elected class one voting member

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1 (transmission owner class) of the WECC Board of Directors. As a member of the

2 Board of Directors, I participate with other WECC members in overseeing

3 WECC’s activities, including defining standards and policies to ensure reliability

4 of the western electric grid. I also hold a position on WECC’s Transmission

5 Expansion Planning Policy Committee, the Scenario Planning Steering Group,

6 and the Reliability Coordination Committee.

7 Q. What is the purpose of your testimony?

8 A. The purpose of my testimony is to support the inclusion in this case of Phase II of

9 the Populus to Terminal transmission investment project, which includes: 1) the

10 addition of the Populus to Ben Lomond transmission line; 2) the Borah to Ben

11 Lomond reconductor, which was timed to follow the November 2010 energizing

12 of the Populus to Ben Lomond segment; and 3) residual costs incurred for the Ben

13 Lomond to Terminal transmission line. Phase II of the Populus to Terminal

14 project, for which the Company is seeking cost recovery in this case, is the

15 remaining scope of the Populus to Terminal transmission line segment. The

16 Populus to Terminal transmission line, and subsequent investments within the

17 Company’s long-term, comprehensive transmission expansion plan known as

18 “Energy Gateway,” satisfy multiple objectives of efficiently operating a six-state

19 transmission system. The benefit to Wyoming and all Rocky Mountain Power

20 customers is initially to enhance reliability and improve transfer capability within

21 the existing system, including the ability to claim increased reserve sharing

22 benefits, followed by establishing incremental capacity, which is key to unlocking

23 plentiful generation resource areas located in Wyoming for the benefit of

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1 Wyoming customers and all Rocky Mountain Power customers. Specifically, my

2 testimony includes the following:

3 • An overview of the Company’s transmission system;

4 • An outline of the Company’s Energy Gateway transmission expansion plan

5 and the details on the Populus to Terminal segment as part of this plan;

6 • An analysis demonstrating that Phase II of the Populus to Terminal

7 transmission investment project, which includes the Populus to Ben Lomond

8 transmission line, the Borah to Ben Lomond reconductor, and the inclusion of

9 residual project close-out costs associated with the completion of the Ben

10 Lomond to Terminal line, is beneficial to customers as part of the overall

11 long-term transmission expansion plan developed by the Company; and

12 • Finally, descriptions of how these transmission investments help satisfy a

13 commitment the Company made as part of the MidAmerican Energy Holdings

14 Company (“MEHC”) transaction.

15 Q. Please explain the facility improvements that are directly associated with the

16 Populus to Terminal transmission project included in this case.

17 A. The Populus to Terminal transmission project’s original scope includes

18 reconductoring a portion of a parallel transmission segment called the Borah

19 to Ben Lomond 345 kV transmission line. The line is being connected at

20 Honeyville, Utah, to the new Populus to Ben Lomond 345 kV transmission line to

21 avoid a 345 kV crossing, and will be reconductored between Honeyville and the

22 Ben Lomond Substation in order to operate at the desired rating. The 2011 test

23 period in this case also includes project close-out costs for the Ben Lomond to

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1 Terminal transmission segment which includes reclamation of construction sites,

2 landscaping, settling construction claims and true-up of

3 engineer/procure/construct (“EPC”) costs.

4 Q. What investment related to Energy Gateway is included in the revenue

5 requirement of this case?

6 A. Investment related to Energy Gateway included in the revenue requirement of this

7 case includes approximately $576.9 million of capital investment on a total

8 Company basis for Phase II of the Populus to Terminal transmission investment

9 project, which includes approximately: 1) $553.8 million of capital investment on

10 a total Company basis for the Populus to Ben Lomond line, which was in-service

11 as of November 2010; 2) $15.4 million of capital investment on a total Company

12 basis for the Borah to Ben Lomond reconductor, scheduled to be in-service March

13 2011; and 3) $7.7 million of capital investment on a total Company basis for

14 residual costs incurred for the Ben Lomond to Terminal transmission line,

15 scheduled to be booked to plant in service by December 2010. Mr. Brian S.

16 Dickman’s testimony describes the revenue requirement calculations associated

17 with the inclusion of this transmission investment.

18 Overview of PacifiCorp’s Transmission System

19 Q. Please briefly describe PacifiCorp’s transmission system.

20 A. PacifiCorp owns and operates approximately 15,800 miles of transmission lines

21 ranging from 46 kV to 500 kV across multiple western states. As of December 31,

22 2009, PacifiCorp’s current total Company net transmission plant in service is

23 equal to approximately $2.1 billion. PacifiCorp is interconnected with more than

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1 80 generation plants and 15 adjacent control areas at approximately 124 points of

2 interconnection. To provide electric service to its retail customers PacifiCorp

3 owns or has interest in generation resources directly interconnected to its

4 transmission system with a system peak capacity of approximately 12,131 MW.

5 This generation capacity includes a diverse mix of resources including coal,

6 hydro, wind power, natural gas simple cycle and combined cycle combustion

7 turbines, and geothermal.

8 Q. Please describe the availability of existing transmission capacity on the

9 system.

10 A. The Company’s 2008 Integrated Resource Plan (“IRP”), which was filed with the

11 Commission in May 2009, and subsequent 2008 IRP Update filed in March 2010,

12 identify the need for investment in major new transmission facilities to meet the

13 forecast loads of PacifiCorp’s customers. The IRP analysis is performed by

14 evaluating loads and resource requirements over a 20-year period.

15 PacifiCorp’s existing transmission system, as well as the transmission grid

16 across the western region, is severely constrained, and numerous regional study

17 groups have identified the pressing need for investment in new transmission

18 infrastructure. These studies are described in more detail later in my testimony.

19 Additional analysis and demonstration of system operating limitations and

20 constraints is described in the direct testimony of Mr. Darrell T. Gerrard.

21 Additionally, new federal standards that mandate increased transmission

22 system reliability along with PacifiCorp’s recent operational experience show that

23 investing in PacifiCorp’s transmission system is required to ensure the Company

Page 5 - Direct Testimony of John A. Cupparo


1 has the capability to provide reliable transmission service under expected

2 operating conditions, and that the Company maintains the transmission system

3 capacity necessary to deliver network load service and contractual point-to-point

4 commitments. Increasing PacifiCorp’s transmission capacity will also provide the

5 opportunity for the Company to make off-peak energy sales when available

6 generation is in excess of loads, which helps ensure efficient utilization of

7 resources and benefits retail ratepayers since any revenues received from the sale

8 of excess generation are shared with retail ratepayers as a credit against rates.

9 Lastly, additional transmission capacity provides the Company added flexibility

10 in the location and use of generating reserves and flexibility to perform routine

11 maintenance on transmission lines with minimal risk, all of which reduce

12 operating costs to customers.

13 Overview of Energy Gateway Transmission Expansion

14 Q. Please generally describe how PacifiCorp’s transmission expansion plan

15 became a component of integrated resource planning.

16 A. As part of MEHC’s acquisition of PacifiCorp, the Company performed a review

17 of the IRP process. From that review, the Company determined there was a need

18 for a long-term transmission investment strategy to support the long-term resource

19 needs of customers. Historically, IRPs were relatively silent on transmission

20 investments, assuming transmission would follow generation investments. Given

21 the long-term needs of customers, existing transmission system constraints, the

22 time required to build new transmission lines and the challenges associated with

23 designing, permitting and constructing transmission lines, transmission is now a

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1 key element of the Company’s IRP, as evidenced by the inclusion of Energy

2 Gateway in PacifiCorp’s 2008 IRP. The Company’s 2008 IRP and subsequent

3 2008 IRP Update identified the need for investment in major new transmission

4 facilities to meet the forecasted loads of PacifiCorp’s customers.

5 Q. Please generally describe Energy Gateway.

6 A. Energy Gateway is a comprehensive transmission expansion plan that includes a

7 series of immediate action items that focus on near- and long-term needs. Energy

8 Gateway will enhance reliability, reduce transmission system constraints and

9 improve the flow of electricity to Rocky Mountain Power’s customers. The

10 Energy Gateway plan is comprised of eight interrelated and interdependent

11 transmission segments as outlined in Exhibit RMP___(JAC-1). The eight line

12 segments within Energy Gateway have been grouped and labeled as Gateway

13 Central, Gateway West, Gateway South and the Westside. Energy Gateway, when

14 fully implemented, will be spread among six states, numerous communities and

15 counties, and significant areas of federally administered lands and will add

16 approximately 2,000 miles of new transmission lines to PacifiCorp’s transmission

17 system. Due to the interconnected nature of PacifiCorp’s transmission network,

18 investments may be required at other facilities in order to maximize the

19 effectiveness and efficiency of the network. For Energy Gateway, the eight

20 identified transmission segments provide specific capabilities, but also support

21 other transmission segments to enhance the full potential of Energy Gateway.

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1 Q. Please describe Gateway Central relative to the overall Energy Gateway

2 plan.

3 A. Gateway Central is comprised of two transmission segments (Populus to Terminal

4 and Mona to Oquirrh) that relieve existing system constraints and reliability

5 concerns, provide an immediate increase in capacity necessary to meet existing

6 customer load service and reserve obligations, and establish a necessary electrical

7 interconnection between Gateway West and Gateway South. The Gateway West

8 and Gateway South line segments, when complete, will be the first 500 kV lines

9 to be installed in Wyoming, southeast Idaho and Utah. Gateway Central will

10 provide an essential reliability backbone allowing Gateway West and Gateway

11 South to operate at a higher reliability and at an overall higher capacity than

12 would otherwise be possible without the Gateway Central interconnection. This

13 investment adds incremental transmission capacity, and in addition, will

14 strengthen PacifiCorp’s overall system while supporting future generation

15 resource development to benefit all Rocky Mountain Power customers.

16 As described earlier in my testimony, the Populus to Terminal

17 transmission segment is comprised of two smaller sections, which in total extend

18 135 miles from the new Populus substation near Downey, Idaho, south to the

19 existing Terminal substation near the Salt Lake International Airport west of Salt

20 Lake City, Utah. The Populus to Terminal transmission line is a key element of

21 the Energy Gateway’s Gateway Central segment. Populus to Terminal is

22 designated as “Segment B” within Gateway Central in the Exhibit RMP___(JAC-

23 1).

Page 8 - Direct Testimony of John A. Cupparo


1 Populus to Ben Lomond Transmission Investment

2 Q. Please describe the transmission investment in more detail.

3 A. Exhibit RMP___(JAC-2) is a map of the Populus to Terminal transmission line

4 segment. Ben Lomond to Terminal is the southern section and is highlighted in

5 red on the map. Populus to Ben Lomond is highlighted in yellow, green and blue

6 on the map. The first phase from the Ben Lomond substation (near Ogden, Utah)

7 to the Terminal substation was fully energized and placed into service March

8 2010. This first phase project was included in the Company’s 2009 Wyoming

9 general rate case in Docket No. 20000-352-ER-09. The second phase from the

10 Populus substation to the Ben Lomond substation was placed into service

11 November 2010. The Populus to Ben Lomond section is included in this rate case

12 Q. Please explain why the Company is seeking recovery in this case of Phase II

13 of the transmission line.

14 A. The Company is seeking cost recovery of Phase II, or the Populus to Ben Lomond

15 section, in this rate case due to the timing of the case with respect to the 2011 test

16 year in this case and the in-service dates for this phase of the project. The test

17 period used to compute revenue requirement in the Company’s last case was the

18 12 months ending December 31, 2010. Because the Populus to Ben Lomond

19 section was not expected to be placed into service until the end of the test period

20 in the Company’s 2009 general rate case, the Company elected not to include it in

21 that case and to instead include the investment in the this case. This conservative

22 approach benefitted Wyoming customers by delaying inclusion of Populus to Ben

23 Lomond in rates until this general rate case. The revenue requirement for this case

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1 and test period development is discussed in more detail in the testimony of Mr.

2 Dickman.

3 Q. Please describe the regional transmission studies that have been conducted

4 related to Energy Gateway and specifically the Populus to Ben Lomond

5 section and what these studies have found.

6 A. Over the past decade, numerous studies have documented the need for new

7 transmission in the Western United States. As early as 2002, the Department of

8 Energy National Transmission Grid Study identified the Wyoming-Idaho

9 interface as a major constrained interface, and found that under optimal

10 conditions, the Wyoming-Northern Utah interface is congested during 50 percent

11 or more of the hours during the year.1

12 In 2004, the Rocky Mountain Area Transmission Study reached similar

13 conclusions, the result of which was a recommended expansion of the 345 kV

14 transmission lines connecting the Bridger substation to points south and west as

15 critically needed improvements.2 In addition, the Department of Energy’s 2006

16 National Electric Transmission Congestion Study (“DOE Congestion Study”)

17 identified several constrained transmission paths in the West, as shown in Exhibit

18 RMP___(JAC-3), including lines used to deliver electricity from generation plants

19 in Wyoming to loads in Utah and Oregon.3 Specifically, the DOE Congestion

1
National Transmission Grid Study at pp 15, 18. A full copy of this report is available at
http://www.pi.energy.gov/documents/TransmissionGrid.pdf.
2
RMATS at Chapter 3-1−3-2, which shows the Bridger expansion as a critical expansion area from
Wyoming to Northern Utah and Wyoming to Idaho. The full report is available at
http://psc.state.wy.us/htdocs/subregional/Reports.htm
3
The National Electric Transmission Congestion Study (August 2006) at pp 31-35. The transmission
constraints identified in this study were identified by reviewing recent transmission studies such as those
conducted by WECC and SSG-WI. The full report is available at
http://nietc.anl.gov/documents/docs/Congestion_Study_2006-9MB.pdf

Page 10 - Direct Testimony of John A. Cupparo


1 Study illustrated that the expansion of the Bridger West facility is critical for

2 relieving congestion from Wyoming to Northern Utah, and Wyoming to Idaho.4

3 Similarly, the Western Interconnection 2006 Congestion Assessment Study,

4 which was issued by the DOE Western Congestion Analysis Task Force,

5 identified areas of congestion in the Rocky Mountain states, and projected that

6 based on 2005 load and resource forecasts and a production model, many of the

7 paths associated with the various segments of the Energy Gateway Project were

8 forecasted to be heavily congested.5

9 Reports initiated by the Western Governors’ Association (“WGA”) also

10 show certain paths in PacifiCorp’s service territory (such as the Populus to

11 Terminal segment) to be constrained.6 Lastly, the Department of Energy

12 sponsored a study through Idaho National Laboratories to assess the economic

13 impact of not building transmission. While the report focused on assessing

14 economic impact on the Pacific Northwest, it also provides discussion and support

15 for the “hub and spoke” design which is similar to the Energy Gateway model for

16 connecting resource areas to load. The report also describes the interconnected

17 nature of transmission as being geographically dispersed, yet interdependent.7

18 Existing NTTG sub-regional transmission planning studies, conducted in

19 accordance with the Federal Regulatory Energy Commission’s (“FERC”) Order

20 890-A, show overall benefits to the region as a result of PacifiCorp’s proposed

4
Such expansion is addressed by the Segment E portion of the Project.
5
A full copy of this study is available at
http://www.oe.energy.gov/DocumentsandMedia/DOE_Congestion_Study_2006_Western_Analysis.pdf
6
The full report is available at
http://www.westgov.org/index.php?option=com_content&view=article&id=129&Itemid=57
7
The Cost of Not Building Transmission: Economic Impact of Proposed Transmission Line Projects for the
Pacific Northwest Economic Region. Full report is available at
https://inlportal.inl.gov/portal/server.pt/community/home

Page 11 - Direct Testimony of John A. Cupparo


1 Energy Gateway.8 Additionally, the Company’s request for incentive rate

2 treatment was granted by the FERC on July 3, 2008, which is analogous to a need

3 determination.9 FERC granted the Company incentive rate treatment, but equally

4 important the commission issued a 4-0 decision in which FERC stated:

5 …we find that PacifiCorp has adequately demonstrated that the


6 Project (with the exception of segment A) will ensure reliability
7 and reduce transmission congestion… We find that segments B
8 through H of the Project would establish for the first time a
9 backbone of 500 kV transmission lines in PacifiCorp’s Wyoming,
10 Idaho and Utah regions. This would provide a platform for
11 integrating and coordinating future regional and sub-regional
12 electric transmission projects being considered in the Pacific
13 Northwest and the Intermountain West, connection existing and
14 potential generation to loads in an efficient manner, thus reducing
15 the cost of delivered power. Also, the Petition cites the 2006 DOE
16 National Electric Transmission Congestion Study and the 2004
17 Rocky Mountain Area Transmission Study in stating that that
18 proposed Project will reduce congestion or maintain reliability in
19 the Western Interconnection. Additionally, the project would
20 establish a direct link between PacifiCorp’s east and west control
21 areas, providing numerous benefits including increasing transfer
22 capability, reducing the need for curtailments, and reducing
23 transmission congestion. [¶39]

24 Commissioner Kelly echoes the petition stating that:

25 …while Segments B and C provide a variety of benefits when


26 considered in isolation, they also enable PacifiCorp to achieve the
27 planned transfer capability rating of subsequent segments.

28 As noted in Exhibit RMP___(JAC-1), Segment B is Populus to Terminal and

29 Segment C is Mona to Oquirrh. The full FERC order is provided in Exhibit

30 RMP___(JAC-4).

8
Northern Tier Transmission Group 2008-2009 Biennial Transmission Plan Report full report is available
at http://nttg.biz/site/index.php?option=com_docman&task=cat_view&gid=220&Itemid=31
9
PacifiCorp, Docket No. EL08-75-000, “Order On Petition For Declaratory Order” (October 21, 2008);
125 FERC ¶ 61,076 (2008).

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1 Further information regarding the existing transmission system limits and

2 operational constraints in the Populus to Terminal line is discussed in Mr.

3 Gerrard’s testimony.

4 Q. What factors does the Company consider before building new transmission?

5 A. The Company considers several factors before building new transmission

6 facilities, including the following:

7 • Current and future forecasts for demand and energy required from existing

8 and new resources to new and existing loads. These considerations are

9 addressed in the Company’s 2008 IRP and IRP Update including demand-side

10 management and energy conservation programs;

11 • Alternatives including building local generation near load and/or energy

12 market purchases;

13 • The Company’s use of existing land rights and existing right-of-way

14 corridors;

15 • Upgrades to increase operability, and reliability from existing transmission

16 lines and substations; and

17 • Maximizing the capacity and capabilities of existing facilities.

18 Because prudent transmission investments are typically large scale to

19 maximize efficiencies and gain economies of scale, the benefits are realized over

20 the long-term. More details related to these general considerations and

21 specifically to Populus to Terminal segment are provided in Mr. Gerrard’s direct

22 testimony.

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1 Q. Once the decision is made to invest in new transmission, what is the process

2 for getting it built?

3 A. Once the decision is made to invest in new transmission, capacity sizing of the

4 transmission line is taken into consideration to balance current and future needs.

5 Constructing long, linear facilities such as a transmission line is an extensive

6 process. Siting, permitting and constructing new transmission can take up to

7 seven years and potentially involves acquiring new rights-of-way and permits

8 from local, state and federal agencies. Maximizing the transmission capacity

9 placed in approved corridors is a critical consideration to ensure the disruption to

10 communities and landowners is minimized. There is also a series of design and

11 routing considerations to minimize the environmental, visual and human impacts.

12 Q. Please describe the approach the Company used to secure appropriate

13 resources to construct the new transmission.

14 A. The Company initiated a competitive bidding process to receive blind sealed bids

15 for the project work scope to be delivered on a turnkey, fixed price, guaranteed

16 completion date basis using an engineer, procure and construct form of

17 contracting. The competitive bidding process began in October 2007 and provided

18 two separate blind-sealed bidding opportunities. All bid responses were due for

19 submittal in May 2008 and again in July 2008 after additional information was

20 provided to bidders allowing a refinement of previously submitted design

21 solutions, terms and conditions including price. Three qualified bids were

22 received and evaluated resulting from the May 2008 proposal submissions.

23 During the evaluation period one of the bidders withdrew from the bidding

Page 14 - Direct Testimony of John A. Cupparo


1 process. The Company received two competing proposals in July 2008 with

2 qualified prices of $609 million and $528 million, respectively. After extensive

3 evaluations of bidder proposals and review of exceptions to work scope and base

4 terms and conditions from each bid proposal, the Company ultimately awarded

5 the contract in October 2008, details of which were provided in Mr. Gerrard’s

6 testimony in Docket No. 20000-352-ER-09. The scope of the bidding process

7 included the Populus to Terminal segment which includes the sections outlined in

8 Exhibit RMP___(JAC-1).

9 Q. Why did the Company use the engineer, procure and construct, or EPC

10 approach?

11 A. The EPC solicitation is a common form of contracting for large construction

12 projects such as the Populus to Terminal transmission segment and is regarded in

13 the industry as a prudent approach for cost control and managing design,

14 procurement and construction risks. This approach provides certainty relative to

15 schedule and cost outcomes for the benefit of customers and caps potential cost

16 escalations where possible upon the occurrence of defined risks. It also ensures

17 more timely delivery to support system needs and transmission reliability.

18 Q. Please explain what you mean concerning capping costs upon the occurrence

19 of identified risks.

20 A. The fixed-price EPC approach has minimal provisions for cost and schedule

21 variances. Where cost and schedule variances were not included in the fixed price

22 for certain contingent aspects of the work scope, these items were identified as

23 risk items and a contingent capped price and schedule allowance was agreed to

Page 15 - Direct Testimony of John A. Cupparo


1 prior to contract execution should any of these risk items materialize. Contingent

2 risk items were limited to defined occurrences such as weather delays,

3 environmental impacts and sub-surface ground conditions.

4 Q. How will these transmission investments benefit Rocky Mountain Power’s

5 customers?

6 A. The Populus to Ben Lomond section of the Populus to Terminal transmission line,

7 and subsequent investments within Energy Gateway satisfy multiple objectives of

8 efficiently operating a six-state transmission system. The benefit to Wyoming and

9 all Rocky Mountain Power customers initially is to enhance reliability and

10 improve transfer capability within the existing system. In the future it will also

11 provide benefits by establishing incremental capacity to deliver the resources

12 within the Company’s 2008 IRP and 2008 IRP Update and meet Wyoming’s

13 long-term resource development objectives.

14 Reliability is fundamental to effectively and efficiently managing the

15 Company’s six-state transmission system. As a federally-regulated transmission

16 provider, the Company must comply with reliability standards mandated by

17 FERC through the North American Electric Reliability Corporation and WECC.

18 By meeting these standards the Company continues to maintain a stable and

19 reliable system during a variety of operating conditions, which minimizes

20 potential outages to all customers as well as the financial impacts of having to

21 deliver higher cost resources if required. At a minimum, the Populus to Terminal

22 segment, of which Populus to Ben Lomond is a section, addresses reliability for

23 all Rocky Mountain Power customers.

Page 16 - Direct Testimony of John A. Cupparo


1 Beyond reliability, when coupled with the Ben Lomond to Terminal

2 section, the two sections increase transfer capability from north to south and south

3 to north across the Company’s transmission system. By doing so, the Company

4 addresses a key constraint (Path C), meets an MEHC transaction commitment and

5 improves the Company’s ability to import and export lower cost resources

6 depending on seasonal needs and operating conditions.

7 The benefit to all Rocky Mountain Power customers is the ability for the

8 Company to use the least-cost dispatch of resources to serve loads and manage

9 power costs by selling excess energy off-system or importing lower cost market

10 energy to serve load. Also, by providing incremental transmission capacity

11 through this transmission segment, the Company has more flexibility in locating

12 reserves on PacifiCorp owned generation, and making full use of the Northwest

13 Power Pool reserve sharing program rather than building additional local

14 generation.

15 For example, the Company participates in the Northwest Power Pool

16 reserve sharing agreement. The reserve sharing agreement allows the Company to

17 carry an amount of reserves in a ratio10 to its actual generation amount which

18 varies by hour and is always less than its single largest contingency. Without the

19 reserve sharing program, PacifiCorp is obligated to carry enough reserves to

20 offset the loss of its largest generating plant, in all hours. To benefit from the

21 reserves program, PacifiCorp must have adequate, unused transmission capability

22 connecting to another reserve member, in this case Path C capability to Idaho

23 Power Company. If adequate capacity is not available, PacifiCorp must carry


10
Either five percent of hydro/wind or seven percent of thermal generation.

Page 17 - Direct Testimony of John A. Cupparo


1 enough spare capability on owned generation to cover its largest generation

2 contingency. As loads continue to grow in the eastern balancing area, existing

3 generation is no longer available to meet reserve requirements as it is needed to

4 meet load service obligation, therefore without the Path C upgrade and associated

5 reserve pool benefits, the Company would be faced with building additional

6 generation to meet reserve requirements. Increasing the import capability allows

7 continued access to those reserves, thereby reducing costs for all customers.

8 Populus to Terminal also establishes incremental capacity to provide long-

9 term benefits to customers. Wyoming has been long identified as a rich resource

10 location for multiple generation resource types. The barrier to accessing those

11 resources for customers and producers alike has been transmission constraints in

12 Wyoming and other states. Populus to Terminal is the first step within the Energy

13 Gateway strategy to unlock those constrained resources. The benefits of the

14 project will accrue to energy consumers and energy producers by allowing

15 economic resources to be developed and delivered across the Company’s service

16 territory. Energy Gateway also satisfies Wyoming’s public policy objectives as

17 set out by the Wyoming Infrastructure Authority by providing a robust

18 Alternating Current backbone transmission network in Wyoming, which will

19 facilitate additional transmission and generation development to benefit the

20 Company’s customers and ultimately the western interconnection.

21 Q. Has the State of Wyoming recognized the importance of investment in

22 transmission infrastructure?

23 A. Yes. The State of Wyoming positioned itself as an early leader in recognizing the

Page 18 - Direct Testimony of John A. Cupparo


1 importance of investment in transmission infrastructure. To that end, in 2004 the

2 Wyoming legislature established the Wyoming Infrastructure Authority with the

3 statutory purpose to:

4 …diversify and expand the Wyoming economy through


5 improvements in the state's electric transmission infrastructure and
6 to facilitate the consumption of Wyoming energy by planning,
7 financing, constructing, developing, acquiring, maintaining and
8 operating electric transmission facilities, advanced coal technology
9 facilities, advanced energy technology facilities and related
10 supporting infrastructure and undivided or other interests therein to
11 facilitate the transmission of energy. 37-5-303

12 Q. Is the Company’s investment in Energy Gateway and specifically the

13 Populus to Ben Lomond line compatible with the goals of the Wyoming

14 Infrastructure Authority?

15 A. Yes. Populus to Ben Lomond is the second phase of a larger transmission

16 investment project to increase transmission capacity from southeastern Idaho into

17 Utah. It adds significant incremental transmission capacity between southeast

18 Idaho and northern Utah and further facilitates a stronger interconnection to

19 systems in Idaho, Wyoming and the Pacific Northwest. Energy Gateway will also

20 facilitate the development of generation resources in Utah, Idaho and Wyoming

21 by providing transmission capacity from proven areas of resource development to

22 load centers. The Populus to Ben Lomond section helps fulfill Wyoming’s vision

23 of facilitating the transmission of energy as outlined in the Infrastructure

24 Authority’s goals.

Page 19 - Direct Testimony of John A. Cupparo


1 MEHC Transaction Commitments

2 Q. Did MEHC commit to making transmission investments as part of the

3 PacifiCorp acquisition process?

4 A. Yes. As part of the process of approval by the Wyoming Commission of the

5 acquisition of PacifiCorp in 2006, MEHC committed to improve capacity on a

6 constrained path in Utah known as Path C. Specifically, MEHC agreed to increase

7 transfer capacity on Path C by 300 MW, acknowledging in the commitment

8 language the potential need for re-examining the investment and modifying as

9 appropriate to ensure it is optimal for customers. Populus to Terminal improves

10 the capacity on Path C and has a planned increase in transfer capacity of 1,400

11 MW when combined with other segments of Energy Gateway. As such, the

12 Populus to Terminal transmission segment will significantly improve a point of

13 constraint on the system that currently affects numerous transmission customers,

14 strengthen reliability and enable the Company to achieve the planned transfer

15 capability rating of subsequent Energy Gateway segments.

16 Conclusion

17 Q. Please summarize your conclusions.

18 A. New transmission is essential to meet load growth, enhance transmission system

19 reliability and provide capacity to integrate resources to the long-term benefit of

20 customers. The Populus to Ben Lomond section completes the Populus to

21 Terminal transmission project and increases transmission capacity from

22 southeastern Idaho into Utah, further facilitating a stronger interconnection to

23 systems in Idaho, Wyoming and the Pacific Northwest. This investment,

Page 20 - Direct Testimony of John A. Cupparo


1 including the planned Borah to Ben Lomond reconductor and residual project

2 close-out costs associated with the completion of the Ben Lomond to Terminal

3 line, and subsequent investments in Energy Gateway are prudent, cost effective

4 and beneficial to customers.

5 Q. Is the Populus to Ben Lomond transmission line section, the Borah to Ben

6 Lomond reconductor, and the residual project close-out costs associated with

7 the completion of the Ben Lomond to Terminal line a prudent investment

8 and in the public interest?

9 A. Yes. These investments and subsequent investments within Energy Gateway

10 satisfy multiple objectives of efficiently operating a six-state transmission system,

11 and therefore are in the public interest. The initial benefit to PacifiCorp’s

12 customers is enhanced reliability and improved transfer capability within the

13 existing system, including the ability to claim increased reserve sharing benefits.

14 In the future, it will also provide incremental capacity for delivery of resources

15 within the Company’s 2008 IRP, including the 2008 IRP Update, which is a key

16 to unlocking rich resource hubs for the benefit of all PacifiCorp customers and

17 ultimately the western interconnection. The Company has effectively managed the

18 costs of the project and the investment is prudent. The investment warrants rate

19 base treatment and inclusion in rates and I urge the Commission to approve the

20 Company’s request.

21 Q. Does this conclude your direct testimony?

22 A. Yes.

Page 21 - Direct Testimony of John A. Cupparo