341 STATE OF IOWA DEPARTMENT OF COMMERCE UTILITIES DIVISION - - - - - - - - - - - - - - - x IN RE: : : : DOCKET NO. GCU-07-1 APPLICATION OF INTERSTATE POWER: AND LIGHT COMPANY FOR A : GENERATING FACILITY CITING : VOLUME II CERTIFICATE : - - - - - - - - - - - - - - - x Iowa Veterans Home Whitehall Auditorium 1301 Summit Street Marshalltown, Iowa Tuesday, January 15, 2008 Met, pursuant to adjournment, at 9:20 a.m. BEFORE: THE IOWA UTILITIES BOARD JOHN R. NORRIS, Chairperson KRISTA K. TANNER, Board Member DARRELL HANSON, Board Member (Pages 341 through 663) JACKIE M. SINNOTT - CERTIFIED SHORTHAND REPORTER PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 342 1 APPEARANCES: 2 For IPL: KENT RAGSDALE, ESQ. PAULA JOHNSON, ESQ. 3 200 First Street SE P.O. Box 351 4 Cedar Rapids, Iowa 52406 5 For the Coalition: CARRIE LA SEUR, ESQ. 6 JANA LINDERMAN, ESQ. Plains Justice 7 100 First Street SW Cedar Rapids, Iowa 52403 8 9 For CIPCO and Corn Belt: DENNIS PUCKETT, ESQ. Sullivan & Ward, P.C. 10 6601 Westown Parkway Suite 200 11 West Des Moines, Iowa 50266 12 For the Office of BEN STEAD, ESQ. Consumer Advocate: JENNIFER EASLER, ESQ. 13 Office of Consumer Advocate Iowa Department of Justice 14 310 Maple Street Des Moines, Iowa 50319 15 16 17 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 343 I N D E X WITNESS DIRECT CROSS REDIRECT RECROSS BOARD For IPL: Larry Harder 346 (recalled) Randy D. Bauer 354 355 360 349 (recalled) (Easler) (Stead) 361 (La Seur) Timothy Bennington 363 389 413 415 403 (Stead) (Stead) 424 390 417 (La Seur) (Easler) 421 (La Seur) Alan J. Arnold 427 458 471 (La Seur) Kevin D. Vesperman 482 521 533 (Easler) 550 524 (La Seur) 548 (La Seur) Brent R. Kitchen 553 607-Stead 655 608-Easler 644-Stead 649-La Seur 657-Stead Jeffery J. Beer 661 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 344 E X H I B I T S EXHIBITS MARKED RECEIVED IPL: 5 428 10 554 11 554 14 482 15 482 20 364 24 358 25 356 358 OCA: 122 628 123 637 638 124 644 657 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 345 1 P R O C E E D I N G S 2 CHAIRPERSON NORRIS: Good morning. We are 3 back in session in Docket No. GCU-07-1. Again, I'm 4 John Norris, here with Board Members Krista Tanner 5 and Darrell Hanson. We are going to have a change in 6 schedule this morning. Counsel for Plains Justice, 7 Ms. La Seur's father passed away this morning, and so 8 we are trying to be as accommodating as we can to 9 their personal situation. 10 As just a matter of information, he was 11 actually a resident in this Veterans Home, and so 12 Ms. La Seur was up with him all night here at the 13 Veterans Home. 14 So we are going--I believe the counsel for 15 Interstate Power and Light wants to recall a witness 16 this morning, Mr. Byers, is that correct? 17 MS. JOHNSON: It will actually be 18 Mr. Harder. 19 CHAIRPERSON NORRIS: Mr. Harder, okay. And 20 then we will take a break until 10:30, at which time 21 I would ask counsel to come back here at 10:30 so we 22 can discuss how we can proceed, and if possible, I've 23 asked Ms. Linderman for Plains Justice to identify 24 any of IPL's witnesses that they didn't have a lot of 25 questions for that we might be able to get those PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 346 1 people up and down between 10:30 and lunch if 2 possible, but, again, I want to see what their 3 situation is when they come back. Then we will take 4 a fairly long lunch break, give them more time to 5 prepare, and then try to proceed with the hearing 6 after lunch this afternoon. 7 So that's at least the tentative plans. So 8 I'll ask counsel, Ms. Johnson, to call--recall your 9 witness, and then we'll take a break until 10:30. 10 MS. JOHNSON: IPL recalls Larry Harder. 11 LARRY HARDER, 12 recalled as a witness by Interstate Power and Light 13 Company, being first duly sworn by Chairperson Norris, 14 was examined and testified as follows: 15 DIRECT EXAMINATION 16 BY MS. JOHNSON: 17 Q. Mr. Harder, are you generally aware 18 yesterday that there were some questions posed to 19 Mr. Andy Byers regarding the water situation between 20 IPL and the City of Marshalltown? 21 A. Yes. 22 Q. Now, there were some questions that he was 23 unable to answer, but since you have been working a 24 lot of the engineering issues for the company, are 25 you probably the more appropriate person to answer PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 347 1 some of those questions? 2 A. Yes. My direct testimony, I think, 3 addressed a lot of the water treatment issues. 4 Q. Can you describe for us, please, how IPL has 5 been working with the City to make sure that the 6 water needs of the Marshalltown facility are being 7 addressed? 8 A. Sure. Actually, during the siting studies, 9 selecting Marshalltown as a primary site for 10 Sutherland Generating Station Unit 4, that was 11 certainly one of our primary concerns was the robust 12 supply of cooling water in Marshalltown, after lots 13 of discussions with them. We've been working with 14 them over a year in that regard, and they just have 15 an outstanding water supply. 16 They have underutilized well capacity of 17 19 1/2 million gallons a day, and water treatment 18 capabilities as well up to, I believe, 12 million 19 gallons a day. 20 Q. So the City has been planning for and should 21 be able to accommodate our water needs at the 22 Sutherland facility? 23 A. Yes. They have no concerns over being able 24 to meet demands. 25 MS. JOHNSON: Thank you. I think we'll PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 348 1 tender Mr. Harder at this time for any cross or 2 questions from the Board on the issue. 3 CHAIRPERSON NORRIS: Any questions? 4 MR. STEAD: No. 5 MR. PUCKETT: No questions. 6 CHAIRPERSON NORRIS: I don't think we have 7 any. Thank you, Mr. Harder. 8 (Witness excused.) 9 CHAIRPERSON NORRIS: All right. We'll stand 10 in recess until 10:30. 11 (Recess taken at 9:20 until 10:30 a.m.) 12 CHAIRPERSON NORRIS: While counsel is 13 getting their seats, we have Mr. Bauer to finish up, 14 and your next witness after Mr. Bauer is-- 15 MS. JOHNSON: The next person we had on the 16 schedule is Tim Bennington, but we'll be flexible 17 about that. 18 CHAIRPERSON NORRIS: Okay. I think how 19 we'll proceed is we'll take Mr. Bauer, and then 20 Mr. Bennington, and see where we're at on time. 21 We'll take an extended lunch break, and I think to 22 the best you can indicate the order you intend to 23 call witnesses after Mr. Bennington would be helpful 24 for counsel as they deal with other issues and 25 prepare for this afternoon. And we'll proceed on PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 349 1 schedule after the lunch break. 2 MS. JOHNSON: Okay. 3 CHAIRPERSON NORRIS: So we'll begin by 4 recalling Mr. Bauer. 5 RANDY D. BAUER, 6 recalled as a witness by Interstate Power and Light 7 Company, being first duly sworn by Chairperson Norris, 8 was examined and testified as follows: 9 CHAIRPERSON NORRIS: I believe counsel for 10 OCA and Plains Justice had finished their 11 cross-examination yesterday. Mr. Puckett, any 12 questions for Mr. Bauer? 13 MR. PUCKETT: No cross-examination for 14 Mr. Bauer. 15 CHAIRPERSON NORRIS: All right. 16 BOARD MEMBER TANNER: Good morning, 17 Mr. Bauer. 18 THE WITNESS: Good morning. 19 BOARD MEMBER TANNER: Can you hear me? 20 THE WITNESS: I can. 21 BOARD MEMBER TANNER: Yesterday you 22 submitted the most recent draft study from MISO. Can 23 you file the final study as a late-filed exhibit when 24 it becomes available? 25 THE WITNESS: Yes. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 350 1 BOARD MEMBER TANNER: You also stated with 2 regards to the MISO study that it identified some 3 upgrades on the Marshalltown to Jasper line. Am I 4 recalling correctly? 5 THE WITNESS: Yes, that is correct. 6 BOARD MEMBER TANNER: Will those 7 upgrades--does that add to the overall transmission, 8 or the upgrade costs that you had already discussed? 9 THE WITNESS: The particular problem that 10 was flagged there is a station equipment rating, 11 which is a relatively low dollar value, probably a 12 few tens of thousands of dollars, so it is not a 13 significant cost in terms of the overall project. 14 BOARD MEMBER TANNER: Okay. And with regard 15 to the overall transmission line upgrades for the 16 Marshalltown area, who will be completing those 17 upgrades? Will that be IPL or ITC Midwest? 18 THE WITNESS: That will be ITC Midwest. 19 BOARD MEMBER TANNER: Will they also be 20 building the proposed substation that you discussed 21 on page 5 of your testimony--of your direct 22 testimony? 23 THE WITNESS: I think that's an issue yet to 24 be settled with ITC Midwest, whether the plant builds 25 that substation or ITC Midwest builds that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 351 1 substation. 2 BOARD MEMBER TANNER: Okay. And this is 3 related, so your answer might be the same, but who 4 will be paying to build this substation, and are the 5 costs of that substation included in the costs of 6 the--the total costs of the proposed permit--proposed 7 unit? I'm sorry. 8 THE WITNESS: The costs that we assumed 9 would be a 50/50 split on transmission between the 10 transmission provider and the power plant, and, yes, 11 those costs--that 50 percent associated with the 12 plant is included in the owner's costs. 13 BOARD MEMBER TANNER: What is the current 14 schedule for these anticipated transmission upgrades? 15 THE WITNESS: They will be done by the time 16 the plant comes on line. I don't have that 17 particular schedule at hand in terms of which 18 projects are done. 19 Obviously, there's a staging that goes with 20 that in terms of which one goes first, which one goes 21 second, because some of these will have to be done 22 some period well in advance of the plant just simply 23 for the outages that would be required to do that. 24 I don't have that schedule at my fingertips. 25 We could provide that if you would so desire. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 352 1 BOARD MEMBER TANNER: I think that would be 2 helpful. Thank you. 3 THE WITNESS: And understand that is 4 preliminary, subject to change. 5 BOARD MEMBER TANNER: I understand. Thank 6 you. That's all I have. 7 CHAIRPERSON NORRIS: Good morning, 8 Mr. Bauer. 9 THE WITNESS: Good morning. 10 CHAIRPERSON NORRIS: I want to just follow 11 up on a question that the--I can't remember if it was 12 Ms. Easler or Mr. Stead asked you yesterday. They 13 introduced Exhibit No. 121 which is the notice of 14 withdrawal of Rocky Mountain Power's motion to build 15 a coal-fired baseload plant--I believe it is in Utah, 16 is that right? 17 The section they referred you to was on 18 page 3, No. 6. I can read it to you, which was, "It 19 has become apparent that Congress will enact some 20 restriction upon carbon emissions, but the projected 21 cost impact upon new coal generation is currently 22 within such a wide range as to make meaningful risk 23 assessment futile." 24 THE WITNESS: Yes, I see that. 25 CHAIRPERSON NORRIS: So in this case where PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 353 1 Interstate Power and Light is proposing to build new 2 coal generation plant, who assumes the risk for 3 carbon costs going forward? 4 THE WITNESS: I'm not sure I'm qualified to 5 answer that question. That is probably better 6 answered by some of our other witnesses, Mr. Guelker. 7 CHAIRPERSON NORRIS: Guelker. Okay. So in 8 terms of whether it's IPL's risk or the consumers' 9 risk as a pass-through cost for carbon assessment, 10 you have no knowledge of how that's handled? 11 THE WITNESS: No. 12 CHAIRPERSON NORRIS: Okay. In your rebuttal 13 testimony on page 6 you make the statement that 14 "Nuclear generation is IPL's least expensive energy 15 source and cannot easily be turned off and on." 16 THE WITNESS: Yes, I see that. 17 CHAIRPERSON NORRIS: One of the--if I 18 recall, one of the rationales for disposing of the 19 asset of Duane Arnold Energy Center was the risk to 20 IPL of continuing to manage a nuclear asset, so you 21 shifted that risk away from the company by disposing 22 of that asset, and maybe this goes to Mr. Guelker too 23 if your response is the same, but if IPL can shift 24 that risk away from themselves, is there any 25 responsibility for IPL to take some risk in building PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 354 1 a coal generation plant that may involve carbon costs 2 going forward since they chose not to keep that risk 3 themselves on the nuclear side? 4 THE WITNESS: I believe that's a policy 5 question that--a company policy question that could 6 best be answered by Mr. Bennington. 7 CHAIRPERSON NORRIS: As the management of 8 assets, you were not involved in that policy 9 decision? 10 THE WITNESS: No, I was not. 11 CHAIRPERSON NORRIS: All right. That's all 12 I have. Ms. Easler. 13 CROSS-EXAMINATION 14 BY MS. EASLER: 15 Q. Mr. Bauer, I wanted to follow up on the line 16 of questions you received from your counsel, or 17 maybe--I'm sorry--it came from Board Member Tanner 18 about who would be performing the transmission 19 upgrades needed to accommodate the proposed new coal 20 plant, and you had indicated that would be ITC? 21 A. Yes. 22 Q. Mr. Friedman, in his rebuttal testimony, 23 identifies as a potential hurdle to IPL implementing 24 more wind generation the cost of needed transmission 25 upgrades. Are you familiar with that? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 355 1 A. I recall his testimony, yes. 2 Q. And I'm not sure who the best witness is for 3 this, but as I understand it, you have some pretty 4 good knowledge about transmission issues, is that 5 accurate? 6 A. I have some knowledge of transmission, yes. 7 Q. Okay. Are you familiar with the attachment 8 FF to ITC transmission's Midwest ISO tariff? 9 A. Vaguely. 10 Q. Would you or Mr. Friedman be more familiar 11 with it? 12 A. Probably Mr. Friedman. 13 MS. EASLER: Okay. I'll pursue that with 14 him then. 15 CHAIRPERSON NORRIS: Mr. Puckett. 16 MR. PUCKETT: Nothing. 17 CHAIRPERSON NORRIS: Anything further? Ms. 18 Johnson. 19 MS. JOHNSON: Thank you. 20 REDIRECT EXAMINATION 21 BY MS. JOHNSON: 22 Q. Mr. Bauer, I want to clarify quickly, is IPL 23 a MAPP member? 24 A. No. 25 Q. Yesterday you were presented Exhibit No. 121 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 356 1 by the OCA, and I believe Chairman Norris questioned 2 you about that earlier with the Utah coal plant, 3 Rocky Mountain Power? 4 A. Yes. 5 Q. In your testimony, your rebuttal testimony 6 at pages 23 through 24 you reference several coal 7 plants that were in the planning stages and going 8 forward. Has that changed based on Exhibit 121, 9 meaning are any of the coal plants that you listed 10 the one that was ultimately withdrawn? 11 A. No. What I list is, to the best of my 12 knowledge, still accurate. Exhibit 121 was not on 13 that list. 14 Q. Thank you. Do you recall also yesterday you 15 were questioned regarding the coal plant shutdowns in 16 Ontario? Do you recall that line of questioning? 17 A. Yes, I recall that. 18 MS. JOHNSON: May I approach with an 19 exhibit? 20 CHAIRPERSON NORRIS: You may. 21 (IPL Exhibit No. 25 was 22 marked for identification.) 23 BY MS. JOHNSON: 24 Q. Could you identify for me, please, what I've 25 handed to you and has been marked as Exhibit 25? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 357 1 A. This is a bit off a website discussing 2 Ontario's electricity market and Ontario hydro, a 3 little bit of history on Ontario hydro, and a little 4 bit about Ontario's capacity mix. 5 Q. And does it appear that this report came out 6 probably about the time the coal plant shutdown 7 initiative would have come into place? 8 A. Yes, it does discuss the proposed coal 9 plants shut down in several locations in the article. 10 Q. And does it reflect what the energy and 11 capacity coal percentages are in that exhibit? 12 A. Yes, it does. 13 Q. And what does it show that those are 14 percentagewise? 15 A. Coal represents 27 percent of Ontario's 16 energy and 25 percent of their capacity. 17 Q. Is that comparable at all to the general 18 electricity mix in Iowa? 19 A. No. Coal comprises a much larger percentage 20 of the generation mix in Iowa. 21 Q. Also in the paragraph appearing directly 22 below the table on page 2, does it reflect any 23 potential effects on the generation supply by 2007 as 24 a result of the coal plant shutdowns? 25 A. It does. The second sentence in that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 358 1 paragraph says, "The announced termination of 2 coal-fired generation by 2007 will create a supply 3 shortfall of between 5,000 and 7,000 megawatts." 4 MS. JOHNSON: Thank you. I would like to 5 move for the admission of Exhibit 25, and kind of on 6 a procedural note, I can't remember if I moved for 7 the admission yesterday of Exhibit 24, so I would 8 like to do that at this time also. 9 CHAIRPERSON NORRIS: Without objection, they 10 are both admitted. 11 (IPL Exhibit Nos. 24 and 12 25 were received in evidence.) 13 MS. JOHNSON: Thank you. 14 BY MS. JOHNSON: 15 Q. Yesterday you were also questioned regarding 16 the need for--or the requisite for determining need 17 for a generation facility. Do you recall that line 18 of questioning? 19 A. Yes, I do. 20 Q. And could you clarify for us in what type of 21 proceeding the need requirement is actually 22 addressed? 23 A. The need proceeding is addressed in the 24 ratemaking principles proceeding. 25 Q. So that is not one of the prerequisites for PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 359 1 the certification proceeding like we're currently 2 involved in? 3 A. I'm not an attorney, but that is my 4 understanding, yes. 5 Q. Okay. Thank you. Finally, and I'm going to 6 try to ask this line of questioning without getting 7 into actual numbers so that we don't have to go into 8 confidential session. 9 A. Okay. 10 Q. But yesterday you were also questioned 11 regarding Mr. Sanzillo's testimony, page 14 of his 12 confidential direct. 13 A. If I could get that quickly. Yes, I have 14 that. 15 Q. Okay. At line No. 297, Mr. Sanzillo has a 16 net projected load for 2013. Do you see that? 17 A. I do. 18 Q. Do you agree that this projected load is an 19 appropriate projected load for 2013? 20 A. No. That is not an appropriate load for 21 2013. 22 MS. JOHNSON: Thank you. I have no further 23 questions. 24 CHAIRPERSON NORRIS: Mr. Stead. 25 MR. STEAD: Just a question or two, Your PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 360 1 Honor. 2 RECROSS-EXAMINATION 3 BY MR. STEAD: 4 Q. With respect to counsel for IPL's question 5 about need, do you remember that discussion? 6 A. Yes. 7 Q. I understand you're not a lawyer. Would you 8 accept, subject to check, that Iowa Code 476A.61 9 states, "The services and operations resulting from 10 the construction of a facility are consistent with 11 legislative intent as expressed in Section 476.53," 12 and then it goes on. Would you accept that, subject 13 to check? 14 A. Subject to check, yes. 15 Q. And would you accept, subject to check, that 16 476.53.2, subsection 2, states, "The General 17 Assembly's intent with regard to the development of 18 electric power generating and transmission facilities 19 as provided in Subsection 1 shall be implemented in a 20 manner that is cost-effective and compatible with the 21 environmental policies of the state as expressed in 22 Title 11." Would you accept that, subject to check? 23 A. Yes, subject to check. 24 MR. STEAD: That's all I have, Your Honor. 25 Thank you. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 361 1 RECROSS-EXAMINATION 2 BY MS. LA SEUR: 3 Q. Mr. Bauer, in response to one of Ms. 4 Johnson's questions just now you referred to page 14 5 of the Sanzillo testimony. Your testimony was that 6 the net projected load for 2013 is incorrect in 7 Mr. Sanzillo's calculation? 8 A. Yes, I did say that. 9 Q. And would you please elaborate on your 10 disagreement with his calculation. 11 A. That can best be addressed by IPL Witness 12 Mr. Hillberry, who will talk about load projections. 13 Q. But can you explain the reason behind your 14 disagreement with Mr. Sanzillo's number? 15 A. Yes, I can. It is--the bottom line is we 16 can't determine how he got to the number. 17 Q. I think he gives his explanation for it 18 immediately before this table on page 14 of his 19 direct testimony. 20 A. We understand that. We still do not 21 understand how the number was calculated. I'm going 22 to defer to Mr. Hillberry for further clarification. 23 Q. Are you able to offer an alternative number? 24 A. Mr. Hillberry would be able to offer an 25 alternative number, yes. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 362 1 Q. Mr. Bauer, did you have anything to do with 2 the preparation of IPL Exhibit 25 that was just 3 offered by Ms. Johnson? 4 A. Yes, I did. 5 Q. Would you be able to tell us anything about 6 the source of this report, PowerGen Corporation? 7 A. I cannot. This was a website that we 8 found--that I found. 9 Q. So you're not familiar with the credibility 10 of this source of evidence? 11 A. I am not. 12 MS. LA SEUR: Nothing further. 13 CHAIRPERSON NORRIS: Mr. Puckett. 14 MR. PUCKETT: Nothing. 15 CHAIRPERSON NORRIS: Ms. Johnson. 16 MS. JOHNSON: Nothing further. 17 CHAIRPERSON NORRIS: Thank you, Mr. Bauer. 18 (Witness excused.) 19 MS. JOHNSON: IPL will call Tim Bennington 20 to the stand. 21 CHAIRPERSON NORRIS: Hello, Mr. Bennington. 22 Raise your right hand, please. 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 363 1 TIMOTHY R. BENNINGTON, 2 called as a witness by Interstate Power and Light 3 Company, being first duly sworn by Chairperson Norris, 4 was examined and testified as follows: 5 DIRECT EXAMINATION 6 BY MS. JOHNSON: 7 Q. Could you please state your full name and 8 business address for the record, please. 9 A. My name is Timothy R. Bennington, and the 10 business address is 200 First Street Southeast, 11 Cedar Rapids, Iowa 52406. 12 Q. And did you file in this docket on July 2nd, 13 2007, 16 pages of direct testimony and an exhibit 14 labeled Exhibit 20, or TRB-1, and also on December 10th, 15 2007, eight pages of rebuttal testimony? 16 A. Yes, I did. 17 Q. Do you have any changes or corrections to 18 make to that testimony? 19 A. Yes, I do. 20 Q. And could you point those out for us, 21 please. 22 A. I would like to clarify on page 4, line 6, 23 the statement "transmission." Subsequent to putting 24 this testimony together, IPL disposed of its 25 transmission assets in the state of Iowa. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 364 1 MS. JOHNSON: Thank you. With that 2 clarification, I will tender the witness for 3 cross-examination. 4 (IPL Exhibit 20 was 5 received in evidence.) 6 (Prepared testimony follows.) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 389 1 CROSS-EXAMINATION 2 BY MR. STEAD: 3 Q. Good morning, Mr. Bennington. 4 A. Good morning. 5 Q. I have just a couple of questions. On pages 6 4 through 6 of your rebuttal testimony, if you would 7 like to look at that-- 8 A. Yes. 9 Q. --I believe you discuss MidAmerican Energy 10 Company's 2002 Council Bluffs 4 now called Walter 11 Scott 4 coal plant application process, is that 12 correct? 13 A. That is correct. 14 Q. Did you review MidAmerican Energy Company's 15 siting application and all of its supporting 16 documentation? 17 A. No, I did not. 18 Q. Did you review any of the Office of Consumer 19 Advocate's formal and informal discovery in that 20 proceeding? 21 A. No, I did not. 22 Q. Would you agree that much has been learned 23 over the last six years about global warming, 24 greenhouse gasses and CO2? 25 A. I don't know. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 390 1 MR. STEAD: That's all I have, Your Honor. 2 Thank you. 3 CROSS-EXAMINATION 4 BY MS. LA SEUR: 5 Q. Good morning, Mr. Bennington. 6 A. Good morning. 7 Q. Let's see. You offer letters as evidence as 8 community support for this plant as one of your 9 exhibits. At the time when IPL solicited and 10 received these letters of support, had any state 11 agencies completed their analyses of the economic, 12 environmental or public health impacts of this plant? 13 A. I do not know. 14 Q. Has the Marshall County Board of Health 15 reviewed this proposal? 16 A. I do not know. 17 Q. Has IPL solicited review from Marshall 18 County Board of Health or any public health body to 19 review this proposal? 20 A. I do not know. 21 Q. To your knowledge, did the authors of these 22 letters at the time of writing have any technical 23 information about the proposal that did not come 24 directly from IPL? 25 A. I cannot answer that. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 391 1 Q. Is it IPL's position that any of these 2 letters has evidentiary weight in considering any of 3 the statutory issues before the Board? 4 A. Yes. 5 Q. And what is that evidentiary weight? 6 A. That the economic good of the area would be 7 very much enhanced by the building of this plant, not 8 only during the building process, but with the 9 agricultural community and the fact that we would 10 have additional power for the state of Iowa and for 11 the businesses within the state of Iowa. 12 Q. So you are unable to testify as to the 13 knowledge of any of the authors of the letters, but 14 you do claim evidentiary weight for their opinions? 15 A. Yes. 16 Q. To which statutory criteria do these letters 17 of support relate? 18 A. They would relate to the--as best I could 19 determine from the statutory issues, the use of the 20 land in a good, reasonable, economic sense for our 21 customers. 22 Q. Referring to Section 476.53 of the 23 administrative code on development of electric power 24 generating and transmission facilities within the 25 state in sufficient quantity to ensure reliable PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 392 1 electric service, is it IPL's intention--is it IPL's 2 position that the proposal for SGS Unit 4 serves the 3 legislative intent expressed in this part of the Iowa 4 Code? 5 A. Yes, it does. 6 Q. If Iowa already has electric power 7 generating facilities in sufficient quantity to 8 ensure reliable electric service, would SGS 4 still 9 serve the legislative intent of this section of the 10 code? 11 A. Would you repeat the question, please? 12 Q. If Iowa already has electric power 13 generating facilities in sufficient quantity to 14 ensure reliable electric service, would SGS Unit 4 15 still serve the legislative intent expressed in this 16 section of the code? 17 A. I couldn't answer that. At this point, we 18 do not feel the state of Iowa has the power needed. 19 Q. So in your capacity as an expert witness, 20 you are empowered with the rules of evidence to 21 respond to hypothetical questions, and so my 22 hypothetical question to you is, in the scenario the 23 state already has sufficient quantity to ensure 24 reliable electric service-- 25 MS. JOHNSON: I object. We have not put PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 393 1 Mr. Bennington up as an expert witness. We have put 2 him up as a policy witness, so, therefore, the 3 opinion question is not appropriate. 4 CHAIRPERSON NORRIS: Let me clarify, 5 Ms. La Seur. You asked the previous question based 6 on a nonhypothetical, is that correct? 7 MS. LA SEUR: I asked the previous question 8 based on the proposed assumption that the state has 9 sufficient generation, so it is a scenario question, 10 I suppose, which seems to me like a policy question. 11 CHAIRPERSON NORRIS: Well, to the extent the 12 witness is able to answer the question, we will ask 13 him to answer the question. If he is unable to-- 14 THE WITNESS: I think I would be unable to 15 answer that question. 16 BY MS. LA SEUR: 17 Q. Is it IPL's position that an applicant in 18 proceedings for a generating facility siting 19 certificate should not have to demonstrate an actual 20 need for the facility being proposed? 21 A. We have demonstrated the need for this 22 facility as being proposed. 23 Q. That's not my question. 24 A. Would you repeat your question? 25 Q. Is it IPL's position that an applicant in PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 394 1 proceedings for a generating facility siting 2 certificate should not have to demonstrate an actual 3 need for the facility being proposed? 4 A. No, I don't believe that is correct. 5 Q. At page 2 of your rebuttal testimony you 6 suggest that the testimony on the need for the 7 facility offered by Coalition witnesses Neil Harl and 8 Thomas Sanzillo is irrelevant, and my question is if 9 the need for the facility is relevant to the 10 legislative intent expressed under Section 476.53, 11 then how is the Harl and Sanzillo testimony on this 12 point irrelevant? 13 A. I would have to defer that to someone that 14 has reviewed that in much more depth than me, and 15 that would be Mr. Bauer. 16 Q. Okay. Is it IPL's position that SGS Unit 4 17 could receive a certificate in these proceedings as a 18 merchant power plant? 19 A. No, it is not IPL's position that we would 20 look at it as a merchant plant. We would look at 21 this as a baseload plant for our current needs, and 22 to replace purchased power that we are currently 23 using at a large quantity. 24 Q. Is IPL able to name a proportion of the 25 electricity to be generated by SGS Unit 4 that can be PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 395 1 guaranteed to serve the Iowa market rather than any 2 out-of-state market? 3 A. I would have to defer to Mr. Bauer on that, 4 on the layout of the needs for local customers. 5 Q. If some part of the capacity from SGS Unit 4 6 is ultimately not needed in IPL's system in Iowa, 7 would this power not be sold out of state? 8 A. We sell our power to the MISO. We buy our 9 power from MISO. That's the Midwest Independent 10 System Operator. MISO moves the power to where it is 11 needed, so I can't tell you where that power is 12 going. 13 Q. Referring again to more of the language from 14 Section 476.53 where it says in a manner that is 15 cost-effective and compatible with the environmental 16 policies of the state, and my question refers to the 17 eventuality that the SGS Unit 4 is not the least-cost 18 option for achieving reliable electric service in 19 Iowa. 20 If that should be the case, is it IPL's 21 position that the stated requirement that electric 22 generating development be cost-effective is a 23 substantive requirement on proposed new generating 24 facilities? 25 A. It is our position that the coal plant, even PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 396 1 with the assumed carbon regulations added to it, 2 still is the most cost-effective viable way to 3 generate power for our customers. 4 Q. So is that a yes, that it is a substantive 5 statutory requirement? 6 A. I would defer to a lawyer on that. I'm not 7 a lawyer. 8 Q. Is it IPL's position that it has an 9 obligation to compare alternatives for new electric 10 generating development? 11 A. It's our position to provide the most cost- 12 effective economical power for our customers. 13 Q. And does a showing that SGS Unit 4 is cost 14 effective require a comparison to other feasible 15 supply options? 16 A. Yes, it would. 17 Q. And should the compatibility of those other 18 feasible alternatives with environmental quality be 19 part of that analysis? 20 A. The analysis that we have done takes in all 21 existing local, state and federal environmental 22 regulations. 23 Q. And would you acknowledge that CO2 emissions 24 are not currently regulated by any state or federal 25 body? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 397 1 A. Yes, I will. 2 Q. What in IPL's view does it mean for a 3 project to be compatible with the environmental 4 policies of the state? 5 A. That means that we will meet the 6 requirements of our permits as issued by the state. 7 Q. And is it IPL's position that the State of 8 Iowa's environmental policies with regard to new 9 electric generation are entirely embodied in the air 10 quality permitting process of the IDNR? 11 A. Yes. 12 Q. If IPL had feasible alternatives for new 13 capacity that could lower CO2 emissions, would this be 14 compatible or incompatible with the environmental 15 policies of the State of Iowa? 16 A. Repeat the question, please. 17 Q. If IPL had feasible alternatives for new 18 capacity that could lower CO2 emissions, would this be 19 compatible or incompatible with the environmental 20 policies of the State of Iowa? 21 A. At this point CO2 emissions are not part of 22 the environmental regulations of the State of Iowa. 23 Q. And my question is with reference not to 24 environmental regulations, but environmental policies 25 as referenced in the code. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 398 1 A. I would have to see the code. I am not sure 2 on that point. 3 Q. Well, I'm referring back to Section 476.53, 4 and the language is "compatible with the 5 environmental policies of the state." 6 A. All right. 7 Q. So my question is whether or not the 8 environmental policies of the State of Iowa endorse a 9 capacity alternative that could lower CO2 emissions? 10 A. Not to my knowledge. 11 Q. In general, is it IPL's goal in its resource 12 planning to lower emissions of air pollutants to the 13 regulatory acceptable numerical level or to minimize 14 them in an absolute sense? 15 A. Our policy is to meet the requirements of 16 the State of Iowa. 17 Q. In light of potential CO2 regulations on the 18 federal level, are the CO2 emissions of SGS Unit 4 19 directly related to the cost-effectiveness of the 20 facility? 21 A. I believe I had stated before that looking 22 at the coal-fired plant, even assuming carbon 23 constraints in the future, the coal-fired plant is 24 still the most economical power we can produce for 25 our customers in the State of Iowa. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 399 1 Q. And so since you have taken into account the 2 potential for CO2 regulation, is that a yes, that this 3 is a relative consideration to cost-effectiveness? 4 A. No, in that we have taken into account that 5 we have not had to take it into account, because what 6 you're talking about is proposed and not something 7 that is law. We can't plan on something that is 8 supposition in the future. We have to plan on what 9 we see basically, and can't work against within our 10 designs. 11 Q. But you do rely on forecasts, do you not, 12 which are suppositions based on probability? 13 A. We do various scenarios on what could 14 happen, yes. 15 Q. And do you acknowledge that the IUB is 16 charged with enforcing Iowa's energy policies 17 generally? 18 A. Yes. 19 Q. Are you familiar with the 2007 Iowa 20 legislation creating the Iowa Climate Change Advisory 21 Council, the Iowa Office of Energy Independence, the 22 Power Plant Board and the Greenhouse Gas Registry? 23 A. Yes. Not too in depth, but I have been 24 briefed on them. 25 Q. And are you aware that Governor Culver has PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 400 1 signed Iowa onto the Midwest Governor's Association 2 climate agreement? 3 A. Yes. 4 Q. Do you acknowledge that these legislative 5 and executive acts constitute policy? 6 A. Policy, not law. 7 Q. Do you acknowledge that they constitute 8 statements of Iowa's environmental policy? 9 A. No. 10 Q. And do you acknowledge that these policy 11 changes, or however you would characterize them, took 12 place since the approval of the Council Bluffs Unit 4 13 plant? 14 A. Yes, to the best of my knowledge. 15 Q. Thank you. I would refer to your rebuttal 16 at page 3. If Sutherland 4 is constructed on the 17 proposed timeline, will IPL's systemwide CO2 emissions 18 be greater or lesser in 2013 than they are today? 19 A. Incrementally larger. 20 Q. By what percentage will IPL's systemwide CO2 21 emissions increase over today's with the construction 22 of Sutherland 4? 23 A. Subject to check, I believe the number is 24 two-tenths of 1 percent, possibly three-tenths of 25 1 percent. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 401 1 Q. On what assumptions do you base your 2 conclusion that construction of Sutherland 4 will 3 decrease IPL's systemwide CO2 emissions? 4 A. What we're looking at here is that it is 5 almost statistically insignificant, two-tenths of 6 1 percent, to anything, and it will remove purchased 7 power from the equation and substitute it with a high 8 efficiency unit that will emit less on a per-megawatt 9 basis. 10 Q. So when you say that systemwide emissions 11 and criteria pollutants will be reduced as a result 12 of IPL's expansion plan, are you referring to 13 absolute reductions from current levels? 14 A. Well, I believe what we're saying in there 15 is there is more than one emission that we're talking 16 about in there. There's also NOx, there's SOx, and 17 there's mercury, and those levels will be reduced 18 significantly by this plant, so in total all 19 emissions with this plant coming on line will be 20 decreased significantly. 21 Q. And is that a decrease below current levels? 22 A. Subject to check, yes. 23 Q. Just one page later referring generally to 24 your rebuttal testimony at page 4, is it your 25 testimony that this Board need not find the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 402 1 Sutherland 4 proposal reasonable in comparison to 2 other supply alternatives? 3 A. I think the Board has to find this 4 reasonable. 5 Q. The question is, is it your testimony that 6 this Board does not need to find the proposal 7 reasonable in order to approve it? 8 A. The Board in this particular hearing has to 9 find that we have met the criteria of the siting. 10 The reasonableness decision comes about, I believe, 11 in the ratemaking hearing. 12 Q. Do you contest the authority of this Board 13 to consider the comparative reasonability of this 14 proposal? 15 A. I do not contest the authority of this Board 16 to look at what they feel. The Board, in my 17 understanding, would look at reasonableness during 18 the ratemaking process. 19 Q. And in reference to this testimony that you 20 have offered in rebuttal, what are your 21 qualifications to opine on the Board's authority in 22 this area? 23 A. A briefing by resident knowledge experts in 24 the company. 25 MS. LA SEUR: Nothing further. Thank you. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 403 1 CHAIRPERSON NORRIS: Mr. Puckett. 2 MR. PUCKETT: Nothing. 3 BOARD MEMBER HANSON: My first question 4 involves some testimony that was classified as 5 confidential, and hopefully we can deal with it 6 without having to clear the room. 7 The OCA Witness Schlissel had referenced a 8 May--I can give you the page if you need it, but has 9 referenced a May 17th, 2007 letter from counsel for 10 Corn Belt and CIPCO to Alliant Energy. While this 11 letter was treated as confidential, I will say it had 12 two main issues. 13 The question is, does the joint ownership 14 agreement between IPL, CIPCO and Corn Belt that was 15 filed with the Board on December 14th resolve those 16 two issues that was discussed in that letter? 17 THE WITNESS: I do not know. 18 BOARD MEMBER HANSON: Who might be a person 19 that would know that; do you know? 20 THE WITNESS: That would be someone from 21 legal staff or--I'm not sure. I would have to check 22 on that. 23 BOARD MEMBER HANSON: Okay. And then on 24 page 8 of your testimony you state that--starting on 25 line 19 you state that the proposed SGS Unit 4 cost PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 404 1 structure will place it in a position to supplant 2 energy production from other baseload generating 3 facilities that produce greater air emissions, and I 4 guess I'll leave it at that. 5 These baseload generating facilities that 6 produce greater air emissions that will be 7 supplanted, will they continue to generate but just 8 not for IPL, or will they be--will they cease to be 9 generating? 10 THE WITNESS: I would have to see the entire 11 resource plan, but they may generate at a much lower 12 level than they currently are today. 13 BOARD MEMBER HANSON: Okay. And I don't 14 know if the answer to this will be the same, but in 15 your rebuttal testimony, page 3, you specifically 16 talk about the resources for the IPL system. You 17 say, "IPL's expansion plan which includes 200 18 megawatts of additional wind generation and a 350 19 megawatt ownership share in SGS Unit 4 serves to 20 reduce IPL's CO2 emissions from what those levels are 21 estimated to be absent these resource additions." 22 So presumably because you have some 23 generating capacity that has higher CO2 emissions that 24 will no longer be used for IPL if this plant is 25 built? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 405 1 THE WITNESS: It would be that they would be 2 either not used or used to a lesser extent. 3 CHAIRPERSON HANSON: Okay. So the CO2 4 emission--the generating capacity that would have 5 generated the CO2 emissions that will no longer be 6 used for IPL's load if this plant is built, will 7 that--do you know if that will be reduced or simply 8 used or sold to other customers, or the power that 9 you used to purchase, you are no longer purchasing 10 anymore? 11 THE WITNESS: This plant, the plant itself 12 will replace purchased power. As far as plants 13 within our own system, I cannot answer at this point 14 what would happen to any excess capacity. 15 BOARD MEMBER HANSON: So this plant--I want 16 to make sure I understood you correctly--will replace 17 purchased power? 18 THE WITNESS: It will replace purchased 19 power. It will also replace probably some of the 20 older coal plants' need for continuous money, reduce 21 their amount of run time. 22 BOARD MEMBER HANSON: Okay. Thank you. 23 CHAIRPERSON NORRIS: Hello, Mr. Bennington. 24 Let me just follow up on a couple of questions that 25 Mr. Hanson just asked you just so I understand. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 406 1 You've bid all your generation into the MISO 2 market, is this correct? 3 THE WITNESS: Yes. 4 CHAIRPERSON NORRIS: And then you receive all 5 the power that you distribute from the MISO plant? 6 THE WITNESS: That's correct. 7 CHAIRPERSON NORRIS: So are you saying--I'm 8 trying to understand how you know that some of your 9 other plants will not be used as much as a result of 10 the construction of this plant, because you don't 11 really control when those generation--generating 12 facilities run or not, is that correct? 13 THE WITNESS: That's correct, but we do 14 control the price that we did bid those particular 15 plants into the market, so we know that this new 16 plant with its high efficiencies will probably be one 17 of the lowest dispatch cost plants within the fleet, 18 if not within the state, so we--they will be called 19 upon much sooner than some of the other plants would 20 be called upon by MISO, so they would be in the 21 market much less than they currently are today. 22 CHAIRPERSON NORRIS: If the MISO market as a 23 whole serves the 14-state region, don't you have to 24 consider all generation facilities in the 14-state 25 region, because those plants that may be displaced by PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 407 1 this plant--we're not weighing them against this 2 plant, are we not? We're weighing it against all the 3 generation facilities in the region? 4 THE WITNESS: We are, but one must remember 5 also that there is a finite distance that the power 6 can be transmitted without excessive losses, so it 7 really is regional bidding into the market, and you 8 will look at particular nodes throughout the state 9 where the particular plants are much more susceptible 10 to be being bid in. 11 CHAIRPERSON NORRIS: Any sense of how far 12 that region--that circle is? 13 THE WITNESS: I'll have to pass on that. 14 CHAIRPERSON NORRIS: Without delving into 15 the confidential information who you are selling that 16 to. 17 THE WITNESS: I'm a poor generation man. 18 That belongs to the energy delivery and transmission 19 people to give you that answer. 20 CHAIRPERSON NORRIS: Okay. You did just 21 say, though, that you project this proposed unit will 22 replace purchased power. 23 THE WITNESS: Yes. 24 CHAIRPERSON NORRIS: Is there a purchased 25 power agreement that you're saying this--you're PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 408 1 replacing here when building this plant? 2 THE WITNESS: As purchased power agreements 3 come up for renewal, they'll be reviewed against the 4 capacity of this plant and the costs of this plant 5 whether we will need to do any renewals or not. 6 CHAIRPERSON NORRIS: So that your estimated 7 350 megawatts of this plant would be IPL's, are you 8 saying that would place 350 megawatts of purchased 9 power, if this plant weren't built? 10 THE WITNESS: Yes. 11 CHAIRPERSON NORRIS: On page 9 of your 12 direct testimony, lines 9 through 11, you say that, 13 "A combination of load growth and IPL's desire to 14 limit its exposure to a volatile purchased power 15 market results in," and it goes on. 16 Whose risk exposure are you limiting there; 17 IPL's or the customers that paid that through an 18 energy adjustment clause or a pass-through? 19 THE WITNESS: Our customers, basically. We 20 could continue to purchase power forever, 21 hypothetically, but we feel we can produce power much 22 more economically and much more reliably for our 23 customers in the state of Iowa by building this 24 plant. 25 CHAIRPERSON NORRIS: You were here when I PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 409 1 asked Mr. Bauer this question earlier today, I 2 believe. If there's a carbon cost down the road to 3 the generation from this facility or generation from 4 your purchased power, who bears the risk of that 5 carbon costs; IPL or the customers? 6 THE WITNESS: Well, we have done the study 7 based upon the coal and the assumption of the carbon 8 cost becoming a reality sometime in the distant 9 future, and it is our analysis, even with that, that 10 this plant is the most economical way to produce 11 power for our customers in Iowa, so it is not a risk 12 that the company is taking on. It is something that 13 has already been calculated into the cost, so it is 14 not something we should take on as an added risk 15 ourselves. 16 CHAIRPERSON NORRIS: What if you're wrong? 17 Who bears that risk then? 18 THE WITNESS: If we're wrong, then that will 19 probably be borne out in a ratemaking case. 20 CHAIRPERSON NORRIS: Would it make a change 21 of policy that those carbon costs couldn't be passed 22 on to the consumer? 23 THE WITNESS: We would look at putting that 24 in the cost of generating our power. You would 25 determine whether or not we could do it. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 410 1 CHAIRPERSON NORRIS: So if the end result is 2 this plant gets built and some of the coal plants 3 that you think will be supplanted by this actually 4 are not, should that be the burden of IPL or the 5 consumers? 6 THE WITNESS: I lost part of that. My 7 hearing is not the best. 8 CHAIRPERSON NORRIS: So this plant goes 9 forward, but it turns out to be plants that you think 10 would be supplanted by this additional generation 11 actually gets sold in the MISO market and don't 12 reduce their emissions. Should that risk be borne by 13 the consumers by a pass-through of the carbon costs, 14 or should IPL bear some responsibility for that? 15 THE WITNESS: If your scenario as stated 16 comes true, it means that Iowa needed more power than 17 we even thought, and that then we are providing that 18 power for our customers, and so that is the cost of 19 the power. It is not a risk to us, or a cost that 20 should be a detriment to us because the state then-- 21 our customers are saying we need more than we had 22 assumed in our scenarios. 23 CHAIRPERSON NORRIS: Thank you. 24 BOARD MEMBER TANNER: Good morning. Can you 25 hear me? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 411 1 THE WITNESS: Yes, I can. 2 BOARD MEMBER TANNER: Can you shed some 3 light on why IPL decided to submit the application 4 for the siting certificate now; that is, why now 5 instead of waiting for more certainty with the carbon 6 regulation? 7 THE WITNESS: Several reasons. No. 1, this 8 carbon has been discussed now for how many years, and 9 we don't appear any closer to a solution on a 10 national or state level than we were a number of 11 years ago. There is a great deal of talk. 12 Our need for the power is in the 2013 time 13 frame, and it's going to take five years to build 14 this plant from the time we have approval, and so we 15 really cannot wait. And the longer we wait, more 16 things change, and technology may also change going 17 forward in the future. 18 BOARD MEMBER TANNER: Related to that, you 19 mentioned you need the space in 2013, and I know IPL 20 has--I know it is throughout various witnesses' 21 testimony, but can you, in a nutshell, give it your 22 best shot, explain why IPL needs this in 2013 and not 23 2014? 24 THE WITNESS: We need it in 2013 just 25 because of our shortages. While we are building this PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 412 1 plant, when it comes on line in 2013, it will have 2 excess capacity to the immediate needs, but we can't 3 build a plant that meets the exact needs of 2013, 4 because in 2014 the needs will have increased once 5 again and we'll be going back in and asking to build 6 another plant, so from the time it takes us to get 7 this built and come on line, while we'll have a 8 short--a small amount of excess capacity, that will 9 be quickly eroded, and I would have to check the date 10 on when we are energy neutral. Two or three years 11 down the line. I forget the exact date at this 12 point. 13 BOARD MEMBER TANNER: So, in essence, you 14 feel that that outweighs any risk of--that comes from 15 having this now instead of a year or two from now? 16 THE WITNESS: Very much so. 17 BOARD MEMBER TANNER: I guess that question 18 assumes that there will be carbon regulation in the 19 next year or two. What's your thought on that? 20 I realize you said we've been talking about 21 it for a while, but the noise seems a little louder, 22 and it seems to be more certain now than maybe it was 23 a couple of years ago, would you agree? 24 THE WITNESS: I would agree there is more 25 discussion now than there was several years ago. My PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 413 1 experience has been that discussion doesn't 2 necessarily imply action, final actions. My concern 3 is that there's going to be a lot more discussion and 4 reviews of technology. 5 BOARD MEMBER TANNER: Thank you. 6 CHAIRPERSON NORRIS: Ms. Johnson. 7 MS. JOHNSON: Thank you. 8 REDIRECT EXAMINATION 9 BY MS. JOHNSON: 10 Q. Just coming back very quickly to Board 11 Member Tanner's question clarifying the need for 2013 12 or 2014, I understand Brent Kitchen would be the 13 witness who would be able to address that in more 14 detail, but to your general knowledge, you're saying 15 that there is an increased need in 2014, and that it 16 increases even more--or in 2013, and it increases 17 even more in 2014, correct? 18 A. Continuous growth, correct. 19 Q. So there isn't just a leap from one year to 20 the next? 21 A. No. 22 Q. Okay. Also to clarify when you were talking 23 about potential hazards with delaying for a year, 24 would you also agree that there could be a potential 25 problem with rising construction costs if we tried to PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 414 1 delay? 2 A. We are seeing continuous cost pressures 3 right now, and we do not expect to see that ease off 4 anytime in the future. China and India are on major 5 expansion plans, and they are really driving the cost 6 tunes for equipment in the power generation area 7 today. 8 Q. And to clarify, Jeff Beer would be the 9 witness who would have even more information on that? 10 A. Yes, he would. 11 Q. Finally on page 3 of your rebuttal 12 testimony-- I'll wait until you get to that page. 13 I just want to clarify. You indicate that the 14 SGS Unit 4 alone reduces IPL's CO2 emissions, or is 15 this in a part of IPL's overall expansion plan that 16 creates a reduction in IPL's CO2 in 2013? 17 A. It is part of the entire plan which includes 18 wind and other things that we are working on, yes. 19 Q. And that would include--you mentioned wind-- 20 about 200 megawatts of wind? 21 A. Yes. 22 MS. JOHNSON: I have nothing further. 23 CHAIRPERSON NORRIS: Mr. Stead. 24 MR. STEAD: Thank you, Your Honor. 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 415 1 RECROSS-EXAMINATION 2 BY MR. STEAD: 3 Q. Mr. Bennington, in the ratemaking principle 4 statute, would you accept that part of that law 5 states, "In determining the applicable ratemaking 6 principles, the Board shall not be limited to 7 traditional ratemaking principles or traditional cost 8 recovery mechanisms," end quote? Do you accept that, 9 subject to check? 10 A. Subject to check. 11 Q. Now, is it your opinion that IPL received 12 satisfactory ratemaking principles from the Board in 13 its Emery proceeding? 14 A. Yes, because we went forward with the plant. 15 Q. And if IPL ever gets ratemaking principles 16 from the Board that it is not satisfied with, it can 17 walk away from the plant, is that correct? 18 A. Absent IUB granting us a ratemaking 19 principle that fits our needs, we will not build this 20 plant. 21 Q. You also received recently, or at least 22 there was a stipulation with the Office of Consumer 23 Advocate for ratemaking principles acceptable to IPL 24 for its proposed wind project, is that correct? 25 A. Could be. I'm not the one to ask on that. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 416 1 Q. Subject to check? 2 A. Sure. 3 Q. Now, following up on a question from 4 Chairman Norris on who bears the risk of CO2 5 regulation in the future, are you aware of the 6 electric power generation facility emissions plan and 7 budget law in the state of Iowa? 8 A. No. I can't answer on that. 9 Q. You're not aware of it? Would you accept, 10 subject to check, that part of that law states, "The 11 Board shall review the plan or update and the 12 associated budget and shall approve the plan or 13 update and the associated budget if the plan or 14 update and the associated budget are reasonably 15 expected to achieve cost-effective compliance with 16 applicable state environmental requirements and 17 federal ambient air quality standards." 18 Would you accept that, subject to check? 19 A. Subject to check. 20 Q. Would you also accept, subject to check, 21 another provision of that law states, quote, "The 22 reasonable costs incurred by a rate-regulated public 23 utility in preparing and filing the plan, update or 24 budget and in participating in the proceedings before 25 the Board, and the reasonable costs associated with PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 417 1 implementing the plan, update or budget shall be 2 included in its regulated retail rates." 3 Would you accept that, subject to check? 4 A. Subject to check. 5 MR. STEAD: That's all I have, Your Honor. 6 Thank you. 7 RECROSS-EXAMINATION 8 BY MS. EASLER: 9 Q. I do have a few questions following up. 10 Mr. Bennington, you testified that the 11 addition of the proposed coal plant would remove 12 purchased power from the equation. Do you recall 13 that? 14 A. Yes, I do. 15 Q. Is it possible that with the capacity 16 currently reflected in the Duane Arnold PPA, which 17 expires in 2014, that this capacity will be replaced 18 with a market-based PPA? 19 A. Could you repeat the question, please? 20 Q. Is it possible that the capacity currently 21 reflected in the Duane Arnold PPA, which expires in 22 2014, will be replaced with a market-based PPA? 23 A. Only if someone could offer power at a much 24 lower price. 25 Q. A much lower price than what? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 418 1 A. Than the current PPA from Duane Arnold. 2 That was your question, was it not? 3 Q. Right. Are you planning to replace that 4 capacity with a market-based PPA? 5 A. No. 6 Q. I would like to show you testimony from the 7 ASB proceeding involving the sale of Duane Arnold, 8 and this is transcript pages 103 through 104, and 9 this is Mr. Aller's rebuttal. 10 Beginning on line 16 of that page, would you 11 read the Q and A contained there? 12 A. "Question. How will IPL replace the 13 capacity and energy from DAEC at the time the PPA 14 expires in February 2014? 15 "Answer. As testified to by Mr. Kitchen at 16 page 3 of his direct testimony, IPL has sufficient 17 time between now and February 2014 to preserve most, 18 if not all, resource options to be considered for 19 replacing the DAEC-related PPA capacity and energy." 20 Q. Please continue. 21 A. "Question. What is the most likely scenario 22 for replacing the capacity of DAEC? 23 "Answer. At this point in time the most 24 likely scenario for replacing DAEC is a market-based 25 PPA for both capacity and energy. This is a resource PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 419 1 which IPL models in its relicensing model. This PPA 2 could be with FPLE, Duane Arnold for DAEC capacity 3 energy, or with another market-based resource." 4 Q. Thank you. Is the capacity that expires 5 under this PPA, the Duane Arnold PPA, more or less 6 than the planned amount of capacity that IPL will be 7 acquiring with the proposed coal plant? 8 A. I'm not positive. I would have to defer 9 that to Mr. Bauer. 10 Q. Would you accept, subject to check, that it 11 is more than 400 megawatts? 12 A. Subject to check. 13 Q. When does IPL first show a shortfall in 14 capacity in their resource plan that it submitted in 15 this case? 16 A. I would have to defer that to Mr. Bauer. 17 Q. And Mr. Bauer is the resource planning 18 expert? 19 A. Yes, yes. 20 Q. I thought that was Mr. Kitchen? 21 A. It won't be the first time I've used the 22 wrong name in my career. I stand corrected. Pardon 23 me. 24 Q. You also indicated during your testimony 25 that cost pressures and potential cost increases are PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 420 1 leading IPL to want to move ahead with the proposed 2 coal plant. Have you seen cost pressures in the area 3 of new wind generation as well? 4 A. Yes, we have. 5 Q. In terms of the time that it takes to site 6 and bring wind generation into operation, how does 7 that compare to a coal plant? 8 A. Less time. 9 Q. About how long has IPL been looking at 10 trying to add more wind to its resource portfolio? 11 A. We've been working on wind six, eight years, 12 I believe. 13 Q. And the ratemaking principles application 14 that you filed for on the new wind, RPU-07-05, what 15 time frame does that allow for the new wind to come 16 in? 17 A. I cannot answer. 18 MS. JOHNSON: I would question whether this 19 line of questioning is appropriate for this witness. 20 He hasn't testified directly regarding wind, and we 21 do have Mr. Vosberg and potentially Mr. Friedman who 22 might be able to speak better toward that area. 23 MS. EASLER: That's fine. Thank you. 24 That's all I have. Oh, I would request that the 25 Board take notice of the referenced transcript pages. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 421 1 CHAIRPERSON NORRIS: We'll take notice. 2 Thank you. 3 THE WITNESS: Do you want them back? 4 MS. EASLER: Yes. 5 RECROSS-EXAMINATION 6 BY MS. LA SEUR: 7 Q. Mr. Bennington, following up on some of the 8 questions about the potential for carbon regulation 9 policy shifts, would you agree that the certainty of 10 a new president a year from now is likely to mean a 11 shift in carbon regulation policy? 12 A. No. 13 Q. Does the timing of the presidential 14 elections have anything to do with the timing of this 15 application? 16 A. No. 17 Q. Does IPL intend to wait until carbon 18 regulations are actually enacted into law before 19 responding to them? 20 A. Yes. 21 Q. Should IPL then bear the responsibility for 22 the risk entailed in that strategy? 23 A. What risk? 24 Q. The risk of significant expense caused by 25 carbon regulations. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 422 1 A. I'm not sure I understand the question. 2 Q. I'm referring to the increased cost of 3 generating electricity when there are--when there is 4 a price attached to carbon. 5 A. I think we've already answered that 6 question. We said that the coal-fired plant, even 7 with the assumption of carbon costs, is still the 8 most economically produced power for our customers in 9 the state of Iowa. 10 Q. Yes. Let's get to that. You testify that 11 Sutherland 4 will displace existing higher emitting 12 generation, correct? 13 A. Yes. 14 Q. And you also testified that there is new 15 demand driving the need for this 630-megawatt plant 16 by 2013? 17 A. Yes. 18 Q. Aren't these mutually exclusive positions? 19 In other words, how can Sutherland 4 displace 20 existing generation at the same time that it serves 21 new load? 22 A. If you look at what we have on the plan, 23 when the plant comes on line in 2013 we have excess 24 capacity, so one is not mutually exclusive of the 25 other. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 423 1 Q. Did you not just testify that if IPL were to 2 build for the need projected for 2013, then it would 3 just have to propose a new plant within another year 4 or so, so are you not anticipating new demand that 5 will consume all this new generation in a relatively 6 short time span? 7 A. What is the relatively short time span? 8 What is relative? 9 Q. You said 2014. In 2014 there would have to 10 be a proposal for a new plant? 11 A. I said if we built the current plant to meet 12 the demand for 2013, then by the end of the year 2014 13 load growth within the state of Iowa where our 14 customers continue to use more power each and every 15 year would then give us a shortage of power, and, 16 theoretically, would require us to start building 17 another plant to meet those shortfalls. 18 Q. So if projected growth is at that level, how 19 will it be possible to displace or shut down existing 20 coal-fired generation? 21 A. Because we will have initially excess 22 capacity and we will be able to constrain what we 23 have. We will look to the future to see what else is 24 needed going forward. 25 Q. Are you able to name any specific PPAs that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 424 1 will be replaced or IPL-owned coal plants that will 2 be closed as the result of Sutherland 4 being 3 constructed? 4 A. No. 5 Q. Is IPL making any enforceable commitments 6 that will ensure that the represented CO2 reductions 7 will actually be realized? 8 A. No. 9 MS. LA SEUR: Nothing further. 10 CHAIRPERSON NORRIS: Just one question, 11 Mr. Bennington, so I am sure I understand where we're 12 at on projected emissions, because if I recall 13 correctly from your previous answers to, I think, my 14 questions and maybe perhaps some other questions, you 15 anticipate that the building of this facility will 16 lower the carbon impact or print of IPL's resources? 17 THE WITNESS: This plant of and by itself 18 will have a lower carbon imprint per megawatt 19 generated than any other plant in the fleet. 20 CHAIRPERSON NORRIS: Okay. But you're not 21 saying it will lower the overall IPL carbon 22 footprint? 23 THE WITNESS: No. I believe that I said 24 earlier on in testimony that with this plant on line, 25 because it will replace some high-cost gas which is a PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 425 1 high-cost energy to our customers, we would actually 2 see incremental increase fleetwide on the carbon. 3 CHAIRPERSON NORRIS: Thank you. 4 Ms. Johnson. 5 MS. JOHNSON: We don't have anything 6 further. 7 CHAIRPERSON NORRIS: Anybody else? Thank 8 you, Mr. Bennington. 9 THE WITNESS: You're welcome. 10 (Witness excused.) 11 MS. JOHNSON: I would like to note for the 12 Board Members, however, regarding the questions 13 regarding the joint operating agreement, Jeff Beer 14 would be able to answer that question if you wanted 15 us to recall him for the Board questioning. 16 CHAIRPERSON NORRIS: Thank you. We'll 17 examine that at the lunch break and let you know if 18 we need to bring him back up. 19 I think at this time I'm going to ask 20 if--Ms. Johnson, if you can give us your best 21 estimate of your witness order when we come back from 22 lunch, that would be helpful. 23 MS. JOHNSON: Yes, I can. From here we're 24 planning to next take, if you wish to recall him, 25 Jeff Beer to address the JOA issue, and then PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 426 1 Alan Arnold. Then we'll move to Kevin Vesperman and 2 Brent Kitchen, Rich Friedman, Bob Vosberg, 3 Eric Guelker, Bob Holmes, Jody Hillberry, and then 4 finally Pat Kampling. 5 CHAIRPERSON NORRIS: All right. It is noon. 6 Why don't we-- Ms. La Seur, being sensitive to your 7 situation, is 1:30 enough, or would you like to make 8 it 1:45? 9 MS. LA SEUR: I think 1:30 would be fine. 10 CHAIRPERSON NORRIS: Are you sure? Okay. 11 We'll reconvene at 1:30. 12 (Recess taken at 12 noon until 1:30 p.m.) 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 427 1 AFTERNOON SESSION (1:30 p.m.) 2 CHAIRPERSON NORRIS: All right. We're back 3 in session. I think we failed to determine if we 4 needed 1to call Witness Beer back. We will try and 5 determine that after Mr. Arnold, but it looks like we 6 probably won't need to recall him. 7 MS. JOHNSON: Okay. In that case, IPL calls 8 Alan Arnold to the stand. 9 CHAIRPERSON NORRIS: Hello, Mr. Arnold. 10 Raise your right hand, please. 11 ALAN J. ARNOLD, 12 called as a witness by Interstate Power and Light 13 Company, being first duly sworn by Chairperson Norris, 14 was examined and testified as follows: 15 DIRECT EXAMINATION 16 BY MS. JOHNSON: 17 Q. Would you please state your full name and 18 business address for the record, please. 19 A. My name is Alan J. Arnold. My address is 20 200 First Street Southeast, Cedar Rapids, Iowa 52406. 21 Q. And did you file in this docket on July 2nd, 22 2007, 22 pages of direct testimony with Exhibits 23 labeled Exhibit 5 for this proceeding, at that time 24 AJA-1, schedules A and B, and also on December 10th, 25 2007, seven pages of rebuttal testimony? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 428 1 A. Yes, I did. 2 Q. And do you have any changes or corrections 3 to make to that testimony? 4 A. No, I do not. 5 MS. JOHNSON: I tender the witness for 6 cross-examination. 7 (IPL Exhibit 5 was 8 received in evidence.) 9 (Prepared testimony follows.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 458 1 MR. STEAD: No questions, Your Honor. 2 CHAIRPERSON NORRIS: No questions from OCA. 3 CROSS-EXAMINATION 4 BY MS. LA SEUR: 5 Q. Let's see. Let me direct you first to pages 6 9 and 10 of your direct testimony where you discuss 7 Iowa's participation in the Clean Air Mercury rule 8 program, which allows mercury-emitting facilities to 9 buy allowances to emit more mercury at one site in 10 exchange for reductions elsewhere in the U.S., is 11 that correct? 12 A. That is my understanding. 13 Q. And when you say that IPL will purchase 14 allowances for certain criteria pollutants like 15 mercury, that means that reductions in those 16 pollutants are happening somewhere in the U.S., 17 correct, just not in Iowa? 18 A. Could you repeat the question? I'm not sure 19 I'm following you. 20 Q. So the question is when IPL purchases 21 allowance for--allowances for criteria pollutants 22 like mercury that means that a reduction somewhere in 23 the United States will take place, but not in Iowa? 24 A. The reductions are a part of the statewide 25 pool that can occur at other utilities in Iowa and PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 459 1 across the nation, in our part of the pool. 2 Q. So more specifically, the reductions will 3 not take place at the site for which the allowances 4 are purchased? 5 A. To the extent we need additional allowances 6 to cover those that are emitted, that is correct. 7 Q. So the cause being that where there is 8 cleaner air, it is permissible to pollute more? 9 A. The plants have permit conditions that they 10 must follow, so to the extent that they are legally 11 obligated to follow those permits, and they are, they 12 cannot pollute over those limits. 13 Q. And along the same line of questioning about 14 the compliance with environmental regulations, I 15 direct you to page 16 and line 9 of your direct 16 testimony, and I believe your testimony reads, "To 17 the extent mercury emissions are produced," and 18 mercury emissions will be produced, correct, at 19 Sutherland 4? 20 A. They will be produced. 21 Q. And would you agree that the range submitted 22 by IPL in its application was in the range of 400 to 23 500 pounds per year of mercury? 24 A. I would have to check on my numbers. Based 25 on new source performance standard requirements which PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 460 1 we would be subject to, I believe our largest 2 emission of mercury would be in the 300- to 350-pound 3 range. We anticipate much less than that. 4 Q. I would direct you then to Volume I of the 5 application, if we could bring that out. I have a 6 question regarding the numbers submitted in the first 7 section of the application about projected emissions 8 of criteria pollutants. 9 A. Could you direct me to the page, please? 10 Q. I'm just looking for it. One of many tabs. 11 One second. So this is page 30 of volume I of the 12 application, table 1.6.4-1, "Primary regulated 13 combustion exhaust gas and its maximum annual 14 emissions." 15 A. Can you tell me what tab that is located? 16 Q. I'm not sure how yours will be tabbed, but 17 I'm looking at an exhibit headed "Facility 18 Description." 19 A. I'm sorry. I'm having difficulty finding 20 it. 21 A VOICE: Page 30 of tab 1. 22 MS. LA SEUR: There are some confidential 23 markings in this section, but I would assume since 24 these are the kind of records that go into DNR as 25 public records, this would not be considered PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 461 1 confidential information. Maybe that's a question 2 for counsel. Are these projected emission numbers 3 public information? 4 MS. JOHNSON: It's not in the confidential 5 portion. 6 MS. LA SEUR: Thank you. 7 MS. LA SEUR: 8 Q. So then I would direct you to the line 9 regarding mercury-- 10 A. Yes. 11 Q. --at the bottom of this table, which 12 projects annual maximum emissions in tons per year of 13 0.24? 14 A. Yes. This table reflects at the time we 15 wrote this PC application, the maximum annual 16 emissions was .24 tons per year. 17 Q. And is that calculation current, or has it 18 changed? 19 A. I would have to check the numbers on that. 20 We would have to look at the maximum potential to 21 make calculations that we use for air permit, but 22 that looks like it's in the ballpark of the number 23 used nationally. 24 Q. That's all I wanted to ask about that one. 25 Thank you. So under current law, those four to five PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 462 1 hundred pounds of mercury can be released completely 2 legally under the Clean Air Act, can they not? 3 A. Yes. My understanding is our requirements 4 are to meet new source performance standard 5 requirements as well as the Clean Air Mercury rule 6 requirements. 7 Q. Okay. And does IPL endorse mercury 8 monitoring and reporting for all Iowa waters? 9 A. That's beyond my capacity as the witness to 10 answer that question. 11 Q. Would you also be unable to answer whether 12 or not IPL is willing to commit to an enforceable 13 numeric limit on its mercury emissions? 14 A. The Iowa DNR will have an enforceable 15 numeric emission in the permit. 16 Q. Subject to allowances purchased? 17 A. No. The DNR will have a new source 18 performance standard limit and it is based on a 19 pounds per megawatt-hour, which is an efficiency 20 limit. It is a finite limit. 21 Q. Are you familiar with the comparative 22 stringency of these new source performance standard 23 limits as compared to the Clean Air Act 112G 24 numerical limits that were removed when the Clean Air 25 Mercury rule became law? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 463 1 A. I have some knowledge of those. 2 Q. And can you compare the stringency? 3 A. My understanding is the 112 rules for 4 mercury were more stringent than the new source 5 performance standards. I'm not aware of the actual 6 limit. I realize they are more stringent. 7 Q. Thank you. I direct you then to page 12, 8 line 7 to 8 of your direct testimony, and 9 specifically your testimony that SO2 emissions will be 10 limited primarily by use of low sulfur coal from the 11 Powder River Basin, and by use of a wet flue gas 12 desulfurization scrubber system. 13 My question refers to Mr. Beer's testimony 14 that no fuel contracts exist, and the unit is being 15 designed for western or eastern coal, whichever is 16 more economic. 17 That being the case, if high sulfur eastern 18 coal turns out to be cheaper, doesn't that remove one 19 of your two primary SO2 reduction strategies? 20 A. No, it does not. The wet flue gas 21 desulfurization system actually works better on 22 bituminous fuel in terms of the percent removal of 23 sulfur. 24 Q. So when you say that SO2 emissions will be 25 limited primarily by use of low sulfur coal, it PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 464 1 doesn't actually matter if you're using low sulfur 2 coal? 3 A. It doesn't matter in that the source content 4 of sulfur is reduced to begin with. The control 5 equipment will work well with either coals, but it 6 works even better with the bituminous fuel. 7 Q. Would it be more expensive to operate the 8 control equipment depending on which fuel you used? 9 A. I don't know that I have the expertise to 10 answer that. 11 Q. Okay. Also on page 12, moving down to lines 12 18 through 20 you mention use of continuous emissions 13 monitoring as an additional environmental protection 14 measure at Sutherland 4. My question is, isn't CEM 15 required as a basic permit condition for this type of 16 plant? 17 A. Yes, it is. 18 Q. Is it IPL's position that existing air and 19 water regulations are one and the same as reasonable 20 land use and environmental policies? 21 A. Could you repeat that question? 22 Q. I'll repeat it, and I'll phrase it a 23 different way if it helps. The question is, is it 24 IPL's position that existing air and water 25 regulations are one and the same as reasonable land PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 465 1 use and environmental policies as the statute 2 directs, and would that then require that this Board 3 only has to check on prospective future regulatory 4 compliance as checking it off a list to perform its 5 statutory mandate in this regard? 6 A. The obligation to obtain all the necessary 7 approvals, clearances and permits from the regulatory 8 agencies overseeing this project, in my opinion, once 9 obtained, shows their approval to the project from 10 the regulatory standpoint. 11 Q. And would you give any further weight to the 12 language "environmental policies"? 13 A. I'm not qualified to answer that. 14 Q. That's fine. Page 18, lines 11 through 13. 15 One moment. Thank you. Okay. So your testimony at 16 lines 11 to 13 is that this supercritical boiler unit 17 will produce less greenhouse gas emissions compared 18 to a subcritical boiler unit of the same size, 19 correct? 20 A. Correct. 21 Q. So are you saying that the greenhouse gas 22 reductions to be achieved by a supercritical PC 23 boiler represents a difference, if I'm reading your 24 testimony correctly elsewhere, of approximately 5 25 percent as compared to a subcritical boiler of the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 466 1 same size? 2 A. I would defer that to Mr. Harder, who I 3 believe has more experience in that area. My 4 understanding is a supercritical unit does have 5 improved thermal efficiency. 6 Q. And building a new PC boiler of whatever 7 thermal efficiency does still result in a large net 8 increase of CO2 emissions, does it not? 9 A. In the context of the fuel you're burning, I 10 would say yes. It depends on the type of fuel you 11 burn. 12 Q. Is there a type of fuel that could be burned 13 in this plant that would cause a negative CO2 impact, 14 or a minimum CO2 impact? 15 A. I believe in our studies on the Sheridan 16 Valley project switchgrass--Sheridan Valley biomass 17 project done in Ottumwa, the carbon cycle associated 18 with the biomass that was consumed in the boiler 19 during those tests was shown to have a net zero 20 carbon imprint, if you will. 21 The material grows, it's cut, it's burned, 22 it grows again. We do know that sequestering of 23 carbon dioxide does occur in the roots of the system, 24 the grasses. In those fields that are--where you 25 replace corn, and plant switchgrass, for example, you PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 467 1 will have a net decrease in the CO2 that's actually 2 released, so in that regard it is fuel dependent. 3 Q. And what size CO2 emission reduction could 4 be achieved by use of that type of alternative fuel 5 at this plant? 6 A. The plant that's currently permitted, we are 7 seeking 5 percent on a heat input basis for 8 switchgrass or corn stover or some likely biomass. I 9 believe the replacement of coal with biomass on a 10 one-to-one ratio on a heat input basis would result 11 in the same reduction of CO2 in that percentage basis 12 as well. 13 Q. So a replacement of one-to-one reduction? 14 A. Approximately. 15 Q. So this would be 5 percent of a projected 16 5.7 or 5.8 million tons of CO2 per year projected to 17 be emitted from this plant? 18 A. The number you describe as 5.7 million tons 19 per year is a number that reflects 100 percent 20 capacity worst case unit running full out throughout 21 the year. This unit will not run more than 85 to 90 22 percent most likely due to outages and planned 23 outages, so the number 5.7 is something less than .85 24 to .89 times that number. 25 Q. Directing your attention to your rebuttal PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 468 1 testimony at page 2 and 3, and particularly your 2 statement that the Iowa Department of Natural 3 Resources has established a permit process to ensure 4 that aquatic life in the receiving stream is 5 protected. Are you aware that DNR is currently the 6 target of a petition to EPA to remove its delegated 7 authority to enforce the Clean Water Act? 8 A. I'm not aware of that. 9 Q. When you say that IPL is committed to 10 meeting compliance levels established by DNR, is it 11 your position that compliance is in some way 12 optional? 13 A. No. 14 Q. So this is not an economic commitment, but a 15 legal requirement? 16 A. Our company commits that we are required to 17 do these things, and we will do them. 18 Q. So that is to obey the law? 19 A. I'm sorry? 20 Q. That is a commitment to obey the law? 21 A. Correct. 22 Q. You mentioned that existing Sutherland total 23 dissolved solids concentrations are not acutely toxic 24 to tested aquatic life. Are you familiar with the 25 distinction between acute toxicity and chronic PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 469 1 toxicity? 2 A. I am not a biologist, but I do know those 3 two toxicity descriptions. 4 Q. And are you familiar with any testing that's 5 been done to gauge the potential for chronic toxicity 6 from these discharges? 7 A. No. 8 Q. Is it your sworn testimony that Sutherland 4 9 discharges will not be chronically toxic to aquatic 10 life in the Iowa River? 11 A. We will meet whatever limit is determined by 12 DNR to protect the Iowa River according to their 13 rules, regulations and processes. 14 Q. Okay. Page 5 and 6 of your rebuttal, 15 referring again to the question of the authority of 16 this Board, which has come up a number of times, is 17 it your position that this Board has authority to 18 determine what constitutes reasonable use of air, 19 land and water resources beyond determining that IDNR 20 and other relevant agencies will issue the necessary 21 permits? 22 A. That's beyond my capacity. I'm sorry. 23 Q. Is it your position that current Clean Air 24 Act permitting removes all risk of harmful health 25 impacts? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 470 1 A. I think you need to direct that to the DNR. 2 Q. Will the existing three Sutherland boilers 3 be upgraded to comply with the Clean Air Act 4 standards required for Sutherland 4? 5 A. My job in this project was to facilitate 6 permitting of Unit 4. I did not speak to Units 1 7 through 3. 8 Q. Are you familiar with cap and trade programs 9 for sulfur dioxide and other criteria pollutants that 10 allow power plants in areas with cleaner air, such as 11 Iowa, to emit higher levels of criteria pollutants in 12 exchange for reductions in areas where the air is 13 already degraded? 14 A. I am familiar with the cap and trade 15 program. 16 Q. And are you aware that Iowa DNR has removed 17 the numeric limits on mercury emissions for the new 18 Council Bluffs coal plant in exchange for its 19 purchase of allowances? 20 A. No, I was not. 21 Q. One question with relation to the 22 archeological and architectural study included as an 23 exhibit to your testimony. I was directed to follow 24 up on this by a previous witness, I believe. 25 Considering the number of uninvestigated PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 471 1 archeological sites that may be of historic, sacred, 2 or cultural significance to Native Americans whose 3 ancestors inhabited the area, have consultations been 4 conducted with the appropriate tribal 5 representatives? 6 A. I cannot answer that question directly. The 7 company we work with, a professional archeological 8 and cultural resource company, performed the 9 necessary investigations as required of them, and 10 their determinations were put forward in the Corps of 11 Engineers permits. This study was done over several 12 months, and very extensive in terms of what they 13 looked at and what they found. 14 Q. And is it your understanding that that 15 process is complete? 16 A. That process is not complete in that 17 Interstate Power and Light is obligated to follow the 18 Corps of Engineers Section 44 permitting process 19 which may create additional questions on the study. 20 MS. LA SEUR: Nothing further. Thank you. 21 CHAIRPERSON NORRIS: Mr. Puckett. 22 MR. PUCKETT: No questions. 23 BOARD MEMBER HANSON: I would like to return 24 to the issues regarding the discharge--total 25 dissolved solids discharge. First of all, do you PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 472 1 know what stream classification applies to the 2 segment that this plant will be discharging into? 3 THE WITNESS: I would have to double-check 4 that. 5 BOARD MEMBER HANSON: Maybe a more general 6 question would be better. Do you know if that 7 segment falls under a classification of requires a 8 test for chronic toxicity, or just requires the acute 9 toxicity check? 10 THE WITNESS: The preliminary information we 11 had from the Iowa DNR's wastewater group is if there 12 are total dissolved standards that we would see our 13 outfall going above-- There was two different 14 standards for acute toxicity, and then there is a 15 different one for chronic, and if we were foreseeing 16 those going above that, we would have to undergo-- 17 BOARD MEMBER HANSON: So it must fall into 18 one of those classes. On page 3, and we'll return to 19 that subject where--that section where you-- This is 20 of your rebuttal testimony. I'm sorry. Page 3 of 21 your rebuttal testimony, where you stated that the 22 existing facility's outfall, your tests indicated 23 that TDS concentration in excess of 4,000 milligrams 24 per liter showed no acute toxicity to tested aquatic 25 life, and maybe you've already answered this, but I PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 473 1 wasn't quite sure. Were there tests done at that 2 time for chronic toxicity? 3 THE WITNESS: No, there were not. 4 BOARD MEMBER HANSON: Were they just not 5 necessary to be done? 6 THE WITNESS: They were not necessary. 7 BOARD MEMBER HANSON: Okay. Do you have an 8 estimate for the new plant of how much flow in 9 gallons per minute will be coming out? 10 THE WITNESS: The plant's outfall to the 11 river can have as low as zero gallons per minute 12 during certain conditions, and up to--I think the 13 high we calculated around 200 to 210 gallons per 14 minute. 15 BOARD MEMBER HANSON: Do you have an 16 estimate yet for the overall level of TDS in the 17 discharge? 18 THE WITNESS: Preliminary-- 19 BOARD MEMBER HANSON: I shouldn't say in the 20 discharge. I believe in your situation it would be 21 measured at the mixing area. 22 THE WITNESS: Yes. That's yet to be 23 determined, the final design, but what I understand 24 is the TDS limits could be in the 1,200 to 2,000 25 milligram per liter range based on the current PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 474 1 cooling tower cycle efficiency. 2 BOARD MEMBER HANSON: Do you have any 3 estimate of what the specific ions in that TDS will 4 be? And the second part to that is, do you expect 5 that those constituents of the TDS to be in some way 6 significantly different than the specific ion in 7 your--in the TDS from the existing plants? Is there 8 some reason it will be different? 9 THE WITNESS: The source water in--the City 10 of Marshalltown source water, what I understand is 11 the cooling tower will concentrate up material as you 12 use more cycles of water, so the general drinking 13 water constituents will cycle up eight to ten times, 14 and that's the ions that we expect to be in that 15 water. 16 One thing we are doing right now to better 17 understand this issue is performing simulated 18 toxicity affluent testing that simulates the cooling 19 tower blow-down to assure us that the total dissolved 20 solids will not create an acute or chronic toxicity 21 impact. 22 BOARD MEMBER HANSON: Is the concentration 23 of the water--the concentration, I should say, of the 24 solids, is that the primary way that TDS numbers are 25 elevated in your discharge, or are there ions that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 475 1 are added to the water or picked up by the water in 2 some way during the process? 3 THE WITNESS: There is slight increases in 4 total dissolved solids, as I understand it, from the 5 chemical treatment of the cooling tower associated 6 with chlorination, but the majority-- 7 BOARD MEMBER HANSON: So chlorides are 8 added, or do you know what that is? 9 THE WITNESS: Slight amounts, yes. 10 BOARD MEMBER HANSON: Are the wet cooling 11 towers subject to DNR permitting? 12 THE WITNESS: Yes. 13 BOARD MEMBER HANSON: Have you made the case 14 for a permit yet? Have you applied for permits yet? 15 THE WITNESS: The DNR's air permit 16 application was filed with the agency on November 17 1st, and we anticipate a six- to nine-month process 18 from that date in issuance of the final permits. 19 BOARD MEMBER HANSON: Did you say air 20 quality permits? 21 THE WITNESS: Yes. 22 BOARD MEMBER HANSON: Okay. Thank you. 23 BOARD MEMBER TANNER: Good afternoon. 24 THE WITNESS: Good afternoon. 25 BOARD MEMBER TANNER: I had a question about PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 476 1 Witness Powers' low end estimate, 1.5 annual 2 efficiency penalty for dry cooling towers, and that 3 is from, if you need that reference, from Powers OCA 4 Exhibit BP-1, Schedule A, 14. I'll give you a minute 5 to look at that. 6 THE WITNESS: I'm sorry. The page number 7 again? 8 BOARD MEMBER TANNER: Schedule A, page 14. 9 THE WITNESS: Okay. 10 BOARD MEMBER TANNER: It says "conclusions" 11 at the top. 12 THE WITNESS: Okay. Yes. Thank you. 13 BOARD MEMBER TANNER: And my question is 14 this: Powers' low end estimate, 1.5 annual 15 efficiency penalty for dry cooling towers, what is 16 the corresponding increase in air emissions? 17 THE WITNESS: I'm going to ask you to repeat 18 that last portion. I'm not sure I follow. 19 BOARD MEMBER TANNER: At that estimate, what 20 is the corresponding increase in air emissions? 21 THE WITNESS: I'm sorry. I can't quite 22 grasp the answer to that right now. I'd have to 23 study that in more detail. 24 BOARD MEMBER TANNER: Forgive me, because I 25 am relaying a question from staff, and I'm not an PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 477 1 environmental expert, but it is my understanding what 2 Powers is proposing is a 1.5 percent penalty, and the 3 question we have is, then is there a corresponding 4 increase in air emissions with that penalty? 5 THE WITNESS: I'm not sure how to answer 6 that. The conventional wet towers being permitted 7 release water vapor, and associated with those--with 8 that water vapor is particulate matter. The dry 9 cooling tower would use air, obviously, to cool and 10 would not have water vapor associated with it, so I 11 don't know how to answer that, the quantification of 12 that. 13 BOARD MEMBER TANNER: To rephrase the 14 question, with that penalty you presumably would be 15 burning more coal. Would the emissions and your fuel 16 costs also increase? 17 THE WITNESS: Correct. 18 BOARD MEMBER TANNER: Okay. 19 THE WITNESS: Yes. 20 BOARD MEMBER TANNER: I apologize for not 21 being clear on that myself. The next question is the 22 Board understands it is IPL's position that SGS Unit 23 4 will be efficient and therefore typically be 24 dispatched fully whenever available. I think we've 25 heard testimony to that effect, is that correct? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 478 1 THE WITNESS: That's my understanding. 2 BOARD MEMBER TANNER: With SGS Unit 4 3 operating, if the electric demands were less than 4 expected, what generation resources would likely be 5 displaced? 6 THE WITNESS: I'm going to have to defer 7 that to another witness. 8 BOARD MEMBER TANNER: I think we've talked 9 about it earlier, too, with other witnesses, but I 10 just wanted to make sure we gave you a chance to 11 answer it as well. 12 THE WITNESS: Thank you. 13 BOARD MEMBER TANNER: Just to make sure 14 you're consistent. And then I asked this question 15 yesterday of Mr. Byers about a late-filed exhibit 16 that was updated with the list of permits, and I 17 realize that you filed that with your application, 18 but as those permits come in, if you could file those 19 as a late-filed exhibit, that would be good. 20 THE WITNESS: Yes. That is our standard 21 practice. There is one that we have filed since my 22 rebuttal testimony that has been entered into the 23 record. It was a--I think it was the December 6th 24 time frame we received from the DNR's floodplain 25 group an affirmation letter that there are no PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 479 1 sovereign land issues involved here, that we followed 2 the correct floodplain permitting process, and we 3 were to continue to work with the Corps of Engineers 4 on any other wetlands-type work and water quality 5 certification requirements. 6 BOARD MEMBER TANNER: Thank you. 7 CHAIRPERSON NORRIS: Hello, Mr. Arnold. 8 THE WITNESS: Hello. 9 CHAIRPERSON NORRIS: I just have a question 10 or two that were referred to you by, I believe, 11 Mr. Harder. In his testimony at pages--direct 12 testimony at pages 8 and 9 and your testimony on page 13 12, IPL--you both discuss IPL's choice of the wet 14 flue gas desulfurization. What analysis was 15 performed to justify the cost of upgrading the 16 scrubber to a WFGD at the proposed plant? 17 THE WITNESS: The scrubbers are a function 18 of the air permit application process. Dry flue gas 19 desulfurization scrubbers, which are sometimes 20 referred to as semi-dry flue gas, are commonly 21 associated with a Powder River Basin only coal. 22 The wet scrubbers are commonly installed on 23 coal plants that burn bituminous fuels. Therein lies 24 a range of options in the middle. 25 The best available control technology PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 480 1 process that the DNR has us go through as an 2 applicant requires us to evaluate all technologies 3 associated with that pollutant, determine the most 4 effective control technology for the range of fuels 5 in your unit, and then evaluate the most effective 6 controls. You have to look at environmental impacts, 7 cost to operate impacts. 8 The bottom line is it drives continuous 9 improvement over time. Three to four years ago for a 10 Powder River Basin only unit, dry flue gas 11 desulfurization units were the best available control 12 technology for these units. Now there have been 13 recent permitting where strict PRB units are being 14 asked to put on wet scrubbers. 15 Our BACT analysis and our air permits 16 determine that the BACT 4 scrubbers was wet scrubber 17 technology due to the intrinsic nature of having 18 bituminous fuels and Powder River Basin fuels as a 19 blend. 20 There's numerous advantages to wet 21 scrubbers, and one that I think our company finds 22 very attractive is the ability to recycle materials. 23 Dry scrubbers inherently produce lots of material 24 that has to be land-filled, and that's a major 25 drawback. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 481 1 Wet scrubbers can produce a gypsum product 2 that can be manufactured into wallboard and reused, 3 and another attraction that I found with the 4 technology was the ability to reuse water within our 5 plant for multiple uses with a wet scrubber. 6 CHAIRPERSON NORRIS: You're saying you have 7 broken this down into a cost analysis, and could that 8 be provided to the Board, the cost analysis to show 9 it is worthy of the investment? 10 THE WITNESS: The IDNR air permit which I 11 believe was filed with the Board December 1st, or 12 so--I'm sorry--November 1st has the economic numbers 13 in those air applications, but I would be happy to 14 get those and extract them for you. 15 CHAIRPERSON NORRIS: Okay. Ms. Johnson. 16 MS. JOHNSON: I don't have any questions. 17 MR. STEAD: No questions, Your Honor. 18 CHAIRPERSON NORRIS: Ms. La Seur. 19 MS. LA SEUR: No. 20 CHAIRPERSON NORRIS: Thank you, Mr. Arnold. 21 (Witness excused.) 22 MS. JOHNSON: IPL calls Kevin Vesperman. 23 CHAIRPERSON NORRIS: Hello, Mr. Vesperman. 24 Raise your right hand, please. 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 482 1 KEVIN D. VESPERMAN, 2 called as a witness by Interstate Power and Light, 3 being first duly sworn by Chairperson Norris, was 4 examined and testified as follows: 5 DIRECT EXAMINATION 6 BY MS. JOHNSON: 7 Q. Could you please state your full name and 8 business address for the record. 9 A. My name is Kevin D. Vesperman. Address is 10 4902 Biltmore Lane, Madison, Wisconsin. 11 Q. And did you file in this docket on July 2nd, 12 2007, 16 pages of direct testimony and Exhibit 14, 13 also known as Exhibit KDV-1, Schedules A through C, 14 and did you also file in this docket December 10th, 15 2005, 22 pages of rebuttal testimony as well as 16 Exhibit 15 or Exhibit KDV-2, Schedule A through L? 17 A. Yes. 18 Q. Do you have any changes or corrections to 19 make to that testimony? 20 A. No. 21 MS. JOHNSON: I will tender the witness for 22 cross-examination. 23 (IPL Exhibits 14 and 15 were 24 received in evidence.) 25 (Prepared testimony follows.) PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 521 1 CROSS-EXAMINATION 2 BY MS. EASLER: 3 Q. Good afternoon. I would like to first 4 direct you to your rebuttal testimony on page 3, line 5 23, the Q and A beginning there. 6 A. Yes. 7 Q. You refer at this point in your testimony to 8 benefits that the proposed coal plant will have in 9 addressing concerns that have been raised in this 10 case about stabilizing atmospheric CO2 emissions to an 11 acceptable level? 12 A. Correct. 13 Q. Could you--what do you mean by an acceptable 14 level? 15 A. Did you say I said that in a given sentence? 16 Q. I believe on page 4, the first line 17 continuing through the second line, addressing the 18 specific concerns raised about stabilizing 19 atmospheric CO2 emissions to an acceptable level. I 20 just wanted to explore with you-- 21 A. The benefits that I allude to there relative 22 to an acceptable level, the acceptable level will be 23 determined or established by state or federal law. 24 My point in this submittal was that there 25 will be more options provided by installing the unit PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 522 1 and, therefore, the flexibility will allow us to get 2 to that acceptable level based on the loss. 3 Q. But you don't have any particular emissions 4 level that you consider acceptable for purposes of 5 this part of your testimony? 6 A. No. 7 Q. Okay. Do you consider a scenario of 8 increasing CO2 emissions by IPL from year to year to 9 be stabilizing emissions at an acceptable level? 10 A. Most forecasts that were--are created for 11 addressing federal proposed legislation often shows 12 increasing CO2 emissions in the short term. The rate 13 of growth is often reduced, which is what we're 14 achieving, and it's the long-term focus that is the 15 driver of the legislation and the way the models are 16 created, so using those as guidance of what is 17 legislative intent, I would say that that is an 18 example of acceptable. 19 Q. So your answer to my question would be yes? 20 A. Yes. 21 Q. And, of course, the legislation hasn't been 22 defined quite yet? 23 A. No. 24 Q. What are IPL's projected CO2 emissions in 25 2022 under the proposed base case scenario? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 523 1 A. Brent Kitchen would be more able to project 2 that. 3 Q. Is that a figure that you know? 4 A. Not in that year. 5 Q. Do you know how they compare to emissions in 6 2007? 7 A. No. 8 Q. Are you aware that the United States, along 9 with 180 other nations, has made a commitment under 10 the United Nations framework convention on climate 11 change to bring about stabilization of greenhouse gas 12 concentrations in the atmosphere at a level that 13 would prevent dangerous anthropogenic interference 14 with the climate system? 15 A. I'm not specifically aware of that 16 provision. 17 Q. Would you have an opinion about whether 18 emissions at a level that could achieve this goal is 19 a reasonable definition of an acceptable level of 20 greenhouse gas emissions? 21 A. For my purposes, acceptable will be defined 22 by the laws that will be established by the State and 23 Federal Government. 24 MS. EASLER: That's all I have. Thank you. 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 524 1 CROSS-EXAMINATION 2 BY MS. LA SEUR: 3 Q. Good afternoon, Mr. Vesperman. 4 A. Good afternoon. 5 Q. I would like to direct you first to pages 3 6 and 4 of your direct testimony, and to your 7 discussion of the choice of what you call a green- 8 field site for--what you call a brownfield site as 9 the site of the Sutherland 4 plant. 10 A. I'm sorry. We're on the--not the rebuttal? 11 Q. That's right. The direct testimony. 12 A. Sorry. Could you ask the question again, 13 please? 14 Q. So my question is with regard to your 15 discussion of the choice of what you call a brown- 16 field site for the Sutherland 4 plant, as an 17 environmental engineer, are you familiar with the 18 common technical usage of the term brownfield to 19 refer to a site with some form of environmental 20 contamination that has to be mitigated before 21 redevelopment can take place? 22 A. Yes. 23 Q. And is this the case with the Sutherland 4 24 site? 25 A. No. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 525 1 Q. It is, in fact, is it not, undeveloped, 2 uncontaminated land adjacent to the existing plant? 3 I believe Volume I of the application says that it is 4 mostly in row crops? 5 A. Correct. 6 Q. And would this be called in usual technical 7 parlance of brownfield or greenfield, a brownfield or 8 a greenfield? 9 A. In the context I was drafting about, they 10 would be in general a brownfield in that the 11 Sutherland Generating Unit represented a community-- 12 or a facility that was in the community, and 13 therefore had some acceptance and long standing in 14 the community. 15 There was no other perceived connotation to 16 the word "brownfield" other than the greenfield being 17 a place where there was no power plant and a 18 brownfield where there was at least an existing 19 facility. 20 Q. Okay. So when you say greenfield--when you 21 say brownfield, are you referring to the plant that's 22 already there, not to the row crop field next to 23 where the proposed plant is to be built? 24 A. Correct. 25 Q. At page 9, I would like to direct you to PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 526 1 lines 12 to 14 of your testimony. 2 A. I'm sorry. Page 9? 3 Q. Page 9. You state here that no significant 4 impact to wetlands, threatened or endangered species, 5 historical and cultural sites, et cetera, were 6 identified in the siting process? 7 A. Correct. 8 Q. Yet many of these analyses had not been 9 conducted when the siting decision was made, is that 10 right? 11 A. At this level there was a desktop study 12 done. 13 Q. What is a desktop study? 14 A. It is basically terminology to say that they 15 got most of their information based on contacting 16 state agencies or using the Internet, using something 17 that they could obtain remotely to learn as much as 18 they could about the given site, do a comparative 19 analysis, and doing some site visits, and the intent 20 of this study at this point in time was to clear the 21 site for further study. 22 Q. So it's not an engineering level study, but 23 an Internet search level study? 24 A. Correct. 25 Q. And it's on that evidence that IPL bases PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 527 1 this claim? 2 A. What it is basing the claim is that at that 3 point in time we knew of nothing that would prevent 4 obtaining the permits and, therefore, it was an 5 acceptable site to go to the next stage of review. 6 Q. Okay. Also in this same couple of lines, 7 what does et cetera refer to? 8 A. It was an attempt to sort of touch on all of 9 the siting criteria that was identified in the 10 report. I'd have to go back to that report and go 11 through the list of things that they identified in 12 the report that were reviewed. 13 Q. So additional review took place that's not 14 necessarily covered in this particular page of 15 testimony? 16 A. Correct. 17 Q. Is it your testimony that refusing to use 18 available greenhouse gas capture technology is 19 consistent with reasonable environmental policies? 20 A. Could you state the question again, please? 21 Q. Sure. Is it your testimony that refusing to 22 use available greenhouse gas capture technology is 23 consistent with reasonable environmental policies? 24 A. I have no opinion about environmental 25 policies and greenhouse gases. As to their applicability PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 528 1 relative to the legal requirements of the facility, 2 to the best of my knowledge, they do not apply. 3 Q. Go back a few pages to page 4 of your direct 4 testimony. I'm looking at lines 4 and 5. I may be 5 on the rebuttal at this point. Let me see. Yes. 6 I'm sorry. I've gone to the rebuttal and didn't make 7 a note of that. The rebuttal testimony at page 4, 8 please. 9 I'm referring here to your statement that 10 Sutherland 4 will displace energy that would have 11 otherwise been produced from older, less efficient 12 units. My question here is to which older units do 13 you refer? 14 A. As Brent Kitchen can attest to in more 15 detail, as the new unit is dispatched and run, it 16 will displace existing units that IPL owns as well as 17 displace purchased power from MISO. 18 Q. Is it your testimony that Sutherland 4 will 19 provide a new source of cleaner electricity to serve 20 existing demand rather than new demand? 21 A. Sutherland Generating Unit 4 will be--will 22 provide the energy for the load that exists at the 23 point in time that it is run. 24 Q. Is the unit proposed to serve new demand or 25 existing demand? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 529 1 A. Brent Kitchen will have to provide the 2 answer to that. 3 Q. If the unit is serving new demand, then 4 won't these older, less efficient units have to stay 5 in service regardless of whether or not the new unit 6 is built? 7 A. As Brent Kitchen can expand on, if you have 8 the economic timing of the new unit, it will displace 9 expensive natural gas for part of the time, and it 10 will displace coal-fired capacity in the off-peak 11 hours that is less efficient and less economic. It 12 will not necessarily shut those units down, but 13 theoretically there will be less generation from 14 older, less efficient coal-fired generation. 15 Q. And if natural gas-fired generation is 16 replaced by coal-fired generation, that will cause an 17 increase in greenhouse gas emissions, will it not? 18 A. If gas-fired generation replaces coal-- 19 Q. The other way around. 20 A. Okay. Yes. 21 Q. Okay. And one page in at page 5, line 3, 22 you refer to ease in retrofitting for developing CO2 23 capture technology. Does any such retrofitting 24 technology currently exist? 25 A. There are no commercial applications of the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 530 1 technology. 2 Q. And there is currently CO2 capture 3 technology available, is there not? 4 A. The technology that was identified in the 5 reports from Bechtel are used commonly in other 6 industry applications, but not utility applications. 7 Q. Would you acknowledge that there are a 8 number of IGCC plants currently proposed around the 9 country? 10 A. Yes. 11 Q. And rather than investigating that 12 technology, IPL holds out hope for a technology that 13 will be not only retrofittable, but economically 14 retrofittable at some point in the future? 15 A. We base that conclusion on some industry 16 reports performed by EPRI that would suggest that the 17 IGCC unit is more expensive initially, and once you 18 retrofit it, the retrofit cost of the amine 19 technology that we studied with Bechtel, they're 20 approximately the same, and so based on the fact that 21 there are no IGCC units that are built and running 22 with CO2, and that a PC unit has been built that's got 23 CO2 capture, we're really talking about an equivalent 24 kind of risk that would appear to be an equivalent 25 cost. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 531 1 Q. When you say there are no IGCC units running 2 with CO2, do you mean there are none that are 3 currently capturing CO2, is that correct? 4 A. Correct. 5 Q. But there are IGCC units in operation, are 6 there not? 7 A. There are no IGCC units that are consistent 8 with what is the standard design that's being 9 proposed by the vendors. They've all modified their 10 standard design to a larger unit, and there are none 11 in the United States that are of the same size that 12 would be put forward as a commercial unit today. 13 There are what I will call earlier phases of the 14 technology running. 15 Q. So various forms of the technology are in 16 use? 17 A. Correct. 18 Q. Okay. And, again, at page 5, footnote 1, 19 where you refer to IPL's generation expansion plan 20 which serves to reduce IPL's CO2 emissions in 2013, my 21 question is just reduce them below what level? 22 A. Brent Kitchen can verify the answer, but I 23 believe the scenario that he's evaluating there is do 24 we build Sutherland Generating Station or do we not, 25 and so it's comparative analysis in that given year PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 532 1 of the two choices that are identified in the EGEAS 2 model. 3 Q. So it would not be a reduction below current 4 levels? 5 A. You'd have to talk to Brent about that. 6 Q. And then page 6, one page in, lines 5 7 through 9, you make a hybrid vehicle analogy I would 8 like to ask you about. You're saying that building 9 Sutherland 4 is analogous to a family purchasing a 10 more efficient hybrid car as a third vehicle, at 11 lines 6 and 7. Even if the family drives the same 12 total number of miles, the addition of a hybrid 13 vehicle into the family system will emit less CO2 14 overall, depending upon how much the hybrid vehicle 15 is used. 16 For this to hold, wouldn't IPL have to 17 produce the same number of megawatts with the new 18 plant in the mix, or to put it another way, your 19 argument only makes sense if there is no increase in 20 demand. That's the analogy to driving the same 21 number of miles? 22 A. Correct. 23 Q. So isn't IPL proposing to drive a lot more 24 miles with the hybrid, and to keep driving the old 25 gas guzzler at the same time? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 533 1 A. We are proposing to meet the load that our 2 customers have, and so, yes, if the load goes up, 3 then we provide more energy from various sources to 4 meet that obligated load. 5 Q. Okay. And in light of this testimony about 6 potential retrofits, potential new technologies, how 7 do you define clean coal? 8 A. There is no standard definition of clean 9 coal. I think the best way to look at clean coal is 10 in the context to--the unit that we're proposing for 11 Marshalltown is, in my mind, clean coal in comparison 12 to what we've previously ever built. It is 13 considerably much more cleaner than the existing unit 14 and, therefore, is clean coal. 15 DOE in a different context might be talking 16 about technology 20, 30 years from now. They'll 17 define clean coal differently than I would as it 18 pertains to Sutherland. 19 MS. LA SEUR: Nothing further. Thank you. 20 BOARD MEMBER HANSON: I'm hoping you don't 21 ask me to explain this question, because this is one 22 that came from staff, and I'm not sure I can explain 23 it. 24 Regarding carbon capture, what is IPL's best 25 estimate of the capability to shift a capacity derate PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 534 1 of carbon capture and sequestration from on-peak to 2 off-peak? What is the amount or percentage that can 3 be shifted, and the largest period of time that it 4 can be shifted? 5 THE WITNESS: There is two modes for us to 6 try to shift what would otherwise be a derate to the 7 off-peak. One of them would be to store the 8 absorbing chemical, so you would simply run it 9 through the scrubber, put it into a stainless steel 10 storage vessel, and retain that for off-peak. At 11 that point in time then you could broaden the number 12 of hours that you could accomplish that. 13 The other choice would be to simply say I'm 14 going to pay attention to the marketplace, and modify 15 my process, and basically when I can forgo the steam 16 because the load is high, the market is high, then we 17 would process at that point in time. 18 My gut level reaction is we could accomplish 19 somewhere between 50 and 55 percent of the--we could 20 accomplish 50 to 55 percent capture using those 21 techniques, in a rough sense. 22 BOARD MEMBER HANSON: Here is another 23 question that I'm equally comfortable explaining. 24 What is the impact to the EGEAS technology selection 25 for SGS Unit 4 if the estimated cost of an PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 535 1 amine-based CO2 capture plant and the associated 2 derate is entered into the model inputs? 3 THE WITNESS: I don't believe we've done a 4 run using the off-peak kind of analogy. 5 BOARD MEMBER HANSON: Okay. How should the 6 Board evaluate your proposal in the case of carbon 7 capture and sequestration if the cost of capacity of 8 SGS Unit 4 may change substantially and also change 9 early in the lifetime of the plant? And then as a 10 follow-up, what is the cost to consumers of carrying 11 that risk? 12 THE WITNESS: At this point in time we do 13 not know the cost of the technology or what the 14 alternative is in the marketplace. What we will 15 learn over time is that--what that cost is, and as we 16 get closer to those time periods, we'll have a better 17 sense of natural gas prices, for example, we will 18 have a better sense of that. 19 At that point in time an economic analysis 20 can be done to verify whether we want 90 percent 21 capture or whether we want to do partial capture and 22 proceed that way. By having Sutherland we have the 23 flexibility to do that analysis. We have the option 24 to do it. Otherwise, if we don't build it, we don't 25 have that option. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 536 1 So my premise, and what I'm trying to put 2 forward to the Board is, you've got more options by 3 building Sutherland than you do without building 4 Sutherland. 5 BOARD MEMBER HANSON: Thank you. 6 BOARD MEMBER TANNER: To follow up on what 7 you just said, when you say options you don't have 8 without it, does that mean that the existing older 9 plants that may or may not be displaced at various 10 times would not have the--would not be as easily 11 converted? 12 THE WITNESS: It depends on the technology 13 for the CO2 capture, but the amine technology was 14 evaluated here. You need to have a very low sulfur 15 input to the scrubber that's used for the CO2 capture. 16 Therefore, any of the existing IPL units 17 would have to have a scrubber put on, so there is a 18 cost associated with that, and it would have to be 19 perhaps a very high quality scrubber, whereas you 20 would do a 95 percent removal if you're simply doing 21 it for SO2. You need to be in the 98, 99 percent 22 removal of the sulfur to put the amine technology on. 23 So, yes, at this point in time we don't have 24 the flexibility for that technology on the existing 25 fleet. There's also a size issue which is that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 537 1 you--the economies of scale will pertain to this 2 concept as well, and we have a limitation relative to 3 the number of units that are in our fleet that are of 4 any kind of substantial size. The only one we have 5 is Ottumwa. 6 BOARD MEMBER TANNER: And you've kind of 7 answered this already, but I realize there are no 8 current CO2 regs in place, but help get me comfortable 9 that IPL does have a plan, or is thinking into the 10 future that that could happen, how they'll address it 11 and how this plant fits into it. 12 THE WITNESS: In general, with the 13 technologies that are available today relative to 14 baseload facilities, you have two choices. You have 15 nuclear or you have coal. You could consider natural 16 gas, but I think most people would recognize with the 17 natural gas supply, it's not the most obvious choice 18 for baseload applications. 19 With that, as this CO2 capture technology 20 gets demonstrated by DOE, EPRI and others, we'll 21 presumably have a choice of carbon capture on a coal 22 unit or a nuclear unit, and with that there are 23 scenarios, and most of them play off of that concept 24 of meeting a 50 or 90 percent reduction strategy, 25 because we will know more down the road relative to PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 538 1 which option makes the most sense. 2 As the CO2 capture technology improves and 3 is demonstrated on new plants, then I would put 4 forward that the Sutherland unit would then have the 5 flexibility to take a look at it and see whether or 6 not one of those technologies would work at that 7 point in time. 8 BOARD MEMBER TANNER: How will SGS Unit 4 9 heat rate efficiency and CO2 emissions compare to 10 other generating units later in its service life? 11 THE WITNESS: I provided some data to 12 suggest that based on the current fleet of coal 13 plants in MISO, that there is a 20, 30 percent 14 differential between SGS and those facilities. 15 If those units are retired, then we will be 16 closer to 15, 20 percent differential. If those 17 units are continued in operation, it will be 30 18 percent. 19 BOARD MEMBER TANNER: In your Exhibit 2, I 20 believe, you provide efficiency information in the 21 form of heat rates for SGS Unit 4 compared to other 22 coal-fired units in the Midwest ISO, and you may have 23 touched on this just a bit, but I'm asking you again. 24 How does SGS Unit 4 compare to units constructed 25 recently, specifically in the past ten years? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 539 1 THE WITNESS: SGS will be very consistent 2 with the units that were built in the last two or 3 three years if they are supercritical units. The 4 differential between subcritical and supercritical, 5 you can get wise men to disagree about the absolute 6 number, but it is somewhere between 3 and 5 percent. 7 BOARD MEMBER TANNER: That's all I have. 8 Thank you. 9 CHAIRPERSON NORRIS: Hello, Mr. Vesperman. 10 I have a question here that--kudos to you if you can 11 answer it, but if not, we will read it into the 12 record so you can file a late-filed exhibit or 13 response to this question. 14 If CCS were installed when available, and 15 based on your estimates, what is the resulting 16 dollars per kilowatt construction cost and dollars 17 per kilowatt-hour operating costs of SGS Unit 4 18 considering parasitic loads, efficiency loss and 19 plant derate with both megawatt and megawatt-hour net 20 production implications? 21 THE WITNESS: I will--I think it would be 22 better for me to evaluate that. 23 CHAIRPERSON NORRIS: Not off the top of your 24 head? 25 THE WITNESS: I could get a pretty close PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 540 1 proxy of that. The operating costs are four or five 2 dollars per megawatt-hour, and the lost output, if 3 you base it on off-peak prices, will be somewhere in 4 the five to ten dollars a megawatt-hour, so looking 5 at it compared to, say, dispatch costs of gas, it 6 will be very attractive to operate the unit once the 7 facility has carbon capture. 8 Then the question comes down to is the 400 9 to 500 million, divide that by 630, and you'll have 10 your dollar kW, and a 20-year time period, that will 11 be considerably less than the cost of building a 12 brand new plant, so it is less than the cost of a 13 combined cycle unit. 14 If we did the off-peak capture of CO2 on 15 Sutherland, it would be approximately what a combined 16 cycle natural gas unit would be, so in some respects 17 we have the flexibility to convert this if there are 18 CO2 rules, and have it from a fuel point of view 19 operating on coal, but yet have the emissions of a 20 combined cycle unit on gas. 21 CHAIRPERSON NORRIS: Let me probe that a 22 little bit. You know we've talked about having this 23 seek and retrofit for carbon capture. We've talked 24 about adding the costs for the biomass capability. 25 We just talked to Mr. Arnold about the wet flue gas PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 541 1 desulfurization process. 2 We seem to keep adding a lot of costs based 3 on some unknown notion of what we have to do out 4 there in terms of carbon sequestration, or as you may 5 have heard the discussion, I think I raised the 6 questions about the biomass, and is it really 7 economical for this plant to be biomass when there is 8 competition for that fuel source in Iowa with the 9 ethanol industry and elsewhere. 10 I presume you're currently operating plants 11 right now that were built over 50 years ago? 12 THE WITNESS: Some of them, yes. 13 CHAIRPERSON NORRIS: What makes more sense? 14 We're adding all of these costs on this super- 15 critical plant. And my--would it be a fair 16 assumption that this plant will be operating 50 years 17 from now? 18 THE WITNESS: Yes. 19 CHAIRPERSON NORRIS: So we are locking in a 20 carbon emission for the next 50 years with 21 construction of this plant. Does it make more sense 22 to not add all these costs on so this plant could be 23 retired--justifiably retired sooner as a cost measure 24 when new technologies develop that would allow us to 25 either more greatly reduce carbon emissions or PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 542 1 eliminate carbon emissions? 2 THE WITNESS: Let me take one cost at a 3 time. The cost of adding the capability of putting 4 biomass into that facility in the great scheme of 5 things is relatively small compared to the asset. 6 What that gives you for flexibility is to improve the 7 heat rate by 5 percent. 8 If you burn 5 percent biomass in the 9 facility, and if you follow the logic that it is a 10 CO2-free resource, it in effect improves the heat rate 11 by 5 percent. There is no technology right now that 12 can improve the heat rate by 5 percent. So that's a 13 relatively small cost to give us the flexibility to 14 improve the heat rate by 5. 15 CHAIRPERSON NORRIS: In the Ottumwa 16 Generating Station, is that an ongoing 5 percent heat 17 rate benefit happening down there? 18 THE WITNESS: We did a test burn with 19 2 percent biomass, and it was discontinued. 20 CHAIRPERSON NORRIS: So it's not working 21 right now? 22 THE WITNESS: No. 23 CHAIRPERSON NORRIS: Yet you've got that one 24 available to use right now and you're not. Are you 25 going to put it in this one because the technology, PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 543 1 you assume, will be developed to get 5 percent? 2 THE WITNESS: We're assuming the technology 3 to combust it in the boiler at the 5 percent level is 4 relatively low risk. The highest risk is what is the 5 cost of gathering that biomass and delivering it to 6 SGS. 7 I think we're going to--we're moving 8 forward--from my understanding is we're moving 9 forward because we believe that concept is 10 cost-effective, and back to your broader issue, 11 someone needs to demonstrate this, the collection 12 process and improve that. 13 If at the end of the day we do it for five 14 years and we prove how the best way is to get the 15 stover off from the cornfield, and later on we say a 16 higher value use is cellulosic ethanol, so be it. 17 Somebody needs to demonstrate that, and move the 18 technology forward. 19 So it's a small cost to pay to recognize 20 that there is global warming discussions out there, 21 and this is a way for us to put ourselves and our 22 customers in a better position relative to doing 23 something about that. So that's one to describe. 24 What were some of the other costs that you were 25 talking about? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 544 1 CHAIRPERSON NORRIS: The ability to retrofit 2 this for carbon sequestration. 3 THE WITNESS: Again, we are leaving space 4 and identifying the steam pathways, the piping 5 pathways, et cetera, that need to move the condensate 6 and the steam to the processing facility. That's 7 more routing, and you've got to go through a few 8 floors and walls. You have to beef up the steel. 9 In the great scheme of things it's a two or 10 three million dollar cost. It's not something that's 11 increasing this facility by a large amount. It is 12 very important to leave the space. By putting the 13 facility remotely from the existing facility we give 14 ourselves more opportunity for retrofit of that 15 technology or any others that are required by DNR or 16 EPA. 17 CHAIRPERSON NORRIS: The wet flue? 18 THE WITNESS: That, as others testified, 19 basically it was driven by the policy to desire fuel 20 flexibility, and with that, once you've made that 21 decision that you want fuel flexibility, then it is 22 the technology you have to put in for BACT. 23 CHAIRPERSON NORRIS: What am I missing? 24 THE WITNESS: Let me throw out some other 25 information for you. The capital costs for a dry PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 545 1 scrubber is less, but the operating costs are higher. 2 A dry scrubber uses calcium oxide. Basically it is 3 limestone that's converted to calcium oxide. 4 How do you do that? You do it with natural 5 gas. So what might make some sense today 6 economically may turn out to be pretty expensive. So 7 you have a tradeoff there of a higher capital cost 8 with the limestone wet scrubber, but you have lower 9 operating costs. All you need is limestone, and 10 there is plenty around the facility. There is no 11 calcium oxide or lime. Someone would have to build a 12 facility reasonably close, put in the kiln to convert 13 it, and we would have a natural gas-related operating 14 cost. 15 CHAIRPERSON NORRIS: Okay. So WFGD, the 16 retrofit, the biomass capability. Anything else I'm 17 missing in that scenario, things we're doing to add 18 costs to these things that will just further embed 19 that in terms of its longevity and in terms of having 20 to run that plant so we're not facing the same 21 situation we're facing now in your plants that are 50 22 years old? 23 THE WITNESS: I would look at it in the 24 opposite way of what you're doing, which is by having 25 this facility there for 50 years and for it to be PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 546 1 reasonably efficient and with those optionalities, it 2 gives us the opportunity to retire units sooner, and 3 therefore--because they are more efficient, and 4 they're cleaner from a priority point of view, and 5 so, yes, they will be in existence for 50 years, but 6 we don't have to run them. 7 If society says that we don't, we will end 8 up shutting them down early, but on the other hand, 9 if this has more flexibility to comply with the 10 future rule, it's clearly got more flexibility than 11 the existing fleet. 12 CHAIRPERSON NORRIS: I get a little confused 13 here in your responses to Ms. La Seur. In reading 14 your testimony--I mean maybe I just took it wrong-- 15 you say you are not claiming this is a brownfield 16 site or you are claiming it is a brownfield site? 17 THE WITNESS: There is terminology and 18 legislative history where they would define an area 19 that had a prior contamination-- 20 CHAIRPERSON NORRIS: I'm familiar with what 21 my standard definition of brownfield is, but I 22 thought you represented this in your testimony as a 23 brownfield site. You said it was not a brownfield 24 site. 25 THE WITNESS: It is a brownfield site in a PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 547 1 broader context of what the community perceives of 2 the use of that general area. 3 CHAIRPERSON NORRIS: Where is that broader 4 context generally used? I'm not familiar with that. 5 THE WITNESS: It is perhaps vernacular that 6 is used in the power plant siting area, where we talk 7 about a greenfield, being that there is no 8 infrastructure. You are going to an area that's 9 remote from rail lines, transmission lines, et 10 cetera, so you have a greenfield site as opposed to 11 an existing facility brownfield site where there is 12 existing infrastructure. In this case we have 13 transmission lines come in. There's railroad lines 14 coming in. There's infrastructure as well as-- 15 CHAIRPERSON NORRIS: It's an industrial 16 site? 17 THE WITNESS: The general area is 18 industrial. We are not-- 19 CHAIRPERSON NORRIS: But this site where it 20 is being built is not an industrial site, right? 21 THE WITNESS: It is zoned industrial. 22 CHAIRPERSON NORRIS: Is it row crop now? 23 THE WITNESS: Yes. 24 CHAIRPERSON NORRIS: So it is not a 25 brownfield site in the traditional sense of a PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 548 1 brownfield site? 2 THE WITNESS: Its current land use is 3 agricultural, but it is zoned industrial. 4 CHAIRPERSON NORRIS: Okay. I'm just trying 5 to get straight here on what was represented and how 6 you represented it, and I'll be curious to see how 7 that issue is briefed. Thank you. 8 Ms. Johnson. 9 MS. JOHNSON: I don't have any questions. 10 MS. EASLER: No questions. 11 CROSS-EXAMINATION 12 BY MS. LA SEUR: 13 Q. A few questions to follow up. I think first 14 on Board Member Hanson's question about how the Board 15 should deal with the prospect of the need for carbon 16 capture in storage relatively early in the plant's 17 life, I don't think I caught the response to the 18 second half of the question regarding costs to 19 consumers. 20 What kind of costs might we anticipate if a 21 retrofit technology becomes available for carbon 22 capture in storage? 23 A. The proxy for what the possible costs are 24 were provided in the Bechtel report. 25 Q. In the Bechtel report? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 549 1 A. Which is confidential. 2 Q. Okay. And does the analysis in the Bechtel 3 report include the increased water consumption for 4 current and projected carbon capture and storage 5 technologies? 6 A. The water consumption with the amine 7 technologies is associated with some additional 8 cooling towers, and that wasn't looked at 9 specifically other than identification of cooling 10 towers would be needed. 11 Q. So the question of water availability and 12 cost is not part of that cost summary? 13 A. Correct. 14 Q. And I also don't think I caught a projected 15 cost for installing and operating wet flue gas 16 desulfurization. Is that also in the prefiled 17 testimony? 18 A. Compared to what? 19 Q. The cost and installation of that particular 20 technology? 21 A. Larry Harder or--I guess I don't know 22 whether or not there is anything that specifically 23 identified what the cost was of a wet FGD system. 24 Q. So it is not within the prefiled testimony? 25 A. The cost of it is included in the overall PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 550 1 estimates. 2 Q. Okay. And that would include an operating 3 cost? 4 A. I don't know whether operating costs are 5 provided in any of these submittals. 6 MS. LA SEUR: Nothing further. Thank you. 7 BOARD MEMBER HANSON: I just have one 8 question to follow up to Ms. Tanner's question 9 about--the question was how would SGS Unit 4 heat 10 rate efficiencies and CO2 emissions compare to other 11 generating units later in the life of the plant, and 12 I don't want to put words in your mouth, but I got 13 the impression that your answer was looking at--was 14 in the context of other generating units within the 15 IPL fleet. I could be wrong about that, but that's 16 the impression I got. 17 I would like to expand that question to just 18 other generating units in general, because the two 19 scenarios you described, one was where the current 20 generating units continue to operate, and the other 21 scenario was where the least efficient ones are 22 retired. 23 And I would suggest a third scenario, which 24 is that either new currently unavailable coal 25 generating technology is developed or other types of PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 551 1 generation are used to a greater extent than they are 2 now. 3 Do you have any general--any general idea of 4 what--or estimate of how you would see this--the 5 efficiency of this plant comparing to the efficiency 6 of the overall Midwest generating fleet, if you want 7 to call it that, at the normal rates of technological 8 growth? 9 I guess maybe another way to ask that is at 10 what point would you see this plant as becoming one 11 of those inefficient plants that everybody talks 12 about it's time to retire? 13 THE WITNESS: In the EPRI report that I 14 submitted there is a timeline that they're suggesting 15 that there would be some improvements in ultra super- 16 critical coal units, and that would be one thing to 17 look at. I can identify it if you give me a minute 18 or so. 19 BOARD MEMBER HANSON: As long as we know 20 where to look for it. 21 THE WITNESS: Okay. Let me kind of help you 22 just get a quick education. We are at the top end of 23 what they call a supercritical range. DOE has 24 defined ultra supercritical to be just a little bit 25 higher from an efficiency point of view and more of a PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 552 1 standard on the temperatures, et cetera, than we are. 2 That level has not been proven in the United States. 3 So the next improvements in the pulverized 4 coal units will be ultra supercritical. 5 There's another level past that that's going 6 to take improvements in metallurgic--metallurgy to 7 accomplish that, and that's going to take quite a bit 8 of time. So in the near term, in the next ten years, 9 there won't be dramatic improvements in pulverized 10 coal units. 11 BOARD MEMBER HANSON: Okay. Then do you-- 12 That's fine. 13 CHAIRPERSON NORRIS: Ms. Johnson. 14 MS. JOHNSON: Nothing further. 15 CHAIRPERSON NORRIS: Thank you, 16 Mr. Vesperman. 17 (Witness excused.) 18 CHAIRPERSON NORRIS: Why don't we take 15 19 minutes and come back at 3:20. 20 (Short recess.) 21 CHAIRPERSON NORRIS: Ms. Johnson, I believe 22 we're ready for your next witness. 23 MS. JOHNSON: I also wanted to quickly 24 clarify, there was a line of questioning you had 25 pursued with Mr. Vesperman regarding some cost PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 553 1 issues. Was he able to adequately address those for 2 you, or do you think you will require a late-filed 3 exhibit on that? 4 CHAIRPERSON NORRIS: It sounds like we're 5 probably okay with his answers. We may reserve the 6 right, at the end of the hearing, to request that, 7 but for now let's leave it as settled. 8 MS. JOHNSON: Thank you. IPL calls Brent 9 Kitchen. 10 BRENT R. KITCHEN, 11 called as a witness by Interstate Power and Light 12 Company, being first duly sworn by Chairperson Norris, 13 was examined and testified as follows: 14 CHAIRPERSON NORRIS: You may be seated. 15 DIRECT EXAMINATION 16 BY MS. JOHNSON: 17 Q. Could you please state your full name and 18 business address for the record. 19 A. Brent R. Kitchen, 1000 Main Street, Dubuque, 20 Iowa 52001. 21 Q. And did you file in this docket on July 2nd, 22 2006 direct testimony of nine pages, and an exhibit 23 labeled Exhibit 10, or BRD-1 Schedule A and B, and 24 also on December 10th rebuttal testimony of 43 pages, 25 and Exhibit 11, or BRK-2 Schedule A through K? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 554 1 A. I did. 2 Q. Do you have any changes or corrections to 3 make to that testimony? 4 A. No, I do not. 5 MS. JOHNSON: I would now tender Mr. Kitchen 6 for cross-examination. 7 (IPL Exhibits 10 and 11 were 8 received in evidence.) 9 (Prepared testimony follows.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 607 1 MR. STEAD: Thank you, Your Honor. We've 2 conferred with IPL counsel. We have two open session 3 questions, and then we have a confidential exhibit to 4 discuss with Mr. Kitchen, and that will require a 5 closed session. 6 CHAIRPERSON NORRIS: Okay. 7 CROSS-EXAMINATION 8 BY MR. STEAD: 9 Q. Good afternoon, Mr. Kitchen. 10 A. Good afternoon. 11 Q. Do the outputs for the EGEAS model include 12 the annual generation at each IPL power plant? 13 A. I believe it does. 14 Q. Do the outputs for the EGEAS model include 15 the annual CO2 emissions at each IPL power plant? 16 A. I believe it does. 17 MR. STEAD: Your Honor, this is probably 18 when we need to go into closed session. 19 CHAIRPERSON NORRIS: Let me ask, I want 20 counsel's input here. Would it make more sense to go 21 into closed session now? Do we want to complete a 22 round to see if we have more confidential 23 information? Let me ask it differently. 24 Would it impair you to wait and go into 25 closed session at the conclusion of the open session PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 608 1 questions? 2 MR. STEAD: None whatsoever. 3 CHAIRPERSON NORRIS: There's no objection. 4 Why don't we proceed that way. That's the end of 5 your open session questions? Let's proceed with Ms. 6 La Seur. 7 MS. EASLER: Actually, I have a few for 8 Mr. Kitchen. 9 CROSS-EXAMINATION 10 BY MS. EASLER: 11 Q. Good afternoon. Let's see. Mr. Vesperman 12 deferred some questions to you about CO2 emissions, 13 and that is, what are IPL's projected emissions in 14 2022 under the proposed base case plan? 15 A. That would be my rebuttal testimony, Exhibit 16 BRK-2, Schedule I, page 2 of 2. 17 Q. Okay. That does answer that question. 18 A. Now, I caution, looking at that number, that 19 number would include another coal plant as well. 20 Those emissions on Schedule I, page 2 of 2, 21 correspond with the expansion plan that you see on 22 Exhibit BRK-2 Schedule B. 23 Q. Right. So this includes all of the 24 indicated resources? 25 A. Yes. Including another coal plant as well. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 609 1 Q. And wind as well? 2 A. And wind as well, yeah. While we're on-- 3 Okay. 4 Q. Resource planning is a dynamic process, 5 correct? 6 A. Correct. 7 Q. And you point out in your rebuttal testimony 8 that the need for additional coal has been indicated 9 through previous integrated resource plans since 10 2001? 11 A. That's correct. 12 Q. The size and timing of the coal indicated in 13 these plans has varied throughout that period, 14 though, correct? 15 A. Since 2001, that's correct. However, the 16 2003 and 2005 basically kept the timing consistent in 17 the 2012 to 2013 time frame. 18 Q. But in 2001 you were identifying coal in the 19 2008 time frame? 20 A. Yes, in 2008, that's correct. 21 Q. And your currently approved 2005 through 22 2020 resource plan, the size of that coal plant 23 is--well, your share of that joint coal plant would 24 be 250 megawatts? 25 A. Yeah, and that was basically because the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 610 1 nominal unit that Black and Veatch had provided us at 2 the time was 500, and just half of that, and that's 3 how that 250 was determined, but subsequently the 4 unit sizes have gone up, so we're proposing not to 5 take a larger share for Sutherland Unit 4, and that's 6 why that number has creeped up. 7 Q. But that's an input that you select? 8 A. It absolutely is, yes. 9 Q. Now, you testified in connection with IPL's 10 sale of its share in the Duane Arnold Energy Center, 11 is that correct? 12 A. I did. 13 Q. And IPL's share of that baseload nuclear 14 plant was in excess of 400 megawatts, is that 15 correct? 16 A. Correct. 17 Q. In that case you relied on an EGEAS analysis 18 to show that IPL could reliably meet the needs of 19 IPL's customers even without the output of Duane 20 Arnold? 21 A. I did. 22 Q. And that was the primary purpose of your 23 testimony? 24 A. In that case, yes. 25 Q. At the time of the sale Duane Arnold was PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 611 1 regarded as IPL's lowest cost baseload generator, is 2 that correct? 3 A. It depends on how you define that. 4 Q. Is it one that would be run--selected first 5 in your economic dispatch? 6 A. On an energy basis, yes, that's true. 7 Q. Now, as part of that sale, IPL entered into 8 a long-term PPA with a purchaser of Duane Arnold, and 9 that contract expires in February 2014, correct? 10 A. I believe so. 11 Q. And while your reliability analysis in that 12 case identified coal--a coal plant as the most 13 probable new replacement for Duane Arnold in 2014, 14 you rejected the assertion by intervenors that Duane 15 Arnold would be replaced by a baseload resource, is 16 that accurate? 17 A. Could you repeat the question, please? 18 Q. In your reliability analysis in the sale 19 case, you identified coal as the most probable new 20 replacement--let me finish--but you rejected 21 arguments that that would actually be the replacement 22 for Duane Arnold? 23 A. Correct. 24 Q. Instead, that you testified that IPL may 25 well negotiate another PPA with a purchaser of Duane PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 612 1 Arnold? 2 A. With the owner of Duane Arnold. 3 Q. Yes. 4 A. Yes. 5 Q. Now, your EGEAS reliability analysis in that 6 case did not model long-term capacity market 7 purchases, but this is what you identified as a 8 leading option for replacing Duane Arnold capacity at 9 the time of that sale, is that correct? 10 A. No. I believe the 2005 resource plan did 11 include long-term purchased power contracts for 12 alternatives. 13 Q. But I'm talking about your reliability 14 analysis that you did just strictly for that case. 15 A. I also believe that the EGEAS analysis that 16 I did for that case also had long-term purchased 17 power alternatives included as well. 18 Q. I'm going to hand you a copy of a portion of 19 your testimony from that case. 20 A. Okay. 21 Q. And this is transcript page 949 from IUB 22 Docket No. SPU-05-15. There is a question beginning 23 at about line 7 or 8 there. 24 A. Okay. 25 Q. If you could read that Q and A, please. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 613 1 A. "Is Mr. Brubaker correct that your direct 2 testimony stated that the best replacement 3 alternative for DAEC is coal? 4 "Answer. No. The purpose of the EGEAS 5 analysis provided in my direct testimony was to 6 demonstrate that IPL's system reliability--its 7 ability to serve load--would not be harmed by the 8 sale of DAEC. The EGEAS analysis did not consider 9 all possible options for the future. For example, 10 IPL did not model long-term capacity market 11 purchases. As such, EGEAS could not have selected 12 this option in any year of the study period. The 13 OCA's characterization of IPL's EGEAS analysis as 14 demonstrating the best replacement alternative for 15 DAEC is blatantly wrong." 16 Q. So my question to you is did your 17 reliability analysis model long-term capacity market 18 purchases? 19 A. Not in that particular year. 20 Q. Okay. Now, you expressed concerns in that 21 case about committing to any particular replacement 22 for Duane Arnold at the time of the sale in large 23 part because IPL had experienced significant 24 reductions in projected capacity--significant 25 reductions in load, is that correct? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 614 1 A. I believe so. 2 Q. IPL's projected need for 2008 as determined 3 in 2005, which is what you were presenting at the 4 time of the sale, was 408 megawatts less than what 5 was determined for your needs in--for your 2008 needs 6 in 2001? 7 A. Could you repeat that question? 8 Q. When you were looking at your forecasted 9 load needs for 2008 in 2001 as compared to your 10 forecast for 2008 conducted in 2005, the difference 11 between those two was 408 megawatts? 12 A. I don't recall that. 13 Q. I think maybe turn to your page 9. 14 A. Okay. 15 Q. I'm sorry. Page 8. Why don't you go ahead 16 and read lines 18, continuing through the completion 17 of that answer, and if you want, why don't you just 18 start with the question. 19 A. "What are some concerns about committing to 20 a resource today for 2014? 21 "IPL's resource planning is dynamic and 22 constantly changing. For example, IPL has had a 23 reduction in projected capacity requirements from 24 IPL's 2001 electric resource plan for the year 2008 25 of approximately 408 megawatts. In other words, PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 615 1 IPL's projected need for 2008, as determined in 2005, 2 is approximately 408 megawatts less than what was 3 determined for 2008 in 2001. The summer capacity 4 rating from the Emery Generating Station is 5 approximately 43 megawatts--is up approximately 43 6 megawatts from the original of 500 megawatts it was 7 assumed to have, thus reducing future need." 8 Q. Continue, please. 9 A. "The pending sale of Illinois load, the loss 10 of high load factor customers choosing to 11 self-generate (i.e., ADM), the choice of high load 12 factor customers to go from firm to interruptible 13 load (i.e. RAI), and a lower projected load growth 14 rate all contributed to this reduction in resources 15 needed for the future. The uncertainty regarding 16 IPL's load going forward will affect plans going 17 forward." 18 Q. Now, you note the possibility--in the sale 19 case of Duane Arnold, you noted the possibility that 20 further reductions in IPL's load projections could 21 negate the need to replace Duane Arnold in whole or 22 in part, is that accurate? 23 A. That's correct. 24 Q. And you and Mr. Aller both recognized this 25 as a possibility, but both expressed hope that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 616 1 further reductions in load would not occur, is that 2 accurate? 3 A. That's correct. 4 Q. Does IPL invest in energy efficiency for the 5 very purpose of reducing load in order to defer or 6 reduce the need for electric resource additions? 7 A. You'll have to ask that question of Bob 8 Holmes. 9 Q. You're not familiar with that concept? 10 A. Just somewhat, but he would be the correct 11 person to ask energy efficiency questions to. 12 Q. Do you model energy efficiency in your 13 resource planning? 14 A. No. It only comes in through the load 15 forecast. 16 Q. If IPL could further reduce its load growth 17 so as to make replacement of baseload capacity 18 unnecessary, isn't that a good thing? 19 A. Maybe and maybe not, because need is only 20 part of whether you--load--reflecting load growth is 21 only part of whether you need a resource like 22 Sutherland 4, because Sutherland 4--if you go back to 23 Witness Vesperman's testimony, Sutherland 4 provides 24 us options in flexibility with respect to going 25 forward and CO2 regulations and what we can and can't PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 617 1 do with the existing resources, so we may need it for 2 other reasons than just load growth. 3 Q. Is part of your justification for this plant 4 meeting the needs of load growth? 5 A. It's both meeting incremental load as well 6 as existing load. 7 Q. If the most likely replacement of Duane 8 Arnold capacity is a market-based PPA with off-peak 9 pricing that is influenced by future CO2 prices, isn't 10 it preferable to avoid such costs by controlling load 11 growth through energy efficiency that has no 12 associated CO2 cost risk? 13 A. I don't believe you can get enough energy 14 efficiency to replace Duane Arnold. 15 Q. But you don't model energy efficiency in 16 your-- 17 A. It gets modeled through a reduction of load 18 forecast. There is not much difference than modeling 19 a discrete unit size of an energy efficiency resource 20 and letting EGEAS select it than there is 21 decrementing your load that goes into the EGEAS model 22 and assigning a cost on the tail end, because you're 23 still not optimizing on your energy efficiency 24 amounts. You're just determining whether that amount 25 is selected or not, so there is really no difference PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 618 1 when you are modeling through EGEAS whether you do it 2 on the front end or on the back end if you assign the 3 appropriate costs and the present value back to the 4 correct year. 5 Q. My question, though, is that you don't allow 6 EGEAS to make that selection? 7 A. No. We do--any energy efficiency variations 8 are modeled through scenarios. 9 Q. I'm going to take this next line of 10 questioning out of order because it just fits better 11 right here. This is the demand side management 12 section of your resource plan. Specifically, this is 13 the approved plan that Minnesota gave its approval 14 to. 15 At page 3-18, under DSM, part 3.4, "DSM 16 scenario development and analysis," it states, 17 "Because IPL does not explicitly model DSM as a 18 resource to be selected in the IRP modeling, the 19 question remains whether the amount of DSM 20 implemented by IPL is an optimum amount in the 21 resource planning perspective. Since the DSM that 22 IPL implements in Iowa is determined by the Iowa 23 Utilities Board administration of Iowa statute, any 24 variation would need to be in Minnesota." 25 Do you mean to suggest that you're precluded PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 619 1 from modeling an optimum amount of DSM? 2 A. Chances are you will never model an optimum 3 amount, no matter whether you model it as a resource 4 or a reduction in your load forecast. 5 Q. Are you familiar with the amount of DSM 6 savings that IPL claims as being achieved through 7 DSM? 8 A. No, I am not. 9 Q. So you're not aware of whether they have 10 more or less? 11 A. No, I'm not. 12 Q. Do you mean to suggest that Iowa law 13 precludes IPL from modeling the optimum amount of 14 energy efficiency in Iowa? 15 A. No. My point is no matter how you model it, 16 chances of hitting the optimal level if you're using 17 either the discrete reduction in your load forecast 18 or discrete unit is slim to none. 19 Q. But you suggest that that's an analysis you 20 can undertake in Minnesota and that you do undertake 21 in Minnesota? 22 A. It is still not an optimal result because 23 you're still using discrete unit sizes. 24 Q. But you allow EGEAS to select--you provide 25 it the ability to choose? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 620 1 A. No, we do not. 2 Q. You model a higher level of energy 3 efficiency investment? 4 A. Only through scenarios in the load forecast. 5 Q. Now, will the Minnesota PUC be evaluating 6 fossil fuel efficiency of IPL's existing generating 7 plants during the course of IPL's next IRP filing? 8 A. I believe they will. 9 Q. And IPL will be required to document efforts 10 to maintain or improve the rates and provide model 11 runs of ways to improve heat rates-- 12 A. Yes. 13 Q. --of their largest existing or the lowest 14 heat rate generating plant? 15 A. Yes. 16 Q. We don't have that in front of us today, do 17 we? 18 A. No, we don't. 19 Q. And that is due to be filed on July of 2008? 20 A. At the current schedule is on or before July 21 1st, 2008. 22 Q. Now, part of the reason for that is--I mean 23 the Minnesota Commission determined that fuel source 24 diversity is adequately considered in the course of 25 an integrated resource plan process, correct? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 621 1 A. I'm not sure why that was determined. 2 MS. EASLER: The docket for this review is, 3 I believe, Minnesota PUC Docket No. CI-06-159 4 implementing the EPACT 2005 fossil fuel efficiency 5 standards, and I would request that the Board take 6 official notice of the Minnesota Department of--PUC's 7 orders in that. 8 CHAIRPERSON NORRIS: We'll take official 9 notice of that. 10 MS. EASLER: Thank you. 11 BY MS. EASLER: 12 Q. Your rebuttal testimony at pages 4 through 5 13 talks about the Minnesota PUC--is it PUC or the DOC, 14 finding that most of your resource plan was ably 15 done? 16 A. They both did. 17 Q. Okay. They found that most of your resource 18 plan was ably done, reasonably on target, and should 19 be approved? 20 A. That's correct. 21 Q. And that is Minnesota PUC Docket 22 No. RP-05-2029? 23 A. I believe that's correct. 24 MS. EASLER: I would request that the Board 25 take official notice of the Minnesota Commission's PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 622 1 orders in that case. 2 CHAIRPERSON NORRIS: So noted. We will. 3 BY MS. EASLER: 4 Q. Now, typically in your filings the 5 Commission in Minnesota reviews a high DSM scenario 6 that represents a more aggressive and expensive 7 pursuit of DSM than is presented in IPL's Minnesota 8 base case scenario, is that accurate? 9 A. Could you repeat that question? 10 Q. Typically the Minnesota PUC asks you to 11 evaluate a high DSM scenario? 12 A. We do. I don't know if they require us to. 13 Q. That's just something you voluntarily do in 14 Minnesota? 15 A. Either that or it might have been a 16 recommendation by the department. I think it is 17 not--maybe not in the rules, but it might have 18 spawned through a recommendation of a future or of a 19 past resource plan, so it might be specific to us 20 that we do it that way, but it might not be in the 21 rules. 22 Q. And that's not something you conduct for 23 Iowa? 24 A. Not typically. 25 Q. Would you agree that the Minnesota PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 623 1 investigation process undertaken in connection with 2 your last resource plan filing involves significant 3 focus on IPL's load forecasting process and methods? 4 A. I recall I believe it did. 5 Q. And as part of their order approving your 6 resource plan, the Commission also asked for better 7 documentation of load forecasting, inputting 8 assumptions and adjustments in your next plan filing? 9 A. I believe they did. 10 Q. For your next plan filing, did the Minnesota 11 Commission order you to focus on greenhouse gas 12 regulation risks? 13 A. Yes, we will. 14 Q. And did it order IPL to include information 15 necessary to assess the financial exposure of IPL 16 Minnesota ratepayers to future CO2 regulations by 17 modeling the comparative impact of future regulations 18 on the company's preferred plan and several other 19 resource mixes, including those required by law or by 20 Commission order to be included in the plan? 21 A. I believe they did. 22 Q. And those resources required by law or by 23 Commission order to be included in the plan would 24 be-- 25 A. I don't know off the top of my head. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 624 1 Q. Did the Minnesota Commission order IPL to 2 address environmental cost and risk issues in all 3 future resource plans, including the development of a 4 more comprehensive CO2 risk and analysis strategy to 5 be applied in IPL's next plan? 6 A. Yes, they did. 7 Q. Did the Minnesota Commission order IPL to 8 more fully evaluate opportunities for more 9 comprehensive distributed generation of heat and 10 power, including evaluation of large customer sites 11 to be determined-- Excuse me. 12 Did the Minnesota Commission order IPL to 13 more fully evaluate opportunities for more 14 comprehensive distributed generation of heat and 15 power, including evaluation of large customer sites, 16 to determine appropriateness and willingness to 17 consider DG, including possible combined heat and 18 power initiatives with the ethanol industry and other 19 industries? 20 A. I don't recall that. 21 Q. Is that something that IPL is evaluating 22 currently? 23 A. I don't know. 24 Q. Turning now to your rebuttal testimony, page 25 22, please. At this point in your testimony you are PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 625 1 discussing adjustments to the price of wind based on 2 observed significant price increases for wind 3 generation. 4 A. Correct. 5 Q. You note in your testimony that the price of 6 wind energy to serve IPL's customers has 7 approximately doubled over the last five years, is 8 that accurate? 9 A. That's correct. 10 Q. Do you mean to suggest that the price for 11 wind actually paid by IPL is double what it paid five 12 years ago? 13 A. The price per megawatt-hour our customers 14 pay has doubled since five years ago. 15 Q. But are you paying today for wind at twice 16 the price? 17 A. The effective rate our customers would pay 18 has doubled since five years ago. 19 Q. But are you paying for wind and flowing 20 through the cost of wind at a level that's twice what 21 it was five years ago? 22 A. Well, five years ago it would be a flow- 23 through because it was a PPA contract. Today's price 24 is going to be a billed facility. 25 Q. But do you have a contract in place where PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 626 1 that rate is being--that cost is being incurred? 2 A. You'll have to ask our wind witness, Bob 3 Vosberg. 4 Q. When you modeled the cost of wind in your 5 resource plans in the past, do you typically use 6 experienced PPA costs? 7 A. I use the best available piece of 8 information that I've got available, so in this case 9 it would be what our proposed wind facility would be, 10 not necessarily PPA. 11 Q. In the past resource plans have you used 12 actual PPA prices? 13 A. Yeah, I mean, what was the most recently 14 observed price is what we used. 15 Q. Does the EGEAS base case run submitted in 16 your direct testimony provide an indication of the 17 timing and amount of wind that IPL will acquire 18 during the planning period under current assumptions? 19 A. Could you ask that question again? I think 20 the answer is yes, but-- 21 Q. Okay. Does the EGEAS base case run 22 submitted in your direct testimony provide an 23 indication of the timing and amount of wind that IPL 24 will acquire during the plan period under current 25 assumptions? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 627 1 A. Yeah. That's--the expansion plan--our 2 current base case expansion plan is included as my 3 Exhibit BRK-2, schedule B, page 1 of 1. 4 Q. And that reflects what? 5 A. Reflects 200 megawatts of wind in--well, for 6 '010, and then you've got 350 megawatts of Sutherland 7 Generating Station No. 4 in '013. 8 Q. Now, your projections show IPL needing 9 additional capacity in 2010 under your base case, is 10 that accurate? 11 A. Yeah. That can be seen in my Exhibit BRK-1, 12 Schedule A, I believe. 13 Q. And currently your plan is to meet those 14 needs through a combination of IPL-owned wind 15 resources and short-term market capacity purchases, 16 is that correct? 17 A. Yeah. To the extent those market capacity 18 purchases would be needed, that would be correct. 19 Q. And that would include 200 megawatts of wind 20 in 2010, is that accurate? 21 A. That's correct. 22 Q. Do you know in your ratemaking principles 23 filing what is the timing of the wind? 24 A. I believe it's on or before 2010, but here 25 again, Bob Vosberg could answer that question. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 628 1 MS. EASLER: I'm going to distribute a 2 document that should be marked Exhibit 122, and this 3 is the Alliant Energy strategic and financial 4 overview provided at an EEI finance conference on 5 November 4th, 2007. 6 (OCA Exhibit No. 122 was 7 marked for identification.) 8 BY MS. EASLER: 9 Q. Now, as I understand it, IPL strives to, or 10 it values maintaining a diverse resource supply mix, 11 is that correct? 12 A. Correct. 13 Q. And turning your attention to page 6 of this 14 document, the charts here depict generation mix in 15 2006 and 2015? 16 A. Correct. 17 Q. Would you agree that for purposes of energy, 18 that your coal percentage is increasing between 2006 19 and 2015? 20 A. That's what this chart says, but I don't 21 have any--I wasn't at this conference. I didn't 22 prepare these charts, so I can't testify to the 23 accuracy of these charts or what else is included, or 24 if these even tie to my EGEAS analysis or what we 25 proposed in this docket. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 629 1 Q. Well, I think that's okay. One of the 2 witnesses testifying in this proceeding, if you will 3 look at page 2, is your vice president and treasurer, 4 and there are a number of other credible sources, I 5 would say. 6 A. Right. 7 Q. Would this tend to show that in general for 8 both energy and capacity that coal is becoming a 9 larger part of your portfolio? 10 A. Here again, I do not know what the context 11 of this was or what this ties to. I just cannot 12 comment on this presentation. I mean, I didn't put 13 it together. I wasn't at this conference. I know 14 there was a vice president on there, but I have no 15 clue on taking this out of context what this is 16 talking about. 17 Q. Okay. Well, looking at the nuclear part of 18 it--assuming just for purposes of our questions here 19 that it shows in 2006 for both energy and capacity a 20 portion of the pie meant for nuclear, and in 2015 it 21 shows approximately the same amount of nuclear. 22 A. Okay. 23 Q. Now, your PPA on the Duane Arnold Energy 24 Center expires in 2014? 25 A. That's correct. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 630 1 Q. So we should see a decline on the nuclear 2 slice, shouldn't we? 3 A. Yes. Here again, I don't know how they are 4 putting this table together. I just don't know what 5 their assumption was here. 6 Q. I think we have this table in one of our 7 prefiled exhibits too. Let's move on to--would 8 you--with respect to that Duane Arnold contract, when 9 it expires, it won't have characteristics of a 10 nuclear power plant anymore? I mean if it is 11 replaced with a PPA, like we've talked about earlier, 12 that market-based PPA for the off-peak periods would 13 be influenced by coal generating plants? 14 A. I don't think I follow there. Mr. Friedman 15 can answer any questions on the PPA or what will 16 happen post-2014. 17 Q. Okay. In your rebuttal testimony you 18 revised some of the inputs related to your market 19 power prices, your off-peak and on-peak. You 20 adjusted the off-peak? 21 A. In--what was the question? 22 Q. In your rebuttal filing. 23 A. Right. 24 Q. Did you change somewhat the manner in which 25 you reflected off-peak market purchases? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 631 1 A. We did not change the prices, no. 2 Q. Did you show them as occurring--as being 3 driven more in the off-peak by coal rather than 4 natural gas? 5 A. No. The profile--the dispatch profile, 6 since it was tied to costs, did not change. The only 7 thing that changed was the output of the emissions 8 from that one market energy off-peak resource, and 9 you can see that in the--to the extent that the costs 10 on my Exhibit BRK-1, Schedule B, which is the old 11 version, and my Exhibit BRK-2, Schedule B--excuse 12 me--Exhibit BRK-2, Schedule B, which is the new base 13 case, the cost of those two are exactly identical, so 14 there was no cost change, no dispatch change 15 whatsoever. 16 Q. Okay. And I'm in your rebuttal testimony, 17 page 13. 18 A. Okay. 19 Q. And what I'm referring to is lines 3 through 20 about 8. The emissions rate for off-peak market 21 energy. 22 A. What page are you at here? 23 Q. Page 13 in your rebuttal, lines 3 through 8. 24 The emissions rates for off-peak market energy were 25 adjusted to reflect the blend in coal emissions rate? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 632 1 A. That's correct. 2 Q. And if the Duane Arnold capacity is replaced 3 with a market-based PPA, it would be influenced by a 4 similar-- 5 A. No, not necessarily. A PPA from Duane 6 Arnold can be market-based as well. I mean that's 7 just the terminology to refer to. Whatever we do at 8 Duane Arnold, or to supply, or to procure power 9 post-Duane Arnold is going to be market-based. 10 Q. And to the extent the market is showing 11 carbon dioxide costs associated with coal, you will 12 see that in the market? 13 A. You'll have to ask that of Rich Friedman. 14 Q. Okay. Turning to page 5 of this exhibit, 15 122, which is a page back, the strategic objectives 16 identify--set forth there at bullet point, 17 "Considerable rate base growth opportunities," would 18 the addition of a new coal plant be consistent with 19 that strategic objective? 20 A. Any new capital investment of a resource 21 would contribute to rate base, I believe. 22 Q. Does energy efficiency present the similar 23 rate base growth opportunity for IPL? 24 A. I don't know about that. 25 Q. In turning, please, to page 26 of this PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 633 1 presentation, this identifies the status of IPL's new 2 generation projects, and then turning, please, to 3 page 34, this sets forth IPL's renewable portfolio 4 standard. 5 Currently you are at somewhere between 3 and 6 4 percent in terms of your renewable portfolio-- 7 renewable as a part of your overall portfolio. 8 A. Okay. 9 Q. With the proposed wind, that would bring you 10 up somewhere over 5 percent, is that accurate? 11 A. I can't tell off the top of my head. 12 Q. Is it somewhere between 5 and 6 percent? 13 MS. JOHNSON: I believe the witness has said 14 on several occasions he was not responsibile for 15 preparing this document, and therefore he is not able 16 to verify its accuracy or speak to its accuracy in 17 any manner. 18 CHAIRPERSON NORRIS: Well, does he have any 19 response? I think to the extent he can answer the 20 questions, and Mr. Kitchen can defer them to someone 21 else if necessary. 22 A. I don't know off the top of my head. I 23 don't even know if the benchmark here is accurate. 24 BY MS. EASLER: 25 Q. But do you believe that IPL would put out PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 634 1 accurate information in general on this type of 2 matter? 3 A. I just don't know what's in this graph. I 4 don't know what's being presented here. I did not do 5 the presentation. I didn't do the presentation. I 6 just don't know. 7 Q. Okay. 8 A. It could be a different context. 9 Q. Okay. Let's turn to page 37. This does 10 interpret what's being depicted here. This observes 11 if there were a national renewable portfolio standard 12 of 20 percent, that an additional 1100 megawatts of 13 wind would be required for IPL over and above what is 14 currently planned? 15 A. But this doesn't state--you know, 20 percent 16 of what? What year? What is the basis for that? If 17 load declines, are we still obligated to do this? 18 There is no reference for me to gauge whether this is 19 accurate or not. 20 Q. That's fine. I'm just asking you to accept 21 that this is what IPL is presenting. 22 A. It's obviously what they're presenting. I'm 23 not sure if it's what it would be going forward or 24 not. 25 Q. And it concludes that your territory is well PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 635 1 positioned for the siting of additional wind 2 resources; would you agree with that? 3 A. That, you would have to ask Mr. Vosberg. 4 MS. EASLER: I would move for the admission 5 of Exhibit 122. 6 MS. JOHNSON: I probably would have to 7 object to that just because we have no basis to 8 authenticate this through this witness. 9 MS. EASLER: I can wait for Ms. Kampling if 10 that would be preferable. 11 MS. JOHNSON: I think that would be more 12 appropriate. 13 CHAIRPERSON NORRIS: Okay. 14 BY MS. EASLER: 15 Q. You represent that IPL's EGEAS resource 16 planning analysis considers all combinations of 17 existing resources and future resource alternatives 18 in deriving at an expansion plan, is that accurate? 19 A. Under the given--given the constraints given 20 to the model, that's accurate. 21 Q. And constraints to the model would be 22 supplied by you? 23 A. They wouldn't necessarily be supplied by me, 24 no. 25 Q. Okay. Well, for your--the amount of wind, PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 636 1 for instance, that could be selected-- 2 A. You'd have to ask Mr. Vosberg. That wasn't 3 supplied by me. 4 Q. But did you implement that direction? 5 A. I obviously run the EGEAS model, so I would 6 obviously data input the numbers. 7 Q. Right. And did you limit the amount of wind 8 that it could select? 9 A. To a certain extent. We limited the amount 10 to 800 megawatts over the planning period given the 11 costs, because it is tied to the cost. There is no 12 way that you're going to be able to get an unlimited 13 amount of wind in a short time period, and 14 Mr. Vosberg can testify to this, under the pricing 15 assumptions that we've got in the model today. 16 Q. But-- 17 A. So they go hand in hand. 18 Q. Does IPL's base case EGEAS analysis assume 19 continuation of current DSM investment requirements? 20 A. I believe it does. 21 Q. Does IPL's--does your low CO2 EGEAS analysis 22 assume continuation of current DSM investment 23 requirements? 24 A. I believe it does. 25 Q. Does your high CO2 EGEAS analysis assume the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 637 1 continuation of current DSM investment requirements? 2 A. Yes, it does. 3 MS. EASLER: I would like to distribute a 4 data request response from Docket No. SPU-05-15 which 5 is the IUB docket concerning the sale of Duane 6 Arnold, and this should be marked Exhibit 123. 7 (OCA Exhibit No. 123 was 8 marked for identification.) 9 BY MS. EASLER: 10 Q. Have you had time to review that? 11 A. Yes, I looked it over. I did not file this 12 response. Terry Baxter did the response. 13 Q. Sure. And that's fine. I'm most interested 14 in part A. 15 A. Okay. 16 Q. And my question is, did you, in your 17 resource planning, treat DSM in the same manner as 18 reflected in the response to part A? 19 A. Here again, I think this question is better 20 directed toward Jody Hillberry who does our load 21 forecasting, but you can't confuse-- There's a 22 couple of different types of DSM. There is load 23 control DSM and there's energy efficiency. 24 Q. And part A-- 25 A. That's all I know. I would direct this PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 638 1 question to Jody. 2 Q. I'll do that. 3 MS. EASLER: I would move the admission of 4 this data request as Exhibit 123. 5 CHAIRPERSON NORRIS: 123 is admitted. 6 (OCA Exhibit No. 123 was 7 received in evidence.) 8 BY MS. EASLER: 9 Q. In your rebuttal testimony, page 32-- 10 A. Yes. 11 Q. --you assert that OCA's analysis double 12 counts the impact of DSM because the approved level 13 of DSM is already reflected in IPL's load forecast? 14 A. That's correct. 15 Q. Can you tell me exactly what level 16 efficiency energy and demand, exclusive of load 17 management, is embedded in IPL's load forecast 18 utilized for your EGEAS analysis? 19 A. Our witness Jody Hillberry would be able to. 20 Q. He will be able to? 21 A. He should be, yes. Either he or Bob Holmes. 22 Q. In determining the capacity savings 23 attributable to the nonload control DSM already done 24 by IPL, is that--would you base that on approved 25 capacity goals established through the DSM PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 639 1 proceedings? 2 A. You'd have to ask Mr. Holmes that question. 3 Q. Is that not something that you have a role 4 in? 5 A. Not directly. 6 Q. And Mr. Holmes? 7 A. Yes. 8 Q. Were you here for Mr. Harder's testimony? 9 A. I believe I was. 10 Q. Do I have you at page 41 already? Turn to 11 your rebuttal testimony, page 41, please. 12 Why don't you go ahead and read lines 12 13 through 18, please. 14 A. "Are you testifying that IPL's carbon 15 footprint increases by 2.9 million tons in 2013 due 16 to the addition of SGS Unit 4?" 17 "No. IPL's carbon footprint was measured 18 based on the emissions needed to meet its obligation 19 to serve and serve its customers needs. As such, the 20 amount of energy IPL purchases from other utilities 21 must be considered in the footprint, as well as the 22 displacement of energy from less efficient coal-fired 23 units in IPL's fleet." 24 Q. Do you recall Mr. Harder writing testimony 25 yesterday that the CHP generation system could have a PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 640 1 significantly lower heat rate than the proposed coal 2 plant? 3 A. I don't specifically recall that, but if 4 that's what he said. 5 Q. Would a lower heat rate for any fuel be 6 likely--for any type of fuel used in CHP be likely to 7 result in lower emissions per unit of energy? 8 A. Not necessarily. 9 Q. If that fuel were natural gas, would CO2 10 emissions be lower? 11 A. CO2 emissions per unit basis are lower than 12 coal. 13 Q. And if the fuel were renewable biomass, 14 would it be possible to argue that CO2 emissions were 15 even lower? 16 A. I believe CO2 would be lower in the case of 17 biomass over gas. 18 Q. Did IPL model any potential ethanol biofuel 19 cogeneration in its EGEAS analysis for the proposed 20 coal plant? 21 A. We did model biogas and biomass, and I don't 22 recall specifically if we did that or not. 23 Q. Is there some reason why you didn't consider 24 the CHP? 25 A. Probably because of the need for a host in PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 641 1 that situation. 2 Q. That's something you will be looking at in 3 your next filing, though, isn't it? 4 A. I think that's something we've done in our 5 past filings if you look at--I believe it is Section 4 6 on distributed generation of our past resource plans. 7 Q. Would you agree that the savings from a 8 comprehensive energy efficiency program would, in 9 effect, provide the continuous level of resource that 10 is typical of a baseload resource? 11 A. I don't know. 12 Q. I have just one more question, I think. 13 Turning to your rebuttal testimony at page 10, and at 14 this--in this part of your testimony you're talking 15 about IPL does not need to demonstrate need for the 16 proposed plant in the application for certification. 17 A. I see that. 18 Q. Is it your position then that the IUB must 19 approve the siting application even if it is 20 established that IPL could secure its energy needs in 21 a more cost-effective manner that positively impacts 22 IPL's emission profile as compared to the proposed 23 coal plant? 24 A. I believe Sutherland Generating Station 4 is 25 a cost-effective resource and it will allow us PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 642 1 options and opportunities to positively affect our CO2 2 profile. 3 Q. I understand that, but if it were 4 demonstrated otherwise-- 5 A. I don't know. I'd have to defer to my 6 counsel and to the regulatory manager. I don't know 7 what the specific rules are. We've typically done 8 the need analysis more in the ratemaking principles 9 docket in which we do intend to file probably 10 additional information relative to need and cost- 11 effectiveness in that proceeding. 12 MS. EASLER: I would request that the Board 13 take note of the transcript pages in my 14 cross-examination of Mr. Kitchen, and with that, that 15 concludes my cross-examination. 16 CHAIRPERSON NORRIS: We'll take notice of 17 those cites. 18 Ms. La Seur, before you start, Mr. Stead, 19 any idea how long you have for confidential 20 questions? Any sense? 21 MR. STEAD: I would say 20 minutes max. 22 CHAIRPERSON NORRIS: Would we rather finish 23 today on confidential, or start tomorrow morning on 24 confidential? 25 MR. RAGSDALE: Do you want to do this off PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 643 1 the record? 2 CHAIRPERSON NORRIS: Yes. Off the record. 3 (Discussion of the record.) 4 CHAIRPERSON NORRIS: Why don't we move into 5 confidential since it's the end of the day, and we 6 can start open session tomorrow morning. So I would 7 ask that anybody who is not a party to the 8 confidential agreement in this hearing--we will not 9 go back into open session today, so I don't want you 10 to stand out in the cold and wait, and we will take 11 just a minute to allow the hearing room to clear. 12 (Short pause.) 13 (Pages 644 through 662 are contained in a 14 separate confidential transcript.) 15 16 17 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 644 1 (The following proceedings were held in 2 closed session.) 3 (OCA Exhibit No. 124 was 4 marked for identification.) 5 MR. STEAD: Your Honor, I have had marked as 6 an OCA exhibit confidential Exhibit 124. 7 CROSS-EXAMINATION 8 BY MR. STEAD: 9 Q. Now, Mr. Kitchen, looking at OCA 10 confidential Exhibit 124, that includes slides in the 11 first part of the proceeding, or first part of the 12 exhibit that were used by IPL in a presentation given 13 as part of the company's 2008 strategic planning 14 process, is that correct? 15 A. That's what it appears to, yes. 16 Q. Now, early on in the document if you would 17 turn to page 2 of 2 of Attachment A. 18 A. I see that. 19 Q. I believe this slide provides the results of 20 a number of analyses that IPL conducted, is that 21 correct? 22 A. Page 2 of 2, you say? 23 Q. Attachment A, page 2 of 2. 24 A. Oh, attachment A. Okay. 25 Q. This slide provides the results of a number PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 645 1 of analyses that IPL conducted, is that correct? 2 A. It appears that way. 3 Q. Were these analyses conducted using the 4 EGEAS model? 5 A. I don't believe they were. We have a 6 strategic planning group. I don't necessarily review 7 all of the analyses. 8 Q. Then if you could turn to attachment B. 9 A. Okay. 10 Q. And if you could look at page 2 of 3. 11 A. Right. 12 Q. Does that provide the IRP assumptions that 13 are related to the 2008 planning process of IPL? 14 A. I'm not sure--I mean this is a strategic 15 planning document, and I'm not necessarily privy to 16 what goes on in strategic planning. 17 Q. Then let's just look back at Attachment A, 18 page 2 of 2 that you at least expressed some 19 familiarity with. 20 A. I didn't necessarily say I was familiar with 21 it. 22 Q. At the top of that document it says "IPL 23 Base Plan," is that correct? 24 A. Okay. The top part there, yes. 25 Q. And I believe we have a coal facility of 350 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 646 1 megawatts going in in 2013? 2 A. That's correct. 3 Q. The next category down is "IPL Coal Delayed 4 until 2016," is that correct? 5 A. That's what it says. 6 Q. And if you look out to column 2016, it has 7 coal, 350 megawatts? 8 A. Correct. 9 Q. And is it my understanding from looking at 10 this exhibit that the delay in an IPL coal plant of 11 350 megawatts until 2016 is less expensive? 12 A. I don't know what the NPV is and how this is 13 being calculated and what this all entails. These 14 three subboxes down here and rows down here doesn't 15 necessarily have to tie to the EGEAS analysis. This 16 could be something based on spreadsheets. I just do 17 not know the assumptions that went into these 18 scenarios, if you will. 19 Q. Just as a factual matter, if we look at NPV 20 column? 21 A. Here again, I don't know what was included 22 or how they come up with these other NPVs and if 23 these comparisons are on an apple-to-apple basis. 24 Q. I understand, and I'm just asking you 25 factually in the NVP column, if the IPL coal plant of PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 647 1 350 megawatts delayed until 2016 based on the numbers 2 shown in the NPV column is less expensive? 3 A. But here again, I don't know what the facts 4 are behind this number. 5 Q. The number is lower? 6 A. The number is lower on this presentation. 7 Q. That's all. 8 A. Here again, I don't know what's driving 9 that. 10 Q. Again, looking toward the 2008 planning 11 process in the Minnesota proceeding, IPL was 12 conducting sensitivity studies using higher CO2 prices 13 as part of its 2008 IRP, is that correct? 14 A. We haven't determined the CO2 scenarios that 15 were put in the upcoming IRP, and I don't know if 16 they would be any higher than what we would currently 17 have for CO2 forecast. 18 Q. But are you currently conducting higher 19 ones? 20 A. You would have to ask that of Mr. Guelker. 21 Q. Again, just referring to the Attachment B, 22 page 2 of 3, the IRP assumptions, just based on your 23 knowledge of how the company IPL operates, do you 24 believe it is fair to state that these IRP 25 assumptions were being discussed at a meeting within PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 648 1 IPL, or at least within the company during this time 2 frame? 3 A. I truly do not know. Like I said, I wasn't 4 involved in either giving this presentation or 5 sitting through the presentation. I don't know what 6 was discussed. 7 Q. Just given your basic nature of the company, 8 would it be your belief that these IRP assumptions 9 are being discussed within the company? 10 A. Again, I do not know. I've never sat 11 through a strategic planning meeting or discussion. 12 I don't know what gets talked about. 13 Q. Is it a fair statement that, not to waste 14 any further time here today, that I should talk to 15 Mr. Guelker about these matters in OCA confidential 16 data request No. 124? 17 A. Do I have that in front of me? 18 Q. That is what we've been talking about. 19 A. Regarding Mr.--Mr. Guelker regarding what? 20 He's our environmental witness, but regarding what 21 gets talked about in senior strategic planning 22 meetings, or what? 23 Q. Right. 24 A. I don't know who is involved, or who is in 25 that process. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 649 1 Q. So you don't--you can't point me to a 2 witness? 3 A. I myself can't. 4 Q. But you did refer Mr. Guelker to that one 5 area? 6 A. For environmental questions. Mr. Guelker 7 can answer environmental questions. 8 Q. Okay. So he can answer questions about the 9 sensitivity studies that are being used for CO2 10 prices, is that correct? 11 A. That would fall under his jurisdiction, I 12 believe, yes. 13 Q. And that would also include the upcoming 14 2008 IRP process in Minnesota? 15 A. I believe it would as well, yes. 16 MR. STEAD: Okay. Why don't we just save 17 those for Mr. Guelker. I apologize. We may have to 18 go into confidential session again, but we'll save 19 those for Mr. Guelker. Thank you. That's all I 20 have. 21 CHAIRPERSON NORRIS: Anybody else have any-- 22 MS. LA SEUR: I have a few things. 23 CROSS-EXAMINATION 24 BY MS. LA SEUR: 25 Q. I would like to refer you to a prefiled OCA PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 650 1 exhibit. This is from Mr. Fagan's direct testimony. 2 It is Schedule A, and I would like to refer to page 3 116 of 212. It is a confidential exhibit, so I saved 4 it for this time. 5 A. What page here? 6 Q. It is 116 of 212 of Schedule A. It is part 7 of the PowerPoint. 8 A. Okay. 9 Q. It says, again, a strategic planning 10 PowerPoint. Would you be familiar with this 11 document? 12 A. No, I would not be. 13 Q. Okay. The question, though, is really 14 related to how the resource planning process responds 15 to a strategic planning directive so we can get to 16 the meat of the questions. I know this is not your 17 document. 18 A. I would be more than willing to talk about 19 the stuff I filed and how it affects the CO2 20 emissions, but I have no knowledge, here again, on 21 this document here. 22 Q. Were you involved in any way in AEC 23 strategic planning for 2008? 24 A. Strategic planning is done above me. I'm at 25 a little bit lower level than that, and I don't know PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 651 1 what they use of mine if anything, so I don't have 2 any knowledge of what gets done in the strategic 3 planning process, if you will. 4 Q. And how is strategic planning information 5 communicated to people that are below that pay grade, 6 if you will? 7 A. I don't know. I get very little information 8 flowing down. 9 Q. Would a strategic plan be integrated into 10 the resource planning process at some point? 11 A. No. I believe the information flows up. 12 Q. So you would not necessarily be privy to the 13 organization's strategic plan? 14 A. That is correct. 15 Q. Would you agree at any rate that this 16 document appears to represent a level of corporate CO2 17 emissions that rises above all projected regulatory 18 limits by 2015? 19 A. I can't answer that. 20 Q. Are you able to speak to how it appears to 21 you? 22 A. No, because I don't know what any of the 23 regulations are, or anything like that. 24 Q. I'm not talking about the regulations. I'm 25 just talking about the page in front of you. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 652 1 A. Yeah. To me this doesn't tell me--I don't 2 know what I'm looking at here. I don't know what all 3 these things are, Sanders-Boxer. This question here, 4 again, would probably be better posed to Mr. Guelker. 5 Q. Okay. So in your resource planning process, 6 you have not then taken into account a projected 7 regulatory exceedance of all currently proposed 8 climate change legislation? 9 A. No, we have not. 10 Q. And would you anticipate then that this 11 strategic planning information would at some point be 12 integrated into resource planning? 13 A. Not necessarily. 14 Q. That's all I have on that page. Then I have 15 a few questions about the cost of electricity that I 16 think should probably be handled confidentially, so 17 I'll put these to you now. 18 What do you believe is a realistic upper 19 limit on the construction price of the Marshalltown 20 plant? 21 A. It's all relative. I do not have a 22 preconceived notion of the upper limit. 23 Q. Is that to say there is no upper limit? 24 A. It is all relevant to other alternatives. 25 Q. When the plant opens in 2013, how much do PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 653 1 you project that it will cost IPL to produce a 2 kilowatt of electricity from that plant? 3 A. Could you ask the question again, please? 4 Q. When the plant opens in 2013, what do you 5 project that it will cost IPL to produce a kilowatt 6 of electricity from that plant? 7 A. I don't have that off the top of my head. 8 Q. Would you be able to direct me to a place in 9 the testimony where that information is? 10 A. No. When you are talking about producing a 11 kilowatt, there's a whole bunch of numbers that comes 12 in. You're talking about O and M, capital. It's 13 just a conglomerate of that, and I don't know where 14 you would necessarily find that in the testimony 15 that's been submitted. 16 Q. So there is no point in the testimony where 17 all that data is distilled into an actual price for 18 producing electricity from this plant? 19 A. It's probably in some of the EGEAS outputs, 20 but I don't know if these have been filed as part of 21 this or not. It's definitely not on the summary. 22 The summary is all composite for the system. 23 Q. Then would you be able to summarize the 24 assumptions that would go into that analysis? 25 A. Not off the top of my head. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 654 1 Q. Would you agree they would include things 2 like capital costs, operating budget, fuel costs? 3 A. Yes, they would. 4 Q. And do you have a general sense of what that 5 ultimate cost of a kilowatt from Sutherland 4 will 6 be? 7 A. I do not. 8 Q. So you would be unable to make any 9 comparison to IPL's current systemwide cost of 10 supplying electricity? 11 A. That's correct. 12 Q. Okay. And you would also be unable to make 13 any comparison to the current cost of producing 14 electricity just from the coal-fired power plants 15 within the system? 16 A. That's correct. We look at things more on a 17 total overall cost basis than--we look at some things 18 on a per-unit basis, but not necessarily like that 19 from EGEAS. 20 Q. When you say per unit, you mean-- 21 A. Per kilowatt or per megawatt-hour. 22 Q. Or as from one form of generation to 23 another? 24 A. Uh-huh. 25 MS. LA SEUR: Nothing further. Thank you. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 655 1 MR. PUCKETT: Nothing. 2 CHAIRPERSON NORRIS: A quick question here. 3 Back to that Attachment A on page 2 of 2 that 4 Mr. Stead had referred you to, Mr. Kitchen. He 5 referred you to the NVP column, and the lower price 6 assuming this is what this reflects in 2016 delayed 7 coal plant. What does the zero percent and then the 8 negative .05 percent represent? Any idea? 9 THE WITNESS: I don't know, no. Like I 10 said, I just haven't seen this before, and I did 11 not--the three bottom scenarios don't look like 12 something I would have done. 13 CHAIRPERSON NORRIS: Just since we're--this 14 may or may not be confidential, but a quick 15 follow-up. Have you been asked to supply any 16 analysis for the strategic planning process? 17 THE WITNESS: They will take my base case. 18 Obviously, this base case might have came from me, 19 but I don't know what they do with it and how they 20 process it after they get it. If they go through it 21 in spreadsheets and move units around based on 22 spreadsheet analysis, I don't know. 23 CHAIRPERSON NORRIS: So you have been asked 24 to supply information for the strategic planning 25 process? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 656 1 THE WITNESS: I don't know if it goes to 2 strategic planning or where it goes. 3 CHAIRPERSON NORRIS: So the inverse, have 4 you been asked to analyze this document or any other 5 strategic planning process documents from the 6 company? 7 THE WITNESS: I have not. 8 CHAIRPERSON NORRIS: Ms. Johnson. 9 MS. JOHNSON: I don't have anything. 10 MR. STEAD: We would move for the 11 admission-- Go ahead. 12 BOARD MEMBER TANNER: I wanted to follow up. 13 Can you shed some light on how strategic planning is 14 done then? 15 THE WITNESS: That question would be better 16 directed to somebody higher up. I just do not know. 17 BOARD MEMBER TANNER: So what--can you 18 clarify your role? 19 THE WITNESS: Yeah. I do our generation 20 planning and resource planning and modeling using the 21 EGEAS model as such, and to the extent that gets 22 tweaked by somebody else, not necessarily me. So the 23 eventual plan may be somewhat different than what you 24 see in my work. But it doesn't necessarily have to 25 be. It is fuzzy. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 657 1 BOARD MEMBER TANNER: It is. That's why I'm 2 asking the question. 3 THE WITNESS: I'm the wrong person to ask, 4 because I'm not privy to all that information. 5 MR. STEAD: One question. 6 CROSS-EXAMINATION 7 BY MR. STEAD: 8 Q. Again, is a good starting place Mr. Guelker? 9 A. Not for strategic planning. 10 Q. Who is a good starting place for strategic 11 planning? 12 A. I would probably ask Mr. Bennington. 13 Q. Mr. Bennington? 14 A. Our highest-up witness is who I would have 15 started with. 16 MR. STEAD: We would move for the admission 17 of OCA confidential Exhibit No. 124. 18 MS. JOHNSON: No objection. 19 CHAIRPERSON NORRIS: 124 is admitted. 20 (OCA Exhibit No. 124 was 21 received in evidence.) 22 CHAIRPERSON NORRIS: Any more questions for 23 Mr. Kitchen? Thank you, Mr. Kitchen. I think you're 24 going to come back. 25 THE WITNESS: Will it be tomorrow? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 658 1 MR. STEAD: We really need to get--our 2 understanding from the prehearing conference was we 3 would go with OCA and Coalition witnesses Wednesday 4 and Thursday, and possibly one or two Coalition 5 witnesses available Friday, and then go back to IPL 6 witnesses. 7 CHAIRPERSON NORRIS: It is my understanding 8 your witnesses will be here tomorrow or Thursday, any 9 or all of them? 10 MR. RAGSDALE: I don't think we have excused 11 anybody yet. 12 CHAIRPERSON NORRIS: Okay. If we wrap up 13 the Consumer Advocate witnesses before the end of the 14 day, we'll probably come back to you, Mr. Kitchen. 15 MR. STEAD: One last question, I would ask 16 Mr. Bennington--obviously Mr. Guelker still has to be 17 here, but Mr. Bennington be subject to recall since 18 he was the one that may be the starting point for 19 strategic planning questions. 20 BOARD MEMBER TANNER: Can we ask counsel who 21 is the best person? Who would be the best witness to 22 connect--to testify to the connection between 23 resource planning and strategic plan? 24 MS. JOHNSON: Can we have just a moment to 25 confer and verify that? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 659 1 BOARD MEMBER TANNER: Sure. 2 MS. JOHNSON: Thank you. 3 (Short pause.) 4 CHAIRPERSON NORRIS: Ms. Johnson, any 5 recommendation on the question? 6 MR. RAGSDALE: I think what we've decided, 7 the people that are present today, Mr. Aller is 8 probably best prepared to respond to questions about 9 the strategic planning process, but not in a position 10 to respond to the substantive plan slide that Ben 11 used, because he doesn't know if he has even seen 12 these, but from the standpoint of how Mr. Kitchen's 13 work product may interact in the strategic planning 14 process, he could address that process from somebody 15 from his level. 16 CHAIRPERSON NORRIS: I don't anticipate that 17 happening today, but probably on the recall. Who was 18 present today? 19 MR. RAGSDALE: Mr. Aller. 20 CHAIRPERSON NORRIS: Mr. Aller. I didn't 21 see you on the witness list there. 22 MR. RAGSDALE: He's not on the witness list, 23 but from the standpoint of giving you the best person 24 to respond to questions about the process as opposed 25 to this specific PowerPoint. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 660 1 MR. STEAD: Do we have a witness for that 2 specific PowerPoint? 3 MR. RAGSDALE: I'm not sure. Mr. Aller says 4 he's not sure. 5 MR. STEAD: It's in the data response you 6 gave us in this proceeding. Mr. Beer is listed as 7 the witness, but I don't think he probably is the 8 one. 9 MR. RAGSDALE: The question was directed to 10 people that--the top five management personnel. 11 MR. STEAD: So at least as of this moment 12 you don't have a witness? 13 MR. RAGSDALE: Who put together the slide 14 show? 15 MR. STEAD: Who can answer questions about 16 some of the slides? 17 MR. RAGSDALE: I don't know that--we haven't 18 had time to figure that out. We didn't regard that 19 as being a request. 20 MR. STEAD: We'll talk about it Friday. 21 CHAIRPERSON NORRIS: Let's give you the 22 night to think about it, discuss it, and we can pick 23 this conversation up either tomorrow morning, or at 24 the conclusion of your witnesses and before we call 25 IPL witnesses back up. It might be wise to have that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 661 1 conversation before Friday so you know who to have 2 here and be prepared to answer questions, okay? 3 So with that, let's bring on Mr. Beer. I 4 think we have one question for you, Mr. Beer. The 5 Board does. If anyone else has anything confidential 6 to follow up, we'll allow them the opportunity. 7 Raise your right hand, please. 8 JEFFERY J. BEER, 9 recalled as a witness by Interstate Power and Light 10 Company, being first duly sworn by Chairperson Norris, 11 was examined and testified as follows: 12 CHAIRPERSON NORRIS: I believe this question 13 is confidential because of the issues that were 14 involved, whether or not there was a letter that came 15 from, but this is in regard to a letter from counsel 16 for Corn Belt and CIPCO to Alliant Energy, and it 17 raises two issues on the joint ownership agreement, 18 and the question is have those issues been resolved, 19 those issues being, as we understand it, that 20 Corn Belt and CIPCO wanted a firm dollar per kilowatt 21 cost on a construction cost cap, and the second one 22 is a firm in-service date, and have those issues been 23 resolved? 24 THE WITNESS: Yes, the issues have been 25 resolved. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 662 1 CHAIRPERSON NORRIS: Resolved in terms of 2 that would not interfere with this project moving 3 forward? 4 THE WITNESS: Right. It would not interfere 5 with this project moving forward. 6 CHAIRPERSON NORRIS: On a joint ownership 7 basis? 8 THE WITNESS: Yes, and that would be 9 incorporated in the joint operating agreement that 10 has been provided here today. 11 CHAIRPERSON NORRIS: Chance for anyone else 12 to follow up on that? Ms. Johnson? 13 MS. JOHNSON: No. 14 CHAIRPERSON NORRIS: Thank you, Mr. Beer. 15 (Witness excused.) 16 CHAIRPERSON NORRIS: All right. We will 17 begin with the OCA witnesses tomorrow morning at nine 18 a.m. We are adjourned. 19 (Recess taken at 5:05 p.m. until 9:00 a.m., 20 Wednesday, January 16, 2008.) 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 663 1 C E R T I F I C A T E 2 I, the undersigned, a Certified Shorthand 3 Reporter of the State of Iowa, do hereby certify that 4 I acted as the official court reporter at the hearing 5 in the above-entitled matter at the time and place 6 indicated. 7 That I took in shorthand all of the 8 proceedings had at the said time and place and that 9 said shorthand notes were reduced to typewriting 10 under my direction and supervision, and that the 11 foregoing typewritten pages are a full and complete 12 transcript of the shorthand notes so taken. 13 Dated at Des Moines, Iowa, this 21st day of 14 January, 2008. 15 16 17 CERTIFIED SHORTHAND REPORTER 18 19 20 21 22 23 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596