664 1 F 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 : VOLUME III GENERATING FACILITY CITING : CERTIFICATE : - - - - - - - - - - - - - - - x Iowa Veterans Home Whitehall Auditorium 1301 Summit Street Marshalltown, Iowa Wednesday, January 16, 2008 Met, pursuant to adjournment, at 9:15 a.m. BEFORE: THE IOWA UTILITIES BOARD JOHN R. NORRIS, Chairperson KRISTA K. TANNER, Board Member DARRELL HANSON, Board Member (Pages 664 through 1157) PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 665 EDIE SPRIGGS DANIELS - CERTIFIED SHORTHAND REPORTER 2 APPEARANCES: 3 For IPL: KENT RAGSDALE, ESQ. PAULA JOHNSON, ESQ. 4 200 First Street SE P.O. Box 351 5 Cedar Rapids, Iowa 52406 6 For the Coalition: CARRIE LA SEUR, ESQ. 7 JANA LINDERMAN, ESQ. Plains Justice 8 100 First Street SW Cedar Rapids, Iowa 52403 9 10 For CIPCO and Corn Belt: DENNIS PUCKETT, ESQ. Sullivan & Ward, P.C. 11 6601 Westown Parkway Suite 200 12 West Des Moines, Iowa 50266 13 For the Office of BEN STEAD, ESQ. Consumer Advocate: JENNIFER EASLER, ESQ. 14 Office of Consumer Advocate Iowa Department of Justice 15 310 Maple Street Des Moines, Iowa 50319 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 666 1 I N D E X 2 WITNESS DIRECT CROSS REDIRECT RECROSS BOARD 3 For the OCA: 4 Michael Drunsic 670 688 696 697 693 5 (Ragsdale) (Ragsdale) 706 704 6 709 699 (La Seur) 7 702 8 (Ragsdale) 9 708 (Ragsdale) 10 Larry Shi 710 716 720 721 718 11 (Ragsdale) (Ragsdale) 722 12 719 723 13 (Ragsdale) (La Seur) 14 Robert Fagan 725 772 820 825 802 (Ragsdale) (Ragsdale) 15 833 790 830 16 (Ragsdale) (La Seur) 17 837 (Ragsdale) 18 Ezra Hausman 844 901 926 927 920 19 (Ragsdale) (Ragsdale) 20 911 (La Seur) 21 William Powers 935 956-Ragsdale 945 22 953 958-La Seur 23 David Schlissel 960 1083 1144 1150 1126 (Ragsdale) (Ragsdale) 24 1105-La Seur 1154 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 667 1 E X H I B I T S 2 OCA EXHIBITS MARKED RECEIVED 3 100 670 4 101 725 5 102 845 6 103 935 7 104 960 8 125 726 727 9 126 126 10 11 12 13 PRODUCTION REQUESTS PAGE LINE 14 801 12 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 668 1 P R O C E E D I N G S 2 CHAIRPERSON NORRIS: We are back in session 3 in Docket No. GCU-07-1. 4 Does anybody have anything to bring before 5 us before we begin with the witnesses? 6 Yes, Mr. Ragsdale. 7 MR. RAGSDALE: We have a couple of matters. 8 One is we would like to see if we can get a couple of 9 our witnesses temporarily excused. They've already 10 been up, Mr. Arnold and Harder, and they do intend to 11 be back here on Friday, so if anything comes up, if 12 we're able to get other witnesses of ours up before 13 Friday and things are deferred to them, they do plan 14 to be back here, but we would like to ask the 15 parties' indulgence if they could slip away for the 16 next couple of days. 17 CHAIRPERSON NORRIS: Yeah, I think-- 18 MR. RAGSDALE: Okay. 19 CHAIRPERSON NORRIS: --plan on having your 20 folks here Friday, but if anyone needs to leave in 21 the next two days and come back Friday, I think we 22 can probably work it out just fine. 23 MR. RAGSDALE: One other matter in regards 24 to questions that we had in our confidential session, 25 I believe, late yesterday about the confidential PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 669 1 strategic planning process. There were some 2 questions, I think, that came from the Board, and the 3 witness that we had was not intimately involved in 4 the actual process and how those meetings work. We 5 do have Mr. Aller, who would be available today, to 6 respond to questions that the Board had in a little 7 bit more detail about that process. He does not plan 8 to be here the rest of the week. 9 So my anticipation of our cross-examination 10 of the OCA witnesses are that I think we will 11 comfortably finish those witnesses today, and we 12 might assess where we are and maybe take a little 13 time at that time to talk to Mr. Aller, or you may 14 want to wait until the end of the day and have 15 another sort of closed session like we did yesterday 16 so that other people could go about their business. 17 CHAIRPERSON NORRIS: Okay. 18 MR. RAGSDALE: But he is the person who is 19 probably best situated to talk about that, and he is 20 here today. 21 CHAIRPERSON NORRIS: Thank you, Mr. Ragsdale. 22 Anybody else? 23 (No response.) 24 CHAIRPERSON NORRIS: All right. Your first 25 witness, Mr. Stead. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 670 1 MR. STEAD: Thank you, Your Honor. The 2 Office of Consumer Advocate calls Michael Drunsic. 3 CHAIRPERSON NORRIS: Hello, Mr. Drunsic. 4 THE WITNESS: Good morning. 5 CHAIRPERSON NORRIS: Raise your right hand, 6 please. 7 MICHAEL W. DRUNSIC, 8 called as a witness by the Office of Consumer 9 Advocate, being first duly sworn by Chairperson Norris, 10 was examined and testified as follows: 11 CHAIRPERSON NORRIS: Thank you. You may be 12 seated. 13 THE WITNESS: Thank you. 14 DIRECT EXAMINATION 15 BY MR. STEAD: 16 Q. Please state your name for the record. 17 A. My name is Michael W. Drunsic. 18 Q. On or about October 22nd, 2007, did you 19 prefile testimony and exhibits in this proceeding 20 that now have been spread upon the record? 21 A. Yes, I have. 22 (OCA Exhibit 100 was 23 received in evidence.) 24 (The prepared testimony follows.) 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 688 1 MR. STEAD: We tender the witness for 2 cross-examination. 3 CHAIRPERSON NORRIS: Mr. Ragsdale. 4 CROSS-EXAMINATION 5 BY MR. RAGSDALE: 6 Q. Good morning, Mr. Drunsic. 7 A. Good morning. 8 Q. Did I do the pronunciation correctly? 9 A. Yes, perfect. 10 Q. Thank you. 11 Isn't it correct that your direct testimony 12 does not contain any references to the Iowa Code? 13 A. That is correct. 14 Q. And isn't it correct that your direct 15 testimony does not contain any references to the 16 Board's rules? 17 A. That is correct. 18 Q. And would you agree with me that IPL has an 19 obligation to serve its electric retail customers in 20 its service territory? 21 A. Yes, I would agree. 22 Q. I would like to direct your attention to the 23 first page of your direct testimony, and particularly 24 direct your attention to lines 24 and 25 there, and I 25 believe you claim there that you're proficient in the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 689 1 PROSYM, PROMOD, STRATEGIST--did I pronounce that-- 2 A. STRATEGIST. 3 Q. STRATEGIST--and EGEAS models? 4 A. That's correct. 5 Q. And isn't it correct that IPL has not used 6 the PROSYM model in this case? 7 A. That is correct. 8 Q. And-- 9 A. To my knowledge. 10 Q. Okay. And isn't it correct that your 11 testimony in this case is not based upon your use of 12 the PROSYM model? 13 A. Yes. 14 Q. And isn't it correct that IPL did not use a 15 PROMOD model in this case? 16 A. To my knowledge, no. 17 Q. Okay. And isn't it also correct that your 18 testimony in this case was not based upon your use of 19 the PROMOD model? 20 A. Correct. 21 Q. And isn't it correct that IPL does not use 22 the STRATEGIST model? 23 A. As far as I know, no. 24 Q. And your testimony in this case is not based 25 upon the use of that model, is that correct? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 690 1 A. Not directly, no. 2 Q. Isn't it correct that IPL has used the EGEAS 3 model in this case? 4 A. That is correct. 5 Q. And your testimony in this case is based 6 upon your use of the EGEAS model? 7 A. Yes, in conjunction with Dr. Shi. 8 Q. And isn't it correct that prior to rejoining 9 Synapse Energy in 2007, you were with TPW Management 10 in Bondville, Vermont? 11 A. That is correct. 12 Q. And isn't it correct that your title with 13 TPW Management was manager of waste operations 14 division? 15 A. That's not correct. It was manager of water 16 and waste operations, I think, water treatment--I 17 don't even remember what my title was, actually, but 18 it wasn't what you stated. 19 Q. So could I turn your attention to 20 Appendix A, page 1? 21 A. Yes. 22 Q. And could you look at what your job title is 23 described for TPW Management on that document? 24 A. Manager, water operations division. 25 Q. And did I read something different? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 691 1 A. Yes. I think you said manager of wastewater. 2 Q. Oh, okay. I can't even read my own, and I 3 typed it out this time. 4 Thank you for that correction. 5 A. You're welcome. 6 Q. Isn't it correct that as manager of the 7 water operations division, you managed the operations 8 of 15 public water system? 9 A. That is correct. 10 Q. And would it be fair for me to assume that 11 in that position, you did not use the PROSYM model? 12 A. That would be a fair assumption. 13 Q. And would that be true for the other 14 computer models that you address or mention on 15 page 1, lines 24 and 25? 16 A. Yes. 17 Q. And prior to working for TPW Management, you 18 worked with the Spiral Press Cafe in Manchester, 19 Vermont? 20 A. That is correct. 21 Q. And would it be fair for me to assume that 22 in your position with that business, that you also 23 did not use those computer simulation models? 24 A. That's true. They don't come in handy when 25 you're making sandwiches. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 692 1 Q. Now, isn't it correct that on November 29th, 2 2006, you filed testimony in Ottertail Power 3 Company's case before the Minnesota commission in 4 which they were seeking to build transmission 5 facilities for the Big Stone 2 project? 6 A. Yes. 7 Q. And in that case you used the STRATEGIST 8 model, STRATEGIST model? 9 A. STRATEGIST model. Yes, I did. 10 Q. You didn't use the EGEAS model in that 11 testimony, is that correct? 12 A. I did not, but the operations are very 13 similar. 14 Q. And isn't it correct that on May 31st, 2007, 15 you filed testimony in the Big Stone case before the 16 North Dakota PUC? 17 A. Yes. 18 Q. And isn't it correct that that case was also 19 related to the construction of the Big Stone 2 20 project? 21 A. Yes. 22 Q. And did you use the same computer model we 23 talked about earlier for the Minnesota case? 24 A. Yes, STRATEGIST. 25 Q. And in your May 31st, 2007, testimony before PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 693 1 the North Dakota commission, isn't it correct that 2 you did not claim you were proficient in the EGEAS 3 model? 4 A. That is correct. 5 MR. RAGSDALE: That's all the questions we 6 have of Mr. Drunsic. 7 MR. PUCKETT: No questions. 8 CHAIRPERSON NORRIS: Ms. La Seur? 9 MS. LA SEUR: No questions. 10 BOARD MEMBER HANSON: Hello, Mr. Drunsic. 11 Right? 12 THE WITNESS: Yes. Good morning. Thank 13 you. 14 BOARD MEMBER HANSON: Now, in your exhibit 15 schedules, the Exhibit MWD-1, Schedules B and C, I 16 believe you show that IPL would need to purchase 17 250 megawatts and then install 800 megawatts of wind 18 generation by 2013. Is that correct? 19 THE WITNESS: That's what these exhibits 20 show, yes. 21 BOARD MEMBER HANSON: Okay. Do you believe 22 it's possible for a utility in the Midwest to add an 23 average of 200 megawatts of generation every year for 24 four years in a row from wind and still provide 25 utility service at a just and reasonable rate? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 694 1 THE WITNESS: I haven't analyzed the issue, 2 but I do believe it's possible. 3 BOARD MEMBER HANSON: Okay. Do you have any 4 comments regarding IPL Witness Kitchen's EGEAS 5 results that show that IPL's base-case expansion plan 6 didn't change when the only change that was made to 7 EGEAS inputs was the change in the number of 8 superfluous units from two to 10? 9 THE WITNESS: I'm sorry. Could you restate 10 that again? 11 BOARD MEMBER HANSON: Okay. When the IPL 12 base case was rerun with only one variable change, 13 which was the change of superfluous units from two to 14 10. 15 THE WITNESS: Yes. 16 BOARD MEMBER HANSON: And the results were 17 unchanged. 18 THE WITNESS: Are you talking about 19 Mr. Kitchen's rebuttal testimony? 20 BOARD MEMBER HANSON: Yes, yes. Do you have 21 any comment about that? 22 THE WITNESS: Well, yes. The superfluous 23 units' constraint was not the only input unit that 24 was changed. He also increased the capital cost 25 escalation for wind resources as well as the increase PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 695 1 in natural gas prices, to my knowledge. 2 BOARD MEMBER HANSON: Okay. Now, if IPL-- 3 THE WITNESS: And I'm sorry. David Schlissel, 4 OCA Witness David Schlissel, will comment on those 5 adjustments. 6 BOARD MEMBER HANSON: Okay. And if IPL 7 demonstrates a need for 350 megawatts of baseload 8 addition by 2013, do you feel that the addition of 9 800 megawatts of wind resources could address that 10 baseload capacity need? 11 THE WITNESS: In conjunction with other 12 resources, I think so, but I haven't analyzed that 13 issue. 14 BOARD MEMBER HANSON: Okay. Thank you. 15 CHAIRPERSON NORRIS: I think that's all the 16 questions the Board has. 17 Mr. Stead. 18 MR. STEAD: Thank you, Your Honor. 19 REDIRECT EXAMINATION 20 BY MR. STEAD: 21 Q. Mr. Drunsic, you were asked by counsel for 22 IPL whether you had cited a statute or Board rule in 23 your testimony. Do you remember that discussion? 24 A. Yes. 25 Q. Are you a lawyer? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 696 1 A. I am not. 2 Q. And then you were just talking with 3 Mr. Ragsdale about TPW Management, is that correct? 4 A. Yes. 5 Q. What about your work at Synapse? Would you 6 explain the work at Synapse that you've done? 7 A. Yes, I would be happy to. 8 I worked on numerous cases that have 9 involved resource planning and the use of various 10 electric system economic models such as STRATEGIST 11 and EGEAS and the other models that I cite in my 12 resume. 13 While the models aren't identical, the 14 operations and the practices that are used in 15 expansion planning modeling are similar, and so I've 16 worked on several projects where I've examined these 17 issues for numerous utilities, and I've looked at the 18 various constraints that are put on models in these 19 sorts of resource planning exercises. 20 Q. Now, as I understand it, EGEAS was used in 21 this proceeding by both IPL and the Office of 22 Consumer Advocate; is that correct? 23 A. That is correct. 24 Q. Now, in your participation in the EGEAS 25 analysis with the Office of Consumer Advocate, did PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 697 1 you collaborate with Dr. Larry Shi? 2 A. Yes, I did. 3 Q. Is it your opinion that Dr. Shi is an expert 4 in the EGEAS analysis? 5 A. Absolutely. 6 Q. And you worked closely with him at every 7 stage of this proceeding? 8 A. Yes. 9 Q. Why didn't you use EGEAS in the Big Stone 10 case that was referenced by counsel for IPL? 11 A. It's not commercially available to 12 consultant firms like ours, and to my knowledge, it's 13 only in limited use. I believe Alliant is one of the 14 only companies in the country that uses it. 15 MR. STEAD: Thank you. 16 That's all we have, Your Honor. 17 CHAIRPERSON NORRIS: Mr. Ragsdale? 18 MR. RAGSDALE: Just a quick follow-up 19 question for Mr. Drunsic, if I may. 20 RECROSS-EXAMINATION 21 BY MR. RAGSDALE: 22 Q. In questioning from Mr. Stead, you made a 23 comment that you had looked at--or used computer 24 simulation models for resource planning for a number 25 of utilities. Did I hear you correctly on that? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 698 1 A. That's correct. 2 Q. And were utilities your clients in the 3 Big Stone case? 4 A. No, they weren't. 5 Q. Who were your clients in that case? 6 A. The Minnesota Center for Environmental 7 Advocacy. 8 MR. RAGSDALE: Okay. Thank you. 9 CHAIRPERSON NORRIS: Mr. Puckett? 10 MR. PUCKETT: No. 11 MR. STEAD: One more question, Your Honor. 12 CHAIRPERSON NORRIS: I'm going to come back 13 around. 14 MR. STEAD: Excuse me. 15 CHAIRPERSON NORRIS: Ms. La Seur. 16 MR. RAGSDALE: Your Honor, before--well, 17 I'll wait and see--is Ms. La Seur going to have a 18 question? 19 CHAIRPERSON NORRIS: I believe so, yes. 20 MR. RAGSDALE: I'll object to any leading 21 questions that Ms. La Seur may pose to any of the OCA 22 witnesses. The basis for that is it's our 23 understanding we've got an e-mail--we are apparently 24 on a routing that Ms. La Seur sent out--that a number 25 of the OCA witnesses will be appearing in public PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 699 1 forums tonight and tomorrow night in the State of 2 Iowa, I think tonight in Des Moines, tomorrow might 3 in Iowa City, appearing with some of the OCA 4 witnesses, not Mr. Drunsic, and it is clear that the 5 OCA and Ms. La Seur's client are closely aligned, and 6 we don't think it's appropriate for either the OCA or 7 Ms. La Seur to ask leading questions to the other 8 parties' witnesses. They clearly are not adverse 9 parties in this docket. 10 CHAIRPERSON NORRIS: Ms. La Seur. 11 MS. LA SEUR: I believe I am allowed to ask 12 leading questions on cross-examination. 13 MR. RAGSDALE: Well, you know, I made my 14 motion that she not be allowed to ask leading 15 questions. This is not an adverse witness. 16 CHAIRPERSON NORRIS: Let's let you proceed, 17 Ms. La Seur, and see where your questions go. 18 RECROSS-EXAMINATION 19 BY MS. LA SEUR: 20 Q. My first question is, why is EGEAS not in 21 common use as a modeling program? 22 A. Well, to my knowledge, it's not very well 23 supported anymore. It was developed several years 24 ago, and other better models have emerged from other 25 vendors that have taken over market share from EGEAS, PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 700 1 I assume. I don't know exactly. 2 Q. And what are the advantages of these more 3 recent models as compared to EGEAS? 4 A. Well, for example, STRATEGIST has a more 5 detailed dispatch algorithm, as well as a more 6 detailed representation of demand-side options, and 7 allows for more extensive analysis of various risk 8 factors. 9 Q. And so in lay terms, what kind of 10 information might it be possible to derive from these 11 later models that cannot be derived from EGEAS 12 modeling? 13 A. I haven't really thought too much about that 14 question, and I think it would be difficult for me 15 right now to properly answer that, but from what I 16 see, other models such as STRATEGIST produce much 17 more detailed output results and allow the model to 18 explore more resource expansion paths. 19 In addition, other models, such as PROSYM, 20 which are more detailed dispatch models, allow for a 21 more detailed representation of actual system 22 operations. 23 So in an appropriate planning exercise, one 24 would use an expansion model to develop a set of 25 resource expansion plans and then use a more detailed PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 701 1 dispatch model to examine the more detailed 2 operations of the various expansion plans that come 3 out of an expansion planning model. 4 MS. LA SEUR: Thank you. I have nothing 5 further. 6 CHAIRPERSON NORRIS: I do think going 7 forward, yes, I agree with Mr. Ragsdale, that we will 8 not treat the witnesses of OCA as adverse witnesses 9 for Plains Justice; however, I'll give Ms. La Seur 10 some latitude on some questions. 11 MR. RAGSDALE: Your Honor, I think it would 12 be fair that I'm not arguing that she doesn't have a 13 right to ask any questions or that the OCA doesn't 14 have a right to ask any questions. I'm principally 15 concerned about the form and nature of how the 16 questions are posed. 17 CHAIRPERSON NORRIS: I think we'll just have 18 to treat it going forward. 19 MR. RAGSDALE: I do have, I guess, another 20 question that I neglected to ask Mr. Drunsic based 21 upon a question from the Bench, and I just want to 22 make sure I understand correctly Mr. Drunsic's answer 23 to Board Member Hanson's question, if I could be 24 allowed to ask that question. 25 CHAIRPERSON NORRIS: All right. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 702 1 FURTHER RECROSS-EXAMINATION 2 BY MR. RAGSDALE: 3 Q. I just want to make sure I understood your 4 response to Board Member Hanson, Mr. Drunsic. I 5 think this is what I heard, and if I'm incorrect, 6 please tell me: Is it correct that in IPL's base 7 case, that SGS Unit No. 4 was selected in 2013 when 8 the only change in the modeling was changing from two 9 to seven superfluous units? 10 A. Yes, but that model--their run didn't have 11 any CO2 costs. 12 Q. Did the company's base case have a CO2 cost? 13 A. No, it did not. 14 Q. So the answer to my question was yes? 15 A. Yes. 16 Q. And neither run had CO2 costs in it? 17 A. Neither of the base-case runs? 18 Q. Right. 19 A. That is correct, yes, neither of the base- 20 case runs had CO2 costs. 21 Q. Are you aware-- This is a follow-up 22 question to Ms. La Seur's questions on the EGEAS 23 model. Are you aware of whether the Public Service 24 Commission of Wisconsin requires the use of the EGEAS 25 model? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 703 1 A. I'm not aware. 2 Q. Are you aware of whether any of the Alliant 3 Energy companies operate in the State of Wisconsin? 4 A. Yes, I am aware of that. 5 MR. RAGSDALE: That's all I have. Thank 6 you. 7 MR. PUCKETT: Nothing. 8 MS. LA SEUR: I would like to ask, if I may, 9 is this a ruling that our cross-examination is to be 10 limited to some subset of what we would like to 11 cover? We are a full party to this matter. We have 12 submitted data requests and interacted as a separate 13 party in all the preparation for the hearing. 14 CHAIRPERSON NORRIS: You are, but I think 15 Mr. Ragsdale's point is right, that these are not 16 adverse witnesses to you; but having said that, we 17 will take each witness and the tack you go. 18 The point is I don't think you're going to 19 be able to double team and utilize each other to open 20 a whole new line of issues that haven't been brought 21 up in the direct testimony that has been presented. 22 Having said that, we're here to listen and 23 understand this case as best we can, so to the degree 24 that you can help us do that, we're going to give you 25 a fair amount of latitude. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 704 1 MS. LA SEUR: Well, if he would direct a 2 specific objection to a specific question, then I 3 would ask you to consider those as they arise, but we 4 in turn would object to any restriction of our right 5 to cross-examination as independent intervenors. 6 CHAIRPERSON NORRIS: I think you probably 7 stated it exactly how I meant to state that and 8 stated it better; but, yes, if there are questions 9 that are objected to on a line of questioning, we'll 10 take those on a question-by-question basis going 11 forward. 12 MS. LA SEUR: Thank you. 13 CHAIRPERSON NORRIS: Mr. Puckett, no. 14 Any further questions, Ms. La Seur, of this 15 witness? 16 MS. LA SEUR: No. 17 CHAIRPERSON NORRIS: Mr. Drunsic, I just 18 have-- Let me back up and say I am not an EGEAS or 19 PROMOD or any expert. I did own a restaurant, so I 20 won't hold that against you. 21 THE WITNESS: It's a tough gig. 22 CHAIRPERSON NORRIS: This discussion with 23 Mr. Ragsdale about the base-case runs that didn't 24 have CO2 costs, I just want to give you an opportunity 25 to give us the big picture here of what you are PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 705 1 stating in this case and what your primary problems 2 are with the EGEAS. Is it the use of the EGEAS model 3 or is it the use of the inputs in the EGEAS model 4 that yielded IPL's outcome of choosing the coal plant 5 in 2013? 6 THE WITNESS: My primary concerns are with 7 the use of the model--or how they implemented their 8 model, not necessarily the use of the EGEAS model. 9 Although I feel that there are better models out 10 there, I don't think that that's the major concern 11 here. 12 The major concern is with the assumptions 13 that they made in their modeling, which constrained 14 the use of the model such that it wasn't able to 15 explore all available pathways. 16 They state in their testimony and in 17 discovery responses that they did a comprehensive 18 expansion planning analysis, and I would say that 19 that's just not true because of the way they 20 constrained the model, and the point of expansion 21 modeling--expansion planning modeling is to--and 22 using a model like EGEAS is to explore all possible 23 pathways and to explore different pathways to then be 24 able to compare the economics of significantly 25 different expansion pathways. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 706 1 CHAIRPERSON NORRIS: Now, you're saying the 2 constraints that they chose were restricting to only 3 two superfluous units or not counting the CO2 costs? 4 Are those the constraints that you're addressing? 5 THE WITNESS: Well, the constraints that I 6 addressed in my testimony were the ways that they 7 constrained the model with the superfluous units' 8 constraint. The CO2 cost is not necessarily a 9 constraint factor; it's more of a risk analysis 10 factor. 11 CHAIRPERSON NORRIS: Mr. Stead? 12 MR. STEAD: Yes, just a couple of questions. 13 FURTHER REDIRECT EXAMINATION 14 BY MR. STEAD: 15 Q. Mr. Drunsic, earlier IPL counsel asked you 16 whether you represented the utility in the Big Stone 17 case. Do you remember that? 18 A. Yes, I do. 19 Q. When you had earlier testified that you had 20 extensively worked on utility resources plans, did 21 you mean to imply that you had always worked for 22 utilities in that analysis? 23 A. Not at all. 24 Q. And would you explain that for me? 25 A. Generally in these sorts of cases, my job PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 707 1 has been to critique how utilities use capacity 2 expansion models and to look at all these various 3 constraints that they put on the models and the 4 assumptions that they make and whether or not those 5 assumptions are reasonable or whether or not they 6 overly constrain the model such that it isn't able to 7 explore all expansion pathways and explore 8 significantly different expansion pathways. 9 Q. So is it a fair statement that you 10 independently evaluate utility resource plans? 11 A. That's a fair statement. 12 Q. You were asked about EGEAS use by the 13 Wisconsin Public Service Commission, and along those 14 lines, do you know if IPL and WPL, its sister utility 15 in Wisconsin, use EGEAS on an integrated basis in 16 Iowa and Wisconsin? 17 A. To my knowledge, no, they do not. They 18 conduct separate expansion planning exercises. 19 Q. There's been evidence admitted by OCA that I 20 would just like you to accept, subject to check. 21 It's Mr. Schlissel's testimony, page 79, lines 19 to 22 22. It's stated there, "Question: Has Alliant 23 Energy conducted any analysis to determine if 24 significant efficiencies are achievable through joint 25 and integrated electric resource planning between its PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 708 1 wholly owned utility subsidiaries?" 2 "Answer: No." 3 Would you accept that, subject to check? 4 A. Yes, I would. 5 Q. Is that your understanding as well? 6 A. That is my understanding. 7 MR. STEAD: No more questions, Your Honor. 8 Thank you. 9 CHAIRPERSON NORRIS: Mr. Ragsdale. 10 MR. RAGSDALE: Just a minute. 11 (Pause.) 12 MR. RAGSDALE: I do have a follow-up 13 question on that last line, if I may. 14 CHAIRPERSON NORRIS: Uh-huh. 15 FURTHER RECROSS-EXAMINATION 16 BY MR. RAGSDALE: 17 Q. As I understand, Mr. Drunsic, your question 18 from Mr. Stead was about integrated resource planning 19 by both IPL and WPL jointly. 20 A. Yes. 21 Q. So under that scenario, IPL and WPL would 22 sort of pool their capacity needs in the future and 23 potentially select a single unit to support those 24 needs? 25 A. Essentially, yes. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 709 1 Q. And is the Office of Consumer Advocate 2 supporting IPL owning ownership interest in a 3 baseload facility that would be located in the State 4 of Wisconsin? 5 A. I don't believe so. 6 Q. Would the Office of Consumer Advocate 7 support Wisconsin Power and Light owning a portion of 8 a baseload unit located in the State of Iowa? 9 A. I'm not qualified to make that assessment. 10 MR. RAGSDALE: That's all the questions I 11 have. 12 MR. STEAD: Just one last question. 13 FURTHER REDIRECT EXAMINATION 14 BY MR. STEAD: 15 Q. Mr. Drunsic, does the Office of Consumer 16 Advocate have the power--after analysis, if it was 17 appropriate for joint planning between IPL and 18 Wisconsin Power and Light to select one unit, does 19 the Office of Consumer Advocate have the power to 20 make the utilities do that? 21 MR. RAGSDALE: I'm going to object. 22 A. Not to my knowledge. 23 MR. RAGSDALE: I'm going to object, please. 24 Mr. Stead already established that this witness is 25 not an attorney, and he's not qualified to offer PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 710 1 legal opinions. 2 MR. STEAD: I'll withdraw the question. 3 CHAIRPERSON NORRIS: Thank you, Mr. Stead. 4 MR. STEAD: That's all I have, Your Honor. 5 CHAIRPERSON NORRIS: Anybody, anything 6 further? 7 (No response.) 8 CHAIRPERSON NORRIS: Thank you, Mr. Drunsic. 9 (Witness excused.) 10 MR. STEAD: The Office of Consumer Advocate 11 would call Dr. Larry Shi. 12 CHAIRPERSON NORRIS: Hello, Mr. Shi. 13 THE WITNESS: Hi. 14 CHAIRPERSON NORRIS: Raise your right hand, 15 please. 16 LARRY SHI, 17 called as a witness by the Office of Consumer 18 Advocate, being first duly sworn by Chairperson Norris, 19 was examined and testified as follows: 20 CHAIRPERSON NORRIS: Thank you. You may be 21 seated. 22 DIRECT EXAMINATION 23 BY MR. STEAD: 24 Q. Please state your name for the record. 25 A. Larry Shi. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 711 1 Q. On or about October 22nd, 2007, did you 2 prefile testimony with the Iowa Utilities Board that 3 has now been spread upon the record? 4 A. Yes, I did. 5 (The prepared testimony follows.) 6 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 716 1 MR. STEAD: We tender the witness for 2 cross-examination. 3 MR. RAGSDALE: Did I miss the go-ahead? 4 CHAIRPERSON NORRIS: Yeah. Well, no, you 5 didn't, but I just assumed you knew when it was, so 6 you may proceed, Mr. Ragsdale. 7 MR. RAGSDALE: Thank you. 8 CROSS-EXAMINATION 9 BY MR. RAGSDALE: 10 Q. Good morning, Dr. Shi. 11 A. Good morning. 12 Q. You're on the staff of the Iowa Consumer 13 Advocate, aren't you? 14 A. That's right. 15 Q. And isn't it correct that you're the only 16 OCA staff member that's presenting testimony in this 17 proceeding? 18 A. That's right. 19 Q. And all the other witnesses the OCA 20 presented are professional witnesses in this matter? 21 A. That's right. 22 Q. And it's my understanding that your role in 23 this proceeding was to provide EGEAS runs at the 24 request of the other OCA professional witnesses; is 25 that correct? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 717 1 A. That's correct. 2 Q. Okay. And, now, how many runs did you 3 perform for these other witnesses? 4 A. I don't remember exactly how many, but we 5 ran a lot, numerous runs. 6 Q. Now, in any of these runs did you adjust the 7 load forecast used in IPL's resource planning model? 8 A. No. 9 Q. In how many of those runs did you change the 10 number of superfluous units from two to 10 in IPL's 11 resource planning model? 12 A. I think in our final presentation, all the 13 runs use 10. 14 Q. All of them are run at 10? 15 A. Right. 16 Q. Now, did you conduct any EGEAS runs for the 17 OCA's professional witnesses that did not change the 18 number of superfluous unit assumptions? 19 A. Yes. In an earlier run, we did. We used 20 two, and then we found out it's not right, so we 21 changed to 10. 22 Q. Not right from a philosophical standpoint? 23 A. No, from a simulation point of view because 24 the program has a lot of primers you need to adjust 25 to make it appear in the right combination. If you PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 718 1 select the primers that are too low, you block a lot 2 of the variable solutions. 3 MR. RAGSDALE: I have no other questions. 4 Thank you. 5 MR. PUCKETT: No questions. 6 CHAIRPERSON NORRIS: Ms. La Seur? 7 MS. LA SEUR: No questions. 8 BOARD MEMBER HANSON: This is actually a 9 follow-up to the question that I asked the previous 10 witness, and unfortunately I wasn't able to find what 11 I needed to find in time to ask him, so I'll ask you, 12 but it relates to the superfluous unit issue. 13 The question was if there was any comment to 14 the rebuttal testimony from Mr. Kitchen that when the 15 IPL base case was rerun with only one variable 16 change, and that was to change two superfluous units 17 to 10 superfluous units, that the result was the 18 same, and I have a copy of the exhibit that shows 19 the--this is, I believe, Mr. Kitchen's exhibit, which 20 shows the IPL base-case output and the IPL base case 21 with the only change being the number of superfluous 22 units, and it looks like the output is that the 23 results were the same. 24 THE WITNESS: They are the same. 25 BOARD MEMBER HANSON: Okay. Do you have any PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 719 1 comment about the significance of the number of 2 superfluous units if the results turn out to be the 3 same if that's the only variable that you change? 4 THE WITNESS: They affect some of the 5 solutions, but not all the solutions. 6 BOARD MEMBER HANSON: Okay. 7 THE WITNESS: That's why we have to be 8 careful and evaluate all the solutions. 9 BOARD MEMBER HANSON: Okay. So you're 10 saying that in conjunction with changing other 11 variables, other inputs, that that could have an 12 impact? 13 THE WITNESS: Could be. 14 BOARD MEMBER HANSON: Okay. Okay. Thank 15 you. 16 CHAIRPERSON NORRIS: Mr. Stead? 17 MR. STEAD: Thank you, Your Honor. 18 MR. RAGSDALE: If I could, I do have a 19 follow-up question to the Board, if that might 20 shorten up our point-counterpoint. 21 CHAIRPERSON NORRIS: Sounds good. Go ahead, 22 Mr. Ragsdale. 23 FURTHER CROSS-EXAMINATION 24 BY MR. RAGSDALE: 25 Q. Mr. Shi--excuse me--Dr. Shi, do you know PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 720 1 what the default number of superfluous units is in 2 the EGEAS model? 3 A. Can you say that again? 4 Q. Do you know the default number of 5 superfluous units in the EGEAS model? 6 A. The default number? 7 Q. Yes, for superfluous units. 8 A. I believe it's two. 9 MR. RAGSDALE: All right. That's all. 10 Thank you. 11 MR. STEAD: Thank you, Your Honor. Just a 12 couple of questions. 13 REDIRECT EXAMINATION 14 BY MR. STEAD: 15 Q. Mr. Shi, you are a professional witness, are 16 you not? 17 A. Yes, I am. 18 Q. You testify in numerous Iowa Utilities Board 19 proceedings as a professional witness, is that 20 correct? 21 A. That's right. 22 Q. Were you here Monday and Tuesday? 23 A. Yes, I was. 24 Q. Did you hear numerous IPL professional 25 witnesses testify as well? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 721 1 A. Yes. 2 Q. The question from the Board I would like to 3 refer you to and your answer: Is it true that other 4 variables and/or other inputs into EGEAS could change 5 substantially either of IPL's base cases? 6 A. Yes, I believe so. 7 MR. STEAD: That's all I have, Your Honor. 8 Thank you. 9 CHAIRPERSON NORRIS: Go ahead. 10 MR. RAGSDALE: Just one follow-up. 11 RECROSS-EXAMINATION 12 BY MR. RAGSDALE: 13 Q. Mr. Shi, have you read the credentials and 14 experience of all the IPL witnesses who have so far 15 appeared in this proceeding? 16 A. Not all of them. 17 Q. Okay. Do you know how many times 18 Mr. Bennington has appeared in front of the Iowa 19 Utilities Board to testify? 20 A. I have no idea. 21 Q. Do you know how many times Mr. Beer has 22 testified in front of the Iowa Utilities Board? 23 A. I don't know. 24 Q. Do you know whether they are professional 25 witnesses? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 722 1 A. I believe so. 2 Q. How many times have they testified? 3 A. I don't know. 4 Q. Then how do you know they're professional 5 witnesses? 6 A. They represent a company. 7 MR. RAGSDALE: Okay. Thank you. 8 FURTHER REDIRECT EXAMINATION 9 BY MR. STEAD: 10 Q. One last question, Mr. Shi. 11 Mr. Bennington and Mr. Beer were allowed in 12 front of this Utilities Board to testify earlier this 13 week as professional witnesses, is that correct? 14 MR. RAGSDALE: I think at this point in time 15 I'll object to defining. I think the record is clear 16 that this is the first time they've ever testified, 17 so they clearly have not made their living as 18 providing testimony in matters before the Iowa 19 Utilities Board. 20 CHAIRPERSON NORRIS: Maybe I can clear this 21 up and you all could brief this, but I consider 22 people coming before us that are professionals who 23 are here as witnesses. I'm not sure of the 24 distinction between--there seems to be a distinction 25 between the way you're phrasing it between a PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 723 1 professional witness and a professional who is here 2 as a witness. I think most of the people here before 3 us are professionals and they're here as witnesses. 4 If you want to brief on the distinction, you can go 5 ahead, but I would just as soon not have this debate. 6 MR. STEAD: That's fine with us, Your Honor. 7 CHAIRPERSON NORRIS: Anything further? 8 MS. LA SEUR: One more from me. 9 CHAIRPERSON NORRIS: I'm sorry. 10 Ms. La Seur. 11 RECROSS-EXAMINATION 12 BY MS. LA SEUR: 13 Q. Mr. Shi, to follow up on Board Member 14 Hanson's question, I think this is in reference to 15 Mr. Kitchen's rebuttal testimony. He, let's see, I 16 believe at page 14 of his rebuttal testimony 17 testifies that you and Mr. Drunsic did not use IPL's 18 exact same input variables in producing an expansion 19 plan that was lower cost than IPL's 2007 base case, 20 and my question is, what changes did you make in 21 IPL's input variables? 22 A. I got confused. Can I see what part of his 23 testimony he is referring to? 24 CHAIRPERSON NORRIS: Dr. Shi, you need to 25 use your microphone. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 724 1 I'm sorry. 2 BY MS. LA SEUR: 3 Q. This is the rebuttal. 4 A. Okay. I believe for that one we used the 5 same input as IPL used. 6 Q. So is it your testimony that Mr. Kitchen 7 is wrong, that you did use the same input variables? 8 A. Yes, same input, same cost information and 9 all the basic information, except the superfluous 10 units. 11 Q. And with that information you were able to 12 produce a lower cost expansion plan? 13 A. That's right. 14 MS. LA SEUR: Thank you. Nothing further. 15 CHAIRPERSON NORRIS: Mr. Ragsdale? 16 MR. RAGSDALE: No. 17 CHAIRPERSON NORRIS: Was that a no? 18 MR. RAGSDALE: No. 19 CHAIRPERSON NORRIS: Anybody else? 20 (No response.) 21 CHAIRPERSON NORRIS: Thank you, Dr. Shi. 22 (Witness excused.) 23 MS. EASLER: The OCA calls Robert Fagan. 24 25 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 725 1 CHAIRPERSON NORRIS: Hello, Mr. Fagan. 2 Raise your right hand, please. 3 ROBERT M. FAGAN, 4 called as a witness by the Office of Consumer 5 Advocate, being first duly sworn by Chairperson Norris, 6 was examined and testified as follows: 7 CHAIRPERSON NORRIS: Thank you. You may be 8 seated. 9 DIRECT EXAMINATION 10 BY MS. EASLER: 11 Q. Mr. Fagan, would you please state your name 12 for the record? 13 A. Robert M. Fagan. 14 Q. On or about October 22nd, 2007, did you 15 cause to be filed direct testimony, public and 16 confidential, as well as an Exhibit RMF-1? 17 A. Yes. 18 MS. EASLER: Mr. Drunsic's exhibit should be 19 designated 100, and we will designate RMF-1 as 101. 20 (OCA Exhibit 101 was 21 received in evidence.) 22 BY MS. EASLER: 23 Q. Do you have any corrections or updates to 24 make to your testimony? 25 A. I have one update. In my testimony I PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 726 1 recommend that the company consider installing wind 2 power at a level to meet 25 percent of their retail 3 energy needs by 2022 as opposed to the company's base 4 plan which would install wind to meet 9 percent of 5 their retail energy needs by 2022, and just yesterday 6 I understand Governor Culver announced an initiative 7 in this state for electric utilities to procure 8 25 percent of their energy from renewable sources by 9 2025. 10 MS. EASLER: Okay. I'm marking as 11 Exhibit 125 a press release from the Governor's 12 Office. 13 (OCA Exhibit 125 was 14 marked for identification.) 15 MR. RAGSDALE: What's the number, Jennifer? 16 MS. EASLER: This should be Exhibit 125, and 17 to clarify, this came from the Governor's web site. 18 BY MS. EASLER: 19 Q. Mr. Fagan, looking at this, does this 20 confirm the additional information you just 21 mentioned? 22 A. Yes, it does. 23 MS. EASLER: I would move the admission of 24 Exhibit 125. 25 CHAIRPERSON NORRIS: Without objection, 125 PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 727 1 is admitted. 2 (OCA Exhibit 125 was 3 received in evidence.) 4 (The prepared testimony follows.) 5 6 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 772 1 MS. EASLER: Mr. Fagan is available for 2 cross-examination. 3 CHAIRPERSON NORRIS: Mr. Ragsdale? 4 MR. RAGSDALE: Thank you. 5 CROSS-EXAMINATION 6 BY MR. RAGSDALE: 7 Q. Isn't it correct, Mr. Fagan, that you're-- 8 Excuse me. Good morning, Mr. Fagan. I'm Kent 9 Ragsdale here on behalf of Interstate Power and 10 Light. 11 A. Good morning. 12 Q. I apologize for my clumsy greeting this 13 morning. 14 Isn't it correct that your testimony does 15 not contain any references to the Iowa Code? 16 A. That's correct. 17 Q. And your testimony also does not contain 18 references to the Iowa Utilities Board's rules, is 19 that correct? 20 A. I believe that's correct. I believe there's 21 a reference to an IUB ruling, but I don't think I 22 have any references to the rules, per se. 23 Q. And just to save Mr. Stead a question on 24 redirect, you're not an attorney either, are you? 25 A. No, I'm not. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 773 1 Q. I'll let somebody else ask you whether 2 you're proud of that or not. 3 We now have somebody on the Board who is not 4 one of us, so it's... 5 BOARD MEMBER HANSON: Is it that obvious? 6 BOARD MEMBER TANNER: I think he's the only 7 one laughing. 8 BY MR. STEAD: 9 Q. On a more serious note, you agree, Mr. Fagan, 10 that IPL has an obligation to serve its electric 11 retail customers in its service territory? 12 A. Yes, I do. 13 Q. And isn't it correct that your testimony 14 reaches certain conclusions regarding IPL's 15 application in this case? 16 A. Yes. 17 Q. And I believe it's correct that your 18 testimony concludes that the Board should not grant 19 IPL's application for a certificate for the 20 Sutherland Unit No. 4? 21 A. Yes, that's correct. 22 Q. And you would agree with me, wouldn't you, 23 that if the Board rejects IPL's application for a 24 certificate for the Sutherland Unit 4, IPL will not 25 be excused from fulfilling its obligation to serve PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 774 1 its electric retail customers in its service 2 territory? 3 A. That's correct, I agree. 4 Q. In regards to the testimony presented in 5 this docket, would it be fair to say that your 6 testimony relates to two basic topics: Wind power 7 and the appropriate planning reserve margin that IPL 8 should use? 9 A. Yes. 10 Q. And isn't it correct that since you joined 11 Synapse Energy, you have testified in a number of 12 dockets? 13 A. Yes, I have, in numerous states and one 14 province. 15 Q. And speaking of a province, isn't it correct 16 that on April 5, 2005, you filed testimony before the 17 Nova Scotia Utilities and Review Board? 18 A. That's correct. 19 Q. And isn't it correct that that testimony 20 concerned an application by Nova Scotia Power for 21 approval of an open access transmission tariff? 22 A. That's correct. 23 Q. And isn't it correct that your Nova Scotia 24 testimony of April 2005 did not discuss either wind 25 power or the appropriate planning reserve margin that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 775 1 an electric utility should use? 2 A. It did not discuss the appropriate planning 3 reserve margin, but aspects of the open access 4 transmission tariff application absolutely touched 5 upon balancing provisions of the open access tariff 6 as they may pertain to wind power developers in 7 Nova Scotia. 8 Q. But you would agree with me that balancing 9 is not the same thing as planning reserve margin? 10 A. I would agree, those are two separate 11 concepts; somewhat related, but separate. 12 Q. And isn't it correct that on April 21st, 13 2005, you filed testimony before the Indiana 14 Utilities and Regulatory Commission involving an 15 investigation into the proposed termination of the 16 operating agreement between PSI Energy and Cincinnati 17 Gas and Electric Company? 18 A. Yes. I don't recall the exact date, but 19 that sounds about the right time, yes. 20 Q. And would you agree with me that that 21 testimony did not discuss either wind power or the 22 appropriate planning reserve margin that electric 23 utilities should use? 24 A. That's correct, that Indiana testimony did 25 not address either of those issues. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 776 1 Q. And isn't it correct that on June 8th, 2005, 2 you filed testimony before the Illinois Commerce 3 Commission involving Commonwealth Edison's proposal 4 to implement a competitive procurement process by 5 establishing certain riders? 6 A. That's correct, I did testify in Illinois on 7 those matters. 8 Q. And you also testified on some similar 9 dockets regarding--involving the Ameren companies in 10 Illinois, is that correct? 11 A. That's correct. 12 Q. And that was on the same general topic as 13 the Commonwealth Edison case? 14 A. Yes, generally. 15 Q. And you filed direct and rebuttal 16 testimonies in those cases? 17 A. Yes. 18 Q. And would you agree with me that those 19 Illinois testimonies did not discuss either wind 20 power or the appropriate planning reserve margins 21 that an electric utility should use? 22 A. Yes, that's correct. 23 Q. Now, isn't it correct that on November 8th, 24 2005, you filed testimony again before the Indiana 25 Utilities and Regulatory Commission involving the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 777 1 merger of Synergy and Duke? 2 A. Yes. 3 Q. And isn't it correct that your November 8th, 4 2005, Indiana testimony did not discuss either wind 5 power or the appropriate planning reserve margin that 6 an electric utility should use? 7 A. Yes, that Indiana testimony also did not 8 address those issues. 9 Q. And isn't it correct that on November 14th, 10 2005, you filed testimony before the New Jersey Board 11 of Public Utilities involving the merger of PSE and 12 Exelon? I think that's Public--is that Public 13 Service Enterprises and Exelon? 14 A. PSE&G. Public Service Electric & Gas, yes, 15 I did file testimony. 16 Q. Isn't it correct that that testimony also 17 did not discuss either wind power or the appropriate 18 planning reserve margin that an electric utility 19 should use? 20 A. Yes. 21 Q. And I believe you also in January of 2006 22 filed testimony again before the Nova Scotia 23 Utilities and Review Board, and that matter involved 24 an application by Nova Scotia Power for approval of 25 air emissions strategy capital projects? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 778 1 A. Yes. 2 Q. Now, I'm correct that that testimony also 3 did not discuss the appropriate planning reserve 4 margin an electric utility should use? 5 A. That's correct. That was about scrubbers 6 for a coal facility. 7 Q. And to be fair, that testimony did talk a 8 little bit, in some limited fashion, about wind 9 power, though, didn't it? 10 A. I believe so. I would have to look at the 11 testimony and refresh my memory, but that sounds 12 correct. 13 Q. Now, isn't it correct that you also in 14 October of 2006 filed testimony before the 15 British Columbia Utilities Commission? 16 A. Yes. 17 Q. So you actually appeared before two 18 provinces? 19 A. Yes. Actually four. I filed testimony in 20 Alberta and Ontario in previous cases. 21 Q. Now, that docket in October 2006 involved 22 BC Hydro's 2006 integrated electric plan and 23 long-term acquisition plan? 24 A. That's correct. They refer to that as their 25 call for power. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 779 1 Q. And isn't it correct that in that case, you 2 also did not discuss the appropriate planning reserve 3 margin that an electric utility should use? 4 A. That's correct. That testimony addressed 5 wind power, but it didn't address planning reserve. 6 Q. And your wind power discussion related to 7 the operational cost of wind integration as examined 8 on other systems in consideration in British Columbia? 9 A. Yes. The essence of the testimony was to 10 look at the integration cost for wind and the role of 11 wind in BC, yes. 12 Q. Isn't it correct that in that testimony in 13 that docket you did not offer any testimony regarding 14 the appropriate capacity credits for wind? 15 A. I don't recall specifically. I would have 16 to look at my testimony on that one. 17 Q. Would you like me to provide you a copy of 18 that? 19 A. Sure. 20 THE WITNESS: If I could just have a moment. 21 CHAIRPERSON NORRIS: Yes. 22 (Pause.) 23 A. That testimony did not directly address 24 planning reserves, but my recommendations in that 25 testimony included British--BC Hydro assessing the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 780 1 way in which wind would be integrated into those 2 systems and, in particular, how wind power would 3 complement the hydro resources that they have out 4 there. 5 They have an extensive hydro system, so 6 there's some interesting overlap between the fact 7 that wind in general has a relatively low capacity 8 value, but when you operate wind on a system with 9 large amounts of hydro storage, it's sort of a 10 different analysis because wind gives you the ability 11 to effectively store energy or even you could think 12 about it as storing capacity. 13 So there's an important area of overlap as 14 it pertains to the amount of capacity that you may 15 get from wind, which is not directly a planning 16 reserve issue, but it absolutely is related if you 17 think about what resources you may need to meet 18 planning reserve needs. 19 Q. Thank you for that, but that wasn't my 20 question. 21 My question was, isn't it correct that that 22 testimony in British Columbia did not discuss or make 23 any recommendations regarding the appropriate 24 capacity credits for wind? 25 A. Yes, that's correct, but as I just PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 781 1 explained, you can't separate the issue of capacity 2 credits from thinking about the way wind can 3 contribute to capacity needs on a system, in 4 particular on systems with extensive amounts of hydro 5 storage. 6 Q. Now, I believe you were present earlier this 7 morning when I visited with Mr. Drunsic. 8 A. Yes. 9 Q. And you recall I asked him some questions 10 about a docket in front of the Minnesota Public 11 Utilities Commission involving transmission related 12 to the Big Stone 2 project? Do you recall that 13 questioning? 14 A. Yes, I do. 15 Q. And I believe it's correct that you also 16 filed testimony in December of 2006 in that same 17 docket, is that correct? 18 A. Yes, that's true. 19 Q. And isn't it correct that that testimony 20 that you filed in Minnesota did not discuss the 21 appropriate planning reserve margin that an electric 22 utility should use? 23 A. That's correct. 24 Q. And isn't it correct that that testimony 25 also did not discuss the appropriate capacity credits PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 782 1 to be used for wind generation? 2 A. The capacity credit that was used in the 3 joint applicants' filing in that state I believe 4 did--was addressed in their modeling exercises. 5 My testimony focused on transmission and the 6 ability for wind to provide for a significant amount 7 of their needs in Minnesota. I don't recall 8 specifically if I touched on the capacity credit 9 issue for wind in Minnesota. 10 Q. Would you like me to provide you a copy of 11 that testimony? 12 A. Sure, if that's important, I can do that. 13 THE WITNESS: If I may have a moment. 14 CHAIRPERSON NORRIS: Sure. 15 THE WITNESS: Thank you. 16 (Pause.) 17 CHAIRPERSON NORRIS: Before we start, 18 Mr. Fagan, could you refresh my memory, what was your 19 question again, Mr. Ragsdale? 20 MR. RAGSDALE: Okay. 21 BY MR. RAGSDALE: 22 Q. Isn't it correct that your December 2006 23 testimony filed in front of the Minnesota commission 24 did not discuss the appropriate capacity credits to 25 be used for wind generation? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 783 1 A. Yes, that's correct. The specific capacity 2 credit issue was not addressed directly in my 3 testimony. Again, the testimony did address the 4 relationship to an energy and capacity for wind, so 5 there is some overlap, even though there wasn't a 6 specific recommendation concerning Minnesota capacity 7 credits, to the extent such a thing exists. 8 Q. Now, isn't it also correct that in that 9 testimony you did not recommend that-- Well, let me 10 lay a little bit better foundation. 11 That case involved an application by 12 Ottertail Power Company, is that correct? 13 A. It was Ottertail Power and six other 14 applicants as joint applicants, since reduced to 15 Ottertail Power and four other applicants. 16 Q. Now, you didn't make any recommendation in 17 that testimony about whether any of those applicants 18 should increase the amount of wind power in their 19 portfolios, did you? 20 A. Oh, I think I did, certainly in general. 21 Part of my testimony was addressing the fact that the 22 Upper Midwest and Midwest in general has a capability 23 to absorb a considerable amount of wind and that wind 24 energy is an important alternative, economic 25 alternative, that should be considered. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 784 1 Q. Did you make a recommendation as to how much 2 more wind Ottertail Power should add to its 3 portfolio? 4 A. My colleagues testified on the detailed 5 modeling results that were done in Minnesota, and 6 they're probably better prepared to address the 7 outputs from the modeling exercises that Synapse 8 performed. 9 Q. And which particular witness? 10 A. David Schlissel and Anna Summer prepared the 11 bulk of that testimony. 12 Q. Okay. Now, isn't it correct that in May 2007, 13 you filed testimony before the Indiana Utility 14 Regulatory Commission? And I believe that docket 15 concerned a request by a unit of Duke Energy to build 16 an IGCC unit in Indiana. 17 A. That's correct. It was Duke and Vectren 18 combined as joint applicants. 19 Q. And are those companies unaffiliated? I'm 20 not all-- 21 A. Yes, those are unaffiliated companies. 22 Vectren is the parent of Northern Indiana Public 23 Service and, I believe, Southern Indiana Gas and 24 Electric. Those would be the major Indiana electric 25 utilities besides Duke's Synergy subsidiary. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 785 1 Q. And I use the term "IGCC," and perhaps you 2 could help define for the record what that stands 3 for. 4 A. IGCC stands for integrated gas combined 5 cycle. 6 Q. And was that project proposed to be fueled 7 by coal, the Indiana Duke project? 8 A. Yes, it was. 9 Q. And isn't it correct that your testimony in 10 that case did not discuss the appropriate planning 11 reserve margin that electric utilities should use? 12 A. That's correct. 13 Q. And isn't it also correct that that 14 testimony did not discuss the appropriate capacity 15 credits to be used for wind generation? 16 A. That's correct, it didn't specifically 17 address capacity credits, but as with the testimony 18 in Minnesota, it did address the energy and capacity 19 value of wind as a contributor to the State of 20 Indiana's resource needs. 21 Q. And isn't it correct that your May 2007 22 testimony in front of the Indiana commission 23 regarding this IGCC project recommended that the 24 companies should increase the amount of wind in their 25 portfolios by 1300 megawatts? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 786 1 A. I would have to look at my testimony to 2 recall the specific number. 3 THE WITNESS: One moment. 4 (Pause.) 5 A. The testimony that you handed me was 6 redacted, so of course the quantity number was 7 redacted, but 1300 sounds about right. 8 Q. Thank you. I thought I got that number 9 somewhere. 10 Now, isn't it correct that in June of 2007, 11 you filed testimony before the Arkansas Public 12 Service Commission? And this matter involved a 13 petition of Entergy Arkansas for a declaratory order 14 approving the determination of avoided cost for 15 qualified co-generation facilities pursuant to co- 16 generation rules? 17 A. That's correct. 18 Q. And isn't it correct that this testimony did 19 not discuss either wind power or the appropriate 20 planning reserve margin that an electric utility 21 should use? 22 A. Yes. 23 Q. And I believe in July of 2007, you also 24 filed surrebuttal testimony in that docket. 25 A. That sounds appropriate. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 787 1 Q. Okay. And, again, isn't it correct that you 2 didn't discuss either wind power or the appropriate 3 planning reserve margin? 4 A. That's correct. Those were not the issues 5 in that case. 6 Q. The last case I want to discuss with you is 7 testimony you filed on October 31st, 2007, before the 8 Pennsylvania Public Utility Commission, and I believe 9 that involved the request to build some transmission 10 facilities in the Pennsylvania, West Virginia, and 11 Virginia area. Do you recall that testimony? 12 A. Yes. 13 Q. And isn't it correct that that testimony did 14 not discuss either wind power or the appropriate 15 planning reserve margin an electric utility should 16 use? 17 A. That's correct. 18 Q. Now, Mr. Fagan, I would ask you if there are 19 other proceedings that I'm not aware of in which you 20 did testify about wind power. 21 A. There are not other proceedings that I've 22 testified in. There is other work that I've done, 23 specifically two instances: 24 This past year Synapse did some work for the 25 Delaware Public Service Commission looking at the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 788 1 amount of existing and projected wind available 2 within the PJM region; and we're currently working on 3 a case for the Ontario Clean Air Energy Alliance 4 examining Ontario Power Authority's integrated power 5 system plan, and that work involves analyzing-- 6 includes analyzing the wind power potential in 7 Ontario and the way that it's represented and 8 analyzed in the OPA's integrated power system 9 planning. 10 Q. And have there been any other proceedings 11 where you've--other than the ones we've talked about, 12 where you talk about or provided testimony on the 13 appropriate planning reserve margin that an electric 14 utility should use? 15 A. I don't believe so, no. 16 Q. Turning your attention briefly to OCA 17 Exhibit 125 which Ms. Easler introduced earlier this 18 morning, do you have that in front of you? 19 A. I do. 20 Q. Would you agree--and it talks--I believe 21 under the heading halfway down, "Environment," is the 22 particular area that makes this document relevant, 23 potentially, to this proceeding about renewable 24 energy? Is that the portion I should focus on? 25 A. That's correct. It's one phrase in there. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 789 1 Q. Okay. It talks about renewable energy 2 produced in Iowa, is that correct? 3 A. That's correct. 4 Q. And would you agree that biomass is a 5 renewable resource? 6 A. Yes. 7 Q. Do you know whether a generator that's 8 fueled by biomass is typically allowed to be counted 9 in a renewable portfolio standard? 10 A. It should be, generally. 11 Q. Do you know whether the General Assembly 12 will adopt this RPS standard that's laid out in OCA 13 Exhibit 125? 14 A. I do not know that. 15 Q. And I want to go back just for a moment. 16 You've talked about the relationship of hydro and 17 wind in your British Columbia testimony. From a 18 British Columbia system, is hydro a baseload resource 19 for that system? 20 A. Hydro is the whole ball of wax up there. 21 Excuse me. Probably 90 to 95 percent of their energy 22 needs are served by hydro. 23 Q. Is there a lot of hydro-related generation 24 in Iowa? 25 A. Not to my knowledge, no. There's PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 790 1 probably--some of the energy produced by hydro 2 systems in the Upper Midwest, electricity certainly, 3 finds its way into Iowa, but other than that, no, I 4 don't think Iowa has much hydro resource. 5 MR. RAGSDALE: That's all of my 6 cross-examination at this time. 7 CHAIRPERSON NORRIS: Mr. Puckett? 8 MR. PUCKETT: Nothing. 9 CHAIRPERSON NORRIS: Ms. La Seur. 10 CROSS-EXAMINATION 11 BY MS. LA SEUR: 12 Q. Good morning, Mr. Fagan. 13 A. Good morning. 14 Q. I would like to direct you first to 15 Mr. Friedman's rebuttal testimony at page 6. 16 MR. RAGSDALE: If I could have a moment so I 17 could find that and be on the same page. 18 CHAIRPERSON NORRIS: Okay. 19 MR. RAGSDALE: You said page 6 of the 20 rebuttal? 21 MS. LA SEUR: Page 6 of Friedman, yes. 22 MR. RAGSDALE: I'm ready. Thank you. 23 BY MS. LA SEUR: 24 Q. Okay. Mr. Friedman's rebuttal testimony at 25 page 6--and I'm referring to the bottom of the page-- PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 791 1 lines 20 through 23, and Mr. Friedman's testimony 2 that without additional investment in manufacturing 3 facilities for wind equipment, he expects the lead 4 time to expand, and my question to you is, is such 5 additional investment likely, in your analysis? 6 A. Not only is it likely, it's my understanding 7 that it's already occurred in Iowa and in other 8 places throughout the Midwest. 9 Q. And in the context of that additional 10 investment that is currently taking place, what is 11 the trend in availability and price of wind 12 infrastructure? 13 A. It's my understanding that the trend is that 14 manufacturing capabilities are being invested in 15 throughout the Midwest to support wind industry 16 material needs. 17 There is less information available on 18 price, although in a very recent edition of the IEEE 19 Power Engineering Society magazine devoted to wind-- 20 and that was the November/December 2007 issue-- 21 there's a series of articles, at least one of which 22 contains some information on there that indicates 23 that sort of a combination of this increased 24 investment in the manufacturing capability, along 25 with the continuing improvements in the technological PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 792 1 advancements of wind machines, could help to put a 2 downward pressure on the costs of wind energy. 3 Q. And I direct you to page 9 in the same set 4 of Mr. Friedman's rebuttal testimony. 5 At lines 13 to 15, Mr. Friedman expresses 6 serious doubts that it could be technically possible 7 to install over 1,000 megawatts of new wind resources 8 beyond IPL's base plan by 2022, as you have 9 recommended in your testimony. 10 My question is, what factors lead you to 11 conclude that installing over 1,000 megawatts of wind 12 beyond IPL's base plan by 2022 is technically 13 possible? 14 A. Well, I think it's technically possible. 15 The constraints on getting a lot of wind in place by 16 2022 are not technical. They have to do with how the 17 Midwest ISOs and the transmission owners deal with 18 the very high volume of requests to interconnect 19 wind. It has to do with how the wind industry 20 handles the ongoing ramping up of its capability to 21 provide a lot more equipment. Those are the 22 challenges that are faced, but they are not technical 23 limitations in the sense of the word. 24 As IPL has indicated, there isn't a 25 technical limitation to getting, for example, 20 to PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 793 1 25 percent of retail MWGs met by wind by 2022. The 2 system can handle it. The machines are--you can put 3 them in. This is not rocket science, but there are a 4 lot of--call them institutional difficulties that do 5 have to be overcome. 6 But 2022 is a long ways off, and my 7 understanding is there's a lot of people working on 8 these things, and the investment by the manufacturing 9 industries is evidence of a trend helping to relieve 10 the supply-chain constraints, and I think the 11 evidence that the transmission interconnection 12 problems are being addressed is sort of all around 13 us. There's a lot of activity at MISO. FERC, 14 towards the end of last year, held a technical 15 conference on this to try to unclog the bottleneck 16 associated with the wind interconnection. 17 It's not an easy problem, but it's not a 18 technical problem. It's an institutional problem. 19 Q. So when Mr. Friedman says he has serious 20 doubts that this is technically possible, in the 21 context of these other obstacles that you have 22 identified, is it practically possible that these 23 thousand megawatts should be in place by 2022? 24 A. I think so, yes. My basis for that is a 25 14-year period is a long time. A lot of things have PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 794 1 happened over 14-year periods in the electric 2 industry. It's difficult to predict what this 3 industry will even look like 14 years out. 4 Anybody who says that it cannot be done 5 underestimates the ability of utility system 6 professionals to handle these types of problems. 7 They're not. 8 They're challenging, but they basically have 9 to figure out, you know, how to put the transmission 10 system infrastructure in place and how to deal with 11 what is a very high backlog of requests, but it 12 certainly can be done. 13 Q. And now I would direct you to Mr.-- 14 A. I'm sorry. One more thing in that regard. 15 Q. Yes. 16 A. There's a lot of evidence from Europe in 17 terms of being able to do this. I mean Europe has-- 18 a few specific countries in Europe, Germany, Spain, 19 and Denmark, have a very significant penetration of 20 wind systems connected to their systems. It has been 21 done. 22 Q. Mr. Vosberg's rebuttal testimony at page 7. 23 A. I don't have that in front of me. I'll need 24 to look at that. 25 Q. Are you ready? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 795 1 A. Yes. 2 Q. In reference to the testimony Mr. Vosberg 3 makes about the increase in the potential price and 4 concerns about the supply chain for the wind industry 5 for the term in which we are discussing potential new 6 installation in Iowa, first my question is, are you 7 able to speak to the general trend expected over the 8 next decade in the cost of wind installations? 9 A. I have two specific sources of information 10 on that. It's difficult to put numbers on that. 11 It's my understanding that the trend is that 12 the run-up in prices that has been seen is not likely 13 to continue, at least certainly not continue at the 14 rate that has been seen, and my two sources of 15 information are a report from the Lawrence Berkeley 16 Laboratories looked at the installation cost and 17 performance trends in the wind industry, and one of 18 the conclusions made was that they anticipated that-- 19 I'm going to step back. 20 The specific piece of information that I 21 have is from the IEEE article that I referenced 22 earlier. 23 This report, this LBL report, doesn't try to 24 make a prediction as to what the prices are going to 25 look like. It indicates that prices historically PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 796 1 have been relatively low, in the two- to six-cent 2 range for wind, but the pattern has been increasing 3 around 2005-2006. 4 The forward-looking IEEE article that I 5 referenced states the following: 6 I apologize. I'm not able to find it on the 7 spot. 8 CHAIRPERSON NORRIS: We'll probably take a 9 break here, and you'll have a chance to look that up. 10 THE WITNESS: Okay. Thank you. 11 BY MS. LA SEUR: 12 Q. So having given us a general characterization 13 of your sense of the wind energy's installation 14 costs, are you able to compare that general trend-- 15 without giving specific numbers, the general trend in 16 the cost of installation of coal-fired generation? 17 A. Mr. Schlissel is better prepared to answer 18 that question. 19 Q. Please turn to the Bauer rebuttal at page 3. 20 A. (Witness complies.) 21 MR. RAGSDALE: If I could perhaps have a 22 moment to secure my copy of that. 23 CHAIRPERSON NORRIS: Certainly. 24 MR. RAGSDALE: I was requested to do that to 25 make sure everybody stays awake. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 797 1 CHAIRPERSON NORRIS: There you go. 2 MR. RAGSDALE: Is it the rebuttal testimony? 3 MS. LA SEUR: Yes, it's the rebuttal, Bauer 4 rebuttal, at page 3. 5 BY MS. LA SEUR: 6 Q. I'm referring to Mr. Bauer's testimony that 7 baseload generation, in specific Sutherland 4, is the 8 most cost-effective way to satisfy IPL's needs for 9 capacity, energy, and this is also a question in the 10 context of these price trends that we're seeing as 11 between coal-fired generation and the alternative 12 wind generation that you're proposing. 13 Do you conclude that Sutherland 4 is not the 14 most cost-effective way to meet future demand within 15 the period after 2022 that you have analyzed? 16 A. Yes. 17 Q. And is it your conclusion, then, that wind 18 is the most cost effective? 19 A. Generally, energy efficiency and demand-side 20 management measures seem to be the most cost 21 effective. That's the stuff you should do first. 22 Beyond that, what we found--and Mr. Schlissel 23 could talk more about the details--what we found is a 24 combination of demand-side management, wind, and 25 possibly some component of gas-fired generation PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 798 1 should be the most cost-effective set of resources 2 for IPL to most cost effectively meet customers' 3 needs. 4 Q. And you conclude that this set of ultimate 5 resources will be sufficient to meet the baseload 6 generation needs referenced by Mr. Bauer? 7 A. They will be sufficient to meet the needs to 8 reliably serve IPL's load. 9 The use of baseload sort of limits the 10 conversation, so to speak. I think of wind power as 11 a baseload form of generation. It's an extremely 12 low cost, if not zero marginal cost wind. It's 13 variable output, but it's running all the time when 14 it can run, but others don't consider it to be a 15 baseload because it doesn't have the same 16 dispatchability characteristics that some fossil fuel 17 plants have. 18 Q. So are we talking about a disagreement over 19 the definition of baseload generation? 20 A. I don't think it's been brought up as an 21 issue in this case at this point. I mean I consider 22 wind to meet the needs, and it has particular output 23 characteristics that don't conform to conventional 24 notions of baseload intermediate peaking, so you 25 could have a discussion about the language that's PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 799 1 used; but, you know, at the end of the day wind is 2 able to provide a significant--cost effectively 3 provide for energy needs. 4 Q. Directing you, then, to page 11 of the Bauer 5 rebuttal, this is where you've referenced two small 6 wind farms--I think it's Beaver Creek and Adams--and 7 nameplate ratings of 3.8 megawatts and 5 megawatts, 8 respectively, and Mr. Bauer has criticized your claim 9 that these wind farms can be used to extrapolate 10 capacity reserve values for larger wind farms. 11 My question is, on what factors do you base 12 your conclusion that this extrapolation is accurate? 13 A. I did not extrapolate from Beaver Creek and 14 Adams. That's a mischaracterization of my testimony. 15 The primary information I used to make that 16 claim was the information on the site provided in a 17 confidential document by IPL. It's a different site. 18 I was just--and my testimony shows what the 19 capacity credit values were for Beaver Creek and 20 Adams, but I did not make my claim for capacity 21 credit values based on the Beaver Creek and Adams 22 facilities. 23 Q. And on what factors did you base your claim? 24 A. The factors that I based my claim on were 25 comparing the monthly trend in capacity factor values PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 800 1 for the facility at this other site--the proposed 2 facility at this other site based on a confidential 3 study done for IPL that examined the wind 4 characteristics at this site. 5 Q. Thank you. 6 And finally page 22 of the Bauer rebuttal, 7 and I refer here to Mr. Bauer's testimony that 8 additional gas-fired generating capacity may be 9 necessary to support the level of wind generation you 10 recommend? 11 My question is, in your analysis do you 12 conclude that additional natural gas-fired generation 13 will be necessary as a backup for the kind of wind-- 14 additional wind power you recommend? 15 A. No, I don't make that conclusion. Electric 16 power systems are operated as an interconnected 17 whole, and you don't need a specific natural gas 18 backup for a specific wind facility. 19 If you have wind on the system and it 20 penetrates the system to some level, 5 or 10 or 20 21 percent, you dispatch that system. In the case of 22 here, it's centrally dispatched by MISO over a 23 hundred-thousand-megawatt-plus region, and you 24 address the presence of wind power facilities on that 25 system through your standard dispatch protocols, and PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 801 1 in particular through how you have units ready to 2 move up and down to follow load. 3 So there's no need to make an artificial tie 4 between wind power generation and gas backup just 5 because of the variable output nature of wind. 6 MS. LA SEUR: Nothing further. Thank you. 7 CHAIRPERSON NORRIS: I think the Board has 8 some questions, Mr. Fagan. Why don't we take a 9 15-minute break and come back, and we'll try to go 10 until about 12:15 or 12:30 before the lunch break. 11 (Short recess.) 12 CHAIRPERSON NORRIS: We'll go on the record 13 here for a second. 14 While we're waiting for Mr. Hanson to come, 15 before Mr. Hanson come backs, I think we would like 16 to request, Mr. Ragsdale, the question I asked of 17 Mr. Vesperman yesterday, if we could get more 18 information as a late-filed exhibit. 19 The question was: If carbon capture and 20 sequestration were installed and available, and based 21 on your estimates, what is the resulting dollars per 22 kilowatt construction cost and dollars per 23 kilowatt-hour operating cost of SGS Unit 4. 24 I also stated to Mr. Vesperman, this 25 considering paresthetic loads, efficiency loss, and PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 802 1 plant dereg with both megawatt and megawatt-hour net 2 production implications. 3 MR. RAGSDALE: Mr. Vesperman acknowledges 4 that he understands your request. 5 CHAIRPERSON NORRIS: Thank you. 6 MR. RAGSDALE: I'm not capable of 7 acknowledging that I understand it, but I don't think 8 that's important. 9 CHAIRPERSON NORRIS: He did a pretty good 10 job of explaining it yesterday off the top of his 11 head, but we decided we better get the details so we 12 know what we're interpreting. 13 All right. Mr. Fagan, I think the Board has 14 a few questions for you. 15 BOARD MEMBER TANNER: Good morning, 16 Mr. Fagan. Now can you hear me? 17 THE WITNESS: Yes. 18 BOARD MEMBER TANNER: I just want to clarify 19 some remarks you made earlier. 20 To clarify, are you suggesting that IPL can 21 meet its load growth with wind and DSM, or are you 22 suggesting it can meet all of its obligations with 23 wind and demand-side management? 24 THE WITNESS: I don't necessarily separate 25 out its load growth from everything else. I think PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 803 1 of it as all in one, although you could. 2 I think you could certainly look at 3 demand-side management as helping to ramp down the 4 rate of load growth significantly, but I think to 5 meet the overall needs, which includes anticipated 6 load plus load growth, you look at the combination of 7 resources, wind and DSM, and some of our modeling 8 runs also included gas-fired capacity to help during 9 those times when wind is not as readily available, 10 although there are also market sources for that. 11 I didn't specifically do modeling that says 12 here's the solution. I know that in general it's 13 going to be more cost effective if you've got more 14 wind and more DSM and not spend such a large amount 15 of money on a less cost-effective coal plant. 16 The wind and the DSM alternatives are 17 probably the ones to choose first. 18 So perhaps the short answer to your question 19 is wind and DSM, perhaps in combination with some 20 gas-fired or market purchases, will be a more cost- 21 effective alternative to meet both existing and 22 anticipated load growth into the future. 23 BOARD MEMBER TANNER: So with that, are you 24 suggesting that existing baseload that comes from 25 coal should be replaced by wind and gas and DSM? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 804 1 THE WITNESS: No, I'm not suggesting that. 2 I think, you know, the issues in this case are very 3 specifically on the margin, where do you spend your 4 new money. 5 It's a different and a bigger question to 6 address how do we deal with older, depreciated, 7 cheap-running-cost coal plants. I haven't gotten 8 into that question. We haven't gotten into that 9 question. 10 But what's absolutely true is that looking 11 ahead, costs of a new coal-fired power plant are very 12 high. It's not like it was in the old world, and if 13 you want to look at the alternatives for marginal 14 resources, look at the cheaper ones. Think about 15 what to do with the old stuff after we get past this, 16 for example. 17 I mean we weren't charged with trying to 18 come up with a coal-plant phase-out or retirement 19 solution over the next 20 or 30 years. We're more 20 specifically looking at this particular plant, is 21 there a better way to spend, you know, well upwards 22 of a billion dollars, and the conclusion we come to 23 is yes, absolutely. 24 BOARD MEMBER TANNER: But this Board is 25 charged with looking at that big picture, is it not? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 805 1 THE WITNESS: Yes, I think you are, 2 certainly from a policy perspective. 3 One part of that picture, a very important 4 part of that picture, is making decisions for the 5 next marginal resource. I mean that's what this 6 really is. 7 I mean we're not here to talk about existing 8 coal-fired facilities and what to do with them. 9 We're saying do not incur the opportunity costs of 10 spending such a large sum of money on a resource 11 that's not cost effective and that carries a lot of 12 risk going forward. 13 BOARD MEMBER TANNER: That's all I have. 14 CHAIRPERSON NORRIS: Mr. Fagan, let me 15 start with--I believe Ms. La Seur referred you to 16 Mr. Bauer's rebuttal testimony--I'm not sure you'll 17 need to look it up for purposes of this question-- 18 where he stated that you relied upon two relatively 19 small wind farms, Beaver Creek and Adams, for your 20 conclusions. 21 Did you say you did not rely on those, but 22 relied on information from another source provided by 23 IPL? 24 THE WITNESS: That's correct. What I stated 25 in my testimony is I pulled the information from the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 806 1 IPL EGEAS run that says here's the capacity credits, 2 the planning reserve values used for Beaver Creek and 3 Adams, but then what I stated is that if you look at 4 the new site in the confidential--let me refer to it 5 specifically. 6 In Docket No. RPU-07-5, Exhibit RMV-1, 7 confidential Schedule B, is an analysis of a future 8 wind power site in northern Iowa, and that document 9 contained detailed monthly capacity factor 10 information for that site. 11 The computation of the planning reserve or 12 capacity credit value that IPL stated in response to 13 data request 162 described exactly how they do that, 14 and they look at the monthly values to get a sense of 15 what's going on during summer peak periods. 16 I looked at that information. I did compare 17 it to those analogous values for these smaller 18 plants, and what it showed was that the capacity 19 factors in the summer periods are fairly high for 20 those plants, so I came to the logical conclusion 21 that this is a better site than some of these smaller 22 ones based on the summer-month capacity factors. 23 That's where I got that information from. 24 I was not directly comparing it or 25 suggesting, you know, that Beaver Creek or Adams is PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 807 1 the proxy. The proxy that I was using was a very 2 specific proposed site. I don't know if it's a 3 proposed site, but it's the site that I believe IPL 4 holds and is proposing to do a significant wind plant 5 on. 6 CHAIRPERSON NORRIS: Do you know, is that 7 part of the record in this case? 8 MS. EASLER: Your Honor, I don't believe it 9 is, but by reference, in being contained in 10 Mr. Fagan's testimony, I think that that--the 11 reliance on that is built on that. 12 CHAIRPERSON NORRIS: Okay. 13 MS. EASLER: And if it's not, I would 14 propose that the Board take notice of that 15 information. 16 CHAIRPERSON NORRIS: All right. So we do 17 have--you sourced it for us, I guess. We know where 18 to find it. 19 Well, your analysis is--I mean let me see if 20 I can state this: Generally, that IPL is using too 21 low of a capacity factor for wind, and you say they 22 should be using an amount higher. 23 THE WITNESS: Yes. In my testimony I 24 recommend that they use a 20 to 25 percent capacity 25 factor. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 808 1 CHAIRPERSON NORRIS: Right. 2 THE WITNESS: I'm sorry. Twenty to 25 3 percent capacity credit for wind facilities. That's 4 an aggressive stance. Midwest ISO uses--in their 5 planning documents they looked at 15 percent, they 6 looked at 20. You know, there's a range of numbers 7 associated with that. IPL themselves for some plants 8 use 25 percent, for some plants they've used 18 9 percent. My testimony contains a listing of those 10 numbers, and the weighted average of those numbers is 11 13 percent. IPL used 10 percent. They just went to 12 the extreme bottom and used that number, and I don't 13 think that that's supportive. 14 CHAIRPERSON NORRIS: Wasn't their bottom 15 based on actual historical performance? I think they 16 used some formula where you best-guess it the first 17 time and then you add the historical data from one 18 year, two years, and then the third year you have a 19 baseline figure to use. 20 THE WITNESS: They didn't provide 21 documentation--they didn't compute a 10 percent 22 number. That's the number that they chose to use, 23 judgment. It's fine to do it that way. I disagree 24 with that judgment. 25 They did--historically, they provided the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 809 1 data on the eight existing wind plants, and that data 2 showed a range from 9 percent up to 25 and change, so 3 there is a range based on historical data associated 4 with those plants, and it's important to look at that 5 for thinking about what capacity credit should you 6 consider going forward, but it's also important to 7 consider that there has been a lot of learning, there 8 has been technological improvement in the wind plants 9 themselves. 10 That LBL report I spoke of earlier 11 documented the improved performance, yielding a 12 metric of natural capacity factor, the improved 13 performance of wind plants over time, over the last 14 10 to 15 years, and that's due in large part to just 15 coming to understand the wind patterns and selecting 16 wind sites properly, and also the wind generation 17 technology itself has improved. 18 All of this should be factored in as we 19 start to move forward. Certainly you shouldn't just 20 look backwards. 21 We used 15 percent. When we revised our 22 runs, we used the 15 percent capacity credit number. 23 Wind is a very good energy source. It's a 24 very inexpensive energy source. It's not a very good 25 capacity source, everybody understands that, but PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 810 1 using 10 percent rather than 15 or 20 or something a 2 little bit higher when you're using this modeling 3 tool to make a selection is just not supportable. 4 CHAIRPERSON NORRIS: We have the 5 responsibility for resource access in this state and 6 people look to us to make sure that the lights are 7 there when you flip a switch, so are you asking us to 8 accept these higher capacity values based upon the 9 theory of the technology that's going to be 10 available, because I keep coming back to the 11 historical performance of these facilities, and how 12 do we not use the low end especially if we're going 13 to get to this, as you advocate, as a baseload source 14 of energy? 15 THE WITNESS: You could use the historical 16 data in support of a 15 or a 20 percent capacity 17 credit. You look at--and in particular you look at 18 the mechanism for computation that IPL has adjusted 19 here, which is indeed looking at the historical data, 20 but then also looking at similar facilities. So for 21 the confidential document that I referenced, they 22 have the wind data for that, all right? They have 23 the distribution of wind over the months, so you can 24 look at that. You could compare it with the actual 25 historical data to try to get a sense of does this PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 811 1 new site look more like Flying Cloud, Beaver Creek, 2 Adams, in the way the wind profile is, and based on 3 that type of an assessment, you could then say this 4 historical plant is a better proxy for what we might 5 expect given the wind data that we have for this 6 proposed site. 7 You can do that, and that's what I've done, 8 so you do not have--you're not relying on anticipated 9 improvements in technology beyond the successful 10 improvements that have been seen so far. 11 CHAIRPERSON NORRIS: Okay. A couple of 12 other follow-up questions from your comments earlier. 13 You're stating that--you got into the cost 14 trends of wind and relying upon that more as a 15 greater share of our generation source. 16 If we rely upon more wind and this wind-gas 17 mix, isn't that going to drive the cost of wind and 18 gas up, and wouldn't it be as a result of the carbon 19 costs that would result in lowering the price for 20 coal, and doesn't that drive the difference in these 21 two sources further apart? 22 THE WITNESS: David Schlissel is better to 23 answer that. There's a lot that you've just put 24 there on the table. I can touch on it just a bit. 25 Do not leave DSM out of this, no matter PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 812 1 what. The DSM is such an important resource, it is 2 the cheapest resource, it is a nontraditional 3 resource, and there are institutional policies that 4 you'll have to deal with to try to make it happen as 5 cost effectively as possible. 6 There's a handful of states that have 7 recently passed legislation requiring utilities to 8 procure all cost-effective energy resources, which is 9 an important leap forward in attaining the most 10 cost--all of the most cost-effective resources or as 11 much of it as you can get. That's point No. 1. 12 The interplay between natural gas prices, 13 carbon prices, coal costs, coal plant prices, wind 14 plant prices, wind technological development is 15 complex, and using modeling tools is not a bad way to 16 get at it, and that's what we've done here. We have, 17 you know, tried to get at that. 18 You can do endless sensitivity runs about 19 what you think is going to happen to the price of 20 gas, the price of capital costs for coal, the price 21 of coal, fuel, and carbon. 22 In the work that we've done, what we see is 23 when you put in proper assumptions, that coal plant 24 gets pushed out further in time or it doesn't get 25 selected. It's just a different world with the costs PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 813 1 of new coal, the capital costs, the operating costs, 2 and the increasingly likely carbon dioxide costs. 3 New coal is different than old coal. 4 CHAIRPERSON NORRIS: Some of the witnesses 5 for IPL said that by putting in this coal plant, 6 you're actually helping the ability for wind because 7 of, I guess, the balance it provides for the baseload 8 and the ability to use wind. What's your take on 9 that, and does this plant help us attain the 10 Governor's newly-stated goal of 25 percent or does it 11 inhibit it, and why? 12 THE WITNESS: No, I don't think it's 13 necessary to put in a baseload coal plant in order to 14 allow for wind to be installed to meet 25 percent of 15 your needs by 2022. 16 The reason that that's the case is that as 17 you add wind to a system, the operators of the 18 system, Midwest ISO, deal with a new generation mix 19 and they deal with a new pattern of how you meet 20 continually changing load, and you layer over a set 21 of wind generators that have varying output, and you 22 just come up with a new profile of net load across 23 the Midwest ISO system that has to be met. 24 They use the dispatch algorithms to then 25 decide how do we now meet this new profile of net PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 814 1 load, and the answer is, well, you meet it in the 2 same way that they've met it in the past. You have 3 ancillary service generation available, regulating 4 reserves and operating reserves, and you do exactly 5 what utilities have done historically: You move the 6 generation to meet the load, and there's no 7 particular reason why you need a baseload coal to 8 meet some new coal requirement. 9 It is a systemwide question, and the size of 10 the system in this case is at least the Midwest ISO, 11 a hundred-thousand-megawatt-plus system. We are no 12 longer working in a four- or five-thousand megawatt 13 system world, and the control requirements have to be 14 tied to that size of a system. 15 We are working in a world where the system 16 is MISO, a 116,000-megawatt peak load a year or two 17 back, and in 2008, MISO is introducing ancillary 18 service markets. 19 Up to now, IPL and the rest of the control 20 areas throughout the Midwest ISO region have had to 21 deal with the balancing and the operating reserve and 22 the regulating resources on a day-to-day basis in 23 planning for those. 24 In 2008, Midwest ISO is taking over that 25 function, introducing ancillary service markets, PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 815 1 analogous to what PJM in New York and New England and 2 ERCOT have already done. Midwest ISO was sort of one 3 of the last ones to actually take on the 4 responsibility of dealing with the ancillary 5 services, and the ancillary services are key to 6 dealing with how do you meet a changing profile when 7 you start laying on wind. 8 I'm not sure if I've-- 9 CHAIRPERSON NORRIS: That's fine. 10 BOARD MEMBER HANSON: I just want to follow 11 up on a question that Mr. Norris asked, and I'm not 12 sure if I understood your answer correctly. 13 Since we are responsible for making sure 14 that Iowans have power every year and every day, not 15 just in typical years or average days or average 16 years, when looking at the capacity credit for wind 17 energy, is it-- Let me ask it differently. 18 When you were looking at--when you were 19 looking at estimating the capacity credit for wind 20 energy to use in the modeling, were you using typical 21 or average years, or worst-case scenarios? 22 THE WITNESS: I was relying on the 23 historical data the past few years for some plants, 24 perhaps more than a few years for other plants, IPL's 25 eight wind facilities, and I was looking at the PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 816 1 snapshot data for wind for this site that I've 2 referenced, and I do not know over what time period 3 that data was collected. Generally they talk about 4 collect at least a year's worth, but you do need to 5 get more data. 6 You do--capacity credit for wind is just a 7 part of the picture. It's an important part. In 8 this case it's an important part because you have a 9 modeling result, and you change the capacity credit 10 for wind and you get a different result, so it's very 11 important to look at that. 12 In the big picture, the whole scheme of 13 things, wind is just a portion of the capacity 14 resources. It's not the lion's share of capacity 15 resources at all. 16 BOARD MEMBER HANSON: Right, but my question 17 was whether you were looking at baseline or lowest- 18 year figures or some sort of typical or average 19 years. 20 THE WITNESS: I was looking at specific data 21 that IPL provided for--I don't know if the data going 22 back a number of years, probably back as far as 1999, 23 are representative of typical years or of extreme 24 years. It's the actual data that was collected at 25 those wind plants. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 817 1 BOARD MEMBER HANSON: Was it listed by year 2 or was it-- 3 THE WITNESS: It was listed by year. It was 4 listed by year, so if you were to look at that data 5 you could see the variation in performance over those 6 years, and based on the algorithm that IPL used, 7 which is looking at the median values of monthly 8 output and then averaging those, based on that 9 algorithm they came up with capacity credits that 10 they used in their EGEAS runs. 11 Then for this new site, I look at the data 12 for the new site, and it corresponds to sort of the 13 upper end of the historical data for these old sites. 14 That tells me 10 percent--it doesn't make sense to 15 use 10 percent. It makes sense to use something 16 higher. 17 BOARD MEMBER HANSON: Okay. Thanks. 18 CHAIRPERSON NORRIS: Just one follow-up, 19 Mr. Fagan. 20 The question I asked you before about the 21 wind and does the baseload coal help or hurt that in 22 getting toward our goal, and you've got the MISO 23 plant and ASM. Wind does not actually add to the 24 system need for ASM. It doesn't contribute to it. 25 It isn't really an ancillary service resource. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 818 1 THE WITNESS: Generally, wind has not been 2 an ancillary service resource. There are new 3 technologies to incorporate into wind machines that 4 actually they could possibly provide ancillary 5 services. I don't know that it's economic to do so, 6 basically saying that you don't run the wind plant up 7 to its full output capability at any point in time. 8 You run it at 95 percent, and then if there happens 9 to be a need to grab another 5 percent from the wind, 10 you could do it, or they certainly have the ability 11 to turn down wind. So there is limited movement 12 capability for new wind going forward, but that's 13 somewhat an aside. 14 Generally what wind does is it does 15 contribute to a different net load profile, and that 16 affects the reliability base requirements for how 17 much regulation, how much capacity do we have online 18 to meet the second-to-second variation, how much 19 capacity do we have online to meet the variation over 20 10, 15 minutes, the variation over hours or over the 21 course of the day. 22 There are an extensive amount of studies now 23 looking at how wind affects that, and the essence of 24 those studies says, well, you put all of this 25 together and there's a need for slightly increased PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 819 1 more ancillary services. That's not necessarily the 2 case always in all places, but generally that's the 3 result. 4 As the forecasting technology improves, that 5 additional burden on ancillary service requirements 6 is lessened because the more you can--the better you 7 can forecast, the better you lessen that 8 unpredictable nature of the wind's output. 9 The bigger you draw your boundary, the more 10 you tamp down the variation that wind imparts to a 11 system. 12 So if you're looking at the effect of one 13 wind farm on IPL's region, that introduces a 14 perturbation in what the wind farms look like. 15 If you're looking at MISO and all of the 16 wind farms aggregated together and moving upward and 17 downward at different times, you get a reduction in 18 the burden that's imposed on ancillary services. 19 This is addressed in my testimony where I 20 talk about the importance of spatial diversity and in 21 particular the way that MISO, as a coordinator on a 22 larger basis, is able to reap the benefits of the 23 spatial diversity introduced when you have wind over 24 a multi-state region. 25 CHAIRPERSON NORRIS: Thank you, Mr. Fagan. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 820 1 Mr. Ragsdale. I'm sorry. Yes, I'm sorry. 2 Ms. Easler. I went the wrong direction. 3 MS. EASLER: That's all right. 4 REDIRECT EXAMINATION 5 BY MS. EASLER: 6 Q. Mr. Fagan, during the course of your 7 questioning you've been asked to comment on the 8 characterization in Mr. Bauer's testimony of what 9 went into your capacity factor that you used for 10 modeling new wind, and you clarified that you 11 considered more resources than merely the Beaver Creek 12 and Adams, is that accurate? 13 A. That's correct. 14 Q. I'm going to show you an exhibit that's 15 already in the record. It's Exhibit 120, and that is 16 IPL's response to OCA data request No. 222, just that 17 first page there. 18 Are those the wind facilities that you 19 evaluated in the course of your analysis? 20 A. Yes, they are. 21 Q. And then regarding the data on those wind 22 facilities, I would direct you to your confidential 23 exhibit Schedule A, which is IPL's data request 24 response No. 104, and I'll hand you a copy of that. 25 The response to part C, could you elaborate PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 821 1 on the basis for the data going into your analysis? 2 A. Sure. This is data request No. 104, and 3 this asks for the capacity values that IPL has 4 assigned to wind facilities in its planning studies 5 over the past three years. 6 Q. I'm sorry. This is confidential. I don't 7 think we'll get into any confidential data, but 8 forewarned. 9 A. All right. Part C of this data response 10 contains an Excel file with the output data from 11 these eight wind facilities, and it was that data 12 that I examined, along with the data in the 13 confidential exhibit from the other docket that I 14 referenced earlier, in coming up with my conclusion 15 that it is more logical to use a higher capacity 16 credit than 10 percent. 17 Q. I would now like to show you an order issued 18 by the Iowa Utilities Board in Docket No. RPU-05-4 19 concerning MidAmerican Energy Company, and this order 20 was issued on April 18th, 2006. 21 If you would, please just read the opening 22 paragraph to give some sense for what this docket was 23 about. 24 A. "On December 16th, 2005, MidAmerican Energy 25 Company (MidAmerican) filed with the Utilities Board PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 822 1 (Board) an application for determination of 2 ratemaking principles pertaining to a proposed wind 3 power generation project with a maximum nameplate 4 capacity of 545 megawatts. MidAmerican said it had 5 not yet determined the ultimate nameplate size and 6 location for the project, but it will be installed at 7 more than one location." 8 Q. And then turning to page 6 of that order, 9 would you please read the last paragraph? 10 A. "First, MidAmerican indicates that it is 11 facing a 235 megawatt capacity deficiency for 12 regulated load, hot weather, by 2010, and a 13 104 megawatt deficiency, normal weather, in 2011. 14 The proposed project is to be in service by 2007, 15 three years before the projected capacity deficit. 16 If load growth is greater than expected, there could 17 be a capacity deficit based on hot weather or normal 18 weather prior to 2010. The proposed wind project 19 will contribute up to approximately 109 megawatts 20 towards MidAmerican's accredited capacity because 21 approximately 20 percent of wind capacity is 22 generally accredited to contribute toward system 23 peak. Thus, the proposed facility would eliminate 24 the projected 104 megawatt deficiency in 2011 based 25 on normal weather conditions." PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 823 1 Q. Thank you. 2 Now, you had discussed the scope of the 3 issues that you're evaluating in this case. Has IPL, 4 as part of its filing, proposed to cease operating 5 any of its existing generating plants? 6 A. Not to my knowledge. 7 Q. There was some discussion about the 8 intermittent nature of wind. You also discussed DSM 9 as a resource option that should be first in the 10 line-up for consideration in meeting resource needs. 11 Is DSM intermittent in nature? 12 A. No, it's not intermittent. Depending upon 13 the measure mix, you could say traditional DSM in the 14 form of energy efficiency is also a varying output 15 resource, but considerably more--somewhat more 16 predictable than wind in its output; and the other 17 generally accepted form of DSM, load response, is 18 also used selectively, usually during on-peak 19 periods. It's a highly flexible resource, and it can 20 be tailored to helping to reduce peak load or helping 21 to reduce energy needs 24 hours a day, depending on 22 what your needs are. 23 Q. And finally, you had some discussion with 24 Mr. Ragsdale about previous dockets in which you've 25 been asked to testify, and with respect to those PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 824 1 dockets, when you've evaluated wind resources and 2 integration of such resources in resource planning, 3 what is a fair inference that can be drawn by the 4 absence of your discussing planning reserve margin or 5 capacity credits for wind? 6 A. Primarily, we weren't asked to specifically 7 look at those issues. 8 MS. EASLER: Thank you. That's all I have. 9 CHAIRPERSON NORRIS: Mr. Ragsdale. 10 MR. RAGSDALE: Yes. Just as, I guess, a 11 point of procedure, we were caught a little bit off 12 base by Mr. Fagan's reference to the confidential 13 exhibit in a different docket. We don't have a copy 14 of that exhibit with us today, and I'm wondering if 15 we could perhaps borrow Mr. Fagan's copy over the 16 noon hour to see if we need to examine him on that 17 document. I trust that he didn't make any 18 inappropriate remarks handwritten in the margins of 19 that document, but I think that that might help us in 20 how to proceed with this testimony that was developed 21 by the Plains Justice folks. 22 I do have other questions I can go ahead and 23 proceed with that might take us up to an appropriate 24 noon break. 25 CHAIRPERSON NORRIS: And as I understand it, PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 825 1 is that document IPL's document in the rate case? 2 MS. EASLER: I believe so, and what I had 3 proposed was taking notice of their filing of that in 4 that docket. I am not sure that we have that 5 confidential-- 6 MR. RAGSDALE: I thought he was looking at 7 it up there. 8 THE WITNESS: No, I was not looking 9 specifically at the document. I was testifying from 10 memory. I don't have that document with me today. 11 MR. RAGSDALE: Okay, okay. 12 CHAIRPERSON NORRIS: Yeah, I guess if we 13 don't have it, we don't have it. 14 MR. RAGSDALE: Yeah, if he doesn't have it, 15 he doesn't have it. 16 Ms. Johnson may have it on her computer 17 electronically, so she's going to see if she can find 18 it, but I have other questions that I'll pursue. 19 CHAIRPERSON NORRIS: Okay. 20 RECROSS-EXAMINATION 21 BY MR. RAGSDALE: 22 Q. Mr. Fagan, generally referring to that IPL 23 rate principles docket that was filed, that was filed 24 last year, wasn't it? 25 A. I believe so, yes. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 826 1 Q. And isn't it correct that IPL in that docket 2 asked for 200 megawatts-- Excuse me. Let me try 3 that again--filed for ratemaking principles for 4 200 megawatts of wind capacity? 5 A. If memory serves me correct, yes. 6 Q. And would you agree with me that the 7 capacity credit that IPL assumed in that docket for 8 its new 200 megawatts of wind was 10 percent? 9 A. I actually don't recall. It wouldn't 10 surprise me, but I don't specifically remember that 11 metric. 12 Q. Is MidAmerican, who is the subject of the 13 order you read from, in the MAPP reliability region? 14 A. Both MidAmerican and IPL are in the Midwest 15 Reliability Organization Reliability region. 16 Q. Okay. Now, when MidAmerican filed that 17 application that was the subject of that Board order, 18 were they in the MAPP reliability region? 19 A. I don't recall. I would have to see the 20 timing of when the Midwest Reliability Organization 21 became effective as a successor organization to MAPP 22 and MAIN, M-A-I-N. 23 Q. And you're aware that IPL was in the MAIN 24 organization? 25 A. I don't recall specifically which PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 827 1 predecessor reliability organization IPL was in. 2 Q. You're not presented in this proceeding as 3 an energy efficiency expert, are you? 4 A. I don't think I've been presented as any 5 particular type of expert. I have energy efficiency 6 expertise. 7 Q. In questions from Mr. Norris, you spoke 8 about MISO wind farms, do you recall that, or wind 9 farms in the MISO region? 10 A. Yes. I probably used the term wind plants, 11 but, yes. 12 Q. Do you know how much wind capacity is 13 currently on the Midwest ISO system? 14 A. No. It's in the range of two- to 15 five-thousand megawatts, I believe. 16 Q. Do you know how many wind farms are 17 represented by that wind capacity? 18 A. No. 19 Q. I believe in questioning from Board Member 20 Tanner you stated that you didn't come up with a 21 specific solution. Did I hear that right, that you, 22 yourself, didn't come up with a specific solution? 23 A. That's correct. That's not our charge. 24 Q. Okay. You said that's not "our" charge? 25 A. It's not Synapse's charge and I don't PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 828 1 believe it's OCA's charge. That's what I meant. 2 Q. So in this proceeding, the OCA has not 3 presented a specific solution? 4 A. Not a specific solution, I don't think so, 5 no. 6 Q. And I understand you don't believe that 7 that's the OCA's responsibility? 8 A. That's my understanding. 9 Q. And is that the company's responsibility? 10 A. Yes. 11 Q. Now, in discussions you had with Plain 12 Justice's counsel, you talked about the price of new 13 wind turbines. Do you recall some of that 14 discussion? 15 A. Yes. I think her questions were around 16 trends, yes. 17 Q. And do you have any experience negotiating 18 with wind turbine suppliers? 19 A. No. 20 Q. Are you aware of when IPL hits its system 21 peak? 22 A. The summertime. 23 Q. And do you know what the seasonal wind 24 patterns are in the State of Iowa? 25 A. Generally speaking, yes. Wind patterns can PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 829 1 be very site specific. 2 Q. Would you agree, as a general matter, that 3 the wind patterns are not particularly strong during 4 IPL's peak-load season? 5 A. It's all relative. They're not as strong in 6 the summer as they are in the winter, and generally 7 they're not as strong in the day as they are at 8 night. 9 Q. And would you believe--tend to believe that 10 when IPL hits its peak load is usually when the sun's 11 out? 12 A. That's generally true, yes. 13 MR. RAGSDALE: I may have a couple more 14 questions here, but Ms. Johnson has found that 15 document. We would like the opportunity to print it 16 over lunch. We do have the opportunity to do that 17 and probably we may need to go into a confidential 18 session with Mr. Fagan, so I would just alert the 19 parties to that. 20 CHAIRPERSON NORRIS: Okay. 21 MR. RAGSDALE: And I think that-- 22 CHAIRPERSON NORRIS: Are your remaining 23 questions related to that document? 24 MR. RAGSDALE: We may have--I think at this 25 point in time I probably don't have anything further PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 830 1 of Mr. Fagan based upon--other than once we review 2 this other particular document over the noon hour. 3 CHAIRPERSON NORRIS: Okay. Let's go ahead 4 and take another round here, and then we can wrap up 5 and come back to that after lunch. 6 Mr. Puckett? 7 MR. PUCKETT: No questions. 8 CHAIRPERSON NORRIS: Ms. La Seur? 9 MS. LA SEUR: Yes. 10 RECROSS-EXAMINATION 11 BY MS. LA SEUR: 12 Q. Following up on Board Member Hanson's 13 questions, is it your testimony that 1,000 or more 14 megawatts of wind could be added to IPL's system by 15 2022 without compromising system reliability in any 16 way? 17 A. Yes, but it's 1,000 megawatts in addition to 18 what IPL has in its base case. 19 Q. So in addition to the proposed 100 20 megawatts, I believe? 21 A. It's more than 100. What I'm proposing is a 22 total amount of wind power in 2022 that ranges from 23 1325 megawatts to 1657 megawatts. 24 Q. And is it your testimony that that amount of 25 wind could be added to IPL's system without PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 831 1 compromising reliability? 2 A. Yes. 3 Q. And in your modeling of this scenario, have 4 you used a variety of need and peak scenarios? 5 A. No. Those numbers are based on IPL's 6 projected forecast of system needs in 2022, so it's 7 actually rather a straightforward math to look at 8 what 25 percent of retail energy needs by wind in 9 2022 looks like. You assume a capacity factor for 10 the aggregate of that wind, and you come up with the 11 megawatt figures that I just quoted. 12 Q. And is this assuming a certain reserve 13 margin? 14 A. No. It's separate from any reserve margin 15 assumptions. It's tied directly to the forecast of 16 energy--annual energy needs in 2022. 17 Q. And so then with regard to Chairman Norris's 18 question about wind capacity factors, just to 19 clarify, if wind is assigned, for example, a 20 20 percent capacity factor, is it the case that five 21 times the nameplate capacity must be installed to 22 realize that amount of baseload capacity? 23 A. No. I didn't--the 1325 megawatts to 1657 24 megawatts that I just described, I don't refer to 25 that as baseload. I refer to that as installed wind PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 832 1 capacity. 2 If the wind capacity credit was 20 percent, 3 it would come with a capacity credit of 20 percent of 4 those values, but I've made no indication about how 5 much wind needs to be installed relative to the 6 capacity credit value of wind. 7 Q. And then following up on Chairman Norris's 8 question about the historic data on wind capacity and 9 your argument that there is an upward capacity trend, 10 I would like to refer you to Vosberg rebuttal Exhibit 11 No. 1. This is at page 2, the U.S. Department of 12 Energy energy efficiency and renewable energy study. 13 A. Yes. 14 Q. And I would like to refer you to page 32 of 15 41. It's a capacity factor chart on wind project 16 performance. 17 A. Yes. 18 Q. And my question is about your interpretation 19 of this document in the context of Chairman Norris's 20 question about the historic trends on wind capacity. 21 Does this data support an argument that new 22 wind can be assigned higher capacity values? 23 A. In general, yes, this does support it. It 24 supports it because it shows an increasing average 25 annual capacity factor of from the low twenties up to PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 833 1 35 percent when you get out to 2004, 2005. 2 Q. And in your analyses, is this a trend that 3 we can expect to continue? 4 A. Yes, I believe so, given the information I 5 have seen on the improved performance of the 6 technology and the improved forecasting and siting 7 efforts. 8 MS. LA SEUR: Nothing further. Thank you. 9 CHAIRPERSON NORRIS: Ms. Easler? 10 FURTHER REDIRECT EXAMINATION 11 BY MS. EASLER: 12 Q. Mr. Fagan, counsel for IPL asked you about 13 wind availability during the summer months, and does 14 the data on IPL existing wind facilities that you 15 considered in your analysis take into account the 16 seasonal variations in wind production? 17 A. Yes. 18 MS. EASLER: Thank you. That's all I have. 19 THE WITNESS: If I may, sir. 20 CHAIRPERSON NORRIS: You have a follow-up to 21 that? 22 THE WITNESS: If you make a copy of that 23 confidential document, since we don't have a copy 24 with us, could I also have a copy? 25 MR. RAGSDALE: Yes. We'll make sure that if PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 834 1 we decide we want to go into that area, we'll have 2 copies for everybody. 3 THE WITNESS: Lastly, before the break, I 4 was struggling to find a cite. I found that cite. 5 Could I speak to that? 6 CHAIRPERSON NORRIS: Yes. 7 THE WITNESS: The cite that I was referring 8 to is in a document. The article is called "To 9 Capture the Wind." The authors are Robert Thresher, 10 Michael Robinson, and Paul Veers. That's in the IEEE 11 Power and Energy Magazine, November-December 2007 12 edition, and I'm just going to quote one paragraph 13 that was specific to what I was talking about at the 14 time. 15 "There is no big breakthrough on the 16 horizon for wind technology; however, many 17 evolutionary steps, executed with technical skill, 18 can cumulatively bring about a 30 to 40 percent 19 improvement in the cost effectiveness of wind 20 technology over the next decade." 21 CHAIRPERSON NORRIS: All right. Anybody 22 else before--and you'll determine over lunch if you 23 want to actually go into that? 24 MR. RAGSDALE: Yes. 25 CHAIRPERSON NORRIS: Go into confidential or PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 835 1 go into it at all or both? 2 MR. RAGSDALE: Both. 3 CHAIRPERSON NORRIS: Okay. So we'll come 4 back from lunch prepared for questions on this 5 document. 6 We may--folks who are in attendance, we may 7 go into confidential session when we come back from 8 lunch, we may not. We'll find out when we get back 9 from lunch, but it will probably be a fairly brief 10 confidential session. 11 MR. RAGSDALE: I thought that was an 12 admonishment. 13 CHAIRPERSON NORRIS: Let's reconvene at 14 1:20. 15 (Recess at 12:05 p.m. until 1:25 p.m.) 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 836 1 AFTERNOON SESSION (1:25 p.m.) 2 CHAIRPERSON NORRIS: Take your seats. We'll 3 get back in session. 4 We will remain open, unless we need to 5 close. 6 Mr. Fagan is still on the stand under oath, 7 and we are to you, Mr. Ragsdale. 8 MR. RAGSDALE: Thank you. 9 ROBERT M. FAGAN, 10 resumed his testimony as follows: 11 MR. RAGSDALE: During the lunch recess, we 12 were able to, I believe, make copies of the exhibit 13 from the wind RPU docket that Mr. Fagan referred to 14 initially from questions from Plains Justice counsel, 15 so my recollection is that this morning I believe 16 Ms. Easler asked the Board to take official notice of 17 a document, so I think from that standpoint, 18 technically I guess it's a matter of record now. We 19 do have additional copies that we probably can 20 provide to some of the parties to sort of help go 21 through potential cross-examination now. 22 I will say that I don't believe Mr. Fagan 23 will need to disclose any confidential information in 24 response to my questions, though I would encourage 25 Mr. Fagan, if he feels unfairly constrained by that PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 837 1 and thinks he needs to provide some information 2 that's confidential, that he would alert us, and 3 we'll go into closed session. 4 So with that, I'll pass out to some of the 5 other parties--I don't think I want to give it to 6 Mr. Puckett for obvious reasons, but we do have some 7 copies here for the Board we can pass out. 8 FURTHER RECROSS-EXAMINATION 9 BY MR. RAGSDALE: 10 Q. Now, Mr. Fagan, you've got a document in 11 front of you that I think has been--it's marked 12 Exhibit RMV-1, confidential Schedule B, page 1 of 50. 13 The title of the document--it makes reference to the 14 Buffalo Creek wind farm. It's dated December 6, 2006. 15 Is that a copy of what you have in front of you? 16 A. Yes. 17 Q. Okay. Now, is this the confidential 18 document you were referring to out of the RPU-07-5 19 docket that you were referring to in response to 20 questions from Ms. La Seur this morning? 21 A. Yes. 22 Q. And I believe her question to you that got 23 into that issue was her questions directed to you 24 regarding Mr. Bauer's rebuttal testimony on page 11; 25 is that correct? PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 838 1 A. Yes, that's correct. I also reference it in 2 my direct testimony. 3 Q. And I believe you indicated to Ms. La Seur 4 there's information in there that indicated a higher 5 capacity factor than what the company was using. 6 Have I fairly characterized what you were indicating? 7 A. Please clarify that question. 8 Q. Okay. You indicated that you used 9 information in this document to conclude that the 10 company's capacity factor for wind was too low. 11 A. I used the information in this document, in 12 comparison with the historical wind data for existing 13 IPL wind facilities, to conclude that it was 14 incorrect to model new wind in EGEAS at 10 percent, 15 that that was too low of a capacity credit number. 16 Q. Okay. Now, is there any particular pages 17 of the December 6th document that you relied upon for 18 that conclusion? 19 A. Yes; pages 13 and 14. 20 Q. And you would agree with me that the 21 information displayed on those two pages is in 22 reference to annual gross energy production and the 23 capacity factor? 24 A. Those two pages include normalized monthly 25 and annual gross energy production and capacity PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 839 1 factor at the Buffalo Creek wind farm. 2 Q. Now, the existing information that Mr. Bauer 3 relied upon, is that displayed on his confidential 4 Schedule A that was attached to his rebuttal 5 testimony, page 101? 6 A. I don't have that confidential schedule in 7 front of me. Oh, wait a minute. I think I have it. 8 I have confidential Schedule 1-A--I have confidential 9 Schedule A from Mr. Bauer in front of me. I don't 10 want to characterize right now just how he has 11 characterized the data in his confidential schedule 12 in his testimony. 13 Perhaps you could repeat the question. 14 Q. Okay. That's fine. 15 In response to my questions you indicated 16 that you looked at the information on Buffalo Creek 17 and concluded that that was more representative of 18 the future than historical numbers the company relied 19 upon. Did I get that right? 20 A. Not quite. The company didn't say exactly 21 what they relied upon to compute or use a 10 percent 22 number, which is the number they used across the 23 board for all new wind in their EGEAS modeling. 24 Now, what I did was I looked at the data 25 provided in response to 104. Mr. Bauer's Schedule A PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 840 1 is a compilation or an aggregation of that data. I 2 used the data provided in response to 104 to look at 3 the monthly pattern of capacity factors for the 4 existing IPL plants. I compared those monthly 5 patterns of capacity factors to the monthly patterns 6 of capacity factors you see in front of you on 7 pages 13 and 14. 8 When you do that, you see that what's on the 9 Buffalo Creek site has higher capacity factors than 10 any of the existing IPL sites for all months of the 11 year. So that tells me--short of a more detailed 12 planning resource study that the company did not do 13 for Buffalo Creek, that tells me that this is a good 14 site, better than the existing sites, and they should 15 be using a--certainly using a number higher than 16 10 percent, and they really should do a computation 17 to figure out what that number should be. 18 Q. So the information you relied upon that was 19 supplied by Mr. Bauer was in the response to OCA data 20 request 104? 21 A. That's correct. 22 Q. And you did not rely upon-- Okay. That's 23 fair. 24 I want to ask you a couple of questions 25 here, Mr. Fagan, about the difference between PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 841 1 capacity factor and capacity for planning reserve 2 purposes. 3 A. Okay. 4 Q. If you had a wind farm that started 5 producing energy on October 1 and continued through 6 the month of May, a continuous operation at peak 7 production, and then starting on June 1 through 8 September produced no energy, isn't it correct that 9 it would have an annual capacity factor of about 10 67 percent? 11 MS. EASLER: I'm going to object. This 12 somewhat exceeds the scope of cross, I believe, where 13 we left off. I believe we left open the possibility 14 to explore this confidential exhibit, but I thought 15 we were at a point where it was not opening up the 16 previous line of cross. 17 CHAIRPERSON NORRIS: I don't know as if 18 we've cut off all cross-examination of Mr. Fagan 19 outside this confidential, but it seems to me it 20 leads from his computations from this information. 21 MS. EASLER: Okay. 22 A. The hypothetical that you've posed--and it 23 is indeed a hypothetical because it sort of has no 24 basis in reality--when plants don't operate at 25 maximum capacity for all of the hours during PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 842 1 two-thirds of the year between October and May and 2 then run at zero for the one-third of the year 3 between June and September, but if that were the 4 case, you could compute an average--you could compute 5 an annual capacity factor of two-thirds, .67, for 6 that hypothetical facility, yes. 7 BY MR. RAGSDALE: 8 Q. So my math was correct-- 9 A. Yes. 10 Q. --under that example? And wouldn't it be 11 correct with that hypothetical, the capacity you 12 could rely upon for planning purposes would be zero? 13 A. Yes, but that's a hypothetical with no basis 14 in reality. 15 Q. I was just trying to illustrate the 16 difference between capacity for planning and a 17 capacity factor. That's all I'm trying to do, 18 Mr. Fagan. 19 So you agree with my example, though we can 20 both agree that it doesn't necessarily comport with 21 reality, but if that were the case, that's how those 22 numbers would compute out. 23 A. If you have defined your algorithm for 24 computing capacity for planning purposes to cover 25 those summer months, then that would be correct. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 843 1 Q. And as I understand, the company's used a 2 10 percent capacity factor for assessing wind 3 resources? 4 A. No. The company has used a 10 percent 5 capacity credit or capacity planning number as a 6 proxy for the capacity credit they would use for new 7 wind units in their EGEAS modeling. 8 Q. And you would agree with me that if you had 9 a capacity credit of 15 percent on a hundred-megawatt 10 wind farm, that would be a difference, between 10 and 11 15, that's 5 percent difference, that would equate to 12 five megawatts of capacity? 13 A. For a 100-magawatt wind farm, that's 14 correct. 15 MR. RAGSDALE: That's all the questions I 16 have. Thank you. 17 CHAIRPERSON NORRIS: Anybody else? 18 Mr. Puckett? 19 MR. PUCKETT: No. 20 MS. LA SEUR: No. 21 CHAIRPERSON NORRIS: Ms. Easler? 22 MS. EASLER: I have no questions. 23 CHAIRPERSON NORRIS: All right. Thank you, 24 Mr. Fagan. 25 THE WITNESS: Thank you. PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 844 1 (Witness excused.) 2 MS. EASLER: The OCA's next witness will be 3 Mr. Hausman--Dr. Hausman. 4 CHAIRPERSON NORRIS: Hello, Mr. Hausman. 5 THE WITNESS: Good afternoon. 6 CHAIRPERSON NORRIS: Raise your right hand 7 please. 8 EZRA HAUSMAN, 9 called as a witness by the Office of Consumer 10 Advocate, being first duly sworn by Chairperson Norris, 11 was examined and testified as follows: 12 CHAIRPERSON NORRIS: Thank you. You may be 13 seated. 14 Did I pronounce that right, Hausman? 15 THE WITNESS: Yes. 16 DIRECT EXAMINATION 17 BY MS. EASLER: 18 Q. Dr. Hausman, would you please state your 19 name for the record? 20 A. My name is Ezra Hausman. 21 Q. And did you cause to be filed on or about 22 October 22nd, 2007, direct testimony and an exhibit, 23 EDH-1, that should be designated OCA Exhibit 102? 24 A. Yes, I did. 25 Q. Did you also on or about January 9th file PETERSEN COURT REPORTERS 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 845 1 supplemental testimony? 2 A. Yes. 3 MS. EASLER: Now, this testimony was not 4 allowed into the record, but I would make an offer of 5 proof for the record based on the prefiled 6 submissions, and the court reporter has a copy of 7 that supplemental testimony that has not been 8 included in the record. 9 CHAIRPERSON NORRIS: All right. 10 BY MS. EASLER: 11 Q. Do you have any corrections or updates to 12 your testimony? 13 A. I do not. 14 (OCA Exhibit 102 was 15 received in evidence.) 16 (The prepared testimony follows.) 17 18 19 20 21 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 891 1 (The prefiled supplemental Direct testimony 2 of Ezra D. Hausman, Ph.D., is contained at pages 892 3 through 900 in a separate transcript as an offer of 4 proof by the Office of Consumer Advocate.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 901 1 MS. EASLER: The witness is available for 2 cross-examination. 3 MR. RAGSDALE: If I could have a few minutes 4 here. 5 (Pause.) 6 MR. RAGSDALE: I apologize. 7 CROSS-EXAMINATION 8 BY MR. RAGSDALE: 9 Q. Good afternoon, Dr. Hausman. 10 A. Good afternoon. 11 Q. We've met in the past, haven't we? 12 A. Indeed. 13 Q. And in light of some of the cooperative 14 answers I got from some of your previous associates, 15 that will probably eliminate some of my questions, so 16 I appreciate that. 17 You would agree with some of the other 18 witnesses who have appeared from your firm here today 19 that IPL has an obligation to serve its electric 20 retail customers in its service territory? 21 A. Yes, I agree that they have that obligation. 22 Q. And your testimony reaches certain 23 conclusions regarding IPL's application in this case, 24 is that correct? 25 A. In a general sense, yes. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 902 1 Q. And isn't it correct that your testimony 2 concludes that the Board should not grant IPL's 3 application for certificate for the Sutherland 4 Unit 4? 5 A. That would be our recommendation, yes. 6 Q. And you would agree that if the Board 7 follows your recommendation and does not allow IPL to 8 build Sutherland Unit 4, IPL is not excused from 9 fulfilling its obligation to serve its customers? 10 A. With or without Sutherland Unit 4, IPL has 11 an obligation to serve its customers at a reasonable 12 cost. 13 Q. Now, I believe it's correct that on 14 February 28th, 2006, you filed an affidavit in front 15 of the Federal Energy Regulatory Commission, and that 16 was regarding some matters involving the PJM 17 Interconnection, L.L.C.? 18 A. I'll take your word on the date, but I 19 certainly have filed such affidavit. 20 Q. I do have a copy of that for you, and I 21 would like to read something out of there, and then 22 if you want to be able to confirm that I've read it 23 appropriately, I can then provide it to you. 24 A. All right. 25 Q. In that affidavit you provided an 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 903 1 introduction and qualifications, and the second 2 paragraph of the introduction and qualifications I'll 3 read and see if you think I read that correctly: 4 "I have worked as a consultant in the 5 electric power industry since 1998, performing a wide 6 range of market analysis, price forecasting, and 7 asset valuation studies for clients in the public, 8 private, and nonprofit sectors. These studies have 9 included long-range price forecasting studies for a 10 number of purposes, including analysis of proposed 11 capacity investment, contract valuation and 12 liquidation studies, market power studies, cost of 13 transmission and cost/benefit studies and market 14 design support. I've testified or assisted in the 15 preparation of testimony in a wide range of civil and 16 regulatory cases. In addition to this analytical 17 work, I have spoken at and led several seminars on 18 electricity pricing and hedging transmission 19 properties in electricity markets. I have also 20 published peer-reviewed papers on topics related to 21 pricing electricity and transmission services and on 22 electricity market dynamics." 23 Does that sound that I read that correctly? 24 A. I don't question your reading skills, but I 25 don't have it in front of me. It sounds like an 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 904 1 appropriate description. 2 Q. Does it sound like you? 3 A. Well, it sounds like an appropriate 4 description of my qualifications, specifically with 5 respect to the issues at issue in that proceeding, 6 yes. 7 Q. Do you think you need it to look and see if 8 I read that right? 9 A. I'll take it on faith that you read it 10 right, you know. I didn't memorize what you said. 11 Q. Okay. Now, isn't it correct that this 12 affidavit was in response to PJM's proposed 13 reliability pricing model to express certain concerns-- 14 and you express certain concerns regarding the 15 structure of the variable resource requirement curve 16 underlying the setting of capacity price to PJM? 17 Does that sound like what that affidavit is about? 18 A. Yes, both the market structure around the 19 variable resource requirement curve and the curve 20 itself, and I would have to review this to tell you 21 exactly which issues I addressed. 22 Q. You would agree with me that this affidavit 23 didn't discuss global warming or greenhouse gases? 24 A. I don't believe that was at issue in this 25 case, no. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 905 1 Q. And I believe on--you filed another 2 affidavit later in that docket, and would it be fair 3 to assume that that affidavit didn't discuss global 4 warming or greenhouse gases either? 5 A. That's correct. 6 Q. Isn't it correct that on April 28, 2006, you 7 filed testimony with the Illinois Pollution Control 8 Board regarding a rulemaking proceeding related to a 9 proposed new control of emissions from large 10 combustion sources regarding mercury? 11 A. Yes, that's true, specifically with regard 12 to the economic impact of the rule. 13 Q. And I want to give you an opportunity to 14 briefly refresh your recollection on that document. 15 A. I would say I have a pretty strong 16 recollection of what the issues were here. 17 Q. That is the testimony you filed with the 18 Illinois Pollution Control Board? 19 A. It certainly appears to be, yes. 20 Q. Would you agree with me that that testimony 21 also didn't discuss global warming or greenhouse 22 gases? 23 A. That is correct, yes. 24 Q. And I would like to turn your attention to 25 page 16 of that document, the Illinois Pollution 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 906 1 Control Board testimony. 2 A. All right. 3 Q. And the bottom paragraph down there that 4 runs onto page 17, I would like you to read into the 5 record the sentence that begins on the fourth line of 6 that paragraph where it starts, "The most recent 7 projection..." 8 A. Okay. "The most recent"-- 9 Q. Just a minute. And if you could just read 10 through the sentence that concludes on the third line 11 of the next page. 12 A. "The most recent projection of reserve 13 capacity in the MAIN region"--and then there's a 14 footnote describing the MAIN region, which has been 15 superseded, as you know, by later reliability 16 organizations. 17 "The most recent projection of reserve 18 capacity in the MAIN region, for example, indicates 19 that for the coming summer MAIN has a planning 20 reserve of 17.6 percent without including uncommitted 21 resources. When uncommitted resources are 22 considered, the planning reserve increases to 21.4 23 percent. This compares favorably to the recommended 24 long-term planning reserve margin of 16 to 19 percent 25 based on the most recent NERC long-term reliability 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 907 1 assessment." 2 Q. Thank you. 3 Isn't it correct that on May 19th, 2006, you 4 filed testimony in the Big Stone 2 docket that was 5 pending before the South Dakota Public Utility 6 Commission. 7 A. Again, I'll take your word on the date, but 8 I did file testimony. 9 Q. Would it be helpful for us to provide you a 10 copy of that testimony? 11 A. If you're going to ask me about specifics. 12 Okay. 13 Q. Now, isn't it correct that that docket 14 concerned an application by Ottertail Power for a 15 facility siting permit for construction of the 16 Big Stone 2 project? 17 A. Well, this docket actually--oh, this is 18 before South Dakota. Yes, that's correct. 19 Q. There were a number of Big Stone 20 proceedings? 21 A. There were proceedings in a number of 22 states, yes, as there still are. 23 Q. Now, you would agree with me, Dr. Hausman, 24 that large portions of the testimony you filed in 25 this docket were also included in your testimony 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 908 1 before the South Dakota commission in the Big Stone 2 docket? 3 A. Yes, that's correct. There was, yes. 4 Q. And most of that testimony was regarding the 5 issue of global climate change? 6 A. Yes. 7 Q. And I believe you also filed testimony on 8 November 17th, 2006, before the Minnesota commission 9 regarding the Big Stone project. 10 A. Yes, in that case regarding transmission 11 lines for the Big Stone project. 12 Q. And is it also correct that substantial 13 portions of your testimony in that docket is 14 substantially the same as what you provided in this 15 docket? 16 A. It's the same globe and so many of the 17 issues are similar. 18 Q. Now, I believe on January 8th, 2007, you 19 filed testimony before the Vermont Public Service 20 Board. 21 A. Again, I have filed testimony before that 22 board, yes. 23 Q. And that was in regard to an application for 24 someone who wanted to build a wind farm. Do you 25 recall that testimony? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 909 1 A. Yes. 2 Q. And did you discuss global warming in any 3 significant manner in that testimony? 4 A. No, I did not. 5 Q. And on October 17th, 2007, you filed 6 testimony before the Nevada Public Service 7 Commission? 8 A. Yes, I did. 9 Q. And that case involved an application by 10 Sierra Pacific for the approval of its 2008-2027 11 integrated resource plan? 12 A. Yes. 13 Q. And in that docket you did provide testimony 14 regarding the costs associated with future CO2 15 emissions, is that correct? 16 A. Yes. Well, the likely price of the CO2 17 emissions for utilities, yes. 18 Q. Now, are you familiar with the action that 19 the Minnesota commission took on December 21st, 2007, 20 regarding the CO2 costs that its jurisdictional 21 utilities should use for planning purposes? 22 A. You would have to remind me of the details 23 or provide me with a reference. 24 Q. Do you know whether you've seen that 25 particular order by the commission? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 910 1 A. I probably have, but I can't say for sure. 2 Q. Do you know whether the Minnesota commission 3 made any reference to studies prepared by your firm 4 in regards to that issue, CO2 emission costs? 5 A. Well, again, as I say, I would have to see 6 the order to comment on details. I'm afraid I see a 7 lot of these things, and it's hard to keep the 8 details straight. 9 Q. I want you to take a look at an order that 10 the Minnesota commission issued on December 21st, 11 2007, Docket No. E-999/CI-07-1199, order establishing 12 estimate of future carbon dioxide regulation costs, 13 and ask you if you've seen that order. 14 A. I would say that I have not read this order. 15 Q. Okay. That's fair. 16 As I understand, Dr. Hausman, you plan to 17 appear this evening in Des Moines, along with the 18 witnesses from the environmental coalition, to talk 19 about this case and global warming. 20 A. Yes, I have been asked to appear and to 21 answer questions. 22 Q. And do you also plan to make a similar 23 appearance tomorrow evening in Iowa City, along with 24 other witnesses from the environmental coalition? 25 A. I think given the weather prediction, I'm 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 911 1 not going to make that one. 2 Q. It's only going to be a few inches, isn't 3 it? 4 Isn't it correct that Des Moines is not in 5 IPL's service territory? 6 A. I don't know the answer to that. 7 Q. Do you know whether Iowa City is in IPL's 8 service territory? 9 A. I couldn't tell you the boundaries of IPL's 10 service territory, I'm afraid. 11 MR. RAGSDALE: That's all. Thank you. 12 CHAIRPERSON NORRIS: Mr. Puckett? 13 MR. PUCKETT: I have no questions for 14 Dr. Hausman. 15 CHAIRPERSON NORRIS: Ms. La Seur. 16 CROSS-EXAMINATION 17 BY MS. LA SEUR: 18 Q. Good afternoon, Dr. Hausman. 19 A. Good afternoon. 20 Q. I would like to direct you first to 21 Mr. Vesperman's rebuttal. 22 A. Okay. I'm afraid I don't have a copy of it 23 in front of me. It was a bit thick to carry on the 24 plane. Oh, there we go. 25 Q. And this is the Vesperman rebuttal at 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 912 1 page 3. 2 A. Okay. 3 Q. Just to characterize it for the record, 4 Mr. Vesperman testifies about your prediction, your 5 estimate, that the addition of Sutherland 4 will 6 represent an addition of 12.5 percent to Iowa's 7 electric generation sector emissions. Mr. Vesperman 8 takes issue with that estimate, and my question to 9 you is on what data do you base your estimate of the 10 12.5 percent CO2 increase to Iowa's emissions with 11 Sutherland 4? 12 A. I looked at--I think I specify in my 13 testimony what exactly I looked at for current 14 emissions for the State of Iowa, and offhand, I'm not 15 sure. It was definitely a U.S. government site. I'm 16 not sure if it was EIA or EPA, but it was U.S. 17 government data on Iowa's total emissions, and then I 18 just divided that into the projected emissions from 19 the Sutherland Unit 4 facility. 20 Q. And where did you obtain the numbers about 21 the projected emissions for Sutherland 4? 22 A. Well, working from memory, I believe I based 23 it on the capacity of the unit times an appropriate 24 capacity factor, which was probably 85 percent, 25 something on that order, times 8760 hours in a year, 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 913 1 times the projected emission rate, which is about a 2 ton of CO2 per megawatt-hour produced. 3 Q. Okay. Is it your position, then, in your 4 direct testimony that Sutherland 4 will cause an 5 absolute increase in IPL's CO2 emissions? 6 A. Yes, that is correct, and that is consistent 7 with the information that had been provided upon 8 discovery by IPL in the model results from the EGEAS 9 model. 10 Q. We've heard testimony from a number of IPL 11 witnesses that this increase will be only 12 incremental. Do you agree with that 13 characterization? 14 A. I'm not sure I know what's meant by 15 incremental. I mean in a sense that it's additional 16 CO2 over their current emissions, yes, that's 17 incremental. I don't think that it's a large 18 increment, but it is certainly, as I've said in my 19 testimony, in the wrong direction. 20 Q. Could you quantify the increase in IPL 21 system's CO2 emissions that you would project to occur 22 between 2013 and 2018 as a result of the addition of 23 Sutherland 4? 24 A. It's a question that I addressed in the 25 supplemental testimony, which has been disallowed in 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 914 1 this proceeding. I would have to refer back to that 2 to look at the numbers. 3 Q. Would you be able to identify a trend from 4 2013 to 2018? 5 A. Yes. It is definitely an increasing trend, 6 not a linearly increasing trend, but by and large 7 increasing every year in terms of total emissions 8 from the IPL system. 9 Q. Assuming that Sutherland 4 would be 10 incrementally more efficient than older, less 11 efficient coal plants in the IPL system, do you agree 12 that the strategy of building these slightly more 13 efficient plants is sufficient to mitigate greenhouse 14 gases to the extent necessary to combat global 15 warming? 16 MR. RAGSDALE: I'm going to object to the 17 leading form of the question based upon my arguments 18 earlier today. This is not an adverse witness. 19 CHAIRPERSON NORRIS: My only pause there is 20 was that the same question written down for him here. 21 MR. RAGSDALE: I'm not going to object to 22 any questions you have. I was objecting to the 23 leading form of the question. 24 CHAIRPERSON NORRIS: Okay, okay. It is a 25 fairly leading question. See if you can restate it 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 915 1 and get-- 2 MS. LA SEUR: I can just refer to the place 3 in the testimony where IPL has made these assertions 4 and ask this witness if he agrees. 5 Mr. Chairman, if you would rather ask the 6 question yourself, that's fine too. 7 BY MS. LA SEUR: 8 Q. How about this: Do you agree with the 9 strategy proposed by IPL of building slightly more 10 efficient plants to mitigate greenhouse gases? 11 A. No, I do not agree that that's an adequate 12 strategy. The strategy proposed by IPL increases 13 emissions of CO2 from year to year, as I've noted, 14 whereas in order to make any realistic attempt to 15 avert the issues associated with global climate 16 change, we would need to be looking at significant 17 reductions in greenhouse gas emissions from today's 18 level. 19 Q. And does your analysis account for the 20 possibility, as testified to by a number of IPL 21 witnesses, that Sutherland 4 may allow IPL to 22 decrease its reliance on electricity from older, less 23 efficient plants? 24 A. To a small degree, it will have that effect, 25 but it's also locking in--you know, it's an enormous 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 916 1 new resource which will be emitting CO2 for decades 2 into the future, up to 50 or 70 years, so I 3 absolutely agree with the strategy of trying to 4 decrease reliance on older, less efficient plants, 5 but they should not be replaced with other plants 6 which are admittedly slightly more efficient, but 7 largely perpetuate and exacerbate the emissions 8 profile. 9 Q. And does your analysis take into account the 10 possibility that IPL could install carbon capture 11 technology at Sutherland 4 at some future date? 12 A. I'm afraid I didn't consider that to be a 13 very realistic possibility. I think that it is 14 certainly possible that carbon capture and permanent 15 storage will be an important technology in the 16 future, but I think that to try and build a plant 17 which is CO2 ready--or CO2 capture ready for an 18 unknown future technology is really a very bold stab 19 in the dark at what would be the appropriate way to 20 go in order to accomplish that. 21 There is existing technology that has been 22 discussed previously which is perhaps closer to a 23 mature technology for capturing and storing CO2, which 24 IPL has not proposed, but there are other 25 technologies, for example, reliance on renewable 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 917 1 energy and management of demand, which are absolutely 2 proven low-cost technologies for meeting energy needs 3 without increasing the impact, but decreasing CO2 4 emissions, and that would be a much more appropriate 5 and effective way to address the challenges 6 associated with global climate change. 7 Q. Are you able to speak to the prospects of 8 the amine technology discussed in Mr. Vesperman's 9 rebuttal? 10 A. No. I would say that I know that it's not a 11 mature technology. I know that it is used in some 12 industrial processes, but there is no site in the 13 world where it's used on a utility scale carbon 14 capture project, and I have not been involved in any 15 research or am familiar with the research on that. 16 You know, I know that it's--the chemistry is 17 there, but in terms of the economics and practical 18 aspects of actually implementing that on a utility 19 scale, I would say nobody knows, but I'm one of those 20 people who doesn't. 21 Q. So then hypothetically speaking, if this 22 amine technology were installed at Sutherland 4, 23 would this mitigate the concerns that you have 24 expressed about the level of CO2 emissions? 25 A. Well, again, the question would be is it 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 918 1 used a hundred percent of the time, and there are 2 certainly cost issues. 3 That's not the facility that's proposed in 4 IPL's plan. IPL's plan uses cost characteristics 5 that are consistent with the plant as it is proposed 6 to be built today. 7 If they are talking about a different plant 8 that actually had not only the amine system built 9 into it, but also the infrastructure for transport 10 and permanent storage of CO2, then I think that would 11 be an entirely different scenario and I might be 12 sitting here today saying this is a great thing for 13 Iowa and the world and IPL's ratepayers, but that is 14 not the scenario we're looking at today. 15 Q. Mr. Vesperman also offers rebuttal testimony 16 on what he characterizes as the need for coal as part 17 of the national electricity generation portfolio. Do 18 you agree that there is a need for coal as part of 19 that portfolio? 20 A. I think today there is certainly a strong 21 reliance on coal as an electricity-generating 22 technology. I think there is a profound need to 23 phase that out over the coming decades, or at the 24 very least to phase it out as a carbon-emitting 25 technology. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 919 1 So, you know, I look forward to the day, as 2 I say, when permanent capture and permanent storage 3 is an available technology, but until that is the 4 case, I don't think that perpetuating reliance on the 5 CO2 intensive--most CO2 intensive fuel can possibly be 6 justified. 7 Q. And if coal is going to be some part of the 8 generation portfolio on an ongoing basis, what is the 9 problem with building an incrementally lower emitting 10 plant at this time? 11 A. Well, again, I think that the best strategy, 12 if we can possibly manage it, is to delay building 13 any coal plants until the technology and 14 infrastructure for carbon capture and permanent 15 sequestration is available. 16 You know, the one exception might be small 17 demonstration plants in order to develop and prove 18 that technology, and in fact that's going forward 19 with some integrated gasification plants elsewhere. 20 So while there are other resources 21 available--and I believe that's the case just about 22 everywhere in the country--it makes no sense 23 whatsoever to build in carbon-intensive resources 24 now. 25 So in IPL's case, other witnesses have 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 920 1 argued that there are other alternatives available, 2 that if you take the economics into account with 3 carbon pricing, that those are economically 4 competitive or superior, so it's hard to imagine why 5 the choice would be to build a resource which 6 exacerbates this fantastic challenge that we face as 7 a society when there are other options available. 8 MS. LA SEUR: Nothing further. Thank you. 9 CHAIRPERSON NORRIS: Mr. Hausman--mine 10 wasn't written in a leading format, but it was the 11 question I wanted to get at here, which seems to be 12 one of the issues here, is if building this plant 13 displaces, you know, dirtier coal and so there's 14 short--let me make sure I characterize this right-- 15 there's some short-term gain, with some possibility 16 for CCS in the out years, help me understand why that 17 isn't better than continuing to burn the old dirty 18 coal and not have this online. 19 THE WITNESS: Well, first of all, you know, 20 my understanding of your responsibility is, at least 21 in part, protecting the interests of ratepayers from 22 investments which don't make any sense in the world 23 that they're going to be serving, so in terms of 24 building a long-term asset for a very short-term and 25 marginal improvement in carbon emissions that will 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 921 1 end up being uneconomic, you know, within a decade, I 2 don't think that makes any sense for Iowa's 3 ratepayers; and I believe that there are other--and I 4 think other witnesses have shown that there are 5 other--less expensive, less risky, and much 6 preferable, from the standpoint of carbon emissions, 7 options for meeting IPL's customers' needs than 8 building this coal plant. 9 There's no evidence, actually, that this 10 plant will be displacing older, dirtier coal plants. 11 There's no proposal to shut down any specific plants, 12 as we asked IPL on discovery, and the answer was that 13 there were no specific plans to shut down any other 14 plants. 15 So I think that's a bit of a red herring in 16 the sense that the plan is to keep using the existing 17 coal plants, build another one, lock in the 18 dependence on coal for another 50 years and, in my 19 opinion and in the opinion of many others, build an 20 asset which is actually going to end up being more 21 expensive for their ratepayers, so I don't see how it 22 makes sense in this case. 23 BOARD MEMBER TANNER: So to follow up on 24 that, would you--if, hypothetically, we have carbon 25 regulation in the next year or two and IPL is able to 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 922 1 meet those regulations as they're required to meet 2 all environmental regulations and they do so in a 3 cost-effective manner, would you still object to the 4 addition of Sutherland 4? 5 THE WITNESS: Well, honestly, if there are 6 carbon regulations which still permit utilities to 7 continue building coal plants without any carbon 8 capture and storage, then I wouldn't say those are 9 any carbon regulations at all. 10 BOARD MEMBER TANNER: Well, how big--and I 11 realize there's a wide range, but I mean I'm not 12 aware of any regulations that are proposing that in 13 the short term, that emissions come down to zero, and 14 there is some transition period. 15 THE WITNESS: No, no. Emissions are not 16 going to come down to zero, and I agree with you, 17 absolutely, on that. 18 But as we have analyzed the proposals for 19 carbon regulation that have come before the U.S. 20 Congress, for example, if you look at the implied 21 prices of carbon, they do have the effect of making 22 coal plants that don't capture and sequester their 23 carbon, which is to say all of them. New coal plants 24 become a less attractive resource economically, and 25 that's the point, right? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 923 1 I mean if the point is to reduce the 2 emissions of CO2 so that we can avert the disastrous 3 impacts of global climate change, the only way that's 4 going to happen is if we cease relying on the most 5 carbon-intensive fuel for generating electricity, so 6 it's not by accident that any serious proposals for 7 carbon regulation would make coal plants 8 less--uneconomic relative to other resources, new 9 coal plants. 10 BOARD MEMBER TANNER: But that goes back to 11 the issue of whether, you know, if this plant is 12 built and IPL has to make a decision to shut down a 13 coal plant, and it would most likely be the older, 14 less efficient. 15 THE WITNESS: Yes. 16 BOARD MEMBER TANNER: I'm not sure if I'm 17 phrasing this the right way, but how can they--how is 18 that still not moving the ball forward toward carbon 19 reduction as the short-term transition into a lower 20 carbon economy? 21 THE WITNESS: If this plant were built and 22 IPL shut down an equivalent number of megawatts of 23 older, less efficient coal plants, which is not the 24 proposal, that would be a small step forward. 25 It would not be anywhere near the kinds of 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 924 1 reductions that will actually be required in order to 2 mitigate the most severe impacts of climate change, 3 and I'm sure you've read Dr. Hansen's testimony, who 4 will be testifying later in this proceeding, so he 5 speaks with great specificity about what kinds of 6 reductions will actually be required in order to 7 stabilize atmospheric CO2 at a level that will avert 8 or is at least likely to avert some of the most 9 disastrous impacts. 10 You know, we throw around words like 11 disastrous and calamitous, and stuff, but they hardly 12 have any meanings compared to some of the impacts 13 that are possible if we allow CO2 to get to the levels 14 that will be experienced if we don't stop building 15 coal plants, frankly, where we're talking about 800 16 parts per million, something like, you know, four or 17 five times the natural level of CO2 in the atmosphere, 18 we're talking about a loss of coastal areas in most 19 of the world. We're talking about enormous impacts 20 on the economy of everywhere, the agriculture in 21 Iowa, the rainfall. We're talking about enormous 22 economic dislocations all over the world, migration 23 of pest species. 24 I mean these are huge, huge problems, and 25 you can't say, well, but we need to meet the needs of 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 925 1 our customers and we've always done that building 2 coal so we're just going to cover our eyes and keep 3 building coal and just let this go on. 4 I'm sorry if I'm getting, you know, teary- 5 eyed here, or whatever, but it's just incredible to 6 me. 7 So in this case we have options, and one 8 option is to actually make some decisions and try and 9 rely on economically technically available resources 10 that don't emit carbon dioxide, and the other is to 11 just say, pfft, we're not going to be part of the 12 solution. 13 BOARD MEMBER TANNER: Well, if--and I'm not 14 trying to be argumentative because I'm not going to 15 debate the merits of climate change. I don't dispute 16 that it's an issue, but in Iowa nearly 80 percent of 17 our generation comes from coal. 18 THE WITNESS: Yes. 19 BOARD MEMBER TANNER: And one of your 20 associates said earlier that you're not part of 21 finding the solution, but we are. 22 So how do we, as a Board, move Iowa forward 23 and how do we go from 80 percent coal to what I hear 24 you saying no coal? I mean isn't part of it 25 incrementally to move that way? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 926 1 THE WITNESS: Absolutely, incrementally is 2 right, but incrementally has to be in the right 3 direction, and that means not building--I would say 4 that means not building any new coal plants that 5 don't include a concrete plan for carbon capture and 6 storage, permanent storage. 7 Let me say one more thing about that: The 8 day this Utilities Board and other utility boards 9 start drawing that line is the day the technology 10 will start getting a serious head start for permanent 11 capture and storage, but if we allow utilities--if 12 you allow utilities to continue building coal plants 13 without worrying about that, they're not going to. 14 They're just not going to do it. 15 So draw the line and, you know, I promise 16 you that within a very short amount of time, they'll 17 be coming forward with proposals for resources that 18 do not emit carbon dioxide, that will be good for 19 their bottom line, good for their ratepayers, and the 20 only possibility for the climate of the planet. 21 CHAIRPERSON NORRIS: Ms. Easler? 22 REDIRECT EXAMINATION 23 BY MS. EASLER: 24 Q. Regarding your appearance at the 25 Plains Justice event that you accepted an invitation 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 927 1 to, are you appearing on behalf of the OCA? 2 A. No, I'm not. Well, I don't know. I'm 3 appearing because I'm a witness in this case, and so 4 I'm answering questions about the case and about my 5 expertise on climate change, so... 6 Q. But you won't be addressing the ultimate 7 conclusions that the Board has to decide in this 8 case, is that correct? 9 A. I suppose I'll answer any question that's 10 posed to me there, but it will be in my personal and 11 professional and scientific opinion. It won't be 12 speaking on behalf of the OCA in this case. 13 MS. EASLER: That's all I have. 14 CHAIRPERSON NORRIS: Mr. Ragsdale? 15 MR. RAGSDALE: Just one second here. 16 (Pause.) 17 RECROSS-EXAMINATION 18 BY MR. RAGSDALE: 19 Q. Just a couple of questions from the Board 20 regarding you testified about the regulations 21 requiring carbon sequestration, the potential of such 22 things. 23 A. It is not--there's no pending regulations, 24 that I know of, to specifically require carbon 25 sequestration. My testimony was that I don't believe 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 928 1 coal plants should be permitted to be built which do 2 not permanently capture and sequester the carbon. 3 That's my recommendation. 4 Q. And I believe you were asked questions about 5 the current status of regulations. Maybe I 6 misunderstood the questions from the Bench, but let 7 me ask you this question: There have been a number 8 of bills introduced in the Congress on that topic, is 9 that correct? 10 A. On the topic of carbon regulation, not 11 specifically on the topic of carbon sequestration. 12 Q. And you would regard legislation on carbon 13 regulation as being a more broader topic than carbon 14 sequestration? 15 A. Yes, I would. 16 Q. Carbon sequestration would be a subset of 17 legislation on carbon regulation? 18 A. I would characterize it that carbon capture/ 19 sequestration would be one means by which resource 20 owners could comply with carbon emissions 21 regulations. 22 Q. And there have been some bills introduced in 23 Congress to address carbon regulation? 24 A. Yes, there have. 25 Q. Have any of those bills made it through 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 929 1 either house of Congress? 2 A. Mr. Schlissel is testifying more on the 3 specifics of the regulations. 4 Q. Okay. So you're--and-- 5 A. I know the number has become law, and 6 whether any has passed either house, I don't believe 7 so at this time. 8 Q. And you say Mr. Schlissel's testimony covers 9 that issue. Do you have a copy of his testimony up 10 there that you can give me a reference? 11 A. I don't, no. 12 MR. RAGSDALE: I think the Board is going to 13 adopt a new rule that all testimony from any party 14 must be confined to one binder. Of course, we're the 15 biggest violators of that. 16 BY MR. RAGSDALE: 17 Q. Do you have his testimony in front of you 18 now? 19 A. I do, and I think we can both congratulate 20 ourselves that you and I are both pronouncing his 21 name correctly today. Last time we both had trouble. 22 Q. Oh, we both had trouble? 23 A. Yeah. 24 Q. Oh, okay. I was asking you can you tell me 25 where in his particular testimony-- 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 930 1 A. I have no idea, I'm sorry, but he's here. 2 We can ask him. 3 Q. I thought--I misunderstood. I thought you 4 indicated that his testimony in this docket addressed 5 that issue. 6 A. That's my understanding. 7 Q. Okay. And I thought counsel had provided 8 you a copy of his testimony. 9 A. Well, they have, but it's--you know, I could 10 sit here and read it or we could have Mr. Schlissel 11 testify, as he's going to do later this afternoon. 12 Q. Okay. So you don't know where in his 13 testimony he talks about that; you just know that he 14 does? 15 A. I believe that he does. I've read drafts of 16 his testimony. We work closely together, but I can't 17 tell you offhand where in the 80 or so pages of 18 testimony here it's addressed. Shall I ask him? 19 Q. Well, I thought maybe--I thought he had some 20 information here too. 21 A. I'm going to be, I guess, similarly 22 resistant about--well, I guess I'll leave that up to 23 the attorneys. I'll answer your questions to the 24 best of my ability. 25 Q. Okay. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 931 1 A. But, again, I did not prepare Mr. Schlissel's 2 testimony for him. 3 Q. Okay. So he's responsible for his testimony 4 and you're responsible for your testimony? 5 A. That's correct. 6 Q. Maybe if I could turn your attention briefly 7 to--he's got a couple of charts starting on 21, 8 running through 23, and it talks about--is that the 9 kind of legislation we've been talking about? Maybe 10 I should wait for you to get to those pages. 11 A. Yes, I see them. I am familiar with this 12 table, and this describes some previously and 13 recently proposed legislation. 14 Q. And do you have an opinion as to whether any 15 such legislation that's been introduced at this point 16 in time is going to make it into law this year on a 17 national level? 18 A. Is going to make it into law this year? 19 Q. Yes. 20 A. You just want me to speculate on that? 21 Q. Well, if I didn't want you to speculate--if 22 you were restricted from speculating, Dr. Hausman, 23 but-- 24 A. I do feel restricted from speculating. It's 25 not my expertise to forecast which laws are going to 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 932 1 become law in this legislative session. 2 Q. Okay. I thought in regards to some 3 questions from the Bench you offered an opinion that 4 you're pretty sure that carbon regulation would be 5 happening pretty soon. 6 A. I think that it's extremely likely within 7 the next several years. 8 Q. But you don't know whether that will happen 9 this year? 10 A. I do not know whether it will happen this 11 year. 12 Q. And your belief is based upon your testimony 13 in this docket? 14 A. My belief is not based upon my testimony. 15 My testimony is based upon my belief. 16 Q. So the basis of that belief is expressed in 17 your testimony in this proceeding? 18 A. Well, I would say there's actually more 19 information on that topic in Mr. Schlissel's 20 testimony. My testimony doesn't really address 21 carbon regulations at all. What can I say? I mean 22 it's just not in there. I don't talk about carbon 23 costs, I don't believe. It's in Mr. Schlissel's 24 testimony. 25 Q. You recall earlier when we talked about your 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 933 1 recent testimony in front of the Nevada commission? 2 A. Yes. 3 Q. Isn't it correct-- 4 MS. EASLER: Was this addressed on-- 5 MR. RAGSDALE: We've just talked about 6 Mr. Schlissel's testimony in this docket. 7 MS. EASLER: Okay, but I just don't recall 8 this being within the scope of the last series. 9 MR. RAGSDALE: Well, we were talking about 10 carbon regulation. 11 CHAIRPERSON NORRIS: Did you finish? 12 MR. RAGSDALE: No, I did not. 13 MS. EASLER: Okay. 14 MR. RAGSDALE: Dr. Hausman has testified 15 that his testimony is his testimony and Mr. Schlissel's 16 testimony is his testimony. 17 MS. EASLER: Okay. Withdrawn. I'll 18 withdraw it. 19 BY MR. RAGSDALE: 20 Q. We talked about the table in Mr. Schlissel's 21 testimony in this proceeding on 21 and 23? 22 A. Yes, yes. 23 Q. And isn't it correct if we look at your 24 Nevada testimony, that that same table is in the 25 Nevada testimony? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 934 1 A. Yes, we did talk about that testimony in 2 Nevada. 3 Q. And aren't there similar charts and tables 4 that are comparable to Mr. Schlissel's testimony in 5 this docket? 6 A. Yes, there are. As I mentioned, we work 7 closely together. 8 MR. RAGSDALE: That's all the recross that I 9 have. 10 CHAIRPERSON NORRIS: Mr. Puckett? 11 MR. PUCKETT: Nothing. 12 CHAIRPERSON NORRIS: Ms. La Seur? 13 MS. LA SEUR: No questions. 14 CHAIRPERSON NORRIS: Ms. Easler? 15 MS. EASLER: I have no questions. 16 CHAIRPERSON NORRIS: Thank you, Mr. Hausman. 17 THE WITNESS: Thank you. 18 (Witness excused.) 19 CHAIRPERSON NORRIS: Go ahead. 20 MR. STEAD: The Office of Consumer Advocate 21 would call William Powers. 22 CHAIRPERSON NORRIS: Mr. Powers, if I could 23 get you to stand and raise your right hand, please. 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 935 1 WILLIAM EDWARD POWERS, 2 called as a witness by the Office of Consumer 3 Advocate, being first duly sworn by Chairperson Norris, 4 was examined and testified as follows: 5 CHAIRPERSON NORRIS: Thank you. You may be 6 seated. 7 DIRECT EXAMINATION 8 BY MR. STEAD: 9 Q. Please state your name for the record. 10 A. William Edward Powers. 11 Q. On or about October 22nd, 2007, did you file 12 prepared testimony and exhibits in this proceeding, 13 which have now been spread on the record? 14 A. I did. 15 MR. STEAD: And for the record, your 16 exhibits are now denominated OCA Exhibit 103. 17 (OCA Exhibit 103 was 18 received in evidence.) 19 (The prepared testimony follows.) 20 21 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 945 1 MR. STEAD: We would tender the witness for 2 cross-examination. 3 CHAIRPERSON NORRIS: Thank you, Mr. Stead. 4 Mr. Ragsdale. 5 MR. RAGSDALE: Interstate Power has no 6 questions for Mr. Powers. Thank you. 7 CHAIRPERSON NORRIS: All right. 8 MR. PUCKETT: Surprisingly, I have no 9 questions. 10 CHAIRPERSON NORRIS: Ms. La Seur? 11 MS. LA SEUR: No. 12 BOARD MEMBER TANNER: Good afternoon. 13 THE WITNESS: Good afternoon. 14 BOARD MEMBER TANNER: I'm going to direct 15 you to your Exhibit BP-1, Schedule A, page 14. 16 THE WITNESS: Yes. 17 BOARD MEMBER TANNER: At the low end of your 18 dry tower efficiency penalty estimates, 1.5 to 2 percent 19 annual, what economic value can you demonstrate for 20 the corresponding increase in capital cost emissions 21 and annual fuel cost? 22 THE WITNESS: The question is what would be 23 the corresponding benefit? 24 BOARD MEMBER TANNER: Corresponding increase 25 in cost, in capital cost emissions and annual fuel 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 946 1 costs. 2 THE WITNESS: The corresponding increase in 3 capital costs would be approximately 5 percent, and 4 the Black and Veatch had about the same number in 5 their filing, so I don't think--that's one number we 6 seem to agree on, that 5 percent increase in capital 7 costs. 8 The 2 percent--1.5 to 2 percent deficiency 9 penalty with air cooling for this facility, assuming 10 that it would operate at a capacity factor of about 11 80 percent, it would require approximately 50,000 tons 12 of additional Powder River Basin coal. 13 BOARD MEMBER TANNER: Does that complete 14 your answer? 15 THE WITNESS: It does for those specific 16 questions, yes. 17 BOARD MEMBER TANNER: Okay. Before I go to 18 my next question, give me just a second here. 19 (Pause.) 20 BOARD MEMBER TANNER: Okay. Now I'm going 21 to direct you to Exhibit KDV-2, Schedule A, so that 22 would be, I believe, Mr. Vesperman's exhibits, if you 23 can get those. I'm going to refer you to Schedule A, 24 page 2 of 4--pages 2 to 4. I'm sorry. 25 THE WITNESS: Schedule A, page 2 of 4? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 947 1 CHAIRPERSON NORRIS: Two through 4. 2 BOARD MEMBER TANNER: What it is, it is the 3 general estimates of SGS 4 heat rates, and I believe 4 comparing it to other plants in the MISO region. 5 THE WITNESS: I am at Schedule A, and the 6 pages? 7 BOARD MEMBER TANNER: Two through 4. 8 THE WITNESS: Two through 4? 9 BOARD MEMBER TANNER: Yes. 10 THE WITNESS: Okay. 11 MR. STEAD: Excuse me. Did you say C? 12 BOARD MEMBER TANNER: A. 13 MR. STEAD: A, okay. 14 CHAIRPERSON NORRIS: I'm going to expedite 15 this. 16 THE WITNESS: Thank you. 17 BOARD MEMBER TANNER: Have you had an 18 opportunity to review this prior to coming here 19 today? 20 THE WITNESS: Have I had an opportunity to 21 review this? 22 BOARD MEMBER TANNER: Right. 23 THE WITNESS: No, I have not. 24 BOARD MEMBER TANNER: Well, I'll go ahead 25 and ask you the question, and if you don't know, then 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 948 1 feel free to say you don't know, but our general 2 question is this, and that is, do you concur with 3 these estimates generally and that SGS Unit 4 would 4 be among the most efficient coal plants in the 5 Midwest ISO? 6 THE WITNESS: Oh, these heat rates 7 look--these heat rates look like a typical range of 8 heat rates for standard steam boilers. 9 BOARD MEMBER TANNER: I guess maybe a better 10 way to phrase it, without making you look at the 11 document in detail, is do you disagree with the 12 assertion that's been made that SGS 4 would be one of 13 the more efficient coal plants in the Midwest ISO? 14 THE WITNESS: If my answer is limited to 15 that very precise question, looking at these numbers, 16 yes. 17 BOARD MEMBER TANNER: That's my only 18 question. 19 BOARD MEMBER HANSON: Mr. Powers, on page 5 20 of your testimony, section four, you discuss your 21 concerns about the volume of makeup water being drawn 22 from the Iowa River. I don't know if it's necessary 23 to have your testimony in front of you or not, but 24 your concern was whether the Iowa River had enough 25 capacity to deal with that amount of withdrawal. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 949 1 I don't know if you were here when an IPL 2 witness testified that the water will actually be-- 3 that the Marshalltown water system actually draws its 4 water from an aquifer rather than the river. 5 Do you have any reason to dispute that 6 description of the water supply for this plant, that 7 it will come from an aquifer rather than the river? 8 THE WITNESS: Am I disputing their decision 9 to use the Marshalltown city water as opposed to the 10 river? 11 BOARD MEMBER HANSON: Well, I guess I 12 interpreted your testimony as assuming that the 13 Marshalltown water system came from the river. Were 14 you assuming that they will be withdrawing, 15 themselves, from the river? 16 THE WITNESS: No. They make fairly clear in 17 their application that they're probably going to go 18 with city water. 19 BOARD MEMBER HANSON: Okay. And the 20 testimony we had yesterday or the day before was that 21 the city water in this case would be from an aquifer 22 rather than from surface water. 23 Do you have any reason to dispute that 24 description of where the water is coming from? 25 THE WITNESS: No, though I would dispute the 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 950 1 interpretation of what I have written on page 5. 2 BOARD MEMBER HANSON: Okay. Go ahead. 3 THE WITNESS: Which is, as I recall, my 4 concern is that when you are currently--one comment 5 on that is that the application says they're going to 6 withdraw 4700 gallons a minute. I got a response to 7 a data request that I made a week ago that said they 8 are going to use 6500 gallons a minute, and that was 9 my first indication that the water requirement is now 10 40 percent greater than it was in reviewing the 11 application. 12 The point here is that I didn't see any 13 indication in the application that with the earlier 14 level of withdrawal, 4700 gallons per minute, that 15 under conditions of drought, higher use conditions 16 for that water, that there had been a determination 17 that given the City of Marshalltown has the potential 18 capability to move this water to the plant, that 19 that's automatically the best use for the water under 20 conditions of drought or foreseeable water shortages. 21 That was the point. 22 BOARD MEMBER HANSON: Oh, okay. I guess I 23 saw your sentence that says the Iowa River nearly 24 runs dry under certain seasonal conditions and 25 assumed you were expecting the water to be withdrawn 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 951 1 from the Iowa River, so if I misunderstood, then I 2 apologize for that. 3 THE WITNESS: Well, I can definitely see 4 that interpretation from this. I apologize for that 5 as well. 6 CHAIRPERSON NORRIS: I'm just curious, you 7 answered the question Ms. Tanner asked you, but you 8 were cautious to qualify if that's limited to that 9 question. What was in your mind there in terms of 10 this plant? 11 THE WITNESS: Thank you. What was on my 12 mind was the core of my testimony, is that the reason 13 for my question "who wrote this document, who wrote 14 the evaluation of what the universe of options were 15 for firing coal at this plant," was that I was 16 peripherally involved in the Florida Power and Light 17 case, and the analysis had also been done by Black 18 and Veatch, and it looked to be identical, except the 19 evaluation that was provided in this case is missing 20 the discussion about ultra supercritical coal, and 21 the commissioner asked me would this unit be the most 22 efficient in this long list of units. Yes, it would, 23 but an ultra supercritical pulverized coal unit would 24 be considerably more efficient, yet that was not 25 included in this analysis. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 952 1 What makes this of particular interest to me 2 is the exact same author at Black and Veatch writes a 3 report in January of 2007 that identifies ultra 4 supercritical coal as head and shoulders more cost 5 effective and more efficient for burning coal. I 6 agree. 7 The analysis submitted in March for IPL is a 8 cut and paste. It's almost identical, except it's 9 missing the section that's talks about ultra 10 supercritical coal. 11 You asked me what would be the impact of 12 going to dry cooling. It would impose a 2 percent 13 efficiency factor. What would be the impact of 14 choosing ultra supercritical coal? It would improve 15 efficiency 6 percent. So not only could you run an 16 air cool condenser on the system with ultra 17 supercritical coal, you would be 4 percent more 18 efficient than the project they proposed, and so that 19 was why I was saying in answering your precise 20 question, I would say this, but I thank you for 21 asking me that question. 22 CHAIRPERSON NORRIS: Ms. Easler-- 23 Mr. Stead. Sorry. 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 953 1 FURTHER DIRECT EXAMINATION 2 BY MR. STEAD: 3 Q. I just had one question, and perhaps you've 4 responded to it to both Board Members now. 5 Is SGS 4 one of the more efficient plants in 6 the region when you take into consideration factors 7 other than simply heat rates? 8 A. Could you ask that question again, please? 9 Q. Yes. Is SGS 4 one of the more efficient 10 plants when you take into consideration factors other 11 than simply Mr. Vesperman's table that you were 12 handed? 13 A. When it's compared to existing facilities, 14 it would be in the higher level in terms of its 15 efficiency, its performance, but I mean there's 16 always a danger in comparing a proposed facility to 17 existing facilities because your range of options for 18 a proposed facility is much greater than existing 19 units that weren't judged under this same set of 20 circumstances. 21 Q. And what are those ranges for a new facility 22 such as is being considered in this proceeding? 23 A. Two of them specifically: The presumption 24 is that you will burn Powder River Basin coal in a 25 pulverized--in a coal-fired boiler. I know the 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 954 1 application indicates that the design is based on 2 firing Powder River Basin coal. 3 You've got--taking the option that's been 4 proposed by IPL, which is supercritical--and I 5 distinguish between supercritical and ultra 6 supercritical because the industry distinguishes 7 between those two. Ultra supercritical is operated 8 at a significantly higher steam temperature. That's 9 why you get more efficiency. But the other option is 10 integrated gasification combined cycle. 11 The point that I brought up about the 12 Florida Power and Light analysis and the analysis 13 done for this case is my same critique of the 14 analysis that was done on integrated gasification 15 combined cycle in this case. 16 What Black and Veatch states is there are 17 three options for integrated gasification combined 18 cycle: There is General Electric, Shell, and Conoco 19 Phillips. The statement is also made that Conoco 20 Phillips is more efficient than GE for firing 21 Powder River Basin coal. Good, I agree. 22 The statement is made that you can also fire 23 Powder River Basin coal in a Shell gasifier, but it's 24 not the preferred gasifier if you're going to do 25 carbon sequestration. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 955 1 So I agree with their analysis in that 2 they've identified the limitations of the different 3 technology; however, the one technology that's 4 actually used Powder River Basin coal and that we 5 know works on Powder River Basin coal is Conoco 6 Phillips technology. That isn't evaluated in detail. 7 Instead, an artificial device is used to say, well, 8 let's assume that they're going to fire Illinois No. 8. 9 We can use a GE unit on Illinois No. 8. We can't use 10 it on PRB, but we can use it on Illinois No. 8. So 11 many pages are spent analyzing using a GE gasifier on 12 Illinois No. 8. Well, that's not the design basis. 13 That's a different coal. 14 Then another analysis goes into great depth 15 on using a Shell gasifier in this case, with the 16 caveat finally being noted that you wouldn't use a 17 Shell gasifier in this case if you're going to do 18 carbon sequestration. 19 So the document spends its time analyzing 20 the two forms of IGCC that you wouldn't use in this 21 case. It ignores the one form that you would use in 22 this case, and that's why I brought up the issue of 23 the FPL and IPL analyses of coal technology. It's 24 the same game where it's an impressive-looking 25 analysis, but it basically identifies what the answer 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 956 1 is in advance and then builds the technical analysis 2 around that answer. 3 MR. STEAD: That's all I have. Thank you. 4 CHAIRPERSON NORRIS: Mr. Ragsdale? 5 MR. RAGSDALE: Unfortunately, I feel 6 compelled to ask a few questions based upon the 7 interchanges from the Board and also with Mr. Stead. 8 CROSS-EXAMINATION 9 BY MR. RAGSDALE: 10 Q. I want to be fair with your testimony, 11 Mr. Powers, but I think I understood you to indicate 12 that a supercritical unit would be more efficient 13 than what's being proposed here. 14 A. Ultra supercritical. 15 Q. Ultra supercritical. Now, did you give a 16 percentage differential in efficiency? 17 A. I did. 18 Q. And was that 5 percent, 6 percent? 19 A. Six. 20 Q. Six percent. And is that a significant 21 difference in efficiency? 22 A. Yes. 23 Q. Do you recall what efficiency heat rate is 24 projected for the Sutherland 4 unit? 25 A. Ninety-two hundred. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 957 1 Q. And do you still have Mr. Vesperman's 2 Schedule A in front of you? 3 A. I have it next to me. 4 Q. Okay. Well, I would like to turn your 5 attention to page No. 4. 6 A. I'm there. 7 Q. Okay. And if you'll look towards the bottom 8 of that page, you'll see a plant name called 9 Prairie Creek. Do you see that? 10 A. Yes. 11 Q. And that shows a heat rate of 1300? 12 A. Thirteen thousand. 13 Q. And what's the differential between a heat 14 rate on that unit and the Sutherland 4 unit? 15 A. Thirteen-thousand minus 9,200. 16 Q. Could you give me a percentage like you did 17 earlier? 18 A. Three-thousand-eight-hundred; 3,800 over--it 19 would be about 30 percent. 20 Q. That would be a significant difference, 21 wouldn't it? 22 A. Is that the proposal, to displace this plant 23 with SGS 4? 24 Q. Mr. Powers, let me ask my question one more 25 time. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 958 1 A 30 percent differential in efficiency, 2 would you regard that as significant? 3 A. I would. 4 Q. Thank you. 5 Are there any ultra supercritical units in 6 operation in the Midwest today? 7 A. Not that I'm aware of. 8 MR. RAGSDALE: That's all I have. 9 CHAIRPERSON NORRIS: Mr. Puckett? 10 MR. PUCKETT: No. 11 CHAIRPERSON NORRIS: Ms. La Seur. 12 CROSS-EXAMINATION 13 BY MS. LA SEUR: 14 Q. Mr. Powers, with regard to Board Member 15 Hanson's questions about water impacts on the 16 Iowa River, are you aware of any analysis that's been 17 done in the context of this application of the 18 interaction between the local aquifer and the 19 Iowa River? 20 A. No. 21 Q. Are you a hydrogeologist? 22 A. No. 23 Q. Are you qualified to speak to the impacts on 24 the Iowa River and the local water shed of doubling 25 of water demand on the local aquifer? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 959 1 A. No. 2 MS. LA SEUR: Nothing further. 3 CHAIRPERSON NORRIS: Mr. Stead? 4 MR. STEAD: No, Your Honor. 5 CHAIRPERSON NORRIS: Okay. Anybody else? 6 MR. PUCKETT: No. 7 CHAIRPERSON NORRIS: Thank you, Mr. Powers. 8 THE WITNESS: Thank you. 9 (Witness excused.) 10 CHAIRPERSON NORRIS: Let's try and keep it 11 to 15 minutes so we can perhaps get through. We'll 12 come back at 3:15. 13 (Short recess.) 14 CHAIRPERSON NORRIS: If we can take our 15 seats, we'll get started very shortly. 16 Mr. Stead, your next witness. 17 MR. STEAD: Thank you, Your Honor. The 18 Office of Consumer Advocate calls Mr. David 19 Schlissel. 20 CHAIRPERSON NORRIS: Hello, Mr. Schlissel. 21 If you would raise your right hand, please. 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 960 1 DAVID A. SCHLISSEL, 2 called as a witness by the Office of Consumer 3 Advocate, being first duly sworn by Chairperson Norris, 4 was examined and testified as follows: 5 CHAIRPERSON NORRIS: Thank you. You may be 6 seated. 7 DIRECT EXAMINATION 8 BY MR. STEAD: 9 Q. Please state your name for the record. 10 A. My name is David, middle initial A, last 11 name Schlissel. 12 Q. On or about October 22nd, 2007, did you 13 prefile testimony and exhibits in this proceeding 14 that have been spread upon the record? 15 A. Yes, I did. 16 MR. STEAD: For the record, Mr. Schlissel's 17 exhibit is now marked 104. 18 (OCA Exhibit 104 was 19 received in evidence.) 20 (The prepared testimony follows.) 21 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1063 1 MR. STEAD: On January 9th, 2008, Mr. Schlissel 2 submitted updated testimony that has not been allowed 3 in the record, and we would make that an offer of 4 proof, and the court reporter has that in her 5 possession. 6 (The prefiled supplemental Direct Testimony 7 of David A. Schlissel is contained at pages 1064 8 through 1082 in a separate transcript as an offer of 9 proof by the Office of Consumer Advocate.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1083 1 MR. STEAD: We tender Mr. Schlissel for 2 cross-examination. 3 CHAIRPERSON NORRIS: Mr. Ragsdale. 4 MR. RAGSDALE: Thank you. 5 CROSS-EXAMINATION 6 BY MR. RAGSDALE: 7 Q. Good afternoon, Mr. Schlissel. 8 A. Good afternoon. 9 Q. If I'm not precise with your name, don't 10 hesitate to reinforce. I need to work on that 11 harder. 12 A. Although I'm an Easterner, I'm in the 13 Midwest today, and so I think I'll act like a 14 Midwesterner, and I'll be a polite Iowan, and I'll 15 let you go unless you totally butcher it. 16 Q. Okay. All right. 17 Isn't it correct that you're the chief 18 policy witness for the OCA in this case? 19 A. I think that's fair to say, yes. 20 Q. And I believe at pages 2 to 3 of your 21 testimony you identify the other OCA witnesses and 22 their responsibilities. 23 A. Yes, sir. 24 Q. Now, other witnesses from your firm today 25 have agreed that IPL has an obligation to serve its 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1084 1 retail customers. It's fair for me to assume that 2 you don't disagree with that testimony that they've 3 offered? 4 A. No. I've not read the statutory language, 5 but I'm sure that's correct. 6 Q. And your testimony addresses certain 7 conclusions you've made regarding IPL's application 8 in this case? 9 A. Yes, sir. 10 Q. And I believe your testimony ultimately 11 concludes that the Board should not grant IPL its 12 application for a certificate for the new Sutherland 13 unit? 14 A. Yes. 15 Q. And you would agree that the outcome of this 16 docket does not have any impact upon IPL's obligation 17 to serve its customers? 18 A. That's correct. It still will have the 19 obligation, whether or not the certificate is granted 20 for the proposed unit. 21 Q. I would like to direct your attention to 22 page 54 of your testimony in this docket. 23 A. Yes, sir. 24 Q. And I'm referring to the testimony of 25 October 22nd. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1085 1 Turn your attention to line 6 of that page. 2 A. Yes. 3 Q. And I see the phrase "the proposed Hempstead 4 project." 5 A. That's correct. That's a typo. It 6 obviously should be SGS Unit 4. I had used language 7 regarding Senator Kerry's bill that I had previously 8 used in another piece of testimony. I apologize. 9 Q. So you cut and paste this testimony from 10 actually testimony you submitted in front of the 11 Arkansas PSC regarding a petition by Southwestern 12 Electric Power Company for approval to construct a 13 baseload coal unit? 14 A. Portions of this testimony fall back and are 15 similar to that that I filed in Arkansas, that's 16 correct. Many pieces are new for this case, but some 17 of it, yes. The issues were the same. I reused 18 language that I myself had written. 19 Q. Okay. And it's correct that Southwestern 20 Electric Power Company, it would be considered a 21 traditional regulated utility? 22 A. Yes. Arkansas is not a deregulated state. 23 Q. And the facility at issue in this case, the 24 Arkansas case, that Hempstead plant, that's not a 25 merchant-type facility, is it? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1086 1 A. That's correct. That's correct, it is not a 2 merchant plant. 3 Q. Looking still on your page 54, and looking 4 at line 12, you talk about the economics of the 5 proposed repowering project. Was this testimony cut 6 and paste from a different proceeding? 7 A. It may have been. Again, I apologize. This 8 was taken--both of these paragraphs were taken from 9 testimony I filed in Louisiana, and I had--you caught 10 a double typo. The Hempstead plant was in the wrong 11 case twice, so it is regarding the repowering of a 12 gas-fired plant. 13 Q. And that was testimony you filed on 14 September 14th, 2007, before the Louisiana 15 commission? 16 A. That's correct. 17 Q. And that was the repowering of Entergy's 18 Gypsy Unit No. 3? 19 A. That's correct. 20 Q. And in the context of Louisiana was Entergy 21 a traditional regulated public utility? 22 A. I think that's correct. I didn't look at 23 that specific issue in the case, but from my general 24 knowledge, I believe Louisiana is not a deregulated 25 state. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1087 1 Q. And the testimony in that docket, you 2 submitted that in opposition to repowering the 3 facility? 4 A. That's correct. 5 Q. And your clients in that case were a number 6 of environmental groups? 7 A. My recollection is there was the Sierra Club 8 and an organization called The Alliance for 9 Affordable Energy. 10 Q. And like the Hempstead case, a number of the 11 Q and A in your Gypsy Unit 3 case appear in your 12 testimony in this case? 13 A. That's correct. A lot of the subjects--I've 14 testified on the same subject a number of times since 15 2006 regarding the uncertainty associated with 16 proposed coal-fired power plants, and the issues are 17 generally the same--excuse me. The issues on which 18 I've testified have, to a greater or lesser extent, 19 been similar, so I just reuse some language that I 20 had previously written, but I think if you match 21 testimony that I've written now versus testimony I 22 wrote six, eight months ago, it's very different. 23 It's evolved over time. 24 Q. Sections have moved around and you've tried 25 to customize it for the particular application that's 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1088 1 pending? 2 A. Well, I've not only tried, I did customize 3 it for the specific case, of course, except where you 4 point out that I made stupid mistakes and left the 5 wrong name in, but also the evidence has changed over 6 time. The bills that have been submitted in Congress 7 have changed over time. The estimates of likely 8 future CO2 costs have changed over time. As, for 9 example, the Minnesota commission order that you 10 started to ask Dr. Hausman about, I now discuss in 11 testimony because I think it's an important 12 development. 13 Q. And I believe it's correct that in 2004, you 14 filed testimony in front of the Wisconsin commission 15 regarding the proposal by Wisconsin Public Service to 16 build Weston Unit No. 4? 17 A. That's correct. 18 Q. And was that--was Westin Unit No. 4 to be a 19 coal-fired baseload plant? 20 A. Yes. It's a pulverized coal facility. 21 Q. And in that case you were offering testimony 22 in opposition to the construction of that unit? 23 A. I believe our testimony--I don't recall. I 24 haven't looked at it in a long time, if you have it. 25 I don't remember the bottom line, but my recollection 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1089 1 is that we recommended that the commission, if they 2 approved the application for a certificate, would 3 require the company to retire a certain amount of 4 older generating capacity, not just talk about doing 5 it, but actually have to retire that capacity. 6 Q. And I think that your recommendations were 7 retire at least 150 megawatts? 8 A. Yes, it was, and it was much different than 9 the testimony that's before us today. At that time I 10 didn't testify--we didn't look at climate change as a 11 major issue in the case. 12 Q. And I believe in the Westin case, the older 13 coal facilities in question would have had a higher 14 heat rate and thus less efficient than Westin 4? 15 A. It's my recollection that they were very old 16 units that didn't have state-of-the-art SO2 and NOX 17 controls, and they were in populated areas. My 18 recollection is that it was in Green Bay or somewhere 19 in that area, and so our point was one of retiring 20 the capacity had a benefit economically because as 21 you pointed out, the new plant would have a better 22 heat rate, and, two, it had health benefits as well. 23 MS. LA SEUR: Mr. Chairman, I'm going to 24 object. Is there any relevance to this line of 25 questioning? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1090 1 MR. RAGSDALE: I believe it's called 2 impeachment. 3 MS. LA SEUR: Is there an argument as to 4 Mr. Schlissel's qualifications? 5 CHAIRPERSON NORRIS: I'm going to let the 6 company proceed. We'll let the Board make a decision 7 on whether it's relevant or not. 8 MR. RAGSDALE: He's been presented as an 9 expert witness, testified many times, and I want to 10 explore with him a little bit of some of the 11 testimony he gave in other dockets. 12 BY MR. RAGSDALE: 13 Q. Now, did the Wisconsin commission grant a 14 certificate to build the Westin 4 project? 15 A. Yes, they did. The plant is currently under 16 construction. 17 Q. Did they require Public Service to retire 18 any units? 19 A. I'm not a hundred percent positive, but I 20 believe they did not, but I'm not a hundred percent 21 sure of that. 22 Q. I believe your testimony talks about Duke 23 Power's application to build the Cliffside plants? 24 A. Yes, sir. 25 Q. And I think you filed testimony in September 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1091 1 of 2006 in that docket? 2 A. I filed testimony in September of 2006 and 3 then again in January of 2007 when the case was 4 reopened. 5 Q. And your general testimony in the Duke Power 6 Cliffside case was comparable to some of the 7 recommendations you're making in this docket? 8 A. Comparable, but very, very different. In 9 the first piece of testimony, we testified that it 10 was likely the cost of the plant would go up over 11 time, and Duke said no in the case, record closed, 12 and then a month later Duke announced a billion- 13 dollar increase in the cost of the project, so the 14 commission reopened the case, and we could kind of 15 feel like we had warned them of that problem. 16 Q. Now, did the North Carolina commission grant 17 a certificate to build one of the Cliffside projects? 18 A. Yes. It was originally a two-unit project, 19 and the commission rejected one and approved one. 20 Q. And you were in the room earlier today when 21 I had talked to some of your colleagues about the 22 Big Stone 2 dockets. You recall that? 23 A. Yes, sir. 24 Q. And I believe you participated in three 25 separate dockets--excuse me--dockets in front of 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1092 1 three separate regulatory commissions involving that 2 proposed project? 3 A. That's correct. Before Minnesota, 4 South Dakota and North Dakota, and now next week 5 there are hearings again on the reopened case in 6 Minnesota. 7 Q. Are you participating in that? 8 A. Yes, I will be back. This is my Midwest 9 garden spots tour. 10 Q. Well, this is just a little warm-up for what 11 the Twin Cities can be like in January. 12 A. Well, actually I'm hoping it's very cold up 13 there because it coincides with the St. Paul winter 14 festival, and I understand that for the past five 15 years, because of climate change, it's been too warm 16 to have a good winter festival in St. Paul. 17 Q. Now, I believe it's fair to say that the 18 various testimonies you supplied with regard to the 19 Big Stone 2 power plant were presented in opposition 20 to that facility. 21 A. That's correct. We believe that it's an 22 uneconomic project that will cause environmental 23 harm. 24 Q. Now, Ottertail Power is one of the 25 participants in that project, is that correct? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1093 1 A. Correct. They were one of the original 2 seven, and then two of the participants withdrew in 3 September, and now there are five. 4 Q. And is Montana Dakota utilities another one 5 of the utilities? 6 A. Yes. Those are the two investor-owned 7 utilities, and there are three public power agencies 8 as well. 9 Q. And those companies, Ottertail and 10 Montana Dakota, they're traditional regulated public 11 utilities? 12 A. Yes. The answer is yes. 13 Q. And your testimony in the Big Stone dockets 14 are--were sponsored by environmental groups in those 15 three matters? 16 A. Yes. I think that's fair to say. I mean 17 some of my testimony has been sponsored by regulatory 18 commissions about coal plants, the Arkansas case, but 19 Big Stone is by environmental groups. 20 Q. Now, the Big Stone 2 unit, that's going to 21 be located physically in the State of South Dakota, 22 is that correct? 23 A. Correct, just over the border from 24 Minnesota. 25 Q. And am I correct in my belief that the 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1094 1 South Dakota commission granted a certificate 2 authorizing the construction of the Big Stone 2 3 project? 4 A. That's correct. The certificate process in 5 South Dakota did not allow the commission to look at 6 economics or need, and my clients wanted to put in 7 the testimony, similar to the issues I've raised in 8 this case, in South Dakota anyway, so we did, and the 9 commission still granted--they did grant a 10 certificate. 11 Q. And I believe in March of this year--excuse 12 me. Obviously not March of this year--March of 2007, 13 you filed testimony in front of the Florida 14 commission regarding FPL's request to construct a 15 baseload coal plant. 16 A. That's correct. 17 Q. And the testimony in that case was also 18 sponsored by environmental groups? 19 A. Yes. Again, I think it was Sierra Club, 20 Natural Resources Defense Council. 21 Q. And the arguments in that case are much the 22 same arguments you presented in this docket? 23 A. Yes. The evidence was somewhat different, 24 but the argument was essentially the same, and the 25 commission ended up rejecting the plants. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1095 1 Q. And after you filed testimony in Florida, 2 you filed testimony in May of 2007 in front of the 3 Indiana utility regulatory commission? 4 A. That's correct. 5 Q. And that was regarding the Duke Energy and-- 6 what was the name of the other company? 7 A. It was--well, the other company you're 8 thinking of is Vectren, V-e-c-t-r-e-n. They were 9 originally a participant in an IGCC facility, but 10 just about the time we filed testimony in May, they 11 withdrew from the project, so now it's just a 12 Duke Energy Indiana project. 13 Q. And that is an IGCC facility? 14 A. Yes; and my testimony there was solely on 15 CO2 costs, and a little economics. 16 Q. And your testimony was sponsored again by 17 some environmental groups in that case? 18 A. Well, I know there was a consumer group, 19 Citizens Action Coalition of Indiana. There may have 20 been-- 21 Q. Was Sierra Club one of your clients in that 22 case? 23 A. I don't recall. You can show me. I just 24 don't remember if they were. 25 Q. Would you accept, subject to check, that 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1096 1 Sierra Club was one of your clients? 2 A. I'll accept it. I believe you. 3 Q. Okay. Now, Duke Energy in Indiana, is that 4 a traditional regulated utility too? 5 A. That's really complicated in Indiana. The 6 wholesale markets are deregulated, but in--they're in 7 MISO, I believe. You should have asked--Mr. Fagan is 8 our expert on MISO. 9 Q. So that's your belief, that perhaps the 10 wholesale markets are deregulated because they're in 11 MISO? 12 A. No. I'm pretty sure that their wholesale 13 market is deregulated, but that for retail purposes, 14 they're an integrated utility. 15 Q. Okay. Now, am I correct in my understanding 16 that the Indiana commission granted a certificate to 17 build that project? 18 A. Yes, they did, in October of this year--I 19 mean, no, October of last year. 20 Q. Now, in November of 2007, you filed testimony 21 in front of the Virginia commission regarding a 22 facility to be constructed in Wythe County, Virginia, 23 is that correct? 24 A. That's correct. 25 Q. And was that a docket involving a petition 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1097 1 for approval for a new coal plant? 2 A. Yes. 3 Q. Now, Virginia Electric Power Company was the 4 applicant? 5 A. Yes. 6 Q. And is that a traditional regulated utility 7 in the State of Virginia or are things complicated 8 there too? 9 A. Things are real complicated there because 10 they were deregulated and now Virginia has 11 reregulated, but-- 12 Q. It's not a merchant plant, is it? 13 A. The answer to that is, no, it is not a 14 merchant plant. 15 Q. And again in that case, your testimony was 16 sponsored by environmental groups? 17 A. That's correct. 18 Q. And in the Virginia case, were the general 19 themes of your arguments somewhat the same as 20 presented in this case? 21 A. The pieces of my testimony in this case on 22 the risks represented by the potential for higher 23 capital costs and for CO2 regulation is very, very 24 similar. Actually, I went on vacation on the 21st of 25 October and I wrote that piece of testimony and this 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1098 1 piece of testimony in this case simultaneously at the 2 end, so they're extremely similar. 3 For each project, I also looked at the 4 specific economics of the project for the company, so 5 there were pieces that are very, very different. 6 Q. And the cases we've been discussing here 7 primarily have been your participation involving 8 matters related to construction of a new coal 9 facility? 10 A. Yes, sir. 11 Q. Except for perhaps the repowering project 12 down in Louisiana? 13 A. Well, that's a new coal facility. I mean 14 it's an old gas facility that will become a new coal 15 facility. 16 Q. Now, you've also testified before regulatory 17 agencies regarding the construction of new electric 18 power plants that have been fueled by natural gas, is 19 that correct? 20 A. Yes. 21 Q. And I believe in 2002, you filed testimony 22 before the New York State Board on Electric 23 Generating Siting and Environmental Quality, a 24 petition for approval to construct a 300-megawatt 25 simple cycle plant? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1099 1 A. Yes. There were three or four or maybe 2 more, five or six cases in roughly 2001 and 2003 in 3 New York state involving proposed either new 4 gas-fired facilities or repowering projects involving 5 gas-fired facilities. 6 Q. And in the--now, I think that particular 7 case involved an applicant known as 8 Kings Park Energy L.L.C.? 9 A. Yes. That's on Long Island. 10 Q. Now, is that a traditional regulated 11 utility? 12 A. No. Those were all merchant plants. The 13 market--wholesale market is completely deregulated in 14 New York state. 15 Q. And in the Kings Park case, you recommended 16 that the New York state board reject that 17 application? 18 A. That's correct. 19 CHAIRPERSON NORRIS: Mr. Ragsdale, I really 20 am impressed with the range of experience that our 21 witness has, but are you going somewhere with all of 22 this? 23 MR. RAGSDALE: Well, yes, we are. 24 CHAIRPERSON NORRIS: Okay. 25 MR. RAGSDALE: We're conducting 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1100 1 cross-examination of an adverse witness. 2 CHAIRPERSON NORRIS: Okay. And are you 3 going to review all the cases he's been involved in? 4 MR. RAGSDALE: We're getting very near the 5 end. 6 CHAIRPERSON NORRIS: Okay. 7 MR. RAGSDALE: And with your encouragement, 8 I'll move along. 9 BY MR. RAGSDALE: 10 Q. You've also provided testimony in front of 11 regulatory agencies regarding construction of 12 transmission lines, is that correct? 13 A. Yes. 14 Q. And there have been a number of cases where 15 you've filed testimony in opposition to the 16 construction of new transmission lines? 17 A. No, I don't think that's a fair way to 18 represent it. In a number of cases I've supported-- 19 actually, in each case I've supported the 20 construction of new transmission lines. In one or 21 two cases I opposed the exact line that was proposed 22 and gave alternative transmission lines that we 23 believe could be built and provide the same economic 24 and reliability benefits with less environmental 25 harm. In no case have we just opposed a transmission 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1101 1 line. 2 Q. You don't recall making the recommendation 3 in the Cross-Sound Cable Company case that the 4 project won't provide public benefits and should be 5 rejected? 6 A. That's correct, but then in subsequent 7 proceedings, we were in favor of alternatives to the 8 line, so it wasn't strictly saying don't build 9 something, and I actually in that case filed--I think 10 I filed two or three pieces of testimony. 11 Q. And perhaps the last case I'll ask you 12 about, in May of 2006, I believe you filed testimony 13 in front of the Georgia PSC regarding Georgia Power 14 Company's request for an accounting order? 15 A. Yes. 16 Q. And I believe Georgia Power's request for an 17 accounting order related their request to record 18 early site permitting and construction operating 19 license costs for new nuclear power plants? 20 A. Yes. 21 Q. And you requested the--or recommended to the 22 Georgia commission that they should reject 23 Georgia Power's request for the accounting order? 24 A. Yes, within the context of looking at the 25 economics of the nuclear plants within the next 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1102 1 integrated resource plan, so it wasn't saying no, 2 don't do anything. It wasn't saying they don't need 3 the nuclear power plants. It was just giving 4 nuclear, what do you call it, a leg up by allowing 5 the company--excuse me--by guaranteeing the company 6 recovery of early siting costs. 7 Q. Isn't it correct in that case you suggested 8 to the Georgia commission that one of the options 9 that Georgia Power should look at would be an IGCC? 10 A. I don't recall that, but I wouldn't be 11 surprised that I said that. 12 Q. And I think you said it to the effect that, 13 "It also appears likely that IGCC facilities also 14 could be built online before 2015"? 15 A. Before 2015? 16 Q. Yes. 17 A. Oh, I'm sure that that's true. It takes a 18 lot less time to build an IGCC facility than a 19 nuclear power plant. 20 Q. Mr. Schlissel, in Mr. Kitchen's rebuttal 21 testimony he claims that you failed to mention that 22 all of the scenarios you include in Table 6 of your 23 direct testimony reflect a change in the number of 24 superfluous units from two to 10. Is Mr. Kitchen 25 correct? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1103 1 A. He's actually--he's correct and he's wrong, 2 and I don't mean to be silly about it. 3 I believe that if you look at Table 6 of my 4 testimony, there are two columns, one column--this is 5 page 75, Table 6 on page 75. There's one column with 6 a description of the scenario, and the next column is 7 the OCA input changes. 8 Under the scenario there's a footnote No. 93 9 that says, "The maximum number of superfluous units 10 that the model could select in any one year was 11 increased from two to 10 in each of the OCA's EGEAS 12 scenarios as explained in the testimony of Michael 13 Drunsic." 14 So I clearly said there that the change was 15 happening, so I think that Mr. Kitchen is flat-out 16 wrong within the language, but I think that the 17 spirit of what he said is right if you just look at 18 Table 7. I should have had a description in Table 7 19 as well as in Table 6. They're the same scenarios in 20 both tables. I just would have been more comfortable 21 if I had indicated it as well in Table 7. So to the 22 spirit, he's right. To the letter, he's wrong. 23 Q. Now, are you one of the OCA witnesses who 24 will be appearing in Des Moines tonight? 25 A. You make it sound like we're going to be in 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1104 1 a vaudeville show. No. I am speaking--I am speaking 2 for a few minutes in Des Moines tonight, yes, on the 3 issue--I'm going to speak about the issues in 4 which--about which I'm testifying here. 5 Q. And that's the matter that I talked about 6 with Dr. Hausman earlier today. 7 A. That's correct. 8 Q. And now unlike Dr. Hausman, are you more 9 confident about your ability to get over to Iowa City 10 tomorrow night? 11 A. No, I'm far less confident about my ability 12 to get to Iowa City. I'm so unconfident that I'm 13 planning to fly home tomorrow. 14 Q. Do you have any better knowledge than 15 Dr. Hausman did about IPL's service territory in the 16 State of Iowa? 17 A. I have a general sense from looking at it in 18 the Duane Arnold sale. To tell you the truth, I 19 don't recall whether either of those two cities that 20 you asked him about are in the service territory. If 21 you want me to accept yes or no, subject to check, 22 I'll be happy to do so. 23 MR. RAGSDALE: Okay. That's all. Thank 24 you. 25 MR. PUCKETT: No questions. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1105 1 CHAIRPERSON NORRIS: Ms. La Seur? 2 CROSS-EXAMINATION 3 BY MS. LA SEUR: 4 Q. Mr. Schlissel--now I'm going to mess up your 5 name. I'm sorry. 6 Mr. Schlissel, would you please turn to the 7 Kitchen rebuttal testimony? 8 A. I don't have it. 9 (The witness was handed the testimony.) 10 A. Okay. I have it. And as a suggestion, you 11 don't need to repeat my name at the beginning of each 12 question. 13 Q. I'm practicing. 14 A. I was just--I'm the only one who you're 15 asking questions to, so I'll know. 16 MR. RAGSDALE: See, that's what I did. 17 THE WITNESS: Oh, you're the company lawyer. 18 I had to make things a little more difficult for you. 19 BY MS. LA SEUR: 20 Q. Okay. At page 29 of the Kitchen rebuttal, 21 please-- 22 A. Okay. 23 Q. --Mr. Kitchen discusses the impact on the 24 proposed wind alternative of increased capital costs. 25 My question to you is, what scenarios did you 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1106 1 consider or did you consider increased capital costs 2 in the scenarios you ran? 3 A. Yes. If you go back to the tables I 4 discussed with counsel for the company a few minutes 5 ago, Table 6 and 7 which were on pages 75 through 77 6 of my October 22nd testimony--actually, it's 75 7 through 77--you'll see that we ran a number of 8 scenarios where we increased all capital costs by 20 9 percent or 40 percent, so we did allow for higher 10 wind costs in the context of we believe that the same 11 factors which would increase the cost of wind also 12 certainly are increasing the cost of SGS Unit 4. 13 Q. And did you do the same for increased costs 14 for natural gas? 15 A. The answer there is a bit more complicated. 16 We did run a scenario where we increased natural gas 17 prices by 10 percent, so that certainly affected the 18 alternatives, the gas-fired alternatives, to SGS 19 Unit 4, so in fact Mr. Kitchen is wrong. We did 20 consider the impact of both. 21 Q. And when you say you ran scenarios, are 22 these EGEAS scenarios? 23 A. Yes. I'm sorry. Yes. Mr. Drunsic and I 24 talked--we had meetings of the Synapse team, that I 25 mentioned in my testimony, roughly every week, and 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1107 1 then Mr. Drunsic spoke to Dr. Shi about running the 2 scenarios. 3 Q. And in these scenarios with increased costs 4 assigned to wind and natural gas, did the EGEAS model 5 select SGS 4? 6 A. Well, sorry. I closed up my testimony. If 7 you look on page 77 of my testimony, as just a 8 sensitivity and something which we believe is 9 extremely conservative, we increased natural gas 10 prices by 10 percent. That's the third row from the 11 bottom of the table. We didn't believe that with the 12 IPL load, the CO2 costs, that there's no way that 13 those low costs would affect natural gas prices 14 either way, and in that case--so we didn't run it. 15 We run EGEAS to increase natural gas prices. 16 Then when we ran the IPL high CO2 costs, it 17 delayed the coal plant by six years, even with a 18 10 percent increase in natural gas prices. 19 Then when we ran the Synapse high CO2 costs, 20 the coal plant was not selected, and again this 21 reflects the change in the number of superfluous 22 units, which is a terrible name, from two to 10. 23 Q. And in running these models, did you also 24 take into account other risks associated with higher 25 capital costs for wind and higher costs for natural 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1108 1 gas? 2 A. We did--you can see other scenarios in this 3 same table. We didn't have time to run all of the 4 scenarios we would have liked. We could have run a 5 number of multiple scenarios. 6 I mean ideally what you would do is, you 7 know, look at the range that each key input 8 assumption could vary, and you might change your 9 model, you know, change, say, gas prices by 10 10 percent, as a hypothetical, so you would look at plus 11 10 percent and you would look at minus 10 percent. 12 Then you would look at capacity factor, you 13 would look at capital costs, wind availability, and 14 you would look at them individually, but in the real 15 world, they're not going to change individually, so 16 you're going to have combined sensitivities, and we 17 just didn't have time to do all of the combined 18 sensitivities we would have liked. 19 Q. So is that to say you considered some 20 potential risk associated, but you did not do a full 21 analysis? 22 A. Well, we did a full analysis of some of the 23 risks, CO2 price, and we think that a 40 percent 24 increase in the price of the plant, it might 25 be--there may be a higher increase, but 40 percent is 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1109 1 probably okay to consider in planning, so we feel 2 comfortable we've looked at those risks. 3 For others, the reserve margin, the range 15 4 to 18 is probably a fair range, so we feel we've 5 covered that. 6 The DSM, I had no input into the selection 7 of the assumptions. You should ask Mr. Parker about 8 how--you know, if he feels that we looked at that 9 they've assumed a reasonable range of DSM potential. 10 What I was talking about in my longer answer 11 a couple of minutes ago was it would be nice to do a 12 number of scenarios where you put a lot of these 13 changes together so you have a combined sensitivity. 14 Q. Okay. A few more questions at pages 33 of 15 the Kitchen rebuttal. 16 A. Okay. 17 Q. And here Mr. Kitchen has testified that IPL 18 has already taken into account significant cost 19 increases associated with new power plants. Is that 20 consistent with your analysis? 21 A. I think they've reflected some. I just 22 don't think they've reflected enough potential for 23 the future. 24 Q. And are you familiar with Schedule F 25 attached to Mr. Kitchen's rebuttal testimony? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1110 1 A. Are you talking about the Schedule F he's 2 referencing here, because that's actually-- 3 Q. I'm sorry. I'm referring to Schedule F that 4 is referenced in Mr. Kitchen's rebuttal. 5 A. Yes, I am familiar with my Schedule F. 6 Q. Okay. Does your Schedule F concur with 7 Mr. Kitchen's testimony? 8 A. My Schedule F discusses the factors that are 9 affecting the construction of new power plants, 10 worldwide and domestic--domestic and worldwide, and 11 suggests reasons why the costs of new power plants 12 will continue to escalate significantly over the 13 future. 14 In that Standard & Poor's report, they have 15 the paragraph that Mr. Kitchen cites where they talk 16 about coal plant costs to rise well north of $2500 17 per kilowatt. 18 We could argue, I suppose, about what they 19 meant by "well north." Mr. Kitchen believes that 20 since the company's estimate is $275 per kW, that's 21 well north. I happen not to agree. I think well 22 north is probably significantly higher, but the 23 Standard & Poor's people would have to speak for 24 themselves. 25 Q. Okay. On to the next page, and it's 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1111 1 Mr. Kitchen's testimony that IPL's use of an 18 percent 2 reserve margin is justified. Are you able to cite 3 any industry trends to the contrary? 4 A. Yes. As part of my work-- Counsel for the 5 company questioned me at some length about Big Stone 2, 6 and as part of my work examining the need for and 7 economics of the Big Stone--proposed Big Stone 2 coal 8 plant, I've looked at the need for capacity and 9 reserve margins in the whole--in this general area 10 of the country, what we call the Midwest and 11 Upper Midwest, and I'm familiar with some of the 12 discussions and I've seen reports on the discussions 13 in terms of a couple of things: 14 One is GE did an analysis for MAPP, the 15 reliability region that's now become part of the 16 Midwest Reliability Organization, and that study-- 17 it's called the loss of load probability 18 study--concluded that something between a 10 and 12 19 or 13 percent reserve margin to be adequate, but they 20 were willing to accept that 15 would stay as the-- 21 15 percent would stay as the reserve margin for the 22 near future. 23 Now the whole issue is being reevaluated 24 again, and I've read from Xcel that they're looking 25 at a 12 to 15 percent reserve margin as a 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1112 1 sensitivity. 2 I don't want to disclose anything in 3 confidential documents, but some of the confidential 4 documents that were discussed yesterday afternoon 5 from the company's strategic planning process looked 6 at sensitivities and reserve margin that the company 7 is planning to study. 8 Q. And what service area does Xcel cover? 9 A. Xcel is Minnesota. I don't know if they're 10 in any other states. I know they're in Colorado, but 11 that's a subsidiary in Colorado and New Mexico. 12 That's Public Service of Colorado. The Xcel I'm 13 talking about is the one in Minnesota. 14 Q. And does the Minnesota Xcel serve a 15 comparable load profile to that of IPL? 16 A. I don't know. I have not looked at 17 comparable. It's a large--very large company. They 18 serve rural, suburban, and urban areas. 19 Q. On to page 35 of Mr. Kitchen's rebuttal-- 20 A. Yes. 21 Q. --Mr. Kitchen refers to some varying numbers 22 you use for the capacity factors for Sutherland 4. 23 Are these your estimates of capacity factors? 24 A. No. 25 Q. I'm not sure I understand these differences 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1113 1 in your testimony. 2 A. The differences are really minor. For one 3 of our scenarios we used an 88 percent--one of our 4 EGEAS scenarios we assumed an 88 percent capacity 5 factor, which is roughly 4 to 5 percent below what 6 the company estimates in its EGEAS runs. 7 In another place in my testimony where I 8 calculate average annual emissions from the plant, I 9 use a 90 percent capacity factor. 10 The reason why we used 88 in one place and 11 90 in the other was the 88 was roughly 5 percent 12 below what the company had estimated, and generally 13 we look at plus or minus 5 percent in capacity 14 factor, but the company's average annual capacity 15 factor was 93 percent. You can't assume that they're 16 going to have an average annual capacity factor of 17 98 percent, no matter how well they run the plant. 18 Nobody does 98 percent. 19 Q. So this was meant to be a low estimate? 20 A. Yes. It was just to see what would happen 21 if you reduced the capacity factor by 5 percent. 22 Q. Okay. The next page, 36 of Mr. Kitchen. 23 A. Yes. 24 Q. Mr. Kitchen testifies that a capacity factor 25 greater than 90 percent and closer to 93 percent is 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1114 1 achievable at Sutherland 4. Do you agree? 2 A. Well, I certainly think it is achievable, 3 yes. Do I think they will achieve that over a 20-, 4 30-, or 40-year period? No. I've seen no evidence 5 that coal-fired power plants achieve those kind of 6 capacity factors over decades-long periods. 7 Some nuclear power plants are achieving 8 those kinds of capacity factors over five or six 9 years, but I've seen no evidence that a coal plant is 10 going to do it on a sustained basis over decades, 11 which is what they are assuming in their EGEAS model. 12 Q. And what are the output results of varying 13 these capacity factor numbers as inputs to the EGEAS 14 model? 15 A. Well, the effect is that you have fixed 16 costs that have to be recovered each year for each 17 alternative in the EGEAS model, and you have variable 18 costs. The variable costs, as their name suggests, 19 they change depending upon the output of each plant, 20 so let's assume it's SGS Unit 4. The variable costs 21 are some variable O and M and fuel costs. The more 22 you run the plant, the higher the fuel cost, but you 23 also have fixed costs, which are the return on 24 equity, the return on interest, depreciation, taxes. 25 If you have less output in a year or lower 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1115 1 output on an average annual basis, you recover those 2 costs on fewer megawatt-hours, so the cost per 3 megawatt-hour goes up, and that affects the result. 4 I hope that's clear. You're looking at me-- 5 Q. I might not know if it weren't, but it 6 sounds confusing. I'll ask you another question. 7 On to page 38. 8 A. Okay. 9 Q. I believe toward the bottom of the page the 10 question at line 15 about increasing diversity in 11 IPL's generation supply, Mr. Kitchen appears to be 12 saying that investments in DSM, energy efficiency, 13 and renewable resources should be considered in 14 evaluating IPL's supply diversity. Is that the way 15 you did your analysis, considering those investments? 16 A. Yeah. I had to read this a couple of times 17 to be really sure what he was talking about. 18 What I--after I did, I think if you look at 19 page 67--or he quotes me on page 67 and he refers to 20 me on page 66. The two pie charts that I represent 21 on page 66 are taken from the company's EGEAS output. 22 I didn't add anything to that. If I did not include 23 DSM, which I don't appear to have, then the company 24 didn't--we didn't have the data in the EGEAS run 25 outputs to include it. We specifically included what 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1116 1 was in the output. 2 Q. So you just mimicked IPL's inputs? 3 A. Mr. Drunsic took the outputs and gave them 4 to me, and I made the pie charts. 5 Q. Okay. And in your opinion, has IPL invested 6 adequately in these areas, DSM, energy efficiency, 7 renewable energy, in its current resource planning? 8 A. I think that's better asked of Mr. Parker. 9 I have not looked at that. 10 Q. I have a further question about fuel 11 diversity. Is that a question better directed to 12 Mr. Parker? 13 A. No, that's me. 14 Q. That's you. Okay. 15 On to page 40, and Mr. Kitchen is discussing 16 fuel diversity--or supply diversity within fuel 17 types. Is that a characterization you agree with. 18 A. Yes, to a really limited extent. I think 19 it's a good idea to have a diversity of supply for 20 any specific fuel you burn. That's a good idea, but 21 I think that generally in the industry and regulation 22 when you're talking about fuel diversity, you're 23 really talking about what mix of fuels do you use. 24 Q. Okay. So by the definition you consider 25 normative in the industry, would adding a different 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1117 1 kind of coal increase IPL's supply diversity? 2 A. Well, it certainly--I don't know if--I 3 wouldn't agree that it increases the supply 4 diversity, but I do consider it it's a smart idea if 5 you're going to rely on gas, you have a number of 6 sources for your gas. To the extent you're going to 7 rely on coal, it's a good idea to have a number of 8 sources so that--you know, I mean I don't know if 9 you're aware of a few years ago there were problems 10 with the train lines coming out of Powder River 11 Basin, and there were severe supply disruptions for a 12 number of utilities. I read some companies had 13 $50 million extra in replacement power costs, so 14 relying too heavily on Powder River Basin coal, or 15 exclusively, is a bad idea, so having diversity of 16 supply for any fuel is a good idea. 17 Q. Okay. On to the Friedman rebuttal 18 testimony, which I think should be just past Kitchen, 19 at page 13. 20 A. Yes. 21 Q. And Mr. Friedman's testimony is that it is 22 completely reasonable to expect increases in the 23 price of natural gas in a 10 to 15 percent range 24 compared to a status quo baseline if a moderate CO2 25 price scenario were assumed and price increases in 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1118 1 excess of 20 percent if a high CO2 price scenario was 2 assumed. 3 Do you agree with this testimony? 4 A. Not at all. His own evidence contradicts 5 it. If you read the studies--he includes a couple of 6 studies as evidence for this. One is a 2004 7 Charles River Associates study that he has as 8 reference-- Excuse me. Give me one second, if you 9 would. 10 (Pause.) 11 A. Oh, it's reference--I'm sorry. Schedule A, 12 he has an October 27th, 2003, Charles River 13 Associates study, and Mr. Friedman cites the results 14 from page--Table 6.2 on page--I think it's page 30 of 15 this document, that gas prices would increase 12 to 16 30 percent in 2010. I think that's the right page. 17 Q. Is this Schedule A? 18 A. Schedule A, page 32 of 43, but it's page 30 19 in the document. 20 If you look at Table 6.2, Mr. Friedman cites 21 the increases in gas prices in 2010, 2015, and 2020, 22 but when you go to the next page, you'll see there's 23 a Table 6.4, and directly above that the sentence 24 that reads, "The price changes for fossil fuels, net 25 of the carbon permit price, are much smaller than the 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1119 1 price changes after inclusion of the carbon costs, 2 which indicates that energy producers are able to 3 pass along much of the price increase in fuels to 4 consumers." What that says is that the big price 5 increases that Mr. Friedman quotes reflect the cost 6 of the carbon allowance. That's what C.R.-- 7 Charles River calls the permit price. 8 So the gas price is not changing that much, 9 except for the price of buying the permit or emission 10 allowance. 11 Q. Okay. 12 A. Now, his 10 to 20 percent increase in 13 natural gas prices is on top of the permit price. 14 Q. And so the total would be some larger 15 number? 16 A. The total would be some larger number. If 17 you look again--if you look at Table 6.4, you'll see 18 that estimated percentage change in fuel prices, net 19 of any carbon costs, meaning the permit price is 20 excluded under the amended S-139, which was the 2003 21 McCain-Lieberman bill, under gas, the change in 2010 22 is 0.4 percent, the change in 2015 is 0.2 to 23 0.5 percent, the change in 2020 is 0 percent to 24 0.6 percent. Those are the numbers you compare to 25 the 10 to 20 percent that Mr. Friedman is claiming. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1120 1 Similarly, if you'll look at his Schedule F, 2 page 32 of 70--and that happens to be, fortunately, 3 page 32 of the document--it's changes in wellhead gas 4 prices relative to AEO 2007 for scenarios, and this 5 study was by the Natural Gas Council. It came out in 6 October of last year. 7 The baseline that has the dollar sign, the 8 second line up is the reference case, business as 9 usual, no CO2 cost. 10 The blue line that's below that line, 11 meaning a negative change in natural gas prices, are 12 the SO--S-280--that's the new version of McCain- 13 Lieberman--core, and what the EIA meant--and the 14 Natural Gas Council is taking the data from the EIA 15 study. What the EIA meant by the "core" were the 16 terms of the bill as it was originally introduced by 17 the senators. 18 Then the Natural Gas Council shows two other 19 scenarios, one in yellow, which is terrible-- in 20 black and white you can probably barely see it-- and 21 then there is one in red, and these in some years do 22 go above, and it spikes significantly in certain 23 years above what the reference case was. But there 24 are two key things you've got to remember in looking 25 at these figures: 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1121 1 One is the core scenario, the one closest to 2 the bill, natural gas prices go down as a result of 3 CO2 regulation. 4 The second thing is EIA looked at eight 5 scenarios, business as usual, the core scenario I 6 just mentioned, and six others. The Natural Gas 7 Council has only focused on two of the scenarios, 8 which were the most restrictive of alternatives to 9 natural gas. 10 Q. When you say most restrictive? 11 A. They restricted the nuclear generation, and 12 they restricted biomass. 13 MR. RAGSDALE: I'm going to interpose an 14 objection any more questions from Ms. La Seur. I 15 mean she exhibited little patience with my attempt to 16 do cross-examination when he clearly is an adverse 17 witness to our case. Mr. Schlissel is not an adverse 18 witness for Ms. La Seur. She is sponsoring him to 19 appear in a public forum tonight in Des Moines on 20 this matter, and this is nothing more than additional 21 direct testimony that's being introduced on the 22 record in the guise of cross-examination. 23 CHAIRPERSON NORRIS: Well, I did give her a 24 fair amount of latitude because I thought you both 25 were widening the margins on this thing, but I would 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1122 1 ask you to try and wrap up soon here, Ms. La Seur. 2 A. So my second point quickly is that-- 3 MR. RAGSDALE: I'm going to object. There 4 is no pending question. 5 CHAIRPERSON NORRIS: I thought there was. 6 MR. RAGSDALE: Now he's coaching his 7 opposing counsel to give him a question. 8 THE WITNESS: I'm not coaching. I was 9 trying to decide whether to be impolite and say that 10 you interrupted me in the middle of my answer. 11 MR. RAGSDALE: There was a long pause. 12 THE WITNESS: No, there was no pause. I 13 just stopped talking and you started. 14 CHAIRPERSON NORRIS: Can you restate your 15 last question, or do you want to just read it back? 16 MS. LA SEUR: Well, my last question was to 17 do with Mr.-- 18 MR. RAGSDALE: She was getting ready to ask 19 a question when I made my statement, so if there's 20 any interruption, Ms. La Seur made the interruption, 21 not me. 22 CHAIRPERSON NORRIS: Well, I'm lost right 23 now. Let's go back to Ms. La Seur. 24 MR. RAGSDALE: She was getting ready to ask 25 another question, to follow up with what Mr. Schlissel 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1123 1 had said, I objected, and I'm sure Edie has got down 2 my objection. There is no reason for me to repeat 3 that. So-- 4 CHAIRPERSON NORRIS: And I've asked-- 5 MR. RAGSDALE: You said what you said. 6 CHAIRPERSON NORRIS: I've asked Ms. La Seur 7 to try to cut to the chase here, and I'll let you 8 proceed to the next question and see where it's 9 going, and let's limit to where we're expanding this 10 thing to. 11 BY MS. LA SEUR: 12 Q. My next question is--and this is more or 13 less a paraphrase of one of Board Member Tanner's 14 questions a few witnesses ago, but I think this may 15 be applicable to your testimony as well. Doesn't it 16 work better--and I'm interested in the consumer 17 impact of this decision. Doesn't it work better to 18 build this plant and shut down older dirtier ones to 19 achieve the restricted carbon emissions that may soon 20 be required? 21 A. The answer is to a very limited extent it 22 would if in fact you're going to shut down the older 23 power plants, but if you're going to continue to 24 operate them, then you don't get any benefit. 25 The negative is the long-term you're locking 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1124 1 into a power plant that's going to emit five to six 2 million tons of CO2 for a service life that you can 3 expect to be 50, 60, 70 years, unless the company 4 makes what I and I think everybody in the industry 5 generally believe will be a very expensive decision 6 to retrofit the plant for carbon capture and 7 sequestration. 8 Q. So is it rational to assume that if a plant 9 like Sutherland 4 is built and then in some short 10 near term carbon regulations such as those that you 11 predict are enacted, that these older plants will 12 have to be shut down as a result of that regulation? 13 A. I think it is rational to expect that. I 14 think if you look at the bills that are currently 15 being considered in Congress--and I have a figure on 16 them. The proposed emission--reductions in emissions 17 that would be required, they basically go down over 18 time so that even though companies may be allocated 19 or have to buy at auction a certain number of 20 allowances that would recover these older--that would 21 include the emissions from these older plants you're 22 mentioning, over time they're not, and the 23 plants--certainly an old--40-year-old plant, 50-year- 24 old plant, I can't see how it would be economic to 25 retrofit for carbon capture and sequestration. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1125 1 The studies I have seen--and I'll cite 2 Duke Energy Indiana, in the case that counsel for the 3 company and I talked about--Jim Rogers, CEO of 4 Duke Energy, said that cost of retrofitting a 5 pulverized coal plant is likely to increase the cost 6 of power from the plant by 68 percent, which means 7 that the cost of power from the plant is roughly $60 8 a megawatt-hour. Carbon capture and sequestration 9 would change that 60 to a hundred, maybe 102. 10 I'm using the 60 as a hypothetical because I 11 think new coal plants would cost more than $60 per 12 megawatt-hour, but that's just an example, and that's 13 with Duke Energy, and it's generally consistent with 14 other studies I've seen. 15 Q. Okay. So just to put the very blunt point 16 on it, is it cheaper for consumers, in a world where 17 we're going to see carbon regulation in the very near 18 term, to build a plant like this and then shut down 19 or retrofit older dirtier plants or not to build now 20 and to wait for some future technological 21 improvement? 22 A. Well, I would echo what Dr. Hausman said 23 within the context of first you do what's the 24 cheapest, which is energy efficiency. Then you do 25 renewables, which I believe our EGEAS runs show 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1126 1 are less expensive. To the extent possible, those 2 can allow you to retire some older coal plants. 3 While you're doing that cheap stuff, you 4 wait for the studies to be done on carbon capture and 5 sequestration. There are any number of pilot 6 projects going on on both IGCC and pulverized coals 7 carbon capture and sequestration. 8 Once you know the technologies and the 9 costs, then you build your coal plants. 10 It seems to me that going and building a 11 coal plant and not knowing what the technology is 12 that you're going to have to implement, because 13 whether it's this year, next year, five years, 10 14 years, something's going to have to be done to reduce 15 emissions of CO2 into the atmosphere. 16 So it seems to me the smart way, from a 17 business point of view and a ratepayer point of view, 18 is wait for the technology to be developed, study it, 19 do pilot projects, and then implement it on a wide 20 scale. Don't build your plant when you don't know 21 what you're going to have to do and how much you're 22 going to have to spend to make it conform to future 23 regulations. 24 MS. LA SEUR: That's all I have. 25 BOARD MEMBER TANNER: Good afternoon. A 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1127 1 couple of quick questions. 2 Do any of the scenarios that you put forth 3 adjust the load forecast to include DSM impact? 4 THE WITNESS: Let me explain what they do, 5 and then if I don't satisfy you with my answer, you 6 can pursue it further with Mr. Parker. 7 BOARD MEMBER TANNER: Okay. 8 THE WITNESS: What we did was accept the 9 company's load forecast, and then we gave the model 10 DSM alternatives that it could select, a low-cost 11 alternative, a high-cost alternative, and a 12 low--sorry. A low-cost alternative with a certain 13 amount, total megawatts and a cost, a mid-cost 14 alternative, again, a certain maximum number of 15 megawatts that could be chosen at a cost, and third, 16 a high-cost DSM, and that was put into the model as 17 if it were a supply-side alternative, as if it was a 18 DSM plant, so that the model could select that if it 19 were more economic; i.e., lower cost than a new coal 20 plant or a gas plant or wind. 21 BOARD MEMBER TANNER: Okay. So when you say 22 that you used IPL's numbers and IPL has testified 23 that they did adjust their load forecast to include 24 DSM, do you accept the company's statement that they 25 already included that in their load forecast? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1128 1 THE WITNESS: You really need to pursue that 2 with Mr. Parker. He's looked at that. I have not. 3 BOARD MEMBER TANNER: Okay. I think you 4 have IPL Witness Kitchen's rebuttal testimony in 5 front of you. 6 THE WITNESS: Yes. 7 BOARD MEMBER TANNER: On page 32, lines 13 8 through 15--and this may be repetitive, I'm 9 sorry--but in essence, do you agree with IPL 10 Kitchen's rebuttal testimony that your EGEAS analysis 11 effectively double counts the impact of demand-side 12 management on IPL's load forecast? 13 THE WITNESS: No. We talked about this 14 after we received the rebuttal testimony. We don't 15 agree that it's double counting. Again, you should 16 pursue it further with Mr. Parker. To a certain 17 extent it might be that our levels of DSM really are 18 reflecting higher--we're reflecting higher levels of 19 DSM than the numbers in Mr. Parker's testimony may 20 indicate; but really, any further--any deeper than 21 that, he's the expert on it, this issue. 22 BOARD MEMBER TANNER: Your testimony also 23 cites rising construction costs. If the construction 24 of SGS Unit 4 were approved, would you recommend a 25 cost cap? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1129 1 THE WITNESS: Yes. What I've done in a 2 number of cases when the commissioners ask me 3 questions about what should they do, my answer is 4 basically require the company to have a cost cap on 5 construction and on CO2 cost recovery. 6 If they say that our Synapse CO2 prices are 7 too high and could never be achieved, then cap their 8 CO2 cost recovery at IPL's high cost, if that's what 9 they really believe CO2 costs are going to be. 10 BOARD MEMBER TANNER: Parties have differing 11 opinions on how to estimate costs due to future CO2 12 regulations, and would I be correct to state that 13 your opinion is that CO2 costs should be estimated for 14 a wide range of potential legislation? 15 THE WITNESS: Yes, ma'am. 16 BOARD MEMBER TANNER: And then on that 17 point, is it reasonable to expect that the most 18 stringent climate change legislation will be passed 19 by Congress? 20 THE WITNESS: No, we don't assume that the 21 most stringent will be passed. 22 If you look at my testimony-- Let me give 23 you an example. If you look at Figure 10 on page 50 24 of my testimony, I compare our projected CO2 costs 25 with the CO2 costs that were estimated by a study at 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1130 1 MIT that looked at the range of CO2 emission 2 reductions that would be required under the bills 3 that are now being considered in Congress, so one of 4 the scenarios was basically stabilize emissions at 5 2008. 6 A second scenario that MIT looked at was 7 reduce emissions by 50 percent by 2050. 8 The third scenario was reduce emissions by 9 80 percent from 1990 levels by 2050. 10 If you look here, you'll see our CO2 costs 11 are a lot lower, that the MIT analysis, the numbers 12 are far higher than what we project. 13 So we think our numbers are conservative, 14 and we don't think it's necessarily reasonable to 15 assume the most stringent legislation will be 16 adopted, but if you look at all the legislation that 17 is in Congress now and the bill--the Lieberman- 18 Werner bill, Senators Lieberman of Connecticut and 19 Werner of Virginia, is the first bill to make it out 20 of committee. It was voted approved in committee I 21 think in December--yeah, I think in December--and is 22 now before the full Senate. 23 That bill has very steep reductions in CO2 24 emissions required by the middle of the century, so 25 that there are politics. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1131 1 Then as Dr. Hausman said in his testimony, 2 there's also science. We need to get down to 450 to 3 550 parts per million by the middle of the century-- 4 that's generally agreed by the scientific community-- 5 in order to start stabilizing atmospheric 6 temperatures. 7 So Congress has to operate within the 8 political range and within the scientific facts, so I 9 think our high range is conservative. I don't know 10 if I've--I hope I've answered your question. 11 BOARD MEMBER TANNER: To follow up, ignoring 12 all other contested issues with the EGEAS model 13 inputs, if the CO2 cost impact of the most stringent 14 climate change legislation were the only case where 15 EGEAS did not select SGS Unit 4--that is, the 16 moderate climate change legislation still results in 17 selecting SGS Unit 4--isn't SGS Unit 4 reasonable in 18 terms of CO2 cost risk? 19 THE WITNESS: If it did select it, I mean I 20 guess--well, I guess the answer is--well, I don't 21 know how to answer the question because I want to 22 explain the answer. 23 The answer is no, it's not still reasonable 24 because I can't accept the premise that all the other 25 input assumptions are reasonable. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1132 1 BOARD MEMBER TANNER: But that's not it. 2 But what if they were not disputed? What if the 3 EGEAS model, all other issues being equal, only did 4 not select it on the highest--or on the most 5 stringent CO2 regulation scenario? 6 THE WITNESS: I would say to you that--I 7 would report that fact, and then I would say to you 8 you've got--still have a problem because the 9 estimated costs of carbon capture and sequestration 10 are significantly higher than the CO2 prices that 11 we're projecting; that the estimated costs of carbon 12 capture are roughly--are in a range of 30 to 80 13 dollars per ton, so even our high range may not be 14 high enough. 15 BOARD MEMBER TANNER: Is carbon capture the 16 only way to meet those regulations? 17 THE WITNESS: There are two ways to meet the 18 regulations: 19 You either buy an allowance--well, actually 20 three possible ways: 21 One, grandfathering so that they're not 22 included in the regulations. I don't think anybody 23 believes that that's going to happen. 24 The second is you buy allowances. 25 Third is you do--you retrofit your plant or 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1133 1 you build a new plant to allow carbon capture and 2 sequestration. 3 BOARD MEMBER TANNER: Well, let's talk about 4 allowances for a while. Is that the model-- 5 THE WITNESS: That's what we have modeled. 6 BOARD MEMBER TANNER: Okay. That's what you 7 have modeled. You've model that and not 8 sequestration. 9 THE WITNESS: Correct. We have not included 10 the cost of sequestration because it's much higher 11 than even our Synapse high range, and once we saw 12 that the price--that the plant wasn't selected at our 13 Synapse high range, there was no need to keep 14 increasing the cost of carbon capture. 15 The economic theory, as it's been explained 16 to me by many in the industry, is that you need an 17 allowance cost that is higher than the cost of 18 capture because nobody will do capture unless it's 19 cheaper than buying an allowance. 20 If it's cheaper to buy an allowance, then 21 you would buy allowances and keep emitting, so 22 eventually the cost of allowances you would expect 23 will go up to what the cost of carbon capture and 24 sequestration is, and no further, because then 25 there's no reason for the cost of allowances to go up 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1134 1 because it will be cheaper to do capture. 2 I hope that's clear. Seeing it in figures 3 is probably better. 4 BOARD MEMBER TANNER: It is. Thank you. 5 BOARD MEMBER HANSON: Okay. Mr. Schlissel, 6 on page 75 of your direct testimony-- 7 THE WITNESS: Yes. 8 BOARD MEMBER HANSON: I know this is marked 9 confidential so I won't--on page 75 of your 10 testimony, since it's marked confidential, I won't 11 talk about the numbers. I'm not sure what part of 12 this is confidential and what isn't, but you show two 13 scenarios that have higher power plant capital costs. 14 THE WITNESS: Yes, sir. 15 BOARD MEMBER HANSON: Do the figures there 16 represent--just to clarify, do they represent the 17 percent increase as a--is that considered to be, 18 let's say, a one-time upfront increase, an annual 19 increase, or an increase over the period of study? 20 THE WITNESS: Over the period of study. 21 BOARD MEMBER HANSON: Okay. 22 THE WITNESS: It's not an annual increase. 23 It was just basically what we thought were 24 reasonable. And, again, none of the information on 25 page 75 is confidential. All the confidential 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1135 1 information is shaded. 2 BOARD MEMBER HANSON: It's okay. You're 3 right, you're right. I'm newer at this than you are. 4 THE WITNESS: Okay. I can tell you look a 5 lot younger. 6 BOARD MEMBER HANSON: Yeah, right. 7 And would you say that that--and let's take, 8 for example, the 20 percent higher costs. So if 9 that's spread out over the period of study, is it 10 spread out evenly or is it front loaded or does it 11 really matter? 12 THE WITNESS: It does not matter. 13 BOARD MEMBER HANSON: Doesn't matter, okay. 14 THE WITNESS: Dr. Shi is here and he can 15 probably explain how EGEAS--how he actually inputs it 16 into EGEAS. I mean it may be that the cost increases 17 are experienced in the first three years, but not in 18 the third and fourth year or fourth and fifth year, 19 if it's a five-year project. There's no way to 20 predict that with specificity. 21 BOARD MEMBER HANSON: Okay. And just to be 22 sure, on page 77 you have similar scenarios that are 23 based on 20 or 40 percent higher power plant capital 24 costs. The answer is the same for those, I assume. 25 THE WITNESS: Yes. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1136 1 BOARD MEMBER HANSON: Okay. 2 THE WITNESS: Table 7 reports the results of 3 the scenarios that are described in Table 6. 4 BOARD MEMBER HANSON: Okay. Let's talk a 5 little bit about the--go back to the issue of 6 increases in the cost of wind or natural gas that 7 might be triggered by carbon regulation. 8 If I understand the argument correctly that 9 was made by the IPL witness, they are discussing 10 specifically what I would call the 11 substitution-driven increases in the price because 12 some people who would otherwise have purchased or 13 generated power from coal will, because of higher 14 prices, be able to--they will choose to substitute 15 wind or natural gas, so I'm talking specifically 16 about that component of future price increases, not 17 other price increases that would come from some other 18 place. 19 THE WITNESS: Okay. 20 BOARD MEMBER HANSON: And I know you covered 21 how you're--you covered the different assumptions, to 22 some degree, of what future cost increases might be 23 in those two components, but are you able to 24 determine, from the information both that you have 25 and that the company presented, how your assumptions 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1137 1 of that substitution-driven component of price 2 increases for wind and natural gas differ--how much-- 3 how they differ from the assumptions that the IPL 4 witness used? 5 THE WITNESS: Yes. After I received the 6 IPL--Mr. Kitchen's rebuttal testimony, I looked at 7 what he said, and the argument is appealing. It 8 certainly makes common sense that if you're going to 9 burn more natural gas, well, that will push the price 10 up, so-- 11 BOARD MEMBER HANSON: Well, it's also, I 12 would assume, that--not to make anybody's argument 13 for them, but I assume it also would come into 14 perhaps a higher demand for building generating 15 capacity from those sources as well, but I just want 16 to know if you know, you know, what's their number, 17 what's your number. 18 THE WITNESS: I was just getting to that. 19 BOARD MEMBER HANSON: Okay. 20 THE WITNESS: So what I did was I went back 21 to all the studies I've got on CO2 prices. I 22 mentioned them in my testimony, the analyses of 23 certain bills by the energy administration 24 agency--sorry--Energy Information Administration of 25 the DOE, by the EPA, by MIT, the Natural Gas Council 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1138 1 study that Mr. Friedman includes, and I looked at the 2 results of all of those. That was what was in my 3 updated testimony. I had figures that I had produced 4 which don't show a 10 percent or 20 percent increase. 5 They show, in some scenarios, that the 6 effect of--excuse me--the effect of CO2 regulation 7 will be reduced natural gas prices because while 8 there's a substitution from coal, there will also be 9 a substitution from natural gas to lower carbon 10 emitting sources, add to energy efficiency and to 11 nuclear, to some extent. So that you've got--it's a 12 very, very complicated process. 13 BOARD MEMBER HANSON: That was something 14 that I was not clear as to whether those studies you 15 talked about were dynamic with respect to changes in 16 demand or if they were just simply looking at direct 17 costs of the legislation. 18 THE WITNESS: No, no. The materials I 19 talked about in response to a question by Ms. La Seur 20 and that were in my updated testimony were strictly 21 the demand-related questions, did not include the 22 cost-- 23 BOARD MEMBER HANSON: Let's talk about wind, 24 then. 25 THE WITNESS: Okay. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1139 1 BOARD MEMBER HANSON: Again, presumably the 2 argument can be made that the substitution away from 3 coal and, as you said, away from natural gas, could 4 lead to greater demand for building wind generating 5 capacity which would lead to a higher price for 6 generating wind energy. 7 Do you have numbers as to what that 8 substitution-driven price change might be for wind, 9 leaving out normal construction costs, and so on? 10 THE WITNESS: No. I've seen no studies that 11 include that. The company in discovery wasn't able 12 to provide any studies of it either. 13 What's happening with wind is different with 14 natural gas in one major aspect: In wind, the 15 manufacturing capacity is expanding dramatically. I 16 know you've got several plants that have either been 17 built in Iowa or that are coming, and that's 18 happening worldwide. The manufacturing capacity for 19 wind turbines, wind blades, and related equipment is 20 expanding so that many believe that over time, the 21 capacity will catch up to and exceed demand. 22 BOARD MEMBER HANSON: But there is no 23 numbers that you're aware of. 24 THE WITNESS: I can't give you a number. 25 I can't tell you it's 2 percent, 5 percent, 3 percent. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1140 1 BOARD MEMBER HANSON: Then--and I've asked 2 this question of other witnesses, but I think we're 3 still looking for a definitive answer. 4 On page 15 of Mr. Kitchen's rebuttal 5 testimony-- 6 THE WITNESS: Yes, sir. 7 BOARD MEMBER HANSON: --starting with 8 line 4, he says that Mr. Drunsic fails to present a 9 scenario, and unfortunately I didn't have my material 10 together in time to ask Mr. Drunsic, but hopefully 11 you can answer this--Mr. Drunsic fails to present a 12 scenario where the number of superfluous units is 13 changed from two to 10 under the costs and 14 assumptions of IPL's base case, and that changing the 15 number of superfluous units from two to 10, if that's 16 the only variable change, causes no change to IPL's 17 2007 EGEAS base case. 18 Now, do you have any comments on that, on 19 those results that appear to show that their base- 20 case expansion plan did not change if that was the 21 only change in inputs, either on the accuracy of that 22 statement or the significance of that statement? 23 THE WITNESS: Well, I'm confused by his 24 statement because Table 7 of my--sorry, six--Table 7 25 of my testimony on page 77 indicates that we did 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1141 1 change their base-case assumptions--I'm sorry. We 2 used their base-case assumptions, except we changed 3 the number of superfluous units from two to 10, so I 4 think Mr. Kitchen is wrong that we didn't look at it. 5 What he says then is that there changing the 6 number of superfluous units from two to 10 causes no 7 change to IPL's 2007 EGEAS base case. 8 In terms of SGS Unit 4, it still comes in in 9 2013. 10 Now, you asked me to comment on his 11 conclusions. The base case assumes zero CO2 prices 12 for the next--for the life of the plant. You have to 13 assume that Congress will never enact a cap and trade 14 program, will never enact a carbon tax, that the 15 State of Iowa, either alone or regionally, in the 16 absence of Congressional action will not take any 17 action, and I think that's beyond being an 18 unrealistic assumption. 19 BOARD MEMBER HANSON: Okay. Then my last 20 question, I think, let's assume for the sake of 21 argument that in this proceeding IPL effectively 22 demonstrates that they have a need to somehow find 23 more baseload capacity. If this plant is not an 24 option, what options does the utility have to meet 25 that increased baseload capacity, and do you have any 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1142 1 reason--and do you have reasons as to why those 2 options would be expected to have lower capital 3 costs? 4 THE WITNESS: Yes. What I believe--if you 5 decide there's a need, a reasonable need, that the 6 least bad alternative is to build combined--either 7 combustion turbine or combined cycle gas capacity, do 8 DSM and do wind. The purpose of the--the effect of 9 the wind and the DSM is you don't run the gas 10 capacity as much, and you're not subject to the 11 higher gas prices. That's the least bad alternative. 12 BOARD MEMBER HANSON: From the standpoint of 13 capital costs? 14 THE WITNESS: Right. If you believe that 15 there is a need, that you have to have more capacity 16 online, more baseload capacity, then build the 17 minimum amount of combined cycle and do wind and DSM 18 so that you run that gas capacity as little as 19 possible, unless running that gas capacity is cleaner 20 than running the old clunker coal plants that 21 Ms. La Seur was asking me about. 22 So I mean I'm not standing here from the 23 Natural Gas Council telling you to build gas because 24 it's the greatest thing, as they used to say in their 25 TV ads. I just think that it doesn't tie you in as 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1143 1 much as building SGS Unit 4 does for your future 2 options. 3 BOARD MEMBER HANSON: Okay. Thank you. 4 BOARD MEMBER TANNER: I just have a quick 5 follow-up to Board Member Hanson. 6 Do you agree with your colleague that wind 7 is baseload generation? 8 THE WITNESS: On its own, no. Wind as part 9 of a portfolio with some gas capacity or hydro 10 capacity can provide baseload energy, and wind, as 11 the discussion this morning went on and on and on 12 about, does have some value for reliability, the 13 capacity credit that they were talking about, but you 14 wouldn't build--unless you were the Himalayas 15 Utility, you wouldn't build wind and expect it to be 16 there on peak hours. You have to allow that only a 17 portion of the wind will be there during your peak. 18 So on its own, I don't think of wind as 19 being a baseload, but if you can combine it with firm 20 purchases in the market or building gas or hydro or 21 biomass, then it can be a baseload energy resource. 22 BOARD MEMBER TANNER: Okay. Thank you. 23 CHAIRPERSON NORRIS: Mr. Stead? 24 MR. STEAD: Thank you, Your Honor. Just a 25 couple of questions. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1144 1 REDIRECT EXAMINATION 2 BY MR. STEAD: 3 Q. Early on, Mr. Schlissel, you were asked by 4 IPL counsel if IPL had a duty to serve its customers 5 with or without SGS 4. Do you remember that 6 discussion? 7 A. Yes. 8 Q. Can IPL carry out its obligations to serve 9 its customers in the future without SGS 4? 10 A. Well, sure. Depending on its resources, 11 existing resources and its need, there are 12 alternatives. Those are the alternatives we looked 13 at in EGEAS. 14 Q. Could you explain what those alternatives 15 are specifically? 16 A. Well, I think as the commissioners 17 questioned, as I answered it, you've got the ability 18 to build gas, which is a lot less capital intensive 19 and can be done quicker. You have the ability to do 20 wind. You have the ability to do energy efficiency, 21 biomass. So there are--you could do load response. 22 I know that MISO is developing a load demand--a 23 demand response program where people actually get 24 paid not to generate on peak, which has been 25 effective, to some extent, in ISO New England and 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1145 1 New York and PJM. So there are alternatives for 2 meeting expected demands. 3 Q. So you feel that there are reasonable and 4 cost effective alternatives to replace SGS 4 in this 5 proceeding? 6 A. Yes. We believe that the results of our 7 EGEAS study show that there are and that if the 8 company focused its energies on identifying and 9 implementing those alternatives, that they could 10 certainly--there is every reason to believe that they 11 would be successful at it. 12 Q. Earlier IPL's counsel asked you about some 13 previous testimony you had given on proposed coal 14 plants. Do you remember that discussion? 15 A. Yes. 16 Q. In your testimonies about proposed coal 17 plants, did any commissions decide to deny 18 certificates? 19 A. Yes. As I discussed with counsel for the 20 company, in the Duke case, the Cliffside project, the 21 company said they needed two units. The commission 22 only certified one. 23 In the Florida Glades project, the company-- 24 Florida Power and Light came in and said they needed 25 2,000 megawatts from two 960-megawatt coal plants or 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1146 1 the lights would go out. The commission said no, and 2 in Florida now, there's basically a boom, a 3 blossoming of energy efficiency programs. The 4 governor has set a state policy and there are lots 5 and lots of efforts in terms of reducing carbon 6 emissions. At the same time they're trying to slow 7 down or stop the tremendous growth in demand that 8 Florida has been experiencing. So there is life 9 after coal. 10 MR. STEAD: I only have two other items. I 11 would like to mark, I believe, OCA Exhibit 126. 12 (OCA Exhibit 126 was marked 13 for identification.) 14 BY MR. STEAD: 15 Q. You discussed with counsel for the Coalition 16 the Charles River Associates study, is that correct? 17 MR. RAGSDALE: I would like to object to the 18 attempt to introduce additional evidence in response 19 to questions of Ms. La Seur that were posed to this 20 witness. 21 MR. STEAD: This was prior to any objections 22 for leading questions, or that type of objection, 23 Your Honor. 24 CHAIRPERSON NORRIS: What's this being 25 introduced in response to, then? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1147 1 MR. STEAD: Charles River Associates, CRA. 2 CHAIRPERSON NORRIS: But it's being 3 introduced in response to what, Mr. Stead? 4 MR. STEAD: The question of Ms. La Seur of 5 Mr. Schlissel about the Charles River Associates 6 study, and this document is a critique of that study. 7 MR. RAGSDALE: I think that if the OCA wants 8 to use this exhibit in cross-examination of our 9 witness who talked about that study, I would not 10 object, but from the standpoint that this topic was 11 brought forward in friendly cross-examination, I just 12 don't think it's appropriate to use this exhibit 13 through this witness. 14 MS. LA SEUR: I would note that we did not 15 object to the introduction of IPL Exhibit 25, which 16 appears to be a rebuttal to IPL's own testimony 17 regarding Ontario's electricity market. 18 MR. STEAD: If I could ask some foundational 19 questions, would that help, or do you want to rule on 20 it? 21 CHAIRPERSON NORRIS: Please. 22 BY MR. STEAD: 23 Q. Mr. Schlissel, are you familiar with 24 Exhibit 126? 25 A. Yes. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1148 1 Q. Do you find that to be a reliable document? 2 A. Yes. 3 Q. And who was it prepared by? 4 A. The Pew Center on Global Climate Change. 5 Q. Do you find them to be a credible 6 organization? 7 A. Yes. I've reviewed a number of studies and 8 documents they've prepared, and they seem--and what 9 they say seems to be consistent with the facts as 10 I've reviewed them. 11 Q. Would you find this something to be 12 reasonable evidence to rely on in a proceeding such 13 as this? 14 A. Yes, I would believe so. 15 MR. STEAD: We would move the admission of 16 Exhibit 126. 17 CHAIRPERSON NORRIS: I'm not sure whether 18 the question is reliable or not. I think it's 19 whether you're introducing a whole new line-- 20 MR. RAGSDALE: As I said earlier, I believe 21 we have a witness who talks about this study, and if 22 they want to use this for cross-examination of our 23 witness, that's perfectly legitimate, but this was 24 introduced--the topic was introduced through friendly 25 cross-examination, so that's really the basis. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1149 1 MR. STEAD: That's not correct, Your Honor. 2 There was no objection at that time of the 3 Charles River Associates discussion when Mr. Ragsdale 4 made his objection. 5 MR. RAGSDALE: Well, I think that there has 6 been no dispute that all of Ms. La Seur's questions 7 of the OCA's witnesses have been in the guise of 8 friendly cross-examination. 9 CHAIRPERSON NORRIS: This is redirect. This 10 seems to be not anywhere in the previous testimony or 11 content of what this witness has talked about prior 12 to this hearing, and I do agree that Ms. La Seur 13 can't open up a whole new line of direct 14 cross-examination of this witness. 15 MR. STEAD: That's fine. We can use it with 16 Mr. Friedman. We'll see then if IPL counsel objects. 17 MR. RAGSDALE: I think I'll be constrained 18 not to. 19 CHAIRPERSON NORRIS: I think he said he'll 20 be willing to have it introduced then. 21 BY MR. STEAD: 22 Q. One last question. Mr. Schlissel, your 23 comments tonight and if you go to Iowa City tomorrow 24 night will be your own comments and not necessarily 25 the Office of Consumer Advocate's, is that correct? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1150 1 A. That's correct. My comments will just be on 2 the risks, as I've testified to them in this case, 3 nothing beyond that. 4 MR. STEAD: That's all we have, Your Honor. 5 Thank you. 6 CHAIRPERSON NORRIS: Mr. Ragsdale. 7 MR. RAGSDALE: Yes, I have just a very 8 limited recross-examination, if I could. 9 CHAIRPERSON NORRIS: Uh-huh. 10 RECROSS-EXAMINATION 11 BY MR. RAGSDALE: 12 Q. I believe you discussed this topic with both 13 Ms. La Seur and Commissioner Hanson. It has to do 14 with the increase in capital cost in the EGEAS runs, 15 and I believe that you indicated that one scenario 16 was a 20 percent increase in capital cost, and that 17 was applied to potential coal plants and also wind 18 plants, is that correct? 19 A. All the alternatives, yes. 20 Q. All the alternatives. And so from the 21 standpoint--20 percent, in that example, was used for 22 wind capital costs, natural gas fuels to power 23 plants? 24 A. Yes, sir. 25 Q. Okay. And why was the same percentage used 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1151 1 for all scenarios? Were you looking at the same 2 general material cost increases? 3 A. Yes. We were assuming that the same 4 material cost increases and design costs and costs of 5 engineering procurement and construction contracts 6 would affect each of the alternatives. 7 Q. So that did not take into consideration, one 8 way or the other, whether any particular power plant 9 technology was subject to a higher demand than 10 another alternative? 11 A. No. We believe that coal was probably 12 subject to--because it's more capital intensive than 13 the others, was probably subject to a higher risk of 14 capital cost increases, but we thought that to be 15 conservative, we would apply the same percentage to 16 each of them. 17 Q. And that scenario, did that have--did that 18 look at the impact of carbon regulation on the 19 different technologies? 20 A. No, not specifically, but it does--I mean it 21 does--it is directly reflecting carbon regulation 22 because of the increased demand for wind. 23 Q. So the component of the increase in capital 24 costs for wind was 20 percent, and that reflects 25 carbon regulation? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1152 1 A. Yes. I mean indirectly it does. 2 Q. Indirectly. Now, in questioning, you 3 mentioned Xcel Energy Company. 4 A. Yes, sir. 5 Q. And you talked about their Minnesota 6 affiliate. 7 A. Yes. 8 Q. Isn't it correct that their Colorado 9 affiliate is building a coal plant? 10 A. They are, but they've said that no more. 11 They started that project several years ago, and 12 they've announced both in their Colorado and 13 Minnesota IRP filings, resource plan filings, that 14 they're going to stay away from coal because it's too 15 risky for new plants. 16 Q. In response to a question from Board Member 17 Hanson--and I believe this was in regards to the 18 natural gas price curve in the future. 19 A. Okay. 20 Q. And I think you made some remark about that 21 there's some scenarios in which natural gas prices 22 could be reduced, and I think in that answer you 23 talked about that perhaps being due to nuclear. 24 Do you recall that exchange? 25 A. Yes. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1153 1 Q. And I guess the question that wasn't clear 2 to me when you mentioned nuclear, are you implying in 3 that answer that there would be more nuclear plants 4 being built? 5 A. There are certainly proposals to build more 6 nuclear plants, as I'm sure you're aware of just by 7 reading the trade information, that to the extent 8 that more nuclear plants are built, it is an 9 alternative to natural--I'm sorry--it replaces 10 natural gas as an alternative to coal. 11 Q. Again, I was trying to clarify and 12 understand your testimony here when you said that 13 some of the scenarios you anticipate under carbon 14 regulation that the price of natural gas may go down, 15 and you mentioned nuclear. You didn't say anything 16 other than you mentioned because of nuclear. I was 17 trying to figure if you were talking about existing 18 nuclear units. 19 A. No, no. I'm talking about--well, you've got 20 a couple of factors. You either can have license 21 extension at existing nuclear power plants, which I 22 think we're all familiar with. You could have power 23 upgrades, or you could have new nuclear power plants. 24 I mean so that that's one of the alternatives, along 25 with energy efficiency and wind and other renewables. 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1154 1 Q. And isn't it correct that you have advised 2 people in the investment community that new nuclear 3 plants are extremely risky? 4 A. Yes, they certainly are risky. 5 MR. RAGSDALE: That's all I have. 6 MR. PUCKETT: No questions. 7 CHAIRPERSON NORRIS: Ms. La Seur? 8 MS. LA SEUR: No questions. 9 CHAIRPERSON NORRIS: Mr. Schlissel, just so 10 I--all the witnesses run together now in my mind. I 11 apologize. 12 Are you against building any new coal plants 13 or are you against building coal plants if there is 14 IGCC technology, or what has been the gist of your 15 agenda here? 16 THE WITNESS: My view is that you build a 17 new coal plant when you can make a commitment to 18 capture and sequester 90 percent of the emissions, 19 that if IPL was in here saying we have a plan, we 20 have the technology, and it's less costly than the 21 alternatives, then I would be in Boston right now 22 instead of in Marshalltown, Iowa, because I would 23 say, well, if it's more economic and they can capture 24 it, that's a great idea. 25 CHAIRPERSON NORRIS: Mr. Stead? 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1155 1 MR. STEAD: Nothing further, Your Honor. 2 CHAIRPERSON NORRIS: Anybody else? 3 (No response.) 4 THE WITNESS: Thank you very much. 5 CHAIRPERSON NORRIS: Thank you, Mr. Schlissel. 6 (Witness excused.) 7 MR. RAGSDALE: I don't know what your plans 8 are for the rest of today. I know the OCA does have 9 an additional witness, and when we talked earlier 10 this morning, we did indicate that if the Board 11 wanted to talk with Mr. Aller today about the 12 strategic planning of the company, he's available 13 today. He's not available the rest of the week, 14 although I think we might have other people later in 15 the week who could pinch hit for him, but like I say, 16 I don't know what your preferences are in regards to 17 that. 18 CHAIRPERSON NORRIS: All right. Is 19 Mr. Parker available tomorrow? 20 MR. STEAD: Yes. 21 CHAIRPERSON NORRIS: Let me confer here. 22 (Discussion off the record.) 23 CHAIRPERSON NORRIS: All right. I think the 24 Board is comfortable we can get to probably any 25 questions we might have with your remaining 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1156 1 witnesses. 2 MR. RAGSDALE: Okay. 3 CHAIRPERSON NORRIS: It's less about the 4 process, but I wanted to ask other counsel if you 5 have questions about the strategic document. 6 MR. STEAD: Well, now, it's my understanding 7 from yesterday's discussion that Mr. Ragsdale had 8 with the Board that Mr. Aller could only talk about 9 process, nothing about the content of the document; 10 is that correct? 11 MR. RAGSDALE: That's right. 12 MR. STEAD: So we have no questions about 13 the process for Mr. Aller. We have Mr. Guelker 14 that's been referred to for content by Mr. Kitchen. 15 CHAIRPERSON NORRIS: I think that was where 16 we were as well. Ours was more about content, not 17 necessarily about process. 18 MR. RAGSDALE: Okay. 19 CHAIRPERSON NORRIS: All right. Well, given 20 that, weather permitting, we'll see you all here at 9 21 in the morning starting with OCA's last witness. 22 MR. STEAD: Thank you, Your Honor. 23 (Recess at 5:10 p.m. until 9:00 a.m., 24 Thursday, January 16, 2008.) 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596 1157 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 23rd day of 14 January, 2008. 15 16 17 CERTIFIED SHORTHAND REPORTER 18 19 20 21 22 23 24 25 837 317 Sixth Avenue, Suite 606 Des Moines, IA 50309-4155 (515) 243-6596