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LARGE POWER INTERVENORS
Utility Information Request
Docket Number: E015/CN-12-1163
Date of Request: August 20, 2014
Requested From: Large Power Intervenors
Response Requested: August 29, 2014
By:
Large Power Intervenors (Andrew Moratzka, Chad T. Marriott , Lane Kollen and Phil
Hayet)
Request
No.
019
Please describe the status of the additional 133 MW PPA contract and provide all
economic evaluations that have been performed, including any Strategist analyses.
Please provide the analyses, workpapers, reports, and documentation associated with the
evaluations, electronically, with all formulas intact. If no studies have been performed,
please explain why not. If studies are in progress, or will be performed in the future,
please fully describe the studies that will be performed, and state when they will be
available. Furthermore, when they do become available, please provide those studies.
Response:
Minnesota Power has executed 133 MW Renewable Optimization Agreements with Manitoba
Hydro. These agreements accompany the previously executed 250 MW Power Purchase
Agreement to create a unique power system partnership that brings additional benefits to
Minnesota Power customers. Minnesota Power is currently in the process of developing a
petition filing to gain Minnesota Public Utilities Commission approval of these agreements as it
did with the 250 MW Power Purchase Agreement. As part of the filing process Minnesota Power
is creating the associated Strategist production cost analysis and supporting data which will be
available as part of the submittal planned for later this year.
The economic benefits that the 133 MW Renewable Optimization Agreements have for
Minnesota Power’s customers are described and supported by the economic evaluations
referenced in the testimony of Mr. Allan S. Rudeck beginning with page 15 line 3 where he
reviews the components of the 133 MW agreements and identifies how the addition of this
unique resource arrangement allows further optimization value to Minnesota Power customers of
our substantial investments in wind energy. Over the twenty year term of the 133 MW
Agreements, Minnesota Power customers are projected to receive between [TRADE SECRET
DATA EXCISED] in comparison to not having the 133 MW Renewable Optimization
Agreements. Mr. Rudeck goes into more specifics starting on page 16 line 16 on the benefits of
the individual attributes of the Renewable Optimization Agreements. Each of the customer
benefits are summarized below with reference provided to the high level economic analysis
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conducted which is provided in the attached TRADE SECRET Excel workbook named
“LPI_IR19_Economic Analysis_TS.xls”.
Renewable Energy: The 133 MW Power Purchase Agreement component of the Renewable
Optimization Agreements will bring up to 230,000 MWh of carbon free energy to Minnesota
Power customers each year. In turn Minnesota Power will be able to reduce its reliance on short
term wholesale market based energy and its associated regional emission profile. The
environmental attributes that come with the renewable energy will have the potential for a range
of benefits as provided in the illustrative examples in Mr. Rudeck’s testimony on page 17, line
15 of $1 M to $9 M depending on market conditions. [TRADE SECRET DATA EXCISED].
Reducing Minnesota Power’s reliance on carbon based energy will protect and provide valuable
tools for meeting future carbon and renewable requirements as they unfold within the state and
nationally.
Wind Energy Storage: The Energy Exchange Agreement component of the Renewable
Optimization Agreements allows Minnesota Power to gain access to an additional 750,000 MWh
of wind storage as referenced in the pricing provisions of Exhibit ______ (AJR), Schedule
2(page 282) of Mr. Rudeck’s testimony. Minnesota customers are projected to see $1.7 M - $4 M
each year from the additional wind storage depending on market conditions (higher market
conditions yields higher customer benefit).
Must Take Fee: The 133 MW Power Purchase Agreement component of the Renewable
Optimization Agreements contains this provision in section 6.2 of Exhibit ______ (AJR),
Schedule 2 on page 170. The Must Take Fee will reduce Minnesota Power customer’s
transmission delivery costs for delivering the additional renewable energy identified in the 133
MW power purchase (see Excel workbook provided as the attachment in LPI IR_17). [TRADE
SECRET DATA EXCISED].
Path to lower cost transmission delivery mechanism for the 250 MW PPA: With the additional
133 MW Renewable Optimization agreements Minnesota Power and Manitoba Hydro were able
to solidify a 500kV Transmission Project option for customers. In turn having access to the 500
kV project will reduce the transmission delivery costs and enable higher efficiency for the
Manitoba Hydro 250 MW PPA from the 230 kV transmission delivery alternative included in the
Certificate of Need application.
As stated in Mr. Donahue’s testimony on page 12, line 19 the current expected capital costs for
the 230 kV option range from $277 million to $355 million (2013 dollars), when compared with
the $158 M to $201 M range of capital costs of the 500 kV project identified by Mr. Donahue on
page 5, line 15 of his testimony. The annual customer capital savings attributed to having the 500
kV project to deliver the 250 MW PPA vs. the 230 kV option is estimated to be $17 M to $22 M.
The graphic below summarizes the projected annual customer benefit from the four categories
described above that are included in the 133 MW Renewable Optimization Agreements. As
emphasized by the testimony provided, the 133 MW Renewable Optimization Agreements
provide significant benefit to customers the calculations that go into these values are provided in
the attached TRADE SECRET Excel workbook “LPI_IR19_Economic Analysis_TS.xls”.
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In summary, the partnership of the Manitoba Hydro 250 MW power purchase, with the 133 MW
Renewable Optimization Agreements creates 383 MW of renewable energy and power supply
for Minnesota Power customers. Together these agreements allow access to a premier 500 kV
transmission line project to efficiently deliver this carbon free power supply and allow
Minnesota Power to continue with its EnergyForward resource strategy that is diversifying its
power supply to include 1/3 renewables, 1/3 natural gas and 1/3 coal fired generation.
Response by: Julie Pierce
List Sources of Information:
Title:
Manager, Resource Planning
_______________________________
Department:
Strategy and Planning ___
_______________________________
Telephone:
218-355-3823 _______________________________
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