31
Ex.-WPL-Terzic-3 PSC REF#:278792 Public Service Commission of Wisconsin RECEIVED: 12/04/15, 12:23:18 PM
Ex.-WPL-Terzic-3
PSC REF#:278792Public Service Commission of Wisconsin
RECEIVED: 12/04/15, 12:23:18 PM
BEFORE THE
PUBLIC SERVICE COMMISSION OF WISCONSIN Application of Wisconsin Electric Power Company for a Certificate of Public Convenience and Necessity to Construct a Wind Electric Generation Facility and Associated Electric Facilities, to be Located in the Towns of Randolph and Scott, Columbia County, Wisconsin
6630-CE-302
VOLUME 1 Prefiled Testimony Pages
November 2, 2009 100-220, 300-315, 316p-318p, D3.1p-D3.24p, D4.1p-D4.24p, D7.1-D7.19, D9.1-D9.17, D9.18r, D9.21-D9.29, D10.1-D10.18, D10.100-D10.126, R1.1-R1.22, R1.23p-R1.44p, R1.45-R1.118, R2.1-R2.16, R5.1-R5.2, R9.1-R9.3, R10.1-R10.5, SR1.1p-SR1.6p, SR1.7-SR1.27, SR2.1-SR2.36, SR3.1p-SR3.9p, SR7.1-SR7.3, SR9.1-SR9.30, SR10.1-SR10.10, SR10.100-SR10.111, SSR1.1-SSR1.27
PSC REF#:123985Public Service Commission of Wisconsin
RECEIVED: 11/25/09, 5:57:47 PM
Ex.-WPL-Terzic-3
Direct Testimony
Andrew J. Hesselbach
Jeffrey Elver
Stephen R. Jones
Terrence W. Carroll
Richard E. Q' Conor
Susan M. Schumacher
Supplemental Direct Testimony
Jeffrey Elver
Stephen R. Jones
Richard E. Q'Conor
Direct Testimony
Michael Arndt
Mark Leaman
Supplemental Direct Testimony
Mark Leaman
Direct Testimony
Jonathan Wallach
Jerry E. Mendl
Michael J. Vickerman
Mick Sagrillo
Gary Steinich
INDEX
Pages
100
124
138
156
178
202
211
215
217
300
305
316p
D3.1p
D4.1p
D7.1
D7.9
D9.1
Ex.-WPL-Terzic-3
Direct Testimony
Jeffrey Bump
Kurt C. Kielisch
Larry Wunsch
. Gerry Meyer
Richard R. James
Michael John Jaeger
James A. Lepinski
Jeffrey a. Kitsembel
Cheryl Laatsch
Shari Koslowsky
David Redell
Supplemental Direct Testimony
David Redell
Rebuttal Testimony
Andrew J. Hesselbach
Jeffrey R. Elver
JohnJ. Reed
Terrence W. Carroll
Susan M. Schumacher
George Hessler
Geoff Leventhall
INDEX
Pages
D9A
D9.11
D9.13
D9.16
D9.21
DIO.l
DlOA
DIO.12
DlO.lOO
DlO.105
DIO.lI5
DI0.125
R1.1
RI.19
R1.23p
RIA5
Rl.50
Rl.62
R1.73
Ex.-WPL-Terzic-3
INDEX
Rebuttal Testimony Pages
Mark Roberts R1.97
Richard S. Larkin R1.109
Mark Leaman R2.1
Bryan Schueler R2.11
RodKok R5.1
JeflTey Bump R9.1
Jeffery A. Kitsembel RIO.l
James A. Lepinski RIOA
Surrebuttal Testimony
JohnJ. Reed SR1.Ip
Terrence W. Carroll SR1.7
Richard E. O'conor SR1.13
Andrew J. Hesselbach SR1.I6
Mark Leaman SR2.I
Bryan Schueler SR2.34
Jonathan Wallach SR3.lp
Michael J. Vickennan SR7.I
Gary Steinich SR9.I
Richard R. James SR9A
Kurt C. Kielisch SR9.23
Jeffrey Bump SR9.29
Ex.-WPL-Terzic-3
Surrebuttal Testimony
Jeffery A. Kitsembel
James A. Lepinski
Shari Koslowsky
David Redell
Sur-Surrebuttal Testimony
Andrew J. Hesselbach
Susan M. Schumacher
Geoff Leventhall
George Hessler
Mark Roberts
Richard Larkin
INDEX
Pages
SRlO.l
SRlO.3
SRlO.100
SRIO.105
SSRl.l
SSRl.3
SSRl.lO
SSRl.l5
SSRl.20
SSRI.25
Ex.-WPL-Terzic-3
PSC REF#:109341
1 BEFORE THE 2 PUBLIC SERVICE COMMISSION OF WISCONSIN
3 Application for a Certificate of Public Convenience and ) 4 Necessity to Construct and Place in Service a Wind ) 5 Turbine Electric Generation Facility Known as the Glacier) Docket No. 6630-CE-302 6 Hills Wind Park in Columbia County, Wisconsin ) 7
8 DIRECT TESTIMONY OF ANDREW J. HESSELBACH
9 ON BEHALF OF WISCONSIN ELECTRIC POWER COMPANY
10 11 Q. PLEASE STATE YOUR NAME, BUSINESS ADDRESS AND TITLE.
12 A. My name is Andrew J. Hesselbach. My business address is 231 West Michigan
13 Street, Milwaukee, Wisconsin 53203. I am the Wind Farm Project Manager for the
14 Wind Generation group of Wisconsin Electric Power Company (Wisconsin Electric
15 or the Company).
16 Q. PLEASE DESCRIBE YOUR EDUCATIONAL AND PROFESSIONAL
17 BACKGROUND.
18 A. I received a Bachelor of Science Degree in Industrial Engineering from the
19 University of Wisconsin Madison in 1990. In 1994 I received my Wisconsin
20 certificate as a Registered Professional Engineer and in 1996 earned a Master of
21 Business Degree from Marquette University. I joined the Company in 1992 and for
22 the past 17 years I have held management positions in engineering, operations,
23 customer relations, energy marketing, and project development. Since 2001 my
24 responsibilities have focused on electric generation power development, first working
25 on the Port Washington Generating Station and Elm Road Generating Station projects
26 as part of Wisconsin Energy's Power the Future initiative, and beginning in 2005 on
100
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Ex.-WPL-Terzic-3
1 wind generation projects. As part of my generation development work I have
2 provided extensive testimony in PSCW proceedings.
3 Q. WHAT ARE YOUR RESPONSIBILITIES FOR THE GLACIER HILLS WIND
4 PARK PROJECT?
5 A I am the Project Manager and am responsible for project permitting, development,
6 and turbine acquisition for the Glacier Hills Wind Park (GHWP or the Project).
7 Q. WHAT ARE THE PURPOSES OF YOUR TESTIMONY IN THIS
8 PROCEEDING?
9 A. The purposes of my testimony are to 1) sponsor Wisconsin Electric's Glacier
10 Hills Wind Park CPCN application filed with the Commission on October 24, 2008
11 and the associated Technical Support document (TSD) as amended; 2) briefly identify
12 the Project components; 3) provide an overview of the Project, including the Project
13 development history and how Wisconsin Electric became involved in the Project; 4)
14 discuss the role that the Project will play in Wisconsin Electric's plan to satisfy the
15 state's Renewable Portfolio Standards (RPS); 5) describe the landowner agreements,
16 permits, and meteorological equipment and data Wisconsin Electric acquired with the
17 purchase of the Project; 6) explain the current status of the wind turbine equipment
18 market and its effect on Wisconsin Electric's strategy for the Project; 7) discuss the
19 Project construction schedule; and 8) explain what Wisconsin Electric is requesting of
20 the Commission, by when and why. My testimony also identifies the witnesses who
21 will provide testimony on behalf of Wisconsin Electric and the subjects their
22 testimony will address.
23 Q. ARE YOU SPONSORING ANY EXHIBITS WITH YOUR TESTIMONY?
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Ex.-WPL-Terzic-3
I A Yes. Wisconsin Electric's Application for a Certificate of Public Convenience
2 and Necessity (CPCN), including all updates and additions, has been filed
3 electronically with the Commission. A listing of the associated filings is marked and
4 offered as Exhibit 1.
5 Q. PLEASE PROVIDE A LIST OF THE WITNESSES WHO ARE PROVIDING
6 TESTIMONY ON BEHALF OF WISCONSIN ELECTRIC, INCLUDING A
7 BRIEF EXPLANATION OF WHAT EACH WILL ADDRESS IN THEIR
8 TESTIMONY.
9 A 10
Andrew Hesselbach
Jeff Elver Stephen Jones
Terry Carroll
Richard O'Conor
Susan Schumacher
Project overview and history; landowner agreements; permits; wind turbine market; project schedule Financial models, RPS compliance planning Wind resource, turbine technology evaluation, project cost, shadow and photo simulations Facility design (roads, cables, O&M building and substation), turbine site selection, differentiation between preferred and alternative sites, transmission system interconnection and telecommunications Turbine and BOP selection, construction process, flexibility required for design changes, sound study and operations State and federal environmental permits; land use and general environmental impacts; Project impacts with respect to threatened and endangered species, cultural resources, agricultural lands, avian and bats
11 Q. PLEASE DESCRIBE THE GLACIER HILLS WIND PARK PROJECT.
12 A The Glacier Hills Wind Park Project is designed to generate electricity from wind
13 using wind turbines. It is located in northeast Columbia County, in the Towns of
14 Scott and Randolph. The Project is designed to accommodate up to 90 wind turbines,
102
Ex.-WPL-Terzic-3
1
2
3
4
5
6
7
8
9
10
11
12
providing up to 207 megawatts (MW) of electric generation. The turbines will be
located within a Project Area of approximately 17,300 acres, of which approximately
7,500 acres are subject to easement agreements with 45 landowners.
Q. WHAT ARE THE MAJOR COMPONENTS OF THE PROJECT?
A. The major Project components are the wind turbines and auxiliary facilities,
collection system, transmission substation, SCADA system, access roads, and O&M
building. Please see the testimony of Stephen Jones for a description of the
components of the wind turbines and the testimony of Terry Carroll for a description
of the transmission substation, collection system, and SCADA system. Richard
O'Conor's testimony includes detail on the access roads and the O&M building.
Q. PLEASE DESCRIBE THE PROJECT DEVELOPMENT mSTORY AND
HOW WISCONSIN ELECTRIC BECAME INVOLVED IN THE PROJECT.
13 A. As part of Wisconsin Electric's sale of the Point Beach Nuclear Plant to FPL
14 Energy, LLC (FPLE) in 2007, Wisconsin Electric obtained an option to acquire the
15 Project. FPL Energy, LLC had been deVeloping the site for a number of years
16 through their wholly owned subsidiary Randolph Wind, LLC. They had collected
17 and analyzed the wind resource, entered into easement agreements, and made
18 substantial progress on securing transmission interconnection rights.
19 Based on such strengths, as discussed in more detail below, Wisconsin Electric
20 concluded that the Project was the best alternative to pursue for the next increment of
21 renewable energy needed to comply with the requirements of Wisconsin's RPS. The
22 Project has several important strengths such as established land control, close
103
Ex.-WPL-Terzic-3
1 proximity to transmission and the Company's service territory, and strong community
2 support.
3 Q. WHAT DIFFERENTIATED THIS PROJECT SITE FROM OTHER
4 PROJECT SITES THAT WERE CONSIDERED?
5 A. In December of 2007, Wisconsin Electric issued an RFP for project sites located
6 within the footprint of the Midwest Independent System Operator (MISO). While a
7 number of the projects had long-term potential to be good wind projects, all but the
8 Glacier Hills Wind Park site suffered from one or more key uncertainties that would
9 take substantial time to resolve, if in fact they could be resolved. For example, it was
10 common for sites to lack adequate control of land for placing turbines. In addition,
11 some sites lacked transmission rights or, the prospect for securing transmission rights
12 was questionable.
13 In the Company's final analysis the Project presented a unique opportunity as a
14 site that was well position to immediately move forward and provide the next large
15 increment of renewable generation.
16 Q. INSTEAD OF DEVELOPING, OWNING, AND OPERATING WIND
17 PROJECTS, COULDN'T WISCONSIN ELECTRIC RELY SOLELY ON
18 POWER PURCHASE AGREEMENTS?
19 A. For many years Wisconsin Electric has utilized Power Purchase Agreements
20 (PPAs) to comprise a portion of its power supply portfolio. The Company has PPAs
21 for nuclear, natural gas, wind, hydro-electric, and other generation sources. We
22 anticipate that, depending on market opportunities, this practice will continue. This
104
Ex.-WPL-Terzic-3
1 Project, however, provides a unique opportunity for WE to secure the next increment
2 of renewable energy to meet the State RPS.
3 Q. YOU MENTION THAT THE PROJECT PROVIDES A UNIQUE
4 OPPORTUNITY FOR WISCONSIN ELECTRIC. WHAT ARE THE
5
6 A.
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
ATTRIBUTES OF THE PROJECT THAT SUPPORT SELECTING IT?
The following is a summary listing of the Project's many attributes, as further
detailed in Section 1.4.1.2 of the TSD:
1) Strong support from local residents.
2) Community leaders (local and county) have been receptive to the Project's plans.
3) Extensive wind data confirms a solid wind energy resource.
4) Land control for wind turbine sites and continual request by residents to host
additional turbines if the Company has plans to expand the site in the future.
5) Environmental analyses have confirmed the suitability of the Project within the
natural environment and agricultural activities of the Project area.
6) Expected full time employment of approximately 15 positions, the majority
expected to be filled from the local community.
7) Construction requirements of 400,000 to 500,000 on-site labor hours, with the
majority provided by the regional community. This does not include the many
off-site economic benefits of supplying materials and support services.
8) The Towns and County will collectively receive an estimated $540,000 to
$800,000 from the State under the current shared revenue formula.
9) MISO I ATC have confirmed the transmission system's ability to accommodate
the output of the Project, subject to certain improvements.
105
Ex.-WPL-Terzic-3
1 10) FAA Detemrinations of No Hazard have been secured and the WDOT Permit to
2 Erect High Structures.
3 11) The Project site is in close proximity to the Company's service territory and
4 benefits from economies of scale from existing operation and maintenance
5 resources.
6 12) The risks of price / cost differentials between MISO nodes are reduced by having
7 the Project in close proximity to the Company's service territory.
8 l3) As a Company owned facility, the Company's customers avoid double application
9 of Gross Receipts tax that would apply if power was purchased from an in-state
10 site under a Power Purchase Agreement.
11 Q. FPL ENERGY, LLC WAS DEVELOPING THE PROJECT WITH A 99MW
12 TRANSMISSION INTERCONNECTION. WHY DID WISCONSIN
l3 ELECTRIC REQUEST ANOTHER 150MW TRANSMISSION
14 INTERCONECTION AND INCREASE THE NUMBER OF TURBINES?
15 A. When evaluating the available acreage on participating parcels and the quality of
16 the wind resource it was determined that the Project site could successfully support
17 more generating capacity than 99MW. The opportunity to increase generation and
18 the following factors led us to increase the number of turbines and the transmission
19 interconnection capacity: 1) costs are reduced through economies of scale realized
20 when developing, permitting, constructing, and operating a larger project; 2) the
21 many positive characteristics of the Project site, and the substantial permitting
22 challenges faced at other locations, lends itself to maximizing this opportunity; 3)
23 landowners persistently voiced their interest in hosting additional turbines; 4) the
106
Ex.-WPL-Terzic-3
1 current shared revenue fonnulas will provide additional dollars to the local
2 community; 5) the substantial requirements of the RPS require several hundred more
3 megawatts of renewable generation; and 6) it is much easier to reduce the size of a
4 project if challenges or conflicts arise, but difficult and costly to expand a project at a
5 later date.
6 The 249MW sum total of the transmission interconnections resulted from two
7 factors. First, the 150MW additional transmission request was selected prior to
8 finalizing the Project's design for maximum of207MW. Secondly, the topography
9 on adjacent land is conducive to expansion at a future date which would benefit from
10 the additional interconnection capability.
11 Q. WHAT ROLE DOES THE PROJECT PLAY IN WISCONSIN ELECTRIC'S
12 PLAN TO SATISFY THE STATE'S RENEWABLE PORTFOLIO
13 STANDARDS (RPS)?
14 A. The Project makes a significant contribution towards the Company meeting its
15 RPS requirements, which I discussed briefly earlier in my testimony and Jeff Elver
16 addresses in greater detail in his testimony. Under the RPS, new renewable
17 generation creates "credits" for each megawatt hour (MWH) of energy generated.
18 These credits can be used to satisfy the RPS for the year in which the credit was
19 created, or they can be banked for use in future years to meet future RPS
20 requirements.
21 The RPS requirements from Wisconsin Act 141 require Wisconsin Electric to
22 generate 4.27% of its Wisconsin retail electric sales from renewable energy by 20lO
23 and a total of 8.27% by 2015. The Company's renewable generation portfolio
lO7
Ex.-WPL-Terzic-3
1 includes wind, solar, biomass, and hydro-electric based technologies and use of all of
2 these technologies will likely continue to grow as demand for renewable energy
3 increases. Wind generation currently provides the most cost effective means to
4 generate large quantities of renewable energy and is currently the preferred
5 generation technology to meet Wisconsin Electric's renewable energy target. The
6 Glacier Hills Wind Park is a key component of our renewable energy strategy.
7 Q. IN MR. ELVER'S TESTIMONY HE STATES THAT THE COMPANY
8 INTENDS TO USE EXISTING RENEWABLE RESOURCE CREDITS TO
9 MEET THE COMPANY'S 2010 REQUIREMENTS. GIVEN TIDS EXISTING
10 BANK OF CREDITS, SHOULDN'T THE COMPANY DEFER THE PROJECT
11 FURTHER?
12 A. No. Even by utilizing credits that have been accumulated, Wisconsin Electric
13 needs to bring new renewable generation into the portfolio no later than 2012.
14 Q. WHAT DID WISCONSIN. ELECTRIC ACQUIRE WHEN IT PURCHASED
15 THE PROJECT FROM FPLE?
16 A. When Wisconsin Electric purchased the Glacier Hills Wind Park the acquisition
17 included the following categories of items:
18 1) Real Estate Agreements: Wind Farm Easement Agreements and Temporary
19 Meteorological Tower Site Lease Agreements;
20 2) Electric Transmission: 99MW queue position within the Midwest Independent
21 System Operator's (MISO) process for evaluating and entering into a Large
22 Generator Interconnection Agreement;
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Ex.-WPL-Terzic-3
I 3) Avian Study: consultant contract and field study work for an avian study FPLE
2 initiated, but was not yet completed at the time of closing;
3 4) FAA: Determinations of No Hazard for the turbine locations FPLE selected; and
4 5) Meteorological Material: Five meteorological towers and data collection
5 equipment and multiple years of wind data.
6 Q. BAS WISCONSIN ELECTRIC ENTERED INTO DEVELOPMENT
7 AGREEMENTS WITH THE TOWNS OF SCOTT AND RANDOLPH?
8 A. No. Wisconsin Electric has provided each of the towns and their attorneys with
9 copies of a proposed Joint Development Agreement (IDA). We continue to talk: with
10 the towns but have not yet reached a definitive agreement.
11 Q. WHAT IS THE NATURE OF THE COMMITMENTS MADE BY WISCONSIN
12 ELECTRIC AND THE TOWNS IN THE JDA?
13 A. The JDA establishes a set of mutual commitments between the Project and the
14 Towns. A copy ofthe proposed IDA is in Appendix E of the Application's TSD
15 (Exhibit 1, PSC Ref# 103288). For example, the IDAs obligate the Project to meet
16 certain requirements, including:
17 I) Turbines must be placed a minimum distance from homes, roads, and other
18 infrastructure;
19 2) Road damage caused by construction activities is repaired or the towns are
20 compensated if they wish to manage road repair activities;
21 3) Turbines are constructed and operated consistent with "Good Utility Practice";
22 4) The Project is decommissioned to certain minimum standards; and
23 5) Specific noise limits are not exceeded.
109
Ex.-WPL-Terzic-3
I To complement the Project's obligations, the JDAs require the Towns of Scott
2 and Randolph to issue zoning, siting, and building permits and approvals required by
3 the Towns' ordinances. Wisconsin Electric continues to work with the Towns to
4 address any issues that may arise with the Project.
5 Q. HAS THE COMPANY PROPOSED ENTERING INTO DEVELOPMENT
6 AGREEMENTS WITH ANY OTHER GOVERNMENT AGENCIES, AND
7 WHAT IS THE NATURE OF ANY SUCH AGREEMENTS?
8 A. Yes. The Company has provided Columbia County with a draft version of a Road
9 Plan Agreement for their consideration. The Road Plan Agreement is essentially
10 identical to the language in the Road Plan language included in the JDAs the towns
11 are considering. While such an agreement is not required, we believe it is helpful for
12 all parties to establish clear expectations of responsibility prior to the.start of
13 construction. For example, the Company's proposed Road Plan identifies a process
14 to select an independent engineering firm that will assess and document road
15 conditions both before and after construction activities. This information is used by
16 the engineering firm to assess the Company's responsibility for repairs.
17 Q. PLEASE BRIEFLY DESCRIBE THE WIND FARM EASEMENT
18 AGREEMENTS AND TEMPORARY METEOROLOGICAL TOWER SITE
19 LEASE AGREEMENTS.
20 A. The Wind Farm Easement Agreements contain several key elements:
21 1) Option Term: The agreements place a hold on the landowner's property while the
22 developer evaluated the wind resource and secured commitments from enough
23 adjacent landowners to establish a critical mass for the project.
110
Ex.-WPL-Terzic-3
1 2) Exercise of the Option: Once it was evident that the wind resource was adequate
2 and enough landowners would participate, FPLE exercised the options to secure
3 land control for continuing development and eventual construction and operation.
4 3) Easements: The agreement identifies Construction, Access, Wind Turbine,
5 Collection (System), Wind Non-Obstruction, Overhang, Noise, Meteorological,
6 and Relocation Easements. Collectively, these easements provide all necessary
7 real-estate rights to develop, construct, and operate the Project.
8 4) Payment: In exchange for granting the easements, the property owner receives
9 annual payments that reflect the number of turbines and acres of land under
10 easement.
11 5) Non-exclusive Easements: Other than on selected easements such as for the wind
12 turbines, the agreement confirms the landowners' rights to use their land for
13 agricultural and recreational purposes, and the Company's responsibility to
14 compensate the landowner for any damage (e.g. crop damage) resulting from
15 construction or operation of the Project.
16 Collectively, the easement agreements cover approximately 7,500 acres of land.
17 The Temporary Meteorological Tower Site Lease Agreements provided a means
18 for FPLE to install weather measurement equipment and collect wind data in return
19 for an annual payment to the landowner. These agreements were essentially
20 superseded once landowners entered into the Wind Farm Easement Agreements.
21 Q. ARE THERE ANY PLANS TO AMEND THE REAL ESTATE
22 AGREEMENTS?
111
Ex.-WPL-Terzic-3
1 A. Yes. Wisconsin Electric has decided to offer the landowners an optional
2 amendment to the Easement Agreements. The amendment will provide benefits to
3 both Wisconsin Electric and the landowllers, such as extending the renewal terms by
4 10 years and triggering the start of easement payments with the start of construction
5 rather than commercial operation. The landowners are not obligated to enter into the
6 amendment and the success of the Project is not contingent on landowner
7 participation. The details of the optional amendment have not been finalized.
8 Q. PLEASE BRIEFLY DESCRIBE THE STATE AND FEDERAL PERMITS
9 AND APPROVALS THAT HAVE BEEN ISSUED OR ARE PENDING
10 APPROVAL.
11 A. Wisconsin Electric has applied for the following state and federal permits and
12 approvals: 1) from the Wisconsin Department of Natural Resources (WDNR),
13 permits and approvals for storm water management and impacts to wetlands and
14 waterways; 2) from the Wisconsin Department of Transportation (WDOT), high
15 structure permits for the wind turbines; 3) from the Federal Aviation Administration
16 (FAA), Determinations of No Hazard to Air Navigation; and 4) from the United
17 States Army Corps of Engineers (ACoE), permits and approvals for impacts to
18 wetlands and navigable waterways.
19 Please refer to Exhibit 1, PSC Ref # lO5640, Table 1.8-1 on pages 33-34 of the
20 TSD for a list of these permits and approvals.
21 To date, we have received FAA Determinations of No Hazard and the WDOT
22 Permit to Erect High Structures.
112
Ex.-WPL-Terzic-3
1 Q. IN RESPONSE TO AN EARLIER QUESTION YOU DESCRIBED WHAT
2 WAS INCLUDED IN WISCONSIN'S ELECTRIC PURCHASE OF THE
3 PROJECT FROM FPLE. WHAT IMPORTANT ELEMENTS WERE NOT
4 INCLUDED?
5 A. The following summarizes what wasn't included in the Project when Wisconsin
6 Electric purchased it:
7 1) State, federal, or local permits and approvals except, as indicated above, FAA
8 permits which had already been obtained;
9 2) Turbines or assignment of a turbine supply agreement; and
10 3) Land for the transmission substation and operations and maintenance facility.
11 Q. DO THESE MISSING ELEMENTS POSE A SIGNIFICANT CHALLENGE
12 TO SUCCESSFULLY DEVELOPING THE PROJECT?
13 A. No. The Company has secured the necessary land rights for the substation and
14 operations and maintenance facility. Because our turbine layout differs from FPLE's
15 preliminary plans, any permits they would have secured would likely be of little
16 value. Additionally, the Company feels its not beneficial to acquire a turbine supply
17 agreement with a fixed delivery schedule that is not likely to coincide with the
18 Project's permitting timeline.
19 Q. WHAT HAS WISCONSIN ELECTRIC BEEN DOING TO DEVELOP THE
20 PROJECT SINCE IT WAS ACQUIRED FROM FPLE?
21 A. Wisconsin Electric has been actively continuing the development of the Project
22 since the acquisition. Our efforts have focused on four areas:
113
Ex.-WPL-Terzic-3
1 1) Working with wind turbine equipment manufacturers to stay abreast of price,
2 availability, and technical specifications;
3 2) Preparing and submitting this CPCN Application;
4 3) Working with the local officials, state and federal agencies and ensuring that all
5 required loca~ state and federal permits and approvals are secured for the Project;
6 and
7 4) Communicating with landowners and local officials to keep them apprised of
8 Project development and to collaborate on the micro-siting of turbine locations
9 and other infrastructure.
10 Q. PLEASE DESCRIBE THE MAJOR STAGES OF CONSTRUCTION.
11 A. The construction process includes the following primary components:
12 1) Mobilization to the site, validation offmal site layout, and staking;
13 2) Installation of roads and lay-down space;
14 3) Installation of the electrical collector system;
15 4) Excavation and pouring of turbine foundations;
16 5) Crane pad installation;
17 6) Delivery, erection, and electrical wiring of turbines;
18 7) Substation construction and electrical interconnection;
19 8) Testing, and commissioning of the turbines; and
20 9) Final road grading, site restoration, and demobilization.
21 Construction is anticipated to require 10 to 12 months of active work on the site,
22 and it may occur in two distinct phases depending on the timing of turbine deliVery.
23 For example, if turbine equipment is expected in the second quarter of a given year,
114
Ex.-WPL-Terzic-3
1 then steps 1 through 4 would likely occur in the fall/winter of the prior year with
2 minimal work during the spring thaw months. In contrast, if turbine equipment
3 deliveries are schedwed to begin in the third quarter it may be more cost-effective to
4 run the construction process continually within a single calendar year. Having the
5 site well prepared when turbine equipment arrives is critical to quickly erecting and
6 commissioning turbines and maximizing generation.
7 Q. BASED ON THE CONSTRUCTION TIMING CONSIDERATION IN YOUR
8 PRIOR RESPONSE, WHEN WOULD YOU ANTICIPATE THE START OF
9 CONSTRUCTION?
lOA. We currently anticipate procuring wind turbine equipment with deliveries
11 beginning in either 2010 or 2011. Based on the range of possible delivery dates
12 within these two years, construction may begin as early as second quarter 2010, to
13 accommodate fourth quarter 2010 wind turbine deliveries, or as late as fourth quarter
14 2010, ifwind turbine deliveries are scheduled for the middle of20Il.
15 Q. WHEN WOULD YOU ANTICIPATE THE START OF COMMERCIAL
16 OPERATION?
17 A. The Project is currently scheduled to start commercial operation in late 2011,
18 subject to the receipt of necessary permits and approvals and the availability ofwind
19 turbineequipmem.
20 Q. WHAT IS THE STATUS OF THE WIND TURBINE EQUIPMENT MARKET?
21 A. Over the last few months the demand for wind turbine equipment has softened
22 due to the scarcity of third party financing for independent developers. This
23 circumstance has created a window of opportunity for utilities whose projects are not
115
Ex.-WPL-Terzic-3
1 dependent on third party project financing and who can directly utilize the benefits of
2 the Production Tax Credits (PTC). None the less, as soon as credit markets stabilize
3 the demand will likely resume its path of fast growth and a "seller's" market will re-
4 emerge. The future strength of the market will likely be bolstered by modifications to
5 the structure of tax incentives, allowing a broad range of financing entities to benefit.
6 This would substantially expand the financing options for project developers and
7 owners increasing demand for wind turbine equipment.
8 Q. HOW DO THESE MARKET CONDITIONS AFFECT WISCONSIN
9 ELECTRIC'S APPROACH TO SECURING WIND TURBINE EQUIPMENT
10 AND HOW DOES THIS FIT IN WITH THE CPCN TIMELINE?
11 A. Pending issuance of a CPCN, the Company will continue to talk with turbine
12 vendors and keep its options open. There are three fuctors that argue for an
13 expeditious processing of the CPCN: 1) Financial markets will eventually thaw,
14 increasing funding for developers, and increasing demand for turbine equipment; 2)
15 RPS requirements are likely to increase at the state level (e.g. Governor's Task Force
16 Recommendations) and there is a real possibility of a federal RPS, both increasing
17 demand for wind turbine equipment; and 3) Turbine vendors typically look for anI 8
18 month lead time between when orders are placed and delivery of equipment.
19 Collectively, these factors indicate that the sooner Wisconsin Electric is in a position
20 to purchase turbines, the better pricing, selection, and leverage will exist to the
21 advantage of the Project and Wisconsin Electric's customers.
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1 Q. ARE THE TURBINE MODELS IDENTIFIED IN THE CPCN APPLICATION
2 A COMPLETE LIST OF TURBINES THE COMPANY WOULD LIKE TO
3 CONSIDER?
4 A. No. While the turbine vendors have not changed, two ofthe vendors have
5 identified alternative models that have recently been introduced that may be better
6 suited for the Project. These are turbine models that are very similar to those specified
7 in the Application. However, when the original application was submitted the
8 vendors were not certain how quickly the additional models would be made available
9 in the US market. All of the turbines fit within the range of size and characteristics
10 already described in the Application. Mr. Stephen Jones describes all of the turbine
11 models in greater detail in his testimony.
12 Q. IN ADDITION TO MANAGING THE CONTRACTUAL ASPECTS OF THE
13 PROJECT, WHAT IS WISCONSIN ELECTRIC DOING TO MANAGE
14 RELATIONSHIPS WITH THE LANDOWNERS AND THE COMMUNITY AT
15 LARGE?
16 A. Wisconsin Electric greatly values its relationships with the community, including
17 the residents and local officials ofthose communities hosting infrastructure projects
18 such as the proposed wind project.
19 Communication with landowners and residents within the project area has been
20 ongoing since the Company exercised its option to purchase the project in October
21 2007. Communication has occurred through mailings, hotline phone calls, door-to-
22 door visits, informational meetings and open houses. Our earliest communication
23 included an introductory letter and in-person visits at the participant's homes.
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Two meetings were held on Tuesday, June 24, 2008, to infonn participating
2 landowners of the change in ownership from FPLE to Wisconsin Electric, the
3 regulatory review process, and the anticipated project timeline. More than 40 people
4 attended the meetings.
5 On Thursday, August 14,2008, project participants were invited to meet with our
6 engineering and real estate staff throughout the day to discuss the proposed layout,
7 provide infonnation on their land and ask questions.
8 . On Tuesday, August 19,2008, Wisconsin Electric hosted the first Open House for
9 the Glacier Hills Wind Park at the Randolph Town Hall. At the request of the local
10 officials, residents within the Towns of Randolph and Scott and the Village of
11 Friesland were invited. The local 0 fficials expressed a desire to see if their
12 constituents expressed major concerns about the proposed project The meeting was
13 held from 11 a.m. to 7 p.m. with overview presentations at 1 p.m. and 5:30 p.rn.
14 Approximately 100 people attended to obtain information.
15 Public tours of the Blue Sky Green Field Wind Energy Center were also offered
16 on Saturday, September 13,2008. Project participants and open house attendees in
17 the Glacier Hills project area were given infonnation on attending the tours to see
18 fIrsthand the turbines and how they operate. Attendees from the Glacier Hills area
19 were able to converse with project staff and participants in our Blue Sky Green Field
20 project Overall, more than 1,000 people came from across the state for the tours.
21 On Wednesday, September 17, 2008 another Open House was held for those
22 living in the Project Area and within a one mile radius outside of the project area.
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An afternoon session was held from noon to 3 p.m. and an evening session was held
from 4 p.m. to 7 p.m. More than 100 people attended throughout the day.
Most recently, Wisconsin Electric met with participating landowners on February
24, 2009 to bring them up to date on the permitting and approval process and review
the anticipated schedule going forward.
For all ofthe above mentioned meetings the attendees were invited by mailed
. invitation.
In addition to formal informational meetings, individual visits and phone calls
occur on an on-going basis. Presentations were also made at Village and Town
board meetings of the communities adjacent to the Project site (e.g. Randolph and
Cambria).
We also maintain regular contact with the elected officials of both the Town of
Randolph and the Town of Scott, as well as various department heads of Columbia
County, to ensure that they are kept abreast of the status of our application. We
continue to address any questions they raise and respond to requests for information
they have received from constituents.
In addition to meeting with affected landowners and local officials, Wisconsin
Electric has established a dedicated Project section on the Wisconsin Electric
website and a dedicated "hotline" phone number and email account used specifically
for answering Project questions.
IN ADDITION TO SEEKING A CPCN FOR THE PROJECT, WISCONSIN
ELECTRIC IS ALSO ASKING THE COMMISSION TO APPROVE A
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A.
"MERGER" BETWEEN WISCONSIN ELECTRIC AND RANDOLPH WIND
LLC. COULD YOU EXPLAIN THE REASONS FOR TIDS REQUEST?
The first point to be clear about is what the word "merger" means in this context.
Wisconsin Electric is not asking the Commission to give Wisconsin Electric
approval to purchase Randolph Wind LLC. Wisconsin Electric already owns
Randolph Wind LLC. It was purchased -- at a price of $1 0 -- as a result of
Wisconsin Electric exercising the option it received as part of the transaction in
which Wisconsin Electric sold the Point Beach Nuclear Plant to FPL Energy. The
Commission approved the transaction between Wisconsin Electric and FPL Energy
in Docket No. 6630-EI-l13. The so-called "merger" at issue in this proceeding
simply involves making the legal entity Randolph Wind LLC disappear so that its
assets are owned directly by Wisconsin Electric rather than being owned indirectly
by virtue of Wisconsin Electric's ownership of the LLC. It is my understanding that
when one entity, such as Wisconsin Electric, is the sole owner of an LLC, making
the LLC disappear as a separate legal entity is fairly common. I am told, in fact, that
Wisconsin law provides a streamlined mechanism for folding an LLC into its sole
owner, which is what we are proposing here. This is also precisely what Wisconsin
Electric did with its Blue Sky Green Field project. In that case, Wisconsin Electric
had purchased two LLCs from Navitas Energy, Inc. and then, as part of the same
proceeding that resulted in the Blue Sky Green Field CPCN, Wisconsin Electric
received approval to roll the two LLCs into the utility. Technically, this abbreviated
process by which an LLC is rolled into the entity that owns it is referred to as a
"merger."
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14 15 16 17 18 19 20 21 22
Q.
A.
Q.
A.
WHY DO YOU WANT TO ROLL RANDOLPH WIND LLC INTO THE
UTILITY?
For the same reason we sought to roll the two Blue Sky Green Field LLCs into the
utility. Unless we roll the LLC into the utility, the utility will not own the project
assets directly. That would mean the LLC would have to raise funds to pursue the
project and then enter into a PP A to sell the output to the utility. Besides adding
organizational and managerial complexity, that approach would impose a second
layer of gross receipts tax on customers. All of these issues can be avoided by
rolling the LLC into the utility.
IS THERE ANY DOWNSIDE TO WHAT YOU ARE PROPOSING?
No. As I mentioned, in Docket 6630-CE-294 the Commission approved precisely
the same thing we are proposing here. Here is what the Commission said in its
decision:
WEPCO requests that the Commission approve this merger as being "reasonable and consistent with the public interest," pursuant to Wis. Stat. § 196.52(3)(a). Considering that such a merger will have no material adverse impact on wholesale competition, will not increase the cost to ratepayers, and will give the Commission greater regulatory authority over the project's operation, the Commission grants this request.
23 Q. WHAT IS WISCONSIN ELECTRIC REQUESTING OF THE COMMISSION
24 IN THIS APPLICATION?
25 A. Wisconsin Electric requests the Commission:
26 1) Issue a Certificate of Public Convenience and Necessity and any other necessary
27 approvals authorizing Wisconsin Electric to construct and place in utility service
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I up to 90 wind turbines and associated facilities of a type selected by Wisconsin
2 Electric with a total capacity of up to 207 MW of electric generation;
3 2) Approve a project cost not to exceed $526 million, not including AFUDC and
4 A TC switchyard costs;
5 3) Approve placement of up to 90 turbines and auxiliary facilities at any of the 118
6 sites identified in the TSD except to the extent the Commission finds any of the
7 sites unacceptable, and provided that all other permits and rights required for the
8 Project are obtained;
9 4) Authorize Wisconsin Electric to make minor siting modifications as outlined in
10 Section 3.0 of the TSD without Commission Staff review or approval and to make
11 more substantial siting modifications subject to Staff's review and approval;
12 5) Approve the merger of Randolph Wind, LLC into Wisconsin Electric; and
13 6) Confirm that the design criteria in the proposed Joint Development Agreements
14 with the towns are acceptable in the event the Company and the towns have not
15 entered into an agreement.
16 Q. WHEN DOES WISCONSIN ELECTRIC BELIEVE THAT THE CPCN NEEDS
17 TO BE ISSUED TO ENABLE THE PROJECT TO SUCCEED AND WHY?
18 A. There are several reason why receipt of a CPCN as close as possible to the 180-
19 day statutory period (i.e., by July 26,2009) would put the Company in the best
20 position to successfully complete the Project.
21 1) As noted earlier, the struggling financial markets have created an opportunity for
22 the Company to negotiate improved pricing, terms, and conditions with vendors.
23 Since the pressure for Renewable Portfolio Standards have continued to grow
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1 within the state and across the country, this circumstance will not continue
2 indefinitely. The sooner an approval is issued and the Company can definitively
3 negotiate a supply agreement, the better for the Company's customers.
4 2) Similar to the wind turbine market, equipment and service providers for the
5 balance of plant (e.g. substation and pad mount transformers, erection contractors,
6 etc.) have seen a drop off in activity, providing an opportunity for the Company
7 and our customers to benefit from a soft market.
8 3) The sooner turbine equipment can be ordered, the more likely the equipment can
9 be installed early, increasing the generation of renewable credits that can be
10 reserved for future use, minimizing pressure on subsequent projects.
11 Q. DOES THIS COMPLETE YOUR PRE-FILED DIRECT TESTIMONY?
12 A. Yes.
13
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10 11 12 13
c :109342
BEFORE THE PUBLIC SERVICE COMMISSION OF WISCONSIN
Application for a Certificate of Public Convenience and ) Necessity to Construct and Place in Service a Wind Turbine ) Electric Generation Facility Known as Glacier Hills Wind ) Park in Columbia County, Wisconsin Electric Power Company ) Docket No. 6630-CE-302
DIRECT TESTIMONY OF JEFFREY ELVER
14 Q. PLEASE STATE YOUR NAME.
15 A. .My name is Jeffrey Richard Elver.
16 Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY?
17 A. I am employed by Wisconsin Electric Power Company as a Project Specialist in the
18 Wholesale Energy and Fuels Department.
19 Q. PLEASE DESCRIBE YOUR PROFESSIONAL AND EDUCATIONAL
20 BACKGROUND.
21 A. I have an MBA from Marquette University with an emphasis in Finance, and a BBA from
22 the University of Wisconsin - Milwaukee with a major in Finance. I have been employed
23 with Wisconsin Electric Power Company for ten years where I have held a number of
24 positions involving planning and economic analysis. More specifically I have been
25 involved in generation expansion planning and planning to meet the Wisconsin
26 Renewable Portfolio Standard (RPS) established by Act 141. In this capacity I conduct
27 the economic evaluation of generation used to meet energy demand and to satisfy the
28 RPS.
29 Q. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY?
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