BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF COLORADO

PROCEEDING NO. 16A-0117E

________________________________________________________________________
IN THE MATTER OF THE APPLICATION OF PUBLIC SERVICE COMPANY OF
COLORADO FOR APPROVAL OF THE 600MW RUSH CREEK WIND PROJECT
PURSUANT TO RULE 3660(h), A CERTIFICATE OF PUBLIC CONVENIENCE AND
NECESSITY FOR THE RUSH CREEK WIND FARM, AND A CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY FOR THE 345 KV RUSH CREEK TO
MISSILE SITE GENERATION TIE TRANSMISSION LINE AND ASSOCIATED
FINDINGS OF NOISE AND MAGNETIC FIELD REASONABLENESS.
________________________________________________________________________
TESTIMONY OF CORTNEY CROUCH
IN THE MATTER OF THE APPLICATION FOR OWNERSHIP AND
OPERATION OF THE RUSH CREEK WIND PROJECT BY PUBLIC SERVICE
OF COLORADO

Q:

Please state your name and the nature of your testimony:

A:

My name is Cortney Crouch and I am testifying in behalf of the

Ratepayers Coalition.
Q:

Will you provide a summary of your credentials?

A:

Yes, my resume is attached.

Q:

Please summarize the nature of your testimony:

A:

I am providing this testimony on behalf of the Ratepayers Coalition of

Colorado. The purpose of my testimony is to deliberate on the cost-reasonableness of the

Rush Creek Wind Project (herein referred to as the Project) from the perspective of

Colorado ratepayers, particularly those customers of Public Service of Colorado (herein

referred to as the Company) who will be directly impacted through base rate changes and
higher adjustment costs with the addition of the 600 MW Rush Creek Wind Project onto
the Companys power supply system. Wind, along with its fellow renewable bed partners,
has certain economic characteristics in common. They all enjoy little to no variable costs
but incur large upfront fixed costs. Therefore it is practical to expect a company that is
applying to develop and own a $1 billion intermittent energy facility to provide heavily
detailed cost analysis to show that the new eligible energy resource will provide energy at
a cost equal to or below other market alternatives.
Q:

Please provide your observations about the application before the

Commission:
A:

Two witnesses for the Company provide economic testimony to show that

the Rush Creek Wind Project can indeed be constructed at a reasonable cost compared to
the cost of similar energy resources available in the market as required by Colorado
PUC Rule 3660(h)(I). Using levelized cost of energy (LCOE)1 as a metric by which to
compare average costs, Company witness Mr. James Hill demonstrates the costreasonableness of the Project when compared to: 1) previous bids that were received in
2011 and 2013 in response to the Companys Request for Proposal and 2) the costs of all
2,560 MW of existing wind power purchase agreements on the Public Service System.
Company witness Mr. Riley Hill additionally demonstrates the cost-reasonableness of the
Project by comparing the cost of construction (in $/kW) to three other wind projects
developed by Company affiliates that are either currently under construction or recently

1 LCOE=

Present Value of Revenue Requirements

Present Value of ElectricGeneration

placed into service. At a cost of $1,525/kW, the construction cost of Rush Creek I and II
is lower than 2 of the 3 wind projects to which it was compared. According to the US
Energy Information Administration (EIA)2, the overnight capital cost of onshore wind (in
2012$) is $2,213/kW. Again, the Project passes the cost-reasonableness test with flying
colors when compared to the average. Mr. James Hill further deliberates on the costeffectiveness of the Project, exhaustively detailing the methodology used to demonstrate
the $443 million in net savings to consumers that the Project will provide throughout its
operational life. This more rigorous computer-based analysis, which incorporates the
generation of the proposed wind farm onto the entire Public Service power supply
system, seeks to establish that the public convenience and necessity require the granting
of the application, per CPUC Rule 3102(b). So, based on the publicly available
testimony provided, it appears that the Company has met its burden in demonstrating that
the Project is cost-reasonable and is in the interest of public convenience and necessity.
However, the Company has only presented two comparative analyses in order to
demonstrate cost-reasonableness using easily obtainable and self-congratulatory metrics
that should themselves be examined with a critical eye. For example, the levelized cost of
energy must be cautiously considered since it is calculated using the Present Value of
Revenue Requirements, which is generated with a twenty-seven year flow of annual
revenue requirements that relies heavily on the availability of 100% of the current
Production Tax Credit (PTC). According to the data provided in Company witness Ms.
Deborah Blairs testimony, the Net Present Value of the stream of Revenue Requirements
(PVRR) with 100% of the PTC is $697,807,212. With only 80% of the PTC available, the
PVRR jumps to $819,512,243, a difference of $121,705,031 representing a 17% increase.
2 http://www.eia.gov/forecasts/capitalcost.

The Capital Cost for Electricity Plants, April 2013.

Each 20% reduction in the PTC results in a 17% increase in the PVRR, thereby
increasing the costs that will be passed on to consumers. The LCOE subsequently
increases 12-17% with each incremental 20% reduction in the PTC. Holding the net
capacity factor and capacity constant (values present in the denominator of the LCOE),
this dramatic increase in the LCOE occurs because the PVRR in the numerator is
increasing while the values in the denominator remain constant (the reduction in the
percentage of PTC has no direct impact on generation unless the Company has previously
chosen to reduce the capacity of the Project knowing ahead of time that it would not
receive the full credit). If the Company has failed to show how this simple manipulation
can so easily affect one of their primary cost-reasonableness metrics, what other
economic factors have they failed to consider and present in their analysis of project costreasonableness?
Q: What concerns does this present for the Commission in assessing the public
need and cost reasonableness of the project?
A:

One of the most blatantly missing costs is the carbon cost associated with

the production of the wind turbines themselves. Once operational, wind farms produce no
carbon emissions. But, the development of any wind farm requires upfront carbon costs
just as it requires upfront capital costs. If there is a social cost attributed to the use of
fossil fuels in electricity generation, then there must necessarily be a similar social cost
associated with all carbon-producing activities, including those concomitant with
renewable energy. These carbon costs come in the form of large amounts of steel and
cement production and the mining of the raw materials resulting in an environmental cost
of approximately 242 tons of CO2 per wind turbine.3 Production of the Rush Creek wind
3 http://www.ipcc-nggip.iges.or.jp/public/2006gl/pdf/3_Volume3/V3_4_Ch4_Metal_Industry.pdf

turbines will result in a cost of 72,600 tons of CO2. Analyses of the costs of climate
change provide estimates of the social costs of CO2 emission. In his 700-page report4
produced in 2006 for the British government, London School of Economics economist
Nicholas Stern estimates a price of $85 per ton of CO2, while William Nordhaus,
professor of economics at Yale University, estimates a price of $8 per ton of CO2. For the
300 turbines of the Rush Creek Wind Project, this would result in a cost of $580,000 to
$6,171,000, depending on the methodology used in determining a fair market price for
the cost of carbon.
The cost of land is another cost about which very little information is provided.
Understanding the proprietary nature surrounding the negotiations involved in wind lease
agreements, there is still very little transparency provided in the testimony concerning not
just the costs associated with land lease payments but also the opportunity cost associated
with the lost value of farm or ranch lands that will no longer be productive. The Project is
to be constructed on 90,000 acres, which is roughly the size of Las Vegas. According to
Iowa State University, the average gross values from 2006-2015 of corn crops and
soybean crops are $722/acre and $511/acre respectively5. Granted not all 90,000 acres
would be used for crops, but this would result in a high-end estimate of $45,990,000 to
$64,980,000 of crop value that is no longer available. Company witness Mr. John Lupo
states in his testimony that the Company will compensate landowners for continued use
of their property by paying them royalties, though this amount over the 25-year life of the
Project is redacted in the public version of the testimony. In her testimony, Ms. Blair
indicates that the Operation and Maintenance expenses (one of the inputs used in
4 http://mudancasclimaticas.cptec.inpe.br/~rmclima/pdfs/destaques/sternreview_report_complete.pdf
5 https://www.extension.iastate.edu/agdm/wholefarm/html/c2-20.html

calculating revenue requirements) include the land lease payments. Though the public
version of the testimony does not provide a detailed cost associated with land lease and
royalty payments to farmers, 90,000 acres represents a substantial land cost that will be
absorbed by ratepayers. By comparison, the Panda Liberty Power Project in Bradford
County, PA, is an 829-MW combined-cycle natural gas plant built on a mere 33 acres, a
much smaller footprint with a correspondingly much smaller land expense that provides
220,000 MWh of generation per acre of land used compared to Rush Creeks 58.4 MWh
of generation per acre of land used.
Though this project will be considered on a stand-alone basis, it is hard to ignore
one of Mr. James Hills final answers provided in his testimony. When asked if approval
of the Project would eliminate the need to acquire additional resources in Phase 2 of the
2016 ERP, he stated that there would still be a need for additional resources after the
Project is operational since the project would only be accredited an Effective Load
Carrying Capability (ELCC) of 8% of its nameplate rating, thereby providing a mere 48
MW of capacity of the additional 664 MW that will be requested in the 2016 ERP. This
statement affords a unique opportunity to provide some interesting and thoughtprovoking discussion about carbon-free alternatives to a large intermittent wind project
that will never provide a base unit capability to the power supply system. Though natural
gas plants are beginning to replace more and more coal plants, coal with carbon capture
and storage (CCS) is a carbon-free electricity-generating source at the output level.
However, with an overnight capital cost of $5,227/kW for a single unit advanced coal
plant with CCS6, this alternative is becoming less economically enticing. Alternatively,
the capital and fixed costs of natural gas plants continue to drop while its capacity factor
6 http://www.eia.gov/forecasts/capitalcost

has been steadily increasing, even above coal at times, as natural gas plants are used more
and more as part of the base load and not just as peaking units. With a carbon emissions
rate of 1.22 pounds per kWh of generation, natural gas plants are becoming both
economically and environmentally attractive. So, with an additional 664 MW of capacity
on request with the PUC, does it truly make sense to spend $1 billion for a scant 48 MW
of effective capacity with a need to invest in a remaining 616 MW of capacity in order to
meet forecasted demand? Furthermore, how will the advertised $443 million in net
savings to customers erode when the remaining 616 MW of required additional capacity
is incorporated onto the power supply system? This seems to be an expensive way in
which to further the States policy objective of encouraging the addition of renewable
energy resources beyond the minimum RES target levels and therefore economically and
environmentally unnecessary.
Q:Do you draw any conclusions from these issues and your analysis?
A:

The job before the Commission is unenviably difficult. While the

Company can provide basic accounting points of consideration to show costreasonableness, the Commission must further consider all other costs associated with the
development and integration of a 600 MW wind farm that will occupy 90,000 acres and
will require 90 miles of transmission lines through five counties. Ultimately, the
Commission has the responsibility to determine if the Company has indeed met its
burden of proof that the project is cost-reasonable and in the interests of public
convenience and necessity, given that a few pages here provides some additional thoughts
to at least delay approval out of respect for the process if not altogether deny the
application.