David S. Maquera

February 7, 2018

Ms. Kavita Kale

Executive Secretary

Michigan Public Service Commission

7109 West Saginaw Highway

Lansing, Michigan 48917

Re: In the matter of the Application of DTE Electric Company for approval of

Certificates of Necessity pursuant to MCL 460.6s, as amended, in connection

with the addition of a natural gas combined cycle generating facility to its

generation fleet and for related accounting and ratemaking authorizations.

MPSC Case No. U-18419

Dear Ms. Kale:

Attached for electronic filing in the above captioned matter is DTE Electric Company’s

Revised Rebuttal Testimony and Exhibit A-48 of Witness, Markus B. Leuker; Revised Rebuttal

Testimony and Exhibit A-72 of Witness, William H. Damon, III; Revised Rebuttal Testimony of

Witness Michael E. Banks; and Revised Rebuttal Testimony of Witness, Angela P. Wojtowicz.

Also attached is the Proof of Service.

Very truly yours,

David S. Maquera

DSM/lah

Attachments

cc: Service List

DTE Electric Company

One Energy Plaza, 688 WCB

Detroit, MI 48226-1279

David S. Maquera

(313) 235-3724

[email protected]

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the Application of )

DTE ELECTRIC COMPANY for )

approval of Certificates of Necessity )

pursuant to MCL 460.6s, as amended, )

in connection with the addition of a ) Case No. U-18419

natural gas combined cycle generating )

facility to its generation fleet and for )

related accounting and ratemaking )

authorizations. )

REVISED REBUTTAL TESTIMONY

OF

MARKUS B. LEUKER

DTE ELECTRIC COMPANY

REVISED REBUTTAL TESTIMONY OF MARKUS B. LEUKER Line

No.

MBL Rebuttal - 1 Revised

Q. What is your name, business address and on whose behalf are you testifying? 1

A. My name is Markus B. Leuker. My business address is: One Energy Plaza, Detroit, 2

Michigan 48226. I am testifying on behalf of DTE Electric Company (DTE 3

Electric or the Company). 4

5

Q. Did you file direct testimony in this proceeding on behalf of DTE Electric 6

Company (DTE Electric or Company)? 7

A. Yes, I did. 8

9

Q. What is the purpose of your rebuttal testimony? 10

A. The purpose of my rebuttal testimony is to respond to MEC/NRDC/SC (“MEC”) 11

Witness Neme’s assertions that the future impacts of energy efficiency are not 12

embedded in DTE Electric’s sales forecast. 13

14

Q. Are you sponsoring any exhibits? 15

A. Yes, I am sponsoring the following exhibits: 16

Exhibit Description 17

A-48 Revised Reconstituted Sales 18

A-49 2016 MISO & EIA Forecast Summary 19

20

Q. Do you agree with Witness Neme’s assertion on page 7 of his direct testimony 21

that DTE significantly overstates the amount of future energy efficiency 22

program savings embedded in its load forecast? 23

A. No. Witness Neme does point to some credible challenges associated with 24

quantifying the actual amount of energy efficiency explicitly embedded in the load 25

M. B. LEUKER Line U-18419

No.

MBL - 2 Revised Rebuttal

forecast however, the forecasts provided by DTE Electric in this case filing are both 1

realistic and prudent for planning purposes and do incorporate historical and future 2

energy efficiency. Witness Neme asserts in his testimony that the forecasts 3

submitted by DTE Electric only account for 50% of historical energy efficiency and 4

do not account for future Energy Waste Reduction (EWR) programs. (Neme p. 37-5

39) He then recalculates an adjustment to the amount of embedded energy 6

efficiency included in the forecast, effectively stating that the sales forecast should 7

be reduced by this “corrected analysis” amount (Neme p. 49, Table 6) see below. 8

In simple terms, witness Neme is saying the Company’s sales forecast is too high 9

and should be adjusted lower by the amount outlined in red below. 10

Q. Why is Witness Neme’s assertion that the sales forecast is too high unjustified? 11

A. Witness Neme’s assertion is unjustified for several reasons: 12

1. Witness Neme states that “DTE should have developed a forecast of future 13

sales absent any efficiency programs” (Neme p. 19) and recommended a 14

forecast methodology in which sales are reconstituted in order to get a forecast 15

absent of historic efficiency programs. Utilizing this reconstituted forecast 16

methodology and accounting for a 1.5% EWR program, DTE Electric ran 17

these calculations. This approach produced a higher forecast for both 18


No.


residential sales and total sales than what the Company submitted in the 2016 1

Reference Scenario. These results are contrary to witness Neme’s “corrected 2

analysis” presented in his testimony (Neme p 49) and would not justify an 3

adjustment to the amount of “EE in the basecase forecast (GWh)” and the 4

resulting lower sales forecast. 5

2. Actual temperature-normalized sales results for 2016 and 2017 (forecasted 6

years in the 2016 Reference Scenario) exceeded the sales forecast provided in 7

the Company’s 2016 Reference Scenario. These results are also contrary to 8

witness Neme’s “corrected” analysis and do not justify an adjustment to the 9

amount of “EE in the basecase forecast (GWh)” and the resulting lower sales 10

forecast. 11

3. A comparison of DTE Electric’s 2016 Reference Scenario forecasted growth 12

rates to independent load forecasts from both the EIA and MISO for the East 13

North Central Region and State of Michigan respectively, clearly show DTE 14

Electric’s 2016 Reference Scenario forecast is in line with third party 15

forecasts. Witness Neme’s “corrected” analysis, on the other hand, when 16

subtracted from the 2016 Reference Scenario forecast is a clear outlier. 17

I provide additional support for each of these reasons below. 18

19

Reconstituted sales forecast methodology 20

21

Q. What is the forecast methodology recommended by Witness Neme? 22

A. In Witness Neme’s testimony (Neme p. 19), he recommends a forecast 23

methodology utilized by the New England ISO to forecast future sales absent any 24

efficiency programs. 25


No.


Q. Are you familiar with this approach? 1

A. Yes, I am. 2

3

Q. What is your opinion on the methodology? 4

The New England ISO approach, when utilized in aggregate for an entire service 5

area forecast or state level forecast can be useful. When utilized for more narrow 6

market segments, results of these types of models can be problematic. 7

8

Q. Can you explain the forecast methodology used by the New England ISO? 9

A. The basic format of the ISO’s model is as follows: 10

Energyt = f(Energyt-1, Economyt, EnergyPricet, Weathert, Xt), where: 11

- Energyt = Net energy load in year t. Sales are reconstituted, meaning that energy 12

savings from behind-the-meter photovoltaics and passive demand resources are added 13

into historical net energy load. 14

- Economy = Economic activity represented by inflation-adjusted Gross Regional 15

Product or Real Personal Income. 16

- Energy Price = Annual price of energy adjusted for inflation. 17

- Weather = Annual heating degree-days (HDD) and annual cooling degree-days (CDD) 18

based on the temperature-humidity index. HDD and CDD are used to represent the 19

effect of relatively high and low temperatures on energy consumption. 20

- X = Unobservable variables, most often represented in modeling as binary variables, 21

that affect energy demand. 22


No.


Q. Were you able to replicate this forecast methodology for DTE Electric for the 1

forecast period 2016-2030? 2

A. Yes. I replicated the New England ISO’s forecast methodology for the period 2016-3

2030 by performing regression analysis that incorporated regional variables from 4

Southeast Michigan corresponding to those used by the New England ISO. The 5

“reconstituted” regression forecast was run for the residential class and again for 6

total sales. 7

8

Q. What inputs were utilized in your replication of the New England ISO forecast 9

methodology? 10

A. The general format of DTE Electric’s total sales and residential sales models is as 11

follows: 12

Energyt = f(Economyt, Populationt, Employmentt, Weathert) 13

- Total sales (i.e., Energyt) are forecast using an ARMA maximum likelihood model 14

with differences in sales as a function of differences in Real Gross County Product 15

(i.e., Economyt) for 11 counties in Southeast Michigan and differences in 16

population (i.e., Populationt) for the same 11 counties. Historical years are 2009-17

2015. Historical and forecast Real Gross County Product and population are 18

obtained from IHS Economics’ October 2015 Michigan county level forecast. 19

- Residential sales (i.e., Energyt) are forecast using a least squares regression model 20

with sales as a function of Real Personal Income (i.e., Economyt) for 11 counties in 21

Southeast Michigan and nonfarm payroll employment (i.e., Employmentt) for those 22

same 11 counties. Historical years are 2000-2015. Historical and forecast Real 23

Personal Income and nonfarm payroll employment are obtained from IHS 24

Economics’ October 2015 Michigan county level forecast. 25


No.


Q. Were there any differences between DTE Electric’s model and the New 1

England ISO methodology? 2

A. Yes. DTE Electric’s models do not use lagged sales (i.e., Energyt-1) because lagged 3

sales lose predictive validity over the longer forecast period of DTE Electric’s 4

models. DTE Electric’s models do not use an equivalent of Energy Pricet because 5

analysis has shown price to have a negligible effect on sales, consistent with the 6

New England ISO’s findings. DTE Electric’s sales models do not use an equivalent 7

of Xt, an unobserved variable, because experimentation has shown that such 8

variables do not improve model statistics. DTE Electric’s models use population 9

and nonfarm payroll employment to improve model statistics, even though neither 10

variable is used in the New England ISO’s model. 11

12

Q. Did both the “reconstituted” total sales model and the “reconstituted” 13

residential sales model produce strong regression statistics? 14

A. No, although regression statistics for the total sales model are strong, where the 15

Durbin-Watson values, t-statistics, and p-values are all within acceptable limits, the 16

regression statistics for the residential model are not nearly as strong. This is a key 17

reason why DTE Electric utilizes an end-use model to forecast residential sales. 18

Statistics for both the total sales model and residential model run can be found in 19

Exhibit A-48. 20

21

Q. How did you adjust for the impacts of future EWR programs? 22

A. For both the total sales model and the residential sales model, cumulative EWR 23

extending from prior years into a forecast year is subtracted from the forecast year’s 24

regression result. The outcome of that subtraction is then reduced by the forecast 25


No.


year’s incremental EWR: 1.15% in 2016 and 1.5% in 2017 forward. Sales in the 1

Other category, which are an element of total sales but not of residential, are not 2

subject to EWR and so are added after EWR reductions to obtain the final forecast. 3

4

Q. How do the results compare for total sales to the 2016 Reference Scenario 5

forecast for total sales? 6

A. In the total sales forecasts, using EWR assumptions of 1.15% in 2016 and 1.5% 7

from 2017 forward, sales are higher than the 2016 Reference Scenario in each of 8

the forecast years, 2016-2030. Please see Table 1: Total Sales 9

Q. How is this result inconsistent with witness Neme’s assertion that EE is not 10

embedded in DTE’s forecast methodology? 11

A. Witness Neme asserts in his testimony that the sales forecast submitted by DTE 12

only accounts for 50% of historical energy efficiency and does not account for 13


No.


future EWR programs. (Neme p. 37-39) He then recalculates an adjustment to the 1

amount of embedded energy efficiency included in the forecast, effectively stating 2

that the sales forecast should be reduced by this “corrected” amount (Neme p.49). 3

When the results of the “reconstituted” sales forecast methodology, accounting for 4

1.5% EWR are compared with the 2016 Reference Scenario forecast, the 5

“reconstituted” sales forecast method produce a higher forecast than the 2016 6

Reference Scenario. This result conflicts with the “corrected” analysis witness 7

Neme provides in his testimony and that he provides to witness Evans for modeling. 8

9

Actual temperature-normalized sales results for 2016 and 2017 10

11

Q. How do actual temperature-normalized sales for 2016 and 2017 compare to the 12

2016 Reference Scenario forecast? 13


No.


A. For residential market, C&I market and total sales, the actual temperature-1

normalized sales for 2016 and 2017 exceeded the sales in the 2016 Reference 2

Scenario forecast. The actual results for temperature-normalized sales by class and 3

in total for both Service Area and Bundled sales are provided in Table 2. 4

5

Q. How is this result inconsistent with witness Neme’s assertion that energy 6

efficiency is not embedded in DTE’s forecast methodology? 7

A. If witness Neme’s corrected analysis were valid, DTE’s 2016 Reference Scenario 8

forecast should have been too high, and should have overstated actual sales by the 9

amount in his “Change Resulting from Corrections-EE in base case forecast 10

(GWh)” for years 2016 and 2017 located in Table 6 of his direct testimony. (Neme 11

p. 49) As can be seen in the Table 2 above, this is not the case. In fact, the opposite 12

occurred; DTE’s 2016 Reference Scenario forecast was lower than actual 13

temperature-normal sales for all residential, commercial and industrial sales, and in 14

total sales. 15

16

These results confirm that the forecast methodology utilized by DTE Electric for 17

years 2016 and 2017 was not too high and accounted for both historic energy 18

efficiency and future EWR programs. These results also confirm that witness 19

Neme’s “corrected analysis” for 2016 and 2017 is flawed. 20

21

Independent load forecasts 22


No.


Q. Are there other third party forecasts for the Midwest and Michigan which can 1

be compared to DTE Electric forecasts? 2

A. Third party forecasters that have a forecast for the Midwest and Michigan include 3

MISO and the EIA, as shown in Exhibit A-49. MISO uses an econometric model 4

that is built for each state to forecast sales using data available from the U.S. 5

Department of Energy’s Energy Information Administration (EIA). The EIA also 6

produces a forecast for the East North Central Region in which Michigan is 7

included. 8

9

Q. How does DTE Electric’s 2016 Reference Scenario forecast align with the EIA 10

and MISO forecasts? 11

DTE Electric’s 2016 Reference Scenario forecast reflects widely accepted industry 12

practice used by both MISO and EIA for electricity forecasting which includes 13

regression and end-use modeling. Although each forecasting group uses slightly 14

different forecasting methodologies, I believe it is important to review these results 15

on a comparative level to determine whether outlooks are aligned. 16

17

Q. How does DTE’s Reference Scenario forecasted growth rate compare to the 18

EIA and MISO forecasted growth rates? 19

A. The Company’s compounded annual growth rate for the period 2016 to 2030 at the 20

total service area level is a decline of 0.1%. EIA is forecasting 0.4% growth in the 21

2016 to 2030 period for the East North Central Region while MISO is forecasting a 22

higher growth rate of 0.9% for MISO Zone 7, which is comprised of most of the 23

lower peninsula of Michigan. 24


No.


A comparison is provided in the Table 3, below. 1

2

Q. How does the forecast for DTE’s Service Area, based off the New England ISO 3

“reconstituted” forecast methodology compare to the other forecasts listed in 4

Table 3? 5

A. The results for the “reconstituted” total sales model accounting for a 1.5% EWR 6

program from 2017 onward comes in at 0.4% 0.5% CAGR for the period 2016 7

2015 through 2030. This forecast is very close to the 2016 EIA Forecast results. 8

Both models incorporate the impact of energy efficiency and consider company 9

sponsored DSM/EWR programs. While the EIA data is based on the East North 10

Central region, consisting of Ohio, Indiana, Michigan, Illinois and Wisconsin, their 11

economies have many similarities with Michigan. 12


No.


Q. How does witness Neme’s “corrected analysis”, when applied to the 2016 1

Reference Scenario forecast, compare to the forecasts listed in Table 3? 2

A. When witness Neme’s “corrected analysis” is subtracted from the 2016 Reference 3

Scenario sales forecast, the resulting sales CAGR is a 0.9% decline for the period 4

2016 through 2030. His forecast certainly appears to be an outlier. Both MISO and 5

EIA produce forecasts that show growth even after accounting for energy efficiency 6

and company sponsored DSM/EWR programs. Witness Neme’s recommended 7

forecast methodology based on New England ISO and adapted for DTE’s Service 8

Area produces a forecast that is more consistent with the 2016 EIA forecast and 9

DTE’s 2016 Reference Scenario than his own “corrected analysis”. The following 10

graph clearly displays these points. 11


No.


Q. How do the forecasts listed above compare to historical temperature-1

normalized retail sales for years 2009-2015 for DTE’s Service Area? 2

A. From 2009-2015, DTE experienced a retail sales CAGR of 0.6% growth. During 3

this period, DTE executed an EWR program that achieved approximately 1.15% 4

energy saving annually. It is difficult to reconcile a historical retail sales growth 5

rate of a 0.6% growth during a period when an EWR program was in place and 6

suggest, as witness Neme does with his “corrected analysis”, that DTE should 7

expect an overall sales decline of 0.9% CAGR between 2016 through 2030. 8

Witness Neme provides no credible historical data to support these drastic 9

adjustments to the amount of “EE in the base case forecast (GWh)” and the 10

resulting lower sales forecast. Based on the data provided, witness Neme’s 11

“corrected analysis” is not realistic or credible. 12

13

Q. Can you please summarize your testimony? 14

A. Yes. Witness Neme asserts in his testimony that the forecasts submitted by DTE 15

only account for 50% of historical energy efficiency and do not account for future 16

EWR programs. (Neme p. 37-39) He then recalculates an adjustment to the amount 17

of embedded energy efficiency included in the forecast, effectively stating that the 18

sales forecast should be reduced by this “corrected” amount (Neme p. 49). In 19

simple terms, he is saying the Company’s forecast is too high and should be 20

adjusted down. Based on the following three arguments Witness Neme’s 21

“corrected analysis” should be disregarded: 22

1. Witness Neme’s recommended “reconstituted” sales methodology model, when 23

adjusted for DTE market conditions and energy efficiency, produced a forecast 24

higher than the 2016 Reference Scenario. 25


No.


2. Actual temperature normal sales results for 2016 and 2017 were higher than the 1

2016 Reference Case forecast and higher than witness Neme’s adjusted forecast 2

based on his “corrected analysis” of embedded energy efficiency. 3

3. When benchmarking independent load forecasts from MISO and EIA, witness 4

Neme’s adjusted forecast appears to be an outlier compared to the other model 5

results. The evidence provided above clearly shows that DTE Electric did include 6

the effects of historic energy efficiency and future EWR programs in its 2016 7

Reference Scenario forecast. Because of witness Neme’s flawed adjustments to the 8

amount of energy efficiency built into DTE’s 2016 Reference Scenario, the analysis 9

provided by witness Evans, who relied on this flawed analysis as an input to his 10

models, should be considered flawed as well. 11

12

Q. Does this complete your rebuttal testimony? 13

A. Yes, it does. 14

STATE OF MICHIGAN










authorizations. )

REBUTTAL EXHIBITS

OF

MARKUS B. LEUKER

Michigan Public Service Commission Case No. : U-18419

DTE Electric Company Exhibit: A-48 Revised

Reconstitued Sales Witness: M.B. Leuker

Page: 1 of 9

2016 Reference 2016 Reference

Scenario w/o Other Reconstituted Sales Reconstituted Sales Other Scenario + Other Reconstituted Sales + Other Reconstituted Sales + Other Actual

2000 49146 49146 49146 2653 51799 51799 51799

2001 48109 48109 48109 2537 50646 50646 50646

2002 49532 49532 49532 2653 52185 52185 52185

2003 50589 50589 50589 2643 53232 53232 53232

2004 50537 50537 50537 2598 53135 53135 53135

2005 49875 49875 49875 2720 52595 52595 52595

2006 49999 49999 49999 3228 53227 53227 53227

2007 50651 50651 50651 3301 53952 53952 53952

2008 48752 48752 48752 3217 51969 51969 51969

2009 45217 45217 45217 3229 48446 48446 48446

2010 46338 46338 46338 3210 49548 49548 49548

2011 46672 46672 46672 3136 49808 49808 49808

2012 46469 46469 46469 958 47428 47428 47428

2013 47327 47327 47327 942 48269 48269 48269

2014 47113 47113 47113 517 47630 47630 47630

2015 47033 47033 47033 291 47324 47324 47324

2016 46902 47780 47797 277 47180 48057 48075 47551

2017 46278 47359 47454 246 46525 47605 47700 47206

2018 46699 47489 47633 240 46939 47729 47873

2019 46751 47926 48112 234 46985 48160 48346

2020 46688 47416 47685 228 46916 47644 47913

2021 46569 47813 48122 224 46793 48037 48346

2022 46472 47952 48292 224 46696 48176 48516

2023 46406 47433 47818 224 46630 47657 48042

2024 46385 47947 48333 225 46610 48172 48558

2025 46407 47882 48275 225 46633 48108 48501

2026 46498 47833 48272 226 46724 48059 48498

2027 46494 48873 49343 226 46720 49099 49569

2028 46489 48864 49383 226 46715 49090 49609

2029 46475 49251 49802 226 46701 49476 50028

2030 46454 50192 50732 226 46680 50418 50958

2031 46426 50038 50595 226 46652 50264 50821

2032 46394 50706 51240 226 46620 50932 51466

2033 46353 51484 51973 226 46578 51710 52199

2034 46349 51466 51946 226 46575 51692 52172

2035 46335 52487 52922 226 46560 52713 53148

2036 46309 52916 53296 226 46534 53141 53522

2037 46274 53024 53387 226 46500 53249 53612

2038 46233 54132 54437 226 46459 54357 54663

2039 46192 54319 54594 226 46418 54545 54820

2040 46148 54722 54989 226 46374 54947 55214

AVERAGE ANNUAL % INCREASE

(2015-2021) -0.2% 0.2% 0.4%

(2015-2026) -0.1% 0.1% 0.2%

(2015-2030) -0.1% 0.4% 0.5%

(2015-2040) -0.1% 0.6% 0.6%

ANNUAL SALES (GWH)

DTE Electric CompanyHISTORICAL: 2000-2015FORECAST: 2016-2040

Total Sales

Michigan Public Service Commission Case No. : U-18419



Page: 2 of 9

Calculations 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040Regression f(d(GCP), d(POP)), 2009-201 49146 48109 49532 50589 50537 49875 49999 50651 48752 45402 46860 47710 48014 49402 49793 50262 51564 51865 52717 53885 54097 55222 56091 56294 57539 58018 58360 59628 59857 60464 61565 61624 62508 63349 63391 64482 64994 65181 66383 66676 671812009 EO 185 185 185 185 185 185 185 185 185 185 185 185 185 185 185 1852010 EO 337 337 337 337 337 337 337 337 337 337 337 337 337 337 337 3372011 EO 516 516 516 516 516 516 516 516 516 516 516 516 516 516 516 5162012 EO 507 507 507 507 507 507 507 507 507 507 507 507 507 507 507 5072013 EO 530 530 530 530 530 530 530 530 530 530 530 530 530 530 530 5302014 EO 605 605 605 605 605 605 605 605 605 605 605 605 605 605 605 6052015 EO 549 549 549 549 549 549 549 549 549 549 549 549 549 549 549 5492016 EO 556 556 556 556 556 556 556 556 556 556 556 556 556 556 556 5562017 EO 721 721 721 721 721 721 721 721 721 721 721 721 721 721 721 7212018 EO 723 723 723 723 723 723 723 723 723 723 723 723 723 723 723 7232019 EO 730 730 730 730 730 730 730 730 730 730 730 730 730 730 730 7302020 EO 722 722 722 722 722 722 722 722 722 722 722 722 722 722 722 7222021 EO 728 728 728 728 728 728 728 728 728 728 728 728 728 728 728 7282022 EO 730 730 730 730 730 730 730 730 730 730 730 730 730 730 730 7302023 EO 722 722 722 722 722 722 722 722 722 722 722 722 722 722 722 7222024 EO 730 730 730 730 730 730 730 730 730 730 730 730 730 730 730 7302025 EO 729 729 729 729 729 729 729 729 729 729 729 729 729 729 729 7292026 EO 728 728 728 728 728 728 728 728 728 728 728 728 728 728 728 7282027 EO 744 744 744 744 744 744 744 744 744 744 744 744 744 744 744 7442028 EO 744 744 744 744 744 744 744 744 744 744 744 744 744 744 744 7442029 EO 750 750 750 750 750 750 750 750 750 750 750 750 750 750 750 7502030 EO 764 764 764 764 764 764 764 764 764 764 764 764 764 764 764 7642031 EO 762 762 762 762 762 762 762 762 762 762 762 762 762 762 762 7622032 EO 772 772 772 772 772 772 772 772 772 772 772 772 772 772 772 7722033 EO 784 784 784 784 784 784 784 784 784 784 784 784 784 784 784 7842034 EO 784 784 784 784 784 784 784 784 784 784 784 784 784 784 784 7842035 EO 799 799 799 799 799 799 799 799 799 799 799 799 799 799 799 7992036 EO 806 806 806 806 806 806 806 806 806 806 806 806 806 806 806 8062037 EO 807 807 807 807 807 807 807 807 807 807 807 807 807 807 807 8072038 EO 824 824 824 824 824 824 824 824 824 824 824 824 824 824 824 8242039 EO 827 827 827 827 827 827 827 827 827 827 827 827 827 827 827 8272040 EO 833 833 833 833 833 833 833 833 833 833 833 833 833 833 833 833FINAL FORECAST 49146 48109 49532 50589 50537 49875 49999 50651 48752 45217 46338 46672 46469 47327 47113 47033 47780 47359 47489 47926 47416 47813 47952 47433 47947 47882 47833 48873 48864 49251 50192 50038 50706 51484 51466 52487 52916 53024 54132 54319 54722 -11731 -11002 -10258 -9514 -8764 -7999 -7237 -6465 -5681 -4897 -4098 -3292 -2485 -1661 -833


Total Sales

Michigan Public Service Commission Case No.: U-18419



Page: 3 of 9

Residential Commercial Industrial Total

2000 13854 19519 15773 49146

2001 14314 19300 14495 48109

2002 14884 19989 14659 49532

2003 15465 20433 14691 50589

2004 15744 20815 13978 50537

2005 15851 20284 13740 49875

2006 15717 20403 13878 49999

2007 15808 20670 14173 50651

2008 15466 20080 13207 48752

2009 15217 19942 10058 45217

2010 14980 19446 11912 46338

2011 15213 19780 11679 46672

2012 15062 19557 11850 46469

2013 15248 19800 12278 47327

2014 15115 19879 12119 47113

2015 15055 20035 11943 47033

2016 46902

2017 46278

2018 46699

2019 46751

2020 46688

2021 46569

2022 46472

2023 46406

2024 46385

2025 46407

2026 46498

2027 46494

2028 46489

2029 46475

2030 46454

2031 46426

2032 46394

2033 46353

2034 46349

2035 46335

2036 46309

2037 46274

2038 46233

2039 46192

2040 46148

ANNUAL CON SALES (GWH)


Total Sales




Page: 4 of 9

EO EO GCP Variable POP Variable Reconstituted Sales Reconstituted Sales

2000 0 0 254 5066 49146 49146

2001 0 0 246 5076 48109 48109

2002 0 0 251 5077 49532 49532

2003 0 0 256 5077 50589 50589

2004 0 0 254 5073 50537 50537

2005 0 0 258 5060 49875 49875

2006 0 0 251 5039 49999 49999

2007 0 0 249 5006 50651 50651

2008 0 0 235 4966 48752 48752

2009 185 185 211 4938 45402 45402

2010 522 550 223 4922 46860 46888

2011 1038 1109 230 4920 47710 47781

2012 1545 1655 235 4925 48014 48124

2013 2075 2216 241 4929 49402 49543

2014 2680 2844 246 4931 49793 49957

2015 3229 3409 251 4934 50262 50442

2016 256 4940 51564 51762

2017 261 4949 51865 52142

2018 266 4959 52717 53046

2019 270 4970 53885 54258

2020 275 4981 54097 54557

2021 280 4992 55222 55727

2022 284 4999 56091 56632

2023 289 5006 56294 56886

2024 294 5011 57539 58138

2025 298 5016 58018 58630

2026 302 5021 58360 58998

2027 307 5025 59628 60261

2028 312 5029 59857 60507

2029 316 5032 60464 61122

2030 321 5034 61565 62197

2031 325 5034 61624 62266

2032 330 5034 62508 63135

2033 335 5033 63349 63937

2034 340 5030 63391 63975

2035 346 5026 64482 65025

2036 351 5020 64994 65484

2037 356 5014 65181 65655

2038 362 5006 66383 66799

2039 369 4999 66676 67059

2040 375 4991 67181 67555


Total Sales

ANNUAL SALES (GWH)




Page: 5 of 9


Total Sales

Dependent Variable: D(SALES)

Method: ARMA Maximum Likelihood (OPG - BHHH)

Date: 01/25/18 Time: 12:08

Sample: 2009 2015

Included observations: 7

Convergence achieved after 23 iterations

Coefficient covariance computed using outer product of gradients

Variable Coefficient Std. Error t-Statistic Prob.

C 137.0386 25.14125 5.450747 0.1155

D(GCP) 101.0976 4.140469 24.41694 0.0261

D(POP) 16.60291 0.570109 29.12235 0.0219

AR(1) -1.285432 0.022592 -56.89891 0.0112

AR(2) -0.999885 0.000790 -1266.116 0.0005

SIGMASQ 22.71754 83.40431 0.272378 0.8307

R-squared 0.999990 Mean dependent var 215.6727

Adjusted R-squared 0.999941 S.D. dependent var 1639.862

S.E. of regression 12.61042 Akaike info criterion 10.14407

Sum squared resid 159.0228 Schwarz criterion 10.09770

Log likelihood -29.50424 Hannan-Quinn criter. 9.571033

F-statistic 20292.34 Durbin-Watson stat 1.564544

Prob(F-statistic) 0.005330

Inverted AR Roots -.64+.77i -.64-.77i

Dependent Variable: SALES

Method: ARMA Maximum Likelihood (OPG - BHHH)

Date: 02/06/18 Time: 13:49

Sample: 2009 2015


Convergence achieved after 18 iterations

Coefficient covariance computed using outer product of gradients


C -99399.06 1257.380 -79.05254 0.0081

GCP 126.8842 0.150778 841.5282 0.0008

POP 23.95793 0.262492 91.27117 0.0070

AR(1) -1.288459 0.002649 -486.4182 0.0013

AR(2) -0.999996 1.15E-05 -86925.11 0.0000

SIGMASQ 0.208008 0.499079 0.416785 0.7486




Sum squared resid 1.456058 Schwarz criterion 6.390812


F-statistic 2688828. Durbin-Watson stat 1.811076


Inverted AR Roots -.64+.76i -.64-.76i




Page: 6 of 9

2016 Reference

Scenario Reconstituted Sales Actual

2000 13854 13854

2001 14314 14314

2002 14884 14884

2003 15465 15465

2004 15744 15744

2005 15851 15851

2006 15717 15717

2007 15808 15808

2008 15466 15466

2009 15217 15217

2010 14980 14980

2011 15213 15213

2012 15062 15062

2013 15248 15248

2014 15115 15115

2015 15055 15055

2016 14871 15699 15182

2017 14778 16026 14982

2018 14720 16300

2019 14662 16591

2020 14625 16911

2021 14578 17165

2022 14540 17351

2023 14500 17531

2024 14459 17716

2025 14435 18025

2026 14421 18484

2027 14406 19074

2028 14392 19655

2029 14377 20242

2030 14363 20809

2031 14349 21327

2032 14334 21749

2033 14320 22231

2034 14306 22726

2035 14291 23231

2036 14277 23717

2037 14263 24186

2038 14249 24681

2039 14234 25185

2040 14220 25708

AVERAGE ANNUAL % INCREASE

(2015-2021) -0.5% 2.2%

(2015-2026) -0.4% 1.9%

(2015-2030) -0.3% 2.2%

(2015-2040) -0.2% 2.2%


Residential Sales

ANNUAL SALES (GWH)




Page: 7 of 9

Calculations 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040Regression f(RPI,EMP), 2000-2015 13854 14314 14884 15465 15744 15851 15717 15808 15466 15338 15309 15849 15997 16497 16675 16896 17722 18294 18816 19359 19937 20452 20903 21349 21805 22268 22800 23373 23954 24536 25108 25670 26241 26817 27410 28016 28606 29181 29788 30409 310542009 EO 121 121 121 121 121 121 121 121 121 121 121 121 121 121 121 1212010 EO 209 209 209 209 209 209 209 209 209 209 209 209 209 209 209 2092011 EO 306 306 306 306 306 306 306 306 306 306 306 306 306 306 306 3062012 EO 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 3002013 EO 314 314 314 314 314 314 314 314 314 314 314 314 314 314 314 3142014 EO 311 311 311 311 311 311 311 311 311 311 311 311 311 311 311 3112015 EO 281 281 281 281 281 281 281 281 281 281 281 281 281 281 281 2812016 EO 183 183 183 183 183 183 183 183 183 183 183 183 183 183 183 1832017 EO 244 244 244 244 244 244 244 244 244 244 244 244 244 244 244 2442018 EO 248 248 248 248 248 248 248 248 248 248 248 248 248 248 248 2482019 EO 253 253 253 253 253 253 253 253 253 253 253 253 253 253 253 2532020 EO 258 258 258 258 258 258 258 258 258 258 258 258 258 258 258 2582021 EO 261 261 261 261 261 261 261 261 261 261 261 261 261 261 261 2612022 EO 264 264 264 264 264 264 264 264 264 264 264 264 264 264 264 2642023 EO 267 267 267 267 267 267 267 267 267 267 267 267 267 267 267 2672024 EO 270 270 270 270 270 270 270 270 270 270 270 270 270 270 270 2702025 EO 274 274 274 274 274 274 274 274 274 274 274 274 274 274 274 2742026 EO 281 281 281 281 281 281 281 281 281 281 281 281 281 281 281 2812027 EO 290 290 290 290 290 290 290 290 290 290 290 290 290 290 290 2902028 EO 299 299 299 299 299 299 299 299 299 299 299 299 299 299 299 2992029 EO 308 308 308 308 308 308 308 308 308 308 308 308 308 308 308 3082030 EO 317 317 317 317 317 317 317 317 317 317 317 317 317 317 317 3172031 EO 325 325 325 325 325 325 325 325 325 325 325 325 325 325 325 3252032 EO 331 331 331 331 331 331 331 331 331 331 331 331 331 331 331 3312033 EO 339 339 339 339 339 339 339 339 339 339 339 339 339 339 339 3392034 EO 346 346 346 346 346 346 346 346 346 346 346 346 346 346 346 3462035 EO 354 354 354 354 354 354 354 354 354 354 354 354 354 354 354 3542036 EO 361 361 361 361 361 361 361 361 361 361 361 361 361 361 361 3612037 EO 368 368 368 368 368 368 368 368 368 368 368 368 368 368 368 3682038 EO 376 376 376 376 376 376 376 376 376 376 376 376 376 376 376 3762039 EO 384 384 384 384 384 384 384 384 384 384 384 384 384 384 384 3842040 EO 391 391 391 391 391 391 391 391 391 391 391 391 391 391 391 391FINAL FORECAST 13854 14314 14884 15465 15744 15851 15717 15808 15466 15217 14980 15213 15062 15248 15115 15055 15699 16026 16300 16591 16911 17165 17351 17531 17716 18025 18484 19074 19655 20242 20809 21327 21749 22231 22726 23231 23717 24186 24681 25185 25708 -5071 -4790 -4499 -4200 -3892 -3575 -3250 -2919 -2580 -2234 -1880 -1519 -1151 -775 -391

Residential Sales





Page: 8 of 9

ANNUAL CON SALES (GWH)

Residential EO RPI Variable EMP Variable Reconstituted Sales Actual

1999 13622 0 206 2436 13622

2000 13854 0 215 2496 13854

2001 14314 0 212 2435 14314

2002 14884 0 210 2383 14884

2003 15465 0 211 2353 15465

2004 15744 0 212 2335 15744

2005 15851 0 212 2333 15851

2006 15717 0 211 2287 15717

2007 15808 0 211 2246 15808

2008 15466 0 206 2176 15466

2009 15217 121 193 2006 15338

2010 14980 329 195 2003 15309

2011 15213 636 204 2056 15849

2012 15062 935 208 2110 15997

2013 15248 1249 209 2149 16497

2014 15115 1560 214 2183 16675

2015 15055 1841 223 2232 16896

2016 14871 229 2256 17722 15182

2017 14778 235 2276 18294 14982

2018 14720 241 2293 18816

2019 14662 246 2303 19359

2020 14625 252 2317 19937

2021 14578 258 2326 20452

2022 14540 262 2334 20903

2023 14500 266 2342 21349

2024 14459 271 2351 21805

2025 14435 276 2359 22268

2026 14421 281 2366 22800

2027 14406 286 2374 23373

2028 14392 292 2379 23954

2029 14377 297 2383 24536

2030 14363 303 2389 25108

2031 14349 308 2393 25670

2032 14334 313 2398 26241

2033 14320 319 2403 26817

2034 14306 324 2408 27410

2035 14291 330 2413 28016

2036 14277 336 2418 28606

2037 14263 341 2423 29181

2038 14249 347 2430 29788

2039 14234 353 2438 30409

2040 14220 359 2447 31054

ANNUAL SALES (GWH)


Residential Sales




Page: 9 of 9


Residential Sales

Dependent Variable: SALES

Method: Least Squares

Date: 01/25/18 Time: 13:02

Sample: 2000 2015



C 6425.895 3022.170 2.126252 0.0532

RPI 111.9737 19.39075 5.774592 0.0001

EMP -6.367605 0.933362 -6.822225 0.0000




Sum squared resid 1980992. Schwarz criterion 15.08426


F-statistic 24.35983 Durbin-Watson stat 0.747147


STATE OF MICHIGAN


In the matter of the Application of ) DTE ELECTRIC COMPANY for ) approval of Certificates of Necessity ) pursuant to MCL 460.6s, as amended, ) in connection with the addition of a ) Case No. U-18419 natural gas combined cycle generating ) facility to its generation fleet and for ) related accounting and ratemaking ) authorizations. )


OF

WILLIAM H. DAMON III

DTE ELECTRIC COMPANY REVISED REBUTTAL TESTIMONY OF WILLIAM H. DAMON

Line No.

WHD Rebuttal - 1

Q. Please state your full name, title, business address and by whom you are 1

employed? 2

A. My name is William H. Damon III. I am a Senior Vice President and Director for 3

the HDR Engineering, Inc. (HDR) Strategic Consulting Practice, and am more 4

broadly responsible for HDR’s National Power Consulting services to the power 5

industry. My business address is HDR Engineering, Inc., 5405 Data Court, Ann 6

Arbor, Michigan, 48108. A statement of my qualifications and experience is included 7

in my resume attached as Exhibit A-37. 8

9



A. Yes, I did. 12

13


A. This testimony is being presented to provide a response to: 15

• MPSC Staff Witness Simpson’s comments related to Owner Contingencies 16

• ELPC Witness Beach’s comments related to advanced class combustion turbine 17

natural gas combined cycle (NGCC) plant market experience 18

19


A. Yes, I am sponsoring the following exhibit: 21

Exhibit A-72 – OEM Fleet Availability Reliability Data 22

23

Q. What is your response to Staff Witness Simpson’s statement on page 17, lines 7-24

8, that “Staff believes that this ($17.8 million in contingency) should be sufficient 25

W. H. DAMON Line U-18419 No.

WHD Rebuttal - 2

due to the Company’s decision to utilize… a full wrap EPC option”? 1

A. Based on the Company’s revised risk register, which was submitted as Exhibit A-73 2

with Company Witness Mr. Fahrer’s rebuttal testimony, HDR does not agree that the 3

$17.8 million of contingency (1.9%) that the Staff is proposing is sufficient for a 4

project at this stage of development, engineering and contracting. 5

6

Q. What is the basis for your position regarding project contingency for these types 7

of projects? 8

A. As acknowledged by Witness Simpson, DTE Electric has entered into a fixed price 9

full wrap contract with an engineering, procurement, and construction (EPC) 10

contractor for execution of this project resulting from a well-defined and competitive 11

bidding process. No contract or project is without unknowns given the extended 12

duration of design and construction of these Natural Gas Combined Cycle (NGCC) 13

projects. These unknowns are directly associated with the complex project scope, yet 14

to be initiated detailed engineering and procurement, Owner obligations outside of 15

EPC scope, and the potential for market change, as have been outlined in the risk 16

register. Consequently, the application of project contingencies is prudent and 17

appropriate both for the EPC contractor and the Owner. HDR believes that the 18

Company’s revised risk register is an adequate reflection of potential risks that the 19

project may realize, and that the amount of Owner’s contingency reflected within that 20

risk register is appropriate. 21

22

Q. What is your response to Witness Simpson’s comments in her corrected 23

testimony regarding her recommendation to eliminate the $12 million of 24

contingency supported by line 19 of the Company’s risk register (page 16, line 25


WHD Rebuttal - 3

11 through page 17, line 2), specifically “…there should be a procedure, process, 1

or analysis put in place to mitigate that likelihood (risk of owner required 2

equipment substitutions or scope changes after negotiation[s] are completed) 3

much earlier in the process” and “the Company’s lack of adequate planning 4

should not result in potential added expense to the ratepayer”? 5

A. HDR does not agree with Witness Simpson’s assertion that identifying a risk for 6

owner required equipment changes or scope changes after negotiation[s] would be 7

considered “a lack of planning”. HDR has been engaged with DTE Electric for nearly 8

three years developing the project and during this time it has been clear that DTE 9

Electric has consistently followed prudent industry practices with regard to planning, 10

procedures, and processes to mitigate these risks. At this early stage of the project 11

development, the EPC has completed less than 10% of engineering and has not 12

procured any of the Balance of Plant engineered equipment. These activities would 13

not be initiated by the EPC until a Notice to Proceed is authorized and as DTE Electric 14

has review rights for the detailed design development and specification and 15

procurement of engineered equipment, we fully expect that equipment selection and 16

design changes will result in owner directed change orders. Our experience has 17

shown that no project has been completed with zero change orders associated with 18

equipment selection and design changes from this early stage. Despite best efforts to 19

identify a detailed scope at this early stage of the project, scope decisions will still be 20

required during detailed design and execution. It is customary and rational to identify 21

improvements during project execution to enhance parameters such as life cycle costs 22

and reliability of the facility. Our experience is that these change orders (post EPC 23

award) are in the 1-2% range. DTE Electric’s risk register line item #19 falls within 24


WHD Rebuttal - 4

this range and is considered a reasonable and prudent level of contingency for owner 1

required equipment substitutions and scope changes at this stage of the project. 2

3

Q. What has HDR’s experience shown to be a reasonable contingency level for a 4

fixed price full wrap NGCC projects at this stage of development? 5

A. NGCC projects we have completed or are currently supporting as Owner’s Engineer 6

(OE) are based on fixed price competitively bid contracts. HDR generally sees 7

project contingency in the 10% range for the combined EPC and owner contingency. 8

HDR would expect and consistently sees EPC contractors bidding contingencies in 9

the 4-5% range which would put owner contingencies in the 5-6% range. The 10

Owner’s contingency as outlined in the Company’s risk register (Exhibit A-73) is 11

representative of a typical owner’s contingency at this stage of the project. 12

13

Q. What is the basis of your estimation of Owner contingency figures indicated in 14

the response above? 15

A. HDR has an extensive resume as OE for natural gas-fired, combustion turbine 16

projects in the United States including over 8GW of new, baseload combined cycle 17

gas turbine projects using advanced class technology. HDR’s involvement in these 18

projects provides us with knowledge of current market costs based on competitive 19

bidding and negotiation of both EPC and Power Island Equipment contracts as well 20

as final costs for fully constructed and commissioned NGCC projects. 21

22

Q. What is your response to ELPC Witness Beach’s statement on page 33, lines 13 23

and 14 of his testimony that “DTE is proposing a 1.1 GW plant, when only 8 24

GW of similar turbines have been developed.”? 25


WHD Rebuttal - 5

A. Witness Beach’s claim of “…only 8 GW of similar turbines have been developed” is 1

mistakenly referring to Witness Fahrer’s direct testimony wherein Witness Fahrer 2

notes HDR’s experience as an OE with over 8 GW of current advance class 3

technology development projects (page 9, lines 2-4). The 8 GW of development does 4

not represent the industry experience with advanced class turbines. 5

6

Q. What is the experience of the selected OEM for the Proposed Project? 7

A. The Company has selected General Electric (GE) advanced class turbines for this 8

project with a commercial resume of 10 GW of advanced class combined cycle power 9

plants currently in operation worldwide and an additional 49 advanced class turbines 10

representing over 20 GW of capacity that are either booked or in various stages of 11

installation at this time. Other manufacturers such as Siemens and Mitsubishi Hitachi 12

Power Systems America (MHPSA) also have operating plants and projects in 13

development that support the continued commercialization of advanced class 14

technology. 15

16

Q. What is your response to Mr. Beach’s concerns about DTE Electric’s proposal 17

using a new class of advanced gas turbines, for which there is little operating 18

experience to date (page 33, lines 12 and 13)? 19

A. The General Electric 7HA.02 advanced class gas turbines selected by DTE Electric 20

follow a lineage of gas turbines produced by the manufacturer dating back in excess 21

of 50 years, with installed experience of approximately 7,000 gas turbines with over 22

300 million operating hours. With each progression to the next advanced gas turbine 23

class, General Electric has built upon technology used in earlier model gas turbines. 24

In addition, it is noted that with each advancement in gas turbine technology, 25


WHD Rebuttal - 6

reliability and availability data has been maintained at a consistently high level. The 1

advanced gas turbine commercial fleet has over 68,000 operating hours and the fleet 2

leader has achieved rates of availability at 97.8% and reliability at 99.7%. This 3

exceeds the publicly available Generating Availability Data System (GADS) 4

publication by North American Electric Reliability Corporation (NERC) for 5

operating combined cycle plants. See Exhibit A-72 for General Electric’s operating 6

information on this topic. 7

8


A. Yes, it does. 10

STATE OF MICHIGAN


In the matter of the Application of ) DTE ELECTRIC COMPANY for ) approval of Certificates of Necessity ) pursuant to MCL 460.6s, as amended, ) in connection with the addition of a ) Case No. U-18419 natural gas combined cycle generating ) facility to its generation fleet and for ) related accounting and ratemaking ) authorizations. )

REBUTTAL EXHIBITS

OF

W. H. DAMON

7/9HA Operating power plants across the world

9HA.01 Launch Customer

1x1 Single Shaft (1 Unit)Fleet Leader 11,134 hours

7HA.02 Launch Customer 2x(2x1) Multi Shaft (4 Units)

20,558 hoursFleet Leader – 5,630 hours

7HA.01 Launch Customer Japan3x1 Multi shaft (3 Units)

9,179 Hours

9HA.01 Pakistan3x(2x1) Multi Shaft (6 Units)

14,883 hours

9HA.01 Russia1x1 Multi Shaft (1 Unit)

5,221 hours

18 HA gas turbines commercial(+5 additional units in commissioning)

2

7HA.02 TaiwanSimple Cycle

2 Units – 4,067 Hours

• 68k+ commercial fleet operating hours

• Fleet leader has achieved outstanding rates of availability at 97.8% and reliability at 99.7%.

Data as of Jan 16, 2018

9HA.01 Customer Japan1x1 Single shaft (1 Unit)

1 Unit – 3,010 Hours

Michigan Public Service Commission DTE Electric Company OEM Fleet Availability Reliability Data

Case No.: U-18419 Exhibit: A-72 Revised

Witness: W. H. Damon Page: 2 of 2

STATE OF MICHIGAN










authorizations. )


OF

MICHAEL E. BANKS

DTE ELECTRIC COMPANY

REVISED REBUTTAL TESTIMONY OF MICHAEL E. BANKS Line

No.

Q. What is your name, business address and by whom are you employed? 1

A. My name is Michael E. Banks. My business address is: One Energy Plaza, Detroit, 2

Michigan 48226. I am employed by DTE Energy within DTE Electric as a Manager, 3

Power Generation Engineering in the Fossil Generation department. 4

5



A. Yes, I did. 8

9


A. I am going to provide clarifications to some of the statements provided by MPSC 11

Staff Witnesses Proudfoot, Simpson, Watson, Gould, and Harlow regarding sizing of 12

the combined cycle power plant; ELPC Witnesses Lucas and Beach regarding 13

reliability of the combined cycle power plant (CCPP or combined cycle gas turbine 14

or CCGT) versus renewables; and ELPC Witness Lucas regarding flexibility of a 15

CCGT. 16

17


A. No. 19

20

Q. In the MPSC staff testimony from Witnesses Proudfoot1, Simpson2, Watson3, 21

1 Mr. Proudfoot’s direct testimony on page 8 beginning on line 13 2 Ms. Simpson’s corrected direct testimony on page 253 beginning on line 1910 and page 25 beginning on line 18 3 Ms. Watson’s direct testimony on page 23 beginning on line 7

M. E. BANKS Line U-18419 No.

MEB Rebuttal - 2

Gould4, Smith5 and Harlow6, they all claim that the use of Demand Response 1

could partially replace the electrical output of the Proposed Project. What 2

would be the impact of partially replacing the electrical output of the Proposed 3

Project? 4

A. The efficiency of the Proposed Project would be reduced. The design of this project 5

from its onset has been focused on the most efficiently designed plant for customers. 6

The combustion turbines are built to a design that maximizes the thermodynamic and 7

electrical efficiencies available. Implementing non-standard plant designs, or a 1x1 8

advanced class, or an older design F-class arrangement, would negatively impact the 9

overall efficiency of the plant. For each 1% in heat rate degradation, approximately 10

540630,000 mmBTUs7 additional natural gas will be required annually, resulting in 11

higher customer costs of approximately $3M8 annually. 12

13

Q. Why was the electrical output of the Proposed Project selected at 1,100MW? 14

A. As Company Witness Chreston testifies, the size of the plant has been selected based 15

on the Integrated Resource Planning capacity need. CCGTs are designed and built in 16

blocks based on the number of combustion turbines that are being used in conjunction 17

with the heat recovery steam generators and the steam turbine. It is typical for 18

advanced class CCGT plants to increase their output capability in 550MW blocks. 19

That is, for each combustion turbine installed the output is increased by 550MW 20

when included in a combined cycle arrangement. Plant size is selected based on these 21

4 Ms. Gould’s direct testimony on page 14 beginning on line 10 5 Ms. Smith’s direct testimony on page 5 beginning on line 15 6 Mr. Harlow’s direct testimony on page 7 beginning on line 10 7 Approximate Proposed Project heat rate at 7,000btu/kWh * 9,000 GWh/yr * 1% degradation in efficiency = 630,000mmBTU 8 Assuming $4/mmBTU natural gas pricing


MEB Rebuttal - 3

standard designs to promote cost minimization, efficiency, and reliability. When the 1

Proposed Project construction is completed and the unit is dispatched into MISO, the 2

plant will operate more efficiently and effectively than the other forms of electrical 3

generation to meet customer demand. 4

5

Q. In the ELPC direct testimony from Witnesses Lucas9 and Beach10, they state 6

that renewables have a higher reliability than a CCGT. What are your thoughts 7

regarding these statements? 8

A. My thoughts start with the point of view that, fundamentally, reliability means that 9

electricity is available to our customers, at the time that they need it. It is a significant 10

flaw to consider an intermittent resource to be more reliable than a dispatchable 11

resource in meeting the power needs of our customers. The very definition of an 12

“intermittent resource” describes its unreliability in that intermittent resources such 13

as wind and solar plants provide generation based on the vagaries of the weather and 14

not based on the customers’ demands. On the other hand, a CCGT plant as proposed 15

in this proceeding by the Company will specifically operate based on the demands of 16

customers for electrical energy. 17

18

Q. Does MISO provide rules on how the generators are credited with meeting 19

resource adequacy reliability requirements? 20

A. Yes. Company Witness Wojtowicz describes the UCAP methodology used by MISO 21

on page 11 of her direct testimony. The UCAP data in Witness Wojtowicz’s Exhibit 22

A-217 illustrates that the Company’s existing wind resources received only 23

approximately 12-16% of their installed capacity as MISO UCAP credit while the 24

9 Mr. Lucas’ direct testimony on page 39 beginning on line 15 10 Mr. Beach’s direct testimony on page 723 beginning on line 2


MEB Rebuttal - 4

existing solar received approximately 30% credit in the most recent MISO planning 1

year. 2

3

Q. Are there other criteria to evaluate when considering the reliability of a 4

generating facility? 5

A. Yes. While the ability to reliably and dependably meet maximum expected customer 6

demands for power is critical, it also necessary to understand the ability of generating 7

facilities to respond to the varying demands for power by customers. Electrical power 8

grid stability requires that generation and load be matched on a constant, continuing 9

and nearly instantaneous basis. Mismatches between load and generation can escalate 10

into power outages. 11

12

Q. Can you contrast the ability of wind and solar units to meet varying customer 13

demand versus the ability of a CCGT plant to provide the same service? 14

A. Yes. While the ability to meet maximum customer demands for power is critical, it 15

is also necessary to meet the varying demands for power by your customers. The 16

following table shows the operational capabilities of the CCGT compared to the very 17

limited capabilities of wind and solar units. 18

19


MEB Rebuttal - 5

1

Requested Ability CCGT Wind Solar

Rapidly alter electrical output based on customer demand Yes No No

Operate in adverse weather conditions (high winds, storms) Yes No No

Operate 7x24 at maximum output Yes No No

Operate 7x24 for weeks at a time at maximum output Yes No No

Provide ancillary services of Regulation, Spinning, & Supplemental Reserve

Yes

No11

No12

Provide ancillary service of VARS Yes Yes Yes

2

Q. According to ELPC Witness Lucas13, a combined cycle power plant is not 3

flexible. Can you describe the flexibility of the Proposed Project as compared to 4

Mr. Lucas’ opinion of its flexibility? 5

A. Yes. It is a fundamental flaw of Mr. Lucas to describe the Proposed Project as a 6

baseload plant similar to Pacific Gas & Electric’s Diablo Canyon nuclear plant. The 7

Proposed Project will be flexible in every aspect because it is being designed so that 8

it can operate in a cycling, a load-following, or a baseload condition. 9

10

The Proposed Project can also startup, shutdown, increase or decrease its electrical 11

output quickly, supporting the rapid load changes that occur at certain times of the 12

day. When initiating a unit startup, the Proposed Project will begin generating 13

electricity to the grid within 10 minutes and achieve 90% of its rated output, 14

approximately 1,000MW, within 40 minutes, and full electrical output within 80 15

minutes. These times represent a startup from an overnight shutdown, i.e. a hot start. 16

Under the harshest conditions for the equipment, when the unit has been offline for 17

longer than 72 hours, i.e. a cold start, times only slightly lengthen14. 18

11 Wind assets are not currently eligible to participate in MISO’s ancillary services market 12 Solar assets are not currently eligible to participate in MISO’s ancillary services market 13 Mr. Lucas’ direct testimony on page 105 104 beginning on line 12 and on page 135 beginning on line 3 14 Electricity to grid in 30 minutes, 90% load in 115 minutes, full load in 175 minutes


MEB Rebuttal - 6

1

The Proposed Project plant will be able to adjust its electrical output by 2

100MW/minute, enough to quickly power 20,000 households per minute15, over a 3

range of 800MW. This means that as the electrical demand adjusts up and down the 4

plant will operate in a flexible and reliable manner to meet the electrical demands of 5

customers. 6

7

In conclusion, it appears Mr. Lucas’ own testimony supports the Company when he 8

states16: 9

10

“…DTE must maintain sufficient capacity to keep its system reliable. 11

Flexibility – both on the generation side and the demand side – is key. As 12

more variable resources such as solar and wind are introduced, matching 13

supply with demand will require more attention. The ability for generators 14

to respond quickly to changes in solar and wind generation, and to ramp 15

their output up or down, is critical.” 16

Through the design described in my direct and rebuttal testimony, the Proposed 17

Project will meet every requirement Mr. Lucas states is required. Mr. Lucas’ claim 18

that the CCGT is a baseload asset and inflexible is false and a misrepresentation of 19

the design capabilities of the equipment. 20

21

Q. Does this conclude your testimony? 22

A. Yes.23

15 Assuming a household uses 5kW 16 Mr. Lucas’ direct testimony on page 105 104 beginning on line 12

STATE OF MICHIGAN










authorizations. )

REBUTTAL EXHIBITS

OF

MICHAEL E. BANKS

STATE OF MICHIGAN


In the matter of the Application of ) DTE ELECTRIC COMPANY for ) approval of a Certificates of Necessity ) pursuant to MCL 460.6s, as amended, ) in connection with the addition of a ) Case No. U-18419 natural gas combined cycle generating ) facility to its generation fleet and for ) related accounting and ratemaking ) authorizations. )


OF

ANGELA P. WOJTOWICZ

DTE ELECTRIC COMPANY REVISED REBUTTAL TESTIMONY OFANGELA P. WOJTOWICZ

Line No.

APW Rebuttal - 1 Revised

Q. What is your name, business address and by whom are you employed? 1

A. My name is Angela P. Wojtowicz. My business address is 414 S. Main Street, Suite 2

300, Ann Arbor, Michigan 48104. I am employed DTE Electric Company (DTE 3

Electric or Company). 4

5



A. Yes, I did. 8

9


A. The purpose of my rebuttal testimony is to: 11

• dispute claims by Michigan Environmental Council, Natural Resources 12

Defense Council, and Sierra Club (MEC/NRDC/SC) Witnesses Avi Allison and 13

Robert Fagan that DTE Electric’s capacity price forecast is too high, 14

• explain how MISO calculates and enforces certain reliability parameters as part 15

of its annual Resource Adequacy construct which refutes the incorrect claims 16

of MEC/NRDC/SC Witness Dale Osborn and Attorney General (AG) Witness 17

Phil DiDomenico that Effective Capacity Import Limit (ECIL) does not limit 18

the amount of external capacity that can be utilized to meet the Company’s 19

Resource Adequacy requirements in the MISO, 20

• discuss the issues with capacity import options MEC/NRDC/SC Witness Dale 21

Osborn suggested the Company should have considered, and 22

• discuss concerns with MEC/NRDC/SC Witness Robert Fagan’s 23

recommendation to retire the Company’s Tier 2 units earlier than the announced 24

retirement dates. 25

A. P. WOJTOWICZ Line U-18419 No.


Q. Are you sponsoring any rebuttal exhibits? 1

A. Yes. I am sponsoring the following rebuttal exhibits: 2

Exhibit Description 3

A-50 MISO Resource Adequacy Business Practice Manual, BPM-011-4

r17, Page 90 5


r17, Page 87 7


r17, Page 88 9

A-53 “MISO 2015/2016 Planning Resource Auction Results” Page 6, 10

4/14/2015 11

A-54 “Locational Planning”, Pages 2&5, MISO Resource Adequacy 12

Subcommittee, 3/8/2017 13

A-55 U-18444, Witness R. Doherty, Exhibit S-5 and S-6 14

A-56 MISO Planning Year 2018-2019 LOLE Study Report, Pages 16, 28, 15

30 16

A-57 U-18419 Witness K.J. Chreston, Exhibit A-4 17

A-58 MISO Zonal Coincidence: 2006-2016 18

A-59 U-17992 MPSC Staff Memorandum, Page 3, 6/29/2016 19

A-60 “MISO 2017/2018 Planning Resource Auction Results” Page 9, 20

4/12/2017 21

A-61 MISO FERC Electric Tariff Module E-1 69A.3.1.c 22

A-62 MISO FERC Electric Tariff Module E-1 69A.3.1.f 23

A-63 “Discussion of 2018 PRA Improvement Priorities”, MISO Resource 24

Adequacy Subcommittee, 1/10/2018 25



CAPACITY PRICES 1

Q. What are your thoughts with regard to the claims of MEC/NRDC/SC Witnesses 2

Avi Allison and Robert Fagan that the Company’s capacity price forecast is too 3

high? 4

A. I disagree. Both Witness Allison (on pages 36 – 46 of his direct testimony) and 5

Witness Fagan (on page 19 of his direct testimony) assert the basis for their claim 6

that the Company’s capacity price forecast is too high is that it is not in line with 7

historic capacity prices in MISO’s Planning Resource Auction (PRA). The MISO 8

PRA is not a relevant comparison point for what the Company would have to pay for 9

long-term capacity. 10

11

Q. Why do you believe the MISO PRA is not a relevant comparison point for what 12

the Company would have to pay for long-term capacity? 13

A. The Company is required to demonstrate capacity four years into the future under the 14

State Reliability Mechanism (SRM) pursuant to Michigan Public Act 341 of 2016 15

(“PA 341”). The MISO PRA is an annual balancing auction held only months prior 16

to the capacity delivery period and as such cannot be used to make future capacity 17

demonstrations. Additionally, the MISO PRA prices are capped at the Cost of New 18

Entry (CONE) of a simple cycle combustion turbine generator, which is not reflective 19

of the cost of base load generation that the Company is retiring and planning to 20

replace. Comparing historic MISO PRA prices to the capacity price projections used 21

by the Company in this filing does not make sense. Witness Kevin Lucas on behalf 22

of Environmental Law and Policy Center, The Ecology Center, The Solar Energy 23

Industries Association, Vote Solar, and The Union of Concerned Scientists agrees 24

with this as he stated on page 121 of his direct testimony, “I also recognize that 25



MISO’s capacity auction results are to an extent not reflective of the regulatory 1

structure in Michigan and might not be the best proxy either.” 2

3

Q. Are there other sources of capacity prices that are a more realistic comparison 4

of what it might cost the Company to comply with the state’s SRM requirements 5

over the next few years? 6

A. Yes. The Company held a reverse capacity auction during the summer of 2017 to 7

purchase existing capacity from within MISO for Planning Years 2018-19 through 8

2021/22. Bilateral capacity purchases for multiple future years have been shown to 9

be much higher priced than the MISO PRA and in line with the capacity price forecast 10

used by the Company in this filing. Results of the Company’s 2017 reverse capacity 11

auction indicated steadily rising capacity prices throughout the next four years, 12

culminating in an average offer price above $50k/MW-yr for the 2021/22 Planning 13

Year. 14

15

Q. Are there capacity prices that are a more realistic comparison of what it might 16

cost the Company to comply with the state’s SRM requirements over the long-17

term? 18

A. Yes. The MISO PRA prices are capped at the Cost of New Entry (CONE), and 19

capacity prices are administratively set to that maximum value for any Local 20

Resource Zone (LRZ) that does not have sufficient resources to meet its Local 21

Clearing Requirement. The amount of local resources in LRZ 7 is projected to be 22

below the LCR in Planning Year 2023/24 even with the addition of the Proposed 23

Project in this filing (Exhibit A-55). As shortages to the LCR become close, holders 24

of excess capacity will likely price it closer to the MISO PRA cap of CONE, as that 25



is their alternative. If an actual shortage to the LCR occurs, the price of capacity to 1

comply with the state SRM will not be based on bilateral purchases of existing 2

capacity because there will be none available. The price of capacity to comply with 3

the state SRM will be based on cost of building new capacity in LRZ 7. 4

5

Q. What is your opinion of the Company’s capacity price projections used in this 6

filing? 7

A. Contrary to the assertions of MEC/NRDC/SC witnesses Allison and Fagan, the 8

capacity price projections used by the Company in this filing are reasonable based on 9

the Company’s capacity auction results, the SRM future capacity demonstration 10

requirement, and potential shortages to the LCR. 11

12

MISO PRA AND RESULTANT EFFECTIVE CAPACITY IMPORT LIMIT (ECIL) 13

Q. Witness DiDomenico states on page 8 of his direct testimony that it is “unclear” 14

how ECIL affects the PRA, Witness Osborn claims on page 39 of his direct 15

testimony that ECIL is not a term recognized by MISO, and Witness Fagan 16

claims on page 11 of his direct testimony that ECIL is not reflective of the 17

potential imports into a LRZ. How do you explain this confusion surrounding 18

the ECIL? 19

A. According to their qualifications in their testimony, it does not appear that these three 20

witnesses have had direct participation or experience with execution of the MISO 21

PRA so it is possible that they do not clearly understand how the PRA is executed. 22

The ECIL is a result of MISO’s application of two constraints when performing the 23

PRA as explained below. 24

25



Q. How does MISO calculate Local Reliability Requirements (LRR) for each LRZ? 1

A. MISO performs an annual local reliability study based on each LRZ’s peak load and 2

internal zone attributes. Per the MISO Business Practice Manual (BPM), “Local 3

Reliability Requirements for each LRZ will be determined by MISO through 4

engineering studies based on the 0.1 days per year loss of load expectation (LOLE) 5

criteria for each LRZ in isolation” (Exhibit A-50). The resulting LRR is the amount 6

of resources needed by that LRZ to reliably meet its forecasted peak load before 7

considering imported capacity. 8

9

Q. How does MISO calculate the Capacity Import Limit (CIL) for each LRZ? 10

A. In addition to the LOLE analysis, MISO performs transfer analysis to determine the 11

Capacity Import Limit (CIL) and Capacity Export Limit (CEL) for each LRZ. 12

13

Q. How does MISO calculate the Local Clearing Requirement (LCR) for each 14

LRZ? 15

A. After calculating the LRR and considering the maximum contribution of the LRZ’s 16

CIL, the remaining capacity must be physically located within the LRZ and is referred 17

to as the LCR, which is mathematically represented as LCR = LRR – CIL. 18

19

Q. How does MISO calculate the Planning Reserve Margin Requirement (PRMR) 20

for each LRZ? 21

A. MISO performs an annual system-wide reliability study based on the MISO 22

coincident peak load. The study enforces a LOLE standard of 0.1 days/year, which 23

results in a PRMR for each individual LRZ during the forecasted MISO-wide 24

coincident peak load. Due to load diversity and other system-wide benefits, the 25



PRMR for each LRZ is typically less than the LRR. 1

2

Q. How does MISO constrain the resources that clear in the PRA? 3

A. Resources are constrained in the auction clearing process by ensuring that sufficient 4

local resources are cleared to meet the LCR, then clearing additional resources in 5

economic order up to the PRMR. The MISO BPM provides, “The annual 6

PRA…shall clear ZRC [Zonal Resource Credit] offers in order to satisfy 100% of the 7

PRMR for each LSE [Load Serving Entity]” (Exhibit A-51). The MISO BPM further 8

states, “MISO will use the offers in conjunction with the import and export 9

constraints, local clearing requirements, and other inputs to determine the least cost 10

set of offers that respects the various constraints” (Exhibit A-52). 11

12

Q. How does enforcement of both the zonal LCR and PRMR impact the amount of 13

non-local capacity that is cleared in the PRA? 14

A. Because both the PRMR and LCR are enforced in the PRA, the amount of imported 15

capacity that is cleared to meet the PRMR cannot exceed the difference between the 16

PRMR and LCR. DTE Electric refers to this difference as the Effective Capacity 17

Import Limit (ECIL), which is mathematically represented as ECIL = PRMR – LCR. 18

ECIL is not a term defined by MISO, but is a direct result of MISO’s reliability 19

processes within the PRA. MISO enforces the LCR of each LRZ to ensure each LRZ 20

has sufficient resources to meet reliability standards during the zone’s forecasted 21

coincident peak load. If MISO were to utilize the entire CIL during the PRA while 22

still adhering to the LCR – effectively enforcing the LRR as opposed to the PRMR – 23

then LSEs would not receive the advantages of MISO’s system-wide benefits, which 24

allow the PRMR to be less than the LRR. 25



Q. Does the resulting ECIL from MISO’s PRA limit the amount of power that can 1

be physically imported into a LRZ? 2

A. No. The CIL is MISO’s projection of the physical limitation of the power that can 3

be imported into a LRZ during the zone’s forecasted peak load, and actual energy 4

flows into the LRZ can, and likely do, reach the CIL. However, to ensure that each 5

LRZ has sufficient capacity resources to meet reliability standards, the LCR for each 6

LRZ is enforced in the PRA. The ECIL results from MISO’s application of the 7

PRMR and LCR constraints in the auction clearing process. The table below shows 8

how the PRMR values have been much less than the LRR values for LRZ 7 over the 9

last five MISO Planning Years which illustrates the benefits the zone gains from the 10

diversity during MISO’s coincident peak load. If MISO were to enforce the LRR for 11

each LRZ (which would allow imports up to the CIL), they would not be allowing 12

each LRZ to benefit from the diversity of the broader MISO region. This diversity 13

benefit (LRR – PRMR) has enabled LRZ 7 to commit approximately 2,000 – 14

3,000 MW less capacity each year over the last 5 years. 15

16 LRZ 7

Planning Year

LRR (MW)

PRMR (MW)

CIL (MW)

LCR = LRR – CIL

(MW)

ECIL = PRMR – LCR

(MW)

LRR - PRMR (MW)

2013/14 25,631 22,702 4,576 21,055 1,647 2,929 2014/15 25,177 22,998 3,884 21,293 1,705 2,179 2015/16 25,255 22,678 3,813 21,442 1,236 2,577 2016/17 24,372 22,406 3,521 20,851 1,555 1,966 2017/18 24,429 22,295 3,320 21,109 1,186 2,134

17

Q. How do you respond to Witness DiDomenico’s claim on page 9 of his direct 18

testimony that an “LRZ can import up to the CIL without violating any resource 19

adequacy or transmission system reliability standards”? 20



A. Witness DiDomenico clearly does not understand how MISO implements its resource 1

adequacy rules. Physical power can be imported into a LRZ up to its CIL without 2

violating resource adequacy standards; however, by first enforcing the LCR and then 3

only the PRMR (as opposed to the LRR) during the PRA, the full CIL is not utilized 4

while clearing resources in the PRA. As I discussed earlier in my rebuttal testimony, 5

MISO indirectly enforces the ECIL when performing their PRA. This can be seen 6

explicitly in the PRA results from Planning Year 2015/16 (Exhibit A-53). For 7

Planning Year 2015/16, LRZ 4 (which makes up most of Illinois) had a CIL of 3,130 8

MW, a PRMR of 10,420 MW, and an LCR of 8,852 MW. This resulted in an ECIL 9

of 1,568 MW (10,420 MW – 8,852 MW). Despite supposed excess capacity 10

importability (as indicated by a CIL of over 3,000 MW), imports into LRZ 4 were 11

limited to 1,568 MW (the ECIL). Additional (cheaper) imports were not cleared 12

because the LCR was first met by clearing the necessary local resources, then 13

additional resources were cleared up to the zone’s PRMR. This clearly shows that a 14

LRZ cannot import up to the CIL without violating resource adequacy requirements, 15

and is rather constrained by the ECIL. 16

17

Q. How do you respond to Witness Osborn’s claim on page 40 of his direct 18

testimony that a firm capacity purchase from outside of LRZ 7 would reduce 19

DTE’s Planning Reserve Margin Requirement? 20

A. Witness Osborn refers to a Full Responsibility Purchase (FRP), which is a purchase 21

that shifts responsibility of load and associated resource adequacy requirements from 22

the purchasing entity to the selling entity. A FRP does not eliminate the resource 23

needs of the shifted load, nor does it move the locational resource requirement to the 24

location of the seller. A FRP by the Company would not eliminate the fact that LRZ 25



7 needs to meet the LCR or no one in LRZ 7 will have reliability that meets industry 1

accepted standards. Furthermore, the Company is responsible for the reliability of 2

its customers’ electric service and would not shift that responsibility to another entity 3

by entering a FRP. 4

5

FEASIBILITY OF CAPACITY IMPORTS 6

Q. Do you believe the Company should further consider the capacity import 7

options suggested by Witness Osborn on page 27 of his direct testimony? 8

A. No. Witness Osborn suggests the Company did not seriously consider capacity 9

imports into LRZ 7 from other MISO LRZs or adjacent Regional Transmission 10

Organizations (RTO); however, the Company has a sound basis for not further 11

evaluating capacity imports as replacement for the planned generator retirements. 12

13

Q. What are your thoughts with respect to purchasing existing capacity with firm 14

transmission from adjacent Regional Transmission Organizations (RTO) as 15

Witness Osborn suggests on page 27 of his direct testimony? 16

A. There are problems with that approach. Simply having firm transmission service and 17

a purchase commitment for an existing capacity resource external to MISO does not 18

change the physical transmission system nor the LRR/CIL/LCR/ECIL of a LRZ. 19

Each LRZ is still required to meet its LCR to achieve acceptable reliability standards. 20

21

Q. Are there flaws in MISO’s current resource adequacy construct that could lead 22

one to believe that importing capacity into an LRZ reduces the LCR of a LRZ? 23

A. Yes. MISO has identified issues with its current construct and has concluded that 24

“imports into zones can be understated, potentially exceeding import limits” and that 25



“import limit risk may exist with current treatment of external resources” (Exhibit 1

A-54). Under the current MISO construct, External Resources are treated in the PRA 2

as if they are local, effectively counting toward the LCR of the LRZ at whose border 3

they sink to, as opposed to being counted correctly as imports. This identified issue 4

has been discussed extensively through the MISO stakeholder process, and tariff 5

changes to resolve the issue are imminent. 6

7

Q. What would likely happen to reliability in LRZ 7, if the Company were to use 8

capacity from outside of LRZ 7 to replace the generators that will be retiring as 9

suggested by witnesses Osborn and Fagan? 10

A. If the Company were to rely on capacity from outside of MISO LRZ 7 (from another 11

MISO LRZ or an adjacent RTO) to replace its retiring coal units, reliability in LRZ 7 12

would likely not meet acceptable standards as there would likely not be sufficient 13

local capacity resources to meet the LCR. Based on recent MPSC Staff projections 14

in Case No. U-18444, LRZ 7 could be as short as 1,407 MW (Exhibit A-55) to 15

meeting the LCR after the retirement of DTE’s River Rouge Unit 3, St. Clair Units 16

1, 2, 3, 6, & 7, and Trenton Channel Unit 9. This projected shortage may actually be 17

conservative, as the Staff’s approach calculates the LCR by holding the CIL constant 18

at the 2018/19 value of 3,785 MW. When using the projected CIL value of 3,143 MW 19

that MISO published for the 2021/22 Planning Year, the forecasted shortage would 20

be over 2,000 MW. 21

22

Q. Can the Company “use as much of the import capacity as it may need if it 23

procures capacity during the PRA” as Witness Fagan suggests on page 11 of his 24

direct testimony? 25



A. No. There are two problems with his suggestion. First, the Company is required to 1

demonstrate capacity four years into the future under the State Reliability Mechanism 2

(SRM) pursuant to Michigan Public Act 341 of 2016 (“PA 341”) while the MISO PRA 3

commits capacity for only the current year, as I stated earlier in my rebuttal testimony. 4

Second, the Company expects to have a LCR requirement starting in Planning Year 5

2022/23. The requirement for utilities, Alternative Electric Suppliers (AES), and 6

municipalities/cooperatives to have local capacity resources is currently being 7

established in Case No. U-18444. It is expected that the local requirement will start 8

in Planning Year 2022/23. To reliably serve its customers, the Company intends to 9

meet its load ratio share of the LCR at a minimum. Doing so would require the 10

Company to have a minimum of approximately 95% (LCR/PRMR = 21,516/22,554 11

based on estimates from the table in the following response) of its capacity located 12

within LRZ 7. 13

14

Q. What is a reasonable and prudent limit for long-term capacity imports into 15

LRZ 7 by the Company to ensure reliability requirements are met? 16

A. It is not reasonable to count on capacity imports greater than the Company’s load 17

ratio share (LRS) of the ECIL as suggested by Witnesses DiDomenico, Osborn, and 18

Fagan. As shown below, the estimated ECIL in Planning Year 2023/24, the year after 19

the projected retirement of the generating units proposed to be replaced under this 20

Company CON application, is approximately 1,000 MW. The Company’s LRS of 21

that ECIL is approximately 500 MW. Knowing that the CIL and ECIL can vary by 22

a few hundred Mega Watts year over year and our LRS of the ECIL could be less 23

than 500 MW in some years, limiting long-term capacity imports to approximately 24

300 MW is prudent. Importing any more capacity than our share of the ECIL would 25



not be prudent for the reliability of our customers and would likely not be compliant 1

with the locational requirements being developed in Case U-18444. 2 3

2023/24 DTE ECIL LRS Estimate 4 A MISO PRM (Exhibit A-56) 8.4% - B LRZ 7 2021 CIL (Exhibit A-56) 3,143 MW - C LRZ 7 LRR (Exhibit A-56) 24,659 MW - D LRZ 7 Peak Demand (Exhibit A-56) 21,384 MW - E DTE Peak Demand (Exhibit A-57) 10,364 MW - F Zonal Coincidence Factor (Exhibit A-58) 97.3% - G LRZ 7 LCR 21,516 MW C–B H LRZ 7 PRMR 22,554 MW (1+A)*D*F I LRZ 7 ECIL 1,038 MW H-G J DTE Load Ratio Share (LRS) 48.5% E/D K DTE Share of ECIL 503.4 MW J*I

5

Q. What are your thoughts with respect to Witness Fagan’s claim on page 17 of 6

his direct testimony that the Company’s use of a 300 MW limit for capacity 7

imports is far too low? 8

A. I disagree. The Company reasonably limited capacity imports to 300 MW to help 9

ensure that LRZ 7 will meet the reliability standards enforced by MISO’s LCR and 10

PRMR which results in the ECIL acting as the import limitation as described earlier 11

in my rebuttal testimony. 12

13

Q. What are your thoughts with respect to Witness DiDomenico’s claim on page 10 14

of his direct testimony that the most recent “PRA results indicate that there are 15

close to 1,200 MW of spare transmission capability to import capacity from 16

neighboring zones into Zone 7 even after retiring the planned 1,800 MW”? 17

A. I do not agree. Witness DiDomenico’s claim regarding import capacity is likely due 18

to his lack of direct experience with how MISO implements its resource adequacy 19



rules. The resources that clear in the MISO PRA and are shown as imports/exports 1

from LRZs are simply the result of an economic solution of all offers in the PRA to 2

meet the PRMR of all LRZs. There is no connection between the PRA results and 3

what LSEs may actually be using on a planning horizon basis to meet their resource 4

adequacy requirements. For example, the MPSC concluded in Case No. U-17992 5

(Exhibit A-59) that there was over 700 MW of external capacity either owned or 6

under contract to serve load within LRZ 7 in Planning Year 2017/18, yet the MISO 7

PRA for the same Planning Year shows imports into LRZ 7 of only 338 MW (Exhibit 8

A-60), as Witness DiDomenico acknowledges. 9

10

Q. Are there other problems with importing capacity specifically from Ontario as 11

Witness Osborn suggests on page 27 of his direct testimony to meet resource 12

adequacy requirements in MISO? 13

A. Yes. Capacity from Ontario does not meet MISO rules for External Resources, so it 14

cannot be qualified as capacity for use in meeting MISO resource adequacy 15

standards. The MISO Tariff requires that in order for External Resources to qualify 16

for capacity credit, (1) the requester must demonstrate “that there is firm transmission 17

service from the External Resource to the border…of the Transmission Provider 18

[MISO] Region” (Exhibit A-61), and (2) that “At its sole discretion, the Transmission 19

Provider [MISO] may curtail exports not being used as capacity by an external 20

balancing authority and/or recall External Resources, PPAs, and Diversity Contracts 21

sourced from a Capacity Resource during a declared Energy Emergency” (Exhibit 22

A-62). The Independent Electric System Operator (IESO) in Ontario does not grant 23

the specified firm transmission service, nor does it comply with the recall standards 24



as established by MISO, thus preventing capacity in its service territory from 1

qualifying in the MISO reliability construct (Exhibit A-63). 2

3

Q. Earlier you rebutted Witness DiDomenico’s claim on page 10 of his direct 4

testimony that there is 1,200 MWs of available import capacity that the 5

Company could use to meet its resource adequacy obligations. Even if that claim 6

were true, would there be other risks with the Company using capacity from 7

outside of LRZ 7 to meet reliability requirements? 8

A. Yes. There is risk that the Company could end up paying significantly more than 9

CONE at the same time that reliability in LRZ 7 is diminished. As local resources in 10

LRZ 7 decline, the risk of the zone not meeting its LCR increases. At the point LRZ 11

7 does not meet the LCR, prices for capacity in the zone will go to CONE in MISO’s 12

PRA. If the Company has capacity resources outside of the zone where there may be 13

excess capacity and lower prices, the Company would receive very little revenue for 14

the external capacity while having to pay CONE for the load serving its customers 15

within LRZ 7. The cost of this price separation would be in addition to the cost of 16

the external capacity purchase. It would not be prudent for the Company to risk 17

jeopardizing reliability for its customers by purchasing large quantities of capacity 18

outside of LRZ 7 at a price that could be the same or even more than the cost of the 19

plant that the Company has proposed in this case. 20

21

RETIREMENT OF TIER 2 UNITS 22

Q. What are your thoughts with regard to Witness Fagan’s claim on page 36 of his 23

direct testimony that River Rouge 3 “can be retired May 31, 2018 given the 24

capacity available in MISO to replace that unit.” 25



A. I disagree. Simply being able to replace the capacity of an existing generation 1

resource does not mean it can be retired. In addition to meeting the LCR to ensure 2

reliability on a planning horizon, local resources support the reliable operation of the 3

transmission system and may be required to keep it within acceptable thermal and 4

voltage limits. The owner of a generation resource in MISO that plans to retire or 5

suspend the generation resource must submit an Attachment Y Notification of 6

Generator Change of Status request to MISO. MISO will perform a reliability study 7

to determine if thermal or voltage violations of applicable NERC Standards and 8

Transmission Owner planning criteria occur when the generation resource is offline. 9

If the study results in such violations, proposed solutions to address the reliability 10

issues will be evaluated. The generating unit may retire at such time that it is no 11

longer required for reliability of the transmission system. 12

13

Q. Does the Company know if retirement/suspension of River Rouge 3 or the 14

remaining Tier 2 units can occur without the implementation of feasible 15

alternatives to address reliability concerns? 16

A. No. The Company submitted Attachment Y Notification of Generator Change of 17

Status requests to MISO for all of the Tier 2 generating units over the last two weeks 18

and is awaiting results of the associated reliability studies. 19

20

Q. Do you have concerns with Witness Fagan’s recommendation to retire the 21

Company’s Tier 2 coal units before their announced retirements dates? 22

A. Yes. The projected amount of capacity resources in LRZ 7 is less than 600 MW 23

approximately 1,200 MW above the LCR in Planning Years 2018/19 and 2019/20 24

and only approximately 400 MW 1,000 MW in Planning Years 2020/21 and 2021/22 25



after the planned retirement of River Rouge Unit 3 as shown in the following table. 1

As Company Witness Ms. Dimitry points out in her Rebuttal Testimony, there are 2

risks associated with these older coal units. If some of these units are retired early 3

based operating economics, and then later additional units are forced into early 4

retirement due to an unexpected catastrophic event, LRZ 7 resources may not be 5

sufficient to meet the LCR and the zone could fall below acceptable reliability 6

standards. 7 8

9 LRZ 7 Projections (Exhibit A-55)

Planning Year

LRZ 7 Resources (MW)*

LRZ 7 LCR (MW)

LRZ 7 Resources above LCR (MW)

2018/19 21,329 21,946 20,769 560

1,177

2019/20 21,329 21,946 20,743 586

1,203

2020/21 21,099 21,716 20,717 382

999

2021/22 21,099 21,716 20,690 409

1,026 * The LRZ 7 Resources for Planning Years 2020/21 and 2021/22 were projected using the 2023/24 Projected 10 Zone 7 Resources of 19,464 MW from U-18444, Witness R. Doherty, Exhibit S-6 plus 763 MW for an error 11 identified by Staff and adding back in the 1,635 MW of Reported Retirements less 146 MW for St. Clair Unit 4 12 retirement in 2017. The LRZ 7 Resources for Planning Years 2018/19 and 2019/20 were projected by adding 13 230 MW onto the Planning Years 2020/21 value to reflect the capacity from River Rouge Unit 3 prior to its 14 announced retirement in Planning Year 2020/21. 15

These projections are comparable and conservative to the preliminary projections in 16

MISO’s Preliminary PRA Data for Planning Year 2018/19 (LRZ 7 Resources = 17

21,722 MW, LCR = 20,719 MW, LRZ Resources above LCR = 21,722 – 20,719 = 18

1,002 MW)1 19

20


1 MISO 2018-19 PRA Preliminary Data, https://cdn.misoenergy.org/20180207%20RASC%20Item%2003b%20PRA%20Preliminary%20Data122824.pdf



A. Yes, it does. 1

STATE OF MICHIGAN


In the matter of the Application of ) DTE ELECTRIC COMPANY for ) approval of a Certificates of Necessity ) pursuant to MCL 460.6s, as amended, ) in connection with the addition of a ) Case No. U-18419 natural gas combined cycle generating ) facility to its generation fleet and for ) related accounting and ratemaking ) authorizations. )

REBUTTAL EXHIBITS

OF

ANGELA P. WOJTOWICZ

STATE OF MICHIGAN


In the matter of the Application of DTE ELECTRIC )

COMPANY for approval of Certificates of Necessity )

pursuant to MCL 460.6s, as amended, in connection ) Case No. U-18419

with the addition of a natural gas combined cycle ) (Paperless e-file)

generating facility to its generation fleet and for related )

accounting and ratemaking authorizations )

PROOF OF SERVICE

STATE OF MICHIGAN )

) ss

COUNTY OF WAYNE )

TANYA M. CARR, being duly sworn, deposes and says that on the 7th day of

February, 2018, she served a copy of DTE Electric Company’s Revised Rebuttal Testimony and

Exhibit A-48 of Witness, Markus B. Leuker; Revised Rebuttal Testimony and Exhibit A-72 of

Witness, William H. Damon, III; Revised Rebuttal Testimony of Witness Michael E. Banks; and

Revised Rebuttal Testimony of Witness, Angela P. Wojtowicz, upon the persons on the attached

service list via e-mail.

TANYA M. CARR

Subscribed and sworn to before

me this 7th day of February, 2018.

Lorri A. Hanner, Notary Public

Wayne County, Michigan

My Commission Expires: 4-20-2020

Acting in Wayne County

SERVICE LIST

MPSC CASE NO. U-18419

| Page 1 of 2

ADMINISTRATIVE LAW JUDGE Hon. Suzanne D. Sonneborn

Michigan Public Service Commission

7109 W. Saginaw Hwy., 3rd Floor

Lansing, MI 48917

[email protected]

ASSOCIATION OF BUSINESSES

ADVOCATING TARIFF (ABATE) Robert A.W. Strong

Clark Hill PLC

151 S. Old Woodward Avenue, Ste 200

Birmingham, MI 48009

[email protected]

Stephen A. Campbell

Clark Hill PLC

500 Woodward Avenue

Suite 3500

Detroit, MI 48226

[email protected]

Sean P. Gallagher

Michael J. Pattwell

Clark Hill PLC

212 East Grand River Ave.

Lansing, MI 48906

[email protected]

[email protected]

ABATE CONSULTANT

Nicholas L. Phillips

James R. Dauphinais

Brubaker & Associates, Inc.

16690 Swingley Ridge Road, Suite 140

Chesterfield, Missouri 63017

[email protected]

[email protected]

ATTORNEY GENERAL (ENRA)

Celeste R. Gill

John A Janiszewski

Assistant Attorneys General

Special Litigation Unit

G. Mennen Williams Bldg.

525 W. Ottawa Street, 6th Floor

P.O. Box 30755

Lansing, MI 48909

[email protected]

[email protected]

[email protected]

ENVIRONMENTAL LAW &

POLICY CENTER; SOLAR ENERGY

INDUSTRIES ASSOCIATION;

ECOLOGY CENTER; THE UNION

OF CONCERNED SCIENTISTS, AND

VOTE SOLAR (ELPC) Margrethe K. Kearney

1514 Wealthy St., SE, Ste. 256

Grand Rapids, MI 49506

[email protected]

Bradley Klein

Environmental Law & Policy Center

35 E. Wacker Drive, suite 1600

Chicago, IL 60601

[email protected]

ENERGY MICHIGAN; MICHIGAN

ENERGY INNOVATION BUSINESS

COUNCIL; CITY OF ANN ARBOR Laura A. Chappelle

Timothy J. Lundgren

Varnum Law

201 N. Washington Square, Ste 910

Lansing, MI 48933

[email protected]

[email protected]

Toni L. Newell

Varnum Law

Bridgewater Place

333 Bridge St. NW

Grand Rapids, MI 49504

[email protected]

mailto:[email protected]













SERVICE LIST

MPSC CASE NO. U-18419

| Page 2 of 2

INTERNATIONAL

TRANSMISSION COMPANY (ITC) Amy Monopoli

Stephen J. Videto

ITC Holdings Corp.

27175 Energy Way

Novi, MI 48377

[email protected]

[email protected]

MICHIGAN ENVIRONMENTAL

COUNCIL (MEC); SIERRA CLUB

(SC); NATIONAL RESOURCE

DEFENSE COUNCIL (NRDC) Tracy Jane Andrews

Christopher M. Bzdok

Lydia Barbash-Riley

Olson, Bzdok & Howard, P.C.

420 East Fwront Street

Traverse City, MI 49686

[email protected]

[email protected]

[email protected]

MICHIGAN PUBLIC SERVICE

COMMISSION STAFF (MPSC)

Heather M. S. Durian

Amit T. Singh

Assistant Attorney General

Public Service Division

7109 West Saginaw Hwy, 3rd Floor

Lansing, MI 48917

[email protected] [email protected]

MIDLAND COGENERATION VENTURE

LIMITED PARTNERSHIP (MCV) Richard J. Aaron

Kyle M. Asher

Jason T. Hanselman

Dykema Gossett PLLC

Capitol View

201 Townsend, Suite 900

Lansing, MI 48933

[email protected]

[email protected]

[email protected]









David S. Maquera

Documents

Transcript of David S. Maquera