EXHIBIT NO. EXHIBIT O. Prepared Direct Testimony of Tanya L. Bodell EXHIBIT NO. TLB-1 STATE OF MAINE PUBLIC UTILITIES COMMISSION DOCKET NO. 2017-00232 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL ON BEHALF OF CALPINE CORPORATION April 30, 2017 1 EXHIBIT NO. TLB-1 TABLE OF CONTENTS I. INTRODUCTION ........................................................................................................................... 1 II. PURPOSE OF TESTIMONY .......................................................................................................... 4 III. OVERVIEW .................................................................................................................................... 7 IV. CONGESTION .............................................................................................................................. 11 V. ENERGY PRICES ......................................................................................................................... 21 VI. CAPACITY ................................................................................................................................... 26 VII. ANCILLARY SERVICES............................................................................................................. 32 VIII. OTHER OPERATIONAL BENEFITS.......................................................................................... 34 IX. CRITIQUE OF MCBER ECONOMIC BENEFITS ...................................................................... 38 X. CONCLUSION .............................................................................................................................. 40 TABLE OF FIGURES Figure 1: Summary of Conclusions .............................................................................................. 10 Figure 2: ISO-NE Representation of New England Interfaces ..................................................... 15 Figure 3: Historical Price Differentials between Maine and New Hampshire (2013–2017) ........ 16 Figure 4: Historical Dispatch of Maine Generators ...................................................................... 17 Figure 5: Congestion on Maine – New Hampshire Interface with Daymark Assumptions ......... 19 Figure 6: Congestion on Maine – New Hampshire Interface with Current Conditions ............... 19 Figure 7: Maine Generation Queue............................................................................................... 21 Figure 8: UPLAN Results – Change in Energy Prices under Alternative Scenarios.................... 23 Figure 9: New York vs. New England: In-State Natural Gas-fired Generator Output ................. 24 Figure 10: Maine Fossil Fuel Generating Units that Could Retire under CASPR ....................... 28 Figure 11: Recent Forward Capacity Market Demand Curves and Clearing Prices .................... 31 Figure 12: Daily 30-Minute Reserve Requirements versus Estimates ......................................... 33 Figure 13: 10-Minute Reserve Requirement and Units Committed ............................................. 34 Figure 14: Economic Impacts during Construction – NECEC vs. Aqua Ventus ......................... 39 Figure 15: Economic Impacts during Operations – NECEC vs. Aqua Ventus ............................ 39 EXHIBIT NO. TLB-1 EXHIBITS Exhibit No. TLB-2: Curriculum Vitae for Tanya L. Bodell Exhibit No. TLB-3: Overview of the UPLAN Network Power Model Exhibit No. TLB-4: University of Maine estimate of economic benefits from the Aqua Ventus Offshore Wind Project Exhibit No. TLB-5: Memorandum from Daymark Energy Advisors to Vineyard Wind LLC, “Vineyard Wind Project Benefits Under Winter Storm Grayson,” January 15, 2018. Exhibit No. TLB-6: Section 83D Request for Proposal Exhibit No. TLB-7: Section 83D Power Purchase Agreement Template EXHIBIT NO. TLB-1 1 2 STATE OF MAINE PUBLIC UTILITIES COMMISSION 3 CENTRAL MAINE POWER COMPANY REQUEST FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR THE CONSTRUCTION OF THE NEW ENGLAND CLEAN ENERGY CONNECT (NECEC) TRANSMISSION PROJECT DOCKET No. 2017-00232 4 5 6 7 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 8 9 I. INTRODUCTION 10 Q: PLEASE STATE YOUR NAME, TITLE, AND BUSINESS ADDRESS. 11 A: My name is Tanya L. Bodell. I am the Executive Director of Energyzt Advisors, LLC 12 and co-founder of the Energyzt companies, which include Energyzt Development 13 Partners, LLC and Energyzt Analytics, LLC. I am based in Boston, Massachusetts. My 14 business address is PO Box 174, Cohasset, MA, 02025. 15 Q: WHAT ARE YOUR DUTIES IN YOUR CURRENT POSITION? 16 A: As the Executive Director of Energyzt, a global collaboration of energy experts who 17 create value for clients investing in the energy industry, I manage the business operations 18 of the Energyzt entities and provide advisory services to clients on business strategy and 19 investment decisions. I also am responsible for overseeing the development and 20 maintenance of our power market models and the quantitative analyses of industry data 21 that allow our clients to make informed investment decisions. Our analytical service EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 2 of 41 1 offerings include energy market assessments, long-term price projections using 2 fundamental analyses, and probability-driven analyses to create a distribution of potential 3 outcomes and risk assessments. We also provide financial assessments of energy assets 4 for purposes of valuation, refinancing and restructuring. 5 Q: PLEASE DESCRIBE YOUR PROFESSIONAL EXPERIENCE. 6 A: I have been a consultant for nearly twenty-five years, providing business advice and 7 expert support to market participants, regulators and policy makers in the energy industry 8 in general and the power sector in particular. Prior to establishing Energyzt in 2012, I 9 was a Managing Director and co-founder of the Electricity Consulting Group at FTI 10 Consulting. Prior to FTI, I was Vice President in the Energy and Environment practice at 11 Charles River Associates, a company I joined in 2000. Prior to that, I was a consultant at 12 Putnam, Hayes & Bartlett, which subsequently merged with Hagler Bailly to become 13 PHB Hagler Bailly before being acquired by PA Consulting. While at Putnam, Hayes & 14 Bartlett, I served as a primary member of the consulting teams charged with developing 15 and implementing competitive markets in Ontario, Canada and Singapore, providing a 16 deep understanding of market design and market rules, how wholesale electricity markets 17 price physical constraints, and economic expectations concerning short-term and long-run 18 impacts of capacity availability on market equilibriums. My role at each of these firms 19 served clients in the power sector as well as other industries. My detailed resume is 20 incorporated herein as Exhibit No. TLB-2. 21 Q: PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND. 22 A: I have the following degrees: EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 3 of 41 1 • B.A. in mathematical economics from Pomona College 2 • M.A. in public policy from the Harris School of Public Policy at the University of 3 Chicago • 4 5 Q: 6 7 M.B.A. from the Massachusetts Institute of Technology Sloan School of Management PLEASE HIGHLIGHT YOUR EXPERIENCE IN ASSESSING POWER MARKETS USING PRODUCTION COST MODELS. A: I have directed multiple studies analyzing electricity markets and projecting prices for 8 electricity products over the long term, for commercial, regulatory and litigation 9 purposes. My work includes performing independent market price projections as well as 10 evaluating price projections and market modeling performed by others. These 11 assignments require an expert understanding of existing and changing market conditions, 12 regulatory requirements surrounding the design of the markets as well as external 13 requirements tied to environmental policy objectives, and financial realities associated 14 with building and retiring generating units. 15 Q: 16 17 HOW HAVE THE WORKPRODUCTS FROM THESE ASSIGNMENTS BEEN USED? A: Deliverables that I oversaw and produced for these assignments have been used to 18 evaluate costs and benefits of proposed infrastructure investments, make investment 19 decisions; assess electricity markets and market power; project prices for energy, capacity 20 and ancillary services; value generating and transmission assets; optimize asset 21 portfolios; determine the impact of new investments on markets and the environment; 22 inform financing decisions; and support expert testimony, as well as other objectives. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 4 of 41 1 Q: HAVE YOU PREVIOUSLY SERVED AS A TESTIFYING EXPERT? 2 A: Yes. I have served as a testifying expert before arbitration panels, in a court of law, 3 before the Federal Energy Regulatory Commission, before the Massachusetts Department 4 of Public Utilities, before the Connecticut Siting Council, and before the Little Hoover 5 Commission in California. Earlier in my career, I served as a non-testifying expert on a 6 number of cases, often supporting the expert and having primary responsibility for the 7 analysis and calculations that were incorporated into the testimony. A list of cases in 8 which I have served as the testifying expert is provided in my resume. 9 II. PURPOSE OF TESTIMONY 10 Q: WHAT IS THE PURPOSE OF YOUR TESTIMONY? 11 A: The purpose of my testimony is to assess the ability of NECEC to provide net benefits to 12 Maine, including an assessment of potential costs to Maine residents in the form of lost 13 jobs, property taxes and risks related to unintended consequences associated with the 14 project. I also respond to the report by Daymark Energy Advisors (Daymark) prepared 15 for Central Maine Power titled, “NECEC Transmission Project: Benefits to Maine 16 Ratepayers, Quantitative and Qualitative Benefits,” dated September 27, 2017. In 17 addition, I critique certain conclusions by the Maine Center for Business and Economic 18 Research (MCBER) at the University of Southern Maine concerning the employment and 19 economic development benefits to Maine, especially where it is inconsistent with market 20 conditions and assumptions incorporated into the Daymark study. 21 Q: DO YOU PROVIDE AN ALTERNATIVE CALCULATION OF BENEFITS? EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 A: DOCKET NO. 2017-00232 Page 5 of 41 No. My testimony explains why the Daymark study understates the costs to Maine 2 residents, overstates certain benefits, provides a set of calculations for 2023 that 3 illustrates the transitory reason for benefits in that year, quantifies how changes in other 4 assumptions impacts estimated benefits, and describes the costs and risks to Maine 5 ratepayers if NECEC proceeds. 6 Q: ARE YOU SPONSORING ANY EXHIBITS? 7 A: Yes. In addition to this testimony, I am sponsoring the following exhibits: 8 • Exhibit No. TLB-2 is my resume. 9 • Exhibit No. TLB-3: Overview of the UPLAN Network Power Model 10 • Exhibit No. TLB-4: University of Maine estimate of economic benefits from the 11 Aqua Ventus Offshore Wind Project • 12 Exhibit No. TLB-5: Memorandum from Daymark Energy Advisors to Vineyard 13 Wind LLC, “Vineyard Wind Project Benefits Under Winter Storm Grayson,” 14 January 15, 2018. 15 • Exhibit No. TLB-6: Section 83D Request for Proposal 16 • Exhibit No. TLB-7: Section 83D Power Purchase Agreement Template 17 Q: PLEASE PROVIDE A SUMMARY OF YOUR CONCLUSIONS. 18 A: In general, the claimed benefits described by Daymark and MCBER are either non- 19 existent or come at a significant cost to Maine residents and towns. Based on the 20 analyses described in my testimony, I conclude the following: EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 • DOCKET NO. 2017-00232 Page 6 of 41 Maine’s generation fleet, including biomass and hydroelectric facilities, would 2 suffer considerable financial harm due to NECEC’s subsidized energy sales into 3 Maine. 4 • 5 6 As a result, NECEC could cause job losses to hundreds of Maine residents and certain towns could lose millions of dollars in property tax revenue. • Maine’s highly-respected institutions such as the University of Maine and the 7 Maine Maritime Institute could lose a critical part of the state’s economic 8 ecosystem that currently provides internships and jobs to many of its students and 9 graduates. 10 • The benefits calculated by Daymark and MCBER -- energy price suppression 11 effects, capacity market price benefits, ancillary services benefits, and 12 diversification benefits -- are either overstated or illusory, limited by existing 13 market rules and conditions that may be temporary in nature. 14 • Many of the same supposed benefits that could be provided by NECEC also can 15 be provided by in-state resources that would generate jobs and tax base for Maine 16 residents. 17 • Market modeling clearly shows that NECEC would force Maine generators to run 18 less or shut down while generators in New York and elsewhere fire-up, depending 19 on how Hydro-Québec sources its energy supply. 20 21 • If NECEC were to proceed, Maine effectively would be exporting its electricity industry jobs to other regions. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 7 of 41 1 In summary, the claimed benefits of NECEC give the appearance of benefits to Maine by 2 focusing only on a limited set of impacts in New England. Understanding the bigger 3 pictures indicates that NECEC could have broader adverse economic and environmental 4 impacts for Maine and beyond. 5 III. OVERVIEW 6 Q: PLEASE PROVIDE A BRIEF OVERVIEW OF THE MARKET CONTEXT 7 8 SURROUNDING NECEC. A: The primary purpose of the proposed NECEC project is to deliver clean energy into New England’s electricity markets under a long-term contract with regulated utilities in 9 10 Massachusetts so that the Commonwealth can meet its carbon emissions reduction goals 11 and other legislative obligations (Section 83D of the 2008 Green Communities Act, as 12 amended in 2016, Acts of 2016 Ch. 188, § 12). In particular, Massachusetts passed 13 legislation signed by its Governor in August 2016 that requires utilities to engage in a 14 competitive Request for Proposal (“RFP”) process for procurement of clean energy, 15 which can include base load hydroelectric power or a combination of hydroelectric power 16 and Tier 1 renewables.1 NECEC was one of 46 bids submitted in response to the RFP 17 issued under section 83D of the legislation, and is proceeding because the announced 18 winner -- a project utilizing existing Hydro-Québec hydroelectricity via a different 19 proposal for a new transmission line (i.e., Northern Pass Transmission) -- could not 20 obtain siting through New Hampshire. 1 Distribution Companies would enter into the power purchase agreement only if the Massachusetts Department of Public Utilities found it to be a cost-effective long-term contract for clean energy. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 8 of 41 1 Q: PLEASE PROVIDE A BRIEF OVERVIEW OF THE PROJECT. 2 A: The proposed NECEC project would be a 145-mile high voltage direct current (HVDC) 3 transmission line with total capacity of 1,200 MW and certain upgrades to existing 4 alternating current (AC) transmission infrastructure in Maine that would deliver an 5 estimated 9.5 TWh of energy from existing hydroelectric power resources from Windsor, 6 Québec to Lewiston, Maine under the assumption of a 90.5% capacity factor. Actual 7 deliveries would be subject to energy caps in the proposed contract with Massachusetts (a 8 minimum of 8.5 TWh up to a maximum of 9.4 TWh per year)2 and the economic dispatch 9 of the 105 MW of transmission capacity reserved for Maine distribution companies.3 The 10 Maine portion of the transmission line is estimated to cost $950 million; the Canadian 11 portion of the transmission line would be constructed and paid for by Hydro-Québec if 12 the project proceeds. CMP is asking for a certificate of convenience and necessity to site 13 the Maine portion of the transmission line, which would be paid for by the contract 14 proceeds from Massachusetts utilities. 15 Q: 16 17 IS ALL OF THE ENERGY DELIVERED THROUGH NECEC TO BE SOLD UNDER THE CONTRACT WITH MASSACHUSETTS UTILITIES? A: 18 No. In exchange for siting the transmission line in Maine, Maine ratepayers would receive a call option on energy that can be delivered through 105 MW of capacity on the Hydro Renewable Energy Corp., “Section 83D Request for Proposal Application Form,” p. 8. Although some of the public documentation submitted to the Maine PUC is redacted, these figures come from the public version of the bid submission by CMP and Hydro Renewable Energy, Inc. available in the NECEC submission documents: https://macleanenergy.com/83d/83d-bids 2 3 EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 9 of 41 1 line (the details of which are not provided) and uncertain, but potentially costly, 2 electricity market and economic impacts. 3 Q: 4 5 IN CALCULATING BENEFITS TO MAINE, DID DAYMARK CONSIDER ONLY THE ENERGY SOLD TO MASSACHUSETTS? A: No. Daymark modeled the transmission line as delivering 981 MW of energy each hour 6 under the contract (Ex. NECEC-5, p. 16), or 8.6 TWh per year, close to the contractual 7 minimum. In addition, Daymark modeled the impact if the entirety of the line was 8 utilized. 9 Q: 10 11 DO YOU AGREE WITH DAYMARK’S ESTIMATED BENEFITS TO MAINE RATEPAYERS? A: No. There continue to be aspects of the proposal that have not been fully disclosed. Of 12 those that we do have enough information to assess, it is clear that the analysis overstates 13 the benefits or does not fully recognize the costs to Maine residents. 14 1) Capacity and Energy Dedicated to CMP: Energy price information is not available 15 to assess whether and under what conditions the 0.9 TWh would be economic for 16 Maine ratepayers. Therefore, we cannot make a determination as to the value of that 17 energy supply versus market prices. 18 2) Electricity Market Benefits: Daymark’s assessment of the impact on Maine energy 19 prices does not properly account for congestion that would occur as a result of the 20 transmission line, incorporates inputs that result in an overstatement of benefits over 21 the long-run, and fails to consider the risk and uncertainty around its calculation of 22 benefits. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 10 of 41 3) Economic Benefits: The MCBER study incorporates assumptions that are 2 inconsistent with Daymark’s analysis, serving to overstate economic activity (and 3 understate adverse consequences) associated with NECEC, and fails to consider fully 4 the offsetting impacts on jobs and property taxes due to lower in-state generation 5 resulting from reduced energy prices in Maine, and deferred investment in Maine 6 renewable projects. 7 Q: BASED ON YOUR ANALYSIS, WHAT ARE YOUR CONCLUSIONS? 8 A: Even without performing a thorough projection of benefits through 2041, it is clear that 9 Daymark’s analysis does not consider all of the costs and risks to Maine residents that 10 would be associated with NECEC. Greater benefits in the form of lower energy costs to 11 Maine ratepayers are offset by higher costs in the form of displaced and potentially 12 retired generation, lost jobs, and lower property tax revenues under conditions that reflect 13 current market expectations. Figure 1 provides a summary of my critique of each 14 component of claimed benefits. 15 Figure 1: Summary of Conclusions Purported Benefit NECEC Claim Energyzt Conclusions Congestion Daymark claims that there would not be any transmission congestion due to NECEC (Ex. NECEC-5, p. 6) Energy price suppression benefits estimated to be around $2.50/MWh under the contract in 2023 Congestion is likely to occur further down the system at Surowiec-South and the Maine-New Hampshire Interface, making it more costly for Maine renewables to compete going forward • Reductions in energy margins to Maine generators tied to lower prices and lower dispatch • Magnitude is very dependent on natural gas and carbon price assumptions • Should fall to zero over time as the market balances Energy Prices Average LMP reductions of $3.38 - $3.70/MWh over 20year period EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL Purported Benefit NECEC Claim Capacity Prices Estimated using Daymark’s proprietary capacity market model and an assumed 800 MW of capacity from NECEC Ancillary Services Hedging Economic Impacts DOCKET NO. 2017-00232 Page 11 of 41 Energyzt Conclusions • Likely to be $0 – market rules make it unlikely that energy supply from NECEC will qualify and clear • If it does clear, likely to be lower than impact calculated by proprietary model due to excess supply and zones/interties which have cleared at lower prices • Comes at the cost of 800 MW of Maine state retirements, representing more than $5.5 million / year in property tax revenue Qualitative argument that Likely to be negligible and could increase prices NECEC baseload energy • Reserve markets are oversupplied would displace generators, • Maine retirements caused by lower energy increasing supply into and capacity prices would offset any benefits ancillary services markets by removing generation resources from the market Daymark claims energy supply Not a unique proposition to NECEC. via NECEC would • Maine has the most diverse set of fuel resources in New England • Existing biomass generation provides same baseload benefits • Daymark memo on recent cold snap indicates off-shore wind can provide diversification and winter reliability benefits • In-state resources come with jobs and taxes • Winter reliability issues would not be resolved, but simply shifted to other parts of Northeast Calculated by MCBER • Inconsistent set of assumptions • Understates impact on Maine economy • Does not incorporate deferred renewable investment, retired plants, lost jobs, and lost property taxes • Fewer economic benefits than building a 500 MW offshore wind facility in Maine 1 IV. CONGESTION 2 Q: WHY IS TRANSMISSION CONGESTION IMPORTANT? 3 A: Maine has limited connectivity with New England, transmitting primarily through a 4 single high voltage AC line. Historically, Maine has been a generation pocket and EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 12 of 41 1 congestion has occurred, resulting in lower energy prices in Maine than in other parts of 2 the ISO-NE system. If transmission proves to be inadequate for NECEC to deliver its 3 energy out of Maine, the state would become even more of a generation pocket, forcing 4 in-state resources to reduce operations in response to lower energy prices created by the 5 congestion. Combined with higher natural gas prices at the end of the pipeline delivery 6 system, Maine generators would be doubly impacted by lower energy prices and high 7 natural gas prices, resulting in less dispatch, lower profits and the risk of earlier 8 retirements. 9 Q: WHAT IS THE IMPACT OF CONGESTION ON MAINE GENERATORS? 10 A: Although Daymark considers these lower prices a “benefit,” they create a cost for Maine 11 residents in the form of underutilization of Maine generating plants, fewer jobs and lower 12 property taxes due to earlier retirement of existing units and lost opportunities tied to 13 potential in-state renewable resources that would not be built. This outcome is inefficient 14 because it does not stem from improved efficiency or competition, but from subsidized 15 resources and an inadequate delivery system that challenge the basic underpinnings of 16 competitive markets. Therefore, it is important to understand potential congestion issues 17 in order to understand the context and cause of potential “benefits” for Maine residents, 18 as well as the repercussions. 19 Q: DOES DAYMARK ANALYZE CONGESTION? 20 A: Daymark’s analysis has a brief analysis of potential congestion, determines that it would 21 occur less than 1 percent of the time, and concludes that it does not create an issue (Ex. 22 NECEC-5, pp. 6, 31-33). EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 13 of 41 1 Q: WHAT DO YOU CONCLUDE? 2 A: I conclude that congestion is an issue that cannot be ignored, especially under alternative 3 gas and carbon price assumptions. In the near-term, Daymark’s analysis appears to 4 understate the prevalence of transmission congestion and therefore the impact of NECEC 5 on energy prices. Under lower gas and carbon price conditions, congestion could be even 6 worse. 7 Q: WHAT IS THE BASIS FOR YOUR CONCLUSION? 8 A: The five primary conditions supporting my conclusions are as follows: 9 10 1) Maine’s Transmission: Maine’s high voltage system configuration is primarily a long, linear connection with New England, creating the potential for congestion. 11 2) Historical Experience: Historical price differentials between Maine and New 12 Hampshire indicate that Maine tends to have congestion. Adding energy from 13 NECEC to historical flows would exceed limits, indicating that significant congestion 14 would occur on the Maine-NH interface under certain conditions due to NECEC 15 unless upgrades are made. 16 3) Generation Queue: The ISO-NE queue for new generation includes more than 5,000 17 MW of new generation, primarily solar and wind projects. Even assuming a fraction 18 of those are built starts to increase congestion on the lines, magnifying potential 19 transmission congestion from NECEC, which would serve as the incremental 20 resource that forces the need for transmission expansion beyond the proposed 21 Surowiec-South Interface upgrades. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 14 of 41 1 4) UPLAN Analysis: Our own analysis using UPLAN for the first-year operation in 2 2023 indicates congestion and losses with NECEC at the Maine-NH interface, 3 contributing a sizable part of the energy price decrease. 4 Q: DID YOU RUN UPLAN YOURSELF? 5 A: No. In performing the analyses described herein, I worked closely with the Calpine 6 modeling team to use their model to run the scenarios described in my testimony. Calpine 7 maintains this model as part of their commercial operations and uses it to make business 8 decisions. Exhibit No. TLB-3 provides a description of the UPLAN Network Power 9 Model. 10 Q: PLEASE DESCRIBE THE MAINE TRANSMISSION SYSTEM. 11 A: As illustrated in Figure 2, energy injected into Maine would have to flow through a 12 number of transmission interfaces in order to get to Massachusetts. In particular, a high 13 voltage direct current (HVDC) injection point at Lewiston as CMP proposes, would need 14 to flow through three or more interfaces in order to deliver energy into Massachusetts: 15 • Surowiec-South Interface between Maine and Southern Maine; 16 • ME-NH Interface between Southern Maine and New Hampshire; 17 • North-South Interface between New Hampshire and Northern Massachusetts; and 18 • Other Interfaces in order to get to Western Massachusetts, Boston and Southern 19 Massachusetts. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 15 of 41 Figure 2: ISO-NE Representation of New England Interfaces 2 3 4 Source: ISO-NE Q: 5 6 WHAT DO HISTORICAL ENERGY PRICES INDICATE ABOUT MAINE’S POWER SECTOR? A: Historically, Maine’s zonal energy prices and locational marginal prices (LMPs) have 7 been lower than in New Hampshire, in particular, and in the rest of New England more 8 generally (Figure 3). EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 16 of 41 Figure 3: Historical Price Differentials between Maine and New Hampshire (2013–2017) 2 3 Source: Energyzt analysis of ISO-NE data 4 Lower prices in Maine tend to be due to congestion and losses. 5 Q: 6 7 WHAT EFFECT HAS THIS PRICING DIFFERENTIAL HAD ON IN-STATE MAINE GENERATION? A; The lower prices in Maine have made it more difficult for in-state generation to be 8 competitive, reducing the frequency of dispatch of Maine’s generators. At the same time, 9 natural gas prices are higher in Maine than in other parts of New England, creating a 10 challenging environment for natural gas-fired generators that face lower prices, less 11 dispatch and higher fuel costs. As a result, total generation output in Maine has fallen to 12 the point where renewable resources – hydroelectricity, wind and biomass -- now 13 represent three-quarters of Maine’s electrical energy fuel mix (Figure 4). EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 17 of 41 Figure 4: Historical Dispatch of Maine Generators Total Generation in Maine by Fuel Type 2008-2017 Total Generation (GWh) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2008 2009 2010 2011 Natural Gas Wood/Wood Waste/Black Liquor Coal Wind Solar 2 3 4 2012 2013 2014 2015 2016 2017 Hydro Petrolium Products Municipal Solid Waste/Landfill Gas Other Biomass Other Source: Energyzt analysis of https://www.eia.gov/electricity/data/eia923/ and https://www.eia.gov/state/print.php?sid=ME 5 Q: HOW WOULD NECEC EFFECT EXISTING GENERATION? 6 A: NECEC could inject close to 9.5 TWh (9,500 GWh) of energy into Maine, or around 85 7 percent of existing in-state generation levels. For a location that already is experiencing 8 low prices, the impact of such a large amount of energy creates even greater financial 9 stress that can lead to early retirements. In addition to lower energy prices, some of 10 Maine’s largest plants would be displaced by NECEC energy flows, causing significant 11 reductions in operating margins due to both price and quantity. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 Q: DOCKET NO. 2017-00232 Page 18 of 41 DO THE SUROWIEC-SOUTH UPGRADES PROPOSED AS PART OF NECEC 2 ADDRESS THIS CONGESTION SO THAT NECEC ENERGY WILL SIMPLY 3 FLOW OUT OF MAINE? 4 A; No. The Surowiec-South Interface presented an obvious issue for NECEC as the 5 transmission limit is 1,500 MW and the addition of NECEC energy would have exceeded 6 the capacity limit during a majority of the peak hours. Although NECEC’s proposed 7 upgrades on the Surowiec-South line addresses this congestion issue, the issue would 8 simply move to the next set of downstream interfaces, especially the Maine-New 9 Hampshire Interface. 10 Q: 11 12 HAVE YOU MODELED THE NUMBER OF HOURS THAT THE MAINE – NEW HAMPSHIRE INTERFACE IS CONGESTED WITH NECEC? A: Yes. Without NECEC, the interface is not congested under any of the scenarios we ran. 13 Under Daymark’s assumptions, flows would be within 5 percent of the line limits 505 14 hours of the year (Figure 5). With a flatter supply curve more reflective of current 15 conditions with lower natural gas prices and $5 / metric ton carbon prices, congestion 16 would occur more often, approach the limit 803 hours or during 9 percent of the hours 17 (Figure 6). The amount of congestion varies according to market conditions and the 18 relative competitiveness of Maine units versus other New England generators. 19 Daymark’s simplistic analysis does not properly assess the potential for congestion or its 20 consequences to existing and future Maine generation projects. 2 3 4 1/1/2023 1/11/2023 1/22/2023 2/1/2023 2/12/2023 2/23/2023 3/5/2023 3/16/2023 3/27/2023 4/6/2023 4/17/2023 4/27/2023 5/8/2023 5/19/2023 5/29/2023 6/9/2023 6/20/2023 6/30/2023 7/11/2023 7/21/2023 8/1/2023 8/12/2023 8/22/2023 9/2/2023 9/13/2023 9/23/2023 10/4/2023 10/14/2023 10/25/2023 11/5/2023 11/15/2023 11/26/2023 12/7/2023 12/17/2023 12/28/2023 Hourly Flows (MW) 1 2,500 2,000 2,500 2,000 1/1/2023 1/11/2023 1/22/2023 2/1/2023 2/12/2023 2/23/2023 3/5/2023 3/16/2023 3/27/2023 4/6/2023 4/17/2023 4/27/2023 5/8/2023 5/19/2023 5/29/2023 6/9/2023 6/20/2023 6/30/2023 7/11/2023 7/21/2023 8/1/2023 8/12/2023 8/22/2023 9/2/2023 9/13/2023 9/23/2023 10/4/2023 10/14/2023 10/25/2023 11/5/2023 11/15/2023 11/26/2023 12/7/2023 12/17/2023 12/28/2023 Hourly Flows (MW) EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 19 of 41 Figure 5: Congestion on Maine – New Hampshire Interface with Daymark Assumptions Maine - New Hampshire Interface Hourly Flows with NECEC Daymark Assumptions ME-NH Limit = 1,900 MW 1,500 1,000 500 0 Figure 6: Congestion on Maine – New Hampshire Interface with Current Conditions Maine - New Hampshire Interface Hourly Flows with NECEC Current Conditions ME-NH Limit = 1,900 MW 1,500 1,000 500 0 EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 Q: 2 3 DOCKET NO. 2017-00232 Page 20 of 41 WHAT IS THE IMPACT OF NECEC ON CONGESTION AT THE MAINE – NEW HAMPSHIRE INTERFACE? A: The impact of NECEC depends on market conditions. However, an increase in 4 congestion would serve to lower prices even further than NECEC’s direct price 5 suppression effects. In addition, higher utilization of the transmission lines increases line 6 losses, further impacting generators in Maine. 7 Q: 8 9 HOW DOES INCREASED CONGESTION IMPACT PLANS FOR NEW RENEWABLE RESOURCES IN MAINE? A: As a result of lower prices due to higher congestion, it would be more difficult for new 10 plants in Maine to be financially justified and fewer plants in the queue would be built. 11 Both the lower energy prices, increased line losses and higher costs to connect would 12 defer or delay new investment in renewables on the north side of the Maine-New 13 Hampshire Interface. 14 Q: HOW MANY POTENTIAL PROJECTS COULD THAT IMPACT? 15 A: Maine has 5,165 MW of new generation in the queue, of which 97 percent are renewable 16 resources with planned operation dates by 2020 (Figure 7). I expect that some of those 17 renewable projects will not come to fruition because of the proposed NECEC project’s 18 impact on market prices and congestion. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 21 of 41 Figure 7: Maine Generation Queue Active Generation Queues in Maine as of 3/22/2018 5,165 MW 1.50% 0.55% 0.58% 13.12% 84.25% Solar Wind Wind Battery Storage Water Natural Gas 2 3 Source: Energyzt Analysis of ISO-NE Queue 4 V. ENERGY PRICES 5 Q: WHAT ARE YOUR CONCLUSIONS ABOUT DAYMARK’S ESTIMATED 6 7 BENEFITS ASSOCIATED WITH LOWER ENERGY PRICES? A: As already discussed, energy prices in Maine initially would be suppressed as a result of 8 an additional 1,200 MW of baseload energy flowing into Lewiston, Maine. The impact 9 would be worse in the near-term due to transmission congestion at the Maine-New 10 Hampshire Interface. As the market moves towards equilibrium, Maine can expect a 11 number of early plant retirements that would eliminate property tax revenue and jobs EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 22 of 41 1 associated with those plants. If that transmission constraint is relieved – either because of 2 Maine generating plant retirements or ISO-NE upgrades – the Maine-related energy price 3 benefits of NECEC would be reduced. Lower natural gas prices, lower carbon prices, 4 and higher levels of renewables on the system compared to what Daymark assumed also 5 would cause benefits to decline. 6 Q: 7 8 AREN’T LOWER PRICES SIMPLY ABOUT MAINE BEING MORE COMPETITIVE? A: 9 No. This type of artificial, anti-competitive price suppression is inconsistent with the long-term viability of the competitive market and effectively penalizes generators who 10 chose to invest in Maine. If NECEC becomes operational, many Maine generating plants 11 would become less competitive, reducing their output, revenues, profitability and 12 therefore ability to continue operations. Maine-based power plants would be curtailed 13 through economic dispatch in order for NECEC to move its energy out of the state. The 14 net effect of NECEC would be a cannibalization of Maine’s in-state generators, their 15 vendors, and lost opportunities for students and graduates of the University of Maine and 16 the Maine Maritime Institute. 17 Q: 18 19 HOW CERTAIN ARE THE BENEFITS TO MAINE RESIDENTS ASSOCIATED WITH NECEC? A: The alleged benefits are very uncertain. Figure 8 illustrates what the difference in energy 20 price reductions for 2023 would be under the steep supply curve assumed by Daymark 21 versus a flatter supply curve more representative of current conditions. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 23 of 41 Figure 8: UPLAN Results – Change in Energy Prices under Alternative Scenarios Change in Energy Price Daymark Assumptions Current Conditions Energy ($1.78) ($1.18) Losses ($1.35) ($0.99) Congestion ($0.10) ($0.13) Total Change in Price ($3.21) ($2.30) 2 3 Changing key conditions such as natural gas prices, carbon prices and renewable build- 4 out illustrates how benefits can be significantly affected by market conditions and policy 5 decisions. Daymark’s estimates of benefits could be reduced by 30 percent if conditions 6 anticipated today were to be realized as opposed to the rosier market price scenario in 7 Daymark’s analysis. 8 Q: WHY DON’T MORE MAINE PLANTS RETIRE ACCORDING TO THE 9 10 11 IF THE PRICE CHANGE IS SO SIGNIFICANT IN DAYMARK’S ANALYSIS, AURORA RESULTS? A: Aurora automatically builds and retires units to balance the market over the long-run. 12 Under Daymark’s assumptions, there are some plant retirements. However, energy prices 13 and associated margins are higher for the more efficient natural gas plants due to the 14 steeper supply curve resulting from a higher natural gas prices and carbon prices than 15 currently occur. In an alternative scenario with a flatter supply curve, energy margins are 16 already strained before NECEC appears and the inflow of that much more energy exerts 17 even more financial stress on units that already are on the economic edge. 18 Q: WHAT ELSE HAPPENS TO MAINE GENERATORS? EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 A: DOCKET NO. 2017-00232 Page 24 of 41 As a result of NECEC, Maine and New England natural gas-fired generators produce 2 less. They are replaced by New York generators, which fire-up and run to replace the 3 lost Hydro-Québec sales into New York (Figure 9). 4 Figure 9: New York vs. New England: In-State Natural Gas-fired Generator Output Comparison of Incremental Natural Gas-fired Generator Output 4,000 2,000 New York - Maine New York Maine (2,000) (4,000) Rest of New England Rest of New England (6,000) Lower Gas-fired Generation Output Generation Output (GWh) 6,000 Increased Gas-fired Generation Output 8,000 (8,000) Current Conditions Daymark Assumptions (Constant Exports) 5 6 Q: 7 8 9 DO YOU THINK DAYMARK’S ANALYSIS IS ACCURATE OVER THE LONG RUN? A: No. Many of the assumptions Daymark makes tend to overstate benefits over the longrun: EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 25 of 41 1 1) Unattainable Equilibrium: Over time, equilibrium should be reached in both 2 scenarios with and without NECEC. Yet, Daymark’s model indicates benefits 3 through 2041, indicating that there is a constraint that prevents energy markets from 4 reaching a long-run equilibrium after the eighth year when capacity market prices 5 equilibrate to the same level with and without NECEC.4 6 2) Static RPS versus Carbon Reduction Goals: Daymark assumes a fixed Renewable 7 Portfolio Standard (RPS) for each state after 2035, even though every state in New 8 England has a goal or target of reducing carbon emissions to around 80 percent of 9 1990 levels by 2050. If electrification and higher renewable integration is modeled, 10 the supply curve would be flatter during the summer and shoulder months, and higher 11 demand could be offset by energy efficiency and demand response programs. 12 3) New Technology: Daymark incorporates only ISO-NE near-term projections of 13 behind-the-meter impacts on load such as energy efficiency and batteries and thereby 14 fails to consider new technologies such as storage that are commercializing and 15 would be available to shift demand and to create a flatter supply curve, mitigating the 16 potential for price spikes. 17 4) Dismantling of Competitive Energy Markets: It is possible that continuing pressure 18 on energy prices would serve to dismantle competitive energy markets, resulting in a 19 completely different compensation structure. For example, the ISO-NE’s use of 4 In both scenarios, the long-run marginal cost of production should be equal. As the capacity market model equilibrates in the scenarios with and without NECEC after eight years, energy prices should do the same so that the combined energy and capacity market revenues equal the long-run marginal cost of production. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 26 of 41 1 reliability contracts for plants such as Mystic (based on fuel security concerns) and 2 Connecticut’s potential plans to subsidize the Millstone nuclear units could be a 3 precursor to a more dramatic market design overhaul that effectively eliminates the 4 current design of competitive energy markets and therefore the benefit of allegedly 5 lower energy prices on consumers over time. 6 In conclusion, over the longer term, Daymark’s assumptions do not reflect the carbon 7 emissions reduction goals by the New England states and therefore overstate benefits 8 from energy markets. 9 VI. CAPACITY 10 Q: WOULD NECEC PROVIDE CAPACITY IN ISO-NE’S FORWARD CAPACITY 11 12 MARKET? A: No. NECEC alone cannot provide capacity. Hydro Renewable Energy, Inc. (“HRE”) – 13 Hydro-Québec’s subsidiary, which is responsible for supplying energy through NECEC - 14 - would have to offer capacity into the ISO-NE’s capacity markets in order for Maine to 15 realize any benefits claimed by Daymark. 16 Q: 17 18 DOES HRE INTEND TO BID CAPACITY INTO THE FORWARD CAPACITY MARKET AS PART OF THE CONTRACT WITH MASSACHUSETTS? A: Without the confidential version of HRE’s bid, I do not know. The draft Power Purchase 19 Agreement included as part of the Request for Proposal is written as an energy-only contract but 20 “to the extent the proposal contemplates a Forward Capacity Market commitment,” the supplier 21 must qualify and participate in Forward Capacity Market auctions during the contract term 22 (Exhibit No. TLB-7, “Draft PPA Firm Hydro,” section 7.2(n)). Whether or not HRE EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 27 of 41 1 contemplates participation in the Forward Capacity Market would be indicated in its confidential 2 Section 83D Application. 3 Q: 4 5 WHAT IS YOUR OPINION REGARDING DAYMARK’S ASSESSMENT OF CAPACITY MARKET BENEFITS? A: Daymark’s analysis assumes that HRE will bid 800 MW of capacity into ISO-NE 6 Forward Capacity Auctions, but does not consider the reality and evolution of ISO-NE’s 7 Forward Capacity Market rules, thereby overstating benefits and ignoring costs to Maine 8 ratepayers. As the testimony of William Fowler (Exhibit No. WSF-1) indicates, CASPR 9 would require a one-for-one replacement of capacity, most likely in Maine, before 10 NECEC could obtain a capacity supply obligation. Therefore, in order for Maine 11 residents to receive the capacity market benefits calculated by Daymark, a number of 12 Maine plants would have to retire, leading to lost jobs and lost property tax revenues. 13 Q: DO YOU KNOW WHICH PLANTS WOULD HAVE TO RETIRE? 14 A: Not with exact certainty. However, we can identify existing plants that are at risk. The 15 most likely candidate would be a fossil fuel peaker unit that barely operates – the William 16 F. Wyman Power Plant (“Wyman”) which is around 850 MW of capacity that could 17 switch out with the 800 MW of capacity measured by Daymark. Wyman represents 53 18 full-time jobs, not including contractors, and $1.035 million in property taxes per year. 19 However, as Wyman is the only oil-fired power plant in Maine, ISO-NE may determine 20 the plant is needed for diversification and reliability reasons, which would preclude it 21 from switching out with NECEC as part of CASPR. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 Q: 2 3 DOCKET NO. 2017-00232 Page 28 of 41 IF WYMAN HAS TO STAY IN THE GENERATION MIX, WHICH PLANTS WOULD RETIRE NEXT? A: If Wyman did not retire, another 800 MW would have to retire before NECEC could 4 enter into a Capacity Supply Obligation. If the plants to retire were to be limited to fossil 5 fuel units, almost 900 MW with low capacity factors could be candidates, representing 6 over $5.5 million in property taxes (Figure 10). 7 Figure 10: Maine Fossil Fuel Generating Units that Could Retire under CASPR Nameplate (MW) Plant Name Mead Rumford Cogen Bucksport Generation LLC Bucksport Generation LLC Androscoggin Energy Center Maine Independence Station Rumford Power, Inc Rumford Power, Inc TOTAL 8 9 12.5 111.6 186.8 163.5 194.6 179.4 95.1 943.5 2016 Net Reported 2016 Property Capacity Generation Prime Taxes Factor (MWh) Mover $ 524 $ 8,720 170,341 $ 222,129 $ 263,928 $ 149,305 814,947 $ 367,084 110,567 ** 1,580,573 188,739 3,285,287 ** 5,532,249 0% 0% 1% 12% 13% 17% 18% ST ST GT GT CA CT CA ** Property taxes already are included in the table under a previous entry. 10 11 Source: Energyzt analysis based on EIA Form 923 and 840 data. Property taxes researched from county websites. 12 Q: HOW MANY JOBS COULD BE LOST AT MAINE’S POWER PLANTS? 13 A: Each combined cycle represents around 20 to 30 employees with another 25 full-time 14 equivalents in the form of contractor services, on average, each year. Peaker plants can 15 have less or more depending on the size. Wyman (811 MW) has around 53 full-time 16 employees; Bucksport Generation LLC (298 MW) employs a total of 13 employees. 17 retirements were focused on fossil fuel plants, Maine could expect to lose at least 100 to 18 200 power plant jobs due to early retirements based on the list above. If EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 29 of 41 1 Q: ARE THERE OTHER POTENTIAL JOB LOSSES? 2 A: Yes. Each generator relies extensively on contractors for plant operations and 3 maintenance. A combined cycle plant such as Westbrook could contract with around 50 4 to 100 different vendors each year. Those companies, most of which are Maine-based, 5 would lose a main source of their business and most likely have to shed jobs if plants in 6 Maine retired and they could not redeploy their workforce into another industry. 7 Q: HOW ELSE WOULD MAINE’S ECONOMY BE IMPACTED? 8 A: In addition to the multiplier effect on the economy, there could be significant 9 repercussions on Maine institutions such as the University of Maine and the Maine 10 Maritime Academy. Nearly the entire staff at many of the Maine power plants are 11 graduates from the Maine Maritime Academy and/or the University of Maine. Most 12 generators and paper mills provide summer student cooperative and internship programs. 13 These institutions would be adversely impacted by NECEC. 14 Q: 15 16 WOULDN’T THOSE JOBS AND PROPERTY TAXES BE LOST EVEN IF NECEC WAS NOT BUILT? A: Not necessarily. Those plants are at risk because of falling energy and capacity prices. 17 However, with in-state replacement by renewable resources in the queue, such as new 18 wind turbines, the lost property tax revenues and payroll would be offset by new long- 19 term jobs and property taxes. In the case of NECEC, ongoing jobs would be replaced 20 with temporary construction jobs, some of which would be performed by existing CMP 21 employees and out-of-state workers. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 Q: 2 3 DOCKET NO. 2017-00232 Page 30 of 41 DOESN’T THE MCBER ECONOMIC STUDY ACCOUNT FOR POTENTIAL JOB LOSSES? A: Not really. MCBER’s results assumed that only two plants in Maine would retire. As the 4 analysis of energy prices and capacity market rules show, there could be significantly 5 more plants to retire if NECEC were to proceed. 6 Q: IS THERE ANY OTHER REASON DAYMARK’S CALCULATED BENEFITS 7 TO MAINE RATEPAYERS FROM LOWER CAPACITY MARKET PRICES 8 MAY OVERSTATE BENEFITS? 9 A: Yes. Capacity clearing prices have fallen to historical lows. Clearing prices in FCA9 at 10 $9.551 / kW-month have fallen to $4.631 /kW-month in FCA12 (Figure 11). If the 11 market continues to be saturated with new policy resources other than NECEC, Forward 12 Capacity Market prices would continue to fall and NECEC would not have any impact as 13 it competes with other resources relieved of the MOPR bid in and the price setting unit 14 reflects the cost of a new entrant. Daymark determined that this point would be reached 15 within eight years by 2031. However, the evolving state policies emphasizing 16 development of new renewables could cause this point to be reached sooner, especially 17 with out-of-market contracts supporting uneconomic generating plants for reliability and 18 fuel diversification purposes. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 31 of 41 Figure 11: Recent Forward Capacity Market Demand Curves and Clearing Prices 2 3 4 Source: Energyzt analysis of ISO-NE Forward Capacity Market demand curves and market clearing prices, https://www.iso-ne.com/isoexpress/web/reports/auctions/-/tree/fca-results 5 In addition, the price that NECEC could obtain in the forward capacity market, if it was 6 able to qualify and clear, could be even lower than the clearing price for the capacity 7 market as a whole. To this point, the most recent forward capacity auction is instructive. 8 Although the market cleared at $4.631 / kW-month, the Canadian Interties closed one 9 round later with a Payment Rate of $3.701 / kW-month at the Phase I/II HQ Excess 10 Interface and even lower at $3.155/kW-month at the New Brunswick Interface.5 My 11 understanding of the Daymark capacity market model is that it does not take into account 5 https://www.iso-ne.com/static-assets/documents/2018/02/fca_12_result_report.pdf EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 32 of 41 1 differences by zone or Intertie, thereby overstating the potential impact on capacity 2 market price savings. 3 VII. ANCILLARY SERVICES 4 Q: WHAT DOES DAYMARK SAY REGARDING THE VALUE OF NECEC TO 5 6 ANCILLARY SERVICES? A: Daymark provides a qualitative discussion of why it contends that NECEC would 7 increase the efficiency of ancillary services markets. Daymark claims that baseload 8 energy would free up other generating resources for use in providing ancillary services. 9 Q: DO YOU AGREE? 10 A: No. Daymark effectively assumes that generating plants no longer being dispatched to 11 provide energy as a result of NECEC would remain in service and therefore provide 12 lower-cost resources in the ancillary services market. However, multiple plants are at 13 risk of retirement due to low capacity factors and the ancillary services markets already 14 are saturated with those resources, rendering additional benefits in these markets 15 negligible. 16 Q: 17 18 WHY DO YOU SAY THE ANCILLARY SERVICES MARKETS ARE SATURATED? A: ISO-NE morning reports provide a summary of daily reserve resources available to meet 19 reserves, as well as an indication of whether ISO-NE had to call for reserves. Figure 12 20 plots 30-minute reserves, indicating that New England’s wholesale electricity markets 21 have sufficient reserves. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 DOCKET NO. 2017-00232 Page 33 of 41 Figure 12: Daily 30-Minute Reserve Requirements versus Estimates ISO-NE 30-Minute Reserve Requirement and Reserve Estimates (2015 - 2017) 5,000 4,500 Reserves (MW) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Thirty Minute Reserve Requirement 2 3 Thirty Minute Reserve Estimate Source: Energyzt analysis of ISO-NE Morning Reports 4 Q: WHAT ABOUT 10-MINUTE RESERVES? 5 A: Spinning reserves are required to ensure that the largest first contingency can be 6 accommodated immediately. The 10-minute reserve requirement reflects the amount of 7 spinning reserves required on the system, and has hovered between 1,500 MW and 2,000 8 MW the past few years (Figure 13). Generally, there are enough spinning reserves on 9 the system that incremental units do not need to be committed, and the number of days 10 when that occurs has been declining over the past three years. The small size of this EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 34 of 41 1 market would make any impact by NECEC negligible, and possibly more than offset by 2 plant retirements. 3 Figure 13: 10-Minute Reserve Requirement and Units Committed ISO-NE 10-Minute Reserve Requirement (2015 - 2017) Reserves (MW) 5,000 4,500 10 Minute Reserve Requirement 4,000 Units Committed to Meet Minimum Operating Reserve and Replacement Reserve Requirements 3,500 3,000 2,500 2,000 1,500 1,000 500 0 33 days 19 days 12 days 4 5 Source: Energyzt analysis of ISO-NE Morning Reports 6 VIII. OTHER OPERATIONAL BENEFITS 7 Q: 8 9 DO YOU AGREE WITH DAYMARK THAT THERE WOULD BE OTHER BENEFITS FROM NECEC? A: In theory, there could be diversification benefits associated with NECEC. However, 10 such benefits are not unique to NECEC and could be provided by other in-state resources 11 that also bring jobs and property taxes to the benefits of Maine residents. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 35 of 41 1 Q: DOES THIS APPLY TO HEDGING BENEFITS? 2 A: Yes. Just as with NECEC, Maine’s biomass plants provide baseload characteristics that 3 apply a hedge to the region’s electric generating resources. According to the U.S. Energy 4 Information Agency, in 2016, 24 percent of Maine’s net electricity generation came from 5 biomass. To the extent NECEC exerts additional financial stress on the biomass plants, 6 causing them to retire, the hedging benefits associated with NECEC would be offset. 7 Q: HOW ABOUT DIVERSIFICATION BENEFITS? 8 A: Yes, there are offsetting impacts associated with supposed benefits associated with 9 diversification. Maine’s diverse resource mix of small hydroelectric plants, on-shore 10 wind, and off-shore wind contributes to diversification of the system. In fact, Maine’s 11 generation mix is one of the most diverse in New England -- diversification that has been 12 exported to New England’s mix and could continue to do so in the absence of NECEC. 13 Wyman, which is at risk of retirement, is the only oil-fired peaker plant in Maine with on- 14 site fuel storage, offering a hedge against natural gas winter price spikes. To the extent 15 NECEC causes Wyman to retire, potential diversification benefits of NECEC would be 16 offset. 17 Q: HOW ABOUT WINTER FUEL SECURITY? 18 A: Losing Maine-based generating units – including Wyman, biomass plants and even 19 natural gas-fired units -- would adversely impact winter fuel security. More importantly, 20 however, is the question of where the NECEC energy supply is sourced. According to 21 Mr. Speyer’s testimony (Exhibit JMS-1), it is very likely that the supply for NECEC 22 would simply come from a reduction in what Québec otherwise would export into other EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 36 of 41 1 jurisdictions. Therefore, in order to deliver during extreme winter conditions into Maine 2 via NECEC (i.e., a new “supply obligation”), Hydro-Québec would need to decrease its 3 deliveries that otherwise would flow into other jurisdictions (e.g., exports into New 4 York). Under this circumstance, providing winter reliability benefits to Maine would 5 serve to increase the winter reliability issues in an interconnected jurisdiction, offsetting 6 benefits to New England and Maine as a result of increased fragility across the broader 7 system. 8 Q: HAS HYDRO-QUÉBEC REDUCED ITS WINTER EXPORTS IN THE PAST? 9 A: Yes. During extreme winter conditions, Hydro-Québec has had to reduce exports in 10 order to meet its reserve requirements and has warned of possible curtailments of their 11 exports. Transmission line outages or Québec’s inability to meet its own reserve 12 requirements during extreme winter conditions have suspended some or all of the Québec 13 exports over a given line. This past winter cold snap, exports into New England from 14 Québec were reduced due to a technical limitation on the Phase I/II Intertie. 15 Q: 16 17 WOULD HYDRO-QUÉBEC BE REQUIRED TO GUARANTEE DELIVERY DURING WINTER PEAKS UNDER THE SECTION 83D PROCUREMENTS? A: The obligation to guarantee winter delivery is unclear from public records. The RFP for 18 the Massachusetts Section 83D procurement only requires bidders of firm service 19 hydroelectric generation to ensure that the delivery profile for Winter Peak Periods are 20 not less than 60 percent of the highest annual single hourly delivery claimed in their 21 annual delivery profile (Exhibit TLB-6, “Section 83D RFP, section 2.2.2.7”). Without 22 access to the confidential version of HRE’s bid and proposed energy schedule, we do not EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 37 of 41 1 know if HRE took advantage of this accommodation. If it did, however, Daymark’s 2 constant energy flow assumption would significantly overstate the winter reliability 3 benefits. 4 Q: 5 6 CAN MAINE-BASED RENEWABLE RESOURCES DELIVER WINTER FUEL SECURITY BENEFITS? A: Yes. Off-shore wind also can deliver during winter peaks. As Daymark recognized in a 7 memorandum to Vineyard Wind LLC dated January 15, 2018 (Exhibit No. TLB-5), if the 8 800 MW off-shore Vineyard Wind Project had been operational, it “would have helped to 9 mitigate the economic, environmental and reliability-related challenges facing New 10 England and particularly the Cape Cod region, during the 96-hour period from January 4 11 through January 7th.”6 It seems logical that Daymark would come to similar conclusions 12 if it were to analyze Maine offshore wind that could be built in the absence of NECEC in 13 the same way. 14 Q: DOES NECEC PROVIDE INCREMENTAL BENEFIT TO MAINE 15 RATEPAYERS THAT CANNOT ALREADY BE PROVIDED BY EXISTING OR 16 POTENTIAL UNITS? 17 A: No. In fact, given that NECEC would curtail existing renewable resources in Maine, 18 causes existing renewable units to retire, or would preclude new units from being built, 19 these are offsetting impacts that would adjust NECEC’s benefits downward. In addition, 20 these offsetting impacts have negative repercussions for Maine residents in the form of Memorandum from Daymark Energy Advisors to Vineyard Wind LLC, “Vineyard Wind Project Benefits Under Winter Storm Grayson,” January 15, 2018. 6 EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 38 of 41 1 lost jobs, lost state income and income tax, and lost property taxes. NECEC’s 2 displacement of baseload and flexible dispatch plants does not provide any unique 3 benefits to the region that are not already being provided by in-state resources. 4 IX. CRITIQUE OF MCBER ECONOMIC BENEFITS 5 Q: DO YOU AGREE WITH THE MCBER STUDY CONCLUSIONS REGARDING 6 7 THE NET ECONOMIC BENEFITS TO MAIN? A: No. First, the inconsistency between the assumptions in the Daymark study and the 8 MCBER study makes them incompatible and therefore unable to provide a definitive 9 insight into what would happen to energy resources and economic benefits under the 10 same conditions. As there are offsetting effects (i.e., retirements increase with lower 11 energy prices, but economic activity increases when energy prices are lower), lack of an 12 internally consistent set of assumptions renders both analyses to be of limited utility. 13 Even if the assumptions were consistent across models, however, a change in even one 14 assumption can have dramatic impacts on the results, indicating that a more robust 15 analysis that examines multiple scenarios to understand potential implications for Maine 16 would be more informative than a single point estimate. As an example, it does not seem 17 that either Daymark or MCBER considered Maine’s alternatives to achieving state goals 18 of reducing carbon emissions by 75 to 80 percent of 1990 levels by 2050. 19 Q: 20 21 22 CAN YOU ILLUSTRATE THE MAGNITUDE OF THESE OFFSETTING IMPACTS? A: Yes. The University of Maine performed an economic impact study for the 500 MW Aqua Ventus Phase II off-shore wind farm project (Exhibit TLB-4). Performing a side- EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL DOCKET NO. 2017-00232 Page 39 of 41 1 by-side comparison of the reported results indicates that during both the construction and 2 operational stage of the projects, in-state Maine renewables would create a much greater 3 positive economic impact and far more substantial benefits to Maine residents than 4 NECEC would create (Figure 14 and Figure 15). 5 Figure 14: Economic Impacts during Construction – NECEC vs. Aqua Ventus 400 3500 3000 300 250 Aqua Ventus OSW 200 NECEC Transmission 150 100 Number of Jobs per Year $ millions per year ($ 2017) 350 2500 1500 0 0 7 NECEC Transmission 1000 500 50 Total Output 6 Aqua Ventus OSW 2000 Employment Income Figure 15: Economic Impacts during Operations – NECEC vs. Aqua Ventus 300 1800 1600 1400 200 150 Aqua Ventus OSW 100 NECEC Transmission 50 Number of Jobs per Year $ millions per year ($ 2017) 250 1200 Aqua Ventus OSW 1000 800 NECEC Transmission 600 400 200 0 Total Output 8 9 10 11 12 13 14 15 Income 0 Employment Source: Aqua Ventus OSW Project: Gabe, Todd M., University of Maine, School of Economics, ECONOMIC IMPACTS OF THE NEW ENGLAND AQUA VENTUS (PHASES I AND II) OFFSHORE WIND POWER PROGRAM IN MAINE, August 30, 2013, pp 16-25. http://maineaquaventus.com/wpcontent/uploads/2017/05/Gabe-Report-Dec-4.pdf ; New England Clean Energy Connect Transmission Project (NECEC): New England Clean Energy Connect and Central Maine Power Company, Connect and Central Maine Power Company Request for a Certificate of Public Convenience and Necessity for the Construction of the New England Clean Energy Connect (NECEC) Transmission Project, Volume I – EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL 1 2 DOCKET NO. 2017-00232 Page 40 of 41 Petition, State of Maine Public Utilities Commission, Docket No. 2017-00232,September 27, 2017, pp. 8,59 -64. 3 Q: CAN BOTH IN-STATE RESOURCES AND NECEC COEXIST? 4 A: Yes and no. As already mentioned, there is limited transmission out of Maine. With the 5 proposed upgrades to the Suroweic-South Interface, the key constraints move to the 6 Maine to New Hampshire Interface, which has a transfer capacity of only 1,900 MW. If 7 the transmission capacity is decreased by renewable projects that already are in the 8 queue, NECEC would not be able to flow to the rest of New England without either: 1) 9 curtailment of existing units; or 2) expensive transmission upgrades beyond what is 10 proposed as part of the project. Therefore, NECEC would displace in-state renewable 11 resources over the long-run because they would be more expensive. 12 X. CONCLUSION 13 Q: CAN YOU SUMMARIZE YOUR CONCLUSIONS? 14 A: Potential benefits that would be associated with NECEC are uncertain and would come 15 with a considerable cost to Maine residents. An injection of 9.5 TWh of energy into 16 Maine’s system will cause significant displacement of existing, in-state Maine generators 17 who will operate less and potential retire early. As a result: 18 • NECEC’s participation in ISO-NE energy markets would hasten Maine 19 generating plant retirements, eliminating jobs and property tax base with 20 negligible, if any, benefit over the intermediate and longer-term as other low 21 carbon options are implemented. EXHIBIT NO. TLB-1 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL • 1 DOCKET NO. 2017-00232 Page 41 of 41 If NECEC could participate in ISO-NE’s Forward Capacity Market, any pricing 2 benefits would be offset by retirements required by CASPR, which could 3 represent losses of more than 150 jobs and over $5.5 million in property taxes. • 4 5 Incremental benefits associated with ancillary services, diversification, and winter reliability are negligible and uncertain. • 6 The project would create fewer jobs and property tax income for Maine than in- 7 state renewable projects that could be built and transmitted through the limited 8 transmission capacity from Maine to New Hampshire. • 9 Given Hydro-Québec’s proposal to use existing resources to supply NECEC, New 10 York generation is likely to replace Maine generation. In effect, NECEC would 11 cause Maine to export its power industry jobs to other states. 12 Q: DOES THIS CONCLUDE YOUR TESTIMONY? 13 A: Yes, at this time, based on the information I have been provided and reviewed to date. 14 However, I reserve the right to modify my testimony as further information is obtained 15 through the course of this hearing. STATE OF MAINE PUBLIC UTILITIES COMMISSION CENTRAL MAINE POWER COMPANY REQUEST FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR THE CONSTRUCTION OF THE NEW ENGLAND CLEAN ENERGY CONNECT (NECEC) TRANSMISSION PROJECT DOCKET No. 2017-00232 PREPARED DIRECT TESTIMONY OF TANYA L. BODELL VERIFICATION I, Tanya Lynne Bodell, certify that the facts set forth in the Testimony of Tanya L. Bodell submitted in this matter are true and correct to the best of my knowledge, information, and belief. Date: April 30, 2018 _________________________________ Tanya L. Bodell