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1 November 9, 018 Ms. Kavita Kale Michigan Public Service Commission 7109 W. Saginaw Hwy. P. O. Box 01 Lansing, MI 8909 RE: MPSC Case No. U-01 Dear Ms. Kale: The following is attached for paperless electronic filing: Michigan Environmental Council, Natural Resources Defense Council, and Sierra Club s Motion to File Surrebuttal Testimony Exhibit - Surrebuttal Testimony of Tyler Comings Proof of Service Sincerely, Christopher M. Bzdok Chris@envlaw.com xc: Parties to Case No. U-01 James Clift, MEC Shannon Fisk, Earthjustice Michael Soules, Earthjustice riana Gonzalez, NRDC Elena Saxonhouse, Sierra Club

2 STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter of the pplication of CONSUMERS ENERGY COMPNY for approval of its integrated resource plan pursuant to MCL 0.t and for other relief U-01 LJ Sharon L. Feldman THE MICHIGN ENVIRONMENTL COUNCIL, NTURL RESOURCES DEFENSE COUNCIL, ND SIERR CLUB S MOTION TO FILE SURREBUTTL TESTIMONY The Michigan Environmental Council, Natural Resources Defense Council, and Sierra Club (collectively, MEC-NRDC-SC ), through their undersigned counsel, move for permission to file surrebuttal testimony in this proceeding under Rule 7 of the Michigan Public Service Commission s Rules of Practice and Procedure, Mich dmin Code R (formerly Rule ). In support of this motion, MEC-NRDC-SC state as follows: 1. This proceeding involves the Integrated Resource Plan ( IRP ) that Consumers Energy Company ( Consumers or the Company ) filed on June 1, 018. The IRP filing was required by MCL 0.t, and the Commission s December 0, 017 and November 1, 017 orders in Case Nos. U-189 and U The IRP includes an analysis of potential retirement dates for four of the Company s coal-fired generating units: Karn units 1 and, and Campbell units 1 and (collectively, the Medium Four ). Consumers included a Medium Four retirement analysis in its IRP at the Commission s direction. Specifically, in the Company s 017 rate case, Case No. U-

3 18, the Commission directed Consumers to submit a retirement assessment of the Medium units... as a standalone analysis in the company s IRP. 1. The Company s Medium Four retirement analysis is described in the direct testimony of Consumers witness Thomas P. Clark, and relied on, inter alia, modeling performed by Consumers witness Sara T. Walz. Based on this analysis, the Company has recommended that Karn units 1 and retire in 0, but that Campbell units 1 and not retire until 01.. On October 1, 018, MEC-NRDC-SC witness Tyler Comings filed direct testimony and supporting exhibits that, among other things, critiqued the Company s decision to delay the Campbell units retirement until 01. His analysis relied, in part, on modeling by MEC- NRDC-SC witness George Evans who, like Company witness Walz, performed modeling runs using Strategist, a modeling software often used in resource planning.. To assess the financial impact of retiring Campbell 1 and, or Campbell alone, in 0, Mr. Comings s analysis assessed those units retirement under two different gas price forecasts (Consumers forecast and the Energy Information dministration s nnual Energy Outlook ( EO ) forecast), multiple capacity price forecasts, and under each of the Commissionrequired planning scenarios (Business as Usual, Environmental Technology, and Environmental Policy).. In addition, to test the financial impact of different replacement capacity options, Mr. Comings s analysis looked at replacing the Campbell units capacity with either (a) new supply-side resources, such as wind and solar, or (b) short-term capacity purchases (to address a two-year capacity shortfall). Mr. Comings s analysis shows that the economics of these 1 Case No. U-18, March 9, 018 Order, page. See generally Direct Testimony of Thomas P. Clark at 1- (June 1, 018).

4 replacement options can vary in some scenarios it is cheaper to build new resources, and in others it is more economic to purchase capacity. His testimony also noted that in actuality the Company might consider a blend of these options. 7. Mr. Comings s direct testimony presents the results of this modeling, which show that retiring either Campbell 1 and, or Campbell alone, in 0 would likely result in significant savings to customers. For example, assuming capacity prices that Mr. Comings testified were reasonable but conservative (0% of CONE), the projected net present value ( NPV ) of customer savings from retiring Campbell 1 and would range from $ million up to $79 million. nd the projected NPV of customer savings from retiring Campbell in 0 would range from $1 million up to $8 million. 8. On November, 018, Consumers witness Sara Walz the Company s modeling witness filed rebuttal testimony claiming that Mr. Comings s analysis suffered from two errors: first, using projected capital and O&M costs based on a 01 retirement, thereby understating the fixed costs these units would incur under a 0 retirement; second, overstating the federal tax credits that Consumers would receive in building wind and solar as replacement resources. Ms. Walz then presented revised NPV figures, testifying that her corrections significantly reduce savings under some scenarios, and would result in increased costs under a number of scenarios. Her testimony also makes clear that the second purported error overstating the savings from the production tax credit ( PTC ) and investment tax credit ( ITC ) for building wind and solar, respectively, has a much greater financial impact than the first one. See Revised Direct Testimony of Tyler Comings at (Oct. 9, 018). See id. at -7. Rebuttal Testimony of Sara T. Walz at -; Exhibits -10, -10. Id. at 8, 0,.

5 9. But this portion of Ms. Walz s rebuttal testimony contains two significant omissions: First, Ms. Walz s rebuttal testimony excludes all of the modeling scenarios based on the EO gas price forecast. Second, in calculating these revised NPVs, Ms. Walz disregarded Mr. Comings s scenarios in which replacement capacity is acquired through short-term capacity purchases, rather than building new generation. By ignoring this option, and assuming that all replacement capacity for Campbell 1 and must come from building new resources, Ms. Walz overstated the financial impact of the modeling errors discussed in her testimony. If consistent with the approach taken in Mr. Comings s analysis both types of replacement capacity are considered, the projected customer savings from retiring Campbell 1 and, or Campbell, increase significantly. These omissions in Ms. Walz s testimony skew the NPV results presented in Exhibits -10 and -10, significantly overstating the projected costs of a 0 retirement under many scenarios. 10. It is unclear why Ms. Walz excluded all of the capacity purchase scenarios from her NPV results. She may have done so based on her mistaken belief that Mr. Comings was advocating that these capacity purchases come solely from the MISO Planning Resource uction ( PR ), rather through bilateral contracts. 7 In truth, Mr. Comings s direct testimony did not advocate acquiring replacement capacity PR, and the price of replacement capacity assumed in MEC/NRDC/SC s modeling was based on a bilateral contract price (i.e., the winning bids from Consumers recent reverse capacity auctions). 7 See Walz Rebuttal at 7:-11. Earlier in her testimony, she criticizes Mr. Comings on that ground, and asserts that market purchases could not replace both Campbell 1 and due to limits on the amount of capacity that can be procure from the MISO Planning Resource uction. Id. at 7-8.

6 PROPOSED SURREBUTTL TESTIMONY 11. Mr. Comings s proposed surrebuttal addresses the omissions in Ms. Walz s testimony described above. The scope of his surrebuttal is narrow: he accepts, for purposes of the surrebuttal, both of the modeling errors claimed by Ms. Walz. Instead, he simply describes the omissions in Ms. Walz s testimony, and presents updated NPV calculations that account for the possibility that Consumers could acquire replacement capacity through short-term purchases. By providing these updated NPV results, Mr. Comings s testimony will give the Commission a more complete and accurate picture of the financial impact of retiring Campbell 1 and, or Campbell, in 0. Mr. Comings s proposed surrebuttal testimony is attached as Exhibit to this motion. 1. Prior to filing this motion, counsel for MEC/NRDC/SC gave counsel for Consumers as much advance notice of the filing as possible under the circumstances, and an advance copy of the proposed testimony and workpaper. CONCLUSION ND REUEST FOR RELIEF For the reasons explained above, MEC/NRDC/SC respectfully request that the LJ enter an order authorizing MEC/NRDC/SC to place Mr. Comings s brief surrebuttal testimony into the record in this case. Date: November 9, 018 OLSON, BZDOK & HOWRD, P.C. Counsel for MEC-NRDC-SC By: Christopher M. Bzdok (P09) 0 E. Front St. Traverse City, MI 98 Phone: 1/9-00; Fax: 1/ chris@envlaw.com

7 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page 1 of 8 STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter of the application of Consumers Energy Company for pproval of an Integrated Resource Plan under MCL 0.t and for other relief. Case No. U-01 LJ Sharon L. Feldman Surrebuttal Testimony of Tyler Comings On Behalf of Michigan Environmental Council, Natural Resources Defense Council, and Sierra Club November 9, 018

8 TBLE OF CONTENTS Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page of 8 1. INTRODUCTION, ULIFICTIONS, ND PURPOSE OF TESTIMONY MODELING RESULTS... 1

9 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page of INTRODUCTION, ULIFICTIONS, ND PURPOSE OF TESTIMONY Please state your name, business address, and position. My name is Tyler Comings. I am a Senior Researcher at pplied Economics Clinic, located at Teele venue, Somerville, Massachusetts. 7 re you the same Tyler Comings that filed direct testimony in this case on October 1, 018 and rebuttal testimony on November, 018? Yes What is the purpose of your surrebuttal testimony? My surrebuttal briefly responds to a portion of the rebuttal testimony filed by Company witness Sara Walz regarding the modeling results presented in my direct testimony. Ms. Walz pointed out errors in modeling conducted by Mr. Evans and attempted to recreate the results to correct for these errors. However, her corrections were incomplete and included a substantial error. In my surrebuttal, I present a more complete set of results, taking her arguments as-read, that indicate higher savings for retirement of Campbell Units 1 and (or Unit alone) than indicated in the corrections of Ms. Walz. 17. MODELING RESULTS Did Ms. Walz discuss errors in the modeling conducted by MEC-NRDC-SC? Yes. In her rebuttal testimony, Ms. Walz claims that there were two errors in Strategist modeling regarding: 1) fixed costs of early retirement, and ) renewable energy tax credits. 1 1 Rebuttal Testimony of Sara T. Walz, p.8, lines -1.

10 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page of 8 1 If her claims are correct, would both errors apply to the MEC-NRDC-SC modeling with capacity purchase replacement for Campbell? No. If Ms. Walz is correct, the tax credit issue would only apply to Mr. Evans s modeling that included new builds of renewables, not his modeling of capacity purchase replacement re you rebutting Ms. Walz s claims in this testimony? No. MEC-NRDC-SC has issued data requests on Ms. Walz s claims. In this testimony, I am crediting both her claimed errors. My surrebuttal merely responds to her attempts to correct for these issues, including correction of an error made by Ms. Walz Did Ms. Walz present corrected modeling results in her rebuttal? Yes. She presented exhibits -10 (STW-) and -10 (STW-7) which purported to correct the errors that she discussed in her testimony. She applied an NPV cost of $7 million ($80 million for fixed costs and $19 million for tax credits) for retirement of Campbell Units 1 and and $ million ($ million for fixed costs and $187 million for tax credits) for retirement of Campbell alone Were the results presented in her rebuttal testimony complete? No. First, Ms. Walz chose to present the results with only the CE gas price and capacity price forecasts of 0 percent and 7 percent of CONE. She claimed to focus only on the CE gas price because it was the price used in the Company s coal retirement analysis. Second, she ignored the modeling results that allowed for purchases of capacity to replace Campbell Units 1 and and mistakenly applied her tax credit correction ($187 million NPV) to all cases where Campbell Unit was retired. Finally, if her tax credit issue is correct, then additional modeling could have chosen a different, lower-cost resource which would have increased the savings from retirement (relative to her corrections). However, my testimony does not address this final point as no additional modeling was run. Ex1118-Walz--Final and Ex1118-Walz-7-Final, Corrections tab. Walz Rebuttal, p., lines 19-0.

11 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page of Did use of the CE gas price show lower savings with coal retirement than the EO gas prices? Yes. Ms. Walz decided to focus on the CE gas price which showed less savings with coal retirement. The results run by Mr. Evans showed higher savings with retirement using the EO gas price, relative to the CE gas price. s I discussed in my rebuttal testimony, the Company ran both gas prices when evaluating the retirement of Karn Units 1 and. In that analysis, the Company also found that EO gas prices produced more savings with those two units retiring than with the CE gas prices. The results with both gas prices were calculated in Ms. Walz s rebuttal workpaper but she only presented a select number of scenarios in her testimony using the CE gas price. Notably, the Company s PC was developed with the benefit of modeling using the EO gas price Did Ms. Walz ignore the modeling runs that included capacity purchase as replacement? In some cases, yes. Ms. Walz claimed that under retirement of Campbell Units 1 and, the modeling of a capacity purchase of 7 ZRCs in 0 was incorrect because the Company could not purchase more than percent of its capacity need from the MISO capacity market. 7 In her Exhibit STW-, she noted that in the case of Campbell 1 and retiring, she only corrected results from the modeling of new builds and then applied her adjustments for fixed costs and tax credits of $7 million to those results. 8 Did you claim that all of the capacity purchases would have to come from the MISO capacity market? No. In fact, I based the cost of capacity purchases on bilateral contract prices provided by the Company. My testimony discussed the MISO market as an option, but I did not claim that all capacity purchases needed to come from there. The Rebuttal Testimony of Tyler Comings, p. -7. STW-0. Walz workpaper lt modeling results summary STW. 7 Walz Rebuttal, p. 8, lines Ex1118-Walz--Final, EXH STW-.

12 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page of 8 1 Company could purchase capacity bilaterally or purchase a mix from the MISO market and some from bilateral contracts, if needed. 7 8 Do your updated results account for the fact that different resources could have been selected as new builds, given Ms. Walz s concerns? No. New modeling addressing Ms. Walz s concerns could select lower-cost new build resources. By definition, a new optimization would not choose a higher cost resource than what was used in the results. However, no new modeling was conducted to support my testimony Please provide the modeling results for Campbell Units 1 and retirement in 0 correcting for Ms. Walz s issues. Consistent with my direct testimony, I chose the lowest cost between the two options: 1) new builds and ) capacity purchases. The issue of tax credits, which is the lion s share of Ms. Walz s NPV adjustments, does not apply to cases with the capacity purchase option. However, Ms. Walz ignored the purchases option and focused on new build results when both units were retired. I have applied Ms. Walz s corrections to both the new build and capacity purchase modeling cases, where appropriate shown in Table 1. This allows for the selection of the lower cost options limited to existing results while addressing Ms. Walz s issues. The results below show costs for retiring both units in 0 in most BU scenarios and savings in all but one ET scenario and all EP scenarios. Table 1: lternative Modeling, Savings from Campbell 1& 0 Retirement ($018 mil NPV) Gas Price (0% CONE) Gas Price (% CONE) Gas Price (0% CONE) Gas Price (7% CONE) Gas Price (100% CONE) Technology Costs BU ET EP CE $ $99 $1 EO -$1 $0 $09 CE -$11 $7 $1 EO -$10 $7 $ CE -$8 -$9 $17 EO -$79 $9 $ CE -$10 $1 $190 EO -$ $18 $77 CE -$1 $ $1 EO -$ $0 $00

13 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page 7 of 8 1 Consistent with my direct testimony, I also show these results with the Company s previous projection of non-environmental capital spending. These results, shown in Table, show savings from retiring both units in 8 of the 0 scenarios run. Table : lternative Modeling, Savings from Campbell 1& 0 Retirement, using 017 Rate Case Non-Environmental Capital Spending ($018 mil NPV) Gas Price (0% CONE) Gas Price (% CONE) Gas Price (0% CONE) Gas Price (7% CONE) Gas Price (100% CONE) Technology Costs BU ET EP CE $19 $1 $ EO -$11 $ $ CE $10 $10 $8 EO $1 $8 $ CE $ $10 $81 EO $ $08 $8 CE $8 $17 $0 EO $7 $1 $91 CE -$9 $19 $ EO $80 $ $ Did Ms. Walz s concern about capacity purchases apply to retirement of Campbell Unit alone? No. In that case, 00 ZRCs were needed for capacity in 0 if that unit retired. This is well below the threshold that concerned Ms. Walz when both units retired Was Ms. Walz consistent with her treatment of capacity purchases for Campbell Unit retirement modeling? No. In her workpaper, Ms. Walz deleted the capacity purchase modeling results from both the Campbell 1 and and Campbell only cases. 9 In her Exhibit STW- 7, for Campbell retirement, she includes both the new build and market purchases taking the lowest cost between the two Walz workpaper lt modeling results summary STW 10 Ex1118-Walz-7-Final, EXH STW-7 tab.

14 Exhibit to MEC-NRDC-SC Motion to File Surrebuttal Testimony Page 8 of In her exhibit STW-7, did Ms. Walz incorrectly penalize the capacity purchase replacement in the case of Campbell retiring? Yes, she mistakenly applied her total NPV adjustment (including tax credits) to scenarios that included capacity purchase replacement. Therefore, she underestimated retirement savings by $187 million NPV in those cases. Her method also did not allow for the selection of a capacity purchase option if the new build option was more expensive, after her corrections Please provide the modeling results for Campbell Unit retirement in 0 correcting for Ms. Walz s issues. The results below show that, even when taking Ms. Walz s issues as-read, the retirement of Campbell Unit provides savings in 7 out of the 0 combinations run. These results allow for the selection of capacity purchase or new build (without new modeling), factoring in Ms. Walz s corrections, but applying them properly to each option. Results using the Commission-required EO gas price show substantially higher savings compared to the CE gas prices that Ms. Walz chose to focus on in her rebuttal. Table : lternative Modeling, Savings from Campbell 0 Retirement ($018 mil NPV) Gas Price (0% CONE) Gas Price (% CONE) Gas Price (0% CONE) Gas Price (7% CONE) Gas Price (100% CONE) Technology Costs BU ET EP CE $9 $ $187 EO $110 $17 $8 CE $ $7 $18 EO $109 $1 $8 CE -$1 $8 $18 EO $108 $1 $8 CE -$ $7 $18 EO $107 $1 $8 CE -$7 $ $18 EO $10 $1 $8 0 1 Does this conclude your testimony? Yes.

15 STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter of the pplication of CONSUMERS ENERGY COMPNY for approval of its integrated resource plan pursuant to MCL 0.t and for other relief U-01 LJ Sharon L. Feldman PROOF OF SERVICE On the date below, an electronic copy of Michigan Environmental Council, Natural Resources Defense Council, and Sierra Club s Motion to File Surrebuttal Testimony and Exhibit -Surrebuttal of Tyler Comings was served on the following: Name/Party Counsel for Consumers Energy Co. Bret. Totoraitis Robert W. Beach Michael C. Rampe Theresa.G. Staley nne M. Uitvlugt Counsel for Michigan Public Service Commission Spencer. Sattler Daniel Sonneveldt Counsel for BTE Bryan. Brandenburg Michael J. Pattwell Counsel for Environmental Law & Policy Center Margrethe Kearney Counsel for Cypress Creek Renewables, LLC and Solar Energy Industries ssociation, Jennifer Utter Heston Counsel for ttorney General Special Litigation Division Celeste R. Gill mit Singh ddress mpscfilings@cmsenergy.com bret.totoraitis@cmsenergy.com robert.beach@cmsenergy.com Michael.rampe@cmsenergy.com Theresa.staley@cmsenergy.com nne.uitvlugt@cmsenergy.com sattlers@michigan.gov sonneveldtd@michigan.gov bbrandenburg@clarkhill.com mpattwell@clarkhill.com mkearney@elpc.org jheston@fraserlawfirm.com g-enra-spec-lit@michigan.gov Gillc1@michigan.gov Singha9@michigan.gov

16 Counsel for Michigan Chemistry Council, Energy Michigan Timothy Lundgren Justin Ooms Counsel for Michigan Energy Innovation Business Council, Independent Power Producers Coalition of Michigan and Institute for Energy Innovation Laura. Chappelle Toni L. Newell Counsel for Midland Cogeneration Venture Jason T. Henselman John. Janiszewski Counsel for Michigan Electric Transmission Company (METC) Richard J. aron Courtney Kissel Counsel for Cadillac Renewable Energy, Genesee Power Station, Grayling Generating Station, Hillman Power Company, TES Filer City Station, Viking Energy of Lincoln, Viking Energy of McBain, Inc. Thomas J. Waters nita G. Fox The statements above are true to the best of my knowledge, information and belief. OLSON, BZDOK & HOWRD, P.C. Counsel for MEC-NRDC-SC Date: November 9, 018 By: Kimberly Flynn, Legal ssistant Karla L. Gerds, Legal ssistant Breanna Thomas, Legal ssistant 0 E. Front St. Traverse City, MI 98 Phone: 1/ kimberly@envlaw.com, karla@envlaw.com and breanna@envlaw.com