A CMS Energy Company November, 0 Ms. Kavita Kale Executive Secretary Michigan Public Service Commission 0 West Saginaw Highway Post Office Box 0 Lansing, MI 0 General Offices: LEGAL DEPARTMENT One Energy Plaza Jackson, MI 0 Tel: Fax: () -00 () - CATHERINE M REYNOLDS Senior Vice President and General Counsel *Washington Office: 0 Rhode Island Ave. N.W. Tel: (0) -0 MELISSA M GLEESPEN Suite 00 Vice President, Corporate Washington, DC 00 Fax: (0) - Secretary and Chief Compliance Officer Writer s Direct Dial Number: () -0 Writer s E-mail Address: gary.genschjr@cmsenergy.com SHAUN M JOHNSON Vice President and Deputy General Counsel Bret A Totoraitis Kelly M Hall Eric V Luoma Assistant General Counsel Ashley L Bancroft Robert W Beach Don A D Amato Robert A. Farr Gary A Gensch, Jr. Emerson J. Hilton Gary L Kelterborn Chantez P Knowles Mary Jo Lawrie Jason M Milstone Rhonda M Morris Deborah A Moss* Mirče Michael Nestor Michael C. Rampe Scott J Sinkwitts Adam C Smith Theresa A G Staley Janae M Thayer Anne M Uitvlugt Aaron L Vorce Attorney RE: Case No. U-0 In the Matter of the Application of Consumers Energy Company for Approval of an Integrated Resource Plan under MCL 0.t and for other relief. Dear Ms. Kale: Enclosed for electronic filing in the above-captioned case, please find Consumers Energy Company s Sur-Surrebuttal Testimony of Company witness Sara T. Walz. This is a paperless filing and is therefore being filed only in PDF. I have included a Proof of Service showing electronic service upon the parties. Sincerely, Gary A. Gensch, Jr. cc: Hon. Sharon L. Feldman, Administrative Law Judge Parties per Attachment to Proof of Service fl--
S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for Approval of an Integrated Resource Plan ) Case No. U-0 under MCL 0.t and for other relief. ) ) OF ON BEHALF OF CONSUMERS ENERGY COMPANY November 0
0 0 Q. Please state your name and business address. A. My name is Sara T. Walz, and my business address is West Parnall Road, Jackson, Michigan. Q. Are you the same Sara T. Walz that filed direct and rebuttal testimony in this case? A. Yes. SECTION I: PURPOSE OF TESTIMONY Q. What is the purpose of your sur-surrebuttal testimony? A. The purpose of my sur-surrebuttal testimony is to address the surrebuttal testimony filed by Michigan Environmental Council, Natural Resources Defense Council, and Sierra Club (collectively, MEC ) witness Tyler Comings. Mr. Comings suggested my filed Exhibits A-0 (STW-) and A-0 (STW-) were incomplete and contained errors. I explain in this sur-surrebuttal that my exhibits do not contain errors or need correction. I further explain that Mr. Comings s proposed replacement of capacity is not consistent with the Company s filing in this Integrated Resource Plan ( IRP ), and that the costs of Mr. Comings s proposals have not been fully and accurately quantified. Q. Are you sponsoring any exhibits as part of this sur-surrebuttal testimony? A. No. SECTION II: REPLACEMENT CAPACITY FOR THE RETIREMENT OF J. H. CAMPBELL UNITS Q. What are your concerns with Mr. Comings s recommended replacement of capacity for the proposed retirement of either J. H. Campbell ( Campbell ) Units and or Campbell Unit alone? A. Mr. Comings proposes to replace the capacity with one of two sources: ssrte-stw
i. The purchase of zonal resource credits ( ZRC ), either from the Midcontinent Independent System Operator s ( MISO ) Planning Resource Auction ( PRA ) or through a third-party bilateral contract; or ii. A combination of 00 MW of wind and 00 MW of solar capacity additions for the retirement of Campbell Units and ; or 00 MW of wind and 0 MW of solar capacity additions for the retirement of Campbell Unit, as presented in the corrected Exhibit MEC-. 0 0 I have concerns with each of Mr. Comings s proposed replacement sources. First, the Company does not support a reliance on an unspecified purchase of ZRCs in its long-term capacity plan. Second, my rebuttal testimony demonstrated that the proposed additions of solar and wind capacity result in significant increases in customer costs for the retirement of either or both Campbell units under the Consumers Energy, or CE, gas Business as Usual ( BAU ) scenario, and a potential increase in customer costs (or marginal results) under the CE gas Emerging Technologies ( ET ) scenario. Reliance on an Unspecified Purchase of ZRCs Q. Please explain your concern with Mr. Comings s recommendation for the Company to plan for a two-year purchase of ZRCs under a Campbell unit retirement. A. Beginning on page, line of his surrebuttal testimony, Mr. Comings argues that the Company should consider the purchase of ZRCs to cover the shortfall created by the retirement of either or both of the Campbell units. He argues the ZRC purchase could come from either the MISO PRA or a third-party bilateral contract. The arguments presented in this section of his surrebuttal testimony are flawed in two ways, with each flaw resulting in an inaccurate quantification of customer cost impacts. See Exhibit A-0 (STW-), columns (c) and (d), lines and, and Exhibit A-0 (STW-), columns (c) and (d), lines and. ssrte-stw
0 First, Mr. Comings s analysis assumed the cost of the ZRCs would be at % of the Cost of New Entry ( CONE ). However, on page lines through of his rebuttal testimony, Company witness Thomas P. Clark explains that the % of CONE prices observed in the Company s historic reverse capacity auctions represent only a snapshot in time, prior to considerable Zone supply reductions. Following the retirement of Palisades, the proposed retirement of D. E. Karn ( Karn ) Units and and DTE Electric Company s proposed coal unit retirement schedule, prices for the purchase of ZRCs is likely to increase to at least % of CONE. Therefore, any results included in Tables through corresponding to the purchase of ZRCs in the surrebuttal testimony of Mr. Comings is understated by approximately $0 million for the retirement of Campbell Units and and approximately $ million for the retirement of Campbell Unit. Second, if the Company presents a long-term capacity plan that includes the unspecified purchase of ZRCs, as proposed by Mr. Comings, there is a risk that the Commission would identify this as a capacity need. Such a determination could expose the Company to a requirement to fill the capacity need with Public Utility Regulatory Policies Act of ( PURPA ) contracts. Such contracts could be at considerably different costs than the cost of a single year purchase of ZRCs as proposed by Mr. Comings, but more importantly, would result in a contract term length of up to years. That is, not only are the costs of the PURPA contracts potentially higher, but 0 those higher costs will be incurred by customers for up to years. This is a Page, line of the direct testimony of MEC witness Tyler Comings. The proposed purchase of ZRCs for Campbell Unit and retirement is ZRCs in planning year 0-0 and 0 ZRCs in planning year 0-0. The proposed purchase of ZRCs for Campbell Unit retirement is 00 ZRCs in planning year 0-0. The difference in assumed capacity price is approximately $,000/ZRC-year. See Exhibit A-0 (KGT-). ssrte-stw
0 0 considerable risk to customers under Mr. Comings s recommendation, the cost impact of which has not been included in his Net Present Value ( NPV ) results. Therefore, the economics of the proposed retirement of either or both of the Campbell units has not been fully considered. Adjustments to Build Replacement Plans Q. Please explain your concerns with Mr. Comings s proposed replacement of either or both of the Campbell units with new wind and solar capacity additions. A. Mr. Comings s analysis proposing the replacement of wind and solar capacity for the retirement of either or both Campbell units required two significant corrections. My rebuttal testimony addressed those issues and the corrections were provided in Exhibit A-0 (STW-) and Exhibit A-0 (STW-). Q. In his surrebuttal testimony, Mr. Comings stated that Exhibit A-0 (STW-) and Exhibit A-0 (STW-) were incomplete and contained errors. Do you agree? A. No. There are no errors in the exhibits I submitted in my rebuttal testimony. Based on the arguments presented in my rebuttal testimony, and in the prior section of this sur-surrebuttal testimony, the Company does not support the recommendation to rely on an unspecified purchase of ZRCs. Therefore, results presented in my rebuttal testimony and exhibits intentionally removed results containing capacity purchases from consideration. My exhibits corrected the results of Mr. Comings s analysis only for build replacement outcomes. ssrte-stw
0 0 Q. Mr. Comings claims on page, lines through of his surrebuttal testimony, that you mistakenly applied a cost correction. Do you agree? A. No. Mr. Comings states that I mistakenly applied a tax correction to all Campbell Unit retirement scenarios. However, in my exhibits, I only considered Mr. Comings s results pertaining to new build replacement of capacity; I did not include any results for capacity market purchases. Under all of his new build capacity replacement optimizations, he failed to capture a $ million net present value cost increase; my exhibits correctly adjusted his results. Q. Mr. Comings further discusses what he believes to be an error in your exhibits on page, line through page, line of his surrebuttal testimony. Do you agree you made an error? A. No. Mr. Comings seems to have concerns as he tries to reconcile my workpapers and my exhibits. However, the results are consistent. On page, lines through of his surrebuttal testimony, Mr. Comings states that in Exhibit A-0 (STW-), for Campbell Unit retirement, that I included both the new build and market purchases taking the lowest cost between the two. However, only the results for new build replacement were considered; market purchases were not included. As he pointed out, in my workpaper, I deleted all results for market purchase outcomes as a way to confirm my exhibit presented new build results only. The $ million NPV tax correction was not made to any market purchase portfolios in my exhibit, as suggested by Mr. Comings on page, lines through of his surrebuttal testimony. ssrte-stw
0 0 Completeness of Corrected Results Q. On page, lines through of his surrebuttal testimony, Mr. Comings claims that the results presented in Exhibits A-0 (STW-) and A-0 (STW-) are incomplete. Do you agree? A. No. Mr. Comings bases his claim on the discussion of corrected results, presented beginning on page, line of my rebuttal testimony. In Tables and of his direct testimony, Mr. Comings presents 0 sets of results for the different scenarios included in this IRP. However, in his direct testimony, Mr. Clark explained that the Company made the retirement determinations based on the BAU CE gas price forecast scenario. While I acknowledge the value of discussing NPV results for the ET and Environmental Policy scenarios, I do not consider the Annual Energy Outlook ( AEO ) gas price forecast in my presentation of corrected results, since the Company clearly stated those results were not used to determine retirement decisions. Furthermore, since Mr. Comings and I respectively identified an input value of the cost of capacity as % and % of CONE, I further limited the presentation of corrected results to those levels of capacity price. This allowed for a clearer presentation of the six most relevant sets of corrected NPV results. Q. Mr. Comings discusses the potential to select lower-cost new build resources on page, lines through of his surrebuttal testimony. Did the Company evaluate alternative build plans to fill capacity needs created by the retirement of one or both Campbell units? A. No. For a number of non-modeling and some non-economic reasons discussed in both the Company s direct and rebuttal testimonies, the Company did not evaluate alternative ssrte-stw
build plans to fill capacity needs created by the early retirement of more than two of Karn Units and and Campbell Units and (collectively, the Medium ). As a result, a fully optimized model simulation was not performed by the Company for the early retirement of more than two of the Medium coal units. SECTION III: CONCLUSION Q. What are your conclusions of your review of Mr. Comings s surrebuttal testimony? A. Mr. Comings filed surrebuttal testimony suggesting that my filed Exhibits A-0 (STW-) and A-0 (STW-) were incomplete and contained errors. This 0 sur-surrebuttal testimony explains that there were no errors in my exhibits and that the presentation of results was complete. The Company and Mr. Comings do not agree on the mix of capacity resources that should be considered when evaluating capacity replacement; however, the analysis presented in my rebuttal testimony remains accurate, with no corrections necessary. These exhibits present the unfavorable economics that would result in the retirement of one or both Campbell units under the CE gas BAU scenarios used for coal unit retirement decisions. Q. Does this complete your sur-surrebuttal testimony? A. Yes, it does. ssrte-stw
S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) Case No. U-0 for approval of its integrated resource plan ) pursuant to MCL 0.t and for other relief ) ) STATE OF MICHIGAN ) ) SS COUNTY OF JACKSON ) PROOF OF SERVICE Samantha J. O Rourke, being first duly sworn, deposes and says that she is employed in the Legal Department of Consumers Energy Company; that on November, 0, she served an electronic copy of Consumers Energy Company s Sur-Surrebuttal Testimony of Company witness Sara T. Walz upon the persons listed in Attachment hereto, at the e-mail addresses listed therein. She further states that she also served a hard copy of the same document to the Hon. Sharon L. Feldman at the address listed in Attachment by depositing the same in the United States mail in the City of Jackson, Michigan, with first-class postage thereon fully paid. Samantha J. O Rourke Subscribed and sworn to before me this th day of November, 0. Wrae E. Loring, Notary Public State of Michigan, County of Eaton My Commission Expires: 0//0 Acting in the County of Jackson ps--
ATTACHMENT TO CASE NO. U-0 Administrative Law Judge Hon. Sharon L. Feldman Administrative Law Judge 0 West Saginaw Highway Post Office Box 0 Lansing, MI 0 E-Mail: feldmans@michigan.gov Counsel for the Michigan Public Service Commission Staff Spencer A. Sattler, Esq. Amit T. Singh, Esq. Daniel E. Sonneveldt, Esq. Heather M.S. Durian, Esq. Assistant Attorneys General 0 West Saginaw Highway Post Office Box 0 Lansing, MI 0 E-Mail: sattlers@michigan.gov singha@michigan.gov sonneveldtd@michigan.gov durianh@michigan.gov Counsel for Attorney General, Bill Schuette Celeste Gill, Esq. Assistant Attorney General Michigan Dept. of Attorney General, Special Litigation Unit th Floor Williams Building Post Office Box 0 Lansing, MI 0 E-Mail: Gillc@michigan.gov AG-ENRA-Spec-Lit@michigan.gov Consultant for Attorney General, Bill Schuette Sebastian Coppola, President Corporate Analytics Southgate Road Rochester, MI 0 E-Mail: sebcoppola@corplytics.com Counsel for the Great Lakes Renewable Energy Association Don L. Keskey, Esq. Brian W. Coyer, Esq. Public Law Resource Center PLLC Albert Avenue, Suite East Lansing, MI E-Mail: donkeskey@publiclawresourcecenter.com bwcoyer@ publiclawresourcecenter.com Counsel for the Cadillac Renewable Energy, LLC, Genesee Power Station Limited Partnership, Grayling Generating Station Limited Partnership, Hillman Power Company, LLC, TES Filer City Station Limited Partnership, Viking Energy of Lincoln, Inc., and Viking Energy of McBain, Inc. Thomas J. Waters, Esq. Anita G. Fox, Esq. Fraser Trebilcock Davis & Dunlap, P.C. W. Allegan Street Lansing, MI E-Mail: twaters@fraserlawfirm.com afox@fraserlawfirm.com Counsel for the Michigan Environmental Council, the Sierra Club, and the Natural Resources Defense Council Christopher M. Bzdok, Esq. Lydia Barbash-Riley, Esq. Kimberly Flynn, Legal Assistant Karla Gerds, Legal Assistant Olson, Bzdok & Howard, P.C. 0 East Front Street Traverse City, MI E-Mail: chris@envlaw.com Lydia@envlaw.com kimberly@envlaw.com karla@envlaw.com sl0-- Page of
Counsel for Midland Cogeneration Venture Limited Partnership Richard J. Aaron, Esq. Jason T. Hanselman, Esq. John A. Janiszewski, Esq. Dykema Gossett PLLC 0 Townsend Street, Suite 00 Lansing, MI E-Mail: raaron@dykema.com jhanselman@dykema.com jjaniszewski@dykema.com ATTACHMENT TO CASE NO. U-0 (Continued) Consultant for ABATE Jeffry C. Pollock Billie S. LaConte Kitty A. Turner J. Pollock, Inc. Olive Boulevard, Suite St. Louis, MO E-Mail: jcp@jpollockinc.com bsl@jpollockinc.com KAT@jpollockinc.com Charles E. Dunn, Esq. Midland Cogeneration Venture, LP 00 Progress Place Midland, MI 0 E-Mail: cedunn@midcogen.com Consultant for MCV Emily S. Medine Principal Energy Ventures Analysis, Inc. 00 Beechwood Blvd. Pittsburgh, PA E-Mail: emedine@evainc.com Counsel for the Association of Businesses Advocating Tariff Equity ( ABATE ) and Gerdau Macsteel, Inc. Bryan A. Brandenburg, Esq. Michael J. Pattwell, Esq. Clark Hill PLC East Grand River Avenue Lansing, MI 0 E-Mail: bbrandenburg@clarkhill.com mpattwell@clarkhill.com Counsel for Cypress Creek Renewables. LLC and Solar Energy Industries Association Jennifer Utter Heston, Esq. Fraser Trebilcock Davis & Dunlap, P.C. West Allegan, Suite 000 Lansing, MI E-Mail: jheston@fraserlawfirm.com Counsel for Energy Michigan Timothy J. Lundgren, Esq. Laura A. Chappelle, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI E-Mail: tjlundgren@varnumlaw.com lachappelle@varnumlaw.com Counsel for Independent Power Producers Coalition of Michigan Laura A. Chappelle, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI E-Mail: lachappelle@varnumlaw.com sl0-- Page of
ATTACHMENT TO CASE NO. U-0 (Continued) Counsel for Michigan Chemistry Council Timothy J. Lundgren, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI E-Mail: tjlundgren@varnumlaw.com Michigan Energy Innovation Business Council and Institute for Energy Innovation Laura A. Chappelle, Esq. Toni L. Newell, Esq. Varnum, LLP The Victor Center, Suite 0 0 North Washington Square Lansing, MI E-Mail: lachappelle@varnumlaw.com tlnewell@varnumlaw.com Counsel for Environmental Law & Policy Center, Ecology Center, Union of Concerned Scientists, and Vote Solar Margrethe Kearney, Esq. Unimuke John Agada, Legal Assistant Environmental Law & Policy Center Wealthy Street SE, Suite Grand Rapids, MI 0 E-Mail: mkearney@elpc.org Bradley Klein, Esq. Environmental Law & Policy Center East Wacker Drive, Suite 00 Chicago, IL 00 E-Mail: bklein@elpc.org Michigan Electric Transmission Company, LLC Richard J. Aaron Courtney F. Kissel Dykema Gossett PLLC 0 Townsend St. Suite 00 Lansing, MI E-Mail: raaron@dykema.com ckissel@dykema.com Counsel for Residential Customer Group Don L. Keskey, Esq. Brian W. Coyer, Esq. Public Law Resource Center PLLC Albert Avenue, Suite East Lansing, MI E-Mail: donkeskey@publiclawresourcecenter.com bwcoyer@publiclawresourcecenter.com Counsel for the Sierra Club Michael Soules, Esq. Massachusetts Avenue NW, Suite 0 Washington, DC 00 E-Mail: msoules@earthjustice.org sl0-- Page of