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Independent Enitity_decision_IRP

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Independent Enitity_decision_IRP

  1. 1. FINAL CERTIFICATION OF THE HECO/MECO/HELCO INTEGRATED RESOURCE PLANNING PROCESS: CERTIFICATION OF KEY PHASES III, IV AND V Phase III: Resource Planning Analyses Phase IV: Development of Action Plans Phase V: Final Integrated Resource Planning Report Hawaiian Electric Company, Inc. (HECO) Maui Electric Company, Ltd. (MECO) Hawaii Electric Light Company, Inc. (HELCO) Docket No. 2012-0036 By Carl Freedman, IRP Independent Entity July 29, 2013 This Final Certification (Final Certification) provides an evaluation of the final three key phases of the IRP planning process conducted by the HECO, MECO and HELCO utility companies (HECO Companies). This planning process is the first implementation of IRP under a revised and revitalized IRP Framework (Framework)1 . In accordance with the Framework, the Independent Entity (IE) must certify, at specified points in the planning process, that the planning process is being conducted consistent with the Framework. The Framework specifies that the IE shall: certify that the planning process, up to the date of the certification, was conducted consistent with the framework. Each certification shall include such information as may be specified by the Commission and shall be provided to the Commission no later than ten (10) days following the utility's completion of each of the following key phases; establishment of Scenarios to be evaluated, establishment of planning assumptions, end of the analyses resulting in the Resource Plans for the Scenarios, development of the Action Plan, and filing of the Integrated Resource Planning Report. The Commission may require a similar certification for other steps in the process. [Framework III.C.2.b.(6) at page 6] The HECO Companies filed a Notice of Completion of the first two key phases of the IRP process with the Commission on December 21, 2012. The IE’s corresponding Certification of Phases I & II of the HECO/MECO/HELCO IRP Process (Phase I & II 1 “A Framework for Integrated Resource Planning” dated March 9, 1992, Revised: March 14, 2011 adopted by the Commission by Decision and Order dated March 14, 2011 in Docket No. 2009-0108.
  2. 2.  Page 2 Certification), dated December 31, 2012, was timely filed with the Commission on January 2, 2013. The HECO Companies filed the final Integrated Resource Planning Report (IRP Report) with the Commission on June 28, 2013. The filing of the IRP Report marks the completion of the final three key phases of the IRP process.2 By Order No. 31311, dated June 21, 2013, the Commission amended the IRP process schedule to provide for an additional IRP Advisory Group meeting, established a comment period for comments by Advisory Group members and determined that the IE’s certification of outstanding phases should be provided within ten days of the additional Advisory Group meeting. By subsequent Order No. 31359, dated July 15, 2013, the Commission established July 29, 2013 as the filing date for the Final Certification. SCOPE AND APPROACH FOR THE FINAL CERTIFICATION The scope of the Final Certification includes all pertinent aspects of all five key phases of the HECO Companies’ IRP process. The Final Certification is explicitly required to address the final three key phases of the IRP process: (3) the end of the analyses resulting in the Resource Plans for the Scenarios, (4) the development of the Action Plan, and (5) the filing of the Integrated Resource Planning Report. In addition, the Final Certification provides final evaluation regarding the certification of the provisional findings of the Phase I & II Certification. The applicable standards used in the Final Certification include the pertinent sections of the Framework, notably including whether the “Principal Issues” identified for the IRP process are meaningfully addressed.3 In particular, the Final Certification examines 2 The date of completion of each key phase of the IRP process is determined by protocols established by the IE. After consultation with Commission staff, the IE provided a memorandum to the HECO Companies by email transmission and posting to the IE web site, Protocols for Completion of Each Key Phase of the IRP Process, dated November 28, 2012. This memorandum was provided as an attachment to the IE’s initial certification: Certification of Phases I & II of the HECO/MECO/HELCO IRP Process, filed with the Commission on December 31, 2012. The protocols established by the IE’s memorandum require the HECO Companies to provide written notice to the Commission and the IE upon completion of each key phase of the IRP process. The filing of a Notice of Completion is the basis for determining an exact date of completion of each key phase of the IRP process. The HECO Companies did not provide any Notice of Completion regarding completion of the third or fourth key phases or regarding the filing of the IRP Report. The IE therefore interprets the filing of the IRP Report to implicitly signify the simultaneous completion of the last three key phases of the IRP process. 3 The Framework includes the identification and definition of “the principal issues to be addressed in the planning process” (Principal Issues) as the first “step” in the Specific Planning Guidelines. [Framework V.C.1 at page 17]. The HECO Companies have identified the Principal Issues to be addressed in the IRP process in Chapter 4 of the IRP Report titled: Principal Issues to Address. The content of the companies’ Chapter, Principal Issues to Address is derived
  3. 3.  Page 3 whether the IRP process was conducted consistent with the Framework, including whether the IRP Report complies with Framework requirements and whether the Principal Issues are meaningfully addressed. The approach taken by the IE to determine compliance with the Framework included several line by line examinations of the Framework provisions and the identified Principal Issues. The IE’s findings for each pertinent provision are documented in two later sections of this Final Certification. The scope of materials and subject matter examined documenting the IRP process includes notes and direct experience from all of the Advisory Group meetings, presentation slides and other materials distributed to the Advisory Group, the IRP Report including Appendices, as well as supplementary spreadsheets provided by the HECO Companies documenting the analyses presented in the IRP Report.4 Several clarifications regarding this Final Certification should be noted: • This Final Certification is not intended to be a comprehensive review of the merits or accuracy of the analyses, conclusions or content of the IRP Report and Action Plans. This is an evaluation of compliance with Framework requirements and, as noted above, determination whether the Principal Issues are meaningfully addressed. This inevitably includes some evaluation and determinations regarding the merits of the IRP Report, Action Plans and the supporting analyses. The fact that the Final Certification addresses some of the merits of subject matter should not, however, be interpreted as any attempt at a comprehensive effort. More specifically, the Final Certification does not attempt a comprehensive evaluation or determination regarding the reasonableness or merits of the various elements in the HECO Companies’ Action Plans. The Framework and Principal Issues include several requirements regarding the merits of the Action Plans, including requirements that the Action Plans must represent a reasonable course of action, must provide “the greatest value and flexibility across as many of the evaluated Scenarios and Resource Plans as reasonably practicable”, and must be supported by meaningful supporting analysis. As far as any comprehensive treatment, beyond determining compliance with Framework requirements and addressing the Principal Issues, the Final Certification focuses on whether the primarily from the language in the Commission’s Order No. 30534: IDENTIFYING ISSUES AND QUESTIONS FOR THE HAWAIIAN ELECTRIC COMPANIES’ INTEGRATED RESOURCE PLANNING, dated July 19, 2012 in Docket No. 2012-0036 (Order Identifying Issues and Questions). There appear to be no intentional differences in meaning between the two documents. Where there may be incidental differences in meaning, it is understood that the meaning in the Commission’s Order will be applied. 4 All written materials distributed to the Advisory Group are documented on a publically accessible web site (IRPIE.COM) managed by the IE and are ultimately forwarded to the Commission’s Document Management System.
  4. 4.  Page 4 Action Plans are supported by sufficient, meaningful analysis in accordance with the more specific requirements and guidance of the Framework and Principal Issues. The Final Certification does include some probative examination and evaluation of the merits of the analyses and conclusions in the IRP Report and Action Plans, but a comprehensive treatment of the merits is not attempted and would, in any case, require adequate opportunity for discovery and the participation of interested parties. • The Final Certification does not attempt to determine the reasonableness or diligence of the HECO Companies’ efforts to provide a compliant IRP Report and Action Plans. The Final Certification is a straight-ahead evaluation of compliance with Framework requirements and Principal Issues (and merits of subject matter to the extent examined) without regard to whether the requirements are reasonable or whether there is justifiable cause where shortcomings are identified. • Although not specifically cited, the Final Certification includes several concerns identified in comments by Advisory Group members in the final set of Advisory Group comments (provided as attachments) and comments offered throughout the IRP process. No attempt is made to characterize or restate all of the comments provided by the Advisory Group. Omission in the Final Certification does not imply disagreement with the comments provided. The IE expects that the Commission, as previously indicated, will review the Advisory Group comments, first hand, with interest. SUMMARY OF FINDINGS Several principal findings in this Final Certification are briefly summarized below. Compliance with each of the pertinent Framework provisions and each of the Principal Issues is documented in two following sections. As indicated in the later detailed sections, the IRP Report and Action Plans are compliant with many Framework provisions and provide substantial analysis addressing the Principal Issues. For purposes of brevity, the summary of findings below focuses on identified shortcomings of the IRP process, IRP Report and Action Plans. Ultimate Finding The IE cannot certify that the HECO Companies’ planning process was conducted consistent with the Framework. As explained below, several aspects of the IRP process, the IRP Report and the Action Plans, are not compliant with specific Framework requirements and do not meaningfully address several of the Principal Issues. General Findings • The conclusions asserted in the IRP Report, that the HECO Companies can meet and exceed Renewable Portfolio Standards (RPS) requirements economically, and that this can be accomplished without inter-island energy transmission are based
  5. 5.  Page 5 on several presumptions that are not supported by analysis or probative examination in the IRP Report. o It has not been demonstrated that the extensive amounts of variable renewable generation assumed in the final resource plans can be accommodated on the utility systems reliably, without substantial curtailment and without substantial (and currently unaccounted) costs. o It has not been demonstrated that the extensive amounts of assumed distributed renewable generation assumed in the final resource plans can be interconnected with the utility distribution systems reliably and without substantial (and currently unaccounted) cost. o It is not clear and it is not addressed whether the extensive amounts of economical renewable generation resources assumed on the HECO system can be sited on the Island of Oahu restricted only by utility system economic criteria. • The rate and bill impacts of the Action Plans are understated and downplayed in the IRP Report but represent substantial concerns for all of the HECO Company systems. o Rates and bills for all customer classes for all of the HECO Companies are projected to increase substantially over the initial five-year Action Plan period. o Concerns regarding customer exit in response to higher rates (and further exacerbation of rate impacts) have not been sufficiently addressed or dispelled in the IRP Report. • The IRP process fell substantially behind schedule, contributing, at least in part, to several shortcomings in the IRP process. o There was no opportunity for Advisory Group input regarding the determination of the final resource plans or the formulation of the Action Plans. The final resource plans and Action Plans were presented for the first time in the final IRP Report. o The HECO Companies did not determine, rank or prioritize final resource plans based on any clear or identified criteria. Criteria were not determined with input from the Advisory Group as required by the Framework. o The HECO Companies’ consideration of Advisory Group comments was minimal. o The amount of analysis, progress and work performed by the HECO Companies in the final weeks of the IRP process was impressive. Reviewing the resulting amount of new previously un-presented material in the IRP Report was a challenge for the IE and the Advisory Group. There
  6. 6.  Page 6 was very limited opportunity for clarifications regarding the new material presented. Addressing the Principal Issues Discussion regarding the extent to which the IRP Report addresses each of the Principal Issues is provided in a later section. In many respects the IRP Report provides meaningful analysis addressing the Principal issues. Several exceptions are summarized below. • The consideration of costs and rate impacts in the IRP Report has several shortcomings: o The HECO Companies did not enlist the participation of the Advisory Group in determining meaningful methods to measure or present rate impacts (as required). o The Companies did not enlist input from the Advisory Group to consider whether the IRP Report and Action Plans result in affordable energy service (as required). o Except for presentation of several metrics and charts showing bill and rate impacts, the affordability of energy services is not explicitly or substantially addressed in the IRP Report. o Rate and bill impacts presented in the IRP Report are unduly optimistic. Rate impacts are underestimated in several respects and are presented in a manner that de-emphasizes concerns. o The IRP Report does not meaningfully address the concerns expressed in the Principal Issues regarding rate impacts on “captive” customers “who do not have a renewable energy device or have implemented energy efficiency measures could face high cost and rate impacts if utility sales decrease for any of several possible causes”. • The IRP Report does not identify the nature, amount or costs of necessary ancillary services to accommodate the amounts of variable renewable generation assumed in the final resource plans and Action Plans. • The net costs and associated rate impacts of implementing the RPS are not meaningfully determined in the IRP Report. The analyses of the final resource plans do not include the necessary measures and costs of incorporating the assumed renewable resources on the utility systems reliably and without substantial curtailment. • The analyses of inter-island and inter-utility system transmission in the IRP Report are indeterminate. Meaningful analysis would require more detailed modeling and appropriate analysis design and assumptions.
  7. 7.  Page 7 • Substantial benefits of smart-grid implementation are identified in the IRP Report but the required analyses of costs and benefits are not provided. • Meaningful analysis of strategies to comply with environmental air quality regulations is provided. Further analysis is required regarding consideration of generation unit retirement options and analysis of several substantial uncertainties. • The analysis of energy efficiency measures and programs in the IRP Report is rudimentary. o No specific energy efficiency measures or programs are being identified, characterized or analyzed. Simplified generalizing assumptions are used to characterize the merits of alternate intensities of energy efficiency implementation and attainment of the EEPS. o Although analysis demonstrates that increased implementation of energy efficiency programs substantially lowers total customer costs, the Companies’ conclusions regarding further program implementation focus negatively on rate impacts. • It is not clear that the Action Plans represent “the greatest value and flexibility across as many of the evaluated Scenarios and Resource Plans as reasonably practicable” or necessarily represent a reasonable course of action. o As discussed in several sections of this Final Certification, several aspects of the Action Plan are not supported by sufficient meaningful analysis. The Action Plans (and the IRP Report more generally) do not present an overall well-analyzed, robust course of action based on clearly laid out supporting plans and alternate plans. o There is no explicit analysis that demonstrates how the Action Plans are optimal or represent greatest value. o It is not explained and it is not clear whether or how the formulation of the Action Plans and determination of the final resource plans were determined based on the identified planning objectives. • It is not clear that the Action Plans provide substantial value in providing context and framing for later incremental decisions, based on the best and current available information. The Action Plans do not identify how, when or by what criteria decisions between the possible alternate preferred, contingency, parallel or secondary plans will be made. IRP Framework Requirements To the extent not addressed in the general issues or regarding the Principal Issues above, compliance with several Framework requirements is summarized below: • The HECO Companies’ consideration of advisory group input generally was not exemplary but was minimally compliant.
  8. 8.  Page 8 • The HECO Companies did not determine, rank or prioritize final resource plans based on any clear or identified criteria. Criteria were not determined with input from the Advisory Group as required by the Framework. The IRP Report does not identify whether or how the planning objectives and metrics were used to formulate or determine the final resource plans. • It is not clear and it is not described how the Action Plans were formulated. It is not clear whether or how the planning objectives were utilized in formulating the Action Plans. • Generally, the IRP Report fails to consistently identify and describe uncertainties in assumptions and weaknesses in analysis methods. • The scope of resource options considered and analyzed in the process does not include “all appropriate, available, and feasible resource options”. o Several resource options, including resource options identified in previous IRP plans, by advisory group members and/or listed in the Framework are not explicitly included in the resource options characterized for analysis. o Resource options were not screened (as required) based on any of the specific screening criteria identified in the Framework or according to other criteria established with input of the advisory group. • The IRP Report does not evaluate customer-sited distributed generation strategies. It remains unaddressed what investments in utility system infrastructure or expenditures towards mitigating system operating protocols are sufficient and justified to accommodate additional variable renewable distributed generation resources. o Customer-sited distributed generation was considered in the analyses only as an assumption, as a subtractive component in the demand forecasts in the planning scenarios. This approach does not produce meaningful evaluation of the merits or detriments of distributed generation resources. o The system upgrades and associated costs necessary to effectively interconnect distributed generation have not been identified or included in the analyses of the final resource plans or projections of rate impacts. • The costs of providing the ancillary services necessary to accommodate additional variable generation resources will be evaluated, either in absolute terms or in terms of comparing alternate means to provide necessary ancillary services.
  9. 9.  Page 9 SPECIFIC ISSUES Uncertainty Regarding the Feasibility and Cost of the Final Resource Plans The HECO Companies’ Action Plans for the HECO, HELCO and MECO systems are based on four final resource plans, including a preferred plan, a contingency plan, a parallel plan and a secondary plan (final resource plans). Each of the final resource plans assumes large penetrations of economical variable renewable energy resources. Three overall conclusions asserted in the HECO Companies’ IRP Report are: (1) that the Companies can meet and exceed Renewable Portfolio Standard (RPS) requirements, (2) that this can be accomplished economically and (3) that this can be accomplished without need for inter-island undersea energy transmission. These conclusions are based upon at least three foundational presumptions: (1) that it is feasible to accommodate the extensive amounts of variable renewable generation assumed in the final resource plans for each utility system reliably, without substantial costs and without substantial curtailment, (2) that the extensive amounts of assumed distributed renewable generation can be interconnected with the utility distribution systems without substantial cost and (3) that the extensive amounts of economical renewable generation resources assumed on the HECO system can be sited on the Island of Oahu restricted only by utility system economic criteria. As discussed in more detail in three sections below, none of these presumptions is supported by analysis or probative examination in the IRP Report. Although it is possible that the assumed amounts of renewable generation might ultimately be sited and feasibly incorporated in the utility systems as presumed, this is far from certain and is subject to reasonable doubt. It is certain, however, that in order to site and accommodate the assumed amounts of renewable generation without substantial curtailment, substantial system operation and infrastructure improvements would be necessary that are yet unidentified and would incur costs that are not accounted for in the final resource plans or projections of rate impacts in the IRP Report. In this respect, the costs and rate impacts associated with the final resource plans and Action Plans are understated. The uncertainties regarding the conclusions in the IRP Report cited above need to be more clearly explained and need to be considered by Hawaii’s decision makers. Before the Legislature raises the RPS requirements based on the findings of the IRP Report (as has already been publicly suggested) the conditional nature of the Report’s conclusions should be well understood. In decisions regarding any approvals of the Action Plans proposed in the IRP Report, the Commission should carefully consider the uncertainties and limitations in the nature and scope of supporting analysis. Feasibility and Cost of Accommodating Extensive Variable Renewable Generation. The final resource plans for the HECO, HELCO and MECO Maui Island systems include extensive amounts of variable renewable generation resources. The inclusion of these resources in the final resource plans is the basis for meeting (and exceeding) the RPS requirements economically in the supporting analyses.
  10. 10.  Page 10                                                                                                                                                                                     Table A. This table, prepared by the IE, shows the amounts of variable renewable generation nameplate capacity assumed in each of the final resource plans for the HECO, HELCO and MECO Maui Island systems along with the amounts of variable generation assumed in several scenarios of the Hawaii Solar Integration Study, Final Technical Report for Oahu, dated December 7, 2012 and Final Technical Report for Maui, dated December 19, 2012.
  11. 11.  Page 11 The magnitudes of assumed variable generation assumed on these utility systems (shown on Table A. above) are extreme and unprecedented. On the HECO utility system, for example, at the end of the planning period (in the year 2033) the final resource plans include a range of 1099 MW to 1309 MW of variable renewable generation capacity. This is a very large proportion of the 1334 MW peak system demand projected for that year. The proportions of variable generation assumed for the MECO system are more extreme, substantially exceeding annual peak demand for each of the final resource plans. As characterized by the HECO Companies at the July 10, 2013 Advisory Group meeting, accommodating the assumed amount of variable renewable generation is “a new frontier” that has not yet been figured out. There is essentially no examination or discussion in the IRP Report regarding whether it is feasible to operate the mix of resources presumed in the final resource plans in the later years of the planning period. This challenge certainly has not been addressed in the analyses supporting the IRP Report.5 Indeed, the analyses of the resource plans, final resource plans and Action Plans do not appear to produce credible or accurate results regarding the incorporation of variable renewable generation in several important respects. (1) The supporting analyses appear to substantially underestimate the expected amount of curtailment of variable renewable generation. For the HECO system, for example, the amount of curtailment of variable renewable resources reported and accounted in the analyses of the final resource plans is zero. This is not a credible result, and is not consistent with actual experience on the existing utility systems6 or the findings of several recent more detailed studies, including the Hawaii Solar Integration Study (HSIS) for the HECO and MECO Maui Island systems.7 These studies include substantially more detailed modeling of variable generation on the utility systems than the analyses presented in the IRP Report. The HSIS for HECO and MECO indicate that substantial curtailment of variable renewable generation would occur assuming amounts of variable generation substantially lower that what is assumed in the final resource plans.8 5 The Companies confirmed at the July 10, 2013 Advisory Group meeting that the development of the IRP Report did not include an examination of the daily load patterns for utility generation resources expected in the later parts of the planning period. 6 Both the MECO and HELCO systems currently experience curtailment due to excess generation conditions regularly at proportions of variable generation much lower than what is assumed in the final resource plans. 7 These studies are described generally in the IRP Report at p. 8-7 and pp. 8-11 to 8-12. 8 For the one scenario considered in the HSIS for the HECO system that approximates the amount of solar variable generation assumed in the final resource plans (over 700 MW) the amount of predicted daytime curtailment exceeds 200 MW. (HSIS Scenario 4A, shown on Table A).
  12. 12.  Page 12 The underestimation of curtailment by the Strategist model can be at least partly explained by the fact that it does not realistically simulate the pronounced and unprecedented bimodal daily pattern of loads that would need to be served by the utility generation system in the later years of the planning period in the final resource plans.9 The Strategist model, as configured in the analyses of the resource plans, final resource plans and Action Plans, is not sensitive to the sequence of hourly loads and is blind to the bimodal daily pattern of utility generation requirements.10 Consequently, modeling assumptions, including assumptions regarding cycling of utility generation units, are not realistically simulated in the model. Since the model does not differentiate between low daytime loads and low nighttime loads, the units that are assumed to cycle daily are essentially modeled as if they cycle twice daily. It is true that utility generation units would need to ramp up and down for two cycles daily to accommodate the mix of resources assumed in the final resource plans, but it is not expected and it is probably not feasible for some cycling units, particularly baseload units converted to cycling duty, to cycle two times daily.11 Said another way, the Strategist model does not sufficiently constrain the simulation of utility system operation in daytime hours to accurately reflect expected generation unit operation constraints. This results in underestimating excess generation conditions, underestimation of renewable generation curtailment, and underestimation of utility system operation costs. These inaccuracies affect the costs, rate impacts and attainment of the RPS that are presented in the IRP Report for the final resource plans and Action Plans. (2) The analyses in the IRP Report do not sufficiently account for the system operation needs and necessary ancillary services to accommodate the extensive amounts of 9 The planning and supporting analyses in the IRP Report do not consider or account for the fairly extreme bi-modal nature of the pattern of daily loads that will need to be served by utility generation resources later in the planning period (and throughout the remainder of the study period). On the HECO system, for example, over 700 MW of solar generation is assumed in later years of the planning period that would lower daytime utility system generation requirements to levels that are substantially lower (about half) of existing or projected night time minimum loads. Contributions of wind generation would add further random extremity to the daily pattern of utility generation load requirements. On the MECO and HELCO systems, the solar generation component of variable renewable generation is proportionately smaller but the larger proportion of assumed wind resources would produce more extreme, albeit less regular, utility generation load requirement patterns. 10 Configuration of the model to consider daily subperiods could improve results. Analysis of at least several resource plans, using a sequential hourly or sub-hourly dispatch model to examine resource commitment, dispatch and curtailment issues, demonstrate system operation feasibility and provide production cost benchmarking, would be appropriate. 11 For the HECO system, the simulated benefits of allowing the Kahe units 1, 2, 3 and 4 to cycle, as assumed in the final resource plans, are substantially overestimated.
  13. 13.  Page 13 variable renewable generation on the utility systems. This results in several substantial inaccuracies. First, the costs of operating the utility system are methodically underestimated. The analyses of the resource plans do not identify the necessary supporting ancillary needs, do not assume any proxy or assessment of costs to provide supporting ancillary needs and do not make any realistic assessment of resulting renewable energy curtailments. The spinning reserve margins assumed in the analyses are not realistic or sufficient proxies for the operating or other costs that would be necessary to accommodate the assumed amounts of variable renewable generation. Second, the analysis and determination of the most economical and appropriate firm resources in the IRP Report does not sufficiently consider the ability of some firm resources to economically provide necessary ancillary services. The analyses do not account for the fact that the operation of the utility systems in the later parts of the planning period in the final resource plans would be substantially different from current operations. The current concept and role of baseload generation in the operation of the utility systems in the later parts of the planning period would be substantially eclipsed by the needs for utility generation cycling and ramping in a pronounced bimodal daily load pattern. In this context, the evaluation of the ability of utility generation resources to effectively and economically provide ancillary services should be a primary consideration in the determination of the most appropriate firm generation resources. As discussed above, the Strategist model does not accurately account for the nature of expected future system operation needs. The analyses supporting the IRP Report should not be considered sufficient to support any conclusions that further investments in combustion turbine technologies (including conversion of the CT-1 unit on the HECO system to a combined cycle unit) are appropriate for the utility system generation needs in the later years of the planning period. Other resources characterized in the IRP would appear to be more appropriate for the expected system operations in the later years of the planning period. The internal combustion engine (ICE) resources, for example, provide superior quick-start, ramping and substantially more economical spinning reserve capabilities than combustion turbine units. These ancillary attributes have not been sufficiently or appropriately accounted for in the analyses supporting the resource plans, final resource plans and Action Plans. Prior to any determination of prudence for investments in combustion turbine technologies there should be a more thorough examination of the utility system needs, considering expected penetrations of renewable resources, and using appropriate modeling tools and assumptions.
  14. 14.  Page 14 Feasibility and Cost of Interconnecting Extensive Distributed Generation Large amounts of renewable distributed generation (DG) are presumed in each of the final resource plans. Although distribution-system-level constraints are known and acknowledged in the IRP Report and are currently being experienced on the HECO Companies’ systems with much lower levels of DG penetration, there is no evaluation or discussion regarding whether or how the presumed amounts of DG could be accommodated on the utility systems. The distribution system infrastructure costs of accommodating the presumed amounts of DG are not explicitly identified and are not included in the characterization of the final resource plans or Action Plans. Feasibility of Siting Extensive Renewable Generation on the Island of Oahu The IRP Report concludes that inter-island transmission of energy is not necessary to meet and exceed RPS requirements. This presumes that extensive amounts of renewable generation can be sited on the Island of Oahu. The IRP Report does not examine or evaluate associated siting or transmission restrictions, public acceptance issues or, generally, whether the installation of the presumed amounts of renewable resources on Oahu is feasible. Without addressing the question of feasibility of “on-island” renewable resource implementation, it is not possible to reach a final determination regarding the question: Whether inter-island transmission is necessary to meet RPS requirements? The determination of feasibility is also necessary to address the more comprehensively framed question that is a principal subject for examination in the IRP process: Whether inter-island transmission investments are necessary or prudent to meet RPS requirements and best serve public interests? The IRP Report suggests that decisions regarding whether an inter-island cable system is required or economic can be answered by “going to the market” by issuing one or more RFP’s. It is not clear, however, how this approach will answer necessary questions about the amount of renewable generation resources that are likely to become available over a long-term planning period. Responses to an RFP may certainly provide valuable and ultimately necessary information regarding the price and current availability of on-island renewable generation options. The amount of renewable generation that might be available over the long-term, considering projects that might be available in the future and perhaps ultimately supported by appropriate transmission system and infrastructure support, will not be determined by responses to an instant RFP. The “take-it-to-the-market” approach may be an important part of obtaining valuable information on current resource availability and pricing, but it is not a substitute or alternative to long term resource planning. One purpose of resource planning is to frame subsequent resource acquisition decisions in the context of overall integrated system needs considered over a long term time frame. The objective is to ensure that later
  15. 15.  Page 15 discrete incremental resource acquisition decisions can be made in a meaningful context. Is a proposed resource a necessary part of a well-considered integrated plan to meet system and customer needs? Whether extensive amounts of renewable generation could be installed on Oahu is a problematic uncertainty. A reasonable approach for long range planning regarding this matter might include investigation of possible outcomes considering known constraints, assessment of probabilities (if possible), consideration of measures to mitigate constraints and evaluation of the relative costs and values of alternate outcomes. An important consideration would be whether acquisition of projects in the near term might eclipse more economical opportunities that could develop with integrated inter-utility transmission. For example, HECO’s analysis of the economics of inter-island transmission is based on the amount of economically produced energy (or capacity) that can optimally be transferred between islands. If “space” on either utility grid is limited by sub-optimal projects, the overall economics of inter-connection of utility systems is affected. An incremental take-it-to-the-market approach may not produce an optimal long term result. Any such long-range determinations, however, require careful planning analysis and forward-looking estimates of the economics and feasibility of siting renewable generation projects. This is not easy, but it is long range planning. The IRP Report is simply silent on how or whether any determination was explicitly made that sufficient cost-effective resources can be sited on the Island of Oahu, in making the determination that Hawaii can meet and exceed RPS requirements without inter-island transmission of energy. OBSERVATIONS REGARDING THE IRP PROCESS Framing Breadth and Purpose In the most general terms, there seems to be a difference between how the HECO Companies interpreted and implemented the purpose of the IRP process and a broader purpose and scope of issues and questions framed by the Commission in its Order Identifying Issues and Questions. The issues and questions identified by the Commission encompass the development of information to inform several important over-arching policy questions, including: the affordability of utility rates; the costs of meeting the State Renewable Portfolio Standards (RPS) and Energy Efficiency Portfolio Standards (EEPS); the prudence of substantial investments in transmission and fuel supply infrastructure, assessment of the need and economics of possible inter-island transmission systems, and analysis of investments and alternatives to facilitate the incorporation of variable renewable generation technologies. The scope of the HECO Companies’ analyses seems to be more narrowly focused within the bounds of a work plan and approach using a specific scenario planning approach and a specific resource analysis model (Strategist) to analyze resource planning issues. The HECO Companies have been resistant to supplementing the work plan and approach that the Companies originally presented at the very beginning of the planning process
  16. 16.  Page 16 prior to the identification of the Principal Issues. Early in the process it was pointed out to the Companies that the particular scenario planning process approach adopted by the Companies was time consuming and added problematic complexity. It was also stressed that the Strategist model would not cover the full scope of the necessary analysis of the Principal Issues and that other types of analysis would be necessary. At an Advisory Group technical session on October 30, 2012, it was agreed (but only after several hours of encouragement and argument by the IE and advisory group) that the Companies would perform some basic limited analysis of energy efficiency implementation and would do some supplementary studies in addition to and parallel with the Strategist model. Beginning with the first presentation of the resource plan analyses at the April 2, 2013 Advisory Group meeting and with the final filing of the IRP report on June 28, 2013, it became clear that the scope of analyses remains primarily limited to the scope of what issues can be addressed using the Strategist model. The hopefully anticipated added depth and scope of the expected supplementary studies was not realized, and several of the Principal Issues remain unaddressed. IRP Process Schedule The IRP process schedule ran substantially behind schedule, particularly beginning with the analyses of the resource plans. In the original IRP process schedule filed with the Commission by the HECO Companies on May 30, 2012, the initial presentation of preliminary results of the resource plan analysis was scheduled for a January 2013 Advisory Group meeting. A second Advisory Group meeting was scheduled for March 2013 to review analysis results and obtain Advisory Group feedback. At the encouragement of the IE, an additional Advisory Group meeting date was scheduled for February 2013 to allow additional opportunity for Advisory Group review and consideration of Advisory Group input. In January 2013, the HECO Companies reported to the IE that the resource analyses had not progressed sufficiently to provide useful information. Consequently, the January 2013 Advisory Group meeting was cancelled. In February 2013 it was again reported that preliminary results of the resource plan analyses were not available for presentation. The agenda of the February 25, 2013 Advisory Group meeting was adjusted to include only a brief report by the HECO Companies regarding the amended schedule and the status of progress on the resource plan analyses. The bulk of the February 2013 Advisory Group meeting was dedicated to discussion regarding improving the characterization of qualitative metrics. In March 2013 it was again determined that preliminary results of the resource analyses would not be ready to present by the time of the March 2013 Advisory Group meeting. The Advisory Group meeting was postponed and rescheduled on April 2, 2013. At the April 2, 2013 Advisory Group meeting the preliminary results of resource analyses were first presented in “raw” form without explanatory or interpretive documentation. Additional resource plan analyses were presented by the Companies at a technical
  17. 17.  Page 17 session on April 8, 2013. An additional technical session was held on April 22, 2013 to provide explanation and clarifications regarding the analyses. At the Advisory Group meeting on May 1, 2013 the HECO Companies provided a projected slide presentation explaining how the resource analyses addressed the identified Principal Issues. Several more-recent resource plan analyses were presented in the form of projected slides. The Companies first presented material regarding the Action Plans at the Advisory Group meeting on May 30, 2013 in the form of presentation slides that explained a conceptual outline of the draft Action Plans. The Action Plans and the final resource plans (including the preferred plan, contingency plan, parallel plan and secondary plan) were first provided in the final IRP Report filed on June 28, 2013. As a result of the delayed schedule, the three-month period originally scheduled for review of the analyses of resource plans and iterative consideration of Advisory Group comments was compressed into a few weeks late in the IRP process. There was no opportunity for Advisory Group input regarding the determination of the final resource plans or the formulation of the Action Plans. Perhaps also because of the delayed schedule, the HECO Companies did not determine, rank or prioritize final resource plans based on any determined with input from the Advisory Group as required by the Framework. Clearly the compressed schedule at the end of the IRP process did not allow for adequate consideration or response to Advisory Group comments. The amount of analysis, progress and work performed by the HECO Companies in the final weeks of the IRP process was impressive. Reviewing the resulting amount of new previously un-presented material in the IRP Report, however, was a challenge for the IE and the Advisory Group. There has been very limited opportunity for clarifications regarding the substantial volume of new material presented in the IRP Report.
  18. 18.  Page 18 COMPLIANCE WITH SPECIFIC FRAMEWORK PROVISIONS The Framework includes several sections and provisions that are not directly relevant to evaluating the IRP process, Action Plans or the IRP Report. A subset of the Framework provisions is listed below with several sections and some language removed that either do not specify certifiable standards or are not do not otherwise pertain to the Final Certification. Framework provisions are in bold italic type. I. Definitions The definitions in the Framework are being applied consistently in the IRP process. II. Goal and Governing Principles B. Governing Principles (Statements of Policy) 1. The development of Scenarios, Resource Plans and the Action Plan is the responsibility of each utility. The utility shall develop Resource Plans and an Action Plan in consultation with Advisory Group(s), the public, and the Independent Entity, subject to the oversight and approval of the Commission. The HECO Companies developed Scenarios and Resource Plans “in consultation” with the Advisory Group with oversight by the IE. The Action Plans, however, were first presented in the IRP Report filed on June 28, 2013 and were not developed with consultation or any other form of input from the Advisory Group, the public or the IE. The IRP process and IRP Report are not in full compliance with this Framework provision. 2. Resource Plans and the Action Plan shall comport with applicable federal, state, and county laws, formally adopted state and county plans, and other applicable administrative and regulatory requirements. As far as yet determined, the Action Plans appear to comport with this provision in the sense that there is no explicit intent to not comply with the noted applicable laws, plans or requirements. Several resource plans are analyzed that represent strategies that are not compliant with State Renewable Portfolio Standards (RPS), Energy Efficiency Portfolio Standards (EEPS), or anticipated air quality regulations. These non-compliant resource plans are formulated for purposes of analysis, not implementation. The HECO Companies have chosen the “Stuck in the Middle” scenario as a primary basis for characterizing and presenting several attributes of its Action Plans. The Stuck in the Middle scenario presumes that EEPS standards will not be met (assuming 75% compliance). It does not seem to be the intent of the Action Plans to fail to meet the EEPS requirements, but the final resource plans (preferred plans, contingency plans, parallel plans and secondary plans) for all of the utilities are characterized as failing to meet the EEPS requirements.
  19. 19.  Page 19 3. Resource Plans and the Action Plan shall be developed upon consideration and analyses of the short and long-term costs, effectiveness, benefits, and risks of all appropriate, available, and feasible resource options and the adequacy and reliability of energy services. The scope of resource options considered by the HECO Companies does not include “all appropriate, available, and feasible resource options”. Several resource options are identified in the Framework, Principal Issues and by advisory group members that are not characterized by the companies for analysis and that could be considered appropriate, available and feasible. This is discussed in more detail below in the context of more- specific language in the Framework at section V.C.6. The IRP Report is not in compliance with this Framework provision. 4. Resource Plans and the Action Plan shall consider the plans' impacts on the utility's customers, the environment, culture, community lifestyles, the State's economy, and society. The IRP Report identifies a spectrum of potential impacts on the utilities’ customers, the environment, culture, community lifestyles, the State’s economy and society.12 It is not clear, however, whether, how or to what extent most of these impacts were considered in the analyses of resource plans, selection of the final plans (preferred, contingency, parallel and secondary plans) or the formulation of the Action Plans. The IRP Report includes substantial analysis and some discussion of some impacts, such as costs and “fairness”, but there is no presentation, description or discussion in the IRP Report regarding how most of the identified impacts addressed by this governing principle were considered in the selection of the final plans or formulation of the Action Plans. The Action Plans do not include elements to address most of the identified impacts. 5. Resource Plans and the Action Plan shall consider the utility's financial integrity, available sources of capital, ownership structure, size, and physical capability. The resource plans and Action Plans take into account the utility characteristics identified in this governing principle. 6. Integrated resource planning shall, where appropriate and applicable, consider governmentally established energy policies in effect at that time. The IRP process is compliant with this governing principle. 7. Integrated resource planning shall be an open and transparent public process that provides opportunities for public participation and feedback and creates broad-based awareness of the complex and sometimes 12 See in particular Chapter 3: Objectives and Metrics and Chapter 17: Advisory Group Qualitative Metrics Considerations.
  20. 20.  Page 20 conflicting objectives and issues the utility and the Commission must resolve. The IRP process is being conducted as an open process that is consistent with this principal. Consistent with the Framework provisions, an advisory group has been established with meetings that are open to attendance by the general public with oversight by the IE. Provisions have been made to encourage and document comments. The HECO Companies held two series of public meetings including meetings on each of the affected islands. In the later stages of the IRP process, due at least in part to time constraints resulting from the utilities getting behind schedule, the development of the final resource plans and Action Plan were less open and transparent than the earlier phases of the process and there was very limited opportunity for public participation, awareness and feedback. 8. Integrated resource planning shall be focused on planning analyses across a range of Scenarios to guide the utility in developing a reasonable and prudent Action Plan. Scenarios were developed and used for planning analyses consistent with this principle. 9. Integrated resource planning shall consider generation, transmission and distribution infrastructure requirements and associate[d] capital and operating costs, including operational changes, grid upgrades, system capacity additions or replacements, and technological advances. The IRP process and resource planning analyses included the considerations listed in this principle with the exception that: some distribution infrastructure requirements and some necessary operational changes (and associated capital and operating costs) were not considered in the resource plan analyses supporting the Action Plans. III. Roles The Framework identifies roles and, in some cases, specific duties in several sections pertaining to the Commission, Utility, Independent Entity, Consumer Advocate, Public Benefit Fee Administrator, Advisory Group and the Public. Except as noted with regard to other Framework requirements, the process was conducted consistent with the Framework provisions in this section. IV. The Planning Process A. Major Steps B. The Planning Cycle C. The Docket 6. If time permits, the utility may conduct public meetings or provide public forums at various phases of its integrated resource planning process for the purpose of obtaining the input of those in the public who are not or may not
  21. 21.  Page 21 be represented by a member of, or the interests of a member of, the Advisory Group. The HECO Companies were compliant with this non-mandatory provision . The HECO Companies held two series of public meetings with meetings on each of the affected islands (and three meetings on the Island of Hawaii) in each series. 7. Unless extended for excusable neglect by Commission order, the utility shall file its Integrated Resource Planning Report and associated Action Plan within one year after the selection of the Advisory Group(s) by the Commission. To encourage public awareness of the filing of the utility's proposed Action Plan, a copy of the Action Plan and the supporting analyses shall be made available for public review at the Commission's office and to the extent applicable, at the office of the Commission's representative in the county serviced by the utility. The utility shall also post electronic copies of the Action Plan and the supporting analyses online on its website. The utility shall note the availability of the documents for public review at these locations in its published notice. During the pendency of the docket, the utility shall make copies of the executive summary of the Action Plan available to the general public, upon request, at no cost, except the cost of duplication. The HECO Companies filed the IRP Report within one year after the selection of the Advisory Group by the Commission. 8. Within seven (7) days of the filing of its Integrated Resource Planning Report, the utility shall cause to be published in a newspaper of general circulation in the State a notice informing the general public that the utility has filed its Integrated Resource Planning Report and proposed Action Plan for the Commission's approval. The HECO Companies published the required notice on July 7, 2013 (nine days after the filing of its IRP Report on June 28, 2013). D. Submissions to the Commission 1. The utility shall file its Integrated Resource Planning Report as follows. a. The utility shall include in its filing a full and detailed description of the key phases of its integrated resource planning process. The utility shall fully describe, as applicable: (1) The planning objectives and principal issues that have been used and considered to provide guidance or be the basis for decisions made in the integrated resource planning process. The HECO Companies’ IRP Report is compliant with this provision. (2) The Scenarios developed to reflect possible futures dealing with uncertain circumstances and risks facing the utility and its
  22. 22.  Page 22 customers, which were used as the basis for the Resource Plans analyzed, including the rationale used to select and formulate the various Scenarios. The HECO Companies’ IRP Report is compliant with this provision. (3) The assumptions and the basis of the assumptions underlying the Scenarios and Resource Plans, and the key drivers of uncertainty that may have a significant impact on the assumptions. The HECO Companies’ IRP Report is compliant with this provision. (4) The risks, trends, expected events (if any), and uncertainties associated with the Scenarios and Resource Plans. The HECO Companies’ IRP Report is only partially compliant with this provision. Generally, the IRP Report does not consistently identify and describe uncertainties in assumptions and weaknesses in analytical methods. This includes some major uncertainties and many details, only some of which are identified in this Final Certification. As noted elsewhere in this Final Certification, for example, several crucial fundamental uncertainties regarding the resource plans have not been identified or described. These include uncertainties regarding whether and how the extensive amounts of renewable resources assumed in the final resource plans can be accommodated reliably on each utility system and whether the amount of renewable resources assumed on the HECO system can feasibly be sited on the Island of Oahu. (5) The forecasts made and any assumptions underlying the forecasts. The HECO Companies’ IRP Report is compliant with this provision. (6) The resource options or mix of resource options considered in the development of the Resource Plans for the Scenarios. The HECO Companies’ IRP Report is only partially compliant with this provision. See discussion regarding provision V.C.6, below. (7) The needs of the utility system, such as identification of supply- side or transmission additions. The proposed procurement method for resources should be identified. The HECO Companies’ IRP Report is only partially compliant with this provision. See discussion regarding provision IV.D.1.a.(4) above. The needs and of the utility system to accommodate the presumed amount of variable renewable generation in the final resource plans is not identified or fully discussed. (8) A detailed description of the analysis or analyses upon which the Resource Plans and Action Plan are based, the data, the source of the data, and the methodologies used, which may
  23. 23.  Page 23 include without limitation: revenue requirement calculations, estimates of the potential impact of the plans on rates, bills and customer energy use, external costs, identification of the risks and benefits, renewable portfolio standards and energy efficiency portfolio standards compliance, reliability impacts, and sensitivity analysis. The HECO Companies’ IRP Report is only partially compliant with this provision. See discussion regarding provision IV.D.1.(4) above. Sensitivity analyses appropriate to address many uncertainties have not been provided or discussed. b. The utility shall include in its filing a full and detailed description of the Action Plan, which shall fully describe, among other things: (1) An implementation schedule that shows the resources, programs, actions, or phases of resources, programs, or actions to be implemented in each of the five (5) years of the Action Plan. The IRP Report is generally compliant with this provision. As noted in the final comments provided by the Consumer Advocate, the level of granularity of detail provided in the Action Plan is not consistent between utilities and within the Action Plans of each utility. The costs and scheduling of some Action Plan elements are identified in much greater detail than other elements. As a general matter, the nature and scope of any approval of an Action Plan by the Commission should be clarified including clarification regarding the nature of approval of details provided or omitted from the Action Plans. (2) The estimated expenditures required by the utility to support implementation of each option or phase of such option. See discussion of provision IV.D.1.b(1) immediately above. (3) The steps anticipated in order to realize and implement the supply-side and demand-side resources included in the schedule. See discussion of provision IV.D.1.b(1) immediately above. (4) How the Action Plan was developed based on the Resource Plans and Scenarios analyzed. One substantial shortcoming in the HECO Companies’ IRP process is ambiguity regarding how the Action Plans were developed based on the analyses of the resource plans or planning objectives developed and presented earlier in the process. The Action Plans were first described, in general prospective terms, in presentation slides at a meeting of the Advisory Group on May 30, 2013. The Action Plans
  24. 24.  Page 24 were first disclosed in the filing of the IRP Report on June, 28, 2013. The IRP Report includes some description of how some aspects of the Action Plans were developed and some deductions can be inferred from the text and analysis details. Several important ambiguities remain that are not described. For example, the Action Plans are formulated and organized around four objectives that were first presented at the May 30, 2013 Advisory Group meeting.13 It is not clear and it was not explained how these four principal objectives were related to or derived from the objectives and metrics established earlier in the process with input from the Advisory Group.14 With the exception of some isolated citations to the planning objectives regarding specific details, the IRP Report does not discuss how the Action Plans were derived using the planning objectives identified earlier in the IRP process. Each of the Action Plans is founded upon four final resource plans, including a preferred plan, a contingency plan, a parallel plan and a secondary plan.15 There is no discussion of how these final resource plans were selected, whether or how the planning objectives were used, whether any methodical process was used for determination, or what each of the plan designations means.16 c. The submissions should be simply and clearly written and, to the extent feasible and practicable, in non-technical language. Charts, graphs, and other visual devices may be utilized to aid in understanding the Scenarios, Resource Plans, the Action Plan, and the analyses made by the utility. The utility shall provide an executive summary of the Scenarios, Resource Plans, analyses, and Action Plan, and shall appropriately index its submissions. The HECO Companies’ IRP Report is compliant with this provision. 13 The four objectives are the same for each Company: “Lower customer bills”, “Clean energy future”, “Modernized grid” and “Fairness.” 14 The Framework provides that the utility shall identify planning objectives at the outset of the IRP process with input from the Advisory Group. (Framework V.C.4.a at page 17). The planning objectives are to be used for decision-making throughout the IRP process. (Framework V.C.4.b). To the extent practicable the IRP Report is required to summarize how the planning objectives are used throughout the process. (Framework V.C.4.d). 15 The MECO Action Plan includes four final resource plans for each of the three island divisions. 16 In addition to requirements for a full description provided in this provision, the Framework includes a process step “Determination of Resource Plans” that requires prioritization of the final resource plans based on criteria established with the advice of the Advisory Group. (Framework V.C.9 at page 20). As discussed below regarding that provision, this step was not executed consistent with this Framework requirement in the HECO Companies’ IRP process.
  25. 25.  Page 25 V. Planning Guidelines A. Purpose of the Planning Guidelines B. General Planning Guidelines. 1. The implementation of planning is the responsibility of each utility provided that each utility shall: a. comply with the planning guidelines and other provisions identified in this framework and any specific orders by the Commission; and Compliance with this very general provision is the subject of comments regarding compliance with the other more-specific Framework provisions and Principal Issues. b. consider the input, comments and suggestions provided by Advisory Group members and the general public, to the extent feasible. The HECO Companies have asserted at several stages of the IRP process that all of the input from the Advisory Group and the public has been considered. It is clear that some Advisory Group input has resulted in modifications to the planning process, particularly modifications to the companies’ stated planning objectives and metrics. Several opportunities to respond to Advisory Group comments were encouraged by the IE. In one instance, the IE offered Advisory Group members a broad opportunity to request responses regarding members’ comments in writing and the utility voluntarily provided written responses. At most Advisory Group meetings, members have had an opportunity to request responses regarding the Advisory Group comments. Outside of these responses to specific requests, the HECO Companies have not volunteered or provided responses to most of the comments from Advisory Group members. The HECO Companies may have “considered’’ the input of the Advisory Group in a minimal and perfunctory meaning of the term. As a generalization based on observations over the duration of the IRP process, however, it would be also be accurate to state that the Companies have ultimately ignored much of the input, comments and suggestions provided by the Advisory Group members. Advisory group comments at meetings often appeared to be greeted with dismissive argument, without acknowledgement of the comments’ merit or substance. The term “consider”, used as a standard in this Framework provision, could be interpreted with varying levels of required rigor. In the extreme, if a utility employee reads a comment by an Advisory Group member and merely ponders the comment for six seconds, has the utility met its burden to consider the comment? Does the utility have any burden to demonstrate in some discernable way that it has considered the comments by the Advisory Group? Does a general assertion that the utility has considered all advisory group comments suffice to meet the companies’ burden to demonstrate compliance with the Framework provision? The term “consider” is used as a standard in several Framework provisions. The appropriate meaning can be derived, in some instances, by context. In a Framework
  26. 26.  Page 26 provision that pertains to analyses, for example, the term should be interpreted to require analysis of anything that is required to be considered. The interpretation in this case, regarding consideration of advisory group input, is more ambiguous from context but falls, in accordance with specific Framework provisions, largely to the discretion of the IE. The IE is given several “gatekeeper” duties in the Framework including determining what issues and concerns identified by the Advisory Group must be addressed by the utility [Framework V.B.2.b], ensuring that the utility provides consideration of input, guidance and recommendations from Advisory Group members [Framework III.C.2.c.(3)] and reporting to the Commission any failure by the utility to provide necessary planning information to the Advisory Group [Framework III.C.2.b.(5)]. The IE was deliberately permissive throughout the IRP process and has not formally required the HECO Companies to respond to most comments submitted by the Advisory Group members. One important consideration, regarding what is “feasible”, is the amount of time required to provide extensive responses to Advisory Group input in light of the rigorous schedule and work load carried by the utilities in the IRP process. The utilities have been substantially behind schedule throughout the third and fourth quarters of the process. The HECO Companies could certainly have made a more diligent effort to actively and more comprehensively respond to Advisory Group input. Advisory Group members who take the time and effort to provide written comments deserve to know whether their comments have been understood and, to the extent any suggestions are made and not followed, whether the suggestions are simply being ignored or whether the companies disagree with the suggestions. This criterion was often not met. Several Advisory Group members have provided substantial suggestions that have not received any answer or response. In response to an inquiry by the IE (dated May 6, 2013) regarding a specific list of Advisory Group comments, the HECO Companies provided a matrix of comments and responses in Appendix D of the IRP Report. The Companies responses in this matrix are cursory and not constructively responsive. The HECO Companies’ compliance with this Framework provision was only minimal. 2. Analysis supporting the Integrated Resource Planning Report shall: a. provide meaningful support for the reasonableness of the Action Plan; and Several concerns regarding the merits of the analyses and support for the reasonableness of the Action Plans are identified in this Final Certification. These concerns are discussed in the context of more specific Framework requirements and in discussion further below regarding whether the Principal Issues have been addressed in the IRP Report. In sum, this Final Certification asserts that the analyses supporting the IRP Report do not provide meaningful support for the reasonableness of the Action Plans.
  27. 27.  Page 27 Ultimately, this provision provides a fundamental standard for evaluating the IRP Report and Action Plans in following proceedings that provide the opportunity for more thorough discovery and more careful examination than is practical in the preparation of this Final Certification. b. address those issues and concerns identified by the Advisory Group(s) and the general public that the Independent Entity determines have merit, to the extent feasible. The IE has explicitly identified several issues and concerns in several documents provided in the IRP process.17 These documents include several issues and concerns identified by Advisory Group members. The IE has not provided any formal statement directing the HECO Companies to address specific issues or concerns explicitly citing this provision of the Framework. The HECO Companies have addressed at least some (but by no means all) of the concerns identified by the Advisory Group members and the IE on a voluntary and cooperative basis, including providing responses to several requests for information by the IE and several substantial changes to planned analysis methods based on discussions at Advisory Group meetings. Discussion of the extent to which the analyses supporting the IRP Report address the issues identified by the Advisory Group members and the IE is provided throughout this Final Certification in the individual sections that specifically address specific Framework requirements and Principal Issues. C. Specific Planning Guidelines The process for developing utility Scenarios, Resource Plans and Action Plan, to the extent applicable, shall include the following. 1. Identification of principal issues. The identification of Principal Issues was completed with the issuance of a final draft “chapter” titled Principal Issues, dated October 19, 2012, most recently provided as Chapter 4 of the IRP Report. The Commission’s Order Identifying Issues and Questions provided a list of issues that must, at a minimum, be addressed in the IRP process. The issues identified in the Commission’s Order were incorporated in the companies’ Principal Issues with reformatting and with some rephrasing but without intentional substantive change. No additional Principal Issues were added beyond those identified by the Commission. In order to avoid extensive concern about the precise language in the final draft chapter, it 17 In particular, the First Quarterly Report on the Status and Evaluation of the HECO/MECO/HELCO IRP Process, dated October 22, 2012; the Certification Of Phases I & II Of the HECO/MECO/HELCO IRP Process, dated December 31, 2012; and IE Interim IRP Process Status Report and Statement of Concerns, dated May 10, 2013.
  28. 28.  Page 28 was clarified and agreed that regardless of any specific differences between the language in the Commission’s Order and the final draft chapter, the requirements identified in the Commission’s Order will apply. The identification of Principal Issues is consistent with the Framework provision. 2. Characterization of existing system and conditions. The utility should provide a description of the existing utility system, any operational issues and existing constraints. The IRP Report includes a description of its existing systems in Chapter 7. Chapter 16 of the IRP Report includes a brief discussion of operational constraints regarding interconnection of distributed generation resources, states that (unidentified) system upgrades will be implemented (at interconnecting customer expense). The IRP Report does not include a description of the operational issues or system constraints associated with the extensive amount of distributed and/or variable renewable generation resources assumed in the final resource plans and Action Plans. 3. Identification of uncertainties and factors that affect utility planning. Uncertainties and factors that affect utility planning pertaining to forecasts and scenarios were discussed and identified as a major subject at the Scenario Planning Workshop, August 20, 21 and 24, 2012. A list of key uncertainties pertaining to the forecasts and scenarios is provided in Chapter 6 of the IRP Report at page 6-2. A more substantial discussion of the identification of uncertainties and factors pertaining to the forecasts and scenarios was provided in a draft “chapter” provided by the HECO Companies titled: “Summary of the IRP Scenario Planning Workshop” (file dated September 28, 2012).18 Uncertainties and factors that affect utility planning have been identified for the forecasts and scenario assumptions. Uncertainties regarding several other aspects of utility planning, including many aspects of the characterization of resources, programs and measures, have not been explicitly identified and discussed. The analyses of resource plans explicitly address several key uncertainties. The use of four final resource plans as the basis for formulation of the Action Plans is specifically intended to address several specific fundamental uncertainties. Generally, the IRP Report does not consistently identify and describe uncertainties in assumptions and weaknesses in analytical methods. This includes some major uncertainties and many details, only some of which are identified in this Final Certification. As noted elsewhere in this Final Certification, for example, several crucial fundamental uncertainties regarding the resource plans have not been identified or described. These include uncertainties regarding whether and how the extensive amounts of renewable resources assumed in the final resource plans can be accommodated reliably on each 18 This document was provided for review by the Advisory Group after the September 24, 2012 Advisory Group meeting but was not provided in the IRP Report.
  29. 29.  Page 29 utility system and whether the amount of renewable resources assumed on the HECO system can feasibly be sited on the Island of Oahu. These uncertainties are crucial to consider in an appropriate and meaningful interpretation of the analysis results but they are not discussed or highlighted in the IRP Report. 4. Identification of planning objectives. a. At the outset of the planning process, the utility, with input from its Advisory Group, shall identify planning objectives that can be used to provide guidance and basis for decisions to be made throughout the planning process. The Commission may specify planning objectives or criteria to be considered in the planning process. Planning objectives and measures of achievement have been identified with input from the Advisory Group. Several progressive drafts of proposed “Objectives and Metrics” were presented by the HECO Companies at Advisory Group meetings. Drafts were presented at IRP Advisory Group Meeting #1 (in matrix form), Meeting #2 (in the form of presentation slides), Meeting #4 (with revisions shown in text and matrix form in “chapter” format and presentation slides), and in “final” form at Meeting #6 and are provided in the IRP Report in Chapter 3. In addition to the development of the objectives and metrics presented in Chapter 3, several Advisory Group members took initiative, with the assistance of the IE and the participation of the HECO Companies, to identify and characterize qualitative metrics, particularly to address the planning objectives regarding the environment and cultural and community values. Several Advisory Group meetings were dedicated, all or in large part, to developing qualitative metrics. The resulting qualitative metrics, as edited and formatted by the IE, are presented in Chapter 17 of the IRP Report.19 b. Objectives shall be used to provide guidance or the basis for decision-making throughout the integrated resource planning process. Some of the objectives and metrics were used consistently and transparently throughout the process as a basis for evaluating resource plans. The analyses of resource plans made extensive use of several metrics including: total resource costs, RPS attainment percentage, and amount of renewable energy curtailment. How most of the other objectives were used in decision-making in the IRP process is not clear and is not discussed in the IRP Report. It is not clear, generally, how the final resource plans were determined or, more specifically, whether and how the entire spectrum of objectives and measures of attainment were used in the analyses of resource plans and the formulation of the Action Plans. 19 Several Advisory Group members, including the Consumer Advocate, have made comments and suggestions to further amend and improve the qualitative metrics that have not (yet) been incorporated in the metrics presented in Chapter 17.
  30. 30.  Page 30 c. The utility should provide measures of the achievement of the planning objectives to the extent practicable. Summary charts showing the attainment of most of the quantitative metrics associated with the analyses of resource plans were presented in spreadsheet format accompanying presentations at several Advisory Group meetings in the month of April. Similar charts are provided for the final resource plans in Appendix P of the IRP Report. d. To the extent practicable, the Integrated Resource Planning Report shall summarize how the planning objectives were used throughout the process. See discussion regarding provision V.C.4.a immediately above. 5. Determination of planning Scenarios and forecasts. a. Each utility, with input from its Advisory Group(s), shall develop a manageable range of Scenarios to guide utility planning. b. The utility, with input from its Advisory Group(s), shall develop a range of forecasts of the necessary planning analysis parameters over the planning time frame. Forecasts may be developed for each planning Scenario, may be developed based on the assumptions associated with each Scenario or may be based on independent criteria as may be appropriate for and consistent with the planning analysis. Forecasts assumptions may be developed before or after Scenarios are developed. Planning scenarios and forecasts for the planning process were determined with input from the Advisory Group. The process for the development of the scenarios and the resulting scenarios and forecasts are presented in Chapters 5 and 6 and Appendix E of the IRP Report. Numerous concerns and many suggestions for amendments regarding the scenarios and forecasts were made by Advisory Group members. Although there seems to be obliging acceptance, there does not seem to be a great level of understanding or enthusiastic support of the identified scenarios or the choices of which forecasts and projected assumptions are associated with each of the scenarios. One substantial issue and concern identified early in the IRP process and reiterated at several stages by the Consumer Advocate and the IE, is the need for a base case or reference planning scenario. The planning scenarios identified for the IRP process were deliberately generated with extreme high and low bounds regarding many individual planning assumptions and forecast projections. Probabilities are not assigned or considered with respect to the planning scenarios. Without some assumptions regarding any probabilities of occurrence and without any base case or reasonably likely planning scenario, determining the most economic resource alternatives or the alternatives with the most value is problematic. The HECO Companies have been opposed to identifying a base case scenario, arguing that this is not consistent with scenario planning principles.
  31. 31.  Page 31 At the end of the IRP process, however, faced by a need to formulate, characterize and present the final resource plans and Action Plans, the HECO Companies adopted the “Stuck in the Middle” scenario to serve as a base case. This is problematic and remains an issue of concern.20 6. Identification of resource options. a. The utility shall consider all appropriate, available, and feasible resource options in the development of the reasonable range of Scenarios and associated possible futures. Options may include: energy efficiency demand-side management programs; demand response and load management programs; distributed generation resources; smart grid measures; measures to mitigate constraints to the incorporation of as available or variable renewable generation resources; alternative renewable fuels; energy storage resources; alternative measures to provide ancillary services; and retirement or protective storage of existing generation units and related facilities. According to a strict interpretation, the scope of resource options considered and analyzed in the HECO Companies’ IRP process does not include “all appropriate, available, and feasible resource options.” Several resource options, including resource options identified in previous IRP plans, options suggested by advisory group members, options identified in the Principal Issues and options listed in this Framework provision are not explicitly included in the resource options characterized for analysis. Currently omitted or excluded options include but are not limited to: o any specifically identified energy efficiency measures or programs o sea water air conditioning options o customer-sited combined heat and power options o hydrogen storage (explicitly identified in the Principal Issues) o pumped hydroelectric storage o demand response programs beyond those already planned by the HECO Companies, o specific measures to mitigate constraints to the incorporation of as available or variable generation resources (other than battery storage options) o alternative measures to provide ancillary services and retirement or protective storage of existing generation and related facilities 20 See, for example, final comments by the Consumer Advocate, dated July 17, 2103, (provided as an attachment to this Certification) at pages 4 – 6.
  32. 32.  Page 32 o coal-fueled resources21 Some logical reasons were offered by the HECO Companies regarding why some of these options are not being explicitly included in the analyses but the options were not “screened out” based on the provisions in section d. below. The IRP process was not conducted consistent with this Framework provision. b. The utility shall include among the resource options to be considered in Section V.C.6.a. immediately above, the options currently in use, promoted, planned, or programmed for implementation by the utility. The IRP process is appears to be conducted consistent with this issue. c. The utility shall also include among the resource options to be considered in Section V. C. 6. a. above, the resource options that are or may be supplied by persons or entities other than the utility. Customer-sited distributed generation options were not considered in the analyses except as components of the forecasted demand projections in the characterization of the scenarios. These resource options are not being characterized in accordance with Sections V.C.6.e. or V.C.6.f or V.C.6.g below.22 No costs, benefits, underlying assumptions, or uncertainties have been identified. The IRP process was not conducted consistent with this Framework provision. d. The utility shall, upon review of the range of Scenarios to be analyzed, screen out those options that are not reasonably appropriate to Hawaii, are not reasonably expected to be available to address the identified range of Scenarios, or are clearly infeasible. The utility, with the input of the Advisory Group(s), may establish such other criteria for screening out clearly infeasible options. The utility has not conducted any screening process that is discernable or consistent with this Framework provision. No screening criteria have been discussed or established with input from the Advisory Group. The IRP process was not conducted consistent with this Framework provision. 21 Coal resources were discussed briefly as a potential “missing” resource option at one Advisory Group meeting (in the context of omission of any projection of coal fuel prices) but there did not seem to be any support stated by any Advisory Group members in attendance to include this option in the IRP analyses. Although this option was not “screened out” by any methodical process, its omission was supported by at least some minimal discussion by the Advisory Group. 22 An Oahu small rooftop solar photovoltaic resource option is characterized as a utility-owned resource in the Supply-side Resource Unit Information Forms, IRP 2013, dated October 15, 2012, provided most recently as part of Attachment 6 of the Notice of Completion. Much of the information regarding this utility-owned resource could be used as a basis to characterize customer-sited distributed generation options.
  33. 33.  Page 33 e. The utility shall identify the assumptions underlying any resource option or the cost or benefit of any option or any analysis performed. f. The utility shall also identify risks and uncertainties associated with resource options. g. The utility shall further identify any technological limitations, infrastructural constraints, legal and governmental policies or requirements, and other constraints that impact any option or the utility's analysis. The underlying assumptions, uncertainties, and other constraints regarding the extensive magnitude of variable generation resources presumed to be available for the Oahu utility system and the infrastructural constraints regarding the large penetrations of variable renewable generation on all of the utility systems were not identified or discussed in the IRP Report. h. The utility shall consider measures, strategies, and programs to address limitations and constraints that may negatively impact its ability to achieve the objectives identified. Several measures have been identified to address some limitations and constraints consistent with this provision. Battery storage options, for example, are being considered to address infrastructure constraints that negatively impact the ability of the utility systems to accommodate variable renewable resources. There is no meaningful consideration, however, of the magnitude or feasibility of necessary measures, strategies or programs to accommodate the large penetrations of variable renewable generation resources presumed in the final resource plans upon which the Action Plans are based. 7. Models. a. The utility may utilize any technically or commercially reasonable model or models in performing the technical analyses required to develop Resource Plans for the Scenarios developed. b. Each model used shall be fully described and documented. A basic explanation of the Strategist model used by the HECO Companies for the analyses of the resource plans and final resource plans is provided in Appendix M of the IRP Report. c. The Independent Entity, an Advisory Group member representing that group (as determined by the Independent Entity) and the Commission or its designee may review a utility's modeling program, documentation and input, output, and diagnostic files, provided that such person (i) certifies in writing that it is not a competitor of the utility or the company providing the modeling program; and (ii) executes any reasonable, appropriate confidentiality or other agreements required by the utility or the model vendor.
  34. 34.  Page 34 The IE appointed an Advisory Group member to represent the Advisory Group consistent with this provision. The Advisory Group representative along with the IE, Commission staff and Consumer Advocate staff were allowed access to input, output and diagnostic files used in the analysis of the resource plans and final resource plans. 8. Analyses. a. The utility, with input from its Advisory Group(s), shall develop Scenarios to guide the utility's integrated resource planning process. Such Scenarios shall reflect possible futures dealing with uncertain circumstances and risks facing the utility, other stakeholders, and the utility's customers. The HECO Companies developed scenarios and forecasts generally consistent with this provision. See discussion above regarding provision V.C.5. b. The utility, with input from its Advisory Group(s), shall develop a reasonable scope and number of Resource Plans for the Scenarios developed. One or more Resource Plans may be developed for each Scenario. A sufficient number of Resource Plans will be developed and analyzed to ensure that the results of the utility planning process are meaningful and will address the scope of the identified issues. However, the number and scope of Resource Plans developed and analyzed will consider the limitations of utility planning resources and the planning process schedule. The HECO Companies developed an extensive number of resource plans included resource plans developed for the identified planning scenarios. The number of resource plans developed was not an issue in the IRP process. Whether the Principal Issues are meaningfully addressed is discussed regarding other more specific provisions of this Final Certification. c. The utility shall analyze all options in the Resource Plans on a consistent and comparable basis. The utility may use any reasonable and appropriate means to assure that such equal consideration is given. The resource options in the resource plans were examined on a consistent and comparable basis. d. In addition to addressing risks and planning uncertainties through consideration of Scenarios, the utility may utilize sensitivity analysis to determine the extent to which uncertainties affect analysis results and conclusions. The HECO Companies did not make extensive use of sensitivity analyses to address uncertainties. Several outstanding uncertainties could and should be addressed by
  35. 35.  Page 35 further analysis, including sensitivity of conclusions regarding fuel and resource pricing and availability, potential amounts of customer system exit, costs and regulatory allowances regarding timing of compliance with air quality regulations, etc. e. Notwithstanding the above, the utility shall compare the options on a present value basis. For this purpose, the utility shall discount the estimated annual costs (and benefits, as appropriate) using reasonable and appropriate discount rates, assumptions and procedures. The utility shall fully explain the rationale for its choice of discount rates, assumptions and procedures. The analyses presented in the IRP Report make extensive use of discounting and presentation of costs on a net present value basis. There is no discussion or explanation, however, of the basis or rationale for the choice of discount rates. The discount rates used in the analyses were not questioned and were not an issue or concern raised during the IRP process. Several related assumptions regarding escalation of future prices for construction of generation resources were questioned and are matters of substantial concern. See, for example, the discussion of renewable generation cost escalation assumptions in the discussion of Principal Issue 14. Inter-Island and Inter-Utility System Transmission. f. The analyses shall identify the resources to be acquired through available procurement mechanisms. The analyses shall consider and identify, to the extent feasible, those resources which the utility proposes to acquire through its available resource procurement mechanisms, including any competitive bidding, feed-in tariff, bilateral contract negotiation, net energy metering, demand response tariffs, or other approved, applicable, or proposed procurement mechanisms. The HECO Companies identify the procurement mechanisms for resources included in the Action Plans in Chapters 18: Competitive Bidding and Resource Acquisition, Chapter 19: Action Plans and the Action Plans for the HECO, HELCO and MECO utilities in Chapters 20, 21 and 22 respectively. g. The utility shall conduct planning analyses to determine, evaluate, and compare the merits of the resources, programs, and actions in the Resource Plans. The HECO Companies’ IRP process and IRP Report are compliant with this provision. h. In its integrated resource planning process, the utility may use information, data, analyses and results from relevant planning studies conducted by the industry, utility, or others, as part of other regulatory dockets or general planning processes. The analyses conducted as part of the integrated resource planning process may in turn be used in other general planning processes or studies.
  36. 36.  Page 36 The HECO Companies’ IRP process and IRP Report are compliant with this expository provision. 9. Determination of Resource Plans. The utility shall rank or descriptively prioritize the final Resource Plans (i.e. , preferred plan, secondary plan, parallel plan, contingency plan) based upon such criteria as it may establish with the advice of its Advisory Group. The HECO Companies have identified four final resource plans, including a preferred plan, contingency plan, parallel plan and a secondary plan, for each of the five utility systems. The IRP Report does not refer to, explain or discuss any ranking or prioritization of the final resource plans. No criteria or explanations are provided regarding the selection of the final resource plans. There was no discussion with or advice provided by the Advisory Group regarding criteria, definitions or the meaning of designation, ranking or prioritization of the final resource plans. The IRP process and IRP Report are not compliant with this provision. 10. Determination of Action Plan. a. Based on its analyses, the utility shall develop its Action Plan, which shall identify those resource options or the mix of resource options or specific actions that the utility anticipates will enable it to reasonably attain the planning objectives in light of the uncertainty regarding the planning Scenarios. The HECO Companies developed Action Plans for each utility. It is not clear or explained how the formulation of the Action Plans was based on the analyses. The Action Plans provide some explanation of how some of the specific actions will enable attainment of some planning objectives. There is no comprehensive or methodical explanation regarding how each of the specific actions will enable attainment of all of the planning objectives. Only one or, in some cases, two of the planning scenarios are used in characterizing the development of the Action Plans. The IRP Report does not sufficiently explain the need or reasons for the use of a limited set of the planning scenarios or the basis for selecting the specific scenarios for the development and characterization of the Action Plans.23 b. The utility shall review the Resource Plans to identify common themes, resources, programs, and actions that demonstrate robust value to balance costs and risks, and provide the greatest value and 23 Several shortcomings of using the “Stuck in the Middle” scenario (or any single one of the identified planning scenarios) as a base or reference case have been noted by the IE and the Consumer Advocate in concerns noted throughout the IRP process. The HECO Companies have been opposed to developing and utilizing a base case or reference case scenario.

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