The following are Mike Waldon’s comments submitted to LUS following the June 30 meeting
All Lafayette citizens and ratepayers were invited to submit comments and questions to LUS in the weeks following the presentation. The following are my comments emailed to IRPfeedback@lus.org
First, Thank you for the opportunity to learn about progress on the developing LUS Integrated Resource Plan through your virtual presentation on June 30, 2020. Leadership at LUS should be commended for the progress made in informing and involving ratepayers and the citizens in planning for the future of our electric utility. As suggested by numerous citizen comments, I do hope that this welcome change continues, and that in the future citizens will have a formally appointed LUS citizens’ advisory board.
I request that all of the public comments and questions sent to LUS be publicly posted on the LUS web site. Without seeing the unedited questions, it is impossible to see whether the posted answers actually address the submitted questions.
Please understand that I am not being judgmental about LUS or its contractor in making my next comment. I believe that the previous IRP followed procedures that are common in the industry.
The most important ways that we learn about model reliability and uncertainty in predicting the future is to compare past model predictions with what actually took place after the modeling predictions were reported. This is the best way to identify needed improvements, and to inform decision makers who depend on model results of the actual reliability of modeled predictions. This is as true for IRP modeling as for any other field of model application (e.g. weather models, flood models, economic models).
I was encouraged that the presentation included a comparison to the previous IRP’s conclusion that LUS should buy reciprocating engine natural gas generators. Now, in the light of recent history and current conditions, we see that this would have been a costly decision. The current IRP must address the assumptions and methods applied in the previous IRP modeling that failed to be predictive. This is essential (1) to see that any past errors in methods or assumptions do not simply propagate into new recommendations, and (2) so that our City Council is clearly made aware of the past uncertainty involved in developing selected alternatives.
Overall, the draft recommendations presented on June 30 do appear to align closely with IRPs recently developed by other municipalities and electric utilities. This is a time of rapid change in electric utility technology, and there is a consequent danger of making decisions now that would lock us in to a sub-optimal mix of solutions for decades. Considering this uncertainty, the plan to incrementally obtain an expanding solar and/or wind capacity through contracts appears prudent.
I do encourage freeing LUS from the RPS2 coal-fired unit as quickly as possible. There is no uncertainty that RPS2 is needlessly adding significantly to the cost of operation and generation for LUS. Ratepayers would be well served by selling the LUS share in that facility. Beyond its high cost and environmental impact, RPS2 represents many millions of dollars annually draining out of the local Lafayette economy. Our city would be much better served by spending that huge amount for salaries and operations on nearby construction or jobs rather than exporting these jobs and dollars far from home.
The growth in peak demand displayed in the presentation graphs seems unreasonable. Nationally, recent per-person demand has been falling. Locally, there is a significant possibility our economy may be impacted by a long-term national decline in the oil and gas production industry. Further, there is a chance that commercial users will begin to adopt demand management systems, and install solar with storage to avoid high peak demand charges. Consumers also continue to move to more energy efficient air conditioning and weatherization to avoid high electric bills. While it is possible that overall and peak demand will grow over the next decade, it would be foolish to invest now in capacity that very possibly will never be needed. I therefore suggest that the most probable future demand scenario should assume a slow reduction in demand rather than an increase.
Future cost estimates that were assumed in the IRP model calculations were not discussed in the June 30 presentation. As I have previously commented, the projection of future costs for capital, fuel, solar, wind, and storage would better be determined by extrapolating from historic values rather than simply setting an arbitrary price inflation factor. I am eager to see how future costs were extrapolated, and how these predictions square with past cost trends.
The assumption of a discount rate was also not discussed. In the November 2019 meeting, an annual discount rate of 4% was presented. This is a high value.Further, there is generally no consensus that municipal governments should use any discounting in economic planning. Discounting makes going into bond debt more economically attractive. Discounting devalues the future cost of fuel, and thus gives inefficient natural gas generation an edge over high efficiency generation or fuel-free renewable generation with storage. I ask that if any discount rate is retained in IRP modeling, then an additional alternative be run with zero discounting to show the impact of this assumption on costs and alternative selection.
The presentation on June 30 did mention environmental constraints and costs. However, I believe we should also consider the impact of alternatives on air quality in Lafayette. You are probably aware that on June 19 Lafayette had an Ozone Action Day that was declared by LDEQ. High ozone levels are a risk to health, particularly among our most vulnerable citizens. Those who work or exercise outdoors are also at risk. Violating ozone criteria can have severe economic impacts on a community because industrial expansion within the city could be limited. While Lafayette is currently in compliance with ozone limits, there have been calls for EPA to set more stringent standards.
There is therefore a risk that building an inefficient single-cycle natural gas generating plant in Lafayette would lead to future ozone non-compliance. Note that ozone violations tend to occur on hot sunny days, and these are exactly the days that a gas peaker plant would be likely to run at full capacity. The lower fuel use and air pollutant discharge of a combined cycle gas plant might provide a reduction in risk of ozone non-compliance. Further, an emission-free battery storage facility would have no direct impact on air quality.
Thank you for the opportunity to question and comment. I look forward to reading the full draft IRP when it is available.
–Michael Waldon, PhD