2018 General Rate Case

Transcription

1 Application No.: Exhibit No.: Witnesses: A SCE-TURN-01 S. Menon (SCE) W. Marcus (TURN) (U -E) 01 General Rate Case SCE-TURN Joint Supplemental Testimony Regarding SPIDA Software Disallowance Scenarios and Calculations Before the Public Utilities Commission of the State of California Rosemead, California December, 01

2 SCE-TURN -01: SCE-TURN Joint Supplemental Testimony Regarding SPIDA Software Disallowance Scenarios and Calculations Table Of Contents Section Page Witness I. INTRODUCTION...1 S. Menon W. Marcus II. BACKGROUND III. THE VARIABLES ASSOCIATED WITH TURN S AND SCE S CALCULATIONS... A. Agreed-upon calculation of number of poles and pole replacement costs (in 01$)... B. Agreed-upon potential starting points for the period of pole replacements... C. SCE and TURN positions on duration of the potential disallowance, including expected remaining life of replaced poles... D. SCE and TURN positions on the impact of gates on the pole number calculation... E. Agreed-upon use of PVRR and proposal to spread ratably over the GRC period... IV. SCENARIO COMPARISON TABLE... -i-

3 I. INTRODUCTION Southern California Edison Company (SCE) and The Utility Reform Network (TURN) offer this joint testimony presenting agreed-upon calculations to reflect potential customer impacts resulting from SCE s procurement, development, and implementation of the pole-loading software program known as SPIDACalc. As detailed in SCE s and TURN s respective testimony, SCE used earlier versions of SPIDACalc enterprise-wide from April 01 through November 01 to identify poles that did not meet the utility s pole loading safety factor. SCE and TURN fundamentally disagree over whether a disallowance is warranted, and this joint testimony does not signal any change in the parties respective litigation positions. However, in the course of briefing this issue, it became clear to SCE and TURN that the Commission might find calculations reflecting a range of potential outcomes on the disputed issues useful. As noted in both SCE s and TURN s Reply Briefs, the parties are submitting this joint testimony to set forth the calculations of potential disallowance amounts (if the Commission deems any disallowance is warranted), based on various timing scenarios and other factors. Subsequent to submitting reply briefs, SCE and TURN engaged in a meet-and-confer process to see if they could reach agreement on such calculations. This additional joint testimony presents and explains the agreed-upon calculations, but is not intended to modify the existing record in terms of SCE s or TURN s arguments for or against a disallowance. 1

4 II. BACKGROUND SCE began using SPIDACalc as the enterprise-wide tool to calculate pole loading safety factors for its poles in April of 01. In June 01, SCE initiated an independent engineering analysis to assess the results provided by the new software, based on field reports from staff raising questions about SPIDACalc s results, which in some cases seemed to run counter to historical experience. Progress updates were provided to SCE s Pole Loading Program (PLP) team in September and November of 01, and final results of that engineering analysis were presented to PLP management in December 01. These study results led to collaboration with the vendor to develop a newer, more precise version of SPIDACalc (Version ), which was released in May 01 for limited use, and fully implemented in November 01 after significant testing. In approximately July 01, SCE reassessed more than a thousand poles that had failed under SPIDACalc Version to determine what effect Version would have had on the failure rates. Based on the reassessment results available as of late August 01, SCE instructed its pole loading assessment contractor to hold all pole loading assessments in the PLP program as of September 1, 01.

5 III. THE VARIABLES ASSOCIATED WITH TURN S AND SCE S CALCULATIONS TURN s prepared direct testimony on the SPIDACalc issues proposed a disallowance of the costs of all poles that were identified as not meeting SCE s pole loading safety factor under SPIDACalc Version and were therefore replaced, but would likely have met or exceeded the pole loading safety factor under SPIDACalc Version and therefore would not have been replaced. TURN separately calculated the number of poles it contends were unnecessarily replaced through the PLP and through other non-plp replacements for which a pole loading safety factor was calculated and served as the basis for the pole replacement. In addition to contending that no disallowance was warranted, SCE s rebuttal testimony challenged TURN s calculations associated with its proposed disallowances. Through the post-briefing meet-and-confer process, SCE and TURN have produced calculations that both parties agree upon. The calculations represent a reasonable approach to identifying the number of poles and associated spending for purposes of calculating a potential disallowance, and apply that approach to various scenarios based on: The potential starting points for the period of pole replacements that could be the subject of a Commission disallowance ( options: April 01, September 01, January 01, and September 01); The potential effective duration of the disallowance ( options: no disallowance, disallowance for years, disallowance for 0 years, and permanent disallowance); The pole replacement process steps or gates that should be included in calculating the number of poles potentially subject to disallowance ( options: all gates or gates 1- only). The sections below provide more details on these options, the rationale for their choice and TURN s or SCE s position as applicable. TURN and SCE agree on the variables and the options for each variable. Both TURN and SCE also agree that any potential disallowance should be calculated on a Present Value Revenue Requirement (PVRR) basis. Cumulatively, this results in the scenario-specific

6 amounts set forth in Table IV-1, below. TURN and SCE further suggest that any disallowance should be spread ratably across the three-year rate case cycle (i.e., 01-00). 1 A. Agreed-upon calculation of number of poles and pole replacement costs (in 01$) The following summarizes the agreed-upon approach to calculating the number of poles and corresponding pole replacement cost (in 01$) associated with each scenario: For each category of poles (PLP and non-plp), the starting point was the calculation of the total number of poles replaced during a given period. This figure was adjusted to remove poles that would have been replaced regardless of the outcome of the pole loading assessment, and poles for which the pole loading assessment was performed using either the Wind Load Estimator that preceded SPIDACalc Version, or the SPIDACalc Version that followed Version. The result reflects the total number of poles replaced based upon the results of a pole loading assessment performed with SPIDACalc Version. A failure rate reduction was calculated based on a comparison of the results from assessments performed with SPIDACalc Version and Version. For the PLP category of pole replacements, the figure varied slightly between % and %. For non-plp pole replacements, the figure was 0%. Multiplying the failure rate reduction by the number of poles replaced under SPIDACalc Version produced the number of poles estimated as having been replaced due to unacceptable pole loading safety factors under SPIDACalc Version for which SPIDACalc Version would have indicated an acceptable pole loading safety factor. 1 This suggestion did not appear in the parties previous testimony or briefs on this issue. SCE s Update Testimony in Exhibit SCE- indicates that the utility s current GRC revenue requirement requests would produce an increase of approximately $ million in 01, $ million in 01, and $ million in 00 (Table II- on page ). In light of that, if a disallowance is adopted, both TURN and SCE believe it would be appropriate to spread it ratably across the three-year rate case cycle.

7 This number of poles was multiplied by the replacement cost of $1,000 per pole to derive a cost of possibly prematurely-replaced poles (in 01$). B. Agreed-upon potential starting points for the period of pole replacements The scenario comparison table includes four different dates as potential starting points for the period of pole replacements that would be the subject of a Commission disallowance, should it choose to adopt a disallowance for the SPIDACalc pole replacements. April 01 This scenario reflects the date of the initial implementation of SPIDACalc as the enterprise-wide tool for assessing pole loading safety factors. September 01 This scenario reflects the approximate date of the first major progress update SCE s Engineering Team provided to PLP Management during the course of SCE s internal engineering evaluation of SPIDACalc Version. January 01 This scenario reflects the approximate date of conclusion of SCE s internal engineering evaluation of SPIDACalc Version, which led to the development of SPIDACalc Version as a newer, more precise pole loading assessment tool. September 01 This scenario reflects the approximate date of SCE completing a further study using SPIDACalc Version to reassess poles that had failed under SPIDACalc Version, and first instructing its pole loading contractor to hold further pole assessments using SPIDACalc Version to permit a broader reassessment using SPIDACalc Version. C. SCE and TURN positions on duration of the potential disallowance, including expected remaining life of replaced poles The scenarios SCE and TURN have included in this joint testimony reflect four different options for the effective duration of the disallowance: TURN s testimony had proposed a disallowance for the life of the replacement poles. SCE s rebuttal testimony had reiterated that there should be no disallowance at all because SCE believes it acted prudently to procure, deploy, improve, and eventually update

8 SPIDACalc Version with Version, but if a disallowance were adopted, it should reflect the fact that the poles in question here would have been replaced eventually. Disallowance for years - SCE compared the age data for poles replaced under PLP using SPIDACalc Version and poles replaced under the Deteriorated Pole Program, and derived a.-year difference in the average age of the pole at the time of replacement. Since SPIDACalc Version was reasonably accurate but somewhat overly conservative, SCE believes that poles that failed pole loading assessment under SPIDACalc Version, but passed under SPIDACalc Version were close to being overloaded. The PLP and the Deteriorated Pole Program are SCE s two enterprise-wide pole inspection and replacement programs. Pole deterioration is the key consideration in identifying poles that need replacement under the Deteriorated Pole Program. As noted in Rule. in G.O., it is relevant when calculating pole loading safety factors. Therefore SCE contends that poles that were prematurely replaced using SPIDACalc Version would be eventually replaced under the Deteriorated Pole Program as the deterioration progressed. Since the average age of the poles replaced in the Deteriorated Pole Program is years more than the average age of the poles replaced in PLP, SCE believes it is reasonable to assume that on average the poles prematurely replaced using SPIDA version would have been replaced years later. Disallowance for 0 years: Through the post-briefing meet-and-confer process, TURN has analyzed SCE s pole retirement data specific to the SPIDACalc Version poles, as well as the data associated with SCE s proposed -R1 life-curve from its depreciation study. TURN s view is that using the Deteriorated Pole Program data presumes that the poles replaced in the PLP

9 were of relatively poor quality, and that the more reasonable assumption is that the poles replaced in the PLP were assessed as having a pole safety factor exceeding SCE s standard but otherwise were in a condition consistent with the rest of SCE s pole population. TURN used the proposed -R1 life-curve as a proxy for the average age of the pole at time of replacement, compared that to the age data for poles replaced under PLP using SPIDACalc, and calculated a roughly 0-year difference in the average age of the pole at replacement. TURN then assumed that the correct answer may lie somewhere in between its calculation and SCE s calculation, and that is the basis for the 0-year period used in certain scenarios here. The scenarios in Table IV-1 below reflect PVRR figures using a -year and 0-year period, as well as the complete disallowance recommended by TURN and the zero disallowance recommended by SCE. D. SCE and TURN positions on the impact of gates on the pole number calculation A second difference between the SCE and TURN positions is the treatment of poles at different gates within the PLP pole replacement process. SCE s pole replacement process has six gates ranging from Gate 1 (when poles are identified for remediation) through Gate (poles having been replaced and put in service). SCE contends that poles that were in Gates or at any given time should be excluded from the calculation, because in all but a few limited circumstances, once a pole reached Gate it had already been released to crews for installation, and therefore reassessment would not have been practical. TURN s recommendation was and continues to be that the calculation of an appropriate disallowance should include all poles, regardless of which gate the pole had reached at a given time. See Exhibit SCE-, pp. -.

10 To reflect this difference, there are scenarios for Gates 1- (consistent with the exclusion of poles that had reached Gates or ), and for All Poles. E. Agreed-upon use of PVRR and proposal to spread ratably over the GRC period Finally, the figures in Table IV-1 reflect the present value revenue requirement (PVRR) associated with each scenario s pole replacement costs. The PVRR calculation provides an easier basis for comparing the results under each scenario. While stated as a single figure reduction to the authorized revenue requirement, SCE and TURN agree that if the Commission adopts a disallowance associated with the SPIDAcalc pole replacement issue, it should be spread ratably over the entire threeyear GRC cycle of for the reasons discussed in footnote 1, above. Any PVRR adjustment would lower SCE s authorized revenue requirement in this rate case (01-00) to account for the premature replacement of the poles in question. If the poles were replaced at a later point in time (such as or 0 years later than they were), the authorized revenue requirement during the intervening period would have been lower, all else being equal. The PVRR numbers shown in the table capture the impact of the lower revenue requirement associated with removing the poles from rate base and putting them back into rate base at a later date. Since the PVRR adjustments simulate the impact of the lower rate base, an additional rate base adjustment would not be necessary. For any PVRR adjustment that the Commission may deem appropriate, SCE and TURN are proposing to spread any adjustment over the three years of the 01 GRC cycle to smooth out the year-over-year volatility of the overall revenue requirement changes.

11 IV. SCENARIO COMPARISON TABLE Table IV-1 Impact to 01 GRC cycle revenue requirement (in millions of dollars) No Disallowance Returned to Rate Base after years Returned to Rate Base after 0 years Complete Disallowance Starting Date All Poles Gates 1- All Poles Gates 1- All Poles Gates 1- All Poles Gates 1- April 01 $0 $0 $. $. $.1 $.1 $. $. September 01 $0 $0 $. $. $. $. $1. $1. January 01 $0 $0 $. $. $. $0. $1. $1.0 September 01 $0 $0 $. $1. $. $. $. $1.1