MR. DANIEL L. STANLEY HONIGMAN, MILLER, SCHWARTZ & COHN, LLP

Transcription

1 rh m p STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the Matter of the application of WABASH VALLEY POWER ASSOCIATION, INC. for authority to implement its power supply cost recovery plan and factors for the -month period ending December, 00, and for related Case No. U- accounting approvals SETTLEMENT AGREEMENT I VOLUME I Proceedings had in the above-entitled matter before Barbara A. Stump, Administrative Law Judge, at the Michigan Public Service Commission, Mercantile Way, Lansing, Michigan, on the th day of August, 00. APPEARANCES : MR. DANIEL L. STANLEY HONIGMAN, MILLER, SCHWARTZ & COHN, LLP North Washington Square, Suite 00 Lansing, Michigan Appearing on behalf of Wabash Valley Power Association, Inc. MS. CHRISTINE MASON SONERAL DYKEMA GOSSETT, PLLC 00 Michigan National Tower Lansing, Michigan Appearing on behalf of Midwest Energy Cooperative MR. WILLIAM W. DERENGOSKI ASSISTANT ATTORNEY GENERAL Mercantile Way, Suite Lansing, Michigan Appearing on behalf of the Commi,ii~iiii~hWtJ~ie ~ W I C GERGER-MORETTI REPORTING SEP, 00

2 0 e TABLE OF CONTENTS Tuesday, August, 00 WITNESSES PAGE 0 Kari D. Wetter (testimony bound in) Denise A. Sewell (testimony bound in) EXHIBITS 7 MARKED/RECEIVED P 7 0 A-, Spreadsheet A-, Schedule A, Schedule B, Schedule B-, and Schedule C A-, Revised tariff sheets GERGER-MORETTI REPORTING --0

3 n 7 0 Lansing, Michigan Tuesday, August, 00 - : a.m. * * * (Exhibits A-, A-, and A- marked) JUDGE STUMP: We're on the record in the matter of the application of Wabash Valley Power Association for authority to implement its power supply cost recovery plan and factors for the -month period ending December st, 00. Case Number U-. Could I have the appearances, please? MR. STANLEY: Yes. Good morning, Judge. Dan r r'\ 7 0 Stanley of Honigman, Miller, Schwartz and Cohn, LLP, on behalf of the applicant, Wabash Valley Power Association, Inc. MS. MASON SONERAL: Morning. Christine Mason Soneral on behalf of the intervener, Midwest Energy Cooperative. MR. DERENGOSKI: Assistant Attorney General William W. Derengoski for the staff. JUDGE STUMP: Thank you. This is the time I set for submission of a settlement agreement and to bind in supporting testimony into the record. Mr. Stanley has presented me with a settlement agreement and an order approving -- a proposed order approving the settlement agreement, which I will transmit to the Commission. GERGER-MORETTI REPORTING --0

4 fi r P And at this point, Mr. Stanley, would you like to present your testimony? MR. STANLEY: Yes, I would, Your Honor. The applicant would move to bind in the direct testimony of Kari D. Wetter, which is a cover page and pages of questions and answers. The cover page is entitled, "Direct testimony of Kari D. Wetter on behalf of Wabash Valley Power Association, Inc." Mr. Wetter's response was one exhibit, which has been marked by the court reporter as Exhibit A-. And I would move that the direct testimony of Kari D. Wetter be bound into the record and move for the admission of Exhibit A-, which consists of a cover sheet and one page, which is a spreadsheet. I'd move for its admission into the record as well. JUDGE STUMP: All right. Mr. Wetter's direct testimony will be bound into the record and Exhibit A- is admitted into evidence. --- GERGER-MORETTI REPORTING --0 -

5 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the Matter of the Application of WABASH VALLEY POWER ASSOCIATION, INC., for ) Authority to Implement its Power Supply Cost ) Recovery Plan and Factors for the twelve-month ) Period ending December,00 and for Related Accounting Approvals ) Case No. U- DIRECT TESTIMONY OF KARI D. WETTER /-'- ON BEHALF OF WABASH VALLEY POWER ASSOCIATION, INC.

6 TESTIMONY OF KARI D. WETTER ON BEHALF OF WABASH VALLEY POWER ASSOCIATION, INC. MPSC Case No. U-. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. Al. My name is Kari D. Wetter, and my business address is the office of Wabash Valley Power Association, Inc., 7 North High School Road, Post Office Box 700, Indianapolis, Indiana. Q. BY WHOM ARE YOU EMPLOYED AND WHAT IS YOUR POSITION? A. I am employed by Wabash Valley Power Association, Inc. ("Wabash Valley") as its Manager r-, I of Planning & Finance.. WHAT ARE YOUR JOB RESPONSIBILITIES? 0 A. I am currently responsible for administering the planning and finance activities of Wabash Valley. I oversee the planning and securing of power resources for Wabash Valley's native load. In addition, I have responsibility for financing and arranging sources of monetary capital and methods of financing.. PLEASE OUTLINE YOUR EDUCATIONAL BACKGROUND AND PROFESSIONAL EXPERIENCE. s A. I received a Bachelor of Science degree in Mechanical Engineering &om the University of Illinois in. In, I received a Masters in Business Administration, with a 7 concentration in Finance, from Indiana University. I am also a licensed Professional Engineer in the state of Indiana. In, I went to work for the Illinois Commerce Commission in the r-. Economics and Rates Department. While there, my responsibilities included the development

7 ' P, of marginal production costs, marginal cost of service studies, and the evaluation of generation capacity planning for electric and gas utilities in Illinois. I also provided expert testimony on these subjects in dockets before the Illinois Commerce Commission. In, I was employed by Wabash Valley as a Senior Planning Analyst. In, I took the position of Planning Supervisor; in, System Planning Principal; and, in, my present position of Manager of Planning and Finance. I have been responsible for the projection of long-tern power costs and corporate financial forecasts, power requirements forecasting, expansion planning, requests for power supply proposals, and evaluation of power supply bids. I am also responsible for developing sources of fmancing and negotiating the terms of such financing. Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING? AS. The purpose of my testimony is to describe the projected resources of Wabash Valley's power supply for the calendar year 00; contrast the proposed 00 capacity purchases wiih the calendar year 00 resources included in MPSC Case No. U-; and to describe the development of the estimated fuel costs for Gibson Unit No.. Additionally, I will provide testimony describing Wabash Valley's efforts to reduce purchased power and fuel costs. Q. PLEASE DESCRIBE WABASH VALLEY'S PROSPECTIVE SOURCES OF ELECTRIC POWER SUPPLY FOR THE TWELVE-MONTH PERIOD ENDING DECEMBER,00. A. Wabash Valley expects to meet its power supply requirements through both internal generation and outside purchases. The generating unit presently anticipated to generate power during this period is as follows:

8 Gibson Unit No. Twin Bridges QPw. MW - Coal.0 MW Landfill gas Gibson Unit No. is a MW Generating Unit in which Wabash Valley o m a % interest. The balance of the unit, which is operated by Ciergy, is co-owned with Cinergy and the hdiana Municipal Power Agency. 0 / The Twin Bridges landfill gas project is located at the Waste Management of Indiana ( W) Twin Bridges landfill in Danville, Indiana. Wabash Valley has conshucted three Caterpillar engine-generators that yield a net. MW. This Twin Bridges landfill gas project is connected to Hendricks Power Cooperative s (a member of Wabash Valley) kv distribution system. Wabash Valley has agreed to purchase waste landfill gas from WMI for twenty (0) years. The facility is expected to operate at % availability and supply Wabash Valley member requirements. The project s costs are estimated to be $./kw - mo. for capital costs and $/MWh for fuel and O&M costs. Additionally, Wabash Valley is negotiating to purchase or build an additional. MW of existing and new landfill generation facilities in Indiana during 00. This generation is expected to have the same cost as the Twin Bridges unit. Wabash Valley also purchases power to serve its member cooperatives. These cooperatives are interconnected with the transmission systems of five investor-owned utilities. Wabash Valley Power has offered membership to two additional cooperatives, Com Belt Energy Corporation ( Corn Belt ) and MJM Electric Cooperative ( MJM ). Their A membership is expected to be effective January 00 and at that time Wabash Valley will

9 begin supplying their entire power requirements. The power supply to meet the power requirements for these anticipated new members are included in the PSCR forecast and are not expected to adversely impact the average PSCR cost. The following schedule summarizes the capacity purchases.

10 Supplier Capacity Type of Purchase Cinergy (FCA-Service Schedule A) NIPSCO MW 0 Mw Reserve Capacity Unit Peaking Power Hoosier Energy Rural Electric Cooperative (HE) Market Power and Seasonal MW Average up to 0 Mw Firm Power Firm Power Cinergy 70 MW Firm Power CIPS MW Finn Power AEP (I&M) IPL All requirements single industrial customer All requirements (Rate Coop-I) Requirements Power Firm Power Duke ETM (formerly NP Energy) Duke ETM 00 MW 00 MW Firm Power Unit Power Unit Power Cinergy C&T 0 MW Waste Management MW AEP 0 MW Wabash Valley also purchases interchange energy from various other suppliers. These purchases generally contain no capacity charge and are used to economically serve Wabash

11 Valley member load. Additionally, Wabash Valley expects to have two contracts assigned from Corn Belt when it becomes a member in 00. These contracts are approxhately 0 hlw. Most of the rates for power purchased by Wabash Valley contain a payment for a fuel cost adjustment or are based on out-of-pocket costs that vary from month to month. Therefore, the exact rates Wabash Valley will ultimately pay can only be estimated at this time ARE THERE ANY MAJOR AGREEMENTS OR POWER SUPPLY ARRANGEMENTS ENTERED INTO BY WABASH VALLEY FOR PROVIDING POWER SUPPLY DURING THE PLAN PERIOD? A 0 A7. Yes. The major agreements and arrangements are as follows:

12 0 Agreement With Type of Power Power Coordination Agreement Interconnection Agreement Power Sales Agreement Cinergy NIPSCO Hoosier Energy Reserve Capacity, Backup Energy, Emergency, Interchange, Short-Term, Wheeling, Ancillary Services Transmission & Distribution, Supplemental Firm, Operating Reserve, Reserve Capacity, Short Term Peaking Capacity Firm Power Renewable Long-term I Long-term -I Open Access Transmission Tariff Rate REMC Rate Coop- AEP IPL AEP (I&M) Transmission Service Ancillary Services Finn Power Requirements Power Renewable Renewable Power Supply and Transmission Services I CIPS (Ameren) Master Power Sales Cinergycap. Unitpower Agreement Interchange Agreement & Trading Duke ETM I System/Firm Power Negotiated Capacity and Energy Long-term Indefinite Indefinite Power Sales Tariff Market Rate Service Agt. AEP (I&M) Unit Power Power Purchase and Sales Agt Letter Agreement Network Integration Transmission Service Waste Management MI Public Power Assn. Midwest, MI El. Trans. Co. Unit Power System Power Transmission Service Ancillary Services Short-Term Renewable I,/- I

13 r\ As a result of the expected addition of Corn Belt and MJM as Wabash Valley members, Wabash Valley is in the process of securing appropriate contracts with Ameren, Illinois Power, and CILCO to serve the Corn Belt and MJM loads in rn Hoosier Energy PSI AEP MPPA RESOURCE ADDITlONSflZEVISIONS Increase fiom to Average Monthly MW From 7 to 0 MW 0 MW FromllMWtoOMW Firm Power Firm Peakine Unit Power Svstem Power 0 7

14 QO.HAVE YOU PREPARED AN EXHIBIT SHOWING THE CALCULATION OF WABASH VALLEY'S POWER SUPPLY COSTS FOR T m PERIOD ENDING DECEMBER,00? A0. Yes. Exhibit A--(KDW-l). Qll. WILL YOU EXPLAIN THE IMPACT OF THE ENRON AMORTIZATION ON THE 00 POWER COSTS? A A. Originally, Wabash Valley had a purchase of energy from Enron that has been replaced with a purchase &om Cmergy and an amortization of the termination cost. The total of the Cinergy power supply and the termination are approximately the same cost as the original Enron contract applicable to 00. Rick Coons and Jeff Conrad have further testimony describing the termination of the Enron contract. Q.PLEASE DESCRIBE WABASH VALLEY'S EFFORTS TO REDUCE POWER SUPPLY COSTS, INCLUDING THE FUEL COMPONENT OF TOTAL POWER COSTS. A. Wabash Valley has taken reasonable and prudent actions to reduce its costs, including continually reviewing its power supply arrangements with the objective of maintaining the lowest possible power supply costs consistent with prudent utility practice. Examples of actions taken by Wabash Valley demonstrating this objective are as follows:. Wabash Valley aggressively intervened in Cinergy's request for a wholesale rate increase and successfully reached a settlement rate agreement, which resulted in a net decrease in power costs to Wabash Valley. Again in Wabash Valley intervened in A

15 P I Cmergy s rate request for a wholesale rate increase and has reached a settlement significantly reducing the increase.. Wabash Valley intervened in the AEP and Central and Southwest merger to protect its rights. As a result Wabash Valley received refunds and reductions in the network transmission rates.. Wabash Valley reviews the manner in which Cinergy operates Gibson Unit No., as well as the coal contracts pertaining thereto. Examples of actions taken by Cinergy to reduce future fuel costs included negotiations with Black Beauty Coal to buy out the highcost coal contract between EXXON and Cinergy and make available substantially lower-cost coal from Black Beauty to Cinergy. These coal cost savings have resulted in a reduction to Wabash Valley s fuel costs from Cinergy.. Wabash Valley owns % of Gibson Unit No., as well as a proportionate share of the transmission system of PSI Energy, Inc., subsidiav of Cinergy, thereby enabling Wabash Valley to benefit from its lower fxed charges.. Wabash Valley monitors power costs in the bulk markets and periodically makes purchases of power for Wabash Valley in order to utilize, to the extent possible, the lowest cost power supply reasonably available. Wabash Valley has continued to enter into new Interconnection and Interchange Agreements to enable it to utilize broader markets. 7. Wabash Valley intervened in the CIPS merger with Union Electric in order to protect its prior agreements with CIPS, which resulted in improved terms of the original fi CIPS agreement. 0

16 . Wabash Valley continues to make off-system sales to minimize total power costs.. Wabash Valley intervened in AEF"s open access filing before FERC pursuant to FERC Order and is W g transmission service under the Open Access Transmission Tariffas of // Wabash Valley is a member of the Midwest IS0 and is actively participating in the formation and start up of the ISO. The IS0 is expected to reduce overall transmission costs and provide access to additional power markets.. Wabash Valley is actively participating in workgroups to protect its 0 P. members' interests in the emerging regional transmission organizations.. Wabash Valley reduced power costs from IPL through rate re-negotiation.. Wabash Valley filed a complaint under 0 of the Federal Power Act against P. 7 0 NPSCO's transmission and distribution rates. Wabash Valley settled with NIPSCO and reduced the overall transmission costs and provided for additional future capacity purchases.. Wabash Valley negotiated with Cinergy to use lower-cost coal in Gibson Unit No. when the buyout with Exxon was complete.. In August, PSI filed a petition (Docket No. EL-7-000) with FERC requesting permission to recover costs associated with the buyout of a long-term coal supply agreement for its Gibson Generating Station. As a result of this transaction, PSI was able to significantly reduce its cost of fuel used to generate electricity at the Gibson Station. The reduction in fuel costs as a result of this transaction were passed through to Wabash Valley and PSI'S other wholesale customers through the FERC fuel adjustment mechanism

17 . Wabash Valley has banded with other generation and transmission cooperatives to form ACES Power Marketing. ACES Power provides services to monitor market risks and help Wabash Valley manage exposure to extreme market price volatility and to manage credit exposure to other counterparties.. DOES THIS COMPLETE YOUR TESTIMONY IN THIS PROCEEDING? A. Yes, it does.

18 r F- P\ I MR. STANLEY: Thank you, Your Honor. The applicant also moves to bind in the settlement testimony of Denise A. Sewell, which consists of a cover page entitled, "Supplemental testimony of Denise A. Sewell on behalf of Wabash Valley Power Association, Inc.," and tw pages of questions and answers. Ms. Sewell sponsored two exhibits which have been marked by the court reporter as Exhibits A- and A-. Exhibit A- consists of four pages and consists of Wabash Valley Power Association, Inc.'s schedule A, schedule B, schedule B-, and schedule C. Exhibit A- consists of three pages of revised tariff sheets. And the applicant moves to have the testimony of Ms. Sewell bound into the record and moves for admission of Exhibits A- and A- as well. JUDGE STUMP: Ms. Sewell's testimony will be bound into the record and Exhibits A- and A- are admitted into evidence. I-- GERGER-MORETTI REPORTING --0

19 COMMISSION STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSIO JUL 00 In the Matter of the Application of WBASH VALLEY POWER ASSOCIATION, INC. ) for Authority to Implement Its Power Supply Cost Recovery Plan and Factors for the twelve-month period ending December,00. ) ) Case No. U- r SUPPLEMENTAL TESTIMONY OF DENISE A. SEWLL ON BEHALF OF WABASH VALLEY POWER ASSOCIATION, LNC MPSC Case No. U- Dated: July,00 r..

20 F- P,/ A. Q. 7 A. 0 Q. A. Q. A A. Q. PLEASE STATE YOUR FULL NAME AND BUSINESS ADDRESS. My name is Denise A. Sewell. My business address is the office of Wabash Valley Power Association, Inc. (Wabash Valley), 7 North High School Road, Post Office Box 700, Indianapolis, Indiana. ARE YOU THE SAME PERSON WHO SUBMITTED PREFILED DIRECT TESTMONY IN THIS PROCEEDING AND ARE THERE ANY CHANGES TO YOUR CREDENTIALS? Yes, I am the same person who submitted prefiled direct testimony and there have been no changes to my credentials. WHAT IS THE PURPOSE OF YOUR TESTIMONY? The purpose of my testimony is to present Wabash Valley's revised PSCR Plan for the balance of 00 and to sponsor revised exhibits detailing the calculation of the new PSCR factor. WHAT IS THE REASON FOR THE REVISED PSCR PLAN? Wabash Valley experienced an increase in power supply costs during the first six months of 00 and expects to incur those costs for the remainder of the year. The revised plan reflects the expected increase in costs for the remainder of the year. The revised factor was not designed to recover any of the under collected balance that occurred in the first six months of the year. WHAT IS THE REASON FOR THE INCREASE IN COSTS REFLECTED IN THE REVISED PLAN? Based on my discussion with Kan Wetter, Manager of Finance and Planning, the increase in costs reflected in the revised plan is due to an increase in market prices for the cost of power. WHY IS WABASH VALLEY REVISING ITS PLAN NOW?

21 ?- A. Q. A. 7 Q. A. Q. 0 A. As mentioned above, Wabash Valley has already experienced an under recovery during the first six months of 00 and increasing the factor now will mitigate the impact on its customer when the plan is reconciled. DO YOUR REVISED EXHIBITS REFLECT THE EXF'ECTED INCREASE IN POWER SUPPLY COSTS? Yes, revised Exhibits through do. IS THE REVISED PSCR PLAN REASONABLE AND PRUDENT? Yes, I believe the revised PSCR plan is reasonable and prudent. DOES THIS CONCLUDE YOUR PREPARED TESTIMONY? Yes. Page

22 0 P- JUDGE STUMP: --- Is there anything else? MR. STANLEY: No, that's all, Your Honor. 7 0 JUDGE STUMP: All right. Thank you. hearing is concluded. (Proceedings concluded at :0 a.m.) This f 7 0 fl GERGER-MORETTI REPORTING --0

23 h f- f CERTIFICATE I, Julie A. Fox (CSR-), do hereby certify that I reported stenographically the foregoing proceedings had in the above-entitled matter, being Case No. U- before Barbara A. Stump, Administrative Law Judge, at the Michigan Public Service Commission, Mercantile Way, Lansing, Michigan, on Tuesday, August, 00; and that the foregoing transcript constitutes a true and correct transcript of my said stenographic notes:, Dated: September, 00 GERGER-MORETTI REPORTING --0