2018 General Rate Case. Transmission & Distribution (T&D) Volume 9 - Poles

Transcription

1 Application No.: A.1-0- Exhibit No.: SCE-0, Vol. Witnesses: C. Fanous (U -E) 01 General Rate Case Transmission & Distribution (T&D) Volume - Poles Before the Public Utilities Commission of the State of California Rosemead, California September 1, 01

2 SUMMARY This chapter describes SCE s activities related to poles, which include: 1. Inspection and remediation of poles as part of the Pole Loading Program;. Inspection and remediation of poles as part of the Deteriorated Pole program; and. Other T&D activities such as Joint Pole credits and wood pole disposal. This exhibit presents SCE s requests for $ million in O&M expenses for the 01 Test Year and $1, million in capital expenditures from Poles O&M Expenses 01 Forecast (Total Company Constant 01 $Millions)

3 Poles Capital Expenditures Forecast (CPUC-Jurisdictional Only Nominal $Million)

4 SCE-0: Transmission & Distribution (T&D) Volume - Poles Table of Contents Section Page Witness SUMMARY OF POLE TESTIMONY...1 C. Fanous A. Overview...1 B. Comparison of Authorized 01 to Recorded Costs... C. Summary of O&M Request... D. Summary of Capital Request... E. Risk factors, Safety, Reliability... F. 01 GRC Decision Requirements... POLE LOADING PROGRAM... A. Background... B. Changes to Pole Loading Methodology Overview of Changes and Expected Impact.... SPIDACalc Selection Process.... Identification of Areas for Improvement: Review of Software Performance After Deployment...1. Technical Summary of Changes...1. Development and Implementation of Software Improvements...1. Recalculation Scope...1. Forecast Remediation rates...1 C. Pole Loading Program O&M Expenses Pole Loading Program Assessment Variance Analysis...1. Pole Loading Program Assessment Cost Forecast...1. Pole Loading Program Repair Variance Analysis...0 -i-

5 SCE-0: Transmission & Distribution (T&D) Volume - Poles Table of Contents (Cont.) Section Page Witness. Pole Loading Program Repair Cost Forecast...1. Shareholder Costs... D. Forecast Capital Expenditures PLP-driven Pole Replacements.... Alternatives to Pole Replacement.... Coordination of Pole Replacements with Other Programmatic Work.... Transformer Replacements, PLP Portion.... Prefabrication, PLP Portion... DETERIORATED POLE PROGRAM...0 A. Background...0 B. Activity Description Replacements Driven by Program Inspections...0. Changes in the Intrusive Pole Inspection Program Standards...1. Restoration (steel stubbing).... Inspection-driven Replacements.... Replacements Driven by Non-Programmatic Activities.... Replacements Driven by Pole Loading Calculation Failures... C. O&M Cost Forecast...1 D. Deteriorated Pole Capital Replacements... POLE CAPITAL REMEDIATION UNIT COSTS... A. Pole Replacement Unit Cost Summary... -ii-

6 SCE-0: Transmission & Distribution (T&D) Volume - Poles Table of Contents (Cont.) Section Page Witness B. Unit Cost Variance Analysis Distribution Pole Unit Cost Analysis.... Transmission Pole Unit Cost Analysis... C. Unit Cost Forecast Development Distribution Pole Unit Cost Forecast...0. Transmission Pole Unit Cost Forecast...1. Steel Stubbing.... Summary of Unit Cost Forecasts.... Ongoing Efforts to Reduce Unit Costs... JOINT POLE ORGANIZATION AND ACTIVITY COST FORECASTS... A. Overview of Joint Use... B. General Discussion of Cost Sharing with Joint Owners and Renters Cost Recovery from Joint Owners.... Cost Recovery from Renters.... Evaluation of Current Cost Recovery Practices... C. Joint Pole O&M Credits... D. Joint Pole Organization (JPO) Expenses, Portion of FERC Account Joint Pole Organization Cost Forecast...0 E. Joint Pole Capital Credits Credit Forecast...1 OTHER POLE RELATED ACTIVITIES... -iii-

7 SCE-0: Transmission & Distribution (T&D) Volume - Poles Table of Contents (Cont.) Section Page Witness A. Wood Pole Disposal Cost Forecast... B. Pole Related Expense... CONTINUATION OF THE POLE LOADING AND DETERIORATED POLE PROGRAMS BALANCING ACCOUNT... SUMMARY OF GRC ACCOUNTS...0 A. GRC Account B. GRC Account C. GRC Account.1... D. GRC Account iv-

8 SUMMARY OF POLE TESTIMONY A. Overview This volume will cover SCE s proposals for Pole related activities. This includes the Deteriorated Pole Program, which inspects and remediates poles in compliance with General Order 1 (GO 1). It also includes the Pole Loading Program (PLP). The Pole Loading Program is an inspection and remediation program that identifies poles for repair or replacement that do not meet safety factor requirements of General Order and SCE s internal design and construction standards, including wind loading in high wind areas of our service territory. This volume also covers other pole expenditures primarily related to the overall activities within T&D such as Joint Pole credits and wood pole disposal costs. The pole programs at SCE address major safety and reliability risks, and compliance requirements. While the Deteriorated Pole program has been active since 1, the Pole Loading Program was only initiated in 01, and adopted in SCE s 01 GRC. There have been notable enhancements in our pole programs since the 01 GRC. In 01, SCE engaged an experienced meteorological engineering firm to perform a system-wide wind study based on a scientific evaluation of historical wind events. The result of this wind study is that SCE added a new pounds per square foot wind loading specification in certain areas and the wind loading criteria in many other areas was increased. The revised wind loadings were implemented in March 01. Furthermore, we have updated the remediation criteria for deteriorated poles, and leveraged the risk evaluation framework described in SCE-0, Volume 1, in evaluating those criteria. SCE also enhanced the pole loading assessment methodology, and evaluated alternatives to pole replacement to strengthen poles. This testimony describes the impact of these changes on the scope and cost of the programs as follows: Section II outlines changes to the Pole Loading Program methodology, and forecasts expenses and capital expenditures based on those changes Section III describes updated remediation criteria for the Deteriorated Pole Program, and forecasts expenses and capital expenditures based on those new criteria Section IV provides a detailed analysis of historical and forecast trends in unit costs utilized in Pole Loading Program and Deteriorated Pole Program forecasts, including improvements driven by alternative remediations and other efficiencies 1

9 Sections V and VI describe forecasts associated with the Joint Pole Organization and other activities Sections VII and VIII discuss SCE s proposal to continue balancing account treatment for the Pole Loading Program and Deteriorated Pole Program, and summarizes O&M expenses presented in this volume B. Comparison of Authorized 01 to Recorded Costs This section compares the amounts authorized by the Commission in the 01 GRC to 01 recorded O&M and Capital spend. Figure I-1 Poles 1 01 GRC Authorized Variance Summary 01 O&M (Total Company - Constant 01 $Millions) 0 0 $0 $ ($) ($) ($) $ $ 0 01 Request 01 Authorized Assessments Repairs & Related Expense Instrusive Inspections Joint Pole 01 Recorded Joint Pole Intrusive Inspections Repairs & Related Expense Assessments 1 Refer to WP SCE-0, Vol., pp. - (O&M Authorized vs. Recorded).

10 SCE performed approximately,000 fewer assessments than originally forecasted for the Pole Loading Program in 01, which led to significantly fewer repairs. Furthermore, the repair rate was less than the % forecast in the 01 GRC. Also, there was a delay in completing repairs as discussed in Section III.B.. Lastly, $1. million associated with planning the PLP remediation work that was forecast as O&M expense in the 01 GRC was later determined to be a planning activity and therefore not recorded to expense in 01. The combined impact of fewer assessments and fewer repairs drove the majority of the variance between authorized and recorded expense. 0, forecast for 01 (SCE-0, Vol. 0, Part 01 GRC testimony), compared to 1, performed, a difference of,. Furthermore, a portion of the spending was funded by shareholders as discussed in Section II.C.. Therefore, those costs are not shown in the recorded costs.

11 Figure I- Pole Replacement 01 GRC Authorized Variance Summary 01 Capital (CPUC-Jurisdictional Nominal $Millions) 00 $0 00 $1 $ 00 $ ($) ($) 00 $ Request 01 Authorized Deteriorated PLP Pole Pole Replacements Replacements Joint Pole Credits Other 01 Recorded Other Joint Pole Credits PLP Pole Replacements Deteriorated Pole Replacements 1 SCE s 01 recorded programmatic pole replacement volumes closely matched the forecast. However, transmission pole replacements represented a larger percentage of the total replacements than anticipated. This increased the recorded costs. In addition, both transmission and distribution pole replacement unit costs increased relative to forecasts, which also led to an increase in recorded costs. The mix of replacements under the Deteriorated Pole Program and Pole Loading Program also differed from the forecast for each program (Table I-1). Pole loading replacements were less than the forecast due to fewer assessments being completed. Deteriorated pole replacements increased relative to Refer to WP SCE-0, Vol., pp. - (Capital Authorized vs. Recorded). Includes expenditures associated with the Aged Pole program. This was primarily due to an increase in intrusive inspection failure rates as discussed in Section III.B..

12 forecasts. The majority of the variance was driven by pole replacements originally scheduled for 01 that were shifted into 01 scope due to operational circumstances. These drivers are discussed in more detail in the related sections of testimony that follow. Table I-1 Total Programmatic Pole Replacements, Forecast vs. Recorded Total, GRC Forecast Replacements PLP,000,000,000 Det Pole,00,00,,0 Total, All Programs,00,00, 1,0 Recorded Replacements PLP -,0, Det Pole 1,1 1,0,1,1 Total, All Programs 1,1 1,, 0,0 Forecast vs. Recorded Variance PLP - (,01) (1,) (1,0) Det Pole,1, 1,0,1 Total Variance,1,,01 C. Summary of O&M Request Table I- Pole O&M Activities (Total Company Constant 01 $000) Activity 01 Forecast Pole Loading Program Assessments $,0 Pole Loading Program Related Expense $,01 Pole Loading Program Repairs $, Intrusive Pole Inspections $, Joint Pole Credits -$, Joint Pole Organization $, Total $, These unit counts exclude replacements associated with the Aged Pole program.

13 D. Summary of Capital Request Table I- Pole Capital Activities (Total Company Nominal $000) Description WBS/Activity Group Pole Loading Distribution Pole CET-PD-IR-PD,,,1 1, 1,1 Replacements Pole Loading Transmission Pole CET-PD-IR-PT,0 1,,,,0 Replacements Transformer Capital Expenditures, CET-PD-OT-TR,0,0,0,1, PLP Portion Prefabrication Capital CET-PD-OT-PF-PL,0,,0,1,1 Expenditures, PLP Portion Distribution Deteriorated Pole CET-PD-IR-DP 1,1 1,0 1, 1,,0 Replacement and Restoration Transmission Deteriorated Pole CET-PD-IR-TR,,1,,, Replacement and Restoration Pole Capital Savings CET-OT-OT-OX (,00) (1,) (1,1) (1,) (,) Joint Pole Capital Credit, CET-PD-CR-JD (,1) (1,1) (0,) (,) (,) Distribution Joint Pole Capital Credit, CET-PD-CR-JT (,00) (,1) (,) (,1) (,0) Transmission Wood Pole Disposal CET-PD-OT-WP,,1,,0, Total $0,1 $, $1, $,1 $,

14 Table I- Pole Capital Activities (CPUC-Jurisdictional Nominal $000) Description WBS/Activity Group Pole Loading Distribution Pole CET-PD-IR-PD,,,1 1, 1,1 Replacements Pole Loading Transmission Pole CET-PD-IR-PT, 1,,1,, Replacements Transformer Capital Expenditures, CET-PD-OT-TR,0,0,0,1, PLP Portion Prefabrication Capital CET-PD-OT-PF-PL,0,,0,1,1 Expenditures, PLP Portion Distribution Deteriorated Pole CET-PD-IR-DP 1,1 1,0 1, 1,,0 Replacement and Restoration Transmission Deteriorated Pole CET-PD-IR-TR,1 0,1,,, Replacement and Restoration Pole Capital Savings CET-OT-OT-OX (,00) (1,) (1,1) (1,) (,) Joint Pole Capital Credit, CET-PD-CR-JD (,1) (1,1) (0,) (,) (,) Distribution Joint Pole Capital Credit, CET-PD-CR-JT (,00) (,1) (,) (,1) (,0) Transmission Wood Pole Disposal CET-PD-OT-WP,,1,,0, Total $,0 $1, $1, $,0 $, Table I- Summary of Forecast and Recorded Pole Replacement Counts Recorded Forecast Deteriorated Poles Distribution Replacements,1,,0,00 1, 1,0 1,1,1,1,1 Transmission Replacements 1,1,01,0,1,1,,, Deteriorated Pole Total,, 1,1 1,0,1 1, 1,00 1, 1,1 1, Pole Loading Distribution Replacements,1,,00,,, Transmission Replacements 0 Pole Loading Total,0,,,1,1,1 Total Poles Mitigated,, 1,1 1,,,,0 1,0 1,0 1,0 Total Distribution Poles,1,,0,,1 1,0 1, 1,1 1,1 1,1 Total Transmission Poles 1,1,01,1,1,,,, These counts exclude replacements associated with the Aged Pole program and steel stubbing.

15 E. Risk factors, Safety, Reliability As discussed in SCE-01, SCE continues to improve and use risk-informed planning to identify, assess, and prioritize risks; identify and evaluate ways to mitigate risk; and help develop spending plans to support risk mitigation. As part of this effort, and consistent with the Commission s direction in the Safety Model Assessment Proceeding (S-MAP), SCE has conducted detailed analyses to incorporate a risk-informed approach in evaluating pole program activities. The risk modeling framework developed for pole programs and the degree to which this analysis influenced operational decisions related to pole programs is discussed in SCE-0 Volume 1 on Operational Overview and Risk-Informed Decision Making. F. 01 GRC Decision Requirements The Commission adopted SCE s proposed pole related programs and costs with some modifications in D The Commission expressed some concerns that SCE had not fully evaluated all of the options available on remediating poles, and needed to do more work on the recovery of costs from the other owners of jointly-owned poles and companies that rent space on poles. The Commission set some requirements that SCE must meet in the 01 GRC. 1. SCE will provide a review of its efforts on recovery of costs from other companies that either jointly own or rent space on poles that must be replaced or repaired. (See V.B below.). SCE will provide information on the number of jointly owned poles, the number of pole renters (See V.A below), and describe the arrangements for cost sharing with other parties. (See V.B below). SCE will provide additional analysis on options to remediate overloaded poles in ways other than repair or replace, and will specifically address the issues of removing attachments, strengthening poles, and increasing the recovery of costs from pole users (See II.D., III.B., IV.C. and V.B below).. SCE will address unauthorized attachments by providing quantitative information and describing their efforts to minimize their impact. (See V.C below.) D Decision Incorporating a Risk-Based Decision-Making Framework into the Rate Case Plan and Modifying Appendix A of Decision

16 If SCE believes a Commission proceeding is needed to address issues raised by joint ownership and renters, SCE need not wait for its next GRC. (See V.B. below.) On April, 01, the Commission held an En Banc to discuss a variety of issues related to poles, including those raised in () above. Included in the 01 GRC was an SCE proposal to systematically replace older poles. This program, called the Aged Pole program, was designed to transition and prepare the company to the greater level of annual pole replacements we were forecasting. The Commission partially accepted our proposal, but determined that the Company had not fully evaluated other alternatives, and disallowed part of our spending for the years 01 and 01. SCE s proposal on this previous disallowance for the 01 GRC is addressed in SCE-0, Volume by Mr. Gunn. As part of its implementing advice letter for the 01 GRC decision, SCE included a section providing a definition of the Pole Loading and Deteriorated Pole Balancing account, Part J of the Preliminary Statement. This included a reporting requirement for SCE s 01 GRC filing, to provide recorded information on spending for the Deteriorated Pole and Pole Loading programs, and information on the number of repairs made and poles replaced. This information is provided in various sections of this testimony. D.1--01, p., 1; Ordering Paragraph. D.1--01, p., Conclusion of Law.

17 POLE LOADING PROGRAM A. Background The Pole Loading Program (PLP) was adopted in the 01 General Rate Case as a comprehensive way to address pole overloading issues. The program assesses T&D s poles 1 to identify and repair or replace those poles that do not meet G.O. minimum safety factors or, to the extent higher, SCE s internal safety standards. PLP assessments began in January 01, with the initial focus on highest-risk areas including high fire regions. 1 SCE expects to complete assessments in high fire areas in 01. The pole remediation phase is expected to continue for 1 years until 0. Under PLP, a pole will be replaced between hours and months depending on the safety factor and its location relative to high fire areas. On a small percentage of poles, the pole can be made compliant by installing or redesigning a down guy. 1 The main risk associated with poles that do not meet minimum safety factor requirements is that they may break or fail at wind loads below the minimum design wind loads for that geographic location, resulting in an increased risk to public safety and system reliability. SCE s design and construction standards require that newly constructed poles meet the safety factors specified in G.O. at the time of installation, in addition to any SCE internal design standards that may exceed minimum regulatory requirements. SCE s internal standards also require that a pole loading calculation be performed whenever equipment is attached or modified that will materially increase the loading on the pole. 1 SCE s facilities are designed and constructed to meet the standards applicable at the time of installation. G.O. requires that utility poles maintain a certain safety factor. This safety factor calculation is called pole loading. 1 PLP will include all wood, light duty steel, and other non-engineered structures. Engineered steel poles and transmission towers are excluded. 1 SCE has defined the high fire regions to exceed the areas defined by the Commission in D and D , which adopted, on an interim basis, the CalFire FRAP map extreme and very high fire threat zones for Southern California. 1 A down guy is a guy wire anchored to the ground. 1 CPUC General Order, Rule. defines a material increase as follows: a material increase in load is an addition which increases the load on a structure by more than five percent per installation, or ten percent over a 1-month span, of the electric utility s or Communication Infrastructure Provider s current load.

18 B. Changes to Pole Loading Methodology 1. Overview of Changes and Expected Impact SCE began using SPIDACalc as the enterprise-wide tool to calculate pole loading safety factors for its poles in April of 01. In December of 01, SCE engineering identified some potential improvement areas in SPIDACalc s safety factor calculation methodology to increase its accuracy while maintaining compliance with safety factors. 1 SCE worked with the software provider to develop the scope of the improvements, which were first incorporated into the SPIDACalc software in May of 01 and fully deployed in the production version of the improved software in November of 01. The changes enabled SPIDACalc to more accurately model poles in the field, and as a result significantly reduced the rate at which poles fail pole loading calculations. SCE s initial estimates suggested that remediation rates will be approximately % 1 compared to the overall remediation rate of approximately % (% requiring repair and 1% requiring replacement) forecast in 01 GRC testimony. 1 SCE met with the Commission staff to discuss this impact on April 1, 01, and also discussed the impact of the change at the Pole En Banc held on April, 01. When SCE understood the impact of this software release in late August of 01, SCE instructed its pole loading contractor to hold all work not already provided to SCE starting on September 1, 01, so it could be reassessed using the new version of the software. In addition, SCE reassessed all poles at Gate 1 of the planning and execution process: poles identified for replacement that had not yet been released to design. The reassessment was later expanded to poles in various stages of planning and design. As of March of 01, the recalculation effort included approximately 0,000 poles, as discussed at the April 1, 01 meeting with Safety and Enforcement Division. 1 The technical details of the changes and timeline of the development and deployment process are summarized below.. SPIDACalc Selection Process The changes described above are SCE s latest improvements to pole loading methods and processes driven by evolving GO requirements. In August of 00, D ordered that pole loading be performed whenever adding facilities could materially increase load, and added a 1 Throughout this volume, when the term compliance is used with respect to pole loading safety factors, compliance refers to compliance with General Order and SCE internal pole loading standards. 1 Refer to WP SCE-0, Vol., pp. - (August_01_SCE_SPIDACalc_Impact_Assessment). 1 Refer to WP SCE-0, Vol., pp. - (01 SCE Pole Loading Study). 1 Refer to WP SCE-0, Vol., pp. - ( SED Briefing).

19 requirement that pole load calculations be retained for ten years. In January of 01, D further increased the record retention requirement for pole load calculations to the life of the structure. SCE initiated the Pole Loading Application Replacement (PoLAR) initiative in 01 to identify a pole loading software solution that could meet these requirements in a production environment, in which planners would perform a large volume of pole loading calculations. As described in SCE s 01 GRC testimony, Wind Load Estimator was deployed in 001 to automate the hand calculation of bending moment at the ground line as described in Appendix F of GO, and to enable the calculation of safety factors for guy wires. 0 While this improved upon the engineering tables previously used, there were scenarios where such methods could not accurately calculate safety factors. SCE sought a replacement for the Wind Load Estimator tool which employed modern calculation techniques, considered safety factors not only at the ground line but also along the entire length of the pole, and came pre-configured with SCE poles, arms, wires, and equipment to enable planners to quickly and accurately perform pole loading analyses. The volume and nature of SCE s work requires a software package and platform simple enough to be used by non-engineers, capable of hundreds of concurrent users, and robust enough to identify noncompliant poles with high confidence. These requirements necessitated trade-offs that are incorporated into these software packages. To reduce the risk of not identifying noncompliant poles, these software packages use conservative assumptions while requiring less technical sophistication from the operator. Several software packages were evaluated in a Request for Proposal (RFP) process, which detailed technical, business, and integration requirements to continue to meet GO requirements. These packages included SPIDACalc, O-Calc, and PLS-CADD/LITE. The technical requirements of the RFP included the performance of pole loading calculations in various scenarios, including bending, buckling, incorporating pole damage, guying, and varying pole types. In its initial evaluation of software packages identified in its RFP process, SCE determined that SPIDACalc provided the best balance among accuracy, simplicity, and conservatism. SCE selected the SPIDACalc software package and began its utilization in April of 01. SCE requested cost recovery for purchasing and deploying SPIDACalc in its 01 GRC testimony, 1 and the request was authorized in D SCE-0, Vol. 0, Part, p. (01 GRC). 1 SCE-0, Vol. 0, Part (01 GRC). 1

20 Identification of Areas for Improvement: Review of Software Performance After Deployment In 01, SCE planners noted that sometimes SPIDACalc called for larger pole sizes than planners were anticipating to meet minimum safety factor requirements. However, the wind study implemented in March 01 updated and expanded the boundaries of high-wind areas throughout SCE s service territory, and introduced new, higher wind loading specifications, which also affected safety factors and pole sizes. This made it difficult to isolate the impact due to the use of SPIDA. In July 01, SCE engineers began to evaluate how SPIDACalc handled the design situations in which these results were obtained. The review included a detailed re-assessment of pole types representing a variety of configurations, including those associated with the unexpected SPIDACalc results. SCE engineers developed models of these poles using the full engineering version of PLS-CADD, rather than PLS- CADD/LITE tested in the original RFP. PLS-CADD required additional field measurements and a much longer model development process, which could take an engineer 1 to days per pole compared to less than an hour for a planner using SPIDACalc. The engineering version of PLS-CADD was not considered in the RFP because it was not suitable for performing large volumes of assessments by planners. In addition, all the software packages considered used broadly similar assumptions, which are described in the following section. These assumptions were considered appropriate by the industry for performing pole loading assessments. Since SCE sought to evaluate the impact of these common assumptions, a standard engineering tool such as PLS-CADD had to provide a basis for comparison. When summarized in December of 01, the evaluation determined that SPIDACalc calculated a lower safety factor in some of the analyzed poles examined when benchmarked against the full engineering version of PLS-CADD. These results reflected conservative assumptions of the software, as discussed below. As a result of these findings, SCE encouraged SPIDA to incorporate enhancements recommended by SCE into the SPIDACalc upgrade and release cycle. While these changes were expected to impact reject rates and pole classes required in certain situations, the general prevalence of these configurations in SCE s system was not well understood, and the overall impact of the changes on the program was not yet clear. Pole sizes are categorized by the pole class, which is determined by a pole s circumference at the base and top. 1

21 Technical Summary of Changes From its initial deployment in April 01 through November 01, SPIDACalc used a pole loading methodology similar to that implemented in comparable software packages. These options surpass the hand-calculation methods shown in GO Appendix F in terms of accuracy, ease of use, and speed. However, in certain circumstances each incorporated conservative assumptions regarding the role of wire tension in balancing the forces exerted on poles. Improvements to SPIDACalc include the integration of geometric nonlinear modeling, displacement-based loading, dynamic wire tensions, and the supporting data needed to enable these capabilities. Together these improvements represent a significant increase in sophistication relative to the software packages considered during the original RFP process. A more technical description of the effect of wire tension on the pole and the changes that were made to more accurately model the pole is in included in workpapers.. Development and Implementation of Software Improvements Every software change requires a development and testing process to confirm accuracy, adequate performance, and integration with back-end systems of record. This process is described in this section. Based on the findings of the engineering study, SCE worked with the SPIDA company from December 01 through the end of March 01 to develop improvements that would increase the accuracy of the model in these design situations. In April 01, a test version of SPIDACalc was provided for re-evaluation of the poles used in the initial engineering study. SCE Engineering determined that the software still required additional development to correctly model what are called dynamic wire tensions. Additionally, the database of equipment characteristics used to build models, called a client file, was updated to improve the accuracy of equipment characteristics represented in the models. In May of 01, the initial delivery of dynamic wire tensions for the most common SCE conductors were provided to the SPIDA company, and work began on compiling dynamic tension values for telecom and cable TV spans. Two improvements were incorporated in SPIDACalc Version.0, which was released on May 1, 01, to more accurately model the effect of wire tension on the pole. The new capabilities became available not only to SCE but to other utilities that employed SPIDACalc software for pole Refer to WP SCE-0, Vol., pp. -1 (Technical Summary of SPIDACalc Changes). In order to fully update the tensions in the client file, Engineering had to set up and run a tension calculation program approximately,000 times. 1

22 loading. However, the dynamic tension data for communication company wires and some SCE wires was not yet complete, so these improvements could not yet be used in the production version of the software. This majority of the data was compiled and provided to SPIDA in June 01. The data was also provided to SCE s assessment vendor so that they could determine the level of effort required to adopt the new client file. The final data was delivered to SPIDA early August 01. SPIDA then configured the data so that it could be used in SPIDACalc, and then provided the configured data to the assessment vendor so that the assessment vendor could make necessary updates in its systems. In July 01, testing of the software determined that reject rates would drop when the new version was deployed. Accordingly, in August 01, SCE performed an assessment of approximately 1,00 poles, which suggested that reject rates with the new software and client file may be approximately %. Testing of the new capabilities and the required client file also revealed significant performance impacts: sometimes, a calculation that previously could have been completed in less than four minutes would take more than an hour to complete. SCE sought to balance the benefit of lower remediation rates against the risk of delaying the identification and remediation of poles with noncompliant safety factors, and impeding the design process and delaying other maintenance and infrastructure replacement work that required a pole loading assessment. SPIDACalc assessments were necessary not only for the PLP program, but for any maintenance or infrastructure replacement activity in any program that would materially impact the load on a pole. For these reasons, SCE decided on August, 01 to delay implementation of the client file until performance issues could be addressed. An improved version of SPIDACalc which addressed these issues was approved on October, 01, and became effective on November 1, 01.. Recalculation Scope While performance issues were being addressed, SCE determined that the benefit of reduced remediation rates would justify reassessing certain in-progress poles when the updated SPIDACalc version was ready for deployment. SCE began by instructing the PLP assessment vendor to hold all poles assessed, and placed poles identified as rejects not yet released to design (Gate 1 see Table II- for gate definitions) as of September 1, 01, in the queue for reassessment when the new SPIDACalc became available. On December 1, 01, SCE added poles released to design (Gate ) to the queue, and on March, 01, poles in various stages of design and review prior to being released to Refer to WP SCE-0, Vol., pp. - (August 01 SCE SPIDACalc Impact Assessment). 1

23 construction (Gates and ) were added. As of March 01, approximately 0,000 pole replacements were included in the recalculation effort. Table II- Summary of Pole Gate Movement Gate 1 Identified for Remediation Poles identified for repair or replacement, poles are grouped and work order number is assigned Gate Released for Design Poles assigned to design resource Gate Design Approval Work orders in approval process, design completed, Joint Pole Agreements initiated, environmental, rights checks/railroad request submitted Gate Pole Program Clearance Work orders approved and pending release to construction based on all constraints being cleared Gate Released to Construction Work scope is assigned to construction resources and in scheduling process for final execution Gate Installation Pole is installed in field and considered used and useful. Forecast Remediation rates Initial reassessments on approximately 1,00 poles compiled in August 01 suggested that assessment reject rates could fall to approximately %. This assessment is the basis for SCE forecasts in this GRC. In addition, approximately,00 down guys with noncompliant safety factors were included in the recalculation effort. Refer to WP SCE-0, Vol., pp. - (August 01 SCE SPIDACalc Impact Assessment). 1

24 C. Pole Loading Program O&M Expenses PLP operating expenses are composed of pole assessment cost and pole repair costs. Pole loading assessments are performed to determine a pole s safety factor. Pole loading assessments require a field assessment and a desktop analysis to calculate each pole s safety factor. Inputs include the physical attributes of the pole, its attachments, and local weather conditions. The field assessment measures or validates the pole s attributes (such as species and type) and the size and equipment it supports. Collecting the data to perform a pole loading calculation requires an experienced field assessor. The field assessor must be able to access poles throughout SCE s service territory, including those in remote terrain and other difficult to access locations, such as customer backyards, in order to take accurate measurements. Assessors must be close enough to the pole to measure the ground line circumference and have sufficient room around the pole to measure attachment heights and span lengths. Photographs are also taken of each pole. The desktop analysis uses SPIDACalc to calculate the pole s safety factor. 1. Pole Loading Program Assessment Variance Analysis Table II- shows the historical cost and number of assessments completed in 01 and 01. These volumes are somewhat lower than SCE s forecast in its 01 GRC (A.1--00). When the forecast was made in early 01, SCE was in the early stages of planning the program. The forecast had called for 0,000 assessments per year for years beginning in 01. SCE began the Pole Loading Program in January 01 and continued ramping up the volume throughout the year. Due to the time to ramp up resources, SCE completed 1,1 assessments in 01. In 01, SCE considered extending the seven-year assessment plan and temporarily adjusted its target assessment rate. SCE considered the challenges of the rapid ramp-up and the regulatory uncertainty associated with SED s and ORA s 0 support for a -year assessment plan. In addition, SCE weighed the relative risk impact of extending the assessment timeframe for lower-risk poles while maintaining a shorter timeframe for higher-risk poles. 1 In 01, SCE completed 1,1, of the 1,1 assessments were completed under SCE s Settlement of the Malibu Fire OII as shareholder-funded work. Therefore, those costs are not shown in the recorded costs of this volume. Refer to WP SCE-0, Vol., pp. 1-1 (SED Letter RE: D.1--01, OP 1 and 1). 0 See A Exhibit ORA-0, page 1. 1 SCE-1, Vol. 0, Pt., page (01 GRC, Rebuttal Testimony). 1

25 assessments an assessment level consistent with a -year timeframe. When the 01 GRC decision was issued in November 01 authorizing a seven year timeframe, SCE revised its assessment forecast. As detailed in Table II-, SCE intends to complete 00,000 assessments in 01, 0,000 in 01 and 0,000 in 01. Pole assessments are performed by contract personnel. Therefore, most of the costs recorded for this activity are non-labor expenses. The cost per assessment has stayed relatively constant throughout the recorded period and is expected to stay constant throughout the forecast period. 1, and, of the 1,1 were completed under the Malibu and San Gabriel Windstorm Settlements, respectively as shareholder-funded work. Therefore, those costs are not shown in the recorded costs of this volume. 1

26 Table II- Pole Loading Program Assessments, Portions of GRC Account.1 and.1 Recorded and Adjusted 0-01/Forecast (Constant 01 $000) Recorded Forecast Labor $ $ $ $0 $ $ $ $ Non-Labor $ $ $ $, $1,0 $ $ $ Subtotal.1 $ $ $ $, $1,1 $ $ $.1 Labor $ $1,0 $ $,1 $, $1, $1, $1, Non-Labor $ $ $1,01 $1, $, $0,0 $,0 $,1 Subtotal.1 $ $1, $, $1, $1, $, $, $,0 Total $ $1, $, $1,1 $1,1 $, $, $,0 Labor $ $1,0 $ $, $, $1, $1, $1, Non-Labor $ $ $1,0 $1,0 $, $0,0 $,0 $,1 Assessments ,1 1, 00,000 0,000 0,000 Cost Per Assessment Ratio of Labor to Total % % 1% 0% % % % Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast 1. Pole Loading Program Assessment Cost Forecast Pole loading assessments under PLP are primarily driven by contract costs of vendors conducting the assessments; a smaller amount of SCE labor cost is included for the assessment staff. The assessment staff works with the vendor, manages the data exchange between the vendor and SCE, updates SCE s systems with the assessment results and performs field checks on certain poles. SCE s assessment contract calls for contract rates to decline by approximately 1.% per year from 01 through 01 when the contract expires. Refer to WP SCE-0, Vol., pp. 1-. Total assessments were forecast as Distribution. In reality, there will be a mix of Distribution and Transmission. Since the price per assessment is the same for both distribution and transmission this has no impact on the expected spend. Refer to Confidential Workpaper: SCE-0, Vol., p. 1- (PLP Assessment Forecast). 1

27 Pole Loading Program Repair Variance Analysis Repair involves the design and installation or modification of guy wires. Design involves determining the appropriate size and placement of a guy wire(s) such that the design conforms to SCE design standards and produces a compliant safety factor. Then a drawing is developed that shows the location of the pole that must be repaired, the placement of the guy on the pole and the guy specifications. This drawing is be used by construction to perform the work in the field. Environmental review and land rights checks, when needed, are conducted as part of the design process. Once the design work is completed, the repair notification is sent to construction. The construction of the guy may be completed by either an SCE crew or a contractor. SCE completed repair designs and constructed 0 repairs under the pole loading program in 01. In 01, SCE completed, repair designs and constructed repairs under the pole loading program. The number of repairs required is directly related to the number of assessments completed. Just as the number of assessments ramped up over 01, the number of repairs ramped up as well. Repairs may be completed one or two years after the assessment, depending on whether the pole is in a high fire or non-high fire area. SCE is responsible for guy repair at electrical levels only. If guy repairs are required at communication levels, SCE will notify the communication company. The communication company is responsible to make the repair and is solely responsible for its cost of repairs. 1 repair design was completed under the Malibu Settlement as shareholder-funded work. Therefore, the costs of that repair are not shown in the recorded costs of this volume. 0 repair designs and constructed repairs were completed under the Malibu Settlement as shareholderfunded work. Therefore, those costs are not shown in the recorded costs of this volume. 0

28 Table II- Pole Loading Program Repairs, 0 Portion of GRC Account 1.1 and.1 Recorded and Adjusted 0-01 / Forecast (Constant 01 $000) 1 Recorded Forecast Labor $ $ $ $1 $ $ $ $ Non-Labor $ $ $ $ $1 $ $0 $ Subtotal 1.1 $ $ $ $1 $ $ $0 $.1 Labor $ $ $ $1 $1 $ $ $ Non-Labor $ $ $ $ $ $, $, $, Subtotal.1 $ $ $ $ $ $, $, $, Total $ $ $ $ $ $, $,1 $, Labor $ $ $ $0 $ $ $ $ Non-Labor $ $ $ $ $ $, $,1 $, Ratio of Labor to Total % % 0% 0% 0% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast 1. Pole Loading Program Repair Cost Forecast Total repair costs are expected to increase relative to 01 levels as the initial ramp-up in assessments is reflected in repair activity. The current repair rates for poles in high fire areas and nonhigh fire areas are 1.% and 1.1%, respectively, which are rates based on the new version of SPIDACalc. The repair rates were applied to the assessment forecast to develop a forecast number of repairs. The costs to complete the drawing and repair are forecast using historical values as they are Refer to WP SCE-0, Vol., pp Repairs were forecast as contract non-labor. In reality, there will be a mix of contract and SCE labor. This not expected to have an impact on the total cost because the cost per repair used in the forecast was based on the historical cost per repair which is a mix of contract and SCE labor. 1 Refer to WP SCE-0, Vol., pp. 1-1 (PLP Distribution Repair Forecast and PLP Transmission Repair Forecast). Refer to WP SCE-0, Vol., pp. 1-1 (PLP Repair Unit Forecast). 1

29 expected to remain constant over the forecast period. Unit costs are based on the recorded costs to design and construct repairs; the total unit cost for design and repair is $1,1 per pole.. Shareholder Costs In D.1-0-0, the Commission approved a settlement agreement (Malibu Settlement) between the SED and SCE resolving issues raised in the Malibu Canyon Fire OII, I The Malibu Settlement required SCE to spend $1 million of shareholder funds to perform pole loading inspections and remediation in the Malibu area. The Commission further required SCE to perform work along Malibu Canyon Road in conjunction with AT&T Mobility, LLC, Verizon Wireless, and Sprint Communications Company under their settlement with the SED. In D , the Commission approved a settlement agreement (San Gabriel Windstorm Settlement) between the SED and SCE resolving issues raised in I The San Gabriel Windstorm Settlement required SCE to spend $ million of shareholder funds to reduce the probability of overloaded poles. The costs associated with the Settlement Agreement work are not included in the recorded amounts shown here. The unit counts associated with shareholder-funded work are noted separately in the appropriate sections. D. Forecast Capital Expenditures 1. PLP-driven Pole Replacements The annual volume of PLP-driven pole replacements is determined by the pace of assessments, assessment remediation rates, and the rate at which these replacements are completed. The expected remediation rates for assessments going forward are described in Section II.B. above. After assessments, the poles identified as needing replacement are assigned due dates based on severity. The due dates range from poles which must be made safe within hours to poles that can be scheduled for replacement within months. Sometimes, poles scheduled for replacement may not be remediated due to execution constraints, such as environmental or permitting requirements or limited physical access to the pole due to adjacent structures or remote locations. While SCE goes to great lengths to work with agencies and Refer to WP SCE-0, Vol., pp. 1-1 (PLP Distribution Repair Forecast and PLP Transmission Repair Forecast). D.1-0-0, issued //01, OP 1.

30 1 1 property owners to get access to poles, a percentage of poles may roll over from the scheduled year for remediation into the following year until these issues are resolved. In other cases, performance of work in one location may offer the opportunity to replace poles in the same location scheduled for replacement in future years. Those poles may be moved forward from their scheduled year and bundled with other work in the current year to achieve efficiencies. The table below summarizes the forecast rate of pole assessments, expected remediation rates, the volume of poles in the replacement queue, and replacements performed each year. The volume of poles replaced each year depends upon the priority levels of poles in the replacement queue, rollover of poles due to execution challenges, and bundling of poles as described above. The attached workpapers quantify these factors in detail. Forecast unit costs for replacement shown in Table II- are explained in Section IV below and summarized in workpapers. The benefits of bundling work and portfolio management are described in Exhibit SCE-0, Vol.. Refer to WP SCE-0, Vol., pp. 1-1 (PLP Detailed Replacement Forecast Volume). Refer to WP SCE-0, Vol., pp. 1-1 ( Pole Replacement Unit Cost Forecast Details).

31 Table II- Forecast Assessments, Identified Replacements, and Scheduled Replacement Volumes: Transmission and Distribution Assessments 00,000 0,000 0,000 0,000 0,000 Reject Rate Total % % % % % % Reject Count Total 1,000 1,00 0,00 0,00 0,00 Identified Prior to 01, 0,0, Poles in Queue,,1 1,1,0, Total Replacements,,,,0, Averaging 01-00,,,1,1,1 Distribution,,00,,, Transmission 0 Unit Cost, 01 $ Distribution $ 1,1 $ 1,0 $ 1, $ 1, $ 1, Transmission $, $, $, $, $, Total Cost, 01 $000 Distribution $, $,0 $,0 $,0 $,0 Transmission $, $ 1, $,1 $,1 $,1 1 Forecast capital expenditures in the PLP program are based on the forecast volume of replacements in Table II- and on the forecast unit costs discussed in Section IV.C below. The resulting forecast capital expenditures for PLP-driven distribution and transmission pole replacements are shown in Figure II- and Figure II-, respectively.

32 Figure II- Pole Loading Distribution Pole Replacements CET-PD-IR-PD Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) $,000 $,000 $,000 $0,000 $0,000 $0,000 $0,000 $0,000 $ Nominal $ - - -, 1,,,,1 1, 1,1 Constant 01$ - - -,0 1,,,0,0,0,0 Nominal $ Constant 01$ Refer to WP SCE-0, Vol., pp. -1. Refer to WP SCE-0, Vol., pp. 1- (CET-PD-IR-PD Distribution PLP Pole Replacement) and Table IV- for forecast unit costs, and Table II- for forecast unit volumes.

33 Figure II- Pole Loading Transmission Pole Replacements 0 CET-PD-IR-PT Recorded 0-01/Forecast (Total Company Constant 01 and Nominal $000) 1 $0,000 $,000 $0,000 $1,000 $,000 $,000 $ Nominal $ - - -,,0 1,,,,0 Constant 01$ - - -,, 1,,1,1,1 Nominal $ Constant 01$ 1 1. Alternatives to Pole Replacement SCE is evaluating the use of an Extended Truss (ET) to remediate poles that have a noncompliant safety factor. SCE is assessing whether the installation of the ET is a viable restoration method for poles with noncompliant safety factors. Since the ET will reach much farther up the length of the pole than a standard steel stub which may be used to restore poles that have internal degradation, new ET design and construction standards compatible with existing construction standards and required clearances must be developed. Furthermore, if SCE decides to move forward with the ET, additional time would be required to set up the ET in SCE s IT systems, coordinate with joint owners, train employees who will encounter the truss in the field, select and onboard vendors to install the truss and develop work management processes. Because SCE has not made a decision on the feasibility of the ET, and much work remains before that decision can be implemented, the forecast does not include ET remediation. 0 Refer to WP SCE-0, Vol., pp Refer to WP SCE-0, Vol., pp.-1-y (CET-PD-IR-TR CET-PD-IR-PT Transmission PLP Pole Replacement) and Table IV- for forecast unit costs, and Table II- for forecast unit volumes.

34 Coordination of Pole Replacements with Other Programmatic Work PLP program design and operations practices allow coordination with other programmatic work when possible. First, SCE has a replacement timeframe for certain PLP failures of up to months. This timeframe enables lower-risk PLP failures to be addressed with other planned work, which may occur prior to the replacement due date. Changes to the intrusive pole inspection remediation timeframes (see Section III.B.) will also permit bundling pole replacements with other planned pole replacements, or other programmatic work. For example, an overhead conductor replacement project may be combined with nearby deteriorated pole replacements. By grouping work, SCE will minimize customer outages and customer disruption. SCE expects the work to be completed more efficiently when grouped with other work in the same geographic area.. Transformer Replacements, PLP Portion Distribution transformer replacements are described in SCE-0, Volume ; a portion of these replacements are associated with pole replacements under the PLP program. We determined the PLP portion of distribution transformer replacements based on the ratio of PLP-driven transformer capital expenditures and PLP-driven pole replacements authorized in the 01 GRC decision (.1%). The resulting forecast for PLP-related transformer replacements is shown below. (Figure II-) As stated in 01 GRC testimony (SCE-0, Vol. 0, Part, p. 1) and D.1--01, p.. Refer to WP SCE-0, Vol, pp. 1-1 (PLP Driven Prefab and Transformer Replacements).

35 Figure II- Transformer Capital Expenditures, PLP Portion WBS Element CET-PD-OT-TR-PL Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) 1. Prefabrication, PLP Portion Capital expenditures for prefabrication are described in SCE-0, Volume ; a portion of these capital expenditures are associated with the PLP program. The PLP portion of prefabrication capital expenditures was forecast based on the ratio of PLP-driven prefabrication expenditures and PLPdriven pole replacements authorized in the 01 GRC decision (.%). The resulting forecast for PLP-related prefabrication expenditures is shown below. (Figure II-) Refer to WP SCE-0, Vol., pp. -1 and WP SCE-0, Vol, pp. 1-1 (PLP Driven Prefab and Transformer Replacements). These expenditures are not included in the pole balancing account. WP SCE-0, Vol, pp. 1-1 (PLP Driven Prefab and Transformer Replacements).

36 Figure II- Prefabrication Capital Expenditures, PLP Portion WBS Element CET-PD-OT-PF-PL Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) $,000 $,00 $,000 $,00 $,000 $,00 $,000 $1,00 $1,000 $00 $ Nominal $ ,,0,,0,1,1 Constant 01$ ,,00,,,, Nominal $ Constant 01$ Refer to WP SCE-0, Vol., pp. -1, and WP SCE-0, Vol., pp. 1-1 (PLP Driven Prefab and Transformer Replacements). These expenditures are not included in the pole balancing account.

37 DETERIORATED POLE PROGRAM A. Background Several factors drive inspection and replacement of SCE s over 1. million poles, primarily maintaining pole strength, which might be compromised due to pole deterioration or pole loading. The programs to assess and remediate pole deterioration are included in this section. The Pole Loading Program is discussed in Section II. SCE also performs pole replacements after storms, when vehicles or other external factors damage poles, or when poles must be relocated, to name just a few scenarios. The costs associated with these activities are included in the relevant accounts for those activities, and are not included here. This chapter discusses pole inspections, maintenance, and replacement for Distribution and Transmission poles due to deterioration. B. Activity Description 1. Replacements Driven by Program Inspections SCE established the distribution pole inspection program to comply with G.O. 1, which became effective in 1. G.O. 1 requires intrusive inspections for all poles at least 1 years old to be completed within years of program inception. Thereafter, it requires all poles to be intrusively inspected by the time they are -years old and then re-inspected at least once every 0 years. SCE completed its first cycle of intrusive inspections in 00. G.O. 1 defines intrusive inspections as involving movement of soil, taking samples for analysis, and/or using more sophisticated diagnostic tools beyond visual inspections or instrument reading. Intrusive inspections involve drilling into the pole s interior to identify and measure the extent of internal decay which is typically undetectable with external observation alone. SCE s inspection standards describe six types of inspections satisfying this definition which apply different combinations of digging, boring, and sounding depending on the type of pole and its setting. Intrusive inspectors may also perform a visual inspection on poles that are in the inspection grid but that are younger than 1 years old, or that have already had an intrusive inspection within the last years, to look for signs of obvious external damage such as damage from vehicles or woodpeckers. Poles due for inspection under G.O. 1 guidelines in any year are spread over SCE s 0,000 square-mile service territory, often requiring significant drive time between poles. Moreover, the number of inspections due any year can vary significantly from year-to-year, depending on the ages of the poles and when the last inspections were performed. This can lead to significant variation in the 0

38 number of pole replacements required from one year to the next. Both are inefficient for resource allocation. These inspections require inspectors with proper training and experience. Maintaining a stable inspection workforce is key to a successful intrusive inspection program. In 00, SCE performed inspections on a grid basis to reduce travel time per inspection and to levelize the number of inspections (and therefore replacements) required per year. Besides inspecting every pole due under the minimum G.O. 1 requirements, SCE inspected all poles within a defined area or grid during the same year. All poles receiving intrusive inspections within the grid will be due for their next inspection in the same future year. In 00, SCE also began transitioning to a -year inspection cycle that meets and exceeds G.O. 1 requirements and matches industry best practices. The other two California IOUs, SDG&E and PG&E, have also transitioned to -year pole inspection cycles. SCE performs both a visual and an intrusive inspection on every pole due for an intrusive inspection under G.O. 1. For poles not due for an intrusive inspection until the next inspection cycle, SCE only performs a visual inspection. A new pole might be installed within a grid three years after that grid underwent intrusive inspections; seven years later, all poles in that grid will be inspected again. To meet G.O. 1 requirements, this pole must be intrusively inspected at least once before the end of its th year. However, under the grid-based system it will be inspected twice, once at age and again at age 1. Here, SCE performs a visual inspection in the pole s th year and an intrusive inspection in its 1th year meeting G.O. 1 s requirement. SCE expects to complete its first grid-based cycle in 01. Completing this transition will cause lower cost per inspection, as shown in Table III-1. Maintaining a steady rate of inspections is necessary to maintain this cost advantage, as non-grid inspections are more expensive than grid-based inspections. The grid-based approach yields reduced inspection intervals with a less than proportional increase in average annual inspection costs. Shorter inspection intervals reduce prevalence and severity of pole decay.. Changes in the Intrusive Pole Inspection Program Standards Three changes were made to inspections standards since 01 that impact the recorded and forecast rates of pole replacement under the Deteriorated Pole Program. The first change, which See A.1--00, Exhibit SCE-0, Vol. 0 Part 1 p.. 1

39 took effect in 01, included clarification of visual reject criteria and reclassified replacement timeframes for certain poles from longer to shorter timeframes. Clarification of visual reject criteria, along with a relatively large proportion of inspections being performed in regions prone to wildlifedriven pole damage, resulted in higher than anticipated overall failure rates. In addition, SCE reclassified certain pole structure types with decay as one-year rather than two or three-year replacements due to concerns about the potential risk posed by these structures if decay is present. This drove up the required minimum volumes of replacements in the short term. This change contributed to the increase in deteriorated pole replacements relative to the 01 GRC forecast, which relied on 0 and 01 inspection failure rates. Table III- Historical Reject Rates for Intrusive Pole Inspections Aggregate Failure Rate Inspection Year (Distribution and Transmission) % % % The second and third changes, which took effect in 01, will reduce replacement rates by changing the criteria for when a pole must be replaced and by reinforcing poles with a steel stub as an alternative to replacement. In SCE s 01 GRC, the Commission challenged SCE to consider reinforcing poles to avoid a replacement and to reduce the number of poles being replaced. 0 To evaluate potential changes to the standards, a team was formed to consider the estimated cost savings, the change in risk and benchmarking of other utilities. Intrusive pole inspection standards are described in SCE s material standard MS-. MS- provides detailed instructions to inspectors on performing inspections and evaluating inspection results, including a definition of key metrics that determine pole inspection failure. Among these metrics Poles with equipment and poles with pole-top extensions. Steel stubbing is described in IV.B.. 0 D1--01, Page 1. While the comment was made in the pole loading discussion section, SCE believes the commission s intent is equally applicable to other pole replacements. Therefore, SCE considered alternative methods to remediate noncompliant poles through alternative methods.

40 is Remaining Section Modulus (RSM), a numerical assessment of pole degradation. The team evaluated various levels of RSM to determine at what level of degradation the pole should fail the intrusive inspection and at what level of degradation a steel stub installation would be appropriate if the pole failed. The team analyzed the customer savings versus the risk increase for various pole failure thresholds. SCE selected the failure threshold based on the point where the incremental increase in savings did not justify the increased risk. Relative to the benchmarked utilities, SCE appears more conservative in its RSM failure threshold. However, since pole populations, construction practices, environmental conditions etc. vary significantly between utilities, SCE relied on its risk modeling and determined that accepting the risk from additional degradation was not justified. The new standard, introduced in April 01, includes the second and third change referenced above. The second change will reduce the pole failure threshold to % RSM. The change in failure threshold will reduce forecast distribution pole replacement rates from.% to.% and transmission pole replacement rates from 1.% to.% (Table III-). With forecast distribution and transmission inspection volumes of 1,000 and 1,000, respectively, in 01 (Table III-1), this change will cause approximately,00 fewer three-year distribution pole replacements and approximately 00 fewer three-year transmission pole starting in 00. The third change will set the allowed RSM threshold for installation of a steel stub to a minimum RSM of %. 1 This will further reduce the count of pole replacements by an average of approximately 1,00 distribution poles and transmission poles per year from 01 through Additional criteria described in MS- also apply. Refer to WP SCE-0, Vol., pp. 1-0.

41 Table III- Impact of Inspection Standard Changes on Forecast Restoration and Replacement Rates Reject Rate By Priority - Recommended Action (RAC) Distribution Reject Rates 01 Reject Rate (Before SPEC Change) Estimated 01 Reject Rate (After SPEC Change) 1 Year.0% 0.% Years 1.0% 1.0% Years 1.1% 1.% Steel Stub Repairs 0.0%.00% Total.%.% Transmission Reject Rates 01 Reject Rate (Before SPEC Change) Estimated 01 Reject Rate (After SPEC Change) 1 Year.1% 0.% Reject Rate By Priority - Recommended Action (RAC) Years 1.%.% Years.% 1.% Steel Stub Repairs 0.0%.00% Total 1.0%.% 1. Restoration (steel stubbing) Steel stubbing is expected to extend the life of a deteriorated pole over 1 years and likely much more than that. Steel stubbing offers a significant cost advantage over pole replacement without compromising safety: the forecast unit cost for stubbing is $, for transmission poles and $,1 for distribution poles, compared to a unit cost of $, (Table IV-) for transmission pole replacement and a weighted average of $1,1 (Table IV-) for distribution pole replacements. SCE anticipates that approximately % of its inspected poles will be steel stub candidates based on their RSM and other criteria established in the inspection standards (Table III-). Of these, SCE estimates that % will be reclassified as replacements after a more detailed evaluation of field circumstances. The expected count of pole restorations is shown in Table III-1 and Table III-1. Refer to WP SCE-0, Vol., pp. 0-0, (CET-PD-IR-DP CET-PD-IR-TR Steel Stub Unit Cost Estimate).

42 Inspection-driven Replacements The annual volume of inspection-driven deteriorated pole remediations determines the rates at which poles flow into the remediation queue, and the rate at which these remediations are completed. The expected remediation rates for intrusive inspections are described in the previous section. After inspection, the poles identified as needing replacement are prioritized based on the extent of deterioration. The priority ratings are: 1. Priority 1, the pole must be made safe within hours and replaced within days of inspection. Priority A, the pole must be replaced within one year of inspection. Priority B, the pole needs to be replaced within two years of inspection. Priority C, the pole needs to be replaced within three years of inspection Sometimes, poles scheduled for replacement may not be remediated due to factors such as unique permitting requirements or limited physical access to the pole due to adjacent structures or remote locations. A percentage of poles may rollover from the scheduled year for remediation into the following year until these issues are resolved. In other cases, performance of work in one location may offer the opportunity to replace poles in the same location scheduled for replacement in future years. Those poles may be moved forward from their scheduled year and bundled with poles in the current year to achieve efficiencies. The table below summarizes the forecast rate of pole inspections, the expected remediation rates by priority level, forecast replacements by scheduled year of replacement, and rollover and bundling for inspection-driven deteriorated pole replacements. Unit rates applied to these forecast volumes are described in Section IV below and summarized in workpapers. The visual and RSM criteria for each timeframe are described in MS-. Refer to WP SCE-0, Vol., pp Refer to WP SCE-0, Vol., pp. - (IPI Driven Deteriorated Pole Replacement Detailed Forecast Distribution), WP SCE-0, Vol., pp. 1-1 (IPI Driven Deteriorated Pole Replacement Detailed Forecast Transmission) for details. Refer to WP SCE-0, Vol., pp. 1-1 (Pole Replacement Unit Cost Forecast Details).

43 Table III-1 Forecast Inspection Volumes, Remediation rates, and Inspection-Driven Pole Remediation: Distribution Q1 Q- Intrusive Inspections,,000 1,000 1,00,00,00 Failure Rate Total.%.%.%.%.%.% Failure Count Total,0,,,,, Scheduled Replacements Identified in 01 or later 1,0,,,1 Identified Prior to 01,0 1, 1, 0 Rollover & Bundling Adjustment (1,) Total Replacements,,0,00,01,1 Averaging 01-00,,0,0,0,0 Unit Cost, 01 $ Replacement $ 1, $ 1, $ 1, $ 1, $ 1, Steel Stub $,1 $,1 $,1 $,1 $,1 Replacement Total Cost, 01 $000 $ 1, $ 0, $,1 $,1 $,1 Steel stub count - 1,,,0 Steel stub total (Constant $000) $ - $ 1, $,1 $,0 $, Total Expenditures (01 $000) 1,,0 0,1,1,

44 Table III-1 Forecast Inspection Volumes, Remediation rates, and Inspection-driven Deteriorated Pole Remediation: Transmission Q1 Q- Intrusive Inspections 1, 1,000 1,000 1,00 1,000 1,000 Failure Rate Total 1.0%.%.%.%.%.% Failure Count Total Scheduled Replacements Identified in 01 or later 00 1 Identified Prior to 01, 0 0 Rollover & Bundling Adjustment () 1 Total Replacements 1, 1,1 1 Averaging , 1, Replacements Unit Cost (01 $) $, $, $, $, $, Total Cost (01 $000) $, $, $ 1, $ 1, $ 1, Steel Stub Unit Cost (01 $),,,,, Count - Total Cost (01 $000) - 0 1,01 1,01 Total Expenditure (Constant $000),, 1, 1, 1, 1. Replacements Driven by Non-Programmatic Activities Besides poles identified because of the formal inspection program, poles identified in other activities may be submitted to the deteriorated pole program for replacement based on their external condition. If these poles meet the criteria for external decay outlined in the program standard, they are prioritized according to the standard for replacement in the Deteriorated Pole program. Forecast volumes of replacements driven by non-programmatic activities are based on the counts of poles identified in 01 for same-year, one-year, and two-year replacement timeframes. As for poles identified through inspections, sometimes a pole may be replaced after the original scheduled timeframe due to issues such as permitting and physical access, or prior to the scheduled timeframe if bundling opportunities are available. The table below summarizes the expected rates of identification,

45 scheduled replacement, rollover and bundling for these poles (Table III-1 and Table III-1). Unit rates applied to these forecast volumes are described in Section IV below and summarized in workpapers. Table III-1 Forecast Identification and Replacement of Deteriorated Poles Identified through Other Activities, Distribution Refer to WP SCE-0, Vol., pp. 1-1 (Other Deteriorated Pole Replacement Detailed Forecast Distribution), and WP SCE-0, Vol., pp. 1-1 (Other Deteriorated Pole Replacement Detailed Forecast Transmission). Refer to WP SCE-0, Vol, pp.1-1 (Pole Replacement Unit Cost Forecast Details).

46 Table III-1 Forecast Identification and Replacement of Deteriorated Poles Identified through Other Activities, Transmission Total Found 1, 1, 1, 1, 1, Scheduled Replacements Identified in 01 or later 0 1, 1, Identified Prior to 01 1, 1,1 0 1 Rollover & Bundling Adjustment (1) 1 1 Total Replacements 1,1 1, 1, 1,0 1, Averaging ,1 1, 1,0 1,0 1,0 Unit Cost (01 $) $, $, $, $, $, Total Cost (01 $000) $, $,00 $,1 $,1 $, Replacements Driven by Pole Loading Calculation Failures Pole loading calculations (PLC) performed in the course of design work for programs outside of the Pole Loading Program may identify poles that do not meet GO standards. Planners perform pole loading calculations as part of day-to-day work when they plan to add new equipment to a pole, such as a transformer, capacitor bank, or conductor wire. The planner first performs a pole loading calculation on the pole as-is, in its current state, assuming only the currently attached equipment is in place. If the pole does not satisfy compliance requirements as-is, the cost of its replacement is included in the Deteriorated Pole program. These PLC failures generally require larger pole replacements on average than intrusive inspection failures or pole loading failures within the PLP program, because these poles are designed to support additional equipment beyond what is on the inservice pole. These PLC failures are included within the Deteriorated Pole replacement program. Forecast volumes of replacement driven non-plp PLC failures are based on the counts of poles identified in 01 for same-year, one-year, and two-year replacement timeframes. These recorded levels are reduced to reflect the expected impact of changes to the SPIDACalc pole loading tool described in Section II.B.1. Sometimes poles may be replaced after the original scheduled timeframe due to issues such as permitting and physical access, or prior to the scheduled timeframe if bundling opportunities are available. The table below summarizes the expected rates of identification, scheduled

47 replacement, rollover and bundling for these poles (Table III-1 and Table III-1). Unit rates applied to these forecast volumes are described in Section IV below and summarized in workpapers. Table III-1 Forecast Identification and Replacement of PLC Failures in Deteriorated Pole Program, Distribution Total Found 1, 1, 1, 1, 1, Scheduled Replacements Identified in 01 or Later 1, 1, 1, 1, Identified Prior to 01, 1 1 Rollover & Bundling Adjustment () Total Replacements,1,1 1, 1, 1, Averaging 01-00,1,1 1, 1, 1, Unit Cost, 01 $ $ 1, $ 1, $ 1,1 $ 1,1 $ 1,1 Total cost (01 $000) $,1 $,0 $ 0,01 $ 0,01 $ 0,01 Refer to WP SCE-0, Vol., pp. 1-1 (NonPLP PLC Driven Replacement Detailed forecast Distribution) and WP SCE-0, Vol., pp. 0-1 (Non PLP PLC Driven Replacement Detailed forecast Transmission). Refer to WP SCE-0, Vol., pp. 1-1 (Pole Replacement Unit Cost Forecast Details). 0

48 Table III-1 Forecast Identification and Replacement of PLC Failures in Deteriorated Pole Program, Transmission C. O&M Cost Forecast Maintaining the grid-based inspection system and a -year inspection cycle requires that percent of the wood distribution pole population be inspected every year. The exact count of inspections planned per year can vary depending upon the count of non-grid inspections required; however, the counts of non-grid inspections are expected to decline significantly with the completion of the current -year cycle. Pole inspections are performed by contract personnel, and therefore most of the costs recorded for this activity are non-labor expenses. SCE contracts provide different rates for inspections depending on type and sequence of inspections. Rates for intrusive inspections are higher than rates for visual inspections, and rates for non-grid inspections are higher than rates for grid-based inspections. The reduction in unit costs in Table IV-1 and Table IV- reflect the transition to grid-based inspections, maintaining negotiated contract rates and a decrease in the number of full excavation and reject evaluation inspection types. The forecast unit cost is based on the forecast mix of inspection types. Total costs in this activity were forecast by multiplying the forecast unit cost by the forecast units. 1

49 Costs associated with distribution and transmission pole inspections (visual and intrusive) are shown in Table III-1. Transmission wood pole inspections are performed on both a grid and circuit basis under SCE s maintenance practices on file with the California Independent System Operator. Table III-1 Deteriorated Pole Inspections 0 Portions of GRC Account.1 and.1 Recorded and Adjusted 0-01/ Forecast 01-1 (Constant 01 $000) 1 Recorded Forecast Labor $ $ $ $1 $ $ $ $ Non-Labor $1 $ $1, $ $ $ $1 $ Subtotal.1 $ $ $1,0 $ $1 $ $ $.1 Labor $ $ $ $ $ $ $ $ Non-Labor $, $,1 $,1 $, $, $, $, $, Subtotal.1 $, $,1 $,1 $,0 $,0 $,1 $, $, Total $,1 $,1 $,0 $,1 $, $,0 $,01 $, Labor $0 $0 $ $1 $ $ $ $ Non-Labor $,1 $,0 $, $, $, $, $, $,1.1 Inspections 1, 1,0,0 1, 1,0 1,0 1,000 1,00 Unit Cost $ $ $0 $ $0 $ $ $.1 Inspections,,0,1 1,,1 1, 1,000 1,00 Cost Per Inspection $ $ $ $ $ $ $ $ Ratio of Labor to Total % % % % 1% % % % Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast Intrusive pole inspection costs are primarily driven by contractor rates for grid and non-grid inspections. The mix of grid and non-grid inspections varies over time, but will decline as SCE completes its first full ten year grid cycle. 0 Refer to WP SCE-0, Vol., pp Refer to WP SCE-0, Vol., pp. - (Det Pole Inspection Forecast Distribution) and WP SCE-0, Vol., pp. -, (Det Pole Inspection Forecast Transmission).

50 D. Deteriorated Pole Capital Replacements This section summarizes the capital expenditures associated with distribution and transmission pole remediation in the deteriorated pole program. The volumes of replacements and steel stubbing anticipated have been described in the previous sections. To these volumes, the unit costs described in Section IV.C below are applied to determine forecast capital expenditures for these activities. Table III-1 Distribution Deteriorated Pole Replacement and Restorations, CET-PD-IR-DP, CET-PD-IR-DL Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) Refer to WP SCE-0, Vol., pp. -1. Expenditures associated with the Aged Pole Program are not included in this graph. Refer to WP SCE-0, Vol., pp. 1-1 (Pole Replacement Unit Cost Forecast Details) and Table IV- for forecast unit costs, and Table III-1, Table III-1, and Table III-1 for forecast volumes.

51 $,000 $0,000 Table III-0 Transmission Deteriorated Pole Replacement and Restoration CET-PD-IR-TR, CET-PD-IR-TL Recorded 0-01/Forecast (Total Company Constant 01 and Nominal $000) $0,000 $0,000 $0,000 $0,000 $ Nominal $ $1,1 $1,1 $,0 $, $,0 $, $,1 $, $, $, Constant 01$ $1,00 $1, $, $,1 $,0 $1, $, $0,1 $1,00 $1,00 Forecast Nominal $ Constant 01$ Refer to WP SCE-0, Vol., pp. -1. Refer to WP SCE-0, Vol., pp. 1-1 (Pole Replacement Unit Cost Forecast Details) for forecast unit costs, and Table III-1, Table III-1, and Table III-1for forecast volumes.

52 POLE CAPITAL REMEDIATION UNIT COSTS A. Pole Replacement Unit Cost Summary The Deteriorated Pole Program and Pole Loading Program capital forecasts are based on the following drivers and their specific unit costs: Deterioration-driven pole replacement unit costs: These replacements are poles that fail inspection criteria, including intrusive pole inspections and visual inspections. Pole Loading Calculation (PLC)-driven pole replacement unit costs: As described in Section III.B. above, in the course of day-to-day work planners may find poles that do not meet GO standards or SCE s internal standards in their current state. The cost of such replacements is included in the Deteriorated Pole Program. These replacements would require a pole upgrade to meet their current loads, and require a larger pole to meet the current wind loading criteria revised in March 01 and to accommodate the additional equipment. PLP-driven pole replacement unit costs: These replacements are PLC failures, but differ from the Planner-driven replacements discussed immediately above because these are identified through SCE s Pole Loading Program described in Section III of this volume. Pole strengthening/restoration (Steel Stubbing) unit cost: These represent a subset of deteriorated poles which will be remediated by the installation of a reinforcing steel stub instead of being replaced. Each unit cost reflects drivers unique to the activity requiring the replacement. The historical variance in these unit costs and forecast unit costs for these activities are described in the following sections. The cost drivers described in Sections IV.B and IV.C below, including ongoing cost reduction efforts described in SCE-0, Vol. 1, will result in a distribution replacement unit cost averaging $1,0 for 01-00, % below the recorded costs for 01. If the pole passes pole loading as is, but fails pole loading with the additional equipment, the cost for that pole replacement will be recorded to the project driving the replacement and will not be shown in this volume.

53 B. Unit Cost Variance Analysis 1. Distribution Pole Unit Cost Analysis In the 01 GRC, SCE reported a recorded unit cost equivalent to $1,0 in 01 dollars for distribution pole replacements. In 01, the recorded unit cost for distribution pole replacements, including PLP replacements, increased to $1, in 01 dollars, a % increase in constant dollars over 01. (Note that all percentages in this Section II.B are relative to the 01 recorded unit cost). The contributions to the overall variance are summarized in Table IV-1. Table IV-1, 0 Distribution Pole Unit Cost Variance Analysis Row # Unit Cost Component 01 Unit Cost (01 $) 01 Unit Cost (01 $) Variance in 01 $ Variance as % of 01 total unit cost 1 Contractor $, $, 1, 1% Labor $ $ 1 (1) -% Summary of Drivers (See following testimony for details) Increased work volume required increased utilization of contractors and premium time Material $ $ 1, % Larger poles required by updated pole loading methodology Other $ 1 $ () 0% Overhead $,0 $, (1,) -1% Capital spending increased while total overhead remained constant resulting in a lower allocation to pole spend Underbuild $ 1 $ % Increase in ratio of transmission to distribution pole replacements Environmental $ 0 0 1% Environmental costs inadvertantly excluded from 01 request Totals $ 1,0 $ 1, $ 1,0 % Corporate Overhead $ 1,0 $ 1,1 $ (1) An increase in contractor costs was the main component of the unit cost increase (a 1% increase relative to the 01 unit cost). SCE resources support pole replacements as well as other capital In the 01 GRC, SCE reported a recorded unit cost of $1,1 (in 01 $) for distribution pole replacements, the equivalent of $1,0 in 01 dollars, and proposed $1, as its forecast. In D , the Commission authorized a unit cost of $, in 01 dollars ($1,1 in 01 dollars), a % reduction. This section focuses on recorded cost; the following section discusses adjustments to the recorded costs that will be incorporated into forecasts. Refer to WP SCE-0, Vol., pp. - (Distribution Pole Replacement Unit Cost Detailed Variance Analysis) for additional detail. 0 Corporate overheads (row ) are discussed Mr. Gunn s testimony in SCE-, Vol. 0; division overheads (row ) are discussed in MDR 1.A.1.

54 and maintenance work. As the volume of work in many areas increased, SCE resources were not adequate to handle the increased volume; therefore contract resources were assigned much of this work. The increase in contractor costs were partially offset by lower SCE labor costs. Table IV-1 shows a % decrease relative to the 01 unit cost. This decrease is only for direct labor of SCE employees, and does not include corporate overheads costs, such as pensions and benefits, Administrative and General expenses or payroll taxes. Contractor charges do include these costs and a profit component; as a result, a shift from SCE labor to contractors will appear to overstate the actual increase in unit costs. 1 Material costs contributed % to the increase in unit costs. Several changes were made to improve the safety and reliability of the poles between 01 and 01, which required larger replacement poles. These changes included an increase in clearance requirements, the implementation of SPIDACalc, and introducing higher wind loading standards throughout SCE s service territory. These changes are notable in the PLC-driven unit costs, accounting for nearly 0% of the overall increase in unit costs. PLC-driven pole replacements are those required when planners perform a pole loading calculation as part of day to day work when they plan to add new equipment to a pole, such as a transformer, capacitor bank, or conductor wire. The planner first performs a pole loading calculation on the pole as-is, in its current state, assuming only the currently attached equipment is in place. If the pole does not satisfy compliance requirements as-is, the cost of its replacement is included in the Deteriorated Pole Program. These replacements on average require larger poles than either IPI or PLP replacements, since the replacement pole will often carry larger or additional equipment loads. Therefore, even though the pole failed pole loading with the existing equipment, the replacement pole must be designed to accommodate the new equipment, resulting in a larger pole. The Deteriorated Pole Program has also replaced larger numbers of PLC-driven poles: while approximately 1,000 were identified in 01, over,00 were identified in 01. A component of the cost labeled Underbuild contributed % to the overall increase. When a pole contains both Transmission and Distribution equipment, SCE refers to it as a combo pole. When a combo pole is replaced, the cost to set the new pole and transfer the Transmission equipment is 1 Corporate overheads per pole in 01 equaled $1,0 in 01 dollars and in 01 declined to $1,1 as shown in Row of Table IV-1, a drop which offsets approximately half the $1,0 increase in unit cost. Corporate overheads are discussed Mr. Gunn s testimony in SCE-, Vol. 0. Refer to WP SCE-0, Vol., pp.- (Distribution Pole Replacement Unit Cost Detailed Variance Analysis) for additional detail. If the pole passes pole loading as is, but fails pole loading with the additional equipment, the cost for that pole replacement will be recorded to the project driving the replacement and will not be shown in this volume.

55 charged to the Transmission budget. The cost to transfer the Distribution equipment is charged to the Distribution budget. This distribution work is called underbuild. The unit count for the pole replacement shows up in the Transmission pole count. Therefore, Distribution unit costs include the cost of Distribution work on combo poles, but include no corresponding unit count. This would not affect unit costs if both transmission and distribution pole replacement volumes grew at the same rate. However, Transmission pole replacements grew faster than Distribution pole replacements. Between 01 and 01, the ratio of transmission poles replaced to distribution poles replaced increased significantly, from one transmission pole replacement for every ten distribution pole replacements in 01 to one transmission pole replacement for every seven distribution pole replacements in 01 (see Table I- for recorded counts). Therefore, more cost from the distribution work on a combo pole replacement is being recorded to distribution without a corresponding pole count. The result is an increase in the Distribution pole unit cost. Environmental costs were inadvertently excluded from the unitized work order data used to develop the distribution unit cost estimate provided in the 01 GRC. While these costs were included in the total recorded costs for the program, the unitized work order data used to develop unit cost estimates did not incorporate these costs. These are necessary costs that SCE did incur. The environmental costs based on the 01 recorded unit cost contributes 1% to the overall variance. As environmental requirements increase, these costs will likely increase as well. For example, as a result of the adoption of a local coastal plan by Los Angeles County for the Santa Monica Mountains local coastal area, Los Angeles Department of Regional Planning (LADRP) is now responsible for issuing coastal permits in the Santa Monica Mountains on behalf of the California Coastal Commission. In the past, SCE performed routine maintenance and replacement work without the need to obtain formal coastal development permits or exemptions. However, LADRP has implemented an approval process where SCE must pay an application fee of $1,00 to apply for a coastal permit exemption, though under specified circumstances up to 0 poles can potentially be grouped into one exemption application. When a coastal development permit and variance are required, an application fee of up to $0,000 applies, though under certain circumstances up to poles could potentially be grouped into one application. The coastal permitting process will take up to two years prior to issuance of a permit. In addition, the cost to prepare each coastal permit application will range For a discussion of the environmental work associated with pole replacements, please see SCE-0, Vol. 1.

56 1 between $,000 and $,000 per submission. SCE is currently negotiating with LADRP to streamline the process and requirements. Despite these developments, SCE has not forecast any increase in permitting costs over the 01 historical values. These cost increases were largely offset by a 1% decrease in division overhead cost relative to 01. As the workload increased, SCE s existing regional and district locations and staff achieved greater levels of productivity. Consequently, more capital work was completed with only a moderate increase in division overhead cost. The result was a lower allocation of division overheads to pole spending and a lower per pole unit cost.. Transmission Pole Unit Cost Analysis SCE s 01 recorded transmission pole replacement unit cost was $1,00 per pole (01 $) or $0,0 per pole (01 $). In 01, SCE s recorded cost for transmission pole replacements increased by % to $,0 per pole. The contributions to this variance are summarized in Table IV-. Row # Unit Cost Component Table IV- Transmission Pole Unit Cost Variance Analysis 01 Unit Cost (01 $) 01 Recorded (01 $) Variance in 01 $ Variance as % of 01 total unit cost Summary of Drivers (See following testimony for details) 1 Contractor $,1 $,0 $ 1,1 Labor $, $,0 $ 0 % 1% Increased work volume required increased utilization of contractors and premium time Material $,000 $,00 $ 0 0% Larger poles required by updated pole loading methodology Other $ 1,00 $ $ (1) -1% Overhead $, $,1 $ () -% Capital spending increased while total overhead remained constant resulting in a lower allocation to pole spend Totals $ 0,0 $,0 $ 1, % Corporate Overhead $, $, $ As with distribution pole replacements, contractor costs represented the single largest driver of this increase, and a combination of increased volumes and constrained SCE resources led to an increase in premium time relative to 01. The use of premium time for both SCE and contractor crews is often necessary to accommodate city or commercial customer requirements that work be performed during certain hours. These increases were partially offset by declines in overhead, which were driven by a change in overhead methodologies as described above.

57 C. Unit Cost Forecast Development We developed unit costs for pole replacement based on the recorded costs and unit quantities in work orders closed in 01. We aggregated unit costs by region, and developed a blended unit cost for each activity based on the forecast regional mix of poles to be replaced in 01. In addition, the 01 rate was adjusted downward to reflect an anticipated reduction in material costs due to a shift in lower pole classes, and an expected reduction in premium time use due to an overall reduction in pole replacement volume. The drivers of the shift in material cost are described in more detail in Section II.B above. 1. Distribution Pole Unit Cost Forecast The distribution pole unit cost forecast includes the following components: the base unit cost, environmental costs, and the distribution costs from transmission underbuild. These components for distribution deteriorated pole replacements are summarized in Table IV- below. The base unit cost reflects the labor, material, contractor, and overhead costs associated with the replacement of the pole. These costs vary regionally based on contractor unit costs, the mix of poles required, and variations in the complexity of work performed in different areas. Environmental costs include permitting associated with pole replacements. 0

58 Table IV- Distribution Pole Replacement Unit Cost Adjustments (01 $),,, Weighted % increase over Row # Unit Cost Average Recorded Total $ 1, % Table IV-1, Row Notes Adjustments for forecast work type and regional mix Adjustment for Increase in Underbuild 01 Forecast, Subtotal $ 1, 1% $ +% More work to be performed in regions with higher unit costs; see workpaper for details $ +% Ratio of transmission to distribution poles forecast to increase Material Cost Adjustment $ () -1% Reduction due to modification of pole loading methodology (see workpaper for details) 01 Forecast, with Material Cost Adjustment $ 1,1 1% Weighted average for IPI, PLC, and PLP replacements 1. Transmission Pole Unit Cost Forecast Transmission pole replacement unit costs were also adjusted to allow for the expected regional mix of pole replacements going forward, and anticipated reductions in material cost and premium time. For 01 recorded total and regional mix adjustments, Refer to WP SCE-0, Vol., pp. 1, -1(CET- PD-IR-DP Distribution IPI Driven Pole Replacement Unit Cost, CET-PD-IR-DP Distribution PLC Driven Pole Replacement Unit Cost, CET-PD-IR-PD-Distribution PLP Pole Replacement). For Environmental costs, refer to WP SCE-0, Vol., pp. - (Distribution Pole Environmental Cost). For Material Cost reductions, refer to WP SCE-0, Vol., pp. - (Pole Class Impact and Material Cost Adjustment). Refer to WP SCE-0, Vol., pp. - (Distribution Pole Replacement Unit Cost Adjustments for Forecasting) for individual unit costs for IPI, PLC and PLP distribution replacements. 1

59 Table IV- Transmission Pole Replacement Unit Cost Adjustments (01 $),f 0 % increase over Recorded Subtotal $,0 % From Row of Table II- Notes Updated Regional Mix $, 1% More work to be performed in regions with higher unit costs; see workpaper for details Material Cost $ (1) -% Reduction due to modification of pole loading methodology Forecast Unit Cost $, 1% The cost associated with replacing the distribution underbuild on transmission poles that support both transmission and distribution equipment is allocated across all distribution pole replacements. The average cost of distribution underbuild per transmission pole is $,0 per transmission pole replacement. 1 The amount of underbuild cost associated with each distribution pole replacement is determined by the ratio of total transmission pole replacements and total distribution pole replacements. Since the ratio of transmission and distribution pole replacements varies over time, the underbuild portion of distribution pole unit costs also varies. This drives the variations in forecast distribution pole unit costs in Table IV-.. Steel Stubbing Steel stubbing unit costs are based on recent quotes from contractors, adjusted to include SCE overheads. The proposed unit costs for distribution and transmission steel stubbing are also shown in Table IV-. Steel stubbing, where applicable, provides a lower-cost alternative to pole replacement, and SCE plans to increase the use of steel stubbing from 01 onward as described in Section III above. The forecast weighted average unit cost of distribution pole remediation will decline % from 01 to 00. Similarly, the weighted average unit cost of transmission pole remediation will decline % from 01 to 00. For Material Cost reductions, refer to WP SCE-0, Vol., pp. - (Pole Class Impact and Material Cost Adjustment). 0 For 01 recorded subtotal and regional mix update, refer to WP SCE-0, Vol., pp. -1 (CET-PD-IR- TR CET PD IR PT Transmission pole replacement unit cost workpaper). 1 Refer to WP SCE-0, Vol., pp. - (Underbuild Cost per Transmission Pole). Refer to WP SCE-0, Vol., pp. 0-0 (CET PD IR DP CET PD IR TR Steel Stub Unit Cost Estimate).

60 . Summary of Unit Cost Forecasts The unit cost forecasts described in the previous sections are summarized below. Table IV- Pole Replacement Unit Cost Forecasts. Ongoing Efforts to Reduce Unit Costs In SCE-0, Vol. 0, SCE describes cost-saving activities which will reduce the capital expenditures required for programs described in this testimony by the amounts shown in Figure IV-. SCE forecasts these efforts to yield a savings equivalent to approximately $1,0 per pole in 01 dollars across forecast distribution pole volumes on average from This would reduce the weighted average pole remediation cost in 01 by more than % relative to the forecast distribution unit cost of $1,1 (Table IV-). The resulting adjusted forecast unit cost of $1,0 (01-00 average) is lower than SCE s 01 recorded unit cost of $1, (Table IV-1). Refer to WP SCE-0, Vol., pp. 1-1 (Pole Replacement Unit Cost Forecast Details) for details.

61 Figure IV- Pole Capital Savings Portion of CET-OT-OT-OX Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) 1 SCE also conducted a Sectional Composite Pole (SCP) pilot in the summer of 01. The pilot comprised installing sectional composite poles. SCE expects to install approximately 1 SCPs in 01. A sectional composite pole is composed of four tapered Fiber Reinforced Plastic (FRP) tubes, connected at slip joints, and bolted together. The replacement of wood poles with a SCP is proposed for rear property line pole replacements because SCPs will eliminate the use of a crane or specialized equipment which is needed when replacing rear property line poles. In addition to reduced installation cost, the benefits of using SCPs would include, but are not limited to, eliminating pole chemical treatment and minimizing pole corrosion and rotting. Additional benefits include simplified transportation to the job site, resulting in lower transportation costs. Overall, despite having a higher material cost, SCPs can be a more cost effective approach for replacing certain poles depending on the location and local operating conditions.

62 JOINT POLE ORGANIZATION AND ACTIVITY COST FORECASTS This section will describe the joint pole activities and cost and credit forecasts. We first present an overview of joint use poles and the rules governing cost sharing among parties attaching to a pole. Then the cost and credit forecasts will be presented. Three forecasts are included here. The first is the O&M credit received from joint owners regarding certain maintenance work SCE performs on jointly owned poles. The second is the O&M expense associated with the Joint Pole Organization (JPO), which manages SCE s relationships with joint owners and renters. The third is the capital credit received from joint owners regarding pole replacements. Any amounts received by SCE from its renters are included in Other Operating Revenue and are discussed in SCE-0, Vol 1. A. Overview of Joint Use Under California s mandatory access policy, implemented in D.--0, SCE must permit certain telecommunications providers to attach to its poles through a rental arrangement. SCE also meets its mandatory access obligations by voluntarily providing access to certain third parties through a joint ownership arrangement. SCE s Joint Pole Organization (JPO) manages SCE s relationships with joint owners and renters. Two types of third-party entities attach facilities to SCE poles joint owners and renters. Joint owners purchase an interest in a pole through membership in the Southern California Joint Pole Committee (JPC). The JPC comprises representatives of utilities, communications providers, and municipalities in Southern California who hold joint equity interest in utility poles. Established by telephone, electricity, and railroad companies in, the JPC was formed because of the need to limit the number of poles in the field and to create a uniform procedure for recording pole ownership. The JPC s principal functions are to keep accurate records of ownership for each jointly-owned pole, to calculate the established value of each transaction involving the sale or purchase of joint pole equity interests or maintenance of those interests, and to prepare monthly Bills of Sale, which are sent to the members to enable them to make monetary settlement of their joint activities. Joint owners are typically telephone or wireless companies, or other electric utilities. There are over 0 members of the JPC. Importantly, the JPC administers the parties interests and arranges payments; it does not perform pole loading calculations, nor does it enforce or track compliance with Commission rules and SCE rents space to a small number of renters who do not qualify for mandatory access under the decision. Refer to WP SCE-0, Vol., pp. 0-1 (List of Southern California Joint Pole Committee Members).

63 regulations. Each joint owner is responsible for making sure that it complies with Commission rules and regulations. Once the joint owner has obtained an ownership interest in a pole, the joint owner is solely responsible for conducting pole loading calculations and for making sure that its attachments (or the attachments of its renters) meet G.O. safety factor requirements. The second category, renters, sometimes called tenants, rent space for their attachments within space owned by SCE on its poles. Renters, primarily Cable TV companies, execute a license agreement with SCE and then submit their requests to attach to SCE s poles. Each renter is responsible for ensuring that they comply with Commission rules and regulations. However, SCE independently calculates the resulting safety factors and determines whether the company can attach to an existing pole, or whether modification or replacement of the pole is required before permitting the renter to attach. SCE has over active license agreements with pole renters. As summarized in Table V-, approximately 0,000, or %, of SCE s poles are jointly owned with other utilities. Approximately 0,000, or 1%, of SCE s poles have renters attached to them. Of course, some jointly owned poles included in the 0,000 also have renters attached. Approximately,000 or % of SCE s poles have both joint owners and renters attached. Table V- Summary of SCE Pole Population Occupancy & Ownership Ownership Joint Sole Total Renters Yes % % 1% No % % 1% Total % % 0% B. General Discussion of Cost Sharing with Joint Owners and Renters This section discusses cost sharing for joint owners and renters. Table V- below briefly summarizes and compares key elements of cost sharing under each joint usage arrangement. Then the details of cost sharing under each arrangement are provided including illustrative examples of the Refer to WP SCE-0, Vol., pp. - (List of Renters).

64 derivation of the joint owner credit and the rental rate. Last, there is a discussion of whether SCE is unduly subsidizing joint owners and renters.

65 Table V- Summary of Cost Sharing for Joint Owners and Renters Framework Cost to Attach Initially Cost of Pole Replacements Ongoing Cost Unauthorized Attachment Penalty Joint Owners Rates and terms are agreed upon by the JPC members. Joint owners pay the original owner to purchase an interest in the pole. Joint owners share in the cost to replace a bare pole unless the replacement will solely benefit one owner. Joint owners reimburse each other for certain maintenance costs such as intrusive pole inspections. Attacher must purchase interest in the pole and pay a penalty of an additional 0% of the cost to purchase interest in a new pole. Renters Rates and terms are decided by State law and the Commission. Renters pay an application fee for SCE to evaluate their application. They make no capital contribution to the cost of the existing pole. If the pole will become overloaded because of their attachment, they must reroute or pay the full cost of the pole replacement. 1 Renters do not contribute to the cost of replacements on poles to which they are already attached. Renters pay a rental fee based on a statutory formula per foot of space (not per attachment). Renter pays a $00 penalty and renter must apply for attachment permit. 1 The app.lication fees, called a P&E fees, record to Other Operating Revenue. See SCE-0, Vol. 1. The rental fees record to Other Operating Revenue. See SCE-0, Vol. 1.

66 1. Cost Recovery from Joint Owners The members of the JPC (also referred to as joint owners) agree on the amounts that members will charge each other for various joint activities. Examples of joint activities include a member purchasing interest in an existing pole, a pole replacement of a jointly owned pole, and an intrusive pole inspection of a jointly owned pole. The members determine what activities are to be reimbursed and how each member will be compensated for performing joint work on behalf of the other joint owners. There are two major cost categories used to determine how much is owed among joint owners: Approved Pole Prices and Authorized Costs. There are key differences in these categories and how they apply to joint activities. Table V- below summarizes fundamental attributes of each category.

67 Table V- Joint Owner Cost Categories Set by JPC Description When is cost used Approved Pole Prices The capital cost one joint owner pays another joint owner to purchase an ownership interest in a pole Used to calculate the cost to purchase an interest in a pole either because of a pole replacement or to initially purchase interest in an existing pole Authorized Costs The cost one joint owner pays another joint owner to perform certain work associated with pole ownership Used to share the cost of work such as removing the old pole after a pole replacement, performing an intrusive inspection or vegetation clearing How are costs determined How costs are shared How often are costs updated Each joint owner submits its pole price and that price is used to charge other joint owners Each joint owner pays in proportion to its ownership interest in the pole Every year Each joint owner submits its cost to perform each item of work. However, all joint owner submissions are averaged and that average is used as the Authorized Cost that joint owners charge each other Costs are shared equally between joint owners Every other year 1 The following example illustrates the cost sharing among SCE and a joint owner. Assume a joint owner owns 1 of space for its use and SCE is installing the new pole. Assume also that the 01 JPC Approved Pole Prices apply. (The calculations are summarized in Table V- and are portrayed in Figure V-). For simplicity the numbers used in this example calculation have been rounded to the nearest dollar. 0

68 For a pole jointly owned by two members, the common space (also called the nonusable space) is 0 and the remaining 1 is the usable space. The non-usable space is the in the ground, the 1 from the ground to the lowest point where facilities can be attached, called the public zone or support structure, and the of safety clearance zone between the communication and electric facilities in which no attachments can be placed. The 01 Approved Pole Price that SCE submitted to the JPC for a pole was $, or $ per foot. Since SCE will replace the pole in this example, the other joint owner will owe SCE for space on the new pole. Note that regardless of how much space a joint owner purchases, all owners share equally in the cost of common space. The cost of the common space is 0 * $ per foot = $,0. Therefore, the other owner is responsible for half of the cost of the common space or ½ * 0 * $ = $1,. The other owner is also responsible for the full cost per foot of usable space it owns or 1 * $ = $. After SCE replaces a pole, it transfers its equipment to the new pole. Let s assume that the joint owner is responsible for removing the old pole. The next step is for the communication company to transfer its equipment at its own cost and then remove the old pole, referred to as pulling, transporting, and disposing (PTD). The cost to PTD a pole is an Authorized Costs. In contrast to Approved Pole Prices, which are member specific, the Authorized Cost for an activity is the same regardless of which owner performs the work. Authorized Costs are shared equally among the joint owners of the pole. Since there are two owners, each joint owner is responsible for one half of the Authorized Costs. The Authorized Cost for PTD is $1,1. SCE will owe one half of the cost to PTD to the other owner (1/ * $1,1) = $1. In summary, the other joint owner will owe SCE $ for its own foot of usable space, plus $1, for its half of the common space, totaling $1,. SCE will owe the other joint owner $1 for half the cost of PTD. The net recovery for SCE will be $1,1. Consider the same example above. However, in this scenario, SCE is responsible to PTD the pole. The joint owner will owe SCE for half of the cost to PTD. In summary, the joint owner will owe SCE $ for its own foot of usable space, plus $1, for its half of the common space, plus $1 for its half the cost of PTD. The net recovery for SCE will be $,0. In practice, when the joint owner is responsible to remove the old pole, SCE would top the pole, which means that the section of pole above the communication space is cut off and removed. This cost is a shared cost. However, for simplicity, this step is omitted from the example. 1

69 Figure V- Diagram of Jointly Owned Pole Cost Sharing

70 Table V- Example of Joint Owner Cost for Pole Replacement Amount Paid to SCE Joint Owner Share of the Cost Scenario 1 Joint Owner Cost SCE Removes the Old Pole Scenario Joint Owner Cost Joint Owner Removes the Old Pole JPC Authorized Cost Total Cost 1 foot of 1 feet Cost of Usable Space $ 1, or.% $ $ Cost of Common Space $,0 0% $ 1, $ 1, Subtotal Cost gof Pole $, $ 1, $ 1, Transporting, Disposal (per pole) $ 1,1 0% $ 1 $ (1) Net Payment to SCE $,0 $ 1, The previous example covered what is called a mutual benefit pole replacement. Mutual benefit pole replacements benefit all owners of a pole. Joint owners have agreed that when a pole is replaced for mutual benefit, joint owners share the cost to set a bare pole in the ground and other associated costs such as the cost to pull, transport, and dispose of the old pole. Each joint owner is responsible for the costs of transferring its own equipment from the old pole to the new pole. Some poles require replacement because SCE is adding equipment or reconductoring with larger wire, which will cause the pole to be overloaded. In these situations, the cost of a pole replacement is not shared because the pole replacement is solely to benefit SCE. Therefore, SCE must bear the cost of the replacement. This has the effect of lowering the overall joint owner credit per pole replaced. Thus far we have discussed cost sharing related to capital work. Certain O&M functions are also shared among joint owners. These are intrusive pole inspections, State Responsibility Area vegetation clearing, and pole tagging. These costs are shared equally among the joint owners and the cost recovery is based on the Authorized Cost for each task performed. The joint owner must purchase an interest in the new pole at the Approved Pole Price.

71 Cost Recovery from Renters The Commission has adopted the statutorily set rate of.% of the cost to own and maintain a pole per foot of space rented. 0 The.% came from the Federal Communications Commission s pricing formula which assumed a hypothetical pole of. feet. The hypothetical pole was the average of a foot pole and 0 foot pole. A. foot pole would have feet of unusable space leaving (. = 1. ) 1. feet of usable space. If a renter rents one foot of the 1. feet, they have rented (1 / 1. =.% ).% of the usable space. 1 As of the date of filing, the fee is $.0 per foot per pole annually. Renters are not responsible for the cost of pole replacements unless the pole replacement is needed solely because a renter applies to attach to a particular pole and the existing pole cannot accommodate the attachment. Renters are not billed for the O&M or inspection cost of the poles on which they attach. Instead the cost of O&M is included in the formula used to calculate the annual rental rate.. Evaluation of Current Cost Recovery Practices The Commission has asked SCE to determine whether SCE s customers unduly subsidize renters and joint owners, and to evaluate renegotiating payments and unilaterally removing non-sce attachments. The section will evaluate the current cost recovery practices first for joint owners and then for renters. SCE has taken steps to improve its cost recovery from attachers. When SCE submitted its costs for the Approved Pole Prices this year, SCE added a separate set of costs for H class poles to account for the material cost difference between H class and regular class poles. When the discussions for Authorized Cost began, SCE asked to include certain costs that had previously been reimbursed on a case by case basis. SCE further proposed that rather than use the average cost of all members, each member charge its own cost to perform each activity. While there are areas for improvement in the cost sharing with joint owners, SCE generally believes the rules are equitable and SCE is recovering an amount consistent with the JPC rules. 0 See Public Utilities Code. and D.--0 OP 1 and page 1. 1 See Code of Federal Regulations, Title, Chapter I, Subchapter A, Part 1, Subpart J, Section 1.. When a renter is denied attachment, the renter may pay for the pole replacement, reroute its attachment to other poles or underground, or install an interset pole. D.1--01, p.. D.1--01, p. 1.

72 SCE s cost in 01 to set a class bare pole as submitted to the joint pole JPC is $,. This submission is based on the categories of cost specified by the JPC. The pole price that SCE submits to the JPC is determined by adding the cost components according to the JPC guidelines regarding what costs may be included. The costs include the cost to dig and erect the pole, material cost, planning cost to site the pole, and A&G. As stated in the example above, a pole has 1 of usable space and 0 of common (or unusable) space. If two joint owners shared the usable space equally, each joint owner would be responsible for half of the $, or $,0 each. The owners rarely share the usable space equally. Telecom companies own much less space on the pole than SCE does. Therefore, SCE bears a greater portion of the cost of the pole. If we were to just look at the common (or unusable space), the cost of the common space is $,1. This is shared equally between joint owners, with each joint owner responsible for $1,0. For each foot of usable space a telecom buys, only an additional $ is added to their cost. Therefore, the amount of usable space a telecom buys will affect its cost responsibility. SCE s unit cost for pole replacements, discussed in Section IV, are greater than the $, shared cost for setting a bare pole. The costs SCE incurs above the $, shared cost are for SCE activities, such as the cost of materials and labor to install electrical equipment, including cross arms, conductors, transformers, and switches, which are not shared with other joint owners. Similarly, SCE believes the reimbursement received to pull transport and dispose of (PTD) of the old pole are reasonable. PTD is an Authorized Cost item, and as described above one cost applies regardless of which owner does the work. That cost is determined by averaging the costs submitted by each owner for a particular activity. This average cost is then split equally based on the number of owners on the pole. The Authorized Cost to pull, transport, and dispose of a pole is $,0. SCE s submission to the JPC was lower than the Authorized Cost. In summary, the cost sharing for a pole replacements, is reasonable and is consistent with SCE s costs to the extent allowed by the JPC rules. The Commission has asked SCE if it can offer assistance to ensure appropriate cost sharing between joint owners and SCE. In some cases, SCE has been unable to collect all the joint credits it is owed because a joint owner objects to SCE s pole replacement due to SCE s wind standards that exceed specified GO minimum wind loading. In those cases, the joint owner has refused to agree Refer to Confidential WP SCE-0, Vol., pp. - (SCE JPC Approved Pole Price).

73 that these pole replacements are a mutual benefit replacement, and have instead claimed that these pole replacements are solely to benefit SCE. If the pole replacement is solely for SCE s benefit, SCE must bear the cost of the replacements and receives no joint owner credit. Verizon Telecom and Verizon Wireless have each sent letters to SCE stating their disagreement with SCE s wind loading standards because SCE s wind loading standards are in excess of GO minimum loading. They further disagree with SCE s decision not to grandfather poles designed under a previous wind loading standard. After Frontier purchased Verizon Telecom, SCE contacted Frontier to reopen discussions on this matter. Unfortunately, Frontier has maintained the position originally espoused by Verizon Telecom. Until these issues are resolved, SCE will not realize the full joint owner credit it is entitled to. In addition, in SCE s San Gabriel Windstorm Settlement Agreement, SCE and the Safety and Enforcement Division (SED) agreed to the following term, which the CPUC adopted through its approval of the settlement: (a) SCE agrees to join SED should SED propose as part of the Infrastructure Safety Rulemaking (R.0--00) or in a new proceeding that attachments made to joint-use poles with electrical equipment must adhere to the strength and loading requirements of the electrical utility in effect at the time the attachment is made to the extent such standards exceed the minimum standards in General Order. (Emphasis added.) SED has not yet made such a proposal in R or in its successor rulemaking, R However, the proceeding is now at a point where such a proposal is ripe. Parties are completing the statewide fire threat maps, and will be working on new rules that will strengthen standards in the newly defined fire threat areas. One way the Commission could assist SCE in collecting its properly incurred costs for pole replacements from joint owners is by directing SED to propose the provision agreed to in the San Gabriel Windstorm Settlement Agreement and support its incorporation into GO. Regarding renters, SCE is following applicable law and Commission decisions. The rental rate is set statutorily, and SCE has little control over the rental rate for those entities covered under the mandatory access rules. The Commission has supported the use of the statutory rate in a recent decision. In the Commission s rulemaking R , the Commission considered how the rights-ofway rules adopted in Decision --0 should be amended to encompass Commercial Mobile Radio The joint owner must purchase an interest in the new pole at the Approved Pole Price. Section 1.1 of GO requires utilities to design according to known local conditions when those conditions exceed GO standards. The letters and SCE s responses are included in workpapers.

74 Service (CMRS) attachments on utility pole tops, including the fees that utilities like SCE could charge CMRS carriers for leasing space on utility poles. In the rulemaking, SCE advocated that CMRS carriers should pay a market based rate for their telecommunication attachments on utility poles because CRMS providers have a variety of practical market alternatives for placing their attachments, such as commercial, industrial, or residential buildings, other utility poles, and communications towers. For example, CMRS providers pay a market rate for antenna sites on top of buildings or construct cell towers in parking lots and other places disguised as trees, with one intervenor indicating that the market rate for pole top attachments was upwards of $1,000 per year. The Commission, however, excluded consideration of a market based rate from the proceeding and ultimately concluded in D that the attachment fee should be based on the statutory rate of.% of the annual cost of the pole, denying electric distribution customers the full benefit of the utility asset. SCE also cannot use self-help to remediate overloaded poles by unilaterally taking down a third-party attachment that may, in SCE s view, be causing the overloaded condition. This is true whether the attachment was known to and approved by SCE, or not. First, most attachments on SCE s system were made prior to the adoption of SCE s heightened wind standards, and using thencurrent pole loading methodologies. Such attachments are authorized by our rental agreement or joint pole agreement and cannot be removed without violating those agreements or the property rights of the attachment owners. When all the attachments on a pole are authorized, but the pole is nonetheless found to be overloaded, the remediation is for the mutual benefit of all the attachers. But even in the few cases where removal of a previously unauthorized attachment could mitigate the need to replace an overloaded pole, SCE still cannot cut down a third-party attachment. Doing so could violate the Commission s rules regarding critical infrastructure, including service. SCE has separate processes for holding unauthorized attachers accountable. Unauthorized attachers must come into compliance by submitting a proper request, and, where the attachment has resulted in an overloaded pole, either pay to have the pole replaced or remove the attachment and find another route. Given this overview of cost sharing, we will now present the activity descriptions and cost and credit forecast for each area related to the Joint Pole Organization. See R , July, 01 Opening Comments of the Joint Venture: Silicon Valley and the California Wireless Association, p..

75 C. Joint Pole O&M Credits O&M costs are shared among joint owners according to the rules agreed upon by the members of the JPC. O&M credits are received for intrusive pole inspections, vegetation clearing in State Responsible Areas and pole tagging. SCE receives a credit from joint owners when it performs an intrusive pole inspection on a jointly owned pole. SCE also receives a credit when vegetation clearing in a State Responsible Area is performed, but not for vegetation inspections. Costs are shared ratably by the number of owners of a pole. The cost is based on the Authorized Cost to perform the work, which is similar to SCE s actual cost. For example, the Authorized Cost agreed to by the JPC to perform an intrusive inspection is $. If there are two joint owners on a pole, the cost will be split evenly. SCE would receive a credit for $ divided by two or $. Credits are also received for the penalty payments for unauthorized attachments. Note that when a joint owner is attached without authorization, the joint owner must pay a penalty and purchase an ownership interest in the pole. The purchase of interest in the pole is shown in section V.. The unauthorized attachment penalties for joint owners are shown in Table V-0. The unauthorized attachment penalties for renters are reflected in Other Operating Revenue in SCE-0, Volume 1. In the 01 GRC Decision, the Commission directed SCE to quantify the role of unauthorized attachments in pole loading to discuss efforts to minimize their impacts. 1 Historically, SCE has found that approximately.% of its poles contain an unauthorized attachment. However, the existence of an unauthorized attachment does not necessarily result in a pole being overloaded. Nevertheless, SCE has taken steps to reduce unauthorized attachments. As described below, SCE has a team that inspects poles to determine if unauthorized attachments exist. At the end of 01, SCE added an additional inspector to this group increasing the size from two to three employees. In May 01, SCE worked with the law department to develop and implement a new unauthorized attachment process for renters. 1 When SCE discovers an unauthorized attachment, it works with the owner or renter of the attachment to either remove the attachment or apply for an authorized attachment. SCE assesses a penalty when an unauthorized attachment is found. As stated above, O&M credits are received for three activities: 1) intrusive pole inspections, ) maintenance, and ) unauthorized attachment penalty payments. Historical costs were used to determine 1 SCE should also quantitatively address the role of unauthorized attachments in pole loading and discuss its efforts to minimize this impact. D.1--01, p Refer to WP SCE-0, Vol., pp. -1 (Unauthorized Attachment procedure).

76 1 the joint pole O&M credit forecast for each of the three activities. Inspection credits were determined by the multiplying the number of annual intrusive inspections in the intrusive pole inspection plan by the five-year average credit of $0. per joint pole. Also, the reimbursement varies by inspection type. For maintenance credits, the 01 recorded credit was used as the test year forecast based on the expectation that the maintenance activities will continue at the current level. For penalty payments, a two-year average (01-01) was used as the test year forecast. The two-year average was used to account for the increase in penalties resulting from the changes described above. SCE did not use the last recorded year as a forecast because some penalty payments identified in 01 weren t recorded until 01 which had the effect of overstating 01 penalties. Therefore, a two-year average is the most reasonable. Overall, there is an incremental year-to-year decrease in the forecast for joint pole O&M credits forecast. This is due to the fact that intrusive pole inspections are decreasing in the forecast period so the credits resulting from the inspections are decreasing as well. Table V-0 Joint Pole O&M Credits Portion of GRC Account.1 Recorded and Adjusted 0-01 / Forecast (Constant 01 $000) Recorded Forecast Labor $ $ $ $ $ $ $ $ Non-Labor -$1,1 -$,0 -$, -$, -$, -$, -$,1 -$, Total -$1,1 -$,0 -$, -$, -$, -$, -$,1 -$, Ratio of Labor to Total 0% 0% 0% 0% 0% 0% 0% 0% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast D. Joint Pole Organization (JPO) Expenses, Portion of FERC Account.1 JPO is responsible for the execution and administration of all joint pole agreements where SCE shares the ownership of electric poles with other utilities. JPO is also responsible for the execution and administration of agreements to lease pole space to other utilities. Both joint ownership and lease arrangements fulfill SCE s requirement to provide non-discriminatory access under D.- Refer to WP SCE-0, Vol., pp. 1-. Refer to WP SCE-0, Vol., pp. - (Joint Pole Expense Credits).

77 JPO generates invoices and receives payments from joint pole users for capital investments and maintenance-related expenses. JPO receives invoices from other joint pole owners, validates the amounts, and makes payment. JPO works with all parties on the JPC to establish policies and resolve issues that affect all JPC members. JPO performs inspections on poles to identify safety deficiencies and unauthorized attachments. The Third Party Attachment Group is responsible for the technical evaluation of third party requests for attachment. This includes performing the planning review, pole loading, and field verification for renter Requests for Access (RFA). The Third Party Attachment Group approves or denies third party access to SCE poles or SCE space on jointly owned poles upon verification of renter fulfilling SCE s requirements and standards for attachments. As part of their work in the field, TPA planners may also discover and document as is pole loading failures, asset corrections, and unauthorized attachments. When an as is pole loading failure results in the need for an SCE guy repair, the Third Party Attachment Group creates the drawings for the repair. 1. Joint Pole Organization Cost Forecast As shown in Table V-1, the expenses in this account have remained stable through 01. During 01, JPO added staff to accommodate the increase in pole replacements due to the Pole Loading Program. The 01 expense level reflects a full year of the staff added in 01. During 01, JPO continued to assess its staffing level and determined that the existing staff was not adequate. Additional employees must ensure work is processed timely. Furthermore, several positions in the third party attachments group are staffed with temporary workers even though the work load has been stable year to year. We are therefore proposing to use the last recorded year as the basis for our test year forecast, and add in the costs of the additional personnel and the costs of moving staff from contract to employee. Table V-1 below shows the costs of the positions that will be added towards the end of 01 and the full year labor cost which will be realized in 01. In the third party attachments group, planner positions and 1 administrative aid position will be converted from contract employees to SCE employees. The costs for these positions will move from non-labor to labor. 0

78 Table V-1 Joint Pole Organization Portion of GRC Account.1 Recorded and Adjusted 0-01 / Forecast (Constant 01 $000) Recorded Forecast Labor $,1 $, $, $,0 $,1 $,1 $, $, Non-Labor $00 $1 $1, $,0 $1, $,0 $1,1 $1,1 Total $, $, $, $,0 $, $,1 $, $, Ratio of Labor to Total % 1% % % % % 1% 1% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast E. Joint Pole Capital Credits As discussed in the previous section, for certain activities, such as when SCE replaces a distribution or transmission pole, it recovers some of the cost of setting a bare pole from joint owners. The capital credits in this section reflect the net payments SCE receives from joint owners for pole replacements. 1. Credit Forecast The joint pole capital credit is forecast using the 01 joint pole billed amounts and applying those amounts to the pole replacements in the forecast period. First, an analysis was done to look at how much was recorded for joint pole capital credits related to the pole programs discussed in this volume (i.e. the programmatic pole replacements under the Pole Loading Program and Deteriorated Pole Program). The result was an average capital credit of $,1 per pole replacement. Next, this average credit per pole replacement was applied to the pole replacements during the forecast period to obtain a forecast of joint pole capital credits related to the work discussed in this volume. SCE replaces poles for other reasons such as adding new equipment or storm damage. The capital credit associated Refer to WP SCE-0, Vol., pp. 1-. Refer to WP SCE-0, Vol., pp. - (JPO Forecast). This method is more accurate than the method used in previous GRCs because of the lag between construction and billing the joint owner. Refer to WP SCE-0, Vol., pp. - (Joint Pole Capital Credit). 1

79 1 with this work is more difficult to forecast because the joint pole credit owed to SCE will vary based on the type of work. For these cases, the forecast was based on the 01 recorded credits. Besides pole replacements, members of the JPC will occasionally purchase an ownership interest in an existing pole and become a joint owner in that pole. Also, when a joint owner is found to be unauthorized on a pole, the joint owner must purchase interest in the pole. The purchase of interest in the pole is recorded as a capital credit. The penalty paid by a joint owner for an unauthorized attachment is recorded in Joint Pole O&M Credits, Section V.C. The capital credits from these purchases in interest in a pole are forecast using the 01 recorded credits. Lastly, as described in Section III.B., certain poles will be remediated with the installation of a steel stub. The joint owner credit for this activity was forecast using the forecast steel stub installations and multiplying it by the joint owner credit amount for steel stubbing. The four sources of capital credits are added together and summarized in Table V-. The resulting forecast represents a significant increase in the joint pole capital credits. Table V- Joint Pole Capital Credits, Constant 01 $ Forecast

80 Table V- Joint Pole Capital Credit, Distribution CET-PD-CR-JD Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) $0 -$,000 -$0,000 -$0,000 -$0,000 -$0,000 -$0, Nominal $ (,) (1,0) (0,) (1,) (,0) (,1) (1,1) (0,) (,) (,) Constant 01$ (1,) (1,0) (1,) (,1) (,0) (,0) (,) (,) (,0) (1,) Nominal $ Constant 01$ Refer to WP SCE-0, Vol., pp.-1.

81 Table V- Joint Pole Capital Credit, Transmission CET-PD-CR-JT Recorded 0-01/Forecast (CPUC-Jurisdictional Constant 01 and Nominal $000) Refer to WP SCE-0, Vol., pp.-1.

82 1 1 OTHER POLE RELATED ACTIVITIES A. Wood Pole Disposal When wood poles are removed from service, they must be appropriately disposed of to mitigate adverse environmental impact. Disposal is complicated, as all poles have been treated with chemical preservatives, and, since 00, these poles have been considered hazardous waste. Wood pole disposal records the cost of disposing of distribution wood poles removed from the system. 1. Cost Forecast Table VI- shows the recorded costs, pole counts, and unit costs from 0 to 01, with the forecast for Disposal costs vary depending on the type of pole and costs have fluctuated from year to year. Therefore, SCE utilized the five-year average cost of $ per pole (constant 01 dollars), as the basis for the forecast. Figure VI- summarizes the recorded expenditures and requests in this category. See Federal Insecticide, Fungicide, and Rodenticide Act, U.S.C. Sec. 1, et seq.

83 Table VI- Wood Pole Disposal Cost Analysis Recorded Wood pole disposal $ 1, $ 1, $,1 $, $, (Constant 01 $000) Total Replacements (unitized), 0,0 1,1, 0,1 Unit cost Average Unit Cost 0.