Southwest Power Pool PROJECT COST WORKING GROUP MEETING December 2, 2015 ITC Great Plains Office 3500 SW Fairlawn Road, Topeka, KS MINUTES

Transcription

1 Minutes No. [56] Southwest Power Pool PROJECT COST WORKING GROUP MEETING December 2, 2015 ITC Great Plains Office 3500 SW Fairlawn Road, Topeka, KS MINUTES Agenda Item 1 Administrative Items a. Call to Order & Introductions Chair Tom Hestermann (SEPC) called the meeting to order at 9:00 a.m., welcomed those in attendance, and asked for introductions (Attachment 1 - PCWG Attendance ). b. Receipt of Proxies SPP Staff Secretary Cary Frizzell announced the following proxies for the meeting: Christopher Matos (GSEC) for Lloyd Kolb (GSEC) Kenny Munsell (SPS) for Thomas Maldonado (SPS) c. Review of Agenda The Chair asked the PCWG for edits or additions to the agenda (Attachment 2 - PCWG Agenda ) and none were mentioned. Agenda Item 2 Review of Past Action Items The Staff Secretary led a review of the action item list for November (Attachment 3 - PCWG Action Items ). No additional items were discussed. Agenda Item 3 Consent Agenda a. Meeting Minutes November 4, 2015 (Attachment 4 - PCWG Meeting Minutes ). Peter Day (OGE) moved and Brian Johnson (AEP) seconded to approve the Consent Agenda item as presented. The motion passed unanimously. Agenda Item 4 Quarterly Report Review The Staff Secretary led the PCWG in a review of a draft of the quarterly report of the PCWG to the MOPC for the first quarter of 2016 (Attachment 5 PCWG Report Q DRAFT). No actions were recommended to the MOPC in the draft as there were no projects subject to PCWG review that were outof-bandwidth. The Staff Secretary noted that the list of Applicable Projects was divided into two Appendices. Appendix 1 included active projects and Appendix 2 listed projects that had been closed-out in accordance with Section 13 of Business Practice The group determined that projects on Appendix 2 should appear on only one quarterly report of the PCWG, and can then be archived, unless a cost variance of +/-20% from the established baseline cost is recognized due to an update to the actual cost.

2 Minutes No. [56] The PCWG asked for a few clarification edits to be made that will be reflected in the report to MOPC. Art Wiese (NPPD) moved and Kenny Munsell seconded to approve the report as modified. The motion passed unanimously. Agenda Item 5 Business Practice for Determining 50% Completion (CTPTF Action Item) The Staff Secretary led the PCWG in a discussion regarding developing a new methodology to determine when Competitive Upgrades are 50% complete (Attachment 5-50% Completion Determination for Competitive Upgrades ). Attachment Y provides that upon 50% completion of a Competitive Upgrade, the Designated Transmission Owner (DTO) may receive a refund of their 2% cash deposit, and the Competitive Transmission Process Task Force (CTPTF) suggested that the PCWG develop or advise on a methodology that could be utilized to make that determination. The Staff Secretary presented a business practice strawman that included a set of Project Tracking metrics that would be utilized as a guideline for determining when the 50% completion milestone had been reached. The proposed process allowed that once each of the metrics had reached a particular milestone for a project, the DTO could petition to Staff to have its cash deposit refunded, and Staff would make a recommendation to the SPP Board of Directors (Board) who would make the final determination. The PCWG discussed the feasibility of using the Project Tracking metrics as a measure of completion and reached a consensus that the metrics could have vastly different meanings to various DTOs and would be too onerous to define. The group also decided to make the process less subjective by eliminating the decision points by Staff and the Board. After a thorough discussion, the PCWG decided that the new business practice should employ the following criteria for a DTO to have its cash deposit refunded for a Competitive Upgrade: 1) Actual cash-out expenditures of the Competitive Upgrade reach 50% of RFP Response Estimate (RRE) 2) Construction of major project elements mobilized 3) Attestation from Company Officer of the DTO that items 1 and 2 have been met Staff will review the criteria proposed by the group with SPP s Legal Department and will prepare a revised business practice draft for the PCWG to review in January. Agenda Item 6 RR57 BP7060 Order 1000 Clean-up & NTC Suspension Language The Staff Secretary provided an update on RR 57 BP7060 Order 1000 Clean-up & NTC Suspension (Attachment 6 - RR57 Recommendation Report ). The document was previously reviewed by the CTPTF and resulted in two language edits that were deemed substantive enough to warrant an additional review and approval vote by the group. The group discussed one of the edits made by the CTPTF to limit the time in which a project could be suspended to 120 days. Staff mentioned that 120 days may not constitute enough time to perform a complete and thorough restudy of a project, and proposed extending the time period beyond 120 days. Some also expressed concern that any limitation in the time of a suspension could be imposing a restriction on Staff that conflicts with a Board directive. It was noted, however, that consideration should be made to the length of time a project is to be suspended due to the potential of incurring additional project costs for construction activities placed on hold for substantial time periods.

3 Minutes No. [56] The group determined to remove the language detailing a time limitation for NTC suspensions, but added language that ensured that the timeframe of the restudy of the project would be defined as a part of the suspension. Larry Holloway (KPP) moved and Peter Day seconded to approve RR 57 as modified. The motion passed unanimously. The Staff Secretary noted that the document will be reviewed by the Business Practices Working Group, Regional Tariff Working Group, and Transmission Working Group during the month of December, before a review by the Markets and Operations Policy Committee (MOPC) in January. Agenda Item 7 Process Improvement in ITP Cost Estimation The Staff Secretary reviewed the feedback received from the CTPTF for the items regarding potential process improvements to be made to the cost estimation process in ITP studies. The CTPTF had determined that the new process change in which the incumbent Transmission Owners will develop Study Estimates for projects likely to be non-competitive will remedy the majority of the issues observed with the process during the 2015 ITP study cycles. The Staff Secretary mentioned that the information regarding cost estimation improvements will be presented to MOPC in January. Agenda Item 8 Other Items No other items were brought up for discussion. Agenda Item 9 Summary of Action Items Staff Secretary reviewed the following new action item: For informational purposes, Staff will calculate the variances in cost between the actual costs and latest estimates received in Project Tracking for the 17 closed-out projects on Appendix 2 of the Q report to the MOPC. Staff will review with SPP s Legal Department the criteria proposed by the group to determine when the 50% completion milestone has been reached for Competitive Upgrades. Agenda Item 10 Develop Agenda for Next Meeting The group discussed the following as potential agenda items for the next scheduled meeting in December: Review business practice draft for 50% Project Completion Milestone Determination Review Strategic Plan Initiative for cost controls for Competitive Upgrades Review PCWG Charter Overview of the new Revision Request process

4 Minutes No. [56] Agenda Item 11 Future Meeting Dates and Locations The next scheduled meeting will be a net conference on January 6 th from 1:00 5:00 pm. The February meeting will also be a net conference on February 3 rd from 1:00 5:00 pm. Meeting adjourned at 2:10 pm. Respectfully submitted, Cary Frizzell Secretary Attachments Attachment 1 - PCWG Attendance Attachment 2 - PCWG Agenda Attachment 3 - PCWG Action Items Attachment 4 - PCWG Meeting Minutes Attachment 5 - PCWG Report Q DRAFT Attachment 6-50% Project Completion Milestone Determination Business Practice DRAFT Attachment 7 - RR57 Recommendation Report

5 PCWG Attendance December 2, 2015 X=In Person P=Proxy T=Teleconference First Name Last Name Position Company Business Phone Attendance Tom Hestermann Chair Sunflower (785) X Cary Frizzell Secretary SPP (501) X Allen Ackland Member KCPL (816) X Peter Day Member OGE (405) X Larry Holloway Member KPP (316) X Leland Jacobson Member OPPD (402) T Brian Johnson Member AEP (918) X Brenda Jessop Member Westar Energy (785) X Lloyd Kolb Member Golden Spread Electric Cooperative (806) P Tom Littleton Member OMPA (405) T Thomas Maldonado Member SPS (806) P Brian Studenka Member ITCGP (734) X Jeff Stebbins Member Tri County Electric Cooperative (800) T Art Wiese Member NPPD (402) X John Krajewski Liaison Member Nebraska Power Review Board (402) John Bell Guest Kansas Corporation Commission X John Boshears Guest CUS T Ben Bright Guest SPP T Jeff Brown Guest EDE T Jason Chaplin Guest Oklahoma Corporation Commission T Shawnee Claiborn Pinto Guest Texas PUC X Dawn Marie Coggins Guest SPP X Noumvi Ghomsi Guest Missouri Public Service Commission T Chris Giles Guest TCEC T Tony Green Guest SPP T Pat Hayes Guest Ameren X Jeff Kunkel Guest SPS T Chris Matos Guest GSEC X Sherri Maxey Guest SPP X Kenny Munsell Guest SPS X Alan Myers Guest ITCGP X Josh Reinbold Guest SPS T Aaron Shipley Guest SPP T Clarence Suppes Guest Sunflower X Heather Starnes Guest MJMEUC/CUS/SCMCN T Boyd Trester Guest BEPC T Michael Wegner Guest ITCGP X

6

7

8 Southwest Power Pool, Inc. PROJECT COST WORKING GROUP MEETING December 2, 2015 ITC Great Plains Office 3500 SW Fairlawn Road, Topeka, KS AGENDA 9:00 am 3:00 pm 1. Administrative Items...(5 min) a. Call to Order & Introductions... Tom Hestermann b. Receipt of Proxies... Cary Frizzell c. Review of Agenda*... Tom Hestermann 2. Review of Past Action Items*... Cary Frizzell (3 min) 3. Consent Agenda (Approval Item)*... Tom Hestermann (5 min) a. Approval of Meeting Minutes November 4, Quarterly Report Review (Approval Item)*... Cary Frizzell (1 hr) 5. Business Practice for Determining 50% Completion (CTPTF Action Item)*... Cary Frizzell (2 hr) 6. RR57 BP7060 Order 1000 Clean-up & NTC Suspension Language*... Cary Frizzell (30 min) 7. Process Improvement in ITP Cost Estimation... Cary Frizzell (15 min) 8. Other Items... All 9. Summary of Action Items... Cary Frizzell (2 min) 10. Develop Agenda for Next Meeting... Tom Hestermann (5 min) 11. Future Meeting Dates and Locations... All (5 min) Jan. 6 Feb. 3 Mar. 2 Apr. 6 May 4 June 1 Net Conference Net Conference AEP Office, Dallas, TX Net Conference Net Conference KCPL Office, Kansas City, KS July 6 Aug. 3 Sept. 7 Oct. 5 Nov. 2 Dec. 7 Net Conference Net Conference SPP Office, Little Rock, AR Net Conference Net Conference KPP Office, Wichita, KS * Background Materials Included Relationship-Based Member-Driven Independence Through Diversity Evolutionary vs. Revolutionary Reliability & Economics Inseparable

9 Southwest Power Pool, Inc. PROJECT COST WORKING GROUP Pending Action Items Status Report December 2, 2015 Action Item 13 As directed by MOPC at the January meeting, review and recommend any changes to the Quarterly Tracking Report process, including timing, data requested, format of data reporting, interaction with other project costrelated initiatives, etc. 142 Staff will determine the proper place to document the new policy of incumbent TOs developing Study Estimates for non-competitive Projects in ITP studies. 146 Staff to review RR 57 with the Competitive Transmission Process Task Force, due to the changes related to Competitive Projects. Date Originated February 7, 2012 September 2, 2015 October 7, 2015 Status On Going Complete Complete Comments MOPC Action item complete. Ongoing project to identify improvements To be included as part of scope documents for ITP studies Reviewed and edited at Nov. 11 CTPTF meeting 148 Staff will research background of the Tariff requirement regarding the 50% completion of Competitive Projects and the 2% deposit refund. October 7, 2015 Complete 149 Staff will provide an overview of the new Revision Request process at a future meeting. October 7, 2015 In Progress 150 Staff will inquire with SPP Legal about confidentiality concerns regarding a working group making recommendations to the Board to refund deposits for Competitive Upgrades. November 4, 2015 In Meeting

10 Minutes No. [55] Southwest Power Pool PROJECT COST WORKING GROUP MEETING November 4, 2015 Net Conference MINUTES Agenda Item 1 Administrative Items a. Call to Order & Introductions Chair Tom Hestermann (SEPC) called the meeting to order at 1:00 p.m., welcomed those in attendance, and asked for introductions (Attachment 1 - PCWG Attendance ). b. Receipt of Proxies SPP Staff Secretary Cary Frizzell announced the following proxies for the meeting: John Humphrey (NPPD) for Art Wiese (NPPD) Kenny Munsell (SPS) for Thomas Maldonado (SPS) c. Review of Agenda The Chair asked the PCWG for edits or additions to the agenda (Attachment 2 - PCWG Agenda ) and none were mentioned. Agenda Item 2 Review of Past Action Items The Staff Secretary led a review of the action item list for November (Attachment 3 - PCWG Action Items ). No additional items were discussed. Agenda Item 3 Consent Agenda a. Meeting Minutes October 7, 2015 (Attachment 4 - PCWG Meeting Minutes ). Leland Jacobson (OPPD) moved and Peter Day (OGE) seconded to approve the Consent Agenda item as presented. The motion passed unanimously. Agenda Item 4 Business Practice for Determining 50% Completion (CTPTF Action Item) The Staff Secretary led the PCWG in a discussion regarding developing a new methodology to determine when Competitive Upgrades are 50% complete (Attachment 5-50% Completion Determination for Competitive Upgrades modified). Attachment Y provides that upon 50% completion of a Competitive Upgrade, the Designated Transmission Owner (DTO) may receive a refund of their 2% cash deposit, and the Competitive Transmission Process Task Force (CTPTF) suggested that the PCWG develop or advise on a methodology that could be utilized to make that determination. Staff proposed a process that would allow DTOs of Competitive Upgrades to provide evidence to the PCWG that the 50% completion milestone had been reached. The PCWG would then make a recommendation to the SPP Board of Directors (Board) who would make the decision whether or not to refund the deposit at that time.

11 Minutes No. [55] Several PCWG members stated a preference for a methodology based upon quantifiable metrics in lieu of any working group making recommendations to the Board. Several possible metrics were suggested and discussed by the group. The PCWG determined that a strawman business practice be developed that will include a set of metrics agreed upon by the group that will be used to determine the 50% completion milestone. Staff will develop a draft for review by the group at the next scheduled meeting in December. Agenda Item 5 Process Improvement in ITP Cost Estimation The Staff Secretary reviewed the feedback received from the CTPTF for the items regarding potential process improvements to be made to the cost estimation process in ITP studies (Attachment 6 - Process Improvement in ITP Cost Estimation PCWG ). The Staff Secretary noted the changes that had been already implemented, and then requested feedback on one remaining potential improvement still under consideration. Staff proposed that a formalized process for receiving feedback and verification for project scopes prior to Study Estimate development for projects likely to be competitive. The goal of this proposal was to ensure that both Staff and the independent consultant developing the Study Estimates for projects likely to be competitive would have as much information as possible to develop better estimates. Staff listed three options for obtaining stakeholder verification: 1. Staff to send project scope descriptions individually to groups of two or three stakeholders with experience developing transmission in the same area as the respective projects. 2. Staff to send full list of project scope descriptions to Order 1000 exploder list to solicit feedback. 3. A pertinent working group, or subset made into a task force, to review and verify project scopes. The group discussed the potential merits and drawbacks to each option. The PCWG reached a consensus that Option 1 would most likely garner the most profitable information from stakeholders. Staff noted that the topic would be discussed at the next CTPTF meeting on November 11. Agenda Item 6 RR57 BP7060 Order 1000 Clean-up & NTC Suspension Language The Staff Secretary provided an update on RR 57 (Attachment 7 - RR57 BP7060 FERC Order 1000 Clean-up NTC Suspension Language PCWG 10-7 BPWG 10-23). The document was reviewed and approved by the Business Practices Working Group on October 23, with one edit to reinstate verbiage stating that NTCs and NTC-Cs are eligible for cost recovery under the Tariff. No opposition to this change was voiced by the PCWG. The Staff Secretary noted that the document will be reviewed by the CTPTF, Regional Tariff Working, and Transmission Working Group during the next month. Agenda Item 7 Other Items No other items were brought up for discussion.

12 Minutes No. [55] Agenda Item 8 Summary of Action Items Staff Secretary reviewed the following new action item: Staff will inquire with SPP Legal about confidentiality concerns regarding a working group making recommendations to the Board to refund deposits for Competitive Upgrades. Agenda Item 9 Develop Agenda for Next Meeting The group discussed the following as potential agenda items for the next scheduled meeting in December: Review business practice strawman for 50% Project Completion Determination Quarterly PCWG report to the MOPC Agenda Item 10 Future Meeting Dates and Locations The next scheduled meeting will be held at the ITCGP offices in Topeka, Kansas on December 2 th from 9:00 am 3:00 pm. The January meeting will be a net conference on January 6 th from 1:00 5:00 pm. Meeting adjourned at 2:45 pm. Respectfully submitted, Cary Frizzell Secretary Attachments Attachment 1 - PCWG Attendance Attachment 2 - PCWG Agenda Attachment 3 - PCWG Action Items Attachment 4 - PCWG Meeting Minutes Attachment 5-50% Completion Determination for Competitive Upgrades modified Attachment 6 - Process Improvement in ITP Cost Estimation PCWG Attachment 7 - RR57 BP7060 FERC Order 1000 Clean-up NTC Suspension Language PCWG 10-7 BPWG 10-23

13 SPP STAFF TO COMPLETE THIS SECTION RR #: TBD Date: 12/2/2015 Impact Analysis Required? No Yes RR Title: 50% Project Completion Milestone Determination Name: Cary Frizzell SUBMITTER INFORMATION Company: SPP Phone: (501) REVISION REQUEST DETAILS Requested Resolution Timing: Normal Expedited Urgent Action Reason for Expedited/Urgent Resolution: Type of Revision (select all that apply): Correction Clarification Design Enhancement New Protocol, Business Practice, Criteria, Tariff Regulatory Mandate (describe): SPP Documents Requiring Revision: Please select your primary intended document(s) as well as all others known that could be impacted by the requested revision (e.g. a change to a protocol that would necessitate a criteria or business practice revision). Market Protocols Protocol Section(s): Protocol Version: Criteria Criteria Section(s): Criteria Date: Tariff (OATT) Tariff Section(s): Business Practice Business Practice Number: Objectives of Revision Request: This new business practice describes the process by which the determination is made by SPP that a Competitive Upgrade is 50% complete. Attachment Y, Section III.2(d)(xii) of the SPP Open Access Transmission Tariff requires the Selected RFP Respondent(s) to provide a 2% cash deposit upon accepting the responsibilities of being the Designated Transmission Owner, and that SPP will refund the deposit once the 50% milestone of the Competitive Upgrade is reached. The process described below is the methodology SPP will utilize to make this determination. REVISIONS TO SPP DOCUMENTS In the appropriate sections below, please provide the language from the current document(s) for which you are requesting revision(s), with all edits redlined. Market Protocols N/A SPP Tariff (OATT) N/A SPP Criteria N/A SPP Business Practices

14 Business Practice The purpose of this business practice is to describe the process for determining when the 50% completion milestone has been reached for a Competitive Upgrade. After a Notification to Construct (NTC) is issued to the Selected RFP Respondent(s), Attachment Y, Section III.2(d)(xii) of the SPP Open Access Transmission Tariff (OATT) requires the Selected RFP Respondent(s) to provide a cash deposit representing 2% of the estimated cost of the Selected RFP Proposal upon accepting the responsibilities of being the Designated Transmission Owner (DTO)(s). The cash deposit will be held in escrow by SPP and will be refunded, plus any interest the deposit accrued while in escrow, to the DTO(s) once the 50% completion milestone of the Competitive Upgrade is reached. Project Tracking Metrics In adherence to Attachment O, Section V.6, SPP solicits feedback quarterly from DTOs to determine the progress of all SPP Transmission Expansion Plan (STEP) projects approved either directly by the SPP Board of Directors (Board) or through a FERC filed service agreement under the OATT. Included in these requests are status updates for the following project phases: Engineering and Design Siting and Routing Environmental Studies Permitting Material Procurement Construction For each Network Upgrade, DTOs are asked to update the status for each of these project phases with one of the following options: Not Started In Progress Complete 50% Project Completion Milestone Determination The project tracking metrics, along with the date of NTC issuance (NTC Issue Date) and the projected inservice date listed in the Selected RFP Proposal (Original In-Service Date), will be utilized as a guideline for determining when the 50% completion milestone has been reached for a Competitive Upgrade. A DTO(s) shall become eligible to have its 2% cash deposit refunded when both the following two conditions have occurred: 1) The halfway point in time is reached between the NTC Issue Date and the Original In-Service Date for a Competitive Upgrade 2) The statuses for the project phases listed in Table 1 below are observed

15 Project Phase Engineering and Design Siting and Routing Environmental Studies Permitting Material Procurement Construction *If necessary Status(es) Complete Complete Complete* Complete In Progress OR Complete In Progress OR Complete Table 1 When both conditions 1) and 2) above are met, the DTO may request their cash deposit be refunded and provide evidence of each project phase status to SPP. Once the DTO(s) provides evidence to SPP of each project phase status, SPP will review their request for refund and provide a recommendation to the SPP Board of Directors (Board) as to whether the 50% completion milestone has been reached. SPP will present its recommendation to the Board at their next regularly scheduled quarterly meeting, provided the DTO(s) submits its request and all evidence to SPP of each project phase status greater than 45 calendar days before the regularly scheduled Board meeting. If the request and evidence is submitted less than 45 days before the scheduled quarterly Board meeting, SPP will present its recommendation to the Board at the next scheduled quarterly meeting. If the Board does not approve refunding the 2% cash deposit, the DTO(s) may request a refund and provide evidence of each project phase status to SPP for recommendation to the Board every six calendar months until one of the following events occurs: a. The Board approves the refund of the 2% cash deposit to the DTO(s) b. The Competitive Upgrade is placed into service

16 Quarterly Report of the Project Cost Working Group January 2016

17 Southwest Power Pool, Inc. Table of Contents Executive Summary...2 Background...3 Review Process...4 Business Practice Process Changes...4 Observed Trends...5 Minimum Design Standards Task Force...6 Recommendation...7 Applicable Project Post-Mortem Report...8 Ellsworth Bushton Rice 115 kv...9 Hopi North Loving China Draw 115 kv...11 Appendix Appendix Appendix Appendix Quarterly Report of the Project Cost Working Group 1

18 Southwest Power Pool, Inc. Executive Summary There are 15 active Applicable Projects that are 300 kv and above subject to review by the PCWG. Twenty-nine (29) additional Applicable Projects are greater than 100 kv. Of these 44 Projects, none had an updated cost estimate that was outside the established precision bandwidth during this quarter. There have been 17 Applicable Projects that have been completed and closed out in accordance with Section 13 of Business Practice 7060, totaling an estimated $1.6 billion based on final cost amounts. The list of all active Applicable Projects subject to PCWG review is included in Appendix 1 to this report. Appendix 2 lists all Applicable Projects that are completed and closed-out. Appendix 3 summarizes all Applicable Projects based on source study. Table 1 below summarizes the cost estimates of the 44 active Applicable Projects with established baseline estimates 1. Type Total Baseline Cost Estimate Amount Quarter Total Cost Estimate Variance Variance % Applicable Projects > 300 kv $2,224,576,478 $2,085,563,658 ($139,012,820) 6.3% Applicable Projects > 100 kv < 300 kv $1,099,090,808 $1,074,542,218 ($24,548,590) 2.2% Total $3,323,667,286 $3,160,105,876 ($163,561,410) 4.9% Table 1: Active Applicable Project Cost Estimate Summary 1 All baseline cost estimate values in this report are adjusted for inflation when applicable. For projects that have not had updates to the baseline cost estimate, variance percentages may indicate a negative variance. Quarterly Report of the Project Cost Working Group 2

19 Southwest Power Pool, Inc. Background The Project Cost Working Group (PCWG) was established to create a group with stakeholder input, oversight, and accountability that can provide a transparent review of transmission cost variances. To ensure cost estimate variances are addressed in a timely manner, the PCWG will evaluate projects exceeding allowable variance levels on a monthly basis. As a part of the project estimate review, the PCWG will provide recommendations to the Markets and Operations Policy Committee (MOPC) and Regional State Committee (RSC) for review and to the SPP Board of Directors (Board) for approval. On a quarterly basis, the PCWG will provide a report of their findings and comments to Stakeholders. This report serves as the PCWG s recommendation to MOPC, RSC, and Board and the report to Stakeholders. The Project Cost Working Group members are listed below: Tom Hestermann, Sunflower, Chairman Brian Studenka, ITCGP, Vice-Chair Al Ackland, KCPL Peter Day, OG&E Larry Holloway, KPP Leland Jacobson, OPPD Brenda Jessop, Westar Brian Johnson, AEP Tom Littleton, OMPA Thomas Maldonado, SPS Jeff Stebbins, Tri-County Electric Art Wiese, NPPD John Krajewski, Nebraska Power Review Bd. (CAWG Liaison) Cary Frizzell, SPP Staff Secretary Quarterly Report of the Project Cost Working Group 3

20 Southwest Power Pool, Inc. Review Process Cost updates were requested from Designated Transmission Owners (DTOs) according to the current quarterly project tracking schedule shown in Appendix 4. DTOs then provided cost increase justifications for any projects subject to PCWG s review that recognized an out-of-bandwidth cost estimate change. This information was compiled by SPP staff and a report was prepared for review by the PCWG at its regular meeting. Business Practice 7060 The PCWG reviews projects in accordance with Business Practice No which establishes applicable precision bandwidths for construction projects. This report covers all Applicable Projects as defined in Business Practice No and subject to update during the current quarterly project tracking update. The list of active Applicable Projects is included in Appendix 1 to this report. There are 15 Applicable Projects that are 300 kv and above subject to review by the PCWG. Twenty-nine (29) additional Applicable Projects are greater than 100 kv. Of these 44 Projects, none had an updated cost estimate that was outside the established precision bandwidth during this quarter. Process Changes At its October 2013 meeting, the MOPC approved a recommendation from the PCWG to move all projects applicable to Business Practice No to Business Practice No Previously, Business Practice 7050 applied to all projects issued NTCs prior to January 1, 2012 (Legacy Projects). The recommendation stipulated that baseline cost estimates for all Legacy Projects would be established as the values listed in project tracking as of January 31, 2014, in coordination with the Quarterly Project Tracking Schedule for the 2 nd quarter of The recommendation directed DTOs to complete and submit cost estimates using Standardized Cost Estimate Reporting Templates for Legacy Projects only if project cost estimates increase 10% or greater over the baseline amount provided as of January 31, The modifications to Business Practice 7060 required to implement the recommendation were approved by the MOPC in January The changes resulted in the retirement of Business Practice There are 16 Applicable Projects that were moved from the purview of Business Practice 7050 to Business Practice 7060, three of which are still active and included in Appendix 1. Quarterly Report of the Project Cost Working Group 4

21 Southwest Power Pool, Inc. Observed Trends The PCWG also maintains the Study Estimate Design Guide (SEDG). The PCWG will notify MOPC if a trend is developing in cost estimates deviating from the SEDG. The MOPC is responsible for determining if a review of the SEDG is required. However, this does not preclude PCWG from suggesting to the MOPC any other changes to the SEDG. The PCWG has not observed any trends in the current quarter to report to MOPC. Quarterly Report of the Project Cost Working Group 5

22 Southwest Power Pool, Inc. Minimum Design Standards Task Force At its April 8, 2014 meeting, the PCWG discussed the role of the SEDG in the Transmission Owner Selection Process (TOSP), and further how design standards would be applied for transmission construction across the diverse group of potential builders in the SPP footprint. The group approved a recommendation to be made to the Strategic Planning Committee Task Force for Order 1000 (SPCTF) to consider implementing minimum design standards for transmission construction in SPP. The recommendation further stated that the SEDG should be considered as a starting point for the minimum design standards. On May 9, 2014, the SPCTF unanimously endorsed a motion that minimum design standards for SPP transmission construction should be implemented. The SPCTF asked the PCWG in coordination with the Transmission Working Group (TWG) to further enhance the SEDG to be used as the minimum design standards guidebook. The SPCTF asked that the work be completed by the October 2014 quarterly meetings of the MOPC, RSC, and Board. The PCWG determined to form a task force to complete the work of developing the minimum design standards guidebook at its May 13, 2014 meeting. The Minimum Design Standards Task Force (MDSTF) members are listed below: Jeff Stebbins, Tri-County Electric, Chair (TWG Liaison) Dave Parrish, AEP, Vice Chair Jay Dring, NPPD Garrett Graybill, OG&E Erin Keeler, ITCGP Mark Kuhlenengel, OPPD Kenny Munsell, SPS Paul Sedlacek, Westar Dan Slaven, KCPL Clarence Suppes, Sunflower Doug Bowman, SPP Staff Secretary The MDSTF completed the first version of the SPP Minimum Design Standards in November 2014, and PCWG approved an edited version at its December 2014 meeting. The MOPC approved the MDS unanimously at their January 2015 meeting. The PCWG will maintain the MDS going forward. Quarterly Report of the Project Cost Working Group 6

23 Southwest Power Pool, Inc. Recommendation As described in Business Practice No. 7060, Section 11, the PCWG will provide recommendations to the MOPC and Board regarding any Applicable Project whose cost estimate exceeded the +/-20% bandwidth of the established baseline cost estimate. Recommended Action(s) may include any of the following: i. Accept the cost estimate deviation as reasonable and acceptable and reset the baseline used to evaluate future cost estimate deviations. ii. Identify all or a portion of the costs related to the variances and recommend any changes to the NTC that would reduce the cost or avoid the issues that may be causing the increase. iii. Suspend all future expenditures on the project while SPP restudies the project to determine appropriate changes to the NTC, possible withdrawal of the NTC or whether an alternative project should replace the project. The Board will make the final determination on whether to accept the PCWG recommendation(s) or to choose an alternative action. The PCWG recommends no actions this quarter, having no Applicable Projects that are out-ofbandwidth. Quarterly Report of the Project Cost Working Group 7

24 Southwest Power Pool, Inc. Applicable Project Post Mortem Report To better evaluate the performance of transmission construction in the SPP region, Staff provides post-mortem analysis to the PCWG for all Applicable Projects once they have completed construction and have been placed into service. This section provides that analysis for all Applicable Projects that have been completed and entered the project close-out phase since the previous quarterly PCWG report. Projects included in this analysis may have been issued NTCs prior to the establishment of several process changes to the project cost tracking process, and, therefore, may not include justifications for cost variances that are as detailed as Projects issued NTCs after these process changes. A summary timeline of those changes is provided below: July 2010: MOPC approved the NTC Whitepaper which established a re-evaluation process for projects incurring a cost estimate increase of more than 20% in a quarter. The NTC Whitepaper was later developed into Business Practice 7050 and approved by the MOPC in January April 2012: MOPC approved Business Practice 7060 effective for projects issued NTCs on or after January 1, Detailed a more rigorous cost estimation process that introduced the NTC-C process for Applicable Projects and the Standardized Cost Estimate Reporting Template (SCERT) for all cost estimates submitted to SPP. Also established process to set baseline project cost estimates for future variance determinations. Legacy Projects remained applicable to Business Practice January 2014: MOPC approved modifications to Business Practice 7060 to move all Legacy Projects from the purview of Business Practice 7050 to Business Practice Baseline cost estimates for all Legacy Projects were established as the values listed in project tracking as of January 31, This post-mortem report includes analysis for two Applicable Projects estimated to cost $47.7 million based on current projections. Quarterly Report of the Project Cost Working Group 8

25 Southwest Power Pool, Inc. Ellsworth Bushton Rice 115 kv Mid-Kansas Electric Company (MKEC) and Midwest Energy (MIDW) were issued NTCs on April 9, 2012 to construct approximately 28 miles of new 115 kv line between the Ellsworth substation owned by MKEC and the MIDW-owned Rice and Bushton substations in central Kansas. The project also included the installation of a new 3-breaker ring bus at the adjacent Ellsworth Tap substation, as well as expansion of Ellsworth to accommodate the new line termination. The project was identified as needed to address reliability issues as part of the 2012 ITP Near-Term Assessment. Figure 1: Ellsworth - Bushton - Rice 115 kv The current project cost estimate of $26,428,339 indicates a 10.7% decrease from the established inflation-adjusted baseline estimate. All portions of the project were reported to be completed and energized on June 1, Table 2 provides a summary of information regarding the project, and Figure 2 depicts the cost estimate history of the project, from the time of NTC issuance to present. Quarterly Report of the Project Cost Working Group 9

26 Southwest Power Pool, Inc. Project Scope Construct new 21 mile 115 kv line from Ellsworth (MKEC) to Bushton (MIDW). Construct new 8 mile 115 kv line from Bushton to Rice (MIDW). Install 115 kv 3 breaker ring bus at Ellsworth Tap (MKEC). Expand Ellsworth substation to include two new 115 kv breakers for the new 115 kv line from Rice. Install 115 kv breaker at Rice. Install terminal equipment at Bushton to accommodate the new 115 kv line from Ellsworth. Source Study 2012 ITPNT Board Approval Date 1/31/2012 Transmission Owner(s) MKEC/MIDW NTC Issue Date 4/9/2012 NTC Modifications 0 NTC Modify Date N/A RTO Determined Need Date 6/1/2012 Actual In Service Date 6/1/2015 Number of Quarters in Project Tracking 13 Number of Cost Estimate Changes 4 Final Costs Submitted Through Formula Rates/Project Tracking No Cost Allocation Base Plan Funding Table 2: Ellsworth Bushton Rice 115 kv Summary $40.0 $38.0 $ Million $36.0 $34.0 $32.0 $ % BASELINE $28.0 $26.0 $24.0 $27,485,183 $26,428,339 $ % $20.0 NPE Q Q Q Q Q Q Q Q Q Q Q Q Q Figure 2: Ellsworth Bushton Rice 115 kv Cost Summary Quarterly Report of the Project Cost Working Group 10

27 Southwest Power Pool, Inc. Hopi North Loving China Draw 115 kv On May 19, 2014, NTC-C No was issued to Southwestern Public Service Co. (SPS) to construct a new 29.2-mile 115 kv transmission line from Hopi to North Loving to China Draw substations located in southwestern New Mexico. The project was identified and studied as a solution to address reliability issues in the SPS area as part of the High Priority Incremental Load Study (HPILS) that was approved by the Board in April SPS s NTC-C Project Estimate of $23,264,106 was found to be within the required bandwidth threshold, and NTC No was issued to SPS for the project on December 3, Figure 3: Hopi - North Loving - China Draw 115 kv The current project cost estimate of $21,320,588 indicates a 10.6% decrease from the established inflation-adjusted baseline estimate. SPS reported that the construction of the new line was completed and energized on May 25, Table 3 provides a summary of information regarding the project, and Figure 4 depicts the cost estimate history of the project, from the time of NTC issuance to present. Quarterly Report of the Project Cost Working Group 11

28 Southwest Power Pool, Inc. Project Scope Construct new 9.5 mile 115 kv line from Hopi to North Loving 115 kv. Construct new 19.7 mile 115 kv line from North Loving to China Draw. Source Study HPILS Board Approval Date 4/29/2014 Transmission Owner(s) SPS NTC Issue Date 12/3/2014 NTC Modifications 0 NTC Modify Date N/A RTO Determined Need Date 6/1/2015 Actual In Service Date 5/25/2015 Number of Quarters in Project Tracking 5 Number of Cost Estimate Changes 4 Final Costs Submitted Through Formula Rates/Project Tracking No Cost Allocation Base Plan Funding Table 3: Hopi - North Loving - China Draw 115 kv Summary $35.0 $33.0 $ Million $31.0 $29.0 $27.0 $25.0 $23.0 $21.0 $19.0 $17.0 $ % BASELINE $23,264,106 20% $21,320,588 CPE Q Q Q Q Q Figure 4: Hopi North Loving China Draw 115 kv Cost History Quarterly Report of the Project Cost Working Group 12

29 Southwest Power Pool, Inc. Appendix 1 {See accompanying list of active Applicable Projects} Quarterly Report of the Project Cost Working Group 13

30 Southwest Power Pool, Inc. Appendix 2 {See accompanying list of closed-out Applicable Projects} Quarterly Report of the Project Cost Working Group 14

31 Southwest Power Pool, Inc. Appendix 3 Applicable Projects Summary by Source Study Source Study Total Study Estimate Total Board Approved Estimate Total Baseline Estimate Total Latest Cost Variance Variance % 2007 STEP $35,185,000 $35,185,000 $60,629,775 $58,065,903 ($2,563,872) 4.2% 2009 STEP $113,404,063 $113,404,063 $164,094,537 $148,149,574 ($15,944,963) 9.7% Balanced Portfolio Priority Projects $282,171,500 $282,171,500 $393,568,825 $392,952,742 ($616,082) 0.2% $1,144,013,634 $1,415,427,292 $1,429,848,910 $1,318,212,383 ($111,636,527) 7.8% 2012 ITPNT $74,436,395 $74,436,395 $122,504,388 $115,192,393 ($7,311,996) 6.0% 2012 ITP10 $774,735,922 $774,735,922 $806,449,578 $773,355,709 ($33,093,869) 4.1% 2013 ITPNT $258,688,542 $258,688,542 $277,456,633 $264,993,993 ($12,462,640) 4.5% 2014 ITPNT $411,949,571 $411,949,571 $449,767,438 $441,463,410 ($8,304,029) 1.8% HPILS $630,038,346 $630,038,346 $645,461,474 $635,183,049 ($10,278,425) 1.6% IS Integration Study $383,400,000 $383,400,000 $392,985,000 $383,400,000 ($9,585,000) 2.4% 2015 ITPNT $35,091,946 $35,091,946 $35,091,946 $35,091,946 $0 0.0% 2015 ITP10 $15,726,289 $15,726,289 $37,510,000 $37,510,000 $0 0.0% Quarterly Report of the Project Cost Working Group 15

32 Southwest Power Pool, Inc. Appendix 4 Quarterly Project Tracking Schedule 2016 Quarter 1 1 TOs submit Project Tracking updates as of October 31 st Nov SPP staff notifies TOs and PCWG of cost increases > 20% and any mitigation plans outstanding TOs provide cost increase justifications TOs provide mitigation plans and are reviewed by SPP staff Dec SPP staff prepares cost increase data for PCWG background materials PCWG reviews cost increase data at December 2nd meeting SPP staff prepares and submits Quarterly Project Tracking Report for MOPC on December 31 st Jan MOPC, RSC, and BOD Meetings Quarterly Report of the Project Cost Working Group 16

33 Southwest Power Pool, Inc. 1 TOs submit Project Tracking updates as of January 31 st Quarter 2 Feb SPP staff notifies TOs and PCWG of cost increases > 20% and any mitigation plans outstanding TOs provide cost increase justifications TOs provide mitigation plans and are reviewed by SPP staff Mar SPP staff prepares cost increase data for PCWG background materials PCWG reviews cost increase data at March 2 nd meeting SPP staff prepares and submits Quarterly Project Tracking Report for MOPC on April 1 st Apr MOPC, RSC, and BOD Meetings Quarterly Report of the Project Cost Working Group 17

34 Southwest Power Pool, Inc. Quarter 3 1 TOs submit Project Tracking updates as of April 30 th May SPP staff notifies TOs and PCWG of cost increases > 20% and any mitigation plans outstanding TOs provide cost increase justifications TOs provide mitigation plans and are reviewed by SPP staff Jun SPP staff prepares cost increase data for PCWG background materials PCWG reviews cost increase data at June 1 st meeting SPP staff prepares and submits Quarterly Project Tracking Report for MOPC on July 1 st Jul MOPC, RSC, and BOD Meetings Quarterly Report of the Project Cost Working Group 18

35 Southwest Power Pool, Inc. Quarter 4 1 TOs submit Project Tracking updates as of July 31 th Aug SPP staff notifies TOs and PCWG of cost increases > 20% and any mitigation plans outstanding TOs provide cost increase justifications TOs provide mitigation plans and are reviewed by SPP staff SPP staff prepares cost increase data for PCWG background materials PCWG reviews cost increase data at September 7 th meeting Sep SPP staff prepares and submits Quarterly Project Tracking Report for MOPC on September 30 th Oct MOPC, RSC, and BOD Meetings Quarterly Report of the Project Cost Working Group 19

36 Revision Request Recommendation Report RR #: 57 Date: 8/5/2015 RR Title: Order 1000 Clean-up & NTC Suspension Language SUBMITTER INFORMATION Submitter Name: Cary Frizzell Company: Southwest Power Pool Phone: (501) OBJECTIVE OF REVISION This document revision is to further address issues associated with FERC Order 1000 after SPP s order received in late Changes are needed to be consistent with FERC s order to SPP in response to the compliance filing for Order Language is also being added to describe the action taken by the SPP Board of Directors to suspend a transmission project with an active NTC. The Business Practice currently does not describe this action. EXECUTIVE SUMMARY OF RECOMMENDATION IMPACT ANALYSIS REQUIRED: Yes No Estimated Cost: $ Cost is a rough order of magnitude estimate, approx. +/-50% Estimated Duration: months Duration is a rough order of magnitude estimate, approx. +/-50% Priority Rank for System Change: 1 Critical 2 High 3 Medium 4 Low SPP DOCUMENTS IMPACTED Market Protocols Protocol Section(s): Protocol Version: Criteria Criteria Section(s): Criteria Date: Tariff (OATT) Tariff Section(s): Business Practice Business Practice Number: 7060 WORKING GROUP REVIEWS AND RECOMMENDATIONS List Primary and any Secondary/Impacted WG Recommendations as appropriate Primary Working Group: BPWG Date: 10/23/2015 Vote: Approved as modified - Unanimous Secondary Working Group: PCWG Date: 10/712/2/2015 Vote: Approved as modified - Unanimous Secondary Working Group: CTPTF Date: 11/11/2015 Vote: Review only

37 Secondary Working Group: Reasons for Opposition: Date: Vote: Abstained: Opposed: MOPC Recommendation: Reasons for Opposition: Date: Vote: Abstained: Opposed: BOD/Member Committee Recommendation: Reasons for Opposition: Date: Vote: Abstained: Opposed: COMMENTS Comment Author: Description of Comments: Status: PROPOSED REVISION(S) TO SPP DOCUMENTS Market Protocols Tariff (OATT) SPP Criteria

38 SPP Business Practices 7060 Notification to Construct and Project Cost Estimating Processes Effective January 1, 2012 (return to TOC) Business Practice Contents 1. Notification to Construct 2. Notification to Construct with Conditions 3. Issuance of an NTC or NTC-C 4. Format of NTC/NTC-C Letters and Identification Numbers 5. Acceptance of an NTC-C or NTC 6. NTC/NTC-C Modification 7. NTC/NTC-C Withdrawal 8. Project Specification and Cost Estimation Process 9. Standardized Cost Estimate Reporting Template (SCERT) 10. PCWG Review Process for Applicable Projects 11. Projects Reviewed by PCWG 12. Project Reporting 13. NTC Project Close-out and Validation Process 14. Dispute Resolution 1. Notification to Construct An SPP Notification to Construct (NTC) letter is a formal document directing the Designated Transmission Owner (DTO) for the commencement of construction of Network Upgrades that have been approved or endorsed by the SPP Board of Directors (BOD) intended to meet the construction needs of the SPP Transmission Expansion Plan (STEP), SPP Open Access Transmission Tariff (OATT), or Regional Transmission Organization (RTO). 2. Notification to Construct with Conditions An SPP Notification to Construct with Conditions (NTC-C) letter is a formal document directing a DTO to further refine itsthe Study Estimate, as defined in Section 18, for an Applicable Project. An NTC-C does not authorize the DTO to start construction or to order materials for the project. The NTC-C will direct a DTO to perform detailed engineering and cost studies within a stated timeframe in the NTC-C letter to refine its the Study Estimate for further SPP analysis to determine if the project should proceed with an NTC for actual construction. The DTO shall provide SPP an estimate of the engineering and other costs (i.e., such as the costs for engineering to develop the design, perform siting/routing reviews, perform environmental studies, or to take other actions required to refine the Study Estimate) required to develop the NTC-C Project Estimate (CPE) Legacy Project

39 A Legacy Project is a construction project for which SPP has issued an NTC prior to January 1, Applicable Projects Applicable Projects are construction projects, including Legacy Projects, that SPP has the authority to direct construction of, has a nominal operating voltage of 100 kv or above, and has a Study Estimate in excess of $20 million. A single Applicable Project may consist of multiple upgrades or multiple projects assigned to multiple DTOs. A non-applicable Project with a nominal operating voltage of 100 kv or above that has been issued an NTC will become an Applicable Project if either its NTC Project Estimate (NPE) or any subsequent cost estimate exceeds $20 million. Applicable Projects will continue to be Applicable Projects even if their subsequent cost estimates fall below $20 million Competitive Projects Competitive Projects are construction projects that are subject to the Transmission Owner Selection Process (TOSP), as defined in Attachment Y of the SPP OATT. 3. Issuance of an NTC or NTC-C The authority for SPP to issue an NTC is derived from approval by the BOD, a FERC filed Service Agreement under the SPP OATT, an endorsed Economic or Sponsored Upgrade upon the execution of a contract that financially commits a Project Sponsor to fund such upgrade, or when such upgrade is otherwise required pursuant to the tariff. An NTC or NTC-C may be issued for projects originating from study processes described in Section VI of Attachment O of the OATT. The issuance of an NTC or NTC-C represents that the Network Upgrade is eligible for cost recovery under the SPP OATT, including if SPP withdraws the NTC or NTC-C as described in Section 07 below. For non-competitive Projects, SPP will issue an NTC-C for Applicable Projects. the timeframe that the DTO has to provide its CPE to SPP in the NTC-C letter. SPP staff will provide SPP will issue an NTC or NTC-C under the conditions and time constraints defined in Sections 3.1 through 3.5. An NTC-C shall not be issued for a Competitive Project. Commented [CF1]: Rejected change to Attachment Y. The word processes in this sentence refers to study processes, which are described in Attachment O Commented [k2]: BPWG opted to retain this sentence. Approved 10/23 Commented [CF3]: This statement is not 100% accurate as NTCs are issued for Network Upgrades whose costs are directly assigned to the customer. Suggestion is to strike sentence, since cost recovery is covered in OATT 3.1. Approved Network Upgrades from ITP/High Priority Studies Unless previously issued, SPP staff will issue NTC(s) or NTC-C(s) for all Network Upgrades approved by the BOD for which financial commitment is required prior to the approval of the next update of the STEP. Additionally if authorized by the BOD, SPP staff will issue an NTC/NTC-C for each Network Upgrade for which a financial commitment is needed within the next four years or other time period as designated by the BOD. For a non-competitive Project, such an NTC/NTC-C will be issued within 15 business days from the time the SPP BOD approves the project. For a Competitive Project, an NTC will be issued to the Selected RFP Respondent in accordance with Attachment Y of the OATT Sponsored Upgrades