STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

Transcription

1 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter, on the Commission s own motion, to open a docket for certain regulated electric Case No. U utilities to file their five-year distribution (e-file paperless) investment and maintenance plans for other related, uncontested matters. / MICHIGAN PUBLIC SERVICE COMMISSION STAFF S REPLY COMMENTS Respectfully submitted, MICHIGAN PUBLIC SERVICE COMMISSION STAFF DATED: January 11, 2019 Emily A. Jefferson (P81040) Assistant Attorney General Public Service Division 7109 W. Saginaw Hwy., 3rd Floor Lansing, MI Telephone: (517)

2 BACKGROUND In final orders of Case Nos. U (Consumers Energy Company s Electric Rate Case), U (DTE Electric s Rate Case), and U (Indiana Michigan Power Company s Rate Case), (collectively Companies) the Commission expressed a need for the Companies to provide a much more transparent, and long-term electric distribution planning process outside of the confines of the accelerated rate case process. This resulted in the Commission opening the Docket in Case No. U and its November 21, 2018 Order (November 21 Order) requiring Five-Year Distribution Plans to be filed by the above-mentioned Companies. The April 12, 2018 Order in Case No. U required Indiana Michigan Power Company (I&M or Company) to file its draft Five-Year Distribution Plan (Plan) in this docket by October 31, 2018 with a final Plan to be submitted by May 1, 2019 pursuant to meeting with Staff. 1 The November 21 Order in this docket required initial comments on I&M s Plan to be filed by December 21, 2018 addressing the following questions: 2 1. Does the company s draft distribution planning report provide transparent review to identify and make cost-effective grid modernization and aging infrastructure investments necessary to support improved reliability, power quality, and future growth? Do the proposed investments provide a clear strategic path to address resiliency, reliability, and grid modernization, consistent with the Commission s stated goals as outlined in recent electric rate case orders? 1 April 12, 2018 Order in Case No. U page November 21, 2018 Order in Case No. U page 31.

3 2. Do the plans identify system upgrades or investment strategies and concrete, measurable performance targets and timelines in areas such as safety and reliability? 3. Aside from those already generally raised in this docket, are there longer-term enhancements to the plan or the planning process that the Commission, utilities, and stakeholders should be considering in future rounds? 4. What is the impact of transmission outages and system issues on distribution reliability for I&M and neighboring utilities, as well as the status and expected impact of solutions? 5. Any other feedback for the Commission s or the Staff s consideration. Vote Solar, the Environmental Law and Policy Center, the Natural Resource Defense Council, and Plugged in Strategies (collectively Joint Commenters) filed comments by the due date. These were the only comments filed on the draft Plan. Additionally, the November 21 Order established a January 11, 2019 filing date for reply comments. Staff submits the following reply comments in response to the Commission s directive. STAFF S REPLIES TO I&M AND JOINT COMMENTERS After review of the Company s Plan, it is evident that I&M s distribution system will require significant investment in the next five years in order to continue to provide safe and reliable access to electricity to Michigan s rate payers. It is also apparent that advanced technologies and approaches to building and operating the distribution system provide an opportunity to reduce operational expense and improve efficiency potentially minimizing the rate impact of these needed investments. A common theme throughout the Company s Plan is that a firstpriority action item is to replace aging assets before significant failures occur causing both safety and reliability concerns. As outlined in the Commission orders

4 framing the Plan, public safety is the top priority and addressing known safety issues on the system through strategic replacement of assets. Given the long useful lives of these assets and the evolving needs and expectations of rate payers, thoughtful consideration must be paid to these replacement strategies to ensure a no regrets investment strategy for the long term. With this in mind, Staff opines that the Company should use reasonable foresight when conducting these activities so that the replacement of assets are done in a manner that will allow the distribution system to be flexible and enabling for future technologies and uses such as bi-directional power flows, communications, automated fault management, etc. Staff is excited to continue working with I&M, DTE Electric, Consumers Energy and stakeholders going forward to continue to refine Plans that will bring Michigan s distribution system in line with other states in the top tier of reliability and automation. Staff commends I&M on its draft Plan. It has filed a comprehensive draft that reasonably articulates the Company s plan to maintain, bolster and update is Michigan distribution assets to provide for safe and reliable electricity to its Michigan customers. Staff feels that it has submitted a Plan that is generally responsive to the five questions stated above as outlined in the November 21 Order. Additionally, staff appreciates the Joint Commenter s thorough review of I&M s Plan and the comments filed in this docket. The Joint Commenters focused on five

5 areas in which it felt I&M s draft Plan deficient or did not respond to the Commission s directives. Staff summarizes these concerns as follows: The Plan lacks future costs, benefits and cost/benefit analysis metrics. The Plan lacks measurable performance targets. The Plan does not include load forecasts The Plan fails to address benefits associated with distributed energy resources (DER) and non-wires alternatives (NWA). The Grid Modernizations section of the Plan should provide more detail as to how the Company can leverage the benefits of grid modernization and DERs. Staff believes that I &M s initial Plan is meant to provide a foundational view of the existing planning process currently utilized by the utility. Developing a better understanding of the current planning process would provide the necessary background for the Commission to analyze the process and make recommendations for improvements that better align the interest of all stakeholders. The Commission did not plan on formally approving the Plan because given the rapid pace of innovation in technology and customer needs, utility planning must be dynamic and allow the Company to be responsive to its customer needs and the incorporation of future technologies. Staff believes that its September 1, 2018 Report (Staff Report) in this case is a guidepost to the Plan in future iterations and understands that many of the suggestions contained within are only feasible once necessary updates have been made to the grid. With that said, safety and reliability concerns should be addressed as a first-priority, but the Company should plan for asset replacement that will provide for future-proofing with enhancements outlined in the Staff Report in mind. Addressing the Joint Commenters listed deficiencies, Staff offers the following reply comments.

6 The Plan s financial analysis is adequate for a draft Plan. With respects to future costs benefit analysis, Staff agrees with the Joint Commenters that the Company did not provide extensive detail on cost and related benefits for future assets, but this may not necessarily result in a deficiency in the draft plan. It is important to note that both DTE Electric and Consumers Energy s draft plans had incomplete financial information at the time of their filing. Staff met with each of the utilities during the drafting of the plans and recognizes the lack of long-term detailed costs information is due to the dynamic nature of utility business. Each utility utilizes annual budgeting exercises as part of their current process to ensure that resources are committed to necessary projects based on the most up to date information. Absent this detailed cost information, staff finds the Company s analysis through its Project Value Ranking (PVR) tool valuable in terms of long-term planning. In determining investment decisions, the PVR software looks at planning components which need to be addressed beyond just cost, such as safety, customer experience, improved data availability and flexibility. When viewed together, these considerations may re-rank priorities when compared solely to a traditional cost/benefit analysis. The final Plan should address reliability as a high priority and include plans to improve it. The Joint Commenters state that the Company s Plan lacks measurable performance metrics. Immediately, Staff has concerns with the Company s reliability as it currently has the highest SAIDI when compared to other Michigan

7 utilities 3 and believes, in the interim, this should be the Company s primary performance metric to drive distribution investments. The Company states that possible causes of its reliability issues result from equipment that was built to now obsolete standards, is towards the end of its useful life (resulting in equipment failure), the high amount of rural/off-road primary lines and vegetation related outages. 4 While acknowledging and identifying the root causes of reliability issues is valuable, what is missing is an understanding and explanation of how the planning and design of the system moving forward mitigates these concerns. Given the current state of reliability in I&M service territory, It is Staff s opinion that, at this point, an improvement of this metric should be of considerable priority for the Company. Staff opines that the final Plan would benefit from a more robust discussion of this particular-metric and the Company s concepts to specifically address customer outage duration going forward. The Company should also include discussion regarding the impact of transmission on distribution reliability. For future-plans, discussion of unique performance metrics to measure the reasonableness of investments related to the Plan would benefit all parties including the Company. 3 FERC Form 861 Reliability Tab 4 Plan page 1, 6, and 14 of 56.

8 Actual load forecast data is not necessary to evaluate the draft Plan. Starting on page 27 of the Plan, the Company discusses its approach to load forecasting for its distribution planning process for each of its circuits and stations. Peak demands are projected for 10 years with adjustments made for expected load increases or decreases. CYME software is utilized to determine feeder loadings and potential faults. Staff supports this approach and struggles to understand how inclusion of the actual forecast data as requested by Joint Commenters, would provide additional benefits to the Company s Plan when compared to the explanation of the process provided. Staff does not believe this level of detail is necessary at this point to understand the Company s distribution plan over the next five years. The Plan fails to address benefits associated with distributed energy resources (DER) and non-wires alternatives (NWA) and the Grid Modernizations section of the Plan should provide more detail as to how the Company can leverage the benefits of grid modernization and DERs. Staff believes that the two concerns of the Joint Commenters above can be considered together. Staff feels compelled to agree in part with the Joint Commenters with respect to NWA, DERs and grid modernization. The Company provided relatively generic statements regarding the above-mentioned aspects of the Plan. Staff feels it would be beneficial to all parties if the Company included more detail on these components in the final Plan. Additionally, Staff sees benefit from incorporating strategic pilots to analyze automatic and remote controlling mechanisms with DERs and other NWAs so the Company can learn how best to

9 leverage Company and customer assets in the future should adoption of these technologies continue to increase at substantial rates. In a similar manner, Staff would be interested in the inclusion in the final Plan of any lesson s learned from the Company s parent company American Electric Power Company (AEP) of strategic pilots in other jurisdictions. Finally, Staff feels the final Plan would benefit from a more detailed discussion of any potentially unique characteristics or challenges regarding NWA, DERs, etc. that I&M faces being a multi-state utility and/or being in the PJM market as opposed to MISO. CONCLUSION The Company s draft Plan provides a good foundation for its final Plan. Staff will continue to work with the Company and stakeholders to improve and refine the Plan to increase system reliability and provide complete and thorough financial analysis. Respectfully submitted, MICHIGAN PUBLIC SERVICE COMMISSION STAFF DATED: January 11, p Reply Comments.docx Emily A. Jefferson (P81040) Assistant Attorney General Public Service Division 7109 Saginaw Hwy., 3rd Floor Lansing, MI Telephone: (517)