Beckwith Electric Co.Rev. 5, 09/26/00

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Economic Evaluation Model

Introduction

Utilities all over the country are doing economic evaluations on newly installedequipment to help determine overall bottom line effectiveness and to determinepayback and return on investment for their shareholders. Recently, the quality ofdelivered power at the customer has been all the rage and Volt/VAr ManagementSystems have risen to the forefront. One progressive, forward-thinking UtilityCompany, utilizing an Autodaptive Volt/VAr Management System, performedsuch an economic evaluation of their new system and their example yielded thefollowing results.

In any evaluation some assumptions must be made when all variables are notquantifiable. In this particular case, the following assumptions were made.

1. Total system losses = 8%2. All losses are not reduced by the installation of distribution pole

top capacitor banks. Estimation was made that portion of thetotal losses that were effected by the installation of the ACCswas 1% of the total 8%. Seemingly conservative.

3. The utility has been using ACCs for many applications and hasconsistently addressed the power factor problem. It wasestimated that they have already saved approximately 75% ofthe available savings or % of the total losses. The estimatedadditional savings that could be attributed to the further change-out of equipment to the Volt/VAr Management System would bethe remaining %.

Given these basic assumptions, they looked at four categories of savings; losses,reduced maintenance, deferred capital expenditure, and operating cost.

Losses Savings

Annual Load = 35,000 GWHr/yr. Total System Losses @ 8% = 2800 GWHr/yr. At $0.05/KWHr, the losses = $140,000,000/yr Working on the second assumption, 1% of the total 8% an effective

real losses probability = $17,500,000/yr Working on the third assumption, 3/4 already saved $13,125,000,

and 1/4 still yet to save with further changeout of equipment = $4,375,000

Beckwith Electric Co.Rev. 5, 09/26/00

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Maintenance Reduction Savings

There are approximately 400 LTC Transformers installed at this Utility and theirmaintenance interval is 15 months based on the number of tap changeroperations. Therefore,

Maintenance Costs = 4 man-days @ $43.75/Hr. = $1400/maint.cycle/transformer

Total Annualized Maintenance Costs = $448,000/yr Estimated reduction in Tap Change Operations = 50% to 75% Estimated Annualized Maintenance Savings = $225,000

Deferred Capital Expenditure Savings

In this calculation estimate we make the assumption that 5% of the upgrade orreplacement of existing power transformers is the result of utilizing theAutodaptive Volt/VAr Management System.

Estimated Time Value of Money Annualized = 8% 5% of the 400 transformers @ $300,00 net ea. = $480,000/yr

We also make the assumption additional Generation will be required for new loadgrowth at 5%/yr, and that % of the losses associated with the new generationwould be saved as a result of utilizing the Autodaptive Volt/VAr ManagementSystem. Therefore:

5% load growth at an estimated cost of new generation @$800/KW multiplied by % = $400,000/yr.

Total Deferred Capital Expense Savings = $880,000

Operating Costs Savings

The Utility estimated their annual cost of engineering and field personnel time forcap bank control setting changes for seasonal and system changes isapproximately $500/control. Since the ACC needs no adjustments but ratheradapts itself to seasonal and system changes, a subsequent operating costreduction per unit would be realized after initial installation.

Beckwith Electric Co.Rev. 5, 09/26/00

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Investment Consideration

The Utility considered investment in a new project to continue the controlsupgrades. Project costs considerations broke out as follows:

Install 400 ATCs = $900,000 Replace 1000 old cap bank controls with new ACCs = $600,000 Install 150 additional new distribution

cap banks with ACCs (labor incl.) = $1,020,000 Total Project Costs = $2,520,000

Overall economic impact analysis and return on investment (ROI) study showed;if the Utilitys new project were implemented, the annual savings of the newproject, plus the other annual savings combined, would bear the followingannualized saving results.

Total savings from losses = $4,375,000 Total Reduction in Maintenance Costs = $225,000 Total Deferred Capital Expenditure = $880,000 Total Operating Costs Savings (assuming 1000

new ACCs installed in the new project) = $500,000 Total Annualized Savings = $5,980,000

With annualized expected savings of $5,980,000 and New Project costs of$2,520,000 a very respectable ROI of less than 1 year could be realized.

Of course these calculations will vary from Utility to Utility depending upon theircosts, their previous VAr management strategy, and their overall systemconfiguration. Nonetheless, annualized savings as well as a relatively short ROIfor new investment can be achieved.

As is readily apparent, the majority of the overall savings (from all categories) isassociated with the installation of the ACC control on the distribution pole top capbanks. It should be noted that the ACCs can be/are, without a doubt, stand-alone devices. The utilization of the full system, however, will definitely optimizethe Volt/VAr management results.

Beckwith Electric Co.Rev. 5, 09/26/00

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Summary

The first priority of any Volt/VAr Management System is to provide quality powerat the customers end. This quality is effected by both the method of voltagecontrol on the tap changers and regulators, and by the VAr flow on thedistribution system. The Autodaptive Volt/VAr Management System can quantifythis measurement of power quality by monitoring and controlling the VoltageRegulation Quality Factor (VRQF).

The second priority is the control of the VAr flow through the distribution systemas limited by the number of distribution line capacitors and substation buscapacitors available. This can be accomplished if the full implementation of thesystem is employed including the ATCs and/or ARCs.

A third priority would be to accomplish priorities 1 and 2 above while reducing thetotal number of tap changes (LTC and Line Regulator) and thereby reduce thefield maintenance associated with these devices. It should be noted that fieldtesting of all these controls (ACC, ATC, and ARC) has shown a significantreduction in the number of tap changes as compared to the number of tapchanges provided by conventional controls. Generally, 50% to 75% in thenumber of tap changes is typical. In some recorded field data we have seen tapchanger operations reduced by as much as a 32 : 1 ratio when integrating the fullsystem.

Undoubtedly, the foundation for the Autodaptive Volt/VAr System that controlsdistribution voltages and VAr flows, is the Autodaptive Capacitor Control providedthe feeder and/or substation has adequate compensation in the way ofcapacitance. Adding the Autodaptive regulating controllers (ATC and ARC)further completes the system and reduces the number of LTC and Line Regulatortap changes. All of this is done to improve and maintain a better VoltageRegulation Quality Factor (VRQF) and a desirable voltage profile that is deliveredto the customer

The individual components of the system have demonstrated their ability to workwell as stand-alone devices, as well as working in conjunction with othersuppliers equipment. They have demonstrated their ability to operate/coordinatewith several other Autodaptive controllers on the same circuit or together onmultiple circuits. The ATC however interacts only with the ACCs on the circuitsand as such must be included in the complete Autodaptive Volt/VArManagement System in order to realize the maximum benefits.

Understanding the devices have the ability to adapt/change the setpoints whichthe deviations are being compared to, based on other fundamental criteria beingmeasured in the circuit, and we begin to see how this approach makes a littlemore sense.

Beckwith Electric Co.Rev. 5, 09/26/00

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Knowing the devices have the capability to capture and collect historicaloperating information that is used for systems planning and analysis, we begin tosee the possibilities.

Learning we are able to have multiple devices working together in a system,communicating to each other but not having the headaches normally associatedwith communications in the traditional sense, one begins to see that thinkingoutside the box is really in order.

When the sum total of all these advancements are coupled with tried and truefield data that backs up the story, and the economic justifications begin savingreal dollars, one begins to really understand how the system works. It becomesreadily apparent the system is a very Pro-active rather than Re-active systemthat continually adjusts and fine tunes itself to operate at its most efficient levelpossible.

The long and the short of it says whether using these devices as stand-alonecomponents or in a system, the savings is there to be made, all that need bedone is to use the technology available.