PRELIMINARY FINDINGS OF BWP AND GWP REGARDING …€¦ · 6. BWP and GWP hereby request that LADWP...
Transcript of PRELIMINARY FINDINGS OF BWP AND GWP REGARDING …€¦ · 6. BWP and GWP hereby request that LADWP...
PRELIMINARY FINDINGS OF BWP AND GWP REGARDING LADWP’S 2017 REVISIONS TO ITS OPEN ACCESS
TRANSMISSION TARIFF
Presented March 8, 2017 by:
Jon Stickman, Esq.Duncan & Allen
Telephone: (202) 289-8400Email: [email protected] for BWP and GWP
Lon PetersNorthwest Economic Research LLC
Telephone: (626) 365-1968Email: [email protected]
Riley RhorerKRSaline & Associates
Telephone: (480) 610-8741Email: [email protected]
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OUTLINE
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1. Objective2. Disclaimer3. Procedural Issues4. Cost‐of‐Service (COSS)/Rate Issues5. Options for Resolving COSS Issues6. OATT Issues7. Options for Resolving OATT Issues8. Conclusions
OBJECTIVE
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This report addresses:
1. The applicability of Sections 211 and 212 of the Federal Power Act (FPA) to LADWP’s OATT and OATT rates.
2. BWP’s and GWP’s concerns regarding LADWP’s failure to fully and promptly respond to information requests in the 2017 OATT Stakeholder process.
3. BWP’s and GWP’s concerns regarding LADWP’s overstatement of costs in its 2017 OATT COSS.
4. BWP’s and GWP’s concerns regarding discriminatory provisions in LADWP’s 2017 OATT revisions.
5. BWP’s and GWP’s legal support for their concerns and their proposed solutions to resolve these concerns.
DISCLAIMER
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This report addresses only BWP’s and GWP’s preliminary findings as of the date of this presentation. BWP and GWP believe that revisions to these findings and additional findings are likely to occur, if and when they receive the information and data they have requested from LADWP. BWP and GWP reserve the right to raise additional findings and plan to do so, if necessary, in the public stakeholder process.
APPLICABILITY OF FPA SECTIONS 211 AND 212 TO LADWP’S OATT AND OATT RATES
1. LADWP’s OATT and OATT rates are subject to the FERC’s authority over transmission under Sections 211 and 212 of the FPA. See e.g., City of College Station, TX, 76 FERC ¶ 61,138 (1996).
2. If LADWP fails to resolve the OATT and OATT rate issues set forth in BWP’s and GWP’s preliminary findings, these issues can be brought before the FERC for resolution. See e.g., City of College Station, TX, 99 FERC ¶ 61,163 (1996).
3. BWP and GWP hope to avoid a complaint at FERC.
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PROCEDURAL ISSUES
1. LADWP has not fully and promptly responded to BWP’s and GWP’s information requests in this Stakeholder process.
2. Since the process began, BWP and GWP have asked a total of 88 questions, many with subparts. As of today, some responses have been denied, some responses are late, some responses are inadequate, and responses 48‐88 have not yet been posted. We are separately providing a table that shows each of the information requests and either a description of BWP’s and GWP’s concerns regarding the answers provided or a note that no response has been provided yet.
3. Some requests submitted on February 1, 2017 have not yet been responded to. 4. Of the questions actually answered, some were not fully and completely answered or responded
to with data that was not responsive or provided in non‐searchable and/or native format.5. Because LADWP has not fully and completely responded to BWP’s and GWP’s information
requests, they cannot complete their analysis of multiple aspects of LADWP’s OATT and COSS proposal (e.g., classification, segmentation, return‐on‐equity, capital structure, income or receivables associated with LADWP’s role as Project Manager for SCPPA ,IPA, and PDCI owners).
6. BWP and GWP hereby request that LADWP rectify this situation and provide them with the information they have requested, LADWP is required to provide and which they have a right to receive.
7. If LADWP’s responses are not provided this week, the Stakeholder Process should be suspended until such time that all full and complete responses have been provided.
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COSS ISSUES
1. Rate Design 2. Segmentation3. Revenue Credits4. Classification and Functionalization5. Ancillary Services 6. Fuel and Pre‐paid Energy Costs7. Capital Structure and ROE
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COSS Issue 1 – Rate Design
1. LADWP’s COSS inappropriately uses an average of 12 Coincident Peak (“CP”) for calculating rates in conditions where 1 CP is appropriate, justified and required by FERC precedent.a) LADWP’s use of a 12 CP is not appropriate because LADWP fails the following 3 Tests:
1) Test No. 1 ‐ On and Off Peak Test ‐ This test first compares the average of the coincidental peaks in the months with the three highest system peaks as a percentage of the annual system peak. Second, it compares the average of the coincidental peaks in the three months with the lowest system peaks as a percentage of the annual system peak. A 12 CP allocation is considered appropriate where the difference between these two percentages is 19% or less.
2) Test No. 2 ‐ Low‐to‐Annual Peak Test ‐ Compares the lowest monthly peak as a percentage of the annual system peak. A range of 66% or higher is considered indicative of a 12 CP system.
3) Test No. 3 ‐ Average to Annual Peak Test – Compares the average of the twelve monthly peaks as a percentage of the annual system peak. A range of 81% or higher is considered indicative of a 12 CP system. See e.g., Southwestern Pub. Serv. Co., 144 FERC ¶61,133, P48‐51 (2013); Golden Spread Electric Co‐Op, Inc., Order No. 501‐A, 144 FERC ¶61,132 (2013); and American Electric Power Service Corporation, 64 FERC ¶61,279 (1993).
b) 1CP is appropriate because LADWP plans for its peak which usually is in one month of the Summer. See e.g., “LADWP’s 2013 Long‐Term Transmission Assessment, Dec. 23, 2013, p. 7, noting that compliance with NERC reliability standards is demonstrated by summer 1‐in‐10 peak conditions.
c) BWP and GWP loads should be included in the LADWP’s Native Load for purpose of calculating 1CP because they meet the OATT definition and are not included in the Native Load of any other Control Area.
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LP [10]1
Slide 8
LP [10]1 would be included in Native LoadLon Peters, 3/2/2017
COSS Issue 1 – Rate Design – Solutions
1. LADWP should replace its 12 CP with a 1 CP so that its OATT rates (a) accurately reflect how LADWP plans for its system peak and (b) do not violate FERC precedent.
2. LADWP should include BWP’s and GWP’s loads in the calculation of Native Load for purpose of calculating 1CP so that this calculation is consistent with LADWP’s OATT definition of “Native Load.”
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COSS Issue 2 – Segmentation
1. LADWP’s COSS inappropriately rolls together the Pacific DC Intertie (PDCI), the Southern/Northern Transmission System (STS/NTS), and the Beltline AC network.
2. The PDCI and STS/NTS facilities should be excluded from the Beltline and separate rate schedules should be established for each of these transmission segments because:a) The PDCI and STS/NTS facilities are not actually integrated to the
LADWP Control Area;b) The PDCI and STS/NTS facilities are segregated by LADWP when
determining Real Power Losses;c) The STS was originally built to move only the IPP generation plant
output to southern California; andd) LADWP has not demonstrated that it has exercised rights to use the
NTS via an option in the agreement between IPA and LADWP.
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COSS Issue 2 – Segmentation – Solution
The costs of the PDCI and STS/NTS should be excluded from the Beltline revenue requirement and separate rate schedules should be established for each of the three segments.Rate divisors for each segment should comport with FERC precedents.
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COSS Issue 3 – Revenue Credits
1. LADWP’s transmission revenue requirement in the 2017 OATT COSS fails to fully document and accurately account for the revenues, payments and cost offsets that LADWP receives under at least the following agreements or arrangements:a) SCPPA‐LADWP Agency Agreementsb) PDCI – Contracts between BWP and GWP for O&M and capital
improvementsc) STS/NTS/IPP – Intermountain Power Project Construction Management and
Operating Agreement2. LADWP’s failure to reflect these revenue credits, payments and cost offsets in its
COSS, overstates the OATT rates by the amount of those credits, payments or cost offsets and results in the unlawful double recovery of transmission costs. See, e.g., Nev. Power Co., 153 FERC ¶ 61,306 at P 46 (2015) (rejecting a transmission providers double recovery of transmission costs); Order No. 888‐B, 81 FERC P 61,248 at 62,096 (directing transmission providers to design rates that will avoid double recovery of such transmission costs or ancillary costs).
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COSS Issue 3 – Revenue Credits – Solution
LADWP’s COSS should be revised to fully document and accurately reflect the revenues, payments, and cost offsets that LADWP receives for the provision of services related to transmission and generation facilities included in the LADWP OATT.
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COSS Issue 4 – Classification and Functionalization
1. LADWP inappropriately includes in the OATT revenue requirement the costs of facilities, which do not qualify or function as transmission facilities but instead are either production facilities or distribution facilities.
2. The inclusion of these facilities violates FERC’s precedent which prohibits the rolling‐in of facilities that cannot and are not used by OATT customers, are not integrated into the LADWP system and do not provide benefits to OATT customers. See e.g., Ky. Utils. Co., 85 FERC ¶ 61,274, at 62,111‐13 (1998) (finding that generation step‐up transformers should be excluded from rolled‐in transmission rates); Nevada Power Co., 100 FERC ¶ 61,077, at P 13‐14 (2002) (excluding the costs of radial generator leads from rolled‐in transmission rates, even though they are transmission facilities).
3. The following facilities that should be excluded from the OATT revenue requirement because they provide only gen‐tie functions for generators (Upper Gorge, Middle Gorge, and Control Gorge) used to serve LADWP’s retail load:a) Inyo Switching Stationb) Barren Ridge Switching Stationc) Haskell Switching Stationd) Inyo‐Barren Ridge Linee) Barren Ridge‐Haskell Linef) Haskell‐Olive Line
4. The listed facilities are gen‐tie facilities for generators that are not under AGC control from LADWP’s ECC. These generators run to a fixed schedule to move water down the Los Angeles Aqueduct, to meet the needs of the Water Department of the City of Los Angeles. The units are block loaded by the Control Operator at Control Gorge Power Plant, after that operator starts the Owens Gorge Units (Upper, Middle, & Control). Shutdown is also accomplished by this operator.
5. LADWP’s “One‐Line Schematic Diagram, Transmission System Overview, Blackstart Reference (BS‐1)” indicates that the Owens Gorge Units (Upper, Middle, & Control) are not considered Blackstart units.
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COSS Issue 4 – Classification and Functionalization – Solution
LADWP should revise its OATT revenue requirement to remove the costs of the following facilities:
a) Inyo Switching Stationb) Barren Ridge Switching Stationc) Haskell Switching Stationd) Inyo‐Barren Ridge Linee) Barren Ridge‐Haskell Linef) Haskell‐Olive Line
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COSS Issue 5 – Ancillary Services
1. LADWP inappropriately uses a 12 CP to calculate its OATT Ancillary Services rates. For the reasons detailed previously, this is unlawful and should be changed to 1 CP.
2. LADWP inappropriately relies on a Variable Energy Resource (VER) study that occurred after the test‐year to establish its rates for reliability and frequency response (RFR) Service.
3. LADWP incorrectly uses a VER study to set the Purchase Obligation for RFR service under Schedule 3. RFR service under Schedule 3 is not the same as Generator RFR for VERs under Schedule 10.
4. LADWP has apparently erred in Schedule 10 by setting the Purchase Obligation (PO) for dispatchable resources higher than the PO for non‐dispatchable resources.
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COSS Issue 5 – Ancillary Services – Solutions
1. LADWP should replace the 12 CP with a 1 CP to calculate its OATT Ancillary Services rates.
2. LADWP should conduct a proper study to determine its RFR capacity needs and related costs for Schedule 3.
3. LADWP should reconsider Purchase Obligations in Schedule 10.
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COSS Issue 6 – Fuel and Pre‐paid Energy Costs
LADWP’s inclusion of the costs of fuel stocks and prepaid energy in its OATT revenue requirement is unjustified and inappropriate because it violates the principle of cost causation. See e.g., Black Oak Energy, LLC v. FERC, 725 F.3d 230, 237, 406 U.S. App. D.C. 357 (D.C. Cir. 2013) (explaining that the cost causation principle requires that all rates reflect the costs actually caused by the customer who must pay them); KN Energy, Inc. v. FERC, 968 F.2d 1295, 1300, 297 U.S. App. D.C. 13 (D.C. Cir. 1992) (same).
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COSS Issue 6 – Fuel and Pre‐paid Energy Costs –Solution
LADWP should exclude from the OATT revenue requirement the costs of fuel and prepaid energy reflected in the COSS, DWP‐104, Tab AL, cells B211‐B223; section D; and section B.5, rows 114‐132.
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COSS Issue 7 – Capital Structure and ROE
1. LADWP’s COSS inappropriately relies on a flawed hypothetical capital structure even though it could have used its actual capital structure. See e.g., Valley Elec. Ass'n, 141 FERC P61,238, 62279 (2012) .
2. LADWP has inappropriately used the wrong proxy group in developing its “Return on Equity” (ROE) because the group it used did not have a single municipality or publicly owned utility, and the group members’ credit ratings were significantly lower than, and not comparable to, LADWP’s credit rating. See e.g., Coakley v. Bangor Hydro‐Electric Co., 147 FERC ¶ 61,234, at P 106 (2014); City of Vernon, 111 FERC ¶ 61,092, at P 96 (2005). The selection of the proxy group violates established FERC precedent.
3. LADWP’s ROE testimony also apparently contains mistakes or mathematical errors, and is inconsistent with FERC Opinions. (See BWP’s and GWP’s unanswered Request Nos. 51‐58 and 64‐65).
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COSS Issue 7 – Capital Structure and ROE – Solutions
1. LADWP should amend its COSS so that it uses LADWP’s actual capital structure.
2. LADWP should change the proxy group it used to develop its ROE so that it includes municipalities and/or publicly owned utilities and entities with comparable credit ratings. In the alternative, LADWP should develop a replacement methodology that reflects LADWP’s actual risk profile.
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OTHER OATT ISSUES
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1. LADWP has neither adequately explained nor provided actual data to show how it calculates Available Transfer Capability (ATC) and the components of ATC.
2. The LADWP OATT’s Real Power Losses are overstated.
3. The purchase obligations for several Ancillary Services are overstated.
4. LADWP has inappropriately excluded any obligation to pay interest on amounts customers pay it for deposits.
LADWP OATT Issue 1 – Calculation of ATC
1. LADWP has not adequately explained how it calculates ATC. See e.g., Fla. Power & Light Co., 123 FERC ¶61,010 at 61,039 (2008).
2. LADWP has failed to clearly identify which methodology it employs to calculate ATC (e.g., contract path, network ATC, or network Available Flowgate Capacity (AFC)) and to describe in detail the specific mathematical algorithms used to calculate firm and non‐firm ATC (and AFC, if applicable) for its scheduling, operating and planning horizons. Order No. 890, FERC Stats. & Regs. ¶ 31,241 at P 323. The actual mathematical algorithms must be posted on LADWP OASIS, with the link noted in its Attachment C. Id. P 325, 328.
3. LADWP has failed to: (i) explain its definition of TTC; (ii) explain its TTC calculation methodology for both the operating and planning horizons; (iii) share and explain the databases used in its TTC assessments; and (iv) explain the assumptions used in its TTC assessments regarding the load levels, generation dispatch, and the modeling of both planned and contingency outages. Order No. 890, FERC Stats. & Regs. P 31,241 at pro forma OATT, Att. C.
4. LADWP has also failed to explain: (i) its definition of ETC; (ii) the calculation methodology used to determine the transmission capacity to be set aside for native load (including NITS load) and non‐OATT customers (including, if applicable, an explanation of assumptions on the selection of generators that are modeled in service) for both the operating and planning horizons; (iii) how point‐to‐point transmission service requests are incorporated; (iv) how rollover rights are accounted for; and (v) its processes for ensuring that non‐firm capacity is released properly (e.g., when real‐time schedules replace the associated transmission service requests in its real‐time calculations). Id.
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LADWP OATT Issue 1 – Calculation of ATC –Solution
1. LADWP must clearly identify which methodology it employs to calculate ATC (e.g., contract path, network ATC, or network Available Flowgate Capacity (AFC)) and describe in detail the specific mathematical algorithms used to calculate firm and non‐firm ATC (and AFC, if applicable) for its scheduling, operating and planning horizons.
2. LADWP must post the actual ATC mathematical algorithms on its OASIS, with the link noted in its Attachment C.
3. LADWP must clearly: (i) explain its definition of TTC; (ii) explain its TTC calculation methodology for both the operating and planning horizons; (iii) share the databases used in its TTC assessments; and (iv) explain the assumptions used in its TTC assessments regarding the load levels, generation dispatch, and the modeling of both planned and contingency outages.
4. LADWP must clearly explain: (i) its definition of ETC; (ii) the calculation methodology used to determine the transmission capacity to be set aside for native load (including NITS load) and non‐OATT customers (including, if applicable, an explanation of assumptions on the selection of generators that are modeled in service) for both the operating and planning horizons; (iii) how point‐to‐point transmission service requests are incorporated; (iv) how rollover rights are accounted for; and (v) its processes for ensuring that non‐firm capacity is released properly (e.g., when real‐time schedules replace the associated transmission service requests in its real‐time calculations).
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LADWP OATT Issue 2 – Real Power Losses
1. Tariff Sections 15.7 and 28.5 contain Real Power Losses that are overstated and have not been adequately justified.
2. Real Power Losses must be justified by a transmission losses study that uses available hourly metered data or) power flow simulations for all hours of the test year and each of the facilities at issue.
3. To justify the findings of its losses study, LADWP should provide Stakeholders:a) Power flow simulations for each of the facilities at issue. LADWP should provide access to the entire
set of power flow models that it uses in the losses study.b) The base cases for each of the power flow studies that it does, and provide hourly test year data
related to the data assumptions including area generation dispatch, area load, area interchange with other areas, and setting for VAR support/control devices.
c) An explanation of: (i) what data was used (historical or prospective data), (ii) how the data were developed for each power flow simulation, (iii) whether all substations were modeled explicitly or whether some were modeled using an equivalent representation, (iv) how the load profile was developed, (v) whether adjacent balancing areas or utilities were modeled and whether they enforce actual test year interchange, (vi) a description of the logic used for shunt on/off control in the model versus how shunts are used in actual operation, (vii) a description of the power factor assumptions used in the model versus historical test year power factors, (viii) a description of how the model accounted for system improvements that occurred during the test year, (ix) whether the calculation of losses was done with or without generator step‐up losses, (x) what formula was used for calculating corona losses, and (xi) whether the value used for losses associated with substation unmetered auxiliary use is inappropriately high and (xii) how power flow simulations take into account all hours of the test year. Duncan & Allen 25
LADWP OATT Issue 2 – Real Power Losses –Solution
LADWP should perform a full transmission losses study that includes power flow simulations per Slide 25.LADWP should provide the data and information listed in Slide 25.
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LADWP OATT Issue 3 – Ancillary Services
1. LADWP has significantly increased the Ancillary Services purchase obligations but has not fully and properly justified these increases.
2. Ancillary Services purchase obligations must be explained and supported with the appropriate documentation.
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LADWP OATT Issue 3 – Ancillary Services –Solution
LADWP should fully explain and justify its Ancillary Services purchase obligations.
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LADWP OATT Issue – Interest
1. LADWP requires customers to pay interest on delinquent amounts but LADWP has inappropriately removed any obligation to pay interest on amounts customers pay to LADWP for deposits in Sections 17.3, 17.4, 17.6, 19.1, 19.4, and 20.3.
2. LADWP’s proposal violates FERC’s policy to require payment of interest on deposits or study costs that are refunded to a interconnection customer. See Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, FERC Stats. & Regs. ¶ 31,146, at P 123 (2003), order on reh'g, Order No. 2003‐A, FERC Stats. & Regs. P 31,160, order on reh'g, Order No. 2003‐B, FERC Stats. & Regs. ¶ 31,171 (2004), order on reh'g, Order No. 2003‐C, FERC Stats. & Regs. ¶31,190 (2005), aff'd sub nom. Nat'l Ass'nof Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277, 374 U.S. App. D.C. 406 (D.C. Cir. 2007), cert. denied, 552 U.S. 1230, 128 S. Ct. 1468, 170 L. Ed. 2d 275 (2008); see also Midwest Indep. Transmission Sys. Operator, Inc., 138 FERC ¶ 61,233, at PP 166‐168 (2012) (rejecting MISO's proposal to eliminate the payment of interest on refunded portions of generator interconnection study deposits); Midwest Indep. Transmission Sys. Operator, 142 FERC ¶61,215 (2013) (directing MISO to revise its Tariff so that interestwill be paid on any refunded portion of the deposit that a transmission developer submitted with its bid).
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LADWP OATT Issue – Interest – Solution
LADWP should amend Sections 17.3, 17.4, 17.6, 19.1, 19.4, and 20.3 to include an obligation for LADWP to pay interest on deposits or study costs that are refunded to a interconnection customer.
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CONCLUSIONS
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Based on the foregoing, BWP and GWP hereby request that LADWP suspend the 2017 OATT stakeholder process, review these findings, provide responses to all outstanding discovery, and implement the proposed solutions provided.
If LADWP determines that it would be appropriate to conduct issue‐specific meetings with stakeholders to address some or all of the individual findings, BWP and GWP would welcome such meetings.