209741
02 - GrantRRDirect DOCKET NO. _____
APPLICATION OF SOUTHWESTERN § PUBLIC SERVICE COMPANY FOR § AUTHORITY TO CHANGE RATES §
PUBLIC UTILITY COMMISSION OF TEXAS
DIRECT TESTIMONY of
WILLIAM A. GRANT
on behalf of
SOUTHWESTERN PUBLIC SERVICE COMPANY
(Filename: GrantRRDirect.doc)
Table of Contents
GLOSSARY OF ACRONYMS AND DEFINED TERMS................................................ 4 LIST OF ATTACHMENTS ............................................................................................... 7 I. WITNESS IDENTIFICATION AND QUALIFICATIONS .................................. 8 II. PURPOSE AND SUMMARY OF TESTIMONY AND
RECOMMENDATIONS ...................................................................................... 12 III. SCHEDULES SPONSORED ............................................................................... 19 IV. REQUESTED RFP AND COMMISSION RULE WAIVERS ............................ 30 V. OVERVIEW OF APPLICATION AND WITNESSES ....................................... 32
A. SPS'S REQUESTED RELIEF......................................................................... 32 B. PRESENTATION OF RATE CASE INFORMATION ........................................... 35 C. INTRODUCTION OF SPS REVENUE REQUIREMENT WITNESSES ................... 37 VI. SPS OVERVIEW.................................................................................................. 48 VII. OBLIGATIONS AND PRECEDENT FROM PRIOR DOCKETS ..................... 52 VIII. QUALITY OF SERVICE ..................................................................................... 53 IX. RECOVERY OF CAPITAL INVESTMENT ...................................................... 54 X. NATIVE O&M AND A&G EXPENSE ............................................................... 61 XI. SOUTHWEST POWER POOL SERVICES ........................................................ 67 XII. REQUESTED REGULATORY ASSETS............................................................ 71 A. ATTACHMENT Z2 CHARGES....................................................................... 71 B. DEFERRED COSTS RESULTING FROM THE EFFECTS OF COVID-19............. 71 XIII. KNOWN AND MEASURABLE IMPACT OF LP&L DISCONNECTING FROM SPS'S TRANSMISSION SYSTEM ....................... 72
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XIV. DEPRECIATION RATES AND RELATED EXPENSE .................................... 74
A. DEPRECIABLE SERVICE LIFE OF THE COAL-SPECIFIC ASSETS AT THE HARRINGTON GENERATING STATION ........................................................ 74
B. DEPRECIABLE SERVICE LIFE OF THE TOLK GENERATING STATION ............ 77
C. DEPRECIABLE SERVICE LIFE OF PLANT X UNIT 3 ...................................... 79
XV. CAPACITY ASSOCIATED WITH SOLAR POWER PURCHASE AGREEMENTS.................................................................................................... 82
XVI. RESILIENCY SERVICE TARIFF....................................................................... 84
XVII. AFFILIATE CLASSES SPONSORED................................................................ 87
XVIII. AFFILIATE EXPENSES FOR THE STRATEGIC REVENUE INITIATIVES CLASS OF SERVICES................................................................ 88
A. SUMMARY OF AFFILIATE EXPENSES FOR THE STRATEGIC REVENUE INITIATIVES CLASS OF SERVICES ............................................................... 88
B.
THE STRATEGIC REVENUE INITIATIVES CLASS OF SERVICES ARE
NECESSARY SERVICES ............................................................................... 96
C.
THE STRATEGIC REVENUE INITIATIVES CLASS OF SERVICES ARE
PROVIDED AT A REASONABLE COST .......................................................... 98
1. ADDITIONAL EVIDENCE ...................................................................... 99
2. BUDGET PLANNING ............................................................................. 99
3. COST TRENDS.................................................................................... 100
4. STAFFING TRENDS............................................................................. 101
5. COST CONTROL AND PROCESS IMPROVEMENT INITIATIVES .............. 102
D. THE COSTS FOR THE STRATEGIC REVENUE INITIATIVES AFFILIATE CLASS OF SERVICES ARE PRICED IN A FAIR MANNER .............................. 103
XIX. AFFILIATE EXPENSES FOR PSCo PRESIDENT CLASS OF SERVICES.......................................................................................................... 106
A. SUMMARY OF AFFILIATE EXPENSES FOR THE PSCO PRESIDENT CLASS OF SERVICES ................................................................................. 106
B. THE PSCO PRESIDENT CLASS OF SERVICES ARE NECESSARY SERVICES ................................................................................................. 108
C. THE PSCO PRESIDENT CLASS OF SERVICES ARE PROVIDED AT A REASONABLE COST.................................................................................. 110
1. ADDITIONAL EVIDENCE .................................................................... 110
1. BUDGET PLANNING ........................................................................... 111
2. COST TRENDS.................................................................................... 112
3. STAFFING TRENDS............................................................................. 113
4. COST CONTROL AND PROCESS IMPROVEMENT INITIATIVES .............. 113
D. THE COSTS FOR THE PSCO PRESIDENT CLASS OF SERVICES ARE PRICED IN A FAIR MANNER ...................................................................... 114
XX. RATE CASE EXPENSES .................................................................................. 117
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A.
EXPENSES INCURRED OR ESTIMATED TO BE INCURRED IN THIS
PROCEEDING ............................................................................................ 119
B.
EXPENSES INCURRED OR EXPECTED TO BE INCURRED IN OTHER
TEXAS REGULATORY PROCEEDINGS ........................................................ 128
C. RATE CASE EXPENSE RECOVERY MECHANISM........................................ 130
XXI. SPS'S REQUESTS OF THE COMMISSION.................................................... 131
AFFIDAVIT ................................................................................................................... 134
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GLOSSARY OF ACRONYMS AND DEFINED TERMS
Acronym/Defined Term Meaning
A&G
Administrative & General
Btu
British Thermal Unit
Commission
Public Utility Commission of Texas
CRS
Customer Resources System
DC
Direct Current
DCRF
Distribution Cost Recovery Factor
EEI
Edison Electric Institute
EPA
Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
Eversheds Sutherland
Eversheds Sutherland (US) LLP
FERC
Federal Energy Regulatory Commission
GI Queue
Order of requests to SPP for interconnection of new generation resources
GSEC
Golden Spread Electric Cooperative, Inc.
Harrington
Harrington Generating Station
Hinkle Firm
Hinkle Shanor LLP
kV
Kilovolt
kWh
Kilowatt-hour
LP&L
Lubbock Power and Light
MMBtu
Million British Thermal Unit
MW
Megawatt
NAAQS
National Ambient Air Quality Standards
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Acronym/Defined Term Meaning
NMPRC
New Mexico Public Regulation Commission
NSP-M
Northern States Power Company, a Minnesota corporation
NSP-W
Northern States Power Company, a Wisconsin corporation
OATT
Open Access Transmission Tariff
O&M
Operation and Maintenance
OPEB
Other Post-Employment Benefits
Operating Companies
NSP-M, NSP-W, PSCo, and SPS
PCRF
Purchased Power Cost Recovery Factor
Plant X 3
Plant X Unit 3 Generating Station
PPA
Purchased Power Agreement
PNM
Public Service Company of New Mexico
PSCo
Public Service Company of Colorado, a Colorado corporation
PTC
Production Tax Credits
PURA
Public Utility Regulatory Act
QF
Qualifying Facility
REC
Renewable Energy Credit
RFP
Rate Filing Package
ROE
Return on Equity
RSC
Regional State Committee
RTO
Regional Transmission Organization
Sagamore or Sagamore Project
Sagamore Wind Project
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Acronym/Defined Term Meaning
SAIDI
System Average Interruption Duration Index
SAIFI
System Average Interruption Frequency Index
SO
sulfur dioxide
SPP
Southwest Power Pool Inc.
SPS
Southwestern Public Service Company, a New
Mexico corporation
TAC
Texas Administrative Code
TCEQ
Texas Commission on Environmental Quality
TCRF
Transmission Cost Recovery Factor
Technical Depreciation Update
Temporary Rate Date
SPS-Texas Technical Update Depreciation Accrual Rate Study at June 20, 2020
35th day following the filing of SPS's Application
Temporary Rate Period
Period from the Temporary Rate Date until the relate-back date in this case under PURA § 36.211
Test Year
October 1, 2019 through September 30, 2020
Tolk
Tolk Generating Station
Update Period
October 1, 2020 through December 31, 2020
Updated Test Year
January 1, 2020 through December 31, 2020
WACC
Weighted Average Cost of Capital
Winstead Firm
Winstead, P.C.
Xcel Energy
Xcel Energy Inc.
XES
Xcel Energy Services Inc.
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LIST OF ATTACHMENTS
Attachment
Description
WAG-RR-1
Summary of Texas Retail Rate Increase Request (Filename: WAG-RR-1.xlsx)
WAG-RR-2
Summary of Texas Retail Fuel Savings (Filename: WAG-RR-2.xlsx)
WAG-RR-3
Map of SPS High-Voltage System (Non-native format)
WAG-RR-4
Native O&M Costs (Filename: WAG-RR-3.xlsx)
WAG-RR-5
Southwest Power Pool Inc. Organizational Chart 2020 (Non-native format)
WAG-RR-6
Summary of Southwest Power Pool Inc.'s Cost Allocation Methods (Non-native format)
WAG-RR-7
Organizational Chart for Group President (Non-native format)
WAG-RR-8
Summary of Rate Case Expenses (Filename: WAG-RR-7.xlsx)
WAG-RR-A (Updated Test Year)
Summary of XES Expenses to SPS by Affiliate Class and Billing Method (Filename: WAG-RR-ABCD.xlsx)
WAG-RR-B(CD) XES Expenses by Affiliate Class, Activity, Billing
(Updated Test
Method and FERC Account
Year)
(Filename: WAG-RR-ABCD.xlsx)
WAG-RR-C (Updated Test Year)
Exclusions from XES Expenses to SPS by Affiliate Class and FERC Account (Filename: WAG-RR-ABCD.xlsx)
WAG-RR-D (Updated Test Year)
Pro Forma Adjustments to XES Expenses by Affiliate Class and FERC Account (Filename: WAG-RR-ABCD.xlsx)
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DIRECT TESTIMONY OF
WILLIAM A. GRANT I. WITNESS IDENTIFICATION AND QUALIFICATIONS Please state your name and business address. My name is William A. Grant. My business address is 790 South Buchanan Street, Amarillo, Texas 79101. On whose behalf are you testifying in this proceeding? I am filing testimony on behalf of Southwestern Public Service Company, a New Mexico corporation ("SPS") and wholly-owned electric utility subsidiary of Xcel Energy Inc. ("Xcel Energy"). Xcel Energy is a utility holding company that owns several electric and natural gas utility operating companies, a regulated natural gas pipeline, and three electric transmission companies.1 By whom are you employed and in what position? I am employed by SPS as Regional Vice President, Rates and Regulatory Affairs. Please briefly outline your responsibilities as Regional Vice President, Rates and Regulatory Affairs. I am responsible for determining the appropriate planning strategy for SPS. In this role, I work with generation and transmission planning personnel and coordinate
1 Xcel Energy is the parent company of four utility operating companies: Northern States Power Company, a Minnesota corporation ("NSPM"); Northern States Power Company, a Wisconsin corporation ("NSPW"); Public Service Company of Colorado, a Colorado corporation ("PSCo"); and SPS (collectively, "Operating Companies"). Xcel Energy's natural gas pipeline company is WestGas InterState, Inc. Through a subsidiary, Xcel Energy Transmission Holding Company, LLC, Xcel Energy also owns three transmissiononly operating companies: Xcel Energy Southwest Transmission Company, LLC; Xcel Energy Transmission Development Company, LLC; and Xcel Energy West Transmission Company, LLC, all of which are regulated by the Federal Energy Regulatory Commission ("FERC").
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3 4 5 6 7 8 9 Q. 10 A. 11 12 13 14 15 16 17 18 19 20 21 22 Q. 23 24 A. 25
with the Southwest Power Pool ("SPP") on regional policy and cost allocation issues affecting SPS. I am also responsible for:
overseeing the activities of the SPS regulatory department to ensure that SPS meets the regulatory requirements of the Texas Public Utility Commission ("Commission") and the New Mexico Public Regulation Commission ("NMPRC"), as well as FERC; and
overseeing the relationships with the state and federal commissions and managing the relationships and policy decisions with the SPP.
Please describe your professional experience. I have over 30 years of experience in both power plant and system operations at Xcel Energy and its predecessors. I have had responsibility for operating several different types of electric generating units ranging from diesel generators, coal-fired steam electric stations, and gas-fired steam units and combustion turbines. I have five years' experience as a System Operator for the SPS transmission control center. For seven years, I was Director, Power Operations for Xcel Energy Services Inc. ("XES"), in which I was responsible for the economic dispatch and analytical support for all of the Xcel Energy Operating Companies, including SPS. For seven years, I was Manager, Transmission Control Center and Wind Integration for SPS. In 2012, I was named Director, Strategic Planning for SPS. In 2017, I was named Regional Vice President of Regulatory and Strategic Planning, and I was named Regional Vice President of Rates and Regulatory Affairs in 2020. Please describe your experience with Regional Transmission Organizations ("RTO"). Over my career, I have had extensive experience with RTOs and transmission coordination organizations, including serving on a number of committees in SPP
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and the Western Electricity Coordinating Council. Currently, I serve on the SPP Markets and Operations Policy Committee and the Strategic Planning Committee. I have also served on the Consolidated Balancing Authority Steering Committee and the Operations Reliability Working Group, and I have chaired the wind integration taskforce. Additionally, I am familiar with the Midcontinent Independent System Operator Day 2 Market development and implementation. Have you testified before any regulatory authorities? Yes. I have submitted pre-filed testimony to the Commission on behalf of SPS in several recent proceedings, including:
Docket Nos. 49831, 47527, 45524, 43695, and 42004 (SPS base rate cases); Docket Nos. 46042 (SPS CCN case); Docket Nos. 48973 and 46025 (SPS fuel reconciliation cases); Docket Nos. 48847 and 49616 (SPS fuel formula revision cases); Docket No. 46496 (SPS's request to recover amounts billed by SPP in 2016,
under Attachment Z2, for transmission projects placed in service between 2008 and 2016); Docket Nos. 46877 and 42042 (transmission cost recovery factor ("TCRF") cases); and Docket No. 46936 (SPS's requests regarding two proposed SPS-owned wind energy facilities and a proposed wind energy purchased power agreement ("PPA"). I have also submitted pre-filed testimony to the NMPRC, the Colorado Public Utilities Commission, the Kansas Corporation Commission, and FERC. My testimony in those jurisdictions has covered, among other topics:
SPP's operations and planning, and how those activities affect SPS; SPP fees and charges;
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SPP regional cost allocation for transmission facilities;
2
SPS generation dispatch and outages; and
3
the proposed SPS-owned wind energy facilities and proposed wind energy
4
PPA.
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7
8
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II. PURPOSE AND SUMMARY OF TESTIMONY AND RECOMMENDATIONS
What is the purpose of your testimony in this proceeding?
In addition to describing the schedules that I either sponsor or co-sponsor, my
testimony supports and provides an overview of SPS's Application, including the
request for temporary rates, and the witnesses supporting SPS's requested relief. I
also explain that not later than the 45th day after the application is filed, SPS will
update its application in accordance with section 36.112 of the Public Utility Regulatory Act ("PURA")2 and 16 Tex. Admin. Code ("TAC") § 25.246 to replace
estimates with actual amounts for the "Update Period," which is the three-month
period from October 1, 2020 through December 31, 2020. In addition, I provide
testimony on the following topics:
an overview of SPS and its operations; the new investment that SPS seeks to include in rate base in this proceeding,
including the 522 megawatt ("MW") Sagamore Wind Project ("Sagamore Project") that was approved for construction by the Commission in Docket No. 46936;3 the quality of service provided by SPS; the waivers requested by SPS with respect to the Commission's Rate Filing Package ("RFP"); SPS's compliance with obligations from prior dockets; the reasonableness of SPS's native operation and maintenance ("O&M") costs;
2 PURA is codified in Title II of the Texas Utilities Code. See Tex. Util. Code Ann. §§ 11.00158.303 (West 2016), §§ 59.001-66.017 (West 2007 & Supp. 2016).
3 Application of Southwestern Public Service Company for Approval of Transaction with ESI Energy, Inc. and Invenergy Wind Development North America LLC, to Amend a Certificate of Convenience and Necessity for Wind Generation Projects and Associated Facilities in Hale County, Texas and Roosevelt County, New Mexico, and for Related Approvals, Docket No. 46936, Final Order (May 25, 2018).
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2
3 4 5 6
7 8 9 10
11 12 13 14 15 16
17
18 19 20
21 22
23 24
25 26
27 28
29 Q.
30 A.
31
the services and related charges SPS receives from SPP;
the Attachment Z2 regulatory asset;
the COVID-19 regulatory asset, including SPS's request to recover incremental direct costs incurred as a result of COVID-19, establish a tracker for bad debt expense, and seek recovery of the additional bad debt expense in SPS's next base rate case;
the known and measurable impact of Lubbock Power and Light ("LP&L") moving its transmission load to the Electric Reliability Council of Texas ("ERCOT") in June 2021, which results in a change in the allocation of transmission costs;
approval of the SPS-Texas Technical Update Depreciation Accrual Rate Study at June 20, 2020 ("Technical Depreciation Update") and resulting depreciation rates, including the requested shorter operating lives of the Tolk Generating Station ("Tolk"), the coal-specific assets at the Harrington Generating Station ("Harrington"), and the Plant X Unit 3 Generating Station ("Plant X 3");
capacity associated with SPS's solar PPAs;
SPS's proposal to offer a voluntary resiliency service tariff for customers who choose to obtain behind-the-meter equipment to maintain service in the event of a disruption;
the reasonableness and necessity of the costs of the Strategic Revenue Initiatives class of affiliate costs;
the reasonableness and necessity of the costs of the PSCo President class of affiliate costs;
the requested recovery of SPS's rate case expenses, and the inclusion of those expenses in base rates; and,
a summary of the relief that SPS asks the Commission to grant in this docket.
Please summarize your testimony.
The remainder of my testimony is organized into 19 sections, which are
summarized as follows:
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1
Section III I describe the RFP schedules that I sponsor or co-sponsor. I
2
also explain that a number of schedules related to fuel reconciliation proceedings
3
are not applicable in this case because SPS's application does not include a request
4
to reconcile eligible fuel and purchased power expenses;
5
Section IV I list the waivers from the RFP that SPS is requesting in this
6
case. Most of the waivers relate to schedules that assume SPS will be filing a fuel
7
reconciliation proceeding along with a base rate case. Because fuel reconciliations
8
are no longer paired with base rate cases, certain RFP schedules are inapplicable to
9
this filing. SPS is also requesting waivers with respect to certain schedules that
10
require the provision of Test Year information because rates will be set in this case
11
based on information from the twelve-month period from January 1, 2020 through
12
December 31, 2020, which I refer to in my testimony as the "Updated Test Year";
13
Section V I provide an overview of the filing and SPS's request for an
14
overall base rate increase of $143,365,836 for the Texas retail jurisdiction and
15
introduce the other SPS witnesses supporting SPS's request. My testimony
16
explains that SPS has elected to provide Test Year information, but it is also
17
providing estimates for the Update Period, as allowed by PURA § 36.112 and 16
18
TAC § 25.246. In addition, my testimony explains that the requested increase is
19
largely driven by the $1.75 billion (Total Company) in new investment that SPS
20
has placed or expects to place into service between July 1, 2019 and December 31,
21
2020. Other factors driving the requested revenue requirement include a necessary
22
change in depreciation rates as supported by SPS's depreciation study and the
23
continuing reduction in SPS's wholesale purchased power sales;
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1
Section VI I provide a high-level overview of SPS, including its history,
2
its customer base, and its generation and long-term purchased power resources;
3
Section VII I summarize the obligations that have been undertaken
4
voluntarily or imposed on SPS in prior cases and establish SPS's compliance with
5
those obligations, as well as its consistent treatment of renewable-energy credits as
6
part of eligible fuel expense;
7
Section VIII I discuss SPS's quality of service.
8
Section IX I summarize the $1.75 billion of capital investment that SPS
9
has placed in service or expects to place in service since the test year in its last base
10
rate case, including the 522 MW Sagamore Project that was approved for
11
construction by the Commission in Docket No. 46936. The SPS witnesses
12
supporting the prudence of this capital investment are identified in Section V of my
13
direct testimony;
14
Section X - I describe certain native O&M and Administrative and General
15
("A&G") costs in FERC Accounts 912, 916, 921, 923, and 928 that SPS seeks to
16
recover. Those costs relate to demonstration and selling expense (FERC Account
17
912), office supplies and expenses (FERC Account 921), outside services and
18
consulting attorneys expense (FERC Account 923), and regulatory expense (FERC
19
Accounts 928). I explain that these expenses are reasonable and necessary to SPS's
20
operations. These costs include estimates that will be updated in the 45-day case
21
update filing, which I will explain later in my testimony;
22
Section XI I describe the reasonable and necessary services provided to
23
SPS by SPP and support the recovery of those costs in SPS's base rates;
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1
Section XII I summarize SPS's request regarding the recovery of and
2
accounting for regulatory assets, including Attachment Z2 charges imposed by SPP
3
in accordance with the SPP Open Access Transmission Tariff ("OATT") for the
4
period from 2008-2016 and expenses resulting from the effects of COVID-19;
5
Section XIII I discuss the known and measurable change in the allocation
6
of transmission costs resulting from LP&L moving its transmission load to ERCOT
7
in June 2021;
8
Section XIV I describe SPS's request for approval of new depreciation
9
rates, including the requested shorter operating lives for the Tolk assets, the coal-
10
specific assets at Harrington, and Plant X Unit 3;
11
Section XV I discuss SPS's treatment of capacity associated with the
12
Roswell Solar, Chaves County Solar, and Long Road Solar (formerly Sun Edison)
13
PPAs.
14
Section XVI I discuss SPS's request for approval of a voluntary resiliency
15
service tariff that allows customers with a need for higher than standard service
16
reliability to acquire behind-the-meter equipment, such as battery storage or
17
back-up generation, to avoid interruptions in service.
18
Section XVII I provide an overview of the affiliate classes that I support;4
19
Section XVIII I support the $147,093 of Updated Test Year costs that SPS
20
seeks to recover for costs recorded in the Strategic Revenue Initiatives affiliate class
4 As explained in more detail in Section XVII, I sponsor three affiliate classes, but one of those classes--Corporate Giving--has no dollars associated with it. Therefore, my testimony is limited to the two classes that do have dollars associated with them: Strategic Revenue Initiatives and PSCo President.
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and demonstrate that these costs are reasonable and necessary and satisfy the affiliate cost recovery standard;
Section XIX I support the $127,560 of Updated Test Year costs that SPS seeks to recover for costs recorded in the PSCo President affiliate class and demonstrate that these costs are reasonable and necessary and satisfy the affiliate cost recovery standard;
Section XX I support SPS's request for rate case expenses associated with this case.
Section XXI I summarize the relief that SPS is asking the Commission to grant in the Revenue Requirement and Rate Design phases of this docket. Were Attachments WAG-RR-1 through WAG-RR-4, and WAG-RR-8 prepared by you or under your direct supervision or control? Yes. Are Attachments WAG-RR-5 through WAG-RR-7 true and correct copies of the documents you represent them to be? Yes. Were Attachments WAG-RR-A through WAG-RR-D prepared by you or under your direct supervision and control? Attachments WAG-RR-A through WAG-RR-D were prepared by SPS witness Ross L. Baumgarten and his staff. My staff and I have reviewed those attachments, and I believe them to be accurate. The same information is presented in Mr. Baumgarten's Attachments RLB-RR-A through RLB-RR-D. This information is presented in attachments to my testimony for the convenience of those reviewing my testimony.
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Were the RFP schedules and portions of the Executive Summary that you sponsor or co-sponsor prepared by you or under your direct supervision or control? Yes. Do you incorporate the RFP schedules and portions of the Executive Summary that you sponsor or co-sponsor into this testimony? Yes.
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III. SCHEDULES SPONSORED
What topic do you discuss in this section of your testimony?
I describe the schedules that I sponsor or co-sponsor. As part of that description, I
note that a number of the schedules in the RFP are not applicable, including those
schedules applicable to fuel reconciliation proceedings. Because of an amendment
to 16 TAC § 25.236, utilities are no longer required to reconcile fuel and purchased
power costs in each base rate proceeding.
Please identify the schedules that you sponsor or co-sponsor.
Table WAG-RR-1 contains the schedules that I sponsor or co-sponsor. I also
sponsor the portions of the Executive Summary to which these schedules
correspond.
Table WAG-RR-1
Schedule B
1.4
Schedule C-6 Series Nuclear Fuel
Schedule E Fossil Fuel Supply Disruptions
Schedule F Description of Company
Schedule G-4 Series Summary of Advertising,
Contributions & Dues
Schedule G
All 2.1, 2.2, 2.3, 2.4, 2.5, 3.1, and 3.2
F All 5.1, 5.1a, 5.1b, 7.11, 8
Schedule G-14 Rate Case Expenses
Schedule H Nuclear-Related Engineering Information
14.1, 14.2
1.1, 1.1a, 1.1a1, 5.2a, 5.3a, 6.1, 6.1a, 6.1b, 6.1c, 6.3a, 10, 12.4b, 12.4d, 12.4e, 12.4f, 12.4g, 13.1,
and 13.1c
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Schedule I Fuel and Purchased Power
Information
Schedule J Financial Statements: Reconciliation Total Company
to Total Electric
Schedule L Financial Information
(River Authorities)
Schedule M Nuclear Plant Decommissioning
Schedule N Energy Efficiency Plan
Schedule O Variability of Average Fuel
Costs with kWh Sales
Schedule P Class Cost of Service Analysis
Schedule Q Rate Design
Schedule R Financial Information (G&T Cooperatives)
Schedule S Test Year Review
Schedule T Notice
Schedule U Compliance with PUCT Orders
Schedule V Request for Waiver of
RFP Requirements
Schedule W Confidentiality Disclosure Agreement
1.1, 1.2, 1.3, 2, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 16.1, 16.2, 16.3,
16.4, 21, and 22 1
All All All 5 1.5 1.1, 2 and 8.7 All All All All All
All
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28 29 30 31
What does Schedule B-1.4 address?
Schedule B-1.4 requires quantification and identification of the attendant impacts
of any post-test year adjustments to rate base. This schedule is not applicable in
this case because SPS is not proposing any post-test year adjustments to rate base.
What do the C-6 schedules address?
The C-6 schedules apply to nuclear fuel. Because SPS has no nuclear plants, none
of those schedules apply in this case.
Please summarize what is contained in the E schedules that you sponsor or
co-sponsor.
The E schedules that I sponsor or co-sponsor contain the following information:
Schedule E-2.1 presents the SPS fuel inventory policies that were in effect during the Test Year for natural gas, fuel oil, and coal. I co-sponsor this schedule with SPS witnesses Stephanie N. Niemi and H. Craig Romer.
Schedule E-2.2 contains a discussion of the studies, if any, performed by the utility to optimize the fossil fuel inventory levels. This schedule describes how SPS evaluates its fuel inventories. I co-sponsor this schedule with Mr. Romer.
Schedule E-2.3 presents an analysis of fossil fuel inventories on hand at the end of the Test Year by type and location at each generating station. It also contains information regarding the total storage capacity and the unused capacity at each location. I co-sponsor this schedule with Mr. Romer.
Schedule E-2.4 presents the monthly fossil fuel inventory for the Test Year in dollars as well as volumes. I co-sponsor this schedule with Mr. Romer.
Schedule E-2.5 describes the accounting treatment of the fossil fuel inventory in terms of how SPS determines the cost and British Thermal Unit ("Btu") content of the fuel burned from inventory. I co-sponsor this schedule with Mr. Romer.
Schedule E-3.1 contains the amount of fuel oil burned in barrels, million Btu ("MMBtu"), and dollars by month, by plant, and by reason. The information is presented for the Test Year and by calendar year for the previous five years.
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Schedule E-3.2 requires information regarding natural gas supply disruptions during the Test Year or the previous five years. SPS experienced no natural gas supply interruptions during those periods.
What does Schedule F contain?
Schedule F includes a general description of SPS's service area and the diversity of
its operations. This schedule also identifies all affiliates and briefly describes those
affiliates. I co-sponsor this schedule with Mr. Baumgarten.
Please describe the information contained in the G-4 schedules that you
co-sponsor.
The G-4 schedules that I co-sponsor with SPS witness Bryan Davis contain the
following information:
Schedule G-4 presents a summary of advertising, contributions, and dues expense subject to the 0.3% limitation imposed by 16 TAC § 25.231(b)(1)(E).
Schedule G-4.1 contains a summary of Test Year advertising expense by FERC account.
Schedule G-4.1a contains a summary of Test Year informational or instructional advertising by FERC account.
Schedule G-4.1b contains a summary of Test Year advertising expense for promoting or retaining usage by FERC account.
Schedule G-4.1c contains a summary of Test Year general advertising expense by FERC account.
Schedule G-4.1d reflects the amount of Test Year advertising expense that was capitalized.
Schedule G-4.2 contains a summary of Test Year contribution and donation expense by FERC account.
Schedule G-4.2a contains a summary of Test Year educational contributions and donations expense by FERC account.
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Schedule G-4.2b contains a summary of Test Year community service contributions and donations expense by FERC account.
Schedule G-4.2c contains a summary of Test Year economic development contributions and donations expense by FERC account.
Schedule G-4.3 contains a summary of Test Year membership dues or support expense by FERC account.
Schedule G-4.3a contains a summary of Test Year electric industry organization dues expense by FERC account.
Schedule G-4.3b contains a summary of Test Year business and economic dues expense by FERC account.
Schedule G-4.3c contains a summary of Test Year professional dues expense by FERC account.
Schedule G-4.3d contains a summary of Test Year social, recreational, fraternal, or religious expenses by FERC account.
Schedule G-4.3e contains a summary of Test Year political organization expense by FERC account.
Is SPS requesting recovery of all costs included in the G-4 series of schedules?
No. The G-4 series of schedules details the Texas retail amounts requested, which
reflects exclusions for below-the-line items such as activities related to political
events, charges attributable to other Operating Companies, charges attributable to
SPS's New Mexico jurisdiction, and other items that do not benefit Texas retail
customers.
What information is addressed in Schedule G-5.1, Schedule G-5.1a, and
Schedule G-5.1b?
Schedule G-5.1 requires a listing of legislative advocacy expenses. Schedule
G-5.1a contains a summary of payments to registered lobbyists, and Schedule
G-5.1b contains a summary of payments to individuals or firms who monitored
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legislation for SPS during the Test Year. I co-sponsor these schedules with Mr. Davis. What information is contained in Schedule G-7.11? Schedule G-7.11 requires the utility to list and explain all effects on federal income tax expense and accumulated deferred federal income tax expense of any post-test year adjustments to plant. What information is included in Schedule G-8? Schedule G-8 presents information on all outside services expenses that appear in the FERC Account 900 series. I co-sponsor this schedule with Mr. Davis. What information is included in Schedule G-14.2? Schedule G-14.2 includes information on rate case expenses from prior dockets, or rate case expenses incurred in SPS's last base rate case that were severed and are being considered in another docket. I co-sponsor this schedule with Ms. Niemi. Please describe the information contained in the H schedules that you sponsor. The H schedules that I sponsor are divided into several different types. The first type involves information regarding nuclear generating stations. Because SPS does not own any of those stations, the information requested in the following H schedules has no applicability to SPS: H-1.1, H-1.1a, H-1.1a1, H-5.2a, H-5.3a, H-6.1, H-6.1a, H-6.1b, H-6.1c, H-6.3a, and H-10.
The second group of H schedules that I sponsor relates to certain reconcilable fuel costs applicable to fuel reconciliation proceedings. Because fuel and purchased power costs are not being reconciled in this proceeding, SPS is
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seeking a good-cause waiver of the requirement to provide the information
requested in Schedules H-12.4b, H-12.4d, H-12.4e, H-12.4f, and H-12.4g.
The third group of H schedules, which I co-sponsor, deals with the quality
of service provided by SPS. Schedule H-13.1 requires the utility to provide a
narrative description of the utility's efforts to maintain and improve the quality of
service. Schedule H-13.1c provides a description of the procedures for dealing with
quality of service complaints and a summary of the number of complaints received
during the Test Year. I co-sponsor these schedules with SPS witness Casey Meeks.
What information is presented in the I schedules that you sponsor?
The I schedules present information regarding fuel and purchased power. A
number of them are intended to apply only to fuel reconciliation proceedings, so
they are not applicable in this case. Accordingly, SPS is seeking a good-cause
waiver of the requirement to provide the information requested in several of the
schedules. The specific schedules that I sponsor or co-sponsor are as follows:
Schedule I-1.1 provides fuel expense by FERC account for each month in the Test Year. The costs are also segregated by types of fuel.
Schedule I-1.2 presents fuel expense by generating station for each month in the Test Year. It contains information by dollar amounts and by MMBtu.
Schedule I-1.3 presents fossil fuel purchased by each generating station for each month in the Test Year. The information is segregated by fuel type and includes MMBtu purchased, the cost of the fuel purchased, and the cost per MMBtu.
Schedule I-2 describes SPS's fuel and purchased power procurement practices, including a separate description for each type of fuel.
Schedule I-6 presents information regarding the natural gas delivery system. SPS is not filing a fuel reconciliation proceeding as part of this
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1
base rate case, but SPS is including Schedule I-6 in the RFP because it
2
remains applicable to information presented in SPS's base rate case.
3
Schedule I-7 presents information regarding SPS's natural gas storage
4
contracts and facilities. Because SPS is not proposing a fuel factor in
5
this case, rate year information is not applicable.
6
Schedule I-8 requires information regarding fuel properties. SPS does
7
not own any fuel-related properties, although it receives royalty income
8
from production from oil and gas leases on company-owned land. The
9
counties in which those properties are located are identified in
10
Schedule I-8.
11
Schedule I-9 presents employee organizational charts, and Schedule
12
I-10 presents employee ethics documents.
13
Schedule I-11 requires a narrative about fuel and purchased power
14
assumptions.
15
Schedule I-12 requires information regarding the utility's fossil fuel
16
mix.
17
Schedule I-13 requires information regarding SPS's relationships with
18
its fuel suppliers. The schedule notes that since the end of SPS's last
19
fuel reconciliation period, no current or former managers, executives, or
20
directors of SPS or any of its affiliates have been involved in any
21
capacity with the management of any provider of fuel or fuel supply
22
service to SPS.
23
Schedule I-14 requires information regarding audit reports for all audits
24
conducted by SPS, or an independent auditor, on SPS's fuel suppliers,
25
transporters, or other handlers during the reconciliation period.
26
The I-16 Schedule series addresses reconcilable fuel costs. Because
27
SPS is not filing a fuel reconciliation in this proceeding, the information
28
requested in the I-16 Schedule series is not applicable.
29
o Schedule I-16.1 requests the mix of contract and spot fossil fuels
30
burned at each of SPS's generating stations by month.
31
o Schedule I-16.2 requests the mix of contract and spot fossil fuels
32
purchased for each of SPS's generating stations by month.
33
o Schedule I-16.3 requests information by fuel type for spot fossil fuel
34
purchases during each month in competitive acquisitions.
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o Schedule I-16.4 requests documentation and a description of the process by which SPS acquired spot fossil fuel supplies, if other than by competitive bid.
Schedule I-21 requests a summary of all significant activities, and benefits of such, since the utility's last fuel reconciliation to reduce fuel, fuel-related, or purchased power energy costs, and workpapers to support the information.
Schedule I-22 is not applicable because SPS is not seeking a fuel reconciliation and is not proposing a new fuel factor in this case.
What information is required to be presented in Schedule J-1?
Schedule J-1 presents reconciliations of the balance sheet and the income statement
on a total company basis with the same information presented on a "total electric"
basis. This schedule is not applicable to SPS because SPS is an electric-only utility.
What information is required to be presented in the L schedules?
The L schedules address financial information for river authorities. Because SPS
is not a river authority, none of the L schedules apply in this case.
What do the M schedules address?
The M schedules address nuclear decommissioning. Because SPS does not have
any nuclear generating stations, none of the M schedules apply in this case.
What information is required to be included in the N schedules?
The N schedules address energy efficiency expenses. Those schedules are not
applicable to SPS because it recovers all of its energy efficiency costs through the
Energy Efficiency Cost Recovery Factor.
What information is requested in Schedule O-5?
Schedule O-5 requests the average cost per kilowatt hour ("kWh") for fuel at total
system unadjusted and total system adjusted kWh sales. Because SPS is not filing
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a fuel reconciliation application in this proceeding, the information requested in Schedule O-5 is not applicable. What information is presented in Schedule O-6.3? Schedule O-6.3 contains the total system line loss calculations from the line loss study supported by SPS witness Richard M. Luth. What information is required to be addressed for Schedule P-1.5? It requires financial information for non-investor-owned utilities. Because SPS is an investor-owned utility, this schedule does not apply. Please explain what the Q schedules that you sponsor address. The Q schedules address rate design. Schedule Q-1.1 is a narrative relating to the revenue summary. Schedule Q-2 requires information regarding the proposed fixed fuel factor. Because SPS is not proposing a new fuel factor in this case, that schedule is not applicable. Similarly, Schedule Q-8.7 is not applicable to SPS because it is not a distribution utility and because SPS generates the majority of its own energy. What information is required to be presented in the R schedules? The R schedules address generation and transmission cooperatives. Because SPS is not a generation and transmission cooperative, these schedules are not applicable. Is SPS providing information responsive to the S schedules? Yes. Although SPS requested a waiver of the requirement that it provide the S schedules in its last base rate case, Staff has requested that SPS provide responsive information in this case.
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What does the T schedule contain? The T schedule contains the public notice of the filing of SPS's application to change rates. That notice is also attached to the application. What information is included in the U schedule? The U schedule lists the requirements from prior proceedings that SPS is addressing in this case. That schedule identifies the particular requirements and identifies the dockets from which the obligation arose. What information is included in the V schedule? The V schedule contains a list of all schedules for which SPS seeks a waiver and the specific waiver that SPS is requesting. I discuss SPS's requests for waivers in more detail in Section IV of this testimony. What does the W schedule address? The W schedule addresses the confidentiality disclosure agreement. SPS requests permission in that schedule to use a protective order that is substantially the same as the one approved in Docket No. 49831, rather than the protective order contained in the RFP.
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IV. REQUESTED RFP AND COMMISSION RULE WAIVERS
2 Q. Is SPS requesting waivers of Commission rules or portions of the RFP?
3 A. 4
Yes. SPS requests waivers of the portions of the RFP that request information related to fuel reconciliation proceedings. As contemplated by 16 TAC § 25.236,5
5
SPS is not filing a fuel reconciliation proceeding in this docket, and therefore the
6
schedules dealing with fuel reconciliation proceedings are not applicable. SPS
7
accordingly seeks a partial waiver of the requirement to file the Schedules I-4 and
8
I-15. SPS seeks a complete waiver of the requirement to file Schedules H-12.4b,
9
H-12.4d, H-12.4e, H-12.4f, H-12.4g, I-16, I-16.1, I-16.2, I-16.3, I-16.4, I-22, and
10
O-5.
11
Additionally, since SPS is not proposing new fuel factors under 16 TAC §
12
25.237, the fuel information requested in Schedules I-7, I-11, I-12, and Q-2 is not
13
relevant to this proceeding. The information requested in Schedules H-12.1,
14
H-12.2a, H-12.2b, H-12.2c, H-12.3a, H-12.4a, and H-12.4c, and H-12.5a through
15
H-12.5f is also unnecessary. Accordingly, SPS requests a waiver of the
16
requirement to provide projected fuel use data or reconciliation period data as
17
requested in these schedules.6
18
In addition, certain of the RFP schedules require information for a "test
19
year" or "adjusted test year." For most schedules, SPS has provided the information
5 Rulemaking Proceeding to Amend P.U.C. Subst. R. 25.236 Relating to Recovery of Fuel Costs, Project No. 41905, Order Adopting Amendments to §25.236 as Approved at the May 16, 2014 Open Meeting at 23-24 (May 29, 2014).
6 If the Commission approves new loss factors in this case, SPS will update its then-current fuel factors using the new approved loss factors as part of its compliance filing in this case.
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1
for the 12-month period ending September 30, 2020, but in some schedules SPS
2
has presented information for the 12-month period ending December 31, 2020. In
3
particular, SPS has provided information for the 12-month period ending December
4
31, 2020, for the following schedules: O-1.1, O-1.7, O-3.3, O-4.1, O-6.1, O-6.2,
5
P-10, P-11, Q-1, and Q-7. SPS seeks a waiver of the requirement to provide the
6
test year information for those schedules. Providing the information only for the
7
twelve-month period ending December 31, 2020 in those schedules is reasonable
8
because ultimately the information from that time period will be used to set rates
9
after estimates for the Update Period are replaced with actual amounts.
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V. OVERVIEW OF APPLICATION AND WITNESSES
SPS's Requested Relief
Please summarize SPS's request in this proceeding. SPS's Application requests a total increase of annual base rate revenues7 in the amount of $143,365,836 on a Texas retail jurisdictional basis, which constitutes a base rate revenue increase of 23% compared to the amounts approved in Docket No. 49831.8 The requested rate increase is based upon an October 1, 2019 through September 30, 2020 Test Year Period ("Test Year") along with the Update Period October 1, 2020 through December 31, 2020.
However, SPS is concurrently requesting approval of a new fuel factor formula in Docket No. 51625 that incorporates the savings from the Sagamore Wind Project as well as the flow back of Production Tax Credits ("PTC") to customers and significantly reduces the total bill impact of the requested base rate increase. Have you provided a quantification of SPS's projected fuel savings? Yes. Attachment WAG-RR-2 shows that based on the fuel factor that SPS proposes in Docket No. 51625, SPS projects that the Sagamore Wind Project will result in approximately $69 million in fuel savings on an annual basis. The fuel savings combined with the base rate increase sought in this case result in a total Texas retail revenue impact of $74,023,612 annually, or 9.2%.
7 My reference to "base rate revenues" refers to revenue from both base rate tariffs and miscellaneous services tariffs.
8 See Attachment WAG-RR-1.
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How would the proposed change in base rates affect a typical residential customer? Under the rate request proposed in this proceeding, a typical Residential Service customer using 1,000 kWh of energy per month would see a base rate increase of $13.22 per month, or 13.57%, compared to the base rates approved in Docket No. 49831. After taking into account the reduction in fuel costs, the incremental increase over current rates for a typical Residential Service customer will be $7.93 per month, or 6.71%. As part of its Application is SPS also requesting to implement temporary rates? Yes. SPS is requesting that its current rates become temporary rates on the 35th day following the filing of its Application ("the Temporary Rate Date") pursuant to PURA § 36.109(a). Further, SPS requests that the final rates set in this case be applied to usage on and after the Temporary Rate Date until the relate-back date in this case under PURA § 36.211 ("the Temporary Rate Period"). SPS will refund or surcharge customers for usage during the Temporary Rate Period in conjunction with any refund or surcharge associated with the relate-back date under PURA § 36.211. Does SPS's request for temporary rates satisfy the requirements of 16 TAC § 22.125, relating to interim relief? Yes. This case is a docketed proceeding and SPS's request for temporary rates has been filed more than 30 days before the request is proposed to take effect. Further, good cause exists to grant temporary rates and is consistent with the agreement
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reached in the Unopposed Stipulation approved by the Commission in Docket No. 46936. In Docket No. 46936, the Signatories to the Unopposed Stipulation agreed to support or not oppose SPS's request to establish temporary rates as part of the first base rate case filed after the Sagamore Project was placed into commercial operation. This case is the first base rate case filed by SPS since the Sagamore Project was placed into commercial operation and SPS's request is consistent with the Unopposed Stipulation approved by the Commission in Docket No. 46936. What are the primary factors that have caused SPS to seek rate relief? As SPS witness and President David T. Hudson explains in more detail in his direct testimony, there are three main cost drivers: (1) investments in infrastructure required to support our service area, to promote economic development, and to maintain and improve our operations, including investment and operating costs for the Sagamore Project; (2) reductions in wholesale transmission service sales; and (3) changes in depreciation expense, including the requested shorter operating lives of the Tolk Generating Station assets and the conversion of the Harrington Generating Station from coal to gas. Has SPS included rate case expenses in its requested revenue requirement? Yes. Ms. Niemi included in the cost of service $6,486,825 of rate case expenses that have been incurred or are expected to be incurred by SPS and the intervening municipalities in this case, SPS's currently pending Fuel Formula case, and SPS's currently pending base rate surcharge case. An itemization of SPS's requested rate case expenses for this case is set forth in my Attachment WAG-RR-8. SPS witness Thomas K. Anson will also discuss SPS's requested rate case expenses.
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Presentation of Rate Case Information
What is the Test Year in this case? The Test Year for the base rate case is the historical twelve-month period from October 1, 2019 through September 30, 2020. SPS is providing information for that Test Year in its testimony, attachments, and schedules. Is SPS presenting additional information as part of its application? Yes. SPS is presenting additional information as authorized by PURA § 36.112. Specifically, PURA § 36.112(b) provides that, in determining the base rate revenue requirement for a utility operating solely outside of ERCOT, the Commission:
shall determine the utility's revenue requirement based on, at the election of the utility: (1) information submitted for a test year; or (2) information submitted for a test year, updated to
include information that reflects the most current actual or estimated information regarding increases or decreases in the utility's cost of service, including expenses, capital investment, cost of capital, and sales. SPS is providing information for the Test Year, as well as its most current estimate for the Update Period, which is the three-month period from October 1, 2020 through December 31, 2020. This effectively creates an Updated Test Year consisting of calendar year 2020. Will the estimates for the Update Period be replaced with actual amounts from the Update Period? Yes. PURA § 36.112(d) requires an electric utility that provides estimated
information in the initial filing to supplement the filing with actual information not
later than the 45th day after the date the initial filing was made. In accordance with
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that statute and 16 TAC § 25.246, SPS will make an update filing no later than 45 days after the Application in this case is filed. Has SPS provided estimates for all elements of capital investment? Yes. SPS has provided estimates related to all capital investments, including capitalized affiliate charges, through December 31, 2020. SPS witness Mark P. Moeller summarizes the estimates of capital expenditures through the end of the Update Period. Has SPS also provided estimates for other types of costs? Yes. Mr. Baumgarten describes the process for updating O&M expense estimates. Additionally, the SPS witnesses supporting affiliate class O&M expenses also describe the estimated costs for their respective classes. Has SPS provided estimates for sales and revenues as of December 31, 2020? Yes. SPS witness Richard M. Luth provides that information. Is SPS also making any known and measurable adjustments? Yes. Consistent with 16 TAC § 25.231 and 25.246(a)(5),9 SPS is making several known and measurable adjustments to the information from the Test Year and the Update Period. SPS witness Stephanie N. Niemi discusses those known and measurable adjustments in her testimony.
9 16 TAC § 25.246(a)(5) ("In establishing the base rates of an electric utility, and electric utility that makes an election under paragraph (2) of this subsection is not precluded from proposing known and measurable adjustments to the utility's historical rate information as permitted by PURA and the commission's rules.").
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What does SPS consider to be a known and measurable adjustment? Generally speaking, SPS considers a known and measurable adjustment to be an adjustment that relates to events occurring after December 31, 2020, which is the end of the Update Period.
Introduction of SPS Revenue Requirement Witnesses
Please explain how SPS has organized its testimony in this case. SPS is presenting its testimony in two phases:
Revenue Requirement; and Rate Design. I am the overview witness in the Revenue Requirement phase, and I introduce the other witnesses who support SPS's requests for relief. SPS witness Richard M. Luth is the overview witness in the Rate Design phase of the case, and he introduces the SPS witnesses who testify in that phase of the case. The Revenue Requirement phase presents and supports SPS's cost of service analysis, capital investments, depreciation expense, capital structure, return on equity ("ROE"), O&M expenses, taxes, and other types of costs that SPS incurs to provide service to customers. The revenue credits that are used to offset costs are also presented in the Revenue Requirement phase. The Rate Design phase addresses how the Texas retail revenue requirement is allocated among SPS's customer classes and how the rates are designed for those customer classes. The fundamental principles utilized are based on cost causation, and they mirror how SPS has performed these functions in past cases. In this case, as Mr. Luth discusses, SPS is proposing a rate increase distribution that is designed
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to eliminate inter-class subsidies by moving all classes to the Texas retail
jurisdictional average rate of return. In the Rate Design phase, SPS witness Jannell
E. Marks also introduces and supports the weather normalization that SPS is
utilizing in this case. Mr. Luth then provide the class cost allocation, the revenue
distribution, and rate design based on this weather normalization. Proposed new
tariffs and changes to tariffs are also presented and supported in this phase of the
case. Mr. Luth also presents the development of the baseline amounts for use in
SPS's future TCRF, Purchased Power Capacity Cost Recovery Factor ("PCRF"),
and Distribution Cost Recovery Factor ("DCRF") filings.
Please introduce the other SPS direct witnesses in the Revenue Requirement
phase of this docket and their areas of testimony.
In addition to my testimony, the following witnesses provide testimony supporting
SPS's case in the Revenue Requirement phase of this docket:
Table WAG-RR-2
Witness
Area of Testimony
David T. Hudson
· Presents an overview of SPS's rate filing and explains the necessity for the requested base rate increase.
· Describes SPS's commitments to provide reliable and affordable electricity and make smart investments for the future.
· Presents the main factors driving the need for a change in rates, including capital investment to support growth, reductions in wholesale power sales, and retirements of fossil generation assets in response to water shortages and other environmental concerns.
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Witness Bryan R. Davis
Patricia L. Martin
Todd Shipman Jess K. Totten Dylan D'Ascendis
Area of Testimony
· Explains that SPS maintains its books and records in compliance with Generally Accepted Accounting Principles.
· Describes SPS's recovery of and accounting treatment of SPP's Attachment Z2 charges for the period from 2008 to 2016.
· Explains SPS's request to recover incremental direct costs incurred as a result of COVID-19 and to establish a tracker for bad debt expense and to seek recovery of the additional bad debt expense in SPS's next base rate case.
· Discusses the financial issues that have important implications for the overall financial integrity of SPS, including the significance of Commission decisions on ROE, capital structure for the Test Year, and associated cost of financing for SPS's utility operations that should be used for setting rates in this case for SPS's Texas retail operations.
· Presents SPS's capital structure, cost of debt, and overall required rate of return on its investments.
· Discusses SPS's continuing need for access to capital on reasonable terms and SPS's capital expenditure plans.
· Discusses the importance of SPS's credit metrics in accessing capital on reasonable terms.
· Explains credit rating agency methodologies for establishing SPS's credit metrics.
· Supports SPS's ROE request based on quality of service and management and discusses the statutory factors that support adjusting ROE on such a basis.
· Presents evidence and provides a recommendation regarding the appropriate cost of equity for SPS.
· Provides evidence and analysis regarding the appropriate ROE, cost of debt, and capital structure on SPS's Texas jurisdictional rate base.
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Witness Richard D. Starkweather
Dane A. Watson Mark P. Moeller
Area of Testimony
· Describes SPS's relative performance when compared with other utilities in Texas and across the United States on a variety of efficiency and quality-of-management metrics for different areas of utility operations.
· Provides an analysis of commercial airfares that SPS would have incurred during the Test Year had commercial airline services been utilized for business travel rather than the XES corporate aircraft.
· Explains the depreciation analysis philosophy.
· Discusses the Technical Depreciation Update completed for SPS assets during the Test Year.
· Supports and justifies the recommended depreciation rate changes for SPS assets for the Test Year, based on the results of the Technical Depreciation Update.
· Supports capital additions, including affiliate charges, closed to plant in service for the period from July 1, 2019 through September 30, 2020.
· Supports the capital additions, including affiliate charges, closed to plant in service for the period from October 1, 2020 through December 31, 2020.
· Supports the depreciation expense included in the cost of service.
· Discusses the Texas-specific balance of SPS's accumulated depreciation.
· Discusses SPS's development of the balance of accumulated depreciation for the Texas retail jurisdiction and related balance of accumulated deferred income taxes (the unblending adjustment).
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Witness Ross L. Baumgarten
Casey S. Meeks
Perry D. Foster Jarred J. Cooley
Area of Testimony
· Provides an overview of the legal structure and the business area or operational and managerial structure of Xcel Energy and explains how that structure affects SPS.
· Explains the XES accounting processes and how direct and indirect costs are billed from XES, the other Operating Companies, and other affiliates to and from SPS.
· Explains XES's allocation methods, statistics, and factors.
· Explains Xcel Energy's compliance with accounting and regulatory requirements regarding affiliate transactions.
· Provides the supporting documentation for the expense charges from XES to SPS and a summary list of transactions with affiliates other than XES.
· Supports the costs, reasonableness, and necessity of Distribution capital additions, including affiliate charges.
· Discusses the reasonableness and necessity of distribution-related native SPS costs.
· Discusses the reasonableness and necessity of affiliate expense charges from the Distribution Business Operations, Distribution Electric Engineering, Distribution Planning & Performance, Vegetation Management & Pole Program, VP Distribution Operations, and Gas Operations affiliate classes during the Updated Test Year.
· Discusses the reasonableness and necessity of affiliate expense charges from the Transmission & Substations affiliate class during the Updated Test Year.
· Discusses the reasonableness and necessity of transmission-related native SPS costs.
· Discusses transmission reliability statistics. · Supports the costs, reasonableness, and necessity of the Transmission capital additions, including affiliate charges.
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Witness David A. Low Bennie F. Weeks
Mark Lytal Richard L. Belt
Area of Testimony
· Discusses SPS's power plant operations, maintenance, and cost-control operations.
· Discusses the reasonableness and necessity of affiliate charges to SPS from the ES Engineering & Construction, ES Environmental, ES Technical Services, ES VP Energy Supply, and ES VP Operations affiliate classes during the Updated Test Year.
· Discusses the reasonableness and necessity of SPS's native energy supply O&M costs.
· Provides an overview of SPS's resource planning process and evaluation methods.
· Discusses the analysis that supports SPS's request to shorten the service lives of the Tolk assets.
· Explains the economic analysis that supports SPS's request to depreciate the coal-specific assets at Harrington by December 31, 2024.
· Describes SPS's economic analysis regarding the Sagamore Project.
· Discusses SPS's generating capacity.
· Discusses the reasonableness and necessity of affiliate expense charges to SPS from the Resource Planning affiliate class during the Updated Test Year.
· Supports the costs, reasonableness, and necessity of the production plant capital additions, including the Sagamore Project and affiliate charges.
· Discusses SPS's proposed change in the useful lives of certain generating units, including Tolk, Harrington, and Plant X Unit 3.
· Discusses analyses regarding the water supply at Tolk.
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Witness Michael O. Remington Lawrence A. Bick
James W. Sample Adam Dietenberger Robert H. Kunze
Area of Testimony
· Supports the costs, reasonableness, and necessity of certain Business Systems capital additions, including affiliate charges.
· Discusses the reasonableness and necessity of affiliate expense charges to SPS included in the Business Systems affiliate class during the Updated Test Year.
· Supports the costs, reasonableness, and necessity of the Property Services capital additions.
· Discusses the reasonableness and necessity of affiliate expense charges from XES to SPS for the Safety class of affiliate services.
· Discusses the reasonableness and necessity of affiliate expense charges from XES to SPS for six different affiliate classes in the Corporate Services business area during the Updated Test Year.
· Supports A&G rent and maintenance of general plant native expenses.
· Discusses the reasonableness and necessity of affiliate expense charges to SPS from the Chief Security Officer affiliate class during the Updated Test Year.
· Supports the costs, reasonableness, and necessity of the Physical Security capital additions, including affiliate charges.
· Discusses the reasonableness and necessity of affiliate expense charges from XES to SPS for ten different affiliate classes in the Financial Operations business area during the Updated Test Year.
· Discusses the capital budgeting process.
· Supports the property and auto liability native costs.
· Discusses the reasonableness and necessity of the affiliate expense charges from the Supply Chain affiliate class during the Updated Test Year.
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Witness Nora Lindgren
Carol C. Bouw
Jeff R. Lyng Shawn M. White
Jeffrey A. Butler
Area of Testimony
· Discusses the reasonableness and necessity of affiliate expense charges from the Customer Care affiliate class during the Updated Test Year.
· Supports the O&M and A&G native costs for meter reading, customer records, and collections.
· Supports SPS's request to recover bad debt expense.
· Discusses the reasonableness and necessity of affiliate expense charges to SPS for the GC Claims, GC Legal Services, and Corporate Secretary affiliate classes during the Updated Test Year.
· Discusses the reasonableness and necessity of SPS's native costs for legal services recorded in FERC Account 923.
· Discusses reasonableness and necessity of affiliate charges from the Policy & Regulatory Compliance affiliate class.
· Discusses the reasonableness and necessity of affiliate expense charges to SPS from the Marketing affiliate class during the Updated Test Year.
· Discusses the reasonableness and necessity of SPS's native energy efficiency and load management costs.
· Discusses the reasonableness and necessity of affiliate expense charges from the OS Senior VP Commercial Operations affiliate class during the Updated Test Year.
· Addresses SPS's expense for fees related to the letter of credit that SPS posts for participation in the SPP's Transmission Congestion Rights auction.
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Witness Michael P. Deselich
Richard R. Schrubbe
H. Craig Romer Jeffrey C. Klein Naomi Koch
Area of Testimony
· Addresses the reasonableness and necessity of the compensation and benefits provided to the employees of SPS and its affiliate employees.
·Discusses the reasonableness and necessity of affiliate expense charges included in the Human Resources, SS Company Benefits, and Enterprise Training affiliate classes during the Updated Test Year.
· Supports SPS's request for recovery of Updated Test Year qualified pension expense, retiree medical expense, and self-insured long-term disability expense.
· Supports SPS's request for recovery of Updated Test Year expenses for active health and welfare, 401(k) match, and workers' compensation expense.
· Discusses the calculation of the prepaid pension asset and explains the rationale for including the prepaid pension asset in rate base.
· Supports the credit attributable to the pension and other post-employment benefits ("OPEB") cost tracker.
· Discusses the reasonableness of coal-related costs included in base rates.
· Discusses the administration of SPS's long-term PPAs.
· Identifies the capacity-related PPA costs incurred in the Test Year and adjustments to the Test Year costs.
· Supports the amounts of federal and state income tax expense included in SPS's cost of service and the amount of ADIT reflected in SPS's rate base.
· Describes the normalization rules prescribed by the Internal Revenue Code and United States Department of the Treasury Regulations and explains that SPS has calculated its rates consistent with those normalization requirements.
· Supports the property tax expense included in the cost of service.
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Witness Ruth M. Sakya
Jannell E. Marks Thomas K. Anson
Area of Testimony
· Presents SPS's proposal to change the imputed price of Texas-generated wind Renewable Energy Credits ("RECs") from $0.60 to $0.86 per megawatt-hour.
· Presents SPS's proposed REC sales revenue credit, which uses the proposed imputed price.
· Addresses SPS's proposal to return 100 percent of the Hale and Sagamore wind facilities REC sales margins to SPS's Texas customers through base rates, through creation of a regulatory liability.
· Presents SPS's request that the Commission continue its long-standing practice of establishing the value of Texas-generated RECs and recognizing the value of New Mexico-generated RECs established by the NMPRC.
· Describes SPS's load research function and the load research information that is used for cost allocation and rate design in this proceeding.
· Explains the methodology that SPS undertakes to measure normal weather and to adjust both sales and demand that have been affected by abnormal weather during the Updated Test Year to determine the sales and demand for the Updated Test Year.
· Discusses the process by which SPS forecasts information required for Schedule O-7.1 of the RFP.
· Discusses the reasonableness and necessity of SPS's external rate case expenses
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Witness Stephanie N. Niemi
Area of Testimony
· Addresses the jurisdictional allocation methods used in the cost of service study.
· Presents SPS's total company and Texas retail jurisdictional revenue requirement and sponsors various schedules that support those revenue requirements.
· Discusses the various components of the cost of service and the adjustments made to those components, including rate base, operating revenues, fuel expense, O&M expense, administrative and general expense, taxes other than income taxes, income tax expense, and capital structure.
· Presents the Updated Test Year amounts for regional market and wheeling expenses and revenues.
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VI. SPS OVERVIEW Please generally describe SPS's high voltage system and interconnections with other systems. SPS is uniquely located relative to the electrical grids of North America. It is a member of the SPP RTO and is synchronously connected to the eastern grid through interconnections with Mid-Kansas Electric Company, Public Service Company of Oklahoma, Sunflower Electric Power Corporation, and AEP Texas Inc. The seven primary interconnections with the SPP are a 230 kilovolt ("kV") transmission power line to Elk City, Oklahoma; a 345 kV transmission power line to Oklaunion, Texas; a 345 kV transmission power line between Amarillo, Texas and Holcomb, Kansas; a 115 kV transmission line between Texas County, Oklahoma and Liberal, Kansas; and two 345 kV lines to Woodward, Oklahoma (two connected to the north part of the system and the other at TUCO, near Lubbock, Texas). SPS is also connected to the western grid through three high-voltage direct-current ("DC") back-to-back converters, or DC ties: (1) through interconnections with Public Service Company of New Mexico ("PNM") at Clovis, New Mexico; (2) through interconnections with El Paso Electric Company and PNM at Artesia, New Mexico; and (3) through interconnections with Public Service Company of Colorado ("PSCo") at Lamar, Colorado. Although SPS operates adjacent to the ERCOT grid, it has no direct interconnections with ERCOT transmission owners. Attachment WAG-RR-3 is a map of SPS's high-voltage transmission system.
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Please describe SPS's generating resources. SPS's generation peak in the Test Year was 4,118 MW. During the Test Year, SPS had 478 MW of company owned wind capacity, increasing to 1,000 MW in December 2020 with the completion of the Sagamore Project. SPS had installed net thermal generating capacity of 4,335 MW, with approximately 48% of this thermal capacity from coal-fired generation and 52% from natural gas generation. During the Test Year, 32.2% of SPS's total system energy needs were served by wind and solar generation, 19.9% by coal-fired generation and 47.5% by natural gas generation. SPS also purchases firm power and energy under long-term purchased power contracts.
As part of their power purchases, SPS and its Xcel Energy affiliates have been very active in renewable energy development. According to the American Wind Energy Association, Xcel Energy has been the largest utility wind provider in 12 of the last 15 years. Table WAG-RR-3 (next page) lists each intermittent renewable generator with whom SPS has a long-term PPA, the location of the generating facility, the nameplate capacity of the facility, and the year in which SPS began or will begin purchasing renewable intermittent energy from that facility. As of 2020, SPS is purchasing 1,640 MW of energy from wind and solar production facilities, although not all of these facilities are used to serve SPS's Texas retail customers.
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1
Table WAG-RR-3
Facility
Location
Nameplate Capacity (MW)
Start Year
Caprock
Quay Co, New Mexico
80
2004
San Juan Mesa
Chaves Co, New Mexico
120
2005
Wildorado
Oldham Co, Texas
161
2007
Long Road Solar Lea/Eddy Co, New Mexico
50
2011
Spinning Spur
Oldham Co, Texas
161
2012
Palo Duro
Hansford Co, Texas
249
2014
Mammoth Plains Dewey/Blaine Co, Oklahoma
199
2015
Roosevelt
Roosevelt Co, New Mexico
250
2015
Roswell Solar
Chaves Co., New Mexico
70
2016
Chaves County Solar
Chaves Co., New Mexico
70
2016
Bonita (Lorenzo) Crosby Co., Texas
80
2018
Bonita (WildCat Ranch)
Cochran Co., Texas
150
2018
2 3 4 5 6 7 8 9 Q. 10 A. 11 12
In addition, SPS currently purchases intermittent renewable energy at avoided cost from numerous Qualifying Facility ("QF") wind generation facilities in the Texas Panhandle. Counting the intermittent renewable energy purchased through long-term PPAs, the intermittent renewable energy received from QFs, the 478 MW from the Hale Wind Project, and the 522 MW from the Sagamore Project, SPS's system resources will include over 2,900 MW of intermittent renewable energy for its customers. Does SPS also make wholesale sales? Yes. Historically, wholesale power sales and transmission services, which are regulated by FERC pursuant to the Federal Power Act, have been a significant business segment for SPS. However, SPS's wholesale sales have steadily declined
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in recent years as a result of agreements that SPS entered into with its wholesale customers during the period from 2007 through 2010.10 SPS's agreement to serve 70 MW of Tri-County Electric Cooperative's load, which is managed by Golden Spread Electric Cooperative, Inc. ("GSEC"), terminated in June 2020. Do the reductions in wholesale sales volumes affect SPS's retail customers? Yes. Those reductions affect SPS's retail customers in three ways. First, reducing wholesale sales frees up lower-cost generating resources that can be used to serve retail customers, which has the effect of lowering the system average fuel costs paid by retail customers. In fact, SPS's customers have been benefiting from the lower system-average fuel costs caused by the 70 MW reduction in GSEC's purchases since that reduction took effect on June 1, 2020.
Second, the reduction in wholesale sales also enables SPS to avoid or defer the need to either construct or acquire new generating resources to serve these wholesale loads. This benefits SPS's retail customers because new generation generally has significantly higher investment costs than older, depreciated generation resources.
Finally, the reduction in wholesale sales means that more of SPS's costs will be allocated to the New Mexico and Texas retail jurisdictions. In this case, SPS has adjusted the jurisdictional allocators to reflect the departure of 70 MW of Tri-County Electric Cooperative load managed by GSEC in June 2020, which has the effect of shifting costs to the retail jurisdictions.
10 GSEC ceased all purchases of wholesale power from SPS on June 1, 2017, and sales to the four New Mexico electric cooperatives declined by 80 MW on June 1, 2017. SPS's contract with West Texas Municipal Power Authority expired on May 31, 2019.
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VII. OBLIGATIONS AND PRECEDENT FROM PRIOR DOCKETS
Please describe the regulatory commitments that SPS has made in prior
dockets.
SPS is subject to the following obligations that are pertinent to this rate case
application:
Docket No. 49831 SPS must suspend the collection from customers of the historical-period expense related to Attachment Z2 of the Southwest Power Pool Open Access Transmission Tariff and must maintain the current regulatory asset with a balance of $4,402,191.55 as of September 12, 2019, adjusted for the resolution of the related, currently pending cases at FERC. SPS must include a proposal to address this regulatory asset in its next baserate proceeding following the resolution of the litigation at FERC regarding Attachment Z2. [Final Order, Section III, Ordering Paragraph 9]
Docket No. 47527 SPS must continue to unwind its excess accumulated deferred income tax and net operating loss-related balances resulting from the change in tax rates under the Tax Cuts and Jobs Act. [Final Order, Section IV, Ordering Paragraph 8]
Docket No. 47527 SPS must continue to unwind its excess accumulated deferred income tax balances associated with protected plant items based on the average rate assumption method. [Final Order, Section IV, Ordering Paragraph 9]
Docket No. 47527 SPS must address its excess accumulated deferred income tax balances and the unwinding of those balances, associated with protected and unprotected plant items, non-plant items, and net operating loss-related balances that may have accrued from the end of the updated test year in Docket No. 47527. [Final Order, Section IV, Ordering Paragraph 10]
Does SPS's rate request satisfy each of these commitments?
Yes. Mr. Davis and I discuss the Attachment Z2 regulatory asset, and Mr. Moeller,
Ms. Niemi, and Ms. Koch address the matters relating to Docket No. 47527.
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VIII. QUALITY OF SERVICE How is quality of service measured for retail customers? Quality of service can be measured in various ways, but two common metrics are the System Average Interruption Duration Index ("SAIDI"), which measures the average number of outage minutes per customer per year, and the System Average Interruption Frequency Index ("SAIFI"), which measures the average number of times that a customer's service is interrupted. Do other witnesses address SPS's quality of service? Yes. Mr. Meeks discusses SPS's SAIDI and SAIFI indices and explains that those metrics show that SPS provides highly reliable service to its customers. Mr. Totten discusses SPS's quality of service in the context of SPS's overall performance. Are there other metrics that demonstrate that SPS provides a high quality of service for its Texas retail customers? Yes. One important metric is the customer satisfaction survey performed by JD Power. In the most recent JD Power survey, SPS ranked in the top 25% compared to its peers for overall satisfaction among residential customers, power quality and reliability, price, corporate citizenship, and customer care. The Edison Electric Institute's ("EEI") recognition of SPS's storm restoration efforts also demonstrates that SPS provides a high quality of service. In 2020, EEI awarded Xcel Energy the Emergency Recovery Award for SPS's response to Winter Storm Billy. What is your conclusion regarding the quality of service that SPS provides to its customers? As shown by the metrics discussed above and by Mr. Meeks, SPS provides a high quality of service to its customers.
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IX. RECOVERY OF CAPITAL INVESTMENT What amount of new capital investment does SPS seek to recover in this case?
SPS seeks to begin recovering approximately $1.75 billion of new capital
investment that SPS either placed in service or expects to place in service during the 18-month period from July 1, 2019 through December 31, 2020.11 These
capital investments were prudently incurred for the benefit of SPS's customers, to
support and promote economic development within SPS's service area, and
maintain and improve SPS's operations.
Please summarize the capital investment SPS placed into service between July
1, 2019 through September 30, 2020 and the SPS witnesses that support the
reasonableness and necessity of this investment.
During the period July 1, 2019 through September 30, 2020, SPS placed in service:
Approximately $57.5 million of production plant investment. Mr. Lytal and Mr. Moeller support those capital additions;
Approximately $264.7 million of transmission investment. Mr. Cooley and Mr. Moeller support those capital additions;
Approximately $155.3 million of distribution investment. Mr. Meeks and Mr. Moeller support those capital additions; and
Approximately $61.5 million of general plant investment. Mr. Remington, Mr. Bick, Mr. Lytal, Mr. Cooley, Mr. Meeks, and Mr. Moeller support those capital additions.
11 As permitted under PURA § 36.112 and 16 TAC § 25.246, SPS has included investments that it will place in service during the three-month period from October 1, 2020 through December 31, 2020.
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Is SPS seeking to include in rate base any other investment made between July 1, 2019 and September 30, 2020 in this case? Yes. SPS is seeking Commission approval to include $20.1 million of intangible plant investment placed in service during this time period. Mr. Remington, Mr. Cooley, Mr. Meeks, Mr. Sample, and Mr. Moeller support those capital additions. Please summarize the capital investment SPS placed into service or expects to place into service for the period October 1, 2020 through December 31, 2020 and the SPS witnesses supporting the reasonableness and necessity of this investment. During the period October 1, 2020 through December 31, 2020, SPS has placed into service the following investment:
Approximately $852.6 million in production plant projects. Mr. Lytal and Mr. Moeller support those capital additions;
Approximately $244.2 million in transmission plant projects. Mr. Cooley and Mr. Moeller support those capital additions;
Approximately $68.7 million in distribution plant projects. Mr. Meeks and Mr. Moeller support those capital additions; and
Approximately $18.8 million in general plant projects. Mr. Remington, Mr. Bick, Mr. Lytal, Mr. Cooley, Mr. Meeks, and Mr. Moeller support those capital additions.
Is SPS seeking to include in rate base any other investment for the period October 1, 2020 through December 31, 2020? Yes. Approximately $11.6 million is attributable to intangible plant projects that SPS placed in service or expects to place in service from October 1, 2020 through December 31, 2020. Mr. Remington, Mr. Sample, and Mr. Moeller support those capital additions.
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Please summarize the new capital investment by function and by time period.
Table WAG-RR-4 contains a summary of the amount placed in service on a Total
Company basis.
Table WAG-RR-4 Total Company Amount Placed in Service
Function
Additions to Plant in Service
July 1, 2019 September 30,
2020
Expected Additions to Plant in Service
October 1, 2020 December 31, 2020
Total Requested Additions to Plant in
Service
Production
$57,500,607
$852,592,158
$910,092,765
Transmission
264,679,698
244,173,604
508,853,302
Distribution
155,259,816
68,734,498
223,994,314
General
61,529,015
18,842,269
80,371,284
Intangible
20,082,294
11,602,518
31,684,812
Total
$559,051,430
$1,195,945,047
$1,754,996,477
6 Q. 7 8 9 A. 10 11 12 Q. 13 14 15 A. 16
If plant that is expected to close during the Update Period does not actually close, will the balance attributable to that plant be included in the actual amounts presented as part of the update filing? No. Only the amounts actually closed to plant in service on or before December 31, 2020 will be included in the actual amounts presented as part of the update filing. If some plant actually did close to plant in service during the Update Period but is not included in the estimated plant, will SPS include that plant balance in the actual amounts presented in the update filing? No. The actual amounts in the update filing will not include any projects that were not included in the estimates for the Update Period. However, the actual dollar
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amounts for the plant balances may be higher or lower than the estimated dollar amounts. Mr. Moeller discusses this issue in more detail. Please describe the Sagamore Project that SPS has recently placed into service. The Sagamore Project, which was approved by the Commission in Docket No. 46936, is a 522 MW wind generating plant with associated facilities located in Roosevelt County, New Mexico. The cost of the Sagamore Project totaled approximately $858 million (total company), and it began commercial operations in December 2020. Mr. Lytal discusses the Sagamore Project in more detail as well as the cost controls and processes SPS utilizes to ensure that its capital investments are reasonable, necessary, and prudently incurred. Will Texas customers benefit from the Sagamore Project? Yes. The Sagamore Project will enable SPS to take advantage of the federal PTCs associated with the facility for the benefit of SPS's customers. More specifically, except for the first 60 days of operation, SPS will credit customers, through eligible fuel expense, with the Texas retail portion of the PTCs, including an income tax gross-up, associated with generation from the Sagamore Project. In Docket No. 46936, SPS also agreed to provide Texas retail customers with various cost protection measures, including a combined cost cap of $1,675 per kW for the Hale and Sagamore Projects, and assurance that Texas retail customers will receive a minimum production guarantee up to the level of the 48% net capacity factor beginning with the first full calendar year after commercial operation. SPS has also agreed to perform an analysis, as specified in the stipulation, to ensure that there is no net cost for customers for the first ten years of the operation of the wind facilities.
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These protections, coupled with the other benefits included in the stipulation, ensure that Texas retail customers will benefit from the Sagamore Project. Please describe SPS's decision timeline regarding the Sagamore Project. As explained in Docket No. 46936, SPS planned to place the Sagamore Project in service by December 31, 2020. SPS had to decide by August 27, 2019 whether to proceed with the project. Was SPS able to construct the Sagamore and Hale Projects within the combined cost cap established in Docket No. 46936? Yes. Though SPS faced significant challenges during construction of the Sagamore Project, including delays in obtaining materials and labor shortages due to the COVID-19 pandemic, SPS was able to control its costs and budget to complete the project within the combined cost cap. Were SPP interconnection costs for the Sagamore Project higher than SPS initially projected? Yes, but as I explained above, SPS was able to complete the project within the applicable cost cap. Please describe the SPP transmission interconnection process. It is the responsibility of the SPP to manage and study requests for interconnecting new generation resources ("GI Queue") to determine the need and costs of any new transmission network upgrades to accommodate interconnection to the transmission grid. The SPP interconnection study process continues to be overwhelmed by numerous requests, which have created a backlog in processing
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and studying new generator applications. For example, if a proposed generator resource was submitted into the SPP GI Queue this year, the final interconnection costs would not be known for a minimum of five years and possibly longer. The significant number of projects included in the GI Queue has also resulted in increased transmission interconnection costs. Please explain how the SPP transmission interconnection process impacted SPS's plans regarding the Sagamore Project. When SPS was determining whether to proceed with the Sagamore Project in early 2019, the SPP had determined that a 345 kV transmission line would be required to serve the project due to the large number of projects included in the SPP interconnection queue. Constructing a 345 kV transmission line would have resulted in significantly increased costs that would have detrimentally impacted the economic viability of the project. How did SPS resolve the issues related to the SPP transmission interconnection process? SPS's counterparty, Invenergy, negotiated with the parties who had projects listed in the queue ahead of the Sagamore Project and was able to reach a resolution that reduced the transmission interconnection costs associated with the Sagamore Project. Was it necessary for SPS to resolve issues related to the SPP interconnection process in order to economically construct the Sagamore Project? Yes. If SPS had not resolved issues relating to the SPP interconnection process, the transmission interconnection costs would have rendered the project uneconomic.
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Prior to proceeding with the construction of the Sagamore Project, did SPS analyze whether the project would remain economic despite the increased costs resulting from the SPP interconnection process? Yes. As explained by Ms. Weeks, SPS performed an economic analysis to determine whether it should proceed with construction of the Sagamore Project. That analysis demonstrated that the project remained economic and provides benefits to SPS and its customers. Does SPS's inclusion of the Sagamore Project in this case comply with the capital cost cap established in Docket No. 46936? Yes. The amount SPS is requesting to include in rate base for the Sagamore Project is $857,993,968. The total cost for the Hale and Sagamore investment that will be placed in service by December 31, 2020 will be approximately $1,563 per kW on a total company basis, which is well below the $1,675 per kW cost cap adopted in Docket No. 46936. Has SPS complied with the requirements established in Docket No. 46936 with regard to depreciation? Yes. According to Section IX of the Unopposed Stipulation in Docket No. 46936, the initial depreciation rate for Sagamore "will be 3.4%, which reflects a 30-year service life and a negative 2.0% net salvage value." SPS has applied that depreciation rate in this case.
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X. NATIVE O&M AND A&G EXPENSE What issues do you address in this section of your testimony? In this section of my testimony, I discuss and support the reasonableness and necessity of the O&M and A&G expenses that are native to SPS. I also discuss and support the O&M expenses associated with specific affiliate classes. In particular, I sponsor services and costs related to the following areas:
Sales Expense: Demonstration and Selling Expense (FERC Account 912); and Miscellaneous Sales Expense (FERC Account 916)
A&G Expenses: Office Supplies and Expenses (FERC Account 921); Outside Services Employed (FERC Account 923); and Regulatory Commission Expense (FERC Accounts 928 - 928.05).
These costs include labor, materials, and other non-fuel O&M costs as reflected on my Attachment WAG-RR-4. As shown on Attachment WAG-RR-4, I also sponsor SPS's recoverable contributions, dues, and donations. Are there other witnesses that support these O&M and A&G expenses? Yes. Mr. Baumgarten, Mr. Deselich, and Mr. Schrubbe provide testimony regarding labor and associated costs (both native and affiliate), and Ms. Bouw addresses outside legal services and third-party vendor costs recorded in FERC Account 923. Ms. Niemi addresses SPS's contributions, dues, and donations. What types of charges are included in the FERC accounts that you sponsor? These FERC accounts include O&M expenses comprised of both native SPS costs and affiliate charges. Native SPS costs are those costs incurred directly by SPS to
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provide electric service to its customers. These costs include labor, materials, and other non-fuel O&M costs. For example, the salaries of SPS employees are native costs. In addition, SPS receives services provided by XES, a centralized service company, which are in addition to, and not duplicative of, the services that SPS employees provide. XES provides these services "at cost," or without profit. Finally, O&M expenses also include charges to SPS from other Operating Companies or affiliated interests. Similar to the charges from XES, these services are charged to SPS "at cost" and generally involve emergency services, such as storm restoration activities. Mr. Baumgarten provides additional details regarding the methodology of charging affiliate costs to SPS from XES and other affiliated interests. How are O&M activities identified and funded? Preliminary budgets are developed at the department level based on current operating conditions, activity levels, and estimates of future business needs. These preliminary budgets are then used to develop an over-all budget for SPS. O&M expenditures are controlled by senior management who monitor and review the O&M trends and operating conditions on a frequent basis to ensure that expenditures are reasonable, necessary, and properly directed. What efforts do SPS and XES take to control O&M costs on an on-going basis? Both SPS and XES strive to control its O&M costs, while maintaining the safety and reliability of its system, as well as providing effective and efficient customer service. The O&M budgeting and monitoring processes ensure that cost controls are in place to operate within reasonable limits. During each fiscal year there is on-
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going monitoring and management of expenses at each of these levels. Furthermore, management recognizes that O&M cost control is a dynamic process, not an annual or periodic exercise. For that reason, senior management frequently meets to discuss O&M spending levels. Does the procurement process also control O&M costs? Yes. SPS and XES utilize a procurement process for both its material and supplies as well as for a majority of its service contracts. Depending upon the product to be purchased or the service to be performed, the procurement group, working with the appropriate work group, either utilizes a bid process or a negotiated supplier agreement to obtain the product or service. This procurement process ensures that SPS receives a quality product or service at a reasonable price. What types of costs are associated with FERC Account 912, Demonstration and Selling Expense? The native costs included in FERC Account 912 are those associated with labor and materials for demonstrations and sales. As Ms. Niemi notes in her testimony, image and promotional advertising have been excluded from the cost of service. However, other costs in FERC Account 912 are recoverable, and SPS is seeking to recover allowable costs that are included in this account. What types of costs are associated with FERC Account 916, Miscellaneous Sales Expense? FERC Account 916 includes the cost of labor, materials, and expenses incurred in connection with sales activities, except merchandising, that are not included in other sales expense accounts.
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What types of costs are associated with FERC Account 921, Office Supplies and Expenses? The native costs included in FERC Account 921 are those associated with office supplies and expenses incurred with the administration of SPS's operations and are not included in other FERC Accounts. The types of items include expenses for office equipment, office supplies, materials, postage, printing, and communications services. What types of costs are associated with FERC Account 923, Outside Services Employed? The native costs included in FERC Account 923 are those associated with the fees and expenses of consultants that are not specific to a particular operating function or other FERC accounts. These expenses include the fees and costs for contract accountants, auditors, appraisers, and engineering consultants. It also includes the supervision fees and expenses paid under contracts for general management services. Ms. Bouw sponsors the expenses associated with consulting attorneys, so I do not address those costs in my testimony. What types of costs are associated with FERC Account 928, Regulatory Commission Expense? The native costs included in FERC Accounts 928 are those expenses incurred by SPS related to formal cases before regulatory commissions, including the Commission, the NMPRC and FERC, as well as fees assessed by regulatory bodies, including those for the administration of the Federal Power Act.
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Are the services and associated O&M costs you sponsor necessary and reasonable for SPS's operations? Yes. The services provided by SPS employees related to the above-described FERC accounts are necessary and reasonable to SPS's operations. These costs are the types of costs all utilities incur, and they are essential to SPS's operations. These costs include labor, materials, and other non-fuel O&M costs. Mr. Deselich and Mr. Schrubbe provide testimony regarding labor costs, Mr. Kunze provides testimony about sourcing and procurement of goods and services, and Mr. Baumgarten provides testimony regarding the methodology of billings for labor and labor overheads. Do SPS's Texas retail customers benefit from the services associated with the specific O&M costs you discuss? Yes. These services allow SPS to provide essential services to its Texas retail customers in an efficient manner. These services are provided through a centralized organizational approach that reduces costs and enables the Operating Companies to benefit from economies of scale, resource sharing during peak workloads, and historical knowledge that enables the employees to respond quickly and with better insights to ensure that the best overall work product is delivered. The centralized organization allows each of the Operating Companies to benefit from the direct experience of the others, leading to improved skills, and improved work practices. Further, the departments within the SPS operating company president organization are focused solely on SPS's operations in Texas and New Mexico, and are attuned to issues, operations, and services directly affecting Texas retail customers. In
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addition, the expenses are reasonable because the costs of the services are managed,
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reviewed and minimized.
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XI. SOUTHWEST POWER POOL SERVICES Please describe SPP and the services it provides to its members. SPP, which is a FERC-approved RTO, is an Arkansas non-profit corporation with its principal place of business in Little Rock, Arkansas. SPP has more than 92 members that include electric cooperatives, federal agencies, independent power producers, independent electric transmission companies, investor-owned electric utilities, marketers, municipal utilities, state authorities, and contract participants.
As an RTO, SPP provides several services to its members, including: reliability coordination; tariff administration; regional scheduling; transmission expansion planning; market operation; contingency reserve sharing; generation interconnection studies; scheduling authority function; compliance; training; and outage coordination.
How are SPP's policies, rules, and tariffs developed? SPP is a member-driven organization. As a result, various committees exist within SPP to develop policy, rules, and tariff provisions related to a wide variety of topics. The primary role of SPP stakeholder committees and working groups is to drive major initiatives that improve or enhance SPP operations. The stakeholder process also focuses on planning for the future. The various committees and working
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groups provide recommendations to the SPP independent Board of Directors on technical issues. The committees are further composed of working groups, steering committees, and task forces. The committees and groups are made up of representatives of SPP members, including SPS. An organizational chart of SPP's committees and working groups is attached to my testimony as Attachment WAG-RR-5. Do state retail rate regulators have a role in the SPP member-driven process? Yes. The Regional State Committee ("RSC") is composed of retail regulators across the SPP footprint and has its own working group, the Cost Allocation Working Group, which is made up of staff members of the retail regulatory authorities. The RSC actively engages in a broad range of issues where SPP has ceded authority, including transmission planning and cost allocation, resource adequacy, allocation of transmission rights, and market evolution issues. For example, the RSC determines: (1) the approach for resource adequacy across the entire region and with respect to transmission planning; (2) whether transmission upgrades for remote resources will be included in the regional transmission planning process; and (3) the role of transmission owners in proposing transmission upgrades in the regional planning process. Have the services that SPS receives from SPP changed since SPS's last rate case, Docket No. 49831? No. As a member of SPP, SPS continues to receive the same services that the Commission reviewed in SPS's last rate case.
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How are the costs associated with new transmission infrastructure within SPP allocated to SPS? SPP costs have been allocated to SPS based on four different allocation methods: (1) Pre-2005; (2) Original Base Plan Funding; (3) the Balanced Portfolio; and (4) the Highway/Byway (Current Base Plan Funding). A matrix showing the effects of these methods during the Test Year is shown in Attachment WAG-RR-6. How does SPP administer these cost allocations and collect the revenue for the regional transmission funding? SPP administers the process through Attachment J of the SPP OATT and recovers the revenue through the resulting Schedule 11 charges under the SPP OATT. SPP collects both the zonal and any regionally-allocated costs under Schedule 11. SPP then distributes this revenue to the Transmission Owners. How is SPS charged for the transmission identified and approved by SPP as part of integrated planning process? SPS is located in Zone 11. As such, the retail customers of SPS are assessed Schedule 11 charges for their share of regional transmission projects and their share of transmission system projects in Zone 11. Ms. Niemi discusses specific Schedule 11 charges assessed by SPP to SPS in the Test Year. What is the SPP administrative fee? The SPP applies the administrative fee to all transmission service customers to cover its expenses for several of the services it provides under its OATT, such as reliability coordination, tariff administration, and seams agreements. The fee is set annually by the SPP Board of Directors based on the next year's expected budget,
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including reconciliation from the previous year's over-or-under-collection. The fee is assessed based upon transmission services purchased or provided pursuant to the SPP Tariff. The SPP administrative fee is recorded in FERC Accounts 561.4, 561.8, and 575.7. How does SPP collect these administrative fees? SPP collects these fees through Schedule 1-A of its OATT. What administrative fee is SPS using in its Test Year? SPS used the SPP administrative fee for the Updated Test Year, which is $0.430 per megawatt hour. Are the new transmission investment amounts charged by SPP and the SPP administrative fee a reasonable and necessary cost of providing service? Yes, the transmission investment has allowed SPS to reliably serve its customers while gaining greater access to economic market resources to serve the SPS customers. The administrative fee which covers the transmission planning cost and operating the SPP Integrated Market has been beneficial to the SPS customers.
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XII. REQUESTED REGULATORY ASSETS
Attachment Z2 Charges
Please describe SPS's request with respect to the recovery of amounts paid to SPP for Attachment Z2 charges for the 2008 through 2016 time period (i.e., Attachment Z2 Historical Period). As discussed in Mr. Davis's direct testimony, SPS proposes to continue the treatment authorized by the Commission in Docket No. 49831 to maintain the current regulatory asset associated with historic period charges to SPS under Attachment Z2 of the SPP OATT given the continued uncertainty created by unresolved litigation at FERC.
Deferred Costs Resulting from the Effects of COVID-19
Please describe SPS's request with respect to deferred costs resulting from the effects of COVID-19. As explained by Mr. Davis, consistent with the Commission's order in Project No. 50664, SPS established a regulatory asset to capture expenses incurred as a result of COVID-19. In this case, SPS proposes to recover incremental direct costs incurred as a result of COVID-19, establish a tracker for bad debt expense, and seek recovery of the additional bad debt expense in SPS's next base rate case.
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XIII. KNOWN AND MEASURABLE IMPACT OF LP&L DISCONNECTING
2
FROM SPS'S TRANSMISSION SYSTEM
3 Q. What will you discuss in this section of your testimony?
4 A. I will explain SPS's request to reallocate transmission costs resulting from LP&L
5
moving its transmission load to ERCOT in June 2021.
6 Q. What is LP&L's relationship to SPS?
7 A. Although LP&L was a wholesale customer of SPS in the past, SPS no longer
8
provides wholesale service to LP&L. LP&L has, however, remained a transmission
9
customer of SPS.
10 Q. Please briefly describe LP&L's planned transition from SPP to ERCOT.
11 A. In March 2018, the Commission approved LP&L's application for approval to
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connect approximately 470 MW of its total load, and a large portion of its system
13
serving that load, to ERCOT on June 1, 2021. The Commission has approved CCN
14
applications for LP&L and a transmission service provider to construct the various
15
transmission lines necessary to integrate LP&L's affected load and system into
16
ERCOT. LP&L and the transmission service provider are currently constructing
17
the necessary transmission facilities, and LP&L files quarterly status reports on the
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progress of the transition. As of September 15, 2020, those reports indicate that the
19
June 1, 2021 target date remains.
20 Q. How will LP&L's departure from SPS's transmission system affect the
21
allocation of transmission costs?
22 A. As discussed by Mr. Luth, LP&L's departure from SPS's transmission system will
23
result in a reallocation of transmission costs that increases the share of costs paid
24
by SPS's other customers.
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If LP&L's transmission load does not transition to ERCOT until June 1, 2021, why is SPS proposing to reallocate transmission costs in this case? Because the impact of LP&L's departure on SPS and its Texas retail customers is a known and measurable change, it is just and reasonable for SPS to address the allocation of transmission costs in this case.
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XIV. DEPRECIATION RATES AND RELATED EXPENSE Please summarize SPS's depreciation request in this case. In Docket No. 49831, SPS provided a complete depreciation study that addressed all depreciable assets. In this case, SPS is providing a Technical Depreciation Update, which provides updated information. The Technical Depreciation Update is sponsored by Mr. Watson, and proposed depreciation rates are discussed by Mr. Moeller. I will discuss SPS's requests related to depreciation of the coal-specific assets at Harrington, the Tolk Generating Station Units, and Plant X Unit 3.
Depreciable Service Life of the Coal-Specific Assets at the Harrington Generating Station
Please briefly describe Harrington Station. Harrington consists of three coal-powered steam turbine units, located in Potter County, Texas with a total net capacity of 1,021 MW. Harrington Unit 1 has a net capacity of 340 MW and a current retirement date of 2036; Harrington Unit 2 has a net capacity of 355 MW and a current retirement date of 2038; and Harrington Unit 3 has a net capacity of 355 MW and a current retirement date of 2040. All three of the plant's boilers were designed to burn both coal and natural gas. Please describe SPS's request with respect to the coal-specific assets at Harrington. SPS seeks to fully depreciate the coal-specific assets at Harrington by December 31, 2024 to comply with ambient air quality standards. Do any other witnesses address this issue? Yes. Mr. Lytal describes the coal-specific assets that SPS seeks to depreciate by December 31, 2024, and Ms. Weeks discusses the economic analysis that SPS
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performed to evaluate its options regarding Harrington and determine that SPS's proposed action is in the best interest of SPS and its customers. Mr. Watson's Technical Depreciation Update includes the coal-specific assets, and Mr. Moeller discusses depreciation rates. What factors led SPS to study alternative operations at Harrington? The Clean Air Act requires the Environmental Protection Agency ("EPA") to set National Ambient Air Quality Standards ("NAAQS") (40 CFR part 50) for pollutants considered harmful to public health and the environment. The EPA has set NAAQS for six principal pollutants, including sulfur dioxide ("SO"). The primary SO standard sets a limit of 75 parts per billion (ppb), calculated using the 99th percentile of 1-hour daily maximum concentrations, averaged over 3 years. Harrington Station emits approximately 99% of the SO2 emissions in Potter County.
In December 2016, the Texas Commission on Environmental Quality ("TCEQ") installed a SO monitor in the vicinity of Harrington Station to collect ambient air quality data. The average reading over three years exceeds the primary standard limit of 75 ppb. Thus, SPS was required to develop an implementation plan to comply with the standard and show that Harrington will achieve compliance with the NAAQS by 2025. SPS presented its plan for complying with the emissions standard to the TCEQ, and an Agreed Order was finalized in October 2020. What does the Agreed Order require of SPS? The Agreed Order requires SPS to cease coal operations at Harrington by December 31, 2024. Pursuant to the Agreed Order, at this time SPS plans to convert Harrington from coal to natural gas.
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Why isn't SPS seeking authorization to depreciate the remaining assets at Harrington? In its discussions with TCEQ, SPS evaluated the potential conversion of Harrington's fuel supply from coal to natural gas to comply with ambient air quality standards and determined that the plant could be converted. In that scenario, the assets that are not coal-specific would remain in service. Is SPS proposing to recover any costs associated with the conversion in this case? No. In this case, SPS is only seeking authorization to fully depreciate the coal-specific assets at Harrington by December 31, 2024. Is SPS's request to fully depreciate the coal-specific assets at Harrington by December 31, 2024 reasonable? Yes. Harrington has provided service to SPS's customers for over 40 years, and conversion of the plant's fuel source will allow SPS to continue to operate the units for the benefit of SPS's customers until the end of their currently approved service lives in 2036, 2038, and 2040, respectively. As Ms. Weeks explains, the proposed conversion provides an economic solution to address the air quality issues in the region. The conversion is also cost-effective because the plant's boilers were designed to burn both coal and natural gas. Converting Harrington's fuel supply from coal to natural gas will provide environmental benefits and allow SPS to comply with the Agreed Order. As a result, SPS requests authorization to fully depreciate the coal-specific assets at Harrington by December 31, 2024.
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Depreciable Service Life of the Tolk Generating Station
Please briefly describe the Tolk Generating Station Units. Tolk Unit 1 began commercial operation in 1982, and Tolk Unit 2 began commercial operation in 1985. The Tolk units originally had 35-year approved service lives in Texas. Under those originally approved service lives, Tolk Unit 1 would have been retired in 2017, and Tolk Unit 2 would have been retired in 2020. In subsequent rate cases, however, the service lives of both units were extended from 35 years to 60 years. Thus, Tolk Unit 1 was scheduled to retire in 2042, and Tolk Unit 2 was scheduled to retire in 2045. In Docket No. 47527, the depreciation rates for the Tolk Generating Station Units 1 and 2 were revised from 2042 and 2045, respectively, to 2037 for both units.12 Please summarize SPS's request with respect to Tolk. As part of the Stipulation reached in Docket No. 47527, SPS agreed to update its economic life analysis for the Tolk Generating Station and to include that analysis in its next base rate case.13 SPS provided that analysis in Docket No. 49831 and requested a 2032 retirement date for the Tolk units. As part of the Stipulation reached in that case, the signatories agreed for SPS's depreciation rates for the Tolk generating station to continue to reflect a depreciation rate based on a 2037 end-oflife assumption and for the depreciation rate to use an assumption of negative 5% net salvage.
12 Application of Southwestern Public Service Company to Change Rates, Docket No. 47527, Order at FoF No. 51 (Dec. 10, 2018).
13 Id. at FoF No. 50.
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In this case, SPS is providing a Technical Depreciation Update that supports its need to increase depreciation expense and shorten the service lives of several of its generating units, including the Tolk Generating Station units that are fueled by coal. With respect to the Tolk units, SPS proposes to change the service lives of these assets to have them retire at December 31, 2032. Mr. Watson, Mr. Lytal, Ms. Weeks, Mr. Belt, and Mr. Cooley also present information related to SPS's request. Is SPS still committed to retiring Tolk in 2032? Yes, because there will be insufficient water to operate the plant after that date. How does SPS plan to operate Tolk until it is retired? In order to maximize the value of the 1,080 MW of Tolk summer capacity to meet customer demand plus a planning reserve margin and to preserve groundwater, beginning in 2021 SPS will offer the Tolk units into the market during the four onpeak months based primarily on economic dispatch principles. During the eight off-peak months, the units will be offline unless called upon by SPP to run because of operational conditions.
SPS has installed synchronous condenser equipment at Tolk to provide critical network voltage support and power stability as SPS uses increasing amounts of renewable energy on its system. The generators will be detached from the steam turbines and used as synchronous generators. Because the synchronous condensers are expected to operate after 2032, SPS only proposes to fully depreciate the Tolk assets that will no longer be used to generate electricity after that date. Mr. Cooley provides additional information regarding the synchronous condensers in his direct testimony.
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Is SPS providing analyses to demonstrate that a 2032 retirement date is appropriate? Yes. Ms. Weeks discusses SPS's additional analysis that continues to support a 2032 retirement date for Tolk. Mr. Belt provides an updated water study that also continues to support a 2032 retirement date. Please summarize your conclusions regarding Tolk. For the reasons explained above and by Mr. Lytal, Mr. Belt, Mr. Cooley, and Ms. Weeks, a 2032 retirement date is appropriate and is in the best interest of SPS and its customers. Accordingly, SPS should be permitted to fully depreciate the Tolk units by December 31, 2032.
Depreciable Service Life of Plant X Unit 3
Please describe Plant X Unit 3. Plant X Unit 3 is a gas-fired steam boiler unit located in Lamb County, Texas that has a net capacity of 93 MW. Plant X Unit 3 began commercial operation in 1955 and had an initial approved service life of 40 years. The current approved service life of Plant X Unit 3 is set to expire in 2024, which results in a service life of 69 years. Please summarize SPS's request with respect to Plant X Unit 3. SPS proposes to retire and fully depreciate the plant by December 31, 2022. Do any other witnesses discuss SPS's request to shorten the service life of Plant X Unit 3? Yes. Mr. Lytal discusses the status of Plant X Unit 3 and the capital expenditures that would be required to maintain and operate the unit until the end of its current service life. Mr. Moeller and Mr. Watson discuss the depreciation rate for the plant.
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Why does SPS propose to fully depreciate Plant X Unit 3 by December 31, 2022? As discussed by Mr. Lytal, SPS performed an initial analysis in January 2020 that showed SPS would need to expend approximately $4.5 million to repair the Plant X Unit 3 boiler, although that repair alone would not be sufficient to allow the unit to run reliably and efficiently. SPS also determined that it would need to incur approximately $625,000 of incremental O&M costs if Plant X Unit 3 was returned to service. Based on that initial analysis, SPS decided it would not be cost-effective to restore the unit to service.
In preparation for its request to retire Plant X Unit 3, SPS performed an additional analysis in December 2020 to determine whether retiring the unit remained more cost-effective than returning the unit to service. That analysis concluded that SPS would be required to expend approximately $10.5 million to complete the repairs that would be necessary for the unit to run reliably and efficiently. In addition, SPS concluded that it would need to incur nearly $1 million of incremental O&M costs if the unit were returned to service. These amounts are significant, especially considering that the unit has a relatively high heat rate (i.e., is relatively inefficient). It burns more natural gas to produce a kilowatt-hour of electricity as compared to other more efficient units. Accordingly, SPS's analyses confirmed that it would not be cost-effective to return Plant X Unit 3 to service.
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If Plant X Unit 3 is not currently in service, why does SPS propose to retire the unit in 2022 instead of 2021? The SPP requires load serving entities to provide one-year notice of any retirement so that a study can be performed to evaluate the potential impacts. In consideration of this requirement, SPS proposes to retire Plant X Unit 3 in 2022. In your opinion, is it in the best interest of SPS and its customers for SPS to retire Plant X Unit 3 in 2022? Yes. As discussed above and by Mr. Lytal, the costs of operating the unit outweigh the benefits. As a result, it is in the best interest of SPS and its customers for SPS to retire Plant X Unit 3 in 2022, and SPS should be authorized to fully depreciate the plant by that date.
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XV. CAPACITY ASSOCIATED WITH SOLAR POWER PURCHASE AGREEMENTS
What will you discuss in this section of your testimony? I will discuss SPS's treatment of capacity associated with the Roswell Solar, Chaves County Solar, and Long Road Solar (formerly Sun Edison) PPAs. Please briefly describe the Roswell Solar, Chaves County Solar, and Long Road Solar PPAs. SPS entered into the Roswell Solar and Chaves County Solar PPAs on March 4, 2015. SPS acquires 70 MW of energy under each PPA, and each agreement has a 25-year term.
SPS entered into the five Long Road Solar PPAs on December 11, 2009. SPS acquires 50 MW of energy under each PPA, and each agreement has a 20-year term. Do these solar PPAs provide capacity benefits? Yes. As explained by Ms. Weeks, the Roswell and Chaves County Solar PPAs provide 140 MW of solar capacity, which results in a 109 MW net planning capability contribution to SPS's system capacity. The Texas allocation of renewable capacity attributed to the Roswell and Chaves County PPAs would be approximately 65 MW.
SPS's five Long Road Solar PPAs provide a total of 50 MW of solar capacity to the SPS system and result in a 32 MW capacity contribution. If SPS included a portion of the net planning capability from the Long Road Solar facilities in Texas, approximately 19 MW would be attributed to Texas.
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1 Q. Do SPS's Texas retail customers pay costs associated with these solar PPAs?
2 A. No. In SPS's most recent fuel reconciliation case, Docket No. 48973, the
3
Commission determined that costs associated with the Roswell Solar and Chaves
4
County Solar PPAs could not be recovered from SPS's Texas retail customers and
5
disallowed $3.1 million of SPS's Texas retail fuel costs.14
6
The Commission also determined that the uneconomic portion of the cost
7
associated with the Long Road Solar PPAs would be directly assigned the New
8
Mexico jurisdiction.15 This determination effectively assigns all of the costs
9
associated with the Long Road Solar PPAs to SPS's New Mexico customers.
10 Q. Can capacity associated with these solar PPAs be considered in determining
11
capacity needs for SPS's Texas retail customers?
12 A. 13
No. SPS's Texas retail customers no longer benefit from the capacity provided by the solar PPAs because they do not pay any of the associated costs.16
14
Accordingly, SPS has excluded the solar PPA capacity in determining the
15
capacity needs of its Texas retail customers. Ms. Weeks explains the effect of
16
this exclusion on SPS's Texas retail customers.
14 PUC Docket No. 48973, Application of Southwestern Public Service Company to Reconcile Fuel and Purchased Power Costs, Order on Rehearing issued February 18, 2020 at ¶ 164-169.
15 Id., ¶ 72-74. PUC Docket No. 35763. Application of Southwestern Public Service Company for Authority to Change Rates, to Reconcile Fuel and Purchased Power Costs for 2006 and 2007, and to Provide a Credit for Fuel Cost Savings, Order issued June 1, 2009 at 7.
16 PUC Docket No. 48973, Application of Southwestern Public Service Company to Reconcile Fuel and Purchased Power Costs, Order on Rehearing issued February 18, 2020 at ¶ 164-169.
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XVI. RESILIENCY SERVICE TARIFF What will you discuss in this section of your testimony? I will discuss SPS's proposal to implement a voluntary resiliency service tariff that allows customers to acquire behind-the-meter equipment, such as battery storage or back-up generation, to avoid interruptions in service. Will other witnesses address this topic? Yes. Mr. Luth describes the proposed resiliency service tariff in his direct testimony. Please explain the concept of resiliency as it applies to the electric system. In the electric system, resiliency refers to the ability to recover from or adjust to disruptions in the supply of electricity. The concept of resiliency in the electric system is becoming more relevant as customers seek to navigate the risks of weather events or other significant disruptions. Resiliency strategies are designed to address anticipated severe electric disruptions to day-to-day life or a customer's operations by investing in critical infrastructure and systems to sustain the customer during electric disruption, and to hasten recovery. One of the most critical objectives of a resiliency strategy is ensuring a secure power supply for critical infrastructure. Installing on-site energy generation, battery storage, and/or control equipment can allow a critical site or a customer's critical loads to operate independently from the electric grid in the event of an emergency resulting in an extended grid outage. These resources may also provide customer benefits during times of normal grid operation.
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Please describe SPS's proposed resiliency service. SPS proposes to support customer resiliency through Company ownership, installation, operation, and maintenance of behind-the-meter equipment, such as battery storage, back-up generation, and switching and control equipment. What benefits will the resiliency service provide to customers? The proposed service will allow customers to obtain combinations of equipment that meet their specific resiliency and reliability needs. Customers will pay for their requested equipment through an on-bill charge that recovers the revenue requirement of the assets requested by each customer. Because costs are recovered through dedicated customer charges, the service does not rely on subsidization from non-participating customers. What types of customers would benefit from the proposed resiliency service? Customers have their own needs and unique circumstances, but various types of customers would benefit from resiliency service. For example, some communities, either through governmental initiatives or public private partnerships, may wish to establish "resiliency centers" to maintain stable functioning during and immediately following a major disruption or weather event. These resiliency centers could include existing structures, services, and/or facilities considered crucial to the community (e.g., first responder facilities, wastewater treatment facilities, evacuation and shelter areas, communications, and traffic safety infrastructure). Commercial and industrial customers are also increasingly considering resiliency options in order to meet both their reliability and power
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quality needs, often while also meeting sustainability objectives. These commercial and industrial customers often have sophisticated operations that do not tolerate grid outages, such as oil and gas production or manufacturing, or serve essential community functions, such as healthcare or education. Each customer is unique, but these customers are generally seeking increased resiliency at a reasonable price, with a desire to maximize the potential for resiliency assets to save money, and to rely on a trusted provider to help them achieve these goals. Would there be any requirement that customers take service under the resiliency service tariff? No, the proposed service is entirely optional. Would the proposed resiliency service tariff benefit SPS and its customers? Yes. The proposed tariff would allow SPS to provide a service that is not currently available and would allow customers to pursue options to increase reliability based on their individualized needs.
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XVII. AFFILIATE CLASSES SPONSORED Earlier in your testimony, you referred to "affiliate classes." What do you mean by the terms "affiliate classes" or "affiliate classes of services"? A portion of SPS's costs reflect charges for services provided by a supplying affiliate, specifically XES or one of the Operating Companies. These charges have been grouped into various affiliate classes, or aggregations of charges, based upon the business area, organization, or department that provided the service or, in a few instances, the accounts that captured certain costs. In his direct testimony, Mr. Baumgarten provides a detailed explanation of how the affiliate classes were developed and are organized for this case. Which affiliate class do you sponsor? I sponsor the following three classes of affiliate services: Strategic Revenue Initiatives; PSCo President; and Corporate Giving. Although the Corporate Giving class appears as an affiliate class on the affiliate cost attachments to my testimony, SPS is not requesting recovery of the costs assigned to Corporate Giving.
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1
XVIII. AFFILIATE EXPENSES FOR THE STRATEGIC REVENUE
2
INITIATIVES CLASS OF SERVICES
3 A. Summary of Affiliate Expenses for the Strategic Revenue
4
Initiatives Class of Services
5 Q. Is the Strategic Revenue Initiatives affiliate class a new affiliate class?
6 A. No. I sponsored the costs related to this class in SPS's most recent base rate case,
7
Docket No. 49831. As I discuss further below, the services of this class are
8
necessary to address a variety of emerging customer needs that have arisen from
9
changing demographics and demands.
10 Q. Where does the Strategic Revenue affiliate class fit into the overall affiliate
11
structure?
12 A. Attachment MLS-RR-6 to Mr. Baumgarten's direct testimony provides a list and a
13
pictorial display of all affiliate classes, dollar amounts for those classes, and
14
sponsoring witness for each class. As seen on that attachment, the Strategic
15
Revenue Initiatives affiliate class was part of the Customer and Innovation business
16
area during the Updated Test Year.
17 Q. What services are grouped into the Strategic Revenue Initiatives affiliate
18
class?
19 A. The services that are grouped into the Strategic Revenue Initiatives affiliate class
20
are those associated with leading, coordinating, collaborating, and engaging in
21
multiple innovative electric service options for the benefit of SPS and its customers.
22
With advancements in technology and increased focus on energy efficiency, the
23
Strategic Revenue Initiatives class works to meet customer desires for
24
non-traditional services. By evaluating emerging technologies that can benefit
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customers and the SPS system and developing new technologies to be deployed
when they are cost-effective, the Strategic Revenue Initiatives class supports SPS's
ability to provide safe and reliable electric service to its customers.
What is the dollar amount of the Updated Test Year XES charges that SPS
requests, on a total company basis, for the Strategic Revenue Initiatives
affiliate class?
The following table summarizes the dollar amount of the estimated Updated Test
Year charges for the Strategic Revenue Initiatives affiliate class. I will update the
table below as part of SPS's 45-day case update filing to reflect the actual Updated
Test Year costs for the Strategic Revenue Initiatives affiliate class.
Table WAG-RR-517
Requested Amount of XES Class Expenses Billed to SPS (Total Company)
Class of Services
Total XES Class
Expenses
Requested Amount
% Direct Billed
% Allocated
Strategic Revenue Initiatives
$1,078,305 $147,093 0%
100%
12 Q. 13 14 A. 15
Please describe the attachments that support the information provided on Table WAG-RR-5. There are four attachments to my testimony that present information about the SPS affiliate expenses for the Strategic Revenue Initiatives affiliate class.
17 Total XES Class Expenses is the Dollar amount of total Updated Test Year expenses that XES charged to all Xcel Energy companies for the services provided by this affiliate class. This is the amount from Column E in Attachment WAG-RR-A. Requested Amount is SPS's requested amount after exclusions and pro forma adjustments. % Direct Billed is the percentage of SPS's requested XES expenses for the class that were billed 100% to SPS. % Allocated is the percentage of SPS's requested XES expenses for the class that were allocated to SPS.
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1
Attachment WAG-RR-A: Provides a summary of the affiliate expenses
2
for this class during the Updated Test Year. The summary starts with the total of
3
the XES expenses to SPS for the services provided by this affiliate class and ends
4
with the requested dollar amount of XES expenses to SPS (total company) for this
5
affiliate class after exclusions and pro forma adjustments. The columns on this
6
attachment provide the following information.
Column A -- Line number
Lists the Attachment line numbers.
Column B -- Affiliate Class
Lists the affiliate class.
Column C --
Billing Method (Cost Center)
Shows the billing method that XES uses to charge the expenses to the affiliates, and the billing method short title. In his direct testimony, Mr. Baumgarten explains the billing methods and defines the codes.
Column D -- Allocation Method
Shows the allocation method applicable to the billing method (cost center).
Column E --
Billings for Class to all Legal Entities (FERC Acct. 400 935)
Shows XES billings to all legal entities for the affiliate class.
Column F --
Class to all Legal Entities Except for SPS (FERC Acct. 400 935)
Shows XES billings to all legal entities other than SPS for the affiliate class.
Column G --
XES Billings for Class to SPS (total company) (FERC Acct. 400-935)
Shows XES billings to SPS (total company) for the affiliate class.
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Column H -- Exclusions
Shows the total dollars to be excluded from Column E. Exclusions reflect expenses not requested, such as expenses not allowed or other below-the-line items.
Column I -- Per Book
Shows XES billings to SPS (total company), for the affiliate class, after the exclusions shown in Column F. The dollar amount in Column G is Column E plus Column F.
Column J -- Pro Formas
Shows the total dollar amount of pro forma adjustments to the dollar amount in Column G. Pro forma adjustments reflect revisions for known and measurable changes to the Updated Test Year expenses.
Column K -- Requested Amount (total company)
Shows the requested amount (total company) for the affiliate class. The dollar amount in Column I is Column G plus Column H.
Column L -- Percentage of class Shows the percentage of affiliate class
charges
charges billed using the cost center.
1
In his direct testimony, Mr. Baumgarten provides a consolidated summary
2
of affiliate expenses billed to SPS for all classes during the Updated Test Year, as
3
well as the Test Year (October 1, 2019 through September 30, 2020).
4
Attachment WAG-RR-B(CD): Provides the detail of the XES expenses
5
for the Strategic Revenue Initiatives affiliate class that are summarized on
6
Attachment WAG-RR-A. The detail shows the XES expenses billed to SPS for the
7
Strategic Revenue Initiatives affiliate class, itemized by the amount, with each
8
expense listed by individual activity and billing method (cost center). When
9
summed, these amounts tie to the amounts shown on Attachment WAG-RR-A and
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1
the detail regarding the expenses is organized to support that attachment.
2
Specifically, the columns on this attachment provide the following information.
Column A -- Line Number
Lists the Attachment line numbers.
Column B -- Legal Entity Receiving XES Expenses
Shows the legal entity (Xcel Energy or one of its subsidiaries) that received the XES expense.
Column C -- Affiliate Class
Lists the affiliate class.
Column D -- Cost Element
Provides the cost element number
Column E -- Activity
Provides a short title for the activity.
Column F --
Billing Method (Cost Center)
Identifies the billing method and short title. In his direct testimony, Mr. Baumgarten explains the billing methods and defines the codes.
Column G -- FERC Account
Shows the FERC Account in which the expense was recorded.
Column H --
XES Billings for Class to All Companies (FERC Acct. 400-935)
Shows the itemized amount of the listed XES expense that was billed to all companies.
Column I --
XES Billings for Class to All Companies Except SPS (FERC Acct 400-935)
Shows the itemized amount of the listed XES expense that was billed to all companies other than SPS.
Column J --
XES Billings for Class to SPS (total company) (FERC Acct. 400-935)
Shows the itemized amount of the listed XES expense that was billed to SPS. Therefore, the sum of this column provides total billings to SPS and ties to the total dollar amount for the affiliate class in Column E of Attachment WAG-RR-A.
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Column K -- Exclusions
Shows the total dollars excluded from Column H. The total dollar amount for the affiliate class in Column I ties to the total dollar amount for the affiliate class in Column F of Attachment WAG-RR-A.
Column L -- Per Book
Shows XES billings to SPS (total company), for the affiliate class, after the exclusions shown in Column I. The dollar amount in Column J is Column H plus Column I. The total dollar amount for the affiliate class in Column J ties to the total dollar amount for the affiliate class in Column G of Attachment WAG-RR-A.
Column M -- Pro Formas
Shows the dollar amount of pro forma adjustments to the dollar amount in Column J. The total dollar amount for the affiliate class in Column K ties to the total dollar amount for the affiliate class in Column H of Attachment WAG-RR-A.
Column N -- Requested Amount (total company)
Shows the requested amount (total company) for the affiliate class. The dollar amount in Column L is Column J plus Column K. The total dollar amount for the affiliate class in Column L ties to the total dollar amount for the affiliate class in Column I of Attachment WAG-RR-A.
1
Mr. Baumgarten also provides a consolidated summary of this information
2
for all affiliate classes during the Updated Test Year, as well as the Test Year
3
(October 1, 2019 through September 30, 2020).
4
Attachment WAG-RR-C: Both Attachments WAG-RR-A and
5
WAG-RR-B(CD) show exclusions to the XES expenses billed to SPS for the
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Strategic Revenue Initiatives affiliate class (Attachment WAG-RR-A, Column H;
2
Attachment WAG-RR-B(CD), Column K). Attachment WAG-RR-C provides
3
detail about those exclusions listed on Attachments WAG-RR-A and
4
WAG-RR-B(CD). The columns on this Attachment WAG-RR-C provide the
5
following information.
Column A -- Line Number
Lists the Attachment line numbers.
Column B -- Affiliate Class
Lists the affiliate class.
Column C -- FERC Account
Identifies the FERC Account for the expense that has been excluded.
Column D -- Explanations for Exclusions
Provides a brief rationale for the exclusion.
Column E -- Exclusions (total company)
Shows the dollar amount of the exclusion.
6
In his direct testimony, Mr. Baumgarten describes the calculations
7
underlying the exclusions.
8
Attachment WAG-RR-D: Both Attachments WAG-RR-A and
9
WAG-RR-B(CD) show pro forma adjustments to SPS's per book expenses for the
10
Strategic Revenue Initiatives (Attachment WAG-RR-A, Column J; Attachment
11
WAG-RR-B(CD), Column M). Attachment WAG-RR-D provides information
12
about those pro forma adjustments shown on Attachments WAG-RR-A and
13
WAG-RR-B(CD). The columns on Attachment WAG-RR-D provide the following
14
information.
Column A -- Line Number
Lists the Attachment line numbers.
Column B -- Affiliate Class
Lists the affiliate class.
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Column C -- FERC Account
Identifies the FERC Account affected by the pro forma adjustment.
Column D -- Explanations for Pro Provides a brief rationale for the pro
Formas
forma adjustment.
Column E -- Sponsor
Identifies the witness or witnesses who sponsor the pro forma adjustment.
Column F -- Pro Formas (total company)
Shows the dollar amount of the pro forma adjustment.
1 Q. 2 3 A. 4 5 6 Q. 7 8 A. 9 10 11 12 13 14 15
Does XES bill its expenses for the Strategic Revenue Initiatives class to SPS in the same manner as it bills other affiliates? Yes. As discussed by Mr. Baumgarten, XES uses the same method for billing and allocating costs to affiliates other than SPS that it uses to bill and allocate those costs to SPS. Are there any exclusions to the XES billings to SPS for the Strategic Revenue Initiatives affiliate class? Yes. As I mentioned earlier, exclusions reflect expenses not requested, such as expenses not allowed or other below-the-line items. Exclusions are shown on Attachment WAG-RR-A, Column H, and on Attachment WAG-RR-B(CD), Column K. The details for the exclusions are provided in Attachment WAG-RR-C. Mr. Baumgarten describes how the exclusions were calculated. In SPS's 45-day case update, I will present an updated Attachment WAG-RR-C that will provide actual exclusions to replace any estimated exclusions included in my original attachment.
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16 B.
17 18 Q. 19 20 A. 21 22 23
Are there any pro forma adjustments to SPS's per book expenses for the Strategic Revenue Initiatives affiliate class? Yes. As I mentioned earlier, pro forma adjustments are revisions to Updated Test Year expenses for known and measurable changes. Pro forma adjustments are shown on Attachment WAG-RR-A, Column J, and on Attachment WAG-RRB(CD), Column M. The details for the pro forma adjustments, including the witness or witnesses who sponsor each pro forma adjustment, are provided in Attachment WAG-RR-D. As shown on that attachment, I sponsor two proforma adjustments for the Strategic Revenue Initiatives Affiliate Class, one in the amount of ($180.20) that relates to office supplies and expenses and one in the amount of ($156.53) that relates to general advertising expenses. Given the time of SPS's initial filing, only the first nine months of the Updated Test Year have completed the full pro forma adjustment review process. In SPS's 45-day case update, I will present an updated Attachment WAG-RR-D that will complete the full pro forma adjustment review process for the last three months of the Updated Test Year.
The Strategic Revenue Initiatives Class of Services are Necessary Services
Are the services that are grouped in the Strategic Revenue Initiatives affiliate class necessary for SPS's operations? Yes. The services grouped in the Strategic Revenue Initiatives affiliate class are critical to SPS's economic development and ability to deliver innovative electric service options to customers. The Strategic Revenue Initiatives class is responsible for the Corporate Economic Development Program, which provides customer and
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1
2
3
4
5
6
7
8 Q.
9
10 A.
11
12 13 14 15 16 17 18 19 20 21 22 Q.
23
24
25 A.
26
Operating Company support for business expansion, retention, and attraction. In
addition, the Strategic Revenue Initiatives class is responsible for the development
and cost-effective protocol implementation of electric service options and program
development and includes the Customer and Innovation Business Area. For
example, programs under evaluation include storage solutions (i.e., batteries),
electric vehicles, microgrid initiatives, and other emerging technological advances
that are important to meet long-term customer demands.
What are the specific services that the Strategic Revenue Initiatives affiliate
class provides to SPS?
The specific services that the Strategic Revenue Initiatives affiliate class provides
to SPS are:
evaluating emerging technologies that can benefit the system and customers through reduced energy usage, improved grid management, and other measures and developing new technologies to be deployed when they are cost-effective;
directly leading and competing for new customers and load growth, including national sales and economic development;
working with SPS employees to meet with various communities regarding economic development potential; and
processing potential certified sites for prospective customers to build or expand within the SPS service territory.
Are any of the Strategic Revenue Initiatives class of services that are provided
to SPS duplicated elsewhere in XES or in any other Xcel Energy subsidiary
such as SPS itself?
No. Within XES, none of the services grouped in the Strategic Revenue Initiatives
affiliate class are duplicated elsewhere. No other Xcel Energy subsidiary performs
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1 2 3 Q. 4 5 A. 6 7 8 9 10 11 12 13 14 15 16 17
18 C.
19 20 Q. 21 A. 22 23
these services for the Operating Companies. In addition, SPS does not perform these services for itself. Do SPS's Texas retail customers benefit from the services that are part of the Strategic Revenue Initiatives class of services? Yes. The services of the Strategic Revenue Initiatives class benefit SPS's customers in many ways. For example, this class is responsible for the Corporate Economic Development program, which has established key communications with national customers to enable expansion opportunities, renewable energy options, and capital investment in the SPS region. These efforts are focused on not only maintaining jobs, but also aiding in the ability to maintain and expand healthy communities and utilization of the electric system. The Corporate Economic Development program also actively markets SPS as a viable location for new future industrial and commercial customers. The potential load growth from these new customers could enable SPS to maintain more steady rates. This benefits SPS's Texas retail customers from multiple perspectives, those that directly impact their utility bill and those that impact their communities and potentially their own livelihood.
The Strategic Revenue Initiatives Class of Services are Provided at a Reasonable Cost
Are the costs of the Strategic Revenue Initiatives class of services reasonable? Yes. The costs of the Strategic Revenue Initiatives class of services are reasonable. The services are provided on a consolidated basis for multiple Xcel Energy legal entities. As a result, SPS benefits from sophisticated services, the consolidated
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1 2 3 4 Q. 5 6 A. 7 8 9 10 11 Q. 12 13 A. 14 15 16 17 18 19 20 Q. 21 22 A. 23
costs of which are shared. The economies of scale inherent in this system result in reasonable costs for SPS for these services.
1. Additional Evidence Is there additional support for your opinion that the costs of the Strategic Revenue Initiatives affiliate class are reasonable? Yes. Approximately 64% of the costs for the Strategic Revenue Initiatives class consists of compensation and benefits costs for XES personnel. Mr. Deselich establishes that the level of Xcel Energy's compensation and benefits is reasonable and necessary.
2. Budget Planning Is a budget planning process applicable to the Strategic Revenue Initiatives class of affiliate costs? Yes. Annual O&M budgets are created for the Customer and Innovation business area, which includes the Strategic Revenue Initiatives class of affiliate costs, using guidelines developed at the corporate level. Each manager within the Customer and Innovation business area carefully reviews historical spend information, identifies changes that will be coming in the future, and analyzes the costs associated with those changes prior to submitting a proposed budget. The budgeting process is discussed in more detail in the testimony of Mr. Dietenberger. During the fiscal year, does the Customer and Innovation business area monitor its actual expenditures versus its budget? Yes. Actual versus expected expenditures are monitored on a monthly basis. Deviations are evaluated each month to ensure that costs are appropriate. In
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1 2 3 4 5 6 Q. 7 8 A. 9 10 11 12 13 14 15 16 Q. 17 18 19 20 A. 21 22 23
addition, action plans are developed to mitigate variations in actual to budgeted expenditures. These mitigation plans may either reduce or delay other expenditures so that the revised budget supports the authorized budget. If authorized budget adjustments are required, they are identified and approved at an appropriate level of management. Are employees within the Customer and Innovation business area held accountable for deviations from the budget? Yes. The managers of the Customer and Innovation business area, which includes the Strategic Revenue Initiatives department, are required to manage their expenses to support the financial goals established by the business area. Budgets are reviewed monthly to ensure adherence to the goals and to discuss action necessary to address variances. Failure to meet these performance goals may affect the business area overall results and the managers' performance evaluations and overall compensation.
3. Cost Trends Please state the dollar amounts of the actual charges (per book) from XES to SPS for the Strategic Revenue Initiatives class of services for the three fiscal years preceding the end of the Updated Test Year and the charges (per book) for the estimated Updated Test Year. The following table shows, for the fiscal years 2017, 2018, and 2019 (calendar years), the actual per book and, for the Updated Test Year, the estimated per book affiliate charges (Column I on Attachment WAG-RR-A) from XES to SPS for the services grouped in the Strategic Revenue Initiatives affiliate class.
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1
Table WAG-RR-6
2
Strategic Revenue Initiatives (Per Book) Charges Over Time
Class of Services
2017
2018
2019
Updated Test Year
(Estimated)
Strategic Revenue Initiatives $142,635 $186,773 $154,872 $148,288
3 Q. 4 A. 5 6 7 8 9 Q. 10 11 12 A. 13 14 15 16
What are the reasons for this trend?
The increase in costs between 2017 and 2018 resulted from the addition of
employees to the Strategic Revenue Initiatives class. The decrease between 2018
and 2019, and between 2019 and the Updated Test Year, resulted from a
reorganization that involved the movement of some employees into other areas.
4. Staffing Trends Please provide the staffing levels for the Strategic Revenue Initiatives class of
services for the three fiscal years preceding the end of the Updated Test Year
and the Updated Test Year.
The following table shows, for the fiscal years 2017, 2018, and 2019 (calendar
years) and for the Updated Test Year, the average of the end of month staffing
levels for the Strategic Revenue Initiatives class of services.
Table WAG-RR-7 Strategic Revenue Initiatives Staffing Trends
Average End of Month # of Staff
Class of Services
2017
2018
2019
Updated Test Year
(Estimated)
Strategic Revenue Initiatives
5
8
6
4
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What are the reasons for the change in staffing over this time period? The Strategic Revenue Initiatives affiliate class was created in September 2016 and was not fully staffed at the time it was created. Additional staff was added in 2017 and 2018. The decrease in staff between 2018 and 2019, and between 2019 and the Updated Test Year, resulted from a reorganization that involved the movement of some employees into other areas.
5. Cost Control and Process Improvement Initiatives Separate from the budget planning process, does the Strategic Revenue Initiatives affiliate class take any steps to control its costs or to improve its services? Yes. As a subsidiary of the Customer and Innovation business area, the Strategic Revenue Initiatives affiliate class continually reviews its plans and initiatives and staffing to ensure they are appropriate and to identify and implement improvements. For example, the department carefully evaluates hiring replacements if employees leave. Updates in systems or the development and implementation of new systems may also lead to savings in headcount or contractor costs. Use of electronic technology may also lead to small additional cost reductions by converting the manual dissemination of information into electronic format.
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1 D.
2
3 Q.
The Costs for the Strategic Revenue Initiatives Affiliate Class of Services are Priced in a Fair Manner
For those costs that XES charges (either directly or through use of an
4
allocation) to SPS for the Strategic Revenue Initiatives class of services, does
5
SPS pay any more for the same or similar service than does any other Xcel
6
Energy affiliate?
7 A. No.
8 Q. Why do you answer "no"?
9 A. The XES charges to SPS for any particular service are no higher than the XES
10
charges to any other Xcel Energy affiliate. The costs charged for particular services
11
are the actual costs that XES incurred in providing those services to SPS. A single,
12
specific allocation method, rationally related to the cost drivers associated with the
13
service being provided, is used with each cost center (billing method). In his direct
14
testimony, Mr. Baumgarten discusses the selection of billing methods and XES's
15
method of charging for services in more detail.
16 Q. How are the costs of the Strategic Revenue Initiatives affiliate class billed to
17
SPS?
18 A. My Attachment WAG-RR-B(CD) shows all of the costs in this class broken out by
19
activity and, in conjunction with Column C in my Attachment WAG-RR-A, shows
20
the billing method associated with each activity. My Attachment WAG-RR-A,
21
shows the allocation method (Column D) associated with each billing method
22
(Column C) used in the affiliate class.
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1 2 3 4 5 6 7 8 9 Q. 10 11 12 A. 13 14 15 16 Q. 17 18 19 A. 20 21 22 23 24
In SPS's 45-day case update, I will present updated Attachments WAG-RR-A and WAG-RR-B(CD) so that the entries for the last three months of the Updated Test Year provide actual data and conform to the information provided for the first nine months. In the event the predominant billing methods and associated allocation methods for the Strategic Revenue Initiatives affiliate O&M expenses on my updated Attachments WAG-RR-A and WAG-RR-B(CD) differ from those discussed below, I will explain those differences in supplemental testimony in SPS's 45-day case update filing. What are the predominant allocation methods used for billing the costs that SPS seeks to recover for the Strategic Revenue Initiatives affiliate class of services? All of the XES charges to SPS for this class were charged using one allocation method:
Assets/Revenue/No. of Employees 100% of XES charges to SPS $147,093.17.
Why is it appropriate to allocate costs based upon the "Assets/Revenue/No. of Employees" method for the costs captured in the cost centers that use that allocation method? Cost Center 200092, which uses the "Assets/Revenue/No. of Employees" method as the allocator, captures costs associated with studying, developing, and demonstrating new energy technologies for future utility uses, providing Operating Company strategy and planning support, and providing leadership for Xcel Energy's renewable energy strategy and business development. Because these services are comprised of a broad spectrum of activities, no measurable method of
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1
cost causative allocation was found to allocate these costs; therefore, the three-
2
factor formula was used. These services are allocated to a subset of companies
3
based on who benefits from the services. For the cost centers that assign costs based
4
upon this allocation method, the per unit amounts charged by XES to SPS as a result
5
of the application of this allocation method are no higher than the unit amounts
6
billed by XES to other affiliates for the same or similar services and represent the
7
actual costs of the services.
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1 2
3 A.
4
5 Q.
XIX. AFFILIATE EXPENSES FOR PSCO PRESIDENT CLASS OF SERVICES
Summary of Affiliate Expenses for the PSCo President Class of Services
Where does the PSCo President affiliate class fit into the overall affiliate
6
structure?
7 A. Attachment MLS-RR-6 to Mr. Baumgarten's direct testimony provides a list and a
8
pictorial display of all affiliate classes, dollar amounts for those classes, and
9
sponsoring witness for each class. As seen on that attachment, the PSCo President
10
affiliate class was part of the Group Presidents business area during the Updated
11
Test Year. Attachment WAG-RR-7 to my testimony is an organization chart
12
showing the Group Presidents organization.
13 Q. What services are grouped into the PSCo President affiliate class?
14 A. The services that are grouped into the PSCo President affiliate class are rate
15
analysis, economic analysis, interest rate forecasts, bond due diligence, rate entry,
16
rate structure modification, and billing implementation of new rates in the
17
Customer Resources System ("CRS") for all four Operating Companies.
18 Q. What is the dollar amount of the Updated Test Year charges that SPS requests,
19
on a total company basis, for the PSCo President affiliate class?
20 A. The following table summarizes the dollar amount of the estimated Updated Test
21
Year charges for the PSCo President affiliate class. The table headings are
22
explained following the table. I will update the table below as part of SPS's 45-day
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1
case update filing to reflect the actual Updated Test Year costs for the PSCo
2
President affiliate class.
3
Table WAG-RR-8
Requested Amount of XES Class Expenses Billed to SPS (Total Company)
Class of Services
Total XES Class Expenses
Requested % Direct
%
Amount Billed Allocated
PSCo President
$1,726,880
$127,560 29%
71%
4 Q. 5 6 A. 7 8 9 Q. 10 11 A. 12 13 14 Q. 15 16 A. 17 18
Please describe the attachments that support the information provided in Table WAG-RR-8. There are four attachments to my testimony that present information about the requested SPS affiliate expenses for the PSCo President affiliate class. I explained these attachments in detail previously in Section XVIII of my testimony. Does XES bill its expenses for the PSCo President affiliate class to SPS in the same manner as it bills other affiliates for those expenses? Yes. As discussed by Mr. Baumgarten, XES uses the same method for billing and allocating costs to affiliates other than SPS that it uses to bill and allocate those costs to SPS. Are there any exclusions to the XES billings to SPS for the PSCo President affiliate class? Yes. There is one exclusion in the amount of $129.39. As I mentioned earlier, exclusions reflect expenses not requested, such as expenses not allowed or other below-the-line items. Exclusions are shown on Attachment WAG-RR-A, Column
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17 B.
18 Q. 19 20 A. 21 22 23
H, and on Attachment WAG-RR-B(CD), Column K. The details for the exclusions are provided in Attachment WAG-RR-C. As I mentioned earlier, Mr. Baumgarten describes how the exclusions were calculated. In SPS's 45-day case update, I will present an updated Attachment WAG-RR-C that will provide actual exclusions to replace any estimated exclusions included in my original attachment. Are there any pro forma adjustments to SPS's per book expenses for the PSCo President affiliate class? Yes. As I mentioned earlier, pro forma adjustments are revisions to Updated Test Year expenses for known and measurable changes. Pro forma adjustments are shown on Attachment WAG-RR-A, Column J, and on Attachment WAG-RR-B, Column M. As shown on Attachment WAG-RR-D, I sponsor one pro forma adjustment for the PSCo President affiliate class. Given the time of SPS's initial filing, only the first nine months of the Updated Test Year have completed the full pro forma adjustment review process. In SPS's 45-day case update, I will present an updated Attachment WAG-RR-D that will complete the full pro forma adjustment review process for the last three months of the Updated Test Year.
The PSCo President Class of Services are Necessary Services
Are the services that are grouped in the PSCo President affiliate class necessary for SPS's operations? Yes. The services grouped in the PSCo President affiliate class are necessary to ensure that rate and billing information entered in CRS is in accordance with SPS approved tariffs, customer bills are generated using the correct rates, and that economic data used in regulatory filings before the Commission and elsewhere are
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accurate and informative. These are functions required by all utilities and without which SPS would not be able to provide electric service to its customers. What are the specific services that the PSCo President affiliate class provides to SPS? The specific services that are provided to SPS by the PSCo President affiliate class are associated with updating the CRS with new or revised SPS tariffs and rates. As mentioned previously, the CRS system is the billing and information system used throughout Xcel Energy, including by SPS, and employees within the PSCo President department have the specialized training required to input this information. These employees are responsible for reviewing all changes in SPS tariffs, understanding the design of the tariffs, building a project plan for implementation of each tariff in the CRS system, working with information technology personnel for scheduling and testing, and working with the billing department to ensure that the tariffs have been correctly implemented in the CRS system and that customers will receive accurate bills. In addition, this class provides SPS with economic analysis, interest rate forecasts, bond due diligence, and expert witness testimony on these issues as necessary. Are any of the PSCo President class of services that are provided to SPS duplicated elsewhere in XES or in any other Xcel Energy subsidiary such as SPS itself? No. Within XES, none of the services grouped in the PSCo President affiliate class are duplicated elsewhere. No other Xcel Energy subsidiary performs these services
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for the Operating Companies. In addition, SPS does not perform these services for
2
itself.
3 Q. Do SPS's Texas retail customers benefit from the services that are part of the
4
PSCo President class of services?
5 A. Yes. The services of the PSCo President class benefit SPS customers by ensuring
6
that the billings to customers are at the approved tariff rates and that information
7
and resources are available for regulatory filings.
8 C.
9
10 Q.
The PSCo President Class of Services are Provided at a Reasonable Cost
Are the costs of the PSCo President class of services reasonable?
11 A. Yes. The costs of the PSCo President class of services are reasonable. The services
12
are provided on a consolidated basis for multiple Xcel Energy legal entities. As a
13
result, SPS benefits from sophisticated services, the consolidated costs of which are
14
shared. The economies of scale inherent in this system result in reasonable costs
15
for SPS for these services.
16 17 Q.
1. Additional Evidence Is there additional support for your opinion that the costs of the PSCo
18
President affiliate class are reasonable?
19 A. Yes. Of the estimated Updated Test Year costs for the PSCo President affiliate
20
class, approximately 95% are compensation and benefits costs for XES personnel.
21
Mr. Deselich and Mr. Schrubbe establish that the level of Xcel Energy's
22
compensation and benefits is reasonable and necessary.
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1. Budget Planning Is a budget planning process applicable to the PSCo President class of affiliate costs? Yes. Annual O&M budgets are created for the Group Presidents business area, which includes the PSCo President class of affiliate costs, using guidelines developed at the corporate level. Each manager within the Utilities & Corporate Services business area carefully reviews historical spend information, identifies changes that will be coming in the future, and analyzes the costs associated with those changes prior to submitting a proposed budget. The budgeting process is discussed in more detail in the testimony of Mr. Dietenberger. During the fiscal year, does the Group Presidents business area monitor its actual expenditures versus its budget? Yes. Actual versus expected expenditures are monitored on a monthly basis. Deviations are evaluated each month to ensure that costs are appropriate. In addition, action plans are developed to mitigate variations in actual to budgeted expenditures. These mitigation plans may either reduce or delay other expenditures so that the revised budget supports the authorized budget. If authorized budget adjustments are required, they are identified and approved at an appropriate level of management. Are employees within the Group Presidents business area held accountable for deviations from the budget? Yes. The managers of the Group Presidents business area, which includes the PSCo President department, are required to manage their expenses to support the financial
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goals established by the business area. Budgets are reviewed monthly to ensure
adherence to the goals and to discuss action necessary to address variances. Failure
to meet these performance goals may affect the business area overall results and the
managers' performance evaluations and overall compensation.
2. Cost Trends
Please state the dollar amounts of the actual charges (per book) from XES to
SPS for the PSCo President class of services for the three fiscal years preceding
the end of the Updated Test Year and the charges (per book) for the estimated
Updated Test Year.
The following table shows, for the fiscal years 2017, 2018, and 2019 (calendar
years), the actual per book and, for the Updated Test Year, the estimated per book
affiliate charges (Column I on Attachment WAG-RR-A) from XES to SPS for the
services grouped in the PSCo President affiliate class:
Table WAG-RR-9 PSCo President (Per Book) Charges Over Time
Class of Services
2017
2018
2019
Updated Test Year
(Estimated)
PSCo President
$10,769 $90,935 $106,374 $123,500
16 Q. 17 A. 18 19 20
What are the reasons for this trend? The increase between 2017 and 2018 resulted from the formation of the Group President business area in 2018. The increase between 2018 and the Updated Test Year resulted from the PSCo President affiliate class providing additional services to SPS and from increased salary and benefits costs.
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3. Staffing Trends Please provide the staffing levels for the PSCo President class of services for
the three fiscal years preceding the end of the Updated Test Year and the
Updated Test Year.
The following table shows, for the fiscal years 2017, 2018, and 2019 (calendar
years) and for the Updated Test Year, the average of the end of month staffing
levels for the PSCo President class of services.
Table WAG-RR-10 PSCo President Staffing Trends
Average End of Month # of Staff
Class of Services
2017
2018
2019
Updated Test Year
(Estimated)
PSCo President
15
13
10
9
10 Q. 11 A. 12
What are the reasons for this trend? The staffing change is due to the movement of PSCo Regulatory employees from XES to PSCo.
13 14 Q. 15 16 A. 17 18 19
4. Cost Control and Process Improvement Initiatives Separate from the budget planning process, does the PSCo President affiliate class take any steps to control its costs or to improve its services? Yes. The PSCo President organization continually reviews its plans and initiatives and staffing to ensure they are appropriate and to identify and implement improvements. For example, the department carefully evaluates hiring replacements if employees leave. Positions are often left vacant for several months
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6 D.
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in order to evaluate if an employee needs to be replaced. Updates in systems or the development and implementation of new systems may also lead to savings in headcount or contractor costs. Use of electronic technology may also lead to small gains in cost reductions by converting the manual dissemination of information into electronic format.
The Costs for the PSCo President Class of Services are Priced in a Fair Manner
For those costs that XES charges (either directly or through use of an allocation) to SPS for the PSCo President class of services, does SPS pay any more for the same or similar service than does any other Xcel Energy affiliate? No. Why do you answer "no"? The XES charges to SPS for any particular service are no higher than the XES charges to any other Xcel Energy affiliate. The costs charged for particular services are the actual costs that XES incurred in providing those services to SPS. A single, specific allocation method, rationally related to the cost drivers associated with the service being provided, is used with each cost center (billing method). In his direct testimony, Mr. Baumgarten discusses the selection of billing methods and XES's method of charging for services in more detail. How are the costs of the PSCo President affiliate class billed to SPS? My Attachment WAG-RR-B shows all of the costs in this class broken out by activity and, in conjunctions with Column C in my Attachment WAG-RR-A, shows the billing method associated with each activity. My Attachment WAG-RR-A
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shows the allocation method (Column D) associated with each billing method (Column C) used in the affiliate class.
In SPS's 45-day case update, I will present updated Attachments WAG-RRA and WAG-RR-B so that the entries for the last three months of the Updated Test Year provide actual data and conform to the information provided for the first nine months. In the event the predominant billing methods and associated allocation methods for the PSCo President affiliate O&M expenses on my updated Attachments WAG-RR-A and WAG-RR-B differ from those discussed below, I will explain those differences in supplemental testimony in SPS's 45-day case update filing. What are the predominant allocation methods used for the PSCo President affiliate class of services? 100% of the XES charges to SPS for this class were charged using two allocation method:
Direct Billing 28.78% of XES charges to SPS $36,711.03. Assets/Revenue/No. of Employees 71.22% of XES charges to SPS
$90,849.18. Why is the "Direct Billing" method appropriate for assigning the costs captured in the cost centers that use that allocation method? For the cost centers that are assigned using the "Direct Billing" method, the costs normally reflect work that was performed specifically for SPS only. In some cases, however, the direct billing occurred after the application of an off-line allocator that tracks the relevant cost drivers. In either situation, the cost centers charged using the "Direct Billing" method are appropriate because the assignment of costs is in
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accordance with the distribution of benefits for the services received. For example, the labor costs associated with personnel who enter new SPS tariff billing rates into CRS are assigned using the "Direct Billing" method. The cost of these services benefitted SPS, the work was performed specifically for SPS alone, and the cost driver is an SPS tariff change. Thus, the "Direct Billing" method is appropriate because it assigns costs in accordance with cost causation and benefits received. For the cost centers that assign costs using Direct Billing, the per unit amounts charged by XES to SPS are no higher than the unit amounts billed by XES to other affiliates for the same or similar services and represent the actual costs of the services. Why is it appropriate to allocate costs based upon the "Assets/Revenue/No. of Employees" method for the costs captured in the cost centers that use that allocation method? Cost Center 200063, which uses the "Assets/Revenue/No. of Employees" method as the allocator, captures costs associated with corporate governance. Because these services are comprised of a broad spectrum of activities, no measurable method of cost causative allocation was found to allocate these costs; therefore, the three-factor formula was used. These services are allocated to a subset of companies based on who benefits from the services. For the cost centers that assign costs based upon this allocation method, the per unit amounts charged by XES to SPS as a result of the application of this allocation method are no higher than the unit amounts billed by XES to other affiliates for the same or similar services and represent the actual costs of the services.
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XX. RATE CASE EXPENSES What amount of rate case expenses is SPS seeking to recover in this docket? SPS requests rate case expenses totaling $6,486,825. This requested amount includes estimates of $5,489,800 for this current case, $685,575 for SPS's currently pending Fuel Formula docket, and $311,450 for SPS's currently pending base rate surcharge docket. An itemization of the SPS's requested rate case expenses for this case, as well as the expenses incurred in currently pending dockets is set forth in my Attachment WAG-RR-8. Does SPS's requested revenue requirement include the $6.5 million in rate case expenses? Yes. What opinion are you providing regarding the reasonableness and necessity of the rate case expenses that SPS is requesting? I discuss and express my opinion regarding the reasonableness, necessity, and recoverability of the rate case expenses that SPS has incurred so far in this rate case and the other cases mentioned above. I wish to point out, however, that to date SPS has incurred only a small fraction of the total amount of expenses it likely will incur in this case. These expenses include: (1) the fees and expenses of both outside counsel and consultants who performed work on the current rate case and other litigation matters for SPS; and (2) expenses incurred by SPS personnel associated with the current rate case and prior rate-related matters.
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Please describe your qualifications to offer rate case expense testimony? I know firsthand the rate case process and what it takes to assemble, file, and process a base rate case, fuel reconciliations, and other regulatory proceedings. I have actively participated in rate case activities, including coordinating the management of the case; developing and adapting case strategy; selecting both internal and external witnesses and consultants; reviewing and approving schedules and testimony, discovery responses, and other filings; negotiating settlements; and participating in hearing and post-hearing briefing efforts. Based on my extensive experience with regulatory proceedings, I am familiar with the work that consultants and outside counsel perform for SPS in regulatory matters and have developed the expertise needed to determine whether the work performed is reasonable and necessary, as well as the expertise needed to determine whether the expenses charged are reasonable for the scope of work performed. Are any other SPS witnesses also addressing rate case expenses? Yes. Mr. Thomas Anson, a Partner at the law firm of Clark Hill PLC, is also providing testimony on SPS's requested rate case expenses. What factors did you consider in analyzing whether the work to be performed by SPS's consultants and outside counsel is reasonable and necessary for purposes of this rate case and whether the budgeted amounts through the end of this case are reasonable? In assessing the reasonableness of the expenses and the budgeted amounts, I considered the factors included in 16 TAC § 25.245(b). In addition, I considered
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other factors, such as the benefit that SPS derived from the consultant's and outside
2
counsel's services.
3 A.
4 Q.
Expenses Incurred or Estimated to be Incurred in this Proceeding
Has SPS incurred rate case expenses to prepare and prosecute this rate case?
5 A. Yes. SPS has incurred rate case expenses to prepare the RFP and to perform the
6
other tasks attendant to filing a base rate case before the Commission. SPS expects
7
to incur additional rate case expenses to pursue this base rate case before the
8
Commission and, if necessary, on appeal. In addition, SPS expects to receive
9
requests for reimbursement of rate case expenses incurred by municipalities
10
participating in the rate case.
11 Q. How has SPS managed its current rate case?
12 A. SPS has reasonably managed its current base rate case by using a mix of internal
13
resources, outside counsel, and external consultants to develop, file, and litigate its
14
requests in this case, with an eye toward keeping expenses at a reasonable level.
15
As to internal resources, SPS's lead counsel for this case, Mr. William
16
DuBois, is an experienced public utility lawyer who understands the details of a
17
rate filing. SPS is also relying on two additional internal, experienced public utility
18
lawyers, Ms. Zoë Lees and Mr. Mark Walker. Additionally, SPS has appropriately
19
relied on its own employees to provide testimony and support for the proceedings
20
in their respective areas of subject matter expertise.
21
For outside counsel, SPS has engaged Winstead, P.C. (the "Winstead
22
Firm"); Eversheds Sutherland (US) LLP ("Eversheds Sutherland"); and the Santa
23
Fe office of Hinkle Shanor LLP (the "Hinkle Firm"). In addition, Amy Shelhamer,
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of the Amarillo firm of Courtney, Countiss, Brian & Bailey L.L.P., has been engaged. The Winstead Firm, Eversheds Sutherland, the Hinkle Firm, and Ms. Shelhamer all have deep experience in handling public utility matters and rate cases. These lawyers are highly regarded and well qualified to handle their case responsibilities. The work has been staffed in a reasonable manner with appropriately experienced lawyers who charge reasonable fees for their services, and these attorneys have experience that allows them to understand SPS and efficiently perform the necessary work with a minimum amount of research.
Duplication of work is avoided through the attorney work assignment process. Witnesses are in many cases matched with attorneys who have experience in the subject matter fields of the witness, so that the case preparation process is streamlined as much as reasonably possible. Younger and less experienced lawyers are also used in an appropriate way for legal tasks, including time-intensive discovery and research matters.
Similarly, the external witnesses and outside consultants are all necessary and experienced, and they have been delegated responsibilities that could not be performed efficiently by internal resources. The use of outside consultants to support certain rate case issues is common and helps defray overall costs when their services are not needed on a day-to-day basis to operate the utility. Was it reasonable for SPS to select the Winstead Firm, Eversheds Sutherland, the Hinkle Firm, and Ms. Shelhamer as outside counsel? Yes. These firms and attorneys have extensive experience and the resources necessary to efficiently and professionally handle all the requirements of a rate case.
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2
3
4
5
6
7
8
9
10
11 Q.
12 A.
13
14 15 16 17 18 19 20 21 22 23 24 25 26
In addition, these law firms often represent other utilities that have rate cases before
the Commission, other state regulatory commissions, the FERC, or other state
agencies, so the firms understand not only the substantive issues involved, but how
to prepare and prosecute a rate case without learning how to litigate these types of
cases from scratch. Furthermore, many of the attorneys associated with these firms
have experience representing other large electric utilities. As a result, SPS enjoys
access to attorneys that have deep and immediate knowledge of a wide breath of
regulatory issues that could affect the utility. SPS's outside counsel can also
provide immediate and sound advice to SPS without performing the extensive
research that some other firms might have to undertake.
What consultants has SPS retained for purposes of this rate case?
For this rate case, SPS has hired the following consultants to help prepare and
present the information required by the Rate Filing Package:
Richard D. Starkweather of ScottMadden, who prepared the cost benchmarking study and commercial aviation study presented in SPS's testimony;
Dylan W. D'Ascendis of ScottMadden, who testifies on ROE and the cost of equity;
Todd Shipman of Utility Credit Consultancy LLC, who testifies on SPS's credit metrics and access to capital;
Jess K. Totten of Osprey Energy Group, LLC, who testifies regarding SPS's ROE request;
Dane A. Watson of Alliance Consulting prepared the depreciation study of SPS's assets and supports the resulting depreciation rates;
Thomas Anson of Clark Hill PLC, who testifies regarding SPS's rate case expenses;
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Management Applications Consulting, which provides assistance regarding the class cost of service;
Willis Towers Watson, which provided the 2020 General Industry Salary Budget Survey; and
Deloitte and Touche, which provided the Independent Accountants' Review Report.
The estimated amount of rate case expenses for each of the consultants retained by SPS for this case as shown in Attachment WAG-RR-8. Has SPS been able to realize certain efficiencies and economies through the engagement of these consultants and outside legal counsel? Yes. On January 4, 2021, SPS filed a general rate case with respect to its retail operations in New Mexico. With the exception of Mr. Starkweather, Ms. Totten, and Mr. Anson, all of the outside consultants retained to support SPS in this case are also assisting SPS with the New Mexico case. Although each case involves unique facts and circumstances, the contemporaneous engagements for two cases allow efficiencies that would not be realized were the consultants engaged for this case alone.
As for legal counsel, aside from their experience and qualifications, the attorneys representing SPS in this case will also represent SPS in its pending New Mexico rate case. Their assignments in this case include working with the same witnesses and the same issues for which they are responsible in New Mexico, thereby enabling SPS to realize efficiencies and economies in both consulting and legal expenses.
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Are the billing rates, budget projections, and terms of engagement for the consulting services reasonable in your opinion? Yes. SPS (or, in some instances, XES) has professional services agreements with each of the consultants or their firms engaged for this case. These agreements detail the scope of work to be performed by the consultant, the applicable billing rates, and the maximum authorized contract amounts for the scheduled work. Change orders must be submitted and approved before the contract limits can be exceeded. The agreements include rigorous terms and conditions intended to control costs, assure quality, on-time performance, and protect the interests of SPS.
Based on my review of the professional services agreements, it is my opinion that SPS has reasonably and prudently engaged each of the consultants and firms to provide services needed for this case. As discussed in detail by Mr. Anson, their rates and charges are reasonable in light of their expertise and experience. Are the outside counsel billing rates reasonable in your opinion? Yes. Based upon my experience with rate proceedings in both Texas and New Mexico, it is my opinion that the hourly billing rates for the attorneys are reasonable in light of the lawyer's experience and expertise, and the cities in which the attorneys are located. Are the miscellaneous expenses reasonable in your opinion? Yes. Rate case filings are voluminous, and during the course of the case, SPS will likely be reproducing thousands of copies of discovery materials for distribution to Commission Staff and intervenors. SPS will be publishing and mailing notices to its customers. At key points in the case, temporary employees may be needed to
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produce and distribute case materials and provide other logistical support. Implementing new rates at the conclusion of the case will involve substantial reprogramming of billing and accounting systems. Does SPS's request include the expense for services of SPS or XES employees who are participating in the case? No. The requested rate case expenses do not include the time (and associated compensation and benefits expenses) for the services provided by SPS or XES employees, except for overtime charges for hourly employees. Overtime pay for hourly employees is necessarily included in the rate case expense amount because SPS is required by law to pay overtime and other expenses incurred by hourly employees working on the rate case.
In addition, employees' miscellaneous out-of-pocket expenses directly incurred in connection with the rate case, such as travel expenses, are included within rate case expenses. Travel expenses primarily include trips by SPS and XES employees to Austin for the hearing on the merits, prehearing conferences, technical conferences, settlement meetings, and other reasons. The expenses consist of hotel costs, transportation costs, and meals, all of which are unavoidable if the case goes to hearing. SPS's witnesses are from places other than Austin, and therefore they must travel to Austin and stay in hotels during the hearing. Employee expenses also include travel expenses to Amarillo, Denver, Minneapolis and Austin incurred by SPS and XES employees while preparing this case. For these types of internal expenses, employees are required to submit detailed expense reports, including all receipts. Employee expenses are reviewed and approved by the
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3 Q.
4 A.
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20 Q.
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22 A.
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employee's supervisor. Finally, all rate case expenses are reviewed by accounting
and regulatory personnel to ensure that all expenses are rate-case related.
Has SPS undertaken any other steps to control or reduce rate case expenses?
Yes. SPS has undertaken a number of steps to control or reduce rate case expenses:
SPS performs a detailed review of posted rate case expenses each month on a transaction-by-transaction basis by a regular salaried employee (i.e., no overtime). That activity catches potential errors in billings to the rate case expense work order and ensures no charges for other cases are being charged as rate case expenses.
SPS offers technical conferences and teleconferences with parties in an effort to avoid or prevent unneeded follow-up discovery.
SPS prohibits travel to meetings and prehearing conferences by employees whose presence is not necessary at those events.
Employees must book the lowest fare options for airline flights, and employees must share a rental car if multiple employees are going to be traveling to the same city at the same time.
If employees are also traveling for business other than the rate case, they must carefully split the travel costs between the rate case and the other business purpose.
Does SPS monitor consultants' expenses to ensure that they are reasonable
and properly billable to the rate case?
Yes. For the expenses described in this testimony, SPS reviews the invoices to
ensure the charges reflect work performed for this case or expenses incurred for
this case. If some or all of the time entries or expenses do not pertain to this rate
case, SPS will reject the invoice and ask the consultant or law firm to submit a
revised invoice or the employee to submit a revised expense report. For
consultants' and legal invoices, SPS also reviews whether the time charged for a
particular task is reasonable and is at the hourly rate set out in the contract. If the
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hours for a task are questionable, SPS will ask the consultant or law firm for further explanation and, when applicable, will request a revised invoice with a reduced number of hours. SPS further reviews whether the expenses contain charges for first-class air fare or for entertainment or personal items, none of which should be charged to SPS (and if it is charged, will not be passed on to SPS's customer). Does SPS monitor the work performed by consultants and outside counsel to ensure that it is necessary? Yes. While the consultants and outside counsel are working on this case, SPS stays in continual contact with them to ensure they are complying with the scope of work set out in the contracts, are making progress to meet preparation deadlines, are providing the quality of work SPS expects to receive, and are staying within budget. SPS takes an active role in monitoring the consultants' and outside legal work and does not simply hand over portions of the case preparation and prosecution to the consultants and outside law firms. Does SPS take steps to ensure that the rate case expenses are not included in other O&M accounts? Yes. SPS records rate case expenses in a separate deferred account to ensure that they are tracked separately from other expenses and therefore are not included in other cost of service amounts. SPS also reviews entries to the general ledger to ensure employee expenses from New Mexico or other Operating Company rate cases are not being charged to an SPS work order. If SPS is being incorrectly charged, SPS's Regulatory Department corrects the error by journal entries. SPS Regulatory personnel also ensure that no regular time is charged to the rate case
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expense work order. Only appropriate employee expenses related to the rate case are recorded. Are any of SPS rate case expenses contingent upon a certain outcome? No. Do you have an overall opinion regarding the reasonableness and necessity of consultants' expenses? Yes. I have reviewed the consultant-related expenses estimated to be incurred by SPS for preparing and litigating this case. Based on my training and experience in regulatory matters as well as litigating SPS's prior base rate cases, I conclude that the estimated consultant-related costs are reasonable and necessary, considering the complexity of the case and the number of issues to be addressed, the amount of money at stake, the extent of each consultant's responsibility, and the benefit that SPS derived from each consultant's services. Do you have an opinion regarding whether the budgeted rate case legal expense amounts are reasonable and necessary? Yes. The services that SPS has asked the law firms to provide are reasonable and necessary, and the hourly rates or fee arrangements are reasonable. SPS's legal department manages the work performed to keep the total level of cost at a reasonable level. Thus, the budgeted amounts are reasonable and necessary. Is SPS willing to submit its actual rate case expenses as this case progresses as a gauge to evaluate the reasonableness of its estimated expenses? Yes. I caution, however, that much of the actual rate case expense is incurred in the later stages of the case, just before, during, and after the public hearing. Thus,
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a great portion of the actual expenses will not be known at the time this case
2
proceeds to hearing.
3 B. Expenses Incurred or Expected to be Incurred in Other Texas
4
Regulatory Proceedings
5 Q. Please summarize the rate case expenses that SPS has incurred in prior Texas
6
regulatory proceedings that it seeks to recover in this case.
7 A. SPS asks the Commission to authorize recovery of $997,025 in rate case expenses
8
that were incurred or are expected to be incurred by SPS and the intervening
9
municipalities in the following dockets:
10
$685,575 rate case expenses associated with Docket No. 51625, SPS's
11
pending Fuel Formula docket; and
12
$311,450 rate case expenses associated with Docket No. 51644, SPS's
13
surcharge proceeding associated with Docket No. 49831.
14
These amounts are included in Schedule G-14.2 and additional support provided by
15
SPS is included in the supporting workpapers.
16 Q. Please describe your review of SPS's expenses associated with these dockets. 17 A. I conducted the same due diligence regarding SPS's expenses associated with these
18
dockets that I used to support the rate case expenses in the current rate case, as
19
described above. To the extent applicable, SPS is also requesting recovery of those
20
amounts reimbursed to the municipalities for their expenses associated with these
21
dockets.
22 Q. Please describe SPS's management or staffing in these dockets.
23 A. SPS managed these dockets in generally the same manner employed in this rate
24
case, which is described above. The Company staffed these dockets utilizing one
Grant Direct Revenue Requirement
RR1 - Page 180 of 470
Page 128
1 2 3 Q. 4 5 A. 6 7 8 9 10 11 12 13 14 15 16 Q. 17 18 A. 19 20 21 22 23
outside legal team per docket. SPS worked to control costs in the same manner as described above. Was it reasonable and necessary for SPS to retain outside legal counsel in these dockets? Yes. It is common for investor-owned electric utilities in Texas to utilize outside legal counsel for fuel formula and base rate surcharge proceedings. As in a base rate proceeding, the utility has the burden of proof and must address various complex issues. The utility also has the burden to prove the reasonableness and necessity of requested rate case expenses.
In my experience, outside counsel working on fuel factor and base rate surcharge proceedings must have good practice skills as well as a highly specialized knowledge of not only Commission procedure, but the substantive components of the proceedings discussed above, to effectively manage the proceedings. Thus, it was reasonable for the Company to employ outside counsel to efficiently and effectively manage these proceedings. Are the rate case expenses that SPS seeks to recover for these dockets reasonable and necessary? Yes. I have applied the same criteria used to evaluate the reasonableness of SPS's requested rate case expenses in connection with this case to the costs that were incurred or are expected to be incurred in connection with the dockets listed above. Based on this criteria, I conclude that SPS's requested recovery of $997,025 in rate case expenses was reasonable, necessary, and should be approved for recovery in this case.
Grant Direct Revenue Requirement
RR1 - Page 181 of 470
Page 129
1 C.
2 Q. 3 A. 4 5 6 7 8 9
Rate Case Expense Recovery Mechanism
How does SPS propose to recover rate case expenses approved in this case? SPS has included its requested rate case expenses as part of its requested revenue requirement in this case. If approved, SPS will recover its requested rate case expenses as part of its base rates. However, in the event that the Commission severs all or part of the rate case expense issues from this docket, as it has done in prior SPS base rate cases, SPS will remove those rate case expense amounts from the cost of service in this case, and SPS will present detailed information supporting the rate case expenses in the severed docket.
Grant Direct Revenue Requirement
RR1 - Page 182 of 470
Page 130
1
2 Q.
3 A.
4
5 Q.
6
7 A.
8
9 10 11 12 13
14
15
16
17
18 19
20 21 22 23 24 25
26 27 28 29 30
XXI. SPS'S REQUESTS OF THE COMMISSION
What topic do you discuss in this section of your testimony?
As the overall overview witness in this case, I will summarize the relief that SPS is
requesting from the Commission in this case.
What relief is SPS requesting from the Commission in this docket with respect
to the Revenue Requirement phase?
SPS asks the Commission to grant the following relief regarding the Revenue
Requirement phase:
1. SPS asks the Commission to approve a total Texas retail base rate revenue requirement (including miscellaneous tariff charges) of $765,521,011 and a base rate increase of $143,365,836, which SPS has calculated based on an overall weighted average cost of capital ("WACC") of 7.56%. That WACC is based on:
a proposed equity ratio of 54.60%;
a proposed long-term debt ratio of 45.40%;
a proposed cost of long-term debt of 4.20%; and
a proposed ROE of 10.35%.
This request is supported by my testimony and by the testimony of the other SPS witnesses who testify in the Revenue Requirement phase of this docket.
2. SPS asks the Commission to find that the capital additions placed into service during the period from July 1, 2019 through December 31, 2020 are reasonable and necessary, and that the costs incurred by SPS for those capital additions are reasonable and prudent. The witnesses supporting this request are Mr. Meeks, Mr. Bick, Mr. Remington, Mr. Lytal, Mr. Harkness, Mr. Cooley, Mr. Sample and Mr. Moeller.
3. SPS asks the Commission to approve SPS's Technical Depreciation Update and resulting depreciation rates, including shorter service lives for: the Tolk Generating Station Units 1 and 2 based upon a retirement date of 2032; the coal-specific assets at Harrington based on a retirement date of 2024; and Plant X Unit 3 based on a retirement date of 2022.
Grant Direct Revenue Requirement
RR1 - Page 183 of 470
Page 131
1 2
3 4
5 6
7 8 9 10
11 12 13
14 15
16 17 18
19 20
21 22
23 24
25 Q.
26
27 A.
28
29 30 31
4. SPS asks the Commission to establish SPS's baseline levels for the pension and OPEB expenses, which are supported by Mr. Schrubbe.
5. SPS asks the Commission to approve the waivers to the RFP Schedules described in Section IV of my testimony.
6. SPS asks the Commission to approve SPS's request to maintain the current Attachment Z2 regulatory asset.
7. SPS asks the Commission to approve SPS's request to recover incremental direct costs incurred as a result of COVID-19, establish a tracker for bad debt expense, and seek recovery of the additional bad debt expense in SPS's next base rate case.
8. SPS asks the Commission to approve its request to reallocate transmission costs as a result of LP&L moving its transmission load to ERCOT in June 2021.
9. SPS asks the Commission to approve SPS's proposed Resiliency Service Tariff.
10. SPS asks the Commission to authorize recovery of $6,486,825 in rate case expenses that were incurred or are expected to be incurred by SPS and the intervening municipalities in the following dockets:
$5,489,800 rate case expenses associated with this immediate docket;
$685,575 rate case expenses associated with Docket No. 51625, SPS's currently pending Fuel Formula Docket;
$311,450 rate case expenses associated with Docket No. 51644, SPS's surcharge proceeding associated with Docket No. 49831.
What relief is SPS requesting from the Commission regarding the issues in the
Rate Design phase of this case?
SPS asks the Commission to grant the following relief regarding the Rate Design
phase of this case:
1. SPS asks the Commission to approve SPS's proposed Texas retail cost allocation and proposed revenue distribution and rate design, which Mr. Luth discusses.
Grant Direct Revenue Requirement
RR1 - Page 184 of 470
Page 132
1 2 3
4 5 6 7
8 Q.
9 A.
2. SPS asks the Commission to approve the complete set of proposed tariff schedules presented in Schedule Q-8.8 of the RFP, including the proposed changes to SPS's rate and rule tariffs.18 Mr. Luth supports this request.
3. SPS asks the Commission to establish SPS's base line revenue requirement components for purposes of setting (i) the TCRF, (ii) the DCRF, (iii) and the PCRF. Mr. Luth supports the baseline revenue requirement components.
Does this conclude your pre-filed direct testimony?
Yes.
18 If the Commission approves new loss factors, SPS proposes to update its then-current fuel factors by using the newly approved loss factors to recalculate the fuel factors, and to provide those recalculated fuel factors in its tariff compliance filing for this application.
Grant Direct Revenue Requirement
RR1 - Page 185 of 470
Page 133
STATE OF TEXAS
)
) COUNTY OF JASPER )
AFFIDAVIT
WILLIAM A. GRANT, first being sworn on his oath, states:
I am the witness identified in the preceding testimony. I have read the testimony and the accompanying attachment(s) and am familiar with the contents. Based upon my personal knowledge, the facts stated in the testimony are true. In addition, in myjudgment and based upon my professional experience, the opinions and conclusions stated in the testimony are true, valid, and accurate.
Subscribed and sworn to before me this .L./-:..J.J.L day of February, 2021 by WILLIAM A. GRANT.
e
SARAH E WEST
COMM EXPIRES4-13·2022
NOTMY ID &2<ll58S-I
a-h r \A b.tt Public State of Texas My Commission Expires: 4--J 3-d6i}-&
Grant Direct Revenue Requirement
RR1 - Page 186 of 470
Page 134
Attachment WAG-RR-1 Page 1 of 1
2021 TX Rate Case
RR1 - Page 187 of 470
Southwestern Public Service Company Summary of Texas Retail Rate Increase Request
Line No. Description
1 Base Rate Revenues 2 EECRF Revenue 3 Rate Case Expense Rider Revenue1 4 Net Non-Fuel Revenue 5 Fuel and Purchased Energy Revenue2 6 Total Texas Retail Revenue
(1)
Current Revenue
(2)
Rate Case Request
(3)
Proposed Revenues
(4) Net Revenue Increase
(5) Net Percent Increase
$ 622,155,175 $ 143,365,836 $ 765,521,011 $ 143,365,836
5,194,401
-
5,194,401
-
1,232,894 $ 628,582,470
-
1,232,894
$ 771,948,306 $ 143,365,836
177,997,146
108,654,922 $ (69,342,224)
$ 806,579,616
$ 880,603,228 $
74,023,612
23.0%
22.8% -39.0%
9.2%
Southwestern Public Service Company Summary of Texas Fuel Savings
Attachment WAG-RR-2 Page 1 of 6
2021 TX Rate Case
Fuel factor using proposed fuel formula ($/MWh) Fuel factor using current fuel formula ($/MWh) Difference in fuel factors ($/MWh) Annual Texas retail sales at meter (MWh) Annual Texas Fuel Savings ($)
13.553208 18.633780 (5.080572) 13,648,513 (69,342,254)
RR1 - Page 188 of 470
Southwestern Public Service Company
2021 Forecast Period Fuel Factor Calculation Revised Voltage Level Fuel Factors
Attachment WAG-RR-2 Page 2 of 6
2021 TX Rate Case
Fuel Cost Factor expressed in $ per MWh = 15.236 + (2.754 (Wn - 2.734)) - 0.0733MH - L
Line
Description Source
1
Wn =
2.733538
NYMEXn + WBDn NYMEXn is the average of NYMEX closing prices for natural gas at the Henry Hub WBDn is the average Waha closing basis differentials Price is the 20 day average
2
2.734000 Jan 2021 - Dec 2021 average of Waha from 20 trading days from Sept 30 - Oct 27, 2020
3
-0.000463 Line 1 minus Line 2
4
2.754000 The expected change in the forecast period system average eligible fuel and purchased power
expense for every dollar change in the cost of natural gas
5
-0.001275 Line 3 times Line 4
6
15.236000 The forecast period system average eligible fuel and purchased power expense in $/MWh
7
15.234725 Average fuel cost factor in $/MWh before accounting for margins and LPL capacity credit
(Lines 5 + 6)
8
0.073300 The customer rate impact of a given level of historical margin
9
MH =
15.887000
The level of historical margin credited to customer rates for the 24-month period in $ millions
10
1.164517 Line 8 times Line 9
11 L =
0.517000
Credit for the revenue from sale of capacity to LPL. This term will be omitted from the formula and factor calculations after the contract with LPL ends in May 2021
12
13.553208 Average fuel cost factor in $/MWh
Line 7 - Line 10 - Line 11
13
1.000000 Ratio
14
13.553208 Line 12 x Line 13
Average Fuel Factor Differentiated by Voltage Level
(A) Voltage Level Secondary Distribution Level Primary Distribution Level Sub-Transmission Level Backbone Transmission Level
(B) Loss Multiplier
1.044719 1.025217 0.960343 0.954515
Line 12 times Column (B)
Voltage Level Fuel Factors
($ per kWh)
$
0.014159
$
0.013895
$
0.013016
$
0.012937
RR1 - Page 189 of 470
Southwestern Public Service Company
2020 Forecast Period Fuel Factor Calculation Revised Voltage Level Fuel Factors
Attachment WAG-RR-2 Page 3 of 6
2021 TX Rate Case
Fuel Cost Factor expressed in $ per MWh = 17.865 + (2.800 (Wn - 1.896)) - 0.0697MH - L
Line
Description Source
1
Wn =
2.733538
NYMEXn + WBDn NYMEXn is the average of NYMEX closing prices for natural gas at the Henry Hub WBDn is the average Waha closing basis differentials Price is the 20 day average
2
1.896000 Jan 2020 - Dec 2020 average of Waha from 20 trading days from Mar 19 - Apr 15, 2019
3
0.837537 Line 1 minus Line 2
4
2.800000 The expected change in the forecast period system average eligible fuel and purchased power
expense for every dollar change in the cost of natural gas
5
2.345104 Line 3 times Line 4
6
17.865000 The forecast period system average eligible fuel and purchased power expense in $/MWh
7
20.210104 Average fuel cost factor in $/MWh before accounting for margins and LPL capacity credit
(Lines 5 + 6)
8
0.069700 The customer rate impact of a given level of historical margin
9
MH =
15.887000
The level of historical margin credited to customer rates for the 24-month period in $ millions
10
1.107324 Line 8 times Line 9
11 L =
0.469000
Credit for the revenue from sale of capacity to LPL. This term will be omitted from the formula and factor calculations after the contract with LPL ends in May 2021
12
18.633780 Average fuel cost factor in $/MWh
Line 7 - Line 10 - Line 11
13
1.000000 Ratio
14
18.633780 Line 12 x Line 13
Average Fuel Factor Differentiated by Voltage Level
(A) Voltage Level Secondary Distribution Level Primary Distribution Level Sub-Transmission Level Backbone Transmission Level
(B) Loss Multiplier
1.045516 1.025999 0.961076 0.955244
Line 12 times Column (B)
Voltage Level Fuel Factors
($ per kWh)
$
0.019482
$
0.019118
$
0.017908
$
0.017800
RR1 - Page 190 of 470
Southwestern Public Service Company
NYMEX and WAHA Basis Differential Futures Prices and Calculation of WAHA Futures Prices
Attachment WAG-RR-2 Page 4 of 6
2021 TX Rate Case
RR1 - Page 191 of 470
NYMEX*
Trade Date
Jan-21
10/23/2020
3.322
10/26/2020
3.371
10/27/2020
3.424
10/28/2020
3.411
10/29/2020
3.417
10/30/2020
3.469
11/2/2020
3.375
11/3/2020
3.195
11/4/2020
3.177
11/5/2020
3.084
11/6/2020
3.031
11/9/2020
2.999
11/10/2020
3.073
11/11/2020
3.151
11/12/2020
3.094
11/13/2020
3.122
11/16/2020
2.864
11/17/2020
2.844
11/18/2020
2.838
11/19/2020
2.72
Sum Average
62.981 3.149
Feb-21 3.285 3.329 3.376 3.363 3.364 3.416 3.332 3.159 3.14 3.058 3.005 2.974 3.041 3.116 3.057 3.083 2.847 2.826 2.818 2.703
62.292 3.115
Mar-21 3.175 3.213 3.247 3.236 3.233 3.284 3.219 3.063 3.045 2.977 2.933 2.904 2.959 3.026 2.969 2.997 2.795 2.777 2.767 2.659
60.478 3.024
Apr-21 2.927 2.954 2.973 2.97 2.968 3.017 3.002 2.907 2.894 2.844 2.807 2.785 2.833 2.892 2.854 2.872 2.726 2.691 2.68 2.584
57.180 2.859
May-21 2.892 2.916 2.933 2.929 2.927 2.975 2.967 2.881 2.868 2.825 2.793 2.776 2.82 2.872 2.846 2.859 2.728 2.697 2.684 2.597
56.785 2.839
Jun-21 2.924 2.947 2.962 2.96 2.958 3.006 3.001 2.921 2.908 2.866 2.834 2.821 2.864 2.91 2.886 2.895 2.768 2.74 2.728 2.645
57.544 2.877
Jul-21 2.966 2.988 3.002
3 2.998 3.047 3.045 2.971 2.957 2.916 2.885 2.875 2.917 2.957 2.932 2.938 2.818 2.793 2.784 2.706
58.495 2.925
Aug-21 2.979 2.999 3.012 3.011 3.008 3.059 3.057 2.983 2.968 2.93 2.9 2.892 2.931 2.966 2.942 2.948 2.834 2.811 2.805 2.731
58.766 2.938
Sep-21 2.968 2.987 2.999 2.999 2.993 3.046 3.045 2.969 2.953 2.917 2.889 2.882 2.919 2.949 2.927 2.933 2.824 2.801 2.794 2.728
58.522 2.926
Oct-21 3.004 3.021 3.032 3.034 3.027 3.08 3.08 3.006 2.991 2.958 2.928 2.918 2.953 2.98 2.958 2.968 2.86 2.837 2.828 2.761
59.224 2.961
Nov-21 3.067 3.083 3.094 3.095 3.087 3.138 3.14 3.076 3.068 3.041 3.008 2.991 3.019 3.047 3.028 3.041 2.946 2.921 2.912 2.839
Dec-21 3.201 3.218 3.229 3.232 3.224 3.272 3.276 3.22 3.214 3.189 3.153 3.129 3.156 3.184 3.168 3.185 3.09 3.064 3.056 2.986
60.641 3.032
63.446 3.172
* Data Source - New York Mercantile Exchange (NYMEX)
Annual
2.985
Attachment WAG-RR-2 Page 5 of 6
2021 TX Rate Case
RR1 - Page 192 of 470
Southwestern Public Service Company
NYMEX and WAHA Basis Differential Futures Prices and Calculation of WAHA Futures Prices
WAHA
Trade Date
Jan-21
10/23/2020
3.087
10/26/2020
3.146
10/27/2020
3.204
10/28/2020
3.201
10/29/2020
3.217
10/30/2020 3.3065
11/2/2020 3.2025
11/3/2020
3.02
11/4/2020
2.987
11/5/2020
2.899
11/6/2020
2.846
11/9/2020
2.799
11/10/2020
2.873
11/11/2020 2.9435
11/12/2020
2.879
11/13/2020
2.897
11/16/2020
2.639
11/17/2020
2.619
11/18/2020
2.588
11/19/2020 2.4575
Sum Average
58.811 2.941
Feb-21 3.0625 3.1215 3.1735
3.163 3.164 3.231 3.1495 2.974 2.9525 2.8705 2.8175 2.784 2.8435 2.9085 2.842 2.863 2.627 2.601 2.593 2.4455
58.187 2.909
Mar-21 2.9175 2.9555 2.9945
2.986 2.9905 3.0615 2.9915
2.833 2.815 2.747 2.698 2.669 2.7165 2.7735 2.7165 2.7395 2.5375 2.5195 2.4895 2.3665
55.518 2.776
Apr-21 2.652
2.6615 2.678 2.675
2.6855 2.747 2.757
2.6545 2.6265
2.574 2.5245 2.495
2.543 2.572 2.534 2.542 2.396 2.341
2.33 2.2365
51.225 2.561
May-21 2.5795
2.586 2.6005 2.5965 2.607 2.7125
2.717 2.621 2.593 2.5475 2.503 2.4835 2.5275 2.547 2.521 2.524 2.393 2.362 2.349 2.2645
50.635 2.532
Jun-21 2.574 2.602 2.637 2.635 2.6455 2.786 2.8035 2.716 2.688 2.6235 2.579 2.556 2.599 2.615 2.591 2.59 2.478 2.45 2.438 2.3725
51.979 2.599
Jul-21 2.7735
2.778 2.7895 2.7875
2.798 2.8445
2.86 2.776 2.747 2.6985 2.655
2.63 2.672 2.682 2.657 2.653 2.533 2.508 2.499 2.4335
53.775 2.689
Aug-21 2.8215
2.824 2.8345 2.8335
2.843 2.8915 2.8895 2.8055 2.7755 2.7275
2.685 2.667 2.706 2.711 2.687 2.683 2.569 2.546
2.54 2.4685
54.509 2.725
Sep-21 2.698
2.6995 2.709 2.709
2.7405 2.8085 2.825 2.7415 2.7105 2.6895
2.649 2.6295 2.6665
2.669 2.647 2.643 2.534 2.511 2.504 2.4405
53.225 2.661
Oct-21 2.7365
2.736 2.7445 2.7465
2.752 2.7925
2.795 2.7135 2.6835 2.6655
2.623 2.598 2.633
2.63 2.608 2.608
2.5 2.477 2.473 2.4085
52.924 2.646
Nov-21 2.8445
2.838 2.844
2.84 2.847 2.9205 2.9275 2.8585 2.8455 2.8235 2.783 2.756 2.784 2.7845 2.753 2.7635 2.6685 2.6485 2.6345 2.5715
Dec-21 3.026
3.0205 3.0265 3.0245 3.0315
3.102 3.1135 3.0525 3.0415 3.0215 2.978 2.944
2.971 2.9715
2.943 2.9575 2.8625 2.8415 2.8285 2.7685
55.736 2.787
59.526 2.976
Annual
2.734
Southwestern Public Service Company
NYMEX and WAHA Basis Differential Futures Prices and Calculation of WAHA Futures Prices
Attachment WAG-RR-2 Page 6 of 6
2021 TX Rate Case
RR1 - Page 193 of 470
WAHA Basis Differential*
Trade Date
Jan-21 Feb-21
10/23/2020
-0.235 -0.2225
10/26/2020
-0.225 -0.2075
10/27/2020
-0.22 -0.2025
10/28/2020
-0.21
-0.2
10/29/2020
-0.2
-0.2
10/30/2020 -0.1625
-0.185
11/2/2020 -0.1725 -0.1825
11/3/2020
-0.175
-0.185
11/4/2020
-0.19 -0.1875
11/5/2020
-0.185 -0.1875
11/6/2020
-0.185 -0.1875
11/9/2020
-0.2
-0.19
11/10/2020
-0.2 -0.1975
11/11/2020 -0.2075 -0.2075
11/12/2020
-0.215
-0.215
11/13/2020
-0.225
-0.22
11/16/2020
-0.225
-0.22
11/17/2020
-0.225
-0.225
11/18/2020
-0.25
-0.225
11/19/2020 -0.2625 -0.2575
Mar-21 -0.2575 -0.2575 -0.2525
-0.25 -0.2425 -0.2225 -0.2275
-0.23 -0.23 -0.23 -0.235 -0.235 -0.2425 -0.2525 -0.2525 -0.2575 -0.2575 -0.2575 -0.2775 -0.2925
Apr-21 -0.275 -0.2925 -0.295 -0.295 -0.2825
-0.27 -0.245 -0.2525 -0.2675 -0.27 -0.2825 -0.29 -0.29
-0.32 -0.32 -0.33 -0.33 -0.35 -0.35 -0.3475
* Data Source - Intercontinental Exchange (ICE)
May-21 -0.3125
-0.33 -0.3325 -0.3325
-0.32 -0.2625
-0.25 -0.26 -0.275 -0.2775 -0.29 -0.2925 -0.2925 -0.325 -0.325 -0.335 -0.335 -0.335 -0.335 -0.3325
Jun-21 -0.35
-0.345 -0.325 -0.325 -0.3125
-0.22 -0.1975 -0.205
-0.22 -0.2425
-0.255 -0.265 -0.265 -0.295 -0.295 -0.305
-0.29 -0.29 -0.29 -0.2725
Jul-21 -0.1925
-0.21 -0.2125 -0.2125
-0.2 -0.2025
-0.185 -0.195
-0.21 -0.2175
-0.23 -0.245 -0.245 -0.275 -0.275 -0.285 -0.285 -0.285 -0.285 -0.2725
Aug-21 -0.1575
-0.175 -0.1775 -0.1775
-0.165 -0.1675 -0.1675 -0.1775 -0.1925 -0.2025 -0.215 -0.225 -0.225 -0.255 -0.255 -0.265 -0.265 -0.265 -0.265 -0.2625
Sep-21 -0.27
-0.2875 -0.29 -0.29
-0.2525 -0.2375
-0.22 -0.2275 -0.2425 -0.2275
-0.24 -0.2525 -0.2525
-0.28 -0.28 -0.29 -0.29 -0.29 -0.29 -0.2875
Oct-21 -0.2675 -0.285 -0.2875 -0.2875 -0.275 -0.2875 -0.285 -0.2925 -0.3075 -0.2925 -0.305
-0.32 -0.32 -0.35 -0.35 -0.36 -0.36 -0.36 -0.355 -0.3525
Nov-21 -0.2225 -0.245
-0.25 -0.255
-0.24 -0.2175 -0.2125 -0.2175 -0.2225 -0.2175 -0.225 -0.235 -0.235 -0.2625 -0.275 -0.2775 -0.2775 -0.2725 -0.2775 -0.2675
Dec-21 -0.175 -0.1975 -0.2025 -0.2075 -0.1925
-0.17 -0.1625 -0.1675 -0.1725 -0.1675
-0.175 -0.185 -0.185 -0.2125 -0.225 -0.2275 -0.2275 -0.2225 -0.2275 -0.2175
SFreomonut thwestern Public Crowley Service ComKiowa pany
Custer
Pue b l o
Map Upda Huerfano ted: 12/16/2020
Legend Costilla Transmission Line Las Animas Voltage (kV) 345 230 115 Colfax 69
Otero Union
Bent
Pro w er s
Colorado
Bac a
Cimarron
Greeley
Wi ch ita
Ha m il to n
Kearny
Stanton
Grant
Morton
Stev ens
Texas
Attachment WAG-RR-3 Page 1 of 1
2021 TX Rate Case
Scott
Lane
Ness
Rush
Barton
Finney
Hodgeman
Hask el l
Gray
Ford
Kansas
Paw n e e
Edw a rd s
Stafford
Kiowa
Pratt
Sew a rd
Meade
Clark
Comanche
Barber
Woods
Beav er
Harper
Oklahoma
Mora
Da ll a m
Sherman
Hansford
Och il tre e
Li p sco m b
Wo o d w ar d
Ma j or
Elli s
Ha r di n g
San Miguel
New Mexico
Quay
Ha r tl e y Oldham
Moore
Hutchins on
Roberts
Potter
Carson
Gray
Hemphill Wheeler
Roger Mills Bec kham
De w e y Custer Washita
Gu ad a l up e
Li n co ln
De Baca
Curry
Deaf Smith Parmer
Randall
Armstrong
Donley
Te x a s
Co ll in g sw o rth
Castro
Swi sh e r
Bris coe
Hall
Ch il d re ss
Greer
Kiowa
Harmon
Jacks on
Hardeman
Till ma n
Ro o se ve l t
Bai le y
Lamb
Hale
Floyd
Motley
Cottle
Foard
Wi lb a rg e r
Wi ch ita
Chaves
Cochran
Hock ley
Lubbock
Crosby
Dic kens
King
Knox
Bay lor
Archer
Yoak um
Terry
Lynn
Garza
Kent
Sto n e w a ll
Hask el l
Throc km orton
Young
Otero
Eddy
Lea
Gaines
Da w so n
Borden
Scurry
Andrews
Martin
Ho w a rd
Mi tch e ll
Culberson
Reeves
Lov ing
Wi n kle r
ReevesReeves File P ath: S:\General-Offices-G O-Trans\SLR-Mapping\GIS Projects\SPS System\_SPS_System_Map.mxd
Ector
Mi d la n d
Glass cock
Ste r li ng
RR1 - Page 194 of 470
Fis her
Jones
Nolan
Taylor
0
20 40
Coke
Runnels
Shac kelford
Stephens
Ca ll a ha n
Eas tland
Coleman
80
Comanche
MiBlreowns
Southwestern Public Service Company SPS Native Operation & Maintenance Expenses
Line
FERC
No.
Acct
Account Description
Production
1
500 Operation Supervision and Engineering
2
501.35 Coal Non-Mine; Non-Freight
3
507.70 Coal Ash Sales
4
502 Steam Expenses
5
505 Electric Expenses
6
506 Miscellaneous Steam Power Expenses
7
507 Rents
8
509 Steam Operation SO2 Allowance Expense
9
509.02 Allowances - NM Nox Expense Amortz
10
510 Maintenance Supervision and Engineering
11
511 Maintenance of Structures
12
512 Maintenance of Boiler Plant
13
513 Maintenance of Electric Plant
14
514 Maintenance of Miscellaneous Steam Plant
15
546 Operation Supervision and Engineering
16
546W Operation Supervision and Engineering Wind
17
548 Generation Expenses
18
549 Misc Other Power Generation Expenses
19
549W Misc Other Power Generation Expenses Wind
20
550 Rents
550W Rents Wind
21
551 Maintenance Supervision and Engineering
22
552 Maintenance of Structures
23
553 Maintenance of Generating and Electric Equipment
24
553W Maintenance of Generating and Electric Equipment Wind
25
554 Maintenance of Misc Other Power Generation Plant
26
554W Maintenance of Misc Other Power Generation Plant Wind
27
556 System Control and Load Dispatching
28
557 Purchased Power Other
29
557.90 REC Costs
30 Total Production O&M Expense
Attachment WAG-RR-4 Page 1 of 4
2021 TX Rate Case
Native SPS O&M Expense through the
Update Period (Jan '20-Dec '20)
Update Test Year Affiliate O&M Expense (Jan '20-Dec '20)
Total Company Requested O&M
for the Updated Test Year
$
1,584,420 $
$
32,900,061 $
$
(1,525,777) $
$
10,813,001 $
$
9,365,875 $
$
9,583,693 $
$
29,041 $
$
-$
$
34,908 $
$
506,357 $
$
3,673,190 $
$
11,792,802 $
$
6,855,891 $
$
9,297,296 $
$
(59,716) $
$
113,231 $
$
293,086 $
$
342,737 $
$
8,507,925 $
$
11,758 $
$
5,319,674 $
$
1,180 $
$
234,508 $
$
1,605,028 $
$
4,398,462 $
$
(67,888) $
$
4,104,846 $
$
-$
$
(5,214,908) $
$
4,110,497 $
$
118,611,178 $
2,220,371 $ -
1,603,318 300 (6)
4,165,010 3,320,913
134,911 4,228 879,815 400,864 19,963 465,664 34,346 39,164 358,506 364,276 449,473
(1) 424,153
1,289 11,490
1,095,557 1,952,664
17,946,268 $
3,804,791 32,900,061
77,540 10,813,301
9,365,868 13,748,704
3,349,954 -
34,908 641,268 3,677,418 12,672,617 7,256,756 9,317,259 405,948 147,577 332,249 701,243 8,507,925 376,034 5,319,674 450,653 234,507 2,029,181 4,399,751 (56,398) 4,104,846 1,095,557 (3,262,244) 4,110,497 136,557,446
RR1 - Page 195 of 470
Southwestern Public Service Company SPS Native Operation & Maintenance Expenses
Attachment WAG-RR-4 Page 2 of 4
2021 TX Rate Case
Line
FERC
No.
Acct
Account Description
Transmission
31
560 Operation Supervision and Engineering
32
561.1 Load Dispatch - Reliability
561.11 Load Dispatch - Reliability
33
561.2 Load Dispatch - Monitor and Operate Trans. System
34
561.4 Scheduling, System Control and Dispatching Services
35
561.4W Scheduling, System Control and Dispatching Services - Wholesale
36
561.5 Reliability, Planning and Standards Development
37
561.6 Transmission Service Studies
38
561.7 Generation Interconnection Studies
39
561.8 Reliability Planning and Standards Development Services
40
561.8W Reliability Planning and Standards Development Services - Wholesale
41
562 Station Expenses
42
563 Overhead Line Expenses
565 Transmission of Others
43
565 Wheeling Lamar DC Tie
44
565 Wheeling Meter Charges
45
565 Wheeling Miscellaneous
46
565 Wheeling Schedule 11
47
565 Wheeling Schedule 11 - Wholesale
48
565 Wheeling Schedule 12
49
565 Wheeling Schedule 12 - Wholesale
50
565 Wheeling Schedule 1 - Wholesale
51
565 Wheeling Schedule 2
52
565 W-Wheeling Schedule 2 - Wholesale
53
565 Wheeling Schedule 9
54
565 Wheeling Schedule 9 - Wholesale
55
565 Z2 Direct Assigned Upgrade Charge
56
565 Z2 Direct Assigned Upgrade Charge - Wholesale
57
565 Z2 Schedule 11 Charges
58
565 Z2 Schedule 11 Charges - Wholesale
59
566 Misc Transmission Expenses
60
567 Rents
569 Transmission Mtce of Structures
61
568 Maintenance Supervision and Engineering
62
570 Maintenance of Station Equipment
63
571 Maintenance of Overhead Lines
64 Sub-Total Transmission O&M Expenses
Regional Market Expenses
65
575.1 Operation Supervision
66
575.2 Day-Ahead and Real-Time Market Administration
67
575.5 Ancillary Services Market Administration
68
575.6 Market Monitoring and Compliance
69
575.7 Market Admin, Monitoring, and Compliance Services
70
575.7W Market Admin, Monitoring, and Compliance Services - Wholesale
71
575.8 Regional Market Rents
72 Total Regional Market Expenses
73 Total Transmission O&M Expenses
Native SPS O&M Expense through the
Update Period (Jan '20-Dec '20)
Update Test Year Affiliate O&M Expense (Jan '20-Dec '20)
Total Company Requested O&M
for the Updated Test Year
$
1,046,989 $
$
(169,941) $
$
170,599 $
$
2,098,567 $
$
3,637,403 $
$
1,065,179 $
$
-$
$
10,956 $
$
(13,397) $
$
2,756,221 $
$
464,991 $
$
1,479,573 $
$
1,491,499 $
$
288,806 $
$
-$
$
403,986 $
$
4,036,141 $
$
140,353,019 $
$
31,315,163 $
$
2,678,896 $
$
639,203 $
$
599,438 $
$
107,336 $
$
30,251 $
$
10,448,848 $
$
31,154,821 $
$
249,444 $
$
17,766 $
$
-$
$
-$
$
2,142,416 $
$
115,413 $
$
-$
$
-$
$
1,490,422 $
$
560,841 $
$
240,670,851 $
$
13,612 $
$
-$
$
-$
$
-$
$
5,692,999 $
$
1,849,773 $
$
4,944 $
$
7,561,327 $
$
248,232,178 $
6,958,673 $ -
1,195,630 -
27,616 22,033 158,983
43 1,527 1,293,758 1,509,504 -
(2) 48,655 11,216,420 $
154,014 $ 306,670
15,371 26,637
39,759 542,452 $
11,758,872 $
8,005,661 (169,941)
3,294,196 3,637,403 1,065,179
27,616 32,989 145,587 2,756,221 464,991 1,479,616 1,493,026
403,986 4,036,141 140,353,019 31,315,163 2,678,896 639,203 599,438 107,336
30,251 10,448,848 31,154,821
249,444 17,766 -
3,436,174 1,624,917
1,490,419
609,496 251,427,866
167,626 306,670
15,371 26,637 5,692,999 1,849,773 44,703 8,103,779
259,531,645
RR1 - Page 196 of 470
Southwestern Public Service Company SPS Native Operation & Maintenance Expenses
Line
FERC
No.
Acct
Account Description
Distribution
74
580 Operation Supervision and Engineering
75
581 Load Dispatching
76
582 Station Expenses
77
583 Overhead Line Expenses
78
584 Underground Line Expenses
79
585 Street Lighting and Signal Systems Expenses
80
586 Meter Expenses
81
587 Customer Installations Expenses
82
588 Misc Distribution Expense
83
589 Rents
84
590 Maintenance Supervision and Engineering
85
591 Maintenance of Structures
86
592 Maintenance of Station Equipment
87
593 Maintenance of Overhead Lines
88
594 Maintenance of Underground Lines
89
595 Maintenance of Line Transformers
90
596 Maintenance of Street Lighting and Signal Systems
91
597 Maintenance of Meters
92
598 Maintenance of Misc Distribution Plant
93 Total Distribution O&M Expenses
Customer Accounts
94
901 Supervision
95
902 Meter Reading Expenses
96
903 Customer Records and Collection Expenses
97
904 Uncollectible Expenses
98
904 Uncollectible Expenses
905 Customer Accounts Miscellaneous
99
DEPINT Customer Deposit Interest Expense
100 Total Customer Accounts Expense
Customer Service
101
908.00 Customer Assistance Expense
102
908.00 Historical EE Amortization
103
908.01 EE Amortization - Texas
104
908.03 EE Amortization - New Mexico
105
908.04 SaversSwitch
106
909.10 Informational and Instructional Advertising Expense
107
910.00 Miscellaneous Customer Service Expense
108 Total Customer Service Expense
Sales
108
912.00 Demonstration and Selling Expense-Economic Development
109
916.00 Miscellaneous Sales Expense
110 Total Sales Expense
Attachment WAG-RR-4 Page 3 of 4
2021 TX Rate Case
Native SPS O&M Expense through the
Update Period (Jan '20-Dec '20)
Update Test Year Affiliate O&M Expense (Jan '20-Dec '20)
Total Company Requested O&M
for the Updated Test Year
$
4,159,461 $
$
53,518 $
$
1,061,336 $
$
593,544 $
$
625,682 $
$
564,247 $
$
2,080,418 $
$
672,562 $
$
5,154,037 $
$
306,415 $
$
19,265 $
$
(22,102) $
$
724,252 $
$
10,191,875 $
$
88,641 $
$
1,262 $
$
304,806 $
$
55,405 $
$
41,218 $
$
26,675,843 $
653,231 $ 325,552
(5) 88,191
(0) 31,248 168,816
233 1,901,606 2,112,339
30,466 -
2,662 203,106
(0) -
(1) 3,158 5,520,604 $
4,812,691 379,070
1,061,332 681,736 625,682 595,496
2,249,234 672,796
7,055,643 2,418,754
49,732 (22,102) 726,914 10,394,982 88,641
1,262 304,806
55,405 44,376 32,196,447
$
-$
$
4,408,365 $
$
2,872,880 $
$
6,043,905 $
$
(588,242) $
$
77,254 $
$
126,563 $
$
12,940,726 $
22,478 $ 640,349 4,497,473
59,453 5,219,752 $
22,478 5,048,714 7,370,353 6,043,905 (588,242)
126,563 18,023,771
$
1,757,163 $
$
-$
$
-$
$
-$
$
667,364 $
$
(39,529) $
$
64,360 $
$
2,449,358 $
116,564 $ -$ -
5,947 39,529 34,403 196,443 $
1,873,726 -
673,311 0
98,763 2,645,801
$
218,209 $
$
5,516 $
$
223,725 $
58,243 $
3,075 $ 61,318 $
276,452
8,592 285,043
RR1 - Page 197 of 470
Southwestern Public Service Company SPS Native Operation & Maintenance Expenses
Attachment WAG-RR-4 Page 4 of 4
2021 TX Rate Case
Line
FERC
No.
Acct
Account Description
Administrative and General Expenses
111
920 Administrative and General Salaries
112
921 Office Supplies and Expenses
113
922 Administrative Expenses Transferred-Credit
114
923 Outside Services Employed
115
924 Property Insurance
116
925 Injuries and Damages
117
926.01 Employee Pensions and Benefits
118
926.03 Deferred Pension Expense
928 A&G Regulatory Commission Expense
119
928 Regulatory Commission Expense - TX
120
928.01 Regulatory Commission Expense - NM
121
928.02 Regulatory Commission Expense - Wholesale
122
928.03 Regulatory Commission Expense - Transmission Related
123
928.04 Regulatory Commission Expense - Misc
124
928.05 Regulatory Commission Expense - Energy Related
125
929 Duplicate Charges-Credit
126
930.11 General Advertising Expenses
127
930.20 Misc General Expenses
128
931 Rents
129
935 Maintenance of General Plant
130
Recoverable Contributions, Dues, and Donations
131 Total Administrative and General Expenses
Native SPS O&M Expense through the
Update Period (Jan '20-Dec '20)
Update Test Year Affiliate O&M Expense (Jan '20-Dec '20)
Total Company Requested O&M
for the Updated Test Year
$
4,567,528 $
$
3,128,572 $
$
(19,367,350) $
$
888,279 $
$
3,853,753 $
$
5,657,269 $
$
17,512,113 $
$
-$
$
-$
$
1,489,288 $
$
2,293,032 $
$
1,949,917 $
$
-$
$
(83,936) $
$
-$
$
(1,149,547) $
$
-$
$
(39,822) $
$
(1,913,122) $
$
76 $
$
2,130,030 $
$
20,916,080 $
29,033,835 $ 17,013,148
(504,767) 5,816,408
1,543 2,213,162 9,035,911
(12) 310,444 13,846,230 38,890 76,804,794 $
33,601,363 20,141,721 (19,872,117)
6,704,688 3,855,296 7,870,431 26,548,023
-
1,489,288 2,293,032 1,949,917
(83,947)
(1,149,547)
270,623 11,933,108
38,966 2,130,030 97,720,874
132 Total Operations and Maintenance Expense
$
430,049,088 $
117,508,051 $
546,961,027
Note: All amounts included in this attachment are included in the cost of service study provided as Attachment SNN-RR-2
RR1 - Page 198 of 470
Group Organizational Chart
Attachment WAG-RR-5 Page 1 of 1
2021 TX Rate Case
RR1 - Page 199 of 470
Regional State Committee President Dennis Grennan
Secty Paul Suskie
Cost Allocation Working Group Chair John Krajewski Vice Chair-Greg Rislov Secty Lee Elliott
SPP Staff President - Barbara Sugg Executive VP - Lanny Nickell Executive VP - Paul Suskie
Senior VP - Tom Dunn Senior VP - Bruce Rew Senior VP - Mike Ross VP - Michael Desselle, Sam Ellis, Antoine Lucas, Malinda See
Oversight Committee Chair - Joshua Martin Secty Michael Desselle
Corporate Governance Committee Chair Barbara Sugg VC-Larry Altenbaumer Secty Paul Suskie
Finance Committee Chair Susan Certoma
Secty - Tom Dunn
Credit Practices WG Chair - Mark Holler
Vice Chair - Terri Wendlandt Secty Jared Barker
Human Resources Committee Chair Mark Crisson Secty Malinda See
Strategic Planning Committee Chair Larry Altenbaumer Vice Chair Mike Wise Secty Bruce Rew
Updated 07/15/20
SPP Board of Directors/Members Committee
Chair - Larry Altenbaumer Vice Chair Graham Edwards
Secty Paul Suskie
Market and Operations Policy Committee Chair Holly Carias
Vice Chair Denise Buffington Secty Lanny Nickell
Membership Chair Larry Altenbaumer Vice Chair Graham Edwards
Secty Paul Suskie
Business Practices WG Chair - Grant Wilkerson Vice Chair Kass Portra
Secty Ken Quimby
Change WG Chair Carrie Dixon Vice Chair Jodi Hall Secty Terry Rhoades
Economic Studies WG Chair - Alan Myers
Vice Chair Tim Owens Secty Joshua Norton
Market WG Chair - Richard Ross Vice Chair Jim Flucke Secty Erin Cathey
Operating Reliability WG Chair Allen Klassen
Vice Chair Ron Gunderson Secty Jason Tanner
Operations Training WG Chair Russell Moore
Vice Chair Michael Gaunder Secty Michael Daly
Project Cost WG Chair Tom Hestermann Vice Chair Brian Johnson
Secty John O'Dell
Reliability Compliance WG Chair John Allen
Vice Chair-Jennifer Flandermeyer Secty Matthew Harward
Regional Tariff WG Chair Robert Pick Vice Chair Mo Awad Secty Marisa Choate
Seams Steering Committee Chair Jim Jacoby
Vice Chair - Bary Warren Secty Clint Savoy
Security WG Chair Phil Clark Vice Chair Chad Wasinger Secty Michael Goad
Supply Adequacy WG Chair Natasha Henderson Vice Chair Tom Hestermann
Secty - Chris Haley
System Protection & Control WG
Chair Stephen Wadas Vice Chair John Anderson
Secty Zachary Sharp
Transmission WG Chair Nathan McNeil Vice Chair Derek Brown
Secty Adam Bell
Model Development WG Chair Nate Morris
Vice Chair Jerad Ethridge Secty Sunny Raheem
Attachment WAG-RR-6 Page 1 of 1
2021 TX Rate Case
RR1 - Page 200 of 470
Date Range Pre-2005
Upgrade Type Pre-BPF Needs
Other Sponsored
Summary of SPP Cost Allocation Methods
Zonal
Regional
Customer
100%
100%
Reliability
67%
33%
Generation Interconnection
Traditional Base Plan
NITS Service Upgrade costs
Funding
67% covered by Safe Harbor limit
NTC Issue Date Before NITS Service Upgrade costs NOT
June 19, 2010
covered by Safe Harbor
limit
100% 33%
100%
PtP Service Upgrade costs that do not qualify for Base Plan Funding
100%
Balanced Portfolio
Balanced Portfolio Sponsored
Reliability/Economic Updgrade
Voltage greater than or equal to
300 kV
Reliability/Economic Updgrade
Voltage greater than or equal to
100 kV and under 300 kV
Reliability/Economic Updgrade
Voltage under 100 kV
Upgrades related to delivery of
power from Wind projects outside
TSR Customer's Load Zone and less
than 300kV
Base Plan Funding
Upgrades related to delivery of
(Highway Byway NTC) Issue power from Wind projects greater
Date of June 19, 2010 or
than or equal to 300kV
later
NITS Service Upgrade costs covered by Safe Harbor limit
NITS Service Upgrade costs NOT covered by Safe Harbor limit
or do not qualify for Base Plan Funding
0% 67% 100%
100% 100% 33%
0% 67%
100%
Voltage Dependent: =>300kV=100% Regional, 100kV
to 299kV=33% Regional+67% Zonal, <100kV=100% Zonal
33% 100%
PIP Service Upgrade costs that do not qualify for Base Plan Funding
100%
Generation Interconnection
100%
Sponsor 100%
Comments Before Regional Cost Sharing
Based on Need-By Date - Zonal on MW-Mi beneficiary %
Zonal on MW-Mi
Safe Harbor Limit: E&C Cost <=$180,000/MW Requested
costs in excess of access charges
100%
Effective in 2009
"Highway/Byway" method, upgrade =>300kV 100% Regional in
all cases
Southwestern Public Service Company Organization Chart Group Presidents As of September 30, 2020
Chairman & CEO
Attachment WAG-RR-7 Page 1 of 1
2021 TX Rate Case
RR1 - Page 201 of 470
EVP, General Counsel
EVP, Chief Customer & Innovation
EVP, CFO Organization
EVP, Chief HR Officer Human Resources & Employee Services
President & COO Operations
SVP, Chief Risk Audit & Compliance Officer Audit & Risk Compliance
SVP, Strategy Planning & External Affairs Strategy
Planning
Executive Assistant Chairman and CEO
Executive Assistant Operations
Director, Community Services & Economic Development
President, PSCO
Director, Customer Relations TX/NM Managed
Accounts
President, NSPM
President, SPS
SVP Distribution Operations
Director, Regional Government Affair - Austin Office TX State Public Affairs
RVP, Rates & Regulatory Affairs
SPS
SR Representative SPS Media Relations
Assistant, Administrative III SPS Regulatory
Manager, Regulatory Administration SPS Regulatory
Manager, Regulatory Administration SPS Regulatory
Director, Regulatory Pricing & Analysis
SPS Regulatory
SVP, Gas
Assistant, Executive SPS President
President, NSPW
EVP, Chief Generation Officer
SVP, Transmission
Southwestern Public Service Company
Rate Case Expenses 2021 TX Rate Case
Attachment WAG-RR-8 Page 1 of 3
2021 TX Rate Case
Line No. Description
Interim Prudence
Rate
Inquiry
General Expenses
Total
Consultant Expenses:
1 Accounting
$ -
2 Engineering
-
3 Legal
-
Other
4
Testifying Consultant
-
5
Non-Testifying Consultant
-
6 Sub-Total Consultant Expenses $ -
$ -
$ -
$ 650,000 -
2,788,700
$ 650,000 -
2,788,700
283,200 32,500
$ 3,754,400
283,200 32,500
$ 3,754,400
Company Expenses:
7 Employee
$ -
8 Other
-
9 Sub-Total Company Expenses $ -
$ -
$ -
$ 115,400 $ 115,400
120,000
120,000
$ 235,400 $ 235,400
10 Intervenor Expenses
$ -
$ -
$ 1,500,000 $ 1,500,000
11 Total Request
$ -
$ -
$ 5,489,800 $ 5,489,800
Note: Please refer to the workpapers to the Direct Testimony of Stephanie N. Niemi for a detailed estimate of rate case expenses expected to be incurred through the full litigation of this proceeding.
RR1 - Page 202 of 470
Southwestern Public Service Company
Rate Case Expenses Dkt 51625 - Fuel Formula
Attachment WAG-RR-8 Page 2 of 3
2021 TX Rate Case
Rate Case Expenses Related to SPS's Pending Fuel Formula Docket
Line No. Description
Interim Prudence General Rate Inquiry Expenses
Total
Consultant Expenses:
1 Accounting
$ -
2 Engineering
-
3 Legal
-
Other
4
Testifying Consultant
-
5
Non-Testifying Consultant
-
6 Sub-Total Consultant Expenses $ -
$ -
$ -
$
-
-
350,000
$
-
-
350,000
$ 350,000
$ 350,000
Company Expenses:
7 Employee
$ -
8 Other
-
9 Sub-Total Company Expenses $ -
$ -
$ -
$ 15,575 20,000
$ 35,575
$ 15,575 20,000
$ 35,575
10 Intervenor Expenses
$ -
$ -
$ 300,000 $ 300,000
11 Total Request
$ -
$ -
$ 685,575 $ 685,575
Note: Please refer to the Direct Testimony of William A. Grant. Amounts included on this
RR1 - Page 203 of 470
Southwestern Public Service Company
Attachment WAG-RR-8 Page 3 of 3
2021 TX Rate Case
Rate Case Expenses Dkt 51644 - Base Rate Surcharge
Rate Case Expenses Related to SPS's Pending Base Rate Surcharge Docket
Line No. Description
Interim Prudence General Rate Inquiry Expenses
Total
Consultant Expenses:
1 Accounting
$ -
2 Engineering
-
3 Legal
-
Other
-
4
Testifying Consultant
-
5
Non-Testifying Consultant
-
6 Sub-Total Consultant Expenses $ -
$ -
$ -
$
-
-
200,000
-
-
-
$ 200,000
$
-
-
200,000
$ 200,000
Company Expenses:
7 Employee
$ -
8 Other
-
9 Sub-Total Company Expenses $ -
$ -
$ -
$ 6,450 100,000
$ 106,450
$ 6,450 100,000
$ 106,450
10 Intervenor Expenses
$ -
$ -
$ 5,000 $ 5,000
11 Total Request
$ -
$ -
$ 311,450 $ 311,450
Note: Please refer to the Direct Testimony of William A. Grant. Amounts included on
RR1 - Page 204 of 470
Attachment WAG-RR-A Page 1 of 1
2021 TX Rate Case
RR1 - Page 205 of 470
Southwestern Public Service Company
Summary of XES Expenses to SPS by Affiliate Class and Billing Method For the Twelve Months Ended December 31, 2020
(A)
(B)
(C)
(D)
Line No. Affliate Class Billing Method (Cost Center) Allocation Method
1 Corporate Giving
200076 - Xcel Foundation
2 Corporate Giving
Direct
3 Corporate Giving Total
Assets/Revenue/No. of employees
Direct
(E) Total XES Billings for Class to all Legal Entities (FERC Acct. 400-935)
(F)
(G)
XES Billings for XES Billings for
Class to all Class to SPS
Legal Entities
(Total
Except SPS
Company)
(FERC Acct. (FERC Acct.
400-935)
400-935)
(H) Exclusions
(I) Per Book
(J)
(K)
Pro Formas
Requested Amount (Total
Company)
$ 286,157.04 $ 249,021.09 $ 37,135.95 $ (10,219.13) $ 26,916.82 $ (26,916.82) $
-
(L)
% of Class Charges
0.00%
5,769.37
4,024.46
$ 291,926.41 $ 253,045.55 $
1,744.91
-
38,880.86 $ (10,219.13) $
1,744.91
52.35
28,661.73 $ (26,864.47) $
1,797.26 1,797.26
100.00% 100.00%
4 NSPW President
Direct
5 NSPW President Total
Direct
$ (8,754.88) $ (8,754.88) $ $ (8,754.88) $ (8,754.88) $
-$ -$
-$ -$
-$ -$
-$ -$
-
100.00%
-
100.00%
6 PSCo President 200063 - Executive - Corporate Assets/Revenue/No. of
Governance
employees
7 PSCo President Direct
Direct
8 PSCo President Total
$ 681,748.75 $ 593,760.83 $ 87,987.92 $
1,045,131.39 1,009,489.61
35,641.78
$ 1,726,880.14 $ 1,603,250.44 $ 123,629.70 $
(129.39) $ 87,858.53 $
-
35,641.78
(129.39) $ 123,500.31 $
2,990.65 $ 1,069.25 4,059.91 $
90,849.18 36,711.03 127,560.22
71.22% 28.78% 100.00%
9 SPS President Direct 10 SPS President Total
Direct
$ (22,389.00) $ $ (22,389.00) $
- $ (22,389.00) $ - $ (22,389.00) $
- $ (22,389.00) $ - $ (22,389.00) $
-$ -$
(22,389.00) (22,389.00)
100.00% 100.00%
Strategic 11 Revenue
Initiatives
200092 - Corporate Strategy & Assets/Revenue/No. of
Business Development
employees
Strategic
12 Revenue
Direct
Direct
Initiatives
13 Strategic Revenue Initiatives Total
$ 1,035,174.53 $ 882,946.61 $ 152,227.92 $
43,130.49
43,130.49
-
$ 1,078,305.02 $ 926,077.10 $ 152,227.92 $
(3,939.66) $ 148,288.26 $
-
-
(3,939.66) $ 148,288.26 $
(1,195.09) $
(1,195.09) $
147,093.17
147,093.17
100.00%
0.00% 100.00%
14 Total Witness William A. Grant
$ 3,065,967.69 $ 2,773,618.21 $ 292,349.48 $ (14,288.18) $ 278,061.30 $ (23,999.66) $ 254,061.64
Amounts may not add or tie to other schedules due to rounding
Attachment WAG-RR-B(CD) Page 1 of 1
2021 TX Rate Case
Southwestern Public Service Company XES Expenses by Affiliate Class, Activity, Billing Method and FERC Account William A. Grant
2021 TX Rate Case APPLICATION OF SOUTHWESTERN PUBLIC SERVICE COMPANY FOR AUTHORITY TO CHANGE RATES
WAG-RR-B(CD) is provided in electronic format.
RR1 - Page 206 of 470
Southwestern Public Service Company
Exclusions from XES Expense to SPS For the Twelve Months Ended December 31, 2020
(A)
(B)
(C)
Line No.
Affiliate Class
FERC Account
1 Corporate Giving 2 Corporate Giving Total
426.1 - Donations
3 PSCo President 4 PSCo President Total
426.5 - Other Deductions
5 Strategic Revenue Initiatives 426.1 - Donations 6 Strategic Revenue Initiatives 426.5 - Other Deductions 7 Strategic Revenue Initiatives Total 8 Total Witness William A. Grant
Amounts may not add or tie to other schedules due to rounding
Attachment WAG-RR-C Page 1 of 1
2021 TX Rate Case
(D)
(E)
Explanation for Exclusions Exclusions (Total Company)
Below the Line $ $
(10,219.13) (10,219.13)
Below the Line $ $
(129.39) (129.39)
Below the Line Below the Line
$ $
(3,804.61) (135.05)
(3,939.66) (14,288.18)
RR1 - Page 207 of 470
Attachment WAG-RR-D Page 1 of 2
2021 TX Rate Case
RR1 - Page 208 of 470
Southwestern Public Service Company
Pro Forma Adjustments to XES Expenses by Affiliate Class and FERC Account For the Twelve Months Ended December 31, 2020
(A)
(B)
(C)
(D)
Line No.
Affiliate Class
FERC Account
Explanation for Pro Formas
1 Corporate Giving 408.1 - Tax Other Than Income Tax - Foundation Payroll
2 Corporate Giving 920 - Administrative and general salaries 3% Wage Adjustment
3 Corporate Giving 920 - Administrative and general salaries Foundation
4 Corporate Giving 921 - Office supplies and expenses
Business Area Adjustment
5 Corporate Giving 921 - Office supplies and expenses
Foundation
6 Corporate Giving 923 - Outside services employed
Foundation
7 Corporate Giving 925 - Injuries & Damages
Foundation
8 Corporate Giving 926 - Employee pensions and benefits Foundation
9 Corporate Giving 930.1 - General advertising expenses Advertising
10 Corporate Giving 930.2 - Miscellaneous general expenses Foundation 11 Corporate Giving Total
(E) Sponsor
William A. Grant Stephanie N. Niemi/Michael P. Deselich William A. Grant William A. Grant William A. Grant William A. Grant William A. Grant William A. Grant Stephanie N. Niemi William A. Grant
(F) Pro Formas
(Total Company)
$
(67.68)
52.35
(19,165.88)
(8.23)
(6,408.97)
(96.33)
(1.11)
(225.00)
(51.88)
(891.74) $ (26,864.47)
12 PSCo President 920 - Administrative and general salaries 3% Wage Adjustment
13 PSCo President 921 - Office supplies and expenses 14 PSCo President Total
Business Area Adjustment
Stephanie N. Niemi/Michael P. Deselich $
William A. Grant $
4,085.52
(25.61) 4,059.91
Attachment WAG-RR-D Page 2 of 2
2021 TX Rate Case
RR1 - Page 209 of 470
Southwestern Public Service Company
Pro Forma Adjustments to XES Expenses by Affiliate Class and FERC Account For the Twelve Months Ended December 31, 2020
(A)
(B)
(C)
(D)
Line No.
Affiliate Class
FERC Account
Explanation for Pro Formas
15
Strategic Revenue Initiatives
920 - Administrative and general salaries
3% Wage Adjustment
Strategic Revenue
16 Initiatives
921 - Office supplies and expenses
Business Area Adjustment
Strategic Revenue
17 Initiatives
930.1 - General advertising expenses Advertising
18 Strategic Revenue 930.1 - General advertising expenses Initiatives
19 Strategic Revenue Initiatives Total
Business Area Adjustment
20 Total Witness William A. Grant
Amounts may not add or tie to other schedules due to rounding
(E) Sponsor
Stephanie N. Niemi/Michael P. Deselich
(F) Pro Formas
(Total Company)
$ 2,596.56
William A. Grant
(180.20)
Stephanie N. Niemi
(3,454.92)
William A. Grant
(156.53) $ (1,195.09) $ (23,999.66)
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