CITY OF SAINT PAUL. March 2, Via Electronic and U.S. Mail

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1 OFFICE OF THE CITY ATTORNEY John J- Choi. City Attorney CITY OF SAINT PAUL Civil Division 4GO City Hail 15 West Kellogg Bh-d. Saint Paul, Minnesota Telephone: Facsimile; /9 March 2, 2006 Via Electronic and U.S. Mail The Honorable Kathleen Sheehy Office of Administrative Hearings Suite Washington Square Minneapolis, MN RE: In the Matter of the Application of Northern States Power Company d/b/a Xcel Energy for Authority to Increase Rates for Electric Service in Minnesota, OAH Docket No ; MPUC Docket No. E-002/GR Dear Judge Sheehy: Enclosed and filed on behalf of the Board of Water Commissioners please find: Direct Testimony of David Wagner. By copy of this letter all parties on the attached service list are hereby served with a copy of the same. Sincerely, LISA L, VETCH Senior Assistant City Attorney Enc. MAR cc: Steve Schneider Dave "Wagner

2 DIRECT TESTIMONY OF DAVID WAGNER Q. Please state your name, business address, and employment position A. David Wagner. Saint Paul Regional Water Services, 1900 Rice St, St Paul MN I am the Business Division Manager. Q. On whose behalf are you testifying? A. I am testifying on behalf of the intervening party, the Board of Water Commissioners of the City of St Paul, known informally as the Saint Paul Regional Water Sen-ices, hereinafter referred to as SPRWS Q. Please describe your education! and professional background. A. I graduated from the University of Minnesota with a Bachelor of Civil Engineering Degree. Since graduation I have had additional coursework in Management and Business. My work experience with Saint Paul Regional Water Services has included progressive responsibility within SPRWS for the last 18 years including Engineering Manager. Assistant Manager of Production and my current position as Business Division Manager. Q, Can you briefly describe the function of Saint Paul Regional Water Services? A. SPRWS provides safe, potable water supply and fire protection to over 415,000 people in St Paul and the surrounding communities of Arden Hills, Falcon Heights. Lauderdale, Little Canada, Maplewood, Mendota Heights, Roseville and West St Paul. Our mission is to provide reliable quality water and sendees at a reasonable cost. Q. Under what rate classifications does SPRWS currently operate? A. SPRWS currently operates under Real Time Pricing, Time of Day rates and the Xcel Energy Municipal Pumping Sendee rate schedule. SPRWS has attempted to use all rate categories to best provide energy management for its operation using load management. JMS vl SU160-67

3 Q. What is the purpose of your testimony? A. I am testifying in opposition to Xcel Energy's proposal to eliminate the municipal pumping class ("Municipal Pumping"). I have seen no justification for the proposal other than Xcel's statement that it does not wish to distinguish its customers by end use. Municipal Pumping customers are distinguishable from customers in the general service rate class, however. I believe that the Municipal Pumping should remain separate from the general service rate class. I also believe that Xcel can work together with municipalities to enhance incentives to Municipal Pumping load management and increase economies for the benefit of Xcel and its customers and SPRWS customers. Q. What do you know about Xcel's proposal? A. Xcel has provided very limited information about the basis for its proposal to eliminate the Municipal Pumping class. The testimony of Paul Lehman states only that this class will be eliminated to merge all Municipal pumpers into the same general service rate category as commercial and industrial customers. Q. Is this proposal to eliminate such classification immediate? A. Yes, and no, as I understand it. Through an errata submission recently, Xcel has stated that the existing large Municipal Pumping class customers will remain within that category (at least until Xcel makes its proposals in the next rate case). Yet, any new large Municipal Pumping class customer will be placed within the general service rate class and not benefit from what SPRWS believes is a very important component of the large Municipal Pumping class, a lower demand ratchet. Q. Can you describe the Municipal Pumping system as it operates in communities the SPRWS services? A.The Board has six water-pumping stations on the Municipal JMS vl SU160-67

4 Pumping rate and two wells. These pump stations provide boosted water.. pressure to various areas of our distribution system. Q. What is your position on XceFs proposal regarding ratchet demand rates? A. Xcel has proposed eliminating Municipal Pumping and moving customers to the general sendee rate. A primary difference between these rates is the existence of a ratchet demand in the general sendee rate. Xcel has proposed exempting existing municipal customers from the ratchet demand, at least temporarily. SPRWS believes that the ratchet exemptions should be applied to all Municipal Pumping customers. This includes current customers and those establishing large Municipal Pumping stations in the future. We believe what works for current municipal customers will also work for future Municipal Pumping customers.. Q. Will the proposed reclassificadon of Municipal Pumping by Xcel to general service encourage load management? A. I don't believe so. It is my opinion that the rate schedule under the commercial and industrial class (general sendee rate category) does not develop any load management inducement to the Municipal Pumping customers. The demand ratchet clause in the general sendee rate removes incentive to lower monthly demands below 50% of the highest demand in the prior eleven months. For example, the SPRWS will normally experience a peak demand in the summer during a prolonged dry spell. Since this demand is usually about twice as great as the normal winter demand, the SPRWS Water Utility could not reduce its electrical costs by reducing winter demands below the ratchet demand level. JMS-2S0968vl SU160-67

5 Q. How would the Xcel proposed ratchet demand impact SPRWS and other municipalities that provide basic service to the public such as fire protection? A. A basic function of the SPRWS is to supply water to fight fires. A fire emergency may exaggerate demand to such an extent that it distorts the purpose of the ratchet, which is to distribute some costs that are used at peak. t Q. What other impact might Xcel's proposal have on water operations? A. Many Municipal Pumping operators don't understand the ratchet issue, which appears to penalize Municipal Pumping customers without offering incentives. The SPRWS represents one of the largest municipal water operations in the state of Minnesota. I am informed that in 1985, Xcel also sought to eliminate the Municipal Pumping class with the same argument that we were not unique from general service rate customers. We are very unique in the services we provide and have much to offer in providing overall efficiencies and reduction in Xcel's need for additional generation. Q. How are Municipalities that supply water under the Municipal Pumping rate structure different than the commercial and industrial class? A. All Municipal water utilities have the vital responsibility of maintaining the health and welfare of the community. They must supply "pure and wholesome" water to the residents, as well as operate the sewer system. This is a vital viewpoint in the daily life of its customers. A municipal water utility must have a readily available water supply that can be used at any time for fighting fires. It must have the flexibility to draw on that water as long as the crisis endures. Through storage strategies employed by SPRWS and JMS vl SU160-67

6 other municipal systems, water demand can be controlled and adjusted. The typical commercial establishment cannot store water in the same way. Importantly, the ability to store water may be used to alleviate peak loads. The Municipal Pumping station load is also much more uniform and does not display the daily diurnal variation in demand exhibited by the large C&I customer class. The characteristic of Municipal Pumping customers is such that the cost to serve this type of load should be much less than the cost to serve the C&I class. The load factor is greater and the demand is less variable for Municipal Pumping than the C & I class. Q. Are there any modification of existing rates that you feel could be used to improve the current Municipal Pumping rate design? A. Yes. I believe, as does Verne Jacobsen, that it is possible to use a modification of the existing demand metered Municipal Pumping Rate Schedule, under a combined billing method. This would involve combining accounts within SPRWS and manage these accounts under a single account. For SPRWS (or other Municipalities) it would involve taking a combination of our water booster stations, which are currently individual accounts and managing the operation of these as if they acted together. By combining when our pumps turn on between different pump stations we could reduce electrical load on the system. SPRWS has been billed according to where the electrical connections happened to be. If the SPRWS Municipal Pump Stations were operated as a complete system under a combined billing method, there would be significant incentive for the SPRWS to practice load management JMS vl SU160-67

7 The application of the modified rates in this fashion will result in a significant incentive for the customer to practice load management, which is beneficial to both Xcel and its customers. SPRWS offers in this hearing an approach to load management that can be put into effect very simply, is within the framework of the proposed rate design, and which should be cost effective for both Xcel, SPRWS and other municipalities, Q. Are there benefits to this type of rate? A. Yes. Conservation by load management can be aided by the SPRWS and other municipalities through appropriate pricing policies and rate schedules. Q. Has Xcel offered this type of demand in the past? A. Yes. It was called the Aggregation Rider Pilot. Although Xcel (NPS) offered this rate, Xcel only offered extremely limited cost incentives for customers. The added workload that Municipal Pumping customer needed to manage loads under this pilot project, and more importantly, the lack of cost incentives made this rate unworkable. In 1999 [ sent a letter to Xcel's account executive describing our concern with the limited cost savings potential of what had been proposed under that rate pilot. A rate such as this with adequate cost incentives could be both beneficial to Xcels's customers and also to Xcel in its load management. Q. What are you asking the Commission to do in this rate case? A. The SPRWS does not believe that Xcel has justified its request to eliminate the Municipal Pumping classes. We agree with the testimony of Verne Jacobson and of Gene Dietz of the Suburban Rate Authority. We also believe a better implementation c-f the Municipal Pumping rate is entirely possible. We invite Xcei to spend the time to learn about what JMS vl SU

8 our unique and public service-oriented operations can provide in refining rate incentives. Through shared information, we believe that a system wide customer account for Municipal Pumping can achieve greater efficiencies. We ask the Commission \o order such a study following this rate class. The SPRWS is willing to participate and I'm certain municipal water and sewer operators will also. Though we believe improvements can be made in the Municipal Pumping classes, we do not expect the Commission to order the changes I advocate without further review, any more than it is justified for Xcel to, without explanation, discontinue a rate class that has existed since the Commission's first Xcel-NSP rate order. Q. Is the SPRWS supported by other organizations in this position? A. Yes. The SPRWS has the support of the American Water Works Association, Minnesota Section. Q. Does this conclude your testimony? A Yes. it does JMS-28096Svl SU160-67

9 In Matter of Xcel Energy Application for Authority to Increase Rates for Electric Service OAH Docket No MPUC Docket No. E002/GR OFFICIAL SERVICE LIST 3/2/06 AFFIDAVIT OF SERVICE BY MAIL STATE OF MINNESOTA ) ) ss. COUNTY OF RAMSEY ) Joanne G. Clements, being duly sworn, on oath says that on the 2 rid day of March , she served the attached: Direct Testimony of David Wagner upon the parties listed on the attached Service List, by mailing to them copies thereof, enclosed in an envelope, postage prepaid, and by deppsrtmc same in the post office Minnesota, directed to them at their respective adresses ason the attach Joanne G. Clements Subscribed and sworn to before me this 2 nd dav of March, RITA M. BOSSARD NOTARY PUBLIC - MINNESOTA MY COMMISSION EXPIRES JAN

10 Burl Haar Executive Secretary Minnesota Public Utilities Commission 121 East Seventh Place, Suite 350 St. Paul, MM Sharon Ferguson Docket Coordinator Minnesota Dept. of Commerce 85 7 th Place East, Suite 500 St. Paul. MN Julia E. Anderson Linda Jensen MN Office of Attorney General 1400 Bremer Tower 445 Minnesota Street St. Paul, MN Kathleen D. Sheehv j Administrative Law Judge Office of Administrative Hearings 100 Washington Square, Suite 1700 Minneapolis, MN Megan Hertzler Sr. Attorney Xcel Energy 800 Nicollet Mall, Suite 2900 Richard J. Johnson Michael J. Bradley Moss&Bamett 4800 Wells Fargo Center 90 South Seventh Street Ronald Giteck Steve Alpert Assistant Attorney j General 900 Bremer Tower 445 Minnesota Street St. Paul MN Curt Nelson OAG-RUD 900 Bremer Tower 445 Minnesota Street, Suite 900 St. Paul, MN Chris Duffrin Pam Marshall Energy CENTS Coalition 823 East Seventh Street St. Paul, MN

11 William Blazer Mike Franklin 400 Robert Street North Suite 1500 St. Paul, MN Larry Schedin LLS Resources LLC 12 South 6 th Street Suite 1137 Robert S. Lee Andrew P. Moratzka MackalL Crounse & Moore Law Offices 1400 AT&T Tower 901 Marquette Avenue Tim Barth Marathon Petroleum Company LLC PO Box 3128 Houston, TX Michael J. Sarafolean Gerdau Ameristeel US, Inc West Boy Scout Blvd., Suite 600 Tampa, FL Kimberly Lillyblad Dahlen, Berg & Company 200 South 6 th Street, Suite 300 Gordon Hauk Ford Motor Company Executive Plaza Drive Dearborn, MI Richard J. Savelkoul Felhaber, Larson, Fenlon & Vogt, PA 444 Cedar Street, Suite 2100 St. Paul, MN Bvron Starns -f Brian M. Meloy Leonard, Street & Deinard 150 South Fifth Street Suite 2300

12 James Strommen Bryan Shirley Kennedy & Graven 470 US Bank Plaza 200 South Sixth Street Mark Thieroff Siegel, Brill, Gruepner, Duffy & Foster 1300 Washington Square 100 Washington Avenue South Minneapolis, MN Myer Shark Suite Phillips Parkway St. Louis Park, MN Rebecca S. Winegarden Union Terrace Lane N. Maple Grove, MN Peter H. Grills W-2800 First Nat. Bank Building 332 Minnesota Street St. Paul. MN SaGonna Thompson Records Analyst Xcel Energy 414NicolletMall ; 5 th Floor Minneapolis, MN Christopher Anderson Minnesota Power 30 West Superior Street Duluth,MN Ron Spangler, Jr. Otter Tail Power Company PO Box South Cascade Street Fergus Falls, MN James C. Erickson Director, Rates Minnesota Power 30 West Superior Street Duluth, MN Bob Bridges Engineering, Maintenance & Utilities Manager Sartell Mill 100 East Sartell Street Sartell, MN

13 Lisa L. Veith Assistant City Attorney 400 City Hall and Courthouse 15 West Kellogg Blvd. St. Paul, MN Angie Beehler Wal-Mart Energy Dept SE 10* Street Bentonville, AR72716 Janet Shaddix Elling Shaddix & Associates 9100 W. Bloomington Freeway, S. 122 Bloomington, MN" Ron EKvood Legal Services Advocacy Project Suite 101 Midtown Commons 2324 University Avenue St. Paul. MN Chris Greenman Excelsior Energy, Inc Wayzata Blvd., Suite 305 Minnetonka, MN Lloyd Grooms David M. Aafedt Winthrop & Weinstine 225 South Sixth Street, Suite 3500

14 Allen R. Jenkins McKenna Long Aldridge LLP 303 Peachtree Street NE Suite 5300 Atlanta, GA Robert S. Lee Andrew P. Moratzka Mackall, Crounse & Moore 1400 AT&T Tower 901 Marquette Avenue Bruce Gerhardson Otter Tail Corporation 215 South Cascade Street PO Box 496 Fergus Falls, MN Steve Schneider General Manager Board of Water Commissioners 1900 Rice Street St. Paul, MN

State of Minnesota Public Utilities Commission

:~' #~" ;.>"> *r??? State of Minnesota Public Utilities Commission May 4, 2009 To: Service List From: Burl Haar Executive Secretary Y Re: In the Matter of the Application of for Authority to File, Establish,