S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * *

Transcription

1 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of INDIANA MICHIGAN POWER COMPANY ) for authority to increase its rates for ) Case No. U the sale of electric energy. ) ) QUALIFICATIONS AND DIRECT TESTIMONY OF JULIE K. BALDWIN MICHIGAN PUBLIC SERVICE COMMISSION July 1, 2010

2 QUALIFICATIONS OF JULIE K. BALDWIN PART I 1 Q. Please state your full name, business address and occupation. 2 A. My name is Julie K. Baldwin, and my business address is 655 Mercantile Way, 3 Lansing, Michigan I am employed by the Michigan Public Service Commission (MPSC) as a Public Utilities Engineer in the Renewable Energy 5 Section of the Electric Reliability Division. 6 Q. Describe your educational and professional background. 7 A. I graduated from Michigan State University in June, 1987 with a Bachelor of 8 Science Degree in Chemical Engineering. I was employed by TRC 9 Environmental Consultants in Los Angeles, California from February 1988 to 10 June 1989 and was involved in various air quality consulting projects. 11 In July, 1989, I began employment with the Michigan Public Service 12 Commission as a Public Utilities Engineer working in the areas of Act 9 natural 13 gas contract pricing issues, natural gas and petroleum products pipeline 1 certificates of public convenience and necessity, and monthly natural gas 15 production reporting. I began working on electric and natural gas tariff 16 administration in December 2002 and in October 2003 was transferred to the 17 Rates and Tariff Section. My tariff administration responsibilities included 18 reviewing all electric and natural gas tariff filings to determine if they met the 19 requirements of the Commission, reviewing Commission Orders to determine 20 whether tariff filings were necessary, determining whether rate books met the 21 requirements of U-6300 (Administrative Regulations Prescribing the Filing 22 Procedures for Rate Schedules, Rules and Regulations, Standard Forms and 23 Contracts by Electric, Water, Steam and Gas Utilities), and serving as case 1

3 QUALIFICATIONS OF JULIE K. BALDWIN PART I 1 coordinator for various ex parte electric and natural gas tariff-related cases filed 2 with the Commission. 3 In June 2005, I attended a short course titled Introduction to Cost of Service Concepts and Techniques for Electric Utilities. 5 During the time period from October 2005 to May 2006, I was 6 temporarily assigned as Executive Assistant to former Commission Chairman 7 Lark. 8 In May 2006, I was assigned to what is now the Renewable Energy 9 Section of the Electric Reliability Division. I am the lead engineer for matters 10 pertaining to electric interconnections and net metering. My work responsibilities 11 include developing and implementing rules for the 2008 PA 295 net metering 12 program and electric utility interconnection, serving as case coordinator for net 13 metering and electric utility interconnection formal complaint cases, resolving 1 informal net metering and electric utility interconnection complaints and 15 inquiries, and public education and outreach. Additional responsibilities include 16 reviewing rates impacting distributed generation in utility rate cases, green pricing 17 programs, and renewable energy contracts filed for approval with the 18 Commission. During 2008 and 2009, I served as the Commission s representative 19 and Secretary on the Wind Energy Resource Zone Board established by the 20 Commission pursuant to 2008 PA Q. Have you previously filed testimony in proceedings before the Commission? 22 A. During my work at the MPSC, I have filed testimony in Case No. U-1056 (Act 9 23 natural gas contract pricing case), various pipeline cases, Case No. U-137 2

4 QUALIFICATIONS OF JULIE K. BALDWIN PART I 1 (Consumers Energy Electric Rate Case), Case No. U-152 (Detroit Edison Rate 2 Case) and Case No. U (Consumers Energy Electric Rate Case). 3 3

5 DIRECT TESTIMONY OF JULIE K. BALDWIN PART II 1 Q. What is the purpose of your testimony in this proceeding? 2 A. The purpose of my testimony is to recommend, on behalf of the Commission Staff 3 (Staff), several tariff revisions. Q. Are you proposing any exhibits? 5 A. No. 6 Q. What is the first tariff change you are recommending? 7 A. I am recommending modifications to a sentence about cogeneration and small 8 power production facilities, which appears in standard form on almost all rate 9 schedules. The purpose of the modification is to indicate to customers with 10 renewable generators that net metering service may be an alternative tariff option. 11 The revision (insertion) is indicated by the underlined text. 12 Customers with cogeneration and/or small power production facilities 13 shall take service under Rider NMS-1 (Net Metering Service for Customers With 1 Generating Facilities of 20 kw or Less), Rider NMS-2 (Net Metering Service for 15 Customers With Generating Facilities Greater than 20 kw), Tariff COGEN/SPP 16 or by special agreement with the Company Q. Why are you recommending that a reference to the net metering riders be added to 19 the above sentence? 20 A. Customers with renewable generators have the option to participate in the 21 Company s net metering program if they meet the program eligibility 22 requirements. Highlighting the net metering option will help customers determine 23 the most appropriate tariff arrangement for their circumstances. 2 Q. What are the additional tariff changes you are recommending? 25 A. I am recommending the following changes to Tariff COGEN/SPP:

6 DIRECT TESTIMONY OF JULIE K. BALDWIN PART II 1 Under Availability of Service, increase the generator size from 100 kw to kw (Tariff Sheet No. D-65.00) 3 Under Energy Credit, add the option for the customer to select the credit/payment rates at real-time, PJM wholesale market locational marginal prices (Tariff Sheet 5 D-69.00). The revision (insertion) is indicated by the underlined text. 6 (1) Energy Credit 7 The following generation credits or payments from the Company to the customer 8 shall apply for the excess electrical energy delivered to the Company or the total 9 electrical energy produced by the customer's qualifying COGEN/SPP facilities: (a) If standard energy meters are used, 2.91 /kwh for all energy delivered or 12 produced during the billing period or, at the option of the customer, the 13 monthly average, real-time, PJM wholesale market locational marginal 1 price at a Company pricing node mutually agreed upon by the Company 15 and the customer (b) If TOD meters are used, 3.07 /kwh for all energy delivered and produced 18 during the on-peak period, and 2.79 /kwh for all energy delivered or 19 produced during the off-peak period or, at the option of the customer, PJM 20 wholesale market real time locational marginal on-peak and off-peak 21 prices at a Company pricing node mutually agreed upon by the Company 22 and the customer Q. Why are you recommending increasing the eligible generator size for this tariff? 25 A. It is helpful to customers with small generators to avoid spending resources on 26 contract negotiation. Providing specific information in a tariff about energy 27 credits/payments, backup and maintenance capacity arrangements makes it easier 28 for small generators to develop a project. 29 Increasing the generator size under this tariff to 550 kw coordinates 30 with Commission s Electric Interconnection and Net Metering Standards 31 generator size project categories 1 through 3. 5

7 DIRECT TESTIMONY OF JULIE K. BALDWIN PART II 1 Additionally, Staff would like to build consistency in the structure of 2 these types of tariffs among all Michigan electric providers. Consumers Energy, 3 in U-16190, its recent rate case, proposed to change the generator size from 100 kw to 550 kw for its customer generation tariff. Staff supports this change. 5 Q. Why are you recommending that the Company include the PJM pricing option 6 under the credit/payment rates? 7 A. As shown on the redline markup on the proposed Tariff COGEN/SPP [I&M-66, 8 (WWH-5), pages ], the Company is proposing to increase the 9 credits/payments for energy from 0.86 cents/kwh to 2.91 cents/kwh. To 10 encourage renewable energy generation, without increasing costs to other 11 customers, Staff is proposing that the Company offer the option for customers to 12 receive energy credits/payments at the PJM wholesale market locational marginal 13 price for an applicable PJM pricing node in the Indiana Michigan Power 1 Company service territory. 15 Q. After making the changes you propose in your testimony, does Staff recommend 16 that the Commission approve the Company s proposed Tariff COGEN/SPP rate 17 schedule? 18 A. Yes. 19 Q. Does this conclude your testimony at this time? 20 A. Yes. 21 6

8 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of INDIANA MICHIGAN POWER COMPANY ) for authority to increase its rates ) Case No. U for the generation and distribution ) of electricity and for other relief ) ) QUALIFICATIONS AND DIRECT TESTIMONY OF NICHOLAS M. EVANS MICHIGAN PUBLIC SERVICE COMMISSION July 1, 2010

9 QUALIFICATIONS OF NICHOLAS M. EVANS PART I Q. Please state your full name, business address for the record. A. My name is Nicholas M. Evans, and my business address is 655 Mercantile Way, Lansing, Michigan Q. By whom are you employed and in what capacity? A. I am employed by the Michigan Public Service Commission (MPSC) as a Public Utilities Engineer in the Energy Efficiency Section of the Electric Reliability Division (ERD). The ERD has responsibility for implementing 2008 PA 295. Q. Describe your education and professional background. A. I earned a bachelor s degree in Electrical Engineering from Kettering University in 2005 and am currently pursuing a Master of Public Administration degree at Western Michigan University. In 2007, I began working at the State of Michigan s Bureau of Energy Systems (then known as the State Energy Office ) as an energy engineer, where I performed energy audits on local government, school district, and state office buildings and advised the building managers and other personnel on ways to increase their buildings energy efficiency and conserve energy. In 2010, I began working for the MPSC in my current capacity. I review filings made in the reconciliation process of utility Energy Optimization plans and am the case coordinator for six cooperative utilities. I am also the case coordinator for U and U-1601, which explores the issue of dispatchable customer owned distributed generation. I participate in the Energy Efficiency Collaborative and the Smart Grid Collaborative. I also participate in the Midwest ISO Demand Response Working Group and the Organization of MISO States 1

10 QUALIFICATIONS OF NICHOLAS M. EVANS PART I Demand Response and Technology Work Group. I am a member of the MPSC s Plug-in Hybrid Electric Vehicle Task Force. Q. Have you previously testified before the Commission? A. No. 5 2

11 DIRECT TESTIMONY OF NICHOLAS M. EVANS PART II Q. What is the purpose of your testimony in this proceeding? A. The purpose of my testimony is to present the Staff s recommendations regarding Indiana Michigan Power Company s (I&M) gridsmart sm program. GridSMART sm is I&M s name for a proposed system-wide (full) deployment of smart grid / Advanced Metering Infrastructure (AMI) technology. Q. Are you sponsoring any exhibits in this proceeding? A. No. Q. Can you summarize Staff s position with regard to I&M s request for cost recovery of its gridsmart sm program? A. Yes. Staff is recommending that the Commission deny cost recovery of I&M s proposed full deployment of smart grid / AMI infrastructure. Staff recommends against cost recovery, irrespective of the mechanism used to recover costs from ratepayers. In particular, Staff is opposed to the use of a tracker, as requested by I&M to recover smart grid / AMI capital and O&M expenditures. The pre-filed testimony of Staff witness Dr. Nicholas I. Nwabueze explains Staff s opposition to trackers. Q. Why does Staff not support cost recovery of I&M s proposed full deployment of smart grid / AMI expenditures? A. Full implementation at this time does not appear to be in the public interest. The total project cost of gridsmart sm is $80,675,612 plus $80,720 for existing meter retirements over the first four years. The monetary benefits to ratepayers over these four years are a small fraction of the total project cost: $2.22 million in 3

12 DIRECT TESTIMONY OF NICHOLAS M. EVANS PART II AMI cost savings and benefits. In addition, most of these benefits do not begin to manifest until the third and fourth year of the program. Q. Is the Staff concerned with the depreciation lives of gridsmart sm assets? A. Yes. Depreciation lives appear to be very short. The smart meters that will be deployed in this project will be capitalized when acquired as one retirement unit with a seven-year life. In addition, Home Area Network Devices will have a shorter asset life of five years. Grid management hardware has a longer asset life of 15 years. These are very short lives for core utility assets. Q. Will increases in operational savings be realized beyond the initial four years? A. Yes. It is reasonable to assume that annual savings for ratepayers will continue beyond the four year deployment phase. Some of these savings will be the result of operational performance data gained during the first years of deployment. However, expected additional capital investments required in light of short depreciation lives will offset savings that accrue in those years beyond the initial four year deployment phase. Q. Could gridsmart sm help customers save money? A. It is possible. For example, time-based rates could induce some conservation by customers, potentially offsetting a portion of the rate hike for them. The greater transparency in retail electricity prices could incentivize consumers to shift load to cheaper, off-peak periods. Q. Do you agree with I&M that it is very difficult to quantify customer benefits associated with smart grid implementation?

13 DIRECT TESTIMONY OF NICHOLAS M. EVANS PART II A. Yes. There is an inherent lack of precision in predicting and quantifying these benefits due to variances in consumer behavior and the fact that opportunities to reduce consumption and/or shift load are different for each customer class. Q. Should these difficult to-quantify benefits be considered by the Commission in an economic evaluation of a proposed full deployment? A. Yes. However, I&M did not attempt an economic analysis of customer benefits in its request for rate recovery. Thus, the Commission is lacking essential information needed to know if such benefits, in conjunction with other cost savings estimated by I&M, will offset the substantial monetary costs that all ratepayers in I&M s Michigan territory would bear to finance the gridsmart sm project. The Staff s position is that a full business case should be filed by I&M prior to any Commission approval of smart grid full deployment. In addition, the utility should complete a smart grid pilot and file a report with the Commission indicating that the company successfully met all milestones associated with the pilot. I&M should also file a comprehensive plan for passing the benefits of smart grid / AMI to ratepayers. It should be noted that these are the same conditions imposed on Detroit Edison in case U Q. Do you have any summary remarks? A. Yes. The gridsmart sm program as presented by I&M, without a full business case, pilot, or a comprehensive plan for passing the benefits to ratepayers, carries an unreasonably high risk for customers, creates an unjustified economic burden for the region and therefore should be rejected by the Commission. Q. Does this conclude your testimony? 5

14 DIRECT TESTIMONY OF NICHOLAS M. EVANS PART II 1 A. Yes. 6

15 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of ) INDIANA MICHIGAN POWER COMPANY ) for authority to increase its rates ) for the sale of electric energy. ) Case No. U ) QUALIFICATIONS AND DIRECT TESTIMONY OF KATIE J. MORGAN MICHIGAN PUBLIC SERVICE COMMISSION July 1, 2010

16 QUALIFICATIONS OF KATIE J. MORGAN PART I 1 Q. Please state your full name, business address and occupation for the record. 2 A. My name is Katie J. Morgan and my business address is 655 Mercantile Way, 3 Lansing, MI I am employed by the Michigan Public Service Commission (MPSC) as an Economic Analyst in the Energy Efficiency Section of the Electric 5 Reliability Division. 6 Q. Please describe your education background. 7 A. I earned a bachelor s degree in Finance and Economics from Lake Superior State 8 University. I am also certified as a Building Analyst Professional from Building 9 Performance Institute, Inc. 10 Q. What is your work experience? 11 A. I worked for the Eastern Upper Peninsula Intermediate School District from to 2009 where I conducted data analysis and data processing of the Michigan 13 Educational Assessment Program (MEAP) as well as with a number of other 1 standardized tests. In August of 2009 I began employment with the Michigan 15 Public Service Commission as an Economic Analyst working in the Energy 16 Efficiency Section. I review filings made in the reconciliation process of utility 17 Energy Optimization plans and am the case coordinator for 0 municipally owned 18 utility companies. I am also the case coordinator of U which examines the 19 issue of Dynamic Peak Pricing. I participate in the Energy Efficiency 20 Collaborative as well as the Smart Grid Collaborative. I am a member of the 21 Midwest ISO Demand Response Working Group, the Organization of MISO 22 States Demand Response and Technology Work Group, and the Michigan Public 23 Service Commission s Plug-in Electric Vehicle Task Force. 1

17 QUALIFICATIONS OF KATIE J. MORGAN PART I 1 Q. Have you previously testified before the Commission? 2 A. No. 2

18 DIRECT TESTIMONY OF KATIE J. MORGAN PART II 1 Q. What is the purpose of your testimony in this proceeding? 2 A. The purpose of my testimony is to present Staff s recommendations regarding 3 Indiana Michigan Power Company s (I&M) proposed decoupling mechanism, referred to as Net Lost Revenue Recovery Tracker by I&M. 5 Q. Are you sponsoring any exhibits along with your testimony? 6 A. Yes. Exhibit S-7. 7 Q. Is Staff recommending that the Commission approve I&M s proposed Net Lost 8 Revenue Recovery Tracker? 9 A. Yes, with some necessary refinements. 10 Q. Has the Commission previously approved decoupling mechanisms in other cases? 11 A. Yes, the Commission has previously approved decoupling mechanisms for 12 Consumers Energy, Detroit Edison, Michigan Consolidated Gas, and Michigan 13 Gas Utilities on a pilot basis. Pilots are advantageous to test assumptions and 1 obtain knowledge before full-scale implementation of more permanent 15 mechanisms is in place. 16 Q. Is the decoupling mechanism that I&M is proposing a pilot as well? 17 A. Yes. 18 Q. Is I&M s proposed decoupling mechanism the same as other decoupling 19 mechanisms that have been approved by the Commission? 20 A. No, I&M s decoupling mechanism, the Net Lost Revenue Recovery Tracker, is 21 more limited in scope than what the Commission has approved in the past but it is 22 considered reasonable by Staff for learning and exploration of different 23 mechanisms. 3

19 DIRECT TESTIMONY OF KATIE J. MORGAN PART II 1 Q. How are lost revenues determined in I&M s proposed decoupling mechanism? 2 A. The mechanism relies on a computation of lost sales that directly resulted from 3 energy efficiency programming efforts. Q. Does I&M directly administer an Energy Optimization (EO) program? 5 A. No. I&M has chosen to pay the alternative compliance payment pursuant to PA Section 91. This state wide program is administered by Efficiency United 7 under Commission direction. 8 Q. Does Efficiency United have the same EO targets as utilities who administer their 9 own programs? 10 A. Yes, pursuant to contract, the same annual targets apply as if a utility 11 administered their own program. 12 Q. Will Efficiency United s compliance with its annual targets be validated by a 13 third-party evaluation contractor? 1 A. Yes. 15 Q. Should third-party validated EO savings (EO credits) be used in the calculation of 16 I&M s decoupling mechanism? 17 A. Yes, such certified values should be used as the basis for estimating lost sales. 18 However, the Commission should note that these are annualized values 19 irrespective of the actual installation date of the energy efficiency measures. For 20 example, a measure that was installed in December would be deemed savings as if 21 it were implemented for the entire year. 22

20 DIRECT TESTIMONY OF KATIE J. MORGAN PART II 1 Q. Should the certified EO savings, determined by Efficiency United s contractor, be 2 adjusted? 3 A. Yes. The EO compliance values will overstate I&M s actual sales losses in the year the measures were implemented. 5 Q. How should this be corrected? 6 A. Noting that EO savings are cumulative, i.e. a measure installed in 2011 will 7 produce energy efficiency savings over the course of the measure s lifecycle, 8 I&M will experience lost sales year-after-year for program measures implemented 9 in a particular year. For the first year, actual sales losses to I&M can be estimated 10 by assuming that customers installed energy efficiency measures uniformly 11 throughout the year. With such an assumption, the achieved savings value should 12 be divided by two. This would reflect that on average EO program measures were 13 installed at the midpoint of the calendar year. For subsequent years, sales losses 1 can be estimated by using the unadjusted certified values. Exhibit S-7 contains a 15 chart illustrating these concepts. 16 Q. Can you explain the detailed calculation? 17 A. Yes, for example, during 2011 the decoupling mechanism should reflect one-half 18 of Efficiency United s EO target of 0.75% of I&M s KWh retail sales in While in 2012 they would receive the entire certified EO KWh savings for (0.75% of KWh retail sales in 2010); in addition I&M would receive one-half of 21 the certified EO KWh savings for 2012 (1% of KWh retail sales in 2011). 22 Q. How does I&M propose to implement its Net Lost Revenue Recovery Tracker? 5

21 DIRECT TESTIMONY OF KATIE J. MORGAN PART II 1 A. The company proposes to implement surcharges simultaneously with expected 2 sales losses. For example, the company s Exhibit I&M-101 (DMR-29) shows 3 that the company intends to implement surcharges reflecting expected 2011 EO sales losses during calendar year It appears that no reconciliation is 5 involved. 6 Q. Does Staff agree with I&M s proposed implementation strategy for its Net Lost 7 Revenue Recovery Tracker? 8 A. No. Staff recommends that the company file an annual revenue decoupling 9 mechanism reconciliation no later than April 30 th (this is the same date as I&M s 10 EO Annual Report/Reconciliation is due to the Commission). Surcharges would 11 be implemented upon Commission approval. 12 Q. Does this complete your direct testimony? 13 A. Yes. 6

22 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of ) INDIANA MICHIGAN POWER COMPANY ) for authority to increase its rates ) for the sale of electric energy. ) Case No. U ) EXHIBITS OF KATIE J. MORGAN MICHIGAN PUBLIC SERVICE COMMISSION July 1, 2010

23 Case No: U Exhibit No: S-7 Page: 1 of 1 Witness: Katie J. Morgan Energy Optimization Sales Losses Decoupling Mechanism (Cumulative losses KWh) Sales Losses in Certified EO Savings 2 Sales Losses in Certified EO Savings Certified EO Savings 2 Sales Losses in Certified EO Savings Certified EO Savings Certified EO Savings 2

24 S T A T E OF M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the application of ) INDIANA MICHIGAN POWER COMPANY ) for authority to increase its rates ) for the sale of electric energy. ) Case No. U ) PROOF OF SERVICE April M. Stow, being duly sworn, deposes and says that on Jul 1, 2010 A.D., she served a copy of the Qualifications and Direct Testimony of Julie Baldwin, Nicholas Evans and Katie Morgan, by first class mail, postage prepaid, or by interdepartmental mail to the persons as shown on the attached service list. April M. Stow Subscribed and sworn before me this 1 st day of July, A.D., 2010 Sharron A. Allen Notary Public, Ingham County, Michigan My Commission expires August 16, 2011

25 MPSC Case No. U July 1, 2010 SERVICE LIST Richard J. Aaron Ross K. Bower II Fahey Schultz Burzych & Rhodes, PLC 151 Okemos Rd. Okemos, MI 886 Robert A.W. Strong Clark Hill PLC 151 S. Old Woodward Ave. Ste. 200 Birmingham, MI 8009 Donald E. Erickson, Assistant Attorney General Environment, Natural Resources, and Agriculture Div. G. Mennen Williams Bldg., 6th Fl. 525 W. Ottawa St.; P.O. Box Lansing, MI 8909 Hon. Barbara A. Stump Administrative Law Judge Michigan Public Service Commission 655 Mercantile Way Lansing, MI 8911