1 ii. assignment and summary of testimony and 2
TRANSCRIPT
1 II. ASSIGNMENT AND SUMMARY OF TESTIMONY AND2 RECOMMENDATIONS
3 Q. What is your assignment in this proceeding?
4 A. I discuss SPS's activities regarding coal acquisition and related costs incurred
5 during the period of October 1, 2014 through September 30, 2015 ("Test Year")
6 that are not included in eligible fuel costs, and thus, are included in SPS's
7 proposed base rates. In addition, I sponsor or co-sponsor the following Schedules
8 of SPS's Rate Filing Package ("RFP"):
9 Table HCR-RR-1
E Schedules 2.1, 2.2, 2.3, 2.4, 2.5, and 3.3
H Schedule 13.2
I Schedules 1.1, 1.2, 1.3, 1.4, 2, 3, 4, 9, 10(V)(CD), 13, 14, 15, 17.1,
17.2, 17.3, 18, 19.1, 19.2, 19.3, 19.4, 19.5, 19.6, 19.7, 20,
and 21
10 In addition, I sponsor or co-sponsor the portions of the Executive Summary that
11 contain information from these Schedules.
12 Q. Please describe the information in the schedules you sponsor or co-sponsor.
13 A. The E schedules address various aspects of fossil fuel policy, inventory levels and
14 valuation, and coal supply interruptions. I sponsor the portion of these schedules
15 that address coal issues. Other SPS witnesses sponsor the discussion of natural
16 gas and fuel oil.
17 Schedules 1-1.1 through 1-1.3 present annual and monthly data on fuel
18 costs and volumes burned and purchased by generating station, and sorted by
19 FERC account. I sponsor the coal-related portions of these schedules. SPS
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1 witness Jennifer Pytlik ensures that the costs are properly accounted for by FERC
2 account number. Schedule 1-1.4 addresses non-recurring fuel costs and I sponsor
3 the coal portion of this schedule, while SPS witness Jeffrey C. Klein addresses the
4 long-term purchased power costs portions.
5 Schedules 1-2, 1-3, and 1-4 are non-financial schedules addressing
6 procurement practices, fuel and purchased power committees, and fuel purchase
7 contracts. I sponsor the coal-related portions of these schedules and Mr. Klein
8 sponsors the purchased power portions.
9 In Schedule 1-9, I sponsor the organizational chart for the coal supply
10 organization I lead.
11 In Schedule I-10(V)(CD), which provides employee ethics documents, I
12 co-sponsor the Xcel Energy Code of Conduct.
13 In Schedule I-13, which provides information regarding relationships with
14 fuel suppliers, I sponsor the information as it pertains to SPS's coal suppliers.
15 In Schedule 1-14, which provides information on fuel audits, I sponsor the
16 audit of TUCO, Inc. ("TUCO") (SPS's coal supplier).
17 1 sponsor the identification of coal supply contracts provided in Schedule
18 I-15. Mr. Klein sponsors the identification of purchased power agreements in the
19 same schedule.
20 The 1-17 Schedules and Schedule 1-18 address coal costs and supplier
21 locations.
22 The 1-19 Schedules address various aspects of using railcars to transport
23 coal to SPS's power plants.
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1 Schedule 1-20 addresses certain kinds of travel costs incurred by personnel
2 involved in acquiring fuels. I sponsor the costs incurred by coal supply personnel.
3 I sponsor the coal-related portion of Schedule 1-21, which provides a
4 narrative description of certain fuel management activities.
5 I co-sponsor Schedule H-13.2 with SPS witness David Low. Schedule
6 H-13.2 provides a copy of the United States Department of Energy IE-24 Reports
7 (Form 417R) (now referred to as OE-417 disturbance reports) that SPS filed
8 during the Test Year.
9 Q. Will your testimony be updated for actual costs incurred in the three months
10 following the Test Year, October 2015 through December 2015?
11 A. No. As discussed by SPS witness Evan D. Evans, SPS will file an update 45 days
12 after SPS filed this application. The update will include actual costs incurred to
13 replace the estimates provided in the application for the period of October 1, 2015
14 through December 31, 2015, referred to as the "Update Period." No estimates for
15 the Update Period are included in this testimony, therefore, it is not necessary to
16 update expenses for this timeframe.. The requested coal procurement costs are
17 the Test Year costs adjusted for known and measurable changes of the 2016
18 margin payment that went into effect on January 1, 2016 and an adjustment to the
19 Test Year costs to correct a billing error.
20 Q. Please summarize your testimony and recommendations.
21 A. Procurement Activity
22 • SPS procures coal from TUCO for its two coal-fueled electric generating23 facilities, Harrington and Tolk Stations, under a long-term, sole supplier24 contract for each station. Among other responsibilities, TUCO arranges
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1 for the purchase, receipt, transportation, unloading, handling, crushing,2 weighing, and delivery of coal to the bunkers to meet SPS's requirements.
3 • SPS determines its coal needs, administers the contracts with TUCO, and4 oversees and reviews TUCO's procurement of coal and transportation5 services and TUCO's administration of its subcontracts.
6 • SPS ensures that all costs incurred for furnishing railcars and for handling,7 storing, crushing, processing, weighing, and delivering coal to SPS's8 bunkers, for assessments and taxes, for financing coal inventories and for9 TUCO's margin are reasonable and necessary costs through a number of
10 activities. These activities include actively monitoring TUCO's11 contracting activities and working to ensure that the lowest reasonable cost12 supplier or suppliers are selected. SPS also ensures the accuracy and13 reasonableness of TUCO's charges for delivered coal through general14 contract administration measures including checking invoices and15 conducting annual audits.
16 • SPS and TUCO both work to ensure that costs incurred for base rate coal17 costs are reasonable and necessary through specific work with and18 monitoring of the coal handling contractor and the contractor's costs.
19 Costs
20 • SPS purchases coal from TUCO for a delivered price at the bunkers.21 Costs incurred for furnishing rail cars and handling, processing and22 delivery of coal to SPS's bunkers, assessments and taxes, financing of coal23 inventory and contractual margin payments to TUCO are recovered in24 base rates. In this Test Year, the coal handling costs that are included in25 base rates include several projects that were undertaken at the Tolk and26 Harrington Stations to improve safety and efficiency.
27 • SPS's coal and coal-related costs that were not included in eligible fuel28 costs in the Test Year totaled $43,260,852 (total SPS before jurisdictional29 allocations, or "Total Company" or "total company"). SPS proposes pro30 forma adjustments of an increase of $51,149 (total company) to reflect a31 contractual increase in SPS's payment to TUCO in 2016, and a decrease32 of $3,651,356 to adjust for a billing error, which yields a total revenue33 requirement coal cost of $39,660,645 (total company). These costs are34 included in SPS's cost of service presented by SPS witness Arthur P.35 Freitas in the Revenue Requirement phase.
36 • SPS's Test Year coal costs were prudently incurred and were reasonable37 and necessary for SPS to have usable coal to burn at its Tolk and38 Harrington Stations.
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1 Q. Was Attachment HCR-RR-1(CONF) prepared by you or under your direct
2 supervision and control?
3 A. The attachment was compiled under my direct supervision and control from the
4 monthly invoices prepared and sent to SPS by TUCO. The attachment contains
5 copies of the relevant summary sheets for handling charges from the TUCO
6 invoices.
7 Q. Were the portions of the RFP schedules you sponsor or co-sponsor prepared
8 by you or under your supervision and control?
9 A. Yes, except for Schedule 1-10, which contains the Xcel Energy Code of Conduct.
10 Q. Do you incorporate the portions of the RFP schedules and the portions of the
11 Executive Summary sponsored or co-sponsored by you into your testimony?
12 A. Yes.
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1 III. COAL COSTS INCLUDED IN SPS'S COST OF SERVICE
2 Q. How does SPS procure its coal requirements?
3 A. SPS procures coal from TUCO for its two coal-fueled electric generating
4 facilities, Harrington and Tolk Stations, under a long-term, sole supplier contract
5 for each station, both of which were executed on April 30, 1979. TUCO arranges
6 for the purchase, receipt, transportation, unloading, handling, crushing, weighing,
7 and delivery of coal to the bunkers to meet SPS's requirements. TUCO is
8 responsible for negotiating and administering contracts with coal suppliers,
9 transporters, and handlers. The FSO Department's responsibilities on behalf of
10 SPS include determining SPS's coal needs, administering the contracts with
11 TUCO, and overseeing and reviewing TUCO's procurement of coal and
12 transportation services and TUCO's administration of its subcontracts.
13 Q. How is SPS's cost of coal determined under the TUCO contracts with SPS?
14 A. SPS purchases coal from TUCO for a delivered price at the bunkers, similar to the
15 utility industry practice of purchasing gas delivered to a generating unit's gas
16 header immediately upstream of the boilers. SPS's delivered price of coal is the
17 sum of TUCO's: (a) Free on Board ("FOB") mine cost of coal; (b) cost of
18 transportation from the mine to the unloading facilities; (c) costs incurred for
19 furnishing railcars and for handling, storing, crushing, processing, weighing, and
20 delivering coal to SPS's bunkers; (d) assessments and taxes (except federal and
21 state income taxes); (e) cost of financing coal inventories; (f) cost of coal losses;
22 and (g) margin.
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I Q. Does SPS include all of these seven cost categories in its eligible fuel costs?
2 A. No. Prior to April 1, 2007 (the date new rates from Docket No. 327662 went into
3 effect), SPS included all cost categories in eligible fuel. As part of the
4 Non-Unanimous Stipulation approved in the final order in Docket No. 298013
5 (SPS's fuel reconciliation for the 2002-2003 time period), SPS agreed to change
6 the treatment of its coal costs as part of its next rate proceeding, which was
7 Docket No. 32766. Therefore, as of April 1, 2007, SPS began including in its
8 base rates all components of the cost of coal paid to TUCO that would
9 traditionally be regarded as non-eligible fuel expenses under 16 Tex. Admin.
10 Code § 25.236(a)(1) if SPS took title to the coal at the mine, which are items (c),
11 (d), (e), and (g) in the prior answer. Costs incurred before delivery of coal to the
12 generation plant site, (i.e., TUCO's FOB mine cost of coal, the cost of
13 transportation from the mine to the unloading facility, and the cost of coal losses)
14 have been included in SPS's eligible fuel expenses since April 1, 2007. This
15 treatment is consistent with the coal costs approved in SPS's most recent litigated
16 base rate case in Texas, Docket No. 43695.4
2 Application of Southwestern Public Service Company for: (1) Authority to Change Rates; (2)Reconciliation of its Fuel Costs for 2004 and 2005; (3) Authority to Revise the Semi-Annual Formulae
Originally Approved in Docket No. 27751 Used to Adjust its Fuel Factors; and (4) Related Relief, DocketNo. 32766 (Jul. 27, 2007).
3 Application of Southwestern Public Service Company for: (1) Reconciliation of its Fuel Costs
for 2002 and 2003; (2) a Finding of Special Circumstances; and (3) Related Relief, Docket No. 29801(Dec. 19, 2005).
4 Application of Southwestern Public Service Company for Authority to Change Rates, DocketNo. 43695 (Dec. 18, 2015).
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Q. As part of this proceeding, is SPS proposing to change the way it treats coal
2 costs in the future?
3 A. No.
4 Q. What cost did SPS incur for coal, other than mine cost, transportation cost,
5 and coal losses, during the Test Year?
6 A. The total cost incurred for coal, other than mine cost, transportation cost, and coal
7 losses, in the Test Year, as reflected in SPS's General Ledger, was $43,260,852
8 (total company).
9 Q. Do these base rate Test Year costs include any non-recurring or unusual
10 items that are not representative of costs to be incurred in the future for
11 these activities?
12 A. No, with the exception of the billing error discussed below.
13 Q. How have these recurring costs been included in this rate request?
14 A. These recurring costs are included in the cost of service study presented by Mr.
15 Freitas.
16 Q. Have you made any adjustments to these costs?
17 A. Yes. SPS's margin payment to TUCO increases annually (effective January lst)
18 by the greater of 2.5% or the percent increase in the Consumer Price Index. Thus,
19 a pro forma adjustment has been made to reflect the higher margin payment that
20 will be made in 2016. Additionally, a billing error in certain months of 2015
21 resulted in $3,651,355.95 being booked to handling charges rather than to
22 transportation. Accordingly, these are eligible fuel expenses that should be
23 collected through fuel, and are not part of the costs categories addressed in this
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1 proceeding. A pro forma adjustment has been made to remove these costs from
2 the amount requested in this proceeding.
3 Q. How were the pro forma adjustments calculated?
4 A. Marsfin
5 The pro forma adjustment's purpose is to reflect the increase in the margin
6 payment from the actual amount incurred in the Test Year to the payment
7 required by the contract in 2016. The actual margin payment incurred during the
8 Test Year included only three-fourths of the 2015 contractual margin payment
9 increase, therefore the first component of the pro forma adjustment is to annualize
10 the 2015 increase. This adjustment to annualize the 2015 contractual margin
11 payment resulted in an increase of $10,029. To this sum, was added the known
12 and measurable increase in the 2016 margin payment of $41,120 (the minimum
13 increase possible under the contract) to derive the total pro forma adjustment of
14 $51,149. This sum should be added to the actual Test Year margin payment to
15 yield the 2016 margin payment.
16 Billin Error
17 In late 2014 and early 2015, the Tolk and Harrington Stations both faced low
18 levels of coal inventory due to delivery issues resulting from months of railway
19 congestion caused by the increased use of rail from other industries, as well as
20 from weather delays. To address this, Burlington Northern Santa Fe Railway
21 ("BNSF") provided additional transportation services to supplement TUCO's
22 contracted transportation service, increasing the deliveries to the Tolk and
23 Harrington Stations. BNSF's fees for this service were billed through TUCO. On
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1 the bills to SPS, however, TUCO misclassified these expenses as "Other
2 Handling" charges. These charges should have been billed with the charges for
3 transportation from the mine to the unloading facilities. Accordingly, these
4 charges are eligible fuel expenses that will be reviewed in SPS's next fuel
5 reconciliation proceeding. The sum of the charges misclassified on the bills is
6 $3,651,355.95 (total company). Please refer to Attachment HCR-RR-1(CONF)
7 for the TUCO Invoice Handling Charges Summaries showing the misclassified
8 charges.
9 These pro forma adjustments add $51,149 and subtract $3,651,356,
10 yielding a total base rate coal cost of $39,660,645 (total company).
11 Q. Were there any amendments to the SPS-TUCO contracts during the Test
12 Year that changed SPS's payments to TUCO?
13 A. No.
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1 IV. REASONABLENESS OF SPS'S BASE RATE COAL COSTS
2 Q. How does SPS assure itself that TUCO's costs incurred for furnishing
3 railcars and for handling, storing, crushing, processing, weighing, and
4 delivering coal to SPS's bunkers, for assessments and taxes, for financing
5 coal inventories, and for its margin are reasonable and necessary costs?
6 A. SPS engages in several activities to ensure that all costs to be passed on to SPS
7 are reasonable and necessary. First, SPS actively monitors TUCO's contracting
8 activities that could affect SPS's costs. SPS has frequent discussions with TUCO
9 before execution of any contracts that would affect these costs. Through these
10 discussions, SPS ensures that the overall bid solicitation is conducted so that
11 TUCO will receive the most competitive bids to meet SPS's needs.
12 During any contract evaluation process, SPS reviews TUCO's
13 methodologies and conclusions to ensure that the lowest reasonable cost supplier
14 or suppliers are selected. SPS also reviews and provides comments to TUCO on
15 draft agreements, thus ensuring the most advantageous and flexible arrangements
16 are made. SPS also works with its generation plant engineers to ensure that any
17 operational concerns can be addressed in the agreements' terms.
18 Additionally, SPS stays informed of various discussions and negotiations
19 between TUCO and its contractors. As a result, SPS ensures that the terms and
20 conditions TUCO ultimately achieves are the result of arm's-length negotiations
21 and are in the best interests of SPS.
22 Finally, SPS engages in contract administration activities, which are
23 further described in the next answer, to ensure it is billed correctly under the
24 various contracts.
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1 All of these efforts help ensure that SPS's base rate coal costs are
2 reasonable and necessary expenses.
3 Q. Please elaborate on the contract administration activities you just mentioned.
4 A. SPS ensures the accuracy and reasonableness of TUCO's charges for delivered
5 coal by checking invoices and conducting annual audits of TUCO. This activity
6 includes not only the coal acquisition and transportation agreements but the other
7 contracts that affect coal costs included in the cost of service. For example, SPS
8 performs calculations to ensure the accuracy of finance charges and TUCO's
9 margins. The other cost components in TUCO's invoices are also reviewed to
10 ensure both the contractual validity of each component and the accuracy of the
11 calculation of each cost category.
12 Q. Are there specific activities that TUCO or SPS, or both, pursue to assure
13 themselves that the costs incurred for base rate coal costs are reasonable and
14 necessary?
15 A. Yes. TUCO and its coal handling contractor, Savage Industries ("Savage"),
16 engage in monthly operational meetings to discuss relevant coal handling issues
17 and coal delivery developments for Tolk and Harrington Stations. SPS coal
18 supply and FSO personnel also attend these monthly meetings. TUCO's
19 personnel monitor Savage's costs relative to the amounts budgeted for coal
20 handling activities. TUCO and SPS personnel review Savage's monthly coal
21 handling invoices for accuracy and conformance with approved activities and
22 identified budget expenditures through the annual audit of the TUCO contract.
23 Also, TUCO employs an independent accounting firm to examine Savage's
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I performance under its contract with TUCO, in accordance with the standards
2 established by the American Institute of Certified Public Accountants.
3 Q. Has TUCO recently pursued any actions to improve operations at the Tolk
4 and Harrington Stations?
5 A. Yes. Several projects were authorized by TUCO for Savage to undertake at the
6 Tolk and Harrington Stations to improve safety and efficiency, which, over time,
7 could lower costs or reduce the extent of unavoidable cost increases. The costs of
8 these projects are included in the coal-handling costs. Following is a brief
9 description of the projects:
10 Tolk Station
11 2014:12 • Handrails were added to the Crusher Motor Control Center roof;
13 • Emergency Equipment Startup Controls in Motor Control Center14 ("MCC");
15 • Redesigned access to magnets on the coal belts;16 • Rotary Car Dumper ("RCD") Lighting upgrade;17 • 6A and 6B Belt Lighting upgrade; and18 • 3A Belt Hoist Replacement.
19 2015:20 • Hoist replacements;
21 • Local area network replacement;
22 • Conspec system upgrade (continued);
23 • Caterpillar D10-fire system installation;
24 • Dust collector bag replacement;
25 • Tunnel lighting upgrade;
26 • Sump line replacement;
27 • 5A belt replacement;
28 • RCD positioner base repair and positioner drive replacement;
29 • RCD MCC roof replacement;
30 • 3A conveyor belt replacement; and
31 • Caterpillar 992 addition.
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1
2
3
4
5
67
8
9
10
11
12
1314
15
16
17
18
19
20
21
Harrington Station
2014:• Installed Railcar Camera Monitoring System;• Belt Replacements (Belts 500, 510, 540, 600, 610);• Crusher/Crusher Motor Rebuild; and• Unit 3 Heater Replacement.
2015:• Programmable Logic Controller Upgrade;• Coal pile sealant (dust control);• Shock Pulse Method upgrades;• Crusher building improvements (corroded steel replacement, removal
of voids in wall space - dust, replacing roof, replaced diamond plateflooring with grating);
• Secured asbestos coating in Tripper Decks; and• Office repairs (roof, ceiling tiles, shower, HVAC, windows, mold
removal, etc.);• Dust collector bag replacement;• Caterpillar D10 addition;• Caterpillar 988 addition; and• Perimeter fence repair.
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1 V. AFFILIATE TRANSACTIONS
2 Q. Do any of the coal-related costs included in SPS's Test Year cost of service
3 reflect the purchase of goods or services from an affiliate?
4 A. No.
5 Q. Did TUCO engage in any transactions with an affiliate of SPS?
6 A. No.
7 Q. Does this conclude your pre-filed direct testimony?
8 A. Yes.
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AFFIDAVIT
STATE OF COLORADO ))
COUNTY OF DENVER )
H. CRAIG ROMER, first being sworn on his oath, states:
I am the witness identified in the preceding testimony. I have read thetestimony and am familiar with the contents. Based upon my personal knowledge, thefacts stated in the testimony are true. In addition, in my judgment and based upon myprofessional experience, the opinions and conclusions stated in the testimony are true,valid, and accurate.
H. CRAIG "ROM
Subscribed and sworn to before me thisI day of February, 2016 by
H. CRAIG ROMER.
JEraN^ wovaaAn^ ^NOTARY PUBLIC
STATE G1F COLORADAjAav ro an14aQ^9'oi Not^^y Fublic, State of ColoradonrsskoN rxpJREs 09F13r2o7a My "C;omm.ission Expires: 03 llls^^ iee
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Attachment HCR-RR-1(CONF)Docket No. 45524
Attachment HCR-RR-2(CONF)
Pages 1 through 7
of
Attachment HCR-R-2(CONF)
Confidential Workpaper of H. Craig Romer
AreConfidential Protected Information
CONFIDENTIAL PROTECTED MATERIALSPROVIDED PURSUANT TO PROTECTIVE ORDER
RR9 - Page 355 of 51004462
DOCKET NO. 45524
APPLICATION OF SOUTHWESTERN § PUBLIC UTILITY COMMISSIONPUBLIC SERVICE COMPANY FOR §AUTHORITY TO CHANGE RATES § OF TEXAS
DIRECT TESTIMONYof
JEFFREY C. KLEIN
on behalf of
SOUTHWESTERN PUBLIC SERVICE COMPANY
(Filename: K1einRRDirect.doc)
Table of Contents
GLOSSARY OF ACRONYMS AND DEFINED TERMS ................................................ 2
LIST OF ATTACHMENTS ............................................................................................... 4
1. WITNESS IDENTIFICATION AND QUALIFICATIONS .................................. 5
II. ASSIGNMENT AND SUMMARY OF TESTIMONY ANDRECOMMENDATIONS ........................................................................................ 9
III. LONG-TERM POWER PURCHASE PROCESS AND PRACTICES ............... 14
IV. LONG-TERM PURCHASED POWER CONTRACTS ...................................... 16
V. REASONABLENESS OF SPS'S CAPACITY-RELATED COSTS ................... 18
AFFIDAVIT ..................................................................................................................... 21
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GLOSSARY OF ACRONYMS AND DEFINED TERMS
Acronym/Defined Term Meaniniz
BEA Borger Energy Associates, L.P.
Commission Public Utility Commission of Texas
FERC Federal Energy Regulatory Commission
LPP Lea Power Partners, LLC
MW megawatt
Oneta Oneta Power, LLC (formerly Calpine EnergyServices, L.P.)
Oneta I PPA during the period January 1, 2012 throughDecember 31, 2018
Oneta II PPA during the period June 1, 2014 throughMay 31, 2019
Operating Companies Northern States Power Company, a Minnesotacorporation; Northern States Power Company, aWisconsin corporation; Public Service Company ofColorado, a Colorado corporation; and SPS
O&M operation and maintenance
PPA purchased power agreement
Rate Year Twelve months starting August 1, 2016
RFP Rate Filing Package
SPS Southwestern Public Service Company, a NewMexico corporation
Test Year October 1, 2014 through September 30, 2015
Total Company or total Total SPS (before jurisdictional allocations)company
Update Period October 1, 2015 through December 31, 2015
Klein Direct - Revenue Requirement Page 2
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Acronym/Defined Term Meaning
Xcel Energy Xcel Energy Inc.
XES Xcel Energy Services Inc.
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LIST OF ATTACHMENTS
Attachment Description
JCK-RR-1 Summary of SPS PPAs(Filename: JCK-RR-l.doc)
JCK-RR-2 Summary of PPA Charges(Filename: JCK-RR-2.xls)
JCK-RR-3 Timeline of PPAs(Filename: JCK-RR-3.xls)
JCK-RR-4 Workpapers of Jeffrey C. Klein(Filename: JCK-RR-4.xls)
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DIRECT TESTIMONYOF
JEFFREY C. KLEIN
1 I. WITNESS IDENTIFICATION AND QUALIFICATIONS
2 Q. Please state your name and business address.
3 A. My name is Jeffrey C. Klein. My business address is 1800 Larimer Street, Suite
4 1000, Denver, Colorado 80202.
5 Q. On whose behalf are you testifying in this proceeding?
6 A. I am filing testimony on behalf of Southwestern Public Service Company, a New
7 Mexico corporation ("SPS") and wholly-owned electric utility subsidiary of Xcel
8 Energy Inc. ("Xcel Energy"). Xcel Energy is a utility holding company that owns
9 several electric and natural gas utility operating companies, a regulated natural
10 gas pipeline, and three electric transmission companies.l
11 Q. By whom are you employed and in what position?
12 A. I am employed by Xcel Energy Services Inc. ("XES"), the service company
13 subsidiary of Xcel Energy, as Manager, Structured Purchases.
14 Q. Please briefly outline your responsibilities as Manager, Structured
15 Purchases.
16 A. I am responsible for managing and coordinating the negotiation and
17 administration of long-term (a term of one year or longer) nonrenewable capacity
' Xcel Energy is the parent company of four utility operating companies: Northern States PowerCompany, a Minnesota corporation; Northern States Power Company, a Wisconsin corporation; PublicService Company of Colorado, a Colorado corporation; 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 electric transmission-only
companies: Xcel Energy Southwest Transmission Company, LLC; Xcel Energy Transmission
Development Company, LLC; and Xcel Energy West Transmission Company, LLC, all of which are either
currently regulated by the Federal Energy Regulatory Commission ("FERC") or expected to be regulated
by FERC.
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1 and associated energy purchased power agreements ("PPA") and associated legal
2 documents, across all four of the Xcel Energy Operating Companies. I also
3 manage XES's Wholesale Account Managers who are responsible for the
4 administration of long-term wholesale power sales agreements.
5 Q. Please describe your educational background.
6 A. I received a Bachelor of Arts degree in Political Science from California State
7 University, Northridge in May 1978. I also received a Juris Doctor degree from
8 Southwestern University School of Law in May 1981.
9 Q. Please describe your professional experience.
10 A. I began my professional career with Rockwell International's Energy Systems
l l Group in Canoga Park, California in 1982 as a Legal Contract Analyst and was
12 responsible for verifying that material procurements and subcontracts were in
13 compliance with company and legal standards. I transferred to the Rockwell
14 Hanford Operations division in Richland, Washington in 1984 and continued to
15 work as a Legal Contract Analyst. In 1985, I accepted employment in the
16 contracts department with Perceptronics Inc. in Woodland Hills, California where
17 I negotiated and managed government, commercial, and international defense
18 related contracts and subcontracts. I subsequently became Director, Contracts and
19 Legal Affairs for Perceptronics.
20 In 1993, I accepted employment with Nevada Power Company, the
21 regulated electric utility that primarily serves Las Vegas, Nevada. Initially, I
22 managed the negotiation and administration of transmission and multi-party
23 electric generation contracts. I subsequently became Director of Resource
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1 Procurement and was responsible for the negotiation and administration of all
2 long-term purchased power and fuel supply agreements.
3 In 2004, 1 accepted a position as Manager, Structured Purchases with
4 XES. I currently manage a total of four Purchased Power Analysts and Wholesale
5 Account Managers. The Purchased Power group, where I am one of two
6 managers, is responsible for managing the delivery to Xcel Energy's electric
7 Operating Companies of over 11,300 megawatts ("MW") of electric generation
8 consisting of over 5,800 MW from renewable energy resources and 5,500 MW of
9 installed capacity from thermal electric generation facilities (structured
10 purchases). I am responsible for administering the structured PPAs.
I1 Q. Have you attended or taken any special courses or seminars relating to
12 public utilities?
13 A. Yes. Over my career, I have taken numerous courses and seminars related
14 specifically to the public utility industry, purchased power contracts and
15 negotiations, utility accounting, the Southwest Power Pool Inc.'s Integrated
16 Marketplace and its predecessor the Energy Imbalance Service Market, Western
17 Electricity Coordinating Council and North American Electric Reliability
18 Corporation reliability issues, and Midcontinent Independent System Operator
19 market and reliability matters.
20 Q. Are you a member of any professional organizations?
21 A. Yes. I am a member of the State Bar of California and the National Contract
22 Management Association.
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I Q. Have you testified or filed testimony before any regulatory authorities?
2 A. Yes. I filed testimony before the Public Utility Commission of Texas
3 ("Commission") in Docket Nos. 42004 and 43695, SPS's last two base rate cases,
4 in support of SPS's PPAs and the capacity-related costs incurred under those
5 PPAs. I have also testified before the Public Utilities Commission of Nevada to
6 support resource plans and PPA approvals. I have testified before the Colorado
7 Public Utilities Commission in Docket No. 11A-869E and filed testimony in
8 Docket No. 07A-447E on the issues of PPA negotiation and standard PPA
9 contracts in support of resource plans. In addition, I have testified on SPS's
10 behalf before the New Mexico Public Regulation Commission in Case No.
11 12-00323-UT, and filed testimony in Case Nos. 10-00170-UT and 12-00235-UT,
12 in support of PPA approval, and filed testimony in Case No. 14-00348-UT
13 addressing long-term purchased power costs.
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1 II. ASSIGNMENT AND SUMMARY OF TESTIMONY AND2 RECOMMENDATIONS
3 Q. What is your assignment in this proceeding?
4 A. I am supporting SPS's request to recover long-term PPA costs. There are two
5 major components of purchased power costs: capacity costs and energy costs.
6 Some of SPS's PPAs also include other components of cost such as variable
7 operation and maintenance ("O&M") costs, start costs, and dispatchability
8 payments. For SPS's Texas retail jurisdiction, capacity and other non-fuel related
9 costs are recovered in base rates. In my testimony, I support recovery of capacity
10 and non-fuel related costs incurred under PPAs.
11 Specifically in my testimony, I will address the following:
12 • SPS's long-term purchased power procurement activities and
13 administration of long-term PPAs; and
14 • the specific capacity-related costs incurred under PPAs that SPS
15 seeks to recover in base rates and the reasonableness of the costs.
16 Finally, I sponsor or co-sponsor the following Rate Filing Package
17 ("RFP") Schedules and the portions of the Executive Summary that contain
18 information from these Schedules or regarding long-term PPAs: H-12.4a,
19 H-12.4c, I-1.4, 1-2, 1-3, 1-4, 1-9, I-10(V)(CD), I-11, I-15, I-21, and Q-8.6.
20 Q. Will your testimony be updated for actual costs incurred in the three months
21 following the Test Year, October 2015 through December 2015?
22 A. No. As discussed by SPS witness Evan D. Evans, SPS will file an update 45 days
23 after SPS filed this application. The update will include actual costs incurred to
24 replace the estimates provided in the application for the period of October 1, 2015
25 through December 31, 2015, referred to as the "Update Period." No estimates for
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1 the Update Period are included in this testimony, therefore, it is not necessary to
2 update expenses for this timeframe. The requested capacity-related PPA costs
3 represent costs to be incurred in the Rate Year, which is the twelve months
4 starting August 1, 2016 ("Rate Year"), as determined by the costs incurred during
5 October 1, 2014 through September 30, 2015 ("Test Year") adjusted for known
6 and measurable changes.
7 Q. Please summarize the key points, recommendations, and conclusions in your
8 testimony.
9 A. Long-term Power Purchase Process and Practices
10 • SPS purchases capacity and associated energy under long-term
11 agreements, and administers those agreements to provide its
12 customers with the lowest reasonable cost of power available.
13 • SPS uses a number of strategies to ensure that it obtains the lowest
14 reasonable cost of power, and then implements a monthly invoice
15 verification process to verify the accuracy of each invoice.
16 • SPS continually updates and improves its process and practices by
17 conducting a review after each solicitation and negotiation.
18 Long-term Purchased Power Contracts and Costs
19 • All capacity-related costs that SPS incurred during the Test Year
20 were incurred under contracts reviewed in previous base rate cases
21 and fuel reconciliations. Given SPS's need for capacity in
22 2014-2015, it was reasonable to make these capacity purchases.
23 • SPS reasonably incurred $120,033,278 (total SPS before
24 jurisdictional allocations, "Total Company" or "total company") in
25 capacity-related PPA costs during the Test Year.
26 • Due to contractually authorized price increases, a PPA termination,
27 changes in operational status, and a change in tested heat rate, pro
28 forma adjustments need to be made to the Test Year data for these
29 known and measurable changes.
30 • Capacity-related PPA costs will increase in 2016 by $3,481,064
31 (total company). The total amount SPS seeks to recover through
32 base rates for capacity-related costs incurred under PPAs is
33 $123,514,342 (total company).
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I . Incurring these costs is reasonable and necessary to provide SPS's
2 customers with reliable electric service.
3 Q. Please describe the information in the H-12.4 series schedules that you
4 sponsor or co-sponsor.
5 A. I co-sponsor Schedules H-12.4a and c, which summarize Purchased Power Data.
6 SPS witness Jennifer S. Pytlik co-sponsors these schedules. I sponsor the data
7 within the schedules that report the companies with which SPS has long-term
8 PPAs, and the Net MWh (H-12.4a) and Fixed Costs (H-12.4c) that resulted from
9 each of the agreements during the Test Year. The data is given by month and
10 totaled for the Test Year.
11 Q. Please describe the information in the I series schedules that you sponsor or
12 co-sponsor.
13 A. I co-sponsor Schedule 1-1.4 which addresses non-recurring fuel and purchased
14 power expenses. SPS witness H. Craig Romer also co-sponsors the schedule. I
15 sponsor the schedule as it relates to long-term purchased power expenses. SPS
16 had no such expenses during the Test Year.
17 I co-sponsor Schedule 1-2 which addresses fuel and purchased power
18 procurement practices, and Schedule 1-3 which describes the fuel and purchased
19 power committees. Mr. Romer also co-sponsors these schedules. Mr. Evans and
20 SPS witness Bennie F. Weeks also co-sponsor Schedule 1-2. Together, these
21 schedules discuss the process for assessing, reviewing, and engaging in
22 transactions regarding fuel and purchased power procurement. I sponsor these
23 schedules as they relate to long-term purchased power expenses.
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I I co-sponsor Schedules 1-4 and 1-15 with Mr. Romer. Schedule 1-4
2 pertains to fuel and fuel-related contracts and presents summaries of such
3 contracts. The workpapers to this schedule contain the contracts. Schedule 1-15
4 pertains to a list of fuel or purchased-power related contracts under which costs
5 were incurred. SPS has not filed a fuel reconciliation with its current base rate
6 case? Consequently, the schedules and workpapers present only the contracts
7 with variable O&M charges and other non-fuel PPA charges because those are the
8 contracts that have costs that impact base rates. I sponsor the long-term
9 purchased power portion of these schedules and workpapers.
10 1 co-sponsor Schedule 1-9, which presents employee organizational charts,
11 and Schedule I-10(V)(CD), which presents employee ethics documents. Mr.
12 Romer, Ms. Weeks, and Mr. Evans also co-sponsor these schedules. SPS witness
13 Carol C. Bouw also co-sponsors Schedule I-10(V)(CD). I sponsor the purchased
14 power portion of the organization chart and the employee ethics documents as
15 they pertain to these employees.
16 I co-sponsor Schedule I-11, which pertains to the methods, assumptions,
17 and sources of information used to determine reasonably predictable fuel and
18 purchased power costs. Mr. Evans also co-sponsors this schedule. I sponsor the
19 portion of the schedule that pertains to long-term purchased power.
20 I co-sponsor Schedule 1-21, which discusses activities intended to reduce
21 fuel, fuel-related or purchased power energy costs. SPS witness William A. Grant
2 As discussed by Mr. Evans, SPS is not filing a fuel reconciliation with this base rate case in
accordance with the Order in Project No. 41905 and 16 Tex. Admin. Code § 25.236 as revised in that
proj ect.
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1 and Mr. Romer also co-sponsor this schedule. I sponsor the portion of this
2 schedule regarding long-term purchased power costs.
3 Q. Please describe the information in Schedule Q-8.6.
4 A. I sponsor Schedule Q-8.6, which relates to contract prices for firm and non-firm
5 purchases and sales of power and energy. As filed in this RFP, the schedule
6 refers to the workpapers for Schedule 1-4 (described above) for the relevant
7 information.
8 Q. Were Attachments JCK-RR-1 through JCK-RR-4 prepared by you or under
9 your direct supervision and control?
10 A. Yes.
11 Q. Were the portions of the RFP Schedules and the portions of the Executive
12 Summary you sponsor or co-sponsor prepared by you or under your
13 supervision and control?
14 A. Yes.
15 Q. Do you incorporate the portions of SPS's RFP Schedules and the portions of
16 the Executive Summary sponsored or co-sponsored by you into this
17 testimony?
18 A. Yes.
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1 III. LONG-TERM POWER PURCHASE PROCESS AND PRACTICES
2 Q. What is SPS's goal in entering into long-term PPAs?
3 A. SPS is committed to purchasing power and energy under long-term agreements,
4 and administering those agreements, to provide its customers with the lowest
5 reasonable cost of power available consistent with predicted market conditions,
6 power supply reliability, system reliability, and electric system constraints.
7 Q. What strategy has SPS employed to accomplish this goal?
8 A. SPS works to accomplish this goal through the selection of suppliers as well as
9 the execution and administration of the PPAs. Ms. Weeks discusses the work
10 done by Resource Planning to accomplish this goal. After Resource Planning has
11 selected the preferred bid(s), the Purchased Power group works to achieve the
12 lowest reasonable cost of power purchases for SPS's customers through the
13 negotiation and administration of the final PPA(s). Important elements of this
14 work include the following:
15 • Develop Contracts in a Timely Manner. SPS has found that, in order to
16 maintain the viability of power supply proposals through the contract
17 development process, power supply proposals need to be evaluated and
18 contracts developed and executed with the winning bidder(s) within a
19 reasonable time.
20 • Include Pay-for-Performance Provisions in Contracts. SPS has
21 attempted, where feasible in contract negotiations, to align the interests of
22 its power suppliers with those of SPS and its customers by including
23 pay-for-performance provisions, such as availability factor adjustments to
24 capacity payments.
25 • Maintain Risk and Price as Proposed. SPS ensures that through the
26 contract negotiation process, the level of risk and price proposed in the bid
27 is maintained or improved for the benefit of SPS customers.
28 • Prudent Administration. SPS works to ensure that the contracts are
29 prudently administered, including ensuring that the suppliers deliver
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1 power based on the terms of the PPA throughout the contract period, and
2 that each PPA invoice is accurate.
3 Q. Please describe how SPS verifies the accuracy of each long-term PPA invoice.
4 A. Through coordination between Purchased Power and Commercial Accounting
5 Services personnel, SPS has implemented monthly invoice verification
6 proceduresto:
7 • compare invoiced deliveries with the SPS revenue-meter readings8 or scheduled quantities, as applicable for each PPA;
9 • confirm that the invoice pricing complies with the applicable
10 provisions of the contract; and
11 • check that the invoice calculations are mathematically correct.
12 Q. Does SPS periodically review its power purchase process and practices to
13 improve their effectiveness?
14 A. Yes. After each power purchase solicitation and negotiation is completed, SPS
15 incorporates "lessons learned" from that process into the next power purchase
16 solicitation and negotiation process to make it more effective. Typical
17 improvements include changes to the forms that SPS requires bidders to submit so
18 that proposals can be evaluated against each other on a comparable basis, adding
19 new bid requirements to improve operations and performance, or changes to the
20 model PPA included in the bid solicitation to incorporate additional protections
21 for SPS and its customers against performance risks that should be the
22 responsibility of the power supplier. In this way, SPS's power purchase process
23 and practices are continually being updated and improved to enhance
24 effectiveness.
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1 IV. LONG-TERM PURCHASED POWER CONTRACTS
2 Q. Have you provided attachments that summarize the PPAs under which SPS
3 incurred capacity-related costs during the Test Year and identify the related
4 costs?
5 A. Yes. Attachment JCK-RR-1 provides a summary of the long-term PPAs under
6 which SPS incurred costs during the Test Year. Attachment JCK-RR-2 provides
7 the capacity-related costs incurred during the Test Year under each of the
8 contracts. SPS is seeking to recover costs associated with several PPAs. Included
9 in the Test Year costs are known and measurable adjustments to reflect costs that
10 will begin or end before the start of the Rate Year. All of the PPAs under which
11 capacity-related costs were incurred in the Test Year were reviewed by the
12 Commission in previous SPS rate cases and their capacity-related costs were
13 approved by the Commission in SPS's last litigated rate case, Docket No. 43695.3
14 Attachment JCK-RR-3 identifies the start and end dates of the thermal PPAs for
15 which SPS is requesting recovery of some costs through base rates.
16 Q. What costs associated with these contracts does SPS propose to include in
17 base rates in this proceeding?
18 A. Attachment JCK-RR-2 lists the various charges incurred under PPAs in the Test
19 Year and identifies the charges for which SPS is seeking recovery through base
20 rates. SPS proposes to include in its cost of service the Test Year capacity-related
21 charges with pro forma adjustments. In general, the capacity-related charges are
22 those for capacity or demand and non-fuel items, such as O&M expenses or
3 Application of Southwestern Public Service Company for Authority to Change Rates, Docket No.
43695 (Dec. 18, 2015).
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1 turbine start/scheduling charges. The Test Year capacity-related costs for all
2 contracts totaled $120,033,278 (total company), before considering pro forma
3 adjustments.
4 Q. Has SPS recovered capacity-related costs as defined above through base
5 rates previously?
6 A. Yes. I am not a regulatory expert, but my understanding is that some
7 capacity-related costs have been recovered through base rates for many years.
8 Variable O&M charges and other non-fuel PPA charges were first included in
9 SPS's base rates adopted in Docket No. 35763 based on the Unanimous
10 Stipulation entered into by parties in Docket No. 32766 4 The continuation of this
11 practice was proposed in Docket Nos. 38147, 40824, 42004, and 43695.5 This
12 practice is consistent with 16 TAC § 25.236(a)(6), which prohibits the recovery of
13 demand or capacity costs in fuel costs absent special circumstances. In Docket
14 No. 43695, the Commission approved the capacity-related PPA costs proposed
15 under this practice, which SPS proposes to continue in this rate case.
4 Application of Southwestern Public Service Company for Authority to Change Rates, toReconcile Fuel and Purchased Power Costs for 2006 and 2007, and to Provide a Credit for Fuel Cost
Savings, Docket No. 35763 (Jun. 1, 2009); and Application of Southwestern Public Service Company for:
(1) Authority to Change Rates; (2) Reconciliation of its Fuel Costs for 2004 and 2005; (3) Authority toRevise the Semi-annual Formulae Originally Approved in Docket No. 27751 Used to Adjust its Fuel
Factors; and (4) Related Relief, Docket No. 32766, Unanimous Stipulation at 8 (Mar. 27, 2007).
5 Application of Southwestern Public Service Company for Authority to Change Rates and to
Reconcile Fuel and Purchased Power Costs for 2008 and 2009, Docket No. 38147 (Mar. 25, 2011);
Application of Southwestern Public Service Company for Authority to Change Rates and to Reconcile Fuel
and Purchased Power Costs for the Period January 1, 2010 through June 30, 2012, Docket No. 40824
(Jun. 19, 2013); Application of Southwestern Public Service Company for Authority to Change Rates and to
Reconcile Fuel and Purchased Power Costs for the Period July 1, 2012 through June 30, 2013, Docket No.
42004 (Dec. 19, 2014); and Application of Southwestern Public Service Company for Authority to Change
Rates, Docket No. 43695 (Dec. 18, 2015).
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1 V. REASONABLENESS OF SPS'S CAPACITY-RELATED COSTS
2 Q. Were the PPA capacity-related costs SPS incurred in the Test Year
3 reasonable?
4 A. Yes. These costs were incurred under contracts reviewed in previous base rate
5 cases and fuel reconciliations. The Lea Power Partners, LLC ("LPP") PPA and
6 the PPAs with Oneta Power, LLC (formerly Calpine Energy Services, L.P.)
7 ("Oneta") were the results of competitive solicitations. The Borger Energy
8 Associates, L.P. ("BEA") contract was certificated by the Commission in 1997.6
9 The capacity cost under the contract with the City of Lubbock (Cooke Facility) is
10 $2.12 per kilowatt per month, which is a reasonable cost based on Resource
11 Planning analysis. Given SPS's need for capacity in 2014-2015, it was reasonable
12 and necessary to make these capacity purchases to provide SPS's customers with
13 reliable electric service.
14 Q. Have you made pro forma adjustments for known and measurable changes?
15 A. Yes. I have made several adjustments. The pro forma adjustments are identified
16 for each contract in the "Pro Forma Adjustments" column of Attachment
17 JCK-RR-2.
18 First, there is a contract with Golden Spread Electric Cooperative, Inc. that
19 expired before the end of the Test Year. Thus, a pro forma adjustment was made
20 equal to the Test Year capacity-related costs incurred under this contract to
21 remove those costs. Please refer to Attachment JCK-RR-2, lines 17-19.
6 Application of Southwestern Public Service Company for Certification of Qualifying Facility
Purchased Power Contract Under Section 2.209 of PURA 1995, Docket No. 17525 (Oct. 30, 1997).
Klein Direct - Revenue Requirement Page 18
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1 Second, PPA contract provisions for BEA, Oneta I and 11,7 City of
2 Lubbock, LPP, and Sid Richardson specify price terms for capacity-related costs
3 and variable O&M expense that change from the Test Year to the Rate Year, or
4 that allow for capacity testing to change the contracted capacity. The pro forma
5 adjustments for these contracts account for these contract provisions. Please refer
6 to Attachment JCK-RR-2, lines 3-4, 6-8, 10-12, 14-15, 21-24, and 26-27,
7 respectively.
8 Third, the PPA contract provisions for the City of Lubbock specify
9 capacity payment refunds to SPS when units are not operational. During the Test
10 Year, SPS received capacity payment refunds due to the non-operational status of
11 three units, which are reflected in the Test Year cost. However, two of the units
12 are scheduled to return to service before the start of the Rate Year. Accordingly,
13 SPS does not expect to receive the same level of refunds in the Rate Year. The
14 pro forma adjustment accounts for the change in operational status of the two
15 units that will be online during the entire Rate Year. No adjustment has been
16 made to remove the refunds received in the Test Year for the 41 MW unit that is
17 expected to return to service in the last quarter of the Rate Year. Please refer to
18 Attachment JCK-RR-2, line 14.
19 Fourth, the PPA for LPP includes an adjustment to the monthly energy
20 tolling payment (a variable O&M payment) if the actual net heat rate for the
21 facility is less than 97% of the PPA's predicted net heat rate (increases variable
22 O&M), or greater than the predicted heat rate (reduces variable O&M). In June of
' SPS has two PPAs with Oneta: "Oneta I" runs from January 1, 2012 through December 31,2018; "Oneta 11" runs from June 1, 2014 through May 31, 2019.
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1 2015, the heat rate test result showed a heat rate less than 97% of the predicted net
2 heat rate, resulting in an increase to the variable O&M charge. The facility's
3 actual net heat rate has improved due to a permanent plant upgrade that improved
4 the efficiency of the plant. Due to the upgrade at the plant, the improved heat rate
5 is expected to continue for the foreseeable future. Accordingly, the pro forma
6 adjustment accounts for this change, applying to the entire Rate Year the increase
7 to the monthly energy tolling payment that was in effect starting in July of 2015.
8 Please refer to Attachment JCK-RR-2, line 23.
9 SPS witness Arthur P. Freitas has reflected these pro forma adjustments in
10 the cost of service study he presents.
11 Q. What is the net change due to all these pro forma adjustments?
12 A. The net change is a $3,481,064 (total company) increase, which brings the total of
13 adjusted Test Year capacity-related costs to $123,514,342 (total company).
14 Q. Does this conclude your pre-filed direct testimony?
15 A. Yes.
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AFFIDAVIT
STATE OF COLORADO
)COUNTY OF DENVER j
JEFFREY C. KLEIN, first being sworn on his oath, states:
I am the witness identified in the preceding testimony. I have read the testimonyand the accompanying attachments and am familiar with their contents. Based upon mypersonal knowledge, the facts stated in the testimony are true. In addition, in myjudgment and based upon my professional experience, the opinions and conclusionsstated in the testimony are true, valid, and accurate.
Subscribed and sworn to before me this ^ day of February, 2016 by
JEFFREY C. KLEIN.
Notary Public, State,,6f ColoradoMy Commission Expires: jf4 - ` ^^^^^ 2bt
Klein Direct -Revenue Requirement Page 21
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Attachment JCK-RR-1Page 1 of 2
Docket No. 45524
Summary of SPS PPAs
1. Contracts Reviewed in Previous Rate Cases and Fuel Reconciliation Proceedings
1) Borger Energy Associates, L.P., dated May 23, 1997 and effective June 12, 1999.Letter Agreement dated February 12, 1998. Subject to contractual limitations, SPSdispatches energy purchases under this agreement by verbal communication withthe power supplier and upon prior notice. This contract terminates June 11, 2024,subject to SPS's option to extend the term for 10 years. The maximum summercapacity available under this PPA is 219.43 MW based on a summer 2015 capacity
test.
2) Oneta Power, LLC (I) (formerly Calpine Energy Services, L.P.) dated May 7, 2010,First Amendment dated August 23, 2010, Second Amendment dated February 26,2014, and Third Amendment dated June 25, 2014. The term of this PPA is fromJanuary 1, 2012 through December 31, 2018. This is day-ahead scheduled delivery
of unit firm energy of 200 MW with flexibility to change the schedule to 150 MW.
The energy is delivered from the Oneta Energy Center located in Broken Arrow,
Oklahoma.
3) Oneta Power, LLC (II) (formerly Calpine Energy Services, L.P.) dated May 24,2012, amended June 25, 2014. The term of this PPA is from June 1, 2014 throughMay 31, 2019. This is day-ahead scheduled delivery of unit firm energy withflexibility to schedule 50, 130 or 200 MW. The energy is delivered from the Oneta
Energy Center located in Broken Arrow, Oklahoma.
4) City of Lubbock, Texas (Cooke Units), dated June 30, 2004, amended April 5,
2005. This agreement, which was effective July 1, 2004, terminates June 30,
2019. SPS dispatches energy purchases under this agreement by verbalcommunication with the power supplier and upon prior notice. The current capacity
rating is 114 MW based on the 2015 annual capacity test.
5) Golden Spread Electric Cooperative, Inc., dated on or about December 1, 2011 topurchase 25 MW for the term of June 1, 2014 through May 31, 2015, FirstAmendment dated February 26, 2014. This is a PPA developed pursuant to theterms of the Western Systems Power Pool Agreement, Service Schedule B, UnitCommitment Service. This is unit contingent capacity and associated energy from
Golden Spread's Mustang Station Unit 6.
6) Lea Power Partners, LLC, dated October 20, 2006, First Amendment dated April 4,2007, Second Amendment dated May 30, 2007, Third Amendment dated September23, 2008, Fourth Amendment dated September 8, 2010 and the Fifth Amendmentdated June 10, 2014. The plant began commercial operation on September 16,2008. The expiration date is September 15, 2033. Capacity billing under this PPA
is based on 604 MW.
04484RR9 - Page 377 of 510
Attachment JCK-RR-1
Page 2 of 2
Docket No. 45524
7) Sid Richardson Carbon, Ltd., dated July 30, 2001 (effective August 1, 2001), FirstAmendment dated July 17, 2007 and Second Amendment dated February 19, 2015.The term of this agreement extends through July 31, 2021. SPS purchases energyunder this agreement on a "must take" basis with no dispatch flexibility. The
average maximum summer capacity available under this PPA based on the summer2014 capacity test is approximately 7.96 MW. The capacity level expected during
the Rate Year is 2.11 MW.
II. New Contracts and Extensions Since June 30, 2015
None.
04485RR9 - Page 378 of 510
Attachment JCK-RR-2
Page 1 of 1
Docket No. 45524
Southwestern Public Service Company
Summary of PPA ChargesFor October 1, 2014 through September 30, 2015
LineNo. Contract
1 Structured2 Boreer Ene v Associates. L.P. - Blackhawk3 Capacity and Fixed O&M4 Variable O & M
5 Oneta Power LLC (1/1/12 - 12/31/18) (1) (Formerly
Caloine Enemy Services. L.P.)6 Capacity Payment7 Variable O&M Payment8 Scheduling Charge
9 Oneta Power LLC (6/1/14 - 5/31/19) (II) (Formerly
Calaine Energy Services, L.P.)10 Capacity Payment11 Variable O&M Payment12 Scheduling Charge
13 Citv of Lubbock (Cooke Units)14 Capacity Payment15 O&M Payment
16 Golden Spread Electric Cooperative Inc. - Mustang17 Capacity Payment18 Variable O&M Payment19 Start Payments
20 Lea Power Partners, LLC - Hobbs Plant21 Capacity Payment22 Dispatchability Payment23 Tolling Payment24 Turbine Starts Payment
25 Sid Richardson Carbon, Ltd.26 Capacity Payment27 Energy Charge
28 Total
Base Pro Forma Adjusted
Test Year Adjustments Test Year
10/1/14-9/30/15
$ 20,843,918 $ 400,285 $ 21,244,203
$ 3,726,650 $ 68,480 $ 3,795,130
$ 14,455,920 $ 587,680 $ 15,043,600530,014.00 18,170.00 548,184.00
$ 1,102,003 $ 724,045 $ 1,826,048
$ 20,028,000 $ 812,000 $ 20,840,000777,851.50 24,217.50 802,069.00
$ 1,082,420 $ 1,599,615 $ 2,682,035
$ 1,466,180 $ 390,940 $ 1,857,120$ 206,840 $ (0) $ 206,840
$ 1,168,000 $ (1,168,000) $ -
$ - $ $
$ 45,839,780 $ (819,444) $ 45,020,3361,692,407.60 (14,495.60) 1,677,912.006,965,347.00 859,542.00 7,824,889.00
$ 4,400 $ 190 $ 4,590
$ 105,727 $ (2,161) $ 103,566$ 37,820 $ 0 $ 37,820
$ 120,033,278 $ 3,481,064 $ 123,514,342
04486RR9 - Page 379 of 510
Attachment JCK-RR-3Page 1 of 1
Docket No. 45524
Southwestern Public Service Company
Timeline of PPAsFor Which Recovery is Requested
Thermal Purchased Power Agreements
Line No. Contract Start Date End Date
1 Borger Energy Associates, L.P. June 12, 1999 June 11, 2024
2 Oneta Power, LLC (I) fka Calpine Energy Jan. 1, 2012 Dec. 31, 2018Services, L.P. (1)
3 Oneta Power, LLC (II) fka Calpine Energy June 1, 2014 May 31, 2019Services, L.P. II
4 City of Lubbock, Texas (Cooke Units) July 1, 2004 June 30, 2019
5 Golden Spread Electric Cooperative, Inc. June 1, 2014 May 31, 2015(Mustang 6 25 MW Capacity Purchase)
6 Lea Power Partners, LLC Sept. 16, 2008 Sept. 15, 2033
7 Sid Richardson Carbon, Ltd. Aug. 1, 2001 July 31, 2021
04487RR9 - Page 380 of 510
Attachment JCK-RR-4
Page 1 of 2
Docket No. 45524
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04489RR9 - Page 382 of 510
DOCKET NO. 45524
APPLICATION OF SOUTHWESTERN § PUBLIC UTILITY COMMISSIONPUBLIC SERVICE COMPANY FOR §AUTHORITY TO CHANGE RATES § OF TEXAS
DIRECT TESTIMONYof
WILLIAM A. GRANT
on behalf of
SOUTHWESTERN PUBLIC SERVICE COMPANY
(Filename: GrantRRDirect.doc)
Table of Contents
GLOSSARY OF ACRONYMS AND DEFINED TERMS ................................................ 2
LIST OF ATTACHMENTS .............................................................................................. . 5
1. WITNESS IDENTIFICATION AND QUALIFICATIONS ................................. . 6
II. ASSIGNMENT AND SUMMARY OF TESTIMONY ANDRECOMMENDATIONS ....................................................................................... . 9
III. SOUTHWEST POWER POOL SERVICES ........................................................ 13
A. RELIABILITY COORDINATION ..................................................................... 16
B. TARIFF ADMINISTRATION AND REGIONAL SCHEDULING ............................ 17
C. TRANSMISSION EXPANSION PLANNING ...................................................... 18
1. TRANSMISSION PLANNING PROCESS .................................................... 18
2. SPP COST ALLOCATION FOR NEW TRANSMISSION
INFRASTRUCTURE ............................................................................... 22
3. SPP DIRECTIVES TO CONSTRUCT FACILITIES ...................................... 25
4. SPP EXPANSION .................................................................................. 34
D. MARKET OPERATIONS ............................................................................... 35
IV. SPP ADMINISTRATIVE FEE ............................................................................. 40
AFFIDAVIT ..................................................................................................................... 42
Grant Direct - Revenue Requirement Page 1
04490RR9 - Page 383 of 510
GLOSSARY OF ACRONYMS AND DEFINED TERMS
Acronym/Defined Term Meaning
APC Adjusted Production Cost
ATP Authorization to Plan
ATRR Annual Transmission RevenueRequirement
Basin Electric Basin Electric Power Cooperative
B/C Benefit-to-Cost
Commission Public Utility Commission of Texas
DTO Designated Transmission Owner
EIS Energy Imbalance Service
FERC Federal Energy Regulatory Commission
ESWG Economic Studies Working Group
Heartland Heartland Consumers Power District
Integrated System Basin Electric Power Cooperative,Heartland Consumers Power District,Western Area Power Administration -Upper Great Plains Region (collectively)
Incumbent Current Public Utility TransmissionProvider
ITP Integrated Transmission Planning
ITP10 ITP 10 - year assessment
ITP20 ITP 20 - year assessment
ITPNT ITP Near - Term assessment
kV Kilovolt
LIP Locational Imbalance Price
Grant Direct - Revenue Requirement Page 2
04491RR9 - Page 384 of 510
Acronym/Defined Term
LMP
MISO
MOPC
MTF
MWG
MWhNERC
NPV
NTC
OATT
O&M
Operating Companies
RC
RCAR
RFP
RSC
RTO
RTWG
RUC
SPP
Meaning
Locational Marginal Price
Midcontinent Independent System
Operator
Markets and Operations Policy Committee
Metrics Task Force
Market Working Group
Megawatt hourNorth American Electric ReliabilityCorporation
Net Present Value
Notification to Construct
Open Access Transmission Tariff
operation and maintenance
Northern States Power Company, aMinnesota corporation; Northern StatesPower Company, a Wisconsin corporation;Public Service Company of Colorado, aColorado corporation; and SPS
Reliability Coordinator
Regional Cost Allocation Review
Rate Filing Package
Regional State Committee
Regional Transmission Organization
Regional Tariff Working Group
Reliability Unit Commitment
Southwest Power Pool Inc.
Grant Direct - Revenue Requirement Page 3
04492RR9 - Page 385 of 510
Acronym/Defined Term
SPP Tariff
SPS
Test Year
Meanin^
SPP Open Access Transmission Tariff
Southwestern Public Service Company, aNew Mexico corporation
October 1, 2014 through September 30,2015
Trigger DateThe date upon which reallocation oftransmission revenue requirements isauthorized under the Balanced Portfolio
TO Transmission Owner
TWGTransmission Working Group
Update PeriodOctober 1, 2015 through December 31,2015
WAPAWestern Area Power Administration -Upper Great Plains Region
Xcel Energy Xcel Energy Inc.
XESXcel Energy Services Inc.
Grant Direct - Revenue Requirement Page 4
RR9 - Page 386 of 510 04493
LIST OF ATTACHMENTS
Attachment Description
WAG-RR-1 Southwest Power Pool Inc. Organizational Chart - 2015(Non-native format)
WAG-RR-2 Summary of Southwest Power Pool Inc.'s CostAllocation Methods(Non-native format)
Grant Direct - Revenue Requirement Page 5
RR9 - Page 387 of 510 04494