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Cont ol Number: 48401

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Item Number: 241

Addendum StartPage: 0

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SOAH DOCKET NO. 473-18-3981 PUC DOCKET NO. 48401

APPLICATION OF TEXAS-NEW §

BEFORE THE STATE OFFICE

MEXICO POWER COMPANY FOR §

OF

AUTHORITY TO CHANGE RATES §

ADMINISTRATIVE HEARIINGS

DIRECT TESTIMONY OF

I3LAKE P. IA1NNI

INFRASTRUCTURE AND RELIABILITY DIVISION

PUBLIC UTILITY COMMISSION OF TEXAS

AUGUST 20, 2018

PUC Docket No. 48401 SOAH Docket No. 473-18-3981 Page 2/33

TABLE OF CONTENTS

I. STATEMENT 01' QUALIFICATIONS 3

11. PURPOSE OF TESTIMONY 3

III. TRANSMISSION INVESTED CAPITAL 6

IV. DISTRIBUTION INVESTED CAPITAL 8

V. VEGETATION MANAGEMENT 9

Capitalized Vegetation Management 9

Service Quality 11

Prospective Vegetation Management Expenses 15

VI. SUMMARY & CONCLUSION 18

ATTACHMENTS

BPI-1 Qualifications of Blake P. lanni

BPI-2 List of Dockets Containing Testirnony of Blake P. Ianni

BPI-3 16 Texas Administrative Code § 25.231(c)(2)(A)

BPI-4 FERC's Guidance on Vegetation Management Capitalization

BPI-5 16 Texas Adrninistrativc Code § 25.52(c)(6)

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1


1 I. STATEMENT OF QUALIFICATIONS

2 Q. Please state your name, occupation, and business address.

3 A. My name is Blake P. lanni. I arn employed by the Public Utility Commission of Texas

4 (Commission) as an Engineering Specialist in the Infrastructure and Reliability Division.

5 My business address is 1701 North Congress Avenue, Austin, Texas 78701.

6 Q. Please briefly outline your educational and professional background.

7 A. I have a Bachelor of Science degree in Petroleum Engineering and a Master of Business

8 Administration degree with a concentration in Engineering and Technology_ Prior to

9 graduate school, I worked as an engineer for an energy service company. I have been

10 employed by the Commission since December 2016. A more detailed summary of rny

11 experience is provided in Attachment BP1-1.

12 Q. Are you a registered professional engineer?

13 A. No, 1 am an Engineer in Training (EIT), and my Texas EIT certification number is 59094.

14 Q. Have you previously filed testimony before the Commission?

15 A. Yes. A list of the dockets in which I have testified is provided as Attachment BPI-2.

16 II. PURPOSE OF TESTIMO1NY

17 Q. Please briefly describe the application in this docket.

18 A. In this docket, Texas-New Mexico Power Company (TNMP) is seeking approval from the

19 Commission to change its utility base rates for its service area. TNMP, which will be

20 referred to as the "Company" or "Applicant" in this testimony, provides service to

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1 customers in several noncontiguous areas across North Texas, Central/West Texas, and the

2 Gulf Coast region. t

3 Q. What is the purpose of your testimony in this proceeding?

4 A. The purpose of my testimony is to present recommendations concerning several

5 transmission and distribution (T&D) costs that the Applicant is seeking to recover in this

6 rate case.

7 Q. What regulations have you referred to in making your evaluation and arriving at

8 your conclusions and recommendations?

9 A. I have referred to 16 .fexas Administrative Code (TAC) § 25.231(c)(2)(A), which I have

10 included here as Attachment BPI-3.

11 Q. What else did you rely upon to reach your conclusions?

12 A. I have relied upon the application, intervenor testimony. and the Applicant's responses to

13 requests for information (RFIs).

14 Q. What issues identified by the Commission in the Preliminary Order of this docket will

15 you address?

16 A. In my testimony, I partially address the following issues which the Cornmission identified

17 in the Preliminary Order:2

18 8. What are the reasonable and necessary components of TNMP's rate base?

19 9. What is the original cost of TNMP's property used and useful in providing service

20 to the public at the time the property was dedicated to public use? What is the

21 amount, if any, of accumulated depreciation on that property?

22

I Prepared Direct Testimony and Exhibits of James Neal Walker on Behalf of Texas-New Mexico Power Company at bates 39 (May 30, 2018) ("TNMP Direct Testimony of Walker"). Staff will cite to bates pages where available.

2 Preliminary Order (June 28, 2018).

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PUC Docket No. 48401

SOAH Docket No. 473-18-3981 Page 5/33

11. What amount. if any. of TNMP's invested capital has not previously been

2 subject to a prudence review by the Commission? If there are any such amounts,

3 what are the amounts, for what facilities, property, or equipment was the investment

4 made. and were the amounts prudently incurred? What amount, if any, of allowance

5 for funds used during construction (AFUDC) is being transferred to invested capital

6 in this proceeding? If AFUDC is being transferred, for what facilities and at what

7 rate was the AFUDC accrued?

8 20. What are TNMP's reasonable and necessary operations and maintenance

9 expenses?

10 51. Has TNMP proposed any rate riders? If so, should any of the proposed riders

11 be adopted? If so, what are the appropriate costs to be recovered through the riders,

12 and what are the appropriate terms and conditions of the riders?

13 a. Should the Commission approve TNMP's proposed rider for vegetation

14 management?

15 Q. How is your testimony organized?

16 A. My testimony begins in Section 1 with a statement of my qualifications. In Section 11,

17 discuss the purpose of my testimony, and in Section 111, 1 discuss several transmission

18 projects that the Company is attempting to include in the calculation of rates and why those

19 particular projects should not be included. Section IV addresses vegetation management

20 issues. including clearing of right-of-way (ROW) and TNMP's request for a vegetation

21 management rider. A summary and conclusion of my testimony are found in Section V.

22 Q. Have you prepared any attachments related to your testimony?

23 A. Yes, Attachments BPI-I , BPI-2, BPI-3, BPI-4, and BPI-5. These include my

24 qualifications, a list of dockets in which I have previously testified, a copy of 16 TAC

25 § 25.231(c)(2)(A). a copy of the Federal Energy Regulatory Commission's (FERC)

26 guidance on vegetation management capitalization, and definitions of service quality

27 metrics.

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1 III. TRANSMISSION INVESTED CAPITAL

2 Q. What is the total amount of transmission capital that TNMP is requesting to include

3 in rate base in this proceeding?

4 A. TNMP seeks to include $213.242,878 of transmission invested capital in rate base in this

5 proceeding.3

6 Q. Based on your analysis, are there any costs that you recommend be disallowed from

7 TNMP's proposed transmission invested capital?

8 A. Yes, I recommend the disallowance of four specific projects, included in Table 1 below,

9 because they are not currently energized and are therefore not used and useful. Pursuant to

10 16 TAC § 25.231(c)(2), "The rate base, sometimes referred to as invested capital, includes

11 as a major component the original cost of plant, property, and equipment, less accumulated

12 depreciation, used and useful in rendering service to the public."' In its Supplemental

13 Response to Staff RF I No. 1-3, TNN4P provided a spreadsheet detailing a number of project

14 additions that it seeks to include in rate base as transmission invested capita1.5 TNMP lists

15 four of these projects as being "In Construction" or otherwise not in service.6 TNMP's

16 most recent Monthly "Transmission Construction Progress Report confirms that three of

17 these project are incomplete.' TNMP further states that construction of the fourth project,

18 NTE07612 Westminster T-Line, has not yet begun because of delays relating to an on-

Prepared Direct Testimony and Exhibits of Henry E. Monroe on Behalf of Texas-New Mexico Power Company at bates 1596 (May 30, 2018) (Exhibit HEM-3: Schedule 11-3). Refer to Column 4, Line 21 on Page 6 of 6

Attachment BP1-3 (emphasis added); see also Public Utility Regulatory Act, Tex. Util. Code Ann. § 36,051 (West 2016 & Supp. 2017) (PURA).

5 Texas-New Mexico Power Company's Supplemental Responses to Staff s First Request for Information - Staff 1-3 (Aug. 2, 2018) ("TNMP's Supplemental Response to Staff RF1 No. 1-3").

6 Id. 2018 Monthly Construction Progress Report Pursuant to 16 TAC § 25.83, Project No. 47927, TNMP

Transmission Construction.Progress Report for July 2018 (July 12, 2018).

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SOMA Docket No. 473-18-3981 Page 7/33

going condemnation tria1.8 Because these projects are not energized. and thus not used and

2 useful, I recornmend that they be disallowed from recovery. The final column in the table

3 below represents the FERC account number that I believe each project is currently assigned

4 to based on the project description that TNMP provided.

5 Table 1. Transmission Invested Capital Disallowances

PROJECT NUMBER

Project Name/Description Explanation if Var +/-

10% City/County

CCN Docket

#

ln Service

Date

Transmission Additions 2017

FERC

Account

NTE07612 Westrninster T Line

The $1M variance is

due to the delay in the

condemnation trial for

the remaining

landowner causing

delay in the project.

Collin Courty 41756 Dec 17 $587,410 FERC 350

STE07317 Rebuild Greenbelt to Tejas

Project delayed due to

easement issues

restricting the

construction activities

Eirazoria

County N/A

In

construction $379,221 FERC 350

NTE08318

Pyote

WickettLineRebuild&138kV

Cony

These expenditures

for long lead time

items for construction

projects to be

completed in 2018

were funded from

2017 capital

expenditure budget

resources, but no

specific 2017 budget

had been set for this

project

Ward County N/A In

construction $121,707 FERC 356

5TE09617 RebuildLaMarque-Praxair

Grant Amoco

Galveston

County NA

in

construction $9,561,586 FERC 356

Total 510,649,924

6 As indicated in the table, two projects "INMP requests for capital recovery are categorized

7 as belonging to the FERC 350: Land and Land Rights, and the other two projects belong

8 to FERC 356: Overhead Conductors and Devices.

9 Q. What is the total amount that you recommend be excluded from transmission

10 invested capital?

11 A. As shown in Table 1, the sum total of these disallowances is $10,649.924.

8 TNMP's Supplemental Response to Staff RFI No. 1-3.

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1 Q. From which FERC accounts should these cost be removed?

2 A. Of this total, I recommend that $966,631 be removed from FERC 350 and that $9,683,293

3 be removed from FERC 356.

4 IV. DISTRIBUTION INVESTED CAPITAL

5 Q. What is the total amount of distribution invested capital that TNMP is requesting to

6 include in rate base in this proceeding?

7 A. TNMP seeks to include $146,593,659 of distribution invested capital in rate base in this

8 proceeding.9

9 Q. Based on your analysis, are there any costs that you recommend be disallowed from

10 TNMP's proposed distribution invested capital? Please explain.

11 A. Yes, I recommend that $72,338 for TNMP project "Hwy 22 Sub 39118032" be disallowed

12 because it is represents land costs with no energized electric facilities yet on site. In its

13 response to Staff RFI No. 5-31, TNMP states that the Highway 22 Substation will not be

14 built and energized until "mid-to-late 2020."1° Due to the fact that the project includes only

15 land without energized facilities, it is not considered used and useful. Therefore, I

16 recommend that the $72,338 be removed from FERC 360: Land and Land Rights.11

9 See Prepared Direct Testimony and Exhibits of Henry E Monroy on Behalf of Texas-New Mexico Power Company at bates 1596 (May 30, 2018) (Exhibit HEM-3: Schedule 11-B). This is contained in Column 5, Line 21 on Page 6 of 6.

I° Texas-New Mexico Power Company's Responses to Staff s Fifth Request for Information Staff 5-1 Through 5-38 at 35 (July 30, 2018) (TNMP's Response to Staff RFI No 5-31).

1 ' $72,338 represents capital addition cost for project, based on TNMP's Response to Staff RFI No. 1-4. See Texas-New Mexico Power Company's Responses to Commission Staff s First Request for Information Staff 1-1 Through 1-13 at bates 6 and 291-321 (July 2, 2018) ("TNMP's Responses to Staff s First RFI") (TNMP Response to Staff RFI No, 1-4, including Attachment TNMP 48401 Staff 1-4 Capital Distribution additions 2017.pdf).

0000008

PUC Docket No. 48401 SOAH Docket No. 473-18-3981 _Page 9/33

1 V. VEGETATION MANAGEMENT

2 Capitalized Vegetation Management

3 Q. What is "vegetation management"?

4 A. Vegetation rnanagernent (VM) are those activities associated with the trimming, removal

5 and control of plant vegetation on electric utility ROW to establish and maintain

6 appropriate clearances between vegetation and electric facilities.

7 Q. Why is VM important for utility companies?

8 A Proper VIVI is a crucial part of a utility maintaining safe, reliable electric service. Adequate

9 clearance distances between vegetation growth in utility ROWs and electric equipment

10 must be maintained to prevent vegetation from coming into contact with an overhead line

11 or other transmission or distribution facility Service interruptions can occur when

12 vegetation contacts an unshielded overhead electric conductor; some of these outages may

13 be intermittent, as is the case when wind causes a tree limb to sporadically contact a

14 conductor. However, in other instances, a tree may break or fall directly onto power lines

15 and create a ground fault and damage the electric facility, even potentially starting a fire.

16 For these reasons, VM is very important for the safety ()f utility personnel, customers, and

17 the general public and is necessary to maintain reliable electric service.

18 Q. What was TNMP's total expenditure for vegetation managernent for the 2017 test

19 year?

20 A. TNMP spent a total of $4.413,880 on vegetation management operations and management

21 (O&M) during the test year and classified an additional $974,978 as capitalized vegetation

22 management expenses.12

12 TNMP's Responses to Staff s RFI at bates 3 (TNMP's Response to Staff RF1 No. I-1); Texas-New Mexico Power Company's Supplemental Responses to Commission Staff s First Request for Information - Staff 1-1 (Aug. 13, 2018) ("TNMP's Supplernental Response to Staff RFI No. 1-1")

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1 Q. What is your recommendation regarding these vegetation management expenses?

A. 1 recommend that $861,344 of the total $974,978 be excluded from capital recovery and

3 recategorized as an O&M expense. Staff RFI to TNMP No. 1-1 asked what portion of

4 vegetation management expenses were related to the first clearing and grading of land and

5 ROW.I3 TNMP explained that $60,561 of the $974,978 spent on ROW clearing was for

6 new lines, and an additional $53,073 was for VM related to the rebuilding or

7 reconductoring of existing 1ines.14 For a vegetation management expense to be considered

8 a capital cost, it must have been incurred at the time the new capital project was built or be

9 associated with a capital project like the rebuilding or reconductoring of an existing line. I 5

1 0 I therefore recommend that the $861,344 TNMP spent for the clearing of ROW on existing

11 distribution lines be reassigned to the proper maintenance account rather than be included

12 as a capitalized expense because these costs are not associated with any capital projects. 1

13 have included the Federal Energy Regulatory Commission's (FERC's) guidance regarding

14 vegetation management costs as Attachment BPI-4.

15 Q. From which specific FERC accounts should these costs be removed, and to which

1 6 accounts should they be reassigned?

17 A. Based on the information provided by the Company, 1 recommend that the $861,344

18 currently assigned to FERC 365 be moved to the distribution maintenance account for

19 Overhead Lines, FERC 593.

20 Q. Were these identified expenses only from the test year?

21 A. Yes, that is my understanding.

13 id

TNMP's Supplemental Response to Staff RFI No. 1- I. 15 See Attachment BPI-4, Federal Energy Regulatory Commission's (FERC's) guidance regarding vegetation

rnanagement costs.


SOAH Docket No. 473-18-3981 Page 11133

1 Q. To the extent that any capitalized vegetation management expenses were included in

2 TNMP's proposed rate base from prior to the test year, do you have a

3 recommendation regarding those costs?

4 A. Yes, to the extent that any other capitalized vegetation management expenses were

5 included in rate base beyond these test year expenses, Staff also recommends that such

6 expenses be disallowed.

7 Service Quality

8 Q. How does the Commission measure a utility's service reliability?

9 A. The Comrnission rneasures a utility's service reliability based on two indices, System-

10 Average Interruption Duration Index (SAIDI) and System-Average Interruption Frequency

11 Index (SA1FI). These terms are defined in 16 TAC § 25.52(c)(6), which I have included as

12 Attachment BPI-5 for ease of reference. SAID1 is a measurement of the average amount of

13 time that a customer's service is interrupted during the reporting period, while SAIFI is a

14 measurement of the average number of times that a customer's service is interrupted.16

15 Lower SAIDI and SAIFI values indicate more reliable service.

16 Q. Is there a standard with which to compare a utility's yearly SAM and SAIFI data?

17 Please explain.

18 A. Yes. Pursuant to 16 TAC § 25.52(g)(1), each utility has its own established benchmark or

19 standard for system reliability:

20 The standards shall be unique to each utility based on the utility's performance, and 21 may be adjusted by the commission if appropriate for weather or improvements in 22 data acquisition systems. The standards will be the average of the utility's 23 performance from the later of reporting years 1998, 1999, and 2000 or the first three 24 reporting years the utility is in operation.

16 16 Tex Admin. Code §§ 25.52(c)(6)(A) & (B) (TAC).

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1 Q. What are TNM13's system-wide SAID1 and SAIF1 standards (benchmarks)?

TNMP's system-wide SAIDI standard or benchmark is 52.16857, and its system-wide

3 SAIFI benchmark is 0.75147.

4 Q. What are TNMP's current and historical SAIDI values?

5 A. The chart below shows TNMP's SAIDI values since 2008. As can be seen, TNIVIP's SAIDI

6 values have steadily increased frorn 42.051 minutes in 2013 to 75.783 minutes in 2017.17

TNMP SAIDI Data, 2008-2017

80

75

70

65

60

55

50

45

40

35

30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

7

8 The dashed line represents TNMP's SAIDI benchmark, and as shown, "fl\IMP has

9 underperformed in regards to its benchmark for the past three years. Specifically, for 2015,

10 2016, and 2017, the Company has had system-wide average SAID1 values in excess of 5%

11 of its benchmark, which is a violation of 16 TAC § 25.52(g)(l )(13).18

12

13

17 To compile this chart. I compared TNMP's annual Electric Service Quality Reports filed pursuant to 16

FAC §§ 25.52 and 25.81 from 2008 through 2017 in the following Comrnission Project Nos.: 36484, 37855, 39035, 40078, 41092, 42146, 44021, 45516, 46717, and 47924.

"SAIDI. Each utility shall maintain and operate its electric distribution system so that its SAID! value shall not exceed its system-wide SA IDI standard by more than 5.0°i)." 16 TAC § 25.52(g)(1)(B).

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I Q. What are TNMrs current and historical SAIFI values?

2 A. The chart below shows TNMP's SAIFI values since 2008. TNMP's current SAIFI value

3 for 2017 is 0.7254,19 which is below its system-wide benchmark value, as shown in the

4 following chart.

TN MP SAIFI Data, 2008-2017

0.85

0.8

0.75

0.7

0.65

0.6

0.55

0.5

0.45

0.4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

5 Q. In 2017, what percent of TNMP's outages were due to vegetation?

6 A. In 2017, 23.1% of TNMP's outages were due to vegetation.2° The chart below shows that

7 the percent of vegetation-related outages that TNMP experienced steadily increased since

2009.2 '

19 See 2017 Electric Service Quality Reports Pursuant to 16 TAC §§ 25.52 and 25.81, Docket No. 47924, TNMP's Service Quality Report to the Public Utility Commission of Texas in Accordance with 16 Texas

Administrative Code §25.81 2017 Reporting Year (Feb. 2, 2018), 2" See id 21 This chart was also compiled through a comparison of TNMP's annual Electric Service Quality Reports

filed pursuant to 16 TAC §§ 25 52 and 25.81 from 2008 through 2017 in the following Commission Project Nos.:

36484, 37855, 39035, 40078, 41092, 42146, 44021, 45516, 46717, and 47924.

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SOMA Docket No. 473-18-3981 Page 14/33

Percent of TNMP's Forced Outages

due to Vegetation

24.0%

23.0%

22.0%

21.0%

20.0%

19.0%

18,0%

17.0%

16 0%

15.0%

14.0%

13,0%

12.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1

2 Q. How does this compare to the vegetation-related outages for other Texas utilities?

3 A. The following table shows the 2017 vegetation-related outage data for other electric

4 utilities in Texas.1 NMP had the second highest level of vegetation-related outages among

5 utilities in Texas,22 however, the service areas of the utilities shown in Table 2 have

6 different amounts and types of vegetative cover.

7 Table 2. Ve etation-Related Outa es

Company Forced Outages clue to

Vegetation (%)

, AEP

Southwestern 33.90%

TNMP 23.1%

Austin Energy 18.19%

Entergy (ETI) 17.56%

AEP Texas 16.23%

CenterPoint 13.29%

Oncor 13.00%

El Paso

Electric 4.38%

Sharyland

; Utilities 1.98%

XCEL Energy 1.93%

22 See generally 2017 Electric Service Quality Reports Pursuant to 16 TAC §§ 25.52 and 25.81, Project No 47924 (Jan. 4, 2018)

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1 Prospective Vegetation A/fanagernent Expenses

2 Q. What is the total amount that TNMP is requesting annually for vegetation

3 management?

4 A. TNMP is requesting $9,000,000 annually in recovery for VM23 Of this amount,

5 $4,413.880 is the actual amount that TNMP spent on VM operations and maintenance

6 during the 2017 test year. TNMP is requesting the remaining amount. $4,586,120. as a

7 vegetation management rider.24

8 Q. Why is TNMP requesting this rider?

9 A. TNMP is requesting this rider to transition to a four-year vegetation management cycle,

10 which it states is necessary to improve its reliability.25 Currently, TNMP utilizes a more

I 1 reactive approach to VM, in which it focuses its resources on improving its worst

12 performing feeders.26 Citing the fact that tree-related SAIDI has increased since 2011.

13 TN MP states this represents "an unsustainable trend that may worsen in the next few years

14 if the current funding level is maintained."27

15 Q. Do you agree that it makes sense for TNMP to transition to a different VM approach?

16 A. Yes. I believe that the Company and its customers would benefit from adopting a more

17 proactive. cyclical VM program.

18

19

23 Prepared Direct Testimony and Exhibits of Anne Beard on Behalf of Texas-New Mexico Power Company at bates 125 (May 30, 2018) (TNIMP Direct Testimony of Beard").

24 Id.

25 Id at bates 124. 26 Id. at bates 120. 27 Id. at bates 124.



1 Q. What is the initial amount TNMP states would be required to transition to this 4-year

2 vegetation management cycle?

3 A. TN MP- s witness Anne Beard states that the Company would require $13,000,000 annually

4 for four years to initially transition to this cycle-based approach.28 However, as stated

5 above, TNMP is requesting to include only $9,000,000 annually in revenue requirement

6 for vegetation management at this time.29 The chart below highlights the Company's

7 proposal.

8

Overview cf TNNIP's Proposal

511

5,1

• Proposvet vro ftfr.Rr

9

10

28 ird.

29 Id. at bates 125.

4

Kt Los* of 4 yr Cyc1e

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SOAH Docket No. 473-18-3981 P age 17/33

1 Q. Why is TNMP only requesting $9,000,000 total when it states that it needs $13,000,000

2 to transition to a four-year cycle?

3 A. This is unclear. but as can be seen from the chart above, TNMP's request raises some

4 concerns from a practical and operational standpoint. If granted the additional $4,586,120

5 in an annual VM rider, TNMP would still face a $4.000,000 million deficit during Years

6 through 4 when it is transitioning to the new four-year cyclical VM program. Moreover,

7 because TNMP states that it needs a total of $13,000,000 annually to initially transition to

8 a four-year cycle, it is unclear what cycle the Company would end up with if the

9 Commission awards it the $9,000,000 in annual VM that it requested. Presumably, with

10 the lesser funding it requested, the cyclical VM program that TNMP would be able to

11 achieve would be substantially longer than the four-year cycle it deems ideal. Additionally,

12 both of the $9,000.000 and $13,000,000 amounts are estimates.

13 Q. How are VM expenses typically handled in a utility's request for rates?

14 A VM expenses, including costs related to cyclical VM programs, are typically treated as

15 routine O&M expenses and included in a utility's annual rate base.

16 Q. What do you recommend regarding TNMP's request for a vegetation management

17 rider?

18 A. I recommend that the vegetation management rider be denied. Pursuant to 16 TAC

19 § 25.231(a), capitalized expenses are required to be based on historical test year expenses

20 and adjusted for "known and measurable costs when necessary.3° Because the proposed

21 rider is not based on historical costs. but rather on an estimate of future costs, it is

22 prospective in nature and therefore not known and measurable. Due to the fact that the

30 16 TAC § 25.231(a).

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1 costs of transitioning to a four-year cycle are not "known and measurable" in accordance

2 with 16 TAC § 25.231, I recommend that TNMP's request for this rider be denied. TNMP

3 has spent an average of $4,000,000 annually for vegetation management over the past

4 several years.31 Despite requesting additional funding for vegetation management, TNMP

5 has not been increasing its vegetation management expenditures in recent years, with the

6 exception of 2017, as the table below shows.32

Total TNMP VM Expenditures

$5,500,000

$5,000,000

$4,500,000

$4,000,000

$3,500,000

$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0

20:1:1 11:0•1 2010 201; )012 21.13 2014 2015 71: I f3 701 70 7

8

9 vl. SUMMARY & CONCLUSION

10 Q. Please summarize the conclusions that you have reached as a result of your analysis.

11 A. Based on my analysis, I am recommending the following:

12 • that $10,649.924 be removed from Transmission Invested Capital because these

13

costs represent projects not in service yet;

TNMP Direct Testimony of Beard at bates 121. ' 2 See 'I-exas-New Mexico Power Company's Response to Cities Served by Texas-New Mexico Power

Company's Second Request for Information to Texas-New Mexico Power Company at bates 24 & 135 (July 5, 2018) (TNMP's Response to Cities RF1 No. 2-21); see also TNMP Direct Festimony of Beard at bates 130 (Exhibit AB-2).

0000018



1 • that $72,338 be removed from Distribution Invested Capital because there is no

2 facility in service on this site;

3 • that $861344 in vegetation management expenditures on existing power lines be

4 removed from capitalized rate base and be assigned to the appropriate distribution

5 maintenance account; and

6 • that TNMP's request for a VM rider be denied because these expenditures are

7 speculative in nature and not known and measureable. Instead, TNMP should

8 transition to its proposed four-year cyclical VM program and return to the

9 Commission in a future proceeding to request recovery of the associated costs.

10 Q. What are the total amounts of your recommended re-classifications and

11 disallowances by FERC account?

12 A. The FERC accounts associated with my recommended disallowances are summarized in

13 Table 3 below. Also, as mentioned above, I am recommending the Company's request for

14 a VM rider be denied.

15

16

17

18

19


SOAH Docket No. 473-18-3981

Page 20/33

1 2 Table 3. Recommendations

Amount Description

Current

FERC

Account

Recommendation:

Reclassify or Disallow?

Re-classify

to FERC Ac count

Vegetation Management

Distribution VA4

$861,344 clearing of

existing ROW

FERC 365

Reclassify FERC 593

Distribution

Invested

Capital

Land & Land Rights

$72,338 Land for -

FERC future Hwy

360 22 Substation :

Disallow N/A

Transmission Invested

Capital I

Land & Land Rights

$966.631 Projects not

yet in service FERC 350

Disallow N/A

(,)verhead conductors and devices

$9,683.293 Projects not

yet in service FERC 356

Disallow N/A

S10,649,924

3 Q. How were your recommended re-classifications and disallowances used by other Staff

4 witnesses?

5 A. Staff witness Anna Givens used my re-classifications and disallowances to adjust the total

6 plant in service amounts for transmission and distribution.

7 Q. Does this conclude your testimony?

8 A. Yes.

0000020


ATTACHMENT BPI-1

Qualifications of Blake P. Ianni

0000021


BPI-1 Qualifications of Blake P. Ianni

In December 2012, I graduated from the University of Texas at Austin with a Bachelor of Science

in Petroleum Engineering as well as a Certificate in Business Foundations. In May 2016, I earned

a Master in Business Administration with a concentration in Engineering & Technology from

Texas State University.

Upon completing my undergraduate degree, I worked for Halliburton, an oilfield service company,

as a Cement Engineer in West Texas. In this position, I worked as part of a rapid response team,

resolving critical issues to achieve field objectives. My primary duties included creating and

managing lab testing requests based on technical specifications and customers contractual

requirements. I was responsible for analyzing and validating lab results, altering the product mix

as needed to meet Railroad Commission of Texas requirements and Company standards.

Additionally, I provided engineering support to the field team, making technical judgement calls

and clarifying and investigating any issues related to the pumping job.

In 2014, after a year of working as an associate level engineer (Associate Technical Professional),

I was promoted to Technical Professional within the Cement Engineering Department.

In August 2014, I began attending Texas State University. My graduate business coursework

emphasized statistical analysis as part of the Engineering & Technology concentration. and I

completed my MBA in 2016. I began working in my current role as an Engineering Specialist at

the PUC in December 2016.

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ATTACHMENT BP1-2

List of Dockets Containing Testimony of Blake P. Ianni

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Docket No. 45414 SOAH 473-16-4051 REVIEW OF THE RATES OF SHARYLAND UTILITIES, L.P., ESTABLISHMENT OF RATES FOR ETI DISTRIBUTION & TR.ANSMISSION SERVICES , L.L.C., AND REQUEST FOR GRANT OF A CERTIFICATE OF CONVENIENCE AND NECESSITY AND TRANSFER OF CERTIFICATE RiGHTS

Docket No. 46449

SOAH 473-17-1764 APPLICATION OF SOUTHWESTERN ELECTRIC POWER COMPANY FOR AUTHORITY TO CHANGE RATES

Docket No. 46726 SOAH 473-17-3245 APPLICATION OF SHARYLAND UTILITIES, L.P. TO AMEND A CERTIFICATE OF CONVENIENCE AND NECESSITY FOR THE STILES TO COATES 138-KV TRANSMISSION LINE IN REAGAN COUNTY

Docket No. 46929

SOAH 473-17-4390 APPLICATION OF RAYBURN COUNTRY ELECTRIC COOPERATIVE, INC. TO AMEND ITS CERTIFICATE OF CONVENIENCE AND NECESSITY FOR THE DENT ROAD EXPANSION TO WIELAND SWITCH I38-kV TRANSMISSION LINE IN HUNT COUNTY, TEXAS

Docket No. 47003 SOAH 473-17-4267 APPLICATION OF ENTERGY TEXAS, INC. TO AMEND ITS CERTIFICATE OF CONVENIENCE AND NECESSITY FOR A PROPOSED 230-KV TRANSMISSION LINE IN JEFFERSON COUNTY

Docket No. 47192 SOAH 473-17-5286 APPLICATION OF PEDERNALES ELECTRIC COOPERATIVE, INC. TO AMEND A CERTIFICATE OF CONVENIENCE AND NECESSITY FOR THE HIGHWAY 32 TO WIMBERLEY TRANSMISSION LINE REBUILD AND UPGRADE PROJECT IN HAYS COUNTY


Docket No, 47462

SOAH 473-18-0626 APPLICATION OF ENTERGY TEXAS, INC. TO AMEND ITS CERTIFICATE OF CONVENIENCE AND NECESSITY FOR A 230-KV TRANSMISSION LINE IN MONTGOMERY AND WALKER COUNTIES

Docket No. 47808 SOAH 473-18-1930 JOINT APPLICATION OF ONCOR ELECTRIC DELIVERY COMPANY LLC AND BRAZOS ELECTRIC POWER COOPERATIVE, INC. TO AMEND CERTIFICATES OF CONVENIENCE AND NECESSITY FOR THE COGDELL TO CLAIREMONT 138-KV TRANSMISSION LINE IN KENT AND SCURRY COUNTIES

Docket No. 48231

SOAH 473-18-3078 APPLICATION OF ONCOR ELECTRIC DELIVERY COMPANY LLC FOR A DISTRIBUTION COST RECOVERY FACTOR

0000025



ATTACHMENT BPI-3

16 TAC § 25.231(0(2)(A)

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16 Texas Administrative Code 25.231(c)(2)(A)

Invested capital; rate base. The fate ot retmn 1,, applied to the late ba,e The late base. s(ametime, ietened to a, invested capital. includes as a major component the oriamal cost of plant. plopertv. and equipment. les, accumulated depreciation. used and useful 111 iendenn2 service to the public

omponent, to be included in detenumun: the oveiall rate base aie as ,,et out in ,,u1)paiaraph. F ()I this pai a :n aph

On2ana1 co,i. less accumulated depreciation. of elecnic utilit plant ii,ed by and useful to the electnc utility in piovidinz ,ervice

On2inal co,t shall be the actual money co,t. oi the actual money vahre ot anv Lonsideiation paid other than money. of the property at the rune it shall have been k.ledicated to public tl.Se. whether by the electric utility which is the pie,ent ounei oi bv

piedeces,oi in Reseive foi depieciation is the accumulation of lecormized allocanon, of ominnal cost.

lepresentaniz iecovery of initial eunent. over the estimated useful hfe of the asset Depieciation ',hall be computed on a stianzht lrrie basi, or by such other method appioved under subsection lb 1 B of this section ovei the expected useful life of the

facility Payment,' to affiliated interet,-. ,hall not be allowed a, a capital co,t except as piovided m the Public Utility Re,zulatory .Act o5rls

0000027


ATTACHMENT BPI-4

FERC's Guidance on

Vegetation Management Capitalization

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FERC's electronic Code of Federal Regulations, Title 18: Conservation of Power and Water Resources, Ch. 1, Subchapter C, Part 101. Electric Plant Instructions, § 9. Equipment, A. https://www.ecfr.gov Accessed on May I, 2017.

9. Equipment.

A. The cost of equiprnent chargeable to the electric plant accounts, unless otherwise indicated in the text of an equipment account, includes the net purchase price thereof. sales taxes, investigation and inspection expenses necessary to such purchase, expenses of transportation when borne by the utility, labor employed. materials and supplies consumed, and expenses incurred by the utility in unloading and placing the equipment in readiness to operate. Also include those costs incurred in connection with the first clearing and grading of land and rights-of-way and the damage costs associated with construction and installation of plant.

Excerpt from FERes Audit Report on American Transmission Systems, Inc. (ATSI), Docket No. FA11-8-000. April 24. 2013. Audit Conducted by FERC's Division of Audits within the Office of Enforcement (OE), at 17.

The Commission's regulations provide for the capitalization of vegetation management costs incurred for the initial clearing of land during construction. Also, the Commission's regulations require vegetation management costs incurred subsequent to the construction phase of a project to be expensed. Vegetation management for plant in service are costs to trim trees, remove trees. prune. and clear brush specifically to ensure the reliability of the transmission system by preventing vegetation-caused failures. Under the Commission's accounting regulations, costs of this nature are recorded as maintenance expense.

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ATTACHMENT BP1-5

16 TAC § 25.52(c)(6)

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SOA1-1 Docket No. 473-18-3981 Page 31/33

16 Texas Administrative Code ti 25.52(e)(6)

Reliabilit indices, SI% stem Average Interruption Frequency Index -- The average number of tn»es that a Customer's servie is interrupted SAIFI i 14:ti1ated by summing the number

Lustomers mteirupted tor tad) eNent anddi \ iLlane by the total munber of custornet s the system being indexed A loxer SAIFI Nalue rep esents a Imther fevel ot servic e

(13) S) stem AN erage Interruption Duration Index -- The aN erav.e atnoum t tune a customer's sen ice is inteuupted lui nie the i eportmy period sAIDI is calculated suirunin..2 the i estoration ume tor eaeh intetruption e ent times the number ot custoiller, micatured ÍOI eadi eNent. and dividmg ti\ the total numbei customeis SAID1 js

explessed in minutes oi how s h.)» ‘alue represents a highet le\ el (4 ',el. \ ice

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