Southwest Power Pool, Inc. PROJECT COST WORKING GROUP …

Minutes No. [14]

Southwest Power Pool, Inc.

PROJECT COST WORKING GROUP NET CONFERENCE

August 28, 2012

• M I N U T E S •

Agenda Item 1 – Administrative Items

a. Call to Order & Introductions Chair Terri Gallup (AEP) called the meeting to order at 9:00 am, welcomed those in attendance, and asked for introductions (Attachment 1 – PCWG Attendance 8-28-2012).

b. Receipt of Proxies SPP Staff Secretary Steve Purdy received the following proxy statements:

• Art Wiese (NPPD) for David Kimball (NPPD)

c. Review of Agenda The Chair asked the PCWG for edits or additions to the agenda (Attachment 2-PCWG Agenda 8-28-2012). The review of minutes from the previous meeting was removed from the agenda.

Agenda Item 2 – Review of Past Action Items

The Staff Secretary led a review of the Action Item list (Attachment 3-PCWG Action Item List 8-28-2012). Leland Jacobson (OPPD) noted in regards to Action Item 30 that while the discussion of costs for distribution versus transmission is pertinent, the overarching goal is to clarify that only costs that are recoverable through the SPP Open Access Transmission Tariff (OATT) should be included when populating a Standardized Cost Estimate Reporting Template (SCERT), and that this clarification should be made in the SCERT Data Dictionary. No other additions or changes were made.

Agenda Item 3 – Review of Balanced Portfolio Costs

The Chair led the PCWG through summary presentations of the information provided by Transmission Owners (TOs) in response to data requests made by SPP Staff on behalf of the PCWG for Balanced Portfolio projects (Attachment 4-20120828 Balanced Portfolio Update and Attachment 5-20120828 Balanced Portfolio Update - SPS Update). The Staff Secretary mentioned that only the summary presentations would be posted and reviewed because of confidentiality concerns on the part of some TOs regarding detailed cost information that was provided to SPP Staff as part of the responses to the data requests. As such, SPP Staff is consulting with its Legal department to determine if confidentiality agreements or other actions are required for the PCWG membership to view the detailed information that is of concern. Cary Frizzell (SPP Staff) reviewed the details of each response. Because OG&E’s response was not available in time for the call, SPP Staff committed to post the response as supplemental background materials as soon as it becomes available. The review began with a summary of the cost estimate updates that had been made to the projects and the Balanced Portfolio as a whole. The upgrades making up the projects were then individually evaluated by reviewing cost increase justifications, completion percentages, and potential future cost drivers. The

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Minutes No. [14]

review led to additional questions to be answered by the next PCWG meeting. SPP Staff will pose those questions to the respective TOs and ask for responses by Tuesday, September 4.

Agenda Item 4 – Other Items

The Vice-Chair Jeff Stebbins (SPS) asked if there were any other items to discuss and none were mentioned.

Agenda Item 5 – Summary of Action Items

Summary of Action Items

1. SPP Staff will submit additional questions related to Balanced Portfolio projects to the applicable TOs on behalf of the PCWG, and request answers by Tuesday, September 4.

2. SPP Staff will post a summary of OG&E’s response to the initial Balanced Portfolio data request to the PCWG website on SPP.org as soon as it is received.

Agenda Item 6 – Discuss Future Meeting Dates

The Staff Secretary noted that the next meeting would take place at KCPL’s offices in Kansas City on September 10th and 11th. Meeting adjourned at 11:00 am. Respectfully Submitted, Steve Purdy Secretary Attachments Attachment 1-PCWG Attendance 8-28-2012 Attachment 2-PCWG Agenda 8-28-2012 Attachment 3-PCWG Action Item List 8-28-2012 Attachment 4-20120828 Balanced Portfolio Update Attachment 5-20120828 Balanced Portfolio Update - SPS Update

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PCWG Attendance Net Conference August 28, 2012

X=In Person

P=Proxy

T=Teleconference

First Name Last Name Position Company Business Phone Email Attendance

Terri Gallup Chair AEP (918)599‐2242 [email protected] T

Steve Purdy Secretary SPP (501)614‐3371 [email protected] T

Allen Ackland Member KCPL (816)245‐3753 [email protected]

Scott Benortham Member Westar (785)575‐8160 [email protected] T

Brent Carr Member AECC (501)570‐2437 [email protected] T

Peter Day Member OGE (405)553‐5959 [email protected] T

Brian Gedrich Member NextEra Energy (512)439‐0831 [email protected]

Tom Hestermann Member Sunflower (785)623‐3314 [email protected] T

Larry Holloway Member KPP (316)264‐3166 [email protected] T

Leland Jacobson Member OPPD (402)636‐2548 [email protected] T

David Kimball Member NPPD (402)297‐4113 [email protected] P

Lloyd Kolb Member Golden Spread Electric Coop (806)379‐7766 [email protected] T

Tom Littleton Member OMPA (405)245‐4896 [email protected] T

Brian Slocum Member ITC (248)946‐231 [email protected]

Jeff Stebbins Member SPS (806)378‐2141 [email protected] T

John Krajewski Liaison Member NE Power Review Board (402)440‐0227 [email protected] T

Trent Campbell Guest Oklahoma Corporation Commission T

Bruce Cude Guest SPS T

Gerald Deaver Guest SPS T

Cary Frizzell Guest SPP T

Noumvi Ghomsi Guest Missouri Public Service Commission T

Bary Warren Guest Empire District T

Art Wiese Guest NPPD T

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Southwest Power Pool, Inc. PROJECT COST WORKING GROUP NET CONFERENCE

August 28, 2012

• A G E N D A • 9:00 am – 12:00 noon

1. Administrative Items

a. Call to Order & Introductions .............................................................................. Terri Gallup

b. Receipt of Proxies ............................................................................................. Steve Purdy

c. Review of Agenda*............................................................................................. Terri Gallup

2. Review of Past Action Items* ............................................................................................... Steve Purdy

3. Review of Balanced Portfolio Costs* ..................................................................................... Terri Gallup

4. Other Items ........................................................................................................................................... All

5. Summary of Action Items ..................................................................................................... Steve Purdy

6. Discuss Future Meeting Dates .............................................................................................. Terri Gallup

a. September 10-11, 2012 – KCPL Kansas City, MO

b. September 21, 2012 – Net Conference

c. October 1-2, 2012 – SPP Offices, Little Rock, AR

d. November 6, 2012 – DFW Hyatt, Dallas, TX

e. December 4, 2012 – AEP Offices, Dallas, TX

* Background Materials Included

Relationship-Based • Member-Driven • Independence Through Diversity

Evolutionary vs. Revolutionary • Reliability & Economics Inseparable 4 of 21

Southwest Power Pool, Inc. PROJECT COST WORKING GROUP Pending Action Items Status Report

August 28, 2012

Action Item Date Originated Status Comments

13. As directed by MOPC at the January meeting, review and recommend any changes to the Quarterly Tracking Report process, including timing, data requested, format of data reporting, interaction with other project cost-related initiatives, etc.

February 7, 2012

In Progress

Schedule to be presented to MOPC, TWG, other changes TBD

26. Leland Jacobson will provide examples of Projects that could present questions as to whether portions of the costs would be considered non-transmission at the August meeting

July 10, 2012 Complete

27. Staff will consult with SPP’s Legal department for input on the confidentiality of the data within the SCERT and the status of NDAs for PCWG members

July 10, 2012 In Progress

28. Staff will modify the Project Cost Review Process document to include the July meeting’s actions and check the definitions in the document against those in the SCERT Data Dictionary. Staff will bring both modified documents back to PCWG for consideration in August.

July 10, 2012 Complete

29. MOPC Action Item from July meeting: Review Balanced Portfolio costs to determine if they are expected to stabilize.

July 17, 2012 In Progress

August 28, 2012 Agenda

30. PCWG members will bring feedback from their respective regulatory departments on cost classification within transmission projects. SPP Regulatory Staff will advise on what is expected to be reported in the SCERT regarding distribution costs.

August 7, 2012

In Progress

September 10-11, 2012 Agenda

31 SPP Staff will make changes to PCWG Project Review Process document as discussed.

August 7, 2012

In Progress

September 10-11, 2012 Agenda

32 Define the terms “upgrade” and “project” in the SCERT Data Dictionary.

August 7, 2012

In Progress

33 SPP Staff will make data request on behalf of the PCWG to TOs regarding Balanced Portfolio projects.

August 7, 2012 Complete

34 SPP Staff will make scheduling changes and/or additions for August, September, and October meetings.

August 7, 2012 Complete

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Balanced Portfolio Update

PCWG

August 28, 2012

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Balanced Portfolio

2

ProjectOriginal Cost Estimate

Q3 2012 Latest Update Cost Variance % Change

Sooner ‐ Cleveland 345 kV $33,530,000 $58,906,000 $59,880,000 $26,350,000 78.6%

Seminole ‐Muskogee 345 kV $129,000,000 $161,700,000 $161,700,000 $32,700,000 25.3%

Tuco ‐Woodward 345 kV $227,727,500 $328,733,021 $328,733,021 $101,005,521 44.4%

Iatan ‐ Nashua 345 kV $54,444,000 $64,800,000 $64,800,000 $10,356,000 19.0%

Spearville ‐ Post Rock ‐ Axtell 345 kV $236,557,015 $224,000,000 $224,000,000 ($12,557,015) ‐5.3%

Swissvale ‐ Stilwell Tap 345 kV $2,000,000 $2,000,000 $1,922,840 ($77,160) ‐3.9%

Gracemont Substation $8,000,000 $15,200,000 $15,966,210 $7,966,210 99.6%

Total $691,258,515 $855,339,021 $857,002,071 $165,743,556 24.0%

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Balanced Portfolio

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Sooner – Cleveland 345 kV (GRDA)

4

Original Cost

EstimateIn‐Service

DateLatest Cost Estimate

Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$1,806,000 12/31/2012 $2,780,000 $974,000 53.9% $1,250,000 45.0%

Percentage of Completion

Material Procurement 40% Environmental Studies 100%

Construction 0% Engineering 80%

Siting and Routing N/A Permit Status 100%

Cost Estimate Increase

Justifications

Higher than estimated construction labor cost 54%

Additional engineering expense 25%

Material cost escalation 21%

Potential Future Cost

Increase FactorsNone anticipated

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Iatan ‐ Nashua 345 kV Ckt 1 (KCPL/GMO)

5

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$49,824,000 6/15/2015 $60,569,180 $10,745,000 21.6% $2,274,842 3.8%


Material Procurement 15% Environmental Studies N/A


Siting and Routing 100% Permit Status 5%


Justifications

“Live‐line” work

Indirects

H Frame vs. Single Pole

Addition of 1 mile to route

Potential Future Cost Increase Factors

Cost and Schedule on “Live‐line” Work – High Risk

Transformer Size and Market Cost Fluctuations – High Risk

Condemnation Costs – High Risk

Easement Prices– Medium Risk

Commodity Escalation – Medium Risk

Southwest Power Pool Directives – Medium Risk 11 of 21

Nashua 345/161 Transformer (KCPL)

6

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$4,620,000 6/15/2015 $4,230,820 ($389,180) ‐8.4 ‐ ‐






JustificationsN/A


Increase FactorsNone mentioned

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Post Rock ‐ Spearville 345kV Ckt 1 (ITCGP)

7






JustificationsN/A


Increase FactorsN/A

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$99,000,000 6/18/2012 $79,863,300 $19,863,300 ‐20.1% $79,863,300 100%

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Post Rock 345/230kV Transformer (ITCGP)

8






JustificationsN/A


Increase FactorsN/A

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$3,000,000 6/18/2012 $4,348,600 $1,348,600 45.0% $4,348,600 100%

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Axtell ‐ Post Rock 345kV Ckt 1 (ITCGP)

9






JustificationsN/A


Increase FactorsN/A

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$66,000,000 6/1/2013 $64,514,700 $1,485,300 ‐2.3% $56,041,209 86.9%

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Axtell ‐ Post Rock 345kV Ckt 1 (NPPD)

10

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$71,377,015 6/1/2013 $76,000,000 $4,622,985 6.5% $48,000,000 63.2%


Justifications

None required. Costs are currently projected to finish at slightly more than 20% under the current cost estimate.







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Swissvale ‐ Stilwell Tap 345 kV (KCPL)

11

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$2,000,000 12/31/2012 $1,922,840 ($77,160) ‐3.9% $1,260,500 65.6%


JustificationsN/A




Not provided

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Gracemont Tap 138 kV (WFEC)

12

Original Cost


Date

Latest Cost

EstimateCost

Variance%

ChangeExpenditure to Date

% of Latest

Estimate

$2,000,000 9/1/2012 $966,210 ($1,033,790) ‐51.7% $308,964 32.0%






Increase Factors

Current Estimate is the most up to date estimate with the contractor hired and construction in progress. Typically cost variations are a result of the construction prices.


JustificationsN/A

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Balanced Portfolio

1

ProjectOriginal Cost Estimate

Q3 2012 Latest Update Cost Variance % Change

Sooner ‐ Cleveland 345 kV $33,530,000 $58,906,000 $59,880,000 $26,350,000 78.6%

Seminole ‐Muskogee 345 kV $129,000,000 $161,700,000 $161,700,000 $32,700,000 25.3%

Tuco ‐Woodward 345 kV $227,727,500 $328,733,021 $328,645,462 $101,917,692 44.3%

Iatan ‐ Nashua 345 kV $54,444,000 $64,800,000 $64,800,000 $10,356,000 19.0%

Spearville ‐ Post Rock ‐ Axtell 345 kV $236,557,015 $224,000,000 $224,000,000 ($12,557,015) ‐5.3%

Swissvale ‐ Stilwell Tap 345 kV $2,000,000 $2,000,000 $1,922,840 ($77,160) ‐3.9%

Gracemont Substation $8,000,000 $15,200,000 $15,966,210 $7,966,210 99.6%

Total $691,258,515 $855,339,021 $857,002,071 $165,743,556 24.0%

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Tuco ‐ Stateline 345 kV Ckt 1 (SPS)

2

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$122,597,500 5/19/2014 $170,247,072 $47,649,572 38.9% $4,195,822 2.5%






Justifications

CREZ projects in same area elevating ROW costs 30%

13% increase in line length (178 to 202.4 miles) 30%

43% increase in number of corner/angle structures 30%

Switch from in‐house engineering and construction to consultants and contractors 10%


Increased costs of purchasing easements (due to recent awards for CREZ projects)

Number of corner/angle structures may increase for minor route adjustments

Labor/material costs could increase due to steel/aluminum price fluctuations and availability of contract labor

In‐service date may change due to length of time to acquire easements

Final Pedestrian survey could cause archeological or biological mitigation requirements20 of 21

Tuco 345/230 kV Transformer Ckt 2 (SPS)

3

Original Cost



Cost Variance

% Change

Expenditure to Date

% of Latest

Estimate

$11,250,000* 3/31/2013 $15,498,390 $4,248,390 37.8% $7,086,641 45.7%




Siting and Routing N/A Permit Status N/A


JustificationsNone provided


None mentioned

*SPS estimate at time of Modified NTC issuance

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