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The City of Indianapolis

Transcript Of The City of Indianapolis

STATE OF INDIANA

FILED
October 7, 2019 INDIANA UTILITY REGULATORY COMMISSION

INDIANA UTILITY REGULATORY COMMISSION

)

VERIFIED PETITION OF INDIANAPOLIS POWER & LIGHT )

COMPANY FOR APPROVAL OF IPL’S TDSIC PLAN FOR )

ELIGIBLE TRANSMISSION, DISTRIBUTION, AND

)

STORAGE SYSTEM IMPROVEMENTS PURSUANT TO

)

INDIANA CODE § 8-1-39-10.

)

)

CAUSE NO. 45264

Direct Testimony and Attachments of
Dennis Stephens EE

On behalf of
The City of Indianapolis

October 7, 2019

Dennis Stephens EE Table of Contents
STATE OF INDIANA INDIANA UTILITY REGULATORY COMMISSION
Table of Contents for the Direct Testimony of Dennis Stephens EE
I. Introduction, Qualifications, Purpose, and Preview............................................................ 1 II. The Methodology IPL Employed to Justify Prospective Asset Replacement Is Flawed,
Overstating the Need for Investment ................................................................................. 8 III. Some IPL TDSIC Plan Components Have Merit, and Warrant Approval With Conditions.17 IV. Other Plan Components Are Unlikely To Deliver Benefits In Excess Of Costs To
Customers ........................................................................................................................22 V. Summary and Recommendations ....................................................................................23 Appendix A – Curriculum Vitae of Dennis Stephens EE ............................................................. 1 Appendix B – Indianapolis Power & Light Relative Reliability Performance................................ 1

Dennis Stephens EE Page 1

Direct Testimony of Dennis Stephens EE

1 I.
2 Q 3 A 4

Introduction, Qualifications, Purpose, and Preview
PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. My name is Dennis Stephens. My business address is 1153 Bergen Parkway, Ste 130, Evergreen, Colorado 80439.

5 Q 6 A 7 8

WHAT IS YOUR OCCUPATION? I am an independent consultant in the field of electric and gas distribution planning, asset management, and operations. I frequently work for the Wired Group, a small consultancy, as its Senior Technical Consultant.

9 Q 10 A 11 12

ON WHOSE BEHALF ARE YOU APPEARING IN THIS PROCEEDING? The City of Indianapolis (“the City” or “City”). The City purchases substantial quantities of electricity from Indianapolis Power & Light (“IPL” or “Company”) and is concerned about potential TDSIC rate impacts on its citizens.

13 Q 14 A 15 16 17 18 19 20 21

PLEASE DESCRIBE YOUR EDUCATION, BACKGROUND, AND EXPERIENCE. After graduating from the University of Missouri with a bachelor’s degree in Electrical Engineering, I began work for Xcel Energy (then Public Service Company of Colorado) as an electrical engineer in distribution operations. In a series of electrical engineering and management roles of increasing responsibility, I gained experience in distribution planning, operations, and asset management, and the innovative use of technology to assist with these functions. Positions I’ve held over the years have included Director, Electric and Gas Operations for the City and County of Denver Colorado; Director, Asset Strategy; and Director, Innovation and Smart Grid Investments.

Dennis Stephens EE Page 2

1

In 2007, I was asked to lead parts of Xcel Energy’s SmartGridCity™

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demonstration project in Boulder, Colorado, the first of its kind at the time, covering

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46,000 customers. I developed the technical foundations for the project, including the

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development of all concepts presented to the Xcel Energy Executive Committee for

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project approval, and including the negotiations with technology vendors on their

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contributions to the project. As Director of Utility Innovations for Xcel Energy, I also

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worked with many software providers, including ABB, IBM, and Siemens, helping them

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develop their distribution automation ideas into practical software applications of value

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to grid owner/operators. I retired from Xcel Energy in 2011, and now work for the Wired

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Group on a part-time basis. A full CV is provided as Appendix A to this testimony.

11 Q 12 13 A 14 15 Q. 16 17 A. 18 19 20 21 22

HAVE YOU BEEN INVOLVED WITH PRIOR PROCEEDINGS BEFORE THE INDIANA UTILITY REGULATORY COMMISSION (“IURC” OR “COMMISSION”)? No.
HAVE YOU BEEN INVOLVED IN PROCEEDINGS BEFORE OTHER REGULATORY COMMISSIONS? Yes. I have testified jointly with my Wired Group colleague, Paul Alvarez, in three rate cases before the California Public Utilities Commission. I testified regarding the appropriateness of multi-billion-dollar grid modernization proposals by Southern California Edison1 and Pacific Gas and Electric.2 (Forward test years are employed in California rate cases.) I also testified jointly with Mr. Alvarez in two cases regarding grid modernization and distribution planning in Michigan3 and New Hampshire.4

1 California PUC A.16.09.001. May 1, 2017. 2 California PUC A.15-09-001 and A.18.12.009. May 5, 2016 and July 30, 2019 respectively. 3 Michigan PSC U-20147. September 11, 2019 4 New Hampshire PUC IR15-296. September 6, 2019

Dennis Stephens EE Page 3

1 Q 2 A 3

WHAT IS THE SUBJECT MATTER OF YOUR TESTIMONY? In this testimony I present my perspectives on IPL’s TDSIC Plan (the “Plan”, or “IPL’s Plan”) proposed in this Cause at a high level.

4 Q 5 6 A 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

PLEASE PROVIDE A PREVIEW OF YOUR TESTIMONY AND RECOMMENDATIONS IN THIS PROCEEDING. My review of IPL’s testimony, TDSIC Plan, and workpapers, as well as data request responses provided in discovery, identified significant deficiencies in the methodology IPL used to develop its TDSIC Plan. For five components of its Plan, IPL used an agebased approach to select assets for prospective (in advance of demonstrated need) replacement. This is not standard industry practice. While standard industry practice provides for prospective replacement of certain types of assets based on the results of commonly-employed tests, these five Plan components were not developed in this manner. My testimony describes the deficiencies in IPL’s age-based approach, as well as the manner in which the IPL approach dramatically overstates the replacements needed for public convenience and necessity. Based on this, I recommend the Commission reject the five components of the Plan IPL developed using the age-based approach to asset replacement selection, totaling $753 million in capital.
If the Commission rejects these five Plan components as I recommend, I anticipate IPL will redevelop and resubmit its Plan or components. To assist the Commission with this potential chain of events, I identify the asset types typically replaced prospectively using standard industry practices, and the commonly-employed tests which constitute standard industry practices for the identification of assets for

Dennis Stephens EE Page 4

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prospective replacement. I recommend the Commission require results from industry

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standard tests as justifications for prospective asset replacement.

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My testimony continues with a discussion of Plan components I believe to have

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merit. I discuss why I believe these Plan components have merit, as well as my

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reservations for each. I recommend the Commission approve these Plan components

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with conditions I describe to address the reservations.

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My testimony concludes by identifying Plan components for which no standard

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industry practice exists, and/or for which no favorable benefit-cost analysis is available.

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I summarize my recommendations in the table below.

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Dennis Stephens EE Page 5

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City Recommendations

TDSIC Program Component

$ in Millions

Reject; Reconsider Future Proposals Based on Standard Industry Practice

Circuit Rebuilds

298.7

Substation Assets Replacement

248.1

XLPE Cable Replacement

86.2

4kV Conversion

92.0

Remote End – Breaker Relay/Upgrades

28.0

TOTAL

753.0

Approve with Conditions

Distribution Automation

109.0

CBD Secondary Network Upgrades

39.0

Pole Replacements

24.2

Steel Tower Life Extension

4.2

TOTAL

176.4

Reject

Tap Reliability Improvement Projects

76.5

Static Wire Performance Improvement

62.1

Substation Design Upgrades

94.5

Meter Replacement (See City witness Alvarez testimony)

55.9

TOTAL

289.0

2

Dennis Stephens EE Page 6

1 Q. 2

BEFORE YOU BEGIN, CAN YOU PROVIDE YOUR PERSPECTIVE ON DISTRIBUTION PLANNING AND GRID MODERNIZATION ACROSS THE US?

3 A. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

As an electrical engineer with 35 years’ experience maintaining grid reliability, I appreciate that periodic investments in grid assets are required. As a grid engineer with experience in California and Colorado – states with relatively high adoptions of distributed solar generation and electric vehicles – I appreciate that investments may be needed to accommodate these technologies at points on the grid as conditions dictate. But I am concerned that the current wave of grid investment is being driven more by earnings growth commitments to shareholders, and an absence of investment opportunities in generation, than by any immediate needs in transmission and distribution. I have seen IOUs propose investments indiscriminately across their grids, rather than surgically based on standard industry evaluation practices on an as-needed basis. The use of “blanket” approaches in anticipation of problems which have not yet materialized, or in place of objectively test and inspection results, invariably results in investments in assets which turn out not to have been necessary. These investments are in addition to those which are legitimately necessary, with the net result being an overall increase in distribution rate base with little impact on reliability. To illustrate, I compare recent increases in US IOU distribution rate bases with recent IOU reliability performance in the chart below. In the last five years, despite a 16% increase in distribution rate base nationwide, reliability performance has deteriorated 8%.

Dennis Stephens EE Page 7

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Rather than grand, distinct grid modernization plans, I advocate the use of

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standard industry practices which have proven their worth in distribution grid planning

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over the past 100 years. They have become standards for a reason; in their absence,

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investor-owned utilities’ capital bias encourages them to replace assets unnecessarily.

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I believe IPL’s historical performance illustrates the value of compliance with

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standard industry practices. IPL rates are reasonable and IPL reliability performance

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is exceptionally good. In each and every year since the Department of Energy started

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collecting reliability data from US IOUs, IPL has performed in the top 10% (see the

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chart below, as well as the chart in Appendix B). If IPL has been delivering safe,

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exceptionally reliable service at reasonable rates through compliance with standard

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industry practices, I see no rationale for departing from standard industry practices in

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IPL’s TDSIC Plan.

Dennis Stephens EE Page 8

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2 II. IPL Methodology to Justify Prospective Asset Replacement Is

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Flawed, Overstating the Need for Investment

4 Q. 5 6 7 A. 8 9 10 11 12 13 14 15

MUCH OF IPL’S TDSIC PLAN INVOLVES PROSPECTIVE ASSET REPLACEMENT. IS THE PROSPECTIVE REPLACEMENT OF ASSETS A STANDARD INDUSTRY PRACTICE? It depends. For most assets, standard industry practice is to replace assets only as they fail. This is particularly true for distribution assets, as equipment failures are a minority of outage causes, and the number of customers impacted by any single equipment failure is relatively small. There are exceptions for high-consequence assets, such as assets in substations which serve thousands of customers, or utility poles (which present a public safety issue when they fail). For these exceptions, equipment testing and inspections are used to identify assets which should be prospectively replaced. I will return to the topics of equipment testing and inspections specific to certain asset types later in my testimony.
AssetsTestimonyCommissionIndustry PracticesPlan Components