2018 General Rate Case

Transcription

1 Application No.: A.1-0- Exhibit No.: SCE-0, Vol. 0 Witnesses: J. Tran (U -E) 01 General Rate Case Power Supply (PS) Volume Energy Procurement Before the Public Utilities Commission of the State of California Rosemead, California September 1, 01

2 SUMMARY Energy Procurement O&M This Volume includes SCE s 01 Test Year (TY) operation and maintenance (O&M) forecast of $. million (constant 01$) for SCE s Energy Procurement function. SCE s O&M request is approximately $. million less than the Commission-authorized 01 expense of $. million (constant 01$). Energy Procurement O&M Expenses 01 Forecast (Constant 01 $Million, SCE Share)

3 Energy Procurement Capital This Volume also includes a capital expenditure forecast of $.1 million for specialized communication equipment, which allows SCE to communicate with and manage SCE s generation resources. Energy Procurement Capital Expenditures Forecast (Nominal $Million, SCE Share)

4 SCE-0: Power Supply Volume Energy Procurement Table Of Contents Section Page Witness I. OVERVIEW...1 J. Tran A. Energy Procurement Organization...1 B. SCE s 01 Test Year Request for Energy Procurement Activities...1 C. Organization of the Testimony... II. COMPLIANCE... A. Comparison of 01 Authorized to Recorded O&M Expense for EPM... B. Comparison of 01 Authorized to Recorded Capital Expenditures for EPM... III. DESCRIPTION OF ORGANIZATION... A. Overview of Functions... B. Description of EPM Departments Portfolio Planning and Analysis (PP&A)... a) Demand and Price Forecasting... b) Fundamental Modeling and Analysis... c) Portfolio Development and Valuation... d) Portfolio Reporting... e) Procurement Policy Analytics.... Energy Contracts Origination (ECO).... Energy Contracts Management (ECM).... Trading & Market Operations (TMO).... Settlements and Operations Services (S&OS)...1 a) Settlements...1 -i-

5 SCE-0: Power Supply Volume Energy Procurement Table Of Contents (Continued) Section Page Witness b) Information and Data Management...1 c) Business Process Services...1 d) Energy Procurement Administration...1 e) Compliance and Cost Recovery...1 IV. EPM O&M EXPENSES...1 A. Delivery of Safe, Reliable, and Affordable Power Regulatory Background/Policies Driving EPM s Request...1. Analysis of Recorded and Forecast Labor Expenses...1. Analysis of Recorded and Forecast Non-Labor Expense...1 V. EPM CAPITAL...1 A. Communication Equipment [CSB-00-P1; CSB-00-PP] Project Description... -ii-

6 I. OVERVIEW A. Energy Procurement Organization To provide delivery of safe, reliable, affordable, and clean electricity to approximately five million residential and business customer accounts, SCE s Energy Procurement & Management Operating Unit (EPM) 1 procures electricity from independent producers and suppliers in addition to utility owned generation. The EPM organization manages approximately $ billion of energy procurement spend to meet the electricity needs of customers while complying with energy-related legislative and regulatory requirements. EPM does this by implementing comprehensive energy resource procurement strategies, optimizing the electric supply from its utility-owned generation and energy procurement contracts in the wholesale power market, prudently administering its energy procurement contracts, and accurately settling all of its energy procurement transactions. The approximately $ billion of direct energy procurement costs are forecasted and recorded as part of SCE s Energy Resource Recovery Account (ERRA Balancing Account) Proceeding, whereas O&M costs and capital expenditures associated with performing energy procurement function are part of the GRC. B. SCE s 01 Test Year Request for Energy Procurement Activities The costs associated with performing energy procurement functions include O&M expenses (labor and non-labor) and capital expenditures. Expenses for energy procurement functions record to FERC Account. This testimony supports the estimated $. million (constant 01$) in expenses SCE expects EPM to incur in 01, a $1. million decrease below SCE s 01 adjusted authorized expenses. Our forecast is based on 01 recorded expenses with future-year adjustment to reflect EPM s expected overall expenses. Chapter V of this volume describes EPM s capital request of $.1 million to continue with the installation and configuration of communication equipment for SCE s 1 EPM is synonymous with Power Procurement and maybe referenced interchangeably in the work papers. Original authorized expenses was $.0 million (in constant 01$) and it included Information Technology, Finance, Human Resources and Regulatory Affairs functions that were previously embedded in the Power Procurement organizations. 1

7 Generation Management System (GMS). SCE also requests $.1 million in major capital expenditures for software projects to support SCE s energy procurement activities. Supporting testimony for these projects is provided in Exhibit SCE-0, Volume. C. Organization of the Testimony This Volume is composed of the following five chapters: Chapter I This chapter provides a high level overview of SCE s request for EPM. Chapter II Compliance This chapter addresses the Commission s directive to provide a comparison of the amounts authorized in SCE s 01 GRC to 01 recorded O&M expense and capital expenditures for EPM. Chapter III Description of Organization - This chapter describes the five EPM departments: Portfolio Planning & Analysis, Energy Contracts Origination, Energy Contracts Management, Trading & Market Operations, and Settlements & Operations Services. Chapter IV O&M - This chapter provides the 01 Test Year forecast for Energy Procurement s O&M expenses. Chapter V Capital - This chapter describes Energy Procurement s capital request. The Portfolio Planning & Analysis and Settlements & Operations Services departments were integrated into the EPM organization effective June 01 as part of a corporate reorganization activity. The five departments in EPM previously comprised the Power Procurement function in SCE s former Power Supply organization unit as described in SCE s 01 GRC application.

8 II. COMPLIANCE Pursuant to D Ordering Paragraph, this chapter provides a comparison of the Commission-authorized 01 O&M expense and capital expenditures to EPM s recorded 01 O&M and capital expenditures. A. Comparison of 01 Authorized to Recorded O&M Expense for EPM Figure II-1 Comparison of 01 Authorized to Recorded O&M Expense FERC - Energy Procurement (Constant 01 $000s) As shown in Figure II-1, the CPUC authorized $.0 million for Energy Procurement s 01 Test Year O&M forecast in FERC account. In 01, SCE recorded approximately $0. million, $1.00 million below the 01 authorized amount due to several factors. EPM labor expenses were $.1 million below authorized due to employee attrition, a delay in filling vacancies, and reduced staffing relative to the 01 authorized level as part of our continuing effort to manage costs. Also, 01

9 recorded labor was $. million lower than the authorized level due to transfer of costs to various other SCE organizations Finance, IT, HR and Regulatory Affairs because of corporate centralization efforts. These labor costs were authorized in EPM s 01 GRC request, but subsequently recorded in the respective Operating Units 01 recorded expenses for which the work functions were transferred. SCE s recorded 01 non-labor expenses were $. million less than authorized due to centralization of corporate functions, reduced use of contractors and consulting services, and less employee travel and related training. In addition, $1.0 million of EPM s capital-related O&M expenses that were authorized in EPM s 01 GRC request were subsequently transferred to and recorded in SCE s IT organization in 01. Refer to WP SCE-0 Vol., pp. 1-1.

10 B. Comparison of 01 Authorized to Recorded Capital Expenditures for EPM Figure II- Energy Procurement Capital Expenditures 01 GRC Authorized vs. Recorded (Nominal $000) In the 01 GRC, the CPUC authorized $1. million for communication equipment primarily related to connecting contracted generating resources to SCE s Generation Management System (GMS). As described in Chapter V, the specialized communication equipment is installed on every generation resource in EPM s portfolio to meet contractual obligations, monitor resources and dispatch information and operate within the CAISO control area. The authorized amount was based on a forecast of approximately 1 facilities reaching commercial operations status in 01 at an estimated average cost of $0.1 million per facility. In 01, SCE recorded approximately $0. million as shown in Figure II-, which was $1.1 million less than authorized. This underspend was due to the factors listed below: Economies of scale achieved through equipment and contract aggregation, Technology advances and upgrades that lead to reduced costs,

11 More contract terminations and fewer contracts executed than anticipated, resulting in lower project management costs, and Project delays resulting in delaying the expenditures beyond the GRC test year.

12 III. DESCRIPTION OF ORGANIZATION A. Overview of Functions EPM is responsible for: Developing comprehensive plans for the procurement of electrical energy, capacity, transmission rights, natural gas and emissions compliance products (collectively, Energy Products) from conventional, renewable, energy storage, certain demand response, and combined heat and power (CHP) resources, other suppliers and the market to meet the daily, mid-and- long term electricity needs for customers in SCE s service territory. Procuring generating capacity and energy via contracts and from the wholesale market under the CPUC-approved procurement plans and decisions. Procuring and scheduling natural gas, natural gas pipeline capacity and natural gas storage to manage transportation risks, all to supply SCE s utility-owned and contractedfor gas-fired generation. Procuring emissions-compliance products to meet compliance and contractual obligations related to utility-owned and contracted power generation resources. Selling surplus Energy Products into the market and through bilateral contracts, that is, contracts entered into outside a competitive solicitation process. Managing conventional, renewable, CHP and other energy contracts. Bidding and scheduling SCE s generation and contracted resources with the California Independent System Operator Corporation (CAISO) to optimize SCE s portfolio on behalf of its customers and to comply with the CPUC s least-cost dispatch (LCD) requirements. Calculating and processing payments for CAISO transactions and short- and long-term transactions for Energy Products. Aggregating, tracking and reporting energy procurement data, including meter data to regulatory agencies.

13 Managing the development of business processes and providing departmental administrative support. Supporting the development and advocacy of policy positions at the federal, state and local levels on matters related to energy procurement. Additional details on how these tasks are accomplished are provided in the Section below. B. Description of EPM Departments The EPM organization has five departments: 1) Portfolio Planning and Analysis, ) Energy Contracts Origination ) Energy Contracts Management ) Trading & Market Operations and ) Settlements and Operations Services. Figure III- Energy Procurement Departments and Their Functions Portfolio Planning and Analysis (PP&A) PP&A performs the valuation activity associated with SCE s energy procurement activities. Additionally, PP&A assists in evaluating new contracts and amendments to existing contracts for the purpose of analyzing risks related to the power and natural gas procurement requirements of meeting SCE s bundled retail load. All these analyses include, but are not limited to, determining and/or forecasting: (i) the amount of load that is hedged and un-hedged by time period; (ii) the likelihood, magnitude, and duration of price spikes; (iii) the availability of natural gas and the potential probabilistic

14 distribution of natural gas prices; (iv) the impact of potential generation outages; (v) and SCE s bundled and retail loads. PP&A accomplishes these tasks through the following divisions. a) Demand and Price Forecasting The primary responsibility of the Demand and Price Forecasting division is preparing and supporting the numerous long-term and short-term demand and price forecasts required for power procurement. These forecasts serve as inputs for the planning, trading, operations, and valuation processes that SCE uses to procure and manage Energy Products on behalf of its customers. b) Fundamental Modeling and Analysis The primary responsibility of the Fundamental Modeling and Analysis division is analyzing the electrical grid in California and the Western Electricity Coordinating Council (WECC). Fundamental Modeling and Analysis maintains and operates many fundamental models EPM relies on to simulate the electric market and grid, and assess possible market outcomes affecting price, supply, demand, and power flows. c) Portfolio Development and Valuation The primary responsibility of the Portfolio Development and Valuation division is analyzing SCE s portfolio of Energy Products over mid- and long-term horizons to support the development of primarily competitive procurement strategies that enable compliance with all required regulatory programs. Portfolio Development and Valuation develops complex analytical and valuation tools to assess and support the procurement of resources bilaterally or through competitive solicitations consistent with least cost, best fit principles, the State s preferred loading order, and applicable environmental laws. Certain work functions of the PP&A department were transferred in April 01 to a new centralized SCE organization called Strategy, Integrated Planning & Process. The specific functions transferred include longterm demand and sales forecasting, long-term price forecasting, fundamental modeling development and maintenance, and demand side management analytics. For purposes of SCE s 01 General Rate Case, these functions are being presented in the EPM organization testimony.

15 d) Portfolio Reporting The primary responsibility of the Portfolio Reporting division is preparing daily, monthly, and annual reports on SCE s net open position regarding Energy Products. The Portfolio Reporting division also develops and prepares SCE s forecasts of purchased power and fuel expenses for its internal planning purposes and regulatory reporting. e) Procurement Policy Analytics The primary role of Procurement Policy Analytics is providing quantitative and analytical support to determine the impact of federal and state policies on SCE s procurement activities and cost. In determining the impact of on procurement activities and costs, Procurement Policy Analytics leads cross-functional teams in analyzing SCE s regulatory and compliance strategies, new products, and emerging markets.. Energy Contracts Origination (ECO) The Energy Contracts Origination department is primarily responsible for negotiating and executing short-term, mid-term, and long-term structured transactions and power purchase agreements on behalf of SCE s customers while ensuring compliance with the CPUC-approved Long-Term Procurement Plan (LTPP), Renewables Portfolio Standard and other related regulatory requirements. This typically requires conducting competitive solicitations for the targeted products. In addition, the ECO department reviews proposed bilateral opportunities and manages and negotiates the execution of bilateral transactions. Such products include renewable and alternative energy, conventional power, capacity, energy storage, emissions credits and allowances, transmission rights, and natural gas.. Energy Contracts Management (ECM) ECM is responsible for management and administration of SCE's energy-related contracts. Contract management activities include: (i) exercising contractual options in a prudent manner; (ii) monitoring to verify that the counterparty is complying with the contract terms; (iii) managing the credit and collateral requirements for each contract in coordination with SCE s Risk Control department; (iv) renegotiating contract provisions as necessary due to changed circumstances or conditions; (v) resolving disputes, and (vi) administering the payment process according to contract

16 requirements. The ECM department is also responsible for monitoring and tracking major milestones of projects during the permitting, construction, and commissioning phases. Additionally, the ECM department is responsible for the administration of numerous contract compliance obligations designed to make certain that counterparties perform their contractual obligations and adhere to the terms of their contracts. These programs, such as efficiency monitoring programs and renewable capacity and insurance verification programs, confirm that SCE s customers receive the maximum contractual benefit for the products SCE procures on their behalf. The ECM department also supports regulatory filings, contract origination activities, generation resource on/off-boarding and contract settlements.. Trading & Market Operations (TMO) The TMO department is responsible for SCE s energy-related trading, wholesale market participation, and generation asset management activities. Specific responsibilities include: (i) generation outage planning and optimization for SCE's utility-owned and contracted generation assets; (ii) water resource planning for SCE's hydroelectric power plants; (iii) development of bidding strategies for the contracts and utility-owned generation that make up SCE s existing supply portfolio; (iv) asset optimization (capital and operational efficiency) project management and related cost/benefits modeling and studies; (v) trading and scheduling physical and financial natural gas products to meet SCE's generation needs and hedging SCE's fuel-related cost exposure; (vi) trading physical and financial energy products to meet SCE's energy needs and manage CAISO price risk; (vii) managing SCE's emissions and greenhouse gas requirements by trading emissions-compliance products; (viii) participating in the CAISO wholesale power markets, including bidding and scheduling all SCE load and generation resources (owned and contracted-for) into the market and dispatching resources in realtime following CAISO s instructions; (ix) developing processes, documentation and training to facilitate compliance with all applicable state and federal rules and regulations; and (x) supporting regulatory Certain work functions of the TMO department were transferred in June 01 to SCE s Generation organization unit as part of a corporate reorganization. The specific functions transferred include asset management and long-term hydro modeling. For purposes of SCE s 01 General Rate Case, these functions are being presented in the EPM organization unit testimony.

17 processes and filings needed to seek cost recovery of SCE s procurement, trading and market participation activities.. Settlements and Operations Services (S&OS) The S&OS department includes the following divisions, as described in more detail below: (a) Settlements, (b) Information and Data Management, (c) Business Process Services, (d) Power Supply Administration, and (e) Compliance and Cost Recovery. a) Settlements The Settlements division settles amounts under all Energy Products contracts for the power procurement function. The settlement process validates that all contract and market payments and receipts are under the terms of the contract or tariff provisions associated with the underlying transactions. This process requires the collection, validation, and analysis of large amounts of price, quantity, and operational data. Given the large amount of data involved and the complexity of the underlying transactions, we rely on computer systems (and where systems are insufficient, manual processes and user-developed applications) to complete the settlement process. When invoice discrepancies are found, the Settlements division works with the contract manager in Energy Contracts Management to resolve them. If the discrepancies are related to CAISO charges, the Settlements division submits the disputed amount to CAISO according to its dispute resolution process. The Settlements division includes Contract Compliance and Analysis (CCA), Contract Settlement Operations (CSO), CAISO Product Analysis (CPA) and CAISO Settlements and Market analyses (CS&MA). CCA supports Power Procurement s solicitation, negotiation, and administrative efforts as they relate to settlement activities for both conventional and renewable contracts. CSO validates and processes approximately $ billion in annual transactions related to Energy Products and financial bilateral contracts. CPA reviews the CAISO-market changes and regulatory policy changes related to settlements to determine the effect of such changes on SCE s customers and on SCE s settlement systems and processes. CS&MA validates the CAISO settlement statements to ensure that SCE s customers incur correct costs and receive correct revenues that result from the bidding, purchase, and sale of energy and ancillary services into the CAISO markets. 1

18 b) Information and Data Management Information and Data Management s responsibilities include: (i) interfacing with CAISO-related Energy Procurement operational data stores and reporting database; (ii) managing Energy Procurement s electronic documents and records; (iii) selecting and managing Energy Procurement s data mining and reporting tools; (iv) supporting general Energy Procurement reporting, compliance, and settlements needs; (v) performing the acquisition, management, and reporting of CAISO market meter data; (vi) developing and managing Energy Procurement s information and data activities, and (vii) overseeing and managing user-developed applications (UDAs), such as models, advanced spreadsheets, and databases, to verify that data generated within each UDA is accurate, appropriate, and available for use in making daily business decisions. c) Business Process Services Business Process Services is responsible for developing and managing Energy Procurement business solutions, operating models, and policies and procedures needed to optimize business activities. The division is responsible for: (i) development of policy and operating procedures, operating models, business requirements, and business continuity plans; (ii) supporting change impact analysis and management for new and existing business solutions. The services provided by Business Process Services are: (i) development and maintenance of the functional and process flow diagrams for Energy Procurement that enable effective business decisions to be made based on the best information; (ii) facilitation of process improvement workshops; (iii) assessment of operational impacts of proposed projects, system change requests, and CAISO/external initiatives; (iv) development and documentation of business requirements and processes for new projects and programs; and (v) quality control and user-interface testing to make certain business requirements are met. d) Energy Procurement Administration Energy Procurement Administration provides administrative support processing purchase orders and non-purchase order payments, managing on-boarding/off-boarding of personnel and 1

19 contractors, coordinating meeting logistics, maintaining office equipment and supplies, maintaining administrative policies, and providing administrative desk coverage for secured areas. e) Compliance and Cost Recovery Compliance and Cost Recovery supports EPM activities by performing the following work: (i) assuring that internal processes for SCE energy procurement activities comply with rules and regulations governing these activities, including improving these work processes when needed due to regulatory changes or non-compliance events, (ii) managing and conducting required regulatory reporting related to SCE's energy procurement operations, including for GHG cap and trade reporting, resource adequacy, renewable and alternative power, (iii) seeking cost recovery of SCE's energy procurement operations, including its GRC and Energy Resource Recovery Account (ERRA) showings, and (iv) assisting with confidentiality protection of filings. 1

20 IV. EPM O&M EXPENSES This Chapter presents SCE s 01 Test Year O&M expense forecast for EPM activities. SCE records all O&M (labor and non-labor) expenses in FERC Account. The major cost drivers for energy procurement activities are described below. A. Delivery of Safe, Reliable, and Affordable Power To deliver safe, reliable, affordable, and clean power, EPM first forecasts customer demand based on regional growth, weather patterns, and historical usage. EPM also monitors actual customer demand and energy usage trends and updates its customer demand forecasts accordingly. SCE buys all the electricity it needs from the CAISO market to serve its customers and sells all its utility-owned generation (UOG) and contracted resources to the CAISO markets to offset its energy procurement expenses. CAISO optimizes the bids and schedules submitted to the market, subject to market and grid operating limits and economic factors. This daily procurement process of buying and selling electricity in the CAISO market is done according to Least-Cost Dispatch requirements set forth by the CPUC. EPM must manage these complex energy procurement operations hours a day, seven days a week. EPM must leverage its approximate $0 million O&M budget to manage a power supply portfolio of over 00 contracted power generation resources and nearly $ billion in annual spend. The large magnitude of funds being managed by EPM drives the need for competent personnel and consultants, accurate and efficient information management systems, regular training, and administrative resources. 1. Regulatory Background/Policies Driving EPM s Request EPM must adhere to numerous, evolving laws and regulatory mandates that govern SCE s procurement of third-party supplied power. Long-term procurement planning under AB, an increase in Renewables Portfolio Standard (RPS) requirements from % by 00 to 0% by 00, an increase in flexible resource adequacy capacity requirements, AB s cap-and-trade program, the Low Carbon Fuel Standard, Local Capacity Requirements, and energy storage all contribute to numerous procurement obligations that EPM must cost-effectively manage on behalf of customers. 1

21 1 The California Global Warming Solutions Act of 00 (AB ), a market-based cap-andtrade program, authorized the California Air Resource Board (CARB) to adopt a schedule of fees to be paid annually by, among other emitting resources, the electric utilities to cover the State s costs of implementing AB. As discussed in Section IV.A., SCE expects to incur lower administrative fees from CARB in the 01 Test Year because SCE decommissioned the Mohave Generating Station, thereby reducing its greenhouse gas volume, which should result in a lower fee. To meet AB and other legislative and regulatory requirements, EPM must procure from eligible resources, track performance, and engage in long-term procurement planning. To comply with the complex regulatory and legal requirements, EPM needs the proper staff for the processes and systems to be maintained accurately. The labor and non-labor recorded and forecast expenses for SCE s energy procurement activities from 0-01 are shown below in Figure IV-. 1

22 Figure IV- Energy Procurement Recorded and Adjusted 0-01/ Forecast FERC Account (Constant 01 $000) 1. Analysis of Recorded and Forecast Labor Expenses SCE s energy procurement labor expenses were relatively stable from 0 to 01. From 01 to 01, labor expenses decreased from $.1 million to $. million primarily due to delay in filling vacancies resulting from Operational Excellence. As described in Chapter II, this caused EPM s 01 recorded labor to be $.1 million below the authorized level. While SCE could maintain the lower staffing levels associated with 01 recorded cost during the interim reorganization period, such levels are unsustainable long term. EPM therefore seeks an increase of $1. million in 01 TY relative to 01 recorded. Refer to WP SCE-0 Vol., pp

23 1 This increase is needed to support increased regulatory complexity. Specifically, the volume and complexity of regulatory programs is increasing due to an increase in state mandated procurement programs such as the Green Rate, California Enhanced Community Renewables Program, 0% Renewables Portfolio Standard, Biofuel Renewable Auction Mechanism, Bioenergy Marketing Adjusting Tariff, Energy Storage initiatives, and Local Capacity Requirements, among others. To comply with these regulatory programs, EPM is projecting a net increase of approximately contracts year-over-year from 01 to 00. Please refer to Figure IV- for an estimate of net contracts to be executed over time based on historical data and anticipated future solicitations. As a result of increased energy procurement-related activity, SCE forecasts $. million for EPM s 01 TY O&M expense. This is based on a last-year recorded estimating methodology of $. million, increased by percent to manage the approximate 0 percent increase in contracts that will need to be managed between 01 and 00. Contracts include but are not limited to renewable, tolls, combined heat and power, energy storage, demand response, enabling agreements, broker agreements, transmission agreements, and gas transportation and/or storage. Refer to WP SCE-0 Vol., pp

24 Figure IV- Estimate of Projected Contracts Increase Year Over Year 1 1. Analysis of Recorded and Forecast Non-Labor Expense SCE s energy procurement non-labor costs in Account include employee-related expenses such as employee travel, telephone use, supplies, and training. These expenses are proportional to the staff in the department. In addition, this account includes costs to retain outside contractors and consultants to augment staffing needs, to assist the department in complex data analysis and economic modeling efforts, and to support legislative and regulatory matters, contract litigation, and consulting services. Last, under CPUC Resolution G-, the administrative fee payments to CARB associated with SCE s utility owned generation and imported power are recovered through the GRC. SCE recorded CARB fees in its GRC FERC account beginning in 0. As shown in Figure IV- above, SCE s energy procurement s non-labor costs significantly decreased from 0 to 01, primarily due to reduced use of contractors and consulting services and cutting back on employee travel and training. EPM forecasts total non-labor expenses of CPUC Resolution G-, p., Pursuant to our general rate case (GRC) ratemaking policies, the utilities are typically at risk for any expenses they incur exceeding their authorized GRC revenue requirements. In their GRC applications, the utilities may request to include anticipated AB fee payments in their revenue requirements. 1

25 $.1 million for the 01 Test Year. This is based on 01 recorded expenses of $.1 million (which were less than the 01 authorized level). Added to this $.1 million is approximately $0. million in consultant services and subscription and licensing fees to support renewable integration as well as increasing the meteorological services performed by EPM personnel to enhance grid reliability and safety system-wide through increased awareness and preparation for potential weather events. There is also an increase of $0. million in employee training and travel proportional to slightly increased forecast staff. However, there is a downward adjustment of $0. million in the CARB administrative fees due to the decommissioning of the Mohave Generating Station. As a result of these adjustments, SCE estimates a net $0.0 million of incremental non-labor expenses ($.1 million compared to the $.1 million of 01 recorded). Table IV-1 01 Non-Labor-Request Breakdown (In Millions) Refer to WP SCE-0 Vol. 1, pp. -. 0

26 V. EPM CAPITAL A. Communication Equipment [CSB-00-P1; CSB-00-PP] In the 01 GRC, the CPUC authorized $1. million for communication equipment primarily related to connecting contracted generating resources to SCE s Generation Management System. In 01, SCE recorded approximately $0. million in such communication equipment costs. As explained in Chapter II, the primary drivers behind underruns were aggregation of equipment and technology advances that reduced costs significantly. Additionally, there were more contract terminations than forecasted, which led to less equipment installation. Lastly, many of the projects under contract have been delayed, which pushed out SCE s timetable for installing the communications equipment, thereby resulting in lower 01 recorded costs. These project delays will require SCE to spend more in this 01 rate case period. Moreover, given the State s aggressive RPS goals and other regulatory drivers (e.g. resource adequacy, the cap-and-trade program, the Low Carbon Fuel Standard, Local Capacity Requirements, and energy storage) SCE expects a net increase of contracts year over year from 01 to 00. SCE requests $.1 million 1 for for the installation and configuration of the communication equipment in Figure V- below is a detailed discussion on the communication equipment project. 1 Refer to WP SCE-0 Vol., pp. -. 1

27 Figure V- Communication Equipment 01 GRC Expenditures Forecast 1 Figure V- Other Communication Equipment (Emergency Satellite Phones) 01 GRC Expenditures Forecast Project Description SCE installs specialized communication equipment on every generation resource in its portfolio to meet contractual obligations, operate within the CAISO control area, monitor resources, 1 Refer to WP SCE-0 Vol., p.. 1 Refer to WP SCE-0 Vol., p..

28 adjust schedules, settle energy transactions, and respond to dispatch protocols where applicable. SCE s GMS is the interface that allows SCE to have two-way communication, monitor, and manage generation resources in its portfolio. The GMS is critical to enable SCE to manage its generation resources remotely and optimize its dispatch of those resources at least-cost. The GMS requires a physical connection to each generation resource to monitor those resources, respond to system issues, maintain resource awareness, and/or send CAISO dispatch instructions and hourly unit power schedules. The GMS utilizes communication equipment, referred to as telemetry, that is necessary to accomplish data connection and transfer between the generation facility and SCE. Telemetry depends on the location and control equipment at the facility. The typical communication equipment in a telemetry system includes T1 data lines, a router, a firewall, a protocol translator, and control system modules. Telemetry equipment requires installation, database configurations, display and interface configurations, testing and commissioning (Figure V-). Given the State s aggressive RPS goals and other regulatory drivers (e.g., resource adequacy, the cap-and-trade program, the Low Carbon Fuel Standard, Local Capacity Requirements and energy storage), EPM estimates, based on historical data, that an average of 0 new facilities (i.e., primarily renewable energy resources) a year will reach commercial operation requiring installation of this communication equipment. On average, cost for the equipment per facility is estimated at $1,000 and costs associated with the additional tasks required at $,000 per facility. SCE has established standard methods through continuous improvement to deploy certain telemetry, including meters, aggregated remote intelligent gateways, and system control devices to generation resources not required to provide such capabilities on their own. This equipment is deployed at small renewable generation resources (less than 0MW) where cost is a key component in the successful integration of these resources. SCE installs emergency satellite phone systems (Figure V-) at all SCE-owned and critical contracted generation station locations in its portfolio. These emergency phone systems allow SCE to contact personnel at critical generation resources in its portfolio facilitating a quick response to emergencies.

29 Table V- EPM Projected Communication Equipment Costs (Nominal Millions) 1 Please refer to Table V- for details on the projected communication costs. EPM forecasts $1. million in 01, $1. million in 01, $1. million in 01, $1. million in 01, and $1.0 million in 00 for the installation and configuration of the communication equipment described above.