2015 General Rate Case

Transcription

1 Application No.: Exhibit No.: SCE-0, Vol. Witnesses: A. Edeson R. Perez J. Rumble (U -E) 01 General Rate Case Generation Volume - Solar Photovoltaic Program, Fuel Cell, and Catalina Before the Public Utilities Commission of the State of California Rosemead, California November 01

2 SUMMARY OF SOLAR PHOTOVOLTAIC PROGRAM The Solar Photovoltaic Program is authorized funding pursuant to Decision (D.) 0-0-0, D and D SCE is not requesting additional capital beyond those amounts already authorized in D.0-0-0, and as modified through D and D.1-0-0, for the construction portion of the program. While the projects will be in-service at the end of 01, certain capital expenditures will occur during the operations and maintenance of the facilities. The Solar Photovoltaic Program transitions from predominantly construction to Operations and Maintenance in years 01 and beyond. SCE is requesting to include recovery of the ongoing SPVP expenses in the 01 General Rate Case revenue requirement, consistent with how SCE recovers other utility owned generation expenses. SCE s request to terminate the current balancing account treatment for the Solar Photovoltaic Program and the basis for its request is discussed in Mr. Snow s testimony in Exhibit SCE-, Vol. 1, Part. Test Year 01 O&M Forecast is. million in 01 dollars. SCE s capital expenditure forecast is $.0 million for SUMMARY OF FUEL CELL PROGRAM The Fuel Cell Program is authorized funding pursuant to Decision (D.)-0-0. SCE is requesting to include recovery of the associated Fuel Cell Program revenue requirement in the total general rate case revenue requirement, consistent with how SCE recovers other utility owned generation revenue requirements. The Fuel Cell Program consists of operations and maintenance in years 01 and beyond. Test Year O&M Forecast is $0. million in 01 dollars. SUMMARY OF CATALINA This chapter discusses the O&M expenses and capital expenditures for Catalina Generation. SCE provides electric service to the approximately,000 permanent residents and 0,000 annual visitors of Santa Catalina Island, which is located approximately twenty-seven miles off the California

3 coast. SCE s service territory covers the entire Island, and includes the cities of Avalon and Two Harbors, as well as rural areas located in Catalina s rugged interior. SCE forecasts 01 O&M expenses of $. million. Activities include operating, maintaining, and repairing SCE s Catalina Generation assets, the auxiliary apparatus and systems, including the emergency generator, compressed air, emission control and monitoring systems, pumps, diesel fuel storage tanks, compressors, and ventilation equipment, and the supervision and management costs for generation personnel. SCE is requesting $. million in capital expenditures for The major project is the PBGS Generation Automation project, which makes up $.0 million. Projects with capital expenditures less than $1 million make up the remaining $.0 million.

4 SCE-0: Generation Volume Solar Photovoltaic Program, Fuel Cell and Catalina Table Of Contents Section Page Witness I. SOLAR PHOTOVOLTAIC PROGRAM...1 R. Perez A. SCE s Solar Photovoltaic Program Forecast Introduction and Overview of the Solar Photovoltaic Program (SPVP)...1. Regulatory History... a) Decision Establishing SPVP... b) Decision Modifying SPVP... II. SPVP CAPITAL FORECAST... A. Capital Forecast... B Recorded and Authorized Capital and Forecast Expenditures... III. SPVP O&M FORECAST... A. O&M 01 Test Year Forecast O&M Forecast Components... a) Inspections and Maintenance... (1) SCADA Inspection and Maintenance... () Switchgear Inspection and Maintenance...1 () Transformer Inspection and Maintenance...1 () Inverter Inspection and Maintenance...1 () Rooftop Inspections and Maintenance...1 b) Miscellaneous Expenses...1 c) Site Leases...1 -i-

5 SCE-0: Generation Volume Solar Photovoltaic Program, Fuel Cell and Catalina Table Of Contents (Continued) Section Page Witness B. Development of O&M Forecast by FERC Account FERC Account Miscellaneous and Other Power Generation Expenses...1 a) Description of Account...1 b) Development of Test Year Forecast...1. FERC Account 0 Rents...1 a) Description of Account...1 b) Development of Test Year Forecast...1 IV. SPVP REASONABLENESS REVIEW...1 A. Reasonableness Review Requirement Reasonableness Threshold...1. SPVP Costs are below the Reasonableness Threshold...1. Capital... a) Hardware Expenditures... (1) Solar Panel... () Inverters and Balance of System... () PV Module Mounting Systems... () SCADA System... () Interconnection Equipment... b) Installation Expenditures... (1) Scope... () Description of Installation Activities.... Operation & Maintenance Expenses... -ii-

6 SCE-0: Generation Volume Solar Photovoltaic Program, Fuel Cell and Catalina Table Of Contents (Continued) Section Page Witness a) Recorded Program and Project Operations and Maintenance Expenses... b) Recorded Roof Lease Costs... V. SCE'S FUEL CELL PROJECT... J. Rumble A. Introduction and Overview of the Fuel Cell Project Regulatory History... a) Decision Establishing the Fuel Cell Program... b) Creation of the Fuel Cell Program Memorandum Account.... Request to Eliminate the FCPMA.... Capital Expenditures Forecast.... Operation & Maintenance (O&M) Forecast...0 a) Description of Account...0 b) Recorded and Forecast Costs...0 c) Development of Test Year Estimate for Account...1 VI. CATALINA GENERATION... A. Edeson A. Introduction Forecast O&M Expenses and Capital Expenditures.... Comparison of 01 GRC Request, Authorized, and Recorded... B. O&M Expenses Catalina Generation O&M Expenses... a) Cost Forecast... C. Capital Expenditures... -iii-

7 SCE-0: Generation Volume Solar Photovoltaic Program, Fuel Cell and Catalina Table Of Contents (Continued) Section Page Witness 1. PBGS Generation Automation Project... a) Cost Forecast.... Projects Less Than $1 Million... D. Recorded Capital Expenditures Compared to Previous GRC Authorized... Appendix A Witness Qualifications -iv-

8 SCE-0: Generation Volume Solar Photovoltaic Program, Fuel Cell and Catalina List Of Figures Figure Page Figure II-1 Solar Recorded And Authorized Capital And Forecast Expenditures ($000 Nominal)... Figure III- SPVP Recorded and Adjusted / Forecast (Constant 01 $000)... Figure III- SPVP FERC Account Recorded 00-01/Forecast (01 $000)...1 Figure III- SPVP FERC Account 0 Recorded 00-01/Forecast (01 $000)...1 Figure V- Fuel Cell Program Recorded, Authorized and Forecast Capital Expenditures... Figure V- Fuel Cell Program Recorded and Adjusted 00-01/Forecasted FERC Account (Constant 01$)...0 Figure VI- PBGS Generation Automation Project Recorded 00-01/Forecast (Nominal and Constant 01 $000)... Figure VI- Various Catalina Generation Projects Less Than $1 Million Forecast (Nominal and Constant 01 $000)... Figure VI- Catalina Generation Recorded, Authorized and Forecast Expenditures... -v-

9 SCE-0: Generation Volume Solar Photovoltaic Program, Fuel Cell and Catalina List Of Tables Table Page Table I-1 SPVP Sites Table II- Capital Expenditure Forecast (Nominal $Millions)... Table III- SPVP O&M Cost per MW...1 Table IV- Summary of Capital Costs of Solar PV Program (00$)...1 Table IV- Reasonableness Review Threshold For Direct Solar PV Program Capital Costs (00$)...1 Table V- SCE Fuel Cell Program: O&M...1 Table VI- Catalina Generation Summary of O&M Forecast (Constant 01 $000)... Table VI- Catalina Generation Summary of Capital Expenditures Forecast (Nominal $000)... Table VI- Catalina Generation O&M Expenses FERC Account. Recorded and Adjusted 00-01/Forecast (Constant 01 $000)... -vi-

10 I. SOLAR PHOTOVOLTAIC PROGRAM A. SCE s Solar Photovoltaic Program Forecast 1. Introduction and Overview of the Solar Photovoltaic Program (SPVP) SCE s Solar Photovoltaic Program (SPVP) is a Commission-approved initiative to install solar photovoltaic panels in SCE s service territory, primarily on commercial rooftop space. 1 This program will be in effect through 01 and, as per the original application, involved the installation of up to 0 MW of solar generating facilities by SCE. The program was modified in Decision D , reducing the program installation to 1 MW, with no less than MW of solar generation facilities absent additional authorization. This decision also increased the allowable ground mount installations from percent of total capacity to 0 percent. The program was further reduced to no less than 1 MW DC ( MW AC) in D.1-0-0, which will be accomplished in 01 with the installation of the final solar rooftop project. Solar photovoltaic panels convert sunlight directly into electricity using a semiconductor material. They use no water to generate electricity and have no moving parts. Photovoltaic (PV) panels generate direct current (DC) electricity, and electrical devices called inverters convert the output to alternating current (AC) electricity for export to SCE s electrical distribution system. Each 1. MW of DC yields approximately 1 MW of AC. The Commission found that this easily deployable technology can help advance California s broad goal of developing renewable energy and specifically help make progress toward the state s emphasis on developing distributed rooftop solar PV projects. The SPVP projects range primarily in size from 1 to MW each and are installed on commercial and industrial rooftop space in SCE s service territory. These projects fill an existing gap in the solar industry market for solar installations of this size and will encourage the development of more distributed generation projects within this range. As originally envisioned, SCE developed these 1 D.0-0-0, Ordering Paragraph 1. D.1-0-0, Ordering Paragraph 1. D.0-0-0, (mimeo), p.. SCE s Application in A states that SCE envisions the individual Solar PV Program installations to be in the 1 to MW range. As the program proceeds, however, some installations may be larger or smaller than this range due to roof size or circuit loading considerations. D.0-0-0, (mimeo), p.. 1

11 facilities over the five-year construction program life, initially targeting approximately 0 MW annually, and with no more than ten percent of the program consisting of ground-mounted solar PV. This build out plan was modified to MW per year and the ground-mount limit increased to twenty percent with the adoption of D During 00-01, SCE constructed a total of sites, all of which were delivering energy to the grid by December 1, 01. In 01, SCE has one additional site under construction which is expected to be completed by the third quarter of 01. A summary of all the sites is included in Table I-1 below. D.1-0-0, Attachment 1, p..

12 Table I-1 SPVP Sites SPVP Site Online Date CAISO COD MW AC MW DC [] Inverters SPVP001 - Fontana[] //00 // SPVP00 Chino //00 1// SPVP00 Rialto /1/0 /1/ SPVP00 Redlands 1//0 // SPVP00 Ontario 1//0 //0.00. SPVP00 Redlands 1//0 // SPVP00 Ontario 1/0/0 //0.00. SPVP00 Ontario 1//0 // SPVP0 Fontana /1/0 1// SPVP0 Redlands //0 Pending[].0.0 SPVP01 Ontario 1//0 // SPVP01 Redlands /1/0 Pending[].0. SPVP01 Fontana 1/1/0 1/1/01.0. SPVP01 Redlands /1/0 Pending[] SPVP01 Fontana 1/1/0 Pending[].0.0 SPVP01 Fontana //0 // SPVP0 Redlands /1/0 // SPVP0 Fontana /1/0 1/1/01.0. SPVP0 Rialto //0 Pending[] SPVP0 Rialto //01 Pending[].00. SPVP0 - San 1/0/0 Pending[].0. Bernardino SPVP0 Ontario 1//0 Pending[] SPVP0 Ontario 1/1/0 Pending[] SPVP0 - Porterville 1//0 // SPVP0 Perris /1/01 Pending[] SPVP0 Redlands Pending[1] Pending.00. SPVP Sites.0 1. [1] SPVP 0 is currently under construction [] Projects are complete and online, but are pending CAISO review of SCE s application for COD status [] Unless otherwise specified, the energy output in this filing follows the common convention within the PV industry, which is to refer to output as PV panel DC output. [] Located on the same rooftop as SPVP01, the sites share a CAISO meter. In the list above, we count these two projects as one site.

13 We forecast the Test Year 01 Operation and Maintenance (O&M) expenses to be $. million ($01) and the Capital Expenditures for to be $.0 million (nominal dollars). These expenditures are necessary to continue providing reliable service at low cost, while complying with applicable laws and regulations, and maintaining safe operations for employees and the public. This testimony supports the reasonableness of SCE s forecasts.. Regulatory History a) Decision Establishing SPVP On June 1, 00, the Commission issued D authorizing SCE to install, operate, and maintain up to 0 MW of utility-owned solar photovoltaic (PV) generating facilities. D also doubled the size of the program by adding an additional 0 MW Independent Power Producer (IPP) component, whereby SCE must hold solicitations to procure up to 0 MW of distributed generation bids from IPPs under power purchase agreements. SCE proposed in Application (A.) to install the utility-owned portion of the program, at a base cost of $ million (00 dollars) in direct capital expenditures, or $.0/W with a percent contingency. In D.0-0-0, the Commission found reasonable SCE s direct capital expenditures forecast of $ million, plus the percent contingency, for a total reasonableness cap of $. million. b) Decision Modifying SPVP On February, 0, SCE filed a Petition for Modification requesting the program be reduced to no more than 1 MW. SCE stated program objectives had been achieved (e.g., bolster the 1- MW solar PV market) and program goals can continue to be realized in the reduced program at better cost savings to SCE customers. The Commission agreed that a program reduction would preserve the intent of the solar program while also reducing costs for customers, thus partially granting SCE s Petition for Modification through D As a result, SCE s solar program was modified to 1 MW (with no less than MW absent additional authorization), and increasing D.0-0-0, Ordering Paragraph. D.0-0-0, (mimeo), pp. -. A D.1-0-0, Findings of Fact, pp. -0. D denies SCE s request to allocate the 0 MW removed from the UOG and IPP portions of the program to a new solicitation called IPP Revised, which aimed for procurement of lower cost solar facilities.

14 ground-mount installations to twenty percent (equivalent to MW) to accommodate for SCE s existing obligations. In D.1-0-0, the Commission reduced not only the program size, but proportionately reduced the cost caps previously found reasonable in D The O&M expense cap was reduced to approximately $0. million (00 dollars), and the direct capital expenditures cap reduced to $1. million (00 dollars, with $. million in direct capital plus a percent contingency). The total costs continue to be based on $.0/W ($./W including the percent contingency), with costs in excess of $./W subject to a reasonableness review. On July, 01, SCE filed a second Petition for Modification, requesting the program be reduced to 1 MW. SCE stated additional changes that took place in the market justified a further reduction in the utility owned generation portion of the program. SCE stated that program goals had been successfully achieved and that customers would realize a greater cost savings with the program reduction. 1 In D.1-0-0, the Commission agreed with SCE s assessment that market changes between the first and second Petition for Modification filings warranted a further reduction in the utilityowned portion of the SPVP program, and thus established that the utility-owned portion of the SPVP program be capped at 1 MW. 1 As well, the Commission made conforming changes to the O&M and capital estimates to reflect the program reduction. The reasonable cost estimates over the program period was reduced to approximately $1.0 million (00 dollars) in O&M expenses, and $0. million (00 dollars) in direct capital expenditures ($1. million direct capital plus a percent contingency). These total costs continue to be based on $.0/W ($./W including contingency), with costs in excess of $./W subject to a reasonableness review. 1 D.1-0-0, Conclusion, p.. 1 D.1-0-0, Findings of Fact, p.1. 1 D.1-0-0, Findings of Fact, p.1. 1 D.1-0-0, Conclusion, p.1-1.

15 II. SPVP CAPITAL FORECAST A. Capital Forecast SCE is not requesting additional capital for construction of any solar PV sites (expected to conclude in 01) beyond the amounts authorized in D.0-0-0, and as modified by D and D Table II- below shows the summary capital expenditures for Table II- Capital Expenditure Forecast (Nominal $Millions) Year Total Forecast Capital Expenditures $1.0 $0. $1.0 $0. $. $ For 01, the capital forecast includes finishing the construction of the final utilityowned SPVP site (SPVP 0), the installations of the Electrical Fault Protection System and the Emerson Monitoring and Control system on the entire utility-owned SPVP fleet, as well as retrofitting the sites for personnel safety mitigation. The SPVP 0 is a. MW DC plant located in Redlands, CA, and is expected to be completed in the third quarter of 01. The Electrical Fault Protection System is an automated protection system that shuts down an inverter if adverse power flows are detected in order to prevent fires and other failures that would damage the buildings or cause harm to the people who occupy them. The Emerson Monitoring and Control system is an upgrade to the current system that will add monitoring and reporting functions to all the sites. SCE will use the Emerson system to monitor, control, and maintain the SPVP sites. Personnel safety mitigation activities include identification and marking pathways of travel, identification and marking the parameter boundaries, sky light protection, ladder access railing, and bridges and platform to cover cable trays. The capital forecast for years is significantly lower than previous years with the conclusion of the construction program and installation of the aforementioned systems. The capital forecast for these years reflects equipment such as inverters, transformers, and other capital designated replacement components. There is a substantial increase in forecast capital spending in 01 because SCE anticipates a significant number of inverters to be replaced in that year. Inverter manufacturers state that an inverter lifespan is between - years. Given SCE s experience with SPVP 001 and 00, the lifespan is expected to be on the shorter end of the range, at seven years. Since the majority of

16 SCE s utility-owned sites were built in 0, the additional capital in 01 is planned for the expected influx of inverter replacements. B Recorded and Authorized Capital and Forecast Expenditures In compliance with Ordering Paragraph of D (SCE s 01 GRC decision), SCE is submitting the following Figure II-1 below, which summarizes SPVP recorded capital expenditures during 00 through 01. This figure also shows forecast expenditures for 01 through 01, and the 01 forecast authorized by the Commission in the 01 GRC. Figure II-1 Solar Recorded And Authorized Capital And Forecast Expenditures ($000 Nominal) As shown above in Figure II-1, SCE s forecast for is substantially less than recorded expenditures during This is primarily due to the expected conclusion of SPVP construction at the end of 01. As mentioned above, the forecasts consist primarily of capital replacements parts necessary to maintain the solar facilities. The 01 forecast includes capital budgets approved in D and as modified through D and D to complete construction of the final solar site, installation of the Electrical Fault Protection and Emerson systems on the entire solar fleet, as well as fitting applicable sites for personnel safety mitigation.

17 SCE s recorded 01 expenditures are lower than the amount authorized in the 01 GRC, primarily due to the cancellation of two SPVP projects, College of the Desert and Delano. Due to significant interconnection upgrade costs, SCE decided that building at those sites was not in the best interest of SCE ratepayers and subsequently cancelled the projects. SCE s 01 capital expenditures were lower also due to SCE s filing of a second Petition for Modification with the Commission on July, 01, requesting that the utility-owned portion of the program be reduced to 1 MW. 1 After filing its petition, SCE was less aggressive in searching for new sites that would fill the gap created by the College of the Desert and Delano cancellations, however SCE continued to search for potential replacement projects should the second Petition for Modification be denied. On May, 01, the second Petition for Modification was approved by the Commission, and the utility-owned portion of the SPVP program concluded at 1 MW. 1 Southern California Edison Company s (U -E) Petition for Modification of Decision No

18 III. SPVP O&M FORECAST A. O&M 01 Test Year Forecast Since construction of new facilities concludes in 01, SCE s Test Year 01 forecast consists of the ongoing operations and maintenance of the utility-owned solar fleet. SCE will operate and maintain solar project sites at the completion of the construction phase of the program for a total of 1 MW. Each site will be unique and have differing types and quantities of solar power plant equipment based on the size of each site and the manufacturer of the equipment. Test Year 01 O&M estimates are based on previously established cost per MW for the SPVP sites for all operations and maintenance activities and include labor and materials necessary for maintaining the plant and lease expenses. Except for site leases, there is not sufficient O&M history on the SPVP sites to utilize a forecasting method based only on recorded data, therefore the O&M forecast relies more on budgeted forecasts that are based on recorded history. Figure III- summarizes the SPVP Labor and Non-Labor O&M recorded costs from 00 through 01, and the Test Year (TY) 01 forecast of $. million.

19 Figure III- SPVP Recorded and Adjusted / Forecast (Constant 01 $000) 1 1 As shown above in Figure III-, labor expenses have increased gradually from 00 through 01 reflecting the construction and maintenance efforts for the SPVP projects, and are expected to further increase in 01. The labor reduces in 01 and 01 to a level appropriate for the ongoing maintenance of the completed SPVP sites. Non-labor expenses increased substantially in 0 through 01 reflecting the expense-related construction non-labor components as well as the maintenance non-labor components including roof leases, and are expected to further increase in 01. The non-labor reduces in 01 and 01 to the level appropriate for ongoing maintenance and roof leases for the 1 MW of SPVP capacity. 1. O&M Forecast Components In preparation for this 01 GRC, SCE reassessed O&M activities as identified in the 01 GRC and, based on program experience, SCE defined a new set of activities that give a more accurate portrayal of O&M activities going forward. These O&M activities can be broken down into

20 three areas, (a) Inspections and Maintenance, (b) Miscellaneous Expenses, and (c) Site Leases. 1 These O&M categories more accurately capture O&M activities for the SPVP plants given O&M experience from 0-01 and correctly categorize how O&M budgets will be planned in future years. a) Inspections and Maintenance Project O&M includes the inspections and maintenance of components of the SPVP facilities such as the Supervisory Control and Data Acquisition (SCADA) system, switchgears, transformers, and so on. Embedded within the inspections and maintenance of different components of an SPVP facility is the forecast expenditure for labor, non-capitalized spare parts and miscellaneous expenses. SCE s forecast cost for the Inspection and Maintenance for items (1)-() below is $1,0 per MW DC ($01), and was calculated based on an itemized forecast of future expenditures. Beginning in 01, existing Power Production Department staff who operate and maintain other SCE utility-owned facilities will perform the inspections and maintenance for the SPVP facilities. These activities require approximately. full time employees (FTE), including roles such as project manager and supervisor, Instrument/Control and Electrical (ICE) technicians, operator, and engineering support. The labor cost associated with these personnel is embedded within the projectspecific O&M forecast described below. Inspection and Maintenance expenses are recorded in FERC Account. Descriptions for different types of inspection and maintenance activities are listed in detail below. (1) SCADA Inspection and Maintenance The SCADA gathers, records and transmits data about the performance of each SPVP site and presents the data to the operator in the form of a Human Machine Interface (HMI). The SCADA presents the operator with valuable and necessary information to insure safe and reliable operation of the plants. Since these systems are computer-based, they require routine maintenance including troubleshooting, software upgrades, security enhancements, virus and malware prevention, etc. 1 Of the items identified in SPVP s original and updated testimony in A , Array Cleaning and Inspection now falls into item (e), Other Equipment Inspection and Maintenance, Inverter Misc. Maintenance is now defined as item (d), Inverter Inspection and Maintenance, DAS Monitoring has been expanded to item (a), SCADA Inspection and Maintenance, and Roof Leases remained as is and listed as item (f). Items (c) and (d) were newly defined so as to capture all major components of the SPVP sites.

21 () Switchgear Inspection and Maintenance The switchgear and main circuit breaker act as the point of demarcation between the Solar Plant and the SCE electrical grid. The switchgear has meters (to measure the amount of energy flowing into/out of the site), breakers (which control power flow and allow for isolation), and replays (which provide circuit protection) of the plant equipment prior to it reaching the SCE Distribution Grid. These systems require routine maintenance including inspection, cleaning, testing and repair. () Transformer Inspection and Maintenance The transformer is used to change voltage levels. SCE s electrical grid has many voltages that are used depending on how far energy needs to be transmitted. Higher voltages allow more energy to be sent on the same size wires with lower losses due to the natural resistances of the wire. The inverters at the SCE sites produce 0 volts of AC power. Our typical transmission line from the SPVP solar rooftop sites, to the customers, is 1,000 volts. The transformer steps up the inverter output voltage from the 0 volts to 1,000 volts, so it can be sent to the customer. () Inverter Inspection and Maintenance The inverter is the primary energy conversion device on the site. This device takes the Direct Current from the panels and converts it to Alternating Current for use by customers. () Rooftop Inspections and Maintenance As needed, to investigate roof leaks, noises, disturbances with warehouse occupants, SCE conducts rooftop inspections and maintenance. If the warehouse owner or occupant discovers an abnormality with their rooftop, SCE is responsible to send a crew to survey the rooftop where SPVP equipment is installed. SCE may also be responsible to remove portions of an SPVP facility to appropriately survey the rooftop. If damages are discovered resulting from an SPVP facility, then it is SCE s responsibility to repair said damages. b) Miscellaneous Expenses The Miscellaneous expense category generally refers to preventative action, facility maintenance (i.e., safety paint, vegetation management), and repairs for all manufactured equipment. The sites have multiple pieces of equipment that require periodic attention in order to maximize the usefulness of the assets. Examples of other expense include, but are not limited to, wire 1

22 and cabling, racking, equipment rental and repairs, transportation, training, and facility maintenance (i.e., paint, fencing, vegetation management). Miscellaneous expenses also include array inspection and cleaning, as identified in the SPVP program application A After conducting the initial cleaning for SPVP 001, SCE determined that at the time it was costly and not effective to justify continue array cleaning as originally planned. There were three main reasons that led to this conclusion. One, array cleaning was more costly than anticipated; local regulations required the use of deionized water and capture of used water. Two, the amount of soiling is greater than expected and would require cleaning more frequently to materially increase solar production. Three, array cleaning requires a site to be shut down, which means SCE would lose production output during the time the site was shut down. Therefore, the benefit of increased kwh resulting from the cleaner panels is diminished due to the loss of production due the shutdown of sites during the cleaning. As a result, SCE concluded natural processes such as wind and rainfall would do an adequate job of array cleaning. In the future, should it become advantageous and cost effective to conduct array cleaning as outlined in A , SCE may elect to conduct regular array cleanings. SCE s forecast cost for Miscellaneous Expenses for the activities described above is $,0 per MW DC ($01), and was calculated based on an estimate of forecast expenditures. Also included in Miscellaneous Expenses are Added Facility Charges, which are fixed payments that SPVP pays to SCE T&D for interconnecting the SPVP sites to the grid. SCE s Test Year 01 forecast for Added Facility Charges is $1, ($01) per MW, and was calculated based on historical costs. Miscellaneous Expenses and Added Facility Charges expense record in FERC Account. c) Site Leases Site leases on all rooftop sites and the single ground mount site (SPVP 0) are fixed lease payments that escalate on their anniversary in conjunction with general Consumer Price Index escalation rates. New site construction will conclude with the completion of SPVP 0 in the third quarter of 01. SCE s forecast for Site Leases is $,01 per MW ($01), and was calculated based on the scheduled lease payments for all the sites. Site Leases expense is recorded in FERC Account 0. B. Development of O&M Forecast by FERC Account Historical O&M data from includes expenses in excess of that required for the 01 Test Years due to expenses that relate to new site construction through 01. Beginning in 01, during 1

23 the Test Year 01, and for the years going forward, utility-owned SPVP sites will be operated and maintained like all other utility-owned generation facilities in the Power Production Department. As such, O&M expenditures in Test Year 01 are based on the previously approved cost per MW, which encompasses the forecasted maintenance expenses. Table III- below shows the previously approved cost per MW and the correlation to our 01 GRC O&M forecast. Table III- SPVP O&M Cost per MW GRC $/MW Forecast (00$) 01 GRC $/MW 1 MW Cost (01$M) Revised Allocation $/MW 01 GRC 1 MW Cost (01$M) Activity Array Cleaning/Inspection,000,0 0. Inverter Misc. Inspection,0, 0.0 DAS Monitoring 1,00 1,0 0. Total Plant Maintenance 1,00 1, 1.1,0.1 Roof Lease Costs 0,000,.,01.0 In the 01 GRC it was believed that roof lease costs would approach $0,000 per MW. The costs at this time are approximately $,000/MW, which would likely have been higher if SCE continued the program past the current 1 MW. O&M expenses for maintenance were forecast at approximately $1,000/MW in the 01 GRC, but the experience to date indicates a higher expense of about $,00/MW. The total expense forecast for the 01 GRC and the 01 GRC per MW of installed solar capacity remains essentially the same at approximately $,00/MW. As noted above in Section 1, the O&M activities have slightly changed from those envisioned when the program began. However, the costs are in line with the original forecast as shown in Chapter IV SPVP Reasonableness Review below. 1. FERC Account Miscellaneous and Other Power Generation Expenses a) Description of Account FERC Account includes the cost of labor and expenses incurred in the operation and maintenance of SPVP sites. The Test Year 01 SPVP O&M expense forecast is $,0 per MW DC ($01). The Labor forecast for this account is $0. million and the Non-Labor forecast is $1. million, providing a total TY forecast of $.1 million. The 00 through 01 recorded expense history and our forecasts for 01 through 01 for this account are summarized in Figure III- below. 1

24 Figure III- SPVP FERC Account Recorded 00-01/Forecast (01 $000) b) Development of Test Year Forecast Upon Commission approval of the program in June 00, SCE began ramping up the staffing efforts to adequately support the project growth schedule for 00 and future years. The increased labor costs through 01 are reflective of the increased number of personnel required to meet the increased SPVP project installation schedule. Program staffing during the construction phase will remain high until construction is completed at the end of 01. Staffing will decline at the end of 01 to that necessary for continued maintenance. The increasing Non-labor costs for 0 through 01, and forecast for 01 reflect the increased number of projects that were installed during those years, and the associated O&M activities required for project maintenance. In 01 the costs include installation of systems including the Electrical Fault Protection System, and the Emerson Monitoring and Control system, required for safe and reliable operation of SPVP facilities. O&M costs associated with site maintenance will reduce to a maintenance required level, which is significantly lower than during the construction period. 1

25 SCE developed its 01 expense forecast primarily based on the previously planned cost per MW for the SPVP development. As discussed above, the previously planned O&M expense of approximately $1,000 requires revising up to $,00/MW, but that is offset by the reduction from the roof lease cost. In FERC for both Labor and Non-Labor expense, the 01 expense serves as an appropriate base estimate for our 01 forecast, with a forecast reduction adjustment for the 01 TY. In D and D. -1-0, the CPUC stated that if costs have shown a trend in a certain direction over three or more years, the last recorded year is an appropriate base estimate. Labor expenses have been increasing for five years from 00-01, so we used 01 recorded as the starting base estimate, but we adjusted the 01 base downward to reflect our belief that there will be reduced staff in 01 given that construction of new facilities will conclude in 01. Nonlabor expenses fluctuated significantly from 00-01, but this was also due to the timing of the construction of new facilities as well as the online dates for the various projects, as opposed to unpredictable factors (such as weather) suggested by the CPUC in D and D that would support the use of an average of recorded years as the test year methodology. Since all projects except SPVP0 were online by the end of 01, SCE used the 01 non-labor recorded expense as its starting base estimate but reduced the expense to the level necessary for the continued site maintenance forecasted for 01.. FERC Account 0 Rents a) Description of Account This account includes all rents of property of others used, occupied, or operated in connection with SPVP projects. The Test Year 01 SPVP O&M expense forecast is $,01 per MW DC ($01). This account does not contain Labor expense. The Non-Labor forecast for this account is $.0 million for the 01 TY forecast. The 00 through 01 recorded expense history and our forecasts for 01 through 01 for this account are summarized in Figure III- below. 1

26 Figure III- SPVP FERC Account 0 Recorded 00-01/Forecast (01 $000) 1 1 b) Development of Test Year Forecast SCE developed its 01 expense forecast primarily based on the previously planned cost per MW for the SPVP development. As discussed above, the previously planned Roof Lease expense of approximately $0,000 requires revising down to $,01 /MW. In FERC 0 for Non-Labor expense we utilize a Last Recorded Year with a forecast decrease adjustment for the 01 TY. In D and D. -1-0, the CPUC stated that if costs have shown a trend in a certain direction over three or more years, the last recorded year is an appropriate base estimate. Lease Nonlabor expenses have been increasing each year, which provides a base for estimating the test year 01. To this base we add an increase adjustment of six months lease for one site that reflected only six months of 01 recorded expense. Costs in this account are expected to remain constant for and for years going forward, as these lease costs are fixed and only increase annually with escalation. 1

27 IV. SPVP REASONABLENESS REVIEW A. Reasonableness Review Requirement In D.0-0-0, the Commission found that the reasonableness review of SPVP s capital expenditures and O&M costs should be conducted in the GRC proceeding, and review of SCE s operation of the facilities should be conducted in the Energy Resource Recovery Account (ERRA) proceeding. In D.0-0-0, the Commission found reasonable SCE s cost estimates (in 00 dollars) of $1.1 million in O&M and $.0 million in direct capital expenditures over the 00 through 01 program period, and authorized SCE to establish the Solar Photovoltaic Program Balancing Account (SPVPBA) to record capital costs and O&M expense associated with the SPVP. 1 As discussed by Mr. Snow in Exhibit SCE-, Volume 1, Part, SCE is proposing to eliminate the SPVPBA in this proceeding and to recover the SPVP rate base and O&M costs in Test Year 01 GRC base rates. In accordance with D.0-0-0, this testimony presents for Commission review the capital expenditures and O&M expenses associated with installation of the completed SPVP sites (. MW DC). 1. Reasonableness Threshold In A , SCE provided an estimate of megawatts installed and associated direct capital expenditures that would be incurred during the five year SPVP. As indicated in SCE s direct testimony, Year 0 estimated a time frame from April 00 to December 00 for installation of the first projects totaling MW, and capital expenditures of $ million. Table IV- summarizes target capital cost of the SPVP and associated installation schedule as provided in direct testimony to A D.0-0-0, (mimeo), pp.,. 1 Please see SCE s Rebuttal Testimony filed in A on October, 00, Confidential Attachment 1 for details on how target capital cost was developed. 1

28 Table IV- Summary of Capital Costs of Solar PV Program (00$) Year Capital (Million$) MW Installed Estimated Time Frame 0 $ April '0 to Dec '0 1 $ $1 0 0 $1 0 0 $ $1 01 Total $ 0 1 The capital cost schedule in Table IV- assumed a Commission decision would be issued on the SPVP in 00; however D did not approve the SPVP until June 1, 00. The timing of issuance of D moved Year 0 of the SPVP installation to 00. Given this delayed installation schedule, the reasonableness review threshold as provided in SCE s application testimony is applied on a program year basis, rather than a calendar year basis. Conclusion of Law in D states that a [r]eview of all SPVP costs should be conducted in SCE s GRC proceeding. 1 SCE s target cost for the Solar PV Program is $.0 million, or $.0/W DC. 0 The reasonableness threshold is $. million ($ 00), or $./W DC ($00), which is the base case amount plus a reasonable percent contingency. 1 If SCE s direct capital expenditures are less, on a $/W basis than the reasonableness threshold, then those capital expenditures will be deemed to be reasonable. 1 D.0-0-0, (mimeo), pp. -0,. 0 D.0-0-0, Ordering Paragraph 1. 1 D.0-0-0, Ordering Paragraph 1. 1

29 The cap for direct capital expenditures has reduced to correspond to revised program installed MW goals approved by the Commission. D issued February 1, 01, reduced the SPVP program by half for the program period, thus reducing the direct capital expenditures to $1. million ($00) ($. million ($00) plus a percent contingency). D issued May, 01, further reduced the program cap to 1 MW, thus concurrently reducing the capital expenditure cap to $0. million ($00) ($1. million ($00) plus a percent contingency. In all three program build out structures, the direct capital expenditure limit remained $./W ($00) ($.0/W ($00) plus a percent contingency), with the requirement that the cost cap be subject to a reasonableness review. The reasonableness threshold is based on installed watt of direct current (DC) electricity. Solar photovoltaic panels generate DC electricity, and inverters convert the output to alternate current (AC) electricity for export to SCE s electrical distribution system. Each MW AC is equivalent to 1. MW DC. Table IV- identifies Reasonableness Thresholds for Direct Solar PV Program Capital Costs on an installed $/W basis. D.1-0-0, Conclusion. (p.). D.1-0-0, Conclusion. (p.1). D.0-0-0, Conclusions of Law (p.); D.1-0-0, Conclusion. (p.); D.1-0-0, Conclusion. (p.1). 0

30 Table IV- Reasonableness Review Threshold For Direct Solar PV Program Capital Costs (00$) Expenditures Incurred During Year 0 Year 1 Year Year Year Year $/W Though the Solar PV Program estimates a base case total installed cost of $.0 per watt, the average cost of installation will vary from year to year. As indicated in SCE s testimony in the SPVP application, the capital costs would be higher in the early years but decrease as SCE s experience increases. In its SPVP application, SCE estimated the costs incurred during the start-up phase of the program (listed as year 0 ) to be $ million ($ 00) for up to MW of installed PV generation, which produces an average installed cost of $.0/W ($ 00) for that year. This estimate was based upon discussions with solar industry experts, and vendor quotes, combined with a forecasted schedule for installation of SPVP projects. Please refer to Rebuttal Testimony (A ) Workpapers for data on original capital cost estimate.. SPVP Costs are below the Reasonableness Threshold SCE s actual capital expenditures for the start-up phase of SPVP, Year 0 were at the reasonableness threshold of $.0/W DC. SCE incurred $0. million in capital expenditures for the These threshold amounts will be escalated to nominal year amounts for use in reasonableness review. Consistent with SCE s testimony in A , because direct capital expenditures will be recorded in nominal dollars during each year of the project, the $/W values will be adjusted for general price inflation between 00 and later years. SCE proposed to adjust the constant 00 dollars to nominal dollars by multiplying the $/W costs in 00 dollars by the ratio of the Gross Domestic Product Price Index for the calendar year being reviewed to the Gross Domestic Product Price Index for 00. SCE s Application Testimony, p.. 1

31 first.1 MW DC of SPVP installations, or $.0/W DC installed. These expenditures are deemed reasonable pursuant to D Year 1 SPVP construction began ramping up with the build of.0 MW DC. Capital expenditures are higher than the reasonableness threshold of $./W DC. SCE incurred $. million in capital expenditures for the additional MW, which translates to $./W DC. Year SPVP construction increased significantly resulting in 1.1 MW DC of new build. Capital expenditures are lower than the reasonableness threshold of $./W DC. SCE incurred $1. million in capital expenditures for the additional MW, which translates to $./W. Year SPVP construction began to taper off with the construction of 1. MW. Capital expenditures are lower than the reasonableness threshold of $./W DC. SCE incurred $0. million in capital expenditures for the additional MW, which translates to $./W. Although Years 0 and 1 capital expenditures were at or higher than the established cost cap for SPVP direct capital expenditures in those particular years, remaining years are considerably lower. The cumulative total for the SPVP program in 00 dollars shows that capital expenditures at this point in the program are in fact lower than the program cost cap of $./W ($00). The cumulative total of capital expenditures in for years is $1. million ($00), therefore SCE is below the cost cap at $./W ($00).. Capital Capital expenditures can be categorized into two expenditures types: (1) Hardware Expenditures, and () Installation Labor. Descriptions of the categories are included below. a) Hardware Expenditures Hardware expenditures represent SCE s costs to procure the solar panels and other project-related equipment (such as racks to mount the panels, inverters, data acquisition equipment, circuit breakers and fuse boxes, metering, and transformers to increase the panel output voltage to levels utilized in the electrical distribution system). (1) Solar Panel SCE utilized solar panels from three manufacturers, First Solar, Sunpower, and Trina. First Solar FS series two rigid thin film modules were utilized for SPVP 001, 00 and 00. These panels convert sunlight directly into electricity utilizing layers of cadmium telluride (CDTE) semiconductor materials. First Solar panels are rated at. watts DC under standard test conditions and have a -year limited power output warranty. Sunpower and Trina panels were used for the

32 remaining SPVP sites. Sunpower and Trina panels have a higher panel rating than First Solar, such that sites with Sunpower and Trina panels produced more MW per panel. Sunpower panels were used for ten SPVP sites. These panels convert sunlight directly into electricity utilizing monocrystalline modules per panel protected by tempered glass. Sunpower panels are rated up to 0 watts DC under standard test conditions and have a -year limited power output warranty. Trina panels were used for the remaining thirteen SPVP. These panels convert sunlight directly into electricity utilizing multicrystalline modules per panel protected by tempered glass. Trina panels are available in various ratings ranging from through 0 watts DC under standard test conditions and have a -year limited power output warranty. () Inverters and Balance of System All solar PV modules, regardless of technology, generate direct-current (DC) power. SCE must convert this DC power to alternating current (AC) power to use in its distribution system. Inverters perform this conversion. SCE plans to utilize inverters by two different manufacturers for future SPVP installations, Satcon Technologies and Xantrex. Satcon PVS-00 Powergate inverters are sized to generate 00 kw AC, and are designed to interconnect to the distribution grid. The inverters are supplied with an interconnection voltage of three phases, 0 VAC nominal. As a result of the design for grid interconnection, the inverters are outfitted with many system protections in place including: inverter on/off switches, Inverter Over Current Fault protection, Line Frequency Controls, etc. If any of these system protections detect a deviation from a safe range operation, safety controls will automatically isolate the system, or parts of the system, from the grid. The Xantrex GT00kW Grid-Tied Photovoltaic inverter is a three phase power conversion system that is designed to generate 00kW AC. Solar PV systems also include conduit, wire, and combiner boxes, called Balance of System (BOS) components. In order to allow the solar array to achieve the proper operating voltage of a nominal 00 volts DC, modules must be wired in series (imagine multiple batteries in a flashlight) into strings. The strings are then terminated in parallel using specially designed SPVP 00, 00, 0, 01, 01, 01, 01, 0, 0, and 0. SPVP 00, 00, 00, 0, 01, 01, 0, 0, 0, 0, 0, 0, and 0.

33 combiner/fuse boxes that provide over-current protection to the series strings, before sending the combined DC power to the inverter. () PV Module Mounting Systems SPVP systems require racks on which to attach the panels. Racking systems vary and can be scalable, ballast and non-ballast-railed, have penetrating and non-penetrating designs, and different wind rated to capacities. () SCADA System The Supervisory Control & Data Acquisition System (SCADA) gathers, records and transmits data about the performance of each SPVP site and presents the data to the operator in the form of a Human Machine Interface (HI). The SCADA System presents the operator with valuable and necessary information to insure safe and reliable operation of the plants. The SCADA System includes weather sensory equipment that will enable SCE to evaluate impact of weather conditions experienced on the quantity of power output. Additionally, the Data Processing Gateway (DPG) receives data from the SCADA System which is transmitted to the CAISO and SCE Generation Control Center. Data provided to these entities include operational data on a real time basis. The SCADA System also archives historical data related to the operation of the SPVP sites in databases which allow for trend analysis as well as alarm and event historical analysis. () Interconnection Equipment Interconnection Equipment includes equipment necessary for interconnecting the SPVP projects to the SCE distribution grid. SPVP projects will connect at low voltages (less than kv) and medium voltages (greater than kv). Standard equipment used for interconnection includes: transformers; switchgear; meters; fuses; breakers; pad mounted switches; and standard switchgear protective relays. The interconnection equipment required for each voltage level is determined on a project specific basis. b) Installation Expenditures (1) Scope Installation consists of SCE s expenditures to install the Generating Facility Equipment on the project site including: Site Selection, Engineering, Permitting, Installation and Commissioning, Project Management and Oversight.