ERRATA. Energy Resource Recovery Account (ERRA) Review Of Operations, 2016 Chapters I-VII PUBLIC VERSION

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1 Application No.: A Exhibit No.: SCE-01 A Witnesses: T. Champ S. Lelewer T. Condit E. Lopez D. Cox M. Palmstrom S. DiBernardo M. Wallenrod S. Handschin T. Watson J. Buerkle R. Hite S. Willis ERRATA (U -E) Energy Resource Recovery Account (ERRA) Review Of Operations, 01 Chapters I-VII PUBLIC VERSION Before the Public Utilities Commission of the State of California Rosemead, California August, 01

2 Testimony of Southern California Edison Company in Support of its Energy Resource Recovery Account (ERRA) Review Of Operations, 01 Chapters I-VII Table Of Contents Section Page Witness EXECUTIVE SUMMARY...1 S. DiBernardo I. INTRODUCTION... A. B. C. D. Organization of Testimony... Comparison Between the Forecast and Recorded Fuel and Purchased Power Revenue Requirement... Disallowance Cap... Safety... II. LEAST-COST DISPATCH... T. Watson J. Buerkle A. Introduction and Commission Standard Review Information in SCE s Testimony and Workpapers... The Commission s LCD Standard... B. Overview of LCD in the CAISO Wholesale Market Supply and Demand Bidding/Scheduling...1 Spot Market Electrical and Natural Gas Transactions...1 C. D. LCD Principles During The Record Period...1 Implementing the LCD Standard SCE s Bidding Strategy...1 a) b) c) d) Supply Bidding Strategy...1 Opportunity Cost Bidding...1 Dispatch Efficiency Bidding...1 Import Bidding...1 (1) Must-Take Hedged Imports...1 i

3 Table III-1 SCE Hydro 01 Unscheduled Outages (Lasting Longer than Hrs on Units Greater Than MW) Line No. Plant and Unit NERC Event Type Beginning Date Ending Date Outage Duration (Hours:Minutes) Bypassed Energy (MWh) 1 Outage 1 May, 01 1:0 Big Creek Unit U1 March 1, 01 June 1, 01 1:00 0 Cause: Action Taken: Low tube oil levels allowed the thrust runner plate to dry rub the bearing pads. The subsequent heat generated from friction damaged the thrust runner plate, the thrust bearings and shaft seal. Necessary repairs were performed on the thrust runner plate, the thrust bearings and shaft seal. A root cause analysis was performed for this outage and has been provided in workpapers. The apparent cause was a partially closed valve which prevented full supply of oil to the bearings during operations. Outage Big Creek Unit U1 August, 01 August, 01 1: Cause: Action Taken: During a routine inspection by operating personnel, an oil leak was discovered in the oil cooler heat exchange cooling coils, which had allowed water to enter the turbine lube oil system. The damaged section of cooling coil was replaced. A root cause analysis was not documented for this outage as the likely causes of leaks are well known, and current maintenance practices are generally effective in preventing the problem to the extent practical. The apparent cause of the leak was erosion of the coil over its many years of service. 0 Outage 1 Big Creek A Units 1& U1 August, 01 August, 01 :00 0 Cause: Action Taken: The penstock developed a leak at the joint between pipe sections. Penstock leaks can occur when: (a) water remains stagnant within a penstock (such as occurs when hydro units are used for Peaking duty rather than around-the-clock operation) and thereby can undergo freeze/thaw The penstock joint leak was repaired. A root cause analysis was not documented for this outage as the likely causes of joint leaks are well known, and current maintenance practices are generally effective in preventing the problem to the extent practical. 1 On March 1, 01, following a return to service from a generator rewind, Big Creek Unit was forced off-line due to low lubricating oil levels which resulted in damage to the

4 thrust runner plate, the thrust bearings and shaft seal. The apparent cause was a partially closed valve which prevented full supply of oil to the bearings during operations. Repairs were performed and the May, 01 unit was returned to a ready for service condition on June 1, 01. A root cause analysis was performed for this outage and a copy of the resulting report is included in workpapers. No outage bypassed energy was incurred during this outage. On August, 01, during a routine inspection by operating personnel of Big Creek Unit, an oil leak was discovered in the oil cooler heat exchange cooling coils, which had allowed water to enter the turbine lube oil system. The apparent cause of the leak was erosion of the coil over its many years of service. Corrective actions include the continuation of daily inspections, installation of a high level oil alarm and replacement of the cooling water coils. A root cause analysis was not documented for this outage as the likely causes of leaks are well known, and current maintenance practices are generally effective in preventing the problem to the extent practical. No outage bypassed energy was incurred during this outage. On August, 01, the penstock feeding the Big Creek A Powerhouse developed a leak between pipe sections that required repairs. Penstock leaks can occur when: (a) water remains stagnant within a penstock (such as occurs when hydro units are used for Peaking duty rather than around-the-clock operation) and thereby can undergo freeze/thaw conditions with associated expansion and contraction inside the penstock, causing joint leakage, or (b) there is insufficient water (such as due to the ongoing drought) to maintain the penstock in a completely full condition, which can cause gaskets to dry out at the penstock joint connections. The penstock joint leak was repaired and the unit was placed back in-service. A root cause analysis was not documented for this outage as the likely causes of joint leaks are well known, and current maintenance practices are generally effective in preventing the problem to the extent practical. No outage bypassed energy was incurred during this outage. SCE personnel investigate essentially all unscheduled outages. Specialists (e.g., engineers from the Generation Department home office) provide assistance to these investigations where needed. Often, the cause of the outage as well as the needed repairs and other corrective actions

5 during low-cost hours (usually during early morning hours) to pump water uphill to the Balsam Meadow forebay, so it can be used to generate power during higher-priced hours. Under typical operations, Eastwood Pump schedules are determined by SCE s Short-Term Market Planning (STP) group in order to maximize the value of Eastwood s Pumped Storage capabilities. For pump operations to add value to Eastwood, the on-peak/off-peak differential needs to be large enough so that the cost to pump is less than the value of generation. In recent years, peak and off-peak prices have evolved with the increased penetration of renewable resources leading to higher price uncertainty. Lower gas prices have also lead to lower absolute differences between peak and off-peak prices thus reducing the margin prices between pump and generation. As a result, during the record period year it was not economical to operate Eastwood as a pumpback facility and it was solely used as a generation resource. SCE continues to monitor changing market conditions and will continue to utilize Eastwood in a way that maximizes 1 value for SCE customers. Eastwood operated in a pumpback mode for only hours during the record period. Pump-back operation is approximately % efficient and consumes approximately 1. MWh of electricity for each 1.0 MWh of electricity subsequently generated when that same volume of water is later released back through the generator. While no pumpback operation occurred during the 01 record period, when viewing generation statistics over multiple years, it should be noted that Eastwood Net Generation statistics typically represent the total MWh of generation produced not including MWh of electricity consumed while Eastwood was operating in pump-back mode.

6 annual net energy production target. Five contracts did not meet their required target. Those failures are described below. (1) Ventura Regional Sanitation District (ID ) Ventura Regional Sanitation District (Ventura), a 1. MW biogas facility, had a 01/01 annual production target of. GWh and delivered 0. GWh, leaving a shortfall of, MWh. The Energy Replacement Damage Amount was calculated to be $1,0, which will be netted from Ventura s payments. () Coso Clean Power (ID ) Coso Clean Power (Coso), a MW geothermal facility had a 01/01 annual delivery obligation of 1,0 GWh and delivered approximately 1,. GWh, leaving a shortfall of approximately 0.0 GWh (after applying 1. GWh of Lost Output credit). As a result, the Energy Replacement Damage Amount was calculated to be $1,001,0. On April, 01 Coso disputed SCE s claim to the Energy Replacement Damage Amount, and requested Early Dispute Resolution before an Arbitrator. The dispute was later settled (for additional information see RPS Contract Disputes in this Chapter VII). () ORNI 1, LLC (ID ) ORNI 1, LLC (ORNI 1), a. MW geothermal facility, had a 01/01 annual delivery obligation of approximately. GWh and delivered approximately.1 GWh, leaving a shortfall of approximately.1 GWh. As a result, the Energy Replacement Damage Amount was calculated to be $1,, which ORNI 1 paid. () Alta Wind IV, LLC (ID 1) Alta Wind IV, LLC, a MW wind facility, had a 01/01 annual production target of. GWh and delivered.1 GWh, leaving a shortfall of.0 GWh. The Energy Replacement Damage Amount was calculated to be $,1, and SCE has invoiced Seller for this amount and received payment in full. Alta Wind IV also failed to meet its Seller's Annual Energy Delivery Obligation for Calculation Period (/01/01 to 0/0/01). The Shortfall Payment was calculated 1

7 SCE participated and monitored the case. One of the issues in that litigation, however, is whether plaintiffs or the other defendants have standing to sue SCE under the PPA. If the plaintiffs prevail, they may initiate arbitration against SCE for breach of contract and failure to return the Development Security. SCE prepared for deposition in summer of 01, but it has been deferred and has yet to be rescheduled. () Western Water and Power Production Limited (ID 1) The Western Water and Power Production Limited (WWPP) PPA was terminated on August, 0 due to lack of timely CPUC approval. On September, 0, WWPP sent SCE a notice of dispute claiming SCE s termination was invalid, claiming promises had been made by SCE to amend the PPA and stating that SCE (among others) had violated the Commerce Clause of the United States Constitution. On March, 01 the parties met at mediation. The mediation produced no progress toward a settlement of the dispute. On May 1, 01, WWPP filed a complaint against SCE at the CPUC (Case ). The case was dismissed and the proceeding was closed on January, 01 (D ). On March 1, 01 WWPP provided notice to SCE demanding arbitration to resolve the matter. The parties agreed to an arbitrator, took depositions, exchanged discovery, and each filed a motion for summary judgment. On June 1, 01, the arbitrator issued an order denying WWPP s motion for summary judgment and granting SCE s motion. The arbitrator issued a Final Judgment in favor of SCE on August 1, 01, finding that WWPP may not recover any of its requested 0 1 relief from SCE. () Coso Clean Power (ID ) 1 Coso Clean Power (Coso) is a MW geothermal project located in Inyo County, CA, originally executed as part of SCE s 00 RPS solicitation. The PPA was executed on November 1, 00. Coso notified SCE by letter on April, 01 that it disputed SCE s calculation of the Energy Replacement Damage Amount of $1,001,0 for the calculation period from January 1, 01 through December 1, 01 and provided Notice requesting Early Dispute Resolution 0