Uncharted Waters. Upcoming Events: Did You Know? Spring National Conference & Public Power Expo. Published by Power System Engineering, Inc.

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1 Published by Power System Engineering, Inc. Spring 2013 Upcoming Events: Uncharted Waters Consumers have benefited for many years from a robust power transmission and distribution infrastructure that has well surpassed its deprecation life. They have also benefited from relatively stable infrastructure construction costs in comparison to the Consumer Price Index (CPI). These factors have allowed electric utilities to keep the power delivery component of residential electric rates relatively flat, when adjusted for inflation of the US dollar. However, with an already postmature power infrastructure aging at a faster rate than replacement and a global economy competing with the US power industry for raw materials, utilities are now facing the impossible challenge of maintaining system reliability without substantially affecting electric rates. American Public Power Association National Conference & Public Power Expo Nashville, TN June 14 19, 2013 PSE s Candice Roth and Rick Schmidt, along with others, will present Developing Your Technology Strategic Plan. The industry is in uncharted waters, and a cultural change is needed to decelerate and ultimately stop the rapid aging of the power delivery infrastructure. Rather than ignore this seemingly impossible challenge, we need to recognize what it will take to make a change: an increase in electric rates. Since 2003, the cost of transmission and distribution construction has grown at a faster rate than ever seen since the inception of the power industry as we know it today. As illustrated in the graph below, the growth rate of construction costs is leaving the CPI in the dust, suggesting that future electric rates will need to increase faster than inflation. Construction costs are increasing throughout the US with the North Atlantic Region seeing the fastest rates of increase, the South Central Region seeing the slowest, and all other regions falling between North Atlantic Region South Central Region CPI 10 Yr Treasure Rate 16% 14% 12% 10% 8% 6% 4% Did You Know? Plugging a smartphone or USB drive into your station at work poses a cyber security risk. A smartphone s internet connection provides a portal for hackers or viruses to potentially bypass network security and gain access to sensitive data. USB drives carry similar risks. A study conducted at last month s RSA Conference 2013 (a leading cyber security event) concluded that 78 percent of the 300 IT and security professionals involved in the study have plugged in USB drives they found lying around or abandoned. Data on the drives often included not only office documents, music, and movies, but also potentially threatening viruses, rootkits, and bot executables % % Continued on page Power System Engineering, Inc. (PSE)

2 Continued from page 1 Uncharted Waters Fortunately, interest rates are the lowest the US has seen over the last 60 years and a proactive utility can make the most of the hand they have been dealt. The key is to develop a comprehensive plan that identifies which transmission and distribution facilities need attention and at what rate they should be addressed. To get the necessary buyin from rate regulators or other rate approval bodies, the plan may also need to demonstrate why it is in the best interest of ratepayers. This demonstration requires nontraditional concepts and approaches that could include the monetary value of reliability to customers, anticipated failure rates of transmission and distribution facilities, and cost benefit analysis models. But most importantly, regardless of the concept or approach, the justification needs to be supported by a culture that has recognized and accepted that a change is required. PSE is supporting utilities in both the US and Canada who are embracing this culture, making hard decisions, and implementing plans that will ultimately benefit the future of their customers. When you are ready, we would like to help your utility too. Submitted by Erik Sonju, PE Vice President, Power Delivery Planning and Design sonjue@powersystem.org 2012 Client Rate Survey Report Our Rates and Financial Planning team is pleased to roll out the inaugural Client Rate Survey Report. This customized report will be provided to our cost of service study clients each year. The intent of the report is to provide interesting and valuable insights from the projects we have conducted for utilities around the country. While the possibilities for content are endless, this inaugural report focuses on a few key topics that often arise from our interaction with utility management, staff, and directors. The 2012 Client Rate Survey Report includes text, charts, and graphs and is divided into three sections: Financial Results, Class Cost of Service Results, and Rate Design. One of the questions we are frequently asked is: how should the margin or return component of the revenue requirement be determined? To that end, the table below identifies the number of systems that used each metric and the average of the metric used, as well as the low, median, and high values. Another hot topic is the level of customer charge (a.k.a. basic charge, facility charge, service charge, etc.). In the 2012 survey, we report both on the customer cost as calculated by the class Cost of Service Study and the customer charge as determined in rate design. Of the 30 studies completed during 2012, all but two systems chose Target Metric TIER Operating TIER Modified TIER DSC Operating DSC Modified DSC Rate of Return Rate of Return (all calculated) No. of Systems to incorporate an increase in the residential/singlephase customer charge. Those increases ranged from $1.31 to $11.00 per month. PSE is hopeful that this report will be of value to each of our rate and cost of service study clients. While this first report focuses on a few major topics, the data we have compiled will allow us to expand future reports and incorporate additional relevant issues and trends as we go forward. Submitted by Shaurice Moorman Senior Financial Consultant moormans@powersystem.org, and Rich Macke Vice President, Economics, Rates, and Business Planning macker@powersystem.org Target Metric Used to Determine Return Requirements Average Value Low Value Median High Value % % % Page 2 PSE / / The Utility Edge

3 ASK PSE A QUESTION How Can We Develop a Power Supply Resource Plan in the Face of Uncertainties? Uncertainty in the electric utility industry has never been greater. Utilities are dealing with this problem in myriad ways. Recently, one of PSE s clients came to us and asked for assistance with evaluating its generation planning in light of several uncertainties: new load growth on the system, an aging generation fleet, dispersed load with a weak transmission system, increased levels of wind generation, and the implementation of a new RTO energy market, just to name a few. To analyze these concerns, PSE first performed an assessment of their existing generation resources. This review consisted of onsite visits by our staff and extensive conversations with the client regarding historical and planned maintenance, environmental regulations, operational concerns, and upgrade plans. PSE then performed a costbenefit analysis on upgrades for each of the generational resources on the system, resulting in some key recommendations regarding resource retirements and/or upgrades. Next, we reviewed the client s RTO situation by running two models. The first was a 20year pricing model of the RTO. Results from this first model were used as inputs to a 20year resource optimization detailed dispatch model. This second model simulated dispatch of each resource into the projected RTO market. The optimization model not only evaluated dispatch of the existing generation but also showed the cost projection of future generation, including both fixed generation development cost and market margins based on the dispatch of future generation units. However, building new generation plants may not be the most costeffective option, especially if there is uncertainty regarding the longevity of prospective load growth in the load forecast. New plants have many possible risks, including capital costs, fuel price, possible CO2 price costs, and project development risks. One of the most important issues may be the large step increase in the capital burden placed on the utility to pay for new generation resources, especially in light of load forecast uncertainties. When looking to avoid the significant capital requirements of new resources and large increment of capacity resources with uncertainty in the load forecast, PSE considered that demand resource ( DR ) options can satisfy the incremental resource needs with a much lower capital impact. As part of this study, PSE conducted an extensive DR review, including an enduse survey, for most of the client s retail classes. We then developed a 20year hourly DR model for 17 different candidate DR programs. The model showed that in many cases, DR programs were much more costeffective compared to building new generation resources. Most importantly, DR can help to defer the need for new units for several years, saving costs and also allowing time to see whether some of the large expected loads come on the system. Submitted by Chris Ivanov Leader, DSM and Load Forecasting ivanovc@powersystem.org Job Opportunities PSE has an opening in our Madison, Wisconsin office for a Utility Automation Consultant. Typical projects involve developing technology strategic plans for utilities and leading automation procurement initiatives involving AMI, MWM, MDM, GIS, OMS, SCADA and other automation technologies. To be considered, candidates must also have five to 10 years of experience. There is a preference for someone with experience working at an electric utility, a consulting firm supporting utilities, or a utility vendor. Interpersonal and business development skills and the ability to meet deadlines are also important. A bachelor s degree is required with a preference for computer science, business administration, or engineering. We are always looking for experienced candidates to join our team. For more information on this position, or if you would like to send your resume for consideration for this or another opportunity, visit our website at Madison Office PSE Contributes to Local Food Pantry Last month, our Madison office supported the River Food Pantry by participating in a spring food and clothes drive. On the last day of the drive, nine PSE employees delivered the collected items and volunteered time at the pantry helping clients navigate the different food areas and fill their baskets. PSE / / The Utility Edge Page 3

4 Distributed Generation Testing and Commissioning Distributed Generation (DG) interconnections with utility systems are becoming increasingly common. After a DG application has been processed, all needed studies completed, and any required interconnection facilities constructed to accommodate the safe and reliable parallel operation of the DG facility, testing and commissioning is required. The size and complexity of the DG installation will determine the required testing and commissioning procedures. For small (< 25 kw) inverterbased interconnections, such as PV, very little testing and commissioning may be required. Typically in these instances, only documentation of the inverter s compliance with UL 1741 Inverters, Converters, Controllers and Interconnection System Equipment for Use with Distributed Energy Resources is required. The utility may, at its discretion, conduct an additional antiislanding 1 test in which service to the inverterbased DG is interrupted and the inverter is observed to discontinue operation. Inspection of the final installation is a prudent practice, but little else is required. For larger DG installations, however, testing and commissioning requirements can be extensive. Larger DG installations, especially those which involve synchronous machines, require two levels of testing and commissioning. The first level requires that the interconnection customer test and commission his facilities and supply adequate documentation to meet the interconnection requirements of the utility. Utility testing requirements are based on IEEE Standard IEEE Standard Conformance Test Procedures for Equipment Interconnecting Distributed Resources with Electric Power Systems. This testing typically includes instrument transformers, batteries, relays, and functional testing of the complete fault and isolation protection systems. This may also include the controls of the generation if they are an integral part of the overall protection scheme. The utility may also witness this testing, especially testing which proves proper phasing and synchronizing of the generation to the utility and antiislanding protection schemes. This level of testing and commissioning is vital to ensure the interconnection customer s facilities are properly installed and functioning as intended, and it should be completed before the generation is allowed to parallel with the utility system. The second level requires that the utility test and commission any utilityinstalled interconnection facilities and protection schemes to prove proper operation of such schemes as direct transfer trip (DTT) or reverse power protection. Equipment and controls installed for metering and monitoring and for maintaining adequate steadystate voltage or mitigating transient voltage concerns also require testing and commissioning. In addition, the utility may consider taking beforeandafter recordings of harmonics and voltage fluctuations to determine if any significant impact due to the generation interconnection has occurred. Regardless of the complexity of the DG installation, completing the required testing and commissioning is vital to ensure all interconnection facilities are functioning as intended. Submitted by Jeff Triplett, PE Utility System Consultant triplettj@powersystem.org 1 Islanding can occur when the generation is able to serve a portion of the utility system that might be deenergized without significant variation in frequency and voltage to detect abnormal system conditions. Telco Frame Relay and 4Wire Analog Service Scheduled for Retirement Most major telephone companies such as AT&T, Verizon, and the major independents have set yearend 2015 as the retirement date for frame relay data service. In addition, most telcos have announced the forthcoming retirement of older 4wire analog service. Frame relay became popular in the early 1990s and remained the preferred data service provided by the telcos until about The 4wire analog technology was introduced prior to Both the frame relay and 4wire analog services were commonly used at many utilities as a substation backhaul communications media primarily for SCADA. Frame relay was also used to connect district offices to the main office. The use of frame relay and 4wire analog has been gradually declining at utilities, but there is still a lot out there. For those utilities still using these older telco services in any capacity, now is the time to begin exploring other fixed data alternatives. Telcos are now offering various types of newer fixed data services such as MPLS and highcapacity data provided over fiber optics. For any utility uncertain of the type of communications media to consider as a replacement for frame relay or 4wire analog service, PSE can offer assistance in exploring and assessing nearly all types of communications media alternatives. Submitted by Rick Schmidt Vice President, Utility Automation and Communications schmidtr@powersystem.org Page 4 PSE / / The Utility Edge

5 Substation Automation: A Launching Point for DA Engineers and operations managers are well aware that modern substation equipment provides enhanced ability to control feeders beyond what had been possible in the past. Many would like to take advantage of these improvements in order to automate restoration during an outage or lower voltage during times of peak demand. However, the options can be overwhelming. Engineers often wonder how much of their existing equipment should be kept and how much should be replaced. And even once equipment has been upgraded, engineers commonly wonder what information and control are needed from substation devices in order to effectively implement DA programs. There are a couple key rules to remember. First, make the best use of the equipment you have by carefully selecting which legacy devices to keep and which to replace. It is important that devices that are central to the DA program are relatively modern, so legacy devices such as relays or regulator controls (depending on the program) may need to be replaced. New equipment is expensive, but the cost of integrating legacy devices, which have proprietary protocols and limited functionality, can exceed the cost of replacing them. However, it is certainly not costeffective to replace all legacy devices because the overall cost as well as time necessary to install, program, and fully integrate them into the new system can greatly outweigh the benefit. Strategically replacing only the most critical devices simplifies the integration of your system and provides the desired functionality while controlling cost. Secondly, remember that information is paramount to effective DA. To perform restoration, the SCADA system will need to interrogate relays for fault targets and fault pickups so that it can accurately detect which IED is closest to a fault and resolve possible miscoordination errors. It will need to reset fault targets so that the next event can be detected properly and to select alternate protection settings to account for modified load profiles during restoration. It will also need to continuously monitor load to properly balance it. By strategically selecting the devices you replace in your substation, and by appropriately programming them, you can greatly improve your ability to manage the quality of the power you provide and to control your operating costs. Submitted by Jim Weikert Lead Utility Automation Consultant weikertj@powersystem.org Other Services Offered PSE is a fullservice consulting firm, and we have been helping utilities succeed for over 35 years. Our services include: Communications, IT, and Automation Planning and Design Economics, Rates, and Business Planning Electrical Engineering Planning and Design Procurement, Contracts, and Deployment We are employeeowned and independent, which gives our clients confidence that we are motivated to satisfy their needs and represent their best interests. For a complete list of services, please visit our website. PSE / / The Utility Edge Page 5

6 Power System Engineering, Inc W. Broadway Madison, WI PRSRT STD US POSTAGE PAID MADISON WI PERMIT #2783 Published by Power System Engineering, Inc. Inside this issue: Uncharted Waters... pg Client Rate Survey Report... pg. 2 Ask PSE a Question: How Can We Develop a Power Supply Resource Plan in the Face of Uncertainties?... pg. 3 Job Opportunities... pg. 3 PSE Contributes to Local Food Pantry... pg. 3 Distributed Generation Testing and Commissioning... pg. 4 Telco Frame Relay and 4Wire Analog Service Scheduled for Retirement... pg. 4 Substation Automation: A Launching Point for DA... pg. 5 PSE Office Locations: Madison, WI (608) Minneapolis, MN (763) Marietta, OH (740) Indianapolis, IN (317) Sioux Falls, SD (605) Cedar Rapids, IA (319) Visit our website for more information shekelss@powersystem.org with questions, comments, or for more information.