direct testimony of the capital expenditures, reliability, and - nyseg

BEFORE THENEW YORK STATEPUBLIC SERVICE COMMISSION----------------------------------------------------------------------------xProceeding on Motion of the Commission as to theRates, Charges, Rules and Regulations ofNew York State Electric & Gas Corporationfor Electric ServiceProceeding on Motion of the Commission as to theRates, Charges, Rules and Regulations ofNew York State Electric & Gas Corporationfor Gas ServiceCase 09-E- ____Case 09-G- ____----------------------------------------------------------------------------xDIRECT TESTIMONY OF THECAPITAL EXPENDITURES, RELIABILITY, ANDOPERATIONS PANELSeptember 17, 2009Michael H. ConroyJeffrey L. McKinneyMichael D. EastmanAlan L. MatthewsHugh J. Ives

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819Q. Can you please state the names of the members of this Capital Expenditures,Reliability, and Operations Panel (the "CRO Panel" or "Panel")?A. We are Michael H. Conroy, Jeffrey L. McKinney, Michael D. Eastman, Alan L.Matthews, and Hugh J. Ives.Q. Mr. Conroy, please state your current position and business address.A. My title is Senior Vice President and Chief Operating Officer for Rochester Gasand Electric Corporation ("RG&E") and New York State Electric and GasCorporation ("NYSEG") (together the "Companies"). My business address is 89East Avenue, Rochester, New York 14649.Q. Please summarize your educational background and work experience.A. I received a B.S. degree in Electrical Engineering from Cornell University, and anM.B.A. from the University of Southern Maine. I was employed by CentralMaine Power Company ("CMP") from 1979 through 2002, serving in a variety oftechnical, supervisory and managerial positions. I left CMP as Vice President ofMarketing and Economic Development to join RG&E and NYSEG in January2003 as Vice President – Electric Technical Services. In September 2003, I wasassigned the added responsibility of Gas Technical Services. I assumed theposition of Vice President – Operations in 2004 and my current position inAugust 2009.1

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. Have you previously testified in other proceedings before the New York StatePublic Service Commission ("PSC" or the "Commission") or any other state orfederal regulatory agency or court?A. Yes. I have previously testified before the Maine Public Utilities Commission. Itestified before this Commission in Case 07-M-0906, the acquisition by Iberdrola,S.A. of Energy East Corporation, and most recently I sponsored testimony inCases 09-E-0082, 09-G-0083, 09-E-0084, and 09-G-0085.Q. Mr. McKinney, please state your current position and business address.A. I am currently Manager – System Planning for NYSEG and RG&E. My businessaddress is 18 Link Drive, P.O. Box 5224, Binghamton, NY 13902-5224.Q. Please summarize your educational background and work experience.A. I graduated from Pennsylvania State University in 1982 with a B.S. degree inElectrical Engineering. In 1987, I completed the General Electric Power SystemsEngineering Course. I received an M.B.A. from Syracuse University in 1999. Ihave been employed by NYSEG in the transmission planning and services areafor over 27 years and assumed similar responsibilities for RG&E in January 2003.Q. Have you previously testified in other proceedings before the Commission or anyother state or federal regulatory agency or court?A. Yes. I testified before the Commission in Case 92-T-1081, and sponsoredtestimony in Cases 09-E-0082, 09-G-0083, 09-E-0084, and 09-G-0085. I testifiedbefore the Federal Energy Regulatory Commission ("FERC") in Docket Numbers2

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021OA96-195-000, ER97-2353-000, ER97-1523-000, ER97-4234-000, OA97-470-000, EC00-001-000, and EC01-97-000.Q. Mr. Eastman, please state your current position and business address.A. My current position is Vice President – Gas Assets for NYSEG and RG&E. Mybusiness address is 1300 Scottsville Road, Rochester, NY 14624.Q. Please summarize your educational background and work experience.A. I have an A.S. degree in Engineering Sciences from Broome Community Collegeand a Bachelor of Mechanical Engineering Technology degree from the StateUniversity of New York at Binghamton. I have 28 years of utility gas experiencein field operations, field and corporate engineering and gas business managementfunctions. In addition, I was U.S. Business Development Manager for natural gasmaterials manufacturer UPONOR Aldyl of Oklahoma.Q. Have you previously testified in other proceedings before the Commission or anyother state or federal regulatory agency or court?A. Yes, I have previously testified in other gas proceedings before the Commission,the Maine Public Utilities Commission and the Vermont Public Service Board. Imost recently sponsored testimony before the Commission in Cases 09-E-0082,09-G-0083, 09-E-0084, and 09-G-0085.Q. Mr. Matthews, would you please state your current position and business address?A. I am currently Director – Gas Engineering for NYSEG and RG&E. My businessaddress is 1300 Scottsville Road, Rochester, NY 14624.3

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Please summarize your educational background and work experience.A. I graduated from Pennsylvania State University with a B.S. degree in CivilEngineering. In addition, I have an M.B.A. from Alfred University. I am alicensed Professional Engineer in New York State. I have been employed in theutility operations and engineering field for over 30 years. I have worked in gasoperations and engineering for 18 years, including management positions in fieldoperations, field engineering and corporate engineering. In addition, I worked inthe electric generation field for 12 years at NYSEG and the Pennsylvania ElectricCompany.Q. Have you previously testified in other proceedings before the Commission or anyother state or federal regulatory agency or court?A. Yes. I testified before the Commission in Case 07-M-0906, the acquisition byIberdrola, S.A. of Energy East Corporation, and most recently I sponsoredtestimony in Cases 09-E-0082, 09-G-0083, 09-E-0084, and 09-G-0085.Q. Mr. Ives, please state your current position and business address.A. I am currently the Manager – Fossil/Hydro Operations for NYSEG and RG&E.My business address is 89 East Avenue, Rochester, New York 14624.Q. Please summarize your educational background and work experience.A. After serving three years in the U.S. Army as a radar technician, I was hired byRG&E on July 27, 1981. During my 28 years with RG&E, I have served in avariety of technical, supervisory and managerial positions including: seven yearsin Electric T&D and Production (fossil, hydro and nuclear) maintenance, two4

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122years as a Technical Instructor for the Ginna Nuclear Power Plant ("Ginna"), 16years as a Project Electrical Engineer and three years as Manager of NYSEG andRG&E Fossil/Hydro Operations. I received an A.A.S. degree in ElectricalEngineering Technology from Rochester Institute of Technology ("RIT") in 1990.I am currently pursuing a B.S. degree from RIT Business Management. FromJune 1999 to November 2006, my engineer responsibilities expanded to includecoordinating Hydro license related matters with local, state and federal agenciesas well as Hydro license compliance. In March 2003, my responsibilitiesexpanded to include supervision of Hydro licensing matters for the NYSEGelectric production facilities. From November 2006 through April 2008, I was theManager of Fossil/Hydro Operations for RG&E electric production facilities. Iassumed my present position in April 2008 and now have responsibility formanagement of operations, maintenance, engineering, regulatory compliance andadministration for both NYSEG's and RG&E's electric production facilities.Q. Have you previously testified in other proceedings before the Commission or anyother state or federal regulatory agency or court?A. No. I have not previously testified in any other proceedings.Q. What is the overall purpose of the Panel's testimony?A. The CRO Panel supports the Company's request for electric and gas capitalexpenditures and incremental operating and maintenance costs necessary for theCompany to continue to provide safe and reliable service to its customers whilemeeting all regulatory requirements and mandated standards of service. The5

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Company undertakes a variety of projects required by regulation such as projectsresulting from municipal highway work or projects necessary to comply with theNorth American Electric Reliability Corporation ("NERC") reliability standardsfor bulk power transmission, and the Commission mandated replacement of leakprone pipe. The Company also undertakes projects related to business operationsand growth such as construction of new or upgraded transmission and distributionfacilities, services and meters to serve new customers or to increase supply toexisting customers. The Company also initiates projects to enhanceinfrastructure, including replacing Company facilities due to various criteria suchas age, obsolescence, condition, capacity, reliability performance, or relativeconsequences of failure. These projects are planned, designed, prioritized, andapproved specifically to maintain safe and reliable service. This Panel describesthe capital projects that have met these criteria, and the incremental O&M costsrequired by the Company to ensure safe and reliable electric and gas service. ThisPanel also addresses line clearance resources required to maintain reliable service.Q. Is this Panel sponsoring any electric exhibits?A. Yes. The Panel will sponsor electric exhibits NYSEGCRO-1 throughNYSEGCRO-13. Exhibit __ (NYSEGCRO-1) is a detailed listing of NYSEG'scurrent and proposed electric capital projects that have an estimated total cost ofat least $1 million. Exhibit __ (NYSEGCRO-2) is a summary of NYSEG's totalcapital forecast by type of expenditure, which includes the cost of the majorprojects listed in Exhibit __ (NYSEGCRO-1) and expenditures for other projects6

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122with total costs that are less than the $1 million threshold. Exhibit __(NYSEGCRO-3) contains a map of various project locations and detailed projectsummary sheets. Exhibit __ (NYSEGCRO-4) is a summary of NYSEG's electricexpenditure history for 2007-2009. Exhibit __ (NYSEGCRO-5) is a summary ofNYSEG's Transmission and Distribution Infrastructure Reliability Program("TDIRP") investments. Exhibit __ (NYSEGCRO-6) is a summary of customerhours of outage related to equipment problems. Exhibit __ (NYSEGCRO-7) is aflow chart that depicts the Company's capital forecast process. Exhibit __(NYSEGCRO-8) is a summary of the Company's 2010 forecast of CommonCapital total expenditures and allocations to electric and gas capital. Exhibit __(NYSEGCRO-9) is an electric franchise area map. Exhibit __ (NYSEGCRO-10)is an index to this Panel's electric work papers. Exhibit __ (NYSEGCRO-11) is asummary of NYSEG Electric Reliability Organization ("ERO") "bright line"estimated costs. Exhibit __ (NYSEGCRO-12) sets forth incremental positionsand the related cost. Exhibit __ (NYSEGCRO-13) identifies incrementalOperation and Maintenance ("O&M") costs.Q. Does this Panel also sponsor any gas exhibits?A. This Panel sponsors gas exhibits NYSEGCROGAS-1 through NYSEGCROGAS-10. Exhibit __ (NYSEGCROGAS-1) is a gas service territory map. Exhibit __(NYSEGCROGAS-2) sets forth gas safety performance measures for 2009.Exhibit __ (NYSEGCROGAS-3) is NYSEG's gas capital budget history, proposaland forecast. Exhibit __ (NYSEGCROGAS-4) contains project summary forms.7

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Exhibit __ (NYSEGCROGAS-5) sets forth incremental positions. Exhibit __(NYSEGCROGAS-6) contains a NYSEG and RG&E gas Research andDevelopment ("R&D") budget history, proposal and forecast. Exhibit __(NYSEGCROGAS-7) sets forth the Integrity Management budget history,proposal and forecast. Exhibit __ (NYSEGCROGAS-8) identifies O&Mincremental programs. Exhibit __ (NYSEGCROGAS-9) addresses Senecastorage. Exhibit __ (NYSEGCROGAS-10) is an index to this Panel's gas workpapers.Q. Is the Panel also submitting its work papers?A. An index to the Panel's work papers is set forth in Exhibit __ (NYSEGCRO-10)and Exhibit __ (NYSEGCROGAS-10). Copies of the actual work papers will beprovided to New York State Department of Public Service Staff ("Staff")contemporaneously with the Company's rate filing.ELECTRIC RATE PROCEEDINGQ. Can you describe the purpose of the Panel's testimony as it relates to the electricrate proceeding?A. In our testimony, we present details of NYSEG's forecasted capital expendituresfor Electric Transmission and Distribution ("T&D"), Generation and CommonCapital, including descriptions of a number of representative major projects for2010 and 2011 within the NYSEG electric franchise area as shown on Exhibit __(NYSEGCRO-9). We also discuss the need for increased distribution vegetationmanagement, transmission right-of-way ("ROW") maintenance, electric system8

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920maintenance, generating system maintenance, and other resources to provide safeand reliable service. We discuss the cost impacts of compliance with regulatorymandates, including the Electric Reliability Organization ("ERO") standards,FERC hydro license compliance, NYSEG's compliance with the conditions in theIberdrola/Energy East Merger Order relating specifically to the concerns raised bythe rural electric cooperatives ("Cooperatives"), increased stray voltagerequirements, and recommendations to improve storm response.Q. Can you please briefly summarize the electric capital investment and operatingexpenditures that you support in your testimony?A. We support a NYSEG capital investment plan for electric and allocated generalcapital of $145.6 million in 2010 and $290.5 million in 2011. The Company'scapital investment plan funds projects that are required by regulation, required tomeet our obligation to serve customers, and that are necessary to provide safe andreliable service. We also support $43.8 million of incremental O&Mrequirements in the rate year to maintain reliable service. These costs aresummarized in Exhibit __ (NYSEGCRO-13).NYSEG CAPITAL PLANQ. What has been the Company's historical capital expenditures?A. The Company's historical capital expenditures are set forth in Exhibit __(NYSEGCRO-4).9

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Would you please describe the Company's capital forecast for the electricdivision?A. The capital forecast is a multi-year projection of the investment needed to serveincremental electric load growth, to fulfill regulatory obligations and to maintainthe electric system infrastructure. It consists of specific projects and lesserdefinedexpenditures that are estimated based largely on historical trends.Q. How is the capital forecast prepared?A. Exhibit __ (NYSEGCRO-7) depicts the Company's process for developing itscapital forecast. The capital forecast is prepared as a collaborative effort withcontributions from subject matter experts representing all affected areas of theCompany. Proposals are developed by the functional areas including system anddistribution planning, maintenance engineering, field engineering and fieldoperations as well as by areas with a focus on investments that are applicableacross gas and electric.Q. Did the Company follow the exact details set forth in the normal capital budgetapproval process reflected in Exhibit __ (NYSEGCRO-7) for the 2009 capitalplan?A. No. Given the historic turmoil in the financial markets and the resulting cashflow challenges faced by the Companies in late 2008 and 2009, a formal capitalbudget was not approved by the Boards of NYSEG and RG&E for 2009. Rather,the Companies utilized a more flexible approach that focused on scrutinizingevery capital project as it arose in order to conserve cash and minimize spend, all10

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122the while addressing critical safety and reliability needs and meeting theCompany's obligation to serve customers. We anticipate that the normal capitalbudget approval process set forth in Exhibit __ (NYSEGCRO-7) will be followedfor 2010.Q. In what manner are specific projects initiated?A. Projects are initiated from a number of internal and external entities includinglarge and small customers, municipalities, and Company resources. Customerrequests include new services, line extensions and reinforcements intended tosupport the addition of incremental new electric load. Government agenciesannually provide a list of proposed highway improvements that require therelocation of Company electric facilities. The Company also generates projectsthat are driven by regular inspections that identify areas of concern, are the resultof system planning studies, or are needed to correct degradation in system orequipment performance.Q. Once initiated, how are project proposals developed?A. Project proposals are developed by the subject matter experts from various areasof the Company. The Company's distribution planning group conducts circuitanalyses, load flow and other studies to identify which circuits have reached, orare close to reaching, loading limits or have the potential to create reliabilityissues. This information is used to develop alternatives to relieve the systemconstraints and reliability concerns. The Company's system planning functionalso analyzes the demands expected of the electric transmission system over a11

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122longer term period and proposes projects that are forecast to be needed to alleviatesystem issues. Examples of the types of issues addressed by the system planninggroup are the proposed revisions to the Electric Reliability Standards, which wewill address in more detail later in our testimony, and the load pocket concernsunder review with Staff. The Company's field engineering function, which has afocus on specific division operations, prepares maintenance projects andcommunicates with customers to identify needs and problem areas, performs fieldinvestigations and proposes solutions to address concerns. Information gainedfrom regular inspections conducted by field maintenance staff and as specifiedwithin the Company's Standard Operating Procedures is also used to support thedevelopment of projects.Q. Can you explain how proposed projects are analyzed?A. All proposed projects require the development of alternatives as well as thepreparation of cost estimates. Projects with estimates that exceed $100,000 areevaluated via use of the Company's capital project analysis or CPA model. Thismodel provides for a consistent and uniform basis for major project evaluationand comparison. Projects are submitted to an Electric Review Panel whichconsists of subject matter experts representing various technical functions. TheElectric Review Panel conducts a preliminary review of project reasons, theproposed solution, cost estimate and benefits. Once screened by the ElectricReview Panel, projects are submitted to the Capital Review Team for review andselection as part of a portfolio of projects to be included in the Company's12

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122proposed electric capital plan. The members of the Capital Review Teamcurrently include: the Director – Electric Distribution Engineering, the Director –Gas Engineering, the Director – Field Operations, the Manager – Performanceand Budgets, the Manager – Electric System Engineering, and the Manager-Fossil/Hydro Operations. Final review and submittal of all projects and theproposed forecast is completed through the Company's Capital Allocation Teamwhich formulates a proposed total capital plan including projects from all areas ofthe Company. The members of the Capital Allocation Team currently include theManager – Performance and Budgets and the Manager – Electric SystemEngineering, and the Manager-Fossil/Hydro Operations.Electric Transmission and DistributionQ. What is the current status of the electric T&D system?A. The Company's T&D system has been performing within the existing reliabilitymeasures. The system, however, is facing challenges as it ages and additionalexpenditures to maintain and improve reliability are required.Q. Can you identify the objective of the Company's electric T&D planning andexpenditures?A. Electric T&D planning and spending are focused on compliance with allregulatory standards and mandates and achievement of reliability performancemeasures. These objectives are met by reviewing current operations andmaintenance records, projecting forecasted loads, evaluating reliability standards,and reviewing reliability performance across the T&D system.13

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. What is the process used by the Company to determine T&D expenditures?A. The Company builds its annual capital and O&M plans from proposed projectswhich best meet mandatory reliability standards and established levels of service.Q. Can you briefly explain the mandatory reliability standards?A. In addition to the Commission's requirements, mandatory reliability standardsinclude the National Electric Reliability Council ("NERC") reliability standards,Northeast Power Coordinating Council ("NPCC") criteria, New York StateReliability Council ("NYSRC") rules and New York Independent SystemOperator ("NYISO") procedures. NERC serves as the FERC authorized ElectricReliability Organization pursuant to the Energy Policy Act of 2005 and isresponsible for developing and enforcing reliability standards for the bulk electricsystem. There are currently approximately 100 NERC reliability standards.NERC standards are the minimum mandatory and enforceable requirements andNPCC, NYSRC and NYISO reliability rules may be more specific or stringentthan NERC standards.Q. What significant transmission and distribution expenditures are planned by theCompany?A. The Company has numerous T&D projects underway to meet minimum operatingcriteria and to improve customer service. Attached as Exhibit __ (NYSEGCRO-1) is a listing of projects with total estimated costs of at least $1 million that areexpected to be initiated within the next five years. Detailed project summary14

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122forms for those projects listed in Exhibit __ (NYSEGCRO-1) that have plannedexpenditures in 2010 or 2011 are included in Exhibit __ (NYSEGCRO-3).Q. Are there also significant electric T&D expenditures planned for the years 2010through 2014?A. Yes. The NYSEG Electric Capital Investment Spending Plan for 2010 through2014 is presented in Exhibit __ (NYSEGCRO-2). Significant expenditures areanticipated during this time period for major transmission projects including, forexample: Ithaca Transmission Project, Corning Valley Upgrade, WatercureTransformer Replacement, and Grid Modernization Initiative ("GMI").Q. What is the Ithaca Transmission Project ("ITP")?A. The ITP includes the construction of a new 345 kV/115 kV substation in thevicinity of the existing Lapeer Switchyard. The new substation will consist oftwo 345 kV/115 kV transformers and appurtenant facilities. The substation willbe connected to the existing 345 kV line 36 between the Oakdale and Lafayettesubstations. The project also includes a rebuild of the existing 115 kV line 947between Etna and the new substations and the construction of a new 115 kV linefrom Etna to the new substation. The Company will also install 115 kV capacitorbanks within its State Street and Wright Avenue substations. The project iscurrently being constructed and is expected to be completed by mid-June 2010.Q. Why is the ITP necessary?A. The ITP fulfills the Company's obligation to meet the requirements as establishedby the Commission in its August 23, 2006 Order Adopting Recommended15

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Decision with Modifications at page 126 in Case 05-E-1222, which directedNYSEG within 60 days of the issuance of that order to "submit all thegovernmental and regulatory filings necessary for the Company to perform thetransmission upgrades and related work necessary to eliminate the load pocketconditions currently prevailing in Ithaca, New York." The ITP will provide theoperating flexibility and capacity needed to ensure that adequate and reliableelectric service will be maintained to all customers in the Ithaca Division duringextended outages (planned or forced) of AES's Cayuga Station generating units aswell as the eventual retirement of one or both of the generating units at CayugaStation. By Order dated October 30, 2007, the NYPSC granted NYSEG aCertificate of Environmental Compatibility and Public Need for the project.Q. Can you briefly describe the Corning Valley Upgrade project?A. The Corning Valley Upgrade Project includes the construction of one new230 kV/115 kV substation connecting to the Company's existing 230 kV line 68between the Company's Hillside and Avoca substations. The new substation willconsist of one 230 kV/115 kV transformer, a 230 kV ring bus and a 115 kV lineterminal. It will also include the construction of one new 115 kV/12.5 kVsubstation with a 115 kV ring bus and two 115 kV/12.5 kV transformers toreplace the existing Science Park substation. A new nine (9) mile 115 kV linewill be constructed between the new 230 kV/115 kV substation and existing WestErie Substation with a connection to the new 115 kV/12.5 kV substation atCorning, Inc.16

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Why is the Corning Valley Upgrade project necessary?A. The Corning Valley Upgrade project fulfills the Company's obligation to serve theload on its system. By the summer of 2009, the proposed addition of 20 MW ofCorning Inc. load, continued load growth in and around the City of Corning, orloss of a 115 kV line will result in sub-marginal voltage throughout the cities ofCorning and Elmira and thermal overloads on parts of the 115 kV system inElmira. With the Corning load addition in place, there would be approximately100 MW of load and 6,500 customers at risk.Q. Would you briefly describe the Watercure Road Sub Transformer Replacementproject?A. The Watercure Road Substation Transformer Replacement project fulfills theCompany's obligation to maintain a reliable electric system. This project isnecessary to complete the unplanned emergency replacement of a bulk powertransformer in the substation.Q. What are Farm Digester Systems?A. Farm Digester Systems generate electric energy from biogas produced by theanaerobic digestion of agricultural waste, such as livestock manure, farmingwastes and food processing wastes.Q. Are Farm Digester Systems connected to the utility grid?A. Yes, Farm Digester Systems are connected to the utility grid like any othergenerator. As a result, they typically require a means to disconnect such as acircuit breaker with the required system protective and safety devices.17

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. How are Farm Digester System interconnection costs ultimately recovered by theutility?A. Under New York State Public Service Law Section 66-j, the maximum amountthat can be charged directly to the interconnecting farm digester party is $5,000for dedicated transformer and other safety equipment. All remaininginterconnection costs must be recovered by the utility from all ratepayers throughadjustments to base rates.Q. What number of farm digesters do you expect that NYSEG will have tointerconnect to its system in the next 36 months?A. Based on the amount of requests NYSEG has received so far, the Companyexpects that 17 farm digesters with a potential generating capacity of at least20 MW to be interconnected over the next 36 months.Q. What are the options to interconnect farm digesters?A. The Company can, to a limited extent, utilize the existing distribution system withcertain modifications. For larger amounts of generation, the Company will needto design and build a Transmission Collection System.Q. Can the current distribution system accommodate the amount of farm digestergeneration that will potentially be connected to the system?A. No, the amount of generation capacity that can be interconnected to the variouspoints on the distribution system will vary but in all cases it will be limited to aportion of the capacity of the particular circuit. The distribution system was notdesigned to accommodate the interconnection of generation and extensive system18

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819studies will be needed to determine required distribution system upgrades. Sincealmost all of the anticipated generators requesting interconnection are greater than1 MW and as a result of New York State Public Service Law limits on theCompany's ability to charge the generators, NYSEG will be required to invest insignificant system upgrades to accommodate these farm digester interconnectionrequests.Q. What are the major issues with connecting generation to the existing distributionsystem?A. Connecting generation to the existing distribution system raises major issues forsystem stability and for safety. The digester system voltage may result in voltageson the electric system exceeding voltage limits allowable for other customers onthe system. Due to system protection schemes there is also a danger of islandinggeneration; a condition in which a portion of the utility system that contains bothload and distribution generation is isolated from the remainder of the utilitysystem. Islanding generation creates a potential danger to customer's equipment,as islanded generation provides very poor power quality. Islanding generationaffects our customers and can negatively impact utility workers. Utility workersface the hazard of customer owned and operated generation coming on line whilethey are attempting to repair the distribution system.19

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. To the extent such interconnection is possible, what is the anticipated cost ofconnecting these facilities to the utility distribution system?A. Interconnection of this amount of generation via the distribution system is notoptimal. To the extent we were to attempt to do so the estimated cost is $17.8million.Q. Is the Company proposing a lower cost and more reliable way to provideinterconnection of farm digesters to the power system?A. Yes. Utilizing a new Transmission Collection System for farm digester systemsis a superior alternative to interconnection to the distribution system.Q. What is the Transmission Collection System?A. The Transmission Collection System is a dedicated transmission system thatinterconnects generation and is very similar in concept to the collection systemsused by wind farms.Q. Are you proposing to build the Transmission Collection System?A. Yes, the Transmission Collection System will be a 34.5 kV system overbuild ofthe existing distribution system that serves the load of these farm operations.Q. Does this project support the goals of the draft State Energy Plan (the "Plan")?A. Yes. The Plan released for review and comment in August, 2009, includes anumber of policy objectives and recommendations aimed at improving energyefficiency, system reliability, and the development of renewable energy resources.As noted in Section 1.1, "[t]he Plan supports development of a Clean EnergyEconomy – one that uses energy efficiently, is increasingly powered by low-20

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021carbon energy resources with lower environmental and health risks, reliesincreasingly on modern infrastructure, fosters technology innovation, creates andsustains jobs, encourages smart transportation alternatives and adopts communityplanning strategies. Investing in the State's Clean Energy Economy and takingimmediate steps to mitigate the effects of climate change will drive future policydecisions and will continue to position New York as a leader nationally andglobally. As such, actions to implement the State's Clean Energy Economy goals,such as the need for new infrastructure development, may be driven by otherlonger term objectives that are not normally considered in energy systemplanning." Anaerobic digesters were recognized as one of the renewable energyresources that would move New York along the path to achieving the goal of theRenewable Portfolio Standards adopted in 2004, and are included as part of theState Energy Plan for their ability to productively convert methane, a greenhousegas, into electricity. Facilitating the cost effective interconnection anddeliverability of these units is consistent with the State Energy Plan, and maycreate a model that can be replicated in other parts of the country.Q. Why is the Transmission Collection System needed?A. The Transmission Collection System is needed because the distribution systemthat currently serves these farms cannot handle the amount of generation thatwould be connected to the system without significant system rebuilding, such assystem protection and control upgrades and new controls and operating21

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819procedures to ensure safety. All of these concerns are avoided with a dedicatedcollection system that would handle interconnecting this generation.Q. Is the Transmission Collection System cost effective?A. The Transmission Collection System is a cost effective solution. The cost toconstruct the Transmission Collection System is $7.1 million, compared to anestimated $17.8 million to attempt to add all of this generation piece meal to ourexisting distribution system, thus saving $10.7 million. The TransmissionCollection System would be sized large enough to accommodate all of thedistributed generation arising out of the processing of the projected amount oflivestock waste. Additional sources of distributed generation could also beaccommodated by the system.Q. Where is the Company proposing the Transmission Collection System?A. The Transmission Collection System is being proposed for two areas ofconcentrated farm digester system projects between Owasco and Cayuga lakes.The Transmission Collection System is a cost effective way to interconnect theseconcentrated areas of farm digesters. Farm digesters that are more widelydispersed on the system will still require interconnection to the existingdistribution system subject to the costs and safety issues we have previouslyidentified.22

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920Q. What is the GMI?A. The GMI is a program designed to systematically replace aging infrastructurewhile injecting newer technology where appropriate to support the improvedoperation and reliability of the electric system.Q. Does the GMI support the goals of the Plan?A. Yes, the GMI supports the Plan because it provides for systematic investment inreplacement and modernization of the Company's infrastructure. The Planrecognizes in Section 1.1.1 at page 2 that New York's businesses and residentsdepend on reliable energy and transportation systems and that "[f]or energysystems, reliability is contingent on adequate supplies of fuel, as well as a robustdelivery infrastructure. Investments made in these systems help ensure that thesystems remain resilient, flexible, and adaptable to accommodate newtechnologies. The ability to construct new, and maintain existing deliveryinfrastructure is key to maintaining reliability."Q. How does the GMI support reliability?A. The objective of the GMI is to systematically replace infrastructure within astructured and focused program with the goal of reducing the average age of theCompany's T&D system. By removing older equipment, NYSEG believes that itwill improve its overall system reliability through a reduction in equipmentrelatedoutages.23

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. How will the Company select assets that will be replaced under the GMI?A. NYSEG will utilize its asset information to prioritize replacement projects to beundertaken during the subsequent budget period. Prioritization will be based onage as the primary characteristic and would use other criteria including condition,customer impact, maintenance test results, equipment loading, short circuit duty(breakers only), design obsolescence, and restoration time to further prioritizeassets that would be replaced. The Company determined the base number of unitsthat would be expected to be replaced annually by dividing the total number ofunits of a specific type of equipment installed on the system by the depreciablelife for that equipment type.Q. In addition to the base number of units needing replacement, did the Companyidentify additional units of a specific type of electric equipment that would needreplacement?A. Yes. Utilizing the Commission-approved depreciable life for each type ofequipment, the Company calculated an 'ideal average age' equal to half of thedepreciable life for the equipment. The Company then selected the number ofunits needing to be replaced to adjust the current average age of the equipment tothe ideal average age.Q. How did the Company calculate the capital investment for the GMI?A. The Company determined the GMI capital requirements utilizing the averagereplacement cost for each type of equipment and assuming a ten (10) year periodto complete the initiative.24

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819Q. Why did the Company select a ten (10) year period to complete the GMI?A. The ten (10) year period selected represents a reasonable balance between thelarge capital expenditure that would be necessary to immediately move theCompany's system to the ideal average age and a more sustainable pace of capitalexpenditure with an accompanying slower replacement schedule. The Companyis proposing a ten (10) year program starting gradually and increasing 20% peryear, with the program estimated to be at its full spending level in 2015.Q. What experience does NYSEG have with infrastructure replacement investmentprograms?A. In 2005, NYSEG initiated an infrastructure reliability program to begin thereplacement of aging assets. Since that time, the Company has investedapproximately $90 million in the program. The Company's investment in thisarea since 2005 is summarized in Exhibit __ (NYSEGCRO-5).Q. What benefit has NYSEG realized as a result of its past investment ininfrastructure replacement?A. NYSEG has experienced a decreasing trend in customer hours of outage due toequipment problems. This trend is demonstrated on Exhibit __ (NYSEGCRO-6).NYSEG recognizes that continued investment in infrastructure replacement isneeded to continue this positive and necessary trend.25

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. Why does NYSEG consider the replacement of aging infrastructure to be animportant investment?A. NYSEG believes that increasing equipment age is the factor that contributes themost to decreasing performance of equipment and, consequently, to a reduction inthe reliability of NYSEG's electric system as a whole.Q. What are the Company's plans related to continuing an infrastructure reliabilityprogram?A. The Company plans to maintain its focus on modernizing its infrastructurethrough the GMI so that it can continue to improve electric system reliabilitythrough a reduction in equipment-related outages.Q. Has NYSEG performed a system assessment that supports continued investmentin aging infrastructure?A. Yes. In the Abbreviated Iberdrola/Energy East Merger Order, Appendix 2, at 1-2,the Commission directed NYSEG to file within ninety (90) days a reportincluding: "an assessment of the physical conditions of all elements of its electricsystem; and repair plans, remedial actions, and monitoring programs forcorrecting problems with facilities found deficient." Accordingly, NYSEGsubmitted its required assessment and report ("Report") on December 8, 2008.Q. What did the Report indicate with regard to aging infrastructure?A. The Report indicated that the average age of NYSEG's substation, transmission,and distribution system infrastructure is increasing.26

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What conclusion do you draw from the assessment with respect to the importanceof the GMI?A. NYSEG currently provides safe and reliable service, as measured through itsachievement of established Customer Average Interruption Duration Index("CAIDI") and System Average Interruption Frequency Index ("SAIFI")performance targets. However, given the amount of aging equipment across itssystem, GMI is needed to systematically replace aging infrastructure, maintainsystem reliability and use modern technology to enhance the operation of theCompany's system. This initiative, however, requires appropriate rate support toensure that the Company is able to continue replacement of its aginginfrastructure at a sufficient pace to assure continued reliable high quality systemperformance.Q. What are examples of technology that NYSEG might interject in its system?A. NYSEG intends to apply advances in designs and materials across its systemincluding, for example, accelerated use of microprocessor-based control, fiberbasedcommunications, modern cable systems, transformers, breakers,sectionalizers, and surge protection.Q. Are there other significant expenditures planned for 2010 and 2011 that theCompany will describe?A. Yes. The descriptions provided above are for projects that are illustrative of theimportant investments proposed to be made by the Company. Detailedinformation including descriptions for these projects and for all other projects27

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819with total costs of at least $1 million and with expenditures expected in 2010 or2011 are included in Exhibit __ (NYSEGCRO-3), which is attached.ELECTRIC GENERATIONQ. Can you please describe the purpose of this part of the Panel's testimony?A. In this part of our testimony, we present details of NYSEG's forecasted capitalexpenditures and incremental O&M for the Company's fossil/hydroelectricproduction facilities. We also support the need to construct and maintainrecreational, environmental and project safety related systems and processes tocomply with regulatory mandates associated with the Company's FERC hydrolicenses.Q. Does this Panel support the incremental O&M associated with the Company'sgenerating facilities?A. Yes. The O&M reflects normal escalation from the amounts already included inrates for the test year with the exception of: (1) the dredging of river silt atRainbow Falls dam and intake, (2) the removal of debris build up in the roadculverts ate Wayne Gates; and (3) the cost to operate and maintain the projects inaccordance with new hydro regulatory mandates such as those set forth in the newFERC licenses for Rainbow Falls and the Saranac Project (High Falls, Cadyville,Mill C and Kents Falls).28

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Will you please provide a short summary of the incremental O&M work related tothe dredging of Rainbow Falls?A. Yes. The Rainbow Falls project is located on the Ausable River in Keeseville,New York. A dive inspection of the canal intake and low level discharge gate inthe concrete dam shows a heavy buildup of river silt on the upstream side of theintake and dam. This buildup is beginning to impede the flow of water into theintake/power canal and discharge gate. The silt needs to be removed to maximizeoutput of the generating units and for reliable operation of the discharge gate. Tocomply with the project's FERC license and environmental concerns, the silt mustbe removed as it cannot be flushed downstream. The initial dredging will becompleted in August 2011 when the plant is out of service for the construction ofthe Rainbow Falls Fish Bypass and Trash Rack Project, at an estimated cost of$150,000. Silt removal will need to be repeated every 3-5 years at an estimatedcost of $50,000.Q. What is the incremental O&M work related to the clearing of debris in the roadculverts at Wayne Gates?A. A dive inspection to determine the condition of the concrete culverts found themto be nearly blocked with natural debris (stone, logs, branches and silt). During aheavy storm, the partial blockage could cause water to backup, overtop anddamage a newly constructed earthen berm. The initial cleaning of debris will bedone in 2010 at an estimated cost of $225,000. It will need to be repeated every3-5 years at an estimated cost of $25,000.29

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What incremental O&M work is a result of new regulatory mandates for hydro?A. All seven (7) of NYSEG's hydroelectric plants must be operated and maintainedin accordance with FERC licenses and other State and Federal regulations. TheRainbow Falls project received a new 40-year license in August 2004 and theSaranac Project received a new 40-year license in January 2006. Both licensesinclude many new requirements regarding public recreation facilities and fishmanagement that will increase annual O&M costs by an estimated $108,000.Q. Would you briefly summarize the levels of capital investment you are supportingfor hydro facilities for the years 2010 through 2014?A. As shown in Exhibit __ (NYSEGCRO-2) the Company is seeking $2.1 million for2010; $2.1 million for 2011; $2.2 million for 2012; $2.3 million for 2013; and$2.3 million for 2014.Q. How is the Company's Hydro generation capital budget developed?A. The Hydro generation capital budget is prepared as a collaborative effort withcontributions from various subject matter experts within the Company. Projectsare initiated based on input from a number of internal and external entities. Forexample, projects are driven by regular inspections that identify areas of concernor that identify actions that are necessary to correct degradation in the system orin individual equipment performance. A project may also replace infrastructurethat has reached end-of-life, or implement a system upgrade or modification toimprove plant efficiency and reliability. In addition, many Hydro generationprojects are the result of regulatory mandates imposed by FERC, the United30

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819States Fish & Wildlife Service ("USFWS"), the New York State Department ofEnvironmental Conservation ("NYSDEC"), and other governmental entities.Each project is evaluated by Engineering and Operations management todetermine the necessity and cost effectiveness of the project and, if the projectpasses that review, it is placed in the long term capital forecasts.Q. In what manner is the Company's Hydro capital budget generally organized?A. The Hydro capital budget is organized into general categories relating to safety,efficiency, reliability and regulatory, although a particular project may fit in morethan one category. Safety projects address public, work or plant safety concerns.Efficiency or growth projects improve the utilization of available water tomaximize the electrical output of the Company's hydro generation. Reliability orinfrastructure type projects are implemented to ensure that equipment is reliableand available when required. Regulatory projects are those projects required bygovernmental requirements or regulations. For example, our FERC licenses andassociated New York State permits require that the Company meet variousstandards and operational requirements. FERC and the NYSDEC conduct routineinspections, typically on an annual basis, of our hydro stations. The results ofthese inspections may result in regulatory agency directives that require"regulatory" capital investments.31

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Can you identify some representative major projects during the years 2010 and2011?A. During this period there are a number of projects planned that this Panel supportsincluding the High Falls Switchgear Replacement and the Mill C Unit 1 andUnit 2 Draft Tube Replacement and Foundation Projects.Q. Would you please provide a summary of the High Falls Switchgear Replacementproject?A. The High Falls Station is located in the Plattsburgh Division. The High Fallspowerhouse utilizes 6.9 kV switchgear indoors for the three electric generators,two generator step-up transformers and one house service transformer. Theswitchgear is original equipment (circa 1950) that has inadequate ampacity ratingsfor interrupting the potential fault-duty current supplied by the generators. Inaddition, the existing switchgear circuit breakers and electro-mechanicalprotective relays are obsolete and the control wiring is near end of life, creatingreliability and safety concerns. Under the current station arrangement, a groundfault could result in the catastrophic failure of the switchgear/circuit breakersleading to an extended plant outage. The new switchgear will have circuitbreakers with adequate ampacity for the generator loads and for interrupting theavailable fault-duty currents, auto-synchronizing equipment for synching thegenerators to the electric grid, microprocessor-based protective relays and remoteracking equipment. These upgrades will improve worker and plant safety, plantreliability and plant efficiency. This budget for this project is $950,000. The32

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021design and bidding process began in 2009 and installation is scheduled to occur in2010.Q. What is the Mill C Unit 1 and Unit 2 Draft Tube Replacement and FoundationProject?A. The Mill C Station is located in the Plattsburgh Division. The steel draft tubesthat channel water from the bottom of the Unit 1 and Unit 2 scroll cases into thetailrace were inspected and deteriorated draft tubes and erosion to the powerhousefoundation was identified in 2000. At that time, interim upgrades were installedto address the issue and Unit 1 and Unit 2 were returned to service. Additionalinspections conducted in a de-watered state in the summer of 2007 identifiedfurther deterioration of the draft tubes and erosion to the powerhouse foundation.The installation of new steel draft tubes and the related foundation work isscheduled to occur in 2011 and 2012. Fabrication of the new draft tubes willoccur in 2011, with installation and foundation work occurring in 2012. Thisproject will improve unit/plant safety, reliability and efficiency and is consistentwith a plan and schedule provided to FERC. The estimated total cost for thisproject is $1.37 million.Q. Are there any major capital projects during 2010-2014 in the regulatory categorythat are mandated by the new FERC hydro licenses?A. Yes. The two most notable projects are the Rainbow Falls Fish Bypass and TrashRack System and the Cadyville Trash Rack System.33

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Can you provide a summary of the Rainbow Falls Fish Bypass and Trash RackProject?A. The Rainbow Falls Station is located in the Plattsburgh Division. The FERClicense for Rainbow Falls requires that the Company consult with the USFWS,the NYSDEC and the New York State Historical Preservation Office to develop afish passage plan by August 18, 2009 and then install it by August 18, 2011. Thefish bypass requires the installation of new racks with ¾ inch bar spacing, a fishentrance and control gate, a plunge pool cantilevered off of the cliff top adjacentto the station/rackhouse and a 400 foot long two foot diameter transport pipeexiting downstream of the station tailrace. The required reduction in bar spacingand related new infrastructure will increase debris and ice buildup across theracks. To contend with this issue and to maximize energy production, this projectincludes the installation of a mechanized rack raking system. The project designand plan development began in 2008 and continues in 2009. In 2010, after wereceive FERC approval of the plan, we will conduct the bidding and order thelong lead equipment. Construction will occur in 2011. The total project cost isestimated to be $940,000. The cost incurred to date is $190,000, with $300,000and $450,000 budgeted in 2010 and 2011 respectively.Q. Can you please provide a summary of the Cadyville Trash Rack and TrashRacking System project?A. The Cadyville Station is located in the Plattsburgh Division. The new license forthe four stations on the Saranac River requires new trash racks with narrower (134

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122inch) bar spacing for the protection of aquatic resources. We have 20 years tocomplete the installation at all of the Saranac plants (one every five years startingin 2010). The first project will be done at Cadyville. We are also required by theFERC license to consult with the USFWS and NYSDEC to develop the trash rackplan and submit the plan to FERC for approval. Cadyville, like all of the Saranachydro plants, currently is raked by hand. The Saranac plants are normally notstaffed. As a result, personnel must be dispatched to and from the various plantsto clean the racks. This is very difficult work, especially in the winter monthswhen weather conditions are harsh. With the newly mandated narrower rackspacing, the station racks will plug up more often. To effectively contend withthis issue and to maximize energy production, this project includes the installationof a mechanized rack raking system. The project design and plan developmentbegan in 2008 and continues in 2009. In late 2009, after we receive FERCapproval of the plan, we will conduct the bidding and order the long leadequipment. Construction will occur in 2010, with a total estimated project cost of$591,000.COMMON CAPITALQ. Will the Panel please summarize the Company's Common Capital forecast,including the allocation of Common Capital to the electric and gas divisions?A. The Company's Common Capital includes forecasted expenditures for GeneralEquipment, Fleet, Information Technology, and Facilities including Security.These expenditures are typically for projects that provide benefits to both the35

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122electric and gas operations of the Company. Common Capital expenditures aregenerally allocated 79% to electric capital and 21% to gas capital. Exhibit __(NYSEGCRO-8) is a summary of 2010 Common Capital proposed expenditures.Q. How was the capital forecast for General Equipment developed?A. The Company's General Equipment capital forecast is developed based onGeneral Equipment needs identified by all areas of the Company.Q. What General Equipment expenditures are planned?A. The investment identified in the Company's Exhibit __ (NYSEGCRO-8) forGeneral Equipment is a total forecast for expenditures needed to provide the toolsand work equipment that are necessary to support the effective construction andmaintenance of the Company's facilities and work processes.Q. What is the Mobile Radio Project?A. The forecast spend for the Mobile Radio Project reflects the cost to complete thereplacement of the NYSEG radio system with a 150 MHz digital hybrid privateland mobile radio system to comply with Federal Communications Commission("FCC") requirements and to avoid failure of the current obsolete system. Thesystem includes mobile radios for 1,500 vehicles, 300 portable radios, and 57dispatch consoles. Additionally, it includes: the development of 51 tower siteswith radio equipment, antennas, shelters, utilities and generators; systemconnectivity by procuring leased lines and microwave installations; and theacquisition and licensing of the required frequencies. The capital forecast for theMobile Radio Project is shown in Exhibit __ (NYSEGCRO-8).36

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920Q. What is the status of the Mobile Radio Project?A. The Company will have completed conversion to the new system in nine ofthirteen NYSEG divisions by the end of 2009. Much of the planning, design, andsite work has been completed for the remaining four divisions. The additionalscheduled time to complete the project reflects the time necessary to address theCanadian frequency approval process for use of mobile radios near theinternational border.Q. How was the capital forecast for Fleet developed?A. The forecast for Fleet replacements is the result of an analysis comparing the"Current" average age of the fleet to the "Ideal" average age, identification of the"Normal" annual capital required to maintain the current average age and the"Additional" annual capital required to achieve the "Ideal" average age. All Fleetvehicles and equipment have an established life cycle (Years, Mileage, and/orHours). Life cycles are based on industry standards and benchmarked each year.During the capital planning phase, the Fleet management system generates a listof units that have achieved their life cycle years. This establishes the proposedcapital dollars required for Fleet replacements.Q. What capital expenditures are planned for Fleet replacements?A. The collective expenditure for the replacement of individual vehicles is identifiedin Exhibit __ (NYSEGCRO-8).37

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. How was the forecast for Information Technology ("IT") projects developed?A. The Company's IT capital forecast includes expenditures for information systemimprovements that support targeted operational processes. IT projects aredeveloped collaboratively between the Company's operating staff and UtilitySupport Services' IT organization. The IT organization leads the projectformulation, including development of the necessary specifications and costestimates.Q. What IT capital expenditures are planned?A. The investment identified in the Company's Exhibit __ (NYSEGCRO-8) is acollection of projects needed to support the Company's IT network.Q. Are there significant expenditures planned within the IT forecast?A. Yes. The Company plans to implement enhancements to its internet site based onrecommendations it received from the Staff.Q. What were the Staff recommendations to the Company and its affiliate regardingweb-based outage information?A. The recommendations made by Staff to the Company concerning its websiteinclude providing a highly visible and easily identifiable link on the Company'shome page to internal page(s) which would be dedicated to information aboutoutages. The information provided should be the most up-to-date information onoutages and restoration times and prioritization and it should include outagelocation maps.38

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Was there other information that Staff recommended be provided via the website?A. Staff recommended that the web site provide information about the location of dryice and bottled water distribution centers, listings of the Company's storm-relatednews releases, and other pertinent information such as safety tips about, forexample, the danger of downed wires and recommendations for preparing for astorm. Finally, the web site should focus on and reinforce the importance ofcontacting the Company to report outages and it should provide the necessaryinformation for making that contact.Q. Has NYSEG begun implementation of the recommendations?A. NYSEG has already made many revisions and enhancements to its web site foroutage information based upon Staff's original recommendations and subsequentdiscussions with Staff. For example, the Company has enhanced its exiting website home page and links to include more prominent identification of links, todedicate space for storm information and to modify drop down and descriptivetext.Q. Are there elements of Staff's recommendations that the Company has not yet beenable to implement?A. Yes. The Company, through its evaluation of the scope and costs to provideoutage location maps, summary level outage and estimated restoration maps anddata, has determined that an Enterprise geographic information system ("GIS") isrequired to properly provide that information.39

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Can the Company's existing Outage Management System provide outage mapsand estimated restoration times on the web?A. The Company's Outage Management System limits the type of outageinformation that can be presented to customers on the web. The system lacks theflexibility to model real world restoration events (e.g., dynamic modeling and cutins)which results in an over-prediction of the numbers of customers affected inmany storm situations. Manual intervention is required to analyze and presentinformation. As such, the information cannot be automatically communicated tocustomers via the web in a meaningful format. An Enterprise GIS system wouldsolve this problem.Q. What other benefits would be derived from the Enterprise GIS?A. The Enterprise GIS will provide improved outage analysis capabilities, anenhanced mapping solution, an enterprise platform for GIS, and position GIS andthe existing Outage Management System for Advanced Metering Infrastructure("AMI").Q. What is the schedule for implementing the Enterprise GIS?A. The project will require eighteen (18) months to complete after initiation and theestimated cost is shown on Exhibit __ (NYSEGCRO-1).Q. What Facility capital expenditures are planned?A. The investment identified in the Company's Exhibit __ (NYSEGCRO-8) is acollection of small projects needed to maintain the Company's buildings andproperty.40

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What Security capital expenditures specifically related to facilities are planned?A. The investment identified in the Company's Exhibit __ (NYSEGCRO-8) is acollection of small projects needed to comply with Security requirementsdiscussed below. Expenditures are anticipated during this time period forhardened security upgrades, lighting and fencing installations at various Companyfacilities, including electric substations and service centers. Closed circuittelevision upgrades at critical gas and electric substations and overall securitysystem upgrades for Hydro generating stations and Company facilities are alsoplanned.Q. Are there any utility critical infrastructure protection orders or regulationsdirecting the Security expenditures described?A. Yes. The United States Department of Homeland Security has recommendedsecurity standards under The Homeland Security Act of 2002. NERC EROstandards under Critical Infrastructure Protection ("CIP") regulations mandate acyber security framework for the physical and electronic protection of CriticalCyber Assets to support the reliable operation of the bulk electric system. TheCommission has also implemented certain actions pursuant to its Orders issued onAugust 2, 2002, September 22, 2002, December 18, 2002, and September 30,2003 in Case 02-M-0953.Q. Has the Company achieved compliance with CIP required security measures?A. Yes. The proposed investments are to continue implementation of securitystandards reviewed and encouraged by Staff.41

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Do these security expenditures include expenditures related to FERC action toexpand the definition of the bulk electric system down to 100 kV?A. No. In the event that the FERC takes such action, additional securityexpenditures are likely to be required.FEDERAL STIMULUS PROJECT OVERVIEWQ. Can you please describe the purpose of the Panel's testimony as it relates to theAmerican Recovery and Reinvestment Act of 2009 ("ARRA") (Public Law 111-05)?A. The ARRA ("Stimulus Program") provides in part for approximately $4.5 billionnationwide to fund competitive projects in the Electricity Delivery and EnergyReliability ("EDER") program. The EDER program, administered by the UnitedStates Department of Energy ("DOE"), supports technology projects that increasethe use of digital information and controls, provides dynamic optimization of gridoperations and status, allows integration of smart appliances, provides timelyinformation to consumers and control options, and minimizes unreasonablebarriers to adoption of smart grid technologies. The DOE established two specificcompetitive grant opportunities for the EDER program: the Investment GrantProgram funded at $3.375 billion and the Demonstration Program funded at $600million. These two programs provide maximum grants for qualifying investmentsbetween 20% and 50% of the project's cost. The DOE suggested that utilities thathad found other non-federal funding sources to cover the remaining costs of theinvestments would have a greater likelihood of success in their selection process.42

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122On July 2, 2009, NYSEG filed with the Commission in Case 09-E-0310 –In the Matter of the American Recovery and Reinvestment Act of 2009 – UtilityFilings for New York Economic Stimulus and in Case 09-M-0074 – In the Matterof Advanced Metering Infrastructure on July 2, 2009, for recovery of between50% and 80% of seven (7) projects' costs with an estimated total capitalexpenditure of $151.3 million and an estimated total annual O&M cost of $6.99million.Q. Did the Commission approve the full recovery of costs for the projects identifiedin the NYSEG July 2, 2009 filing through a surcharge?A. The Stimulus Order was clear that only 50% of the cost of a DOE approvedproject would be collected through a NYSEG surcharge. If the DOE were toaward less than a 50% matching grant, NYSEG would need to resubmit theirproject for Commission approval.Q. What Commission-approved projects has the Company proposed for fundingunder the DOE Stimulus Program?A. NYSEG did not have any approved Investment Program projects that needed tobe filed with the DOE on August 6, 2009. NYSEG is party to the NYISOtransmission owner DOE filings for Investment Program grants for PhasorMonitoring Units estimated at $2.1 million and NYISO supported capacitorsestimated at $9.0 million. A Stimulus Program demonstration grant filing wasalso submitted on August 24, 2009 for a Smart Grid demonstration project in theHorseheads/Cooperstown areas estimated at $28.4 million.43

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What is the status of these projects?A. NYSEG awaits word from the DOE as to the status of any awards. DOE hasindicated that it intends to provide a response on these types of projects byNovember 6, 2009.Q. Will there be material capital or O&M expense impact on the Company as a resultof these projects?A. The Company expects that any DOE-approved projects will be funded forbetween 20% and 50% of the estimated project capital costs. Therefore, NYSEGmay have to resubmit their Commission filing to collect any unfunded capitalcosts between the 50% that the Commission has already approved and up to 80%of the costs that may remain to be recovered. The Commission Stimulus Orderdid allow for a surcharge mechanism that would collect incremental depreciation,O&M expenses, taxes, and a return on the investment once the project is placedin-service.Q. Are the capital and O&M costs for any of the Stimulus Program projects includedin Exhibit __ (NYSEGCRO-1)?A. No.NERC ERO STANDARDS OVERVIEWQ. Can the Panel please provide a brief background on the ERO reliability standards?A. The U.S. Energy Policy Act of 2005 amended Section 15 of the Federal PowerAct ("FPA") to require that FERC adopt mandatory and enforceable reliabilitystandards for the bulk power system ("BPS") and to create a self-regulatory44

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516"electric reliability organization," with FERC oversight in the United States. OnJuly 20, 2006, FERC gave the NERC responsibility for developing and enforcingthese standards as one means of improving the reliability of North America's BPS.On March 15, 2007, FERC approved the first set of 83 mandatory andlegally enforceable reliability standards. Since that time, additional reliabilitystandards have been submitted and approved by FERC. Currently, there areapproximately 100 approved reliability standards, each with multiple subparts.FERC established June 18, 2007 as the effective date of compliance for theapproved mandatory and enforceable reliability standards. Since that date,NYSEG has operated under mandatory, enforceable reliability standards.Q. Do these standards have a material capital or O&M expense impact on theCompany?A. The NERC ERO reliability standards require a significant amount of documentmanagement and compliance monitoring for annual self-certification ofcompliance and periodic NERC audits. Several of the standards also havematerial capital or O&M impacts for implementation. Such standards include:171819202122CIP standards provide a cyber security framework for the physical andelectronic protection of Critical Cyber Assets to support reliable operation ofthe bulk electric system ("BES"). The additional levels of security, beyondindustry standards, result in additional capital and O&M expenses.Facilities Design and Maintenance ("FAC") standards establish criteria forfacility design and maintenance to help avoid adverse impacts on reliability.45

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789Under the FAC standards, NYSEG must establish facility connection andperformance requirements, effectively manage vegetation in and adjacent totransmission ROWs, and ensure proper facility ratings in accordance withestablished rating methodologies.Protection and Control ("PRC") standards establish requirements for theinstallation, maintenance and testing of system protection and controlequipment. NYSEG has had to upgrade and/or install equipment insubstations to meet these standards, including breakers, relays, disturbancemonitoring equipment and automation equipment.10111213141516171819202122Bulk Electric System Definition Issue (100 kV Bright Line)Q. What is the bulk power system?A. The BPS consists of the power plants, transmission lines and substations, andrelated equipment and controls, that generate and move bulk electricity to thepoints from which local electric companies distribute the electricity to customers.Section 215 of the FPA requires FERC to approve and enforce standards for thereliability of the BPS.Q. Is there a difference between the BPS and the BES?A. Yes. The two have different definitions. For purposes of this discussion, the keydefinition at issue is the BES.Q. What is the definition of the BES?A. FERC initially accepted NERC's definition of the BES to apply the mandatorystandards. NERC's BES was, as defined by the Regional Reliability Organization46

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021("RRO"), the electrical generation resources, transmission lines, interconnectionswith neighboring systems, and associated equipment, generally operated atvoltages of 100 kV or higher. Radial transmission facilities serving only loadwith one transmission source are generally not included in this definition.Because NERC allowed for regional definition, the Northeast NPCC had its ownapproach to defining the BES; NPCC includes its own definition of "bulk powersystem" as follows:The interconnected electrical systems within northeastern NorthAmerica comprised of system elements on which faults ordisturbances can have a significant adverse impact outside of thelocal area.According to NERC, NPCC analyzes all system elements within its footprintregardless of size (voltage) to determine impact based on this definition. NERC'sfiling included NPCC's "Classification of Bulk Power System Elements,"("BPSE") which provides further information on the above definition and how itis applied. Each "Area," i.e., balancing authority, within NPCC maintains andupdates lists of bulk power system elements. The New York control authority(now called the "balancing authority"), NYISO, has developed multiple lists ofBPSE, each with some variation. The NPCC Document A-10, Classification ofBulk Power System Elements ("A-10 methodology"), listed New York facilitiesabove 200 kV as BPSE.47

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. How has NYSEG defined its BES?A. NYSEG has defined its BES with the same definition adopted by the NYSRC forthe New York BPS. NYSRC defines the BPS as the portion of the bulk powersystem within the New York control area, generally comprising generating units300 MW and larger and generally comprising transmission facilities 230 kV andabove. However, smaller generating units and lower voltage transmissionfacilities on which faults and disturbances can have a significant adverse impactoutside of the local control area are also a part of the New York State BPS.Q. Is the NPCC definition of BES under review by FERC?A. Yes. NPCC is the only regional entity in the United States that uses a risk-basedassessment methodology. The other seven RROs use a "bright line" test thatfollow FERC's recommendation that the BES be defined at 100 kV and above.FERC has expressed concern over the A-10 methodology. On December 18,2008, FERC issued an Order to NPCC and NERC to collect data on the elementsincluded in NPCC's BES, and elements over 100 kV not included in NPCC's BES.FERC stated that the other seven regional entities use either a modified orunmodified definition of the BES at 100 kV and above. FERC has initiated aproceeding under Docket No. RC09-3-000 to review this matter.Potential Outcome of FERC Action on BES Definition IssueQ. What action may be taken by FERC on the definition of BES?A. On February 20, 2009, NERC and NPCC submitted a comprehensive list offacilities at 100 kV and above in the United States portion of the NPCC region,48

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122including facilities owned by NYSEG/RG&E. Since the February submittal,NPCC has developed a working definition of BES to evaluate the economic andreliability impacts of applying the NERC standards within the United Statesportion of the NPCC region. The working definition includes all transmissionelements of 100 kV or higher, but excludes radial portions of the transmissionsystem.The findings of NPCC's BES Impact Assessment will be used to develop arecommended BES definition for the United States portion of the NPCC region.As of August 2009, NPCC's draft recommended definition includes alltransmission elements of 100 kV or higher, but excludes radial portions of thetransmission system and excludes those portions of the transmission systemdetermined by a regionally approved methodology to have a minimum impact ontransfers across the BES.The assessment findings and recommended BES definition will besubmitted by NPCC to FERC by September 20, 2009. Following this submittal,FERC will determine the acceptability of the recommended BES definition forimplementation in the U.S. portion of the NPCC region.Q. What electric system impacts could the potential FERC action have for theCompany?A. The Company has evaluated two potential definitions that FERC could approve:(1) all transmission elements of 100 kV or higher, excluding radial portions of thetransmission system; and (2) all transmission elements of 100 kV or higher,49

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678excluding radial portions of the transmission system and excluding those portionsof the transmission system determined by a regionally approved methodology tohave a minimum impact on transfer of power across the BES (such as facilitiesthat have less than a 1% impact on transfers across New York State, based on theNYISO Transfer Distribution Factor analysis). Definition 1 would include moreNYSEG transmission facilities than Definition 2.Q. Can you identify the quantitative impacts on NYSEG's facilities?A. The quantitative impacts on NYSEG facilities include:910111213141516171819202122An increase by between 45 to 82 substations to meet the new standard.Currently, there are 20 substations that required upgrades to meet the CIP(CIP-002-1 through CIP-009-1).Improvements to between 45 and 82 NYSEG substations to meet the PRCStandards. This work includes control house expansions, separation of cablesystems, addition of battery banks and chargers relay additions, breaker, tripcoil, and current transformer additions.Under an expanded 100 kV bright line definition, NYSEG would also need tocomply with Transmission Operator Standards ("TOP"). Under the currentstandard, the NYISO is the operator of the defined BPS in New York State.Under the new definition, NYSEG would face additional coordination,monitoring and reporting for NYSEG System Operations.A series of capital projects will be required to meet the expandedTransmission Planning Standards ("TPL") (TPL-001-0 through TPL-003-0)50

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213for contingencies in the event of the loss of a single BES element (TPL-002-0), and in the event of the loss of two or more BES elements (TPL-003-0).As a transmission operator, compliance with Personnel Standards ("PER") andEmergency Preparedness Standards ("EOP") would require additional trainingand staffing at the NYSEG Energy Control Center ("ECC").Additional control house expansions, separation of cable systems, addition ofbattery banks and chargers, relay additions, breaker, trip coil, and currenttransformer additions would be required.TPL (TPL-001 through TPL-003) for contingencies in the event of the loss ofa single BES element (TPL-002), and in the event of the loss of two or moreBES elements (TPL-003) would apply.Compliance with Communications (COM), PER and EOP would requireadditional training and staffing at the RG&E ECC.141516171819202122Q. Has the Company prepared capital and O&M estimates in preparation for FERCaction on expanding the definition of bulk transmission?A. The estimated cost impact to NYSEG is included in Exhibit __ (NYSEGCRO-11).Q. What is the time frame for the capital and operating expenses shown in Exhibit __(NYSEGCRO-11)?A. The projects shown in the capital forecast are a one-time cost to bring existingfacilities into compliance, based on currently approved NERC ERO standardsonly. Revisions to existing standards or additional standards could add to these51

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021cost estimates. It is not known how long FERC would give entities to bring newBES facilities into compliance, but there is likely to be a multi-year phase inperiod. If changes occur in the ERO standards at a later date, additional capitalprojects may be required. The operating and maintenance costs are annual coststhat would continue as long as the ERO standards are considered to be mandatoryby FERC.Q. Why are there differences between the previous estimates provided to theCommission and the current estimates?A. The original estimates assumed that the 100 kV bright line definition would haveno exceptions, thus more substations were included in the original estimates. Forexample, estimates for PRC standards compliance was based on upgrades at 113NYSEG substations. Current estimates are based on 45 to 82 NYSEGsubstations.In addition, compliance costs for the Vegetation Management Standard(FAC-003) have been reduced because this standard specifically applies totransmission lines over 200 kV. The new BES definition would not change theapplicability level for this standard. Finally, estimates for compliance withsystem redundancy requirements of the TPL (TPL-002-0 and TPL-003-0) aredifferent because of the change in the proposed BES definition, resulting in fewerprojects needed to come into compliance. However, the project capital estimateshave been updated, resulting in slightly higher estimates.52

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Are the estimated capital and O&M costs related to redefinition of bulktransmission included in the five year capital plan summarized in Exhibit __(NYSEGCRO-2), or in the Company's proposed revenue requirements?A. No. The cost estimates have been updated and presented to the Commission forits information.Q. In the event that the definition of bulk transmission is modified, will the Companyhave to recover the related costs?A. Yes. As the information presented to the Commission demonstrates, the costsassociated with such a redefinition will be significant and the Company will needtimely recovery of those costs once the standards and a timeline for compliancehave been approved.NYSEG O&M to Maintain Reliable ServiceQ. Can you briefly summarize the areas of increased O&M investments necessaryfor NYSEG to maintain safe and reliable service?A. Increased investment in distribution vegetation management, transmission rightof-waymaintenance, electric system maintenance, and human resources arenecessary to maintain safe and reliable service.Distribution Vegetation ManagementQ. Can you explain the Company's current distribution vegetation program?A. The Company has vegetation management programs to provide safe and reliableelectric service to its customers. The distribution vegetation managementprogram is referred to as a line clearance program and is managed to maintain the53

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122system in accordance with established levels of service reliability. The Companyrecently filed a full description of its line clearing program in its ReportRegarding Line Clearance filed on August 24, 2009 in Case 09-E-0472.Q. Can the Panel please elaborate on the need for additional distribution vegetationmanagement?A. The Company currently performs scheduled cycle line clearance on three phaseportions of its distribution system. The balance of distribution circuit lineclearance is prioritized to maximize reliability impact. This approach has allowedNYSEG to achieve its established service quality levels (as measured by theCAIDI and SAIFI targets). However, establishing a full cycle line clearanceprogram for all distribution circuits would support continued reliabilityperformance and in the long run be most cost-effective. Lines on cleared ROWare less likely to sustain interruptions due to tree contact, and it follows thatclearing more ROW on a periodic basis will maintain or improve reliability.Cycle clearing ensures that ROW boundaries are well-established and maintainedon a regular schedule, providing consistent visibility and accessibility toinspection and repair crews. This allows for quicker identification and correctionof problems and facilitates preventive line maintenance. Cycle clearing alsoensures periodic identification and removal of danger trees along the ROW edge.Furthermore, cycle clearing enhances public safety by minimizing the risk thatvegetation will become energized, and lessens the system-wide potential forhuman contact with energized conductors. The reduction in vegetation size,54

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122density and proximity to energized conductors that can be achieved with periodic,scheduled clearing, and the reduction in handling costs for the large trees removedduring the first cycle can mitigate the cost of subsequent clearing cycles. Further,a comprehensive cycle program would allow for even more efficient planning andcontracting of clearing work, reducing per-mile maintenance costs. Cyclical lineclearance also helps improve customer satisfaction. Customers are moreamenable to frequent cutting of small limbs and trees, and generally view this asacceptable. During the first cycle, however, customer satisfaction may beexpected to decrease as ROW is reclaimed. The incremental annual cost is $25.3million and the total annual cost for this program would be $36.19 million.Q. Has the Company utilized a partial clearing cycle in the past?A. Yes. Distribution line clearance has been funded to achieve established reliabilitytargets. This has resulted in the implementation of a partial clearing cycle.Transition to a full cycle clearing program has multiple benefits as described inthe previous response.Q. Is the Company proposing a change in accounting treatment?A. Yes. The cost to perform full cycle distribution line clearance is significantlygreater than the present spend. Additionally, costs for line clearance can varybased on market conditions and the expected volume of work per mile. TheCompany proposes that costs to achieve full cycle distribution line clearance bereconciled as part of the deferral recovery mechanism surcharge or surcreditmechanism that is discussed in detail by the Revenue Requirements Panel.55

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Transmission Right-of-Way MaintenanceQ. Can you explain the Company's current transmission line clearing program?A. The transmission line clearing program is set forth in the Company's Long-RangeRight-of-Way Management Plan (also referred to as the Transmission VegetationManagement Plan or "TVMP"). The TVMP is designed to meet mandatoryNERC standards (i.e., FAC-003) and the Commission's requirements establishedin Case 04-E-0822. We have determined that there is a need for approximately$400,000 in incremental annual transmission line clearing expenditures to ensurecompliance with the applicable standards and requirements.Incremental PositionsQ. Are incremental positions necessary to support reliable service?A. Additional positions are needed to maintain the electric system. The CommissionStaff recommended in the 2007 Electric Reliability Performance Report, datedSeptember 8, 2008, that NYSEG should conduct a detailed self-assessment of itsexisting crewing/field work personnel levels, crew locations, and the effect theselevels have on system reliability, particularly interruption duration. The reportalso noted that the assessment should include historical personnel levels and fieldwork locations broken down per operating division, along with the Company'sfuture plans. The report also noted that the assessment should identifyimprovements to ensure that an adequate workforce remains in place so thatreliability is maintained at pre-2007 levels.56

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Has NYSEG performed the assessment?A. Yes. The Company filed its Field Staffing for Reliability Self-Assessment Reporton January 7, 2009.Q. What were the primary findings of NYSEG's Field Staffing for Reliability Self-Assessment Report?A. The primary finding was that field electric craft position staffing levels are animportant component of NYSEG's reliability program and that NYSEG needs toincrease the number of fully qualified electric craft positions.Q. Has NYSEG identified additional full time equivalent positions to supportreliability?A. Yes. Additional positions are needed to maintain the electric system. Thesewould include workers skilled in overhead lines, underground cables, substations,and system protection.Q. Are there positions needed beyond the craft positions to support safety andreliability performance?A. Yes, additional positions are necessary in distribution engineering to evaluatehigh priority circuits, plan and design improvements, and maintain effectivestandards. Positions in maintenance engineering would provide for additionalanalysis of system performance and inspection results and the development anddirection of maintenance plans. Other positions are necessary to support thescheduling, coordination and processing of work. Qualified SecurityInvestigators are important to support the continued protection of employees and57

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819Company assets. Replacement positions in the electric test group would improvecoverage for substation inspections, tests, and maintenance. Further, increasingcustomer traffic and transaction times in our customer offices requires additionalsupervision and customer service positions to enhance training and the customer'sexperience.Q. What is the total number of new positions needed?A. The total number of positions needed is 102 at an annual cost of $9.4 million.Exhibit __ (NYSEGCRO-12) provides additional detail on the number ofpositions sought by the Company.Electric System MaintenanceQ. What additional incremental electric system inspection and maintenanceinitiatives would support the desired reliability performance level?A. NYSEG has identified additional incremental inspection and maintenance ofT&D lines and electric substations that would further support achievement ofreliability goals. Examples include, wood pole inspection and treatment,helicopter inspection process improvements, thermography and line inspection,cross arm replacement, circuit breaker maintenance, animal fence repair, relaymaintenance, oil pipe cable maintenance, and network repair. The incrementalcost for these activities is $8.5 million per year.58

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920REGULATORY MANDATESQ. What incremental expenses does the Company expect to incur due to regulatorymandates?A. NYSEG expects to incur incremental expenses for compliance with therequirements of: (1) the continued testing and inspection standards established inthe Commission's January 5, 2005 Order Instituting Safety Standards in Case 04-M-0159 (the "Stray Voltage Order") and December 15, 2008, Order AdoptingChanges to Electric Safety Standards ("Modified Stray Voltage Order"); (2)Transmission and Distribution Loss and Cost of Losses Study in response to theOrder issued on July 17, 2008 in Case 08-E-0751, which directed the utilities tospecifically identify all major sources of losses on their transmission anddistribution systems; and (3) additional cost to implement Staff recommendationsto improve storm response.Stray VoltageQ. What are the current costs associated with stray voltage?A. NYSEG's filing contains a rate year expense of $7.2 million. The rate year levelof costs associated with stray voltage has been adjusted to include compliancewith the inspection and testing requirements of the Stray Voltage Order, theModified Stray Voltage Order and an estimated increase in contractor costsassociated with testing.59

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What are the major requirements of the Stray Voltage Order?A. Stray voltage testing must be conducted on all electric facilities that are capable ofconducting electricity and are publicly accessible. Testing is required on allfacilities annually. Certification for 100% compliance with test requirement mustbe provided by the utility.Q. Are there other requirements under the Stray Voltage Order?A. Inspections are also required on all electric facilities that are capable ofconducting electricity and are publicly accessible. All electric facilities shall beinspected at least every five years (a minimum of 20% per year). Certification ofcompliance with the requirements must be provided by the utility annually.Q. Has the Commission modified its Stray Voltage Order?A. Yes. On December 15, 2008, the Commission issued the Modified Stray VoltageOrder, which imposed on the Company incremental requirements above those inthe initial Stray Voltage Order issued in 2005.Q. What are the incremental inspection and testing costs associated with compliancewith the Modified Stray Voltage Order issued on December 15, 2008?A. NYSEG's estimated incremental inspection and testing costs associated with theModified Stray Voltage Order totals over $1.09 million annually.Q. Can you explain the additional increase in Stray Voltage above those costsimposed by the Stray Voltage Order and Modified Stray Voltage Order?A. The rate year expense includes an estimated increase in the contractor costsassociated with testing.60

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920T&D Loss and Cost of Losses StudyQ. Can you briefly describe the need for the T&D Loss and Cost of Losses Study?A. In Case 08-E-0751, the Commission directed the utilities to specifically identifyall major sources of losses on their T&D systems. As directed, NYSEG explainedin its filing made on December 23, 2008, that data used to quantify the T&Dlosses was no longer current. NYSEG proposed to retain a consultant to performa loss study based on 2007 system configurations. The estimated cost of that studyis $350,000.Storm Costs and RecoveryQ. How does NYSEG currently recover storm costs?A. NYSEG's revenue requirement provides for a $7.4 million funding of aMajor/Minor Storm reserve. To the extent the Company incurs cumulative stormdamage costs in excess of the reserve balance, NYSEG defers the costs for futurerecovery. If NYSEG incurs cumulative storm damage costs that are less than thereserve balance, the net balance is carried forward to future years.Q. Is NYSEG proposing a change to its annual storm funding in this proceeding?A. Yes. Based upon its historical experience with major and minor storms since2004, NYSEG proposes to increase the $7.4 million base by an additional $10.0million, bringing the new annual funding amount to $17.4 million. Recovery ofthe deferral is addressed by the Revenue Requirements Panel.61

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456Q. What were NYSEG's storm expenses for each year for the period 2004-2008?A. As the following table demonstrates, NYSEG's recent spending on storm repairsand restoration activities dwarf the ongoing recovery amount of $7.4 million,creating large deferrals and exacerbating the Company's cash flow problems.Note that the expenses NYSEG incurred in 2008 for minor storms alone exceededthe $7.4 million threshold for minor and major storms combined.NYSEG 2004 - 2008 Storm Charges2008 2007 2006 2005 2004Minor $11,272,788 $6,413,006 $2,457,079 $2,087,000 $1,856,000Major $42,118,286 $11,049,159 $33,527,374 $8,589,000 $1,538,000Total $53,391,074 $17,462,165 $35,984,453 $10,676.000 $3,393,00078910111213141516Q. Please explain the reason for the increase in Company's storm costs in recentyears.A. One reason for the increase in the Company's storm costs is due to changes inweather patterns and the increased number of damaging storms during the period2005-2008 compared to prior years. Using the activation of the NYSEGEmergency Operations Center as a reference, 2005 through 2008 showed anincrease compared to prior years, with 2006 and 2008 being significantly higher.The severity of the storms and the resulting damage to NYSEG's facilities andelectric system infrastructure have also increased, leading to longer restorationefforts and higher costs of repairs. In 2008, NYSEG's experience with days with62

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021severe weather related outages due to high winds far exceeded the 2000-2007yearly average numbers of days with severe weather due to high winds reportedacross New York State as calculated by the National Oceanic and AtmosphericAdministration (NOAA). Inflationary effects have increased the cost of labor,vehicles, and materials over time. Finally, as NYSEG continuously improves itsstorm restoration efforts in response to the Commission's requirements, there is acorresponding increase in costs.Q. Can you describe more fully the recommendations by Staff and the impact ofthose recommendations on storm costs?A. The Company continues to implement Staff recommendations to improve stormresponse. These recommendations have included increased priority and staffingfor downed wires, more formalized damage assessment, and more proactiveacquisition and deployment of additional crews. These initiatives should, overtime, improve the quality of storm response. They will also contribute to theincreased cost of storm response.Rural Electric CooperativesQ. What steps did NYSEG take in cooperation with the Cooperatives to address theMerger Conditions as set forth in Appendix 2, Item 3 of the Abbreviated MergerOrders (as affirmed in the Long Merger Order) in Case 07-M-0906?A. On October 7, 2008, NYSEG established a task force to investigate the ruralcooperative issues (the "Task Force").63

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. Did NYSEG conduct a transmission study, to be completed no later than 90 daysafter the closing of the Iberdrola acquisition of Energy East, to determine the ageand capacity of all facilities providing service to the substations owned andcontrolled by the Cooperatives and the Village of Sherburne?A. Yes. The Transmission Study was completed on December 8, 2008.Q. Was a meeting held by NYSEG, within 30 days after completion of thetransmission study?A. Yes. A conference call meeting was held on January 7, 2009. Task Forcemembers and Staff members were in attendance.Q. Did the Task Force jointly establish communications protocols no later than 90days after the closing of the Iberdrola acquisition of Energy East?A. The Task Force jointly established communications protocols. NYSEGimplemented these protocols on November 17, 2008.Q. Were capital improvements that could be made to enhance system reliability withrespect to the systems used to serve the Cooperatives and the Village ofSherburne identified by the Task Force?A. The Task Force identified several capital projects to enhance NYSEG facilitysystem reliability serving the Cooperatives. After having been reviewed by theTask Force, these projects are now being included for consideration in this rateproceeding. One example of such a project is the rebuilding 5.36 miles of 46 kVline between NYSEG South New Berlin and New Berlin substation.64

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Did the Task Force identify incremental operating or maintenance expenditures?A. The Task Force identified additional tree trimming, relocation of a normally openpoint on a circuit, and replacement of davit arms at a cost of $275,000.Q. Were guidelines developed by the Task Force that are intended to lead to thedevelopment of penalty and enforcement protocols should NYSEG fail to satisfythe guidelines set forth in the Merger Orders?A. The Cooperatives and the Village of Sherburne expressed concerns regardingpresent and future electric reliability. The Task Force agreed that, on a goingforward basis, the Cooperatives' customer counts and outages to Cooperatives'facilities will be taken into consideration when evaluating NYSEG's compliancewith the performance targets set forth in Case 07-M-0906 - Appendix 2 - GeneralPerformance and Reporting Conditions.Q. Are there potential transmission-related expenses that are not included in thecapital forecast in Exhibit __ (NYSEGCRO-2)?A. Yes. As a market participant in the electric control area operated by NYISO,NYSEG may be required to incur mandated, incremental transmission-relatedcosts as a result of the NYISO's application of its Comprehensive SystemPlanning Process ("CSPP").Other Transmission RequirementsQ. What is the NYISO's CSPP?A. The CSPP is an independent and comprehensive study of New York's electricdelivery system that focuses on the overall reliability of the system in accordance65

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122with industry criteria and policy and analysis of the costs and benefits ofalternatives to alleviate future transmission congestion.Q. Has the NYISO CSPP identified any projects that may impact NYSEG?A. No. The annual NYISO CSPPs through 2009 have yet to identify any needswithin the NYSEG franchise area.Q. How has the Company treated the potential projects that may emerge from theNYISO CSPP?A. Such potential projects have not been included in the Panel's forecast. The costsassociated with such projects, therefore, should be addressed as mandated costs,the recovery of which will be addressed in a future proceeding.Q. Are there other potential additional expenditures that are not included in thecapital forecast in Exhibit __ (NYSEGCRO-2)?A. Yes. Certain costs will need to be incurred on National Grid's property to supportone or more large scale projects that are in our capital plan. We are seekingCommission authorization to capitalize those improvements on our books.ELECTRIC RELIABILITY PERFORMANCE METRICSQ. Has the Company been encouraged by Staff to propose additional electricreliability performance metrics?A. Yes. Staff has encouraged the Company to propose additional electric reliabilitymetrics. CAIDI and SAIFI are currently the sole measures of electric reliabilityperformance. One of the most significant opportunities to support maintenance orimprovement in electric reliability is an increase in annual miles of distribution66

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122line clearance as proposed in our testimony above. The percentage of cycle trimmiles achieved each year would provide an additional electric reliability metricconsistent with the proposed direction of the program.GAS RATE PROCEEDINGQ. Mr. Eastman and Mr. Matthews, what is the purpose of this portion of the Panel'stestimony?A. The purpose of this portion of the Panel's testimony is to: (1) describe theNYSEG natural gas system; (2) discuss the historical and proposed Capitalexpenditure plans; and (3) discuss incremental O&M programs needed to meetcurrent work tasks and new regulatory requirements and their associated cost.NATURAL GAS SYSTEM STATUSQ. What is the current status of the system operations of NYSEG's natural gasbusiness?A. The NYSEG natural gas transmission and distribution system infrastructure is ingood condition. Systematic replacement programs targeting leak prone main andservice piping continues to result in fewer emergency leaks, leaks requiring repairand outstanding leaks each year. Emergency response times are improving anddamage prevention and quality assurance programs continue to improve.Q. Can you please provide a description of the NYSEG Natural Gas System?A. NYSEG operates and maintains 4,675 miles of transmission and distribution gasmain, 3,235 miles of gas service lateral piping and a natural gas salt storagefacility. NYSEG has 61 purchase stations, 22 heaters, 63 odorizers, 85 city gate67

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122regulator stations, 394 district regulator stations, and approximately 260,000distribution gas meters.Q. What tasks must NYSEG perform to run its natural gas system?A. NYSEG is responsible to operate, maintain and upgrade all the systemsconstructed throughout its 157 years of operating history, respond to emergencies24 hours per day seven days per week and 365 days per year, locate facilities forevery construction project occurring in 30 of 62 New York State counties, asshown on Exhibit __ (NYSEGCROGAS-1), connect approximately 1,500 newgas services annually and relocate facilities in conflict with all street, road andhighway rebuilding projects. Employees witness test 160 gas pipeline supplysales meters annually, calibrate 579 industrial meters, maintain 670 metretekinstruments, exchange approximately 1,500 distribution meters for accuracytesting, train 300 contractors in operator qualification skill assessment,construction and safety practices, engineer 2,000 service orders and work orders,maintain all the records associated with all these facilities, and perform corrosionmonitoring and corrective work on 4,400 cathodically protected piping systems.Q. Are there other tasks that the Company must perform?A. Yes. The Company must perform thousands of mandated operating andmaintenance inspections on the infrastructure, calculate gas network studies tocorrectly size facilities for replacements and load additions, work proactively with5 local production companies who desire to connect and are connected directly tothe distribution facilities, maintain system pressures, monitor district regulator68

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718stations and coordinate deliveries from the NYSEG gas control center with theinterstate pipeline control centers, balance gas deliveries, interact with multiplenatural gas marketers, optimize supply for all firm customers, maintain andproduce all of the billing documents for all of these transactions, collect paymentsfrom customers, and provide NYSEG commodity and delivery service asrequired. In addition, NYSEG employees operate and maintain the Seneca LakeNatural Gas Storage facility.Q. What is the operations business strategy for the NYSEG natural gas business?A. NYSEG's operations business strategy is to focus on public safety and systemreliability. NYSEG is committed to operational excellence, continuousimprovement, serving new customers and coordinating activities withmunicipalities, highway departments, regulatory agencies and jurisdictional andgoverning bodies to provide safe, reliable, cost efficient natural gas service tomany upstate rural businesses and communities. The Company has one of thelowest lost and unaccounted for gas ("LAUF") factors in the State, repairs all leakclassifications annually, maintains one of the lowest third party damage rates, andstrives to be among the top emergency responders and system safety performanceleaders in the State.69

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Does NYSEG currently have mandated service quality performance measures andsafety related targets that they are required to accomplish in its current gas rateplan?A. Yes. NYSEG is subject to targets and associated revenue adjustments related toinfrastructure enhancements, leak management, damage prevention, andemergency response times. Targets for the Company were in effect throughDecember 2008 and were recently modified in the Iberdrola/Energy East MergerOrder in September of 2008. They are attached as Exhibit __ (NYSEGCROGAS-2).Q. Do the current mandated service quality performance measures help NYSEG toachieve and maintain the Company's infrastructure and current high performance?A. Yes, these mandated and Commission ordered programs have helped NYSEG tosystematically identify, prioritize and coordinate upgrades and replacements ofaging mains and services, reduce main and service leaks, improve emergencyresponse times, reduce third party system damages, extend the useful life of mainand improve the effectiveness of the quality assurance and employee trainingprograms, thereby improving system safety, reliability and economics.Q. Based upon NYSEG's historic performance under the gas safety performancestandards in effect through December 31, 2008, has NYSEG ever incurred arevenue adjustment penalty for not performing its duties?A. No, NYSEG has never incurred a performance measure penalty for not meetingits gas safety performance measure targets.70

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819Q. What service performance measures is NYSEG planning to accomplish in thenear future?A. NYSEG is planning to accomplish the performance measures that were adoptedby the Commission in the Iberdrola merger.CAPITAL EXPENDITURE PLANQ. Can you please summarize the levels of capital investment you are supporting inthis testimony?A. As indicated in Exhibit __ (NYSEGCROGAS-3) (NYSEG Gas Capital BudgetHistory, Proposal and Forecast), the proposed investment is $22.0 million in2010, excluding common capital.Q. What is the actual NYSEG natural gas historical five year capital spending?A. The historical, proposed and future proposed capital expenditure information isattached as Exhibit __ (NYSEGCROGAS -3) (NYSEG Gas Capital BudgetHistory, Proposal and Forecast) and in Exhibit __ (NYSEGCROGAS-4), whichcontains project summary forms.Q. How much money has NYSEG invested in gas system capital and improvementssince 2004?A. Since 2004, NYSEG has invested approximately $95 million dollars in gas capitalsystem improvements, excluding common investments.71

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920Q. What are the levels of gas capital required by the Company to perform its serviceresponsibilities?A. Approximately 85% of the Company's proposed level of annual capitalexpenditures is spent on mandatory replacement programs, mandated tariff mainand service extensions and rate case service quality performance measures.Q. Has NYSEG met its main and service replacement targets during the past fiveyears?A. Yes, NYSEG has met or exceeded the leak prone main replacement and leakprone service replacement targets every year.Q. Please describe the process that NYSEG uses to develop the forecast of its annualgas capital investment requirements.A. NYSEG's gas capital forecast is developed by the Director of Gas Engineeringand division operating departments based on forecasted customer additions, gassystem performance information and NYSEG's business plans.Q. What are the broad categories of focus used regarding program planning andcapital spending?A. The broad categories of focus used regarding program planning and capitalspending are Transmission Mains, Distribution Mains, Gas Services, Meters andService Regulators, M&R/Gate Stations, Production Plant, Highway Relocations,and General Plant/Miscellaneous.72

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. Can you please describe NYSEG's projects that are classified as TransmissionMains?A. These projects involve relocating or replacing NYSEG's gas transmissionfacilities including mains and cased crossings.Q. What NYSEG projects are classified as Distribution Mains?A. These projects include the leak prone main replacement program, extension ofmains to serve new customers, and the installation of new pipe required to supportorganic growth of existing distribution systems.Q. What is NYSEG's capital forecast for these projects based upon?A. NYSEG forecasts these expenditures based on the projected cost to replace 20miles of leak prone main, the known development projects such as commercialand industrial development, residential housing development, subdivisions andhistorical growth information. Expenditures for the leak prone main and leakprone service replacement programs are based upon historical leak information,risk factors, NYSEG's O&M procedures and the terms and conditions of theNYSEG mandated programs. Economic development driven projects are alsoincluded in distribution. The capital requirements for new business are generallydependent upon the economic conditions throughout the service territory. Eventhough the Company has been experiencing net negative load growth due toequipment efficiencies, a sluggish economy and fluctuating commodity cost, abaseline level of work continues.73

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920Q. Can you please describe NYSEG's projects that are classified as gas services?A. These projects include installation of services to new customers, upgrade ofservices to supply increased loads to existing customers as required and thereplacement of a minimum of 2,000 leak prone services as part of the leak proneservice replacement program.Q. What projects are included in the budget for those NYSEG projects that areclassified as gas meters and service regulators?A. The budget for gas meters includes new meters and regulators to serve newcustomers, upgraded meters for existing customers and the replacement of agingmeters identified through the alternative in test program ("AIP").Q. Can you please describe M&R/Gate Station and Distribution Regulator Stationprojects?A. The M&R/Gate Station and Distribution Regulator Station projects include thereplacement or addition of new gas facilities due to the particular condition or theneed to increase system capacity. Examples of these types of programs includeobsolete regulator replacements, station replacement programs, and odorizerreplacement programs. These facilities are critical components to the safety andreliability of the delivery system. Systematic replacement and upgrade programssimilar to the main and service replacement programs should also be included andfunded in the annual capital plan.74

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. Can the Panel please describe the projects included in the Production Plantcategory?A. The production plant category includes projects to upgrade or replace equipmentat the Seneca Storage facility.Q. What are Highway Relocation projects?A. Regulations and terms of highway access permits allow NYSEG facilities to belocated within State of New York ROW, but mandate relocation of those facilitieswhen in conflict with street reconstruction projects. These relocations areHighway Relocation projects. The proposed scope of work includes relocation ofall gas facilities in conflict with proposed highway reconstruction. Facilitieslocated in easements on private property generally are reimbursable. Relocationof the facilities prior to the start of construction reduces the potential for damageto the facilities and prevents unscheduled interruption of service to customers inthe affected surrounding area.Q. What is NYSEG's capital forecast of these projects based upon?A. NYSEG forecasts these expenditures based on preliminary project descriptionsand schedules provided to NYSEG by the New York State Department ofTransportation ("NYSDOT"), county and local municipal highway departments,and engineering estimates for other known or anticipated projects. Theserelocation projects must be completed and schedules are subject to changes due tothe availability of federal and state project funding levels.75

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. Do you anticipate that federal stimulus funds will increase the amount ofmandatory highway relocation projects?A. It is possible that federal stimulus funds will result in additional highway repairand construction, which could increase our mandatory highway relocationprojects. Should that occur, the current forecast would need to be updatedaccordingly.Q. What projects are included in General Plant/Miscellaneous?A. General Plant/Miscellaneous includes Gas Supervisory Control and DataAcquisition ("SCADA") upgrades and miscellaneous replacement of RemoteTerminal Units ("RTUs"), and projects that are not included in the categoriesdescribed above.Q. What is NYSEG's capital forecast for these projects based upon?A. NYSEG's capital forecast for these projects is based upon anticipated work levelsand equipment age.Q. Has NYSEG included in its common capital budget money to update theSmarTrac gas retail access balancing system?A. Yes, NYSEG has included $1.625 million in common capital to update theSmarTrac gas retail access billing system in 2011.Q. Please explain in further detail the proposed SmarTrac project.A. Additional project-specific details are explained in the Direct Testimony of theElectric and Natural Gas Supply Panel.76

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What were the 2008 gas capital budget and 2008 gas capital actually spent atNYSEG?A. The 2008 gas capital budget was $22,378,000 and the actual amount spent was$26,827,000.Q. What is the reason for the difference between these two figures?A. The reason for the difference was a sharp increase in gas service requestsprimarily in the Plattsburgh Division due to spiking fuel oil prices and theunprecedented large price differential between fuel oil and natural gas.Q. What was the amount of capital spent in the test year?A. The capital spent in the test year was $27,086,000, excluding common capital.Q. Why is the gas capital budget increasing over the next five years?A. NYSEG would like to proactively implement additional systematic infrastructureenhancement programs to replace other critical system facilities in addition toprimarily mains and services. In addition, NYSEG is planning to interconnect theSeneca West pipeline directly to the Elmira Distribution system.Q. What are the benefits of connecting the Seneca West pipeline directly to theElmira Distribution system?A. Connecting directly will allow the Seneca Lake storage gas and local productionsupplies to flow directly to the distribution system without having to beredelivered from the Dominion interstate pipeline. In addition, added benefitsresult from the increased reliability of the Elmira gas distribution system and theoptimization of the Seneca Lake gas storage facility.77

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL1234567891011121314151617181920Q. What is the estimated cost of the Seneca West to Elmira direct connectionproject?A. The cost of the project is estimated to be $4.285 million and is planned forconstruction in 2011. Further information and project benefits are explained inthe Direct Testimony of the Electric and Natural Gas Supply Panel.Q. What are the other system facilities that NYSEG is proposing to systematicallyupgrade or replace?A. Additional system facilities that require attention in addition to mains and servicesinclude purchase stations, heaters, regulator stations, odorizers, SCADA/RTUequipment, exposed piping on bridges, cased crossings and the Seneca StorageFacilities. Currently there are no line item capital dollars budgeted for thesefacilities in the existing rate plans. These facilities are aging and requirereplacement attention similar to the main and service replacement programscurrently in place.Q. Are you proposing any capital improvements to the Seneca Storage Facility?A. Yes. We are proposing to replace the Opto 22 facility programmable logiccontroller ("PLC") control system and other facilities based on condition andservice life. Attached as Exhibit __ (NYSEGCROGAS-9) (Seneca Lake GasStorage 5 Year Capital and O&M Forecast), is a five-year spending plan for theSeneca Lake Storage facility.78

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819Q. How will the cost of the upgrade be allocated between NYSEG's System Supplyand the FERC jurisdictional (Phase III) portion of these facilities?A. The allocation of cost between the FERC jurisdictional and the NYSEGjurisdictional portions of Seneca is consistent with the Order ApprovingSettlement and Amendment to the Certificate of Environmental Compatibility andPublic Need issued and effective May 30,1997 and additionally clarified inInformation Request (LVV-5) by Lyle Van Vranken dated December 5, 2001 inCase No. 01-G-1668.Q. Have NYSEG's capital costs, contractor costs, material costs and expenses beenincreasing?A. Yes, during the past five years, NYSEG's capital costs have been increasing dueto various items. Contractor construction costs have continually increased yearover year, sometimes as much as 30% to 40% a year. Material costs haveincreased significantly in the past few years as well as internal cost structureincreases. The Merger Order increased the amount of replacement of leak pronemain, leak prone services and leak repairs while increasing the penalties for noncompliance.Therefore, capital expenditures and O&M cost have increased also.Q. Have you included inflation in your capital cost budget estimates?A. Yes, we have included 3% inflation per year in our capital cost budget estimates.79

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122OPERATIONS & MAINTENANCEQ. What changes or incremental programs does NYSEG propose to include in thisrate proceeding that were not included in the test year or require an adjustment inbase rates?A. NYSEG is proposing the following changes or incremental programs regardinggas main clearing, Integrity Management ("IMP") and Distribution IntegrityManagement ("DIMP"), damage prevention and public awareness enhancements,a gas meter relocation revenue recovery program, enhanced maintenance ofexposed piping on bridges, incremental Seneca Storage maintenance and leasecost escalation, Seneca well logging, and manpower. DIMP will be required bythe U.S. Department of Transportation Pipeline and Hazardous Materials SafetyAdministration ("PHMSA"). The program cost associated with these initiatives isdetailed in Exhibit __ (NYSEGCROGAS-8) (Operation and MaintenanceIncremental Programs).Q. Does NYSEG currently perform mandated programs that cause NYSEG to incursignificant expense as deferral items?A. Yes, the federal mandated IMP for transmission pipelines has caused NYSEG toincur significant expense during the past six years, please refer to Exhibit __(NYSEGCROGAS-7) (NYSEG Integrity Management Budget History, Proposaland Forecast). NYSEG has spent approximately $1 million to date. NYSEG isproposing to include future costs for these programs in base rates. Theseprograms have proven to be very beneficial to NYSEG. NYSEG has discovered80

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122facilities requiring repair due to construction damage and material defects. Thisprogram will continue to require additional resources in the future.Q. What is the proposed level of O&M spending requested related to the IMP?A. The O&M expense to continue the requirements for this program is estimated at$525,000 in 2010.Q. Are you aware of any future integrity related programs that will cause you toincur significant cost increases?A. Yes, starting in 2010, all distribution natural gas companies will be required tohave a formal DIMP that will address additional operational and safety aspects.PHMSA is expected to issue the final rule making in the first quarter of 2010. Itis anticipated that 18-24 months will be given for program development andimplementation. The final details and approvals of Company procedures have yetto be finalized. NYSEG has estimated the cost to prepare appropriatedocumentation and implementation plans to be in compliance with these newfederal and state mandates and have included these costs in our O&M plans.Q. What is the estimated annual O&M spending for DIMP that is being proposed?A. The estimated amount required is $100,000 per year, starting in the last quarter of2010.Q. Does the Company currently have a gas main clearing program and budget?A. Yes, the Company has O&M procedures in place that specify gas main clearingand pipeline marker requirements and the costs to perform the work are includedin regional operations budgets. In the future, the Company plans to enhance the81

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021gas main clearing and pipeline marker practices to improve damage preventionand public awareness programs.Q. What is the estimated annual incremental cost of the gas main clearing program?A. The incremental cost is approximately $250,000, including labor.Q. What additional initiative is NYSEG planning to accomplish regarding damageprevention and public awareness?A. NYSEG is planning to enhance its outreach and education program with thefederal mandated public awareness plan. The goal is to provide a greaterunderstanding and awareness of pipeline infrastructure to our major stakeholders(affected public, emergency officials, public officials, and excavators). Thebenefit is improved public safety, pipeline safety, and an enhanced damageprevention program. The additional funding will be used for baseline evaluationsurveys, direct mailings to customers adjacent to the transmission ROWs, damageprevention advertising, and outreach.Q. What is the estimated incremental cost of these programs?A. The incremental cost is approximately $50,000 for each program, excluding labor.Q. Is the Panel proposing any programs to help reduce arrears and controluncollectibles?A. Yes, NYSEG proposes the relocation of 1,000 gas meters each year with higharrears from inside locations to outside locations. The relocations will provideeasier access to the meters to support ongoing collection activity.82

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021Q. How many meters currently fall within this category?A. Approximately 10,000 meters are in this category.Q. In what way does moving meters outside help with arrears and write offexpenses?A. Some customers with indoor meters tend to have poor payment patterns becausethe threat of disconnection is greatly diminished. An analysis of 90 days orgreater arrears showed that customers with indoor meters had 40% higher arrearsat NYSEG than customers with outdoor meters. Having access to meters allowsthe Company to disconnect service for non-paying customers while providingmore incentive for customers to make timely payments. Keeping arrears low onaccounts has a direct correlation to limiting uncollectible expense.Q. What factors will be used to select accounts for relocation?A. Accounts will be reviewed individually based on factors such as arrears,feasibility for relocation, condition of customer equipment, and cost to determinethe priority list.Q. What is the estimated cost of the meter relocation program?A. The estimated cost is $816,000 per year, including labor.Q. What are the incremental O&M costs associated with Seneca Storage?A. The incremental Seneca Storage O&M costs involve logging the well casings forsafety purposes and recovery of the annual lease cost increases based upon theProducer Price Index escalation. Attached as Exhibit __ (NYSEGCROGAS-9)83

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021(Seneca Lake Gas Storage 5 Year Capital and O&M Forecast) is a line itembudget listing the cost associated with operating Seneca storage.Q. Is NYSEG planning to incur incremental expenses in order to repair exposedpiping on bridges?A. Yes. NYSEG's cost to maintain exposed piping on bridges is increasing due tofacility age, location and accessibility. The estimated cost to repair the piping isapproximately $300,000 a year, including labor.Q. Is NYSEG proposing to add additional positions, not included in the test year, tohelp complete its required work and to continue providing safe and reliableservice?A. Yes, as indicated in Exhibit __ (NYSEGCROGAS-5) (Incremental Positions), theCompany is proposing incremental manpower resources of approximately 34 gaspositions and 6 electric meter positions. These resources (primarily gas fitters)are needed to complete existing and incremental work requirements, improvemeter operations and performance, assist in engineering projects, and trainingemployees and contractors.Q. What is the total number of new gas positions needed to support workrequirements and the estimated cost?A. Approximately 34 gas positions need to be added at an approximate annual costof $3.2 million dollars. These positions are needed to be able to sustain the currentlevels of safety performance and increasing work requirements.84

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112131415161718192021RESEARCH AND DEVELOPMENTQ. Does the Company plan to propose any changes in the R&D program and if soplease explain?A. Yes, the Company is proposing a reduction to the funding required for the R&Dprogram at NYSEG and an increase in the funding required for the R&D programat RG&E. The intent of the proposed change is to more equally share the costsand the program benefits between NYSEG and RG&E.Q. What is the current level of funding for the NYSEG Gas R&D Program?A. The current NYSEG Gas R&D Program consists of two parts, an internal programwith an annual allowance in base rates of $1.4 million and an external programfunded via an annual surcharge of $650,000. This surcharge is commonlyreferred to as Millennium funds. Funds required to pay the semi-annualCommission Assessment for the New York State Research and DevelopmentAuthority ("NYSERDA") statutory program are collected as part of the internalprogram and paid as one of the internal program expenditures. The historic,current and proposed amounts are set forth in Exhibit __ (NYSEGRGECROGAS-6) (NYSEG and RG&E Gas R&D Budget History, Proposal and Forecast).Q. How is the funding being provided for the existing Gas R&D Program atNYSEG?A. The existing funding was established under the Joint Proposal ("JP") for Case01-G-1668 and Case 01-G-1683 dated, September 12, 2002.85

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. What is the proposed funding level for the NYSEG Gas R&D Program?A. NYSEG is proposing to reduce the NYSEG internal category from $1,400,000 to$450,000, leave the Millennium funding at the current level of $650,000, andcollect the annual NYSERDA assessment using the same collection process usedfor the Internal category which is the same as proposed to be used at RG&E. It isfurther proposed that the remaining funds of $450,000 from the NYSEG internalprogram be transferred to a newly created RG&E internal category. Theremaining line item funding (Millennium and Internal) will remain fixed fromyear to year.Finally, it is proposed that the level of funding created for the NYSERDAline item and separated from the internal funding amount as shown in Exhibit __(NYSEGRGECRO-6) (NYSEG and RG&E Gas R&D Budget History, Proposaland Forecast), be allowed to vary automatically with increases or decreases in theactual NYSERDA gas assessment. Therefore, the proposed funding forMillennium expenditures will be $650,000 per year, internal gas R&Dexpenditures will be $450,000 per year, and the NYSERDA payments will varybased upon the annual PSC assessment and will be collected consistent with thecurrent methods. All the funds collected (except NYSERDA) will be dedicatedfor R&D cost and not used for any other purpose. Differences between actualexpenditures and actual collections will be deferred from year to year with anybalance available for R&D in subsequent years used to recover any deferred costfrom a previous year.86

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122Q. Are there any restrictions placed on the use of the NYSEG Gas R&D funds?A. Yes. As stated in the JP, NYSEG is not permitted to use any excess R&D costsfor any other purpose, or book such costs to earnings, without the approval of theCommission.Q. How does NYSEG manage R&D?A. NYSEG has a centralized staff in the Energy Technology Group to administer theR&D program as well as manage individual projects and uses project managersthroughout the organization on a project-by-project basis. Executive managementprovides program direction to maximize the benefit of the program to NYSEG'scustomers and shareholders. Frequent communication between RG&E and theNYSEG Energy Technology Group keeps the two companies' programs inalignment with each other and the NYSEARCH Millennium program. Wheneverthere are sufficient funds, NYSEG and RG&E collaboratively fund projects thatwould provide benefit to both Companies. However, due to the limitations on theuses of Millennium funds and the disparity in funding levels, there are manyprojects in which RG&E is not able to be a participant.Q. Can you please provide examples of how the Gas R&D funds have been used bythe Company for the benefit of the ratepayers?A. The NYSEG/RG&E gas R&D program has had several significant successes. ForNYSEG, these successfully deployed technologies come from NYSEARCH andGTI collaboratively-funded projects as well as from in-house projects. Theygenerated significant cost savings that exceed the annual R&D investment of87

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123$2,364,000 (includes $314,000 of Millennium funding from RG&E). They alsoyield positive safety, customer service and environmental benefits. Examples ofsome of these successful projects include:45678910111213141516171819202122The P&L E-Communications LLC damage prevention and securitycamera/software project allowed an immediate $8,000,000 cost reduction in2008 with added savings and safety benefits expected to continue for manyyears. This was an RG&E innovation that was co-funded by NYSEG andNYSEARCH.The NYSEARCH PAH (Poly-aromatic Hydrocarbons) – ContaminatedSediments Bioavailability project documented the true (lesser) biological riskpresented by Manufactured Gas Plant ("MPG") tars in aquatic sediments andallowed NYSEG to avoid $3,000,000 of remediation costs at the formerPlattsburgh MGP site.The NYSEG Compact Directional Drill project acquired the first compactdirectional drill in the United States and allowed a 6-year, $1,410,000 costreduction along with significant customer service and environmental benefits.Annual savings of approximately $235,000 will continue for the life of theequipment.The NYSEG Compact Construction Equipment project has reduced O&Mcosts by $630,000 by the addition of small excavation equipment to the O&Mfleet. In addition to safety and customer service benefits, annual savings ofapproximately $142,000 continue to accrue.88

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL123456789101112The NYSEARCH Pipeline Integrity Management portfolio of projectsdeveloped a suite of advanced technologies to conduct the direct or remoteassessment of pipelines. These projects are supported by significant FederalOffice of Pipeline Safety co-funding monies and are tested at the state-of-artpipeline integrity test facility at the NYSEG training/R&D center inBinghamton, New York.The NYSEARCH Remote Methane Leak Detection ("RMLD") revolutionizedleak survey methods world-wide by allowing for the remote detection ofmethane. In addition to reducing operating costs and generating significantroyalties, the RMLD significantly improves public safety. The RMLD serveda particularly valuable public safety function during the recent flood disasterassessment and recovery operations in the Southern Tier of New York.13141516171819202122Since 2002, the NYSEG gas R&D has deployed 76 new technologies into theworkplace.ELECTRIC AND GAS METER OPERATIONSQ. Can you please describe the organization and function of the NYSEG meterservices work group?A. The Meter Services Department at NYSEG is headed by a manager, who overseesseveral groups involved with measurement of gas and electricity. There is anelectric meter test and repair lab in Binghamton and a gas meter and regulator testand repair lab in Geneva. All labs contain calibration and test equipmentapproved for use in New York State. The Binghamton Electric Meter Lab is89

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122responsible for all rubber goods (Personal Protective Equipment) testing andwarehousing. Meter Services also includes a meter reading services group that isresponsible for the collection and data analysis for the MV90 meter readingsystem and supports the day-to-day running of the Radix Handheld MeterReading System at NYSEG. Meter Services has one meter engineer who isresponsible for making sure the electric meter technicians are supported in theirfield work and oversees compliance for the mandated programs, troubleshooting,and new large electric meter installation work. Meter Services also includes a gasfield measurement department that works throughout the NYSEG territory.Q. What is the staffing and organization of the NYSEG Gas Meter Lab?A. NYSEG's Gas Meter Lab currently consists of the manager of meter services(acting as front line supervisor), an analyst who engineers and sets up nonstandardgas meter sets for the field, two gas meter mechanics, two laborers, and aclerk.Q. What types of activities do the employees in the NYSEG Gas Meter Lab perform?A. The employees in the lab test all of the gas meters that are mandated to be testedfor compliance with several programs. These include any meters removed forPSC test programs (approximately 1,500 gas meters and 1,500 electric meters),any meters that were removed for special testing (high bill complaints, specialprojects), and any other meters removed for any other reason that are intended forre-use. In addition, lab employees are responsible for testing samples of newmeters from manufacturers to make sure that they perform within NYSEG and90

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819202122New York State specifications before being placed into service. They are alsoresponsible for repairing meters and retiring or recycling meters that are no longerserviceable.The analyst is responsible for engineering and setting up gas regulators forlarger accounts (Commercial and Industrial accounts). The analyst also setsregulators for fixed factor (elevated pressure) meter sets, sets relief valves whenneeded and engineers and supplies metering equipment for large jobs. Inaddition, the analyst tracks all gas measurement related inventory, including partsfor the repair work within the lab, tracks the maintenance of all lab equipment,prepares testing reports and provides backup supervision to lab productionemployees.Q. Are you proposing additional positions for the NYSEG Gas Meter Lab?A. Yes, NYSEG is proposing to add a Supervisor position in the Gas Meter Lab.Currently, the position is vacant and the manager of meter services provideslimited supervision to lab personnel.Q. Are you proposing to add additional positions for the NYSEG Electric MeterLab?A. Yes, as indicated in Exhibit __ (NYSEGCROGAS-5) (Incremental Positions), sixfull-time equivalent positions are being proposed. The NYSEG Electric MeterLab also includes the Rubber Goods Testing function. There are currently sevenhourly production employees, one hourly clerk, one meter engineer, and onesupervisor. The meter engineer is involved in every special project involving91

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819metering including handling new rates, meter programming and meter retirementprograms. With the onset of the Smart Grid/Smart Metering initiatives, NYSEGis requesting an additional meter engineer position to focus on the new initiativesand provide support and backup. NYSEG has over 850,000 electric customerswith only one Meter Engineer supporting all programs. With metering andrecording technology changing so rapidly it is imperative to begin developingadditional talent in the metering department.Q. Is the Panel proposing to add additional positions to the NYSEG Meter ReadingSupport (MV90) group?A. The MV90 group is responsible for maintaining and reviewing the electric meterreading data for NYSEG, including the manual handheld system and the MV90telemetering data. There are currently six analytical staff and one manager for thedepartment. The Mandatory Hourly Pricing (MHP) mandates have increased theamount of data collected and analyzed by this group immensely. The existingstaff can handle the workload as of 2009, but any additional MHP that is phasedin will require additional positions. NYSEG is automating as many processes aspossible, although the volume of data flowing through this department on a dailybasis warrants NYSEG adding one additional analyst position to assist withbilling, the energy control center, and energy profiler online.92

Case 09-E-____; Case 09-G-____ (NYSEG)DIRECT TESTIMONY OF THE CAPITAL EXPENDITURES,RELIABILITY, AND OPERATIONS PANEL12345678910111213141516171819Q. Are you proposing to add any additional field positions to the NYSEG electricmeter technician positions?A. Yes. There are currently 35 electric meter technicians working in the 13 NYSEGDivision offices. Given the onset of new technology for electric metering (e.g.,time based rates, Smart Grid), NYSEG is proposing to create a small, mobilegroup of approximately four (4) experienced meter technician positions. Thesemeter technicians would be an extension of the Corporate Meter Lab and wouldreport directly to the meter engineer. They would be responsible for providingtraining and support to the rest of the meter technicians. Their expertise would bein high volume metering, particularly the Interchange Point metering. This groupwould be mobilized for special project work as well.Q. Are you proposing to add positions at any of the other departments within MeterServices?A. No. The existing position levels in the remaining departments are adequate andshould be maintained at the current levels.Q. What is the estimated incremental cost of these positions?A. The incremental annual cost is $92,400 for gas and $575,000 for electric.Q. Does this complete the Panel’s direct testimony at this time?A. Yes.93