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

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