2017-092 TCOS Rate FilingDate: December 22, 2017 Report No. 2017-092
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
2017 DME Transmission Cost of Service (TCOS) Rate Filing
BACKGROUND:
Consistent with past practice, staff is finalizing the 2017 TCOS rate filing for submittal prior to
year-end with the Public Utility Commission of Texas. The filing contains supporting information
about Denton Municipal Electric’s transmission investments made on behalf of the ERCOT over
the 12 month period ending June 30, 2017. It enables DME to recover transmission investment
costs made during this period ($13,034,664) plus a nominal rate of return. The filing will be made
by the City’s outside legal (the Lloyd Gosslink Law Firm) who has handled this annual filing since
2003.
In the upcoming budget process, staff will be providing the City Council with additional
information regarding the costs and revenues related to the transmission system for DME, but we
wanted to provide the City Council with a copy of the rate filing in advance.
ATTACHMENT(S):
Denton Municipal Electric Application for Interim Update of Wholesale Transmission Rates and
Supporting Testimony (Nalepa and Langley)
STAFF CONTACT:
George F. Morrow, General Manager -- DME
940-349-8487
george.morrow@cityofdenton.com
DRAFT — 7489597
12/15/2017 12:46 PM
DOCKET NO.
APPLICATION OF DENTON
MUNICIPAL ELECTRIC FOR
INTERIM UPDATE OF
WHOLESALE TRANSMISSION
RATES PURSUANT TO
16 TEX. ADMIN. CODE § 25.192(h)
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BEFORE THE
PUBLIC UTILITY COMMISSION
OF TEXAS
DENTON MUNICIPAL ELECTRIC APPLICATION FOR
INTERIM UPDATE OF WHOLESALE TRANSMISSION RATES
TO THE HONORABLE PUBLIC UTILITY COMMISSION OF TEXAS:
The City of Denton, operating its municipally-owned utility under the name of Denton
Municipal Electric Utility (DME), files its Application for Interim Update of Wholesale
Transmission Rates pursuant to 16 Tex. Admin. Code § 25.192(h) (TAC), and in support of this
filing would respectfully show the following:
I. BACKGROUND AND AUTHORITY
In this docket, DME seeks an interim revision to its previously approved transmission
cost of service (TCOS) and wholesale transmission rate pursuant to, and consistent with, th e
requirements of the Public Utility Commission of Texas (Commission), 16 TAC § 25.192(h), and
the Filing Requirements for Interim Update of Wholesale Transmission Rates (the Interim TCOS
Filing Package).
Pursuant to 16 TAC § 25.192(h), each transmission service provider (TSP) in the ERCOT
region may on an annual basis update its transmission rates to reflect changes in its invested
capital. If the TSP elects to update its transmission rates, the new rates shall reflect the addition
and retirement of transmission facilities and include appropriate depreciation, federal income tax
and other associated taxes, and the Commission-allowed rate of return on such facilities as well
as changes in loads. Under 16 TAC § 25.192(h)(2), an interim update of transmission rates is
subject to reconciliation at the next complete review of the TSP’s transmission cost of service.
The Commission shall review whether the costs of transmission plant additions are reasonable
and necessary at that time. Thus, this proceeding to update wholesale transmission rates is not
intended to determine the reasonableness of these costs.
DME Application 2
II. DME’S FILING
Together with this Application, DME has filed the Direct Testimony of Bryan Langley,
the Direct Testimony of Karl Nalepa, and the Interim TCOS Filing Package Schedules and
Workpapers. As discussed in Section V. below, DME’s notice is attached as Attachment A.
III. COSTS INCLUDED IN DME’S INTERIM TCOS UPDATE
DME’s Application compares the actual June 30, 2017 transmission net plant balances,
and additional projects completed and energized but not yet classified, with the net plant
balances established in Docket No. 46348, Application of Denton Municipal Electric for Interim
Update of Wholesale Transmission Rates Pursuant to P.U.C. Subst. R. 25.192(h). The difference
between these two balances provides the increase in the rate base for DME in this Application.
IV. REQUESTED RELIEF
The requested increase in invested capital in this filing is $44,431,406. The
corresponding total annual wholesale transmission revenue requirement is $39,221,665, which
represents an increase of $13,034,664. The proposed interim revenue requirement increase
represents a 49.7753% increase in DME’s wholesale transmission revenue requirement. DME
further requests that by expedited process, the Commission approve an interim wholesale
transmission rate of $579.42895 per megawatt ($0.579429 per kilowatt). To facilitate this relief,
DME undertakes to provide any information pertinent to the processing of this Application by
prompt response to formal or informal Commission Staff data requests. For formal and statutory
purposes, DME designates the effective date for these proposed rate changes as January XX,
2018, which is 35 days after the filing of this Application.
V. NOTICE AND PROCESSING
Any consideration or determination of whether the costs included in DME’s Application
are reasonable and necessary is specifically removed from this proceeding by 16 TAC
§ 25.192(h)(2). Because such determinations are ultimately reserved for a later proceeding, the
issues in this docket are very limited and it should be processed expeditiously.
Within a reasonable period of time after the filing of this Application, DME will provide
written notice pursuant to 16 TAC § 25.192(4)(A) to all parties in the last interim update of
DME Application 3
DME’s TCOS (Docket No. 463481) and all of the distribution service providers listed in Docket
No. 46604, Commission Staff’s Application to Set 2017 Wholesale Transmission Service
Charges for the Electric Reliability Council of Texas in the form attached as Attachment “A.”
Upon completion of the notice described above, DME will file an affidavit attesting to the
provision of such notice within a reasonable time and by such date as may be established by the
presiding officer.
Pursuant to 16 TAC § 25.192(h)(4)(A), the intervention deadline is 21 days from the date
service of notice is completed.
To the extent the relief requested herein is contested in a manner that would prevent the
expedited implementation of DME’s request, DME respectfully requests an opportunity for
hearing, pursuant to 16 TAC § 22.125(c), to establish that good cause exists for the Commission
to grant DME interim relief. In such event, DME further requests expedited treatment of this
petition so as to permit the Commission to issue a final order expeditiously.
VI. PRAYER
WHEREFORE, PREMISES CONSIDERED, DME respectfully requests that the
Commission approve DME’s Application and expeditiously order an interim adjustment to
DME’s annual revenue requirement to $39,221,665, and approve an interim wholesale
transmission rate of $0.579429 per kilowatt. Additionally, DME requests all other and further
relief, general or special, at law or in equity, to which DME may show itself to be justly entitled.
1 Application of Denton Municipal Electric for Interim Update of Wholesale Transmission Rates
Pursuant to 16 Tex. Admin. Code § 25.192(h), Docket No. 46348, Order (Sept. 16, 2016).
DME Application 4
Respectfully submitted,
LLOYD, GOSSELINK,
ROCHELLE & TOWNSEND, P.C.
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Telephone: (512) 322-5830
Facsimile: (512) 472-0532
LAMBETH TOWNSEND
State Bar No. 20167500
WILLIAM A. FAULK, III
State Bar No. 24075674
ATTORNEY FOR THE CITY OF DENTON
CERTIFICATE OF SERVICE
I, Lambeth Townsend, attorney, certify that a copy of the Notice of Rate Change Request
was served on all parties in Docket No. 46348 and all distribution service providers listed in
Docket No. 46604, as listed on Attachment B hereto, on this the day of December, 2017,
the following manner: hand delivered, e-mailed, sent via facsimile, or mailed by U.S. First Class
Mail.
LAMBETH TOWNSEND
1060/43/7489597
DRAFT — 7496940
12/12/2017 3:25 PM
DOCKET NO.
APPLICATION OF DENTON
MUNICIPAL ELECTRIC FOR INTERIM
UPDATE OF WHOLESALE
TRANSMISSION RATES PURSUANT
TO 16 TEX. ADMIN. CODE § 25.192(h)
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BEFORE THE
PUBLIC UTILITY COMMISSION
OF TEXAS
DIRECT TESTIMONY
OF
KARL J. NALEPA
ON BEHALF OF
DENTON MUNICIPAL ELECTRIC
DECEMBER , 2017
DIRECT TESTIMONY 2 KARL J. NALEPA
DIRECT TESTIMONY OF
KARL J. NALEPA
TABLE OF CONTENTS
Page
I. INTRODUCTION AND QUALIFICATIONS ...................................................................3
II. PURPOSE AND SCOPE .....................................................................................................4
III. COST OF SERVICE CALCULATIONS ............................................................................6
IV. REVENUE REQUIREMENT INCREASE .........................................................................7
V. UPDATED WHOLESALE TRANSMISSION RATE .......................................................9
VI. CONCLUSION ..................................................................................................................10
ATTACHMENTS:
Attachment A Statement of Qualifications
Attachment B Previously Filed Testimony
Attachment C Wholesale Transmission Service Tariff
SCHEDULES SPONSORED:
Schedule A Updated Wholesale Transmission Cost of Service
Schedule B Updated Wholesale Transmission Rate Base
Schedule B-1 Updated Wholesale Transmission Plant
Schedule B-5 Updated Wholesale Transmission Accumulated Depreciation
Schedule E-1 Updated Wholesale Transmission Depreciation Expense
WORKPAPERS SPONSORED:
WP / A-1 Notice of Approval (Docket No. 46348)
WP / A-2 Schedule A: Transmission Cost of Service (Docket No. 46348)
WP / B Schedule B: Summary of Rate Base Allocation (Docket No. 46348)
WP / B-1 Schedule B-1: Original Cost of Utility Plant (Docket No. 46348)
WP / B-5 Schedule B-5: Accumulated Depreciation (Docket No. 46348)
WP / E-1 Schedule E-1: Depreciation Expense (Docket No. 46348)
DIRECT TESTIMONY 3 KARL J. NALEPA
DOCKET NO.
APPLICATION OF DENTON
MUNICIPAL ELECTRIC FOR INTERIM
UPDATE OF WHOLESALE
TRANSMISSION RATES PURSUANT
TO 16 TEX. ADMIN. CODE § 25.192(h)
§
§
§
§
§
BEFORE THE
PUBLIC UTILITY COMMISSION
OF TEXAS
DIRECT TESTIMONY OF
KARL J. NALEPA
I. INTRODUCTION AND QUALIFICATIONS 1
Q. PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS ADDRESS. 2
A. My name is Karl J. Nalepa. I am the President of ReSolved Energy Consulting, LLC, 3
an independent utility consulting company. My business address is 11044 Research 4
Blvd., Suite A-420, Austin, Texas 78759. 5
Q. ON WHOSE BEHALF ARE YOU PRESENTING TESTIMONY IN THIS 6
PROCEEDING? 7
A. I am presenting testimony on behalf of the City of Denton operating its municipally-8
owned utility under the name of Denton Municipal Electric Utility (“DME”). 9
Q. PLEASE OUTLINE YOUR EDUCATIONAL AND PROFESSIONAL 10
BACKGROUND. 11
A. I hold a Bachelor of Science degree in Mineral Economics and a Master of Science 12
degree in Petroleum Engineering, and am a certified mediator. I have been a partner 13
in ReSolved Energy Consulting since July 2011, but joined R.J. Covington 14
Consulting, its predecessor firm, in June 2003. Before that, I served for more than 15
five years as an Assistant Director with the Texas Railroad Commission (“RRC”). In 16
that position, I was responsible for overseeing the economic regulation of natural gas 17
utilities in Texas. Prior to that, I spent five years with two different consulting firms, 18
DIRECT TESTIMONY 4 KARL J. NALEPA
providing expert advice regarding a broad range of electric and natural gas industry 1
issues. I also served four years as a Fuels Analyst with the Public Utility Commission 2
of Texas (“Commission”). My professional career began with eight years in the 3
reservoir engineering department of an exploration company affiliated with a major 4
interstate pipeline company. My Statement of Qualifications is included as 5
Attachment A. 6
Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THIS COMMISSION? 7
A. Yes, I have testified many times before both the Commission and the RRC on a 8
variety of regulatory issues. A summary of my previously filed testimony is provided 9
in Attachment B. In addition, I supervised the RRC staff in proceedings before the 10
RRC and served as a Technical Rate Examiner on behalf of the RRC. I have also 11
provided analysis and recommendations in numerous city-level regulatory 12
proceedings that resulted in settlements without written testimony. 13
II. PURPOSE AND SCOPE 14
Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING? 15
A. The purpose of my testimony is to support the interim update of DME’s wholesale 16
transmission service rate. DME has added transmission plant since its last interim 17
cost of service filing, Application of Denton Municipal Electric for Interim Update of 18
Wholesale Transmission Rates Pursuant to P.U.C. SUBST. R. § 25.192(h), Docket No. 19
46348. As set forth in the testimony of Bryan Langley filed with this application, the 20
transmission facilities included in this filing are in service and used and useful for 21
providing transmission service. 22
I adopt and support the schedules and workpapers included in this filing, 23
which are consistent with the Filing Requirements for Interim Update of Wholesale 24
DIRECT TESTIMONY 5 KARL J. NALEPA
Transmission Rates (“Interim TCOS Rate Filing Package”) and 16 TAC § 25.192(h). 1
Section 25.192(h)(1) states that a transmission service provider “may apply to update 2
its transmission rates on an interim basis not more than once per calendar year to 3
reflect changes in its invested capital.” Under the rule, “the new rates shall reflect the 4
addition and retirement of transmission facilities and include appropriate 5
depreciation, federal income tax and other associated taxes, and the commission-6
authorized rate of return on such facilities as well as changes in loads.” 7
Q. WHEN DID DME LAST CHANGE ITS RATES? 8
A. DME’s last interim rate case filing, Docket No. 46348, was filed on September 16, 9
2016 and was based on fiscal year plant balances as of June 30, 2016. The 10
Commission’s Notice of Approval dated November 10, 2016 established the current 11
Transmission Cost of Service (“TCOS”) rate. 12
Q. WERE THE SCHEDULES AND WORKPAPERS INCLUDED IN THIS 13
FILING PREPARED EITHER BY YOU OR UNDER YOUR DIRECTION? 14
A. Yes, the schedules and workpapers that I sponsor in this filing were prepared by me 15
or under my supervision. 16
Q. DOES THIS FILING COMPLY WITH THE REQUIREMENTS OF THE 17
COMMISSION’S RULES AND THE INTERIM TRANSMISSION COST OF 18
SERVICE RATE FILING PACKAGE INSTRUCTIONS? 19
A. Yes, where applicable, I have followed the Interim TCOS Rate Filing Package. In 20
cases where the rate filing package instructions did not address a particular cost of 21
service item or where any inconsistency seemed to exist, I relied on the 22
Commission’s rules. The filing package instructions do not track the rule in its 23
DIRECT TESTIMONY 6 KARL J. NALEPA
entirety. For example, the rate filing package instructions do not mention property 1
taxes or payments in lieu of taxes associated with the new plant. In cases of this 2
nature, I have followed the rule and adjusted my schedules accordingly. 3
Q. WHAT INTERIM INCREASE IS DME REQUESTING? 4
A. DME is requesting an annual increase in wholesale transmission revenue of 5
$13,034,664. This increase includes depreciation expense and return on DME’s net 6
investment in transmission assets added since June 30, 2016. The return component 7
is $12,461,833, as shown on Schedule B of the rate filing package. 8
III. COST OF SERVICE CALCULATIONS 9
Q. WHAT COSTS ARE INCLUDED IN THIS INTERIM UPDATE? 10
A. Section 25.192(h)(1) states that “the new rates shall reflect the addition and 11
retirement of transmission facilities and include appropriate depreciation, federal 12
income tax and other associated taxes, and the commission-authorized rate of return 13
on such facilities.” Pursuant to this rule, DME includes calculations for additions and 14
retirements, and rate of return. As a municipal utility, DME is not subject to federal 15
income taxes. 16
Q. PLEASE EXPLAIN DME’S ADDITIONAL CAPITAL INVESTMENT 17
INCLUDED IN THIS INTERIM UPDATE. 18
A. This interim update includes the capital investments for in-service transmission 19
facilities added since Docket No. 46348. Bryan Langley’s Direct Testimony in this 20
application describes the transmission projects comprising the additional capital 21
investment through test year ending June 30, 2017, and additional projects completed 22
and energized but not yet classified. DME also included all transmission facility 23
retirements and changes in accumulated depreciation for the same time period. 24
DIRECT TESTIMONY 7 KARL J. NALEPA
This results in the netting of plant additions and retirements in FERC accounts 1
350–359 through June 30, 2017, included in this interim update. The transmission net 2
plant value for additions and retirements is summarized on Schedule B-1 by FERC 3
account for the entire period. The transmission plant accumulated depreciation is 4
summarized on Schedule B-5 by FERC account for the entire period. Annual 5
depreciation expense is summarized on Schedule E-1 by FERC account for the entire 6
period. DME’s incremental transmission investment is detailed on Attachments BL-1 7
and BL-2 to the Direct Testimony of Bryan Langley. 8
IV. REVENUE REQUIREMENT INCREASE 9
Q. WHAT IS THE REVENUE REQUIREMENT INCREASE THAT RESULTS 10
FROM DME’S ADDITIONS TO TRANSMISSION PLANT? 11
A. The total interim TCOS increase that DME is requesting is $13,034,664. This 12
increase is comprised of: 13
Depreciation and Amortization $ 572,831 14
Return on Rate Base 12,461,833 15
$ 13,034,664 16
Q. PLEASE EXPLAIN THE CALCULATION OF DEPRECIATION EXPENSE 17
ASSOCIATED WITH THE TRANSMISSION FACILITIES INCLUDED IN 18
SCHEDULE E OF THIS FILING. 19
A. Annual depreciation expense is computed on the transmission plant in service on 20
June 30, 2017 using the depreciation rates approved in Application of Denton 21
Municipal Electric to Change Rates for Wholesale Transmission Service, Docket No. 22
30358, Final Order (June 15, 2005), DME’s last full transmission cost of service case 23
before this Commission. The resulting depreciation expense represents a $572,831 24
DIRECT TESTIMONY 8 KARL J. NALEPA
increase over the amount included in DME’s current wholesale transmission rate, as 1
shown on Schedule E-1. 2
Q. DOES THE DEPRECIATION EXPENSE COMPUTED USING THE 3
DEPRECIATION RATES APPROVED IN DOCKET NO. 30358 AGREE 4
WITH THE DME’S BOOKS AND RECORDS? 5
A. Yes, it does. 6
Q. PLEASE EXPLAIN DME’S RATE OF RETURN USED IN THIS INTERIM 7
UPDATE. 8
A. DME used a derived rate of return of 28.0474%. As determined in Docket No. 9
30358, DME’s annual transmission revenue requirement was calculated using the 10
cash flow methodology, an acceptable method recognized in the NON-IOU TCOS 11
Rate Filing Package. In Docket No. 30358, the Commission authorized transmission-12
related Capital Requirements in the amount of $2,939,476 which, when divided by 13
the transmission rate base of $10,480,403, imputes a rate of return on rate base of 14
28.0474%. 15
As shown on Schedule B in this filing, using this rate of return, DME’s return 16
on its rate base updated to include net transmission plant additions as of June 30, 17
2017, plus energized construction completed but not yet classified plant through 18
June 30, 2017, is $12,461,833 higher than the return established in DME’s last 19
interim increase in Docket No. 46348. 20
DIRECT TESTIMONY 9 KARL J. NALEPA
Q. HAS DME INCLUDED CHANGES TO FEDERAL INCOME TAX AND 1
OTHER ASSOCIATED TAXES IN THIS FILING? 2
A. As a municipal utility, DME does not pay federal income taxes. However, DME is 3
required to make payments in lieu of taxes. This transfer is analogous to what an 4
investor-owned utility would pay in franchise fees and property taxes. In its TCOS 5
filing in Docket No. 30358, DME included payments in lieu of taxes, referred to as 6
Return On Investment by DME, in its cash flow method.1 The cash flow method 7
determined DME’s capital requirements in Docket No. 30358, which, when divided 8
by rate base, provided the return on rate base utilized in this interim TCOS filing. 9
Therefore, the payments in lieu of taxes are included in this interim TCOS filing as a 10
component of DME’s capital requirements. 11
V. UPDATED WHOLESALE TRANSMISSION RATE 12
Q. HOW DID YOU DETERMINE DME’S UPDATED WHOLESALE 13
TRANSMISSION SERVICE RATE? 14
A. As I previously testified, DME’s revenue requirement has increased by $13,034,664 15
to a total interim revenue requirement of $39,221,665. Per § 25.192(b)(1), this 16
amount is then divided by the most recent average four coincident peak (“4-CP”) in 17
the Electric Reliability Council of Texas (“ERCOT”) to calculate the new DME 18
wholesale transmission service rate. 19
1 Reference Docket No. 30358, Workpaper C-3.6.
DIRECT TESTIMONY 10 KARL J. NALEPA
Q. WHAT MEGAWATT BILLING UNITS DID YOU USE IN THIS FILING’S 1
TRANSMISSION RATE CALCULATIONS? 2
A. This proposed transmission rate update uses 67,690.2056 MW, which is the 2016 3
average 4-CP established by the Commission in Docket No. 46604, Commission 4
Staff’s Application to Set 2017 Wholesale Transmission Service Charges for the 5
Electric Reliability Council of Texas. This is the most recent average 4-CP for 6
ERCOT. 7
Q. WHAT TRANSMISSION RATE WILL DME BILL AND COLLECT UPON 8
FINAL APPROVAL OF THIS INTERIM CAPITAL ADDITION FILING? 9
A. DME will bill and collect an annual rate of $579.42895 per MW upon approval of a 10
final order in this proceeding. 11
Q. WHAT IS THE PROPOSED EFFECTIVE DATE FOR THE REQUESTED 12
INTERIM WHOLESALE TRANSMISSION RATE? 13
A. DME proposes that this interim wholesale transmission rate become effective on 14
January XX, 2018. 15
VI. CONCLUSION 16
Q. PLEASE SUMMARIZE YOUR TESTIMONY. 17
A. DME has followed 16 TAC § 25.192 and the Interim TCOS Rate Filing Package 18
instructions in developing its updated wholesale transmission service revenue 19
requirement. The rate base included in DME’s interim TCOS update is used and 20
useful in providing electric service. The information contained in the Interim TCOS 21
Rate Filing Package schedules is true and correct. DME has correctly calculated its 22
new interim TCOS revenue requirement. DME’s proposed wholesale transmission 23
service rate of $579.42895 per MW has been calculated correctly. The Commission 24
DIRECT TESTIMONY 11 KARL J. NALEPA
should approve DME’s interim TCOS update as proposed and make it effective no 1
later than January XX, 2018. 2
Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 3
A. Yes, it does. 4
DIRECT TESTIMONY 12 KARL NALEPA
ATTACHMENT A
Statement of Qualifications
DIRECT TESTIMONY 13 KARL NALEPA
KARL J. NALEPA
Mr. Nalepa is an energy economist with more than 35 years of private and public sector experience
in the electric and natural gas industries. He has extensive experience analyzing utility rate filings
and resource plans with particular focus on fuel and power supply requirements, quality of fuel
supply management, and reasonableness of energy costs. Mr. Nalepa developed peak demand and
energy forecasts for municipal and electric cooperative utilities and has forecast the price of natural
gas in ratemaking and resource plan evaluations. He led a management and performance review of
the Texas Public Utility Commission, and has conducted performance reviews and valuation
studies of a number of municipal utility systems. Mr. Nalepa previously directed the Railroad
Commission of Texas’ Regulatory Analysis & Policy Section, with responsibility for preparing
timely natural gas industry analysis, managing ratemaking proceedings, mediating informal
complaints, and overseeing consumer complaint resolution. He has prepared and defended expert
testimony in both administrative and civil proceedings, and has served as a technical examiner in
natural gas rate proceedings.
EDUCATION
1998 Certificate of Mediation
Dispute Resolution Center, Austin
1989 NARUC Regulatory Studies Program
Michigan State University
1988 M.S. - Petroleum Engineering
University of Houston
1980 B.S. - Mineral Economics
Pennsylvania State University
PROFESSIONAL HISTORY
2003 - ReSolved Energy Consulting, LLC
President and Managing Director
1997 – 2003 Railroad Commission of Texas
Asst. Director, Regulatory Analysis & Policy
1995 – 1997 Karl J. Nalepa Consulting
Principal
1992 – 1995 Resource Management International, Inc.
Supervising Consultant
1988 – 1992 Public Utility Commission of Texas
Fuels Analyst
1980 – 1988 Transco Exploration Company
Reservoir and Evaluation Engineer
DIRECT TESTIMONY 14 KARL NALEPA
AREAS OF EXPERTISE
Regulatory Analysis
Electric Power: Analyzed electric utility rate, certification, and resource forecast filings. Assessed
the quality of fuel supply management, and reasonableness of costs recovered from ratepayers.
Projected the cost of fuel and purchased power. Estimated the impact of environmental costs on
utility resource selection. Participated in regulatory rulemaking activities. Provided expert staff
testimony in a number of proceedings before the Texas Public Utility Commission.
As consultant, represent interests of municipal clients intervening in large utility rate proceedings
through analysis of filings and presentation of testimony before the Public Utility Commission.
Also assist municipal utilities in preparing and defending requests to change rates and other
regulatory matters before the Public Utility Commission.
Natural Gas: Directed the economic regulation of gas utilities in Texas for the Railroad
Commission of Texas. Responsible for monitoring, analyzing and reporting on conditions and
events in the natural gas industry. Managed Commission staff representing the public interest in
contested rate proceedings before the Railroad Commission, and acted as technical examiner on
behalf of the Commission. Mediated informal disputes between industry participants and directed
handling of customer billing and service complaints. Oversaw utility compliance filings and staff
rulemaking initiatives. Served as a policy advisor to the Commissioners.
As consultant, represent interests of municipal clients intervening in large utility rate proceedings
through analysis of filings and presentation of testimony before the cities and Railroad
Commission. Also assist small utilities in preparing and defending requests to change rates and
other regulatory matters before the Railroad Commission.
Litigation Support
Retained to support litigation in natural gas contract disputes. Analyzed the results of contract
negotiations and competitiveness of gas supply proposals considering gas market conditions
contemporaneous with the period reviewed. Supported litigation related to alleged price
discrimination related to natural gas sales for regulated customers. Provided analysis of regulatory
and accounting issues related to ownership of certain natural gas distribution assets in support of
litigation against a natural gas utility. Supported independent power supplier in binding
arbitration regarding proper interpretation of a natural gas transportation contract. Provided
expert witness testimony in administrative and civil court proceedings.
DIRECT TESTIMONY 15 KARL NALEPA
Utility System Assessment
Led a management and performance review of the Public Utility Commission. Conducted
performance reviews and valuation studies of municipal utility systems. Assessed ability to
compete in the marketplace, and recommended specific actions to improve the competitive
position of the utilities. Provided comprehensive support in the potential sale of a municipal gas
system, including preparation of a valuation study and all activities leading to negotiation of
contract for sale and franchise agreements.
Energy Supply Analysis
Reviewed system requirements and prepared requests for proposals (RFPs) to obtain natural gas
and power supplies for both utility and non-utility clients. Evaluated submittals under alternative
demand and market conditions, and recommended cost-effective supply proposals. Assessed
supply strategies to determine optimum mix of available resources.
Econometric Forecasting
Prepared econometric forecasts of peak demand and energy for municipal and electric cooperative
utilities in support of system planning activities. Developed forecasts at the rate class and substation
levels. Projected price of natural gas by individual supplier for Texas electric and natural gas
utilities to support review of utility resource plans.
Reservoir Engineering
Managed certain reserves for a petroleum exploration and production company in Texas.
Responsible for field surveillance of producing oil and natural gas properties, including reserve
estimation, production forecasting, regulatory reporting, and performance optimization. Performed
evaluations of oil and natural gas exploration prospects in Texas and Louisiana.
PROFESSIONAL MEMBERSHIPS
Society of Petroleum Engineers
United States Association for Energy Economics
International Association for Energy Economics
DIRECT TESTIMONY 16 KARL NALEPA
SELECT PUBLICATIONS, PRESENTATIONS, AND TESTIMONY
“Summary of the USAEE Central Texas Chapter’s Workshop entitled ‘EPA’s Proposed Clean Power Plan Rules:
Economic Modeling and Effects on the Electric Reliability of Texas Region,’” with Dr. Jay Zarnikau and Mr.
Neil McAndrews, USAEE Dialogue, May 2015
“Public Utility Ratemaking,” EBF 401: Strategic Corporate Finance, The Pennsylvania State University, Sept 2013
“What City Officials Need to Know About the Process of Ratemaking,” ABCs of Energy Workshop, Texas Municipal
League, December 2012
“What You Should Know About Public Utilities,” EBF 401: Strategic Corporate Finance, The Pennsylvania State
University, October 2011
“Natural Gas Markets and the Impact on Electricity Prices in ERCOT,” Texas Coalition of Cities for Fair Utility Issues,
Dallas, October 2008
“Natural Gas Regulatory Policy in Texas,” Hungarian Oil and Gas Policy Business Colloquium, U.S. Trade and
Development Agency, Houston, May 2003
“Railroad Commission Update,” Texas Society of Certified Public Accountants, Austin, April 2003
“Gas Utility Update,” Railroad Commission Regulatory Expo and Open House, October 2002
“Deregulation: A Work in Progress,” Interview by Karen Stidger, Gas Utility Manager, October 2002
“Regulatory Overview: An Industry Perspective,” Southern Gas Association’s Ratemaking Process Seminar, Houston,
February 2001
“Natural Gas Prices Could Get Squeezed,” with Comm. Charles R. Matthews, Natural Gas, December 2000
“Railroad Commission Update,” Texas Society of Certified Public Accountants, Austin, April 2000
“A New Approach to Electronic Tariff Access,” Association of Texas Intrastate Natural Gas Pipeline Annual Meeting,
Houston, January 1999
“A Texas Natural Gas Model,” United States Association for Energy Economics North American Conference,
Albuquerque, 1998
“Texas Railroad Commission Aiding Gas Industry by Updated Systems, Regulations,” Natural Gas, July 1998
“Current Trends in Texas Natural Gas Regulation,” Natural Gas Producers Association, Midland, 1998
“Overview of the American Petroleum Industry,” Institute of International Education Training Program, Austin, 1993
Direct testimony in PUC Docket No. 10400 summarized in Environmental Externality, Energy Research Group for the
Edison Electric Institute, 1992
“God’s Fuel - Natural Gas Exploration, Production, Transportation and Regulation,” with Danny Bivens, Public Utility
Commission of Texas Staff Seminar, 1992
“A Summary of Utilities’ Positions Regarding the Clean Air Act Amendments of 1990,” Industrial Energy Technology
Conference, Houston, 1992
“The Clean Air Act Amendments of 1990,” Public Utility Commission of Texas Staff Seminar, 1992
DIRECT TESTIMONY 17 KARL NALEPA
ATTACHMENT B
Previously Filed Testimony
DIRECT TESTIMONY 18 KARL NALEPA
KARL J. NALEPA
TESTIMONY FILED
DKT NO. DATE REPRESENTING UTILITY PHASE ISSUES Before the Public Utility Commission of Texas 47236 Jul 17 Cities AEP Texas EECRF EECRF Methodology 47235 Jul 17 Cities Oncor Electric Delivery EECRF EECRF Methodology 47217 Jul 17 Cities Texas-New Mexico Power EECRF EECRF Methodology 47032 May 17 Gulf Coast Coalition CenterPoint Energy Houston DCRF DCRF Methodology 46936 Oct 17 Cities Southwestern Public Service CCN Public Interest Review 46449 Apr 17 Cities SWEPCO Cost of Service Cost of Service 46238 Jan 17 Office of Public Counsel Oncor Electric Delivery STM Public Interest Review 46076 Dec 16 Cities Entergy Texas, Inc. Fuel Reconciliation Fuel Cost 46050 Aug 16 Cities AEP Texas STM Public Interest Review 46014 Jul 16 Gulf Coast Coalition CenterPoint Energy Houston EECRF EECRF Methodology 45788 May 16 Cities AEP-TNC DCRF DCRF Methodology 45787 May 16 Cities AEP-TCC DCRF DCRF Methodology 45747 May 16 Gulf Coast Coalition CenterPoint Energy Houston DCRF DCRF Methodology 45712 Apr 16 Cities SWEPCO DCRF DCRF Methodology 45691 Jun 16 Cities SWEPCO TCRF TCRF Methodology 45414 Feb 17 Office of Public Counsel Sharyland Cost of Service Cost of Service 45248 May 16 City of Fritch City of Fritch Cost of Service (water) Cost of Service 45084 Nov 15 Cities Entergy Texas, Inc. TCRF TCRF Methodology
DIRECT TESTIMONY 19 KARL NALEPA
DKT NO. DATE REPRESENTING UTILITY PHASE ISSUES 45083 Oct 15 Cities Entergy Texas, Inc. DCRF DCRF Methodology 45071 Aug 15 Denton Municipal Electric Denton Municipal Electric Interim TCOS Wholesale Transmission Rate
44941 Dec 15 City of El Paso El Paso Electric Cost of Service CEP Adjustments 44677 Jul 15 City of El Paso El Paso Electric EECRF EECRF Methodology 44572 May 15 Gulf Coast Coalition CenterPoint Energy Houston DCRF DCRF Methodology 44060 May 15 City of Frisco Brazos Electric Coop CCN Transmission Cost Recovery 43695 May 15 Pioneer Natural Resources Southwestern Public Service Cost of Service Cost Allocation 43111 Oct 14 Cities Entergy Texas Inc. DCRF DCRF Methodology 42770 Aug 14 Denton Municipal Electric Denton Municipal Electric Interim TCOS Wholesale Transmission Rate 42485 Jul 14 Cities Entergy Texas, Inc. EECRF EECRF Methodology 42449 Jul 14 City of El Paso El Paso Electric EECRF EECRF Methodology 42448 Jul 14 Cities SWEPCO TCRF Transmission Cost Recovery Factor 42370 Dec 14 Cities SWEPCO Rate Case Expenses Rate Case Expenses 41791 Jan 14 Cities Entergy Texas, Inc. Cost of Service Cost of Service/Fuel 41539 Jul 13 Cities AEP Texas North EECRF EECRF Methodology 41538 Jul 13 Cities AEP Texas Central EECRF EECRF Methodology 41444 Jul 13 Cities Entergy Texas, Inc. EECRF EECRF Methodology 41223 Apr 13 Cities Entergy Texas, Inc. ITC Transfer Public Interest Review 40627 Nov 12 Austin Energy Austin Energy Cost of Service General Fund Transfers 40443 Dec 12 Office of Public Counsel SWEPCO Cost of Service Cost of Service/Fuel
DIRECT TESTIMONY 20 KARL NALEPA
DKT NO. DATE REPRESENTING UTILITY PHASE ISSUES 40346 Jul 12 Cities Entergy Texas, Inc. Join MISO Public Interest Review 39896 Mar 12 Cities Entergy Texas, Inc. Cost of Service/ Cost of Service/ Fuel Reconciliation Nat Gas/ Purch Power 39366 Jul 11 Cities Entergy Texas, Inc. EECRF EECRF Methodology 38951 Feb 12 Cities Entergy Texas, Inc. CGS Tariff CGS Costs 38815 Sep 10 Denton Municipal Electric Denton Municipal Electric Interim TCOS Wholesale Transmission Rate 38480 Nov 10 Cities Texas-New Mexico Power Cost of Service Cost of Service/Rate Design 37744 Jun 10 Cities Entergy Texas, Inc. Cost of Service/ Cost of Service/ Fuel Reconciliation Nat Gas/ Purch Power/ Gen 37580 Dec 09 Cities Entergy Texas, Inc. Fuel Refund Fuel Refund Methodology 36956 Jul 09 Cities Entergy Texas, Inc. EECRF EECRF Methodology 36392 Nov 08 Texas Municipal Power Texas Municipal Power Interim TCOS Wholesale Transmission Rate 35717 Nov 08 Cities Steering Committee Oncor Electric Delivery Cost of Service Cost of Service/Rate Design 34800 Apr 08 Cities Entergy Gulf States Fuel Reconciliation Natural Gas/Coal/Nuclear 16705 May 97 North Star Steel Entergy Texas Fuel Reconciliation Natural Gas/Fuel Oil 10694 Jan 92 PUC Staff Midwest Electric Coop Revenue Requirements Depreciation/ Quality of Service 10473 Sep 91 PUC Staff HL&P Notice of Intent Environmental Costs 10400 Aug 91 PUC Staff TU Electric Notice of Intent Environmental Costs 10092 Mar 91 PUC Staff HL&P Fuel Reconciliation Natural Gas/Fuel Oil 10035 Jun 91 PUC Staff West Texas Utilities Fuel Reconciliation Natural Gas Fuel Factor Natural Gas/Fuel Oil/Coal
DIRECT TESTIMONY 21 KARL NALEPA
DKT NO. DATE REPRESENTING UTILITY PHASE ISSUES 9850 Feb 91 PUC Staff HL&P Revenue Req. Natural Gas/Fuel Oil/ETSI Fuel Factor Natural Gas/Coal/Lignite 9561 Aug 90 PUC Staff Central Power & Light Fuel Reconciliation Natural Gas Revenue Requirements Natural Gas/Fuel Oil Fuel Factor Natural Gas 9427 Jul 90 PUC Staff LCRA Fuel Factor Natural Gas 9165 Feb 90 PUC Staff El Paso Electric Revenue Requirements Natural Gas/Fuel Oil Fuel Factor Natural Gas 8900 Jan 90 PUC Staff SWEPCO Fuel Reconciliation Natural Gas Fuel Factor Natural Gas 8702 Sep 89 PUC Staff Gulf States Utilities Fuel Reconciliation Natural Gas/Fuel Oil Jul 89 Revenue Requirements Natural Gas/Fuel Oil Fuel Factor Natural Gas/Fuel Oil 8646 May 89 PUC Staff Central Power & Light Fuel Reconciliation Natural Gas Jun 89 Revenue Requirements Natural Gas/Fuel Oil Fuel Factor Natural Gas 8588 Aug 89 PUC Staff El Paso Electric Fuel Reconciliation Natural Gas Before the Railroad Commission of Texas 10622 Apr 17 LDC, LLC LDC, LLC Cost of Service Cost of Service/Rate Design 10617 Mar 17 Onalaska Water & Gas Onalaska Water & Gas Cost of Service Cost of Service/Rate Design 10580 Mar 17 Cities Steering Committee Atmos Pipeline Texas Cost of Service Cost of Service/Rate Design 10567 Feb 17 Gulf Coast Coalition CenterPoint Energy Entex Cost of Service Cost of Service/Rate Design 10506 Jun 16 City of El Paso Texas Gas Service Cost of Service Cost of Service/Energy Efficiency 10498 Feb 16 NatGas, Inc. NatGas, Inc. Cost of Service Cost of Service/Rate Design
DIRECT TESTIMONY 22 KARL NALEPA
DKT NO. DATE REPRESENTING UTILITY PHASE ISSUES 10359 Jul 14 Cities Steering Committee Atmos Energy Mid Tex Cost of Service Cost of Service/Rate Design 10295 Oct 13 Cities Steering Committee Atmos Pipeline Texas Revenue Rider Rider Renewal 10242 Jan 13 Onalaska Water & Gas Onalaska Water & Gas Cost of Service Cost of Service/Rate Design 10196 Jul 12 Bluebonnet Natural Gas Bluebonnet Natural Gas Cost of Service Cost of Service/Rate Design 10190 Jan 13 City of Magnolia, Texas Hughes Natural Gas Cost of Service Cost of Service/Rate Design 10174 Aug 12 Steering Committee of Cities Atmos Energy West Texas Cost of Service Cost of Service/Rate Design 10170 Aug 12 Cities Steering Committee Atmos Energy Mid Tex Cost of Service Cost of Service/Rate Design 10106 Oct 11 Gulf Coast Coalition CenterPoint Energy Entex Cost of Service Cost of Service/Rate Design 10083 Aug 11 City of Magnolia, Texas Hughes Natural Gas Cost of Service Cost of Service/Rate Design 10038 Feb 11 Gulf Coast Coalition CenterPoint Energy Entex Cost of Service Cost of Service/Rate Design 10021 Oct 10 AgriTex Gas, Inc. AgriTex Gas, Inc. Cost of Service Cost of Service/Rate Design 10000 Dec 10 Cities Steering Committee Atmos Pipeline Texas Cost of Service Cost of Service/Rate Design 9902 Oct 09 Gulf Coast Coalition CenterPoint Energy Entex Cost of Service Cost of Service/Rate Design 9810 Jul 08 Bluebonnet Natural Gas Bluebonnet Natural Gas Cost of Service Cost of Service/Rate Design 9797 Apr 08 Universal Natural Gas Universal Natural Gas Cost of Service Cost of Service/Rate Design 9732 Jul 08 Cities Steering Committee Atmos Energy Corp. Gas Cost Review Natural Gas Costs 9670 Oct 06 Cities Steering Committee Atmos Energy Corp. Cost of Service Affiliate Transactions/ O&M Expenses/GRIP 9667 Nov 06 Oneok Westex Transmission Oneok Westex Transmission Abandonment Abandonment 9598 Sep 05 Cities Steering Committee Atmos Energy Corp. GRIP Appeal GRIP Calculation 9530 Apr 05 Cities Steering Committee Atmos Energy Corp. Gas Cost Review Natural Gas Costs
DIRECT TESTIMONY 23 KARL NALEPA
DKT NO. DATE REPRESENTING UTILITY PHASE ISSUES 9400 Dec 03 Cities Steering Committee TXU Gas Company Cost of Service Affiliate Transactions/ O&M Expenses/Capital Costs
Before the Louisiana Public Service Commission U-33633 Nov 15 PSC Staff Entergy Louisiana, LLC/ Resource Certification Prudence Entergy Gulf States Louisiana U-33033 Jul 14 PSC Staff Entergy Louisiana, LLC/ Resource Certification Revenue Requirement Entergy Gulf States Louisiana U-31971 Nov 11 PSC Staff Entergy Louisiana, LLC/ Resource Certification Certification/Cost Recovery Entergy Gulf States Louisiana
Before the Arkansas Public Service Commission O7-105-U Mar 08 Arkansas Customers CenterPoint Energy, Inc. Gas Cost Complaint Prudence / Cost Recovery & pipelines serving CenterPoint
DIRECT TESTIMONY 24 KARL NALEPA
ATTACHMENT C
Wholesale Transmission Service Tariff
DRAFT — 7496939
12/15/2017 1:30 PM
DOCKET NO.
APPLICATION OF DENTON
MUNICIPAL ELECTRIC FOR INTERIM
UPDATE OF WHOLESALE
TRANSMISSION RATES PURSUANT
TO 16 TEX. ADMIN. CODE § 25.192(h)
§
§
§
§
§
BEFORE THE
PUBLIC UTILITY COMMISSION
OF TEXAS
DIRECT TESTIMONY
OF
BRYAN LANGLEY
ON BEHALF OF
DENTON MUNICIPAL ELECTRIC
DECEMBER , 2017
DIRECT TESTIMONY 2 BRYAN LANGLEY
DIRECT TESTIMONY OF
BRYAN LANGLEY
TABLE OF CONTENTS
Page
I. INTRODUCTION AND QUALIFICATIONS ...................................................................3
II. DESCRIPTION OF DENTON MUNICIPAL ELECTRIC .................................................4
III. PURPOSE OF TESTIMONY ..............................................................................................5
IV. DESCRIPTION OF PROPERTY ........................................................................................5
V. PURPOSE AND SCOPE .....................................................................................................5
VI. TRANSMISSION FACILITIES, ADDITIONS, AND RETIREMENTS ...........................7
ATTACHMENTS:
Attachment BL-1 Summary of Docket No. 46348 Transmission Plant in Service
Attachment BL-2 Construction Completed not Classified at June 30, 2017
WORKPAPERS SPONSORED:
WP/B-1.2 Listing of Transmission Projects Closed to EPIs July 1, 2016 through
June 30, 2017
WP/E-2 Electric Plant in Service & Accumulated Depreciation Balance at
June 30, 2017
DIRECT TESTIMONY 3 BRYAN LANGLEY
DOCKET NO.
APPLICATION OF DENTON
MUNICIPAL ELECTRIC FOR INTERIM
UPDATE OF WHOLESALE
TRANSMISSION RATES PURSUANT
TO 16 TEX. ADMIN. CODE § 25.192(h)
§
§
§
§
§
BEFORE THE
PUBLIC UTILITY COMMISSION
OF TEXAS
DIRECT TESTIMONY OF
BRYAN LANGLEY
I. INTRODUCTION AND QUALIFICATIONS 1
Q. PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS ADDRESS. 2
A. My name is Bryan Langley. I am the Interim General Manager of the Denton 3
Municipal Electric Utility (“DME”). My business address is 1659 Spencer Road, 4
Denton, Texas 76205. 5
Q. ON WHOSE BEHALF ARE YOU PRESENTING TESTIMONY IN THIS 6
PROCEEDING? 7
A. I am presenting testimony on behalf of the City of Denton, operating its municipally-8
owned utility under the name of DME. DME is a municipal electric utility serving 9
customers within the DME certificated service area. 10
Q. PLEASE OUTLINE YOUR EDUCATIONAL AND PROFESSIONAL 11
BACKGROUND. 12
A. I am the Deputy City Manager/Chief Operating Officer for the City of Denton. 13
Additionally, I served as the Interim General Manager for DME during the 14
preparation of the application. Previously, I served as Director of Finance, Chief 15
Financial Officer, and Assistant City Manager for the City of Denton. Prior to joining 16
Denton, I worked as Assistant Finance Director for the Town of Addison, and for the 17
City of Dallas in a variety of capacities in the Office of Financial Services. 18
DIRECT TESTIMONY 4 BRYAN LANGLEY
I earned a Bachelor of Business Administration and Master of Business 1
Administration degrees from the University of North Texas. In addition, I hold a 2
Master of Science in Accounting and Information Management from the University 3
of Texas at Dallas. I am a Certified Government Finance Officer, and a member of 4
the Government Finance Officers Association, the Government Finance Officers 5
Association of Texas. 6
Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THIS COMMISSION? 7
A. No, I have not previously testified before this Commission. 8
II. DESCRIPTION OF DENTON MUNICIPAL ELECTRIC 9
Q. PLEASE DESCRIBE THE DENTON MUNICIPAL ELECTRIC UTILITY. 10
A. DME is a municipal electric utility serving approximately 51,000 customers within 11
the DME certificated service area. The highest system peak load for DME was 3 53 12
megawatts (“MWs”) recorded in the summer of 2016. Total sales for Fiscal Year 13
(“FY”) 2016 were 1,433,317 MWh. DME’s total revenues for FY 2016 were 14
$166,290,498. 15
During 2001, DME divested its production assets through the sale of these 16
assets to PG&E National Energy Group. DME currently obtains all of its power 17
supply through wholesale power contracts. 18
To serve our retail customers, DME owns and operates transmission and 19
distribution facilities within its certificated service area. The transmission system 20
includes approximately 30 miles of transmission line. DME owns, operates, and 21
maintains fifteen substations, one interchange, and one switch station. DME also 22
operated two interchanges and one substation for the Texas Municipal Power Agency. 23
DIRECT TESTIMONY 5 BRYAN LANGLEY
The electric distribution system includes approximately 470 miles of underground 1
distribution lines and 352 miles of overhead distribution lines. 2
III. PURPOSE OF TESTIMONY 3
Q. DOES DME HOLD A CERTIFICATE OF CONVENIENCE AND NECESSITY 4
(“CCN”) TO CONSTRUCT TRANSMISSION FACILITIES IN TEXAS? 5
A. No. The Public Utility Regulatory Act (“PURA”)1 § 31.002(6)(A) exempts 6
municipally-owned utilities from the definition of “electric utilities.” Therefore, until 7
recently, DME was not required to obtain a CCN for the construction of transmission 8
lines under Chapter 37 of PURA. However, PURA § 37.051 was amended in 2015 to 9
require municipally-owned utilities to obtain a CCN for transmission facilities in 10
certain circumstances.2 11
IV. DESCRIPTION OF PROPERTY 12
Q. ARE ANY OF DME’S ACTIVITIES SUBJECT TO REGULATION BY THE 13
COMMISSION? 14
A. Yes. As a transmission service provider in ERCOT, DME is subject to the 15
Commission’s regulation under Chapter 35 of PURA. 16
V. PURPOSE AND SCOPE 17
Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING? 18
A. My testimony supports DME’s application to update its wholesale transmission rate 19
pursuant to 16 TAC § 25.192(h)(1) and (2). Section 25.192(h)(1) states that 20
transmission service providers “may apply to update its transmission rates on an 21
1 Public Utility Regulatory Act, Tex. Util. Code Ann. §§ 11.001-66.017 (Vernon 2007 & Supp. 2008)
(“PURA”).
2 See PURA § 37.051(g) and (h).
DIRECT TESTIMONY 6 BRYAN LANGLEY
interim basis not more than once per calendar year to reflect changes in its invested 1
capital.” The rule further states, “the new rates shall reflect the addition and 2
retirement of transmission facilities and include appropriate depreciation, federal 3
income tax and other associated taxes, and the commission-authorized rate of return 4
on such facilities as well as changes in loads.” Section 25.192(h)(2) states that, “An 5
update of transmission rates under paragraph (1) of this subsection shall be subject to 6
reconciliation at the next complete review of the TSP’s transmission cost of service, 7
at which time the commission shall review the costs of the interim transmission plant 8
additions to determine if they were reasonable and necessary.” DME has added a 9
significant amount of transmission assets since its last interim rate case, Docket No. 10
46348. DME is requesting an interim update to its wholesale transmission rate to 11
recover increased costs associated with these additional assets. 12
Q. WHAT PORTIONS OF THE APPLICATION IN THIS DOCKET DO YOU 13
SPONSOR? 14
A. In addition to this testimony, I sponsor Attachments BL-1 and BL-2, and workpapers 15
WP/B-1.2 and WP/E-2. Attachment BL-1 summarizes the booked transmission plant 16
in service by FERC account and describes the completed transmission projects 17
installed since Docket No. 46348 through the test year ending June 30, 2017. 18
Attachment BL-2 provides details of additional facilities that have been placed in 19
service and energized that have been included as Construction Completed Not 20
Classified. I describe each of these projects later in this testimony. WP/B-1.2 21
identifies each of the transmission projects closed to electric plant in service. WP/E-2 22
provides a complete listing of all installed facilities and the calculation of 23
DIRECT TESTIMONY 7 BRYAN LANGLEY
depreciation expense and accumulated depreciation for the test year ending June 30, 1
2017. 2
Q. WHEN DID DME LAST CHANGE ITS RATES? 3
A. DME’s last interim rate case filing in Docket No. 46348 was filed on September 16, 4
2016, and was based on fiscal year plant balances as of June 30, 2016. The 5
Commission’s Notice of Approval dated November 10, 2016, established the current 6
Transmission Cost of Service (“TCOS”) rate. 7
Q. WERE THE SCHEDULES AND WORKPAPERS INCLUDED IN THIS 8
FILING PREPARED EITHER BY YOU OR UNDER YOUR DIRECTION? 9
A. Yes, the attachments and workpapers in the filing previously identified were prepared 10
by me or under my supervision. 11
VI. TRANSMISSION FACILITIES, ADDITIONS, AND RETIREMENTS 12
Q. WHAT TRANSMISSION FACILITY ADDITIONS ARE INCLUDED IN THIS 13
RATE FILING? 14
A. Attachment BL-1 provides a complete list and description of the facility additions 15
through the test year ending June 30, 2017, included in this interim update of DME’s 16
wholesale transmission rate. The listed facilities are in service and used and useful, 17
and the costs of the facility additions shown on Attachment BL-1 were not included 18
in the transmission plant in service in DME’s last interim rate case, Docket No. 19
46348. 20
DIRECT TESTIMONY 8 BRYAN LANGLEY
Q. PLEASE PROVIDE A DESCRIPTION OF EACH OF THE PROJECTS 1
INCLUDED IN THIS INTERIM TCOS FILING THAT ARE ENERGIZED 2
AND SHOWN AS CONSTRUCTION COMPLETED NOT CLASSIFIED. 3
A. Attachment BL-2 identifies those facilities that are used and useful and fully 4
energized and currently shown as “Completed Construction Not Classified”. These 5
projects are: 6
WOODROW–KING’S ROW TM—Reconstruct approximately 4.17 miles of 7
existing 69kV transmission line as 138kV along a new route to replace aging facilities 8
and provide capacity needed to meet contingency planning criteria. 9
DENTON NORTH–KINGS ROW—Reroute and reconstruct approximately 10
2.5 miles of existing 69kV transmission line to replace aging facilities and to provide 11
the capacity needed to meet contingency planning requirements. New route length 12
will be approximately 3.1 miles and reconstructed as 138kV. 13
US 380 TO NORTH LAKES TM LINE—Reconstruction of approximately 14
1.2 miles of existing 69kV transmission line to provide capacity needed to meet 15
contingency planning criteria and future conversion to 138kV. 16
NORTH LAKES–DENTON NORTH TM LINE—Reconductor 17
approximately 1.25 miles and reconstruct approximately 1 mile of existing 69kV line 18
to provide the capacity to meet the requirements of contingency planning criteria. 19
KINGS ROW SUBSTATION CONSTRUCTION—Construct new 69kV–20
13.2kV substation to replace existing Kings Row Substation which is 50 years old. 21
ARCO SUBSTATION—Reconstruct the Arco Substation on an adjacent site 22
to provide terminals to serve at least two additional transmission lines. 23
DIRECT TESTIMONY 9 BRYAN LANGLEY
NORTH LAKES SUBSTATION RECONSTRUCTION—Construct a new 1
69kV–13.2kV substation to replace the existing substation for future conversion to 2
138kV. The existing station does not have the capacity for contingency planning 3
criteria. 4
TEASLEY TO POCKRUS TML REBUILD—Reconstruct the 138kV 5
transmission line to provide the capacity required by contingency planning criteria. 6
DENTON NORTH INTERCHANGE—Terminate the existing TM line from 7
the 69kVportion of the station to the 138kV TMPA station in conjunction with 8
conversion of the 69kV loop to 138kV. 9
WOODROW–MCKINNEY TM LINE—Reconstruct approximately .9 miles 10
of aging existing 69kV transmission line and convert to 138kV. 11
MCKINNEY–COOPER CREEK TM LINE—Reconstruct approximately 1.5 12
miles of aging existing 69kV transmission line and convert to 138kV. 13
COOPER CREEK–KINGS ROW TM LINE—Reconstruct approximately 2.1 14
miles of aging existing 69kV transmission line and convert to 138kV. 15
WOODROW–SPI–N SPENCER TML—Construct approximately 1,735’ of 16
new 138kV transmission line to connect Woodrow Substation to the Spencer 17
Interchange. 18
ARCO TML TIE IN—Construct transmission facilities to connect the new 19
Arco Substation. 20
NORTH LAKES AUTO XFMR—Relocate existing decommissioned 21
autotransformer to allow 69kV transmission service to be maintained until conversion 22
to 138kV can be completed. 23
DIRECT TESTIMONY 10 BRYAN LANGLEY
Q. DID DME OBTAIN A CCN FOR THE PROJECTS INCLUDED IN THIS 1
APPLICATION? 2
A. No. As a municipal utility, DME was not required to obtain a CCN because the 3
facilities were either installed or extended inside the municipal boundaries; were 4
exempted because the facility upgrades did not require any additional land, right-of-5
way, easement, or other property not owned by DME; or the construction, 6
installation, or extension of the facilities were entirely located not more than 10 miles 7
outside of DME’s certificated service area. 8
Q. HAVE ANY OF THE PROJECTS BEEN REVIEWED OR APPROVED BY 9
ERCOT? 10
A. No, all of the transmission facility additions are “local” under Commission rules and 11
only local projects that have regional impacts require review, endorsement, or 12
approval by ERCOT. However, all of these local transmission projects address 13
ERCOT reliability requirements, and DME’s own planning criteria addressing 14
reliability and load growth, as well as safety and environmental requirements. 15
All projects requiring improvements to existing transmission facilities have 16
been included in the ERCOT informal review process through the annual filing of 17
load flow cases, data filings, and/or where applicable, worked through the ERCOT 18
Regional Planning Group. 19
Q. ARE ALL THE TRANSMISSION FACILITIES INCLUDED IN 20
ATTACHMENTS BL-1 AND BL-2 USED AND USEFUL? 21
A. Yes, they are. 22
DIRECT TESTIMONY 11 BRYAN LANGLEY
Q. PLEASE SUMMARIZE YOUR TESTIMONY. 1
A. The transmission facilities included in this filing are in service and used and useful, 2
and the interim TCOS rates should be approved as filed. 3
Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 4
A. Yes, it does. 5