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1 (The following proceedings were
2 had in open hearing.)
3 COMMISSIONER HANSEN: Also identifying
4 Exhibit 226 as identified on the record. Is there
5 any objection? Being none, so ordered.
6 (ScottishPower Exhibit No. 226 was
7 marked for identification.)
8 COMMISSIONER HANSEN: Okay, we'll now
9 go then to see if we have any questions. Mr. Budge.
10 MR. BUDGE: Thank you, Mr. Chairman.
11 Just a couple of areas.
12
13 CROSS-EXAMINATION
14
15 BY MR. BUDGE:
16 Q. Mr. MacLaren, as I understand your
17 testimony, you were attempting to respond to
18 positions that were taken by Mr. Anderson on behalf
19 of Solutia and Mr. Yankel on behalf of the
20 Irrigators that raised questions regarding the
21 savings estimated by the Company of some $60 million
22 to customers if outages were reduced. Is that
23 basically correct?
24 A. That is correct, basically, yes.
25 Q. And your testimony is relying almost
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1 exclusively on the 1990 BPA study. Is that correct?
2 A. It is.
3 Q. And do you know the basis or the
4 timing and the information that was -- the period of
5 information that was studied by the BPA for purposes
6 of developing its 1990 study?
7 A. It was a -- I believe in the early
8 1990s the issue was raised in Mr. Anderson's
9 testimony, and I had carried out -- I have, because
10 the issue was raised, carried out subsequent work to
11 ensure that data remains valid.
12 Q. Let me ask it this way: The study was
13 released in 1990?
14 A. Yes.
15 Q. But it was based upon a survey that
16 was done of customers' usage and outage patterns in
17 previous years. Is that correct?
18 A. In previous years, that's correct.
19 Q. And do you recall what previous years
20 were studied that we were talking about?
21 A. I cannot just on the stand here. I
22 would need to go look at the BPA which would allow
23 me to have the answer to that.
24 Q. Okay. I'd hope so.
25 A. Yes.
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1 Q. And you wouldn't know whether or not
2 that survey or information, the data base that they
3 were surveying, has been updated from those prior
4 years?
5 A. The answer to that is no. I do know
6 that our subsequent studies carried out by a -- a --
7 Q. No, I was referring to the 1990 BPA
8 study. Had that particular study been updated?
9 A. That particular study had not been
10 updated.
11 Q. And is it a fact, Mr. MacLaren, that
12 the projected savings from the BPA study would
13 simply be savings to those particular customers
14 whose outages were reduced? It is not any reduction
15 in the operating costs of PacifiCorp?
16 A. That is correct. It is an economic
17 assessment of the value to the community of reduced
18 system outages and employs techniques that have been
19 employed for some time in trying to come to an
20 assessment of what the worth is to customers in
21 general for reduced outages.
22 Q. And I think you said it was an
23 economic estimate only, not a precise calculation of
24 value?
25 A. It is difficult to get a precise
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1 value. Other studies would back up the scale of the
2 benefits which were 60 million. Other studies would
3 indicate that the scale of these benefits is in that
4 order.
5 Q. Is it also true that the 1990 BPA
6 study that you relied upon was based upon major
7 outages that would be continuous in nature of either
8 one, four, or eight hours?
9 A. That's correct.
10 Q. And is it also true that the SAIDI and
11 MAIFI indexes include small momentary outages?
12 A. They do, and we made estimates for the
13 value of these.
14 Q. And those, again, were economic
15 estimates?
16 A. Again, these are economic estimates
17 which are backed up by my experience in the UK. The
18 kind of figures that came out of these studies are
19 typical of what I see when I speak to large
20 customers in the UK and to other customers in the
21 US.
22 Q. Did you have an opportunity to review
23 the witness of -- excuse me, the testimony of Staff
24 witness Sterling on this particular issue?
25 A. I did.
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1 Q. And Staff witness Sterling makes a
2 statement that the dollar amount of outages, the
3 dollar value of outages, is very subjective in
4 nature. Would you agree with his testimony on that?
5 A. I would -- I would agree with that.
6 Q. Would you also agree with his
7 testimony that the benefits of improved reliability
8 are very difficult to quantify?
9 A. I accept that.
10 Q. Would you also agree that to many
11 customers, outages are mere inconveniences and
12 irritations, rather than giving rise to monetary
13 damages, as witness Sterling said?
14 A. I would accept that and the
15 correlating that there are many customers to whom
16 outage is far more valuable than the figures
17 included within the study.
18 MR. BUDGE: No further questions.
19 Thank you.
20 COMMISSIONER HANSEN: Mr. Nye.
21 MR. NYE: Thank you, Mr. Chairman.
22
23
24
25
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1 CROSS-EXAMINATION
2
3 BY MR. NYE:
4 Q. Mr. MacLaren, would you agree that the
5 outage to a irrigation farm user would be more
6 serious than a momentary interruption to a
7 household?
8 A. That would be my experience and is
9 reflected in the value of -- of the studies and the
10 figures that are applied, yes.
11 Q. What would be the total penalty to be
12 paid in Idaho under this $1 penalty if the proposed
13 improvement is not met, assuming 52,000 customers,
14 53,000 customers?
15 A. That would be $52,000.
16 Q. And is it fair to assume --
17 What level of improvement would you
18 need to offset or gain the $60 million benefit?
19 A. Sorry, I'm -- the $60 million benefit
20 is predicated on improving network performance by
21 some ten -- a ten percent on SAIDI and SAIFI, and
22 five percent on MAIFI.
23 Q. All right. And if there were a
24 ten-percent decline, would you agree there would
25 likewise be a $60 million loss?
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1 A. That would be the inference of that
2 impact, yes.
3 Q. Is it true that ScottishPower's plan
4 is to conduct replacements of distribution equipment
5 based upon, quote, the strategic importance of the
6 asset, end quote?
7 A. Yes, I think you are talking about
8 performance-driven management of --
9 MR. MILLER: Mr. Chairman, I wonder if
10 I could just ask that the witness --
11 COMMISSIONER HANSEN: Mr. Miller.
12 MR. MILLER: -- or Mr. Nye direct the
13 witness to a specific page and line so that we would
14 know what part of his testimony he's being
15 cross-examined on.
16 MR. NYE: He's answered the question.
17 But I was looking at the Response to Irrigation
18 Pumpers Request 107-A.
19 COMMISSIONER HANSEN: Okay, I believe
20 the witness did answer the question. However, in
21 the future, would you reference that page then that
22 you're asking the question, please?
23 MR. NYE: Thank you. Thank you,
24 Mr. Chairman.
25 MR. MILLER: Before proceeding though,
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1 could the witness be allowed to examine that
2 Response to be sure his answer is -- he didn't want
3 to make some different answer based on precisely
4 what the question was?
5 THE WITNESS: Can I just get precise
6 wording of the question again, please?
7 Q. BY MR. NYE: The question was is it
8 not true that ScottishPower plans to conduct
9 replacement of distribution equipment based upon,
10 quote, the strategic importance of the asset, end
11 quote.
12 And the answer I think was "yes."
13 A. The answer is --
14 MR. MILLER: Mr. MacLaren, before
15 answering, would you look at the Data Request,
16 please?
17 THE WITNESS: Yes. Yes.
18 Yes, and my answer was to ensure the
19 reliability of the network is maintained, and it is
20 also supplemented by ensuring that the whole asset
21 base is generally maintained. So it's not purely a
22 single asset we're talking about.
23 Q. BY MR. NYE: My question is in
24 ScottishPower's view, is population a factor that
25 goes into how strategically important an asset is;
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1 in other words, say, in London or Glasgow versus out
2 in Tipperary, so to speak?
3 A. I think I preface my reply by saying,
4 first of all, every customer is important; and in
5 looking at the strategic management of the asset
6 base, what one is looking at is a -- the -- a -- the
7 ability, for instance, to change an asset. If the
8 asset is a large one, we're supplying a large
9 customer, a large number of people, it takes a bit
10 longer to replace it than if it's a small asset
11 which can be replaced in, say, a few hours; and part
12 of the strategic management is to ensure that we
13 take these factors into consideration in looking at
14 the asset replacement.
15 We are performance-driven. That means
16 we look at the performance of the network in
17 supplying electricity to customers, which is our
18 primary function.
19 And I hope -- have I answered your
20 question?
21 Q. Let me ask it this way --
22 A. Yeah.
23 Q. -- to have a strategic ranking of
24 assets --
25 A. Yeah.
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1 Q. -- you have to have some priority
2 there, do you not?
3 A. Yes, and that would be looking at the
4 performance. For instance, we might know when a
5 particular type of switch gear had a problem and was
6 requiring attention before another perhaps older
7 type of switch gear that was performing adequately
8 and quite well, so we would prioritize the
9 replacement on the basis of that strategic
10 performance to a performing asset, as opposed to
11 just looking, for instance, at the age alone or
12 looking at what -- for instance, what resources we
13 need to do the work. We derive it by looking at the
14 performance of the network and the performance of
15 the asset base.
16 Q. So if I'm a user or customer at the
17 very end of a distribution line in rural -- rural
18 Idaho --
19 A. Yeah.
20 Q. -- and there are a number that are way
21 out there at the end --
22 A. Uh-huh.
23 Q. -- is ScottishPower saying that that
24 customer is as strategically important as, say, a
25 major industrial user or somebody -- a customer in
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1 the heart of a city?
2 A. I think there are -- if we're talking
3 about a major industrial customer such as some of
4 those that are represented here, they do receive
5 attention. And as far as residential customers and
6 commercial customers, in my mind, every customer is
7 equal, they all deserve the same attention and the
8 same service. The geographic -- geography of the
9 territory will very often mean that a rural network
10 is more difficult to hold the standard up to the
11 same as commercial; but that is not a function of
12 the management system, that is a function of the
13 geography. We will give every customer the same
14 attention.
15 Q. So you're saying that the customer at
16 the end of the line is as strategically important an
17 asset or the equivalent there is as in the heart of
18 some urban area?
19 A. Absolutely, yes.
20 Q. I'd like to ask you just a couple
21 questions about extreme events and then complete.
22 The term "extreme events" in the electrical system
23 has varying definition, does it not, depending upon
24 who you ask?
25 A. It does. We have tried to base our
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1 definition on the IEEE -- Institution of Electrical
2 and Electronic Engineers -- definitions within the
3 US. These do have a degree of what I would describe
4 "willingness," and we have tried actually to
5 introduce some more preciseness into that definition
6 by stating customer numbers and also number of
7 events.
8 Q. And does ScottishPower's current
9 definition of the term "extreme event" differ from
10 the definition given by and used by PacifiCorp?
11 A. I think it does in terms of the
12 preciseness.
13 Q. In that?
14 A. We are more precise.
15 Q. Are the two of you trying to work up a
16 third definition that you agree on for the term
17 "extreme event"?
18 A. I have put forward proposals for the
19 definition of "extreme event." And in working with
20 Commissions, that will be part of the process talked
21 about in Exhibit 226 to make sure these definitions
22 were as tight as they can be.
23 I would say that the extreme events
24 and the claiming of extreme events is a rare
25 occurrence. It is not many times a year, yes.
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1 Q. ScottishPower is proposing standards
2 relating to the system average, eruption duration,
3 and MAIFI --
4 A. Yes.
5 Q. -- that exclude extreme events.
6 Right?
7 A. That is with regard to the standards.
8 We will report all events. The basic figures will
9 be available. In managing the network and improving
10 performance, we need to be able to look at the
11 underlying network performance or the result is that
12 all you have is a weather indicator.
13 Q. In other words, the $60 million that
14 could be a penalty excludes extreme events?
15 A. That excludes extreme events.
16 Q. And you don't have a definition that
17 is the same as PacifiCorp's definition for "extreme
18 events." Right?
19 A. The def- -- that is correct. The
20 definition we are putting forward is a tighter
21 definition of the "extreme event" than the loose one
22 that is used at present.
23 Q. And, Mr. MacLaren, do you consider
24 this lack of agreement on the term defining "extreme
25 event" to be reflective of ScottishPower's bona fide
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1 attempt to operate and maintain the system in the
2 public service?
3 MR. MILLER: To which we object. It's
4 calling for a conclusion with respect to meaning of
5 the Statute.
6 COMMISSIONER HANSEN: Mr. Nye.
7 MR. NYE: No response.
8 THE WITNESS: I'm having difficulty
9 with the question because it seems to be a
10 statement. It doesn't comply with my -- with what I
11 am trying to say, sorry.
12 (Laughter.)
13 MR. MILLER: I think the precise
14 status --
15 MR. NYE: There's no cross-examination
16 in this country.
17 THE WITNESS: Sorry.
18 COMMISSIONER HANSEN: We'll go back.
19 I believe he pretty well answered the question.
20 Do you have any additional question?
21 MR. NYE: No, your Honor.
22 COMMISSIONER HANSEN: We'll move on
23 then. Mr. Ward.
24 MR. WARD: No questions.
25 COMMISSIONER HANSEN: Mr. Richardson.
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1 MR. RICHARDSON: No questions,
2 Mr. Chairman.
3 COMMISSIONER HANSEN: Staff.
4 Mr. Purdy.
5 MR. PURDY: Thank you.
6
7 CROSS-EXAMINATION
8
9 BY MR. PURDY:
10 Q. Initially, Mr. MacLaren, I want to
11 touch on one point that you raised in your rebuttal
12 testimony, and if you need direct reference, it's
13 page 5, beginning toward the end of line 15 there.
14 Do you have that in front of you?
15 A. Yes, I have that.
16 Q. All right. Where you state -- part of
17 the sentence anyway -- ScottishPower does not
18 understand Staff's position that an additional
19 penalty scheme is required to ensure that
20 reliability does not erode from current standards?
21 A. Yes.
22 Q. All right. Now, I recognize that this
23 testimony was submitted prior to your recent
24 Exhibit No. 226, but I do want to just see if we can
25 come to an understanding on concept that I consider
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1 pretty important in this case; and that is, as has
2 been discussed throughout this hearing thus far,
3 that we have what is essentially, we all seem to
4 agree, a no-harm standard in Idaho; and that
5 meaning, of course, that the merger not put
6 ratepayers in a position worse off than they
7 otherwise would have been. And with respect to
8 reliability, Staff has made a proposal that includes
9 penalties.
10 And can you understand, at least in
11 concept, and agree that there is that need to ensure
12 that the merger does not harm ratepayers in any
13 matter?
14 A. Yes, I said in the testimony that I
15 didn't understand the issue with respect to
16 penalties. What I understand and understand now is
17 the need to have the underpinning to ensure the
18 system performance does not deteriorate, and that is
19 why I have put forward that process. And I
20 understand also that in the clarification that that
21 was the force behind the statement. And what we are
22 trying to do here is just absolutely underpin that
23 there will be no harm to customers and there is --
24 in my mind, that there is a process that ensures, in
25 the unlikely event of deterioration, that we put it
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1 right for customers.
2 Q. And your manner of doing that is what
3 you have put forth here in Exhibit 226?
4 A. That is correct.
5 Q. All right. I just want to ask you a
6 couple questions about that exhibit and see if
7 perhaps we could agree on a slight verbage
8 modification, so if you could put that in front of
9 you there?
10 A. I have that.
11 Q. All right. Now, on the first page of
12 Exhibit 226, at the very bottom -- this might seem a
13 minor, nitpicky kind of change, but I think, given
14 the rural nature of the service territory of
15 PacifiCorp in Idaho, might it be better in that last
16 bullet point beginning with the words "examine the
17 network performance to the affected communities,"
18 might it be more appropriate to strike out the word
19 "communities" and put "areas" there?
20 A. Yes, I would be happy with doing that,
21 yes.
22 Q. You would accept that?
23 A. Yes, I would accept that. I think it
24 underlines some earlier points that were made, yes.
25 Q. Thank you. Similarly, on the second
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1 page of Exhibit 226, the first bullet point at the
2 top of the page where it says "provide a view on
3 whether any element of the performance deterioration
4 is attributable to imprudent investment by
5 PacifiCorp/ScottishPower." Could we possibly strike
6 out the word "investment" and replace that with the
7 words "action or inaction"?
8 And I'll just help you out a little by
9 suggesting that failure to achieve a standard to
10 provide adequate service might not always
11 necessarily entail an investment, but it also might
12 involve the failure of the Company to perform some
13 type of activity.
14 A. Yes, sir, I would accept that, yes.
15 MR. PURDY: One minute, Mr. Chairman.
16 (Discussion off the record.)
17 MR. PURDY: That's all I have. Thank
18 you.
19 COMMISSIONER HANSEN: Okay. Let's see
20 if we have any questions from the Commission.
21 Commissioner Smith.
22 COMMISSIONER SMITH: Just a couple.
23
24
25
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1 EXAMINATION
2
3 BY COMMISSIONER SMITH:
4 Q. As part of keeping reliability of the
5 system at the highest possible level, in your
6 experience, does a utility need to have a tree
7 trimming program?
8 A. It does. It is a normal part of the
9 maintenance activities required to keep overhead
10 networks in good operating condition.
11 Q. Have you examined what PacifiCorp does
12 now in that area?
13 A. I haven't looked in detail in Idaho on
14 the tree-trimming programs that are in existence.
15 One of the -- that's the short answer to your
16 question if you would -- and expanding on that.
17 Q. Sure.
18 A. A -- the new fault reporting systems
19 and tightening up of fault reporting systems allows
20 us to identify, for instance, tree related faults
21 and make sure that these are being managed and
22 managed properly. But fundamentally, I agree
23 totally, a tree-trimming program for trees causing
24 problems is something that you have to have any
25 utility operating.
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1 Q. Is that something you've had
2 experience with in your -- ScottishPower?
3 A. Very much so, both -- we have
4 extensive rural areas both in the South of Scotland
5 and in Wales and have to have managed tree programs.
6 We carry out tree cutting, we carry out tree
7 trimming, and they have to manage that within all
8 the environmental considerations as well, because
9 people don't like us cutting trees as well, so you
10 have to balance the two.
11 Q. Well, I guess I have to inquire,
12 because in the real extreme events we experienced a
13 couple years back involved a tree, and when it's a
14 wet spring, trees grow faster.
15 A. Yes.
16 Q. And so people on a regular schedule
17 who don't take account of the fact that trees grow
18 faster if there's more moisture sometimes have a
19 extreme event?
20 A. Yes, they grow faster, and they come
21 out of the ground more easily and so we need to take
22 that into --
23 COMMISSIONER SMITH: That's all I
24 have.
25 COMMISSIONER HANSEN: I have a couple
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1 questions.
2
3 EXAMINATION
4
5 BY COMMISSIONER HANSEN:
6 Q. Why do you think it's so important to
7 establish a review committee?
8 A. I think this is part of the way that
9 we have worked with regulators certainly in the UK
10 and we hope to do so here in the US, and that it is
11 important to have the feedback and to work with the
12 Commission on issues associated with network
13 performance. I regularly report to Commissions of
14 equivalent to the Commissions in the UK, keep them
15 and customers informed of how we are doing on
16 network performance, and listen to the issues as
17 well; so that informs my management of the network
18 to know what the issues are locally, and in the
19 context of Idaho, to know what the particular
20 problems are in Idaho.
21 So I think a review committee is a
22 valuable way to allow the Commissions and ourselves
23 to work forward; and in the case of Idaho, we also
24 have this overall process that we're putting forward
25 to make sure there is no network deterioration.
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1 Q. What kind of authority do you really
2 see this review committee having?
3 A. I see that review committee having
4 effectively the ultimate authority of the
5 Commission, because the entire process is basically
6 the committee, through the Staff, can have to the
7 Commission the --
8 Our desire is to move the network
9 performance forward, and as I say, to be informed by
10 the committee; but the actual authority of the
11 committee is based on the powers that the Staff have
12 and the powers that the Commission has.
13 Q. I guess as I -- and I haven't had a
14 chance to really look in detail at your exhibit, but
15 as I look at it, it looks to me like -- just a quick
16 review -- that if the Company really disagrees with
17 the review committee, then really it goes to a next
18 stage or step, and I believe it says here on page 2,
19 then you go to a consultant. Is that correct?
20 So really the review committee, if
21 there isn't an agreement on what they recommend or
22 what they see, then -- with the Company -- then you
23 see the Company then obtaining a consultant to try
24 to work this out. Is that right?
25 A. We see the Staff being able to get
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1 assistance by appointing a consultant if the Staff
2 are unhappy with the way things are moving forward.
3 Our aim is to resolve matters before it gets to any
4 sort of a enforcement type of mechanism, and in
5 principle, that is the way that we've always tried
6 to work with the regulatory authorities. What this
7 process does is put a backstop in place that allows
8 the Commission oversight to what's going on if there
9 is network performance deterioration.
10 I would also see this as a vehicle of
11 dealing with the ongoing issues of base line and
12 system performance improvement to make sure that
13 Staff are fully up to speed with what we are doing
14 and the initiatives that we have in place to improve
15 network performance.
16 I don't know if that answers your
17 question.
18 Q. Well, I guess I go on to page 2.
19 A. Uh-huh.
20 Q. And when you're talking about the
21 performance review committee will consider the
22 consultant's recommendation. And then if
23 PacifiCorp, ScottishPower, and the Staff can not
24 agree within 90 days, then you present proposals to
25 the Commission.
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1 I guess my experience with committees,
2 I'm kind of reluctant sometimes to agree they're
3 very effective; but I guess here, to me, it looks
4 like they're creating a lot of time factor in. If
5 we've got problems and concerns out there and the
6 Staff doesn't agree that things are being run
7 correctly and they can't agree with the Company, to
8 me, as I viewed it in the past here at the
9 Commission, that comes before the Commission and we
10 decide whether the performance is adequate or not.
11 A. Yeah.
12 Q. And I guess as I look at this, I'm
13 saying here we're putting another step in, another
14 90 days, even time that that committee would get
15 together and discuss the issues and back and forth.
16 We could probably be looking for six months before
17 the Commission even found out that you couldn't
18 resolve the issue. I'm concerned about the time.
19 A. Right. I think what we've said is,
20 first of all in the existing process, is that we
21 accept the normal powers of the Commission are in no
22 way undermined by this proposed process.
23 Network performance issues in the
24 general scale of things, as you know, it takes some
25 time to resolve because even if you decide now to do
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1 something, you have construction time and other lead
2 times to be able to deal with it.
3 Q. Right.
4 A. So time is one of the factors. And
5 what we've tried to do here is because there's some
6 area in system performance, is to put forward a
7 process that formally measures the network
8 performance, reviews it, and requires us to come
9 forward with ways of rectifying matters if for any
10 reason it deteriorates -- for any reason the system
11 performance deteriorates.
12 If there was some particular issue
13 that Staff had that they didn't feel was being
14 addressed by this process and was addressable by
15 some alternative process that existed in the
16 Commission, this is not designed to supersede that.
17 It's designed to supplement and deal with
18 existing -- or, to supplement the existing
19 processes.
20 COMMISSIONER HANSEN: Do we have any
21 redirect?
22 MR. MILLER: Just a couple. First,
23 with respect, Mr. Chairman, to the questions you had
24 regarding the review process: On behalf of the
25 Company, I do want to make Mr. MacLaren's commitment
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HEDRICK COURT REPORTING MacLAREN (Com)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 clear that we did not intend this to in any way take
2 away or detract from whatever powers the Commission
3 has otherwise. It's not intended in that way. So I
4 just want to make that clear for the record.
5
6 REDIRECT EXAMINATION
7
8 BY MR. MILLER:
9 Q. Now, I'll come back to questions on
10 that point in a moment, but I want to start with a
11 couple of questions on the $60 million BPA study.
12 Do you have that topic in mind?
13 A. Yes.
14 Q. You indicated in your answer that
15 subsequent to the preparation of your testimonies --
16 or, your testimony -- you became acquainted with
17 other studies that attempted in some way to value
18 from a customer point of view the value of system
19 reliability. Is that correct?
20 A. That's correct, yes.
21 Q. Did you -- did the Company, once it
22 acquired those studies, distribute them -- those to
23 the other parties in this case I think yesterday?
24 A. They were distributed yesterday. I,
25 myself, only got the information fairly recently,
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 and that was prompted by some of the questions that
2 had been raised, and these have now been circulated
3 to the Intervenors.
4 MR. MILLER: May I approach the
5 witness, Mr. Chairman?
6 COMMISSIONER HANSEN: You may.
7 MR. BUDGE: Mr. Chairman, while we
8 have a break, if the intent of redirect is to go
9 into these other studies, then we would have an
10 objection as beyond the scope of cross-examination.
11 We crossed only as of the BPA statement. This
12 witness attempted to refer -- somewhat
13 unresponsive -- to the question of other studies
14 which we did not go into. And as I note in his
15 testimony, I don't see that he has gone into any of
16 these other studies on his rebuttal testimony, so it
17 appears to be another one of those areas that we're
18 going to reintroduce some new testimony that was not
19 covered by cross, and if that's the intent, we will
20 object.
21 COMMISSIONER HANSEN: Mr. Miller.
22 MR. MILLER: Well, first, with respect
23 to my intent: All I intend to do is introduce this
24 exhibit and make it available to the Commission and
25 should the Commission want to see those additional
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 studies. I do not intend a lengthy -- or, any
2 cross-examination -- or, examination with respect to
3 it.
4 As to the point that this would be
5 beyond the scope of cross-examination, I don't think
6 that Mr. Budge can limit the scope of redirect by
7 defining it in terms of the questions he asked.
8 That is, the witness gave responsive answers to
9 those questions, one of those answers being that
10 there are other studies that back up the BPA study.
11 That statement is in the record. It's fair for us
12 now to be able to show that there are other studies
13 that back up the BPA study.
14 So that's all we intended to do is to
15 introduce for the record, have it available for the
16 Commission, and we wouldn't have any further
17 questions with respect to it.
18 COMMISSIONER HANSEN: Okay. Is there
19 any objection?
20 MR. BUDGE: Just the one that was
21 stated: We didn't cross-examine on any study but
22 the BPA study. I don't think it's appropriate we
23 put new studies into evidence in the way of exhibits
24 that haven't been previously introduced in any of
25 the prior testimony of the Company.
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 COMMISSIONER HANSEN: Okay, I think we
2 will think about this as a Commission for a few
3 minutes. We need to take a break. We will come
4 back at five after the hour.
5 MR. MILLER: Very good. Thank you,
6 Mr. Chairman.
7 (Recess.)
8 COMMISSIONER HANSEN: Okay, we said
9 we'd take a break till 12 after, so we'll get back.
10 Mr. Miller, I believe we were on your
11 redirect.
12 MR. MILLER: Yes, thank you,
13 Mr. Chairman.
14 Mr. Chairman, members of the
15 Commission, we would like simply to withdraw the
16 proposed exhibit that we had submitted just before
17 the break in the interest of avoidance of
18 controversy.
19 COMMISSIONER HANSEN: Okay. Be so
20 ordered then. We'll withdraw that then.
21 MR. MILLER: Very good.
22 Just one other point: There was a
23 question with respect to withdrawing the exhibit as
24 to when it was given to other parties. And -- no,
25 when Exhibit 226 was given to other parties. During
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 the break, I was able to confirm that that was
2 circulated on July 8th to all the parties, just to
3 correct.
4 Q. BY MR. MILLER: Mr. MacLaren, let me
5 direct your attention back to Exhibit 226.
6 A. Yes.
7 Q. Do you recall that the question was
8 put to you by President Hansen expressing a concern
9 about the length of time that might be involved with
10 this process, and perhaps the process would simply
11 add time to the Commission being able to reach a
12 Decision if it's necessary?
13 A. Yes.
14 Q. In order to address that concern,
15 would the Company be willing to suggest that in the
16 event something ever got to the stage that a
17 consultant's recommendations were obtained and then
18 considered by the committee, that if things ever
19 reached that stage, the Commission would be formally
20 notified that things had entered into that stage so
21 that the Commission could be aware that things were
22 on a escalated path?
23 A. Yes, I would be happy to do that if
24 that would help.
25 Q. And if, after review, the Commission
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 has other suggestions for improvements of this
2 process, would the Company be willing to consider
3 those and try to incorporate them to the extent
4 possible?
5 A. Yes.
6 Q. Very good. With respect to the
7 questions Mr. Budge asked you about the $60 million
8 in benefits as shown by the BPA study, you
9 acknowledge, of course, that quantification of those
10 types of benefits does involve some degree of
11 subjective judgment. Is that correct?
12 A. Yes.
13 Q. But just for these purposes, let's
14 take the 60 million as a rough approximation of a
15 order of magnitude. A $60 million benefit is an
16 annual benefit. Is that correct?
17 A. That is correct.
18 Q. And would it continue for how long?
19 A. For the life of the plant that was
20 installed to achieve the performance improvements;
21 typically, 20, 30 years.
22 Q. And as I understand the Company's
23 testimony, the Company is proposing to spend
24 approximately $55 million to achieve those benefits?
25 A. Yes: Roughly $11 million a year.
461
HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 Q. Eleven million per year?
2 A. Per year.
3 Q. And do I understand also correctly
4 that that is not an incremental expenditure; that
5 is, it's not additional to any money PacifiCorp is
6 spending now?
7 A. It is not additional. It will result
8 from the both efficiencies, redirection of the
9 capital, and from the targeted asset management
10 programs which we have implemented. That has been
11 my experience in the UK, and I have no reason going
12 upon here to believe it's any different.
13 Q. So with no new spending, you
14 anticipate a benefit of $60 million?
15 A. Yes.
16 Q. Now, there'd been some criticism of
17 lack of cost benefit studies. Doesn't zero spending
18 and $60 million benefits seem like a pretty good
19 cost/benefit ratio to you?
20 A. It does.
21 MR. BUDGE: Objection. Leading the
22 witness.
23 COMMISSIONER HANSEN: Mr. Miller.
24 MR. MILLER: I can rephrase it.
25 COMMISSIONER HANSEN: Please.
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 Q. BY MR. MILLER: Does spending zero
2 dollars -- new dollars -- how would you characterize
3 the cost/benefit relationship between spending zero
4 new dollars and obtaining $60 million in benefit?
5 A. I would see that there is a
6 substantial cost benefit with the case presented,
7 and any uncertainties over the 60 million were far
8 outweighed between the ratios between cost/benefit
9 here.
10 Q. And even if you viewed the 55 million
11 as somewhat incremental, you indicated that would be
12 an $11 million expense per year, compared to
13 60 million?
14 A. Yes.
15 Q. And, of course, that is the capital
16 outlay that the Company would make. And the annual
17 revenue requirement associated with that outlay
18 would be what?
19 A. I wouldn't -- I would need to go to a
20 calculator to work out the actual figures. It would
21 be the cost of the capital -- the allowed cost of
22 the capital, which would be considerably lower than
23 the 11 million.
24 I think it has to be put in
25 perspective as well of the figure that Mr. O'Brien
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HEDRICK COURT REPORTING MacLAREN (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 mentioned yesterday of 400 million pounds per year,
2 a capital expenditure, and I'm quite confident that
3 I can find that kind of efficiency within that size
4 of capital budget. I've done it in several
5 occasions during my career up until now.
6 MR. MILLER: No further questions,
7 Mr. Chairman.
8 COMMISSIONER HANSEN: Okay, thank
9 you.
10 We'll move now to the next witness.
11 (The witness left the stand.)
12 MR. MILLER: Thank you, Mr. Chairman.
13 Joint Applicants will call Mr. Jack Kelly, who will
14 be presented by Mr. Van Nostrand.
15
16 JACK KELLY,
17 produced as a witness at the instance of
18 ScottishPower, being first duly sworn, was examined
19 and testified as follows:
20
21 DIRECT EXAMINATION
22
23 BY MR. VAN NOSTRAND:
24 Q. Mr. Kelly, could you state your name,
25 please?
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HEDRICK COURT REPORTING KELLY (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 A. My name is Jack Kelly.
2 Q. What is your business address?
3 A. My business address is Dealain
4 House -- D-E-A-L-A-I-N House -- Cumbernauld, near
5 Glasgow, in Scotland.
6 Q. And what is your position with
7 ScottishPower?
8 A. I am the managing director of
9 ScottishPower Learning.
10 Q. And what are your duties and
11 responsibilities in that position?
12 A. My duties and responsibilities are to
13 acquire, develop, and manage learning resources that
14 I deliver through our 51 learning centers in the UK
15 for Staff, and to manage the ScottishPower merger
16 community initiatives.
17 Q. Did you have occasion in this
18 proceeding to prefile written direct testimony
19 consisting of 12 pages?
20 A. I did.
21 Q. Are there any exhibits to your direct
22 testimony?
23 A. There are not.
24 Q. Do you have any corrections to make to
25 your prefiled written direct testimony?
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HEDRICK COURT REPORTING KELLY (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 A. I do.
2 Q. Could you start with corrections,
3 please?
4 A. The corrections are matters of fact,
5 data elements in the testimony which need to be
6 updated.
7 Starting on page 4, line 5, the figure
8 "60" percent should be replaced by "68".
9 On line 8, the figure "3,900" should
10 be replaced by "4,900".
11 On line 10, the figure "1,200" should
12 be replaced by "1,591".
13 COMMISSIONER HANSEN: Excuse me, sir.
14 Evidently -- I follow your numbers, but the lines
15 are a little different on mine. The first one when
16 you want to change the 60 percent number, that's on
17 line 8. When you talk about the 3,900 families and
18 community members, that's -- on my testimony, that's
19 on line 11. And so I'm having a little problem
20 with --
21 If mine's different than everybody
22 else's or is yours the same? Do we have the same
23 direct testimony?
24 MR. VAN NOSTRAND: We have the same
25 problem with my copy as well, Mr. Chairman. We're
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HEDRICK COURT REPORTING KELLY (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 going to make sure he's working from the correct
2 copy.
3 THE WITNESS: Can I recap that?
4 Q. BY MR. VAN NOSTRAND: Yes, please.
5 A. On page 4, on line 8, the figure
6 should be "68" and not "60".
7 On line 11, the figure will be
8 "4,900", replacing "3,900".
9 And on line 13, figure "1,200" should
10 be replaced by the figure "1,591".
11 On page 6, and in fact in your copy
12 will be page 7, on line 5, the figure "550" should
13 be replaced by "640".
14 And on line 9 on page 7, figure "40"
15 should be replaced by "50".
16 And on line 10, the figure "400"
17 should be replaced by the figure "510".
18 And just for completeness, on line 17,
19 the figure "3,900" should be replaced by "4,900".
20 That's all the corrections.
21 Q. And as corrected, if I asked you today
22 the questions set forth in your prefiled written
23 direct testimony, would your answers be the same as
24 set forth therein?
25 A. They would.
467
HEDRICK COURT REPORTING KELLY (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower
1 Q. That testimony is true and correct, to
2 the best of your knowledge?
3 A. It is.
4 MR. VAN NOSTRAND: Mr. Chairman, if
5 there is no objection, we would ask that the
6 prefiled direct testimony of Mr. Kelly be spread on
7 the record as if read.
8 COMMISSIONER HANSEN: The testimony
9 will be spread upon the record if there is no
10 objection. Being none, so ordered.
11 (The following prefiled direct
12 testimony of Mr. Kelly is spread upon the record.)
13
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468
HEDRICK COURT REPORTING KELLY (Di)
P.O. BOX 578, BOISE, ID 83701 ScottishPower