20040209Holmes Direct.pdf

DAVID J. MEYER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
A VISTA CORPORATION
O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMll.E: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA TIER OF THE APPUCA TION
OF A VISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC AND
NATURAL GAS CUSTOMERS IN THE STATE OF IDAHO
CASE NO. A VU-04-
CASE NO. A VU-04-
DIRECT TESTIMONY
DA VID D. HOLMES
FOR A VISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
Please state your name, employer and business address.
My name is David D. Holmes and I am employed as the Manager of
Distribution Engineering for A vista Utilities, at 1411 East Mission A venue, Spokane
Washington.
experience?
Would you describe your educational background and professional
I am a 1977 graduate of Montana State University with a degree in Electrical
Engineering. I originally joined the Company in 1977 and spent eighteen years in various
engineering and management positions including five years managing the Company s electric
and natural gas metering departments. In 1995, I left the utility to develop advanced metering
systems for A vista Advantage and then joined A vista Labs to direct their Application
Engineering staff. In early 2003, I rejoined Avista Utilities to supervise the Distribution
Engineering staff.
Washington.
I am a Professional Electrical Engineer in the States of Idaho and
What is the scope of your testimony in this proceeding?
My testimony will describe Avista s proposal for implementation of Advanced
Meter Reading (AMR) for Avista s customers in the State ofldaho.
Please summarize the Company request in this case regarding
Advanced Meter Reading, or AMR.
The Company proposes to install AMR devices on all Idaho electric and
natural gas meters over a four-year period commencing January 2005. The Company is not
proposing a change in rates in this filing related to the implementation of AMR. Mr. Falkner
Holmes, Di
Avista Corporation
explains the Company s proposal for the future ratemaking treatment of the costs associated
with this program.
Has Avista been following the Commission s recent examination of
AMR?
Yes. The Company has been actively monitoring Case No. IPC-02-12.
While A vista has not submitted written comments in that proceeding, Company
representatives attended the Commission s June 5, 2003 technical workshop and participated
in the December 2, 2003 workshop via a conference bridge.
Please summarize the Company s perspective on AMR.
A vista has been following the development of AMR over the past decade, and
periodically assessing possible AMR implementation in areas where it is demonstrably cost-
effective. The Company has installed a small number of AMR devices on some meter
reading routes and customer locations that involve extensive driving, lack of access or have
represented a hazard for our personnel.
The Company has also monitored development of AMR technology with attention to
costs and with an eye to the future. Regarding costs, we have noted that AMR technology
has been improving and its costs are generally decreasing. Our plan is to select and install
systems that are compatible with existing systems, long-lived, and suitable for later
expansIon.
The cost of manual meter reading continues to increase. Meter reading expenses in
Idaho have increased an average of 4.8% per year since 1995, as shown in Exhibit No. 13.
Page 1 depicts historical meter reading expenses in Idaho, Washington and Oregon. We
Holmes, Di
A vista Corporation
believe that the expected continual increases in meter reading expenses and a decline in
equipment pricing indicate that now is the time to commit to a broader implementation of
AMR technology.
What technology, or type of AMR devices, is the Company proposing to
install?
The Company will utilize a combination of AMR technologies in its Idaho
service territory. We intend to install radio-based technology in areas with higher meter
densities, and a power line carrier (PLC) based technology in areas with lower densities. We
will continue to use telephone-based technologies for selected industrial accounts. A number
of factors will determine where each technology is utilized including geography, distribution
configuration, installation costs and the presence of natural gas. All electric technologies will
have the capability to provide hourly or more frequent interval data. Meters utilizing a radio-
based technology will initially be read monthly through a mobile device. They will not
require modification when a fixed radio communication network is added to collect data in
the latter phases of the project.
Will the proposed AMR technology provide such functions as automated
meter reading, theft detection, accuracy improvement, improved outage monitoring,
flexible billing schedules, account aggregation, and improved customer service?
Yes. The equipment we propose to install will provide interval metering data
as well as indications of tampering and information on outage conditions. Data collected
from this equipment will enable us to provide flexible billing schedules for our customers.
This equipment is not intended to provide aggregated demands for tariff calculations, but it
Holmes, Di
A vista Corporation
will enhance our ability to provide consolidated billing statements for customers with
multiple accounts.
This system will greatly reduce estimated reads, reduce the volume of phone calls
associated with estimated reads and the need for investigations related to such calls.
Customer billings will tend to be more accurate because estimates and misreads will be
reduced. The actual metering accuracy will not be affected by this automated system and will
continue to be monitored through our periodic sampling program.
Will this system provide the capability for future Time-of-Use or critical
peak pricing?
Yes. This technology will allow the remote capture of electric interval meter
readings in intervals of one hour or less. The significance of capturing interval readings is
that it provides the foundation for later adoption of retail energy pricing that may vary by
hour of the day or day of the week. This type of pricing can ultimately be used to provide
economic incentives to customers to curtail usage during critical energy periods.
Although this project does not include the necessary modifications to our billing
system to implement a time of use or critical peak rate structure, this equipment will provide
all the field data necessary to support this type of system in the future.
What other AMR systems did the Company review prior to selecting the
technology it did?
A vista has evaluated several advanced metering systems. A vista has installed
over 74,000 radio and 350 PLC based AMR devices throughout Washington, Oregon and
California including 1 700 within the State of Idaho. Our supplier for radio-based equipment
Holmes, Di
Avista Corporation
has been Itron, based in Spokane, Washington. We have utilized Hunt Technologies for PLC
based technology and are currently reviewing Distribution Control System s Incorporated
TW ACS PLC technologies. We will continue to review vendor technologies to ensure
program requirements are met and future technology migration and service is available.
How will you determine the AMR plan for roll out and the most cost-
effective area to begin implementation?
An efficient deployment of AMR systems is based on the specific attributes of
each geographic area. Our intent is to begin AMR installations in areas that will free up the
most labor, which in turn will be used to accelerate additional installations. These areas tend
to be more rural in nature, however, the same attributes that make these meters more costly to
read, reflect a generally higher AMR retrofit cost. Efficient utilization of PLC technology is
usually accomplished with the conversion of customers served by the same substation. The
efficient deployment of radio-based systems tend to be organized by the specific terrain and
geographic densities. Specific system design, vendor evaluation and selection will take place
in 2004.
What is the projected cost to install this system in Idaho?
We estimate the cost of installing this system in Idaho will be approximately
$16 300,000. We propose that this system be installed over a four year time period beginning
in 2005, with approximately equal expenditures in each year as shown in Exhibit 13. Page 2
is a summary of costs in 2003 dollars associated with the proposed AMR installation. It is
important to note that these are initial estimates. The selection of appropriate technologies
Holmes, Di
A vista Corporation
for each location, vendor, evaluation, and selection, as well as a refinement of cost estimates
will take place during 2004.
What are your anticipated hard dollar savings?
A vista believes that installing a fully networked AMR system on all of Idaho
meters will represent an annual operations savings of approximately $994 000. The majority
of these savings (92%) is achieved through a 91% reduction in meter reading labor and
associated expenses. Other savings are represented by efficiencies in customer billing,
service, reduced energy diversion and reduced p1eter maintenance, as shown in Exhibit 13.
Page 3 represents estimated savings associated with the installation on Avista s system.
Will the hard dollar savings offset all of the costs, or will this project
cause an increase in overall net costs?
Our current estimates indicate that the costs of this project, as compared to the
costs of continuing with the technology and operations that are currently in place, will result
in additional annual electric costs of $188 700. This additional cost represents approximately
13% of the Company s $146 000,000 of annual electric revenues.
With regard to natural gas, we estimate that the costs of this project, as compared to
the costs of continuing with the technology and operations that are currently in place, will
result in a decrease in costs of $63,000 per year. These cost savings represent approximately
12% of the Company s $51,000 000 annual natural gas revenues. These values are based on
an analysis of costs and benefits over a fifteen-year period. The costslbenefit analyses show
higher net costs in the early years, which decline over time. This is shown in Exhibit 13.
Holmes, Di
A vista Corporation
Pages 4, 5, and 6 depict estimated annual costs, savings and net annual revenue requirements
for an AMR system, compared to not installing an AMR system over a fifteen-year period.
We believe the relatively small levelized costs on the electric side are justified by
other benefits associated with this proposed system.
Please describe these additional benefits to the Company and its
customers.
There are a number of benefits to AMR that clearly exist, but for which dollar
values are difficult to quantify. For example, information obtained through a networked
AMR system will be of value in determining specifications for distribution equipment used to
serve our customers. Interval data provided by the system can be utilized for customer load
research and rate development programs.networked AMR system can provide
information to help manage operations during outages and may prevent extended customer
outages where a traditional outage report may have not been made.There may be
opportunities to provide meter-reading services for other utilities. Furthermore, the addition
of software in the future, not provided in the scope of this project, would allow customers on-
line access to hourly load profile data, which would allow them the opportunity to better
manage their electricity consumption.
Does this conclude your prefiled direct testimony?
Yes.
Holmes, Di
Avista Corporation