before the new mexico public regulation commission … · xcel energy xes meanin2 allowance for...

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF SOUTHWESTERNPUBLIC SERVICE COMPANY’SAPPLICATION FOR REVISION OF ITSRETAIL RATES UNDER ADVICENOTICE NO. 258,

SOUTHWESTERN PUBLIC SERVICECOMPANY,

APPLICANT.

)))))))))))

DIRECT TESTIMONY

ALAN J. DAVIDSON

CASE NO. 15-00296-UT

on behalf of

SOUTHWESTERN PUBLIC SERVICE COMPANY

TABLE OF CONTENTS

GLOSSARY OF ACRONYMS AND DEFINED TERMS ...............................................iii

LIST OF ATTACHMENTS ..............................................................................................iv

I. WITNESS IDENTIFICATION AND QUALIFICATIONS ..................................1

II. ASSIGNMENT AND SUMMARY OF TESTIMONY ANDRECOMMENDATIONS ........................................................................................6

III. ENERGY SUPPLY-RELATED CAPITAL PROJECTS PLACED INSERVICE BETWEEN JULY l, 2014 THROUGH JUNE 30, 2015 ......................9

IV. ENERGY SUPPLY-RELATED CAPITAL PROJECTS TO BE PLACEDIN SERVICE BETWEEN JULY l, 2015 AND NOVEMBER 30, 2015 .............21

V. SELECTION & MANAGEMENT OF CAPITAL PROJECTS ...........................30

VI. CHANGES IN USEFUL LIVES OF GENERATING UNITS ............................37

VII. DISMANTLING COSTS .....................................................................................43

VIII. CONCLUSION .....................................................................................................47

VERIFICATION ...............................................................................................................48

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GLOSSARY OF ACRONYMS AND DEFINED TERMS

Acronym/Defined Term

AFUDC

CO

Commission

CT

EPA

FERC

ISD

MATS

NOx

O&M

PM

RFP

RPC

SPS

Test Year

TLG

Xcel Energy

XES

Meanin2

Allowance for Funds Used DuringConstruction

Carbon Monoxide

New Mexico Public Regulation Commission

Combustion Turbine

Environmental Protection Agency

Federal Energy Regulatory Commission

In-Service Date

Mercury and Air Toxics Standards

Nitrogen Oxides

Operation and Maintenance

Project Manager

Rate Filing Package

Regional Prioritization Committee

Southwestern Public Service Company, a NewMexico corporation

July 1, 2014 through June 30, 2015

TLG Services, Inc.

Xcel Energy Inc.

Xcel Energy Services Inc.

ooonl

Attachment

AJD-1

AJD-2

LIST OF ATTACHMENTS

Description

Energy Supply Capital Additions to Plant in Service:July 1, 2014 through June 30, 2015(Filename: AJD-l.xlsx)

Energy Supply Capital Additions to Plant in Service:July 1, 2015 through November 30, 2015(Filename: AJD-2.xlsx)

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Case No. 15-00296-UTDirect Testimony

ofAlan J. Davidson

I. WITNESS IDENTIFICATION AND QUALIFICATIONS

Please state your name and business address.

My name is Alan J. Davidson. My business address is 600 South Tyler Street,

Amarillo, Texas 79101.

On whose behalf are you testifying in this proceeding?

I am filing testimony on behalf of Southwestern Public Service Company, a New

Mexico corporation ("SPS") and wholly-owned electric utility subsidiary of Xcel

Energy Inc. ("Xcel Energy"). Xcel Energy is a registered holding company that

owns several electric and natural gas utility operating companies, a regulated

natural gas pipeline company, and three electric transmission companies.~

By whom are yon employed and in what position?

I am employed by Xcel Energy Services Inc. ("XES"), the service company

subsidiar3’ of Xcel Energy, as Director, Regional Capital Projects in the

1 Xcel Energy is the parent company of four wholly-owned electric utility operating companies:Northern States Power Company, a Minnesota corporation; Northem States Power Company, a Wisconsincorporation; Public Service Company of Colorado, a Colorado corporation; and SPS. Xcel Energy’snatural gas pipeline subsidiary is WestGas InterState, Inc. Xcel Energy also has three electric transmissioncompanies, Xcel Energy Southwest Transmission Company, LLC, Xcel Energy Transmission DevelopmentCompany, LLC, and Xcel Energy West Transmission Company, LLC, all of which are either currentlyregulated by the Federal Energy Regulatory Commission ("FERC") or expected to be regulated by FERC.

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Engineering and Construction Department of Energy Supply, which is the

generation operation and maintenance business unit of Xcel Energy.

Please briefly outline your responsibilities as Director, Regional Capital

Projects in the Engineering and Construction Department of Energy Supply.

I am responsible for managing the capital budget process and projects for the SPS

region within the Energy Supply business unit. Thus, I am responsible for the

regional capital budget, schedules, development, and construction for all of SPS’s

electric generating projects. I directly manage the major projects for SPS and

supervise other managers handling smaller projects. My management duties

include safety, technical design selection, engineering and contractor oversight,

managing the bidding process, and negotiating major equipment supply

agreements. I work with the Environmental, Regulatory, Engineering and

Technical Resources, and Resource Planning departments to assist with scoping

and planning of new generation and major generation retrofit projects.

In your capacity as Director, Regional Capital Projects, do you have

knowledge of and experience relating to the dismantling of SPS and Xcei

Energy generation units?

Yes. With respect to SPS, I am involved in reviewing dismantling bids and

contracts and monitor the project managers who are responsible for the

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dismantling of retired generation units. I am also generally familiar with Xcel

Energy generation units and their associated dismantling projects. I am also

knowledgeable of the estimated and actual costs relating to the dismantling of

retired SPS and Xcel Energy generation units.

Please describe your educational background.

I have a Bachelor of Science degree in Mechanical Engineering from Texas Tech

University.

Please describe your professional experience.

I have worked in the electric power industry for over 30 years in various positions

with Xcel Energy and SPS. My experience has included: plant engineering

responsibilities for boilers, turbines, and the balance of plant equipment;

performance testing and analysis responsibilities for combustion turbines ("CT")

and fossil units; control system design and installation for CT and fossil units;

photovoltaic systems installation; plant refurbishments; operation and

maintenance ("O&M") management; project director for environmental controls

projects on coal units; and project director for installation of simple cycle CTs.

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Have you attended or taken any special courses or seminars relating to

public utilities?

Yes. Over my career, I have taken numerous courses and seminars related

specifically to the construction and operation of power plants. I have presented

technical presentations on water treatment, general project management, solar

project installation, environmental controls for coal plants, and installation of gas

turbines to internal and external groups. I have presented a paper on potential

turbine upgrade projects at a Marcus Evans industry conference and given a

"lessons learned" presentation on gas turbine installation to an international group

of engineers and managers for Siemens.

Do you hold a professional license?

Yes. I am a Registered Professional Engineer in Texas.

Are yon a member of any professional organizations?

Yes. I am a member of the American Society of Mechanical Engineers, the Texas

Society of Professional Engineers, and the National Society of Professional

Engineers.

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Have you testified before any regulatory authorities?

Yes. I have testified before the New Mexico Public Regulation Commission

("Commission") and the Public Utility Commission of Texas. My testimony has

addressed, among other topics, Energy Supply capital additions, generating plant

operations and planning, useful lives of generating plants, and generation plant

dismantling costs.


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II. ASSIGNMENT AND SUMMARY OF TESTIMONY ANDRECOMMENDATIONS

What is your assignment in this proceeding?

I will:

review and provide cost data for the Energy Supply-related capitalprojects that SPS placed in service during the period July 1, 2014through June 30, 2015;

review and provide cost data for Energy Supply-related capitalprojects budgeted to be placed in service between July 1, 2015 andNovember 30, 2015;

describe how Energy Supply capital projects are ranked and selectedfor funding;

describe the process by which Energy Supply manages capitaladditions;

provide the operational and engineering justification for proposedchanges in the useful lives of certain SPS generating units; and

support the reasonableness of the estimated costs presented in theDismantling Cost Study sponsored by SPS witness Francis W.Seymore.

In addition, I sponsor Schedule P-11 in SPS’s Rate Filing Package ("RFP").

Please summarize your testimony and recommendations.

The cost of Energy Supply-related capital additions placed in service between

July 1, 2014 and June 30, 2015 ("Test Year"), including an estimate for allowance

for funds used during construction ("AFUDC"), equals $45,005,329. SPS witness

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Lisa H. Perkett will discuss AFUDC in detail. These capital additions for the

Energy Supply business area are reasonable and necessary and support SPS’s

ability to provide electric service to its customers. The capital additions to be

included in rate base are for projects that are necessary to maintain the reliability,

environmental performance, thermal performance, and overall operation of the

generation fleet. It is critical that the plants perform at high availability factors to

ensure a safe, low-cost supply of power for our customers during all seasons of

the year.

In addition, SPS will incur additional Energy Supply-related capital

additions of $12,586,668 for projects that have been or will be placed in service

during the period July 1, 2015 through November 30, 2015. These costs are also

reasonable and necessary capital costs to maintain and enhance the

environmental, safety, performance, and reliability characteristics of SPS’s

existing generation units. SPS has also incurred $4,142,523 to acquire plant held

for future use, which expenditure was reasonable and necessary to ensure that

SPS will have a site location for a new generation unit, which is needed to serve

the electricity demand needs of its customers.

The total of these three sums, $61,734,520, was prudently incurred.

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The changes in the useful lives of certain SPS generating units set forth in

Section VI of this testimony are reasonable. Furthermore, the Dismantling Cost

Study sponsored by SPS witness Francis W. Seymore presents a reasonable

estimate of dismantling costs for SPS’s planning purposes. SPS must plan for

sufficient funds to satisfy its obligations when its plants are dismantled.

Historically, SPS has expended significant funds to dismantle its retired

generation units and there is no reason to believe that similar funds would not be

required for future dismantling projects.

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ENERGY SUPPLY-RELATED CAPITAL PROJECTS PLACED IN SERVICEBETWEEN JULY 1~ 2014 THROUGH JUNE 30~ 2015

AS part of this case, is SPS asking to include Energy Supply (generation

plant) capital additions in its rate base?

Yes. The capital additions that SPS is asking to include in its rate base support

SPS’s ability to provide electric service to its customers.

What is the dollar amount of the Energy Supply capital additions placed in

service between July 1, 2014 and June 30, 2015 that SPS is requesting in this

case?

The total dollar amount of Energy Supply-related capital additions for projects

placed in service during the Test Year (i.e., July 1, 2014 through June 30, 2015) is

$45,005,329 (total company), including estimated AFUDC. These capital

additions are for production and related general plant. Attachment AJD-1 lists all

of the Energy Supply-related capital projects that SPS placed in service during the

period July 1, 2014 through June 30, 2015. SPS witness Arthur P. Freitas

allocates the total company dollar amount among SPS’s jurisdictions (New

Mexico retail, Texas retail, and wholesale).


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Please describe the information provided on Attachment AJD-1, which

provides the details about the dollar amounts closed to plant in service for

the period July 1, 2014 through June 30, 2015.

Attachment AJD-1 provides the following information about each project:

Column A

Column B

Column C

Column D

Column E

Column F

Column G

Asset Class

Witness

Project Category

Parent

Parent Description

In-Service Date

Additions to Plant-in-Service (July 2014 -June 2015)

Provides the asset class for the project.

Identifies the witness supporting theproject.

Provides the project category that isdescriptive of the project’s type.

Provides the parent work order numberfor the project.

Provides a description of the parentwork order.

Provides the in-service date ("ISD") ofthe parent work order.

Provides plant additions for the periodJuly 1, 2014 through June 30, 2015

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In Column F, In-Service Date, there are a number of line items with dates

after June 30, 2015. Are these valid line items?

Yes. These line items with an ISD after June 30, 2015 are large parent or blanket

projects that consist of multiple parts (or contain child work orders) that are

completed and put into service throughout the year. Only the costs of the

individual parts or child work orders completed during the Test Year are included

in the additions to plant in-service expenditures.

In Column F, In-Service Date, there are a number of line items with dates

prior to July 1, 2014. Are these valid line items?

Yes. Typically, charges can continue for a short period after the ISD is

recognized on a work order. These charges can include recognition of the final

bills from vendors, completion of as-built drawings, final documentation, testing

of the equipment, and settlement of any disputes.

Please describe the Energy Supply capital additions for the period July 1,

2014 through June 30, 2015.

All of the Energy Supply-related capital additions listed in Attachment AJD-1

support SPS’s ability to provide electric service to its customers. These additions

maintain the environmental, safety, performance, and reliability characteristics of

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SPS’s existing generation fleet. In various instances, these projects also improve

or enhance these same attributes.

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As shown in Table AJD-1, the plant additions for this period fall within

the following categories: Reliability and PerformanceEnhancement;

Environmental Compliance; and Environmental Improvement.

Table AJD-1

Energy Supply-Related Capital Additions(in millions, total company)

I Capital Additions for the PeriodProject Category July 1, 2014 through June 30, 2015

Reliability and Performance Enhancement $33,122,044

Environmental Compliance $2,315,681

Environmental Improvement $9,567,604

Total $45,005,329

Q. Please describe the types of projects included in the "Reliability and

Performance Enhancement" category.

A. This category of investment contains the capital additions for maintaining and

enhancing the safety, performance, and reliability characteristics of SPS’s existing

production plant. For example, the replacement of equipment reduces the

occurrence of unplanned outages and helps to maintain a high reliability factor,

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which reduces the need for higher cost replacement energy. Additionally, safety

projects ensure a safe workplace for employees and enable SPS to meet the safety

standards established by regulatory agencies. The total investment in this

category amounts to $33.1 million during the period. Major projects (i.e., projects

in excess of $1.0 million) included in this category are:

Tolk Station Unit 1 - Boiler Nose Replacement (Parent Work Order11348137) - The bull nose area experiences more ash erosion than anyother section of the boiler. During the last inspection of this boiler, thenose tubes were eroded under the reheat pendants. Consequently, the topsection of bull nose under the reheat pendants was replaced with tubescontaining a higher chrome content and with additional wear cladding tomake the area more wear resistant. The screen tubes in this section werealso replaced.

Tolk Station Unit 1 - Replace Reheat Pendants (Parent Work Order11348161) - During previous outage inspections, a significant number ofthe T-22 reheat pendants were showing signs of long-term overheating andliquid phase corrosion in the upper sections. These conditions can causetube failures that will degrade unit performance and could require aseveral-day outage to repair. This project involved replacement of thecomplete reheat pendant section from the inlet header terminal tubes to theboiler penthouse to the horizontal crossover tubes between the front andrear reheaters in the furnace. The lower sections will be replaced withstainless steel tubes and all other areas will be upgraded to T-22 material.

o Tolk Station - Develop Barrett Water Rights (Parent Work Order11649187) - This project reworked existing wells, added new pumps, andinstalled a gathering system to utilize the relatively recent water rightspurchased from the Barrett family to off-set production declines fromexisting wells at the Tolk Station and Plant X complex. Eight existingwells were refurbished with new pumps, screens, and gravel pack. The

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project included the installation of roadways for access to the wells,additional gathering pipelines, well controllers, and upgrades to theelectrical service. To maintain reliability, it is critical to have adequatewater supply available all year, but especially during the summer. Declineof SPS’s current well field production puts Tolk Station and Plant X atrisk for a water shortage.

Harrington Unit 2 - Cooling Tower Structure (Parent Work Order11805719) - In January 2014, during a detailed inspection of the coolingtower, it was determined that the wooden structure, hot water deck, fandeck, and splash fill had reached end of life. It was not cost effective tocontinue to repair the columns, laterals, and support members and therewas a risk that the tower could collapse. This project involves replacingthe complete wood structure and decking of the cooling tower with newfiberglass components. The replacement will occur in three major phasesto align with outages and prevent unit deratings. In phase one, theunderwater columns were replaced during the 2014 fall outage. In phasetwo, there was a cell by cell replacement of the South tower during thespring of 2015. These two phases are in-service and are the costs shownon Attachment AJD-1. The third phase will be a cell by cell replacementof the North tower starting in the fall of 2015 and will continue until thespring of 2016. By taking this approach, there was no derating impact onthe unit.

Tolk Station - Purchase Rose Water Rights (Parent Work Order11838442) - This project consisted of purchasing water rights, wells,electrical infrastructure, roads, and rights-of-way from the Rose family.The water rights and wells will be used to offset production declines fromSPS’s existing wells supplying water to Tolk Station and to Plant X.

Harrington Unit 2 - Major Coal Mill Overhaul (Parent Work Order11797638) - This project consisted of a complete rebuild of the "D" coalmill including replacement of the journals, all wear parts in the separatorsection (e.g., liner, bull ring) exhauster fan, floor section, bowl, feed pipe,and major components in the motor/worm shaft assembly. The coal millsexperience a high level of wear and are considered a severe service

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system. Some of the high wear components are replaced on periodicoutages; this is the first full teardown and rebuild of the mill in its lifetime.The addition of the new exhauster fan will allow the mill to run at 100%speed without coal layout and spillage. By the mill running at fullcapacity, the generating unit can operate on 4 mills, which will lower therisk of deratings.

Tolk Unit 1 - Replace Mill A Gearbox and Grinding Section (ParentWork Order 11969703) - This project consisted of a replacement of thegrinding rolls, journals, vertical shaft and worm shaft assemblies(including bearings), bull rings, classifier, vane wheel assembly, and bodyliners. The majority of these parts have been in service for over 33 years.The coal mill is considered a severe service system. Recently, thrust andradial bearing failures on other mills have been observed and oil analysisis showing metal in the gearbox. The last visual inspection showed severewear in the gearbox area along with significant wear on the journals,grinding, and vane wheel areas. This type of project will keep theequipment at correct operating levels to maintain proper coal fineness andflow to support combustion at design levels. Increasing environmentalrequirements (e.g., Mercury and Air Toxics Standards ("MATS"))requires that equipment performance and reliability be at design levels.

Combined, these projects account for approximately 60% of the total

capital additions in this category. The remaining 40% of the projects are similar

in nature in that they maintain or enhance the operational performance and safety

of SPS’s generating facilities, which is integral to SPS’s ability to provide reliable

electric service to its customers. For example, several of the remaining projects

relate to major parts replacement or refurbishment to existing unit components.

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Please describe the types of projects included in the "Environmental

Compliance" category.

This category of investment contains the capital additions necessary for ensuring

SPS’s compliance with existing federal and state environmental regulations,

including permits. For example, necessary refurbishment or replacement of

equipment such as wastewater recovery systems, evaporation ponds, landfill, and

pollution control equipment needed to ensure continuing compliance would be

included in this category. The total investment in this category amounts to $2.3

million during the period. Major projects (i.e., projects in excess of $175,000)

included in this category are:

Harrington Station Unit 1 - Electrostatic Precipitator ChemicalInjection (Parent Work Order 12064253) - This project consisted ofreplacing the current chemical injection system with a new high pressuresystem of pumps, motors, piping, chemical tanks, injection lances, lowpressure shield air, electrical components, and modeling for properdispersion of the chemical in the duct work. The new system significantlyreduces the ash buildup in the duct work (due to high pressure atomizationof the chemical), improves the particulate removal rate of the Precipitator,and improves the reliability of the unit to maintain environmentalperformance.

Harrington Station Unit 3 - Install Boiler CO Analyzer (Parent WorkOrder 11798059) - This project consisted of installing a new CarbonMonoxide ("CO") analyzer system (one for each boiler duct), electricaland control wiring, control system programming, and piping to supportbetter control of boiler combustion. Currently, only stack CO is available

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for the neural network control system and the current system does notadequately represent the boiler combustion dynamics when trying to lowerexcess oxygen to better optimize Nitrogen Oxides ("NOx"). To bettermaintain proper boiler stoichiometry for low NOx operation, boiler COinto the control system is required.

Plant X - Replace Emergency Diesel (Parent Work Order 11805647) -This project consisted of replacing the Unit 1 emergency diesel generatorwith a new unit that could meet current emissions standards (i.e., 20%visible opacity). The plant is required to have an emergency dieselgenerator to run critical equipment in case of a plant blackout or internalelectrical issues. Outside experts had been brought in to tune and work onthe original unit to meet emissions requirements, but the unit was unableto pass such requirements.

Harrington Units 3 and 2 - Replacement of Baghouse Bags (ParentWork Orders 11805722 & 11962054) - This project consisted of replacingeight compartments of bags on Unit 3 and seven compartments on Unit 2.Included in the replacement are the bag, J-hooks, and caps. Acompartment is made of 204 bags that filter the boiler emissions byremoving flyash from the flue gas stream. A typical bag will lastapproximately 6-8 years before it will fail to filter properly. As bags age,they start to plug which increases fan horsepower to move the flue gas aswell as potentially limit the boiler load. To align with major and minioutages, approximately 1/3 of the compartments are replaced every 2years, which replaces bags before major failures or issues that could causean environmental exceedance.


capital additions in this category. The remaining 22% of the projects are similar

in nature in that they ensure SPS’s compliance with existing environmental

regulations and permit requirements, which is essential to maintaining the

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operational viability of SPS’s generating facilities. For example, several of the

remaining projects include replacement or installation of necessary pollution

control equipment.


Improvement" category.

This category of investment contains the capital additions necessary to enable

SPS to meet new federal and state environmental regulations, including

amendments to existing regulations. For example, necessary retrofits to existing

pollution control equipment and installation of new equipment needed to meet

additional environmental controls would be included in this category. The total

investment in this category amounts to $9.6 million during the period. Major

projects (i.e., projects in excess of $1.0 million) included in this category are:

1. Harrington Station Unit 1 - ACI Mercury Reduction (Parent WorkOrder 10807076) - This project consisted of engineering, purchasing, andinstalling a mercury reduction system to comply with the EnvironmentalProtection Agency’s ("EPA") MATS rule. A chemical injection system(to inject activated carbon) consisting of a storage silo, transport blowers,piping, lances (or an injection nozzle grid), and controls were installed inthe duct work after the air preheater. This project was duplicated on all ofthe remaining coal units in SPS’s system and all were in service by April2015.

2. Tolk Station Unit 0 - ACI Mercury Reduction (Parent Work Order11921749) - This project consisted of engineering, purchasing, and

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installing a storage silo, transport blowers, and controls for a mercuryreduction system to comply with the EPA’s MATS rule. This equipmentwas designed to feed a chemical injection system (i.e., to inject activatedcarbon) consisting of lances (or an injection nozzle grid) to both TolkUnits 1 and 2. This specific parent work order did not include the boilerinjection lances and piping; these items were purchased and installed onParent Work Order numbers 10637872 & 10637870. The lances wereinstalled in the duct work after the air preheater. This project wasduplicated on all of the remaining coal units in SPS’s system and all werein service by April 2015.

Harrington Station Unit 0 - ACI Mercury Reduction (Parent WorkOrder 11921829) -This project consisted of engineering, purchasing, andinstalling a storage silo, transport blowers, and controls for a mercuryreduction system to comply with the EPA’s MATS rule. This equipmentwas designed to feed a chemical injection system (i.e., to inject activatedcarbon) consisting of lances (or an injection nozzle grid) to bothHarrington Units 2 and 3. This specific parent work order did not includethe boiler injection lances and piping; these items were purchased andinstalled on Parent Work Order numbers 10807078 & 10807077. Thelances were installed in the duct work after the air preheater. This projectwas duplicated on all of the remaining coal units in SPS’s system and allwere in service by April 2015.

Combined, these major projects (coupled with the smaller, associated

projects cited in the project descriptions above) account for approximately 86% of

the total capital additions in this category. The remaining 14% of the projects are

similar in nature in that they ensure SPS’s generation facilities are able to meet

evolving environmental regulations, which is essential to sustaining the

operational viability of SPS’s generating facilities. For example, several of the

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remaining projects involve the installation of enhanced pollution control

technologies and equipment.

Were the Energy Supply-related capital additions presented in Attachment

AJI)-I reasonable and necessary?

Yes. As discussed above in my testimony, the capital projects listed in

Attachment AJD-1 were reasonable and necessary to support SPS’s ability to

provide electric service to its customers and to maintain the reliability,

operational, safety, and environmental requirements of SPS’s plants, The

rigorous process that is followed in evaluating, selecting, and monitoring the

execution and implementation of capital projects ensures that the expenditures are

reasonable and necessary and that the costs are prudently incurred.

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ENERGY SUPPLY-RELATED CAPITAL PROJECTS TO BE PLACED INSERVICE BETWEEN JULY L 2015 AND NOVEMBER 30~ 2015

As part of this rate case, is SPS asking to include Energy Supply-related

capital costs for projects that have been or will be placed in service between

the end of the Test Year and November 30, 2015?

Yes. SPS seeks to include in rate base the cost of capital additions placed in

service between the end of the Test Year (June 30, 2015) and November 30, 2015

that relate to capital projects totaling $500,000 or more. Attachment AJD-2

identifies these projects and provides SPS’s costs for these projects, which are

budgeted amounts. SPS witness Evan Evans explains the basis for the $500,000

threshold.

What is the estimated cost of Energy Supply-related capital projects to be

placed in service between July 1, 2015 and November 30, 2015?

The total cost as reflected on Attachment AJD-2 is $12,586,668, including

AFUDC (total company). Mr. Freitas allocates the total company dollar amount

among SPS’s three rate jurisdictions (Texas retail, New Mexico retail, and

wholesale). The estimated dollar amount of capital additions for each project is

shown in Attachment AJD-2.

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What is the status of the projects listed on Attachment AJD-2?

Some of these projects have already been completed and are now in service and

the charges incurred are to complete and close out the projects. Others are

scheduled to be placed into service by November 30, 2015.

Please describe the information in Attachment AJD-2, which provides the

estimated dollar amounts that are expected to be dosed to plant in service for

the period July 1, 2015 to November 30, 2015.

Attachment AJD-2 provides the following information:

Column A Asset Class Provides the asset class for the project.

Column B Witness Identifies the witness supporting theproject.

Column C Project Category Provides the project category that isdescriptive of the project’s type.

Column D Parent Provides the parent work order numberfor the project.

Column E Parent Description Provides a description of the parentwork order.

Column F In-Service Date Provides the ISD of the parent workorder.

Column G Additions to Plant in Provides plant additions for the periodService(July2015- July 1, 2015 through November 30,Nov 2015) 2015.

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Please describe the Energy Supply capital additions to be placed in service

for the period July 1, 2015 through November 30, 2015.

The capital additions to be placed in service between July 1, 2015 and November

30, 2015 are similar to the projects that were closed during the Test Year and that

are discussed in the previous section of my testimony. As shown in Table AJD-2

below, the plant additions for this period fall within the following categories:

Reliability and Performance Enhancement and Environmental Compliance.

These categories are described in Section III of this testimony.

Table AJD-2

Energy Supply-Related Capital Additions(in millions, total company)

Capital Additions for the PeriodProject Category July 1, 2015 through November 30, 2015

Reliability and Performance Enhancement $11,586,947

Environmental Compliance $999,721

.....~~~ai i~i~;~eni~~ ...........................................................................................................................................................$6 .............................................

Total $12,586,668

2 I list the category Environmental Improvement on this table to be consistent with the categoriespresented in Table AJD-1. For the period July -November 2015, there are no projects totaling $500,000 ormore that are currently expected to fall within the Environmental Improvement category.

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Please describe the types of projects included in the "Reliability and

Performance Enhancement" category.

The general description of the Reliability and Performance Enhancement category

is provided in Section III of this testimony, which description applies to the

projects included for the July 1, 2015 through November 30, 2015 time period

identified as "Reliability and Performance Enhancement" in Column C on

Attachment AJD-2. The total planned investment in this category amounts to

$11.6 million during the period. The major projects (i.e., projects with estimated

budgets over $800,000) included in this category are:

Harrington Unit 3 - Rewind H3 Generator (Parent Work Order11350276) - This project consists of installing new coils in the generator.During the last inspection in 2012, SPS as well as the original equipmentmanufacturer concurred that the existing coils were at their end of life.Several tube to copper resistors had failed and if the generator shortedunder full load, the damage to the existing iron and the length of outagecould be excessive. To minimize the length of outage if the coils failed,new coils were purchased (in a previous capital project) and stored so thatthey could be used for any of the 3 units at Harrington. Installation of thecoils on Unit 3 should be conducted at the next planned major outage (fallof 2015).

Tolk Station - Develop Barrett Water Rights (Parent Work Order11649187)- This project is a continuation of the work required to makefacility changes needed to utilize the relatively recent water rightspurchased from the Barrett family to off-set production declines fromexisting wells at the Tolk Station and Plant X complex. Included in theproject was the construction of infrastructure incorporating 4.5 miles of

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12’ wide road and 4.5 miles of 16", 12", and 8" diameter PVC pipeline.Eight existing wells (previously drilled by the owner) providingapproximately 2,000 Gallons Per Minute of flow were fully refurbished bycleaning the casing, installing new equipment (i.e., pump, motor andstarter, pump pad), and constructing a new fence and tie in to the newpipeline.

Harrington Unit 1 - Cooling Tower Structure (Parent Work Order11805725) - This project consists of replacing the complete woodstructure and decking of the cooling tower with new fiberglasscomponents. During a previous detailed inspection of the cooling tower, itwas determined that the wooden structure, fan deck, and splash fill hadreached end of life. It was not cost effective to continue to repair thecolumns, laterals, and support members and there was a risk that the towercould collapse. The replacement will occur in five phases. Each phasewill involve a set of cell by cell replacements of the tower undertaken atopportune times so as to not limit the capacity of the generating unit. Bytaking a phased approach over a couple of years, there should be noderating impact on the unit.

Harrington Unit 3 - Rewind Exciter Rotor (Parent Work Order11971545) - This project consists of removing the exciter from the unitand shipping it to Siemens (OEM) for necessary work. Siemens willrewire the base, modify the bearing pedestals, and install a completerewound rotor that is part of a rotor exchange program. The exciter onthis unit had failed in 2014 during the 2014 Harrington 2 outage. The Unit2 exciter was moved to Unit 3 to get Unit 3 back up and running. TheUnit 2 Exciter was rewound with an exchanged rotor and the refurbishedexciter installed within the outage window. SPS and OEM concur that theexciters on both Unit 1 and Unit 3 are past their expected life based onindustry average and need to each be replaced.

Harrington Unit I - Cooling Tower Fire Damage (Parent Work Order12173403) - This project consists of removing and replacing fire damagedequipment in Cells 1, 2, and 3 of the cooling tower. Equipment includedare the gearbox, fan blades and hub, gearbox structure, fiberglass header

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pipe, and wiring. The wood structure that was damaged was alreadybudgeted to be replaced and was charged to the structure replacementproject (Parent Work Order 11805725). The fire started on the deck dueto a fault in the motor and wiring. Only the first three cells were affectedbefore the fire was extinguished by the plant Emergency Response Teamand local fire department.

Jones Unit 2 - Automate Electrical Board (Parent Work Order11628264) - This project consists of removing all of the existing analogelectrical switches and indicators, metal cabinets, and associated wiring onthe electrical board in the control room. This project will also involve theengineering and installation of a new transducer panel, wiring, andequipment to display all of the breakers, voltage regulator, tap changers,bus switching, diesel generator controls, and indications into theDistributed Control System. The project includes all of the checkout andstart-up required for the new controls. Jones Unit 2 is the only unit in theSPS region that has not automated its electrical board. This causes aseparation of control between the boiler/turbine controls and the operationof the electrical system. Automating the electrical board will providebetter coordination of control and continuity for the control room operatorwho will be operating four units. This conversion will also seal thecontrol room from the lower levels from potential smoke and heat damagein the event of a fire.


planned capital additions in this category. The remaining 38% of the projects are

similar in kind in that they maintain or enhance the safety, reliability, and

performance of SPS’s generating facilities, which is integral to SPS’s ability to

provide electric service to its customers.

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Compliance" category.

The general description of the Environmental Compliance category is provided in

Section III of this testimony, which description applies to the projects included for

the July 1, 2015 through November 30, 2015 time period identified as

"Environmental Compliance" in Column C on Attachment AJD-2. The total

planned investment in this category amounts to $1 million during the period. The

project included in this category, which accounts for 100% of the total planned

capital additions in this category, is:

Tolk Unit 0 - Build Evaporation Pond 15 (Parent Work Order10636082) - This project consists of engineering, procurement, andconstruction of a new 10-acre evaporation pond. The pond will beconstructed using on-site materials of dirt and flyash. Geotextile materialwill be used to "smooth out" the flyash berms and a plastic 60 mil linerwill be installed to prevent any ground leakage. Leak detection wells willalso be installed along with piping to move the wastewater from thecooling tower to the pond. This additional pond is needed due to thechanging water intake chemistry to the plant. As the water becomeshigher in silica, the concentration (cycles) level of the cooling tower goesdown which forces more discharge. Tolk is a zero discharge plant whichmeans all waste water must be evaporated. In addition, over the years, theexisting 13 evaporation ponds have filled up with additional sedimentwhich has diminished their effective storage capacity. To maintain properlevels in the ponds (known as freeboard), an additional pond is required toassure the plant will not be derated or violate any of its existing permits.

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Are the capital costs presented in Attachment AJD-2 reasonably reflective of

SPS’s expected costs for Energy Supply-related capital projects to be placed

in service during the period July 1, 2015 through November 30, 2015?

Yes. However, SPS has chosen to include only those capital projects totaling

$500,000 or more in its request as discussed by SPS witness Evan D. Evans.

With respect to the included projects, although the actual cost of any single capital

project may vary somewhat from the estimated amount on Attachment AJD-2,

and it is possible that other projects will emerge or replace those listed,

Attachment AJD-2 is a reasonable estimate of the total costs for the Energy

Supply capital investment to be placed in service between July 1, 2015 and

November 30, 2015.

Are there any other additions to Energy Supply capital requested for the

July 1, 2015 through November 30, 2015 period that are not related to

projects closing to plant in service?

Yes. There are amounts that are recorded to FERC Account 105, Plant Held for

Future Use, relating to the purchase of land rights needed for a future SPS

generation facility. Specifically, SPS incurred $4,142,523 for the purchase of

land rights for a generation facility to be located in Gaines County, Texas near the

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New Mexico state line, with an approximate generating capacity of 200 MW.

This project is identified as "GMSOC - Gaines Cty Land Acq" (Parent Work

Order 11985741) on Attachment AJD-2. The generation output from the Gaines

County plant will serve the load needs of SPS customers in both New Mexico and

Texas. Due to the long lead times associated with power plant development (e.g.,

securing of permits) and construction, land rights have been procured to help

ensure an optimal site location for the plant. Ultimately, SPS’s load forecasts will

drive the timeline under which the plant will be constructed and introduced into

service.

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V. SELECTION & MANAGEMENT OF CAPITAL PROJECTS

What are the primary business drivers affecting Energy Supply’s capital

additions?

Multiple factors drive Energy Supply capital requirements. The most significant

factors include load growth, environmental regulation, and unit operational

conditions. As discussed below in Section VI of this testimony, future retirements

and the age of SPS’s units are also factors. Energy Supply has specific evaluation

and ranking criteria that it uses in the development, ranking, and planning of

capital projects.

Please describe the process Energy Supply uses to rank and select capital

projects for funding.

As the plants identify and develop capital projects, they have specific operational

and other data available that allows them to identify and quantify how the project

meets specific drivers and criteria. The plants specify the identified information

on the project document that they submit as part of the project evaluation and

budgeting process. The plants review their systems and identify and submit

projects that they expect to implement over a five- to ten-year period.

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Projects submitted by the plants are evaluated on technical scope, solution

to a problem, and ranked according to their financial and operational merits, such

as impact on availability, reliability, efficiency, safety, and environmental

compliance. Each capital project is reviewed and prioritized using multiple

criteria, including financial merit (such as Net Present Value or Present Value of

Revenue Requirements) and operational factors such as impact on unplanned

outage rate, equipment condition, and environmental compliance laws and

regulations (e.g., Clean Air Interstate Rule and MATS), efficiency, reliability,

capacity, safety, and legislative commitments. Projects that are evaluated include

those that may be completed in a single year (e.g., replacing the bags in a fabric

filter dust collector), as well as those that will require multiple years to execute

and complete (e.g., replacing a Cooling Tower internal structure).

As each new fiscal year planning time arrives, projects are developed and

submitted by the plants to a review committee of engineers and subject matter

experts that validate the need for the project and reviews and validates the cost

estimates. After the budget review committee approves the projects, they are

passed on to the Regional Prioritization Committee ("RPC"). The RPC reviews

and validates the list of projects, the ranking attributes, timing for the

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expenditures, the project drivers, supporting information, and the necessity of the

projects. As part of this process, each project has numerical points assigned based

on the way the attributes were chosen that creates a project total number. The

RPC utilizes this numerical ranking to create a prioritized list of projects to

evaluate against the available budget for the next year, as well as the planned unit

outage schedule for the next several years and known regulatory factors, such as

new environmental regulations. The RPC makes adjustments to schedules and

budgets as required to account for evolving conditions and factors, and proposes a

final list of projects that meets the planned budget targets for the next five years.

This process allows SPS to submit a five-year projection of capital expenditures

with estimated ISDs to the corporate capital budget process. The most recent five

years of planning information, capital additions, and estimated ISDs are recorded

in the corporate budgeting system. The RPC continually meets throughout the

year to review emergent projects and make adjustments to projects currently

under way and recommends those emergent projects that must be undertaken to

meet operational or business requirements.

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Please explain the process Energy Supply follows to manage capital costs.

After a capital project has been approved for execution, it is assigned to a Project

Manager ("PM"), typically three to six months in advance of the first planned

activity required to commence the project. The PM is responsible for working

with plant engineering and technical services personnel as well as subject matter

experts to review and more fully develop the final scope, schedule, and monthly

cash flow requirements for the assigned project.

The PM will typically contact vendors and contractors to firm up cost and

schedule data and begin engineering and purchasing activities. If the PM

identifies specific information related to significant potential cost or schedule

variance to the original approved budget, the PM advises management and

recommends options for consideration. Management then responds as appropriate

depending on the specifics of the information provided. As the PM works

through the project details, the PM develops a final scope of work, detailed cash

flow, and schedules for the project. The PM submits the updated project details to

management as a funding plan to establish child work orders that will collect the

project charges. If the updates result in significant changes to the original

approved budget, the funding plan is considered the first change order for the

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project. These updated schedules and expected cash flows are entered into

corporate accounting and project management systems when the child work

orders are assigned.

Once a project is funded and begins, the PM receives periodic (weekly or

monthly) reports that track actual expenditures and compare such expenditures to

the capital budget for the project. Monthly, significant budget variances are noted

and reviewed to ascertain the cause for the variance and what corrective actions

can be taken if budget limits have been exceeded or were greatly overstated. If

corrective action is necessary and feasible, it is implemented. Sometimes the

variance is simply a timing issue and no corrective action is necessary.

In other cases, the budget may need to be amended because the project is

simply more or less costly than originally contemplated. In such situations, a

scope or budget change order is developed that revises the project to align with

the current needs. These requests are then reviewed and approved by the

Regional Capital Director. On a monthly basis, all of these projects are reviewed

by the Regional Capital Leads and then the RPC to re-rank these projects along

with new emergent projects to align with the year-end budget target. Adjustments

are made to the regional portfolio so as not to exceed the year-end budget target

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for the SPS region. If meeting the target is not in the best interest of operations,

the Regional Capital Director will submit a regional target adjustment request to

executive management for review and approval.

Typically during the year, outage inspections will discover equipment that

needs significant repair or replacement to maintain unit reliability. In other

situations, equipment will fail. To address these situations, an "emergent project"

will be submitted by the plant director to fund the project. These projects are

assigned to a project lead or PM and the scope and cost reviewed. Depending on

the time sensitivity of the project, the Regional Capital Director will fund the

project if deemed critical to be completed in the current year. If time permits, the

project will be reviewed by the RPC. To meet year-end regional targets, the

project is funded out of the undesignated fund parent project. If funds are not

available, other projects will be cut or delayed or a target adjustment will be

requested from executive management.

Is a capital work order closed as soon as the equipment subject to that work

order is placed in service?

No. Frequently, minor work continues after the equipment is placed in service

and charges can continue for a short period after the ISD is recognized on a work

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order. These charges can include recognition of the final bills from vendors,

completion of final drawings and documentation, testing of the equipment, and

settlement of any disputes. This is why some of the ISDs in Attachment AJD-1

are earlier than July 2014.

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VI. CHANGES IN USEFUL LIVES OF GENERATING UNITS

What topic do you address in this section of your testimony?

I worked with SPS witness Dane A. Watson, SPS’s depreciation expert, to

develop revised useful lives for SPS’s generating units. In this section of my

testimony, I set out the considerations underlying the useful lives I provided to

Mr. Watson.

What kind of considerations go into reviewing when a unit should be retired?

The current retirement dates for the units were set several years ago based on data

and information available at that time. There have been several changes to the

industry and market since that time that require some adjustments to the current

retirement schedules. There is no single factor that determines the appropriate

retirement date and several of the factors one must consider may be in opposition

to each other. From an economic, technology, and operations point of view, the

main factors to be considered in setting a retirement date are summarized below.

1. The extent to which new materials and technologies allow for upgradeand replacement of components that extend the useful life of agenerating unit.

2. The value of specific generating units in markets such as theday-ahead market operated by the Southwest Power Pool, based uponcurrent and forecasted capital costs, current and forecasted O&M costsof the unit, system load projections, fuel prices, type of fuel, market

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cost of energy, market cost of capacity, book life of the unit, size, andseveral other factors in estimating when specific generating units willno longer be competitive. The increasing efficiency of gas-fired unitsand lower gas prices are accelerating dates when older generating unitsbecome uneconomic.

The practical need to incrementally stage unit retirements to align withestimated system growth, the need for generation in specific locations,and availability of replacement capacity.

The location of retired units and new construction, as well as availabletransmission capacity, can influence subsequent retirement decisions.

The extent to which changes in the frequency of unit cycling affectsreliability and the associated costs. In general, units that were notdesigned for frequent cycling will be negatively affected by theincreased cycling common in current market operations, but theprecise effect on unit retirement is not well understood at present.

The impacts of the transition to renewable technologies, such as windand solar generation. Accommodating these technologies causes morecycling and favors newer generators that more easily adjust theiroutput as generation from renewable resources varies over time.

The extent to which units nearing retirement age can be reliably andeconomically operated with a more limited capital budget. This factorsuggests a limitation on large equipment purchases and more emphasison short-term repair of components or the use of equipment salvagedfrom retired units instead of replacement. This change will limit theability to extend the life of older units.

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What changes in useful lives of generating units does SPS propose in this rate

case?

The changes vary from unit to unit, with some useful lives being shorter and

others being longer.

changes.

Table ADJ-3 (on the next page) summarizes the proposed

Table AJD-3

Generating Unit Current Proposed Years added orRetirement Retirement (subtracted)

Date Date

Plant X Unit 2 2019 2020 1

Plant X Unit 3 2020 2024 4

Cunningham Unit 1 2022 2019 (3)

Maddox Unit 1 2030 2028 (2)

Maddox Unit 2 2020 2025 5

Maddox Unit 3 2020 2025 5

Nichols Unit 1 2020 2022 2

Nichols Unit 2 2022 2023 1

Quay County 2035 2034 (1)

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Please explain the reasons for the changes identified in Table AJD-3.

The SPS system has experienced significant growth over the past several years

and this growth is forecasted to continue into the future. Thus, in general, SPS

has a continuing need for capacity.

Based on the Loads & Resources Balance Table, the Portfolio

Rationalization model, and the current operating status and condition of the units,

it is economic to operate Plant X Unit 2 and Cunningham Unit 1 until the

2019-2020 time period. Cunningham Unit 1 currently has issues with the turbine

rotor and cooling tower, but mitigation plans are being implemented to keep the

unit viable until 2019. As of the proposed retirement dates, Plant X Unit 2 will be

67 years old and Cunningham Unit 1 will be 62 years old. At this time, it is not

advisable to plan to operate these units past their proposed retirement dates.

Nichols Units 1 and 2 are extended to the 2022-2023 timeframe due to age

of the units, when they will no longer be economic, and alignment with the need

for new generation to meet capacity needs at that time. At the proposed

retirement dates, these two units will be 62 and 61 years old, respectively. These

units will likely need substantial investment in the cooling towers and other

components at that time if their life is to be extended any further.

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Plant X Unit 3 will be close to 70 years old at the proposed retirement

date. This unit is expected to need a few replacement items to keep it viable, but

it appears to still be economic and the proposed retirement date aligns with the

next acquisition of new resources. There are currently no serious issues

associated with the equipment in this unit.

The Maddox Unit 1 proposed retirement date was moved up by two years

to align better with the economic modeling. This unit is a single steam plant that

is more expensive to operate than multiple steam units at a plant site. The

retirement date would align with possible closing of the plant after the combustion

turbines are retired a few years earlier. The proposed retirement date also aligns

with possibly obtaining combined-cycle generation in the area to replace the

generation at this site. The cycling of this unit will increase over the next few

years, and it is not clear if it can run much past 61 years, which will be reached in

2028.

Maddox Units 2 and 3 are both combustion turbines. Unit 2 is of a vintage

that is not efficient, but is fairly robust in nature. This unit has limited hours of

operation and SPS believes its life can be extended until the next major outage is

required. At that time, parts for this unit could be difficult to obtain and the

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continued operation of the unit may not be economic. Eventually it becomes less

expensive to replace a CT with new technology than continue to operate and

repair old technology.

Maddox Unit 3 is based on very old technology and was placed in service

in 1963 and is run and maintained only as a black start unit. Although the life is

extended, reliability becomes a significant issue in the future. By aligning the

retirement dates of Maddox Units 2 and 3 with the steam unit retirement date, it is

estimated to be more economical to retire the entire site and have the needed

generation produced at a more economical plant.

The Quay County proposed retirement date was moved up one year to

align with the life expectancy of this vintage of generation. Until there is more

operational history on the unit at its new location, it is difficult to assess the

impact of the other factors listed above on the life expectancy of this unit.

Does SPS continue to evaluate plant lives on a going-forward basis?

Yes. Although the plant lives and changes I to those lives I discussed above are

accurate, SPS continues to evaluate plant lives in light of changing load forecasts

and the potential construction of new plants.

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VII. DISMANTLING COSTS

Are you familiar with the Dismantling Cost Study prepared by TLG

Services, Inc. and sponsored by SPS witness Francis W. Seymore?

Yes. SPS retained the services of TLG Services, Inc. ("TLG’), a firm that has

extensive experience in preparing dismantling and decommissioning costs studies

for fossil fuel and nuclear plants, to perform site-specific estimates for the

dismantling of SPS’s fossil-fueled electric generating plants. The results of

TLG’s findings, as well as the methodology TLG employed to develop its

estimates, are detailed in the Dismantling Cost Study attached to the direct

testimony of Francis W. Seymore.

What did the Dismantling Cost Study conclude with respect to the estimated

dismantling costs for SPS’s generation units?

The study estimates that the dismantling and demolition of the 27 units in SPS’s

fossil-fuel fleet will cost $162 million in 2014 dollars, including credit for scrap

generated and sold in the dismantling process.

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Does the Dismantling Cost Study present a reasonable estimate of

dismantling costs for SPS generation units?

Yes. I know of no instances in the past ten years where SPS’s total costs to

dismantle a power plant has been exceeded by other factors (e.g., sale of salvage

equipment or scrap). The Dismantling Cost Study employs a methodology, based

on reasonable assumptions, that appropriately estimates the level of SPS’s

anticipated dismantling costs. Further, the study underscores the need for SPS to

plan for sufficient funds to satisfy its obligations when its plants are dismantled.

Please explain why you conclude the assumptions used by the Dismantling

Cost Study with respect to the dismantlement of SPS’s generation units are

reasonable.

The assumptions used by TLG in its development of the Dismantling Cost Study

are sound and reflective of SPS’s past and anticipated furore practices. For

example, the method of dismantling SPS uses with respect to its retired generation

units is controlled engineering, which is the methodology TLG used as the basis

for its Dismantling Cost Study. Controlled engineering does not eliminate the use

of heavy, mechanical equipment but assumes that dismantling work will be

accomplished through a controlled, mechanical approach. Additionally, the TLG

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study did not overvalue scrap credits and appropriately did not include offsets for

the sale of salvageable plant equipment.

The scrap credits SPS and Xcel Energy historically have been able to

include in its dismantling contracts have been only a small amount of overall

actual dismantling costs. With respect to the sale of salvageable equipment, I

know of a very limited number of instances where SPS has sold equipment, or

otherwise realized equipment salvage value, from its retired power plants. This is

not surprising given that it is SPS’s intention to operate its generating units until

the end of their useful lives. Thus, plant components are generally of an obsolete

design and near the unit’s end of life by the time the plants are dismantled.

Moreover, the total dollar amount of salvage value that SPS has realized as

compared to the plant amount retired has been insignificant.

Furthermore, TLG’s assumption of a five-day, ten-hour a day workweek

for dismantling crews is appropriate and consistent with SPS’s prior experience.

Given the remote nature of SPS’s generation units, any shorter workweek or

workday would be inconsistent with the expectation of dismantling contractors.

Plus, the remote location of SPS’s generation units helps to explain why it has

been SPS’s experience that such land has limited, if any, resale value.

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10

11


ofAlan J. Davidson

The examples above, which are based on SPS’s past and anticipated future

practices, help demonstrate the reasonableness of the assumptions used by TLG in

its development of the Dismantling Cost Study.

How must SPS approach dismantling costs from a planning perspective?

SPS must plan for sufficient funds at the end of the useful lives of its generation

plants to dismantle these units. Historically, SPS has expended significant funds

to dismantle its retired generation units and there is no reason to believe that

similar funds would not be require for future dismantling projects. Thus, from a

planning perspective, it is reasonable to assume that SPS will incur significant

dismantling costs with respect to the plants identified in the Production

Dismantling Cost Study at issue in this proceeding.

46

1 Q.

2

3 A.

4

5

6

7

8 Q.

9

10 A.

11

12

13 Q.

14

15 A.

16 Q.

17 A.


ofAlan J. Davidson

VIH. CONCLUSION

Were Attachments AJD-1 and AJD-2 prepared by you or under your direct

supervision and control?

Attachments AJD-1 and AJD-2 were prepared by SPS witness Lisa A. Perkett and

her staff, and the information in Attachments AJD-1 and AJD-2 are included in

Ms. Perkett’s Attachments LHP-1 and LHP-2, respectively. My staff and I have

reviewed these documents and confirmed that the projects are Energy

Supply-related projects and that the costs appear to be correctly stated.

Was the Rate Filing Package Schedule P-11 that you sponsor prepared by

you or under your direct supervision and control?

Schedule P-11 was prepared by XES Resource Planning. My staff and I have

reviewed this schedule and confirm that the information provided appears to be

correctly stated.

Do you incorporate Schedule P-11 in the RFP that you sponsor into your

testimony?

Yes.

Does this conclude your pre-filed direct testimony?

Yes.

47

VERIFICATION

STATE OF TEXAS

COUNTY OF POTTER

ALAN J, DAVIDSON, first being sworn on his oath, states:

I am the witness identified in the preceding direct testimony. I have read thetestimony and the accompanying attachments and am familiar with their contents. Basedupon my personal knowledge, the facts stated in the direct testimony are true. Inaddition, in my judgment and based upon my professional experience, the opinions andconclusions stated in the testimony are true, valid, and accurate.

ALAN J.

SUBSCRIBED AND SWORN TO before me this ~"~ day of October, 2015.

-"~’" "-~ Notary Public, State of Texas

~"":~" ~ ~ "4~"~;’~ ]~11 " ........’~ March 23, 2016

Notary Public of the State of TexasMy Commission Expires:

48

Attachment AJD- 1Page 1 of 12

Case No. 15-00296-UT

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Attachment AJD-1Page 2 of 12




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