NDEX

TESTIMONY OF

ANGELA R. DECLERCK, DAVID L. GILMAN, RONALD J. HOMENICK

Witnesses for Bonneville Power Administration

**SUBJECT: Segmentation of U.S. Army Corps of Engineers and\
Bureau of Reclamation Transmission Facilities**

**Page**

Section 1. Introduction and Purpose of Testimony 1

Section 2. COE and Reclamation Segmentation Analysis 1

Section 3. Generation Integration 3

Section 4. Calculation of Revenue Credit for COE and Reclamation
Network\
and Delivery Facilities 4

TESTIMONY OF

ANGELA R. DECLERCK , DAVID L. GILMAN, RONALD J. HOMENICK

Witnesses for Bonneville Power Administration

**SUBJECT:** **Segmentation of U.S. Army Corps of Engineers and Bureau
of Reclamation Transmission Facilities**

Section 1: Introduction and Purpose of Testimony

*Q. Please state your names and qualifications.*

A. My name is Angela DeClerck. My qualifications are contained in
WP-02-Q-BPA-15.

A. My name is David Gilman. My qualifications are contained in
WP-02-Q-BPA-25.

A. My name is Ronald Homenick. My qualifications are contained in
WP-02-Q-BPA-30.

*Q. What is the purpose of your testimony?*

A. The purpose of this testimony is to sponsor the segmentation analysis
of the U.S. Army Corps of Engineers (COE) and Bureau of Reclamation
(Reclamation) transmission facilities. *See* Section 4.3 of the
Wholesale Power Rate Development Study, WP‑02‑E‑BPA‑05.

*Q. How is your testimony organized?*

A. Our testimony includes this introduction in Section 1. Section 2 is
an explanation of the segmentation analysis of the COE and Reclamation
facilities. Section 3 is a description of the treatment of Generation
Integration (GI) costs. Section 4 is a discussion of the calculation of
the revenue credit for COE and Reclamation Network and Delivery
facilities.

Section 2: COE and Reclamation Segmentation Analysis

*Q. Please define the proposed treatment for COE and Reclamation
transmission costs.*

A. A small portion of COE and Reclamation investment is associated with
transmission facilities. In previous rate cases, COE and Reclamation
transmission investment was

identified and included in the transmission repayment study and the
associated annual costs were included in the transmission revenue
requirement. For the first time, all COE and Reclamation investments,
including those associated with transmission facilities, are now
included in the generation repayment study and the generation revenue
requirement. *See* the Revenue Requirement Study, WP‑02-E-BPA-02. The
investment associated with the transmission facilities owned by the COE
and Reclamation is identified and assigned to the appropriate
transmission segment. The investment for COE and Reclamation
transmission facilities has changed compared to the 1996 rate case based
on new data from the COE and Reclamation, both as updates to actual
investment, as well as more detailed component data.

*Q. Why is it necessary to assign the investments of COE and Reclamation
transmission facilities to the transmission segments?*

A. COE and Reclamation transmission facilities perform GI, Network, and
Delivery functions. The investment of transmission facilities must be
identified and segmented so the costs can be assigned to the appropriate
use. GI cost is assigned to be recovered through power rates, while the
cost of COE and Reclamation Network and Delivery facilities is assigned
to be recovered through transmission rates.

*Q. How are COE and Reclamation transmission facility investments
assigned to the transmission segments?*

A. The assignment of transmission facility investment to the appropriate
segment is consistent with the segmentation for the 1996 rate filing.
The segment definitions used to segment COE and Reclamation Network and
Delivery facilities are from the 1996 Final Segmentation Study,
WP-96-FS-BPA-03, pp. 2-4. The GI segment definition in the 1996 final
study is expanded to include generator step-up (GSU) transformers.
This change affects the segmentation of COE and Reclamation facilities
only, because the COE and Reclamation have investments in GSUs, and BPA
does not.

*Q. Does this proposal determine the segmentation for BPA-owned
transmission facilities?*

A. No. The segmentation of BPA-owned transmission facilities will be
done in the transmission rate case. To the extent the segment
definitions change in that case, the cost of the COE and Reclamation
facilities will be placed in the appropriate segment.

Section 3: Generation Integration

*Q. What are Generation Integration (GI) facilities?*

A. These are the transmission facilities that connect the federal
generating plants to the BPA Network. The GI segment normally includes
the line from the powerhouse to the Network substation and the
associated switching equipment. This is consistent with the GI segment
definition in the 1996 Final Segmentation Study, WP‑96‑FS‑BPA‑03, p. 2.
In addition, GSU transformers are included in the GI segment for the
first time.

*Q. What are GSUs?*

A. These are the facilities at the Federal projects that transform the
voltage of the power from that of the generator to that of the local
transmission system. The GSUs are all owned by the project owner. In the
1996 rate case, the GSU costs were not separately identified from
generation costs, and thus, were included in the generation revenue
requirement. Separate identification of the GSUs facilitates the
allocation of these costs to generation inputs for ancillary services.
*See* DeClerck *et al.,* WP-02-E-BPA-26. All GI costs, including GSUs,
will be assigned to be recovered through power rates, which is the same
treatment as in the 1996 rates.

*Q. Why are you assigning GI cost to power?*

A. Although BPA had historically assigned GI cost to power rates, we
decided to review the treatment of this cost after an examination of the
practice of other utilities in the region, as well as historical Federal
Energy Regulatory Commission (FERC) rulings, suggested that BPA's
practice was not consistent with that of the industry. However, FERC
reversed its position and now assigns such costs to generation for
ratemaking purposes.

*Q. How was the GI cost calculated?*

A. The GI facilities have been separated into two portions, those owned
by the COE and Reclamation, and those owned by BPA. The COE and
Reclamation GI annual costs were included directly in the generation
revenue requirement. The costs associated with the GI facilities owned
by BPA are estimated by PBL, as these costs will not be identified until
the BPA transmission revenue requirement is calculated for the
transmission rate case. The annual cost of BPA GI facilities was
estimated to be \$8 million based on the GI costs for BPA-owned
facilities in the 1996 rate case. *See *Section 4.3 of the Wholesale
Power Rate Development Study, WP-02-E-BPA-05. *See* also the 1996 Final
Segmentation Study, WP-96-FS-BPA-03. This cost is treated as an expense
in the generation revenue requirement. *See* the Revenue Requirement
Study, WP-02-E-BPA-02.

Section 4: Calculation of Revenue Credit for COE and Reclamation
Network\
and Delivery Facilities

*Q. Please describe the revenue credit to the generation revenue
requirement for the COE and Reclamation transmission facilities.*

A. The credit to the generation revenue requirement is for COE and
Reclamation transmission facilities that perform a Network or Delivery
function. The annual cost of these facilities (operation and
maintenance, depreciation, and interest expense) is calculated and
assigned to transmission and will be recovered through transmission
rates. The segmentation analysis determines the COE and Reclamation
investment in these segments, which is used to develop the associated
annual cost of \$3.7 million. *See* the Documentation for Revenue
Requirements Study, WP-02-E-BPA-02B. This annual cost is a revenue
credit to the generation revenue requirement and will be an expense in
the transmission revenue requirement when transmission rates are
developed. *See *Section 4.3 of the Wholesale Power Rate Development
Study, WP-02-E-BPA-05. Inclusion of the cost of COE and Reclamation
Network and Delivery facilities in the transmission revenue requirement
is consistent with their treatment in the 1996 and previous rates.

*Q. Does this conclude your testimony?*

A. Yes.