EXHIBIT 30 

Case:17-03283-LTS Doc#:24535-30 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

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1

2 IN THE UNITED STATES DISTRICT COURT

 FOR THE DISTRICT OF PUERTO RICO

3 Case No. 17-BK-3283-LTS

 ----------------------------------------x

4 In re:

5 THE FINANCIAL OVERSIGHT AND MANAGEMENT

 BOARD FOR PUERTO RICO,

6

 as representative of

7

 THE COMMONWEALTH OF PUERTO RICO, et al.,

8

 Debtors.

9 -----------------------------------------x

 Case No. 17-BK-4780-LTS

1 0 -----------------------------------------x

 In re:

1 1

 THE FINANCIAL OVERSIGHT AND MANAGEMENT

1 2 BOARD FOR PUERTO RICO,

1 3 as representative of

1 4 THE PUERTO RICO ELECTRIC POWER AUTHORITY,

1 5 Debtor.

 ----------------------------------------x

1 6 May 25, 2023

 9:20 a.m.

1 7

1 8 VIDEOTAPED DEPOSITION of ELLEN SMITH,

1 9 held at the offices of Kramer Levin

2 0 Naftalis & Frankel LLP, located at 1177

2 1 Avenue of the Americas, New York, New York

2 2 10036, before Anthony Giarro, a Registered

2 3 Professional Reporter, a Certified Realtime

2 4 Reporter and a Notary Public of the State

2 5 of New York.

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1 ELLEN SMITH

2 form.

3 A Can you explain more what

4 you mean by sufficient?

5 Q Do you think that LUMA

6 should be proposing a higher number for

7 its budgeted expense for transmission

8 towers?

9 MS. PAVEL: Objection to

1 0 form.

1 1 A I think their budget for --

1 2 this budget that just recently has been

1 3 presented, that will be approved by PREB,

1 4 I think it has in it, the work that they

1 5 feel they can accomplish. Whether or not

1 6 the asset conditions require something

1 7 different over time, time will tell

1 8 because eventually -- essentially, the

1 9 entire system will have to be rebuilt.

2 0 Q When you say that LUMA's

2 1 budget for the transmission towers

2 2 reflects what they think they can

2 3 accomplish, what are the constraints on

2 4 what they think they can accomplish?

2 5 A Constraints include

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1 ELLEN SMITH

2 A Yes.

3 Q Do you have a view on

4 whether the amount budgeted to be spent

5 on repairs to the transmission

6 substations is sufficient?

7 MS. PAVEL: Objection to

8 form.

9 MR. MERVIS: Objection to

1 0 form.

1 1 A So LUMA goes through a very

1 2 detailed prioritization process where

1 3 they assess the criticality and the

1 4 likelihood of something bad happening.

1 5 And that's what their basis of their

1 6 programs and projects are. So based on

1 7 that assessment, I believe that what they

1 8 have in their budget is what they feel is

1 9 most urgently needed.

2 0 Q Do you have any basis to

2 1 disagree with LUMA's assessment?

2 2 A I don't.

2 3 Q Are there any constraints on

2 4 LUMA's ability to -- I'll ask it another

2 5 way.

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1 ELLEN SMITH

2 Q Has LUMA budgeted for the

3 repair and upgrade of the distribution

4 poles?

5 A Yes.

6 Q And do you have any view

7 about whether it has sufficient --

8 budgeted sufficient funds for the

9 distribution -- the repair of the

1 0 distribution poles?

1 1 MR. MERVIS: Objection to

1 2 form.

1 3 MS. PAVEL: Objection to the

1 4 form.

1 5 A I don't have any reason to

1 6 believe they haven't, that it doesn't

1 7 meet what they're intending to do. But,

1 8 again, it's a many years program to do

1 9 this work.

2 0 Q And why does it take many

2 1 years to repair the distribution poles?

2 2 A Primarily, because there's

2 3 so many of them. So the prioritization

2 4 process has to be very disciplined. And

2 5 work that requires outages is oftentimes

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1 ELLEN SMITH

2 Q Let me simplify it.

3 Have you ever been asked to

4 forecast the capital needs for an

5 electric utility?

6 A Yes.

7 Q And what time span have you

8 made these forecasts? Five years out,

9 ten years out, 20 years out?

1 0 MR. MERVIS: Objection to

1 1 the form.

1 2 A Generally, my experience in

1 3 particular was with respect to National

1 4 Grid in their Upstate, New York utility

1 5 named Niagara Mohawk. In those

1 6 processes, we would look at five years.

1 7 Q Why would you look at five

1 8 years?

1 9 A Generally, the rate cases at

2 0 the time were not done frequently. Now,

2 1 today, they're done every three or four

2 2 years. So you could keep up to date with

2 3 them. But five years essentially gets

2 4 you to a rate case-to-rate case view on a

2 5 rolling basis.

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1 ELLEN SMITH

2 Q Can you explain to me how

3 you would create these forecasts of

4 capital needs for five years out?

5 MR. MERVIS: Objection to

6 the form.

7 A Sure. So you begin by doing

8 a very systemic inspection of your assets

9 over a certain period of time. Those

1 0 inspections result in a view of the

1 1 health or condition of those assets.

1 2 Then there is a prioritization process

1 3 that is gone through to identify what

1 4 must be done first, what can be pushed

1 5 out to later years. And then there's

1 6 a -- incorporated in this is

1 7 understanding of how the system is

1 8 performing in terms of outages and any

1 9 other issues.

2 0 And then all that gets put

2 1 together in terms of coming up with a

2 2 capital plan by asset category. So by

2 3 transmission, by transmission

2 4 substations, distribution, distribution

2 5 substations and other customer-related

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1 ELLEN SMITH

2 work. So in my case, I had some of our

3 capital needed to be spent because of

4 customer-driven work. So we have new

5 customers. You have to put them in

6 service, for example.

7 Q Is what you just described

8 consistent with how in your experience,

9 electric utilities forecast their capital

1 0 needs?

1 1 MR. MERVIS: Objection to

1 2 the form.

1 3 A Yes.

1 4 Q Have you ever performed

1 5 forecast of capital needs for an electric

1 6 utility going beyond five years?

1 7 MR. MERVIS: Objection to

1 8 the form.

1 9 A No.

2 0 Q Is there a reason you

2 1 haven't done that?

2 2 MR. MERVIS: Objection to

2 3 the form.

2 4 A No.

2 5 Q Is it possible to forecast

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1 ELLEN SMITH

2 capital needs for an electric utility for

3 a longer period than five years?

4 MS. PAVEL: Objection to

5 form.

6 A It's possible. But

7 generally, the view of the accuracy of

8 such forecast is, you know, not great.

9 Q Why do you mean it's not

1 0 great?

1 1 A Because in 10 or 15 or 20

1 2 years, you're not really sure of what the

1 3 system -- how it's going to be operating.

1 4 You can forecast some things. You can

1 5 look at your categories of equipment,

1 6 like transformers, and you can look at

1 7 some breakers.

1 8 If you have a class of

1 9 breakers that's already 30 years old or

2 0 older, then you could say within this

2 1 five-year period, I have to replace a

2 2 certain number of them. As those get

2 3 replaced, you could say their meantime to

2 4 failure or average life is 25 years. And

2 5 you could say 25 more years. Then I will

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1 ELLEN SMITH

2 ten-year forecast that ties essentially

3 to FEMA work over this period of time.

4 But that is essentially entire rebuild

5 work. So when you say CAPEX forecast

6 over time, maybe you could confirm. Are

7 you talking about a system that's

8 operating well today?

9 Q I mean, are you aware of any

1 0 methodology in your field for forecasting

1 1 the capital needs of an electric company

1 2 based on the network length?

1 3 MR. MERVIS: Objection.

1 4 MS. PAVEL: Objection to

1 5 form. She's asked for a

1 6 clarification.

1 7 MR. MAYRELL: And I'm trying

1 8 to give her one.

1 9 A What do you mean by network

2 0 length?

2 1 Q The length of the

2 2 transmission and distribution lines.

2 3 A Like the distance?

2 4 Q Yes.

2 5 A Oh.

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1 ELLEN SMITH

2 No, not specifically.

3 Distance is not generally -- I mean it's

4 a component, circuit miles. But it's one

5 piece of the equation.

6 Q What would be the other

7 pieces of the equation?

8 A The number of substations,

9 the number of transformers, the number of

1 0 breakers, the number of relays, all other

1 1 pieces.

1 2 Q Would the number of

1 3 electricity customers be a factor in

1 4 performing a longer-term forecast of

1 5 capital needs?

1 6 MS. PAVEL: Objection to

1 7 form.

1 8 A If there was known load

1 9 increases, customer increases, then they

2 0 would be incorporated.

2 1 Q Would a forecast of capital

2 2 needs for an electric utility need to

2 3 account for, for example, the geographic

2 4 constraints where a utility is operating?

2 5 MR. MERVIS: Objection to

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1 ELLEN SMITH

2 form.

3 MS. PAVEL: Objection to

4 form.

5 A I would say yes. But I

6 would call it environmental constraints.

7 So, for example, what you build in

8 Upstate, New York or on the west coast,

9 which has a lot of fire hazards, will be

1 0 very different than what you build in

1 1 Puerto Rico.

1 2 Q Why is that?

1 3 A Because the environments are

1 4 different. So Puerto Rico's a tropical

1 5 environment. But it has a rain forest.

1 6 It also has an earthquake zone. So you

1 7 have to design for those factors.

1 8 In California, you have wild

1 9 fire risk. And you have a large number

2 0 of high fire risk districts. And those

2 1 areas have to have certain precautions

2 2 taken, even different than the rest of

2 3 the non-wildfire risk areas. So

2 4 utilities work very hard to make sure

2 5 that the work they're defining is

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1 ELLEN SMITH

2 specific to the environment that the

3 work's being done in.

4 Q So are there differences in

5 the environmental constraints that apply

6 to Puerto Rico versus to the southeastern

7 United States?

8 MS. PAVEL: Objection to

9 form.

1 0 A Yes.

1 1 Q Could you explain what those

1 2 are?

1 3 MR. MERVIS: Objection to

1 4 form.

1 5 A Wild parts of the southeast

1 6 United States are tropical like

1 7 environments. They're not as tropical as

1 8 Puerto Rico; also, Puerto Rico has

1 9 hurricane risks that are quite high. And

2 0 they have earthquake risks that are quite

2 1 high that are somewhat different than the

2 2 southeast United States.

2 3 Q If I use the phrase

2 4 concentration of electricity customers,

2 5 do you understand what I mean by that?

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1 ELLEN SMITH

2 A Yes.

3 Q So would the concentration

4 of electricity customers affect a

5 forecast of capital needs?

6 MR. MERVIS: Objection to

7 form.

8 MS. PAVEL: Objection to

9 form.

1 0 A Not independently by itself.

1 1 I mean there's an obligation by utilities

1 2 to serve everybody. So you have to serve

1 3 everybody.

1 4 Q So, for example, if

1 5 utilities customers are very spread out,

1 6 like in a rural area, would its capital

1 7 needs be different than those of a

1 8 utility that mainly served an urban area?

1 9 MR. MERVIS: Objection to

2 0 the form.

2 1 MS. PAVEL: Objection to

2 2 form.

2 3 A I will tell you, for

2 4 example, New York City has a very

2 5 different capital plan than Niagara

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1 ELLEN SMITH

2 Mohawk does in Upstate, New York. Yes.

3 They're very different. The capital

4 plans are very specific to the utilities

5 customer base and their location.

6 One more point to factor for

7 Puerto Rico I didn't mention, but I

8 should, is that it's a salt air

9 environment. Parts of the southeast of

1 0 the United States are not. Along the

1 1 coasts, they are, but not inland. So

1 2 that salt air environment also has to be

1 3 accounted for.

1 4 Q Have you ever seen in your

1 5 experience, a forecast of the capital

1 6 needs of a utility that is performed by

1 7 comparing one utility's -- let me think

1 8 of a better way to put this question.

1 9 Can you infer what the

2 0 capital expenditures of one utility will

2 1 be, simply by looking at another utility?

2 2 MR. MERVIS: Objection to

2 3 form.

2 4 MS. PAVEL: Objection to

2 5 form.

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1 ELLEN SMITH

2 A Yes and no.

3 Q Can you explain?

4 A So if Utility A and Utility

5 B have similar conditions and locations

6 and customer types, then if you're a very

7 large investor own utility and you have a

8 certain percentage of urban, certain

9 percentage of rural customers, then you

1 0 might be able to compare them. In other

1 1 cases, you can't.

1 2 In Puerto Rico's case,

1 3 you're on an island. You're not

1 4 interconnected to anybody. So it makes

1 5 the situation very different, as well as

1 6 the physical environment, environmental

1 7 issues.

1 8 MR. MERVIS: Ralph, if we

1 9 could take a break in a little bit.

2 0 MR. MAYRELL: Yes. I was

2 1 figuring on going until noon. So we

2 2 could take a break now.

2 3 THE VIDEOGRAPHER: The time

2 4 is 11:55. We're going off the

2 5 record.

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