CPUC Docket: A.17-11-009 Exhibit Number: __________ Witness(es): T. Long, C. Yap, J. Defever

PREPARED TESTIMONY OF THE UTILITY REFORM NETWORK

CHAPTER 7 – TESTIMONY OF THOMAS LONG, CATHY YAP, AND JOHN DEFEVER

ADDRESSING ISSUES PRESENTED BY PG&E TESTIMONY – CHAPTER 7

FACILITIES ASSET FAMILY

THE UTILITY REFORM NETWORK

785 Market Street, Suite 1400

San Francisco, CA 94103

July 20, 2018 September 28, 2018 (with errata)

TABLE OF CONTENTS I. INTRODUCTION ......................................................................................................... 3

II. SUMMARY OF RECOMMENDATIONS ................................................................... 5

III. LONG TESTIMONY .................................................................................................... 7

1) MEASUREMENT AND CONTROL (M&C) TERMINAL UPGRADES - CAPITAL ........................................................................................................... 7

A. The Potentially Very Expensive Brentwood Rebuild Project Should Be Deferred Until PG&E Has Done a Quantitative Analysis of the Cost Effectiveness of Rebuilding as Compared to Alternatives ...................... 8

B. PG&E’s Forecast for Terminal Upgrade Work Should Be Reduced Based on More Complete Cost Data ........................................................ 9

C. TURN’s Combined Recommendation ................................................... 10

2) M&C STATION OVER PRESSURE PROTECTION ENHANCEMENTS - CAPITAL ......................................................................................................... 10

A. PG&E’s New $18 Million Capital Program Should Be Deferred Until PG&E Gains the Benefits of Its System Planning Studies and Settles on the Best Strategy for Reducing Over Pressure Events .......................... 10

3) CRITICAL DOCUMENTS: THE COMMISSION SHOULD CONTINUE TO ALLOW PG&E TO TRACK CRITICAL DOCUMENTS EXPENSES IN A MEMORANDUM ACCOUNT FOR POTENTIAL FUTURE RECOVERY BY APPLICATION .................................................................. 13

4) STATION ASSESSMENT PROGRAMS ......................................................... 15

A. TURN Does Not Object to PG&E’s Expense Forecasts for Engineering Critical Assessment (ECA) Phases 1 and 2 Provided that the One-Way Balancing Account Is Retained .............................................................. 15

B. Consistent with TURN’s Recommendation for Critical Documents, the Commission Should Allow PG&E to Continue to Track Station Strength Testing Expenses in a Memorandum Account for Potential Future Recovery By Application ........................................................... 16

5) PHYSICAL SECURITY CAPITAL: PG&E’S FORECAST SHOULD BE REDUCED TO REFLECT A LOWER AVERAGE COST OF UPGRADE PROJECTS ...................................................................................................... 17

IV. YAP TESTIMONY ..................................................................................................... 19

1) RESPONSE TO PG&E CHAPTER 7, SECTION C, SUBSECTION 4B, REPRIORITIZED SIMPLE STATION REBUILD WORK SUBJECT TO THE 2017 GRC SETTLEMENT .................................................................... 19

A. It Was Reasonable for PG&E to Reprioritize Funds from Simple Station Rebuild Work to Complex Station Rebuild Work Based on Information from Field Condition Assessments.................................... 19

B PG&E Has Significantly Exceeded Authorized Expenditure Levels in Pursuing Both Its Simple Station and Complex Station Rebuild Work But Failed to Provide Any Information to Demonstrate that such Expenditure Levels Are Reasonable. ..................................................... 20

2) RESPONSE TO PG&E CHAPTER 7, SECTION C, SUBSECTION 2B, REPRIORITIZED LOS MEDANOS COMPRESSOR REPLACEMENT WORK SUBJECT TO THE 2017 GRC SETTLEMENT .............................. 24

A. Redirecting Funds for Los Medanos Compressor Replacement Project Is Appropriate in Light of PG&E’s Recommended Closure of the Los Medanos Storage Field But the Uses to Which PG&E Propose to Apply Those Funds Need to Be Reasonable. .................................................... 24

B. Having Access to Redirected Funds from a Cancelled Compressor Replacement Project Does Not Justify Overspending on Another Compressor Replacement Project. ........................................................ 25

C. Likewise, Having Access to Redirected Funds from a Cancelled Compressor Replacement Project Does Not Justify Overspending on Station Control Replacement Projects. ................................................. 27

V. DEFEVER TESTIMONY ........................................................................................... 29

1) FACILITIES ROUTINE EXPENSE ................................................................ 29

VI. CONCLUSION ............................................................................................................ 30

3

PREPARED TESTIMONY OF THE UTILITY REFORM NETWORK 1

CHAPTER 7 – TESTIMONY OF THOMAS LONG, CATHY YAP, 2

AND JOHN DEFEVER 3

I. INTRODUCTION 4

Long Testimony 5

Mr. Long’s testimony addresses PG&E’s forecast and proposals for the following 6

programs: (1) Measurement and Control (M&C) Terminal Upgrades – Capital (Section III.1); 7

(2) M&C Station Over Pressure Protection Enhancements – Capital (Section III.2); (3) Critical 8

Documents – Expense (Section III.3); (4) Station Assessment Programs, including Engineering 9

Critical Assessment (ECA) Phases 1 and 2 – Expense, and Station Strength Testing – Expense 10

(Section III.4); and (5) Physical Security – Capital (Section III.5). 11

Mr. Long is TURN’s Legal Director. He has over 30 years of experience as an advocate 12

and witness in major energy and telecommunications proceedings at the CPUC, and as a 13

Commissioner advisor. Since September 2011, Mr. Long has served as TURN’s lead attorney 14

and a TURN witness in several Commission proceedings relating to natural gas pipeline 15

operations and safety and has led TURN’s advocacy in the Commission’s proceedings to 16

improve the utilities’ risk assessment and risk mitigation efforts. A summary of Mr. Long’s 17

qualifications is attached to his Chapter 8 testimony regarding Corrosion Control issues. 18

19

Yap Testimony 20

This testimony addresses the reprioritization of funding for simple station rebuild projects 21

to complex station rebuild projects and the reprioritization of Los Medanos compressor 22

4

replacement funds to the Burney K-2 compressor replacement project and the Gerber station 1

controls upgrade project. 2

This testimony is presented by Catherine E. Yap on behalf of TURN. Ms. Yap has over 3

35 years of experience preparing and delivering testimony before this Commission as well as in 4

other jurisdictions. Ms. Yap’s qualifications are set forth in Appendix A to Chapter 10 of 5

TURN’s opening testimony in this proceeding. 6

7

Defever Testimony 8

Larkin & Associates, PLLC was retained by The Utility Reform Network (“TURN”) to 9

review various expenses within Pacific Gas & Electric Company's Gas Transmission & Storage 10

("GT&S") 2019 Rate Case. Accordingly, I am appearing on behalf of TURN. This chapter will 11

address PG&E’s cost forecasts for the facilities asset family. 12

This testimony is presented by John Defever, Certified Public Accountant and Regulatory 13

Consultant of Larkin & Associates, PLLC. A Summary of Mr. Defever's experience and 14

qualifications is provided as Appendix A to Chapter 9 of TURN’s opening testimony in this 15

proceeding. 16

Larkin & Associates, PLLC is a Certified Public Accounting and Regulatory Consulting 17

Firm. The firm performs independent regulatory consulting primarily for public service/utility 18

commission staffs and consumer interest groups (public counsels, public advocates, consumer 19

counsels, attorneys general, etc.). Larkin & Associates, PLLC, has extensive experience in the 20

utility regulatory field as expert witnesses in over 800 regulatory proceedings including 21

numerous electric, gas, water and sewer, and telephone utilities. 22

23

5

II. SUMMARY OF RECOMMENDATIONS 1

Long Testimony 2

Mr. Long’s testimony offers the following recommendations, each of which will be 3

addressed in more detail below: 4

(1) PG&E’s capital forecast for Terminal Upgrade Programs should be reduced as 5 follows, (a) because the expensive Brentwood Rebuild project should be deferred 6 until PG&E has demonstrated its cost-effectiveness compared to alternatives; and 7 (b) to reflect more complete cost data for Terminal Upgrade work: 8

Combined Terminal Upgrades ($ Millions) (MAT 765) 2019 2020 2021 PG&E 7.44 7.54 7.62 TURN 2.43 2.43 2.43 TURN minus PG&E (5.01) (5.11) (5.19)

9

(2) PG&E’s new $18 million capital program for Station Over Pressure Protection 10 Enhancements should be deferred, as shown in the table below, until PG&E gains 11 the benefits of its system planning studies and settles on the best strategy for 12 reducing over pressure events. 13

Station OPP Enhancement Capital (MAT 76G) ($ Millions) 2019 2020 2021 PG&E 6.14 6.16 6.15 TURN - - - TURN minus PG&E (6.14) (6.16) (6.15)

14

(3) PG&E should be allowed to continue to track Critical Documents expenses in the 15 memorandum account created in D.16-06-056, for potential recovery in a future 16 application. No recovery of PG&E’s $3.1 million in forecast expenses for 2019 17 should be allowed at this time. PG&E’s request to discontinue this memorandum 18 account should be denied.1 19

1 This recommendation also relates to Chapter 17B of PG&E’s testimony.

6

(4) TURN does not object to PG&E’s 2019 expense forecasts for ECA Phases 1 and 1 2, provided that the current one-way balancing account is retained. PG&E’s 2 request to discontinue this 1- way balancing account should be denied.2 3

(5) PG&E should be allowed to continue to track Station Strength Testing expenses 4 in the memorandum account created in D.16-06-056, for potential recovery in a 5 future application. No recovery of PG&E’s $1.0 million in forecast expenses for 6 2019 should be allowed at this time. PG&E’s request to discontinue this 7 memorandum account should be denied.3 8

(6) PG&E’s capital forecast for Physical Security should be reduced as follows to 9 reflect a lower average cost of upgrade projects: 10

11

12

13

14

15

16

Yap Testimony 17

TURN offers the following recommendations, each of which will be addressed in more 18

detail below. 19

(7) The Commission should allow simple station rebuild capital expenditures made in 20 2015-2018 only up to the actual number of simple station rebuilds times the 21 Commission authorized expenditure level for simple station rebuilds in the year 22 the rebuild project is completed. 23

(8) The Commission should allow complex station rebuild capital expenditures made 24 in 2015-2018 only up to the actual number of complex station rebuilds times the 25 Commission authorized expenditure level for complex station rebuilds in the year 26 the rebuild project is completed. 27

(9) The Commission should allow only the authorized level of Burney K-2 28 compressor replacement project costs of $54.115 million to be added into rate 29 base in Test Year 2019. 30

2 This recommendation also relates to Chapter 17B of PG&E’s testimony. 3 This recommendation also relates to Chapter 17B of PG&E’s testimony.

Physical Security - Capital (MAT 76Z) ($ millions) 2019 2020 2021 PG&E 9.39 9.43 9.43 TURN 7.61 7.63 7.61 TURN minus PG&E (1.78) (1.80) (1.82)

7

(10) The Commission should allow only the authorized level for Gerber station 1 controls upgrade project to be added into rate base in 2018. 2

3

Defever Testimony 4

TURN offers the following recommendation regarding Chapter 7, which will be 5

addressed in more detail below: 6

(11) A reduction of $2.104 million to Facilities Routine Expense. 7

8

III. LONG TESTIMONY 9

1) MEASUREMENT AND CONTROL (M&C) TERMINAL UPGRADES - CAPITAL 10

For the M&C Terminal Upgrade program, PG&E proposes two categories of work: (1) 11

regular upgrade and maintenance for each of its three gas terminals at Milpitas, Antioch and 12

Brentwood; and (2) beginning to rebuild the Brentwood terminal. The forecast costs are as 13

follows: 14

Table 7-1 15

PG&E Terminal Upgrade Capital Forecast (MAT 765)($ Millions) 16 17 2019 2020 2021 Terminal Upgrade4 2.88 2.97 3.05 Brentwood Terminal Rebuild – Phase 1

4.56 4.58 4.57

Total 7.44 7.54 7.62 18

TURN recommends reductions to the forecasts for both categories of work, as discussed below. 19

4 PG&E’s 2020 and 2021 forecasts for the Terminal Upgrade work, but not the Brentwood Rebuild, appear to apply escalation improperly (and excessively). TURN will correct the escalation error in its recommendations below.

8

A. The Potentially Very Expensive Brentwood Rebuild Project Should Be 1 Deferred Until PG&E Has Done a Quantitative Analysis of the Cost 2 Effectiveness of Rebuilding as Compared to Alternatives 3

PG&E states that, while it manages the risk of equipment failure for this critical facility 4

through routine equipment and component upgrades, the planned rebuild project will 5

significantly improve reliability.5 PG&E seeks almost $14 million in the rate case period, just 6

for “Phase 1” of the rebuild. PG&E states that it envisions a total of four phases for the rebuild, 7

but would not provide any cost estimates for Phases 2, 3 and 4, saying such estimates would not 8

be available until the completion of Phase 1.6 When TURN pressed PG&E for any idea 9

whatsoever of the total cost of the Brentwood rebuild, PG&E stated that the cost could be “over 10

[the] $50-$100 million range.”7 Clearly, this could be a very expensive project that, by PG&E’s 11

admission, could exceed $100 million in cost. 12

Because of TURN’s concern that PG&E is planning to embark on an extremely 13

expensive project without even having a reliable estimate of its cost, TURN inquired about 14

whether PG&E had done any quantitative analysis of the cost-effectiveness of the rebuild in 15

terms of risk reduction per dollar spent or any other measure. PG&E responded that it has done 16

no such analysis, even for the Phase 1 work for which it seeks funding in this case.8 In response 17

to another TURN data request, PG&E acknowledged that there are alternatives to terminal 18

rebuild, namely equipment upgrade and routine component replacement, but it did not provide 19

any analysis of why PG&E chose not to pursue such alternatives, other than to offer the single 20

comment that the alternatives would not simplify the station.9 21

5 PG&E Testimony, p. 7-54. 6 PG&E Response to TURN DR 11-4.a and b. 7 PG&E Response to TURN DR 23-2.a. 8 PG&E Response to TURN DR 11-5.a and b. 9 PG&E Response to TURN DRs 11-6 and 11-5.c.

9

PG&E has failed to demonstrate that it has sufficiently considered all alternatives to a 1

project that could cost over $100 million and has likewise failed to show that its proposed 2

approach, a rebuild of the station, is the most cost-effective. Rather than devoting a large 3

amount of money, $14 million, to begin a project that PG&E has failed to justify, the 4

Commission should decline to earmark any funds for rebuilding at this point and direct PG&E, if 5

it wishes to pursue this or a similar project, to present a quantitative analysis of the risk reduction 6

per dollar spent (also known as risk spend efficiency) of all alternatives as part of its showing in 7

the next case. Based on its participation in the Safety Model Assessment Proceeding (A.15-05-8

002), TURN has direct knowledge that PG&E has the knowhow to prepare such a quantitative 9

analysis of risk spend efficiency for risk mitigation alternatives, so this would not be a difficult 10

undertaking for PG&E. Accordingly, the part of PG&E’s forecast devoted to the Brentwood 11

Rebuild should be reduced to zero for this rate case period. 12

B. PG&E’s Forecast for Terminal Upgrade Work Should Be Reduced Based on 13 More Complete Cost Data 14

PG&E bases its forecast for the Terminal Upgrade cost category on a 3-year average of 15

costs for this work from 2014-2016, $2.8 million.10 TURN asked for equivalent information for 16

2012, 2013 and 2017. The full six years of recorded costs is shown in the table below. 17

Table 7-211 18

Recorded Costs for Terminal Upgrade Program ($ Millions) 19 20

2012 2013 2014 2015 2016 2017 6-Year Avg.

0.62 4.02 4.19 3.21 0.87 1.25 2.36 21

10 WP 7-69, Table 2. 11 Source: PG&E Response to TURN DR 11-2.

10

PG&E acknowledges that the mix of work for the three additional years added by TURN 1

is typical of the types of work expected for this category for the forecast period.12 Accordingly, 2

given the volatility in the recorded costs for this category, TURN recommends that the forecast 3

be based on the longer six-year average, resulting in an approximately $0.5 million reduction to 4

PG&E’s annual forecasts, as shown below. 5

Terminal Upgrades ($ millions) 2019 2020 2021 PG&E 2.87 2.97 3.05 TURN 2.43 2.43 2.43 TURN minus PG&E (0.44) (0.54) (0.62)

C. TURN’s Combined Recommendation 6

TURN’s combined recommendation for the Brentwood Rebuild and Terminal Upgrade 7

categories is as follows: 8

Combined Terminal Upgrades ($ Millions) (MAT 765) 2019 2020 2021 PG&E 7.44 7.54 7.62 TURN 2.43 2.43 2.43 TURN minus PG&E (5.01) (5.11) (5.19)

2) M&C STATION OVER PRESSURE PROTECTION ENHANCEMENTS - 9 CAPITAL 10

A. PG&E’s New $18 Million Capital Program Should Be Deferred Until PG&E 11 Gains the Benefits of Its System Planning Studies and Settles on the Best 12 Strategy for Reducing Over Pressure Events 13

PG&E states that the station Over Pressure Protection (OPP) Enhancement Program is a 14

new program designed to prevent large over pressure events due to equipment failure at regulator 15

12 PG&E Responses to DR TURN 23-1.c.

11

stations.13 According to PG&E, the expense projects in this program are for “system studies to 1

determine the most effective individual regulator station and system solution as well as new 2

technology pilot studies.14 Another outcome of the system studies will be the development of a 3

prioritization scheme for capital mitigation projects based on customer impact, identified areas of 4

liquids or debris, and operational factors.15 5

Even though PG&E has not yet performed these key system planning studies, PG&E 6

seeks funding for $6 million of capital projects (plus escalation) in each of the three rate case 7

years. The capital projects will modify or add station equipment to provide secondary protection 8

against over pressure events.16 9

With respect to this capital work, PG&E’s workpapers provide a cost breakdown 10

showing that PG&E intends to install a variety of different types of devices, including slam shut 11

devices, relief valves, and other alternate technologies.17 When TURN asked for further detail 12

about the work identified in the workpapers, PG&E provided an attachment that described a 13

different plan of work, heavily focused on installation of slam-shut devices, which PG&E 14

incorrectly stated “ties to” the forecast shown in the workpapers.18 When TURN pointed out the 15

significant discrepancies between the work shown in the workpapers and work described in 16

response to data request TURN 11-7, PG&E stated that its capital plan has “evolved” since the 17

plan presented in the workpapers and that the new plan is focused on slam-shut devices for a 18

certain type of transmission regulation stations (H-14).19 19

13 PG&E Testimony, pp. 7-57 to 7-58. 14 PG&E Testimony, p. 7-58. Similarly, page 7-59 references “[s]ystem planning studies to identify the most effective secondary overpressure protection option for specific stations.” 15 PG&E Testimony, p. 7-59. 16 PG&E Testimony, pp. 7-58 to 7-59. 17 WP 7-71, Table 3; Testimony, p. 7-59. 18 PG&E Response to DR TURN 11-7 and the confidential attachment, TURN 11-7Atch 01CONF. 19 PG&E Response to DR TURN 23-4; see also PG&E Response to DR TURN 23-6.

12

PG&E’s workpapers include a white paper on secondary over pressure protection 1

strategies that identifies several issues with the installation of slam-shut devices, including the 2

“major risk” of causing customer outages downstream after the devices operate (elsewhere 3

characterized in the workpaper as a “high” risk), and the potential for “spurious operation” of 4

such devices.20 In addition, the white paper describes the following risk: 5

These devices rapidly shut off flow and create the possibility for a pressure pulse back 6 upstream, which has the potential to create brief overpressure events upstream. This 7 phenomena needs to be studied to ensure that there are no detrimental effects. If 8 pressure pulses exist, there may be the need to add some type of pressure relief valve 9 upstream.21 10 11 TURN welcomes PG&E’s study of options for reducing or eliminating over pressure 12

events and supports the expense program to conduct system planning studies to identify the most 13

effective system plan for secondary over pressure protection. However, it makes more sense to 14

obtain the benefits of those planning studies before committing ratepayer funds to a new capital 15

program that was, by PG&E’s own admission, still evolving when it prepared this rate case and 16

that relies on a strategy, slam-shut devices, for which PG&E’s own white paper identifies 17

significant risks and limitations that need further study. 18

Therefore, TURN recommends that PG&E’s capital program be deferred until the next 19

rate case period, when PG&E will have the benefit of the system planning studies it intends to 20

perform in this rate case period. In the next GT&S, PG&E should be required to explain how its 21

proposed plan addresses the known risks and limitations for slam-shut devices and any others 22

solutions it proposes. Accordingly, TURN’s recommendation is as follows: 23

24

25

20 WP 7-97 to WP 7-98. 21 WP 7-97 (emphasis added).

13

Station OPP Enhancement Capital (MAT 76G)($ Millions) 2019 2020 2021 PG&E 6.14 6.16 6.15 TURN - - - TURN minus PG&E (6.14) (6.16) (6.15)

3) CRITICAL DOCUMENTS: THE COMMISSION SHOULD CONTINUE TO 1 ALLOW PG&E TO TRACK CRITICAL DOCUMENTS EXPENSES IN A 2 MEMORANDUM ACCOUNT FOR POTENTIAL FUTURE RECOVERY BY 3 APPLICATION 4

PG&E seeks $3.1 million in 2019 expense funding for its Critical Documents Program, to 5

revise and develop new critical drawings and documents reflecting installed facilities.22 6

This program is a continuation of the program with the same name that was begun in the 7

last GT&S case. In D.16-06-056, the Commission found that “it is likely that some portion [of 8

the costs in this program] will be to remediate prior deficient records management practices.”23 9

The Commission therefore deferred recovery of any costs in the program to ensure that PG&E 10

recovers “only the costs to update existing station documentation or create new documentation to 11

meet the standard set in Utility Standard TD-4551S” for facilities built on or after December 31, 12

1955.24 The decision allowed PG&E to track costs that PG&E believed met these requirements 13

in a memorandum account for potential recovery in a future application.25 The Commission 14

emphasized that tracking of the costs in the memorandum account did not mean that recovery 15

was appropriate and that PG&E would bear the burden of demonstrating that recovery was 16

appropriate, that PG&E incurred the costs prudently, and that the level of costs was reasonable.26 17

22 PG&E Testimony, pp. 7-61, 7-64. 23 D.16-06-056, p. 139. 24 Id. 25 Id. 26 Id., footnote 386.

14

PG&E states that it has tracked $6 million in this memorandum account for the 2015-2018 1

period.27 2

In this case, PG&E asks to discontinue the memorandum account28 and to obtain 3

approval for its $3.1 million expense forecast. PG&E asserts that its forecast only includes costs 4

to address facilities built on or before December 31, 1955.29 5

The Commission should reject PG&E’s request to discontinue the memorandum account 6

and should continue to defer recovery of costs tracked in the memorandum account until the 7

reasonableness issues for all of the tracked costs can be addressed in a future application. 8

PG&E’s removal of costs relating to facilities installed post-1955 does not fully address the 9

Commission’s concern that some of the incurred costs are to remediate past record-keeping 10

deficiencies. PG&E has made no effort in its request to demonstrate that the costs included in its 11

forecast were prudently incurred and were not to remediate past deficiencies. Rather than trying 12

to address that prudence issue in this case, the issue can be comprehensively addressed for all 13

costs tracked in the memorandum account when PG&E files its future application pursuant to 14

D.16-06-056. 15

Accordingly, no rate recovery of Critical Documents costs should be permitted at this 16

time and PG&E should be allowed to continue to track costs in a memorandum account pursuant 17

to the direction on page 139 of D.16-06-056. 18

19

20

21

27 PG&E Testimony, p. 7-63, footnote 16. 28 PG&E Testimony, p. 7-7. 29 PG&E Testimony, p. 7-63.

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4) STATION ASSESSMENT PROGRAMS 1

A. TURN Does Not Object to PG&E’s Expense Forecasts for Engineering 2 Critical Assessment (ECA) Phases 1 and 2 Provided that the One-Way 3 Balancing Account Is Retained 4

Like Critical Documents, ECA Phases 1 and 2 are continuations of programs begun in the 5

last rate case. ECA 1 entails reviewing, identifying and remediating issues that may compromise 6

station integrity.30 After ECA 1 is complete, some station components, such as those for which 7

the pressure test history is incomplete, may still require mitigation, which would occur in ECA 8

Phase 2.31 Thus, the need for ECA Phase 2 work is dependent on the outcome of ECA Phase 1. 9

In response to intervenor arguments that the amount of recoverable costs for ECA Phases 10

1 and 2 was highly uncertain, the Commission adopted expense forecasts for this work but 11

required PG&E to create one-way balancing accounts to track the difference between the 12

adopted amounts and its actual costs, limited to costs related to stations installed on or before 13

December 31, 1955.32 14

PG&E’s recorded results (for the costs that are recoverable from ratepayers), which are 15

generally much lower than the authorized amounts for both ECA Phases 1 and 2, prove the 16

wisdom of the creation of a one-way balancing account. 17

The table below shows that PG&E’s recorded results for 2015-2017 have been much 18

lower than authorized, particularly for ECA Phase 2, where, for example, 2017 actual spending 19

was only 2% of the authorized amount. 20

21

22

30 PG&E Testimony, p. 7-66. 31 PG&E Testimony, pp. 7-68 to 7-69. 32 D.16-06-056, p. 135.

16

1

Table 7-3 2

Comparison of Authorized33 and Recorded34 Costs for ECA Phases 1 and 2 ($ Millions) 3 4

Activity 2015 Auth.

2015 Actual35

2015 Actual % of Auth.

2016 Auth.

2016 Actual

2016 Actual % of Auth.

2017 Auth.

2017 Actual36

2017 Actual % of Auth.

ECA 1 15.63 9.98 63.9% 16.01 7.6937 48.0% 16.68 7.72 46.2% ECA 2 8.68 0.57 6.6% 8.89 1.03 11.6% 9.10 0.20 2.2%

5 In light of PG&E’s proven difficulty in accurately forecasting costs for these programs --6

and demonstrated bias toward over-forecasting -- TURN recommends that the Commission 7

retain the one-way balancing account for the 2019-2021 rate case period. Provided that the one-8

way balancing account is retained, TURN does not take issue with PG&E’s 2019 expense 9

forecasts of $4.72 million for ECA Phase 1 and $1.83 million for ECA Phase 2. 10

B. Consistent with TURN’s Recommendation for Critical Documents, the 11 Commission Should Allow PG&E to Continue to Track Station Strength 12 Testing Expenses in a Memorandum Account for Potential Future Recovery 13 By Application 14

After ECA Phase 1 and 2 work has been completed, PG&E may perform station 15

component strength testing where warranted.38 Because of the complexity and increased risk of 16

33 Authorized figures are from D.16-06-056, p. 135, using PG&E’s “old” cost model. 34 Recorded figures for 2015 use the old cost model and 2016 and 2017 use the new cost model. PG&E’s workpapers (WP 7-10) provide actual results under the old cost model only for 2015, which means that for 2015, both authorized and actual numbers in the table use the old cost model. For 2016 and 2017, TURN only has the new cost model numbers for actual results. WP 7-10 shows that the conversion factor for these work categories from old to new cost model was 97.3% for ECA 1 and 99.4% for ECA 2, meaning that the new cost model numbers are only slightly lower (by less than 3%) than the old cost model numbers. Thus, TURN infers that converting the new cost model figures for 2016 and 2017 to the old cost model would only increase those figures slightly. As the table shows, even if the increases were on the order of 20-30% (which TURN thinks is unlikely), the converted 2016 and 2017 recorded numbers would still fall significantly short of PG&E’s authorized figures. 35 WP 7-10 (old cost model results) 36 PG&E Response to ORA 35-1, Atch 01 Rev01. 37 WP 7-1. As noted in a previous footnote, this is a new cost model figure. 38 PG&E Testimony, p. 7-73.

17

strength testing station components, PG&E characterizes this work as a “last-resort 1

alternative.”39 2

In D.16-06-056, the Commission agreed with TURN that because these costs are 3

unknowable until the ECA Phase 1 and 2 work is complete and because some of the costs are 4

inappropriate to recover from ratepayers, PG&E’s costs should be tracked in a memorandum 5

account and recovery deferred until a future application, i.e., the same treatment as Critical 6

Documents expenses.40 Notably, in the 2015 GT&S, PG&E forecast amounts of $5.9 million, 7

$11.2 million, and $22.9 million for this program in 2015, 2016 and 2017 respectively, but in 8

reality show zero recorded costs for these years.41 9

The reasons for deferring recovery in the last GT&S still apply. The Commission should 10

not approve any forecast funding for this work and PG&E should be allowed to continue to track 11

costs in a memorandum account pursuant to the direction on page 136 of D.16-06-056. 12

5) PHYSICAL SECURITY CAPITAL: PG&E’S FORECAST SHOULD BE 13 REDUCED TO REFLECT A LOWER AVERAGE COST OF UPGRADE 14 PROJECTS 15

PG&E forecasts the need for security upgrade costs for two stations per year for each of 16

the three years in the rate case period, at a cost of approximately $9 million per year.42 PG&E’s 17

testimony lists a variety of different type of upgrade projects it typically performs including 18

installation of locks, construction of walls or fences, video surveillance technology and intrusion 19

detection and activation.43 In response to TURN’s data requests, PG&E stated that its 2019-2021 20

39 PG&E Testimony, p. 7-74. 40 D.16-06-056, pp. 135-136. 41 D.16-06-056, p. 7-76 , Table 7-29 42 PG&E Testimony, pp. 7-76 to 7-77. 43 Id., p. 7-77.

18

forecast is “at a programmatic level of two stations per year and not based on specific locations;” 1

nor is it based on specific work tasks that PG&E plans to perform.44 2

PG&E used an average of the costs of just two security upgrade projects completed in 3

2016, which came in at $4.57 million per project, and then multiplied by two planned projects 4

per year to arrive at its forecast. In discovery, TURN learned that PG&E has since completed 5

three more projects in 2017, each with a lower cost than the two 2016 projects. The costs for the 6

five projects are shown in the following table. 7

Table 7-445 8

Average Cost of Security Upgrade Projects ($ Millions) 9 10

Station 2016-1 2016-2 2016 Average

2017-1 2017-2 2017-3 2017 Average

Total Average

Cost 4.76 4.36 4.57 4.13 2.44 2.82 3.13 3.70 11

Notably, the average cost of the three 2017 projects, $3.1 million, is significantly lower than the 12

average cost of the two 2016 projects, $4.6 million, that PG&E used for its forecast. 13

Based on this updated data, a good argument could be made that the 2017 average cost 14

per project should be used, which reflects the most recent costs and may reflect cost savings that 15

PG&E has achieved. However, TURN will use the average of all five projects, $3.70 million, 16

for its forecast. Accordingly, TURN recommends that PG&E’s forecast be reduced as follows: 17

18

19

44 PG&E’s Response to TURN DRs 11-10.b and 11-12.a. 45 Source: WP 7-75 and PG&E Response to TURN DR 11-11.a.

Physical Security - Capital (MAT 76Z) ($ millions) 2019 2020 2021 PG&E 9.39 9.43 9.43 TURN 7.61 7.63 7.61 TURN minus PG&E (1.78) (1.80) (1.82)

19

IV. YAP TESTIMONY 1

1) RESPONSE TO PG&E CHAPTER 7, SECTION C, SUBSECTION 4B, 2 REPRIORITIZED SIMPLE STATION REBUILD WORK SUBJECT TO THE 3 2017 GRC SETTLEMENT 4

A. It Was Reasonable for PG&E to Reprioritize Funds from Simple Station 5 Rebuild Work to Complex Station Rebuild Work Based on Information from 6 Field Condition Assessments. 7

In D.16-06-056, the Commission authorized $81.579 million in terms of the old cost 8

model to perform 30 simple station rebuilds.46,47 The authorized amount translates to $83.5 9

million in terms of the new cost model.48 Thus, the authorized amount per site was $2.783 10

million in terms of the new cost model. In D.16-06-056, the Commission also authorized $34.03 11

million in terms of the old cost model to perform eight complex station rebuilds.49,50 The 12

authorized amount translates to $35.2 million in terms of the new cost model.51 Thus, the 13

authorized amount per site was $4.4 million per site in terms of the new cost model. 14

PG&E employed an outside engineering firm to conduct a detailed site assessment for the 15

simple and complex stations.52 The assessment included “a desktop review of available data for 16

asset management, project management and maintenance databases and supplemented by visual 17

inspection from field visits.”53 The assessments were conducted during the 2013-2014 period.54 18

46 PG&E Chapter 7 at 7-52, Ftn.. 12. 47 D.16-06-056, slip op. at 151. The decision adopted PG&E’s 2015 forecast of $19.66 million and applied the capital escalation factors found in Appendix E, Table 7. The forecast was to complete 22 stations in 2015-2017, and the decision added another eight stations to be completed in 2018 for a total of 30 stations. See A.13-12-012, Ex. PG&E-1 at 6-47. 48 PG&E Chapter 7 at 7-52. 49 PG&E Chapter 7 at 7-53, Ftn. 13. 50 D.16-06-056, slip op. at 152. The decision adopted PG&E’s 2015 forecast of $8.2 million and applied the capital escalation factors found in Appendix E, Table 7. The forecast was to complete six stations in 2015-2017, and the decision added another two stations to be completed in 2018 for a total of eight stations. See A.13-12-012, Ex. PG&E-1 at 6-48. 51 PG&E Chapter 7 at 7-53. 52 PG&E’s Response to TURN-21, Q.12(a). 53 Id. 54 Id.

20

The station assessments were followed by control assessments at complex stations, evaluating 1

the operation of the regulation equipment and providing specific information to inform station 2

rebuild actions.55 PG&E explains that these assessments demonstrated greater concerns with the 3

condition of the complex stations than with the condition of the simple stations.56,57 Therefore 4

PG&E prioritized work at the complex stations over work at the simple stations.58 Based on the 5

enhanced amount of information that PG&E developed about the conditions of the complex 6

stations as well as the simple stations, I agree it made sense to reprioritize the use of funds. 7

B PG&E Has Significantly Exceeded Authorized Expenditure Levels in 8 Pursuing Both Its Simple Station and Complex Station Rebuild Work But 9 Failed to Provide Any Information to Demonstrate that such Expenditure 10 Levels Are Reasonable. 11

PG&E projects that it will complete four simple station rebuilds at a cost of $26 million 12

during the 2015-2018 period.59 However, in response to a TURN data request asking for the 13

identification of the simple station rebuild projects that were either completed or will be 14

completed during the period 2015-2018, PG&E could only identify three stations, each of which 15

had been completed by early 2018.60 The total 2015-2018 capital expenditure identified for 16

those three stations is $20.832 million, an average of $6.944 million per station.61 17

PG&E projects that it will complete nine complex station rebuilds by the end of 2018 for a total 18

cost of $127 million.62 PG&E’s response to a TURN data request demonstrates that the updated 19

projected total is even higher at $156.936 million for nine stations.63 Two-thirds of the stations 20

55 Id. 56 PG&E Chapter 7 at 7-52 to 7-53. 57 PG&E’s Response to TURN-21, Q.12(c). 58 PG&E Chapter 7 at 7-53. 59 Id. at 7-52. 60 PG&E’s Response to TURN-21, Q.11, Atch01CONF. 61 Id. 62 PG&E Chapter 7 at 7-53. 63 PG&E’s Response to TURN-21, Q.11, Atch01CONF.

21

were completed prior to 2018.64 The average 2015-2018 capital expenditures including actual 1

and projected costs are $17.437 million per station. 2

The table below presents, broken down by year, the average costs for both simple and 3

complex station rebuilds completed in the years 2015-2017 and the average forecasted costs for 4

both simple and complex station rebuilds expected to be completed during 2018: 5

Table 7-5 6

7

8

9

PG&E completed the three simple station rebuilds for costs ranging from $6.0 million to 10

$7.5 million, an average of $6.9 million, but the cost per station authorized by the Commission 11

was only $2.8 million. Thus, PG&E simple station rebuild costs have averaged about 2.5 times 12

the authorized level. PG&E has completed six of the complex station rebuilds for average 13

annual costs ranging from $4.667 million to $13.656 million, with an average cost of about $11.2 14

million, but the cost per station authorized by the Commission was only $4.4 million. 15

Furthermore, PG&E projects that it will complete an additional five stations for a 16

combined cost of $112 million, which is an average of $22.4 million per station. Thus, the cost 17

per station has averaged about 2.5 times the authorized level for 2015-2017, but the cost per 18

station is projected to average about 5.1 times the authorized level for 2018. 19

PG&E has not provided any support to justify the excessive costs of rebuilding each of 20

the simple or complex stations. PG&E has only provided the recorded costs during the period 21

2015-2017 and provided the forecasted costs for 2018. At TURN’s request, PG&E has provided 22

64 Id.

2015 2016 2017 2018$000

Recorded Recorded Recorded ForecastedSimple Station Rebuild $7,510 $6,065 $7,257Complex Station Rebuild $13,656 $12,909 $4,667 $22,410

Average per Station Cost

22

detailed explanations of the station assessment process that PG&E conducted to determine that 1

more work was warranted on the complex stations than on the simple stations, but PG&E has 2

provided no explanation regarding the level of investment that was required to restore the 3

stations. Furthermore, PG&E has provided no analysis of why the rebuilds for each of the 4

stations has actually cost as much as it has cost. 5

The Commission has an obligation to ensure that costs passed into rates are reasonable. 6

There is no evidence in this proceeding that the costs of the simple and complex station rebuilds 7

in excess of authorized amounts constitute reasonable expenditures. The burden of proof for 8

demonstrating reasonableness rests with the utility as enunciated by Commission decision. 9

Whenever the utility comes before this Commission seeking affirmative rate 10 relief, it full exposes its operations to our scrutiny and review. It must justify 11 the reasonableness of its request and its operations by making at least a prima 12 facie case of reasonableness, even in the absence of opposition. Where it faces 13 opposition, its reasonableness showing is naturally a more difficult undertaking. 14

This is a statutory obligation imposed on every public utility subject to PU Code 15 §451, which provides in relevant part that: “All Charges demanded or received 16 by any public utility…shall be just and reasonable…”65 17

PG&E requests to recover capital expenditures that are grossly in excess of the levels 18

authorized by the Commission in D.16-06-056. Because PG&E has failed to present even a 19

prima facie case supporting its request to recover these excess costs, the Commission should 20

deny PG&E’s request. PG&E should be entitled to recover costs that reflect the authorized 21

levels for capital expenditure reflecting the number of stations that were completed each year as 22

well as the type of station. Table 7-6 compares the incurred and authorized capital expenditure 23

level on an annual basis, showing the amount that should be disallowed: 24

25

65 D.87-12-067, slip op. at 24.

23

1

Table 7-6 2

3

The Commission should allow into rate base only $11.583 million (less depreciation) for 4

simple and complex station rebuilds completed during 2015. The Commission should allow into 5

rate base only $7.183 million (less depreciation) for simple and complex station rebuilds 6

completed during 2016. The Commission should allow into rate base only $4.40 million (less 7

depreciation) for the complex station rebuild completed during 2017. 8

The expenditures for 2018 shown in Table 7-6 are based on PG&E’s projections. We 9

will not have confirmation of the exact amount of PG&E’s expenditures on the simple and 10

complex station rebuilds completed in 2018 until sometime in 2019. Therefore, consistent with 11

the recommendations of TURN witness Florio regarding Chapter 14A, I recommend that the 12

Commission authorize the addition of the 2018 simple and complex station rebuild program to 13

rate base only after the completion of the work and the recording of actual costs. The total 14

amount allowed into rate base should be limited to no more than the expenditure rate authorized 15

by the Commission times the actual number of simple and complex stations, respectively, 16

completed during 2018. 17

2015 2016 2017 2018

$000 Recorded Recorded Recorded ForecastedSimple Station Rebuild (MAT 763) $7,510 $6,065 $0 $7,257Complex Station Rebuild (MAT 764) $27,312 $12,909 $4,667 $112,048

Simple Station Rebuild (MAT 763) $2,783 $2,783 $0 $2,783Complex Station Rebuild (MAT 764) $8,800 $4,400 $4,400 $22,000

Simple Station Rebuild (MAT 763) $4,727 $3,281 $0 $4,474Complex Station Rebuild (MAT 764) $18,512 $8,509 $267 $90,048Figures are based on D.16-06-056 and PG&E's Response to TURN-21, Q.11, Atch01CONF

Authorized

Disallowance

Incurred

24

However, if the Commission wishes instead to adopt PG&E’s forecasted 2018 numbers 1

of simple and complex station rebuilds to be completed in 2018, the amount allowed in rate base 2

should be limited to $24.783 million, which is the total of the Commission’s authorized 2018 3

level of cost per station66 for simple stations times the projected number of simple station 4

rebuilds and for the Commission’s authorized 2018 level of cost per station67 for complex 5

stations times the projected number of complex station rebuilds as shown in the table above. 6

7

2) RESPONSE TO PG&E CHAPTER 7, SECTION C, SUBSECTION 2B, 8 REPRIORITIZED LOS MEDANOS COMPRESSOR REPLACEMENT WORK 9 SUBJECT TO THE 2017 GRC SETTLEMENT 10

A. Redirecting Funds for Los Medanos Compressor Replacement Project Is 11 Appropriate in Light of PG&E’s Recommended Closure of the Los Medanos 12 Storage Field But the Uses to Which PG&E Propose to Apply Those Funds 13 Need to Be Reasonable. 14

In D.16-06-056, the Commission authorized the replacement of the compressor at Burney 15

(K-2) unit for $26.75 million in 2015.68 This work was forecasted as requiring two years to 16

complete so the total amount authorized for Burney was $54.115 million. The Commission also 17

authorized the replacement of the compressor at the Los Medanos storage field beginning in 18

2017 for an amount of $28 million.69 Since the rate case period was extended to 2018, the total 19

authorized amount for Los Medanos was $57.032. The combined capital expenditures 20

authorized for the two compressor replacement projects was therefore $111.147 million. PG&E 21

confirms that the Commission authorized $111 million in terms of the old cost model or $114.6 22

million in terms of the new cost model for the two compressor replacement projects.70 23

66 D.16-06-056, slip op. at 88, App. E. Table 7. The authorized cost per mile escalates each year. 67 D.16-06-056, slip op. at 88, App. E. Table 7. The authorized cost per mile escalates each year. 68 D.16-06-056, slip op. at 144, App. E, Table 7. 69 Id. 70 PG&E Chapter 7 at 7-44, Ftn. 9.

25

PG&E states that it has cancelled the Los Medanos compressor replacement program 1

because PG&E has proposed to close the Los Medanos storage field at part of PG&E’s Natural 2

Gas Storage Strategy (“NGSS”).71 PG&E states that the expenditures that would have been used 3

to complete the Los Medanos compressor replacement have been used for other “high-priority 4

C&P programs such as Upgrade Station Controls and Physical Security Capital programs.”72 I 5

agree that it does not make sense to replace a compressor at a storage field if PG&E is planning 6

to close the storage field. However, the uses to which PG&E proposes to put the redirected Los 7

Medanos funds need to be a reasonable use of ratepayer funds. 8

B. Having Access to Redirected Funds from a Cancelled Compressor 9 Replacement Project Does Not Justify Overspending on Another Compressor 10 Replacement Project. 11

One use to which PG&E appears to have put some of the Los Medanos funds to is to 12

cover cost overruns for the Burney K-2 compressor replacement project. This is not a reasonable 13

use for the Los Medanos funds provided by ratepayers, particularly in the absence of any PG&E 14

justification for the excess costs. 15

PG&E states that it has spent $62.58 million on the Burney K-2 replacement project as of 16

the end of May 2018.73 PG&E estimates that it will spend an addition $5.1 million on the 17

Burney K-2 replacement project during the last seven months of 2018 and an additional $2.6 18

million on the project in 2019.74 This would bring the total capital expenditures on the Burney 19

K-2 compressor replacement project to $70.26 million. This is $16.145 million in excess of the 20

Commission’s authorized $54.115 million expenditure level. Having access to unspent funds 21

71 PG&E Chapter 7 at 7-44. 72 Id. 73 PG&E’s Response to TURN-21, Q.10(a). 74 PG&E’s Response to TURN-21, Q.10(b).

26

because the Los Medanos compressor was not replaced does not make overspending on the 1

Burney compressor replacement project reasonable. 2

PG&E has provided no testimony or other information to justify the excessive spending 3

levels on the Burney K-2 compressor replacement project. The Commission has an obligation to 4

ensure that costs passed into rates are just and reasonable. The Commission addressed this same 5

type of deficiency in PG&E’s showing when considering excess costs in A.13-12-012 and the 6

Commission rejected PG&E’s proposed capital expenditures because PG&E failed to justify 7

them as reasonable. 8

A review of PG&E’s testimony finds that, aside from listing the 2011 9 and 2012 recorded costs and the 2013 and 2014 forecast costs for MWC-10 78 (Manage Buildings) and MWC-05 (Tools and Equipment), there is no 11 explanation how the 2011-2014 costs were determined. Further, 12 although PG&E contends that the programmatic costs for Pipeline 13 Reliability Safety and Corrosion are supported “through its testimony 14 and workpapers in its initial showing,” it fails to provide any citation to 15 any supporting documents. Absent this information, there is no basis for 16 the Commission to determine what work was performed in these projects 17 and whether the level of spending was reasonable.75 18

The Commission should once again reject PG&E’s proposal to add excessive capital 19

expenditures on the Burney K-2 Compressor Replacement project to its Test Year 2019 20

forecasted rate base. The Commission should limit the amount of Burney K-2 compressor 21

replacement costs to the authorized $54.115 million amount as shown in Table 7-7: 22

Table 7-776,77 23

24

75 D.16-06-056, slip op. at 272-273 (citations omitted). 76 D.16-06-056, slip op. at 143-144, App. E, Table 7. 77 PG&E’s Response to TURN-21, Q.10(a) & Q.10(b).

Authorized Forecasted DisallowedMAT 76X $000 $000 $000

Burney K-2 Replacement 54,115 70,260 16,145

For the Test Year 2019

27

C. Likewise, Having Access to Redirected Funds from a Cancelled Compressor 1 Replacement Project Does Not Justify Overspending on Station Control 2 Replacement Projects. 3

PG&E also claims that it spent some of the Los Medanos funds on replacing station 4

controls at a number of stations. In order to evaluate the appropriateness of the reallocation of 5

funds, one has to first consider what was authorized for this work and what was actually spent by 6

PG&E once it had applied the Los Medanos funds. 7

In D.16-06-056, starting in 2016, the Commission authorized $1.6 million for the upgrade 8

of controls at a station for each year of the rate case period.78 Thus, PG&E was authorized to 9

spend $4.848 million in terms of the old cost model or $4.838 million in terms of the new cost 10

model79 to upgrade station controls at three stations. 11

In response to a TURN data request, PG&E states that it has upgraded station controls at 12

only two stations. The first station (Santa Rosa) was completed in 2016 for a cost of $1.9 13

million.80 PG&E projects that the second station (Gerber) will be completed in 2018 for a cost of 14

$4.030 million.81 While the first station control upgrade was completed for 19 percent more than 15

the authorized level, PG&E expects that it will spend 2.4 times the authorized level on its 2018 16

Gerber station control upgrade. Having access to the Los Medanos deferral does not justify 17

spending grossly in excess of the authorized levels on upgrading station controls. 18

PG&E has provided no testimony justifying its spending 2.4 times the authorized level 19

for upgrading the Gerber station controls. PG&E has provided no information in its testimony 20

and workpapers apart from a listing of recorded costs for years 2012-2016 and a forecast of costs 21

78 D.16-06-056, slip op. at 145, App. E, Table 7. 79 PG&E Chapter 7 Workpapers at WP7-46 states the conversion rate from the old cost model to the new cost model for MAT 76T, Upgrade Station Control, is 99.8 percent. 80 PG&E Response to TURN-21, Q.10(d), Atch01. 81 Id.

28

for years 2017-2021. The Commission has an obligation to ensure that costs passed into rates 1

are just and reasonable. Absent a compelling justification for the expenditure level, the 2

Commission should not allow PG&E to place more of the expenditure for the Gerber facility 3

than is authorized by D.16-06-056. 4

We will not know the completed cost for the upgraded Gerber station controls until the 5

work is completed and actual costs have been recorded. Therefore, consistent with the 6

recommendations of TURN witness Florio regarding Chapter 14A, I recommend that the 7

Commission authorize the addition of the Gerber station controls replacement work based on 8

recorded costs only after the completion of the work. The total amount allowed into rate base 9

should be limited to the Commission’s authorized level of $1.684 million. 10

However, if the Commission wishes instead to develop a 2018 rate base figure based on 11

PG&E’s forecasted amounts, the Commission should limit the amount allowed for the capital 12

expenditures on the Gerber station controls replacement project to the Commission’s authorized 13

level of $1.684 million as shown in Table 7-8: 14

Table 7-882,83 15

16

17 18 19 20 21 22

82 D.16-06-056, slip op. at 145. 83 PG&E’s Response to TURN-21, Q.10, Atch01.

Authorized Forecasted DisallowedMAT 76T $000 $000 $000

Gerber station controls replacement 1,642 4,030 2,388

For the year 2018

29

V. DEFEVER TESTIMONY 1

1) FACILITIES ROUTINE EXPENSE 2

For the 2019 Test Year, the Company is requesting $11.259 million, a $3.906 million 3

increase over the 2016 amount of $7.353 million.84 PG&E determined this amount using an 4

average of costs from 2014 through 2016 and adjusting for large one-time projects and projects 5

related to new regulation,85 with incremental adjustment amount of $3,378,420.86 6

TURN takes issue with PG&E’s forecasted increase for this cost. The following table 7

provides the recorded costs for this expense for each of the years 2012-2017: 8

Table 7-9 9

HISTORICAL FACILITIES ROUTINE EXPENSE87 10 11

$000s 2012 2013 2014 2015 2016 2017

$5,358 $5,167 $8,408 $6,932 $7,353 $9,155 12

The Company was asked in TURN_020-Q01 to provide all documents including 13

estimates, work orders, etc., supporting the $3,378,420 adjustment. In response, PG&E provided 14

the attachment TURN_020-Q01Atch01, a one-page chart that listed the costs and order numbers 15

and also explained the basis for the forecast. However, PG&E response did not provide any 16

actual work orders or quotes. The requested support for this cost was lacking. As an example, 17

one project, for which the planned level for 2018 and 2019 was $200,000, the Order Description 18

states: 19

84 PG&E WP, p. WP 7-4. 85 PG&E Direct Testimony, p. 7-31. 86 PG&E WP, p. WP 7-11. 87 DR TURN-004, Q01.

30

Future Planned work, work order has not been created.88 1

For a planned $1 million project, the Order Description states: 2

Future Planned work, work order has not been created. There are emergent expense 3 projects such as compressor rod packing etc. that are not planned and but [sic] will be 4 needed to support these regulations.89 5 6

The provided document provides insufficient support for $3,378,420 in costs. PG&E has not 7

shown that the requested increase can be considered known and measurable. 8

Another reason to question the increase is the inaccuracy of previous forecasts made by 9

PG&E, which forecasted 2017 expenses to be $13,859,000,90 but the recorded expense in 2017 10

was only $9,154,745,91 a difference of $4,704,255. 11

As shown in the chart above, costs have trended up over the years 2015 – 2017. As such, 12

the last recorded year (2017) is the most known and measurable amount and therefore 13

appropriate to use for the forecast. As explained above, the use of the last recorded year is 14

consistent with prior CPUC guidelines for this situation. 15

For Facilities Routine Expense, TURN recommends the use of $9.155 million for the 16

2019 test year, a reduction of $2.104 million. ($11,259,000 - $9,155,000) 17

18

VI. CONCLUSION 19

This concludes TURN’s testimony regarding Chapter 7 issues. TURN requests that the 20

Commission adopt the recommendations set forth in this testimony. 21

88 DR TURN-020, Q01 Atch01. 89 Id. 90 PG&E Direct Testimony, p. 7-32. 91 DR TURN-004, Q01.