STATE OF INDIANA INDIANA UTILITY REGULATORY … · 8/6/2013 · Q1. Please state your name, employer and business address. AI. My name is Barry J. BentleyJames A. Sadtler. I am employed

STATE OF INDIANA

INDIANA UTILITY REGULATORY COMMISSION

VERIFIED PETITION OF INDIANAPOLIS POWER & ) LIGHT COMPANY ("IPL"), AN INDIANA) CORPORATION, FOR (1) ISSUANCE OF A ) CERTIFICATE OF PUBLIC CONVENIENCE AND ) NECESSITY FOR THE CONSTRUCTION OF A ) COMBINED CYCLE GAS TURBINE GENERATION ) FACILITY ("CCGT"); (2) ISSUANCE OF A ) CERTIFICATE OF PUBLIC CONVENIENCE AND ) NECESSITY TO CONVERT COAL FIRED) GENERATING FACILITIES TO GAS; (3) APPROVAL ) OF THE CONSTRUCTION OF TRANSMISSION, ) PIPELINE AND OTHER FACILITIES; (4» APPROVAL OF ASSOCIATED RATE MAKING AND ) CAUSE NO. 44339 ACCOUNTING TREATMENT; (5) AUTHORITY TO ) TIMELY RECOVER 80% OF THE COSTS ) INCURRED DURING CONSTRUCTION AND) OPERATION OF THE GAS REFUELING PROJECT ) THROUGH IPL'S ENVIRONMENTAL ) COMPLIANCE COST RECOVERY ADJUSTMENT; ) (6) AUTHORITY TO CREATE REGULATORY ) ASSETS TO RECORD (A) 20% OF THE REVENUE ) REQUIREMENT FOR COSTS, INCLUDING,) CAPITAL, OPERATING, MAINTENANCE,) DEPRECIATION TAX AND FINANCING COSTS ON ) THE REFUELING PROJECT WITH CARRYING ) COSTS AND (B) POST-IN-SERVICE ALLOWANCE ) FOR FUNDS USED DURING CONSTRUCTION, ) BOTH DEBT AND EQUITY, AND DEFERRED ) DEPRECIATION ASSOCIATED WITH THE) PROJECTS UNTIL SUCH COSTS ARE REFLECTED ) IN RET AIL ELECTRIC RATES; AND (7) ISSUANCE ) OF A NECESSITY CERTIFICATE TO TRANSPORT ) NATURAL GAS IN INDIANA )

PETITIONER'S NOTICE OF SUBSTITUTION OF WITNESSES AND ' SUBMISSION OF REVISIONS TO DIRECT TESTIMONY

Petitioner Indianapolis Power & Light Company ("IPL"), by counsel, hereby gives notice

of witness substitution and revisions to IPL's prefiled case-in-chief.

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shunter

New Stamp

1. Witness Substitution. IPL hereby submits the verified direct testimony of James

Sadtler and Craig Jackson and notifies the Commission and the parties that Ml'. Sadtler is being

substituted for and is adopting the testimony previously prefiled by IPL Witness Bentley and Mr.

Jackson is being substituted for and is adopting the testimony previously prefiled by IPL Witness

Huntington.

2. For the convenience of the Commission and the parties, redline versions of Mr.

Sadtler's and Mr. Jackson's testimonies are attached showing the changes from the previously

prefiled public version of the testimony they are replacing. In addition, clean copies of their

respective testimony are also attached. A clean version of the confidential testimony is being

filed under seal in accordance with Commission procedure. At the evidentiary hearing in this

Cause, clean versions of the direct testimony of Mr. Sadtler and Mr. Jackson will be offered into

evidence. For ease of reference, Petitioner's Exhibit BJB-2 (Confidential) will not be relabeled.

3. Related Changes to Prefiled Case-in-Chief. The following pages ofIPL's prefiled

direct testimony are also being corrected to reflect the witness substitutions. Clean copies of the

public revised pages are attached hereto and the confidential pages will be submitted under seal

pursuant to the Commission's May 28, 2013, Docket Entry. Clean copies of the revised pages

will be included in the court reporter copies offered into evidence at the hearing.

Petitioner's Exhibit KWC-l (Public):

• Table on Page 6 - replace "Barry 1. Bentley" with "James Sadtler"

• Table on Page 6 - replace "Kelly M. Huntington" with "Craig Jackson"

• Page 9, line 9 - replace "Bentley" with "Sadtler"

• Page 15, line 1 - replace "Bentley's" with "Sadtler's"

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Petitioner's Exhibit KWC-l (Confidential):



Petitioner's Exhibit HNS-l :


• Page 13, line 17 - replace "Bentley's" with "Sadtler's"

Petitioner's Exhibit RLB-l (Public):


• Page 15, line 12 - replace "Huntington" with "Jackson"

Petitioner's Exhibit DCD-l (Public):


Petitioner's Exhibit CFA-l:

• Page 8, lines 21 and 26 - replace "Bentley" with "Sadtler"

Petitioner's Exhibit JLC-l :


4. Additional Revision to Exhibit. Petitioner also submits Petitioner's Exhibit LHA-

4 (Revised). The heading on the third column of this exhibit has been changed from "IURC

Gross EE Related Demand Savings" to "Net Incremental Annual Demand Reductions". A clean

copy of Exhibit LHA-4 (Revised) is attached hereto and will be offered into evidence at the

hearing in this Cause in lieu of the previously filed document.

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Dated this 6th day of August, 2013.

Respectfully submitted,

Teresa Morton yliart o. 14044-49) P. Jason Stephenson (No. 21839-49) Jeffrey M. Peabody (No. 28000-53) BARNES & THORNBURG LLP

11 S. Meridian Street Indianapolis, Indiana 46204 Nyhart Phone: (317) 231-7716 Stephenson Phone: (317) 231-7749 Peabody Phone: (317) 231-6465 Fax: (317) 231-7433 Nyhart Email: [email protected] Stephenson Email: [email protected] Peabody Email: [email protected]

Attorneys for INDIANAPOLIS POWER & LIGHT COMPANY

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CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing was served upon the

following via electronic mail this 6th day of August, 2013.

Lorraine Hitz-Bradley Randall C. Helmen OFFICE OF UTILITY CONSUMER COUNSELOR

115 W. Washington Street, Suite 1500 South Indianapolis, Indiana 46204 Phone: (317) 232-2494 Fax: (317) 232-5923 Email: [email protected]

[email protected]

Joshua A. Claybourn Robert E. Heidorn Vectren Corporation One Vectren Square 211 N.W. Riverside Drive Evansville, IN 47708 Email: [email protected]

[email protected]

Timothy L. Stewart Anne E. Becker Lewis & Kappes, P. C. One American Square, Suite 2500 Indianapolis, Indiana 46282 Email: [email protected]

[email protected]

INDSOI 1408087vI

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Jennifer A. Washburn Citizens Action Coalition 603 East Washington Street, Suite 502 Indianapolis, Indiana 46204 Phone: (317) 735-7764 Fax: (317) 290-3700 Email: [email protected]

J. David Agnew Lorch N aville Ward, LLC 506 State Street P.O. Box 1343 New Albany, Indiana 47150-1343 Phone: (812) 949-1000 Fax: (812) 949-3773 Email: [email protected]

Iil1<71vlzwt Teresa Mo&n Nyhart

Petitioner's Exhibit BJRJAS-l(PUBLIC)

(PUBLIC)

VERIFIED DIRECT TESTIMONY

OF

BARRY J. BENTLEY

JAMES A. SADTLER

ON BEHALF OF

INDIANAPOLIS POWER & LIGHT COMPANY

CAUSE NO. 44339

SPONSORING PETITIONER'S EXHIBIT BJB-2 (CONFIDENTIAL)

Petitioner's Exhibit BJ-BJAS-l (PUBLIC)

VERIFIED DIRECT TESTIMONY OF BARRY J. BENTLEYJAMES A. SADTLER ON BEHALF OF


Q1. Please state your name, employer and business address.

AI. My name is Barry J. BentleyJames A. Sadtler. I am employed by Indianapolis Power &

Light Company ("IPL" or "Company"), One Monument Circle, Indianapolis, Indiana

46204.

Q2. What is your position with IPL?

A2. I am Senior Vice President, Customercurrently the Director of Transmission Field

Operations.

Q3. Please describe your duties as Senior Vice President, Customer Director of

Transmission Field Operations.

A3. In this position, my principal responsibilities include transmission, distribution, customer

service, stffitegic cus-tBfRef-ac·eeuHts,afl:d.-s.upply chain.As Director of Transmission Field

Operations. I am responsible for the real time operations for the IPL transmission and

distribution systems. the operation and maintenance of all IPL substations and the

downtown electrical network. This includes the operation and maintenance of the

protective relaying schemes. and supervisol)' control and data acquisition systems. The

real time operation of the transmission system requires coordination with the

Midcontinent Independent System Operator. Inc. (MISO).

Q4. Please summarize your educational and professional qualifications.

A4. I heklreceived a Bachelor of Science tIegr-eeDegree in Electrical Engineering Technology

from Purdue University. I have attended several management courses from the

IPL Witness BentleySadtler- 1


University of MichigLm and the University of Virginia, Darden School of BusinesG. I am

a former member of the East Central l\rea Reliability Council ("BCAR") Operation and

Compli£mce PLmekam a Registered Professional Engineer in the State of Indiana.

Q5. Please summarize your prior work experience.

AS. Including my Cooperative Engineering assignmentG while attending Purdue University, I

have been employed at IPL for over )5 years. My experience includes positions of

increasing reGpom;ibility in the areaG of power generation, tranGmission and distribution,

customer service, supply chain, corporate venture capital, fuel supply, and energy

di~;patching and marketing. I began my career \vith IPL in 198(1 as a Cooperative

Engineering student while attending Purdue University. In 1988, I became a full time

employee, working an an engineer in Pmver Production. In 1990, I became Supervit;or,

Instrument Electrical at the H. T. Pritchard Generation Station. In 1992, I moved to

Supervisor, Maintemmce for all electrical and mechanical maintenance at the Pritchard

Plant. Bet\veen 1993 and 1998, I '.vas Supervisor and then Director, System Operation,

ret;pom;ible for the operation of the tram;mim;ion t;ystem Lmd dit;patching of generation

assets. In 1999, I became Manager, Bulk Power, ',:vhich included responsibility and

oven;ight of the planning, engineering, operations, and maintenance for all IPL

transmission and substation assets. In 2000, I '.vas promoted to Principal in IPL's

Corporate Venturing Group. In 2002, I '.vat; promoted to the Director, Demand

Coordination, responsible for strategic account management for IPL's top 300 retail

CUGtomers. In 2003, I tnmsitioned to the Director, Supply Coordination and later to the

Vice President, Fuel ffild Energy supply, responsible for energy dispatching, wholesale

sales, and fuel procurement for IPL's generation fleet. In 2008, I transitioned from the

IPL Witness BcntleySadtler- 2

Petitioner's Exhibit BJBJAS-l (PUBLIC)

generation Gide of the businestj to the Vice Pretlident, Power Delivery, in IPL'n electric

delivery organization. My responsibilities included the planning, construction, operation,

and maintenance of IPL'n tram;mission and dit;tribution tlystem. I atltlwl1ed my current

position of Senior Vice President, Customer Operations in December 2011. I have been

employed by IPL or one of IPALCO Entemrises. Inc. subsidiaries (Mid America Capital

Resources) since 1980, assuming my current role in December. 201 1. Previously, I have

held a number of management and staff positions at IPL. including overseeing the IPL

Power Supply organization, leading the Supply Coordination Office, managing the Eagle

Valley Generating Station, managing Transmission Operation and Generatjon Dispatch.

overseeing the Transmission Planning, Supply Chain, and Fuel Procurement functions,

Business Development, and engineering support roles in Power Supply and Transmission

& Distribution.

Q6. Have you testified previously before this Commission?

A6. Yes. I testified in Cause No. 43663 on utility tree trimming practices and tariffs related to

service quality. I testified on behalf of the Joint Petitioners in Cause No. 42685, involving

their request to recover their costs associated with taking transmission service under the

Midv{etlt Independent Tramlmitltlion Syntem Operator, Inc.'s ("MISO") Open A.ccem;

Transmission and Energy .Markets Tariff ("TEMT"), and on behalf of the Joint Petitioners

in Cause No. <12962 involving Day Ahead and Real Time R~venue Sufficiency Gum'antee

credits and charges. I also testified in Cause No. 43414 regarding IPL's Purchased Power

Benchmark proceeding, Caut;e No. 43623 regarding Demand Side Management

programs, and numerous Fuel Adjustment Charge proceedings. , I have submitted



testimony on behalf of IPL in some of its previous FAC proceedings (FAC55 through

FAC6?). and in IPL's FAC89 and FAC90 proceedings.

Q7. What is the purpose of your testimony in this proceeding?

A? There are five parts to my testimony: First, my testimony provides an overview of the

IPL Transmission System. Second, it describes the generator interconnection process

within the IPL and MISO Transmission System. Third, my testimony addresses

transmission reliability issues related to: (a) the short-list of four independent power

producer ("IPP") projects from the June 28, 2012 RFP ("RFP Short List"); (b) the

combined cycle gas turbine ("CCGT") IPL proposes to construct at its Eagle Valley

generating plant ("Eagle Valley CCGT"); and ( c) Harding Street 5&6 Refueling

("Harding Street 5&6 Refueling"). Fourth, my testimony addresses interconnection issues

related to the IPL and MISO transmission system and both the Eagle Valley CCGT and

Harding Street 5&6. Finally, I discuss the impact of the Harding Street 5&6 Refueling on

system reliability in the IPL service territory.

Q8. Are you sponsoring any exhibits in support of your testimony?

A8. Yes. I am sponsoring Petitioner's Exhibit BJB-2 (CONFIDENTIAL), titled

Interconnection Facilities and Network Upgrades.

Q9. Was the exhibit identified above prepared or assembled by you or under your

direction or supervision?

A9. Yes.

QIO. Please provide an overview of IPL's transmission system.


Petitioner's Exhibit RJBJAS-l (PUBLIC)

A 10. The IPL transmission system consists of 345 kilovolt ("k V") and 138 k V lines and

substation facilities in and around Indianapolis with additional transmission lines from

Indianapolis to the Petersburg Generating Station in Petersburg, Indiana and to the Eagle

Valley Generating Station in Martinsville, Indiana, as well as interconnecting lines to

other utilities.

Q11. Please explain the term "transmission system" as you are using it.

All. When referring to the transmission system, I am using the North American Electric

Reliability Corporation ("NERC") definition of the Bulk Electric System ("BES") of any

transmission facilities 100 kV and above.

Q12. Please explain how IPL's transmission system is interconnected with the

transmission systems of other electric utilities.

A12. IPL has 345 kV transmission interconnections with Indiana Michigan Power Company

("I&M") (which is part of American Electric Power or AEP) and Duke Energy Indiana,

Inc. ("Duke"), as well as 138 kV interconnections with Duke, Hoosier Energy and

Southern Indiana Gas and Electric Company d/b/a Vectren Energy Delivery of Indiana,

Inc. ("Vectren"). IPL has two 345 kV interconnections with I&M in Indianapolis and one

in Southern Indiana. There are two Dukefive 345 kV interconnections with Duke. three

in the Indianapolis area and tflreetwo in Southern Indiana. There is also one 138 kV

interconnection with Duke in Indianapolis, one in Martinsville, Indiana and two in

Petersburg, Indiana. Lastly, IPL has one 138 kV interconnection with Vectren and one

138 kV with Hoosier Energy in Petersburg, Indiana.



Q13. Are you familiar with generator interconnection studies performed with respect to

new generating plants?

A13. Yes.

Q14. Please discuss how the Company determined whether additional transmission

facilities were necessary in past instances in which IPL added a generation resource

prior to joining MISO.

A14. Prior to joining MISO, IPL would perform internal transmission and deliverability studies

utilizing regional models from ECAR, which is the predecessor organization to the

Reliability First Corporation ("RFC"). If the internal studies indicated a potential impact

or provided advantages outside of IPL, a coordinated study would be completed with

neighboring utilities who may have shared in the construction costs of new transmission

facilities as appropriate.

Q15. Did the Company's evaluation process change as a result of its membership in

MISO?

A 15. Yes. IPL now completes preliminary analysis of generation impacts on its transmission

system; however, MISO is responsible for the evaluation of new generator

interconnections to the transmission systems under its functional control, which includes

IPL. MISO's existing procedures for evaluating such generator interconnection are set

forth in Attachment X to its Open Access Transmission Tariff ("OATT").!

Q16. Please describe the process used by MISO to evaluate new generator

interconnections to the transmission system under the functional control of MISO.

! See link at https:llwww.midwestiso.orgiLibrary/Tariff/Pages/Tariff.aspx1.



A16. The MISO process for any entity interested in connecting a generator to the transmission

system starts with the submission of an application for interconnection. The application

is used for an initial screening and Feasibility Study. When the application is submitted,

MISO places the Feasibility Study request into a queue with all other requests. The

Feasibility Study will determine whether the interconnection of the generating facility

would result in constraints that exceed a pre-determined level. If the proposed

interconnection does not exceed any of the pre-determined system constraints, the project

will proceed to the Definitive Planning Phase ("DPP") which requires additional funding

for detailed system studies. The applicant may also elect to proceed to the DPP knowing

that electric system upgrades are likely. In order to enter the DPP stage, an applicant

must provide a stability model, point of interconnection, impedance from the substation

to the point of interconnection, all the appropriate technical data, one-line diagram,

generation output, and necessary generator step-up ("GSU") data. The applicant must

also provide proof of site control documentation that demonstrates ownership and

sufficient land area and pay a deposit as non-technical milestones.

In the DPP, a System Impact Study ("SIS") will be conducted to determine steady state

voltage issues, thermal overload constraints, deliverability, short circuit issues, and

transient stability. These studies will alsoA Facility Study is conducted after the SIS to

determine the required transmission upgrades, including a good faith cost and schedule

estimate for construction. The SIS includes an ad hoc group of interested parties that

include interconnection customers, consultants, transmission owners and other

independent system operators such as P JM, along with MISO transmission planning

personnel.



Q17. Has IPL requested MISO to begin the study process for the Eagle Valley CCGT?

A 17 . Yes. IPL submitted its initial application for the interconnection to MISO on January 9,

2012. By the June 28, 2012 deadline, IPL provided MISO the appropriate data and

funding and subsequently entered the DPP. MISO held a kickoff meeting for the Central

Area DPP group on August 13,2012 to begin the studies.

Q18. When does IPL anticipate that the MISO review will be complete for the Eagle

Valley CCGT?

A18. IPL anticipates that the MISO review will be complete for the Eagle Valley CCGT before

December 31, 2013.

Q19. What is IPL's role in the MISO study process?

A19. IPL performs preliminary power flow studies, such as load flow, contingency and

short-circuit studies using the NERC criteria to determine the impact of new generation

on the transmission system and to determine what additional transmission facilities and

associated costs are necessary to address any identified impact. However, these are not

provided to MISO. MISO performs independent analysis and provides the analysis to the

SIS group for all stakeholders including IPL to review, provide feedback, raise concerns

and propose solutions.

Q20. Will a Generator Interconnection Agreement be signed for the Eagle Valley CCGT

at the end of the MISO process?

A20. Yes, if the project is approved. A Generator Interconnection Agreement will be signed at

the end of the MISO process and the signatory parties will include IPL as generator

owner, IPL as transmission owner, and MISO as the independent system operator.



Q21. How were the potential transmission impacts related to the RFP Short List and

Eagle Valley CCGT addressed?

A2I. The integration impact analysis was performed by IPL, ABB Power Systems Consulting

("ABB"), and Ventyx, LLC ("Ventyx"). IPL engaged ABBN entyx to study transmission

and deliverability issues related to the RFP Short List and the Eagle Valley CCGT. Three

studies evaluated include: (1) congestion (as detailed in Witness Adkins' testimony); (2)

power transfer; and (3) reactive capability effects (as detailed in Witness Martin's

testimony) of the RFP Short List and the Eagle Valley CCGT. This process identified

any necessary transmission system upgrades or modifications and the associated costs.

IPL also analyzed the direct interconnection facilities and associated costs of the RFP

Short List. As appropriate, a cost adder or credit was applied to the RFP Short List

projects and the Eagle Valley CCGT to reflect these transmission-related costs.

Petitioner's Exhibit BJB-2 (CONFIDENTIAL) provides the estimated costs for

interconnection facilities and network upgrades for the Self Build Eagle Valley CCGT,

Bid 10, Bid 11, Bid 12, and Bid 13.

Q22. Why did IPL hire outside consultants to perform transmission related studies?

A22. IPL hired ABB to perform studies to assess transmission related impacts of the Eagle

Valley CCGT as well as the RFP Short List projects. This was done because the MISO

process to determine the additional transmission facilities necessary to address any

identified impact for the projects under consideration could not be completed in time to

incorporate into the Present Value Revenue Requirement ("PVRR") analysis of the

projects. It was essential to determine the costs of the necessary transmission facilities of

each project so that these costs could appropriately be factored into PVRR analysis of the



projects. The results of the transmission facilities studies for the Eagle Valley CCGT are

provided here and in more detail in Witness Martin's testimony. Witness Martin's

testimony also provides the results of the transmission impact study for each of the RFP

Short List projects and Eagle Valley CCGT. The summary results of the transmission

impact studies for the Eagle Valley CCGT are provided below.

Q23. Why did IPL hire Ventyx to perform congestion analysis?

A23. IPL hired Ventyx to perform congestion analysis on the Eagle Valley CCGT and the RFP

Short List projects to provide economic information for IPL's analysis of all five options.

MISO does not address congestion related issues as part of its interconnection studies.

The details of the congestion analysis and results are presented in Witness Adkins'

testimony for the Eagle Valley CCGT and the RFP Short List projects.

Q24. How were transmission considerations factored into the decision to site the CCGT at

Eagle Valley?

A24. Transmission capacity and transmission congestion were both factors for siting generation

at Eagle Valley. One distinct advantage of using the Eagle Valley site is that IPL has four

existing 138 kV lines from Martinsville to Indianapolis to support the present generation

at Eagle Valley that can be used to support the new CCGT. Also, from a congestion

perspective, the Eagle Valley site was expected to have less congestion related impacts

than alternative sites due to being directly connected to the IPL 138 kV transmission

system in and around Indianapolis. The congestion related benefit is demonstrated in the

congestion studies performed by Ventyx and presented in detail in Witness Adkins'

testimony. Finally, from a transmission operational viewpoint, generation connected to

IPL Witness BentleySadtler-10

Petitioner's Exhibit BJRJAS-l (PUBLIC)

the same 138 kV system that serves IPL customers provides more dynamic operational

flexibility.

Q25. Did the ABB study identify the need for any transmission system upgrades?

A25. Yes. The ABB reactive capability and power transfer transmission studies determined that

additional transmission infrastructure is necessary to support up to a 725 MW CCGT at

the Eagle Valley site. The ABB study also determined the additional transmission

infrastructure and associated cost necessary for each of the RFP Short List projects as

provided in Witness Martin's testimony. As noted in Witness Crawford's testimony, IPL

considered CCGT plants sized from 550 MW to 725 MW, and thus this study could

accommodate the projects considered within this generation output range.

Q26. Please describe the transmission system upgrades identified in the ABB study for

the Eagle Valley CCGT.

A26. Because the four existing 138 kV lines are insufficient to carry the full load of the Eagle

Valley CCGT, a new 138 kV transmission line of approximately 23 miles will be

constructed from the existing Eagle Valley plant and Pritchard substation point of

interconnection site to the IPL Franklin Township substation located on the southeast side

of Indianapolis, Indiana. The new transmission line will be built on the available tower

line segment of the existing line from the Petersburg substation to Hanna substation that

runs adjacent to Eagle Valley. In addition, the existing 138 kV line from Pritchard

substation to Southport substation (132-21) and the 138 kV line from Prichard substation

to Mooresville substation (132-24) will be upgraded to support the new generating

capacity. Atse,At the Mooresville substation a 138kV breaker will be replaced. Also. an

additional 138 kV breaker replacement and bus modifications are needed at the Hanna


Petitioner's Exhibit :J1J:BJAS-l (PUBLIC)

needed at the Hanna substation to accommodate the increased rating of the 138kV line

from Hanna substation to Southeast substation (132-26).

Q27. Please describe IPL's analysis of the interconnection facilities and associated costs

of the RFP Short List.

A27. IPL reviewed the direct interconnection facilities of the RFP Short List to ensure that all

necessary equipment and associated costs were included for each project to allow a safe

and reliable connection to the transmission system in compliance with all applicable

requirements and standards.

Q28. What were the results ofIPL's analysis of the interconnection facilities and

associated costs of the RFP Short List?

A28. IPL determined that $_would need to be added to Bid 10's cost for two new

345 kV breakers and accessories at the IPLIDuke Gwynneville Substation which are

required to meet IPL Transmission Planning Criteria for a 345 kV substation

configuration. IPL also determined that $_ would need to be added to Bid 11

for the necessary interconnection facilities as no interconnection facilities were included

in their bid. The added to Bid 11 is for a new 345 kV substation which

includes all necessary breakers and a 1 mile loop from the plant substation to the IPL

Petersburg-Hanna Line. No adjustments related to the direct interconnection facilities

were necessary for the other two projects as it was determined that all necessary

equipment and associated costs for the interconnection facilities were included in their

bids.

IPL Witness IjentlcySadtler-12

Petitioner's Exhibit :B!WJAS-l (PUBLIC)

Q29. Is IPL planning to expand the existing substation or construct a new one to

accommodate the CCGT at Eagle Valley?

A29. IPL determined that a new substation will be safer, less congested, and less costly to

construct and operate than renovating the existing substation. The existing Pritchard

substation at Eagle Valley would need to be substantially renovated to enable

interconnection of the new Eagle Valley CCGT.

Q30. What are the anticipated construction costs to build the new transmission line,

upgrade the existing transmission lines and for the new substation for the Eagle

Valley CCGT?

A30. The following table details the estimated of the new substation at

Eagle Valley, the cost to both move and upgrade existing transmission lines and

termination equipment at the Pritchard Substation and the cost of the new transmission

line from Martinsville to Indianapolis and other associated cost to support the new

CCGT.

IPL Eagle Valley CCGT Plant I MISO Interconnection Request GI J238

1. New 138 kV substation and

3. New 23.0 mile IPL Pritchard - Franklin Township 138 kV Line and communications for SCAD etc.

4. New IPL 138 kV Breaker and accessories at Franklin Township Sub for New Line

5. Upgrade 15.7 mile 132-24 IPL Pritchard - Mooresville 138 kV Line for clearance m

6. Upgrade 21.6 mile 132-21 IPL Pritchard - Southport 138 kV Line for clearance mitigation, Honey Creek 3-way disconnect switch,

terminal . $-IPL Witness Bettt1eySadtlQr-13

Petitioner's Exhibit UJ:BJIAS-l (PUBLIC)

7. Upgrade IPL 138 kV Hanna Sub to mitigate Hanna - SE 138 kV Line loading with terminal equipment and line re-connected to the bus $_

--~~~---------------------------------------------r--TOTAL TRANSMISSION AND SUBSTATION COSTS

As shown in Witness Guletsky's testimony, the ~for the substation. Item 1 is

included as part of the EPC cost estimate. The remainder of the transmission costs

I~~~~ are included as part of Owner's costs as identified in Witness

Crawford's testimony. The network upgrade cost-ffi...J..1km 3-7 an~ shown in Witness

Martin's testimony and was assessed from the Power Transfer Study results.

Q31. Are the transmission upgrades and associated costs determined by ABB for the

Eagle Valley CCGT and the RFP Short list projects reasonable estimates of the

upgrades and costs that would result from the MISO process?

A31. Yes. The study methodology and approach used by ABB is substantially similar to that

used by MISO. Preliminary results from the MISO Interconnection request J238 studies

for the Eagle Valley CCGT have identified the same upgrades as the ABB studies.

Therefore, the associated costs from ABB' s study should closely match the results of the

MISO study.

Q32. Please discuss the Company's timeline projections associated with the necessary

transmission construction and upgrades it has identified.

A32. Design engineering of this project will begin in the spring of 2013. Detailed engineering

and procurement is planned to commence in April 2014, shortly after the anticipated date

of securing CPCN approval. Construction of the transmission upgrades will take place in

parallel with the construction of the Eagle Valley CCGT and are expected to be


Petitioner's Exhibit BJB.JAS-l (PUBLIC)

sufficiently complete to allow back-feed power to the Eagle Valley CCGT for testing and

commissioning by May 30, 2016. All transmission upgrades and construction are

planned to be completed in time to allow the Eagle Valley CCGT to achieve an April

2017 commercial operations date.

Q33. Will any of the identified costs be eligible for cost-sharing with other MISO

members?

A33. It may be possible that a small portion of these costs will be eligible for cost sharing with

other MISO members but IPL does not have sufficient information to make that

assumption at this time. If any cost sharing does occur, the benefit of the reduced costs

will be utilized for the benefit of the IPL customers. However, IPL does not believe these

costs will be eligible for cost sharing because the interconnection customer is normally

assessed these costs based on MISO cost sharing procedures.

Q34. What is the significance of the Harding Street 5 & 6 Refueling on transmission

reliability?

A34. Witness Crawford explains the rationale, timing and process to convert the 200 MW

Harding Street Generating Units 5 & 6 from coal as the primary fuel to natural gas as the

primary fuel. In addition to the capacity benefits associated with approximately 200 MW

of generating capability, the IPL 138 kV transmission system benefits include voltage

support by maintaining the existing dynamic volt-ampere reactive ("VAR") power

capability during contingency conditions and frequency response in the IPL service

territory. Continued utilization of Harding Street Units 5 & 6 provides operational

flexibility for planned and unplanned outages on the transmission system and/or for

planned and unplanned outages to the larger coal and gas-fired generation in the IPL


Petitioner's Exhibit BJ.BJAS-l (PUBLIC)

serVIce territory. This flexibility allows IPL to offer its own generation with low

congestion costs into the market instead of relying on MISO to dispatch higher cost

generation to alleviate operational issues which benefits IPL customers.

Q35. Are there any transmission upgrades necessary as part of the Harding Street 5 & 6

Refueling?

A35. No. After the refueling conversion, Harding Street 5 & 6 will continue to use the existing

interconnection facilities. \

Q36. Would upgrades be required if Harding Street 5 & 6 are not refueled?

A36. The MISO interconnection application and studies were based upon refueling of Harding

Street units 5 & 6. Therefore, additional studies and fees would be needed by MISO to

evaluate this option. In lieu of MISO studies, IPL has performed similar studies to

determine the transmission implications. Based upon our preliminary studies, we believe

additional transmission/substation equipment would be required to support an

incremental 200 MW of import capability from the 345 kV system into the 138 kV IPL

load zone if Harding Street 5 & 6 were retired.

Q37. Is it necessary for the Harding Street 5 & 6 Refueling project to go through the

MISO interconnection process?

A37. No. Harding Street 5 & 6 will continue to use the existing interconnection with similar

output capability from each unit; therefore, it is not necessary to go through the MISO

interconnection process.

Q38. Does this conclude your prefiled direct testimony?



A38. Yes, at this time.

INDSO I 1408470y3


Petitioner's Exhibit KM:H~


OF

KELLY M. HUNTINCTON

CRAIG JACKSON

ON BEHALF OF


CAUSE NO. 44339

Petitioner's Exhibit KMHCJ-l

VERIFIED DIRECT TESTIMONY OF KELLY M. HUNTINGTONCRAIG .JACKSON ON BEHALF OF


Q1. Please state your name, employer and business address.

AI. My name is Kelly M. Huntington. Craig Jackson. I am employed by The Dayton Power

and Light Company ("DP&L"). 1 065 Woodman Drive. Dayton. Ohio. 45432.

02. What is your position and professional relationship with Indianapolis Power &

Light Company ("IPL" or "Company"), One Monument Circle, Indianapolis, Indiana

46204.

Q2. What is your position with IPL?

A2. I am Seniorthe Director. Vice President", and Chief Financial Officer of.{.l2b.;-AES US

Services. LLC. AES US Services. LLC is the AES Strategic Business Unit ("SBU") that

provides services for IPL. and other AES affiliates. pursuant to an Affiliate Services

Agreement filed with the Indiana Utility Regulatory Commission ("IIJRC").

Q3. Please describe your duties as Senior Vice Prc§idcnt and Chief Financial Officer.

A3. I am rC[JpomJible for the Company'tJ financial servicetJ and information technology

functions. My finffilcial services responsibilities include accounting, internal controls

over fimmcial reporting, financing and tremmry, tax, and financial pltmning and

ffilalysis.ln my current position. I report to the President of the SBU who is also CEO of

IPL. I have direct responsibility and oversight for the accounting. tax. financial planning.

treasury. risk management. and internal audit functions onPL and other AES affiliates.

Q4. Please summarize your educational and professional qualifications.

IPL Witness HuntingtonJackson- I


A4. I OOMreceived a Bachelor of Science Degree in Management Science from the

Massachusetts Institute of Technology, Cambridge, Massachusetts. I havedegree 10

Business Administration from Bloomsburg University in 1996. I also obtained earned a

Master of Business Administration f)e.gree from Northwestern University'S Kellogg

School of Management, Evanston, Il1inoit;. J am a CFA (Chartered Financial i\nalyst)

chatierholder. degree in Finance from Wright State University in 2001.

Q5. Please summarize your prior work experience.

A5. From 1997 to 1999, I was a Corporate Finance Analyst at BancBoston Robertson

Stephem;. From 1999 to 2001, I wat; an l\t;t;ociate at Thayer Capital Partnem. Since

2003, I have been employed by the AES Corporation holding a wide vat'iety of finatlcial

and leadership assignment,. I joined as a Financial Analyst and was promoted to Senior

Financial Analyst in 2004. I '.vas promoted to Director, Investor Relations in 2005. I was

promoted to Managing Director, Risk Management in 2007. I was promoted to Vice

President, Special Projects, reporting to AES Corporation's President and Chief

Executive Officer, in January 2008. I '.vat; promoted to Vice President! joined DP&L in

February 2000 as a Financial Analyst. Corporate Modeling. In December 2002. I

accepted the position of Team Leader. ISO Settlements. with PPL Comoration. In June

2004. I returned to DPL as Manager, Financial Planning and Analysis, reporting to AE-S

Corporation's Executive Vice Prenident and Chief Financial Officer, in September 2008.

I joined IPL as Seniol-ihe Chief Financial Officer. From Jlme 2004 to May 2012. I was

promoted through several positions of increasing responsibility within the Treasury

organization at DP&L. the last of which was as Vice President and Chief Finatlcial

Of1icer in April 2011.Treasurer.

IPL Witness HuntingtonJackson- 2


Prior to joining DP&L in February of 2000. I served in the United States Air Force ("Air

Force") as a Finance Technician. I began my service with the Air Force in May 1996.

Q6. Have you testified previously before this Commission?

A6. No,

Q7. What is the purpose of your testimony in this proceeding?

A 7. The purpose of my testimony is to support the Company's proposed accounting and

ratemaking treatment presented by IPL Witness Cutshaw. My testimony explains the

impact IPL' s construction of a new combined cycle turbine ("CCGT") at the Eagle Valley

generating station ("Eagle Valley CCGT") and refueling of Harding Street Station Units

5&6 (collectively, the "Projects") will have on IPL's financial strength and on IPL's

credit ratings. I also discuss the benefit to customers to maintaining the Company's

ratings and address how earnings erosion can adversely affect the Company's credit rating

and otherwise strain resources. Additionally, I identify the tax benefits that will be

realized as a result of the Eagle Valley CCGT option.

Q8. What are IPL's financial objectives?

A8. At a high level, IPL seeks to maintain the financial strength of an investment grade utility

so that we can deliver reliable service at a reasonable cost to our customers. Maintaining

this investment grade credit profile is important to ensure we have reliable access to the

credit markets at attractive interest rates during all types of economic cycles. This in turn

provides the ability to meet our financial obligations during periods of heavy capital

expenditures.



Q9. What are IPL's capital needs associated with the construction of the Replacement

Generation Projects?

A9. IPL projects that its capital expenditures excluding Allowance for Funds Used During

Construction ("AFUDC") associated with the construction of the Replacement

Generation Projects will total approximately $667 million through 2017.

QIO. Please discuss how IPL plans to finance the construction of the Replacement

Generation Projects.

AIO. IPL plans to finance the projects in a manner that is consistent with its targeted credit

ratings and capital structure. Funding for the Replacement Generation Projects will come

from three primary sources: (1) secured or unsecured debt issued by IPL; (2) operating

cash flow from IPL; and (3) equity investments from IPALCO Enterprises, Inc., IPL's

parent. Tax-exempt debt may also be considered as a component of (1) above to the

extent that a portion of these Projects qualify for this type of financing.

QU. Please explain why it is important for the Company to maintain its investment grade

credit rating.

A 11. As previously explained, the capital needs associated with the construction of these

projects are substantial and as such cannot be funded through internally-generated funds

alone. These funding needs are compounded by the capital necessary to comply with the

Utility Mercury and Air Toxics Standards ("MATS") requirements as outlined in our

request for a Certificate of Public Convenience and Necessity in Cause No. 44242

currently pending before the Commission. Based on supplemental testimony filed in

early January, the capital expenditures for the Utility MATS requirements are estimated

to be $511 million through 2016, excluding AFUDC and removal costs. By following the



Company's plan for funding the Replacement Generation Projects, IPL should have ready

and flexible access to the capital markets and should be able to maintain its current

capital structure, and therefore its investment grade ratings. However, IPL will have

lower credit metrics until it receives recovery of the costs through retail rates. Such lower

metrics will increase the risk that IPL's investment grade credit rating is downgraded.

This will be more fully described later in my testimony. The specific accounting and

ratemaking relief proposed by Witness Cutshaw is also necessary to support this

construction program and maintain IPL's financial strength. Without ready and flexible

access to the capital markets and a supportive ratemaking framework, IPL would not be

able to support this construction program. As a result, IPL's financial strength and

flexibility would decline and as discussed below this would adversely affect customers.

Q12. Please discuss the impact to the Company and its customers if IPL's investment

grade rating is not maintained.

A12. Financial strength and flexibility provide the framework for operational effectiveness

which is necessary to provide safe and reliable service to customers at a reasonable cost.

A non-investment grade rating would lead to an increase in overall financing costs and

result in a higher cost of capital. Customers would be adversely affected because higher

capital costs lead to higher rates for electric service and strain resources that could

otherwise be utilized to meet our customers' ongoing need for reliable electric service.

Q13. Please describe the credit rating process and the key factors analyzed by the three

major credit rating agencies.

A13. Credit ratings reflect a credit rating agency's independent judgment of the Company's

credit worthiness and its ability to meet its debt obligations. Credit committees at each



agency determine the ratings of a company based on certain quantitative and qualitative

measures. These factors are used to assess the financial and business risks of

fixed-income issuers. Both Fitch Ratings ("Fitch") and Standard & Poor's ("S&P")

delineate investment grade as any rating equal to "BBB-" or above. Moody's Investors

Service ("Moody's") delineates investment grade as any rating equal to "Baa3" or above.

Non-investment grade ratings at Fitch and S&P are "BB+" or below and "Bal" or below

at Moody's.

Qualitative factors differ somewhat at each of the rating agencies but generally are related

to business risk such as regulation, the ability to recover costs and earn authorized

returns, and fleet diversification. At S&P, these qualitative factors are referred to as the

Business Risk Profile and are rated on a scale from excellent to vulnerable.

Since most electric utilities are highly capital intensive, financial strength and liquidity

are key quantitative factors in determining long-term viability. Over the last several years

each of the rating agencies has become more transparent in their methodologies for

determining financial strength and liquidity. For example, S&P views the following three

financial measures (or Financial Risk Indicative Ratios) as the most important to its

analysis of financial risk: 1) Funds from Operations ("FFO")/ Debt; 2) Debt/Earnings

before Interest, Taxes, Depreciation and Amortization ("EBITDA"); and 3) Debt/Capital.

As a part of its methodology, S&P considers a combination of quantitative and qualitative

factors in a Business and Financial Risk Profile Matrix. The Financial Risk Profile

category of a company is determined by the results of the ratios analysis ("Financial Risk

Indicative Ratios") as mentioned in the financial measures above; and is rated on a scale

of six measures from minimal to highly leveraged. The weaker the Business Profile



category, the stronger the Financial Risk Indicative Ratios must be in order to maintain an

investment grade rating.

The discussion above has focused on S&P and its rating methodology. Moody's and

Fitch employ similar methods in their ratings determinations, although the quantitative

calculations and weightings along with qualitative measures may be slightly different.

Q14. Can you expand on the regulatory factor mentioned above and your thoughts on its

importance in the credit rating process?

A14. Yes. Regulation is a key factor in the credit rating process at all three credit rating

agenCIes. Predictability, full and timely cost recovery and a regulatory environment

supportive of a utility's financial strength are key credit considerations. A utility

operating in a stable, reliable, and highly predictable regulatory environment will be

scored higher than a utility that operates in an unstable, unreliable or highly unpredictable

regulatory environment. To that point, S&P recently revised the regulatory assessment of

Indiana downward from "More Credit-Supportive" to "Credit-Supportive." It is unknown

at this time whether this change in assessment will have a negative impact on IPL's

ratings.

Q15. Please discuss IPL's current credit ratings.

A 15. As of the date of this prefiled testimony, IPL' s credit ratings by the credit rating agencies

are as follows:

Moody's Investors Service Standard & Poor's Fitch Ratings

Corporate Credit Baa2 BBB- BBB-Rating/Issuer Rating Secured Debt A3 BBB+ BBB+

IPL Witness Huntingtonlackson- 7


I Unsecured Debt I Baa2 I BBB- I BBB

Q16. Please describe the potential impact the construction of the Replacement Generation

Projects may have to the Company's investment grade credit ratings.

A16. As discussed previously, IPL's credit ratings are expected to stay at investment grade if

the rating agencies continue to view Indiana's regulatory framework as supportive and if

earnings erosion from these large capital projects is avoided. IPL Witness Cutshaw

discusses the specific accounting and ratemaking relief needed to maintain a supportive

framework.

However, IPL's credit metrics will be lower for a period of time as a result of the heavy

construction related to the proposed projects in this proceeding compounded by the

construction expenditures necessary for utility MATS compliance, until recovery through

rates is granted. This could put our credit ratings at risk for downgrade. However, we

believe the rating agencies will look through the temporary time period of lower credit

metrics, as ratios recover nicely in later years when cash flow measures grow stronger and

earnings erosion is avoided as recovery of costs is achieved through supportive

ratemaking.

Q17. Is it easy for a company that has been downgraded to regain its prior credit rating?

A17. No. It is not easy for a company that has been downgraded to regain its prior credit

rating. In this volatile economic climate it is easier for a utility's ratings to decline as a

result of a deficiency than it is for a company's rating to increase once that deficiency has

been remedied. In other words, a company's credit rating can decline quickly, but it takes



longer for the rating to increase as rating agencies need to see an improvement in metrics

over a period of time before granting an upgrade.

Q18. Please describe the financial analysis related to credit worthiness conducted by the

Company in light of Standard & Poor's methodology related to long-term power

purchase agreements.

A 18. S&P views power purchase agreements as fixed, debt-like obligations of a utility and as

such has determined that they should be included in the calculation of financial metrics

on which they base a company's credit worthiness. This method treats fixed capacity

payments as if they were a part of the company's permanent capital structure by

calculating the present value of the fixed (capacity) portion of the annual payment,

discounted at the utility's average cost of debt, and multiplied by a risk factor.

Q19. Please discuss the concept of the risk factor in more detail.

A19. S&P's risk factor reflects the probability of recovery that power purchase agreement costs

will be recovered through rates. This factor varies by state statute or regulatory policy

and can range from 0% to 100%. The greater the certainty of recovery the lower the risk

factor, which results in a lesser amount of debt imputed onto the utility's balance sheet

for each power purchase agreement.

Q20. Are you knowledgeable as to the risk factor assigned to Indiana?

A20. Based on conversations with S&P's staff, the risk factor most likely assigned to Indiana is

25%, reflecting high confidence of recovery through rates for power purchase

agreements. This risk factor, of course, is re-evaluated each time an analysis is done by

S&P and is subject to change.



Q21. Please discuss other adjustments made by S&P related to its evaluation of power


A2l. S&P also imputes interest and depreciation expense. Imputed interest is based on the

amount of debt imputed at the embedded debt cost of the utility. Imputed depreciation is

based on the difference between the fixed capacity payment and the amount of imputed

interest for the year.

Q22. Describe the outcome of this analysis as you evaluated the projects competing with

the Eagle Valley CCGT option.

A22. The analysis indicated that the key metrics used to determine IPL's credit rating all

deteriorated using S&P's methodology for the two short-listed tolling projects. However,

these key metrics did not deteriorate significantly enough to trigger an expected

downgrade, and therefore no increased interest expense was expected if IPL were to enter

into either of the proposed tolling agreements. As such, no quantitative adjustment was

made to either tolling project in assessing the Present Value Revenue Requirement

("PVRR"). This nevertheless remains an important qualitative consideration as entering

into either of the tolling agreements would negatively impact key credit rating metrics and

would leave nearly no margin for any other negative event that could result in a credit

rating downgrade.

Q23. Have you identified any tax incentives or other benefits associated with the

construction and proposed financing plan for the Eagle Valley CCGT option?

A23. Yes.

Q24. Please identify the tax incentives or other benefits.

IPL Witness HuntingtonJackson-lO

Petitioner's Exhibit KMH(;J-l

A24. IPL has secured a ten-year real and personal property tax abatement with the Morgan

County Economic Development Corporation. Discussions are on-going to consider

establishing a tax increment finance ("TIF") district; however at this time it is unknown

as to whether this will occur.

The ten-year real and personal property tax abatement represents the maximum allowed

by law and will begin when the plant goes into service. The estimated property tax

abatement savings for a $631 million plant is approximately $23.5 million. This

abatement is unlike declining abatement approaches that start with a 100% abatement that

steadily declines over a ten-year period. We chose to use a ten-year flat 60% abatement.

This approach allows Morgan County to begin immediately receiving additional property

tax revenue and also provides IPL with a reduction in property tax expense.

If the TIF District is established, it will encompass the site of the new facility in Morgan

County. The County has proposed to pledge up to $2 million in TIF assistance for

infrastructure and investment at the plant site.

Morgan County also plans to offer up to $1,500 per employee for training. The training

funds will be in the form of a reimbursable grant to IPL.

Q25. Does this conclude your prepared verified direct testimony?

A25 . Yes, at this time.

INDSQ I J 408476y3

IPL Witness Huntingtonlackson-ll

Petitioner's Exhibit JAS-l(PUBLIC)

(PUBLIC)


OF

JAMES A. SADTLER

ON BEHALF OF


CAUSE NO. 44339

SPONSORING PETITIONER'S EXHIBIT BJB-2 (CONFIDENTIAL)

Petitioner's Exhibit JAS-l (PUBLIC)

VERIFIED DIRECT TESTIMONY OF JAMES A. SADTLER ON BEHALF OF


1 Q1. Please state your name, employer and business address.

2 AI. My name is James A. Sadtler. I am employed by Indianapolis Power & Light Company

3 ("IPL" or "Company"), One Monument Circle, Indianapolis, Indiana 46204.

4 Q2. What is your position with IPL?

5 A2. I am currently the Director of Transmission Field Operations.

6 Q3. Please describe your duties as Director of Transmission Field Operations.

7 A3. As Director of Transmission Field Operations, I am responsible for the real time

8 operations for the IPL transmission and distribution systems, the operation and

9 maintenance of all IPL substations and the downtown electrical network. This includes

10 the operation and maintenance of the protective relaying schemes, and supervisory

11 control and data acquisition systems. The real time operation of the transmission system

12 requires coordination with the Midcontinent Independent System Operator, Inc. (MISO).

13 Q4. Please summarize your educational and professional qualifications.

14 A4. I received a Bachelor of Science Degree in Electrical Engineering Technology from

15 Purdue University. I am a Registered Professional Engineer in the State oflndiana.

16 Q5. Please summarize your prior work experience.

17 A5. I have been employed by IPL or one of IP ALCO Enterprises, Inc. subsidiaries (Mid

18 America Capital Resources) since 1980, assuming my current role in December, 2011.

19 Previously, I have held a number of management and staff positions at IPL, including

IPL Witness Sadtler-l

1

2

3

4

5


overseeing the IPL Power Supply organization, leading the Supply Coordination Office,

managing the Eagle Valley Generating Station, managing Transmission Operation and

Generation Dispatch, overseeing the Transmission Planning, Supply Chain, and Fuel

Procurement functions, Business Development, and engineering support roles in Power

Supply and Transmission & Distribution.

6 Q6. Have you testified previously before this Commission?

7 A6. Yes, I have submitted testimony on behalf of IPL in some of its previous F AC

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20

Q7.

A7.

proceedings (FAC55 through FAC67), and in IPL's FAC89 and FAC90 proceedings.

What is the purpose of your testimony in this proceeding?

There are five parts to my testimony: First, my testimony provides an overview of the

IPL Transmission System. Second, it describes the generator interconnection process

within the IPL and MISO Transmission System. Third, my testimony addresses

transmission reliability issues related to: (a) the short-list of four independent power

producer ("IPP") projects from the June 28, 2012 RFP ("RFP Short List"); (b) the

combined cycle gas turbine ("CCGT") IPL proposes to construct at its Eagle Valley

generating plant ("Eagle Valley CCGT"); and (c) Harding Street 5&6 Refueling

("Harding Street 5&6 Refueling"). Fourth, my testimony addresses interconnection issues

related to the IPL and MISO transmission system and both the Eagle Valley CCGT and

Harding Street 5&6. Finally, I discuss the impact of the Harding Street 5&6 Refueling on

system reliability in the IPL service territory.

21 Q8. Are you sponsoring any exhibits in support of your testimony?

IPL Witness Sadtler-2

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A8.

Q9.

A9.

QIO.

Ala.


Yes. I am sponsoring Petitioner's Exhibit BJB-2 (CONFIDENTIAL), titled

Interconnection Facilities and Network Upgrades.

Was the exhibit identified above prepared or assembled by you or under your

direction or supervision?

Yes.

Please provide an overview of IPL's transmission system.

The IPL transmission system consists of 345 kilovolt ("kV") and 138 kV lines and

substation facilities in and around Indianapolis with additional transmission lines from

Indianapolis to the Petersburg Generating Station in Petersburg, Indiana and to the Eagle

Valley Generating Station in Martinsville, Indiana, as well as interconnecting lines to

other utilities.

12 Ql1. Please explain the term "transmission system" as you are using it.

13 All. When referring to the transmission system, I am using the North American Electric

14

15

Reliability Corporation ("NERC") definition of the Bulk Electric System ("BES") of any

transmission facilities 100 kV and above.

16 Q12. Please explain how IPL's transmission system is interconnected with the

17 transmission systems of other electric utilities.

18 A12. IPL has 345 kV transmission interconnections with Indiana Michigan Power Company

19 ("I&M") (which is part of American Electric Power or AEP) and Duke Energy Indiana,

20

21

22

Inc. ("Duke"), as well as 138 kV interconnections with Duke, Hoosier Energy and

Southern Indiana Gas and Electric Company d/b/a Vectren Energy Delivery of Indiana,

Inc. ("Vectren"). IPL has two 345 kV interconnections with I&M in Indianapolis and


1

2

3

4

5


one in Southern Indiana. There are five 345 kV interconnections with Duke, three in the

Indianapolis area and two in Southern Indiana. There is also one 138 kV interconnection

with Duke in Indianapolis, one in Martinsville, Indiana and two in Petersburg, Indiana.

Lastly, IPL has one 138 kV interconnection with Vectren and one 138 kV with Hoosier

Energy in Petersburg, Indiana.

6 Q13. Are you familiar with generator interconnection studies performed with respect to

7 new generating plants?

8 A13. Yes.

9 Q14. Please discuss how the Company determined whether additional transmission

10

11

facilities were necessary in past instances in which IPL added a generation resource

prior to joining MISO.

12 A14. Prior to joining MISO, IPL would perform internal transmission and deliverability studies

13 utilizing regional models from ECAR, which is the predecessor organization to the

14 Reliability First Corporation ("RFC"). If the internal studies indicated a potential impact

15 or provided advantages outside of IPL, a coordinated study would be completed with

16 neighboring utilities who may have shared in the construction costs of new transmission

17 facilities as appropriate.

18 Q15. Did the Company's evaluation process change as a result of its membership in

19 MISO?

20 A 15 . Yes. IPL now completes preliminary analysis of generation impacts on its transmission

21 system; however, MISO is responsible for the evaluation of new generator

22 interconnections to the transmission systems under its functional control, which includes


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Q16.

A16.


IPL. MISO's existing procedures for evaluating such generator interconnection are set

forth in Attachment X to its Open Access Transmission Tariff ("OATT"). 1

Please describe the process used by MISO to evaluate new generator

interconnections to the transmission system under the functional control of MISO.

The MISO process for any entity interested in connecting a generator to the transmission

system starts with the submission of an application for interconnection. The application

is used for an initial screening and Feasibility Study. When the application is submitted,

MISO places the Feasibility Study request into a queue with all other requests. The

Feasibility Study will determine whether the interconnection of the generating facility

would result in constraints that exceed a pre-determined level. If the proposed

interconnection does not exceed any of the pre-determined system constraints, the project

will proceed to the Definitive Planning Phase ("DPP") which requires additional funding

for detailed system studies. The applicant may also elect to proceed to the DPP knowing

that electric system upgrades are likely. In order to enter the DPP stage, an applicant

must provide a stability model, point of interconnection, impedance from the substation

to the point of interconnection, all the appropriate technical data, one-line diagram,

generation output, and necessary generator step-up ("GSU") data. The applicant must

also provide proof of site control documentation that demonstrates ownership and

sufficient land area and pay a deposit as non-technical milestones.

In the DPP, a System Impact Study ("SIS") will be conducted to determine steady state

voltage issues, thermal overload constraints, deliverability, short circuit issues, and

I See link at https:llwww.midwestiso.org/Library/Tariff/Pages/Tariff.aspx



1 transient stability. A Facility Study is conducted after the SIS to determine the required

2 transmission upgrades, including a good faith cost and schedule estimate for construction.

3 The SIS includes an ad hoc group of interested parties that include interconnection

4 customers, consultants, transmission owners and other independent system operators such

5 as P JM, along with MISO transmission planning personnel.

6 Q17. Has IPL requested MISO to begin the study process for the Eagle Valley CCGT?

7 A 17 . Yes. IPL submitted its initial application for the interconnection to MISO on January 9,

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2012. By the June 28, 2012 deadline, IPL provided MISO the appropriate data and

funding and subsequently entered the DPP. MISO held a kickoff meeting for the Central

Area DPP group on August 13,2012 to begin the studies.

11 Q18. When does IPL anticipate that the MISO review will be complete for the Eagle

12 Valley CCGT?

13 A18. IPL anticipates that the MISO review will be complete for the Eagle Valley CCGT before

14 December 31, 2013.

15 Q19. What is IPL's role in the MISO study process?

16 A19. IPL performs preliminary power flow studies, such as load flow, contingency and short-

17 circuit studies using the NERC criteria to determine the impact of new generation on the

18 transmission system and to determine what additional transmission facilities and

19 associated costs are necessary to address any identified impact. However, these are not

20 provided to MISO. MISO performs independent analysis and provides the analysis to the

21 SIS group for all stakeholders including IPL to review, provide feedback, raise concerns

22 and propose solutions.



1 Q20. Will a Generator Interconnection Agreement be signed for the Eagle Valley CCGT

2 at the end of the MISO process?

3 A20. Yes, if the project is approved. A Generator Interconnection Agreement will be signed at

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Q21.

A21.

the end of the MISO process and the signatory parties will include IPL as generator

owner, IPL as transmission owner, and MISO as the independent system operator.

How were the potential transmission impacts related to the RFP Short List and

Eagle Valley CCGT addressed?

The integration impact analysis was performed by IPL, ABB Power Systems Consulting

("ABB"), and Ventyx, LLC ("Ventyx"). IPL engaged ABB/Ventyx to study transmission

and deliverability issues related to the RFP Short List and the Eagle Valley CCGT. Three

studies evaluated include: (1) congestion (as detailed in Witness Adkins' testimony); (2)

power transfer; and (3) reactive capability effects (as detailed in Witness Martin's

testimony) of the RFP Short List and the Eagle Valley CCGT. This process identified

any necessary transmission system upgrades or modifications and the associated costs.

IPL also analyzed the direct interconnection facilities and associated costs of the RFP

Short List. As appropriate, a cost adder or credit was applied to the RFP Short List

projects and the Eagle Valley CCGT to reflect these transmission-related costs.

Petitioner's Exhibit BJB-2 (CONFIDENTIAL) provides the estimated costs for

interconnection facilities and network upgrades for the Self Build Eagle Valley CCGT,

Bid 10, Bid 11, Bid 12, and Bid 13.

21 Q22. Why did IPL hire outside consultants to perform transmission related studies?

22 A22. IPL hired ABB to perform studies to assess transmission related impacts of the Eagle

23 Valley CCGT as well as the RFP Short List projects. This was done because the MISO



1 process to determine the additional transmission facilities necessary to address any

2 identified impact for the projects under consideration could not be completed in time to

3 incorporate into the Present Value Revenue Requirement ("PVRR") analysis of the

4 projects. It was essential to determine the costs of the necessary transmission facilities of

5 each project so that these costs could appropriately be factored into PVRR analysis of the

6 projects. The results of the transmission facilities studies for the Eagle Valley CCGT are

7 provided here and in more detail in Witness Martin's testimony. Witness Martin's

8 testimony also provides the results of the transmission impact study for each of the RFP

9 Short List projects and Eagle Valley CCGT. The summary results of the transmission

10 impact studies for the Eagle Valley CCGT are provided below.

11 Q23. Why did IPL hire Ventyx to perform congestion analysis?

12 A23. IPL hired Ventyx to perform congestion analysis on the Eagle Valley CCGT and the RFP

13 Short List projects to provide economic information for IPL's analysis of all five options.

14 MISO does not address congestion related issues as part of its interconnection studies.

15 The details of the congestion analysis and results are presented in Witness Adkins'

16 testimony for the Eagle Valley CCGT and the RFP Short List projects.

17 Q24. How were transmission considerations factored into the decision to site the CCGT at

18 Eagle Valley?

19 A24. Transmission capacity and transmission congestion were both factors for siting

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generation at Eagle Valley. One distinct advantage of using the Eagle Valley site is that

IPL has four existing 138 kV lines from Martinsville to Indianapolis to support the

present generation at Eagle Valley that can be used to support the new CCGT. Also,

from a congestion perspective, the Eagle Valley site was expected to have less


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congestion related impacts than alternative sites due to being directly connected to the

IPL 138 kV transmission system in and around Indianapolis. The congestion related

benefit is demonstrated in the congestion studies performed by Ventyx and presented in

detail in Witness Adkins' testimony. Finally, from a transmission operational

5 viewpoint, generation connected to the same 138 kV system that serves IPL customers

6 provides more dynamic operational flexibility.

7 Q25. Did the ABB study identify the need for any transmission system upgrades?

8 A25. Yes. The ABB reactive capability and power transfer transmission studies determined

9 that additional transmission infrastructure is necessary to support up to a 725 MW CCGT

10 at the Eagle Valley site. The ABB study also determined the additional transmission

11 infrastructure and associated cost necessary for each of the RFP Short List projects as

12 provided in Witness Martin's testimony. As noted in Witness Crawford's testimony, IPL

13 considered CCGT plants sized from 550 MW to 725 MW, and thus this study could

14 accommodate the projects considered within this generation output range.

15 Q26. Please describe the transmission system upgrades identified in the ABB study for

16 the Eagle Valley CCGT.

17 A26. Because the four existing 138 kV lines are insufficient to carry the full load of the Eagle

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Valley CCGT, a new 138 kV transmission line of approximately 23 miles will be

constructed from the existing Eagle Valley plant and Pritchard substation point of

interconnection site to the IPL Franklin Township substation located on the southeast side

of Indianapolis, Indiana. The new transmission line will be built on the available tower

line segment of the existing line from the Petersburg substation to Hanna substation that

runs adjacent to Eagle Valley. In addition, the existing 138 kV line from Pritchard


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substation to Southport substation (132-21) and the 138 kV line from Prichard substation

to Mooresville substation (132-24) will be upgraded to support the new generating

capacity. At the Mooresville substation a 138kV breaker will be replaced. Also, an

additional 138 kV breaker replacement and bus modifications are needed at the Hanna

substation to accommodate the increased rating of the 138kV line from Hanna substation

to Southeast substation (132-26).

7 Q27. Please describe IPL's analysis of the interconnection facilities and associated costs of

8 the RFP Short List.

9 A27. IPL reviewed the direct interconnection facilities of the RFP Short List to ensure that all

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necessary equipment and associated costs were included for each project to allow a safe

and reliable connection to the transmission system in compliance with all applicable

requirements and standards.

13 Q28. What were the results of IPL's analysis of the interconnection facilities and

14 associated costs of the RFP Short List?

15 A28. IPL determined that $_ would need to be added to Bid 10's cost for two new

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345 kV breakers and accessories at the IPLIDuke Gwynneville Substation which are

required to meet IPL Transmission Planning Criteria for a 345 kV substation

configuration. IPL also determined that $_ would need to be added to Bid 11

for the necessary interconnection facilities as no interconnection facilities were included

in their bid. The $_ added to Bid 11 is for a new 345 kV substation which

includes all necessary breakers and a 1 mile loop from the plant substation to the IPL

Petersburg-Hanna Line. No adjustments related to the direct interconnection facilities

were necessary for the other two projects as it was determined that all necessary

IPL Witness Sadtler-l 0


1 equipment and associated costs for the interconnection facilities were included in their

2 bids.

3 Q29. Is IPL planning to expand the existing substation or construct a new one to

4 accommodate the CCGT at Eagle Valley?

5 A29. IPL determined that a new substation will be safer, less congested, and less costly to

6 construct and operate than renovating the existing substation. The existing Pritchard

7 substation at Eagle Valley would need to be substantially renovated to enable

8 interconnection of the new Eagle Valley CCGT.

9 Q30. What are the anticipated construction costs to build the new transmission line,

10 upgrade the existing transmission lines and for the new substation for the Eagle

11 Valley CCGT?

12 A30. The following table details the estimated $_ cost of the new substation at

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Eagle Valley, the cost to both move and upgrade existing transmission lines and

termination equipment at the Pritchard Substation and the cost of the new transmission

line from Martinsville to Indianapolis and other associated cost to support the new

CCGT.

IPL Eagle Valley CCGT Plant I MISO Interconnection Request GI J238

1. New 138 kV substation and re-

3. New 23.0 mile IPL Pritchard - Franklin Township 138 kV Line and communications for contro etc.

4. New IPL 138 kV Breaker and accessories at Franklin Township Sub for New Line

5. Upgrade 15.7 mile 132-24 IPL Pritchard - Mooresville 138 kV Line for clearance

IPL Witness Sadtler-ll

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6. Upgrade 21.6 mile 132-21 IPL Pritchard - Southport 138 kV Line for clearance mitigation, Honey Creek 3-way disconnect switch,

terminal 7. Upgrade IPL 138 kV Hanna Sub to mitigate Hanna - SE 138 kV

Line loading with terminal equipment and line re-connected to the bus TOTAL TRANSMISSION AND SUBSTATION COSTS

As shown in Witness Guletsky's testimony, the $_ for the substation, Item 1 is

included as part of the EPC cost estimate. The remainder of the transmission costs

($_), Items 2-7 are included as part of Owner's costs as identified in Witness

Crawford's testimony. The network upgrade cost, Item 3-7 are shown in Witness

Martin's testimony and was assessed from the Power Transfer Study results.

7 Q31. Are the transmission upgrades and associated costs determined by ABB for the

8 Eagle Valley CCGT and the RFP Short list projects reasonable estimates of the

9 upgrades and costs that would result from the MISO process?

10 A31. Yes. The study methodology and approach used by ABB is substantially similar to that

11 used by MISO. Preliminary results from the MISO Interconnection request 1238 studies

12 for the Eagle Valley CCGT have identified the same upgrades as the ABB studies.

13 Therefore, the associated costs from ABB' s study should closely match the results of the

14 MISO study.

15 Q32. Please discuss the Company's timeline projections associated with the necessary

16 transmission construction and upgrades it has identified.

17 A32. Design engineering of this project will begin in the spring of2013. Detailed engineering

18 and procurement is planned to commence in April 2014, shortly after the anticipated date


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of securing CPCN approval. Construction of the transmission upgrades will take place in

parallel with the construction of the Eagle Valley CCGT and are expected to be

sufficiently complete to allow back-feed power to the Eagle Valley CCGT for testing and

commissioning by May 30, 2016. All transmission upgrades and construction are

5 planned to be completed in time to allow the Eagle Valley CCGT to achieve an April

6 2017 commercial operations date.

7 Q33. Will any of the identified costs be eligible for cost-sharing with other MISO

8 members?

9 A33. It may be possible that a small portion of these costs will be eligible for cost sharing with

10 other MISO members but IPL does not have sufficient information to make that

11 assumption at this time. If any cost sharing does occur, the benefit of the reduced costs

12 will be utilized for the benefit of the IPL customers. However, IPL does not believe these

13 costs will be eligible for cost sharing because the interconnection customer is normally

14 assessed these costs based on MISO cost sharing procedures.

15 Q34. What is the significance of the Harding Street 5 & 6 Refueling on transmission

16 reliability?

17 A34. Witness Crawford explains the rationale, timing and process to convert the 200 MW

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Harding Street Generating Units 5 & 6 from coal as the primary fuel to natural gas as the

primary fuel. In addition to the capacity benefits associated with approximately 200 MW

of generating capability, the IPL 138 kV transmission system benefits include voltage

support by maintaining the existing dynamic volt-ampere reactive ("VAR") power

capability during contingency conditions and frequency response in the IPL service

territory. Continued utilization of Harding Street Units 5 & 6 provides operational


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flexibility for planned and unplanned outages on the transmission system and/or for

planned and unplanned outages to the larger coal and gas-fired generation in the IPL

service territory. This flexibility allows IPL to offer its own generation with low

congestion costs into the market instead of relying on MISO to dispatch higher cost

generation to alleviate operational issues which benefits IPL customers.

6 Q35. Are there any transmission upgrades necessary as part of the Harding Street 5 & 6

7 Refueling?

8 A35. No. After the refueling conversion, Harding Street 5 & 6 will continue to use the existing

9 interconnection facilities.

10 Q36. Would upgrades be required if Harding Street 5 & 6 are not refueled?

11 A36. The MISO interconnection application and studies were based upon refueling of Harding

12 Street units 5 & 6. Therefore, additional studies and fees would be needed by MISO to

13 evaluate this option. In lieu of MISO studies, IPL has performed similar studies to

14 determine the transmission implications. Based upon our preliminary studies, we believe

15 additional transmission/substation equipment would be required to support an

16 incremental 200 MW of import capability from the 345 kV system into the 138 kV IPL

17 load zone if Harding Street 5 & 6 were retired.

18 Q37. Is it necessary for the Harding Street 5 & 6 Refueling project to go through the

19 MISO interconnection process?

20 A37. No. Harding Street 5 & 6 will continue to use the existing interconnection with similar

21 output capability from each unit; therefore, it is not necessary to go through the MISO

22 interconnection process.



1 Q38. Does this conclude your prefiled direct testimony?

2 A38. Yes, at this time.

INDSOI l408470v3

IPL Witness Sadtler-I5

VERIFICATION

I, James Sadtler, DirectOl' of Transmission Field Operations for Indianapolis Power &

Light Company, affirm under penalties of pmjury that the foregoing representations are true and

correct to the best of my knowledge, information and belief,

~-?-n~~--~Sadtler

,J

Dated: August~, 2013


OF

CRAIG JACKSON

Petitioner's Exhibit CJ-l

ON BEHALF OF


CAUSE NO. 44339


VERIFIED DIRECT TESTIMONY OF CRAIG JACKSON ON BEHALF OF


1 Q1. Please state your name, employer and business address.

2 AI. My name is Craig Jackson. I am employed by The Dayton Power and Light Company

3 ("DP&L"), 1065 Woodman Drive, Dayton, Ohio, 45432.

4 Q2. What is your position and professional relationship with Indianapolis Power &

5 Light Company ("IPL" or "Company")?

6 A2. I am the Director, Vice President, and Chief Financial Officer of AES US Services, LLC.

7 AES US Services, LLC is the AES Strategic Business Unit ("SBU") that provides

8 services for IPL, and other AES affiliates, pursuant to an Affiliate Services Agreement

9 filed with the Indiana Utility Regulatory Commission ("IURC").

1 0 Q3. Please describe your duties as Chief Financial Officer.

11 A3. In my current position, I report to the President of the SBU who is also CEO of IPL. I

12 have direct responsibility and oversight for the accounting, tax, financial planning,

13 treasury, risk management, and internal audit functions oflPL and other AES affiliates.

14 Q4. Please summarize your educational and professional qualifications.

15 A4. I received a Bachelor of Science degree in Business Administration from Bloomsburg

16 University in 1996. I also earned a Master of Business Administration degree in Finance

17 from Wright State University in 2001.

18 Q5. Please summarize your prior work experience.

19 AS. I joined DP&L in February 2000 as a Financial Analyst, Corporate Modeling. In

20 December 2002, I accepted the position of Team Leader, ISO Settlements, with PPL

IPL Witness Jackson-l

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Corporation. In June 2004, I returned to DPL as Manager, Financial Planning and

Analysis, reporting to the Chief Financial Officer. From June 2004 to May 2012, I was

promoted through several positions of increasing responsibility within the Treasury

organization at DP&L, the last of which was as Vice President and Treasurer.

Prior to joining DP&L in February of 2000, I served in the United States Air Force ("Air

Force") as a Finance Technician. I began my service with the Air Force in May 1996.

7 Q6. Have you testified previously before this Commission?

8 A6. No.

9 Q7. What is the purpose of your testimony in this proceeding?

10 A7. The purpose of my testimony is to support the Company's proposed accounting and

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ratemaking treatment presented by IPL Witness Cutshaw. My testimony explains the

impact IPL's construction of a new combined cycle turbine ("CCGT") at the Eagle

V alley generating station ("Eagle Valley CCGT") and refueling of Harding Street Station

Units 5&6 (collectively, the "Projects") will have on IPL's financial strength and on

IPL's credit ratings. I also discuss the benefit to customers to maintaining the

Company's ratings and address how earnings erosion can adversely affect the Company's

credit rating and otherwise strain resources. Additionally, I identify the tax benefits that

will be realized as a result of the Eagle Valley CCGT option.

19 Q8. What are IPL's financial objectives?

20 A8. At a high level, IPL seeks to maintain the financial strength of an investment grade utility

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so that we can deliver reliable service at a reasonable cost to our customers. Maintaining

this investment grade credit profile is important to ensure we have reliable access to the

IPL Witness Jackson-2

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credit markets at attractive interest rates during all types of economic cycles. This in turn

provides the ability to meet our financial obligations during periods of heavy capital

expenditures.

4 Q9. What are IPL's capital needs associated with the construction of the Replacement

5 Generation Projects?

6 A9. IPL projects that its capital expenditures excluding Allowance for Funds Used During

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Construction ("AFUDC") associated with the construction of the Replacement

Generation Projects will total approximately $667 million through 2017.

9 QIO. Please discuss how IPL plans to finance the construction of the Replacement

10 Generation Projects.

11 A10. IPL plans to finance the projects in a manner that is consistent with its targeted credit

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ratings and capital structure. Funding for the Replacement Generation Projects will come

from three primary sources: (1) secured or unsecured debt issued by IPL; (2) operating

cash flow from IPL; and (3) equity investments from IPALCO Enterprises, Inc., IPL's

parent. Tax-exempt debt may also be considered as a component of (1) above to the

extent that a portion of these Projects qualify for this type of financing.

17 Q11. Please explain why it is important for the Company to maintain its investment grade

18 credit rating.

19 All. As previously explained, the capital needs associated with the construction of these

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projects are substantial and as such cannot be funded through internally-generated funds

alone. These funding needs are compounded by the capital necessary to comply with the

Utility Mercury and Air Toxics Standards ("MATS") requirements as outlined in our


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request for a Certificate of Public Convenience and Necessity in Cause No. 44242

currently pending before the Commission. Based on supplemental testimony filed in

early January, the capital expenditures for the Utility MATS requirements are estimated

to be $511 million through 2016, excluding AFUDC and removal costs. By following the

Company's plan for funding the Replacement Generation Projects, IPL should have ready

and flexible access to the capital markets and should be able to maintain its current

capital structure, and therefore its investment grade ratings. However, IPL will have

lower credit metrics until it receives recovery of the costs through retail rates. Such

lower metrics will increase the risk that IPL's investment grade credit rating is

downgraded. This will be more fully described later in my testimony. The specific

accounting and ratemaking relief proposed by Witness Cutshaw is also necessary to

support this construction program and maintain IPL's financial strength. Without ready

and flexible access to the capital markets and a supportive ratemaking framework, IPL

would not be able to support this construction program. As a result, IPL's financial

strength and flexibility would decline and as discussed below this would adversely affect

customers.

17 Q12. Please discuss the impact to the Company and its customers if IPL's investment

18 grade rating is not maintained.

19 AI2. Financial strength and flexibility provide the framework for operational effectiveness

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which is necessary to provide safe and reliable service to customers at a reasonable cost.

A non-investment grade rating would lead to an increase in overall financing costs and

result in a higher cost of capital. Customers would be adversely affected because higher


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Q13.

A13.


capital costs lead to higher rates for electric serVice and strain resources that could

otherwise be utilized to meet our customers' ongoing need for reliable electric service.

Please describe the credit rating process and the key factors analyzed by the three

major credit rating agencies.

Credit ratings reflect a credit rating agency's independent judgment of the Company's

credit worthiness and its ability to meet its debt obligations. Credit committees at each

agency determine the ratings of a company based on certain quantitative and qualitative

measures. These factors are used to assess the financial and business risks of fixed

income issuers. Both Fitch Ratings ("Fitch") and Standard & Poor's ("S&P") delineate

investment grade as any rating equal to "BBB-" or above. Moody's Investors Service

("Moody's") delineates investment grade as any rating equal to "Baa3" or above. Non

investment grade ratings at Fitch and S&P are "BB+" or below and "Bal" or below at

Moody's.

Qualitative factors differ somewhat at each of the rating agencies but generally are

related to business risk such as regulation, the ability to recover costs and earn authorized

returns, and fleet diversification. At S&P, these qualitative factors are referred to as the

Business Risk Profile and are rated on a scale from excellent to vulnerable.

Since most electric utilities are highly capital intensive, financial strength and liquidity

are key quantitative factors in determining long-term viability. Over the last several

years each of the rating agencies has become more transparent in their methodologies for

determining financial strength and liquidity. For example, S&P views the following three

financial measures (or Financial Risk Indicative Ratios) as the most important to its


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Q14.

A14.


analysis of financial risk: 1) Funds from Operations ("FFO")/ Debt; 2) Debt/Earnings

before Interest, Taxes, Depreciation and Amortization ("EBITDA"); and 3) Debt/Capital.

As a part of its methodology, S&P considers a combination of quantitative and qualitative

factors in a Business and Financial Risk Profile Matrix. The Financial Risk Profile

category of a company is determined by the results of the ratios analysis ("Financial Risk

Indicative Ratios") as mentioned in the financial measures above; and is rated on a scale

of six measures from minimal to highly leveraged. The weaker the Business Profile

category, the stronger the Financial Risk Indicative Ratios must be in order to maintain

an investment grade rating.

The discussion above has focused on S&P and its rating methodology. Moody's and

Fitch employ similar methods in their ratings determinations, although the quantitative

calculations and weightings along with qualitative measures may be slightly different.

Can you expand on the regulatory factor mentioned above and your thoughts on its

importance in the credit rating process?

Yes. Regulation is a key factor in the credit rating process at all three credit rating

agencies. Predictability, full and timely cost recovery and a regulatory environment

supportive of a utility's financial strength are key credit considerations. A utility

operating in a stable, reliable, and highly predictable regulatory environment will be

scored higher than a utility that operates in an unstable, unreliable or highly unpredictable

regulatory environment. To that point, S&P recently revised the regulatory assessment of

Indiana downward from "More Credit-Supportive" to "Credit-Supportive." It is

unknown at this time whether this change in assessment will have a negative impact on

IPL's ratings.

IPL Witness lackson-6


1 Q15. Please discuss IPL's current credit ratings.

2 A15. As of the date of this pre filed testimony, IPL's credit ratings by the credit rating agencies

3 are as follows:

Moody's Investors Service Standard & Poor's Fitch Ratings

Corporate Credit Baa2 BBB- BBB-Rating/Issuer Rating Secured Debt A3 BBB+ BBB+

Unsecured Debt Baa2 BBB- BBB

4

5 Q16. Please describe the potential impact the construction of the Replacement Generation

6 Projects may have to the Company's investment grade credit ratings.

7 A16. As discussed previously, IPL's credit ratings are expected to stay at investment grade if

8 the rating agencies continue to view Indiana's regulatory framework as supportive and if

9 earnings erosion from these large capital projects is avoided. IPL Witness Cutshaw

10 discusses the specific accounting and ratemaking relief needed to maintain a supportive

11 framework.

12 However, IPL's credit metrics will be lower for a period of time as a result of the heavy

13 construction related to the proposed projects in this proceeding compounded by the

14 construction expenditures necessary for utility MATS compliance, until recovery through

15 rates is granted. This could put our credit ratings at risk for downgrade. However, we

16 believe the rating agencies will look through the temporary time period of lower credit

17 metrics, as ratios recover nicely in later years when cash flow measures grow stronger

18 and earnings erosion is avoided as recovery of costs is achieved through supportive

19 ratemaking.



1 Q17. Is it easy for a company that has been downgraded to regain its prior credit rating?

2 A17. No. It is not easy for a company that has been downgraded to regain its prior credit

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rating. In this volatile economic climate it is easier for a utility's ratings to decline as a

result of a deficiency than it is for a company's rating to increase once that deficiency has

been remedied. In other words, a company's credit rating can decline quickly, but it

takes longer for the rating to increase as rating agencies need to see an improvement in

metrics over a period of time before granting an upgrade.

8 Q18. Please describe the financial analysis related to credit worthiness conducted by the

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Company in light of Standard & Poor's methodology related to long-term power


11 A18. S&P views power purchase agreements as fixed, debt-like obligations of a utility and as

12 such has determined that they should be included in the calculation of financial metrics

13 on which they base a company's credit worthiness. This method treats fixed capacity

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payments as if they were a part of the company's permanent capital structure by

calculating the present value of the fixed (capacity) portion of the annual payment,

discounted at the utility's average cost of debt, and multiplied by a risk factor.

17 Q19. Please discuss the concept of the risk factor in more detail.

18 A19. S&P's risk factor reflects the probability of recovery that power purchase agreement

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costs will be recovered through rates. This factor varies by state statute or regulatory

policy and can range from 0% to 100%. The greater the certainty of recovery the lower

the risk factor, which results in a lesser amount of debt imputed onto the utility's balance

sheet for each power purchase agreement.



1 Q20. Are you knowledgeable as to the risk factor assigned to Indiana?

2 A20. Based on conversations with S&P's staff, the risk factor most likely assigned to Indiana

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is 25%, reflecting high confidence of recovery through rates for power purchase

agreements. This risk factor, of course, is re-evaluated each time an analysis is done by

S&P and is subject to change.

6 Q21. Please discuss other adjustments made by S&P related to its evaluation of power

7 purchase agreements.

8 A21. S&P also imputes interest and depreciation expense. Imputed interest is based on the

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Q22.

A22.

amount of debt imputed at the embedded debt cost of the utility. Imputed depreciation is

based on the difference between the fixed capacity payment and the amount of imputed

interest for the year.

Describe the outcome of this analysis as you evaluated the projects competing with

the Eagle Valley CCGT option.

The analysis indicated that the key metrics used to determine IPL's credit rating all

deteriorated using S&P's methodology for the two short-listed tolling projects. However,

these key metrics did not deteriorate significantly enough to trigger an expected

downgrade, and therefore no increased interest expense was expected if IPL were to enter

into either of the proposed tolling agreements. As such, no quantitative adjustment was

made to either tolling project in assessing the Present Value Revenue Requirement

("PVRR"). This nevertheless remains an important qualitative consideration as entering

into either of the tolling agreements would negatively impact key credit rating metrics

and would leave nearly no margin for any other negative event that could result in a

credit rating downgrade.



1 Q23. Have you identified any tax incentives or other benefits associated with the

2 construction and proposed financing plan for the Eagle Valley CCGT option?

3 A23. Yes.

4 Q24. Please identify the tax incentives or other benefits.

5 A24. IPL has secured a ten-year real and personal property tax abatement with the Morgan

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County Economic Development Corporation. Discussions are on-going to consider

establishing a tax increment finance ("TIF") district; however at this time it is unknown

as to whether this will occur.

The ten-year real and personal property tax abatement represents the maximum allowed

by law and will begin when the plant goes into service. The estimated property tax

abatement savings for a $631 million plant is approximately $23.5 million. This

abatement is unlike declining abatement approaches that start with a 100% abatement that

steadily declines over a ten-year period. We chose to use a ten-year flat 60% abatement.

This approach allows Morgan County to begin immediately receiving additional property

tax revenue and also provides IPL with a reduction in property tax expense.

If the TIF District is established, it will encompass the site of the new facility in Morgan

County. The County has proposed to pledge up to $2 million in TIF assistance for

infrastructure and investment at the plant site.

Morgan County also plans to offer up to $1,500 per employee for training. The training

funds will be in the form of a reimbursable grant to IPL.

21 Q25. Does this conclude your prepared verified direct testimony?

22 A25. Yes, at this time.

IPL Witness J ackson-l 0


INDSOI 1408476v3

IPL Witness Jackson-II

VERIFICATION

I, Craig Jackson, Director, Vice President, and Chief Financial Officer of AES US

Services, LLC, affmn under penalties of peJjury that the foregoing representations are true and

correct to the best of my knowledge, information and belief.

c(d~ Dated: August S , 2013

Petitioner's Exhibit KWC-l (PUBLIC) REVISED

I AI2. We will plan to seek recovery for portions of the Projects not timely recovered in a future

2 rate proceeding.

3 IV. IPL WITNESSES

4 Q13. Please identify the other witnesses and the subject matter of their respective

5 testimony offered by IPL in support of its Petition.

6 Al3. IPL's evidence includes testimony and evidence from the following witnesses:

Herman N. Schkabla

Richard L. Benedict

Paula M. Guletsky, Sargent & Lundy

James Sad tier

Dennis C. Dininger

IPL's integrated resource planning process and current IRP, IPL's need for additional generation and discussion of how IPL's proposal is consistent with IPL's IRP, Present Value Revenue Requirement analysis of the proposed Projects and the short listed alternatives, economic analysis of bringing small coal units into compliance with current/future environmental requirements, IPL's load forecast and the State Utility Forecast Group's ("SUFG's) "Indiana Electricity

. ections: The 2011 Forecast" Discusses the Request for Proposal conducted to identify and analyze CCGT options and the review and analysis of short listed CCGT and describe the CCGT site Eagle Valley CCGT Engineering, Procurement and Construction ("EPC") cost estimate, Harding Street 5&6 Refueling cost estimate, cost estimate of bringing Harding Street 5&6 into compliance with current/future environmental uirements Transmission system connection and upgrades, Interconnection issues Fuel mix and source identification, Midwest Independent Transmission System Operator, Inc.! ("MISO") issues, natural gas

and s

J On April 26, 2013, MISO changed its name to the Midcontinent Independent System Operator, Inc. Due to the timing of this name change, IPL's Case-In-Chief reflects the prior name.

IPL Witness Crawford - 6


1 has recently contracted to purchase about 100 MW of energy from solar facilities located

2 throughout its service territory pursuant to its Rate REP Tariff. As discussed by IPL

3 Witness Allen, IPL also uses demand-side management, which currently represents

4 approximately 62.7 MW of capacity, to meet the need for electricity within our service

5 area.

6 All of these resources are discussed in IPL's most recent IRP, a copy of which is included

7 as an exhibit to IPL Witness Schkabla's testimony.

8 Q17. How does IPL deliver this electricity to its customers?

9 A17. As more fully described by Witness Sadtler, electricity is delivered to IPL customers over

lOa network of transmission and distribution lines. IPL is also a member of and follows the

11 rules of the MISO as detailed in Witness Dininger's testimony.

12 VI. NEED FOR PROPOSED PROJECTS

13 Q18. What causes IPL's need for additional generation resources?

14 A18. The need for new generation resources stems from IPL's obligation to provide reasonably

15 and adequate electricity to meet the current and future needs of its retail customers.

16 Environmental Protection Agency ("EPA") rules, as described in IPL Witness Oliger's

17 testimony, will directly or indirectly result in the shutdown or refueling of up to six (6)

18 older coal units and five (5) associated oil/diesel-fired units. In addition, unit

19 obsolescence and falling natural gas and market prices have contributed to the decision to

20 retire these units. In total, these eleven (11) units comprise 607 MW of capacity (MISO

21 Installed Capability rating). Significant retrofitted controls would be required on the six

22 older coal-fired units as discussed by Witnesses Guletsky & Schkabla in order to comply


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were not refueled, as described by Witness Sadtler's testimony. Finally the combination

of the Harding Street 5&6 Refueling and the Eagle Valley CCGT match well with IPL's

capacity needs.

4 Q25. When does IPL need to bring the Projects on line?

5 A25. Because the six (6) small coal units do not comply with the MATS Rule, they are

6 currently required to shut down by April 2016 and the timing of the new Projects has

7 been developed with this fact in mind. However, IPL is also pursuing potential options to

8 keep the Eagle Valley units in service through early 2017.

9 The Harding Street Units 5&6 Refueling has been developed to allow completion of the

10 conversion from burning coal to burning natural gas by April 2016. This will allow the

11 units to meet the April 2016 deadline and integrate into the overall outage schedule at

12 Harding Street Station. This schedule also allows the units to be on-line during the

13 period of peak summer demand.

14 The schedule for the Eagle Valley CCGT includes approximately 12 months for

15 engineering and to procure long-lead items and approximately 24 months of major

16 construction on site. Thus, if the CPCN is issued no later than April 2014, IPL plans for

17 commercial operation of the Eagle Valley CCGT in April 2017. As in the case of

18 Harding Street Station Units 5&6, this commercial operation date is tied to being on-line

19 before the beginning of the period of peak summer demand. A delay in issuance of a

20 CPCN beyond April 2014 will impact the ability of IPL to achieve commercial operation

21 in time to be accredited for 2017 capacity needs.

22 VII. CCGT PROJECT



1 Q26. Please summarize IPL's proposal to construct a new CCGT at the Eagle Valley site.

2 A26. IPL proposes to build the Eagle Valley CCGT at its existing Eagle Valley site. The

3 proposed CCGT will have a generation capacity of 550-725 MW and is estimated to cost

4 approximately $631 million, not including AFUDC or financing charges. The target in-

5 service date is spring 2017.

6 As explained by Witness Guletsky, the Eagle Valley site is an existing site. IPL has other

7 generating facilities at this site which will be retired-in-place prior to the commercial

8 operation of the Eagle Valley CCGT. IPL has been active on this site for nearly sixty

9 years and has strong local support for the continued use of the site for power generation.

10 This is reflected in the fact that the Morgan County Board approved a 10-year tax

11 abatement if the proposed Eagle Valley CCGT is built. As described by Witness

12 Benedict, this site has water, land, and transmission, as well as good access into the

13 MISO market and close proximity to IPL customers. Additionally, the site has access to

14 interstate and intrastate pipelines within a 12-mile radius.

15 As explained by Witness Sadtler, an additional 13 8 kilovolt ("kV") transmission line will

16 need to be built. The proposed transmission line would run approximately 23 miles from

17 the existing Eagle Valley plant and Pritchard substation point of interconnection site to

18 the IPL Franklin Township substation located on the southeast side of Indianapolis,

19 Indiana. The new transmission line would be built on the spare tower line segment of the

20 existing Petersburg substation to Hanna substation transmission line that runs adjacent to

21 the Eagle Valley site.

22 Q27. Please identify the major components of the Eagle Valley CCGT.


1

2

3

4

5


through the Definitive Planning Process ("DPP") stage. It is projected that the

interconnection agreement will be signed before the end of 2013 as described more fully

by Witness Sadder.

Likewise, IPL filed an air-permit application at IDEM in October 2012. The final air-

permit is expected late in 2013 or early in 2014.

6 Q29. Please summarize the cost estimate of the Eagle Valley CCGT Project.

7 A29. The estimated cost of the construction of the Eagle Valley CCGT is summarized in the

8

9 10

table below in millions of dollars:

EPC Costs (without escalation)

Owner's Costs

Owner's Contingency

Escalation

Total (excludes AFUDC cost)

$476 ....................• ................. -.-• $631

11 Q30. How was the cost estimate developed?

12 A30. As described in Witness Guletsky's testimony, the EPC Cost of the Eagle Valley CCGT

13 is based on a detailed 600+ line item cost build-up prepared by S&L and covered a range

14 of different turbine configurations. IPL and S&L sought budgetary bids for every piece

15 of equipment expected to cost more than $1 million. S&L used the budgetary bids, in-

16 house engineering and recent experience to generate the estimate. In addition, multiple

17 meetings, reviews and revisions took place based on review and input. Multiple meetings

18 were also held with turbine manufacturers (GE, Siemens and Mitsubishi) and EPC

19 contractors (Chicago Bridge & Iron, SNC Lavalin, CH2M Hill and Bechtel) from which

20 capital costs, operating costs, performance characteristics and construction schedules


1

2

3

4

5

6

7


were secured. Collectively, this body of information was used to generate the Eagle

Valley CCGT EPC cost estimate that would cover the different turbines that might be

used. In order to achieve the reasonably lowest life cycle cost for IPL customers, IPL

intends to conduct an RFP process to establish the Eagle Valley CCGT with the lowest

reasonable cost, reliable turbine configuration.

IPL owner's costs are also included in the budget estimate as part of the project costs.

The Company has used an escalation rate of" per year.

8 Q31. What are Owner's costs?

9 A31. Owner's costs are generally those items that are not expected to be included as part of an

10

11

12

13

14 15 16

17

18

19

20

EPC contract and include the cost of transmission upgrades, the natural gas lateral,

professional services (e.g., Owner's Engineer), taxes, insurance, permitting fees, plant

personnel, project management, contract administration costs, and start-up.

For the Eagle Valley CCGT, the Owner's Costs are as follows in millions of dollars:

Witnesses Sadtler and Dininger will provide further detail regarding the cost estimates

related to the Transmission and Natural Gas Lateral costs. Other Owner's costs include:

(1) equipment spares; (2) mobilization & start-up; (3) permitting, land, legal, &

development costs; (4) Emission Reduction Credits ("ERCs"); (5) insurance; and (6)

project management.

21 Q32. Please describe the Owner's Contingency.


1

2

Petitioner's Exhibit HNS-l REVISED

IPL in the summer of2012 to focus on CCGT generation alternatives. The RFP process

is discussed in detail in the testimony of Witness Benedict.

3 Q20. Please describe the next phase of the updated analysis conducted by IPL.

4 A20. Having identified a CCGT as the preferred new resource option, the next phase in the

5 updated analysis was to compare the Eagle Valley CCGT self-build option against the

6 short listed project proposals that resulted from the RFP process described by IPL

7 Witness Benedict in his testimony.

8 Q21. Please describe the analysis process that was used to evaluate the Eagle Valley

9 CCGT against the request for proposals ("RFP") short list alternatives.

10 A21. The Eagle Valley CCGT and the RFP short list units were individually represented in the

11 Midas Gold modeling to determine the relative cost to customers on a comparative PVRR

12 basis. Because of the locational differences of the resource options being evaluated, it

13 was important to appropriately incorporate the transmission cost implications as

14 described in the testimony of Witnesses Sadtler, Adkins, and Martin into the comparative

15 PVRR results.

16 Q22. Please describe how the results of the IPL interconnection facilities study and ABB

17 power transfer study and reactive capability study presented in Witness Sadtler's

18 and Martin's testimony were incorporated into the Midas Gold Model PVRR

19 comparative results.

20 A22. The capital costs for the required transmission facilities identified for each of the CCGT

21 options in the respective studies were included as incremental capital costs for each of the

22 alternatives in the Midas Gold modeling.

IPL Witness Schkabla -13

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2

3

4

5

6

7

8

9

10

11

12

Petitioner's Exhibit RLB-l (PUBLIC) REVISED

Given that challenge, it was altogether necessary and appropriate to consider locational

factors for various bid proposals. Because IPL' s need for capacity and energy was

prompted largely by the planned retirement of the Eagle Valley and Harding Street units,

IPL issued the RFP with the goal of obtaining resources that could replace, or at least

closely approximate, the system support of the units that were slated for retirement.

Bidders were put on notice that whatever proposal they submitted, it would be

compared with IPL's self-build option of a CCGT that would connect to IPL's 138 kV

transmission system and would likely operate in a 40 percent to 60 percent capacity

factor range. Thus, rather than the RFP respondents simply competing against other

bidders, respondents were also competing against an option available to IPL at the time it

recognized the need for new capacity located on the 138 kV system. In this way, the RFP

established a robust competitive solicitation for new capacity.

13 Q18. Were any adjustments made to the information received from the short-listed

14 bidders from the RFP concerning transmission issues within MISO Zone 6?

15 A18. Yes. IPL engaged ABB/Ventyx to study transmission and deliverability issues related to

16 the short-listed bids from the RFP and the Eagle Valley CCGT. This study evaluated

17 congestion (as detailed by IPL Witness Adkins), and power transfer and reactive

18 capability effects (as detailed by IPL Witness Martin) of the four projects and the Eagle

19 Valley CCGT.

20 Additionally, as discussed by IPL Witness Sadtler, IPL analyzed the

21 interconnection facilities and associated costs of each bid.

IPL Witness Benedict - 8

Petitioner's Exhibit RLB-l (PUBLIC) REVISED

1 A28. Yes. As noted by Witness Schkabla, the Eagle Valley CCGT has the lowest PVRR of the

2 projects evaluated. There are additional qualitative reasons for selecting the Eagle Valley

3 CCGT as noted below.

4 In the case of a 20-year, long-term contract it is difficult to project prices long-

5 term and capture those prices within the confines of a contract. Long-term contacting

6 creates difficulties because either the seller or the buyer is sometimes significantly "out

7 of the money" under the contract as compared to prevailing market prices. Additionally,

8 as we have seen in other relatively recent situations, the congestion picture on the

9 transmission grid can change over time. With a self-build option, potential disputes

10 between buyer and seller regarding congestion and curtailment risk can be avoided.

11 In addition there are imputed debt considerations associated with a long-term

12 contract as discussed by IPL Witness Jackson. While IPL has not applied any

13 quantitative adjustment to either of the two tolling bids due to imputed debt in the PVRR

14 calculation, it is a qualitative consideration as it negatively impacts some of the financial

15 metrics used by Standard & Poor's to establish IPL's credit rating.

16 Both of the tolling bids also placed limits on the number of starts and/or

17 additional costs for exceeding a certain number of starts. Bid 12 imposes a limit of 120

18 starts per year, while Bid 10 imposes additional costs above 100 starts per year and a

19 limit of 200 starts per year. While a quantitative adjustment was not made to the PVRR

20 calculation in either case, it is a qualitative consideration.

21 Finally the Eagle Valley CCGT is more advanced in its development than any of

22 the four bids and has relatively lower development and schedule risk.

IPL Witness Benedict - 15

Petitioner's Exhibit DCD-l (PUBLIC) REVISED

1 A27. Yes. IPL has the requisite financial, technical and managerial ability to provide the

2 service. IPL Witness Jackson describes IPL's plans to finance these projects and the

3 Company's credit ratings. With respect to the technical and managerial ability, IPL has

4 experience managing utility infrastructure and will contract with others to manage the

5 pipeline as necessary to ensure compliance with state and federal regulations.

6 Q28. Does the public convenience and necessity require the provision of the requested

7 service giving consideration to the availability of gas service from any gas utility

8 authorized to serve end use customers within the geographic area covered by the

9 application?

10 A28. Yes. Authorizing IPL to transport natural gas to the Eagle Valley CCOT will support the

11 public convenience and necessity by providing the authorizations necessary for IPL to

12 secure gas for this necessary facility at the most reasonable cost.

13 Q29. Will the public interest be served by the issuance of the necessity certificate?

14 A29. Yes. IPL Witnesses Crawford and Schkabla all explain the need for and importance to

15 IPL's customers of constructing the Eagle Valley CCOT. Issuance of this necessity

16 certificate will enable IPL to supply natural gas to the Eagle Valley CCOT in the most

17 cost effective manner. A certificate will afford IPL the flexibility to transport natural gas

18 across an IPL owned pipeline if that option is the best method for securing gas for the

19 Eagle Valley CCOT.

20 Q30. Does this conclude your prefiled direct testimony?

21 A30. Yes,itdoes.

IPL Witness Dininger-ll

1 2 3 4 5 6 7

8 Q13.

9 A13.

10

11

12

13

14 Q14.

15 A14.

16

17

18

19

20

21

22

23

24

25

26

Petitioner's Exhibit CFA-l REVISED

• Ventyx updated the annual inflation factors for Variable O&M; • Ventyx reviewed the assumptions regarding electric demand, generation

expansion and generation retirements and found them comparable to the Ventyx assumptions from the Spring 2012 Reference Case; and

• Ventyx retired the IPL generating units: Eagle Valley 1-6 and Harding Street 3-4 and also converted Harding Street 5-6 from coal-fired to gas-fired with a limitation on capacity factor.

Why were changes to the MISO database necessary?

IPL has conducted a robust economic analysis of the five generation alternatives using

the Strategic Planning Model. This congestion analysis is designed to augment that

economic analysis. It is critical for an "apples to apples" comparison that the underlying

assumptions be consistent between the Strategic Planning Model economic analysis and

the PROMOD IV Model congestion analysis.

What inputs were provided for the five generation alternatives?

Ventyx received the modeling parameters for each of the five generation alternatives

under consideration: Eagle Valley CCGT, Bid 10, Bid 11, Bid 12, and Bid 13. The

general modeling parameters and respective heat rate curves for the Eagle Valley CCGT

were provided by IPL, while the general modeling parameters and respective heat rate

curves for the RFP generation alternatives were based upon data submitted to IPL by the

project bidders. IPL Witness Martin, from Ventyx's parent company ABB, provided the

transmission network upgrades and IPL Witness Sadtler provided the interconnection

facilities necessary for each of the five generation alternatives. As a result, each of the

five generation alternatives were independently added to the PROMOD IV model's

"business as usual" scenario along with any transmission network upgrades and

interconnection facilities associated with the generation alternative as provided by IPL

Witnesses Martin and Sadtler and described in their testimony.

IPL Witness Adkins -8

Petitioner's Exhibit JLC-l REVISED

1 Q34. How does IPL intend to recover the portion of the Harding Street 5&6 Refueling not

2 timely recovered?

3 A34. We plan to seek recovery in a future rate proceeding.

4 Eagle Valley CCGT Accounting and Ratemaking Treatment

5 Q35. Why is IPL requesting that the Commission authorize the proposed accounting

6 treatment with respect to post-in-service AFUDC and the deferral of depreciation

7 for the Eagle Valley CCGT Project?

8 A35. The request is necessary because of the magnitude of the Project. Unless the requested

9 authorization is obtained, the Company will suffer a severe negative impact on its

10 earnings during the period between the in-service date(s) of the Project and the issuance

11 of an order authorizing recovery of a return on the Project and including depreciation

12 expense thereon in its recoverable operating expenses. The Company will also lose any

13 opportunity to recover the carrying costs of the Project incurred during the interim period.

14 This accounting change is also necessary to assist the Company in attracting permanent

15 capital at reasonable rates as discussed by Witness Jackson.

16 Q36. Can you put the magnitude of the Project into perspective?

17 A36. Yes. As noted in the testimony of Witness Crawford the construction costs for the Eagle

18 Valley CCGT are $631 million (excluding AFUDC), which represents 31.4% of the Total

19 Company Original Cost Rate Base as of December 31, 2012 recently reported on Form

20 PR in the FERC Form 1. And the rate base reflected on Form PR does not yet reflect the

21 $511 million of construction costs (excluding AFUDC and removal costs) which IPL is

22 seeking timely recovery of in pending Cause No. 44242.

IPL Witness Cutshaw-IS

Year

2013

2014

2015

2016

2017

2018

2019

Petitioner's Exhibit LHA - 4 REVISED

Incremental Amount of Energy Efficiency and Demand Savings

(EE Related) Included in IPL Load Forecast

IURC Target {% of IURC Gross Energy Net Incremental

Weather Savings Target Annual Demand

Normalized Sales) {MWh) Reductions {MW)

0.90% 127,351 14 1.10% 156,027 16 1.30% 186,006 17 1.50% 216,018 17 1.70% 248,073 20 1.90% 279,823 21 2.00% 295,594 20

Extension beyond 2019

2020 1.00% 147,572 11

Note: The Demand Savings are only the Demand Savings that are expected to

result from the deployment of energy efficiency programs.

The Load Forecast also assumes a going level of Load Management programs

(ACLM for example) of 67 MW per year.

Documents

STATE OF INDIANA INDIANA UTILITY REGULATORY … · 8/6/2013 · Q1. Please state your name, employer and business address. AI. My name is Barry J. BentleyJames A. Sadtler. I am employed