J. KENNEDY AND ASSOCIATES, INC. PROPOSAL TO THE LOUISIANA PUBLIC SERVICE COMMISSION IN RESPONSE TO RFP 14-26 PROPOSAL TO ASSIST COMMISSION STAFF WITH ENTERGY GULF STATES, LLC S UPCOMING FILING REGARDING ACQUISITION OF TWO POWER BLOCKS LOCATED AT UNION POWER STATION 570 Colonial Park Drive Suite 305 Roswell, Georgia 30075 770-992-2027
Executive Summary J. Kennedy and Associates, Inc. ( Kennedy and Associates ) is pleased to submit this proposal in response to the Louisiana Public Service Commission s ( LPSC or Commission ) Request For Proposal ( RFP ) 14-26, which seeks independent technical consulting assistance for Commission Staff ( Staff ) in its review and analysis of Entergy Gulf States, LLC s ( EGSL ) upcoming certification application for the acquisition of two power blocks located at the Union Power Station from Union Power Partners ( UPP ) and Entegra. This proposal is structured to meet the requirements specified in the Commission s General Order dated November 10, 2014, regarding the selection of contract employees. Background Concerning EGSL s Proposed Acquisition RFP 14-26 states that EGSL has notified the Commission of its intention to request certification of 990 MW of capacity that it plans to acquire from the Union Power Station by the end of 2015 at a cost of $474 million. The acquisition stems from an unsolicited offer that the plant s owners, Union Power Partners, L.P. ( UPP ) and Entegra TC, LLC ( Entegra ) made to Entergy in June 2014. 1 This acquisition is subject to the requirements of and must comply with the Commission s 1983 General Order, as amended. The 1983 General Order requires utilities acquiring resources to demonstrate that the public convenience and necessity will be served through the acquisition of the resources. 2 In addition, because this stemmed from an unsolicited offer, this acquisition must comply with the Commission s requirements in LPSC General Order dated October 28, 2008 (In re: Consideration of procedures whereby jurisdictional electric utilities must 1 Entergy letter sent to LPSC Executive Secretary Eve Gonzales, December 16, 2014. 2 September 30, 1983 General Order, as amended by the Commission s Order R-30517, dated October 29, 2008.
Page 2 of 7 provide the Commission Staff with notice of unsolicited offers, as well as their response to, and analysis of, unsolicited offers). Kennedy and Associates is quite familiar with these Orders as we have been involved in numerous certification proceedings involving Entergy and the other utilities in the state, including Cleco Power and SWEPCO. Kennedy and Associates Qualifications Kennedy and Associates is well qualified to assist Staff in performing a review of EGSL s certification application given our many years of experience working on Entergy System related matters, as well as working on matters that involved the other electric utilities in Louisiana. Kennedy and Associates assisted the Staff in its review and evaluation of Entergy s 2009 RFP for new renewable resources. We also assisted Staff in the resulting certification proceedings of the new renewable resources that Entergy has now acquired including Dockets U-32557 (Rain Certification), U-32785 (Agrilectric Certification), and U-32981 (Montauk Certification). We also assisted Staff in the review and evaluation of other resources in Louisiana, including Cleco Power, LLC s ( Cleco Power ) 2007 Request for Certification of Purchase Power Agreements in Docket U-30334, Cleco Power s 2007 RFP for Long Term Resources, and in the resulting certification proceeding of the Acadia Combined Cycle resource in Docket U-31157. Kennedy and Associates has been involved in certification proceedings in other states, as well, including Utah, Wyoming, Georgia, Kentucky, Minnesota and Colorado. Kennedy and Associates meets all of the professional qualification requirements specified in the Commission s RFP for technical consultants. We are qualified to prepare and render expert testimony and stand for cross-examination with respect to all of the issues addressed in the RFP, which may arise in this proceeding. Our consultants are experienced in analyzing the
Page 3 of 7 operations, books and records of utility companies, which is important in evaluating a utility s capacity needs, and in determining appropriate capacity resources for the utility. In addition, our consultants have expert knowledge of: 1. Production cost modeling; 2. Resource evaluation and planning, including both supply-side and demand-side resources; 3. Capital cost evaluation; 4. Integrated resource planning; Furthermore, Kennedy and Associates broad utility consulting practice allows us to be able to provide expert testimony in all of the areas discussed at page two of the RFP 14-26 document. In general, we have substantial expertise with: 1. Appropriate accounting standards and practices used by electric utilities; 2. The Commission s relevant Rules and Orders; 3. Principles associated with unsolicited offers; 4. Evaluating the reliability of resources, and whether they are among the least cost options; 5. Evaluating whether the utility has made use of resource planning methods that could improve the efficiency of the utility s power supply operations; 6. Identifying the public interest criteria that should be used in selecting purchase power contracts and unit acquisitions; 7. Applying LPSC cost recovery rules for power supply resources, including the ELL and EGSL Formula Rate Plans, the Commission s Fuel Clause Recovery Order, and Commission General Order U-21497 dated November 6, 1997; 8. The Entergy System Agreement, and in particular, Schedule MSS-4. In addition to our experience working with the Entergy System and its generation resources, we also have been closely involved with Entergy s transition to MISO, and changes to the Entergy
Page 4 of 7 System Agreement. With regard to MISO, our firm assisted the Commission and Staff in the review of Entergy s application for approval to transfer functional control to MISO (Docket No. U- 32148), and we assisted Staff in the evaluation of on-going transition matters as part of the Entergy Regional State Committee ( ERSC ) Working Group. We also have a thorough understanding of MISO s resource adequacy requirements, which should be considered as part of the evaluation of Entergy s acquisition of the UPP capacity. With regard to the System Agreement, our firm has been involved in numerous System Agreement matters that have been litigated in front of this Commission and at FERC, including all of the Bandwidth Proceedings. We are also currently working with Staff to evaluate the status of the System Agreement as it evolves due to Entergy s membership in MISO, and the exit of some Companies from the System Agreement. The acquisition of new resources should be considered in decisions made regarding the evolution of the System Agreement. Our firm also has provided extensive consulting assistance to the Staff in dozens of other proceedings involving nearly all of the electric and natural gas utilities in Louisiana. These proceedings have involved rulemakings, acquisitions, rate cases, fuel clause audits, and affiliate transactions. Recent rulemakings we have been involved with, that are relevant to this RFP, include the development of the IRP Rules (Docket R-30021), a Renewable Energy Pilot (R-28271), and development of the Energy Efficiency Rules (Docket R-31106). Our experience as a firm and the expert appearances of our consultants are detailed in our Qualifications package, a copy of which is enclosed with our proposal. Our Project Team will consist of Mr. Stephen Baron, President; Mr. Lane Kollen, Vice President, CPA, CMA, CGMA; Mr. Philip Hayet, Vice President, and Ms. Leah Wellborn, Consultant. Their resumes list the regulatory proceedings and subject matters in which they have provided expert testimony.
Page 5 of 7 Plan of Action and Timeline Entergy has requested prompt Commission action on this filing, and Kennedy and Associates is prepared to begin work on this project immediately upon being retained by the Commission. We have developed the following Plan of Action and Timeline for the major activities in this proceeding. This timeline is simply an estimate and we will adjust to any schedule that is worked out between the parties involved. 1. Review EGSL s Certification Filing It is anticipated that EGSL will make a detailed certification filing in January 2015 containing the Company s support for its acquisition of 990 MW of combined cycle capacity. This represents a large addition of natural gas resources to its supply-side portfolio of resources. We anticipate that the filing will provide the Company s support that the acquisition is a reasonable alternative that will meet the Company s capacity needs, is economic compared to other alternatives, and will be a reliable resource. Our independent evaluation will either confirm the reasonableness of the Company s findings or will identify possible alternatives that would provide greater ratepayer benefits. 2. Conduct Initial Discovery and Analyses Beginning in January 2015 we will develop and submit initial discovery requests, and we will analyze the information that we receive back from the Company. We will also factor into our analyses other information that is already available to us or that we acquire from public sources. Our discovery requests will seek all communications between the parties, will explore why an unsolicited offer was made, will probe the timing for EGSL s capacity needs, and will request all economic evaluations and market reviews that EGSL performed. While the exact schedule will have to be worked out with Staff, we anticipate that we would file additional discovery and perform additional analyses over the period of January through the end of April 2015. We will maintain close communication with Staff and will seek Staff s input throughout this process. We also anticipate that we may need to schedule conference calls with the Company, in order to gain a better understanding of the analyses that it performed. 3. Finalize Positions and Participate in Settlement Discussions After conducting analyses we will work with Staff to finalize our positions. Then we will assist Staff in settlement discussions conducted with the Company. In the event that we agree with the Company and conclude that the transaction is in the public interest, it is quite possible that a Settlement Agreement could be reached on some or all of the issues by the end of May. 4. Develop Testimony and Participate in Hearing Our timeline has been developed to
Page 6 of 7 allow the Company to close the transaction by December 31, 2015, if we determine that the transaction is in the public interest. As such, we believe that if we were to file testimony in early June, and the Company were to file responsive testimony in early July, a hearing could be scheduled for the July/August timeframe. The type of hearing would depend on whether a Settlement Agreement could be reached on some or all of the issues. After that, we believe there would be plenty of time for briefs to be submitted, an Order to be written and a vote to be taken by the Commission in order to meet the desired December 31, 2015 transaction closing date. We would provide all support necessary that Staff requires for any post-hearing activities. In the event that parties prefer to file additional rounds of testimony, this schedule could easily be adjusted. 5. Make Recommendations to the Commission at a B&E Meeting As a final step, we would attend and assist Staff in making a recommendation to the Commission at either the November or December 2015 B&E meeting, though a decision at the November B&E meeting would be best. While this timeline is tentative, we will assist Staff to develop a final procedural schedule once the docket has been established. Once set, we will commit to perform our work in a timely manner in accordance with the established schedule. We will commit to providing our services for the entirety of the period required to conduct the Certification Proceeding, as discussed in the scope of work above. Budget to Provide These Comprehensive Services We propose a total budget of $29,000 to provide these services, which includes $27,500 for consulting services and $1,500 for expenses, such as reproduction, courier services, travel, and lodging. This budget assumes the scope identified in the Commission s RFP 14-26 document, and as reflected in this proposal. The costs of such services will be billed at the hourly rates on the Attachment to this proposal.
Page 7 of 7 No Conflicts of Interest Kennedy and Associates has no known conflict of interest in representing the Louisiana Public Service Commission in this proceeding. Kennedy and Associates does not represent investor-owned gas or electric utilities. Contact Information Thank you for the opportunity to provide consulting services to the Commission Staff on this important project. Please call or e-mail Philip Hayet at phayet@jkenn.com or Lane Kollen, Vice President of Kennedy and Associates, at lkollen@jkenn.com with any questions or comments.
RESUME OF STEPHEN J. BARON, PRESIDENT EDUCATION University of Florida, BA Political Science, Mathematics with High Honors University of University of Florida, MA Economics. Specialization in econometrics, statistics, and public utility economics. Post Graduate study in time series analysis, model building. PAPERS "How to Rate Load Management Programs" in the March 1979 edition of Electrical World. "Standby Electric Rates" was published in the November 8, 1984 issue of Public Utilities Fortnightly. "Load Data Transfer Techniques" on behalf of the Electric Power Research Institute, 1984. EXPERIENCE Mr. Baron has more than thirty-nine years of experience in the electric utility industry in the areas of cost and rate analysis, forecasting, planning, and economic analysis. Following the completion of his graduate work in economics, he joined the staff of the Florida Public Service Commission in August of 1974 as a Rate Economist. In December 1975, he joined the Utility Rate Consulting Division of Ebasco Services, Inc. as an Associate Consultant. In the seven years he worked for Ebasco, he received successive promotions, ultimately to the position of Vice President of Energy Management Services of Ebasco Business Consulting Company. He joined the public accounting firm of Coopers & Lybrand in 1982 as a Manager of the Atlanta Office of the Utility Regulatory and Advisory Services Group. In this capacity he was responsible for the operation and management of the Atlanta office. In January 1984, he joined the consulting firm of Kennedy and Associates as a Vice President and Principal. Mr. Baron became President of the firm in January 1991. Mr. Baron has presented testimony in over 250 cases as an expert witness in the following jurisdictions: Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Indiana, Kentucky, Louisiana, Maine, Michigan, Minnesota, Maryland, Missouri, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Texas, Utah, Virginia, West Virginia, Wisconsin, Wyoming, the Federal Energy Regulatory Commission and in United States Bankruptcy Court.
RESUME OF LANE KOLLEN, VICE PRESIDENT EDUCATION University of Toledo, BBA (Accounting) University of Toledo, MBA Luther Rice University, MA PROFESSIONAL CERTIFICATIONS Certified Public Accountant (CPA) Certified Management Accountant (CMA) Chartered Global Management Accountant (CGMA) PROFESSIONAL AFFILIATIONS American Institute of Certified Public Accountants Georgia Society of Certified Public Accountants Institute of Management Accountants Society of Depreciation Professionals EXPERIENCE Mr. Kollen has nearly forty years of utility industry experience in nearly every facet of utility planning, performance, and operations, including the financial, accounting, rate, tax, and financing areas. He has conducted prudence and operational audits on behalf of utilities and regulatory commissions; participated in and reviewed mergers and acquisitions on behalf of utilities and regulatory commissions; conducted
RESUME OF LANE KOLLEN, VICE PRESIDENT performance and financial analyses on behalf of utilities and regulatory commissions; developed and reviewed alternative and performance based ratemaking plans; performed traditional ratemaking evaluations and filed reports and/or provided expert testimony before state and federal courts and regulatory commissions on hundreds of occasions addressing prudence and restructuring, including staffing levels and organizational structure; mergers, acquisitions, and divestitures; contract performance; revenue requirements; taxes; depreciation; financing; operation and maintenance expense; reliability; cost of service; and other issues. Mr. Kollen also is experienced in various proprietary and nonproprietary software systems used by utilities for budgeting, rate case support and strategic and financial planning. J. Kennedy and Associates, Inc. (1986 to Present): Vice President and Principal. Mr. Kollen provides consulting services that address planning, performance, operational, financial, accounting, and tax issues. Clients include state regulatory commissions and other government agencies, large users of electricity, natural gas, water, and steam. Energy Management Associates (1983 to 1986): Lead Consultant, Product Manager. Mr. Kollen provided consulting services to electric and natural gas utility clients throughout the country in numerous planning, financial, accounting, and budgeting areas. In addition, he used and developed proprietary software tools widely used throughout the regulated utility industry. The Toledo Edison Company (1976-1983): Planning Supervisor, Auditor, Accountant. Mr. Kollen was engaged in financial planning activities, including generation expansion planning; construction monitoring; capital and expense budgeting; evaluation of tax law changes; rate case strategy and support; production cost and financial modeling; and operational and financial audit.
RESUME OF PHILIP HAYET, VICE PRESIDENT EDUCATION Purdue University, BS Electrical Engineering Purdue University, Cooperative Education Certificate Georgia Tech, MS Electrical Engineering. Specialization in Power Systems. Post Graduate Study in Business Administration PROFESSIONAL AFFILIATIONS National Society of Professional Engineers Georgia Society of Professional Engineers Institute of Electrical and Electronic Engineers EXPERIENCE Mr. Hayet has nearly thirty five years of electric utility industry experience in the areas of resource planning, operations analysis, economic analysis, regulatory policy development, and utility rate analysis. He has worked on projects that led to the development of both supply-side and demand-side resources, participated in resource certification proceedings, evaluated power purchase agreements, participated in the development of commission rules concerning renewable energy and energy efficiency policies, and has performed utility fuel audits. Mr. Hayet has written reports and filed expert testimony on numerous occasions in federal court, regulatory commissions and at the Federal Energy Regulatory Commission ("FERC"). Mr. Hayet is an expert in the use of proprietary and non-proprietary production cost and longterm resource planning software tools. Mr. Hayet began his career working for 15 years for Energy
RESUME OF PHILIP HAYET, VICE PRESIDENT Management Associates ("EMA" now known as Venytx), providing client support services and consulting services using the firm's PROMOD IV ("PROMOD") and Strategist software. J. Kennedy and Associates, Inc. (2000 to Present): Director of Consulting. Mr. Hayet also works for this firm, and provides consulting services involving electric utility regulatory matters. Mr. Hayet has assisted in certificate of necessity, utility commission rulemaking, and decertification proceedings. These projects have involved performing production cost modeling and long term resource planning analyses. Mr. Hayet has used numerous production cost and resource planning software tools as part of these projects. Hayet Power Systems Consulting (1995 to Present): President and Principal. Mr. Hayet has provided consulting services to clients in the U.S. and abroad related to resource planning analyses. Mr. Hayet has assisted in the evaluation of power purchase agreements, generation resource additions, fuel budget audits, resource certifications, and generating unit de-certifications stemming from environmental regulations. Mr. Hayet has continued to use PROMOD and Strategist, along with other tools as part of his consulting work. Energy Management Associates (1980 to 1995): Lead Consultant, Product Manager. Mr. Hayet provided client support and consulting services to electric utility clients using the PROMOD and Strategist software systems. These tools were used to perform a wide range of studies, including operations evaluations, resource planning studies, economic evaluations, financial analyses, and accounting and budgeting studies.
RESUME OF LEAH JUSTIN WELLBORN, CONSULTANT EDUCATION Georgia Southern University, Statesboro, GA B.S. Mathematics, 2012 GPA 3.72, Magna Cum Laude Georgia Institute of Technology, Atlanta, GA Working towards M.S. Operations Research degree Expected Completion in 2015 EXPERIENCE Ms. Wellborn is a recent college graduate with a mathematics and analysis background. She has been working at J. Kennedy and Associates, Inc., and has been sub-contracting to Hayet Power Systems Consulting on projects since early 2013. For these companies, she has been providing critical support in the areas of production cost modeling and data analysis involving utility regulatory proceedings on cases for clients located across the country. Ms. Wellborn has worked on projects for regulatory commissions and government agencies such as the Department of Justice and the Louisiana Public Service Commission Staff, as well as the large industrial users group, the Kentucky Industrial Utility Customers, Inc. J. Kennedy and Associates, Inc. (2013 to Present): Consultant Responsible for conducting research, data analysis, production-cost modeling, and performing resource planning analyses. Project Experience Analyses and development of commodity forecasts, Data extraction, interpretation, and organization, Analysis using statistical software such as PAST, and Familiarity with production cost models such as Strategist and Aurora XMP Hayet Power Systems Consulting (2013 to Present): Sub-contractor Consultant Responsible for conducting research, data analysis production-cost modeling and performing resource planning analyses. Project Experience Analysis of PROSYM results, Evaluation of incremental cost, heat rate, and expected forced outage rate calculations, Integrated Resource Planning assessments, and Development of numerous analyses and creation reports and presentations
RESUME OF LEAH JUSTIN WELLBORN, CONSULTANT Relevant College Coursework (2008-2013) Deterministic Optimization, Operations Research, Statistical Methods, Number Theory, Linear Algebra, Differential Equations, Math Structures, Modern Algebra, Java Programming, and Calculus I, II, III