National Peer Group

PUC Docket No. 46449 EXHIBIT AMS-5

Page 2 of 2

' National Peer Group

AEP Texas Central Co AEP Texas North Co Alabama Power Co Appalachian Power Co AEP Texas Central Co AEP Texas North Co Alabama Power Co Appalachian Power Co Arizona Public Service Co Baltimore Gas & Electric Co CenterPoint Energy Houston Electric LLC Cleveland Electric Illuminating Co Commonwealth Edison Co Duke Energy Carolinas Duke Energy Florida Duke Energy Indiana Duke Energy Kentticky Duke Etiergy Ohio Duke Energy Progress Entergy Arkansas Inc. Entergy Gulf States Louisiana LLC Entergy Louisiana Inc. Entergy Mississippi Inc. Entergy,New Orleans Inc. Entergy Texas Inc. Florida Power & Light Co Georgia Power Co Gulf Power Co Indiana Michigan Power Co Jersey Central Power & Light Co Kentucky Power Co Kentucky Utilities, Co Kingsport Power Co Louisville Gas & Electric Co

Metropolitan Edison Co Mississippi Power Co Monongahela Power Co Northern States Power Co (Minnesota) Northern States Power Co (Wisconsin) Ohio Edison Co Ohio Power Co Oncor Electric Delivery PECO Energy Co Pennsylvania Electric Co Pennsylvania Power Co Potomac Edison Co PPL Electric Utilities Corp Public Service Co of Colorado Public Service Co of Oklahoma Southern California Edison Co Southwestern Electric Power Co Southwestern Public Service Co Toledo Edison Co West Penn Power Co Wheeling Power Co CLECO Power LLC Connecticut Light & Power Co El PasoTlectric Co Kansas City Power & Light Co Kansas Gas & Electric Co NSTAR Electric Co Oklahoma Gas & Electric Co Public Service Co of New Mexico Westar Energy Inc.

900

EXECUTIVE SUMMARY OF STEVEN J. WOOLDRIDGE

Steven J. Wooldri'dge, Station Technical Services Manager for the west American

Electric Power (AEP) footprint, presents testimony supporting the cost of service

required to provide safe and reliable transmission service in Southwestern Electric Power

Company's (SWEPCO) transmission service area.

Mr. Wooldridge first summarizes the physical configuration and manner of

planning and operation of both AEP's and SWEPCO's transmission systems. He testifies

that American Electric Power Service Corporation (AEPSC) and SWEPCO coordinate

with respect to planning, construction, operations and maintenance, and that AEP's

Transmission organization enables SWEPCO to benefit from economies of scale. He

describes SWEPCO's programs to maintain the reliability of its transmission system.

Mr. WoOldridge explains the overall organizational structure of the AEP Transmission

organization. He describes the services performed by each of the four primary functional,

units of the AEP Transmission organization. He testifies that each of the šervices

proyided to SWEPCO by that organization is essential to ensure the system is well

maintained, in good working order, and provides reliable electric service.

Mr. Wooldridge provides an overview of test 'year transmission operations and

maintenance expenses incurred by SWEPCO. He describes the processes in place for

establishing business planning and budgeting, annual work plans, and reviewing

expenditures on an ongoing basis to keep them within budget. He explains cosi trends

and their significant underlying drivers.

901

1

- Mr. Wooldridge explains three benchmarking studies done under his supervision

comparing SWEPCO's transmission operations and maintenance (O&M) and capital

expenditures to others in the industry. He explains how thc three peer groups — Texas,

south central, and national — were selected.. He testifies that the studies indicate that

SWEPCO transmission O&M as well as total expenditures are near or below the median

values for,each of the three peer groups: He identifies one exception, and explains that t•

SWEPCO's O&M expenditures are above median within the Texas peer group because,

of differences in geography, topography, and demography.

Mr. Wooldridge discusses the trends in the total number of SWEPCO transmission

employees in recent years. He explains how SWEPCO outsources some of its O&M

services and ensures they are provideci in a quality, cost-effective manner. He concludes

that SWEPCO's overall transmission O&M expenses are reasonable and necessary.

Mr. Wooldridge also addresses the affiliate component of SWEPCO's O&M

transmission expenses. He confirms that the seryices do not duplicate those provided by

personnel within SWEPCO or any other entity. He describes recent trends in AEPSC

billings to SWEPCO and in AEPSC's workforce and workload. He testifies that his

bepchmarking studies support the reasonableness of SWEPCO's affiliate O&M

transmission charges for the test year.

Finally, Mr. Wooldridge ,summarizes the major transmission capital

additions that have been booked to plant in-service for SWEPCO since its last base rate

case. He confirms that the capital investments support capacity requirements. He also

explains that SPP has influenced the need for significant increases in transmission

2

902

investments to accommodate regional transmission service needs. Mr. Wooldridge

explains how SWEPCO keeps the cost of transmission capital projects reasonable, and

that the benchmarking studies support the reasonableness of SWEPCO's transmission

capital addition costs, including affiliate charges comprising those costs.

3

903

PUC DOCKET NO. 46449

PUBLIC UTILITY COMMISSION OF TEXAS

APPLICATION OF

SOUTHWESTERN ELEeTRIC POWER COMPANY

FOR AUTHORITY TO CHANGE RATES

DIRECT TESTIMONY OF

STEVEN J. WOOLDRIDGE

FOR

SOUTHWESTERN ELECTRIC POWER COMPANY

DECEMBER 2016

904

TESTIMONY INDEX

SUBJECT PAGE

GLOSSARY ii

I. INTRODUCTION AND QUALIFICATIONS 1

II. PURPOSE AND BACKGROUND 3

III. AEP AND SWEPCO TRANSMISSION SYSTEMS 4

IV. AEP TRANSMISSION ORGANIZATION 10

V. SWEPCO TRANSMISSION O&M EXPENSES 13

I. AEPSC CHARGES TO SWEPCO FOR TRANSMISSION SERVICES ' 21

VII. TRANSMISSION CAPITAL ADDITIONS 27

EXHIBITS

EXHIBIT SJW-1 AEP Transmission System Map

EXHIBIT SJW-2 AEP Transmission Organization Chart

EXHIBIT SJW-3 Benchmark — Peer Groups

EXHIBIT SJW-4 Benchmark Analysis — Texas Peer Group

EXHIBIT SJW-5 Benchmark Analysis — South Central Peer Group

,

EXHIBIT SJW-6 ' Benchmark Analysis — National Peer Group

DIRECT TESTIMONY PUC DOCKET NO. 46449 i STEVEN J. WOOLDRIDGE ..

905

GLOSSARY

AEP American Electric Power Company, Inc. AEPSC American Electric Power Service Corporation Company SWEPCO ERCOT Electric Reliability Council of Texas FERC Federal Energy Regulatory Commission HVDC High Voltage Direct Current ISO Independent System Operator MISO Midcontinent Independent System Operator NERC North American Electric Reliability Corporation NTC Notification to Construct OATT Open Access Transmission Tariff O&M Operation and Maintenance P&C Protection and Control PE Professional Engineer PSO Public Service Comi5any of Oklahoma PUC Public Utility Commission of Texas ROW Right-of-Way RTO Regional Transmission Organization RTU Remote Terminal Unit SCADA Supervisory Control and Data Acquisition SPP Southwest Power Pool STEP SPP Transmission Expansion Plan SWEPCO SouthWestern Electric Power Company TCC AEP Texas Central Company TCRF Transmission Cost Recoverý Factor TFS Transmission Field Services TNC AEP Texas North Company TVMP Transmission Vegetation Management Program

DIRECT TESTIMONY PUC DOCKET NO. 46449 ii STEVEN J. WOOLDRIDGE

906

1 I. INTRODUCTION AND QUALIFICATIONS

2 Q. PLEASE STATE YOUR NAME, BUSINESS ADDRESS AND POSITION IN THE

3 COMPANY.

4 A. My name is Steven J. Wooldridge. My business address is' 428 Travis St.,

5 Shreveport, LA 71101. I am employed by American Electric Power Service

6 Corporation (AEPS6 as the Station TeChnical Services Manager for the western

American Electric Power Company, Inc. (AEP) footprint.

8 Q. PLEASE DESCRIBE YOUR RESPONSIBILITIES AS STATION TECHNICAL

9 SERVICES MANAGER OF TRANSMISSION FOR THE WESTERN AEP

10 FOOTPRNT.

11 A. I am responsible for providing leadership for the Transinission Field Services (TFS)

12 employees for construction and operations and maintenance (O&M) transmission

13 projects for the western AEP operating companies including Southwestern Electric

14 Power Company (SWEPCO or Company), AEP Texas Cenyal Company (TCC), AEP

15 Texas North Company (TNC), and Public Service Company of Oklahoma (PSO).

16 This includes coordinating with SWEPCO and other AEP. Transmission departments

17 related to thè transmission operations, construction, planning, and budgeting for the

18 SWEPCO transmission system.

19 Q. PLEASE DESCRIBE YOUR EDUCATIONAL QUALIFICATIONS AND

20 PROFESSIONAL BUSINESS EXPERIENCE.

DIRECT TESTIMONY PUC DOCKET NO. 464'49 1 STEVEN J. WOOLDRIDGE

907

1

1 A. I earned a Bachelor of Science degree in Electrical Engineering front Virginia

Polytechnic Institute and State University in 2007 as well as a Master of Business

3

Administration from Ohio University in 2013. I also obtained illy Professional

4

Engineer (PE) license from the State of Ohio in 2011 and I am an active PE.

5

I have worked for AEP for over ten years in various roles supporting the

6

transmission field staff. I started with AEP as a student intern while still attending

7

Virginia Tech. After graduating from Virginia Tech; I accepted a field Substation

8

Engineer position in Roanoke Virginia. I then took a position.in Gahanna, Ohio as a

9

Technical Support Engineer and was later promoted to Station Supervisor in the

10 Station Policy, Procedures and Standards group. A few years later I took a position

11

in Shreveport, Louisiana as a Principal Transmission Field Specialist in the TFS

12

Operations West organization supporting SWEPCO, TCC, TNC, and PSO operating

13 companies in various capacities. I was promoted to my current position as

,14 Transmission Station Technical Service-s Manager for the western AEP footprint, in

15 ' July of 2016.

16 Q. ARE YOU SPONSORINd ANY SCHEDULES TO THE RATE .FILING

17 PACKAGE?

18 A. Yes. I am sponsoring or co-sponsoring Schedules H-13.1b, H-13.1d, H-13.1e,

19 H-14.1a, H-14.1b, and H-14.2.

20 Q. WHAT EXHIBITS DO YOU SPONSOR IN THIS PROCEEDING?

21 A. I sponsor the exhibits listed in the table of contents to my testimony.

22 Q. PLEASE DESCRIBE THE CONTENT IN THE GLOSSARY PROVIDED IN THE

23 BEGINNING OF YOUR TESTIMONY.

DIRECT TESTIMÕNY PUC DOCKET NO. 46449 2 STEVEN J. WOOLDRIDGE

908

1 A. The glossary is a list of all acronyms used in my direct testimony, created for the

2 reader's ease of reference.

3

4 II. PURPOSE AND BACKGROUND

5 Q. WHAT fs THE PURPOSE OF YOUR TESTIMONY?

6 A. The purpose of my testimony is to describe the AEP Transmission organization,

7 describe the transmission-related services provided to SWEPCO by AEPSC,

8 demonstrate the necessity and reasonableness of SWEPCO's transmission capital

9 additions not already recovered in its Transmission Cost Recovery Factor (TCRF)

10 Rider, and support SWEPCO's test year level of O&M expenses. My testimony

11 specifically addresses the following topics:

12 • A description of the SWEPCO transmission system, including how the

13 transmission system is planned and operated;

14 • A description of the AEP Transmission organizatiori and how the functions

15 provided by its AEPSC transmission employees complement the functions

16 provided by SWEPCO employees, so that there is no duplication of functions

17 between AEPSC and SWEPCO employees;

18 • The necessity and reasonableness of the transmission—related costs for

19 services provided by AEPSC, associated with the SWEPCO transmission

20 system, including system planning, engineering, project management,

21 construction, and O&M of transmission facilities;

22 • The necessity and reasonableness of SWEPCO's transmission capital

23 additions placed in service since the last approved TCRF1 filing, as well as the

24 capital vegetation management costs that had been removed from the last

25 approved TCRF, as summarized in Figure 8.

I PUC Docket No. 45691.

'DIRECT TESTIMONY PUC DOCKET NO. 46449 3 STEVEN J. WOOLDRIDGE

909

1 III. AEP AND SWEPCO TRANSMISSION SYSTEMS

2 Q. PLEASE PROVIDE AN OVERALL DESCRIPTION OF THE PHYSICAL

3 CONFIGURATION AND MANNER OF OPERATION OF THE AEP

4 TRANSMISSION SYSTEM.

5 A. The AEP transmission system is an expansive system spanning AEP's 11 state

6 service territory located in the Southwest Power Pool (SPP) regional transmission

7 organization (RTO), Electric Reliability Council of Texas (ERCOT) independent

8 system operator (ISO), and the PJM Interconnection RTO. AEP's transmission

9 system encompasses facilities operating at voltages from 23 kilovolt (kV) to 765 kV,

10 and consists of approximately 37,000 miles of circuitry. Of this total, approximately

11 7,900 miles operate at Extra High Voltage -- 345 kV, 500 kV or 765 kV as shown in

12 EXHIBIT SJW-1. The AEP transmission system is also highly interconnected with

13 its neighboring utility transmission systems at numerous interconnection points.

14 Q. PLEASE DESCRIBE SWEPCO'S TRANSMISSION SYSTEM.

15 A. The SWEPCO transmission system is located in the SPP RTO footprint, which

16 provides transmission and generation interconnection services to deliver pbwer and

17 energy frorn generators throughout SPP for its members load,, including SWEPCO

18 load and loads served by other utilities, cooperatives, and municipalities located in

19 the SPP RTO. SWEPCO's transmission system is also used to deliver power and

20 energy through an asynchronous interconnection with ERCOT and through other

21 synchronous interconnections with utilities outside of the SPP RTO footprint. The

22 voltage leV'els of the SWEPCO transmission 6.cilities range from 69 kV to 500 kV.

23 There are over 4,100 circuit Miles of transmission lines in the SWEPCO system,

DIRECT TESTIMONY PUC DOCKET NO. 46449 4 STEVEN J. WOOLDRIDGE

910

1

stretching from near Grand Saline, TX east to Haughton,.LA and from the northern

2 Arkansas border with Missouri to near Crockett, TX. SWEPCO also owns

3

transmission facilities in the Texas Panhandle area from Shamrock, TX to

4

Vernon, TX.

5

SWEPCO is interconnected with other utilities, cooperatives, and

6

municipalities lo'cated in both the SPP RTO and in the Midcontinent Independent

7

System Operator (MISO) footprints.

8

SWEPCO, in partnership with TCC, Oncor, and CenterPoint, also owns one

9

High Voltage Direct Current (HVDC) interconnection with ERCOT at the Welsh

10

substation facility, commonly referred to as the East HVDC Tie. This East HVDC

11

Tie in northeastern Texas connects SPP to ERCOT.

12

SWEPCO has transferred functional control of its transmission facilities to the

13

SPP RTO. SWEPCO purchases Network Integration Transmission Service under the

14

SPP Open Access Transmission Tariff (OATT) to serve its retail and grandfathered

15

wholesale customers. SWEPCO's transmission system is also used to provide

16 wholesale transmission service under the SPP OATT to loads serviced 'by other

17 utilities, cooperatives, and municipalities connected to SWEPCO's transmission

18 system. As such, SWEPCO has been experiencing an increase in capital projects due

19 to transmission expansion projects identified by SPP and the AEP Transmission

20 organization, as well as other projects to support a more robust and reliable system as

21 well as reduce congestion in the SPP footprint.

22 Q. PLEASE DESCRIBE HOW AEP PLANS, CONSTRUCTS, OPERATES AND

23 MAINTAINS THE SWEPC6 TRANSMISSION SYSTEM.


911

A. The SWEPCO transmission system is planned, constructed, operated, and maintained

2 through the coordinated efforts of AEP Transmission and SPP. AEP Transmission

3 achieves economies of scale by enabling AEP affiliate companies to share common

4 support staff and resources which help provide cost and operational efficiencies.

5 Using a combination of services provided by AEPSC 'employees, SWEPCO

6 employes, and côntractors allows SWEPCO to efficiently and cost-effectively plan,

7 construct-operate and maintain its transmission system.

8 Because SWEPCO is interconnected with other companies transmission

9 systems in SPP, as well as ERCOT and MISO, the AEP Transmission organization

10 works closely with the RT0s/ISOs and its neighboring utilities to plan and operate

11 the 'transmission grid. SPP's transmissión planning arid operational requirements are

12 set out in the SPP OATT and the SPP GoverningDocuments Tariff.2

13 Q . PLEASE PROVIDE AN OVERVIEW OF THE RELIABILITY OF SWEPCO'S

14 TRANSMISSION SYSTEM IN RECENT YEARS.

15 A. The SWEPCO transmission system is currently and has been providing reliable

16 service within SWEPCO's service area and has consistently met all North American

17 Electric Reliability Corrioration (NERC) reliability criteria. The AEP Transmission

18 organization has successfully completed various NERC Regional Entity audits and

19 performed the

2 https://www.spp.org/documents/13272/current%20bylaws%20and%20membership%20agreement%20 tariff.pdf

DIRECT TESTIMONY PUC DOCKEf NO. 46449 6 STEVEN J. WOOLDRIDGE

912

annual compliance self-certifications for each of the regions that AEP operates in,

2 including the SPP region, since the NERC Reliability Compliance Standards

3 requirements were in effect.

Q. WHY IS IT IMPORTANT TO MAINTAIN A RELIABLE TRANSMISSION

5 SYSTEM?

6 A. A reliable transmission system that is well-maintained and meets applicable state and

7 federal standards is required to maintain reliable electric service to customers. To

8 meet this need, SWEPCO has an ongoing program to refurbish the existing

9 transmission infrastructure, replacing, equipment and rebuilding lines based on their

' 10 condition and performance. Routine evaluations of the transmission system coupled

11 with network considerations are used to determine the pricirity and ,schedule for the

12 most effective impleMentation of the refurbishment plan.

13 Q. PLEASE DESCRIBE SWEPCO'S PROGRAMS TO MAINTAIN THE

14 RELIABILITY OF ITS TRANSMISSION SYSTEM.

:

15 A. SWEPCO's programs to maintain and improve reliability by minimizing service

16 interruptions on the transmission system can be divided into three major categories:

17 1) Transmission Asset Management Programs, 2) Major Tiansmission Reliability

18 Program, and 3) Transmission Vegetation Management Program.

19 Q. PLEASE DESCRIBE THE TRANSMISSION ASSET MANAGEMENT

20 PROGRAMS.

21 A. The Transmission Asset Management Programs fall into three broad functional areas:

22 Station Programs, Transmission Line Programs, and Protection & Control (P&C)

23 PrOgrams. The objective of these programs is to identify. potential -problems with


913

1 existing transmission facilities that could cause an interruption of service and to

2 implement proactive corrective actions to maintain the reliable operation of those

3 facilities.

4 The Station Programs include the inspection, maintenance, and replacement,

5 as needed, of SWEPCO's station equipment such as circuit breakers, transformers,

6 switches, reactive power devices, station batteries, control buildings, supporting

7 štructures, and associated facilities.

The Transmission Line Programs include the inspection, maintenance, and

9 replacement, as needed, of line equipment, which includes structures, conductois,

10 switches, insulators, hardware, and right-of-way (ROW). The transmission line

11 inspection activities include walking, climbing, aerial, and emergency inspectiOns to

12 ensure a well-maintained system.

13 The P&C Programs primarily involve the inspection, maintenance and

14 replacement, as needed, of protective relays and associated equipment, such as power

15 line carriers, instrument transformers, and communication channels. In addition to

16 the protection relays, remote terminal units (RTU) are included in the program.

17 Q. PLEASE DESCRIBE THE MAJOR TRANSMISSION RELIABILITY PROGRAM.

18 A. Each year, SWEPCO completes various major transmission reliability projects that

19 expand its transmission system to meet load growth, to connect new customers, and

20 to construct SPP-mandated projects, including those for generation interconnections

21 and transmission service, for delivery of power from generation to load. These

22 improvements range from upgrading existing circuits to installation of new stations

23 and the associated transmission lines and assets needed to maintain reliable service to


914

1 SPP OATT customers, including SWEPCO's retail and grandfathered wholesale

2 customers.

3 Q. PLEASE DESCRIBE SWEPCO'S TRANSMISSION VEGETATION

MANAGEMENT PROGRAM.

5 A. The objedive of SWEPCO's• Transmission Vegetation Management Program,

6 (TVMP) is to provide for the safe and reliable operation of ihe SWEPCO

7 transmission system. For circuits greater than 200 kV, SWEPCO clears the ROW to

the maximum appropriate width, removing all woody-stemmed vegetation within the

9 ROW to comply with NERC transmission reliability standard FAC-003-04, which,

10 addresses management of vegetation located on and along transmission ROW. AEP

11 conducts aerial inspections, as needed ground inspections, and develops, annual

12 vegetation management work plans to ensure this program objective is achieved in

13 the most efficient, environmentally sound, economical manner practical and complies

14 with all laws and regulations. A

15 Vegetation on SWEPCO's transmission system is managed on a prescriptive

16 basis for all transmission voltage levels. Ongoing evaluation of the system through

17 ground and aerial inspections. by AEP Forestry personnel provides 'the basic

18 ififormation used by AEP Forestry Operations to develop its annual work plan.

19 Circuit criticality,. historical data, circuit voltage, location, vegetative inventory

20 information, and land use are among the items considered when developing the

21 annual vegetation management work plan. These plans are dynamic during the year

22 and adjusted for changing conditions.

DIRECT TESTIMONY PUC DOCKET NO. 46449 9 •STEVEN J. WOOLDRIDGE

915

1

As plant growth occurs along the ROW, these annual work plans will change

2

based on the sizes and types of vegetation present. AEP Forestry-Operations staff

3

and their contractors continuously work to ensure the appropriate plan is utilized to

maximize effectiveness and efficiency.

5

6 IV. AEP TRANSMISSION ORGANIZATION

7 Q. WHAT GROUP IS RESPONSIBLE FOR MANAGING THE SWEPCO

8 TRANSMISSION SYSTEM?

9 A. The AEP Transmission organization, in conjunction with SWEPCO leadership,

10 operates and manages the SWEPCO transmission system as part of its responsibility

11 to manage the overall AEP transmission system. This organization is comprised of

12 AEPSC employees, SWEPCO employees, and contractors.

13 Q. PLEASE DESCRIBE THE PRIMARY FUNCTIONAL DEPARTMENTS WITHIN

14 THE AEP TRANSMISSION pRGANIZATION THAT SUPPORT SWEPCO'S

15 TRANSMISSION NEEDS.

16 A. The AEP Transmission organization consists of four primary functional departments

17 that support SWEPCO's Transmission needs. These four functional departments that

18 report directly to the Executive Vice President — Transmission are as follows:

19 Transmission Business Operations Programs, Controls and Field Services, Grid

20 Development, and Transmission Asset Strategy and Policy. The AEP transmission

21 system assets are planned, engineered, constructed, operated and maintained through

22 the coordinated efforts of the AEP Transmission organization. The AEP

23 Transmission organization structure is shown in EXHIBIT,SJW-2.


916

1 Q. PLEASE DESCRIBE THE SERVICES PERFORMED BY EACH OF THE FOUR

2 FUNCTIONAL DEPARTMENTS OF THE AEP TRANSMISSION

3 ORGANIZATION THAT SUPPORTS SWEPCO TRANSMISSION.

4 A. The four departments within the AEP Transmission organization that support

5 SWEPCO Transmission are *as follows:

6 • The Transmission Business Operations Programs Organization is responsible

7 for process improvement, performance management, and portfolio

8 management.

9 • The Controls and Field Services organization is the service provider for field

10 operations, maintenance, and emergency restoration of the AEP transmission

11 system. In addition, Transmission Field Services provides internal labor

12 resources for implementation of transmission capital projects. This group is

13 also responsible for providing transmission project financial controls.

14 • Grid Development is the organization that is responsible for, including but not

15 limited fo, transmission planning, engineering, project management,

16 operations, technology development, and for providing support to the AEP

17 Transmission organization by ensuring compliance with reliability standdrds

18 and requirements established by NERC, regional reliability organizations, and

19 state regulatory agencies, and developing and executing transmission strategy

20 and business development plans.

21 • The Transmission Asset Strategy and Policy organization is responsible for

22 Transmission financial oversight and reporting and the oversight of all

23 transmission policy and regulatory" rnatters involving RTOs, the Federal

24 Energy Regulatory Commission (FERC), and State regulators affecting

25 transmission'. They also provide the regulatory support for the AEP

26 transmission-only companies, and siting and ROW for transmission projects.


917

1 Q. HOW ARE THE PERSONNEL WHO PERFORM TRANSMISSION

2 ORGANIZATION ACTIVITIES CLASSIFIED?

3 A. There are three categories of personnel that support SWEPCO's transmission system:

4. 1. AEPSC Transmission employees work primarily on assignments for more

5 than one of the AEP operating companies. To the extent AEPSC employees

6 work on projects that are specific to the facilities of other affiliate companies,

7 those associated costs are not incurred by SWEPCO.

8 2. SWEPCO Transmission employees are devoted to SWEPCO transmission

9 projects and assets. All SWEPCO employees who are part of the AEP

10 Transmission organization are stationed in SWEPCO's service area.

11 Fundtional responsibilities of AEPSC and SWEPC9 transmission employees

12 are clearly delineated and divided so there is no duplication of responsibilities

13 between AEPSC employees and SWEPCO employees.

14 3. Third-party contractors are also used to support SWEPCO and AEPSC.'

15 Contractor services are an important aspect in work force planning as they can

16 be used to respond to changes in workload related to construction activities

17 and service restoration.

18 Q. ARE EACH OF -THE SERVICES PROVIDED TO SWEPCO BY THE AEP

19 TRANSMISSION ORGANIZATION NECESSARY TO PROVIDE RELIABLE

20 ELECTRIC SERVICE?

21 A. Yes. Reliable electric service requires an adequte and well-maintained transmission

22 system that meets applicable state and federal standards. Each of the services

23 performed by the AEP Transmission organization is necessary in order to operate and

24 maintain a large and geographically diverse transmission system like SWEPCO's.

25 Without the constant monitoring of performance and identification of future needs,

26- system planning, engineering and design improvements, procuring materials and

27 supplies, constructing and installing new facilities or rehabilitating existing aging

28 infrastructure facilities, coordinating with other utilities, as well as with SPP, NERC,

29 and customers, and ensuring compliance with state, federal, and other regulatory


918

1 requiremenits, the transmis'sion system would ultimately fail to be adequate for its

2 purpose, and it would no longer be reliable. Thus, each service provided by the AEP

3 Transmission organization, to SWEPCO is essential to the SWEPCO mission of

4 providing safe and reliable electric service to customers in a cost effective manner.

5

6 V. SWEPCO TRANSMISSION O&M EXPENSES

7 Q. WHAT PERIOD WAS USED TO DEVELOP THE TEST YEAR O&M EXPENSES

8 FOR THE COMPANY?

9 A. The test year is the twelve-month period from July 1, 2015, through Jude 30, 2016.

10 Q. PLEASE PROVIDE AN OVERVIEW OF THE TEST YEAR TRANSMISSION

11 O&M EXPENSES THAT SWEPCO INCURRED.

12 A. Exclusive of expenses associated with SPP-related charges, SWEPCO incurred

13 adjusted test year transmission O&M expenses of apprpximately $22.0 million. This

14 includes costs recorded in FERC Accounts 560 through 564 and FERC Accounts 566

15 through 573, as shown in Figure 1. Figure 1 also provides a description of these

16 FERC Accounts, as well as the corresponding test year amounts. The O&M expenses

17 are for activities associated witli the ongoing operation and maintenance of the

18 transmission system. Effective management and. control of these costs are primary

19 objectives of the transmission management team and the support organizations'that

20 provide these activities.


919'

1 Figure 1 r 2 FERC Accounts Included in O&M Expenses

FERC Account ' Description Test Year Amount

560 Operations Supervision & Engineering $3,840,939 561* Load Dispatching $3,373,884 562 Station Expenses $524,930 563 Overhead Line Expenses ' $113,509

,564 Underground Line Expense $860 566 Miscellaneous Transmission Expenses $4,240,308 567 Rents $23,446 568 Maintenance Supervision & Engineering $42,313 569 Maintenance of Structures $1,029,691 570 Maintenance of Station Equipment $2,308,920 571 Maintenance of Overhead Lines _ $6,281,499 572 Maintenance of Underground Lines $404 573 Maintenance of Miscellaneous Transmission Plant $175,774

Test Year Total Transmission O&M $21,956,478 *Includes FERC Accounts 561.1, 561.2, 561.3, and 561.5.

3 ,E'ERC Accounts 561.4 (Scheduling, System Control and Dispatching Services),

4 561.8 (Reliability Planning and Standards Development Services), and

5 565 (Transmission of Electricity for Others), are Jlot included in Figure 1, as these are

6 O&M expenses associated with SPP. Company witness Randall W. Hamlett supports

7 these expenses.

8 Q. PLEASE DESCRIBE THE COST TREND FOR SWEPCO'S TRANSMISSION

9 COSTS OVER THE PAST FEW YEARS.

10 A. Figure 2 shows the §WEPCO Transmission O&M costs for 2013-2015, and the test

11 year. The costs include those incurred both by SWEPCO Tranšmission directly and

12 also those charged to SWEPCO Transmission by AEPSC. As can be seen in

13 Figure 2, test year costs are consistent with 2015, but represeni!an increase over 2013

14 and 2014 expenses.


920

1

The overall test year increase is primarily attributable to an increase in

2

operations and maintenance support and vegetation management activities that are

3

necessary to maintain the reliability of SWEPCO's transmission system. SWEPCO's

4

transmission system facilities continue to age, which necessitates additional

5

maintenance and targeted replacement of an increasing population of obsolete and

6

aging equipment. Additionally, NEk'C mandatory reliability standards, including

7

vegetation management standards, continue to impact SWEPCO's costs. As the

8

demands placed on the SWEPCO transmission system increase over, time, it is

9

necessary for SWEPCO to incur greater levels of transmission O&M expenses to

10

maintain safe and reliable transinission _service.

11

Figure 2 — SWEPCO Transmission O&M Expense

2013 2014 2015 Test Year

$17,956,397 $19,873,170 $22,876,677 $21,956,478

12 Q. DOES SWEPCO INCUR BOTH AEPSC CHARGES AND SWEPCO EXPENSES

13 IN THE OPERATION OF ITS TRANSMISSION SYSTEM?

14 A. Yes, SWEPCO incurred both AEPSC cfiarges'of $6.8 million and SWEPCO O&M

15 expenses of $15.2 million. I will address the total SWEPCO transmission O&M

16 expenses in this section of my testimony and will address the AEPSC component of

17 these expenses in section VI.

18 Budget Controls and Cost Trends

19 Q. PLEASE DESCRIBE ANY PROCESSES, SUCH AS BUDGETING, PLANNING,

20 AND COST REVIEW, WHICI4 ARE USED TO CONTROL BOTH AEPSC AND

21 SWEPCO TkANSMISSION O&M COSTS.


921

1 A. AEP's transmission planning and budgeting is a cohesive and dynamic planning

process that is linked to the SWEPCO annual business planning process. Each

3 department within the AEP Transmission , organization, as well as SWEPCO

4 leadership, provides input for the business plan and the related expenses and capital

5 requirements, including inputs specific to SWEPCO. After the business plan is

6 approved by executive management, a ten-year capital budget and a two-year O&M

7 budget are prepared that describe capital and O&M expenditures necessary for the

8 AEP Transmission organization to perform its primary functions of planning,

9 engineering, constructing, operating and maintaining the transmission network. An

10 annual work plan based on the approved ,budgets, which includes projected costs to

11 support the plan, is then prepared and implemented. During the work plan year,

12 which is a calendar year, the status of the work plan and the related costs are

13 monitored by SWEPCO leadership and AEP Transmission management on an

14 ongoing basis,,and work plan adjustments are made as necessary to address emerging

15 needs. AEP Transmission management reviews any variances versus budget for

16 O&M expenses and capital expenditures in order to keep such expenditures within

17 budget. As discussed below, similar budgeting, planning, and cost review processes

18 are used to control costs related to transmission capital additions.

19 Benchmarking Studies

20 Q. HAVE YOU PERFORMED ANY BENCHMARKING STUDIES COMPARING

21 SWEPCO'S TRANSMISSION O&M AND CAPITAL EXPENDITURES TO

22 OTHERS PEER GROUPS IN THE INDUSTRY?


922

1 A. Yes. Under my supervision, three benchmark studies were prepared, each u*sing a

2 different peer group. The three peer groups were a Texas peer group, a south, central

3 peer group and a national peer group. This benchmarking study was based on the

4 benchmarking studies used in the last SWEPCO Texas base case, Public Utility

5 6ommission of Texas (PUC) Docket No. 40443. ,The results have been updated to

6 reflect the available data obtained from FERC Form 1 for each of the benchmark

7 companies.

8 The benchmarking metrics included transmission O&M dollars per lirfe-mile

9 and total dollars (O&M plus capital) per line-mile from 2013 through 2015. This

10 time period was selected to provide a sufficient number of years to see the general

11 trends. Transmission total aollars per line-mile for each year consist of the sum of

12 transmission O&M for each year and a three-year average of transmission plant

13 capital additions. A three-year average is used for transmission plant additions

14 because capital expenditures can vary significantly from year to year. The resulting

15 metric provides comparisons between utilities, normalized for size. The data utilized

16 in the transmission benchmarking for all of the electric utilities comes from FERC

17 Form 1. The following FERC accounts are included in the benchmark study data:

18 560, 561, 562, 563, 564, 566, 567, 568, 569, 570, 571, 572 and 573.

19 The benchmarking studies provide the minimum, maximum, and median

20 values for each metric for the years 2013 through 2015, and the relative position of

21 the corresponding SWEPCO transmission metric for comparison.


923

1 Q. PLEASE DESCRIBE HOW THE THREE PEER GROUPS WERE SELECTED.

2 A. The Texas peer group consists of the investor-owned electric utilities in Texas

3 (except for Entergy Texas, Inc. and Texas-New Mexico Power Company due to

4 incomplele FERC Form 1 data for some of the years used in the analysis) that own

5 transmission facilities. There are eight utilities included in the Texas peer group.

The south central peer group, with a total of 18 utilities, includes the Texas peer

7

group utilities, the investor-owned utilities in all of the states that border Texas, and

8

investor-owned utilities in Kansas. By including Kansas, the south central peer group

9

captures most of the investor-owned electric utilities that are members of either

10

ERCOT or SPP. The national peer group is comprised of 26 holding companies, and

11 includes the south central peer group utilities and the other similar utilities in the

12 United States. The members of these three peer groups are listed in EXHIBIT

13 SJW-3.

14 Q. PLEASE DISCUSS YOUR,BENCHMARKING STUDY RESULTS.

15 A. The results ,of these benchmarking studies indicate that SWEPCO Transmission

16 O&M as well as total expenditures, which include capital, are near or below the

17 median values for each of the three peer groups. The one exception to this trend is

18 the resultsfor the O&M expenditures included for the Tekas peer group. SWEPCO is

19 above the median within this peer group, but this result is driven by differences in

20 geography, topography, and demography. SWEPCO's service territory is a

21 combination of hilly terrain and heavy forestation, which distinguishes it from many

22 of its Texas peers. These differences all increase the O&M expenses associated with

23 operating and maintaining a transmission system. These results are provided in detail


924

1 in EXHIBIT SJW-4, EXHIBIT SJW-5, and EXHIBIT SJW-6, and tliey provide solid

2 support for the reasonableness of SWEPCO's O&M and capital, costs for its

3 transmission system.

4 Q. DOES THE FERC FORM 1 PROVIDE COMPARABLE UTILITY DATA FOR

5 BENCHMARKING?

"6 A. Yes. Benchmarking requires comparable data from a coMmon source for all of the

7 entities compared in the benchmarking study. FERC Form 1 is a required filing for

8 all investor-owned electric utilities in'the United States. The FERC Form 1 includes

9 O&M expense and capital data by FERC Accounts, which are the standardized

10 accounts utilized for reporting O&M and capital expenses. For these reasons, FERC

11 Form 1 data is a reasonable source to use for benchmarking activities.

12 Staff Level trends

13 Q. PLEASE DISCUSS THE TRENDS IN THE TOTAL NUMBER OF SWEPCO

14 TRANSMISSION EMPLOYEES SINCE 2013.

15 A. Most of the SWEPCO employees devoted to working on its transmission system are

16 located in the Transmission Field Services department. Actual counts for SWEPCO

17 Transmission employees in each year from 2013 to 2015 at year-end and at test year-

18 end are shown in Figure 3 below. Figure 3 shows that staffing levels in the test year

19 are slightly above 2014 and 2015. The increase in SWEPCO employees corresponds

20 to the increase in transmissiOn activities, including construction, maintenance and

21 operations support, within SWEPCO's service territory.


925

Figure 3 SWEPCO Transmission Employees

12/31/13 12/31/14 12/31/15 Test Year SWEPCO Transmission Employees 84 95 95 101

1 2

Outsourcing

DOES SWEPCO MAKE USE OF CONTRACTOR SERVICES OR

OUTSOURCING IN CONNECTION WITH THE OPERATION AND

MAINTENANCE OF THE SWEPCO TRANSMISSION SYSTEM?

Yes. SWEPCO uses contractor services to supplement SWEPCO' s,own workforce in

order to respond to changes in workload related to construction activities, service

restoration and to provide some of SWEPCO's ongoing 24 x 7 support staff. Some of

the contractors perform services (e.g., vegetation management, line inspection and

niaintenance, pole inspection afid maintenance, and station maintenance) under multi-

year contracts awarded by SWEPCO. SWEPCO utilizes competitive bidding in

3

4 Q.

5

6

7 A.

8

9

10

11

12

13 awarding these contracts" to ensure reasonable and Competitive pricing. These

14 contractors are evaluated annually for safety qualification and productivity

15 compliance.

16 For other contract services (e.g., ROW maintenance, emergency patrols and

17 emergency restoration, and specialty work such as transformer or relay maintenance),

18 SWEPCO negotiates blanket contracts under which contract services can be provided

19 repeatedly over time. These contracts include pre-determined labor and equipment

20 rates, value limits and expiration dates as a further control on contractor costs.

21 Contractors operating under blanket contracts are selected on the basis of historical

22 ,safety performance, skills, capability, and associated rate schedules that compare


926

1 favorably to the rate schedules for other similar type contractors. This process

2 expedites required transmission asset maintenance activities that are time constrained,

such as emergency restöration and reliability projects, while still ensuring

4 competitive cost.

5 Q. WHAT DO YOU .CONCLUDE ABOUT THE REASONABLENESS AND

6 NECESSITY OF SWEPCO'S OVERALL TRANSMISSION O&M EXPENSES?

7 A. The budget controls and processes, cost trends, cost drivers, staffing trends and

8 benchmarking studies I have discussed, as well as our strategic use' of outsourcing,

9 collectively support a conclusion that SWEPCO's overall transmission costs are

10 necessaiy, reasonable, and are in line with other peer group utilities.

11

12 VI. AEPSC CHARGES TO SWEPCO FOR TRANSMISSION SERVICES

13 Q. PLEASE PROVIDE A DESCRIPTION OF THE AEPSC CHARGES TO SWEPCO

14 FROM THE AEP TRANSMISSION ORGANIZATION.

15 A. AEPSC's adjusted test year O&M charges to SWEPCO for the transmission services

16 it provided .totaled approximately $6.8 million as previously mentioned. These

17 charges represent the cost of AEPSC's transmission-related services to SWEPCO,

18 including: transmission planning, engineering and design, forestry support and

19' management, Supervisory Control and Data Acquisition (SCADA) support,

20 construction management, operations and dispatch services, engineering support,

21 maintenance management, budgeting and cost analysis and controls; training,

22 regulatory, compliance and settlement support.


927

1 The AEPSC charges for transmission services SWEPCO fall into the major

2 cost categories shown in Figure 4 below.

3 Figure 4 4 AEPS'C Test Year Charges to SWEPCO for Transmission Services

O&M Costs Category Test Year Internal Labor $5,293,141 Outside Services • * $967,675 Materials $76,546 Other $432,444 Total $6,769,806

5

Internal Labor is approximately 78 percent of the AEPSC charges (employee

6

salaries and benefits) to provide services as described above. SWEPCO witnesses

7 Andrew R Carlin and Curt D. Cooper support the reasonableness of AEPC's

8 salaries and employee benefits as discussed in greater detail in their direct

9 testiinonies.

10 Q. DO THESE SERVICES DUPLICATE SERVIC'ES PROVIDED BY PERSONNEL

11 WITHIN SWEPCO OR BY ANY OTHER ENTITY?

12 A. No. My previous discussion of transmission-related services shows thafthe activities

13 of SWEPCO Transmission employees, AEPSC Transmission organization

14 employees, and contractors are coordinated such that there is no overlap among the

15 services provided by each group. This is also discussed in the respective direct

16 testimonies of SWEPCO witnesses Patrick L. Baryenbruch and Brian J. Frantz.

17 Q. WHAT HAVE BEEN THE RECENT TRENDS IN AEPSC BILLINGS TO

18 SWEPCO FOR TRANSMISSION SERVICES?

19 A. Figure 5 shows the AEPSC charge trend t SWEPCO for transmission services, by

20 department, since 2013.

DIRECT TESTIMONY PUC DOCKET NO. 46449 22 STEVEN J. WOOLDRID6E

928

1 Figure 5 2 AEPSC Historical Charges to SWEPCO for Transmission Services

Department 2013 2014 . 2015 Test Year Transmission

Business Operations Programs

$85,097 $107,754 $194,211 ' $357,116

Controls and Field Services

$825,168 $1,392,137 $1,984,163 $1,532,649

Grid Develdpment $3,054,371 $3,548,938 $4,090,535 $4,465,530 Transmission Asset Strategy and Policy

$232,607 $284,984 $354,711 $414,512

Total AEPSC $4,197,242 $5,333,813 $6,623,621 $6,769,806

3 Over the past few years, AEPSC staff levels arid AEPSC O&M costs have

4 been increasing. These increases in both AEPSC staff levels and AEPSC O&M have

5 been necessary to support transmission activities. As discussed earlier with regard to

6 overall SWEPCO transmission O&M, the increases in AEPSC O&M costs and

7 staffing levels are attributable to increased transmission O&M responsibilities due to

increased reliability requirements and -financial, state, federal, and other regulatory

9 reporting requirements.

10 Q. ., HOW HAS THE STAFFING OF AEPSC TRANSMISSION ORGANIZATION

11 'EMPLOYEES CHANGED SINCE 2013?

12 A. Figure 6 below shows the employee count for the AEP Transmission organization

13 personnel who were AEPSC employees at the end of each year from 2013 to 2015,

14 and the end of the test year.


929

1 Figure 6 2 AEPSC Transmission Employees

12/31/13 12/31/14 12/31/15 Test Year AEPSC Transmission 1,540 1,708 1,782 1,895

3

The,number of AEPSC employees has increased from 2013 through the end of

4

the test year. The majority of the overall increase is in the Grid Development and

Controls and Field Services departments. With the increasing amount of capital work

6 occurring in SWEPCO's service territory, as well as througholit the entire AEP

7 service territory, the decision was made to convert a portion of the Grid Development

contractors to full-time employees and to increase the Controls and Field services

9 staff to support construction project execution. It was more efficient and economical

10 to convert existing contractors into full-time employees to handle the increased

11 workload.

12 Recently, the Controls and Field Services organization underwent a

13 reorganization to help improve efficiency and reduce capital costs by using AEP

14 Controls and Field Services internal resources, which are less expensive especially on

15 small to medium size capital projects. By using AEP Controls and Field Services

16 emplOyees, we can better execute our capital plan and create a more customer-

17 focused organization and culture. As part of this reorganization, some of thd AEP

18 operating company employees were transferred to AEPSC.

19 Q. WHAT HAS BEEN SWEPCO'S RECENT TREND FOR SPP-MANDATED

20 PROIECTS?

21 A. SPP-mandated projects, or those that are issued 'a Notification to Construct (NTC),

22 have been a significant portion of SWEPCO's transmission capital expenditures over


930

1

the past few years. As part of the SPP Transmission Expansion Plan (SiEP), SPP

2

directs owners to construct specific regionally approved transmission projects.

3

Figure 7 shows the trend for SWEPCO's NTe projects since 2012.

4

Figure 7 — SWEPCO NTC Projects for 2012-2016

Time Period

SWEPCO Transmission Capital Expenditures

with SPP NTC

Total SWEPCO Transmission Capital

Expenditures for Time Period

% of Totil SWEPCO Transmission Capital

ExpenditUres with NTC 1/1/12-2/1/14 $128,411,379 $206,004,359 62% 3/1/14-12/31/14 $80,760,499 • $109,840,394 74% 1/1/15-12/31/15 $52,330,772 $89,956,045 58% 1/1/16-6/30/16 $73,092,316 $91,855,438 , 80% Totals $334,594,965 $497,656,237 67%

5 Q. PLEASE EXPLAIN THE BUDGETING PROCESS USED AT AEPSC FOR THE

6 AEP TRANSMISSION ORGANIZATION.

7 A. Budget targets for the upcoming year are based on prior-year budget inputs plus or

8

minus any items that are identified and approved for inclusion or omission. Labor

9 expense is budgeted by hours. Mater1als, supplies; outside services expenses, etc., are

10 budgeted based on prior activity and any anticipated'changes. Variances from budget

11 are reviewed monthly and discussed with AEP Transmission management.

12 Q. DO OTHER SWEPCO WITNESSES DISCUSS AEPSC CHARGES?

13 A. Yes. Company witness Frantz provides testimony regarding the reasonableness of

14 the AEPSC allocation factors utilized to allocate charges to SWEPCO. Also,

15 COmpany witness Baryenbruch provides testimony as to the necessity of AEPSC

16 services and the reasongbleness of costs charged by AEPSC to SWEPCO.

17 Q. IS THE BENCHMARKING YOU DESCRIBED EARLIER CONCERNING THE

18 OVERALL TRANSMISSION COSTS RELEVANT TO THE REASONABLENESS

19 OF AEP TRANSMISSION CHARGES?

DIRECT TESTIMONY 1 PUC DOCKET NO. 46449 25 STEVEN J. WOOLDRIDGE

931

1 A. Yes. The benchmarking studies I discussed above comparing SWEPCO's overall

2 transmission O&M costs to those of other electric utilities also support the

3 reasonableness of SWEPCO's AEPSC O&M .transmission charges. FERC Form 1

4 data does not separately record AEPSC charges. Accordingly, it is not possible to

5 directly benchmark AEPSC transmission services costs using FERC Form 1 data.

6 However, AEPSC charges represent a portion of the overall O&M costs provided in

7 FERC Form 1 filings. Moreover, the transmission services- I have described are

8 provided to the overall transmission operation using a combination of AEPSC

9 employees, SWEPCO employees, and contractors. Consequently, benchmarking at

10 the overall cost level is consistent with the manner in which the services are provided

11 and managed, and supports the conclusion that the AEPSC portion of those costs are

12 also the product of effective management and contribute to an overall reasonable

13 level of costs.

14 Q. PLEASE SUMMARIZE THE EVIDENCE YOU HAVE PRESENTED' THAT

15 DEMONSTRATES THE NECESSITY AND REASONA4LENESS OF THE

16 AEPSC TRANSMISSION ORGANIZATION CHARGES TO SWEPCO.

17 A. The budget controls and processes, cost trends, cost drivers, staffing trends and

18 benchmarking studies I have discussed, at both the overall O&M cost level and the

19 AEPSC cost level, collectively support a conclusion that AEPSC test year charges to

20 SWEPCO for transmission services are necessary and reasonable.


932

1 VII. TRANSMISSION CAPITAL'ADDITIONS

2 Q. PLEASE DESCRIBE THE TRANSMISSION CAPITAL ADDITIONS THAT

3 HAVE BEEN RECORDED TO PLANT IN-SERVICE FOR SWEPCO SINCE THE

4. LAST APPROVED :TCRF FILING.

5 A. The transmission capital additions that have been booked to plant in-service for

6 SWEPCO since the last approved TCRF filing fall into five categories: Asset

7 Improvement, Customer Service & = Other, Forestry, ,Reliability, and System

8 Restoration.• These categories are further defined below, as well as summarized 'in

9 Figure 8.

16 • Asset Improvement projects include replacement of aging infrastructure, as

11 well as the addition of new assets. These projects include both line and

12 station equipment. This riroject category also has a significant impact on

13 reducing outages and improving customer reliability.

14 • Customer Service & Other projects include new service to customers,

15 relocation projects, and projects that are different from the other project

16 categories and include miscellaneous projects or transmission projects that

17 support other business units within SWEPCO.

18 • Forestry projects primarily include clearing for new ROW or for widening

19 ROW, which continues to be an important initiative to reduce tree contacts.

20 • Reliability projects are designed to repair or replace aging infiastructure in

21 order to mitigate potential problem§ that 'can cause an interruption of service

22 and implement corrective actions to maintain the reliable operation of- the

23 transmission equipment. Additionally, some projects are intended to address

24 operational deficiencies that could cause above average outage frequencies or

25 durations. Some of these projects are identified by SPP through an annual

26 planning process that I describe in more detail below. Examples of Reliability

27 projects include circuit 'breaker replacement, improvement of lightning

28 shielding of lines, and additions of line sectionalizing devices

29 (switches/circuit breakers, etc.).

30 • Finally, System Restoration projects are completed to replace equipment or

31 assets that failed or were damaged during stórms or other weather events.


933

1 The total of the capital additions since the last approved TCRF is approximately

2 $91.9 million, and is shown in Figure 8.

3 Figure 4 Transmission Capital Projects by Category

Project Category 1/1/16-6/30/16

(000's) Asset Improvement $8,819 _ Customer Service & Other $8,899 Forestry $475 Reliability $69,249 System Restoration $4,413 Total $91,855

5 Q. WHAT FACTORS HAVE INFLUENCED THE NEED FOR THE SIGNIFICANT

INCREASES IN TRANSMISSION INVESTMENTS IN SWEPCO?

7 A. With the issuance of FERC Order 2000, and the creation of RTOs, the nature of how

8 the transmission system is planned and used 'has changed. In the SPP region,

9 generators and transmission customers submit transmission ,service requests to SPP to

10

facilitate power deliveries depending on their needs. Over, the past several years, the

11

available transfer capability calculated by ihe SPP RTO in many parts of the SPP

12

Transmission System has been fully utilized as evidenced by the projects required

13

under the 2016 STEP. This transmission expansion plan report identified the need for

14

$6.1 billion of investments throughout the SPP region for new or upgraded

15

transmission facilities to meet the regional transmission t service needs of customers

16. for the next twenty years.

17

SPP conducts studies to identify the transmission upgrades needed in the SPP

18

region to accommodate transmission service and generation interconnection requests.

19

Ultimately, the transmission-owning utilities are required to build transmission


934

1 upgrades to accommodate these regional transmission servide needs because the

2 facilities,in each SPP zone are now planned and used to satisfy regional demands.

3 Additionally, existing transmission facilities require replacement and/or

4 rehabilitation as equipment deteriorates, ages, and fails. Specific equipment is

5 strategically targeted for replacement or rehabilitation based on trouble reports,

6 inspection data, and equipment database information, such as age and- condition.

7 Based on this data, replacements and rehabilitations are prioritized to minimize

8 service interruptions and system impacts.

9 Q. HOW MUCH OF THE TRANSMISSION CAPITAL PUT INTO SERVICE SINCE

10 THE LAST APPROVED TCRF IS DIRECTLY ATTRIBUTABLE TO SPP

11 REQUIREMENTS?

12 A. SWEPCO has been .experiencing an increase in capital projects due to SPP NTC

13 projects being identified, as well as other projects to support a more robust and

14 reliable system. Of the $91.9 million in transmission capital projects highlighted in

15 Figures 7 and 8, approximately $73.1 million, or approximately 80 percent of the

16 total capital ,expenditures for the period of January 1, 2016 through June 30, 2016,

17 were required by SPP. Additional details are provided below for project examples.

18 Q. PLEASE EXPLAIN WHAT PROCESSES SWEPCO HAS IN PLACE TO KEEP

19_ THE COST OF TRANSMISSION CAPITAL PROJECTS REASONABLE.

20 A. All projects are built in accordance with good engineering practices and the

21 planning/operating standards and guidelines set forth by NERC, SPP, Institute of

22 Electrical and Electronics tngineers, Inc., National Electrical Safety Code, Occupational

23 Safety and Health Administration and American National Standards Institute. Similar

• DIRECT TESTIMONY

PUC DOCKET NO. 46449 29 STEVEN J. WOOLDRIDGE

935

1 to the out-Sourcing described earlier in my testimdny, a competitive bidding process is

2 used in selecting contractors to perform transmission construction and in procurement

3 of the necessary materials and supplies. SWEPCO considers safety, customer

4 satisfactidn, reliability, capacity, availability, and adherence to planning and

5

engineering standards while maintaining cost controls in the planning and

6

management of all transmission capital projects.

7

Also, similar to transmission O&M costs, transmission capital costs are

8 budgeted and reviewed employing the same cohesive,planning process that is linked

9 to the AEP, annual business planning process. I have explained this cost control

10 process in detail earlier in Section V, of my testimony.

11 Q. PLEASE GIVE AN EXAMPLE OF A MAJOR ASSET IMPROVEMENT PROJECT

12 • THAT SWEPCO HAS PLACED IN SERVICE SINCE THE LAST APPROVED

13 TCRF FILING.

14 A. SWEPCO has completed the following major Asset Improvement project since the

15 last approved TCRF:

16 • Ellerbe Road - South Shreveport 69 kV — Rebuild ($6,071071):

17 SPP identified and mandated this project to rebuild approximately 3.1 miles of

18 69 kV transmission line from Ellerbe Road - Forbing Road Tap - South

19 Shreveport to prevent the existing line from overloading. The line rebuild

20 portion of the project, which was the SPP requirement, was approximately


936

1 $4.9 million of the $6.1 million total project cost. In addition to the line

2 rebuild, upgrades were completed at the Ellerbe Road, South Shreveport, and

3 Forbing Road Tap stations that cost approximately $1.2 million.

4 Q. PLEASE IDENTIFY AN EXAMPLE OF A MAJOR CUSTOMER SERVICE AND

5 OTHER PROJECTS THAT SWEPCO HAS PLACED IN SERVICE SINCE THE

6 LAST APPROVED TCRF FILING.

7 A. SWEPCO has completed the following major Customer Service and Other project

8 since the last approved TCRF:

9 • GodfreS/ Road Station ($1,321,433):

10 Black Bayou Operating, LLC, requested to interconnect a 3.5 MW load in

11 Caddo Parish, LA, to serve their oil recovery, operations and injection wells.

12 To accommodate this request, SWEPCO constructed Godfrey Road, which is

13 a new 138 kV station.

14 Q. PLEASE IDENTIFY ANY MAJOR RELIABILITY PROJECTS THAT SWEPCO

15 HAS PLACED IN SERVICE SINCE THE LAST APPROVED TCRF_FILING.

16 A. SWEPCO has completed the following major Reliability projects since the last

17 TCRF:

18 • Layfield Station ($56,391,793):

19 SPP identified and mandated this projeCt to build a new 500/345/230kV

20 station. The Layfield station was constructed to address the overload of

21 International Paper '- Wallace Lake 138 kV Ckt 1 (SWEPCO/CLECO) and

22 International Paper - Mansfield 138 kV (CLECO) for the outage of Dolet

23 Hills - Southwest Shreveport 345 kV Ckt 1.

24 • Rock Hill - Springridge Pan-Harr REC 138 kV Rebuild ($5,313,914):

25 As part of this project, 27.6 miles of 138 kV transmission line from Rock Hill

26 , to Springridge REC were rebuilt. This portion of the line was rebuilt to

27 prevent overloads of the present summer emergency rating during

28 contingency otiage conditions.

29 Q. WHAT IS THE TOTAL AMOUNT OF CAPITAL SWEPCO IS PROPOSING TO

36 RECOVER IN THIS PROCEEDING?

DIRECT TESTIMONY PUC DOCKET NO. 46449 31 STEVEN J. WOOLDRIDGE,

937

1 A. SWEPCO is proposing to recover a total transmission capital amount of $92,710,802.

2 This amount includes the $855,364 in transmission vegetation management capital

3 expenditures that had been removed from SWEPCO's most recent approved TCRF

4 filing (representing 2015 capital expenditures), as well as tranšmission capital

5 expenditures in the amount of $91,855,438 for the period of January 1, 2016"through

6 June 30, 2016.

7 Q. PLEASE DESCRIBE HOW SWEPCO DETERMINES WHAT TYi3ES OF RIGHT-

8 - OF-WAY CLEARNG AND VEGETATION MANAGEMENT ACTIVITIES

9 SHOULD BE CAPITALIZED.

10 A. SWEPCO makes these determinations consistent with AEP's applicable accounting

11 policies, which are explained in the direct testimony of Company witness Hamlett.

12 Under this policy, costs of "initial" or "original" clearing of land and ROW, and'

13 likewise initial removal of trees, are to be capitalized. In addition, clearing of a

14 previously uncleared ROW, or expanding ROW, is capitalized.

15 Also, this policy is intended to account Tor clearing trees old enough to have

16 existed when the line was originally constructed. Had those trees been removed

.17 during initial clearing, the costs would have been capitalized. Specifying an 18-inch

18 diameter for use in determining capital is a method to distinguish between "original"

19 trees old enough to have existed when the ROW was first cleared.

20 Q. IS THIS METHODOLOGY CONSISTENT WITH HOW SWEPCO

21 DISTRIBUTION DETERMINES CAPITAL VEGETATION MANAGEMENT

22 EXPENDITURES?


938

Yes. Both SWEPCO Transmission and Distribution utilize the same methodology

and accounting principles to determine what types of ROW clearing and vegetation

management activities should be capitalized.

DOES THE SWEPCO BENCHMARKING SUPPORT THE 'REASONABLENESS

OF THE TRANSMISSION CAPITAL ADDITION COSTS?

Yes. One of SWEPCO's benchmarking measures compares the total cost of

providing transmission services, including capital investments, to that of other

electric utilities as discussed in Section V of my testimony.

DO THE CAPITAL ADDITIONS INCLUDE ANY AEPSC CHARGES?

Yes. During the period from January 1, 2016 t19-ough June 30, 2016, $9.1 million of

the total capital iniTested was compried of AEPSC costs. The cost for the services

provided by AEPSC to SWEPCO, which comprise the affiliate capital costs, include

the planning, engineering, design and construction management services for all

SWEPCO transmission station, system protectioii, and transmission line facilities.

See Exhibit BJF-Š in the direct testimony of SWEPCO witness Frantz for further

detail on the AEPSC capital costs.

PLEASE SUMMARIZE THE EVIDENCE THAT DEMONSTRATES THE

REASONABLENESS OF THE AEPSC CHARGES INCLUDED IN THE CAPÍTAL

ADDITIONS.

The capital project budgeting and approval processes I described earlier ensure that

any AEPSC charges included in the capital additions are appropriate. In addition, the

benchmarking results that I discussed above, which include a comparison of total

costs (O&M and three-year average capital costs) to SWEPCO peers, provide further

1 A.

3

4 Q.

5

6 A.

7

8

9 Q.

10 A.

11

12

13

14

15

16

17 Q.

18

19

20 A.

21

22

23


939

1 support for this conclusion. Finally, the staffing levels that I 'discussed or referenced

2 earlier in Section V further support the conclusion that these costs are reasonable and

3 necessary.

4 Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?

5 A. Yes, it does.


940

PUC Docket No. 46449 EXHIBIT SJW-1

113.. 8

Controls and Field Services

Grid DeiTlopment

Transmission Business

Operations Programs

Transmission Asset Strategy

and Policy

Executive Vice President

Transmission

Exhibit SJW-2 AEP Transmission Organizational Chart PUC Docket No. 46449

EXHIBIT SJW-2

• Transmission Business Operations Piograms

• Transmission Field Services

• Transmission Strategy, Planning & Business Development

• Transmission Project Finahcial Controls

• Transmission Forestry

• Transmission Asset Strategy & Planning

• Transmission Engineer & Project Services

• Transmission Reliability Compliance and Risk

• Transmission Financial Analysis & Budget Planning

• Transmission Asset Strategy & Policy

• Transmission Project Siting

• AEP Transmission Administration

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EXECUTIVE SUMMARY OF BRETT MATTISON

Brett Mattison, the Director of Customer Services and Marketing for Southwestern

Electric Power Company (SWEPCO or Company) supports the recovery of $23,396,395 in total

adjusted test year customer services costs included in SWEPCO's cost of service. Mr. Mattison

has overall responsibility for customer service and marketing as well as meter-related operations

at SWEPCO. Among the activities Mr. Mattison is responsible for are the following: (a) meter

reading; (b) meter electrician functions; (c) credit and collection activities; (d) customer account

management; (e) complaint management; (f) new services and expansions; and (g) billing.

Mr. Mattison describes SWEPCO's Customer Services and Marketing Organization,

including the benefits of its recent actions to acquire and install modernized meters in its service

area. He further describes the customer service component of the Customer and Distribution

Services (C&DS) organization of American Electric Power Service Corporation (AEPSC), the

service company affiliate that provides support to SWEPCO's customer services activities.

Mr. Mattison also discusses SWEPCO's quality Of customer service, including saveys

that demonstrate a high level of customer satisfaction with SWEPCO compared to national

averages. He further demonstrates that SWEPCO Customer Services has an exemplary safety

record and describes an initiative undertaken specifically designed to achieve the goal of zero

harm. Finally, he notes that SWEPCO's customers have filed no complaints with the Public

Utility CoMmission of Texas re'garding the Company's service during the test year.

Mr. Mattison also demonstrates that AEPSC C&DS organization provides essential,

complementary services to his organization through the activities of four groups: Customer

Operations; Customer Services Support; Meter Services and Repair; and Economic and Business

Development. These groups activities include: operation of call center, billing operations,

credii and collection support, responding to bankruptcy filings, providing bankruptcy-associated

1

950

account maintenance, providing customer support for all non-mail customer payment methods,

management of large chain accounts, support of SWEPCO's website as it relates to end-use

customers, raising awareness on cost-effective customer contact channels, management of

third-party asset utilization, load research, meter services support, and assistance with customer

programs.

Mr. Mattison justifies the recovery by SWEPCO of total Customer Services costs, which

includes $8,685,597 in•affiliate expenses billed to SWEPCO by the AEPSC C&DS drganization

and the AEPSC Safety and Health organization. Mr. Mattison explains that the high customer

satisfaction achieved by SWEPCO supports the fait that AEPSC C&DC is providing effective

support to SWEPCO's service operations. In addition, AEPSC customer service costs have been

reduced since the last test year and have remained consistent since 2013.

Mr. Mattison further discusses how cost trends, benchmark -studies, performance to

budget, and staffing trends collectively demonstrate the reasonableness of SWEPCO's custoiner

services costs, including the service company component of the costs.

Finally, Mr. Mattison supports the affiliate charges for AEPSC Safety and Health

organization services provided to SWEPCO. Mr. Mattison describes this organization and the

nature of its services. Based on this, and through further discussion of cost trends and budget

and cost control processes, he demonstrates the reasonableness and necessity of the AEPSC

charges for Safety and Health.

951

2

PUC DOCKET NO. 46449

PUBLIC UTILITY COMMISSION OF TEXAS

APPLICATION OF


FOR AUTHORITY TO CHANGE RATES

DIRECT TESTIMONY OF

BRETT MATTISON

FOR


DECEMBER 2016

952

TESTIMONY INDEX SUBJECT PAGE

I. INTRODUCTION 1

II. CUSTOMER SERVICE OVERVIEW 4

A. Description of the SWEPCO Customer Services and' Marketing Organization 5

1. Meter Revenue Operations Department 2. Customer Services 7 3. Energy Efficiency & Consumer Programs Department 8 4. Lean/Process Improvement Department 9

B. Description of the AEPSC Customer and Distribution Services Organization 9

1. AEPSC Customer Operations 11 2. AEPSC Customer Services Support 14 3. AEPSC Meter Services Support and Repair 16 4. Economic and Business Development 16

C. SWEPCO Interface with AEPSC C&DS 17

III. QUALITY OF SERVICE 18

A. Residential and Colnmercial.Customer Surveys 19 B. Managed Account Customer Survey 20 C. Customer Operations Center Surveys 21 D. Meter Reading 22

W. CUSTOMER'SERVICE COSTS 23

V. AFFILIATE COSTS 27

VI. AEPSC SAFETY AND HEALTH ORGANIZATION OVERVIEW 31

A. Description of the AEPSC Safety and Health Organization 31 B. SWEPCO Interface with AEPSC Safety and Health 34 C. CoS•ts and Cost Trends 35

DIRECT TESTIMONY PUC DOCKET NO. 46449 i BRETT MATTISON

953

EXHIBITS

EXHIBIT BM-1 SWEPCO Customer Service & Marketing (CS&M) Organizational Chart

EXHIBIT BM-2 AEPSC Customer & Distribution Services Organizational Chart

EXHIBIT BM-3 Texas Peer Group — Customer Service Costs per Customer

EXHIBIT BM-4 Regional South Central Peer Group — Customer Serviee Costs per Customer

EXHIBIT BM-5 National Peer Group — Customér Service Costs per Customer

DIRECT TESTIMONY PUC DOCKET NO. 46449 ii BRETT MATTISON

954

1 I. INTRODUCTION

2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.

3 A. My name is Brett Mattison. My businesg address is 428 Travis Street, Shreveport,

4 Louisiana: 71101.

5 Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT,CAPACITY?

6 A. I am employed by the Southwestern Electric Power Company (SWEPCO or

7 Company) as Director of Customer Services and Marketing. SWEPCO is an

8 operating company of American Electric Power Company, Inc. (AEP). SWEPCO is

9 headquartered in Shreveport, Louisiana, dnd provides retail electric service to

1 0 cusfomers in East Texas, the Panhandle in North TeXas, Louisiana, and Arkansas.

11. Q. WHAT IS YOUR EDUCATIONAL BACKGROUND AND PROFESSIONAL

12 EXPERIENCE?

13 A. I earned a bachelor's degree in Business Finance from Louisiana Tech University in

14 Ruston, Louisiana and a Certified commercial .banking degree from the American

15 Institute of Banking. After graduation in 1986, I began my career in commercial

16 banking with Pioneer Bank in a management training program working in all areas of

17 banking. I became a. manager of branCh operations and a commercial loan Officer

18 prior to leaving the banking profession in 1990 to pursue a career with SWEPCO.

19 I have 26 years of electric utility experience and have held several positions in

20 the area of customer service and marketing. I began my career with SWEPCO in

21. 1990 as a residential marketing consultant. In 1992, I was named residential

22 marketing supervisor for Louisiana. In 1993, I became the SWEPCO Marketing

DIRECT TESTIMONY PUC DOCKET NO. 46449 1 BRETT MATTISON

955

1 Manager for Louisiana. I kept this title for, several years and was named Mass

2 Marketing Manager with responsibility for all residential, small industrial and small

3

commercial customers of SWEPCO, which included Texas, Louisiana, and Arkansas.

4

In 1995, I was named Middle Marketing Manager in charge of all the large industrial

5

and large commercial customers in the SWEPCO territory. In 1996, I became the

Customer Relations Manager, performing account maintenance, with responsibilities

7 for retention of SWEPCO customers. In 2004, I moved to my current position as

8 Director of Customer Services and Marketing for SWEPCO.

9 Q. WHAT ARE YOUR RESPONSIBILITIES AS DIRECTOR OF CUSTOMER

10 , SERVICES AND MARKETINC;

11 A. I am responsible for customer service and marketing as well as meter-related

12 operations at SWEPCO. I am responsible for the overall design, development,

13 implementatfon, analysis, and administration of SWEPCO field custdmer service

14 activities, including measurement, meter reading, and meter reventie operations.

15 I am also responsible for the administration of a Field Communications Team that,

16 among other thine, provides assistance and direction on credit and collection

17, service orders to SWEPCO Distribution and Customer Services groups.

18 Additionally, I am responsible for the resolution of customer inquiries concerning

19 issues such as power quality, quality of service, and billing. I ensure the accurate

20 reading of meter§ and the timely connecting and disconnecting of service.

, 21 My customer services and mdrketing responsibilities include formulating,

22 implementing, and administering policies and programs pertaining to all segments


956

1 of customers, including residential, commercial, and.industrial customers. Large

2 industrial and large commercial customer accounts are managed utilizing an

3 individual employee titled "account manager" who is the customer's single point of

contact, assigned to manage each of these customers accounts on an individual

5 basis. All segments of customers that are outside of the account management

6 assignment are assigned to employees titled "customer service representatives,"

7 who are geographically assigned across the SWEPCO service territory. I am also

8 responsible for the deployment of demand response and energy efficiency (EE)

9 programs for SWEPCO customers, as well as the Lean/Process Improvement

10 Department.

11 Q. DO YOU SPONSOR ANY RATE FILING PACKAGE SCHEDULES?

12 A. Yes. I sponsor the following schedule:

13 • H-13.1c Quality of Service Complaints

14 I co-sponsor the following schedule:

15 • H-13.1e Quality of Service Improvements (with Company witnesses

16 A. Malcolm Smoak and Steven J. Wooldridge)

17 Q. HAVE YOU PREVIOUSLY FILED TESTIMONY BEFORE THE PUBLIC

18 UTILITY- COMMISSION OF TE5CAS (PUC qR COMMISSION)?

19 A. Nies. I have filed testimony before the Commission on behalf of SWEPCO in PUC

20 Docket Nos. 37364 and 40443.

21 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?

22 A. I will provide an overview of SWEPCO's Customer Services and Marketing

23 organization, the Customer and Distribution Services (C&DS) and the American


957

1

Electric Power Service Corporation (AEPSC) Safety and Health organizations,

2

which provide support to SWEPCO's customer services activities. I will also

3

summarize the quality of customer service provided to our 'customers, including

4

customer servic' e survey results, and the lack of complaints against SWEPCO filed

5 with the Public Utility Commission of Texas (PUC or Commission). I support

6 SWEPCO and AEPSC customer service and AEPSC Safety and Health

7 organization costs, and demonstrate the reasonableness, necessitY, and

8 appropriateness of the customer services charges to SWEPCO provided by its

9 affiliates, primarily AEP§C.

10

11 II. CUSTOMER SERVICE OVERVIEW

12 Q. HOW-DOES, SWEPCO PROVIDE THE customER SERVICES THAT RETAIL

13 CUSTOMERS REQUIRE IN CONNECTION WITH THE PROVISION OF

14 ELECTRIC SERVICE TO THEM BY SWEPCO?

15 A. SWEPCO's retail customers receive customer services they require in connection

16 with the provision of their electric service from the Customer Services and Marketing

17 organization within SWEPCO. In addition; the AEPSC C&DS organization also

18 supports and provides customer services to SWEPCO's retail customers. These

19 groups are complementary and do not duplicate services, as I will explain below.

20 Q. PLEASE GENERALLY DESCRIBE THE CUSTOMER SERVICES GROUPS AT

21 SWEPCO AND AEPSC.


958

1 A. Customer Services employees are employed by either a specific AEP Operating

2 Company (e.g., a SWEPCO meter servicer in Longview) or by AEPSC (e.g., a

3 national account representative supporting national accounts). In general,

4

Operating Company employees are focused on the day-to-day business of serving

5

SWEPCO customers, While the AEPSC employees *vide services to improve

6

SWEPCO's ability to serve its customers. Because of the nature of these function,

7

the Company can realize efficiencies by sharing AEPSC resources with sister utility

8

companies.

9 A. Description of the SWEPCO

10 Customer Services and Marketing Organization

11 Q. WHAT, IN GENERAL, IS THE SCOPE AND NATURE OF SWEPCO'S

12 CUSTOMER SERVICES AND MARKETING ORGANIZATION?

13 A. SWEPCO Customer Services and Marketing is responsible for SWEPCO's

14 customers - from receiving outage reports and dispatching restoration orders, to

15 resolving meter access issues; coordinating the installation of new services and

16 expansions, and resolving customer inquiries. The SWEPCO organization alsd

17 administers the residential critical care customer designations, performs connects,

18 disconnects and 're-reads, and resolves billing complaints ,where necessary. The

19 specific services provided by this organization are detailed in the following sections.

20 A high-level organizational chart of the SWEPCO Custonier Services and

• 21 Marketing Organization is shown in EXHIBIT BM-1..

22 Q. EXPLAIN THE ORGANIZATION OF THE SWEPCO CUSTOMER' SERVICES

23 AND MARKETING ORGANIZATION.

DtRECT TESTIMONY' PUC DOCKET NO. 46449 5 BRETT MATTISON

959

1 A. The SWEPCO Customer Services and Marketing Organization is comprised of

2 158 employees who provide services related to the provision of electricity to retail

3 customers. SWEPCO Customer Services and Marketing is made up of four

departments: 1) Meter Revenue Operations (MRO), with 113 employees, 2) Customer

5 Services, with 32 employees, 3) Energy Efficiency & Consumer Programs, with nine

6 employees, and Lean/Process Improvement with four employees. I will describe the

7 structure and functions of each of those four departments below.

8 . 1. Meter Revenue Operations Department

9 Q. PLEASE DESCRIBE THE ACTIVITIES OF THE SWEPCO METER REVENUE

10 OPERATIONS DEPARTMENT.

11 A. The. SWEPCO MRO Department is comprised of employees that read meters,

12 complete a variety of field service orders, and perform meter electrician services - all

13 activities that are necessary to provide electric service to retail customers. Field

J 4 Revenue Specialists are responsible for completing orders, which include cu§tomer

15 move-ins and move-outs, disconnections for nOn-payment and the associated

16 reconnections, special redds for off-cycle switches, and meter re-read requests. Field

17 Revenue Specialists also investigate and resolve reports of broken meter seals.

18 Meter Electricians duties include designing, installing and maintaining

19 transformer-rated metering equipment, and performing internally generated and

20 customer requested meter tests for residential, commercial, and industrial meters.

21 MRO has three Revenue Protection Coordinators, with one in Texas, whose

22 function is to investigate and resolve energy diversion and theft.


960

1

MRO also includes the Field Communications Department, which serves as a

2

radio contact point with MRO employees, as well as distribution employees. Their

3

functions include tracking and expediting . time-sensitive orders, dispatching

4 emergency orders including those received after normal business hours, and serving

5 as an emergency resource for MRO employees involved in hazardous circumstances.

6 2. Customer Services

7 Q. PLEASE DESCRIBE THE ACTIVITIES OF THE SWEPCO CUSTOMER

8 SERVICES DEPARTMENT.

9 A. The Custonier Service§ Department resolves end-use customer problems regarding

10 service and billing issues. These employees also manage relationships with large

11 end-use customers such as hospitals, manufacturers, refineries and chain accounts, as

12 well as electric cooperatives, whicli encompass all activities that are necessary to,

13 provide electric service to customers. SWEPCO Customer Services, employees also

14 play an important role in providing logistics support during storm restoration.

15 SWEPCO Customer Services field-based personnel are assigned by area to

16 investigate and resolve end-use customer problems such as meter reading access, rate

17 verification, damage claims, power quality problems, and other customer issues.

18 SWEPCO Customer Services is also résponsible for managing customer complaints

19 and conducting root cause analyses to find and correct root causes ,of customer issues.

20 Additionally, SWEPCO Customer Services facilitates local operational improvement

21 meetings with other SWEPCO workgroups to improve service and productivity.


961

Additionally, this department is responsible for working with customers to provide

2

alternate energy solutions, such as renewables (i.e., wind, solar, etc.).

3

3. Energy Efficiency & Consumer Programs Deliartment

4 Q. PLEASE DESCRIBE THE ACTIVITIES OF THE SWEPCQ ENERGY

5 EFFICIENCY & CONSUMER PROGRAMS DEPARTMENT.

6 A. The Energy Efficiency & Consumer Programs Department is responsible for

7 administering standard offer programs and market tranšformation programs in each

8 jurisdiction to achieve the state-mandated goals for energy efficiency. Program

9 administration includes program design, outreach activities, application review,

10 contract execution, on-site inspections of work sUbmitted, invoice review and

11

processing, website maintenance, monitoring of the programs, cost-effeetiveness

12 review, energy efficiency expense accounting, and completion of annual energy 4

13 efficiency filings. The Energy Efficiency & Consumer Programs Department ensures

14 compliance with regulatory rules and statutory requirements.

15 Q. ARE YOU SEEKING RECOVERY OF SWEPCO ENERGY EFFICIENCY

16 PROGRAM COSTS IN THIS PROCEEDING?

17 A. No. Company witness Randall W. Hamlett has made a pro forma adjustment to

18 exclude all energy efficiency program costs, including the 'Texas portion that is now

19 recovered through the Energy Efficiency Cost Recovery Factor (EECRF).

On April 29, 2016, SWEPCO filed an Application with the Commission, seeking to adjust its EECRF in PUC Docket No. 45824.

DIRECT TESTIMONY PUC DOCKET. NO. 46449 8 BRETT MATTISON

962

1 4. Lean/Process Improvement Department

2 Q. PLEASE DESCRIBE THE ACTIVITIES OF THE SWEP'CO LEAN/PROCESS

3 IMPROVEMENT DEPARTMENT.

4 A. Lean is a system for continuous process improvement that helps to shorten the process

5 cycle by defining what is value according to the customer, and organizing and

6 improving processes to deliver what is needed, when it is needed, and with minimal

7 waste. Lean appliesin every business and every process. It is not a tactic or a cost

8 reduction program, but' a way of thinking and acting for an entire organization.

9 The Lean/Process Improvement Department is responsible for working with

10 employees to develop and implement process and productivity improvements. The

11 team is also charged with driving cultural improvements through employee

12 engagement:

13 B. Description of the AEPSC

14 Customer and Distribution Services Organization

15 Q. .DOES AEPSC ALSO PROVIDE CUSTOMER SERVICE AND DISTRIBUTION

16 SUPPORT TO SWEPCO?

17 A. Yes. As I mentioned previously, the C&DS organization at AEPSC provides

18 customer service and d1stribution support to SWEPCO and the other AEP

19 Operating Companies. I only discuss the customer service functions. Company

20 Witness Smoak discusses the distribution functions in his direct testimony.

21 AEPSC provides services that are complementary to the services provided

22 by the SWEPCO Customer Services and Marketing Organization. The AEPSC

23 C&DS organization primarily provides the services that' are common among all


963

1 Operating Companies throughout the AEP system, thus allowing the Operating

Companies So benefit through economies of scale. In general, SW ÉPCO is

3 responsible for providing those services that are unique to SWEPCO.

4 Q. PLEASE SUMMARIZE THE SERVICES PROVIDED BY THE AEPSC

5 CUSTOMER AND DISTRIBUTION SERVICES ORGANIZATION AND WHY

6 THESE SERVICES ARE NECESSARY.

7 A. The AEPSC C&DS organization provides specialized energy delivery support

8 services and expertise dcross the AEP System. C&DS is made up of six groups:

9 Distribution Performance Management and Data Analytics; Customer Services

10 Support; Customer Operations; Distribution Services Support; Meter Services

11 Support and Repair; and Economic and Business Development. Within each

12 department are centralized subgroups that provide dedicated resoUrces to AEP's

13 Operating Companies in 11 states. I will discuss four of the six groups listed above.

14 CompanS7 witness Mr. Smoak will discuss Distribution Performance Management

15 and Data Analytics and Distribution Services., A high level organizational chart of

16 the AEPSC C&DS organization is shown in EXHIBIT BM-2.

17 Q. PLEASE DESCRIBE THE CUSTOMER SERVICE PORTION OF THE AEPSC

18 CUSTOMER AND DISTkIBUTION SERVICES ORGANIZATION AND ITS

19 FUNCTIONS.

20 A. The Customer Service function of the AEPSC C&DS organization has employees

21 in four groups responsible for providing customer service support for all AEP

22 Operating Companies, including SWEPCO. The four groups are:


964

1 1. Customer Operations;

2 2. Customer Services Support;

3 3: Meter Services Support and Repair; and

4 4. Economic and Business Development.

5 1. AEPSC Customer Operations

6 Q. PLEASE liESCRIBE THE SERVICES PROVIDED TO SWEPCO BY THE

7 AEPSC CUSTOMER OPERATIONS GROUP.

8 A. C&DS Customer Operations is comprised of AEPSC employees, supplemented

9 with contract employees, who provide services to the AEP Operating Companies

10 through three functional work subgroups: Customer Operations Centers (COCs),

11 Credit Policy and Payment Administration, and Customer Interface and Channel

12 Management.

13 Q. PLEASE DESCRIBE THE SERVICES PROVIDED TO SWEPCO BY THE

14 AEPSC CUSTOMER OPERATIONS CENTER SUBGROUP.

15 A. AEPSC has ,five virtually-integrated COCs that are strategically locaited throughout

16 AEP's service territories. AEPSC employees are supplemented with contract -

17 employees in the five COCs, including support functions. AEP's COC located in

18 Shreveport, Louisiana provides primary call handling responsibility for customers

19 located in SWEPCO's service area.

20 The COC employees 13rocess inbound customer calls and interne inquiries

21 from www.SWEPCO.com and take the appropriate action to respond to all customer

22 service inquiries including credit-related functions, outage reporting and customer

23 hazardous, conditions. COC employees also process hazardous condition calls

DIRECT. TESTIMONY PUC DOCKET NO. 46449 11 BRETT MATTISON

965

1

originatirig from 9-1-1 and other emergency service providers. In addition to AEP's

2

internal COC employees, additional services are provided by NCO Financial Systems

3

(NCO), a third-party contractor, to supplement call processing for credit-related

4

inquiries. The NCO representatives are also available to assist with outage call

5

processing as needed.

In addition, the Customer Operations Center organization contains the AEPSC

7 Billing and Accouni Operations group, which is comprised of employees whose

8

responsibilities include the maintenance of 'customer billing programs. They are

9

responsible for responding to customer correspondence, answering customer

10

complaints, and maintaining records. They process the release of all customer

11

information, run usage history requests, maintain usage history request records in the

12 database, maintain. non-metered service billing records, and resolve billing disputes

. 13 and billing complaints, including making appropriate billing adjustments. They also

14 respond to information requests, as well as process and post service orders that have

15 been referred to them by SWEPCO field personnel. In addition, they handle changes

16 in customer status associated with alterations in city limits due to municipal

17 annexations/de-annexations, work all billing account exceptions to ensure accounts

18 are billed accurately, and issue investigation orders to the field for rereading of

19 meters, lost meters, stoppedmeters, and other reasons.

20 Q. HAVE THE CUSTOMER OPERATIONS .CENTERS RECEIVED ANY

21 RECOGNITION FOR ITS PERFORMANCE?


966

1 A. Yes, the Center of Excellence certification from the Center for Customer-Driven

2 Quality at Purdue University was received in 2008 and 2010 through 2015 - seven

3 years in total. The Center Of Excellence certification is awarded to customer service

4 call centers that rank in the top 10 percent of the thousands of call centers studied.

Purdue University benchmarks the performance of cus'tomer service call centers in

6 44 different business industries in North America. Certified call centers balance a

7 commitment to service excellence with cost-effective service strategies. To earn the

8 Center of Excellence certification, a, call center must meet objective, quantitative

9 criteria and pass audits by BenchmarkPortal researchers. The key drivers of superior

10 call center performance in customer service include operational efficiency, service

11 level standards, customer satisfaction, leadership, quality/training,

12 staffing/scheduling, and Customer Operations support. Ifi addition, AEP has been

13 recognized as a BenchmarkPortal Top 100 Contact Center and awarded a Top 100

14 certificate and trophy each of the past four years (since the contest's inception).


16 AEPSC CREDIT POLICY AND PAYMENT ADMINISTRATION SUBGROUP.

17 A. The AEPSC, Credit Policy and Payment Administration subgroup's responsibilities

18 include custorner bill print and insert functions, responding to bankruptcy filings

19 and performing bankruptcy-associated account maintenance. They process

20 payrnents from all public and private energy assistance sources, provide financial

21 information relative to nonresidential ctistomer creditworthiness, prepare responses

22 to credit-related customer complaints to regulatory agencies, and provide statistical


967

1 information and measurements related to credit and collection activity.

2 AdditionallST, they administer and provide customer support for all non-mail

3 customer payment methods, including in-person payment locations, pay-by-

4 telephone services, and various electronic funds transfer methods.

5 Q. PLEASE DESCRIBE THE SERVICES PROVIDED TO SWEPCO BY THE AEPSC

6 CUSTOMER INTERFACE AND CHANNEL MANAGEMENT (CICM)

7 SUBGROUP .

8 A. The AEPSC CICM subgroup employees have responsibilities that include support

9 related to Customer Operations including AEP's Operating Company websites.

10 The customer services sections on these websites are designed to enhance the

11

customer experience while conducting business online, and provide residential and

12

business customers valuable information and a full array of self-service account

13

functions. Among these self-service functions is the enrollment of customers in

14 both outage alert and paperless billing programs. The CICM team is also

15 responsible for the efforts to raise awareness and encourage additional customers to

16 use these cost-effective customer contact channels.

17 2. AEPSC Customer Services Support

18 Q. PLEASE DESCRIBE THE SERVICES PROVIbED TO SWEPCO BY THE

19 AEPSC CUSTOMER SERVICES SUPPORT GROUP.

20 A. The AEPSC Customer Services Support employees have responsibilities that

21 include support activities for customer-facing functions and systems. There are six

22 subgroups related to Customer Services Support that include Utility Business


968

1 Development, Special Billing and Translation, Load Research, EE & Consumer

2 Programs, Customer Choice, and Customer Information Systems Implementation &

3 Support. The Utility Business Development group focuses on asset utilization 133'T

4 managing joint-use contracts with third parties who attach their own lines„cables,

5 or other equipment io SWEPC'O's distribution facilities.

6 Special Billing and Tranšlation employees prepare billing information for

7 large customers and process billing data exceptions for those large customers who

8 are metered and billed using interval data recorder (IDR) meters: They administer

9 the system that translates and processes billing information from IDR meters and

10 collect and provide interval load data for data analysis and load'research. They also

11 " provide central support to Operating Company MRO personnel, large industrial

12 customers, autornated metering systems and back office process development.

13 Load Research employees perform analyses primarily in support of

14 consumer programs, as well as providing support on a variety of issues including,

15 but not limited to, assistance whh energy efficiency and demand response programs

16 and program plan development.

17 The EE & Consumer Programs employees ensure the availability of

18 consumer programs in all AEP jurisdictions dedicated to EE, or any other related

19 utility service offerings.

20 The Customer InforMation Systems Implementation & Support group

21 supports billing and customer information systems used by all operating companies.

22 The Customer Choice group manages the exchange of account and billing


969

1

information for customers within the deregulated service territories that participate

2

in choice programs with energy marketers. These employees also provide technical

3

and training support to SWEPCO-based custOmer services employees, and are

4

responsible for remediation and documentation for customer services processes and

5

functions.

6 3. AEPSC Meter Services Support and Repair


8 AEPSC METER SERVICES SUPPORT AND REPAIR GROUP.

9 A. The AEPSC Meter Services Support and Repair employees represent three

10 functional subgroups. These functional subgroups consist of Meter Systems

11 Support, Meter Labs, and Repair Shops. Meter Systems Support selects meter

12 testing saniples, analyzes meter performance, and assists with meter inventory

13 management. Additionally, this group coordinates and develops meter standards

14 and service guides, and assists in advanced metering r systems and related

15 communications systems development. The four Meter Labs across the AEP

16 service territory procure meters and instrument transformers and provide regulatory-

17 required testing based on established schedules. The four Repair Shops located

18 across the AEP System provide cost-effective refurbishment of distribution

19 equipment, management of distribution tools, and testing of distribution equipment.

20 4. Economic and Business development

21 Q. PLEASE DESCRIBE THE SERVICES PROVIDED TO SWEPCO BY -THE

22 AEPSC ECONOMIC AND BUSINESS DEVELOPMENT GROUP.


970

1 A. The Economic and Business Development Group provides a variety 'of professional

2 resources and research to evaluate regional and local market conditions and to

3 develop new programs and initiatives to spur growth and investment throughout

4

AEP's service territories, which brings jobs to our communities.

5

The Economic and Bu§iness Development Group also, manages AEPSC

6

National Accounts. This subgroup of employees have responsibilities that include

providing national account management services to large chain accbunts that have

8

locations in more than one AEP Operating Company service area-. These employees

-9

provide large chain account customers with a single point of contact to more

10

effectively and efficiently help resolve service issues involving new or existing

11

locations. Examples of such customers in SWEPCO's Texas service area include

12 International Paper Company, Pilgrim's Pride Corporation, Exxon Mobil

13 Corporation; Tyson Foods, Inc., and Brookshire Grocery Company.

14 C. SWEPCO Interface with AEPSC C&DS

15 Q. HOW DOES SWEPCO INTERACT WITH THE AEPSC C&DS ORGANIZATION?

16 A. SWEPCO provides direction and input to that orgariization in several ways.

17 AEPSC's C&DS organization is integral to the SWEPCO customer services

18 organi±ation. The local AEPSC COC supervisors and AEPSC Billing and Account

19 Operations supervisors regularly attend SWEPCO Customer Services and Marketing

20 management.meetings and staff conference calls and function as integral parts of that

21 team.


971

1 SWEPCO representatives help with various training conferences and serve on

a number of formal functional review groups that provide input to the AEPSC C&DS

3 Organization, and in particular to AEP leadership.

4 Q. *HAT OTHER MECHANISMS ARE AVAILABLE FOR SWEPCO TO PROVIDE

5 FEEDBACK AND DIRECTION TO THE AEPSC C&DS ORGANIZATION?

6 A. Regularly scheduled meetings of the AEP Operating Company customer -services

7 directors and the AEPSC cusfomer service support organization leadership are

8 conducted where service issues are discussed and resolved. These discussions also

9 address best practices lised in other Operating Companies to better and more

10 efficiently meet the needs of our customers. Additionally, the AEPSC C&DS

11 leadership team travels to each Qperating Company periodically to discuss specific

12 concerns or needs and to obtain feedback on the quality of service being provided to

13 the Operating Company.

14

15 III. QUALITY OF SERVICE

16 Q. HOW DOES SWEPCO TRACK CUSTOMER SATISFACTION?

17 A. SWEPCO measures and tracks end-use customer satisfaction using four separate

18 surveys, three of which are performed by independent market research firms on behalf

19 of SWEPCO. There are four separate surveys, as there are four different sets of

20 customers: 1) residential, 2) commercial, 3) managed account customers, and

21 4) customers who have had a recent experience with a COC. The managed account

22 customer surveys are directed at nianaged and key accounts, including accounts such


972

1 as the federal government and Wal-Mart Stores, Inc., which have operations in the

service territory of multiple AEP Operating Companies. The COC transactional

3 survey is completed only by customers who have had a recent interaction with the

4 COCs.

5 A. Residential and Commercial Customer Surveys

6 Q. PLEASE DESCRIBE THE RESIDENTIAL AND COMMERCIAL CUSTOMER

7 SURVEYS.

8 A. The surveys for residential and commercial customers Were conducted throughout the

9 year via telephone interviews with a random sample of SWEPCO customers. Both

10 surveys were conducted by Market Strategies International (MSI). MSI is an

11 unaffiliated survey research firm, which ensured the integrity and quality of the data.

12 MSI was hired to provide SWEPCO with comparative national benchmarking data on

13 standardized questions. Both surveys contained many questions, including questions

14 that MSI asked of customers of industry peers enabling benchmarking. These

15 questions iricluded topics such as being responsive to customer needs, the value of

16 customer service, the value of readily accessible customer service, and having bills

17 that are easy to understand.

18 Q. PLEASE bESCRIBE HOW THE SAMPLES ARE ŠELECTED FOR THE

19 RESIDENTIAL AND COMMERCIAL CUSTOMER SURVEYS.

20 A. The residential and commercial surveys were administered by phone interview,

21 employing a random SWEPCO-supplied sample of residential and commercial

22 customers obtained from the Company's customer information system.

15IRECT TESTIMONY PUC DOCKET NO. 46449 19 BRETT MATTISON

973

1 Q. HOW DID SWEPCO'S RESULTS IN THE RESIDENTIAL AND COMMERCIAL

2 SURVEYS COMPARE TO OTHER UTILITIES?

3 A. Figure 1 displays SWEPCO's overall customer satisfaction percentage ratings for

4 2015 compared to the national average for residential and commercial customers.

5 The percentiges below represent the percent of positive responses (ratings of '6 to

6 '10' using a '0' to '10' scale). The results are shown for the entire SWEPCO service

7 territory.

8 Figure 1 — 2015 Overall Customer Satisfaction Ratings

SWEPCO National Average Residential 86% 84% Commercial 89% 87%

9 As noted above, numerous'questions were used for benchmarking SWEPCO

10 versus its national peers, in both the residential and commercial surveys. SWEPCO

J

1 1 was ranked in the top quartile in 22 of the 30 benchmarked questions asked in the

12 residential survey and 17 of the 29 benchmarked questions asked in the commercial

13 survey.

14 B. Managed Account Customer Survey

15 Q. PLEASE DESCRIBE THE MANAGED ACCOUNT CUSTOMER SURVEY.

16 A. SWEPCO utilizes AEP's Corporate Performance Management group to conduct

17 customer satisfaction surveys for its managed accounts. The managed account survey

18 is conducted bi-annually with large customers and chain account customers. The

19 survey questiops cover six focus areas as shown in Figure 2 below.


974

1 Q. PLEASE DESCRIBE HOW THE SAMPLES ARE SELECtED FOR THE

2 MANAGED ACCOUNT CUSTOMER SURVEY.

3 A. To survey these managed accounts, AEP selects SWEPCO's assigned account

4 contacts and`sends them e-mail invitations to participate in the online survey.

5 Q. PLEASE DESCRIBE SWEPCO'S MANAGED ACCOUNT CUSTOMER SURVEY

6 PERFORMANCE.

7 A. Figure 2 shows the results for the entire SWEPCO territory. The percentages below

8 represent the percent of 'Consistently Good and 'Excellent' responses on a five-point

9 rating scale (ratings of 'Needs Major Improvement' to Excellent').

10 Figure 2 — 2015 Key Account Customer Satisfaction Ratings

FOcus Area SWEPCO % Reliability 89% Corporate Citizenship 92% Energy Management 80% Price 89% Account Manager 96% Satisfaction with SWEPCO 86%

11 C. Customer Operations Center Surveys

1 Q. PLEASE DESCRIBE THE COC TRANSACTIONAL SURVEY.

13 A. MSI also conducted the COC transactional survey. The COC transactional survey

14 employed a telephone interview methodology to conduct the survey.

15 Q. PLEASE DESCRIBE HOW THE SAMPLES WERE SELECTED FOR THE CALL

16 CENTER TRANSACTIONAL SURVEY.

17 A. MSI randomly selected a- daily sample of customers from the SWEPCO service

18 territory who have had a recent transaction with the call center. The sample

DIRECT TESTIMONY PUC DOCKET NO. 46449 • 21 BRETT MATTISON

975

1 population included all SWEPCO customers who placed one of the 584,676 calls

2 received by the call centers during 2015. These samples typically are approximately

90 percent residential customers and 10 percent small commercial customers.

4 Interviews are targeted for completion no later than ten days after the transaction and

5 are self-identified by the respondent as to transaction type. Sample sizes were set at

6 the COC level with overall system data reflecting a representatively Weighted total of

7 those individual solutions centers data. •

8 Q. WHAT WERE SWEPCO'S RESULTS IN THE 'CALL CENTER

9 TRANSACTIONAL SURVEY?

10 A. Customers were asked how satisfied they were with the entire transaction experience

11 with the call center. The overall customer satisfaction rating was 86 percent out of a

12 possible 100 percent, which is viewed as a positive result.

13 Q., DID SWEPCO RECEIVE ANY CUSTOMER COMPLAINTS FILED WITH THE

14 PUC?

15 A. No. SWEPCO Texas received zero PUC customer complaints during the test year.

16 D. Meter Reading.

17 Q. ARE THERE ANY OTHER PERFORMANCE MEASURES THAT SWEPCO

18 TRACKS TO ENSURE A HIGH QUALITY OF SERVICE?

19 A. Yes. SWEPCO Texas tracks the percentage of meters that are read each month:

20 During the test year, a total of 2,297,840 meter reads were, made, which was


976

1

99.2 percent of the available meter reads. This high percentage shows that SWEPCO

2

uses estimation minimally and makes every possible effort to obtain actual meter

3

readings.

4

5 IV. CUSTOMER SERVICE COSTS

6 Q. WHAT ARE THE TOTAL TEST YEAR COSTS FOR SWEPCO CUSTOMER

7 ACCOUNTS AND CUSTOMER SERVICES?

8 A. The total adjusted test year expenses are $23,396,395, which includes $20,197,754

9 relating to Customer Accounts and $3,198,641 relating to Customer Services.

10 Affiliate costs make up $8,685,597 Of the total test year expenses. These costs

11 exclude the EE amounts that are recovered through the EECRF, as discussed earlier.

12 Q. WHAT METHODS HAVE YOU USED TO DETERMINE TfIE

13 REASONABLENESS OF SWEPCO OVERALL CUSTOMER SERVICE COSTS?

14 A. I have utilized several methods for proving the reasonableness of the costs', including

15 cost trends and comparisons to the customer services costs of similar utilities.

16 Cost Trends

17 Q. PLEASE DESCRIBE THE COST TREND FOR SWEPCO'S CUSTOMER

18 SERVICES COSTS OVER THE PAST FEW YEARS.

19 A. Figure 3 shows the Customer Services costs for 2013-2015, and the test year. The

20 costs include those incurred both by SWEPCO directly and also those charged to

21 SWEPCO by AEPSC. The following costs include all the costs charged to Federal

22 Energy Regulatory Commission (FERC) accounts 901, 902, 903, 904, 905, 907, 908,


977

1 909, and 910, with the exception of EE costs, which are excluded as previously

2 discussed. As can be seen in Figure 3, the test yeaf Customer Services costs have

3 decreased since 2013, providing a good illustration of SWEPCO's ongoing

4 commitment to cost control.

5 Figure 3 — Customer Services Costs

2013 2014 2015 Test Year Customer Accounts $21,582,430 $22,604,151 $21,412,991 $20,197,754 Customer Services $4,324,247 $3,617,788 $5,226,368 $3,198,641

Total $25,906,677 $26,221,939 $26,639,360 $23,396,395

6 Cost Comparisons

7 Q. HAVE YOU PERFORMED ANY STUDIES THAT FURTHER SUPPORT THE

8 REASONABLENESS OF SWEPCQ'S CUSTOMER SERVICES EXPENSES?.

9 A. Yes. Internal benchmarking using FERC Form 1 data from 2013-2015 compares

10 SWEPCO's customer service accounts to three peer groups, based on per end-use

11 customer. The three peer groups were a Texas peer group, a south central peer

12 group, and a national peer group. These studies provide the minimum, maximum,

13 and median values for each metric and the relative position of the corresponding

14 SWEPCO metric for comparison.

15 Q. PLEASE DESCRIBE THE TYIREE PEER GROUPS THAT WERE SELECTED.

16 A. The Texas peer group consists of four investor-owned integrated electric utilities in

17 Texas: SWEPCO, El Paso Electric Company (EPE), Southwestern Public- Service

18 Company (SPS), and Entergy Texas Inc. Electric Reliability Council of Texas

19 members are excluded because,, as unbundled utilities, the customer 'services they

20 provide are significantly different from those provided by an integrated utility. The


978

south central peer group, with a total of 14 utilities, includes the Texas peer group

2

utilities, most of the investor-owned utilities in all of the states that border Texas,

3

and investor-owned *utilities in Kansas. By including Kansas, the peer group

4

includes most of the invekor-owned elect'ric utilities that are members of the

Southwest Power Pool. The national peer group, with a total of 58 utilities,

6

includes the utilities that make up the S&P 500 Utilities Index, as well as the south

7

central peer group utilities. The members of the Texas, south central and national

8 peer groups, and the benchmarking results are contained in EXHIBITs BM-3,

9 BM-4, and BM-5.

10 Q. PLEASE DISCUSS THE METHODOLOGY YOU HAVE FOLLOWED IN

11 CONDUCTING THE BENCHMARKING STUDIES PRESENTED IN THIS

12 TESTIMONY.

13 A. As mentioned above, these benchmarking studies are based on FERC Forrn 1 data,

14 which is a required filing for all investor-owned electric utilities in the United

15 States and is information that is straightforward, ieadily available, and clear. The

16 benchmarking metrics include accounts 901-Supervision, 902- Meter reading

17 expenses, 903-Customer records and c011ections expenses, 904-Uncollectible

18 accounts, 965-Miscellaneous cukomer accounts expenses, 908-Customer assistance

19 expenses, 909-Informational and instructional expenses, and 910-Miscellaneous

20 customer service and informational expenses. I excluded account 907 as it

21 primarily reflects EE incentive cost. I would note that companies may have


979

1

somewhat different practices regarding which costs go into individual accounts;

2 thus, this comparison has some limitations.

3 Q. ARE BENCHMARK COMPARISONS BASED ON FERC FORM 1 FILINGS OF

4 OTHER UTILITIES THE TYPE OF INFORMATION THAT AEP AND ITS

5 OPERATING COMPANIES COMMONLY USE TO ASSESS THE

6 PERFORMANCE OF THEIR OPERATIONS?

7 A. Yes. Benchmarking requires comparable data from a common source for all of the

8 entities compared in the benchmarking study. FERC Form 1 includes data by

9 FERC Accounts, which are the standardized accounts utilized for reporting

10 operations and maintenance (O&M) and capital expenditures. For these reasons,

11 FERC Form 1 data is a reasonable source to use for benchmarking activities.

12 Q. WHAT ARE THE RESULTS OF THE BENCHMARKING STUDIES WITH

13 RESPECT TO THE TEXAS PEER GROUP?

14 A. SWEPCO's customer service costs for the benchmarked period are higher than EPE

15 and lower than SPS. This is not surprising because EPE's load in Texas is

16 concentrated in the city of El Paso, while SPS and SWEPCO serve territories that

17 are far less dehsely Populated. Customer density is a significant driver of customer

18 service costs. The cost per customer for functions such as meter reading and field

19 order completion activities, which are labor and travel-intensive, is greater when

20 serving *a large geographic area with low customer density conipared to serving a

21 small geographic area with high customer density.


980

1 Q. WHAT ARE THE RESULTS OF THE BENCHMARKING STUDIES WITH

2 RESPECT TO THE SOUTH CENTRAL AND NATIONAL PEER GROUPS?

3 A. SWEPCO compares favorably to those groups. While we are higher than the

4 median in the south central group, I would note that the population in our service

5 territory is generally less dense than many of the utilities in that group. For

6 example, EPE and Entergy New Orleans have dense areas of load concentrations,

7 located primarily An large cities. Others in the group, such as Entergy Arkansas,

8 Kansas City'Power and Light, and Oklahoma Gas and Electric Company, also serve

9 cities much larger than any in SWEPCO's service area.

10 With respect to the national peer group, which is perhaps the best

11 comparison because it includes .58 companies, SWEPCO is slightly above the

12 median in each of the three years measured.

13 The overall benchmarking results demonstrate that SWEPCO's customer

14 service costs are in line with other utilities and are reasonable.

15

16 V. AFFILIATE COSTS

17 Q. WHAT EVIDENCE SUPPORTS THE REASONABLENESS AND NECESSITY OF

18 THE TEST YEAR CUSTOMER OPERATIONS AFFILIATE *CHAAGES TO

19 SWEPCO?

20 A. Below, I discuss recent budget performance and cost trends for the AEPSC C&DS

21 organization. In addition, the benchmarking of total SWEPCO customer operations

22 costs (affiliate and direct) discussed above supports the reasonableness of the affiliate


981 '

1

2

charges, since affiliate costs are 'a significant portion of the total and are ,included

therein. Finally, the high customer satisfaction achieved by SWEPCO supports the

3 fact that AEPSC is providing effective support to SWEPCO's customer operations.

4 Q. WHAT WERE THE CUSTOMER OPERATIONS AFFILIATE EXPENSES

5 CHARGED TO SWEPCO FOR THE TEST YEAR THAT YOU SUPPORT?

6 A. Test year customer operations affiliate expenses charged to SWEPCO that I support

7 total $8,685,597.

8 Q. HOW DO SWEPCO'S TEST YEAR AFFILIATE EXPENSES BREAK DOWN BY

9 MAJOR COST CATEGORY?

10 A. The expenses can be broken down into the following categories:

Category AmOunt Percent Laboi / Benefit $6,682,362 77% Outside Services $1,354,302 16% Other $ 648,933 7% Total $8,685,597 100%

11 Q. WHY ARE THESE COST COMPONENT CATEGORIES SIGNIFICANT?

12 A. This breakdown shows that a substantial percentage of test year AEPSC affiliate

13 charges to SWEPCO Custorner Services are composed of labor and benefits. In

14 addition to my testimony, the reasonableness of AEPSC's labor and benefit costs,

15 which -make up 77 percent of the AEPSC affiliate cOsts in this. catego'ry, is supported

16 by the testimony of Company witnesses Andrew R. Carlin and Curt D. Cooper.

17 Q. EXPLAIN WHAT IS INCLUDED IN TI-1E OUTSIDE SERVICES COST

18 CATEGORY.

19 A. Outside Services includes payments to outside vendors, most notably NCO Group,

20 Inc. When called upon, these vendors handle overflow' calls from the call centers.


982

1 These services provide benefit to SWEPCO customers by assisting during times of

2 peak call volume to ensure readily available access to customer service.

Q. WHAT •HAS BEEN THE TREND IN CUSTOMER OPERATIONS AFFILIATE

4 EXPENSES CHARGED TO SWEPCO? 1

5 A. The annual trend in Customer Operations affiliate expenses for SWEPCO is as

6 follows:

7 Year Amount

8 Prior Test Year $11,698,725

9 2013 $ 8,513,826

10 2014 $ 8,487,421

11 2015 $ 8,617,236

12 Current Test Year $ 8,685,597

13 As can be seen from,the above information, costs have been reduced since the last test

14 year and have remained consistent since 2013.

15 Q. HAS THE NUMBER OF FULL-TIME EMPLOYEES WITHIN THE AEPSC -

16 CUSTOMER AND DISTRIBUTION SERVICES ORGANIZATION CHANGED

17 SINCE THE END OF 2013?

18 A. Yes, but only very slightly. The AEPSC Customer and Distribution Services

19 organization had 763, 773, 763, and 762 employees at the end of 2013, t2014, 2015,

20 and the test year, respectively. As can be seen, the number of AEPSC dustomer and

21 Distribution Services employees has remained consistent during thMime'period.

22 Performance-to-Budget

23 Q. PLEASE EXPLAIN THE BUDGETING USED AT AEPSC IN THE AREA OF

24 CUSTOMER SERVICES.


983

1 A. ,Budget targets for the upcoming year are based on prior year budget inputs plus or

2 minus any items that are identified and approved for inclusion or omission. Labor

3 expense is budgeted by hours. Materials, supplies, outside services expenses, etc., are

4 budgeted based on prior activity and any anticipated changes. Variances from budget

5 are reviewedmonthly and discussed with Customer Services management.

6 Q. HOW HAS AEPSC CUSTOMER SERVICES PERFORMED AGAINST BUDGET?

7 A. Figure 4 shows the AEPSC Customer Services O&M budget versus actual

8 performance for the years 2014, 2015, and the test year. Short and long-term

9 incentive amounts have been removed from my analysis, and are discussed in the

10 testimony of Company witnesses Carlin, Hamlett, and Brian J. Frantz.

11 Figure 4 — AEPSC Customer Services Budget vs. Actuals

,. 2014 2015 Tesf Year

Budget $66,185,646 $64,023,070 $63,927,692

Actual $63,424,480 $64,394,509 $64,195,882

Over (Under) ($2,761,165) $371,439 $268,190

12 The budget has decreased approximately 3.5 peicent since 2014, and the

13 actual expenditures have consisteptly been below or near budget in all three years.

14 Q. DO OTHER SWEPCO WITNESSES DISCUSS CUSTOMER SERVICES

15 AFFILIATE COSTS?

16 A. Yes. Company witness Frantz provides testimony regarding the reasonableness of the

17 AEPSC allocation factors utilized to allocate AEPSC Customer Services costs to

.18 SWEPCO.


984

1 VI. AEPSC SAFETY AND HEALTH ORGANIZATION OVERVIEW

2 A. Description of the AEPSC Safety and Health Organization

3 Q. PLEASE DESCRIBE THE AEPSC SAFETY AND HEALTH ORGANIZATION.

A. The AEPSC Safety and Health organization at AEP provides support in all areas of

5 occupational safety and health, public and contractor safety, industrial hygiene,

6 ergonomics, health and wellness, and training. Its staff consists of safety and health

7 generalists and specialists who hold professional degrees and certifications in many

8 areas, including nursing, occupational health, industrial hygiene, and public safety.

9 AEPSC Safety and flealth is generally organized according to the function being

1 0 supported, for example generation, or program area, such as industrial hygiene. These

11 support groups ensure that the AEPSC Safety and Health policies and procedures

12 within AEP's operating companies, such as SWEPCO, are aligned with AEP's

13 corporate AEPSC Safety and Health policies and procedures as well as federal

14 standards from agencies such as the Occupational Safety and Health Administration.

15 AEPSC Safety and Health is comprised of six primary groups covering safety

16 and health forš generation, transmission, and_distribution operations, safety and health

17 training, industrial hygiene, and public safety. The AEPSC Safety and Health groups

18 support AEP Generation, AEP Transmission, and AEP Distribution operations, and

19 develop initiatives and programs to foster a safety and health culture in these

20 organizations. For example, the Zero Harm initiative challenges employees to not be

21 satisfied until zero harm is achieved — i.e., every employee goes home safe and

22 healthy at the end of his/her workday. A spin-off of this initiative, Target Zero,


9f,35

1

promotes the same ideals of a zero harm culture within the AEP Generation

2

organization.

3

AEPSC Safety and Health support staff for AEP's transmission organization

4

have facilitated Safety Stand Downs and periodic visits to communicate corporate

5

policies on vehicle safety, fire retardant clothing, hazard assessments, and recognition

6

for employee safety efforts.

7

The AEP TransmissiOn, AEP Generation, and AEP Distribution organizations

8

have been utilizing Safety and Health's Human Performance Initiative as an error

9

reduction system for employees and have also partnered with AEP Distribution to

10

update the Contractor Safety Oversight Programs for each organization. AEP

11

Distribution is assisted by Safety and Health in the area of strategic communication

12

with safety alerts and safety bulletins for communication of significant issues.

13

Another key communication tool is The Serious Event conference call, which -ensures

14

that critical issues and events are communicated quickly across the organization with

15

an emphasis on immediate corrective actions.

16

The Safety and Health Training Team is involved with communicating AEP

17

safety and health programs to AEP's operating companies, ensuring that a consistent

18

message is conveyed system-wide. Program and initiative-specific training is also

19

facilitated by ihi group through Safety and Health Summits. For example, the Safety

20 - and Health Industrial Hygiene (IH) group conducted a welding fume study to better

21 characterize'exposure potential, implemented sharing of air sample analysis across the

22 AEP system through the IH database, and coordinated a radio frequency (RF) safety


986

1

workshop that led to the updating of the RF Safety Manual. The IH group also

2

determined a simple statistical process for negative exposure assessment to ensure

3

thatsampling is representative of actual industrial exposure hazards.

4

The Safety and Health Public Safety group facilitates AEP's outreach plan for

5

eliminatiorL of °preventable electrical contacts and public fatalities by producing, in

6 conjunction with AEPSC Corporate Communications, safety videos, multiple Internet

7 website communications, television safety advertising, and publishing articles in

8 Consumer Circuit, AEP's customer publicati6n. The Safety and Health Public Safety

9 group also provides -safety content for employee communications about public sa:fety.


11 AEPSC SAFETY AND HEALTH ORGANIZATION.

12 A. Safety and Health groups supporting the generation, transmission, and distribution

13 operations of SWEPCO provided services including site inspections of

14 SWEPCO-owned facilities to conduct safety/health assessments, maintaining AEPSC

15 Safety and Health corpofate-wide databases to facilitate knowledge sharing, creating

16 safety bulletins, issuing guidance on safety footwear and implementation of fall

17 protection while climbing wood poles, and conducting business unit-specific safety

18 conferences. In addition, AEPSC Safety and Health provided expertise and

19 interpretation of the rules, regulations and policies that govern our business with

20 respect to safety and health, and, where applicable, changed or modified those

21 policies and procedures to meet or exceed the associated federal and/or state standard.

22 The Industrial Hygiene group of AEPSC Safety and Health conducted assessments at

DIRECT YESTIMONY PUC DOCKET NO. 46449 33 BRETT MATTISON

987

1 SWEPCO service centers to monitor exposure to chemicals, provided mandated

2

training for asbestos compliance with federal and state regulations, and served as a

3

technical' resource to plant Industrial Hygiene coordinators. The AEPSC Safety and

4

Health team provided leadership and guidance as well as identification and correction

5

of weaknesses in the AEPSC Safety and Health Management System. AEPSC Safety

6

and Health provided proactive solutions-and recommendations to prevent unwanted

7 incidents, injuries, and illnesses. AEPSC Safety and Health also has created an

8 Enterprise Hazard Assessment application that supporth SWEPCO's hazard

9 assessment/recognition efforts directly aimed at preventing empioyee injuries.

10 Finally, AEPSC Safety and Health develop public safety materials, including videos,

11 factsheets, online learning modules, social media messages, news articles, customei

12 emails, Web communications, and blog messages that are customized and reside on

13 SWEPCO's websites.

14 B. SWEPCO Interface with AEPSC Safety and Health

15 Q. ARE THERE AEPSC SAFETY AND HEALTH ORGANIZATION EMPLOYEES

16 LOCATED 'WITHIN SWEPCO'S SERVICE TERRITORY?

17 A. Yes. Since both SWEPCO and AEP place such high value on safety, AEPSC Safety

18 and Health' has placed employees within SWEPCO's service territorY in order to

19 better serve SWEPCO and its customers. Having AEPSC Safety and Health

20 organization employees in the service territory allows SWEPCO employees to have

21 immediate access, as well as face-to-face interactions, with safety and health

22 professionals. For example; AEPSC Safety and Health employees within the ;territory


988

1 are able to participate in local safety inspectiOns, safety meetings, and give

2 presentations on a number of safety topics.

3 C. Costs and Cost Trends

4 Q. WHAT WERE THE AEPSC SAFETY AND HEALTH EXPENSES CHARGED TO

5 SWEPCO FOR THE TEST YEAR THAT YOU SUPPORT?

6 A. Test year customer operations affiliate expenses charged to SWEItO that I support

7 total $427,043.

8 Q. HOW DO SWEPCO'S TEST YEAR AEPSC SAFETY AND HEALTH EXPENSES

9 BREAK DOWN BY MAJOR COST CATEGORY?

10 A. The expenses can be broken down into the following categories:

Category , Amount Percent Labor / Benefits $352,156 82% Outside Services $37,254 9% Other '$37 633 9% Total $427,043 100%

11 Q. WHY ARE THESE COST COMPONENT CATEGORIES SIGNIFICANT?

12 A. This breakdown shows that a substantial pekentage of test year AhPSC Safety and

13 Health charges to SWEPCO Customer Services are composed of labor and benefits.

14 In addition to my testirnony, the reasonableness of AEPSC Safety and Health labor

15 and benefit costs, which make up 82 percent of the AEPSC costs in this category, is

16 supported by the testimony of Company witnesses Carlin and Cooper.

17 Q. EXPLAIN WHAT IS • INCLUDED IN THE OUTSIliE SERVICEŠ COST

18 CATEGORY.


9S9

8 9

10 11 12 13

1 A. Outside Services includes payments to outside safety vendors. When called upon,

2 these vendors help provide specialized products, such as safety training or safety

3 surveys, that AEPSC Safety and Health are not able to provide on their own.

4 Q. WHAT HAS BEEN THE TREND IN AEPSC SAFETY AND HEALTH AFFILIATE

5 EXPENSES CHARGED TO STWEPCO?

6 A. the annual trend in AEPSC Safety and Health affiliate expenses for SWEPCO is as

7 follows:

Year Amount Prior Test Year $412,508 2013 $409,643 2014 $460,028 2015 . $598,912 Current Test Year $427,043

14 As can be seen from the above information, although Safety and Health costs

15 increased from 2013 to 2015, the 'current test year is lower than 2014 through 2015,

16 and is consistent with the prior test year.

17 Q. 'HOW HAS AEPSC SAFETY AND HEALTH PERFORMED AGAINST BUDGET?

18 A. Figure 5 shows the AEPSC Safety and Health organization O&M budget versus

19 actual performance for the years 2014, 2015, and the Test Year. Short and long-term

20 incentive amounts have been removed from my analysis, and are discussed in the

21 testimony of Company witnesses Carlin, Hamlett, and Frantz. I have also removed

22 one-time charges for safety programs during the Test Year that are not expected to

23 recur. Mr. Hainlett provides the pro forma for these non-recurring items.

DIRE& TESTIMONY PUC DOCKET NO. 46449

36

BRETT MATTISON

990

1 Figure 5 — AEPSC Safety and Health Organization Budget vs. Actuals

2014 2015 Test Year

Budget $3,434,634 $2,543,209 $2,501,339,

Actual $2,679,725 ,.$2,867,874 $2,878,878

Over (Under) ,($754,910) $324,665 $377,539

2 As can be seen in Figure 5, the AEPSC Safety and Health Organization manages

3 against their budget with no material variances. Like most other AEPSC

4 organizations and as I discussed above;this department is primarily driven by payroll

5 and payroll-related charges; and as I discuss below, the headcbunt for this department

6 has been very consistent over the last fdur years.

7 Q. WHAT HAS BEEN THE TREND OF FULL-TIME EMPLOYEES WITHIN THE

8 AEPSC SAFETY AND HEALTH ORGANIZATIONS SINCE THE END OF 2013?

9 A. The AEPSC Safety and Health organization had 26, 24, 23, and 26 employees at the

10 end of 2013, 2014, 2015, and the Test Year, respectively: As can be seen, the number

11 of AEPSC Safety- and Health employees has remained consistent during this time

12 period.

13 Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?

14 A. Yes, it does.


991

Director of Customer

Services & Marketing

Meter Customer Energy Lean / Revenue Services & Efficiency & Process

Operations Marketing Consumer Improvement Programs

PUC Docket No. 46449 EXHIBIT BM-1

Exhibit BM-1 SWEPCO CS&M Organizational Chart Organizational Chart

i

,

992


Exhibit BM-2 AEPSC Customer & Distribution Services Organizational Chart

Customer & Distribution

Services

Distribution Customer Economic & Customer Performance Services Business Operations

Management & Support Development Data Analytics

Meter Services Support

Repair

Distribution Services Support

993


Exhibit BM-3 Texas Peer Group

Texas Peer Group Sum of FERC Accts $ per Customer

--*--.SWEPCO $90

$80

$70

$80

$50

$40

$30

$20

$10

$0 ,

Year 2013 2014 2015

Lowest $45 $50 $48

Median S72 $67 $74

Highest $81 $80 $83 SWEPCo $71 $72 $76

Utilities in Peer Group: El Paso Electric Co Entergy Texas Inc Southwestern Electric Power Co Southwestern Public Service Co

4

994

PUC Docket No. 46449 ÉXHIBIT BM-4

Exhibit BM-4 . South Central Peer Group

South Central Fteer Group Sum of FERC Accts $ per Customer

—6— SWLPCo $180 -

$160 -

$140 -

$120 -

$100 -

$60 - 40........___........................A

L,

$60 -

$40 - 1.--:—

$20 -

$0

Year 2013 2014 2015 Lowest S32 $32 ' $32

Median $65 $60 574 Highest $115 $150 $157

SWEPCo $71 $72 $76

Utilities in Peer Group:

CLECO Power LLC El Paso Electric Co Entergy Arkansas Inc Entergy Louisiana Inc Entergy New Orleans Inc Entergy Texas Inc Kansas City Power & Light Co

Kansas Gas & Electric Co Oklahoma Gas & Electric Co Public Service Co of New Mexico Public Service Co of Oklahoma Southwestern Electric Power Co Southwestern Public Service Co Westar Energy Inc


Page 1 of 2 •

Exhibit BM-5 National Peer Group

i National Peer Group Sum of FERC Accts $ per

Customer 4.

.—e—SWEPCo $250 -

$200 -

$150 -

$100

41--

$50

• .

$0 ,

Year 2013 2014 2015

Lowest $32 $27 $31

Median $68 $71 $75

Highest $224 $236 $223

SWEI2Co $71 $72 $76

996


Page 2 of 2

Utilities in Peer Group:

AEP Texas Central Cd AEP Texas North Co Alabama Power Co Appalachian Power Co Arizona Public Service Co Baltimore Gas & Electric Co CLECO Power LLC Cleveland Electric Illuminating Co (The) Commonwealth Edison Co Connecticut Light & Power Co (The) Duke Energy Carolinas Duke Energy Florida Duke Energy Indiana Duke Energy Kentucky Duke Energy Ohio Duke Energy Progress El Paso Electric Co Entergy Arkansas Inc Entergy Gulf States Louisiana LLC Entergy Louisiana Inc Entergy Mississippi Inc Entergy New Orleans Inc Entergy Texas Inc Florida Power & Light Co Georgia Power Co Gulf Power Co Indiana Michigan Power Co Jersey Central Power & Light Co Kansas City Power & Light Co

Kansas Gas & Electric Co Kentucky Power Co Kentucky Utilities Co Kingsport Power Co Louisville Gas & Electric Co Metropolitan Edison Co Missis'sippi Power Co Monongahela Power Co Northern States Power Co (Minnesota) Northern States Power Co (Wisconsin) NSTAR Co Ohio Edison Co Ohio Power Co Oklahoma Gas & Electric Co . PECO Energy Co Pennsylvania Electric Co Pennsylvania Power Co Potomac Edison Co (The) PPL Electric Utilities Corp Public Service Co of Colorado Public Service Co of New Mexico Public Service Co of Oklahoma Southern California Edison Co Southwestern Electric Power Co Southwestern Public Service Co Toledo Edison Co (The) West Penn Power Co Westar Energy Inc Wheeling Power Co

997

EXECUTIVE $UMMARY OF BRIAN BOND

Brian Bond is Vice President External Affairs for Southwestern Electric Power Company

(SWEPCO). As Vice President of External Affairs, he is responsible for the Community Affairs,

Governmental Affairs, Economic Development and Environmental Affairs activities at

SWEPCO.

Mr. Bond discusses SWEPCO's External Affairs organization and the services it provides

in support of SWEPCO's mission to provide safe and reliable electricity to SWEPCO's

customers. SWEPCO's External Affairs gfoups perform the following functions for SWEPCO:

1) liaison and communications with local governments and state officials; 2) participation in

community and business development; 3) legislative analysis, monitoring, and advocacy; and

4) management of charitable contributions.

Mr. Bond also supports the reasonableness and necessity of the affiliate charges billed to

SWEPCO by the American Electric Power Service Corporation (AEPSC) Federal Affairs

organization. AEPSC Federal Affairs provides federal governmental affairs support for

SWEPCO and the other AEP Companies. AEPSC Federal Affairs services are necessary to

ensure that SWEPCO is apprised of national legislalive and regulatory developments and to

assess the impact of such developments on SWEPCO and its customers. This enables SWEPCO

to comply with resulting federal laws and regulations. These serVices are provided exclusively

by AEPSC Federal Affairs.

During the test year, $141,107 of affiliate charges for Federal Affairs services were billed

to SWEPCO. Mr. Bond demonstrates that these charges are reasonable and necessary. Finally,

Mr. Bond supports the reasonableness of SWEPCO's requested amounts included in cost of

service for memberships and for charitable contributions and donations. Contributions and

1

998

donations are primarily associated with educational, community service and economic

development activities. The amounts requested for contributions and membership expenses fall

within the Commission's requirements regarding inclusion of charitable contributions and

rnembership expenses in rates.

999

2