Peter T. Zschokke, Andrew F. Sloey - National Grid

289 Pages·2010·5.75 MB·English

National Grid

Niagara Mohawk Power Corporation

INVESTIGATION AS TO THE
PROPRIETY OF PROPOSED

ELECTRIC TARIFF CHANGES

Testimony and Exhibits of:

Peter T. Zschokke
Andrew F. Sloey
Exhibits __ (AFS-1) through (AFS-3)

Book 5

January 29, 2010

Submitted to:
New York Public Service Commission
Docket No. 10-E-____

Submitted by:
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Before the Public Service Commission

NIAGARA MOHAWK POWER CORPORATION d/b/a NATIONAL GRID

Direct Testimony

of

Peter T. Zschokke

Director, Regulatory Research and Special Projects

Dated: January 29, 2010

1
Testimony of Peter T. Zschokke
1 Q. Please state your name and business address.
2 A. My name is Peter T. Zschokke. My business address is 40 Sylvan Road,
3 Waltham, Massachusetts, 02451.
4
5 Q. By whom are you employed and in what capacity?
6 A. I am employed by National Grid USA Service Company, Inc. (“Service
7 Company”) as Director, Regulatory Research and Special Projects.
8 Service Company provides services to all of National Grid plc’s U.S.
9 affiliates, including Niagara Mohawk Power Corporation d/b/a National
10 Grid (“Niagara Mohawk” or “the Company”). In my position, I provide
11 resources and support to Niagara Mohawk in connection with regulatory
12 matters that affect the Company.
13
14 Q. Are you the same Peter T. Zschokke whose educational background,
15 professional background and experience is included as part of the
16 Revenue Requirements Panel testimony in this case?
17 A. Yes, I am.
18
19 Q. What is the purpose of your testimony?
20 A. The purpose of my testimony is to describe briefly the current status of the
21 Company’s efforts associated with the recently concluded management
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2
Testimony of Peter T. Zschokke
1 audit of Niagara Mohawk’s electric business, and to introduce the
2 Company’s Implementation Plan, which is also being separately filed this
3 date in Case 08-E-0827.
4
5 Q. Are you sponsoring any exhibits through your testimony?
6 A. Yes. I sponsor one exhibit: Exhibit __ (PTZ-1) is a copy of the
7 Company’s audit Implementation Plan, which was also filed with the
8 Commission this date in Case 08-E-0827.
9
10 Q. Please provide a brief summary of the Management Audit process.
11 A. In July 2008, the Public Service Commission (“Commission”) authorized
12 issuance of a Request for Proposal (“RFP”) for an independent third-party
13 consultant to conduct a comprehensive management and operations audit
14 of the electric business of the Company. At its October 15, 2008 session,
15 the Commission selected NorthStar Consulting Group (“NorthStar”) to
16 conduct this audit under the supervision of the Staff of the Department of
17 Public Service.
18
19 From fall 2008 through November 2009, NorthStar conducted an audit of
20 Niagara Mohawk’s electric operations, focusing on eight specified scope
21 areas:
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3
Testimony of Peter T. Zschokke
1 • Corporate mission, objectives, goals and planning
2 • Load forecasting
3 • Supply procurement
4 • System planning
5 • Capital and operations and maintenance (O&M) budgeting
6 • Program and project planning and management
7 • Work force management
8 • Performance and results measurement
9 The Company approached the audit as an opportunity to identify and
10 assess areas in which management of its operations, systems, governance,
11 and processes could be improved as part of our commitment to continuous
12 improvement for the benefit of customers.
13
14 NorthStar’s audit was comprehensive. It involved over 450 data requests,
15 more than 270 interviews, and the submission of thousands of pages of
16 documents by the Company. In addition, the Company, NorthStar and
17 Department Staff participated in several collaborative sessions during
18 which the Company sought and received much constructive guidance from
19 NorthStar regarding how to improve its operations to better serve its
20 electric customers throughout the State.
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4
Testimony of Peter T. Zschokke
1 The Final Audit Report issued December 3, 2009, identifies several of the
2 Company’s areas of performance strength, and also provides 44
3 recommendations aimed at promoting further improvement. At its
4 December 16, 2009 session, the Commission accepted the audit report,
5 and by an order issued and effective December 18, 2009, directed the
6 company to submit an Implementation Plan within 45 days. The
7 Commission’s order described the information to be included in the
8 Implementation Plan, including an overall characterization of relative
9 priorities for the recommendations, implementation action steps and
10 schedules, risk/cost/benefit analyses, and designation of executive officer
11 accountability. The December 18 order also directs the Company to meet
12 with Staff regarding development of the Implementation Plan, and to
13 provide written progress reports at least every four months.
14
15 Q. Please describe the Company’s Implementation Plan.
16 A. The Company’s Implementation Plan is attached as Exhibit__ (PTZ-1).
17 The Company and Staff communicated several times by e-mail and
18 telephone in connection with Implementation Plan development; however,
19 because of the relatively short period to develop our Implementation Plan
20 coupled with end-of-year and holiday schedules, as well as a number of
21 other challenges, the Company and Staff were unable to meet prior to
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5
Testimony of Peter T. Zschokke
1 producing the Implementation Plan that is included with my testimony.
2 However, the Company views the Implementation Plan as a living
3 document, and looks forward to meeting with Staff soon to discuss the
4 plan and obtain Staff’s input. The Company intends to update the
5 Implementation Plan as appropriate following consultation with Staff.
6
7 As set forth in the Commission’s order, the Implementation Plan reviews
8 the recommendations made in the audit report. For each recommendation,
9 the Company sets forth: implementation action steps; team members and
10 assignments; implementation schedules; risks/costs/benefits analyses
11 associated with implementing the recommendation; and the designation of
12 an executive sponsor.
13
14 Q. Are the costs that are reflected in the Implementation Plan for
15 implementing the recommendations reflected in the Company’s
16 revenue requirements in this case?
17 A. The management audit identified several opportunities for Niagara
18 Mohawk to improve its operations and processes, and the
19 recommendations included in the audit report are intended to promote
20 those goals for the benefit of customers. Several of the recommendations
21 relate to activities the Company was already undertaking consistent with
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6
Testimony of Peter T. Zschokke
1 its commitment to continuous improvement (e.g., consolidating the mutual
2 service companies, or developing the estimating center of excellence), and
3 are reflected in the Company’s revenue requirement. On the other hand,
4 there are a number of other recommendations that give rise to new,
5 incremental initiatives. The Company’s Implementation Plan includes
6 preliminary estimates of the incremental costs of these new initiatives
7 needed to implement the recommendations.
8
9 Q. What is Niagara Mohawk’s proposal regarding cost recovery for
10 implementing the recommendations in the audit report?
11 A. As I mentioned previously, and as indicated in Exhibit __ (PTZ-1), several
12 of the recommendations have incremental costs associated with their
13 implementation. However, as Mr. King describes in his testimony, the
14 Company is mindful of the financial challenges facing customers in the
15 current economic conditions. Accordingly, and consistent with the
16 Commission’s Order Approving Ratepayer Credits in Case 09-M-0435
17 (issued and effective December 22, 2009) (“Austerity Order”), the
18 Company plans to proceed with implementing its Implementation Plan,
19 but plans to forgo recovery in this case of any incremental costs associated
20 with new initiatives identified as necessary to implement
21 recommendations described in the Implementation Plan. To the extent the
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7
Testimony of Peter T. Zschokke
1 costs of such implementation activities continue into a future period
2 beyond that covered by this rate case, the Company would seek recovery
3 of those costs as it would for any other cost of service items.
4
5 Niagara Mohawk viewed this audit as an important element of its
6 fundamental commitment to continuous improvement. The Company’s
7 response to, and implementation of, the recommendations in the audit
8 report emphasize our commitment to continuous improvement for the
9 benefit of our customers and the Company. The Company looks forward
10 to working with Staff on the delivery of its Implementation Plan.
11
12 Q. Does that conclude your testimony?
13 A. Yes it does.
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