E Capital Investments - DOC by hft11353

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									                         SUNRISE POWERLINK A.06-08-010
                          SDG&E’S 3/28/08 RESPONSE TO
                            CAISO DATA REQUEST #3


These questions are from the "Sunrise Rev Req Results Summary" file provided to the
CAISO as part of the workpapers supporting the March 12, 2008 testimony:

Request No. 1:

(A) Does the levelized value in Cell C26 on "proposed" tab ($182.6 million) incorporate
$1,518 of direct capital cost and $199 of mitigation costs only?

SDG&E RESPONSE 1(A):

No. In addition to the direct capital and mitigation costs, that figure also includes the
levelized revenue requirement for expected associated O&M.



(B) Is this also true for the DEIR Alt 4, Alt 5, and TE/VS projects?

SDG&E RESPONSE 1(B):

No. In each case, that cell will include direct capital, mitigation, and associated O&M.
                        SUNRISE POWERLINK A.06-08-010
                         SDG&E’S 3/28/08 RESPONSE TO
                           CAISO DATA REQUEST #3


Request No. 3:

Why does depreciation in row 15 on the “proposed” file sum to a larger amount than total
capital costs?

SDG&E RESPONSE 3:

Remediation costs (negative salvage) are included in the depreciation amounts.
                         SUNRISE POWERLINK A.06-08-010
                          SDG&E’S 3/28/08 RESPONSE TO
                            CAISO DATA REQUEST #3


Request No. 4:

Why does total revenue requirement in row 11 of the "proposed" tab become negative
starting in year 2069?

SDG&E RESPONSE 4:

Remediation costs (negative salvage) create negative revenue requirements two ways.
First, since remediation costs are collected in depreciation over the life of the asset,
depreciation collected can exceed asset value creating negative net plant property and
equipment. This generates negative rate base and negative return components. Further,
the expensing of remediation costs at the end of the asset’s book life creates a tax credit,
often resulting in a negative revenue requirement.



a. How should we interpret a negative annual revenue requirement value?

SDG&E RESPONSE 4a:

The project would reduce overall company revenue requirements in those years.



b. Is the utility rebating amounts to customers during those years?

SDG&E RESPONSE 4b:

Yes. In those years, the project would produce a reduction to revenue requirements.
                        SUNRISE POWERLINK A.06-08-010
                         SDG&E’S 3/28/08 RESPONSE TO
                           CAISO DATA REQUEST #3


Request No. 5:

Why are there revenue requirements amounts past analysis year 58 for all projects?

SDG&E RESPONSE 5:

Capital investments create revenue requirements for at least the book life of the asset.
The book lives for these alternatives range from 20 years to 100 years. As a result, there
are revenue requirements extending out at least 100 years in some cases.

In each case, the levelized figures assume a 58 year period. While there is revenue
impact beyond the 58 year analysis window, the levelized figures show the cost to rate
payers assuming the entire project were recovered over 58 years. This method was
applied consistently to all alternatives in the analysis.
                         SUNRISE POWERLINK A.06-08-010
                          SDG&E’S 3/28/08 RESPONSE TO
                            CAISO DATA REQUEST #3


Request No. 6:

(A) Why are returns and taxes (rows 16-20) negative starting in year 2051 on "southern"
tab of same file?

SDG&E RESPONSE 6(A):

As described in the response to Request No. 4 in this data request, remediation costs
(negative salvage) create negative revenue requirements, specifically through negative
return and tax credits.

Each asset type associated with the “southern” alternative that has negative salvage will
have negative revenue requirements in different years. Lines 16-20 aggregate the
revenue requirement associated with each asset type, which are shown in lines 29-216 on
the same tab.



(B) Why does the LEAPS project not demonstrate a similar negative return and tax
profile during nearly all years? (See rows 16-20 on the "LEAPS" tab of the same file)

SDG&E RESPONSE 6(B):

The greater the remediation costs associated with an alternative, the greater the chance
for creating a negative revenue requirement. As a percent of total capital expenditures,
the “southern” alternative has significantly more remediation costs than the “LEAPS”
alternative.

								
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