Exhibit No. PNM-6 Docket No. ER-13___-000 Page 1 of 85 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Public Service Company of New Mexico ) Docket No. ER-13___-000 PREPARED INITIAL TESTIMONY OF MICHAEL L. EDWARDS ON BEHALF OF PUBLIC SERVICE COMPANY OF NEW MEXICO December 31, 2012 Exhibit No. PNM-6 Docket No. ER-13___-000 Page 2 of 85 TABLE OF CONTENTS I. INTRODUCTION AND QUALIFICATIONS .................................................................. 4 II. DESCRIPTION OF PNM’S FORMULA RATE ............................................................... 9 III. TRANSMISSION SERVICES PROVIDED BY PNM UNDER THE OATT, THE COORDINATION TARIFF, THE GFAS, AND OTHER TRANSMISION SERVICES PROVIDED BY PNM ...................................................................................................... 13 A. TRANSMISSION SERVICE PROVIDED UNDER PNM’S OATT .................. 13 1. NITS PROVIDED UNDER PNM’S OATT ............................................. 13 2. PTP SERVICE UNDER THE OATT ....................................................... 22 B. SERVICE UNDER THE COORDINATION TARIFF ........................................ 24 C. SERVICE UNDER THE GFAs ............................................................................ 25 D. OTHER TRANSMISSION SERVICES ............................................................... 34 IV. TRANSMISSION SERVICE RECEIVED BY PNM ...................................................... 35 V. DETERMINATION AND ALLOCATION OF REVENUE CREDITS .......................... 42 VI. DIRECTLY-ASSIGNED COSTS .................................................................................... 46 A. RADIAL LINES ................................................................................................... 46 1. SOUTHERN NEW MEXICO .................................................................. 51 2. ALBUQUERQUE NETWORK ................................................................ 51 3. SOUTH OF ALBUQUERQUE ................................................................ 52 4. NORTH AND WEST OF ALBUQUERQUE .......................................... 53 5. SANTA FE TO LAS VEGAS .................................................................. 54 B. TRANSMISSION PLANT RELATED TO SERVICE PROVIDED UNDER INCREMENTAL RATES .................................................................................... 56 C. FACILITIES ASSOCIATED WITH LGIAs ........................................................ 58 D. FACILITIES ASSOCIATED WITH GSUs ......................................................... 59 VII. NETWORK SERVICE CREDITS ................................................................................... 59 Exhibit No. PNM-6 Docket No. ER-13___-000 Page 3 of 85 VIII. RECOVERY OF COSTS ASSOCIATED WITH AQUISITION ADJUSTMENT RELATED TO THE EASTERN INTERCONECTION PROJECT (“EIP”) ................... 61 IX. RATE DESIGN ................................................................................................................ 71 X. AMENDED TARIFFS AND AGREEMENTS ................................................................ 83 XI. CONCLUSION ................................................................................................................. 85 Exhibit No. PNM-6 Docket No. ER-13___-000 Page 4 of 85 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Public Service Company of New Mexico ) Docket No. ER 13-___-000 PREPARED INITIAL TESTIMONY OF MICHAEL L. EDWARDS ON BEHALF OF PUBLIC SERVICE COMPANY OF NEW MEXICO 1 I. INTRODUCTION AND QUALIFICATIONS 2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS 3 A. My name is Michael L. Edwards. My business address is 414 Silver Avenue SW, 4 Albuquerque NM 87102. 5 Q. BY WHO ARE YOU EMPLOYED AND FOR HOW LONG HAVE YOU BEEN 6 EMPLOYED? 7 A. I am employed by PNM Resources (“PNM Resources” or “PNMR”). I have been 8 employed by PNMR or Public Service Company of New Mexico (“PNM”) since August 9 1977. PNM is a subsidiary of PNMR. Based in Albuquerque, New Mexico, PNMR is an 10 energy holding company and through its regulated utilities – PNM and Texas-New 11 Mexico Power Company – serves electricity and provides an array of services to 12 customers in New Mexico and Texas. 13 Q. ON WHOSE BEHALF ARE YOU SUBMITTING THIS TESTIMONY? 14 A. I am testifying on behalf of PNM. 15 Q. PLEASE DESCRIBE YOUR EDUCATIONAL AND PROFESSIONAL Exhibit No. PNM-6 Docket No. ER-13___-000 Page 5 of 85 1 BACKGROUND. 2 A. In 1975, I completed a Bachelor of Arts Degree with majors in Accounting, Business 3 Administration and Journalism from New Mexico Highlands University, and in 1977 I 4 completed a Masters of Business Administration Degree with a concentration in Finance 5 from the University of New Mexico. I started my employment with Public Service 6 Company of New Mexico in 1977 and have held various positions in the regulatory and 7 transmission planning and contracts departments. 8 Q. WHAT IS YOUR CURRENT TITLE AND THE NATURE OF YOUR PRESENT 9 EMPLOYMENT? 10 A. I currently hold the position of Director of Federal Regulatory Policy. In my role as 11 Director of Federal Regulatory Policy, I oversee and manage the following activities for 12 PNM and PNMR: 13 • Compliance with the Federal Energy Regulatory Commission (“FERC” or 14 “Commission”) Standards of Conduct program; 15 • Preparation of filings related to rate change applications and other approval 16 actions at the FERC; 17 • PNM and PNM Resources participation in FERC rulemaking and notice of 18 inquiry dockets; and 19 • Compliance with and preparation of the eTarriff and Electric Quarterly 20 Reports programs. 21 Q. PLEASE SUMMARIZE YOUR EXPERIENCE TESTIFYING BEFORE 22 REGULATORY BODIES AND COURTS ON UTILITY-RELATED MATTERS. 23 A. My experience testifying is described in Exhibit No. PNM-7, attached to this testimony. Exhibit No. PNM-6 Docket No. ER-13___-000 Page 6 of 85 1 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY AND HOW IS IT 2 ORGANIZED? 3 A. The purpose of my testimony is to: 1) describe the formula rate that PNM is proposing 4 (“PNM Formula Rate”) including certain benefits associated with moving from a stated 5 rate to the PNM Formula Rate; 2) describe the transmission services PNM currently 6 provides under its Open Access Transmission Tariff (“OATT”), PNM’s Coordination 7 Tariff, certain grandfathered agreements (“GFAs”) and other transmission services PNM 8 provides; 3) describe the transmission services PNM receives from other transmission 9 providers to meet its retail and wholesale service commitments, certain transmission 10 service exchanges PNM has with other utilities, and the mechanism by which PNM has 11 measured the value of those exchanges; 4) describe PNM’s basis for determining and 12 allocating revenue credits; 5) describe PNM’s directly-assigned costs including radial 13 transmission lines that are not integrated in the PNM transmission system operation, 14 transmission plant related to service provided under incremental rates, interconnection 15 facilities related to Large Generator Interconnection Agreements (“LGIA”) and generator 16 step-up transformers (“GSUs”); 6) describe PNM’s assessment of network service 17 credits; 7) describe PNM’s proposed acquisition adjustment; 8) describe the rate design 18 of PNM’s proposed transmission service rates under the PNM Formula Rate; and 9) 19 describe the changes to the OATT, the Coordination Tariff, and certain GFAs to 20 implement the PNM Formula Rate. 21 Q. ARE YOU SPONSORING ANY EXHIBITS TO YOUR TESTIMONY? 22 A. Yes. I am sponsoring the following exhibits to my testimony: 23 • Exhibit No. PNM-7 Curriculum Vitae Exhibit No. PNM-6 Docket No. ER-13___-000 Page 7 of 85 1 • Exhibit No. PNM-8 Coversheet and Table of Contents to PNM's 2 “Determination and Posting of Total Transfer 3 Capability (TTC) & Available Transfer Capability 4 (ATC) Capacity” demonstrating transmission paths 5 posted by PNM; 6 • Exhibit No. PNM-9 Comparison of lease versus ownership scenario for 7 EIP facilities; 8 • Exhibit No. PNM-10 Revenue comparison of Stated Rates, Filed Rates, 9 and the PNM Formula Rate; 10 • Exhibit No. PNM-11 Clean Revised OATT Sheets for Schedule 7 – 11 Long-Term Firm and Short Term Firm Point-To- 12 Point Transmission Service; Schedule 8 – Non-Firm 13 Point-To-Point Transmission Service; and 14 modifying Attachment H to include Attachments H- 15 1 through H-3; 16 • Exhibit No. PNM-12 Redlined Revised OATT Sheets for Schedule 7 – 17 Long-Term Firm and Short Term Firm Point-To- 18 Point Transmission Service; Schedule 8 – Non-Firm 19 Point-To-Point Transmission Service; and 20 modifying Attachment H to include Attachments H- 21 1 through H-3; Exhibit No. PNM-6 Docket No. ER-13___-000 Page 8 of 85 1 • Exhibit No. PNM-13 Clean Revised Coordination Tariff Sheets reflecting 2 the addition of the PNM Formula Rate and 3 Implementation Protocols; 4 • Exhibit No. PNM-14 Redlined Revised Coordination Tariff Sheets 5 reflecting the addition of the PNM Formula Rate 6 and Implementation Protocols; 7 • Exhibit No. PNM-15 Clean Revised GFA Sheets in Contract P0695 8 reflecting the addition of the PNM Formula Rate 9 and Implementation Protocols; 10 • Exhibit No. PNM-16 Redlined Revised GFA Sheets in Contract P0695 11 reflecting the addition of the PNM Formula Rate 12 and Implementation Protocols; 13 • Exhibit No. PNM-17 Clean Revised GFA Sheets in Service Schedule I to 14 EPE GFA reflecting the addition of the PNM 15 Formula Rate and Implementation Protocols; and 16 • Exhibit No. PNM-18 Redlined Revised GFA Sheets in Service Schedule