RE:

Case No. 12-T-0248: Application of New York State Electric & Gas Corporation for a Certificate of Environmental Compatibility and Public Need for the Construction of the "Columbia County Transmission Project," Approximately 1.1 Miles of 115 Kilovolt Transmission Lines and related facilities in the Towns of Chatham, Ghent, and Stockport, in Columbia County.

DPS Staff Comments on NYSEGs February 26, 2014, Assessment of Alternatives The Staff of the Department of Public Service (DPS) designated to represent the public interest in this proceeding (Staff) has the following comments on the Assessment of Alternatives filed by New York State Electric & Gas Corporation (NYSEG). Regarding Attachment B Based upon the Chatham Area being 49.1% of the Mechanicville Division load (as per IR CCTP-12-093 (DPS-48)), the megaWatt (MW) figure shown as part of the base case (normal) power-flow (in Attachment B, page 1) total flow into the Chatham Area (the sum of 115 kV inputs into Wyantskill, Stephentown, Falls Park and Craryville) is equivalent to a Mechanicville load above the forecasted load of 252 MW. We do not concur with this higher level, and NYSEG has not provided an explanation for why this higher load level was used, which makes the results more conservative thereby potentially necessitating completion of some of the Staffs 34.5 kiloVolt (kV) phased work that may otherwise not be needed. Regarding Attachment C The identification of the location of the 34.5 kV feeders exiting the proposed Falls Park Substation site and County Route 22, as depicted at Attachment C mapping, does not reflect the locations identified by DPS Staff in mapping submitted in October 2013. (Compare locations at Pages 2, 6, 12 and 16 of 24 in NYSEG Attachment C with DPS map entitled "34.5 kV System Alternative" filed October 30, 2013, which accompanies this filing.) Staff would like to review the specific locations of proposed feeders 1 through 4 with NYSEG to identify specific constraints and opportunities for location of new feeder locations. Staff notes that NYSEG proposes to rebuild the existing distribution circuit in this area as part of the Feeder #3, which is acceptable as an alternative to Staffs earlier proposal. Regarding Attachment D 1. NYSEG has provided no explanation for why land acquisition and right-of-way (ROW) costs (on Attachment D) for the DPS Staff 34.5 kV plan (distribution circuits to be built on already existing ROW or on existing roads requiring rights-of-way of approximately 20 foot widths) are expected to cost $210,000 or 34% more than the NYSEG 115 kV proposal (a transmission circuit that will require 75 to 100 foot wide new off-road ROW). NYSEG has provided no explanation for why access roads and matting costs (on Attachment D) for the DPS Staff 34.5 kV plan (distribution circuit to be built or rebuilt on

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Case No. 12-T-0248 DPS Staffs Comments existing roads) are expected to cost $231,000 or 15% more than the NYSEG 115 kV proposal (transmission that will be built off-road). 3. NYSEG has provided no explanation for why environmental control and restoration costs (on Attachment D) for the DPS Staff 34.5 kV plan (distribution to be built or rebuilt on existing roads) is expected to cost $1.8 million or 80% more than the NYSEG 115 kV proposal (transmission that will be built off-road). NYSEG has provided no explanation on whether the administrative overhead adder is a percentage allocation of fixed and sunk corporate costs, or if it is truly an incremental cost unique to a specific project. Admittedly, regardless of whether these costs are sunk or incremental, they should be added to the total capitalized cost of a completed project. However, for the purposes of comparing prospective projects, we believe sunk fixed costs are irrelevant and should be ignored; and that only true incremental costs should be included in a comparison. NYSEG indicated that Allowance for Funds Used During Construction (AFUDC) costs (on Attachment D) for the DPS Staff 34.5 kV plan is $2.9 million or 78% higher than the NYSEG 115 kV proposal. With respect to AFUDC, presumably most of the distribution line work in the DPS Staff 34.5 kV plan can be built and completed in small sections each in a matter of months and capitalized or booked in a relatively short amount of time thereby incurring lower AFUDC costs. Transmission line projects, on the other hand, have much longer construction times, and cannot be capitalized on a piecemeal basis since they are not used and useful until fully completed. NYSEG has assumed the same 13.5% AFUDC adder for both the 34.5 kV distribution work and the 115 kV transmission project, which we believe unduly penalizes the 34.5 kV line work. The second 115/34.5 kV transformer at the Falls Park Substation, along with a fourth 115 kV breaker and two 34.5 kV breakers (downside of the 115/34.5 kV transformer and the split bus tie breaker) should be cost estimated as a separate line item since presumably these may be needed in the future, but not in the short term. With respect to its cost estimate for the DPS Staff 34.5 kV plan distribution line work, NYSEG has provided no detail on type of construction, number of poles to be replaced, underground costs, and whether estimates were a bottoms-up consolidation of project specific estimates or a tops-down per unit cost estimate. With respect to its cost estimate for the DPS Staff 34.5 kV plan substation work, NYSEG has not provided cost detail on individual substation projects (e.g., capacitor bank and associated breaker work and which substation projects are included in Phase 1 versus Phase 2), and whether estimates were a bottoms-up consolidation of project specific estimates or a tops-down per unit cost estimate.

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Regarding Attachment E 1. In Attachment E, NYSEG raises a number of concerns and suggests additional work that it believes will be needed (some of which is not part of the DPS Staff 34.5 kV proposal); but did not indicate which, if any, of this work is included in the cost estimates on Table 9-2 of 2

Case No. 12-T-0248 DPS Staffs Comments Attachment D, and which are not. Based upon this and several of the more specific concerns raised herein, we are unable to verify whether the cost estimate comports with the intent of the DPS Staff 34.5 kV plan. 2. NYSEG suggests the need for an addition of 5 sets of 34.5 kV reclosers for the DPS Staff 34.5 kV plan to improve reliability without an explanation of why they will be needed. Taking into account that load presently served by four 34.5 kV feeders would be served by eight feeders under the DPS Staff plan, thereby reducing the exposure of existing feeders while apparently no 34.5 kV reclosers are recommended by NYSEG for its 115 kV proposal, which maintains four 34.5 kV feeders serving the area - we do not concur with the need for 34.5 kV reclosers as NYSEG has recommended for the DPS Staff 34.5 kV plan. NYSEG has provided no definitive explanation of why 34.5 kV breakers need to be added to both ends of the #615 line when none exist now. DPS Staffs intent for Falls Park Feeder #3 is to both serve local load and growth along the way and provide an emergency backup tie (normally open) in the event the GreenbushStephentown 115 kV line or the Stephentown 115/34.5 kV line are out of service for an extended period. NYSEG has proposed two different express 34.5 kV normally closed circuits for Feeder #3, presumably to serve only as an emergency backup (and also presumably requiring another circuit along Route 22, et al., to serve local load). We do not concur with this approach. NYSEG has indicated that a number of substation 34.5 kV capacitor banks will need SF6 34.5 kV breakers (at Chatham-Hilltop, NYSEG is recommending an underground dip and rise due to space limitations in adding the breaker). As an alternative to these substation breakers, we would instead recommend use of pole mounted capacitor banks (perhaps in individual sizes of 600 to 1,200 kVAr) with vacuum switches (and/or some which may be fixed unswitched capacitor bank installations) as a more economical approach. NYSEG indicates that it intends to install SF6 34.5 kV circuit breakers without an explanation of why it has chosen to use SF6 circuit breakers over more environmentally friendly and likely less expensive (for a medium voltage application such as 34.5 kV) vacuum circuit breakers.

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Regarding Attachment F 1. The assumption stated at page 1-2 is that "all 115 kV routes proposed by the parties were overhead transmission lines." As stated at the November Technical Conference, DPS Staff assumed in mapping the ValKin-Klinekill alternate (as generally proposed by Protect Ghent) that this alternative would include an underground segment between ValKin station and the intersection of the route with the National Grid ROW at or near the abandoned railroad grade east of State Farm Road. Staff further stated that its consideration of alternative locations of the NYSEG proposed route does not include identification of locations that could be later proposed for underground installation, based on further analysis. Staff recommends that the analysis of the Protect Ghent Churchtown-Craryville Proposal include a variation that would add a new 115 kV circuit from Craryville to Klinekill in addition to the Churchtown-Craryville circuit. While this would be a significantly longer length of 3

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Case No. 12-T-0248 DPS Staffs Comments transmission line, it would have the advantage of maximizing the use of existing NYSEG ROW and be electrically similar to the NYSEG proposed facility (and the DPS Staff and Ag&Mkts 115 kV variations), as well as the ValKin-Klinekill alternative. 3. The bullets conveying the "Advantages" and "Disadvantages" of the various alternatives in terms such as "fewer than average" or "longer than average" may benefit from a comparative table of actual numbers of features or factors under consideration, rather than the relative descriptions provided.