ROCKLAND ELECTRIC COMPANY DIRECT TESTIMONY OF ADVANCED METERING, SMART GRID / DISTRIBUTION AUTOMATION, AND COMMUNICATIONS INFRASTRUCTURE PANEL

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1 0 0 Q. Would the members of the Advanced Metering, Smart Grid / Distribution Automation, and Communications Infrastructure Panel ( Panel ) please state their names and business addresses? A. (Scerbo) Keith C. Scerbo, 0 West Route, Spring Valley, New York 0 (White) Joe N. White, 0 West Route, Spring Valley, New York 0 (Durling) Michael E. Durling, One Blue Hill Plaza, Pearl River, New York 0. Q. By whom are you employed and in what capacity? A. (Scerbo) I am employed by Orange and Rockland Utilities, Inc. ( Orange and Rockland ), of which the Rockland Electric Company ( RECO or the Company ) is a wholly-owned subsidiary, as Director of Advanced Metering Infrastructure ( AMI ). In this position, I am responsible for the projects and processes associated with implementing AMI for RECO and its affiliated utilities in New York and Pennsylvania. (White) I am employed by Orange and Rockland as the Section Manager of Technology Engineering in the Technology and Automation Engineering Department. My duties include responsibility for the expansion of enhanced distribution technologies and automation systems across the Company s service territory as well as distributed generation interconnections. I was named Orange and Rockland s Distributed Generation ( DG ) Ombudsman in 0. In this

2 0 0 role, in addition to my automation and DG duties, I will assist DG developers to resolve interconnection-related questions and disputes. (Durling) I am employed by Orange and Rockland as the Systems Manager in the Information Technology Planning Department. Q. Please briefly describe your educational and business experience. A. (Scerbo) I graduated from Juniata College in with a Bachelor s Degree in Business Management. Later that year, I joined Orange and Rockland as a Customer Accounting Representative. I have since held the positions of Customer Systems Analyst Customer Accounting, Business Analyst CIMS, Lead Business Analyst CIMS, Senior Specialist CIMS, Section Manager CIMS, and Director of New Business Services prior to my present position. (White) I have a Bachelor of Science degree in Electrical Engineering from Auburn University and years of increasing responsibility in utility operations and engineering. Prior to coming to Orange and Rockland, I spent years at Southern Company where I worked in various capacities at the subsidiaries of Alabama Power Company, Savannah Electric & Power Company, Mississippi Power Company, and Georgia Power Company in electric transmission, distribution systems and resource policy and planning. My background includes the areas of Transmission Area Maintenance, Transmission Line Design, Distribution Region Operations, and Distribution Material Standards. I also served as the Lead Product Engineer for Insulators and Lighting Materials for all of Southern Company. Within the electric utility industry, I have served on

3 0 0 various regional committees as part of the Southeast Electric Exchange Working Groups for the Overhead, Underground, Joint-use, Transformers, National Electric Safety Code ( NESC ), and Pole Line Hardware Committees. I joined Orange and Rockland in 0 as a Principal Engineer in the Reliability Department where I analyzed outage data, customer complaints, and regulatory inquiries. I led teams to identify and address the worst performing circuits within the service territory and helped select circuits that could benefit from storm hardening projects. In October 0 I became Section Manager of Technology Engineering in the Technology and Automation Engineering Department. (Durling) I attended Control Data Institute, New York, NY where I earned a technical certificate in computer electronics in. Prior to my employment at Orange and Rockland, I was hired at American Teleconnect, Mount Vernon, NY in, as a Field Engineer. In, I joined IBM Corporation as a Technical Specialist and was hired by Orange and Rockland in as an Engineer in the Telecommunications Engineering organization, which later became Information Technology ( IT ). During my years at Orange and Rockland, I have worked various positions within the IT Organization and in, was promoted to Systems Manager of Information Technology Planning ( ITP ) group, where I continue to serve today. Q. Have you previously submitted testimony to the New Jersey Board of Public Utilities ( Board )?

4 0 0 A. (Scerbo) Yes, I submitted rebuttal testimony in BPU Docket Number ER000. (White) Yes, I submitted direct and rebuttal testimony in BPU Docket Number ER000. (Durling) No. Q. What is the purpose of the Panel s direct testimony in this proceeding? A. The Panel will address the Company s proposal to install AMI infrastructure and smart meters throughout RECO s service territory and the relationship between AMI and the Company s Smart Grid and Distribution Automation ( DA ) investments. We will also describe RECO s plans to enhance and expand the communications infrastructure that supports these investments. Lastly, we will explain the importance of all three initiatives to RECO customers and the New Jersey Energy Master Plan (Update) issued in December 0 ( EMP ). Q. Is the Panel sponsoring any exhibits in this proceeding? A. Yes, the Panel is sponsoring the following five exhibits, all of which were prepared under the Panel s supervision and direction: Exhibit (P-, Schedule ) entitled Advanced Metering Infrastructure Business Plan ; Exhibit (P-. Schedule ) entitled RECO AMI White Paper ; Exhibit (P-, Schedule ) entitled White Paper - Fiber Infrastructure Upgrade NJ ;

5 0 0 Exhibit (P-, Schedule ) entitled White Paper - Comm HUB Site Expansion NJ ; and Exhibit (P-, Schedule ) entitled White Paper - Data Network Upgrade NJ. Q. Please summarize the Company s proposals regarding AMI, Smart Grid/Distribution Automation and Communications infrastructure. A. The Company s proposals are summarized below. AMI The Company proposes to install two-way AMI communications infrastructure and smart meters across its entire service territory covering parts of Bergen, Passaic and Sussex counties, which will benefit the Company s customers and further the goals set out in New Jersey s Energy Master Plan ( EMP ). The scope of the AMI proposal and the proposed AMI technology are set out in detail below. The Company is not seeking cost recovery for its proposed AMI program as part of this base rate filing, and will address cost recovery in a future rate proceeding or proceedings. In this rate case, the Company is seeking the Board s approval of its proposed AMI program and authorization to commence the investment and expenditures on the projects contemplated in its AMI program. This testimony will explain how the Company s implementation of AMI infrastructure will deliver a range of benefits through the introduction of new processes, applications, and technology infrastructure. The AMI proposal will provide granular meter-level data that benefit customers, the Company, and the

6 0 environment through improved operations, reduced power usage and a reduction in harmful emissions. As noted from industry studies and other utility implementations, AMI empowers customers with the information needed to more efficiently manage electricity consumption and also provides utilities with system data to more effectively manage distribution system operations. AMI furnishes a platform by which to deploy grid modernization technologies that will help RECO better manage costs and prepare the distribution system for future improvements. For example, time of use billing, nested outage support, and the integration of more diverse renewable and distributed energy resources ( DER ) are all enabled through AMI. The integration of more diverse renewable resources and DER are goals of the EMP. Smart Grid / Distribution Automation RECO plans to deploy distribution system technologies that provide increased visibility and DA in the distribution network across RECO s service territory. This includes the installation of real-time, automated, interactive technologies, such as automated switches, reclosers, capacitors, sensors, and a coordinated control system that monitors conditions and optimizes the operation of the grid. Increased DA will provide RECO with the ability to automatically monitor and control its electric distribution system in response to changing system conditions. EMP at p.. EMP at p..

7 0 0 This improved system will operate as a self-healing system, with the capability to identify, assess and implement necessary system changes. The installations include automatic restoration, command and control capabilities of field devices, along with an integrated volt/var control scheme. During the past decade, the term Smart Grid was used in the utility industry primarily to refer to research and development ( R&D ) projects involving the automation of devices on the grid and the exchange of data to a central command center. As utilities progressed from R&D into more widespread implementation, the term Distribution Automation, or DA, expanded to include command and control of switching devices, capacitors and sensors with smart technologies. Given these developments, in this direct testimony, the Panel uses the terms Smart Grid and DA interchangeably. Communications Infrastructure The Company plans to upgrade its communications infrastructure to enhance day-to-day operations, and support the planned Smart Grid/DA projects. The communications infrastructure within RECO s service territory is composed of several voice and data networking components. This includes private optical and microwave networks for reliable backhaul communications, along with private radio systems for mobile dispatch and low-speed data communications. Planned and future distribution system upgrades will require an increase in data transmission, security and reliability of the supporting communications infrastructure. AMI and Smart Grid/DA will require upgrades to the Company s

8 0 0 communications infrastructure in order to support the increased data demands. Upgrading the pathways for data communication with increased fiber optics, additional wireless spectrum throughout the communication infrastructure and upgrading networking equipment, improves the Company s ability to monitor and control system automation across its distribution system. AMI Q. Please provide an overview of RECO s AMI proposal. A. RECO proposes to install two-way AMI communications infrastructure and smart meters across its entire service territory covering parts of Bergen, Passaic and Sussex counties. The Company would begin deployment of AMI infrastructure and smart meters in 0 and finish this deployment by year-end 0. The implementation of RECO s AMI proposal will engage customers and deliver a range of benefits through the introduction of new business processes, energy programs, and technology infrastructure. The RECO AMI proposal includes:. Installing an AMI communications network for service territory-wide coverage, and verifying that the existing information technology ( IT ) platform/interfaces between the AMI communication and IT systems and the legacy IT systems are operating according to performance specifications;. Installing approximately,0 electric smart meters; and

9 0. Gathering meter usage data measured in minute intervals for commercial meters, and minute intervals for residential meters, all of which will be delivered in near real time, i.e., every minutes.. Providing data for potential distribution system improvements and monitoring. Implementation of RECO s AMI proposal will allow customers to be better informed and involved energy consumers by providing them with the information necessary to help them manage their energy usage and control costs. Additionally, the initiative will benefit the environment through reduced emissions. AMI also will provide a platform for deploying grid modernization technologies that will help RECO better manage costs, prepare the distribution system for future improvements, and pave the way for the integration of more diverse renewable and Distributed Energy Resources ( DER ), which are goals of the New Jersey Energy Master Plan ( EMP ). Q. Why is the Company proposing AMI in this proceeding? A. As noted above, AMI technology supports the state s EMP s Overarching Goals and provides significant additional benefits that will be discussed below. Q. Please explain how RECO's AMI proposal aligns with the objectives of the EMP? See New Jersey Energy Master Plan ( EMP ) Update (December 0) at p.. EMP at p..

10 0 A. Two goals central to the EMP are Reward Energy Efficiency and Energy Conservation/Reduce Peak Demand and Drive Down the Cost of Energy for All Customers. Providing customers with AMI assists New Jersey in achieving these goals by enhancing the potential results of Energy Efficiency efforts and reducing the cost of energy to customers. Coupling AMI with a data access web portal that allows customers to view and analyze their granular real-time data, provides customers with the necessary tools to modify their usage and lower their energy costs. Also, AMI enables customers to share their granular usage data with other parties (e.g. third-party energy providers) who can provide the customer with energy cost reduction strategies and help the customer adopt sustainable energy management strategies. An example of such strategies might be the adoption of time-varying rates offered by the Company. By delivering opportunities for customers to reduce energy the potential exists that all customers can benefit even those that do not reduce energy consumption because the peak load may be reduced. The New Jersey EMP (p.) suggests that ratepayer costs are lowered by lowering peak demand. Q. Are there other EMP goals that align with the implementation of AMI? EMP at p.. Id. 0

11 0 A. Yes. The EMP goals Capitalize on Emerging Technologies for Transportation and Power Production and Maintain Support for the Renewable Energy Portfolio Standard are both supported by the implementation of AMI. The customer meter-level data provided by AMI will allow RECO to use advanced distribution technologies that monitor and control power flow, maintain consistent power quality, and support efficient operations of its distribution system. With AMI implemented across RECO s service territory, and meter level data available for all customers, emerging technologies will be able to more accurately and precisely monitor and control the distribution system. The optimization of emerging technologies (e.g. advanced distribution management system) is important for managing the expected increase in DERs, particularly where accurate real-time management of bi-directional power flows is critical to providing a safe and reliable distribution system. The granular usage data that AMI provides could help foster greater adoption of energy efficiency efforts as customers seek to reduce energy bills and utilize green energy sources. Q. Is implementation of AMI consistent with the Board s achievement of the new overarching goal, set forth in the EMP to Improve Energy Infrastructure Resiliency & Emergency Preparedness and Response (pp. -)? Id. Id.

12 0 0 A. Yes. That overarching goal subsumes several action items. One action item (p.0) is to Improve and Enhance the EDC Smart Grid and Distribution Automation Plans. In the Background section (p.0), the EMP notes that the electric distribution systems must be continually upgraded with the most current technology to improve and enhance the grids reliability and resiliency, the upgrade to a smart grid through DA should advance, and that a smarter grid through DA can incorporate advanced meter options. The EMP Update Goal focuses on the electric distribution companies future plans for Smart Grid/DA for reliability and resiliency, and the Board states its intention to work with the companies to further develop and enhance a smarter grid. Finally, the Goal Status notes that Smart Grid/DA systems, which support storm resiliency, could lead to the development of advanced meters, which could assist in meeting a number of EMP goals (as already discussed in our testimony above). Another action item (p. ) is to Protect the State s Critical Infrastructure. The EMP Update Goal for this item (p.) includes promoting efforts to increase response and restoration times to damage to the State s critical energy infrastructure and the Recommendations (p. ) include an emphasis on infrastructure resiliency measures. In sum, the EMP recognizes the logical and complementary relationship between Smart Grid/DA advancements and the development of an advanced metering system, as well as the storm resiliency benefits of a smarter grid employing those technologies.

13 0 0 Q. How is the Company s advanced metering program complementary to its Smart Grid/DA program and in furtherance of the Board s storm resiliency goals? A. The granular real-time AMI system data assists DA with modernizing the distribution system through advanced monitoring, communications and controls. That is, AMI optimizes the monitoring and control capabilities of emerging technologies such as DA, including Smart Capacitor Banks and Reclosers, by providing meter level data for all customers Indeed, there is no question that AMI enhances storm resiliency afforded by Smart Grid/DA. By using DA, customers will be restored more quickly in response to outages due to major storm events, both as a result of the automatic rerouting of power to undamaged circuits, and the faster location and restoration of system faults by analyzing system data. The meter data collected by AMI systems provides an even more granular identification of necessary repair, allowing an identification of nested outages at the individual customer level, allowing a prompt determination of service restoration via communication with the meter, and allowing Company resources to be focused on actual outage restoration rather than locating outages. AMI Benefits Q. Please describe the benefits realized by the implementation of AMI. A. AMI, combined with the existing DA will allow the Company to operate more efficiently by monitoring the energy flowing across the distribution system to every meter. This information helps save energy, reduce costs, and increase

14 0 distribution system reliability. This information also provides greater transparency while operating the distribution system Q. Please further explain how AMI improves the operation of the distribution system. A. Historically, there has been limited visibility into the operation of the distribution system in front of the customer meter due to the lack of available and costeffective technology. AMI will provide the Company with additional intelligence by connecting these meters and distribution points with minimal incremental expense beyond smart meter investments. Q. Are there other benefits from AMI? A. Yes. Information derived from AMI helps optimize business operations, which can generate operational savings and provide improved customer experiences. AMI also provides societal benefits by improving air quality through reductions in electric generator and vehicle emissions. In addition, by improving outage management, AMI reduces the financial impact of power outages on business and residential customers. Q. Is AMI truly an established technology in the utility industry? Has its use and that of advanced metering technologies in the energy industry expanded in the last few years? AMI and DA Convergence: Benefits of Growing Your Smart Grid Infrastructure with a Multi Technology Approach

15 0 A. AMI is an established technology within the utility industry. AMI meters are in use at over 0 million US homes and, as noted in a recent report from the Federal Energy Regulatory Commission ( FERC ), entitled the Assessment of Demand Response and Advanced Metering, ( 0 FERC Assessment ) issued in December 0, there continues to be significant expansion of AMI in the United States. The report also states that deployment of advanced meters continues to progress throughout the nation s electric system, providing support for two-way communications networks that utilities can use to improve electric system operations, enable new technological platforms and devices, and facilitate consumer engagement. Additionally, in September 0 in a report titled Utility Scale Smart Meter Deployments the Institute for Energy Innovation ( IEI ) reported a % advanced metering penetration in the Country. Q. Is there other support for the Company s AMI proposal in the FERC Assessment reports? A. Yes, a 0 FERC Assessment Report noted that with recent storm activity and extreme weather events, AMI facilitated efficient restoration of electric service following outages caused by the storm damage. Electric system outages can be ( 0 FERC Assessment Report ) id. at pp at p.. ( 0 FERC Assessment Report )

16 0 0 the result of small, medium, and very large scale events spanning several states that often impact other infrastructure systems (e.g., communication, financial, and health care). Providing for improved restoration efforts can be accomplished with data from AMI smart meters and communications. For that reason, the Company filed an AMI proposal as one component of its incremental storm hardening and resiliency proposals in the Storm Hardening Proceeding (BPU Docket Number ER000) ( Storm Hardening AMI Proposal ). Although the Stipulation reached in that case did not include AMI as a component of the storm hardening and resiliency programs, it recognizes (at ) the Company s intention to file meter upgrade proposals (i.e., for the installation of advanced metering) in a future base rate or other proceeding before the Board. Of course, as discussed herein, AMI benefits are not limited to storm resiliency, but rather AMI provides a broad range of customer, distribution system, and societal benefits, consistent with the goals set out in the EMP, which should be made available to all of RECO s customers. The current proposal provides for the full deployment of,0 AMI meters across the entire RECO service territory to serve all of RECO s customers, which goes beyond the Storm Hardening AMI Proposal that would have deployed,000 AMI meters to Bergen County. Further, the timing of the current proposal, if approved, will also benefit the Company s customers because RECO s affiliate, Orange and Rockland is Id. at pp.-.

17 moving forward with the implementation of AMI in its New York service territory. Coordination of the proposed AMI implementation with Orange and 0 0 Rockland s AMI implementation will significantly reduce the cost of the project from what it would be if done by RECO on a stand-alone basis. The cost reductions are primarily due to the result of the project start up, testing and IT system integration work. Q. How does AMI benefit the electric grid? A. Historically, most utilities have had little ability to obtain data from the grid to monitor the operating characteristics of major segments of their distribution systems particularly at the transformer level due to the high cost of the equipment that was available for the purpose. Although utilities have long recognized that collecting transformer level information would be valuable to the distribution system, the cost of establishing an infrastructure specifically for that purpose was prohibitive. Operators are now focusing specifically on DA systems and AMI to connect previously inaccessible devices and distribution points. AMI uses smart meters to remotely monitor and communicate energy consumption and power quality data more frequently and reliably. Now smart meters coupled with grid monitoring devices can provide visibility into distribution lines, transformers, and residential and business power usage, which provides the transparency through real time information that utilities can use to manage the distribution system more effectively. In addition to providing granular usage data, information derived from AMI and DA systems can optimize a utility s

18 0 0 system engineering, maintenance, and customer service operations. The end result is greatly improved visibility and control of the power system. Q. Does AMI enable other technologies important to grid modernization? A. Yes. AMI is a key component to future grid modernization technologies which provide benefits for customers. AMI captures real-time granular system data and provides increased visibility into system operations both for the Company and for its customers. When customers are provided access to their granular usage data and are able to connect to third-party vendors, they can proactively manage their energy consumption and reduce their energy costs. Additional forward looking benefits that the new AMI technology supports are the ability to remotely upgrade metering firmware and the ability to collect more data, more frequently from the meters (e.g., Kvar readings and voltages which will provide valuable distribution data to the last meter on the circuit). In the area of Energy Efficiency and Demand Response ( DR ), the AMI communication network will have the ability to connect to devices behind the customer s meter so that customers can start receiving signals such as for critical peak or voluntary load reductions on in-home displays or even to mobile devices thus allowing for more effective DR programs. The AMI communication network can also be leveraged to control load at customer premises, thereby providing a new avenue for addressing periodic distribution network constraints. Leveraged Benefits Across Previous AMI Implementations

19 0 0 Q. Are there any lessons learned from previous AMI implementations that can be applied to RECO's proposed AMI program? A. Yes. With nearly half of the meters in the United States AMI enabled a substantial amount of information has been accumulated in the industry. RECO has discussed AMI with utilities such as Commonwealth Edison, PECO, Baltimore Gas and Electric Company, Ameren Corporation, Florida Power and Light and Southern Company, all of which shared their experiences and lessons learned with RECO. From the information obtained in these discussions it is the Company s position that the AMI industry has matured to a level that makes this the optimum time to engage in the technology. Concerns with the early AMI implementations, regarding communications delays, vendor viability, and meter manufacturing capability, have been sufficiently addressed and resolved. Q. Are there benefits that RECO customers will realize from the planned AMI deployment across Orange and Rockland s New York service territory? A. Yes. Orange and Rockland has completed its competitive bid analysis and selected AMI vendors and technologies and deployment is scheduled to begin in 0. RECO will benefit not only for the experience garnered in this deployment but also from the various AMI related contracts that Orange and Rockland has secured. The pricing contained in these contracts, based on the volumes deployed in Orange and Rockland s service territory, will be extended to RECO. Further, the IT infrastructure and IT system integration costs for integrating the Customer Information Management System and Outage

20 0 0 Management System for Orange and Rockland s AMI deployment will be utilized for the RECO customers resulting in additional capital and labor cost savings. Additionally, RECO will have the benefit of the operational experience gained by deploying AMI in NY in advance of the RECO deployment. RECO AMI Implementation Q. What benefits will AMI deliver to RECO s customers? A. As explained above, AMI provides customer, operational, and societal benefits. The detailed, customer level energy consumption data provided by AMI, will give our customers insight into their usage patterns and allow them to more effectively manage their energy use and reduce their electric bills. Usage data also will enable the development of third party products and incentive programs that will further empower customers. One such product, Green Button Connect ( GBC ), is to be implemented by Orange and Rockland and will be available for RECO customers. GBC will give our customers the ability to grant thirdparty vendors access to their usage data for energy management product offerings. This increased control, choice and convenience will enable our customers to better manage their energy usage. The Company s AMI proposal will result in operational efficiencies, including enhanced outage management, specifically, faster service restoration. Currently during blue sky days or during storm events the Company primarily relies on the customers to contact the utility when power interruptions occur. AMI enables the Company to identify nested outages in areas where restoration was completed on the main lines of a 0

21 0 circuit, but pockets of RECO customers off distribution spurs are still without power. AMI also enables the Company to identify customers whose power has been restored, and will eliminate unnecessary field visits by Company personnel. AMI will lower the Company s manual meter reading costs and reduce the number of estimated bills. AMI enables increased remote activation and disconnect functionality, which helps save operational costs by reducing truck rolls and provides better service to our customers. Customers no longer will need to wait for a utility representative to arrive for metering appointments. Q. Is there evidence that providing customers with granular usage data provides opportunity for energy usage behavioral changes? A. Yes. Providing the tools to manage energy consumption fosters an environment where customers are both engaged and empowered to proactively optimize their energy use. This was illustrated in a U.S. Department of Energy ( DOE ) study released in January 0, indicating that of,000 pilot program participants in Central Maine Power s test group who received weekly usage and cost reports, 0% said they took action to reduce usage which resulted in.% reduction in their electricity consumption. Q. Does the AMI proposal provide other benefits to the Company s service territory? p.

22 0 0 A. Yes. AMI data will enable improved voltage/var optimization ( VVO ) and equipment usage analysis. This improved data will promote increases in system efficiency and longer equipment life. The enhanced monitoring and control functionality facilitated by the data provided by AMI will reduce the duration of outages at critical facilities. In addition, with AMI deployed across the entire service territory, the Company can provide information that will support New Jersey s energy efficiency efforts and, if applicable demand management programs. This information may be helpful in reducing customers peak usage, which can potentially reduce capital spending. Also, the AMI communications network will enable additional functions, such as the integration of a variety of sensors to improve the Company's knowledge of its distribution networks. This improved knowledge will facilitate the identification of potential problems or issues that may impact the grid. The data provided by AMI will help modernize the distribution infrastructure and enable more DERs. Please refer to Figures and for estimated customer benefits and cost reductions resulting from a full scale AMI implementation. Q. Please summarize some of the benefits that DA will offer. A. The Board recently authorized RECO in BPU Docket No.ER000 to deploy additional DA assets within its service territory. Like AMI, investments in DA can defer asset upgrade costs and are consistent with the New Jersey s EMP,

23 0 which encourages emerging transmission and distribution technologies, and measures that drive down customer energy costs. Q. Are there other benefits to DA that AMI enables, such that AMI installation is complementary to and enhances the benefits of DA? A. Yes. RECO s DA investments will modernize the grid and support increased penetration of distributed generation ( DG ) and DER. The granular real-time AMI system data assists DA with modernizing the distribution system through advanced communications and controls. DA allows ground crews to concentrate on finding and repairing the actual fault, spending far less time determining the state of the system than under full manual response. Major storms cause faults on lines and damage equipment, sometimes destroying parts of the overhead lines and the various devices they hold. A fault on a circuit may take down the entire circuit, locking out the breaker at the substation. If the circuit has switches, and if segments of the circuit can be switched to alternate sources, then undamaged, un-faulted segments of the circuit can be restored to service by judiciously operating the switches. In the past, the operation of switches was fully manual and required a manual effort to verify the state of the circuit and segments before going through the process of operating switches. By using DA, customers will be restored more quickly in response to outages due to See

24 0 0 major storm events, both as a result of the automatic rerouting of power to undamaged circuits, and the faster location and restoration of faults by analyzing system data and AMI meter data. The Smart Grid Program and AMI both benefit the safe, reliable, and efficient operation of the electrical system. The Smart Grid program employs enhanced DA and SCADA that will eventually be coupled with state of the art command and control systems, which will result in improved system reliability (Fault Location, Isolation and Service Restoration - FLISR), deferred capital investment, energy conservation (VVO), and improved overall efficiency benefits. In addition, the data collected by AMI systems opens the door for a more granular identification of necessary repair, greater integration of new resources, aids pro-active outage detection and new energy services for customers. Q. Please explain the benefits of AMI data collection. A. The data from AMI will enable the Company to obtain, store and analyze actual -minute interval energy usage and power quality data from customer premises. By using this data as input for the Company s Integrated System Model ( ISM ) and coupling it with the Company s sophisticated analysis tools, RECO will realize a more accurate simulation of system electrical performance will be realized. This will benefit the Company s electric planning and forecasting processes. Also, greater granularity within those processes improves integrated planning analysis to incorporate more DER and potentially defer or eliminate, major capital expenditures. As DG is introduced to the ISM, AMI will

25 0 0 accurately capture the generation profile of that resource and assist in developing the load profile not only for that customer, but also for the area in which the generator is connected. With the AMI input, the entire system and generation profile can be integrated and reviewed for peaks, demand reduction, contingencies and monitoring (and future controlling) of generation sources such as solar and micro grids. Data can be summarized or aggregated to provide realtime operational awareness in the control center. As these innovative technologies are implemented, AMI metering will enable the Company to closely monitor and model load characteristics and local voltage and power quality, so that these technologies are safely integrated with the use of smart devices in the field for the benefit of the consumer. Locational problems, even down to the secondary level, could be realized and resolved more quickly. Q. Does the data collected by AMI provide other potential benefits? A. Yes. The equipment and technologies to be implemented with the Company s enhanced distribution technology, automation and communications will assist in the integration of renewable resources and energy storage devices (monitoring, protection and potentially control), and the installation of new and emerging technologies such as, micro-grids and Plug in Hybrid Electric Vehicles. Q. What are the anticipated costs for implementing DA? A. RECO has been investing roughly $0. million annually for DA in base budgets. The investments have been important in modernizing the distribution system, improving operations and positioning RECO to handle emerging

26 0 technologies. The level of funding yielded a 0 year deployment of DA technology throughout the service territory. The DA funding approved in the storm hardening case added an additional approximate $. million annually ($ million over three years) allowing RECO to accelerate its investment in DA infrastructure and improves monitoring and controls within the distribution system. It also allows RECO to employ new grid technologies that, when coupled with granular real-time data from AMI, will help RECO optimize grid operations and support the grid modernization goals of the EMP. The additional funding accelerates the program to an to 0 year plan. Q. In what timeframe does the Company plan to implement SG/DA? A Historically the Company has been proactive about implementing distribution system upgrades and has actively invested in upgrades that improve system operations, reliability and more recently increased automation. The approved implementation plan related to the Storm Hardening proceeding indicates that system upgrade implementations will occur between 0 and 0. This schedule closely aligns with the proposed AMI deployment of Q. How will the Company address individual customer questions and concerns regarding advanced meters? A. The Company will address customer questions and concerns initially through outreach and education. The Company will develop a communication plan to explain the benefits associated with AMI. The communication plan will include the opportunity for customers to ask questions and discuss their concerns. Based

27 0 0 on discussions with other utilities that have deployed AMI the Company understands that some customers may not want an advanced meter. Therefore, the Company will provide such customers with the option of leaving their existing non-ami meter in place. Customers that opt out of advanced metering will be required to do so in writing to the Company and also agree to provide the Company access to the non-ami meter so that the Company can obtain monthly meter reads and access equipment for any required maintenance. Also, because such manual readings will require the use of personnel, vehicles and equipment that would otherwise not be retained by the Company, any customer who opts out will be charged an incremental service fee to cover the cost of the monthly manual meter readings. Customers will be provided information about the Company s opt-out policy, after contacting the Company with their advanced meter concerns. Q. Has the Company calculated the incremental costs for manually reading a non-ami meter? A. Yes, any customer that opts-out of advanced metering will be charged a monthly service fee of $, to cover the incremental costs of manually reading the customer s meter. Q. Is the Company proposing other AMI opt-out fees? A. Yes. The Company proposes a one-time meter change-out fee of $ for a customer who requests the change out of an AMI meter and the installation of a non-ami meter. This one-time fee will not be assessed to customers who make

28 0 0 the election 0 days prior to the AMI meter initially being installed. Also, a customer who elects to switch back to an AMI meter after requesting that their AMI meter be removed will be charged a meter installation fee of $. Q. Is there any way the Board could assist in controlling the overall cost of the AMI project? A. Yes, the Board requires RECO to perform a retirement test on all meters that RECO discards in accordance with N.J.A.C. :-.. Based on the current meter volumes in the RECO service territory,0 meters would require a retirement test. If the Board would grant a waiver of the retirement test for these meters as part of this AMI project, the Company could save approximately $. million. The non-ami meters being removed can be stored for a period of time to provide for a retirement test if a customer complaint is received related to a billing concern. However, providing retirement tests for the,0 meters that are being removed and not re-used does not provide benefit to the customers. If the meter retirement tests are required the total cost of the project would increase from $. million to $. million. Q. Has a market assessment of available AMI vendor technologies? A. Yes. RECO s affiliate Orange and Rockland, did perform such an assessment. In 0 Orange and Rockland released a request for proposals (RFP) for AMI technologies. Orange and Rockland then selected four vendor responses for a more detailed review and analysis. The review evaluated the vendors available

29 0 0 technologies for AMI to determine the best fit for all current and currentlyanticipated future requirements. Also in 0, the Companies developed a number of Requests for Proposals ( RFPs ) for the AMI meters and communications system, Meter Data Management System ( MDMS ) and Meter Asset Management System ( MAMS ). The RFPs that were released sought costs for AMI products and services to cover Orange and Rockland and RECO customers. The information from these bids was utilized to select the AMI technology and vendors as well as to refine project estimates. Vendors were selected for the AMI system, AMI meters, MDMS and MAMS in the fourth quarter of 0 to provide the services included as part of the recently approved O&R AMI Project scope. Q. Please describe the AMI technology that the Company proposes to deploy across its service territory and what is included. A. An AMI system has three major components: () AMI smart meters, () an AMI communication network, and () AMI IT platform systems to manage two-way communications. The Company plans to install an AMI system that leverages an open, standards-based architecture provided by Silver Springs Networks. The technologies and services to be acquired to support AMI deployment include: AMI Technology and Services: The AMI technology includes electric AMI meters, the communications network, and the AMI head end

30 0 0 IT system responsible for the coordination of the communication to all of the devices. MDMS Technology and Services: The MDMS is the central repository of meter data for a number of applications across the Company and is responsible for providing complete valid data to other systems, such as the Customer Information Management System ( CIMS ), in the format and frequency they require. The MDMS is also the integration hub for AMI meter data where multiple systems can access validated data. The MDMS will support advanced meter data management requirements associated with complex rates, extensive customer engagement, and market animation in the distribution grid. (Please refer to the AMI business plan for additional information about MDMS) MAMS Technology and Services: The MAMS manages the meter and related metering components of the AMI system. MAMS provides the ability to manage the transfer, configuration, testing, and reporting of metering system field assets. It is designed to optimize asset tracking and manage maintenance efforts associated with the meters and communication system equipment (Please refer to the AMI business plan for additional information about MAMS) Integrated AMI technologies that form a cohesive seamless AMI platform are necessary for technologies to work together effectively. The open standards 0

31 0 protocol of Silver Springs Networks is an industry leading solution that delivers flexibility and optimizes the benefits of the AMI platform. Q. What are the estimated costs of implementing the Silver Springs AMI system? A. Assuming a. year project deployment, one-time project costs are estimated at $. million for the AMI implementation with cumulative recurring operation and maintenance (O&M) expenses totaling $.0 million for a 0-year period. Net depreciation costs are estimated at $0. million for the 0-year period which includes the depreciation of the AMI program capital costs, the amortization of outmoded meter assets and an offset of depreciation savings from deferred capital expenses. The table below depicts the project implementation costs over the. year deployment period: Expense Category ($000s) Yr. Total Labor $ $ $ $, Contract Service $ $ $0 $ Equipment and $,0 $, $,0 $, Installation Services Capital Overheads $ $ $ $, Total $, $, $, $,

32 Q A Have you quantified the benefits of RECO s implementation of the Silver Springs Networks AMI system? Yes. Figure below illustrates benefits and cost reductions that will result from a full scale AMI implementation. 0 Year Benefit Description Cumulative Value Meter Reading Metering Field Services Reduced labor costs and associated system and equipment costs for meter reading Deferred capital expense for existing meter replacements Reduced operating costs for field work related to collections, connects, disconnects, cut-ins, re-reads, field tests, and investigations $. $. $.0

33 Reduced call center Call Center Meter Accuracy and Irregular Meter Condition (IMC) Outage Management Revenue Protection Voltage VAR Optimization (VVO) Inactive Meter/Unoccupied Premises inquiries, bill complaints, and cancel/rebills Increased recovery of unaccounted for energy Reduced outage restoration and false dispatch costs Increased recovery of unaccounted for energy Reduction of the amount of power purchased and consumed Reduced unbilled energy costs $. $. $. $ 0. $. $ 0. Total Benefits $.0 Fig : Benefits as a Result of AMI Implementation

34 0 Major cost savings and cost reduction benefits totaling $.0 million over a 0- year period include, but are not limited to: Reduced labor in field services, meter reading, billing and call center Reduced expenses in relation to meter reading systems, such as fleet maintenance and fuel costs, meter reading equipment and cell phone expenses Estimated benefits from a system perspective in relation to outage management (e.g., reduced truck rolls due to the availability of more detailed information and nested outage data from smart meters, better understanding of mutual aid needs, reduced site safety costs, etc.); and System retirement benefits (avoided costs from GEMS replacement and associated O&M costs for the existing MDMS) A summary financial view of the costs and benefits for the AMI deployment is shown in Figure below. Business Case Financial View Over 0 Years Costs A. Costs (0 Year Total Costs) (millions) O&M Expense for AMI System $.0 Net Capital Depreciation Expense for AMI System $. Amortization of Outmoded Assets $. Sub-Total $. B. AMI Benefits (0 Year Total Benefits) AMI Cost Reduction Benefits $.0 Customer and Societal Benefits $.0

35 Sub-Total $.0 C. Total (0 Year Net Total) Benefits Less Costs $. Utility Simple Payback Period. years Utility Discounted Payback Period. years Fig : AMI Benefits and Costs 0 Q. Is there additional value being delivered with the implementation of the Silver Springs Networks AMI system? If so please describe. A. Yes. The proposed AMI system leverages an open, standards-based architecture provided by Silver Springs Networks. This technology provides the flexibility to support multiple meter vendors and multiple utility service types. Communication is managed using a two-way point-to-point mesh communication technology protocol, which will enable meters to converse directly with two-way wireless communication devices across the network. Meters will be able to send data directly to and receive data from the Company s IT systems, and the consumer s home area network. Communications will be seamless with Company systems such as the Company s Outage Management System and the Customer Information Management System. Q. Are there alternative deployment approaches that may be better used instead of the proposed AMI implementation? A. RECO has determined that a full scale AMI implementation best meets its customers' current and future needs, facilitates wide scale energy efficiency and

36 0 0 participation in other energy usage reduction programs: and provides a most effective means of enabling the vision and goals cited in the EMP. The Company evaluated multiple alternatives to a fully enabled AMI rollout and determined that there are a number of benefits that would not be realized by a partial deployment, the deployment of Automated Meter Reading (AMR) or no deployment of AMI. Partial deployment would limit to only some customers the many benefits of AMI, unfairly offering flexibility to make energy decisions to some but not to all. It would also not support the system enhancements that full deployment of AMI would provide such as voltage/var optimization, outage detection for all customers and the resulting improved outage management. Further, it would not support real-time communication between the Distributed System and DERs phased implementation. If it were later decided to expand a partial AMI deployment to all customers, such expanded deployment would be more expensive, losing the economies of scale available with an initial full scale implementation. Other examples of inadequate alternatives to the proposed full scale implementation are: spotty AMI deployment which would increase costs per customer served, spreading AMI deployment over a longer period of time which would decrease the cost efficiencies available in coordination with the O&R implementation, utilizing Itron AMR meters in anticipation of converting to AMI in the future which would also result in greater cost to the customer. In the first