proposal to perform comprehensive management audits of new

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Proposal to Perform Comprehensive Management Audits

of New York State Electric & Gas Corporation

and Rochester Gas and Electric Corporation

Submitted to: Secretary of the New York State

Public Service Commission

Submitted by:

Overland Consulting 11551 Ash Street, Suite 215

Leawood, KS 66211 (913) 599-3323

February 9, 2017

Case 16-M-0610

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Response to Request for Proposal – Case 16-M-0610 – Comprehensive Management Audits of New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation

© 2017 OVERLAND CONSULTING i

Contents 1. Introduction and Firm Experience .................................................................................................... 1-1

Audit Objectives and Scope ................................................................................................................... 1-1 Company Organization and Background ............................................................................................... 1-2

NYSEG................................................................................................................................................. 1-2 RG&E .................................................................................................................................................. 1-3 Reforming the Energy Vision (REV) .................................................................................................... 1-4

Project Team .......................................................................................................................................... 1-5 Project Approach ............................................................................................................................... 1-6 Relevant Past Projects – Overland Consulting ................................................................................... 1-7

Project Deliverables ............................................................................................................................. 1-10 2. Scope and Objectives ........................................................................................................................ 2-1

Corporate Governance ........................................................................................................................... 2-1 Impact of REV on Corporate Governance and Utility Operations ..................................................... 2-1 Regulated Operations Budgets and Resource Allocation .................................................................. 2-4 Corporate Management .................................................................................................................... 2-5 Affiliate Relationships and Transactions ............................................................................................ 2-6 Planning and Risk Management ........................................................................................................ 2-8 Review of Global SAP Enterprise Accounting System ........................................................................ 2-9

Electric Planning and REV Preparations ............................................................................................... 2-10 Integrated Electric System Planning ................................................................................................ 2-10

Gas Planning ......................................................................................................................................... 2-24 The Gas Planning audit area covers the following topics: ................................................................... 2-24 Budgeting and Finance ......................................................................................................................... 2-33

Background ...................................................................................................................................... 2-33 Scope of Work .................................................................................................................................. 2-34

Project Management and Work Management .................................................................................... 2-37 Discussion – Project Management .................................................................................................. 2-37 Discussion – Work Management ..................................................................................................... 2-38

Performance Management .................................................................................................................. 2-44 Background ...................................................................................................................................... 2-44 Scope of Work .................................................................................................................................. 2-45

Customer Operations ........................................................................................................................... 2-47 Background ...................................................................................................................................... 2-47 Scope of Work .................................................................................................................................. 2-47

3. Approach, Methods, & Project Management .................................................................................. 3-1 Audit Approach ...................................................................................................................................... 3-1 Orientation and Preliminary Review Phase ........................................................................................... 3-3 Technical Analysis Phase ........................................................................................................................ 3-4 Report Phase .......................................................................................................................................... 3-5

4. Customer Benefit Analyses ............................................................................................................... 4-1


© 2017 OVERLAND CONSULTING ii

5. Project Team & Responsibilities ....................................................................................................... 5-1 Project Personnel ................................................................................................................................... 5-1 Project Organizational Structure............................................................................................................ 5-2 Project Hour Allocation .......................................................................................................................... 5-3 Individual Responsibility Summary ........................................................................................................ 5-3

Overland Consulting........................................................................................................................... 5-3 Subcontractors (FTI Consulting) ......................................................................................................... 5-4

6. Work Timeline ................................................................................................................................... 6-1 7. Individual Experience and Qualifications ......................................................................................... 7-1 8. Conflicts of Interest ........................................................................................................................... 8-1 9. References ......................................................................................................................................... 9-1 10. Insurance Attestation ...................................................................................................................... 10-1 11. Minority- and Women-Owned Business Enterprises (M/WBE) .................................................... 11-1


© 2017 OVERLAND CONSULTING 1-1

1. INTRODUCTION AND FIRM EXPERIENCE Overland Consulting and (Overland) and FTI Consulting (FTI) appreciate the opportunity to respond to the December 16, 2016, New York State Department of Public Service (NYSDPS or DPS) Request for Proposals (RFP) in Case 16-0610, for a consultant to perform Comprehensive Management Audits of New York State Electric & Gas Corporation (NYSEG) and Rochester Gas and Electric Corporation (RG&E). We have developed our proposal to meet the specific requirements set forth in the RFP by the DPS. This Introduction section contains some brief background on NYSEG and RG&E, summarizes our understanding of audit scope and objectives, and identifies key issues and concerns that may affect the audit. This section also contains an introduction to our audit approach, highlights the qualifications and experience of the key members of our project team, and provides a summary of project deliverables.

Audit Objectives and Scope

In its RFP, the DPS seeks an independent auditor to perform a comprehensive management audit of NYSEG and RG&E. The overriding objective of the audit is to identify opportunities and create actionable, cost-effective recommendations to improve the following:

• System construction and maintenance and utility operations, including related planning, risk management, work management, and budgeting processes, in order to enhance the efficiency, productivity, and effectiveness of providing reliable, customer-responsive service at affordable rates.

• Governance, management, and organizational design to enhance NYSEG’s and RG&E’s ability to respond to the needs and concerns of customers and other stakeholders.

• Successful implementation of REV objectives as it relates to corporation governance, organizational structure, budgeting/finance, and overall operations.

With the overall objective and focal points in mind, the scope of the audit will include:

• Evaluation of the adequacy of the system planning, construction, and maintenance functions to assure service reliability, transmission and distribution system resiliency, and the development of a distributed system platform.

• Review of the planning, engineering and design, scheduling, costing, and execution of NYSEG and RG&E programs and projects, including project prioritization and approval, contractor bidding and management practices, and the extent to which the use of available labor resources is optimized.

• Evaluation of the efficiency of NYSEG’s and RG&E’s operations and the quality of its customer service function.



• Evaluation of the capital and expense budgeting processes, including the roles of the Board of Directors of NYSEG/RG&E as well as AVANGRID and Iberdrola and senior management, and the impact of rate and financing constraints on establishing budget goals, setting and managing priorities, and oversight of budgeting processes.

• Assessment of performance measurement, including whether it accurately and adequately measures key aspects of utility performance, whether results are properly calculated for determining incentive compensation, and how performance measurement may be affected by changes to metrics or their calculation.

• Review of progress in transitioning to an integrated system planning process. • Assessment of how Distributed Energy Resources are incorporated into utility electric planning. • Review of corporate governance and executive management functions and the planning

processes, including assessment of the impact of the existing functions, planning procedures, as well as the commitment to the objectives of REV.

• Examination of the roles of Iberdrola of Avangrid in regards to REV implementation, budgeting, strategic planning, and NY regulatory issues.

• Assessment of the appropriateness of the processes and controls governing affiliate relationships.

• Evaluation of demand forecasting practices including the review of gas forecasting models, gas procurement strategy, and financial and physical hedging practices.

• Evaluation of asset management and gas system planning processes.

Company Organization and Background

New York utilities NYSEG and RG&E are third-tier subsidiaries of Avangrid Inc. (Avangrid), a diversified US-based energy company with more than $30 billion in assets and operations in 25 states. Avangrid and its US subsidiaries operate with approximately 7,000 employees. The company was formed by a merger between Iberdrola USA and UIL Holdings Corporation in 2015. Avangrid owns and operates regulated utilities and electricity generation subsidiaries through two primary lines of business. Avangrid Networks includes eight regulated electric and natural gas utilities, serving 3.1 million customers in New York and New England, including NYSEG and RG&E. Avangrid Renewables is the second largest U.S. renewables owner-operator, with 6.3 gigawatts of electricity capacity, primarily through wind power, in states across the United States. Avangrid is 81.5% owned by Iberola S.A. (Madrid: IBE), an international energy company headquartered in Spain with operations in Europe, North America, and South America. Most of Avangrid’s remaining equity is publicly owned and traded under the New York Stock Exchange symbol AGR.

NYSEG

NYSEG serves electric and natural gas customers across more than 40% of the upstate New York geographic area with approximately 885,000 electricity customers and 265,000 natural gas customers as of December 31, 2015. The ratio of NYSEG’s 2015 operating revenues for electric and gas was approximately 80% and 20% as of December 31, 2015.



NYSEG’s electrical distribution system consists of 4,463 miles of transmission lines, 32,319 pole miles of overhead distribution lines, and 2,702 miles of underground lines. NYSEG owns 435 substations. Total electricity delivered for the calendar year of 2015 was 15,711,000 MWh. NYSEG’s natural gas system consists of 20 miles of transmission pipeline and 8,151 miles of distribution pipeline. The total natural gas delivered during the calendar year of 2015 was 56,533,000 DTh.

NYSEG Service Area

RG&E

RG&E, a subsidiary of AVANGRID, serves approximately 374,000 electricity customers and 309,000 natural gas customers in a nine-county region centered on the City of Rochester. The ratio of operating revenues for electric and gas was approximately 71% and 29% as of December 31, 2015. RG&E’s electric distribution system consists of 1,025 miles of transmission lines, 6,091 pole miles of overhead distribution lines, and 2,834 miles of underground lines. RG&E owns 153 substations. Total electricity delivered for the calendar year of 2015 was 7,110,000 MWh. RG&E’s natural gas system consists of 105 miles of transmission pipeline and 10,592 miles of distribution pipeline. The total natural gas delivered during the calendar year of 2015.

Source: NYSEG website



RG&E Service Area

Reforming the Energy Vision (REV)

In April 2014, the Commission commenced the “Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision” (REV). Through REV and a variety of related policy proceedings, the Commission has expressed the conviction that “business as usual” is not sustainable for electric utilities due to a number of factors, including the effects of extreme weather events, declining demand growth, customer expectations regarding reliability and resilience, and aging infrastructure. REV’s success will depend on whether it delivers measurable value to customers relative to their total expenditures on energy-related products and services. This value will come from giving customers greater control over how they consume and produce energy, while enabling the utility to monitor and control the impact of consumer actions on the integrity of the grid. At the same time, utilities must maintain safe and reliable service, produce revenue streams that will help finance additional enabling investments, spur innovation, attract competitive suppliers, and lead to the introduction of valued products and services. REV has followed several simultaneous paths, including a formal Track 1 dealing with Market Design and Platform Technology and Track 2 dealing with Regulatory Reform. NYSEG and RG&E are participating in all aspects of the REV initiative. As the REV proceeding is an ambitious endeavor with broad reach, NYSEG and RG&E should be modifying their overall organizational structure and analyzing how their commitment and investment in REV objectives will impact planning, operations, innovation, and relationship with DER developers. On June 30, 2016, NYSEG and RG&E submitted their Distributed System Implementation Plan to the NYPSC. Additionally, they are working on a REV demonstration project. This project is an e-commerce

Source: RG&E website



site to test energy related online transactions, customer satisfaction, and the delivery of more comprehensive energy solutions for our customers. The Energy Marketplace platform will further test methods to customize, engage, and grow the market, while better connecting with customers on a range of DER offerings through targeted marketing and tailored content. The foundational investments that will be deployed in the Project include Advanced Metering Infrastructure (“AMI”), grid automation, and associated communications systems.

Project Team

Our proposed project team is composed of individuals from Overland Consulting and FTI Consulting. It consists of a group of highly-qualified utility professionals with the depth of experience needed to address all of the areas and issues identified in the RFP and provide meaningful, actionable recommendations to enhance NYSEG and RG&E’s financial and cost structure, system reliability and resiliency, service quality and customer satisfaction, management and governance, and various REV implementation considerations. Our complete project team is discussed in the Experience and Qualifications section of the proposal. The project team includes the following key members:

• Mr. Howard Lubow (Engagement Director and Technical Lead) – As Engagement Director, Mr. Lubow will oversee and coordinate the efforts of the entire project team, as well as serve as the Technical Lead for the Corporate Governance audit area and will assist in Budget & Finance. Mr. Lubow is the founder and President of Overland Consulting. He has an extensive background as a public utility auditor and consultant, focused primarily on the electric and gas industries. He has directed numerous management and operational and focused audits of utilities, as well as reviews of proposed utility acquisitions and mergers. He served as Project Director on Overland’s recent audits of National Grid and the self-reported performance metrics of New York’s nine largest investor-owned utilities. He is also serving as Project Director in the Central Hudson Management Audit, specifically responsible for Corporate Governance and Budget and Finance areas of the review. He has an extensive background in utility finance and governance. Aside from his consulting experience, Mr. Lubow was Chief Operation Officer and Chief Financial Officer of a gas transmission regulated utility located in the Midwest.

• Mr. Robert Welchlin, CPA (Project Manager and Technical Lead) – Mr. Welchlin will serve as Project Manager, coordinating overall day-to-day project administrative and management activities, and serve as Technical Lead in the area of Customer Operations. Mr. Welchlin has managed and directed audits and consulting projects in the electric and gas, telecommunications, water, and cable TV industries for more than 30 years. He has managed and served as a Technical Lead on numerous large utility management and operational audit engagements, including Overland’s recent audits of National Grid and the self-reported performance metrics of New York’s investor-owned utilities.

• Ms. Ellen Smith, P.E. (Technical Director) – Ms. Smith will serve as the Technical Director in charge of coordinating the FTI’s efforts in the audit. She will also contribute technical expertise and assistance with respect to REV preparation and implementation in the Corporate Governance and Electric Planning audit areas and in the Project and Work Management audit



area. Ms. Smith is a Senior Managing Director responsible for FTI Consulting’s Power & Utilities Practice, with over 30 years of experience in the physical operation, maintenance, and design of electric systems. She served as the Chief Operating Officer of National Grid’s U.S. operations and has direct experience leading teams responsible for designing, maintaining, and operating utility transmission and distribution systems, and experience leading teams to restore utility service in response to utility system outage events. She recently worked with the Puerto Rico Electric Power Authority (PREPA) as an advisor to the Government Development and to PREPA in order to develop programs for cash management and operational improvement.

• Mr. Donald Racey, PMP (Technical Lead) – Mr. Racey will serve as the Technical Lead in the Electric Planning and REV Preparations audit area. Mr. Racey is Managing Director within FTI’s Power & Utilities Practice. In recent years he has specialized in the design and implementation of various utility asset management, maintenance, and reliability programs. He has assisted utilities in implementing enterprise resource planning systems and participated in utility process improvement and merger integration efforts. He led the implementation of National Grid’s end-to-end project and portfolio management process that standardized key processes within the company’s electric and gas businesses.

• Mr. Colin Hassett, PMP (Technical Lead) – Mr. Hassett will serve as the Technical Lead in the Project and Work Management audit area. He has more than 15 years of operational experience in the Electric and Gas Utility sector, Mr. Hassett specializes in business advisory and litigation support services, including matters involved in power and utility operations, power reliability-related damages, utility regulatory strategy, emergency response, and strategic communications. During his tenure with National Grid, Mr. Hassett led numerous project management initiatives including the design, development, and management of the PMO for National Grid’s process excellence group. Additionally he led the implementation of a Process Safety Management program to the electric business yielding improvements to risks around Process Safety.

• Mr. Frank DiPalma (Technical Lead) – Mr. DiPalma will serve as the Technical Lead in the Gas Planning audit area. Mr. DiPalma is a Partner/Principal within Williams Consulting, Inc. He has over 40 years of utility industry experience, spending the last 14 years leading consulting teams in various operations-related consulting projects. Mr. DiPalma has worked with Overland in numerous consulting projects in New York and other jurisdictions over a number of years.

Project Approach

Our approach to the audit is discussed fully in Section 3. Highlights of our approach include the following:

• A phased approach to the audit work, consisting of: o Orientation and preliminary review to develop an understanding of the utility and the

audit work required. o Technical analysis based on interviews of utility subject matter experts and analysis of

documents and data.



o Development of a report focused on audit findings and meaningful, actionable audit recommendations.

• A detailed work plan that documents all activities and aspects of our planned technical analysis.

• Effective project management with responsibility for overseeing the overall project vested in a qualified Engagement Director and responsibility for day-to-day and administrative project management vested in an experienced Project Manager.

• Ongoing internal coordination of audit plans and efforts between the Overland and FTI between the Engagement Director (Mr. Lubow, Overland) and Technical Director (Ms. Smith, FTI).

• On-going communication between the audit team and the DPS including, but not limited to, communication between the audit team Engagement Director and DPS senior management and between the audit team Project Manager and DPS audit management.

• The use of effective processes to document requests and schedules for interviews and requests for audit information and data.

• Effective management and organization of project data (audit data requests and responses) vested in a Project Data Manager.

• Monthly written status reporting and other on-going reporting that may be requested by the DPS or indicated by the RFP and proposal.

• Development of a report with facts, findings, and conclusions directly supported by work papers that include notes from project interviews (confirmed with the interviewee when necessary), information and data provided by the auditee, and analytical work products produced by the project team.

Relevant Past Projects – Overland Consulting

Central Hudson Gas & Electric Management and Operations Audit – Case 16-M-0001 Client: New York State Public Service Commission Location: Poughkeepsie, NY Project Dates: August 2016 to June 2017 Project Description: Overland was retained by the New York State Public Service Commission to perform a

comprehensive management audit of Central Hudson Gas & Electric. This audit is ongoing, with the final audit report expected to be released in June 2017. The audit focuses on the utility’s existing processes, practices, systems, and organizational structures and how best to enhance Central Hudson’s future performance. The primary areas of review include: Corporate Governance, Electric Planning and REV Preparations, Budgeting/Finance, Gas Planning, Performance Management, and Customer Operations. The engagement is being led by Engagement Director and Project Manager Howard Lubow.



Connecticut Natural Gas Management Audit Client: Connecticut Department of Public Utility Control Location: New Britain, CT Project Dates: April 2009 to July 2010 Project Description: Overland was retained by the Connecticut Department of Public Utility Control to

perform a management audit of Connecticut Natural Gas (CNG). At the time of the audit, CNG was a subsidiary of Iberdrola USA. Major audit areas included: executive management, finance, gas operations, gas supply and capacity procurement practices, customer service, external relations, human resources, support services (legal, information services, facilities, and transportation), and several special topics, including an analysis of cost allocations from two service companies (Utility Shared Services and Energy East Management Co.).

Exelon/Pepco Holdings Merger Review, Maryland – Case 9361

Client: Maryland Public Service Commission Location: Baltimore, MD Project Dates: August 2014 to February 2015 Project Description: Overland was retained by the Maryland Public Service Commission to provide consulting

services to assist the Maryland Public Service Commission’s Technical Staff in evaluating the application filed by Exelon Corporation, Pepco Holdings, Inc., Potomac Electric Power Company, and Delmarva Power & Light Company, for approval of the proposed merger between Exelon and PHI. Overland examined various subject matters on behalf of staff, including corporate governance, ring-fencing, merger savings, cost benefit analysis, credit impacts, rate impacts, the distribution of merger benefits among stakeholders, and possible impacts on service quality, safety, and customer service. We also performed a statewide economic impact study among other things, considering the impact of workforce reductions on the Maryland economy. Our analysis ultimately resulted in submittal of expert testimony that provided a framework for the Maryland PSC to make its ruling.

Operations Audit of the Accuracy of New York State Utilities’ Self-Reported Data

Client: New York State Public Service Commission Location: Albany, NY Project Dates: December 2013 to April 2015 Project Description: Overland was retained by the New York State Public Service Commission to perform a

focused operations audit of the accuracy of electric interruption, gas safety, and customer service data reported to the Commission by nine utilities. We performed a series of detailed tests to review the accuracy and completeness of the data collected by various systems and identified opportunities for improvements and recommendations for implementing program or process changes in the data collection and reporting of results. The result was a detailed report which was released by the New York State Public Commission in the fall of 2015. The engagement was led by Project Director Howard Lubow with Robert Welchlin serving as the Project/Technical manager.



PG&E – Focused Audit of Capital and Operations Expenditures Related to the Gas Distribution System Client: California Public Service Commission Location: San Francisco, CA Project Dates: June 2012 to February 2014 Project Description: Overland performed a financial and management operations review of PG&E’s gas

distribution operations over a 12-year period. We determined the extent to which the company’s approved spending on safety-related gas distribution operations and maintenance (O&M) expenses and capital expenditures was realized. We also reviewed internal processes and documentation for much of this time period for evidence that safety resources were constrained for financial reasons. We determined the extent to which financial curtailments and austerity programs may have adversely impacted reliability and safety of gas distribution operations.

South Jersey Gas Company Affiliate Transactions and Management Audit

Client: New Jersey Board of Public Utilities Location: Trenton, NJ Project Dates: February 2012 to September 2013 Project Description: Overland conducted an affiliate transactions and management audit of South Jersey

Gas Company (SJG) on behalf of the New Jersey BPU. The areas of review included an audit of the transactions between SJG and its affiliates and a comprehensive management audit of SJG. Key audit objectives included determining whether the resources of the utility were appropriately allocated, assessing whether South Jersey Gas Company properly managed its gas procurement programs to ensure it met supply and capacity requirements, and an assessment of corporate governance and strategic and financial planning. The engagement was led by Project Manager Howard Lubow and Technical Manager Robert Welchlin.

PG&E San Bruno Investigation – Audit of Gas Transmission Pipeline Safety-Related Expenditures

Client: California Public Utilities Commission Location: San Francisco, CA Project Dates: May 2011 to October 2012 Project Description: The catalyst for the audit was the gas transmission pipeline rupture that occurred in a

residential area of San Bruno, California, on September 9, 2010. The natural gas released by the rupture ignited and caused a fire that destroyed 38 homes and damaged 80. Eight people were killed and many more were injured. Overland performed an analysis of capital expenditures and operating costs associated with the transmission system over a 15-year period. Overland assessed the reliability of the system in light of the level of capital and operations funding over time. We reviewed the extent to which financial curtailments and austerity programs adversely impacted reliability and safety metrics. Subsequent to the release of our report in December 2011, we provided expert testimony in Commission proceedings addressing our findings, as well as commenting on evidence submitted by other parties relevant to the PG&E’s management practices and financial controls. The engagement was led by Project Director Howard Lubow and Technical Manager Gregory Oetting.



National Grid Audit of Affiliate Cost Allocations, Policies, and Procedures Client: New York State Public Service Commission Location: Albany, NY Project Dates: February 2011 to October 2012 Project Description: Overland was retained to conduct an in-depth review of the four service companies

that allocate costs to regulated entities in New York. As part of this review, Overland tested a large sample of service company transactions that caused costs to be allocated to National Grid’s New York utilities. Specifically, Overland reviewed the underlying documentation for these transactions to ensure that this documentation was adequate to support the cost direction for these charges, as well as to support the ultimate accounting treatment these costs received. In addition to our detailed testing, Overland provided Staff with an overall assessment of the appropriateness of National Grid’s cost allocation policies and internal controls. Overland also provided Staff a high-level review of the corporate reorganizations that had occurred at National Grid in recent years and the impact of these reorganizations on National Grid’s cost allocation methodologies. The engagement was led by Project Director Howard Lubow and Project/Technical Manager Robert Welchlin.

Project Deliverables

At a minimum, Overland and its subcontractors will provide the following deliverables identified in the RFP:

• Project Work Plan – Overland will provide a comprehensive project work plan encompassing all audit areas and required tasks. We will provide a draft work plan by June 2017.

• Regular Status Updates and Reports – Overland and FTI will provide regular teleconference updates to the DPS concerning identified and emerging audit issues. We will also provide monthly written status reports on audit progress, the status of requested audit data, and the audit budget.

• Midpoint Briefing – At a date agreed upon between the consulting team and the DPS, Overland and its subcontractors will provide the DPS with a midpoint briefing to discuss tentative findings, assessments, and possible conclusions. We will provide other, less formal briefings throughout the project, as required.

• Draft Report – Overland/FTI will provide a draft of our final audit report by January 2018. • Customer Benefit Analyses – We will support each audit recommendation with an analysis of

the costs and customer benefits associated with the recommendation. • Final Report – We will submit our final audit report by March 2018 in accordance with the

requirements of the RFP.

.



2. SCOPE AND OBJECTIVES This proposal section outlines our understanding of the work to be done in each of the following scope areas.

1. Corporate Governance 2. Electric Planning and REV Preparations 3. Gas Planning 4. Budgeting and Finance 5. Project Management and Work Management 6. Performance Management 7. Customer Operations

Within each scope area, we outline the important components and considerations for each major audit task listed in the RFP. The audit efforts described in this section reflect a preliminary, summarized version of the audit work plan.

Corporate Governance

The Corporate Governance audit area covers the following broad topics:

• Impact of REV on Corporate Governance and Utility Operations • Regulated Operations, Budgets and Resource Allocation • Corporate Management • Affiliate Relationships and Transactions • Planning and Risk Management • Review of the new Global SAP Enterprise Accounting System

Impact of REV on Corporate Governance and Utility Operations

In April 2014, the New York State Public Service Commission (NYSPSC or Commission) commenced the “Proceeding on Motion of the Commission in Regard to Reforming the Energy Vision” (REV). Through REV and a variety of related policy proceedings, the Commission has expressed the conviction that “business as usual” is not sustainable for electric utilities due to a number of factors, including the effects of extreme weather events, declining demand growth, customer expectations regarding reliability and resilience, and aging infrastructure. REV’s success will depend on whether it delivers measurable value to customers relative to their total expenditures on energy-related products and services. This value will come from giving customers greater control over how they consume and produce energy, while enabling the utility to monitor and control the impact of consumer actions on the integrity of the grid. At the same time, utilities must maintain safe and reliable service, and produce revenue streams that will help finance additional enabling investments, spur innovation, attract competitive suppliers, and lead to the introduction of valued products and services.



As the REV proceeding is a an ambitious endeavor with broad reach, utilities should be modifying their overall organizational structure and analyzing how their commitment and investment in REV objectives will impact planning, operations, innovation, and relationship with DER developers. Upstream management decisions at Avangrid and Iberdrola in regards to supporting REV commitments, in terms of capital and personnel will play a role in the successful implementation of REV objectives by NYSEG and RG&E. This area of the audit will include the following tasks as listed in the RFP: 1.1. Describe and assess how the utilities’ corporate governance, organizational structure, and internal working relationships demonstrate commitment to the objectives of REV, including in planning, operations, promoting a culture of innovation, and facilitating relationships with DER developers. Identify changes which will increase the likelihood of success in achieving REV objectives. 1.2. Describe and evaluate how the objectives of REV have been reflected in changes in corporate governance as well as the utilities’ planning and operations. 1.8. Examine and assess the extent to which upstream management decisions, including at Avangrid and Iberdrola, ensure that New York’s regulated utility operations are able to achieve REV objectives.

Discussion

We will take into account the impact that REV will have on corporate governance and review at a more global level the following:

a. We will gauge the appropriateness of the utilities organizational structure and view any changes since REV implementation.

b. Gain an understanding of the delegation of duties between NYSEG/RG&E and Avangrid/Iberdrola, board and management, etc., through a review of board and board committee charters, governance guidelines, etc. We will pay attention to the frequency of REV discussions and will review presentations and underlying analyses pertaining to REV developments.

c. Review of projected capital expenditures related to REV considering how the increase in capital expenditures will affect NYSEG’s and RG&E’s financing capabilities and credit quality

d. Assess the comprehensiveness of data provided to board members through a review of minutes of the board and selected committees along with pre-meeting and in-meeting materials.

e. Evaluate the method by which board members of the utilities (NYSEG and RG&E) and Avangrid/Iberdrola are selected with special attention placed on how potential candidate expertise is matched with board needs.

f. To the extent possible, evaluate the effectiveness of the board through discussions with selected board members concerning board and committee self-evaluations, training of board members, interaction with management, etc.

g. At a high level, determine how the performance of executive management and the board is measured and rewarded, including any incentives related to REV.



h. Review of the June 2016 Distributed System Implementation plan filed with the NYPSC, assessing the utility companies’ commitment and relationship with DER developers.

i. Assess the degree of support and extent to which the corporate culture is focused on a strategic and robust implementation of REV initiatives.

1.3. Examine and evaluate how internal reporting mechanisms and employee performance standards are being used to monitor the implementation of REV objectives and flag areas requiring corrective action or re-direction.

Discussion

Overland will assess whether the utilities have an appropriate department managing the company’s commitment and implementation to REV objectives. This will be accomplished by reviewing the credentials of the members of the department or group, ensuring that they have experience and expertise necessary to properly implement and monitor the implementation of REV objectives. Additionally, we will review the monitoring techniques employed by the implementation group ensuring timely and accurate recording of the REV initiatives through various reports, status, and implementation updates provided to the NYPSC. We will review benefit and cost analyses of the REV projects prepared by the utilities and review the underlying inputs within the analyses. As a result of REV implementation objectives, we would expect the company to have modified their employee performance standards to incorporate successful implementation and monitoring of REV objectives. We will assess these new REV performance standards based on industry best practices and determine whether these metrics should be enhanced or new metrics be added to improve the accuracy, responsiveness, cost-effectiveness, quality, and productivity of the implementation of REV objectives within employee performance. We will determine if sufficient weight on REV is being placed in incentive compensation determinations for executives and senior management. 1.4. Describe and assess the extent to which the utilities’ change management processes and resources (e.g., training, communications, transition management) have been designed to accomplish the objectives of REV.

Discussion

We will assess NYSEG and RG&E’s change management policies and processes to gauge whether the procedures in place are robust enough to accommodate the large scope of REV implementation. We will also address the extent to which the parent companies, Avangrid and Iberdrola, are involved with the change management process particularly in terms of communication and potential funding of new training programs specific to REV.



Regulated Operations Budgets and Resource Allocation

1.5. Examine and assess how the interests of New York’s regulated operations are reflected in upstream management decision making concerning budgeting and resource allocation. Are the interests of New York’s regulated utility operations appropriately prioritized by Avangrid and Iberdrola?

Discussion

We will evaluate the functioning of the NYSEG and RG&E Boards and executive and senior management as it concerns the preparation and oversight of the NYSEG and RG&E Boards’ budgets. We will evaluate the relationship between long-range planning and the budget to ensure consistency between the two. Additionally, we will assess the role played by parents Avangrid and Iberdrola in the budgeting and resource allocation processes as well as their awareness of NY regulatory operations and developments. We will utilize our extensive experience from various utility management audits in reviewing management decision-making concerning budgeting and resource allocation to determine whether the procedures are consistent with best practices and industry standards. The REV initiative will have a material impact on utility and corporate budgets and financial forecasts. We will evaluate the commitments of the regulated entities, as well as the intermediate and ultimate parent, to ensure that necessary resources are committed to the successful implementation of REV projects both now and overtime. 1.9. Examine the roles of Iberdrola, Avangrid, NYSEG, and RG&E Boards of Directors in developing, reviewing, and approving capital and operating budgets.

Discussion

We will determine to what extent Iberdrola and Avangrid impact the budgeting priorities and level of expenditures at NYSEG and RG&E by reviewing formal policies and discussing the matter with board members and executive management through interviews. This evaluation will include the indirect or more subtle effects of the degree of influence that members of the NYSEG/RG&E Boards associated with Iberdrola/Avangrid may have in the decision process. Additionally, we will identify and assess any parent-wide constraints put on capital and operating spending of NYSEG and RG&E. In the 2011 Liberty Consulting Management Audit report, it was found that NYSEG and RG&E had difficulties executing their capital expenditure plans on a timely basis. The difficulties were primarily perpetuated by Iberdrola USA (now Avangrid), failing to provide adequate capital project designs, cost estimating, and project planning to support the timely execution of the NYSEG and RG&E capital budgets. Overland will review this area and assess whether there have been necessary improvements. Finally, from interviews with the Boards of Directors and review of minutes and presentations, we will examine whether there has been an appropriate amount of consideration and analysis in REV objectives and their impact on capital and operating budgets.



1.10. Examine how the Boards of Directors monitor and react to actual spending and variances during the year.

Discussion

For effective management reporting to occur from a budgeting perspective, budget variances should be identified and evaluated, with corrective action taken for significant variances. We will determine what role the Boards of Directors play in the budgeting process and assess whether they review an adequate amount of detail to carry out their duties and the extent to which they review spending variances during the year. This will include an evaluation of variance reporting on capital spending through reviews of documentation and interviews with management and board members. Additionally, we will review budget variance explanations for evidence of deficiencies in the budget development process. From the review of minutes, interviews, and other discovery requests, we will be able to determine whether the Boards have an appropriate amount of authority and responsibility in monitoring actual spending and variances. Importantly, we will access the level of commitment to incremental funding requirements and possible declines in earnings associated with unanticipated variances in REV and other high priority initiatives.

Corporate Management

1.6. Examine and assess how New York’s regulated utilities take advantage of knowledge and expertise of Avangrid and Iberdrola.

Discussion

Avangrid, a diversified energy and utility company, has more than 30 billion dollars of assets. Iberdrola S.A., based out of Spain, owns 81.5% of Avangrid and is one of the largest utility companies in the world by market capitalization. Both of these companies have substantial resources from a financial and technological perspective. Additionally, upper management at these companies has considerable expertise in utility operations. In the 2011 Liberty Consulting Management Audit, it was found that Iberdrola USA (now Avangrid) executives are fully engaged and aware of New York conditions, needs, priorities, resources, customer needs, and public requirements and expectations. We would expect NYSEG and RG&E to leverage the knowledge and expertise of these executives, and the relevant affiliates in the Avangrid organization. Additionally, we will evaluate the extent and frequency to which Avangrid and Iberdrola communicate with NYSEG and RG&E and what role they play in assessing developments in New York for regulated utilities, particularly as it pertains to REV. During July 2016, Iberdrola USA and SimpleEnergy, a Software-as-a-Service (SaaS) company that uses behavioral science, big data analytics, and digital marketing to educate and empower consumers on energy consumption, announced a partnership as part of New York State’s new energy plan to help utilities achieve Reforming Energy Vision (REV) goals. RG&E is incorporating Simple Energy’s Marketplace platform for customers to purchase curated distributed energy resource (DER) products with targeted and broad-based instant incentives. This partnership demonstrates part of the commitment by Iberdrola in assisting the utilities in REV related efforts. We will assess the



implementation of this platform and other possible partnerships pursued by Avangrid and Iberdrola on behalf of NYSEG and RG&E. 1.7. Assess the internal controls regarding non-financial risk areas.

Discussion

Internal control is the process designed by an organization to provide reasonable assurance that its operations are effectively and efficiently conducted, its financial reporting is reliable, and its compliance with applicable laws and regulations is achieved. We gauge the processes that the utility companies have in place and the management review cycle that ensures the adequacy of controls in place. This will be accomplished by reviewing what management relies on when reviewing and monitoring controls, as well as company procedures in developing supporting documentation. Additionally, we will review the results of testing performed during the year on these internal controls, identifying any deficiencies that still remain.

Affiliate Relationships and Transactions

1.11(a) Examine the appropriateness of the processes and controls governing affiliate relationships and transactions between: (1) Iberdrola, its operating companies, and Avangrid; and (2) NYSEG and RG&E, and evaluate whether they provide sufficient protections to NYS ratepayers. 1.11(b) Determine the adequacy of NYSEG and RG&E’s policies, procedures, and training programs related to affiliate relations and the separation of regulated and unregulated activities.

Discussion

New York Standards of Conduct – NYSEG and RG&E are part of an extensive network of companies affiliated with and controlled by Iberdrola S.A. and Avangrid, Inc. The regulated New York utilities’ relationships and transactions with each other, with Avangrid Service Company and with other entities are governed by Standards Pertaining to Affiliates and the Provision of Information (Case 07-M-0906, Appendix I to the Joint Proposal). Within these Standards, the utilities must adhere to Standards of Conduct which:

• Prohibit NYSEG and RG&E from marketing or providing sales leads to unregulated affiliates and prohibit giving preferential service rates or terms to affiliates.

• Require customer authorization before utility customer information is released to affiliates and restrict the release of customer or market information to all affiliates other than shared services companies.

• Provide the NYSDPS Staff with access to the books and records of companies affiliated with the utilities as they relate to utility transactions with the affiliates.

• Require pricing standards for the transfer of assets between the utilities and non-utility affiliates and for standards for the provision of services between utility and non-utility affiliates.



• Require the utilities maintain employees separate from those of affiliates and establish conditions on the transfer of or loaning of employees between the utilities and affiliates.

• Regulate joint utility and non-utility affiliate officers, including a restriction on the percentage of utility officers who may also be officers of utility parent companies or affiliates.

• Provide for the provision of corporate services to the utilities by a service company at fully loaded cost, with the service company subject to the same conduct standards as the utilities.

• Require utilities to be protected from claims against unregulated affiliates that are covered by shared utility/non-regulated insurance policies.

• Prohibit the utilities from conducting most “competitive, behind the meter energy services.” Prior Management Audit – The prior auditor found that NYSEG and RG&E had significant transactions with each other, received significant charges and allocations from two service companies, and had smaller amounts of transactions with other affiliates, including an international affiliate, Iberdrola Energy Products. Among the more significant control recommendations resulting from the prior audit were:

• End the practice of treating certain inter-affiliate services as “convenience payments” and include them in normal affiliate time charging, billing and settlement processes.

• Update inter-affiliate service agreements to reflect current practices. • Improve the timeliness of payment for affiliate bills (some payments were more than 100 days

late.) • Improve employee affiliate transactions and rules training. • Improve service company time charging processes to make them more direct and cost-

causative. • Establish controls to prohibit inter-affiliate billing without a service agreement.

Organizational Changes – Iberdrola’s US organization recently changed with the merger of Energy East and UIL Holdings, which created Avangrid, Inc. The prior management audit examined the relationships and transactions within Energy East, prior to the merger. The combination of UIL and its four utilities with the former Energy East utilities changed the structure of the US operation and likely had a significant impact on the services and charges provided by the shared services company. We will consider all organizational changes and their impact on the New York utilities’ control over affiliate transactions and cost allocations. Key Tasks – Important tasks in the area of affiliate transactions and relationships will include the following:

a. Determine whether the New York utilities and their affiliates have accounting and administrative procedures in place to control and measure the flow of transactions and services between affiliates and whether these controls function to identify, record, bill and settle payments for transactions among affiliates on an accurate and timely basis.



b. Determine whether the services and goods provided to the New York utilities by affiliates, including shared services companies, are properly supported by service agreements. We will examine agreements between the New York utilities and their affiliates to determine whether they properly define the nature, pricing and other important terms governing transactions between the utilities and affiliates who are parties to the agreements. [Additional tasks additional tasks with respect to the services provided and costs charged by affiliates, particular the shared service company, to NYSEG and RG&E, are discussed within the Budgeting and Finance subject area.]

c. Assess the extent to which the New York utilities have internal controls and procedures in place to ensure compliance with the requirements of the New York Code of Conduct with respect to:

• Utility relationships with unregulated affiliates, • Protection of utility customer information, • Separation of utility and affiliate employees, and employee loans and transfers

between the utilities and other affiliates, • Pricing standards (e.g. market-based, fully distributed cost, etc.) for goods and services

exchanged and assets transferred among affiliates, and services provided by shared services companies to the utilities,

• Code of Conduct restrictions on utility officers who serve as officers of unregulated or non-utility affiliates,

• Utility claim protections in joint (multi-subsidiary) insurance policies. d. Evaluate the adequacy of employee affiliate transaction training, especially with respect to

identifying when services or goods should be charged to or shared with affiliates, and the timekeeping processes necessary to ensure such transactions are properly recognized and recorded.

e. Document the impact of organizational changes associated with the Energy East/UIL merger on the New York utilities on affiliate transaction controls and procedures.

f. Examine controls and procedures governing transactions between NYSEG and RG&E.

Planning and Risk Management

1.12. Assess the utilities’ Enterprise Risk Management program.

Discussion

Overland will review the documentation presented to the Audit Committee on enterprise risk and identify the methods by which risks are quantified and prioritized. This will include assessing the effectiveness of steps taken to mitigate identified risks. Additionally, we will gain an understanding of how the Enterprise Risk Management Program is applied to the subsidiaries NYSEG and RG&E from Iberdrola and Avangrid. We will assess whether there is a risk management committee in place at NYSEG and RG&E that is ultimately responsible for setting the level of risk that the utility companies are willing to accept. This assessment will include reviewing the experience and credentials of the committee as well as reviewing policies and documentation of the relationships between risk functions at NYSEG and RG&E and their relationship to Avangrid and Iberdrola. Finally, we will assess what role



Iberdrola and Avangrid play in developing and monitoring enterprise risk management procedures at NYSEG and RG&E. We will review to what extent, if any, risk program occurred to identify and mitigate specific risks associated with REV and cybersecurity. 1.13. Assess the utilities’ strategic planning processes, including the linkage of programs to strategic goals, the roles of Avangrid and Iberdrola, and the extent to which the strategic planning function is incorporated with other planning activities.

Discussion

Strategic planning provides a roadmap of a company’s plans for the future and how it is going to achieve that future. Successful strategic planning will encompass strong leadership from NYSEG and RG&E and effective communication to and with Avangrid and Iberdrola. We will assess the utilities’ missions, goals, and strategic planning processes, including the linkage of programs to strategic goals, and the extent to which the strategic planning function is incorporated with other planning activities. Additionally, we will examine the involvement of Avangrid and Iberdrola within the strategic planning process. We will perform the following steps in our evaluation:

a. Evaluate the process by which the utilities’ missions, goals, and objectives are set. b. Determine whether the corporate missions are aligned with NY regulatory requirements,

especially those established in relevant New York statutes and Commission policies. c. Determine whether the utilities’ goals and objectives are supportive of the mission. d. Gain an understanding of how the missions, goals, and objectives are communicated to

employees, the Board of Trustees, Avangrid and Iberdrola, and other third parties. Strategic planning is generally developed on a centralized basis, where subsidiary goals and objectives do not conflict with the parent company. We will assess the extent to which NYSEG and RG&E planning is supported by and is consistent with its intermediate and ultimate parent planning commitments

Review of Global SAP Enterprise Accounting System

1.14. The utilities upgraded their existing US financial SAP system to a new Global SAP Enterprise Resource Planning system, effective January 1, 2015. Evaluate (1) the basis for the upgrade and how the upgrade was planned and effectuated; (2) the extent to which the new system adequately supports NYSEG and RG&E’s management and technical business needs and processes including interfaces with other systems and compliance with state laws, regulations and PSC Orders (including FERC and PSC reporting); and (3) if a post implementation gap analysis study has been done to assess if the system is being used to its full potential, employee training needs and how gaps in the new system are being addressed.



Discussion

System conversions have the potential for significant, unexpected cash outlays as well as inefficient use of internal and external resources if not planned properly. Given that two years have transpired since the utilities upgraded their systems, we should have ample evidence to analyze their ability to execute their plans and realize any benefits from the conversion.1 As part of our review, we will request the documentation developed by the utilities to justify their system upgrade and the manner in which they intended to measure progress and success. We will determine whether they employed a project management office to oversee the conversion. We will interview key users to determine whether the new system operated efficiently and effectively on a timely basis, including any key interfaces that the new Enterprise Resource Planning system has with other systems. Based on discussions with various stakeholders, we will evaluate whether the new system was rolled out in such a way that the utilities continued to comply with state laws, regulations, and PSC orders. We will assess the comprehensiveness and effectiveness of employee training on the new system. Finally, we will determine what improvements the company has identified for future roll-out and when they plan to adopt them.

Electric Planning and REV Preparations

Integrated Electric System Planning

This audit area will be focused on determining how well NYSEG and RG&E (“the Companies”) are transitioning to an Integrated Electric System Planning model both through their existing processes, structure, and management and how they make decisions within the system planning function. Further examination will be centered on the adoption of technology, responsiveness to REV objectives, and ultimately a review of how the Companies balance tradeoffs regarding asset management. Integrated Electric System planning should effectively enable utilities like NYSEG and RG&E to make appropriate decisions on addressing system needs while balancing constraints of budget resources, while maintaining reliability. The industry overall has undergone a transformation where competing energy sources (renewables and distributed generation) can, at certain times, reduce peak daytime load. Theoretically, this peak load reduction can be thought to potentially reduce capital budgets; new challenges resulted including: the difficulty planning for intermittency, reverse load flow, and the general need to replace aging assets. Renewables, especially roof top solar and wind, present unique challenges since these resources generally serve to reduce daytime peak load during sunny/windy days, but on cloudy and low wind days, the intermittency of the resource can be problematic. As a result, a planner must be careful to understand each of these diverse and unique generation characteristics. This also is the first time in the history of the electric utility system where it may be desirable for power to flow bi-directionally, posing

1 This assumes that management tracked and measured the progress made before, during, and after the system

upgrade.



a challenge for a system that was designed for a single direction flow of power, resulting in additional design criteria for utility planners.

2.1. Assess the utilities’ progress in transitioning to an integrated system planning process.

Discussion

This focus area will be concentrated on the progress of NYSEG and RG&E toward an integrated system planning process. Key elements include the following:

• Planning process and tools • Management and organization • The effectiveness of the Companies‘ management structure of system design • The overall capability of the Companies to understand system capabilities

Planning Process – We will detail this element in section 2.11 that follows.

Management and Organization Structure Supporting Integrated Electric System Planning – In this area the audit team will look for evidence that the management and organizational structure in place supports what is considered an industry integrated electric system planning capability. We will investigate and evaluate the alignment of the various stakeholders involved in the process to gain an understanding of where they align and if there are any major gaps. We will assess gaps and challenges (if any) with the tools and the resulting effectiveness of the tools used to manage new resources such as Distributed Energy Resources (DERs). We will then evaluate the organizational structure and assess its fit for purpose for driving change. Audit themes will include:

a. Determine if employees, third parties, customers, processes, and technology are aligned in planning for integrated system planning.

b. Assess the adequacy of "change management tools" (training, communications, and employee acceptance).

c. Assess the adequacy of “management of change” processes. d. Evaluate processes, prioritization, criticality, and risk in decision making.

Management of System Design and Capabilities – This area will look for evidence of how NYSEG and RG&E plan for future industry and regulatory trends. Specifically, we will evaluate how the planning function investigates and integrates new system technology into their planning process. We will evaluate for evidence that planning criteria actively seeks out opportunities to introduce new technologies, when able, and will also investigate new versus old evaluation criteria. Similarly, we will address whether existing electric systems are capable of managing REV mandated projects since REV projects rely heavily on the support of Information Systems (IS) and Operational Technology (OT). We will also examine for evidence that IS and OT will be capable of supporting future growth beyond the demands of today and, if not, that plans exist to ensure that future growth can be supported. Additionally, we will be focused on ensuring that data integrity, security process, policies, and procedures are in place and whether these are being followed.



Audit themes include:

a. Review how new system technologies are evaluated in the planning process. b. Assess Information System/Operational Technology capabilities in meeting "Reforming Energy

Visions" (REV) objectives. c. Review procedures concerning data breaches that may involve customer data or affect system

operations. d. Assess load data collection processes and the ability to maintain data integrity/security. e. Review the process for exploring tradeoffs in replacing older technology and the impact on

depreciation assumptions of existing infrastructure, cash flow, and system reliability. 2.11. Describe how the utilities use the Commission’s benefit/cost framework in electric system planning and prioritization, and assess whether the utilities’ analysis fully complies with the Commissions’ framework.

Discussion

This area is an extension of section 2.1 where the audit team will specifically evaluate the processes NYSEG and RG&E utilize to make decisions regarding both short-term and long-term upgrades to the system, with specific emphasis on how/if they use PSC’s benefit-to-cost framework. This will include the process for identifying and justifying the need for major projects. It will also examine how NYSEG and RG&E include and consider the influence of Distributed System Platform and Distributed System Implementation Plans, where the effectiveness of these activities will be covered in more detailed in subsequent sections. This will be accomplished through the following investigation:

a. Evidence of master plans that define NYSEG’s and RG&E’s understanding of system needs. b. Evidence of long- and short-term system planning criteria and how the planning criteria are

established and embedded in the models used. c. Evidence of a planning prioritization process and scoring criteria for planning drivers of all types,

including Transmission, Subtransmission, Distribution, and related facilities. d. Evidence of the consistent criteria used for determining the need for a major system project

versus smaller, more tactical capital improvements or non-wires/projects alternatives such as strategic load transfer.

e. Evidence of how Distributed System Planning (DSP) and Distributed System Implementation Plan (DSIP) concerns enter into planning decision, including forecasted growth of DSP and DSIP and how they impact procurement processes (further examination in the DSP section).

f. Evidence of consideration of other load and infrastructure factors in the planning process including advanced metering and energy efficiency and load reduction due to economic or other factors.

Integration of Distributed Energy Resources into the Electric Distribution System – Effective planning to integrate DERs into NYSEG and RG&E systems is necessary to ensure appropriate decision-making for addressing system needs while balancing the constraints of budgets and resources. As discussed earlier, DERs present a unique challenge because they can reduce peak day-time load. As a result, a planner



must be careful to understand and properly model for all loading and generation criteria which may prove to be a departure from traditional models. Additionally, greater emphasis is placed on planning models at the distribution level with very specific and localized power flows. The following audit sections will be focused on DERs and their integration into the distribution system. 2.2. Determine and describe how Distributed Energy Resources (DER) are included as part of the utilities’ electric planning process.

Discussion

This section will examine how NYSEG and RG&E include and consider the influence of DSP&DSIP. This will be accomplished through the following:

a. Evaluate the plan and what DER assumptions are used to determine system needs. b. Evaluate short- and long-term system planning criteria and the models used to determine if

DERs are appropriately considered including evidence of probabilistic models. c. Determine if appropriate decisions are being made to curtail investments if deemed appropriate

by DER influences. d. Seek evidence that consideration is made to promote DERs that could help offset critical system

investments. e. We will also evaluate the cost of implementing the DSP and DSIP and ensure allocations are

appropriate to ensure mutual benefits to customers and DER participants. 2.3. Assess and describe efforts to procure DER to meet forecasted needs. Describe and assess the effectiveness of market enabling activities that are designed to facilitate DER provider and customer engagement.

Discussion

This section examines how DERs are sourced based on forecasted needs, by ensuring the portfolio of DERs are understood and are properly utilized for given market economic conditions. We will examine how NYSEG and RG&E inform and manage change necessary to engage customers with DER choices and programs. This will include reviewing implementation plans to determine if practices are working or are ineffective and if there are change management and supporting marketing plans. We will also examine the organizational structure in place to facilitate the growing demand of DERs.



2.4. Describe and assess the measurement processes used to collect and report information regarding the performance of DERs against system planning expectations. Identify areas of discrepancy and needed improvements.

Discussion

This section examines the processes and systems in place to ensure that NYSEG and RG&E are appropriately collecting, measuring, and reporting DER performance variances versus planned expectations. This will be performed by:

a. Examining the process governing the collection, measurement, and reporting of various DER performance metrics.

b. Examining the procedures for reporting performance including governance. c. Examining the reports and ensuring they are fit for purpose. d. Examining the process for managing exceptions.

2.5. Determine and describe how the utilities are aligning their maintenance and modernization efforts with their DSP/Distributed System Implementation Plan (DSIP) efforts.

Discussion

This section will examine what procedures exist for maintaining the system, inclusive of existing and new equipment required for Distributed System planning and implementation efforts. This will be accomplished through the following:

a. A review of most recent Distribution System asset condition as reported to the DPS PSC. b. Review maintenance policies and procedures and conduct an examination of evidence of

changes made to include distributed systems. c. Examine how planning takes DSIP into consideration when making investment and design

decisions. d. Examine the performance reporting of the maintenance function. e. Evaluate how maintenance is prioritized versus other system maintenance. f. CAPEX and Opex drivers evaluate if there is training specific for maintaining distributed systems

and their supporting infrastructure. 2.6. Determine and describe how the utilities plan to change their construction programs, planning practices, and equipment procurement practices as more DER are connected to the electric system.

Discussion

This section will examine how NYSEG and RG&E may have to modify their planning, equipment procurement, construction methods, and standards to accommodate the requirements driven by DERs. We will seek to understand that NYSEG and RG&E understand the design, construction, and operational



challenges presented by DERs and that they recognize the practices necessary to modify existing standards, procedures, and processes to accommodate.

a. The audit team will interview Company personnel to gain an understanding of the level of design, construction, and operational challenges presented by DERs.

b. All documentation will be reviewed for evidence of standards changes to accommodate DERs. c. Determine how change management is included in the Company training and engagement of

employees. d. Determine if there is a feedback loop to capture lessons learned and to make subsequent

changes as appropriate to standards, processes, and procedures. 2.7. Determine and describe how the utilities are developing new DSP platform service offerings that will generate utility revenue.

Discussion

This section will gather information and report on plans that have been developed or will be developed to ensure that the DSPs are designed to generate revenue. We will look for the market design and methods to market DSPs to customers to determine that there is revenue stream that would support mutual benefits for providers, utilities, and customers. We will also examine the organizational structure developed to support these activities and evidence of performance reporting to governance that is responsible for overall implementation. 2.8. Determine and describe the utilities’ efforts to develop more granular cost of service estimates for planning valuation and DER valuation purposes.

Discussion

We will examine how NYSEG and RG&E develop plans to implement a cost model. We will be looking for evidence that modeling is grounded in sound economic cost models which balance competitive suppliers. This area will consider the availability of supply provided by DERs as compared to other NYS utilities. This will also require an examination of the markets to ensure competition is enabled and will support the costs bore by the supplier. 2.9. Determine and describe how the utilities are planning to collect and manage system asset management data and how they will make the data available to DER providers.

Discussion

This section will be an examination of how NYSEG and RG&E collect and manage asset information to ensure that they have an accurate and detailed asset database that provides flexibility for appropriate information sharing with DER providers. We will also examine and look for evidence of policies and procedures that govern what information is shared and how including what commercial terms. This is critical since a certain level of transparency is required but too much transparency could make the utilities vulnerable to security concerns. We will also be looking for evidence of document control and



what systems are being utilized to provide appropriate asset information. An assessment of the quality of these systems, policies, and procedures will be provided.

a. Evaluate distribution asset management systems. b. Evaluate the policies and procedures in place to share asset information while protecting

Company information. c. Evaluate the process used to share information. d. Evaluate the process used to update information both through external and internal means.

Electric System Load Forecasting – As discussed in the DER Integration and Electric System Planning and the DSP Development section, Load Forecasting over the last many years has undergone a transformation as the penetration of distributed generation, demand response (DR), and energy efficiency (EE) programs have gained traction. This audit area will be a more specific focus on how NYSEG and RG&E is able to understand and manage these challenges so they can effectively forecast load in a way that optimizes capital planning.

Discussion With the potential for wide-scale penetration of roof top solar, details about the type of system, size and availability of generation is not always accessible, so a planner must be careful when forecasting for generation behind the meter. Planners are, therefore, encouraged to make reasonable assumptions to model system response. Additionally, this is the first time in the history of the electric utility system where power at the residential and commercial levels may be flowing bi-directionally, which is a unique challenge for a system that was primarily designed for one direction flow of power. This audit area will be focused on the forecast models used to simulate a number of key areas including the use of emerging technologies. We will also evaluate the access to information such as number of connected solar systems and how this is being modeled into the forecasts. We will evaluate if regional economic factors are evaluated to determine how they will impact load needs and to determine if historical forecasts are reviewed. We will evaluate the processes and procedures of load modeling and forecasting by performing the following:

• Evaluate model input criteria for modeling load on a centralized and regional basis. o Understand and evaluate how the two areas influence decisions.

• Evaluate how major, future uncertainties such as weather are incorporated into the forecasts o Determine whether these uncertainties are appropriately modeled in stochastic fashion.

• Evaluate if modeling includes forecasts for gas connections (reduced reliance on electric appliances), EE, DR, ER’s, and DG to ensure that the respective departments provide appropriate information.

• Evaluate the structure of system, regional, and substation level planning by understanding the driver and inputs and how each can benefit from both bottom-up and top-down approaches.

• Examine how macro-factors, such as NYISO’s input, determine and support planning criteria. • Evaluate how uncertainty is incorporated in the forecasts. • Evaluate if regional economic factors are evaluated to determine how they will impact load

needs and to determine if historical forecasts are reviewed.



2.10. Determine, describe, and evaluate the utilities’ means and methods for collecting disaggregated load data (disaggregated by time and location).

Discussion

We will evaluate the system(s) and/or tools that are used by the Companies to collect loading information and determine the level of detail that is collected for granularity. The level system capability and level of detail is very important because any deficiencies in this area could hinder planning processes:

a. Determine how they specify manage load monitoring locations. b. Collect load information. c. Frequency of collection and storage of loading data. d. Reporting process. e. Access policies. f. Frequency of review and correction of off performance.

We will ensure that the tools and reporting methods both serve the needs of all users and do so within Company policies and procedures. This includes ensuring that these tools scale if needs change or increase to ultimately support a growing user base. We will also evaluate the integrity of the systems to ensure they consider security and resist manipulation. 2.12. Determine and describe how the various components of the utilities’ information systems either will or won’t support short- and long-term REV objectives (e.g., REV DSIP related plans for granular substation forecasts).

Discussion

With the influx of transformative energy solutions and mandates such as REV, reliance on technology is essential to manage the complexity and provide flexibility of integrating new technologies. We will examine NYSEG and RG&E to ensure connectivity to existing systems while supporting existing system reliability when new technologies are integrated:

a. Determine if technology prioritizes grid reliability and stability when integrating. b. We will evaluate how IT and OT integrate and how the organization supports interrelated needs. c. We will review procedures concerning data and/or operational cyber breaches. d. We will determine if controls are in place to protect customer data and if system operations are

secure. e. We will assess the load data collection processes and the ability to maintain data

integrity/security.



2.13. Identify, describe, and evaluate changes to the utilities’ electric load forecasting process, including organization and staffing, since the previous management audit, taking into consideration policy initiatives that could have significant impact on load and energy requirements.

Discussion

Competing interests, such as REV, smart grid, cyber security, and system resilience, to name a few, have complicated system planning by adding additional dimensions to system planning. This task will involve an evaluation of staff and structure involved in the planning process to ensure they consider the opportunities that REV present. This will be accomplished by:

a. Evaluating what an effective organization that promotes skill development and innovative solutions would look like given the pressures and challenges around system planning.

b. Evaluate if the planning organization is flexible to emerging needs such as Smart Grid, REV, and all their subtopics.

c. Evaluate if the planning organization promotes change management both internally and externally to ensure that changes are not forced or simply just assumed.

d. Evaluate that the planning organization promotes cross group development to allow for shifts in resources.

e. Evaluate that the organization is designed to be responsive to governance and cross functional needs.

2.14. Determine, describe, and evaluate how the utilities’ forecasting and procurement processes are affected by substantial increases in distributed energy resources (demand response, distributed generation, etc.), energy efficiency, and migration of retail customers to competitive suppliers.

Discussion

In this section we will evaluate the effect of large increases in DER penetration is considered and planned. This will include ensuring that appropriate measures are in place to mitigate undue delays to the connecting DER providers and that staffing and system capabilities are able to ramp up to large shifts with demand. This will also be considerate of how EE programs influence planning challenges around DER and how effectively they are managed. Additionally, we will examine how customer supplier choice is managed including the ability to scale to increases in demand. This will be accomplished by understanding:

a. Staffing scalability in planning and energy purchasing groups if there are increases in connection needs.

b. The ability of NYSEG and RG&E to anticipate increases in interconnection requests. c. Understand the stress rapid increases in DER connections impart on these groups and

recommend changes as needed. d. Communication methods with DERs to understand how they manage the DER provider

stakeholder group. e. Ensure that groups understand how EE and supplier choice programs can affect the forecasting

and procurement procedures.



2.15. Determine, describe, and evaluate the extent to which load forecasts are and will be derived (e.g., performing a top-down analysis of a company-wide peak forecast and/or bottom-up aggregation of substation level peak demand forecasts). Assess the accuracy of those forecasts, both at the system wide and substation level, including how accuracy could be improved by combined and synchronized use of both methodologies. Describe how significantly increased DER penetration will impact existing load forecast processes and assess the adequacy and timeliness of the planned methodological changes required to ensure robust and accurate forecasts.

Discussion

We will assess how load forecasts are “derived” (from a top-down analysis of Company-wide peak forecasts or a bottom-up substation analysis) and why this method is used, and whether top-down and bottom-up analyses are synchronized. This is important since micro- and macro-factors should be considered when completing a holistic forecast. Specifically, transmission and distribution planners should be aligned to ensure that forecasts are effectively shared and rationalized. We will perform the following tasks:

a. Evaluate criteria for modeling load on a centralized and regional basis. (i) Understand and evaluate how the two influence decisions.

b. Evaluate if inputs include new gas conversions/connections, EE programs, EV, DR, and DG forecasts, and ensure that the respective departments provide appropriate information when requested.

c. Evaluate if economic factors are considered and how they are used to assist with forecasts. d. Evaluate the structure of system versus regional versus substation level planning by

understanding the driver and inputs and how each can influence in both directions, not just from the top (system level) down (distribution level).

(i) Evaluate the methodology used by NYSEG and RG&E and why. e. Examine how macro-factors, such as NYISO’s influence, determine and support planning criteria.

2.16(a) Determine, describe, and evaluate how total system-wide and substation-specific load forecasting are incorporated into the utilities’ electric system planning process. As DER penetration levels increase and as the sources and magnitudes of uncertainties increase, examine the value in incorporating probabilistic approaches into the planning process.

Discussion

This area will be a deep dive of section 2.15 concerning how load is forecasted at a specific substation. This is critical because DERs can influence loading and flow at a very specific location (substation), including providing reserve load flow. We will:

a. Determine the criteria and process for planning loads at specific substations. b. Determine if historical data is used to determine prior forecast accuracy. c. Determine effectiveness of modeling load at specific substations. d. Examine for evidence of loading planning at specific substations, where applicable, for sampling

purposes.



2.16(b) As DER penetration levels increase and as the sources and magnitudes of uncertainties increase, examine the value in incorporating probabilistic approaches into the planning process.

Discussion

This is an extension of the DER planning section above where, we will determine if NYSEG and RG&E uses probabilistic models to forecast future load by timeframe, and understand the preparations being made to ensure that this in embedded into the system planning organization. We will also examine how they will couple probabilistic methods with other methods used to understand future DER penetration, such as if communication channels are opened with DER providers.

Electric Supply Management (Purchased Power) – This audit area will specifically examine the policies, procedures, and practices in place as it relates to Purchased Power. Specifically, we will examine how well the procurement process utilizes and implements industry practices to manage risk, cost volatility, diversification of alternative energy sources, controls, and procedures to manage these activities. Procurement processes, when effectively managed can be a great source of cost stability if, policy, procedures, strategies and risk are managed effectively and a skilled procurement team is in place to ensure that best practices are applied to contain procurement costs. This audit will be a top down review with focused on a number of areas within the procurement discipline as it relates to purchased power costs. Other utilities in NYS will serve as a benchmark forming the basis of evaluation. This audit will understand the overarching supply portfolio principles, goals for the mass market default service customer to establish a baseline for procurement activities. The evaluation will also extend to the Internal Controls and the oversight governing the portfolio management of DSM and Response, EE programs, and the ability to move customers to competitive suppliers. Risk management practices will focus on how NYSEG and RG&E identify and qualify risk and how they ultimately score and rank the risk so it can be properly managed. This will also include the review of financial and physical hedging of fuel costs and the use of financial and physical hedging and transmission congestion contracts to stabilize costs. We will review the organizational structure and employees engaged in these audit areas. We will determine the effectiveness of the structure as well as the capability of the staff. We will review all relevant materials that outline the principals, strategies, practices, and goals of each of these areas and evaluate their effectiveness. We will focus on measures and goals that are defined to quantify the overall performance of this area. The measures will be assessed for effectiveness and appropriateness and will also be benchmarked against other utilities. The established measures will then be evaluated to determine what performance benchmarks exist and if they are appropriate and challenges goals.



Given the importance of REV and the utilization of DERs and other alternative generation sources the final area this section will be focused on the utilization of these alternative generation assets to promote fuel diversity. 2.17. Identify, describe, and evaluate the utilities’ electric supply portfolio principles, objectives, policies, processes, oversight, and risk management strategies.

Discussion

This section will review how NYSEG and RG&E utilize market tools such as financial and physical hedging practices and transmission congestion contracts to stabilize price fluctuation given a range of market influences. The factors we will examine include:

a. Review financial and physical hedging practices by customer type. b. How market tools are utilized and examined against benchmarked utilities. c. Examine use of performance benchmarking. d. Review portfolio principles and performance goals. e. Review portfolio oversight and internal controls.

2.18. Determine, describe, and evaluate the utilities’ financial and physical hedging practices as they relate to electric supply, including an examination of the role and use of transmission congestion contracts and rights used in the New York Independent System Operator’s (NYISO) wholesale market.

Discussion

This section will review how NYSEG and RG&E utilize market tools such as financial and physical hedging practices and transmission congestion contracts to stabilize price fluctuation given a range of market influences. The factors we will examine include:

a. Review financial and physical hedging practices by customer type. b. How market tools are utilized and examined against benchmarked utilities. c. Examine use of performance benchmarking. d. Review portfolio performance goals. e. Review portfolio oversight and internal controls.

Outage Management – Emergency Response has been a critical link to customer satisfaction over the last several years. This audit section will focus on NYSEG and RG&E capability to plan, prepare, execute and complete outage response. Specific areas of focus will center on how they supplement their work force through contracted and mutual aid support, how effectively they transition between incident classes, how they train and manage their local government liaisons that assist with outage response, and how they determine and meet resourcing needs for each outage response class. This section will also explore the emergency response plans to ensure that they represent industry best practices. We will also investigate to ensure that lessons learned from previous events are captured and incorporated into their response plans indicating a level of continuous improvement with special focus



on the sections below. A key element to effectively managing outage management is ensuring employees’ awareness of their role during an event so we will evaluate training records as well as perform a spot check on the assigned roles. We will further investigate staffing levels to ensure there is sufficient staff if a major event occurs. 2.19. Examine and assess NYSEG and RG&E’s processes for supplementing local workforces during outage events under both local ICS and Area Command Planning activation. Include assessment of crew movement as well as trigger points for change from local Incident Command to Area Command. Assess overall mutual assistance levels requested and the timing of such requests.

Discussion

This section will examine NYSEG’s and RG&E’s process and procedures for augmenting their workforce and the triggers for activating those resources. Given that utilities have a workforce that is resourced for primarily day-to-day work demands, we want to review what specific relationships are maintained with contracting firms and evaluate how they participate in mutual aid or other forums. We also will review the Companies’ decision points for activating additional crews. We will include a review of support crews, such as damage assessment, vegetation management, wires down standby, metering, and others (inclusive of utilizing gas crews) as deemed necessary. We will therefore examine:

a. Evidence of plans and procedures that detail crew activation processes. b. How the Companies plan for the specific crews needs for an event.

(i) Pre-event and during event. c. Evidence of contracts for additional crews. d. Specific triggering events for activating additional crews by tier (from other mutual aid, Avangrid

utilities, other area utilities, and contractors). e. The decision matrix or similar tool identifying who makes the decision to augment crews and

review the activation process and its effectiveness. f. A review of how crews are on-boarded upon arrival and how they obtain work assignments. g. A review of how crews are physically tracked during an event and how work progress is

determined. h. A review of the process of roving crews from one location to another (coordination). i. A review of the crew demobilization process. j. A review of how lessons learned are captured and result in modification to plans (and when

these are refiled). 2.20. Examine and assess how NYSEG and RG&E’s transition from an event that requires local Division resources (Class I and Class II) to a Class III outage event.

Discussion

This area will determine how NYSEG and RE&G transition from a Class I or II event where local resources are deemed sufficient to a Class III event where there will be a significant need for external resources. Specifically, we will be reviewing the following:



a. The decision triggers and the person(s) in charge of making the decision to move from a Class I or II to a Class III event.

b. Evidence of the ability to scale from a Class I or II event to Class III and determine how timely and effectively the activation process occurs.

c. A review of all support functions including whether or not the Companies are able to activate the additional IT and IS systems to scale up to a Class III event.

d. A review, utilizing the information gathered in section 2.20, when outside resources are activated and how.

e. A review of the training and preparedness plans and drills for activating internal resources that are not normally activated for a Class I or II event.

2.21. Examine and assess how NYSEG and RG&E train county and local liaisons to assist in responding to outage events.

Discussion

This section will focus two-fold on how NYSEG and RG&E train their internal employees to perform in a Government Liaison role and how they train government officials, including first responders such as fire, rescue, and department of public works (DPW) organizations with respect to safety and on Company emergency response policies and procedures. The Government Liaison role is an increasingly important role. This role is an important conduit between the utility and local, county, and state government to assist with the coordination of life safety, then stabilization, and ultimately restoration. This ensures that all agencies priorities are coordinated. Therefore, this area will focus on how they the Companies train employees on the following:

a. ICS Orientation I-100 ICS. b. Understanding of the Companies’ Electric Emergency Response Plan. c. Understanding of the utility system and safe operations. d. Understanding of government liaison process.

Additionally, since we believe in the important link between government and utility, we believe that government officials should be trained on the processes and systems that the utilities follow including what to do in the case of finding a “downed” wire and how they train on safe operations. 2.22. Examine and assess how NYSEG and RG&E determine and meet their resource needs during Class I, II, and III outage events.

Discussion

This area is similar to section 2.21 where will examine how NYSEG and RG&E determine how many crews are needed during pre-event planning and during an event activation. We will determine if they use historical data, institutional information, or predictive models or a combination of all to determine the number of crews that are needed. We will also look for evidence of a plan that details how these



decisions are made coupled with the capturing of actual data, including advanced weather data, and how that is modified for future decisions.

Gas Planning

The Gas Planning audit area covers the following topics:

• Organization and staffing • Utilization of forecasts • Forecasting models • Gas supply procurement • Hedging practices • Distribution system design • Replace versus repair • Gas and electric coordination • Asset management

Audit tasks listed in the RFP are as follows. 3.1. Evaluate the organization and staffing of gas forecasting, procurement, and planning functions.

Discussion

This section of the audit focuses on the management and organization of gas forecasting, procurement and planning activities. Appropriate management implies well-qualified leadership along with adequate staffing organized in such a manner to encourage good communications between the various components of the forecasting, procurement and planning functions. An effective management organization and planning process is essential to a well-managed, efficient gas procurement function. This area of the audit will include the following tasks:

a. Evaluate the organization and staffing of gas forecasting, procurement, and planning functions. b. Review organization structure, reporting relationships, and integration with the NYSEG and

RG&E gas business. c. Review the qualifications, background, and experience of gas forecasting, procurement, and

planning staff. d. Assess if staff has specific industry training and certifications in the gas forecasting,

procurement, and planning functions. e. Determine if staff participates in gas forecasting, procurement, and planning industry

committees either at the state, regional, or national level. Overland will review the interaction of the forecasting, procurement, and planning function organizations by examining the procedures and practices conferring authority and responsibilities. Additionally, Overland will gain a perspective of the formal and informal communications between the various groups to ensure that the necessary information is being communicated in a timely manner.



Furthermore, we will look for interaction between NYSEG and RG&E with regards to sharing of knowledge, expertise and staff in these critical and cost intensive gas utility functions. 3.2. Evaluate the development and utilization of forecasts for gas sales and reliability purposes. Determine if separate forecasts are developed for gas sales and reliability.

Discussion

This section of the audit focuses on the gas load forecasting process with the objective of ensuring that the process is capable of identifying forecasted customer loads. Gas load forecasting affects supply reliability, procurement costs, gas system planning and design; and impacts the regulatory, financing and strategic planning functions. The amount of gas used by individual customers and the send out in the gas distribution system fluctuates with weather and by season. Accurate gas load forecasts must also incorporate customer additions, reduced consumption through increased energy efficiency and customer consumption trends. The effectiveness of the load forecasting function can be judged by comparing forecasts with actual requirements. Forecasts typically are judged with respect to the backdrop of normal, which is defined by the utility based on system requirements from years past along with known or predicted changes. This area of the audit will include the following tasks:

a. Review the criteria utilized in various forecasts developed for gas sales, customer demand, and reliability purposes. Types of forecasts could include: Design day, Peak versus off-peak, Near-term forecasts (next year), Mid-term forecasts (five-year), and Long-term forecasts (10 or 20-year).

b. Assess the correlation between the various forecasts developed for gas sales, customer demand, and reliability purposes for all types of forecasts noted above.

c. Assess the validity of the data used to develop short-term and long-term gas forecasts by understanding data source limitations.

d. Determine how developed sales and reliability forecasts impact gas system planning. Overland will review the various types of forecasts developed for gas sales, customer demand and reliability purposes as these forecasts serve multiple purposes. It is critical that the entire utility organization rely on one source for forecasting, if this were not the case then the corporate business plan, NYSEG and RG&E obligations with respect to the NYSPSC’s Winter Supply Review and gas procurement and supply would be working with inconsistent assumptions resulting in potentially significant inefficiencies. Overland will evaluate the use of econometric and trending forecasting methodologies to develop the gas customer and sales forecast. We will confirm that the majority of sales and peak demand projections are gathered through econometric analysis and that sales are categorized appropriate customer segments, which could include: residential, commercial, industrial, other public authority and interdepartmental and residential and commercial segments are further subdivided into heating and non-heating classes.



3.2. Assess the models and inputs used to develop short- and long-term gas forecasts and determine the extent to which back casts are utilized to determine the accuracy of the forecasting function.

Discussion

This section of the audit focuses on the accuracy of the forecasting function. When the various customer segment sales forecasts are added together, the results are the composite total monthly sales forecast. At this point, adjustments for energy efficiency and targeted gas expansion are considered as adjustments to the forecast. Making these adjustments outside of the models requires ongoing analysis and prevents uncertain assumptions from creeping into the modeling process. This area of the audit will include the following tasks:

a. Review the models that NYSEG and RG&E use to develop its short- and long-term gas forecasts to ensure that they meet or exceed the industry standards.

b. Evaluate the modeling process including steps, key participants, short- and long-term planning horizons, etc.

c. Review forecast assumptions, as well as the basis for those assumptions as made by NYSEG and RG&E with respect to various types of load – residential, commercial and industrial-firm, off-peak or seasonal, and interruptible – and compare them to actual demand.

d. When forecasts loads are inconsistent with the utility’s strategic objectives, determine if new programs or plans are developed and initiated.

The load forecasts should provide accurate information for projecting future natural gas sales and serve as input into NYSEG and RG&E financial forecasts. Overland will analyze a comparison of forecasted gas sales to actual normalized gas sales to determine the current and trending variances. Generally, we would expect a variance of less than 5%. We will also seek to understand if the companies perform further analysis to reflect other known variations beyond whether, resulting in a closer correlation between forecast and actual normalized sales. These adjustments to reflect known variations beyond weather should be routinely analyzed to improve the accuracy of future forecasts. Similarly, when forecasting peak day send out under normal conditions and comparing the results to weather normalized actual send out, differences between forecast and compared to actual results again generally occur because of weather variations, customer usage variations and/or model specifications. Overland will look at the variances related to peak load as another indicator for forecasting accuracy. We will confirm that adjustments beyond normalizing weather are made to reflect known variations and that once analyzed are used appropriately to improve the accuracy of future peak day forecasts. n conducting our analysis, we will confirm that estimated actual energy efficiency savings reflect information filed by NYSEG, RG&E and the New York State Energy Research and Development Authority in Case 07-M-0548.



3.4. Review the utilities’ gas supply procurement strategies, policies, processes, and methods.

Discussion

This section of the audit focuses on assessing NYSEG and RG&E strategies, policies and processes to serve their combined gas customer base of almost 570,000 customers. In 2015, the total natural gas delivered by NYSEG was 56,533,000 DTh, while the total natural gas delivered by RG&E was slightly less at 51,498,000 DTh. Each year local natural gas utilities develop a plan to reliably help meet customer needs during winter heating season peak consumption periods. The plan is usually based on a forecast of expected loads and is later adjusted to actual weather-induced demand requirements. Numerous scenarios are examined when building a seasonal natural gas supply portfolio always against the backdrop of normal, which is defined by a utility based on local weather information and system requirements from years past. This area of the audit will include the following tasks:

a. Document NYSEG and RG&E’s decisions affecting gas supply management, population growth, and demand side management practices.

b. Assess gas forecasting, procurement, and planning accomplishment against written performance expectations.

c. Determine if performance measures such as price volatility, potential cost and out of market outcomes tolerance, utilization of firm capacity, and capacity release targets are utilized; and if so, compare performance results to NYSEG and RG&E peer companies.

The reliability and pricing of gas supply for NYSEG and RG&E’s ratepayers depends on the number of interactive factors, some of which are under control of the utilities and others which vary with the regional and national energy markets. Overland will examine the markets being served, the trends in customer migration, supply and delivery options available and underdevelopment, regulatory guidelines and risk factors associated with various options. We will confirm that NYSEG and RG&E’s energy resource planning and procurement is performed at various time frames and include the following:

• Immediate (monthly/weekly/daily) activities to ensure meeting immediate needs of customers and involves near-term planning based on forecasted weather conditions.

• Near-term (9 to 18 months) activities to ensure capacity and supply arrangements based on design weather.

• Long-term (2 to 5 years out) activities looking at future capacity and supply needs based on long-term customer usage and industry trends.

We will evaluate competition from alternative suppliers, effectiveness of energy efficiency programs and competitiveness of the spot market.



3.5. Review the utilities’ financial and physical hedging practices as they relate to gas.

Discussion

Hedging is a risk management required activity due to the volatility in natural gas prices. Historically during the last decade, major price spikes occurred along with a general tightening of the supply demand balance in U.S. gas markets resulting in higher natural gas prices and higher price volatility for U.S. gas consumers. Of course, natural gas market prices have been depressed in more recent years. Since natural gas is also the marginal or price-setting fuel in electricity markets in many regions of the country, the volatility in natural gas prices in the past also had a pronounced impact on retail electricity prices and vice versa, as natural gas-fired generation has been the predominant source of increased gas demand. Consequently, efforts to hedge natural gas price risk have become much more important for many market participants. This area of the audit will include the following tasks:

a. Review current NYSPSC policies and incentives associated with utility hedging practices. b. Review NYSEG and RG&E stated objectives and written policies for hedging natural gas costs. c. Review the percentage of gas volumes subject to hedging and over what time periods hedges

are employed. Compare NYSEG and RG&E policies with standard practice of other New York regulated utilities.

d. Determine the relative effectiveness of the NYSEG and RG&E hedging programs as compared to stated objectives and as benchmarked against other New York regulated utilities.

(i) Provide analysis of hedging gains and losses. (ii) Provide analysis of hedging costs.

e. Determine to what extent NYSEG and RG&E engages in open hedges or market price and commodity risk positions.

f. To the extent that NYSEG and RG&E accepts commodity and price risks, determine the impact of these positions over time and how such outcomes are distributed to utility and customer stakeholders.

3.6. Evaluate whether gas distribution systems are designed to ensure an optimal balance of results in the areas of delivery, safety, and upgrades.

Discussion

The maximum demand-design load-of a customer or group of customers determines the capacity required for the pipe layout serving them. Thus, the economic design of gas transmission and distribution facilities requires good estimates of the present and future demands that will be imposed on the system. The demand profile for the distribution system is made up of four categories of load:

• Residential, commercial and industrial-firm excluding space heating – firm load without space heating is called the baseload and is relatively constant day-to-day although it does change seasonally on and on weekends.



• Space heating – firm load used for heating of living or working space that closely relates to the weather, little or no use in the summer and maximum use in winter.

• Off-Peak or seasonal – customers who use gas on a firm or guaranteed basis during part of the year when consumption by space heating customers is low, using other fuel for the balance of the year resulting in an overall cost that is less than the cost of using competing fuels.

• Interruptible – load with no guarantee of a firm supply. When the demands of firm customers are such that no surplus is available, the LDC will serve notice of cut off to the interruptible customers must then resort to standby facilities using other fuels.

Taking these four categories into account, a flow model can be populated, certain planning assumptions made and detailed area and flow studies can be conducted. This area of the audit will include the following tasks:

a. Review how the system planning process supports the adequacy of distribution supplies and reliability of delivery systems.

b. Review planning criteria, methodologies, and records management systems. c. Assess conformity with current industry, state, and federal codes and standards, and uniformity

of engineering design standards and practices. d. Review gas delivery-related project identification and justification processes.

Overland will review system reinforcement projects to ensure they were developed based upon flow and integrity study report analysis. And since recommendations in these reports are largely and almost exclusively based upon assuring that adequate pressures are available to supply existing and reasonably anticipated firm loads, we will verify the before and after conditions to ensure the anticipated results from the study are realized. Both NYSEG and RG&E’s should have well-developed distribution engineering/design guidelines that provide procedural guidance for gas system planning. Overland will confirm that these manuals include guidance on the scheduling and performing system planning studies, sizing and layout of supply lines, material specifications, design of gas regulator stations, location of valves, providing reserve and loop ties, planning for contingencies, answering gas engineering requests, and report preparation. We will also confirm that the software used to conduct the system integrity studies is state-of-the-art and compares favorably to NYSEG and RG&E’s peers. 3.7. Review the decision-making process regarding replace versus repair and evaluate the impact on the overall construction program planning process.

Discussion

The overall age of NYSEG and RG&E’s mains and services in service are constantly increasing and subject to normal material deterioration due to corrosion and other environmental factors. In addition, certain materials historically used for gas pipe have proven to have reliability limitations and consequently increased safety concerns. To remove this type of pipe from their respective systems both NYSEG and



RG&E need to have well thought out replacement and repair processes in place to maintain the reliability and safety of their distribution systems. Gas pipeline safety has been an area where there has been extensive legislative activity at the federal level for both transmission and distribution piping. The program required for transmission piping is referred to as Transmission Integrity Management Plan (TIMP), while the program required for distribution piping is referred to as Distribution Integrity Management Plan (DIMP). NYSEG’s natural gas system consists of 20 miles of transmission pipeline and 8,151 miles of distribution pipeline, while RG&E’s gas system consists of 105 miles of transmission pipeline and 10,592 miles of distribution pipeline. The TIMP and DIMP plans not only document the decision-making process regarding replace versus repair, but bring together for each pipeline segment (transmission) or type of pipe (distribution) the original material makeup and operational history, an assessment of the current threats a pipeline is subject to, a thoughtful look at how threats can be mitigated and an assessment of steps to be taken to ensure pipeline safety. This area of the audit will include the following tasks:

a. Evaluate written policies regarding the replace versus repair decision-making process. b. Determine conformance to written replace versus repair policies in actual practice. c. Identify the impact of replace versus repair policies on the construction program, assessment to

include: financial impact-capital versus expense, number of projects/work orders created and perceived variance in safety.

d. Determine if the repair versus replace process is incorporated into NYSEG and RG&E’s Distribution Integrity Management Program.

e. Review the veracity of the IT systems and underlying data employed to support the repair versus replace decision process.

The gas distribution systems’ related tasks seek to ensure that all related facilities are designed to obtain optimal results in the areas of delivery, safety, and upgrades. Federal and state safety standards require the best engineering techniques available be used in gas piping systems. In addition, once a distribution system is installed, periodically there may be a need for repair or replacement. This is particularly true for piping materials, like cast-iron and bare steel that were historically used for piping in the industry. The repair versus replace decision potentially has significant impacts on safety as well as costs. In assessing this area, Overland will review the amount of leak prone pipe both NYSEG and RG&E’s have in their respective distribution systems and compare it to the overall amount of pipe. We will evaluate the replacement rate relative to the new leaks that the system is developing by types of material. In addition, we will analyze for the various high-risk types of pipe whether they are at elevated pressures and if NYSEG and RG&E take this into account in their facility replacement programs. 3.8. Evaluate the coordination between the gas planning and electric planning functions.

Discussion

There are numerous areas within the gas and electric planning functions that are complementary and when taken combined, promote the overall efficiency and effectiveness of the utility. Coordination can



be achieved through numerous types of interactions, such as an integrated business strategy, instituting a shared service organization structure, management and supervisory rotation, joint planning meetings, joint engineering departments, complementary standards, sharing of human resources when needed, sharing of specialized equipment, etc. This area of the audit will include the following tasks:

a. Review the utility’s policies which identify where coordination between gas planning and electric planning should be taking place.

b. Identify the coordination and communications that currently exist between gas and electric planning functions.

c. Assess where additional coordination between the gas and electric planning may be beneficial. Overland has observed utilities that seek integrated electric and gas functions, as well as those that pursue separate business units. There are definitely trade-offs between the two types of organization structures. Much of the sharing described above, drives the belief that both electric and gas are in it together, which is generally highly desirable. However, when the electric planning overshadows the gas planning due to the “big brother electric syndrome” it is easy for gas to be undervalued. Consequently, the gas business unit concept allows each entity to rise, but does not emphasize the desired coordination to produce maximum efficiency and effectiveness. In assessing this area, Overland will evaluate the degree of integration between electric and gas and determine whether strategy and resources are shared to support vigorous electric and gas functions. 3.9. Assess the readiness, capability, and possible impediments to meeting increasing natural gas load and possible alternatives to new long-term projects like pipeline capacity, including the ability of conservation, temporary compressed natural gas facilities, demand response, or other programs to meet peak load requirements in the future.

Discussion

Prudent gas system expansion is a highly desirable outcome, as in most instances new customer additions offset the use of fuel oil, a less environmentally desirable fuel while saving the customer money. However, each new customer added comes at a facility connection cost that should not be subsidized by the existing customer base. When significant amounts of load are added to the gas system, pipe capacity may become an issue requiring expensive reinforcement projects. Some of these projects can be delayed by improving customer efficiency to reduce peak load requirements or temporary solutions like compressed natural gas or LP facilities can be employed. Over the years new business tariffs have been devised that retard or promote expanding gas service. These tariffs need to be examined considering today’s economics to assess their full impact and whether they are achieving the desired societal outcome. This area of the audit will include the following tasks:

a. Review gas service expansion program goals and results obtained. b. Determine if current economic development programs and customer outreach practices support

expanding gas service.



c. Review current new business tariff for gas connections highlighting potential modifications and programs that would expand NYSEG and RG&E’s ability to connect new customers.

d. Assess the need for long-term projects to ensure additional pipeline capacity and examine alternatives considered by NYSEG and RG&E to meet future peak load requirements.

Overland will examine NYSEG and RG&E’s efforts to expand their respective gas service offerings and will evaluate the results obtained. The effectiveness of gas marketing programs can best be measured by customer load added as compared to the cost to add those customers. We will examine the NYSEG and RG&E’s new business tariffs for gas connections and identify modifications that would enhance their ability to grow the gas business. In Overland’s experience, some tariffs are overly restrictive in terms of investment payback prohibiting prudent gas main expansion to significant potential growth areas. We will seek to see if there is a well thought out balance between potential revenues and the cost to obtain knows revenues and if the utilities are willing to make needed investments. System reinforcement is the classic way of increasing pipeline capacity, however other alternatives exist. We will seek to understand if NYSEG and RG&E’s system integrity and flow study processes consider exploring viable alternatives to expanding pipe line size and pressure. 3.10. Evaluate the process for plant/infrastructure asset management decisions including factors such as asset condition, age, obsolescence, preventative maintenance, etc.

Discussion

Asset management is one of the core capabilities for sustainable business success. The objective of asset management is to derive the maximum benefits for the business by increasing the asset life through a continuous process that involves proactive maintenance and integrated information. Proactive maintenance is maintenance initiated before the asset deteriorates or fails. While integrated information is, information gathered to create an asset history that should help determine the need for future asset inspection, preventive maintenance needed to extend the asset’s life, and eventual asset replacement. Effective asset management decisions entail coordination between key utility support functions including: engineering, field inspection and maintenance, and information technology. This area of the audit will include the following tasks:

a. Review the processes in place for making plant/infrastructure asset management decisions. b. Assess the robustness and reliability of the data captured that would be helpful in assessing the

original materials and construction techniques used, the assets operating history and the results of past inspections.

c. Evaluate the ability of the data captured to be predictive of asset failure rates, noting the influence of such variables as asset age, condition, preventive maintenance, etc. on extending the life of the asset.

Given the level of asset intensity, asset management is a critical capability for utilities operating in both the electric and gas sectors. Overland will gas review assets that NYSEG and RG&E maintain. We will



evaluate how complete the asset registry is i.e. mains, services, pounds to pounds regulators, street regulators, house regulators, SCADA equipment, meters, etc. We will recommend where the effectiveness of the asset management of these facilities can be improved. We will seek to understand if asset management is a strategic objective and hence a focus of NYSEG and RG&E. Overland will examine if NYSEG and RG&E’s asset management programs are just a disparate collection of activities and checklists, which are not systematically designed to enable a higher level of performance. Furthermore, we will look for organizational competencies that demonstrate the knowledge, experience and skills in addressing asset management and preventive maintenance.

Budgeting and Finance

Ratepayers expect a utility to provide safe and reliable service at a reasonable cost. One of the primary methods by which utilities monitor their level of spending is through the use of budgets. In this area, Overland intends to assess the effectiveness of the company’s budgeting process and the considerations that go into managing it.

Background

In NYSEG’s and RG&E’s most recent rate cases, the NYSPSC agreed to adopt certain spending requirements that were included in a Joint Proposal filed by interested parties. These included, but are not necessarily limited to:

• NYSEG and RG&E are required to replace either a minimum of 26 miles of leak prone main in 2016, 28 miles in 2017, and 30 miles in 2018, OR they will replace on average 28 miles of leak prone main per year for the three-year period 2016-2018. Failure to do so will result in negative revenue adjustments.2

• Both utilities have net plant targets for each year of the rate plan that, if not met, will result in deferrals of the revenue requirement impact for the benefit of customers. In targeting these net plant balances, there is an underlying assumption regarding a certain level of capital expenditures that must be performed each year. However, NYSEG and RG&E have discretion regarding the timing, identity, and scope of the projects that will be worked in any given year.3

• Both NYSEG and RG&E have committed to a certain level of effort on vegetation management matters also. Failure to meet the requirements agreed to in the Joint Proposal subjects the utilities to negative revenue adjustments.4

As a result, it is critical for NYSEG and RG&E to have an effective means to track their expenditures as well as their progress towards specific longer-term goals. One common way of doing this is through the use of budgets. In our review of this area, we will determine what steps the utilities have taken to monitor and manage these types of expenditures so that they avoid incurring unnecessary, additional costs.

2 Joint Proposal Appendix M to Cases 15-E-0283 et al. 3 Joint Proposal to Cases 15-E-0283 et al. and Appendix P. 4 Joint Proposal Appendix J to Cases 15-E-0283 et al.



Additionally, the previous auditor raised concerns about the manner in which NYSEG and RG&E employed budgeting in the past. These concerns ranged from noted delays in approving capital budgets to an inability of the utilities to execute their capital expenditure plans on a timely basis and the lack of a common method to prioritize projects. As part of our review of the utilities’ budgeting approach, we will evaluate how effective the companies have been in addressing the previous auditor’s concerns.

Scope of Work

4.1. Evaluate the utilities’ capital budgeting processes, including capital priority setting and forecasting, project authorization and appropriation, and status and variance reporting.

a. Gain an understanding of NYSEG’s and RG&E’s budgeting process by reviewing formal procedures and documentation associated with recent budgets along with interviews of management.

b. Assess how the utilities prioritize capital spending projects, including distinctions drawn between projects mandated by rules and regulations and those that are optional and driven by system expansion.

c. Determine what, if any, input operations personnel have in prioritizing spending on capital projects and subsequent authorizations to proceed with work.

d. Assess the level of input that Avangrid and Iberdrola have on NYSEG and RG&E’s capital budgeting process through global limits placed on subsidiary spending, incentive performance metrics, etc. In the absence of any formal restrictions, evaluate the impact of Avangrid and Iberdrola representatives on the NYSEG and RG&E Boards in setting capex limits.

4.2. Determine the extent to which actual construction projects implemented are consistent with approved project.

a. For the most recent year, compare the construction projects authorized to be performed at the beginning of the year with those actually worked. Obtain explanations for significant discrepancies.

b. Perform a similar comparison of capital projects listed on Appendix P of the Joint Proposal and those actually worked in the most recent year. Obtain explanations for significant discrepancies.

c. Assess the level of involvement that operations personnel had in making changes to the original authorized project listing.

4.3. Determine the adequacy of capital and operations and maintenance budgeting guidelines, procedures, and the use of zero-based or similar budgeting approaches.

a. Based on recent documentation distributed to responsible personnel, gain an understanding of the basis for the budget amounts developed (zero-based, amounts tied to prior year budgets or actuals, top-down or bottoms-up, etc.).

b. Through interviews of key personnel (operations, finance, etc.), identify areas for budget development improvement.



c. Review budget variance explanations for evidence of deficiencies in the budget development process.

d. If applicable, review the results of internal audit testing that would indicate there are issues with budget development.

4.4. Determine the impact of regional and centralized planning on capital and O&M budgeting.

a. Evaluate to what extent the planning performed by the New York Independent System Operator with respect to electric operations is considered when developing the budget.

4.5. Evaluate the utilities’ management and control of capital budgeting, including a review of the methodologies used to control and manage program and project capital costs, the process for determining whether total expenditures are adequate, and controls to ensure that deviations from plans are justified and appropriately approved.

a. Gain an understanding of the method by which approved spending levels for capital projects can be changed through a review of procedures and other applicable documentation.

b. Through discussions with management and the utility boards, assess how they conclude that total expenditures on the utility system are adequate. To the extent that system reliability and safety performance metrics have been established, determine whether such metrics have been satisfied in recent years.

c. Evaluate what deficiencies internal audit has identified in the change order process in recent years.

4.6. Evaluate whether the utility is utilizing the most cost effective means to procure goods and services.

a. Determine the method(s) used by the utility to ensure that it is minimizing costs when procuring goods and services through reviews of formal procedures and interviews with personnel.

b. Evaluate whether those methods yield least-cost results and whether that is always the optimal choice.

4.7. Evaluate the effectiveness of internal control procedures to ensure that direct charges and cost allocations are appropriately billed among the holding company and its affiliates.

Discussion

The Corporate Governance subject area includes a discussion of New York Standards of Conduct for affiliate transactions and the audit steps required to determine whether sufficient controls exist to ensure that the utilities comply with the standards. The following audit tasks concern procedures surrounding affiliate transaction budgeting and cost distribution processes, particularly as they involve internal services provided and costs distributed from Avangrid Service Company to NYSEG and RG&E.



a. Evaluate the procedures used in Avangrid Service Company’s budgeting process to determine functions to be provided by the service company and how services are quantified and priced out to recover fully distributed cost. Evaluate how each affiliate’s share of budgeted cost is determined, and whether and to what extent the utilities and non-utility entities that are cost objectives in the service company allocation process have input during the budgeting process. For example:

(i) Do NYSEG and RG&E have any role in determining the types or quantities of services they “buy” from the service company?

(ii) Which services provided by Avangrid Service Company are driven by subsidiary demand, and which are corporate governance services that do not vary with demand? How are differences in the nature and type of services reflected in the budgeting and cost allocation process?

(iii) Are the utilities permitted to choose an outside service provider if the internal service company price for a service is too high? Is any type of price benchmarking done to assess whether the internal source (Avangrid Service Company) is the most cost-effective source for services?

(iv) Do NYSEG and RG&E have any ability to negotiate the price of services provided by the service company, or are they simply required to pay whatever price corporate and service company management determine to be fully distributed cost? If service company agreements provide for review and/or negotiation of service company prices, do the New York utilities take advantage of this during the service planning and budgeting processes?

b. Evaluate the methods used to determine the price of services and the methods used to charge and/or allocate the services to NYSEG, RG&E and other affiliates. Determine whether appropriate principles are used to distribute service company costs (direct charging when possible, cost causative allocations when direct charging is not possible).

c. Determine whether the methods to distribute costs to Avangrid’s regulated utilities are also used to distribute costs to non-regulated affiliates. In particular, assess the use of non-attributable cost allocation procedures that rely on measures of subsidiary size (assets, revenue, O&M expense, employees, etc.) to determine whether such methods distribute a reasonable amount of cost between Avangrid’s regulated and non-regulated subsidiaries.

d. Assess the reasonableness of corporate-level costs allocated from US or Spanish holding company organizations and the methods used to distribute such costs. To the extent corporate governance expenses are distributed to NYSEG or RG&E, assess their reasonableness, potential redundancy (similar costs allocated from multiple levels) and necessity for the provision of utility service in New York. To the extent the State of New York has traditionally excluded any such costs from revenue requirements, determine whether they are properly identified and can be segregated on NYSEG’s and RG&E’s books.



4.8. Evaluate the utility’s Pension & Other Post-Employment Benefits plan asset investment strategy, including an assessment of the level of risk, the utility’s ability to meet its plan obligations, and the appropriateness of the diversification of funds.

Discussion

We will review the plan investment allocation and assumed returns in comparison with peers and best practices. We will determine if budget, financial forecast and funding assumptions are consistent with plan obligations. We will assess the adequacy of policies and procedures associated with management and board oversight of the NYSEG and RG&E plans

Additional Key Tasks:

a. Based on a review of the most recent actuarial report(s), determine the funding status of the benefit plans.

b. Review board materials and reports to executive management that justify asset allocation of the plans from third parties in order to judge whether they are reasonable.

c. Determine the reasonableness of discount rates used in determining the present value of plan obligations by comparing to similar companies.

Project Management and Work Management

Discussion – Project Management

Having a robust Program and Project Management framework and methodology is critical to managing large capital projects. With the general competition for resources, all organizations benefit from managing cost, scope and schedule through application of this methodology. This audit area will focus on NYSEG and RG&E’s methodology and application of the methodology. Project Management as defined by Project Management Institute is temporary and unique endeavor which requires coordination, control and reporting to deliver on time, on budget results.5 Given the complex nature of the work and the required coordination, industry frameworks and best practices exists to guide organizations on effective implementation. PMI organization defines five process areas that a properly managed project must cycle through. These process areas are:

• Initiating • Planning • Executing • Monitoring and Controlling • Closing

5 What is Project Management. Retrieved September 09, 2016, from https://www.pmi.org/about/learn-about-

pmi/what-is-project-management.



Understanding the process areas and building a framework, while a good start, is not enough to effectively manage projects. For that reason 10 knowledge areas are defined and are the basis for continued learning and development of a project manager. These knowledge areas are also unique where they contain a number of soft skills that are ultimately a development opportunity that should not be taken for granted. For reference the 10 knowledge areas include:

• Integration • Scope • Time • Cost • Quality • Procurement • Human Resources • Communications • Risk Management • Stakeholder Management

The difference between a well-run project and one that is not, or has no clear project manager can result in significant budget and cost overruns and scope creep. With the critical need for well-run projects to optimize a finite capital spend, and the finite amount of human resources to complete critical programs, it’s in the best interest of NYSEG and RG&E to ensure they manage a robust project management group who are well qualified and utilize an industry standard framework.

Discussion – Work Management

Effective work management is the ability to initiate, plan/schedule, execute, manage/track and close work products in an efficient manner. This audit area examines the methods and capabilities to execute this critical process. Sections of this audit area will be more specifically focused on the leak prone pipe replacement programs, including flood zone management, risk models, and other factors used to determine mains to be replaced, verification that high risk pipes are replaced, and the program’s impact on total system leaks. We will also assess and evaluate the utilities’ Incident Investigation processes to comply with Pipeline Safety Regulations and Best Practices: gas leaks, carbon monoxide, facility or equipment failure, explosions, testing of pipeline and equipment investigation for analysis of any failure or accident to determine its cause and to minimize the possibility of recurrence, etc. Over the years the utility industry has been evaluating the most effective ways manage their human resources to ensure that they maximize the productivity of crews through minimizing the amount of rework, minimizing the amount of windshield time, ensuring they have the right tools and equipment for the job, and effectively managing the emergency response and emergent work. Industry response has been focused on schedule management, process management and the underlying systems that



assist with the effective management and measurement of work. Critical success factors include but are not limited to the following:

• Clear process maps that are relevant to the work management program. • Constant evaluation of the effectiveness of work management processes and continuous

improvement. • Work management system or systems that integrate into the process, and do not drive the

process. • Mobile work management systems that are appropriately utilized by the field force and are

connected to the primary work management system. • Realistic locked down scheduling which is adjusted on exception only and reporting the

exceptions and documenting for later improvement. • Prioritization of high risk assets and their repair or replacement. • Metrics that are visible to all employees responsible for the work management program. • Appropriate resourcing and response to emergent and emergency work. • Linkages to the project management, customer and asset management groups. • A work management program that includes and is responsive to the needs of both internal and

contracted resources. Additional challenges to capital spend also include inventory management and the effectiveness of ensuring that the right material is delivered at the right time. This highlights the importance of ensuring that all departments are responsive to the work management process, and remain coordinated when any change occurs. This all demands that effective processes and underlying systems are functioning, understood, and continuously improved upon. Departments that are linked via processes to the work management program include but are not limited to:

• Asset Management • Engineering Design • Construction and or Field Contractor Management • Inventory Management • Project/Program Management

This audit area will be focused on a range of concerns to ensure that not only are processes effective now, but that it will also be responsive and scalable to the new challenges presented by any changes in spend. The audit will consider all groups within the work management program, including those whom are outside but are enablers, to evaluate and demonstrate evidence that the scheduling of work is effective and maintains high levels of productivity through careful and realistic planning. We will also examine the effectiveness of the crews through their ability to obtain the materials they need, designs that are required, and evidence of standards being followed. We will also understand and examine the effectiveness of how emergent and emergency work factors into the normal operations of the work management program. This is necessary since this type of work and cause schedule delays and cost overrun of capital construction and customer derived work.



A key component of this audit area will include the examination of the existing work management systems, as they relate to the work management process, to understand its fit for purpose, the age of the system and the limitations that this might present. The integration of mobile work management platforms has been a major focus of utilities over the last decade and if implemented effectively can be very useful for the crews using them and can provide an abundance of information for the company. We will evaluate the deployment of this technology, and how adequate the platform is in its ability to provide customer information. 5.1. Evaluate the management of projects and programs, including the design, estimating, engineering, scheduling, procurement, execution, oversight, and review processes. This audit area will be focused on the holistic review of the project/program management at NYSEG and RG&E. We will focus on the following areas:

a. Examine for good practices related to how they prioritize projects by performing the following: (i) Review of the measurement systems that are used to prioritize projects.

(ii) Review of the calibration and approval of prioritized projects. (iii) Understand how emergency or emergent projects are managed. (iv) Documentation of prioritization decision.

b. Assess the planning procurement and management of materials, equipment, transportation and other logistical support for program and projects.

(i) Review the documentation and planning criteria for long lead time items. (ii) Evaluate how materials are procured and scheduled.

(iii) Understand how materials are transported and staged for pending and on-going projects.

(iv) Document areas where materials were not at the right place and at the right time and understand what mitigation plans were put in place and find evidence of future improvement.

c. Review the type and tools used for estimation, including study, design and construction grade estimating processes.

(i) Understand the groups who are consulted for estimating support. d. Review decision-making to optimize use of in-house workforce, review contractor/engineering

bidding practices. (i) Review the program management process.

(ii) Determine how resource decisions are made and document how they are made. (iii) Evaluate how resources are tracked and monitored.

e. Review the integration of planning and engineering into the project/program management process including their participation in all phases of the project management lifecycle.

f. Review planning and management/oversight of in house and contractor projects, assess quality control and assurance processes at the project level.

(i) Determine the decisions made to determine in-house verse contracted engineering and construction.



(ii) Determine the controls and reporting in place to monitor performance. (iii) Evaluate the oversight existing for the management of contracted resources. (iv) Assess how they manage performance that does not meet standards. (v) Review documentation of measures for performance.

g. Evaluate project execution within time and budget constraints. (i) Evaluate active and past projects for documentation.

(ii) Review selected project documents for evidence of scope, schedule and cost management.

5.2. Assess the effectiveness of quality control and quality assurance programs. This area will explore the processes and the teams responsible for the quality and assurance programs (QA/QC) in place at NYSEG and RG&E. Specifically we will be looking for evidence that existing work management systems and reports are being utilized to make decisions on the how and where of the performance of tasks. The goal is to ensure that these programs are robust and thorough and that corrections are appropriate and cascade through the utilities. We will:

a. Look for evidence of a QA/QC program and the processes that governs the program. b. Determine the organizational structure of the QA/QC program. c. Evaluate the systems, tools, and reports used by the QA/QC program. d. Determine how investigations/inspections are performed and evaluate samples. e. Determine how corrective actions are managed and propagate through the appropriate

organizations. 5.3. Assess the utilities’ processes for forecasting and tracking total project costs, work units, unit costs, and work quality for specific programs and projects and compare the accuracy of forecasted costs to observed actual costs and costs projected in rate cases. This section will examine the process and tools that are used to forecast and track results based on forecast for project costs, work units, and work quality. We will also look for evidence that accuracy is checked by comparing the forecast with actual results. It is important for not only the forecasting process that this occurs but that the results also get fed back into the estimating process for future refinement. The overall scope of this audit area includes:

a. Evaluate the tools that are used for forecasting and tracking results. b. Evaluate the process used for the forecasting and tracking. c. Evaluate the reports that are created and the governance used to manage the process. d. Determine if there is a feedback loop to refine forecasts and estimates. e. Sample projects to examine for evidence that forecasts and actuals are aligned and that the

governance process is effective at managing variances.



5.4. Assess how variances are incorporated, as appropriate, into the estimating process. Similar to Section 5.3, this section will be focused on how NYSEG and RG&E use results to fine tune estimates. We will understand and evaluate how variances that could be caused by a number of factors, including planned and unplanned challenges, are included in estimates. We will also understand if there is a feedback loop how is it used to refine future projects.

a. Evaluate how variances are determined in the estimation process. b. Evaluate the feedback loops to refine future estimates. c. Evaluate how and when unplanned variances are managed through the governance process and

determine if variances are approved or unapproved based on defined criteria. d. Seek evidence that variance lessons learned are share throughout the project and finance

organizations. 5.5. Evaluate measures or practices used to ensure contracts are evaluated and awarded on an impartial basis (related to the Transparency of Bidding Process). Our focus will be based on how effective is NYSEG and RG&E at ensuring the bidding process is not only transparent but considers the values and virtues of all bidders without prejudice to ensure that the right bidder is awarded a contract. This will be accomplished by identifying upfront and transparent criteria and tools that are designed to enable this approach.

a. Evaluate the RFP process to determine how bidders are solicited. b. Evaluate how the bidder process is managed including the systems used. c. Evaluate the communication process including how communication is shared among bidders. d. Sample bidder documents and evaluations to determine effectiveness of program. e. Determine how lessons learned are captured at the end of the bidder process and how they are

used to evaluate the effectiveness of overall decisions and if appropriate adjustments are made. f. Determine if an audit process exists and how often they perform audit of the bidding process.

We will seek examples. 5.6. Assess the leak prone pipe replacement programs, including flood zone management, risk models, and other factors used to determine mains to be replaced, verification that high risk pipes are replaced, and the program’s impact on total system leaks. This section will focused on the management of risk based gas programs such as leak prone pipe replacement, flood zone management and how they use risk models to prioritize these factors for either maintenance or replacement of these high risk pipes.

a. Evaluate the tools and methods used record risk pipe/facilities. b. Evaluate the tools and methods used to evaluate and prioritize risk pipes. c. Evaluate the process of inserting prioritized work into the work plan.



d. Understand the organization structure set up to support this process including reports used by this structure.

5.7. Assess and evaluate the utilities’ Incident Investigation processes to comply with Pipeline Safety Regulations and Best Practices; gas leaks, carbon monoxide, facility or equipment failure, explosions, testing of pipeline and equipment investigation for analysis of any failure or accident to determine its cause and to minimize the possibility of recurrence, etc. This section will be focused on the investigation process that is utilized to manage and comply with Pipeline Safety Regulations and Best practices for gas leaks, carbon monoxide, facility or equipment failure, explosions, testing of pipeline and equipment investigation for analysis of failure or accident to determine root cause for mitigation. We will evaluate the overall program for minimum compliance, and then will build by evaluating the following:

a. Evidence of a root cause analysis program for problematic equipment/systems/facilities to identify systemic issues and how mitigation is managed, we will also sample actual outcomes.

b. Evaluate the governance program in place to monitor program performance. c. Evaluate reports designed and utilized for monitoring program performance. d. Evaluate mitigation efforts and evaluate the process to insert work into annual budget. e. Evaluate efforts to share results with peer utilities.

5.8. Assess the work management systems and how the utilities use the systems to monitor workforce productivity, manage capital projects and maintenance work, and the systems’ effectiveness for reporting, planning, and performance management purposes. This audit section will focus on the effectiveness of the work management systems at NYSEG and RG&E. We will target not only on how effective they are as tools, but how effective the utilities are at utilizing these systems. This will include the evaluation of management and reporting used for the work management program as well as the governance that manages the effectiveness of this function. This will be an all-inclusive review where we examine capital and maintenance work.

a. Evaluate the systems and tools to manage the work management program b. Evaluate the utilization of these systems and tool against the work management process maps c. Evaluate the training and utilization of these systems and tools by those responsible for the

work management program. d. Evaluate the measures and reports used to measure performance and the governance that

manages the review of these reports. 5.9. Evaluate the day-to-day management of program and project schedules. The focus of this area is to understand and evaluate how NYSEG and RG&E manage their day-to-day program and project schedule. This particular area is looking at how effective they not only manage normal work flows, but also how they are able to manage change whether it’s based on emergent work



or unplanned emergencies. We will investigate how effectively they prioritize competing needs and how effectively they manage stakeholders through the change. This area will also investigate whether they decide to utilize external or roved internal crews to manage high priority but short duration work. It includes the following tasks:

a. Review the planning, scheduling, and executive of programs into daily work. b. Assess workforce management systems. c. Assess mobile technology deployment. d. Review day-to-day management of program and project schedules including management of

variances. e. Review processes for translation of rework, failures, repair history into corrective actions,

infrastructure age analysis, and repair versus replace. f. Assess feedback of work management systems into performance improvement opportunities

Determine if systems provide pertinent historical data for analysis.

Performance Management

Background

The process of measuring and managing a utility’s performance is critical in determining whether the utility is operating as effectively and as efficiently as possible, thereby providing the greatest value to its various constituents. This process is initiated through the board of directors and executives when establishing the mission, vision, values and/or goals of the utility. These core beliefs are typically communicated throughout the organization by means of the company’s corporate governance processes and procedures. The overall goals of the utility are frequently broken down into more detailed goals or key performance indicators that are applicable at a departmental or individual employee level. Performance management is most effective when the goals and key performance indicators at the employee and departmental levels can be easily linked to the overall goals, mission, and vision of the organization. Effective performance management also relies upon goals that are measurable, controllable, and require a reasonable level of effort to achieve. Aligning the interests of employees with that of the organization can be promoted by linking employee compensation to performance. Performance management should also provide decision makers with the information necessary to take corrective action when organizational goals are not being achieved. The direction of an organization is set by its mission statement. The mission approved by the IBERDROLA, S.A. board of directors for the group of companies which it controls, including NYSEG and RG&E, is as follows:

Our mission is to create value sustainably in carrying out our activities for society, citizens, customers, employees, shareholders, and other stakeholders, as the leading multinational group in the energy sector providing a quality service through the use of environmentally-friendly energy sources, which engages in innovation, leads the process of digital transformation in its area of activity, and is committed to the fight against



climate change through all of its business activities, with a social dividend and the generation of employment and wealth, considering its employees to be a strategic asset. Along these lines, we foster their development, training, and measures of reconciliation, favouring a good working environment and equal opportunity. All of the foregoing is within the framework of our strategy of social responsibility and compliance with tax rules.

While more extensive and detailed than most, the IBERDROLA mission statement mentions the three primary constituencies around which a well-intentioned utility designs its performance management process – customers, shareholders, and employees. This is a positive sign, but the audit will obviously delve into the matter in further detail to determine the extent to which performance measurements address an appropriate variety of functions as well as encourage effective management response. A unique aspect that Overland and its team brings to this project is the familiarity we have with these two utilities from the work we performed on the data verification audit completed in 2013 in which NYSEG and RG&E were two of several utilities whose performance metrics in the areas of electric reliability, gas safety, and customer service were audited for validity and accuracy. From this work, we not only know which performance metrics have high management visibility because they have the potential to generate negative revenue adjustments, but we understand the strengths and weaknesses of these metrics due to the way the companies chose to accumulate the underlying data.6 This information will be especially important if recommendations for use of alternative performance metrics become necessary. A review of the last management audit report indicates that some of the previous auditor’s major concerns in the area of performance management involved the companies’ lack of emphasis that they placed on benchmarking, the inadequate oversight of executive management compensation by the companies, and their use of inappropriate metrics and targets when determining incentive compensation. As part of our review, we intend to assess how the utilities have remedied such concerns in their current approach to performance management.

Scope of Work

6.1. Determine the adequacy of the performance management process and the performance measures used, including measures of achieving REV objectives.

a. Obtain all written policies, procedures or practices in the area of performance management at NYSEG and RG&E and evaluate if the performance measures used by the companies can be linked to the stakeholders listed in their mission statement(s).

b. Determine if the measures linked to each stakeholder are adequate, especially with respect to any REV objectives.

6 It should be noted that a similar, detailed review of the NYSEG and RG&E performance metrics is beyond the scope

of this particular audit.



c. Obtain an understanding of how all performance management systems, applications, and procedures are used by NYSEG and RG&E to organize, track or monitor performance and results of operations for each utility.

d. Obtain comprehensive listings of the performance measures that are tracked and monitored by management at both utilities. Included in these listings should be any positive or negative consequences for achieving or not achieving a specific level of performance.

e. Obtain a copy of all of the performance management reports that are utilized by NYSEG and RG&E for the latest completed fiscal year.

6.2. Assess the roles and responsibilities of the Iberdrola, Avangrid, NYSEG, and RG&E Boards of Directors in the performance management process.

a. Review applicable charters of the Iberdrola, Avangrid, NYSEG, and RG&E boards of directors and associated committees to assess the responsibilities of each as they pertain to the utilities’ performance management process.

b. Conduct interviews of key board members. During these interviews we will discuss how the directors provide oversight to the performance management process at NYSEG and RG&E.

c. Evaluate how often the Directors review the performance management reports and the process of implementing process improvements or “best practices” for areas of utility operations that are not performing at an optimal level.

6.3. Evaluate management accountability for performance and the inclusion of corporate and lower-level goals and objectives in management compensation programs.

a. Evaluate the effectiveness and appropriateness of incentive compensation oversight. b. Determine how NYSEG and RG&E tie individual and utility performance to employee

compensation. c. Assess how NYSEG and RG&E management determine whether corrective action is necessary

when goals and objectives are not met. d. Evaluate whether the utilities follow through in taking appropriate corrective action when goals

and objectives are not met. 6.4. Assess the extent to which incentive compensation performance targets are in line with the Commission’s goals and objectives (safety, reliability, environmental protection, or customer service) as opposed to financial goals.

a. Based on a review of executive and non-executive management incentive compensation plans, determine the weightings assigned to various categories of corporate goals (e.g., safety, reliability, customer service, financial, etc.) which are used in the computation of incentive compensation.

b. Based on a review of executive and non-executive management incentive compensation plans, determine whether any corporate goals serve as triggers for the release of employee pay.

c. Assess whether incentive compensation goals are realistically within the control of employees.



d. Determine whether targeted performance is consistent with NYSPSC requirements. e. Using the acquired information, assess whether the incentive compensation plan design for

NYSEG and RG&E adequately promotes NYSPSC goals and objectives. 6.5. Examine NYSEG and RG&E’s use of performance benchmarking with other utilities.

a. Determine what steps NYSEG and RG&E have taken to address the previous auditor’s concerns regarding the lack of emphasis placed on benchmarking in the past.

b. Obtain a copy of all benchmarking reports (internal and external) that are or were available to NYSEG and RG&E for the past two years.

c. Determine how utilities’ use of industry best practices drives operational performance and improvement.

6.6. Evaluate how the change in corporate structure (from Iberdrola to Avangrid) impacted the Company’s Performance Management Process. List each change.

a. Through review of historical and current policies and procedures as well as interviews of management and board members, determine what changes have occurred to the NYSEG and RG&E performance management process since the creation of Avangrid.

b. Absent an existing internal list, document each change that has occurred. 6.7. Determine and assess the extent to which internal corporate incentives, including in NYSEG/RG&E, Avangrid, and Iberdrola, appropriately reflect the interests of New York’s regulated utility operations.

a. Evaluate the relative size of NYSEG and RG&E to the Avangrid and Iberdrola family of companies.

b. To the extent possible, obtain the corporate performance metrics of Avangrid and Iberdrola. c. If possible, quantify the extent to which NYSEG and RG&E operations impact such performance

metrics.

Customer Operations

Background

The primary focus in the Customer Operations task area are the internal controls associated with consumer protection rules outlined in 16 YCRR, Part 11 (residential customers) and Part 13 (commercial/industrial customers).

Scope of Work

7.1. Examine the adequacy and effectiveness of each utility’s internal controls related to the Home Energy Fair Practices Act and Energy Consumer Protection Act (HEFPA) (16 NYCRR Pat 11).



7.2. Examine the adequacy and effectiveness of each utility’s internal controls related to the Rules Governing the Provision of Service by Gas, Electric and Steam Corporations to Nonresidential Customers (16 NYCRR Part 13).

Discussion

The consumer protections in New York’s Home Energy Fair Practices Act (HEFPA, 16 NYCRR Part 11) and the commercial customer rules in 16 NYCRR Part 13 include requirements for services provided by utilities to their customers. The primary subject areas addressed in the rules include:

• Service application and initiation – The rules require residential and non-residential services to be provided within specified timeframes (e.g., in most cases within five business days of meeting service conditions for residential applicants). The rules also address what may be required as conditions to qualify for service.

• Service deposits – The rules define the circumstances under which utilities may require deposits, the amounts that may be collected, and the period over which customers may pay. The rules also require utilities to pay customers interest on the deposits they hold.

• Service usage measurement (metering) – Metering rules establish limits on the number of consecutive usage estimates utilities may make without obtaining (or making additional efforts to obtain) a meter reading. The rules also address the provision of meter readings by customers and a customer’s right to pay for billing differences between estimated and actual usage in installments.

• Service billing and payment – A large part of the HEFPA and equivalent commercial rules is devoted to utility billing, collection and payment processes. Topics addressed include the content of bills, rules governing back-billing for usage that was not properly metered or billed when consumed, late payment charges, the amount of time customer have to pay bills before they are considered late, budget (levelized) billing plans, and deferred payment arrangements.

• Involuntary service disconnection and restoration – These include rules specifying the conditions, limitations and circumstances under which utilities may initiate disconnection for non-payment of bills or service theft, and related customer notice requirements and rights. The rules also cover service restoration procedures following disconnection.

Utility compliance with many of the HEFPA rules depends on procedures and processing routines governed by customer account, billing and meter data systems. Controls to ensure compliance with a number of the rules can be automated and should be built into NYSEG’s and RG&E’s customer information, billing and work scheduling systems. At least as recently as two years ago, both utilities used the SAP CCS customer information system, the same Avaya phone system and Itron (electric) and Metretek (gas) meter data systems. It appears from examples on the websites that customer bills for both utilities are identical (or nearly identical) in content and format, suggesting that automated system controls and routines applicable to one utility should be applicable to the other. We have taken this into account in estimating the audit effort required to audit customer operations.



Although there are differences between the New York rules applicable to residential and commercial customers, both sets of rules address the same subjects and issues, and many automated and procedural controls should apply to both residential and non-residential customers, with relatively minor differences. This means that audit tasks covering most NYCRR subject areas can be conducted simultaneously for residential and commercial customers. Key audit tasks include the following, for each utility:

a. Document the customer service environment, including the organizations and their management, staffing, use of contract labor, information systems and the degree of integration between RG&E’s and NYSEG’s customer service management, staffing and systems.

b. Review the metrics reported to the NYSPSC and maintained internally, as they relate directly or indirectly to NYCRR rules. Among metrics that may relate indirectly to the New York rules are customer satisfaction and customer complaints to the NYSDPS, and the trends in these metrics over time.

c. Evaluate the adequacy of customer service policies and procedures and employee training as they relate to New York consumer protection rules.

d. Document and evaluate the controls and procedures in place at both utilities as they relate to each key area of the rules applicable to residential and nonresidential customers, including:

(i) Service application and initiation (ii) Usage measurement and estimation

(iii) Billing and payment (iv) Involuntary disconnection and service restoration

We will document the automated and procedural controls RG&E and NYSEG have in place for each major HEFPA subject area. Given that HEFPA and equivalent commercial customer rules are highly detailed, the audit will consider rule materiality; that is, the number of utility customers affected by each rule, the consequence of utility non-compliance, and in some cases the potential dollar amounts involved. 7.3. Examination of the effectiveness and efficiency of the utilities’ Budget Billing process relating to customer overpayment/underpayment of bills under the program.

Discussion

HEFPA rules require that New York utilities offer customers a budget (levelized) billing plan, which is the opportunity to eliminate seasonal variations in bills by spreading estimated annual usage over 12 equal monthly installments. The rules require that budget billing plans be based on a recent 12 month period of usage (or estimated usage when a full 12 months of actual is not available), that during the budget billing year, customer bills show actual consumption and the amount that would be due if the customer were not under the plan, and that the utility’s plans are filed with the NYSPSC. We will review RGE’s and NYSEG’s budget billing plans and customer information system usage levelizing and estimation routines for reasonableness and consistency with HEFPA and equivalent commercial customer rules. We will



determine whether all categories of customers specified in the commercial rules are eligible as specified in 16 NYCRR 13.6(b). 7.4. Examination of the effectiveness and efficiency of scheduling routine field work to ensure goals of service quality and customer satisfaction are achieved.

Discussion

A utility’s field work scheduling and dispatch processes have the potential to facilitate or inhibit compliance with specific HEFPA rules, including requirements relating to the time between service application and service initiation, the time between mailing of final termination notices and service disconnection for non-payment, and the time it takes to have service restored after disconnection for non-payment. In addition to compliance with HEFPA, the utility field crew scheduling processes have the potential to affect customer satisfaction in a variety of areas not directly specified in the HEFPA rules, including customer and public safety. We will review each utility’s procedures and processes relating to scheduling and dispatching field work other than meter reading. This will include an evaluation of each utility’s work scheduling systems. The evaluation will consider whether NYSEG’s and RGE’s scheduling procedures and processes:

• Take into account the requirements of HEFPA and related commercial rules (e.g., a requirement that residential accounts have service established within five business days of meeting service conditions).

• Field collection and non-pay disconnection procedures are non-discriminatory with respect to geographic areas identified for collection/disconnection activity when accounts reach a given past-due age.

• Field work is prioritized in a way that takes safety into account. • The utilities include field activities in customer surveys and properly consider and adjust

scheduling procedures when and if surveys identify areas for improvement.



3. APPROACH, METHODS, & PROJECT MANAGEMENT This section of our proposal provides a detailed description of our audit approach within the parameters defined in the RFP, as well as procedures we employ in conducting all Overland engagements.

Audit Approach

Overland Consulting is well known for planning and performing management audits of large and complex utilities and their holding companies in a manner that is thorough and provides meaningful findings and recommendations. We will rely on using this approach in this management audit. We anticipate working and communicating closely with the NYSDPS Staff in each phase of the management audit. The Engagement Director at Overland will communicate regularly and frequently with NYSDPS Staff throughout each phase of the management audit to ensure that the audit objectives are being met, all recommendations are substantive and actionable, and that our final report (including the customer benefit analyses) is clearly understood and supported from our detailed analysis. Additionally, we will work closely with our primary subcontractor, FTI Consulting, ensuring that the audit objectives are being met in a timely manner in line with our work plan, with the overall objective of functioning as an integrated team. Monthly teleconferences will occur between the Technical Leads on both the Overland and FTI side to discuss the status of the audit, findings, and any audit issues identified. A weekly call will be in place between the Overland Project Manager and the Administrative Lead at FTI Consulting to discuss, at a more detailed level, the status of the audit from both Overland and FTI’s perspective. NYSDPS Staff will be invited for both the monthly and weekly conferences to stay informed of the status and any issues identified throughout the audit. The RFP states that the timeframe for completion of the audit from the award date to the submission of the final report should be approximately 11 months. Overland agrees with the NYSDPS that this is a reasonable timeframe to complete the management audit of New York State Electric & Gas Corporation (NYSEG) and Rochester Gas and Electric Corporation (RG&E), assuming reasonable cooperation from the utilities. We have not deviated significantly from the timeline provided in the RFP. Our anticipated timeline for this project is shown in Section 6 – Work Timeline. The audit objectives and project scope are summarized in our proposal in Section 2 – Scope and Objectives. This section of the proposal describes the management and administration of the engagement as it relates to the phases of our work, our project management and quality control procedures, and the deliverables we anticipate based on the RFP. Our management of this project incorporates the following key elements:

• An organized, phased approach • Ongoing, frequent, and timely communication with NYSDPS Staff and Project Manager • Protocols to govern the format and processing of data gathered • Comprehensive, systematic information gathering • Use of an automated data management system



• Use of proven project administrative systems • Assignment of project tasks to experienced personnel • Use of well-defined and thorough quality review and control processes • Thorough documentation of report analyses, findings, and conclusions • Review of relevant deliverables with NYSDPS Staff and the NYSPSC

Overland, with the support of subcontractor FTI Consulting, will conduct an objective and focused management audit in accordance with the standards adopted by National Association of Regulatory Utility Commissioners (NARUC) Consultant Standards and Ethics for the Performance of Management Analysis including:

• Staffing the engagement with qualified auditors and properly supervising the work of the auditors assigned to the project.

• Gathering sufficient, competent evidence to support all findings, conclusions, and recommendations necessary and relevant to accomplishing the project objectives.

• Documenting the basis for those findings, conclusions, and recommendations in an organized set of working papers and communicating the results of the audit in a meaningful audit report.

We will assess the policies and procedures of NYSEG and RG&E in each of the areas identified and addressed in the RFP. Our goal will be to perform the audit as an integrated team in a cooperative environment with NYSEG/RG&E management, recognizing the requirements of the audit, but also minimizing any undue burden on personnel caused by discovery, interviews, and other technical elements of the audit process. Our proposed audit includes the following principal elements:

• For the specific audit elements identified in the RFP, conducting a thorough audit and technical analysis of NYSEG/RG&E’s management functions and processes necessary to assess the effectiveness of their operating policies and procedures.

• Coordinating written discovery and interview requirements with the utility and NYSDPS personnel to conform to the project timeline.

• Communicating fully on at least a monthly basis with the NYSDPS Staff concerning project status and the development of audit findings during the course of the technical analysis.

• Considering recent developments in utility operations and management, as well as industry best practices, and explaining how these practices and developments can be implemented at NYSEG and RG&E when we observe that the utilities’ current processes and procedures are less than optimal.

• Developing new or modified business practices or procedures required to address audit findings and recommendations when modifications to current policies or procedures may be warranted.

• Developing a customer benefit analysis for each audit recommendation where applicable. The personnel assigned to this project are qualified, experienced expert witnesses in the subject matter of the audit. Should testimony and hearings be required, Overland is fully prepared and committed to defending the audit report in administrative proceedings before the NYSPSC.



Orientation and Preliminary Review Phase

Entrance Conference – Shortly after contract award and approval, we will meet with the NYSDPS Project Manager and Staff involved with or interested in the project. This meeting will focus on the detailed workplan, discovery procedures, and other administrative matters associated with the project. During this meeting, Overland will discuss its draft of the initial data requests to be sent to NYSEG and RG&E in advance of the Orientation Presentation as well as the logistics involved in planning and preparing for the Orientation Presentation. This initial conference with the NYSDPS Staff will also be an opportunity for Staff to address their views and objectives implicit in the various audit tasks identified in the RFP and for Overland to communicate how it will sharpen its focus on the Staff’s desired audit objectives.

Orientation and Preliminary Review – The primary objective during the orientation phase of an audit is to determine, as quickly and efficiently as possible, what information is relevant to review, where it can be obtained, and who can provide it. Overland believes that this initial task will occur efficiently, over a short period of time. The orientation phase of this project begins with an initial an Orientation Meeting/Presentation. The meeting will be attended by key members of the Overland and FTI project team, NYSDPS Staff, and personnel from NYSEG and RG&E responsible for coordinating the management audit. Based on the RFP’s anticipated schedule, we expect this to take place in May 2017. Additionally, more focused meetings between smaller groups will follow. During the orientation and preliminary review phase, we expect to gain a detailed understanding of NYSEG and RG&E and the operating environment. The initial meeting will also provide a venue through which we can discuss the initial set of discovery requests and to work with NYSEG and RG&E on an efficient process to obtain further information through interviews of subject matter experts and further discovery requests. It will be important to communicate and reach a consensus with the NYSDPS Staff regarding the proper approach to the audit at a more detailed level than is possible in the RFP or this proposal in order to produce a detailed and refined work plan. This version of the work plan will include a more detailed schedule of work to be completed, audit methodology, and detailed scope of work to be addressed based on this proposal and the RFP. Key tasks during the orientation and preliminary review phase will include:

• Attend the Orientation Meeting/Presentation with NYSEG/RG&E and NYSDPS Staff at the utilities’ headquarters.

• Review current financial and operating reports available from NYSEG and RG&E or through the NYSDPS Staff.

• Review responses from initial data requests and develop follow-up requests, as appropriate. • Identify management and Board of Directors’ personnel to be interviewed and schedule field

work trips. • Meet with NYSEG and RG&E personnel to identify the individual or individuals responsible for

coordinating discovery and interview requests. • Establish agreed-upon guidelines for the processing of discovery requests, treatment of

confidential materials, and the transmittal of electronic files.



• Prepare a refined and detailed work plan and obtain approval for the work plan from NYSDPS Staff. We anticipate obtaining approval of our work plan before beginning the Technical Analysis phase of the management audit.

Technical Analysis Phase

Technical Analysis – A significant portion of the technical analysis phase of the project will take place on-site at NYSEG and RG&E. The analysis phase involves the identification and acquisition of documents needed to complete the tasks listed in the work plan. Document review will be supplemented by interviews of managers, directors, and others relevant to the audit. All of our work conducted on-site will be coordinated with the utilities and NYSDPS Staff so that the utilities can make available the proper personnel and documents and the Staff can attend the interviews or document reviews. Data requests will be used to obtain written documentation of policies and procedures, when required, and to solicit data necessary to conduct our analytical review. Overland will use the refined and detailed work plan approved by the NYSDPS Staff to guide our work through the technical analysis phase, ensuring that all issues and objectives are addressed, leading to the development of significant findings, recommendations, and customer benefit analyses. Key project objectives during the technical analysis phase of work include:

• Fully developing all significant elements of the project objectives as detailed in the audit work plan.

• Conducting management and analytical reviews to put relevant evidence into a meaningful conceptual framework, consistent with project objectives.

• Obtaining an understanding of facts sufficient to permit conclusions and recommendations. • Testing and verifying that NYSEG’s and RG&E’s processes and procedures are in compliance with

company policies and industry and regulatory standards. • Thoroughly documenting all findings and developing conclusions regarding each identified audit

issue and communicating the preliminary audit results to NYSDPS Staff. Overland and FTI’s emphasis during this phase of work will be the development of practical recommendations that will benefit NYSEG/RG&E and its customers. In this process, we will verify compliance with applicable statutes, rules and regulations, and other regulatory policies that govern utility operations within the scope of this review. We will also review and consider best practices in the utility industry in each of the scope areas when developing our recommendations for process improvements. For each of our recommendations, as applicable, Overland will develop a customer benefit analysis. For further discussion of our process of evaluating the costs and benefits of our recommendations, see Section 4 of our proposal.

Sampling Techniques – During the technical analysis phase of this project, Overland will use procedures to obtain representative sampling where it is not prudent to test an entire population of data. In choosing the appropriate procedure to use in selecting a representative sample, Overland will consider how homogenous the population is so that the selected sample can be extrapolated to the population. We will also consider the sampling method that would yield the best representative sample of the



population. Some examples of sampling methods that we have used in the past are: monetary unit sampling (MUS), stratified sampling, and random sampling. While it is difficult to predict which sampling technique would be best suited to draw a representative sample from a given population, in general, Overland would use the following sampling techniques in the following circumstances:

• MUS – We would use this sampling method for a population containing items of wide variety of dollar amounts. This method has a higher probability of selecting higher dollar items in the population.

• Stratified Sampling – We would use this sampling method for a population that contains a few larger unit amounts and many smaller unit amounts. This method would be used to ensure that a higher percentage of the population was selected in the sample for testing purposes.

• Random Sampling – We would use this sampling method for a population where most, if not all, of the items within the population are similar in unit size.

There are other sampling methods that will yield a sample that is representative of the population that Overland may consider using. To determine an appropriate sample size for testing, Overland will utilize sampling guidance from the American Institute of Certified Public Accountant (AICPA) Audit Guide and Auditing Standard AU Section 350. Overland has demonstrated its ability to create and develop sampling procedures to test the attributes of a population in previous projects completed for the NYSDPS Staff. In 2009, we conducted a project in which we used statistical sampling to test over 1,000 National Grid Service Company transactions. In 2013, we used representative sampling to test the accuracy of metrics in the areas of electric interruption, gas safety, and customer service for nine large New York utilities.

Analytical Review and Substantive Testing – When appropriate, Overland will consider reviews of accounting and management procedures and internal controls to identify compliance deficiencies and opportunities for improvements. We will supplement this review on occasion with analytical and substantive procedures, which range from simple comparative analyses to use of financial models that consider multiple relationships and key statistical tests.

Report Phase

Towards the end of the technical analysis phase and the development of the customer benefit analyses, Overland will begin to create the management audit draft report. The report will begin with the project background and executive summary, which explain how we conducted the audit, and also contain a summary of our key findings and conclusions. The report will contain a chapter or chapters that cover each scope area and its subtasks as shown in the RFP. Each chapter will begin with a summary of findings and recommendations for the chapter, followed by a narrative discussing the process and procedures used to conduct the management audit for the specific scope area. The chapter will also contain our observations during the technical analysis phase and how those observations led to our findings and recommendations. The chapter will conclude



with the customer benefit analyses for each recommendation developed in the chapter. The customer benefit analyses section of each chapter will begin with the recommendation that corresponds to the customer benefit analysis and then will discuss the qualitative factors that comprise the analysis as well as a description of the quantitative factors, if applicable. Finally, where quantitative factors are involved, we will have a table summarizing the cost or benefit to customers as well as the period of time over which those costs or benefits will be achieved. Assuming a reasonable level of cooperation from the companies, we anticipate meeting the project schedule provided in the RFP by having a first draft of our management audit report by March 1, 2018. This draft will contain fully developed analyses, findings, recommendations, and customer benefit analyses. We expect that the Staff will review our draft and provide comments for Overland and FTI to address. After incorporation of the comments and revisions from the Staff into our draft report, we expect to submit the revised draft to NYSEG/RG&E so that the utilities can review the revised draft for factual accuracy. After incorporating any factual corrections from the utilities, Overland will submit a final draft to NYSDPS Staff.

Project Deliverables – In compliance with the requirements of the RFP, as well as in conformity with standard Overland project management practices, our work products will include the following:

• A work plan as described above in the Orientation and Project Mobilization Phase. • Monthly written status reports to the NYSDPS Project Manager, including copies of our

discovery data log showing the information requested and the status of NYSEG/RG&E’s responses throughout the project. These reports will also include variances against the schedule and budget and anticipated consulting activities for the following month. (To be provided within ten business days following the close of each month).

• A Midpoint Briefing where Overland will discuss preliminary observations and findings and potential recommendations.

• Copies of the draft and final audit report for review by the assigned NYSDPS Project Manager. Included in our draft and final reports will be an executive summary, which will describe the NYSDPS Staff and consultants involved in the audit, the interviews conducted, and summaries of recommendations and why they are being presented. Our draft and final reports will include the customer benefit analyses.

• A complete indexed set of work papers supporting the audit report, which will be delivered upon request to the NYSDPS Staff on or about the time of the final audit report.

• In-person briefings or meetings on our final report with the Department Staff, Commission, or NYSEG/RG&E’s management or Board of Directors, if required.

• Prefiled and oral testimony in support of our audit report, if requested by the NYSPSC. Aside from the above project deliverables, Overland and FTI intend to provide the Project Manager with informal status updates on at least a weekly basis. These updates will involve Overland communicating to Staff: project tracking against the schedule and budget, emerging issues, and upcoming tasks to be



completed. Overland will provide advance written notice of intended interviews and site visits, subject to the approval of and coordination with, the Staff Project Manager and NYSEG/RG&E.

Use of Computer Applications for Analysis and Work Management – Overland and FTI have network-based computer systems and customized project management applications to facilitate consulting projects and focused audits. We use our networks to centralize electronic project data, ensure daily backup, and for communication within the integrated project team. We use a customized database application (Microsoft Access) to manage data requests and responses. Because our proposed audit team resides in two locations, we anticipate the use of a secure FTP site, or some similar device, to ensure secure access to data by the entire project team. If desired, we can also provide access to audit data to the NYSDPS Staff, as we have done in past projects performed for the NYSDPS. Overland’s Project Administrator (Mindy Jack) will be assigned the responsibility of overseeing and maintaining the database application and organizing project data on the network. Regardless of the means of access, we will make our discovery database and audit data available to the NYSDPS Staff for its review.

Quality Control Over the Audit Process – Overland applies quality control measures at all stages of the audit process. At a minimum, any factual or mathematical errors will be detected and corrected through our audit control procedures. The Project Manager will review all of Overland and FTI work as it progresses. A second level consists of two separate but related reviews. A detailed, technical review of all work papers and analyses is conducted. This includes an independent check of the accuracy of all analyses, as well as verification to all source documents. It also includes verification of referencing of all materials in support of the audit report. The Engagement Director and Project Manager will also determine whether the proposed findings, recommendations, and cost benefit analyses are properly and completely developed and are consistent with the overall development of the audit. Finally, we anticipate a third level of review will be conducted by the Staff to determine whether proposed findings, recommendations, and cost benefit analyses are properly supported and fully address all audit matters identified in the proposed scope of work and related work plans. The Lead Consultants and Technical Managers will also review and comment on the technical and overall quality of their applicable sections of the final report, provide testimony (if necessary), or provide other project deliverables.

Contract Management – Major elements of contract administration include:

• Monthly status reports will contain a section on project activities and comparison to work plan, schedule, and project budget. Time will be tracked to work plan tasks to allow direct comparisons of actual versus planned work. Major variations in actual versus planned work tasks will be identified and addressed, as needed, in the status reports.

• Invoices will be submitted monthly and contain a detail of work by work plan task area, by person.

• Should any areas of analysis be deemed out-of-scope or if Overland believes that any factors outside of its control are potentially impacting the project cost or schedule (i.e., material delays in production of required discovery responses), Overland will immediately bring such matters to the attention of the NYSDPS. Overland will discuss and estimate the impact such conditions will have on the work, the project cost, and the project schedule. Overland will not assume any



changes to the project work plan, the project schedule, or project costs unless or until all appropriate documents and contract amendments are properly agreed upon and executed.

• Aside from monthly written status reports, Overland will keep the NYSDPS Project Manager informed with verbal communications on at least a weekly basis during the technical phase and as appropriate during the report development phase of effort.

• Where appropriate, Overland will also inform other relevant technical and administrative NYSDPS Staff of important project events or issues that may arise.

• Monthly status meetings will be coordinated with Staff and held to address project status, developments associated with the technical analysis, and any issues that may require resolution.

Hearings/Litigation Support – Overland understands that its report may be considered in a formal proceeding before the Commission. In this event, Overland project personnel are prepared to submit testimony in support of our audit report and to defend our findings and recommendations at public hearings. Overland will assist Staff through the procedural process as directed. Overland recognizes that these activities may include the review and comment on evidence filed by other parties, development of cross examination, and assistance with the development of briefs.



4. CUSTOMER BENEFIT ANALYSES The RFP indicates that whenever possible, the consulting firm is required to quantify the costs and benefits associated with each audit recommendation. These analyses should contain a thorough evaluation of anticipated costs and expected benefits including: one-time, ongoing and cumulative costs, potential benefits and risks, and potential savings and efficiencies. Our analyses will be developed. Our customer benefit analyses will help the Commission and Staff to develop implementation plans that are feasible and provide the most benefit to NYSEG and RG&E. Overland will begin developing the customer benefit analyses for our recommendations during the technical phase of the audit after we have discussed our preliminary audit findings and recommendations with the Staff. For each area in which improvements are recommended, we will evaluate the feasibility of measuring and/or estimating costs/benefits based on available data and, for those areas where feasible, provide a supporting cost/benefit analysis. To obtain the data necessary to complete these analyses, we will work closely with NYSEG and RG&E to identify current costs and estimate the implementation cost of each recommendation to obtain the best information possible to discern the actual costs and savings of our recommendations. Furthermore, Overland will work closely with subject matter experts to obtain reasonable estimates where appropriate for these analyses. Overland views this part of the project as an iterative effort, yielding analyses that are as accurate and meaningful as possible. Identified costs will include:

• Implementation and on-going costs associated with the recommendations, including additional labor, materials, equipment, systems, training and development costs, as well as any other costs that may be identified. These costs will include both one-time implementation costs (e.g., new computer hardware and software, etc.) as well as recurring O&M costs, recurring capital costs, and so forth. Additionally, cost estimates will be made regarding the risks associated with not implementing the recommendation.

Identified benefits will include:

• Program savings relative to “business-as-usual” or status quo include reduced capital and O&M expenditures (including labor, maintenance, reduced physical risk [e.g., reduced likelihood of forced outages and health/safety risks to the employees and the public]), reduced financial risk (e.g., lower weighted average cost of capital and ability to sustain greater financial leverage), and improved development of competitive markets. For benefits that are not directly quantifiable, such as provisions that improve separation from affiliates and reduce the likelihood of anticompetitive cross-subsidies, those benefits will be noted to assess their relative importance.

Response to Request for Proposal – Case 16-0610 – Comprehensive Management Audits of New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation


For some non-quantifiable impacts, determining whether these are “costs” or “benefits” may not always be clear. For example, a change in “corporate culture” (defined broadly as the way the utility does business) may have characteristics of both. To the extent we identify any such non-quantifiable impacts, we shall highlight them and explain why they may have both costs and benefits. An analysis of all of the cost components and qualitative benefits will be highlighted as well. Key issues associated with identifying and, where possible, estimating costs and benefits will include the timing of costs and benefits in the future. Overland has chosen to use a five-year timeframe to determine and calculate the costs and benefits to NYSEG and RG&E customers. We chose a five-year timeframe because we believe that the costs, benefits, and other impacts of our recommendations will have an immediate impact on NYSEG/RG&E customers, providing them with an overall improvement in both service and reliability. On a preliminary basis, we also have chosen not to use a discount rate to determine the present value of customer costs and benefits in our analysis in order to simplify our calculations. Also, a discount rate would have a minimal impact on the amount of customer costs and benefits during a five-year period due to the current cost of funds. Overland has developed a customer benefit analysis template that we will use for all of the recommendations in our audit report. The first table in the template will provide the qualitative information for the customer benefit analysis including: priority, background, potential risks, and timeline. The second table in the template will contain the quantitative data for the analysis, if applicable. This table will list the different types of costs and benefits that will be incurred in the implementation of the recommendation. The table also includes the timeframe during which the quantifiable cost of benefit is estimated to occur (Year 1 through Year 5). The bottom of the table is where the net customer cost or net customer benefit is calculated for each of the five years and in total. See Exhibit 4-1 – Preliminary Customer Benefit Analysis Structure.


© 2017 OVERLAND CONSULTING Exhibit 4-1

EXHIBIT 4-1 PRELIMINARY CUSTOMER BENEFIT ANALYSIS STRUCTURE

Recommendation(s): Description of recommendation – May include numerous recommendations if part of one process.

Priority: Suggested priority.

Background: Discussion of current process/system (as-is state) to be addressed by recommendation.

Benefits: Discussion of benefits realized as a result of implementation (to-be state). Potential Risks: Discussion of any possible risks if recommendation is not implemented. Expected Timeline for Implementation:

Expected Timeline for Improvement:

Cost Analysis: See recommendation-specific table below for analysis of costs. Benefit Analysis: Benefit analysis shown in recommendation-specific table below. Other Costs/Benefits:

NYSEG/RG&E Management Audit Customer Benefit Analysis Recommendation #_____

Cost Type Year 1 Year 2 Year 3 Year 4 Year 5 Total Labor Equipment Financing Cost

Total Cost Benefit Type Labor Equipment Financing Cost

Total Cost Net Cost/Benefit

Response to Request for Proposal – Case 16-M-0610 – Comprehensive Management Audit of New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation


5. PROJECT TEAM & RESPONSIBILITIES This section of our proposal identifies personnel assigned to the project, gives an overview of their relevant experience, and describes the project organizational structure and each person’s role in the project.

Project Personnel

Overland proposes the following personnel for this audit engagement.

Overland Personnel Project Responsibility Howard Lubow Engagement Director; Technical Lead

Robert Welchlin, CPA Project Manager; Technical Lead Gregory Oetting, CPA Technical Lead Frank DiPalma Technical Lead Bill Williams Lead Consultant

Patrick Duffy Consultant Mindy Jack Data Manager/Project Administrator

FTI Consulting

(Subcontractor) Personnel Project Responsibility

Ellen Smith Technical Director Colin Hassett Technical Lead Don Racey Technical Lead John Cochrane Senior Consultant Ken Ditzel Senior Consultant RJ Arsenault Senior Consultant

The NYSDPS requires that the consulting firm awarded this audit possess an adequate level of understanding and demonstrated experience to perform the management audit of New York State Electric & Gas and Rochester Gas and Electric Corporation. The audit elements, as outlined in the RFP, will focus on the following:

• Corporate Governance • Electric Planning and REV preparations • Gas Planning • Budgeting and Finance • Project Management and Work Management • Performance Management • Customer Operations



Project Organizational Structure

Howard Lubow Engagement Director

Technical Director

Howard Lubow Technical Lead

Corp Governance

Patrick Duffy Consultant

Robert Welchlin Technical Lead

Customer Operations

Gregory Oetting Technical Lead

Budgeting/Finance Performance Management

Frank Dipalma Technical Lead Gas Operations

Bill Williams Lead

Consultant

Ellen Smith Technical Director

Colin Hassett Technical Lead

Project and Work Management

John Cochrane Senior

Consultant

Ken Ditzel Senior

Consultant

RJ Arsenault Senior

Consultant

Don Racey Technical Lead

Electric Planning and

REV Prep

RJ Arsenault Senior

Consultant

John Cochrane Senior

Consultant

Mindy Jack Data Manager

Robert Welchin Project Manager

FTI Overland



Project Hour Allocation

The following is a breakout of the estimated project hours by project element and individual.

Individual Responsibility Summary

The following summaries identify areas of specific responsibility for members of the proposed project team and the scope area project team members will work on. For a summary of individual experience for each team member refer to Section 7 – Experience and Qualifications.

Overland Consulting

Howard Lubow. Mr. Lubow is Overland’s President and will serve as Engagement Director and Project Manager. He will have overall responsibility for Overland’s work and the subcontractor’s work, ensuring that key deliverables are provided on schedule. He will also serve as the Technical Lead for Corporate Governance, additionally he will evaluate the utility’s Pension & OPEB. Mr. Lubow is a public utility regulatory consultant with 40 years of utility industry experience. He has extensive experience with regulatory policy, utility finance, utility planning, and corporate governance. Mr. Lubow has served as Project Director for more than 200 consulting projects, including at least 15 projects that exceeded 5,000 hours of consulting effort, and has testified as an expert witness in over 100 regulatory proceedings. Robert Welchlin, CPA. Mr. Welchlin will serve as the Project Manager responsible for working with Staff, NYSEG, and RG&E on day-to-day activities for this audit and will be responsible for the efficient conduct of this audit. Additionally, he will serve as the Technical Lead in Customer Operations. He has more than 30 years of regulated industry experience and has been the Technical Manager for topics relating to customer operations in several recent projects for Overland Consulting.

HowardLubow

Robert WelchlinGreg

OettingPatrick Duffy

MindyJack

Frank DiPalma

Bill Williams

Ellen Smith Ken Ditzel Don RaceyJohn

CochraneColin Hassett

RJ Arsenault

Eng. Director/ Technical Lead

Proj. Manager/ Technical Lead

Technical Lead ConsultantData

ManagerTechnical

LeadTechnical

LeadTechnical Director

Senior Consultant

Technical LeadSenior

ConsultantTechnical Lead

Senior Consultant

Corporate Governance 432 200 140 402 - 40 - - 10 - 1,224

Electric Planning and REV Preparations - - - - - - - 126 72 408 106 492 118 1,322 Gas Planning 40 - - 32 - 332 332 - - - - - 736 Budgeting and Finance 72 140 228 60 - - - - - - 500 Project and Work Management - - 80 - 208 24 272 104 688Performance Management - - 348 128 - - - - - - 476 Customer Operations - 320 - 64 - - - - - - 384 Management Activities Attributable to the Project as a Whole: 56 56 - 32 176 16 16 - - 52 - 404

Total Project Hours 600 716 716 718 176 348 332 262 72 616 130 826 222 5,734

Case 16-M-0610SUMMARIZED PROJECT LABOR MATRIX

Audit Scope Area

Overland Consulting FTI Consulting

Total Labor



Gregory Oetting, CPA. Mr. Oetting will serve as the Technical Lead in the areas of Performance Management and Budgeting and Finance. He has over 15 years of consulting experience while at Overland. Mr. Oetting has extensive experience in the natural gas industry and previously served as Controller of an interstate natural gas pipeline. Mr. Oetting has served as a Technical Manager or Lead Consultant in several recent management audits performed by Overland Consulting. Frank DiPalma. Mr. DiPalma will serve as the Technical Lead in the area of Gas Planning. He has over 40 years of utility industry experience, spending the last 14 years leading consulting teams in various operations-related consulting projects. Bill Williams. Mr. Williams will serve as a Lead Consultant, assisting Frank DiPalma in the area of Gas Planning. He is an experienced executive with a strong background in operations, team building, process improvements, and performance monitoring. Mr. Williams has over 20 years of utility consulting experience. Patrick Duffy. Mr. Duffy will serve as a Consultant. He will provide assistance in the following areas: Corporate Governance, Budgeting and Finance, Performance Management, and Customer Operations. Mr. Duffy has 3 years of experience as a lead senior at a public accounting firm. Additionally, he has recent experience working in the areas of Corporate Governance and Finance on the Central Hudson management audit. Mindy Jack. Ms. Jack will serve as the Data Manager and provide all aspects of administrative support, including the management of Overland’s data request process and report preparation. She began with Overland in 2014 after spending more than 13 years in numerous project administrative roles for a public company headquartered in the Midwest.

Subcontractors (FTI Consulting)

Ellen Smith, P.E. Ms. Smith will serve as the Technical Director for the FTI team. Ellen will oversee all areas assigned to FTI Consulting: Electric Planning and REV Preparations and Project/Work Management. Additionally, Ellen will utilize her expertise in Corporate Governance to assist Overland Consulting in areas pertaining to REV. Ms. Smith has over 30 years of experience in the physical operation, maintenance, and design of electric systems. She served as the Chief Operating Officer of National Grid’s U.S. operations and has direct experience leading teams responsible for designing, maintaining, and operating utility transmission and distribution systems, and experience leading teams to restore utility service in response to utility system outage events. Donald Racey, PMP. Mr. Racey will serve as the Technical Lead for Electric Planning and REV Preparations Additionally, he will assist in Project and Work Management. In recent years he has specialized in the design and implementation of various utility asset management, maintenance, and reliability programs. He has assisted utilities in implementing enterprise resource planning systems and participated in utility process improvement and merger integration efforts



Colin Hassett, PMP. Mr. Hassett will serve as the Technical Lead for Project/Work Management. Additionally, he will assist in Electric Planning and REV Preparations. Colin will assist with the coordination of project team discovery, data management, work plan preparation, on-site work, and draft report development for all areas assigned to FTI Consulting. Mr. Hassett has more than 15 years of operational experience in the Electric and Gas Utility sector, Mr. Hassett specializes in business advisory and litigation support services, including matters involved in power and utility operations, power reliability-related damages, utility regulatory strategy, emergency response, and strategic communications. John Cochrane. Mr. Cochrane will serve as a Senior Consultant in Electric Planning and REV Preparation as well as Project/Work Management. Mr. Cochrane has an extensive background in U.S. and international utility finance. He served as CFO of National Grid’s U.S. operations where he was responsible for a number of financial functions, including the renegotiated 15-year, $4.5 billion power supply agreement with LIPA. He was also responsible for fuel and power supply contracts for National Grid U.S. and was lead for the T&D contract, people, and assets to PSE&G. He also served as Executive Vice President of National Grid’s Global Business Development and Mergers and Acquisitions from 2006 to 2013.

RJ Arsenault, CFA. Mr. Arsenault will serve as a Senior Consultant in Electric Planning and REV Preparations as well as Project/Work Management. Mr. Arsenault has spent a combined 10 years in the energy and financial sectors. His expertise in the electricity industry covers each facet of the investment cycle from target identification and evaluation to commercial optimization asset portfolios. His recent experience includes working with utilities and independent power producers, providing advice related to power purchase agreements, contracts renegotiations, merchant plant investment opportunities, and non-utility generation mergers and acquisitions. Ken Ditzel. Mr. Ditzel will serve as a Senior Consultant in Electric Planning and REV Preparations. Mr. Ditzel has 18 years of experience working in and consulting for the energy industry. He has been both an expert advisor and an expert witness for clients in the oil and gas, coal, power generation, biofuels, and manufacturing industries. As an expert advisor, Mr. Ditzel has extensive experience performing energy and environmental market modeling and portfolio analysis for utilities, merchant generators, and coal developers.



6. WORK TIMELINE Overland has reviewed the requirements of the audit as described in the RFP. Based on the proposed scope of work and deliverables required, we believe the anticipated schedule presented in the RFP can be achieved, assuming reasonable cooperation from NYSEG and RG&E with respect to the availability of personnel and provision of responses to data requests. Audit methods and tools to ensure that project milestones are met are described in the Approach, Methods, and Project Management section of this proposal. Below is the anticipated schedule based on milestones identified in the RFP. Attachment 6-1 is a graphical representation of this schedule.

• Orientation/Project Mobilization May 2017 – June 2017 • Develop Work plan and finalize with Staff May 2017 – June 2017 • Draft Work Plan due to Staff June 2017 • Conduct Interviews and Site Visits July 2017 – November 2017 • Preliminary Review and Technical Analysis July 2017 – December 2017 • Midpoint Status Meeting October 2017 • Drafting of Audit Report November 2017 – January 2018 • Draft Report due to Staff January 2018 • Final Report due to Staff March 2018

Attachment 6-1

© 2017 Overland Consulting Page 1 of 1

PROJECT PHASEDescription May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar

Orientation/Project Mobilization

Develop Work Plan and Finalize with Staff

Draft Workplan Provided to Staff

Conduct Interviews and Site Visits

Perform Technical Analysis / Identify Emerging Findings

Midpoint Status Meeting

Drafting of Audit Report

Provide Draft Report to Staff

Address Staff and Utility Comments

Final Report due to Staff

TIMELINE (2017) TIMELINE (2018)

Overland ConsultingManagement Audit of NYSEG and RG&E

Work Timeline (2017-2018)



7. INDIVIDUAL EXPERIENCE AND QUALIFICATIONS We have included abbreviated resumes of all proposed team members from Overland Consulting and our sub-contractors, FTI Consulting and Williams Consulting, which demonstrate the unique credentials we bring to this project as well as recent and relevant experience. Additionally, we have included full resumes for all team members in Appendix A.

Howard Lubow

Mr. Lubow is the founder and President of Overland Consulting. He has an extensive background as a public utility auditor and consultant, focused primarily on the electric and gas industries. He has directed numerous management and operational and focused audits of utilities, as well as reviews of proposed utility acquisitions and mergers. He served as Project Director on Overland’s recent audits of Central Hudson and the self-reported performance metrics of New York’s nine largest investor-owned utilities. He has an extensive background in utility finance and governance.

Representative Experience

• Project Director in a comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. The audit focuses on the utility’s existing processes, practices, systems, and organizational structures and how best to enhance Central Hudson’s future performance; the audit specifically addresses corporate governance, electric planning and REV preparations, gas planning, budgeting and finance, project management, work management, performance management, and customer operations.

• Project Director in the review of the proposed merger between Exelon Corporation and Pepco Holdings, Inc., on behalf of the Maryland PSC. Appeared as the lead policy witness, addressing financial, governance, and rate issues implicit in the merger review.

• Project Director in the review of the proposed merger between Exelon Corporation and Pepco Holdings, Inc., on behalf of the Delaware PSC. Prepared written testimony, addressing financial, governance, and rate issues implicit in the merger review.

• Project Director in a focused audit of all major electric and gas utilities in the State of New York. The audit addressed the reliability and comparability of operating metrics reported to the Commission concerning electric reliability, gas safety, and customer service.

• Project Director in a focused review of PG&E gas distribution gas safety and reliability financial commitments and operations procedures. Considered the adequacy of financial commitments and management practices, as well as consequences of resource restrictions on safety and reliability metrics. Results were provided in a report filed with the CPUC on behalf of the Public Safety Division.

• Project Manager in a management audit of South Jersey Gas Company and its parent, South Jersey Industries. The audit addressed compliance with affiliate transaction rules, as well as all primary functional areas of utility and corporate operations. Specifically addressed corporate



governance, finance, gas operations, gas safety, and gas procurement functions within the audit. Reviewed implications of diversification on utility risk.

• Project Director in a focused review of PG&E practices associated with their gas transmission system. This project arose from the San Bruno incident, which led to intense investigations at the state and federal level. Overland was retained by the California PUC to audit the management operations and financial commitments of PG&E necessary to assess the adequacy of resources supporting gas safety policies and procedures. In this context, capital expenditures and operating budgets were reviewed in relation to regulatory commitments reflected in customer rates over time. Provided testimony on the financial capacity of PG&E to support capital investments needed to upgrade gas safety and reliability across the transmission system, as well as to consider the implications of potential fines under review by the CPUC.

• Project Director in a focused audit of National Grid service and parent company charges to New York jurisdictional utilities. The audit included a review of internal control procedures, as well as an in-depth review of transactions over a 20-month period, ultimately associated with jurisdictional cost-of-service implications. The scope of charges considered in the audit exceeded $5.0 billion. Overland sampled the total population of costs through direct and statistical analysis.

• Project Director in the review of the proposed merger between Exelon and Constellation Energy on behalf of the Maryland PSC. Appeared as the lead policy witness, addressing financial, governance, and rate issues implicit in the merger review. Considered the implications of market power and cost-benefit analyses in making recommendations concerning proposed settlement options.

• Directed a comprehensive financial and regulatory base period audit of a large gas transmission and distribution company in connection with implementation of an incentive regulation plan. Reviewed savings resulting from force reductions of 1,200 employees and implementation of aggressive cost reduction programs.

• Directed a comprehensive review of the $850 million PG&E gas transmission pipeline expansion project. This study included a review of regulatory considerations in recognizing construction and operating costs in light of competition in the California pipeline markets and, based upon the Commission intended allocation of risks among regulated customers, project shippers, and the pipeline owner.

Education and Professional Certification

• University of Missouri – Kansas City, Kansas City, MO Bachelor of Business Administration – Accounting, Economics Minor

• University of Missouri – Kansas City, Kansas City, MO Graduate studies in quantitative and systems analysis



Robert Welchlin, CPA

With over 30 years of experience as a utility industry consultant and auditor, Mr. Welchlin has managed and directed audits and consulting projects in the electric and gas, telecommunications, water, and cable TV industries for more than 20 years. He has managed and served as a Technical Lead on numerous large utility management and operational audit engagements, including Overland’s recent audits of Central Hudson and the self-reported performance metrics of New York’s investor-owned utilities.


• Lead Consultant in the comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. Responsible for an examination of the adequacy and effectiveness of the utility’s internal controls related to customer operations.

• Lead Consultant in the evaluation of the acquisition of Pepco Holdings, Inc., by Exelon Corporation. Conducted a detailed review of Exelon’s merger savings and costs to achieve analysis on behalf of the Maryland and Delaware Public Service Commissions and developed testimony on behalf of the Public Service Commission Staff in each state concerning the net savings attributable to Maryland and Delaware.

• Project Manager in a focused audit of all major electric and gas utilities in the state of New York. Responsible for oversight of the auditing of accuracy, completeness, and comparability of data submitted by nine investor-owned utilities to the NYSPSC.

• Project Technical Manager in a regulatory and management audit of the affiliate transactions, management, and operations of South Jersey Gas Company. Responsible for accounting procedures and costs charged to the regulated gas company from the parent and service companies, transactions with affiliate South Jersey Energy Solutions and its subsidiaries, and operational and management reviews of various support services (supply chain, fleet management, facilities management), customer service operations, construction contractor management, and excavation damage prevention.

• Project Manager in the investigation of National Grid affiliate cost allocations, policies, and procedures. The audit included a review of accounting and internal control procedures governing service company transactions, an analysis of service company cost allocation procedures, and a regulatory audit of the costs charged by the service companies to National Grid’s New York distribution utilities (Niagara Mohawk, KeySpan Energy Delivery New York, and KeySpan Energy Delivery Long Island). The work was performed for the New York Public Service Commission.

• Project Manager in the analysis of the Wexpro I and II Agreements and an audit of expenses charged to Questar Gas for 2005 to 2014. The audit included an in-depth review of costing procedures attributed to the Operator Service Fee and recognition of capital additions considered under the Agreement. The work is being performed for the Utah Division of Public Utilities.




• Eastern Illinois University, Charleston, IL Bachelor of Science – Accounting and Business Administration

• St. Edwards University, Austin, TX Master of Business Administration

• Certified Public Accountant Certificate in Kansas

Ellen Smith, P.E.

Ms. Smith is a Senior Managing Director responsible for FTI Consulting’s Power & Utilities Practice, with over 30 years of experience in the physical operation, maintenance, and design of electric systems. She served as the Chief Operating Officer of National Grid’s U.S. operations and has direct experience leading teams responsible for designing, maintaining, and operating utility transmission and distribution systems, and experience leading teams to restore utility service in response to utility system outage events. Ms. Smith recently worked with the Puerto Rico Electric Power Authority (PREPA) as an advisor to the Government Development and to PREPA in order to develop programs for cash management and operational improvement.


• Led teams responsible with engineering, designing, maintaining, and operating utility scale generation, transmission, and distribution systems.

• Led teams in the restoration of utility system events. • Experience in engineering, design, and procurement of electrical equipment and systems. • Led the implementation of process safety including an extensive review of operational control

room procedures, strategic communication, and risk reduction. • Works with client and stakeholder groups and is experienced in simplifying the communication

of technical ideas. Within client organizations, she works with engineers, economists, lawyers and senior management, providing consulting services geared to various forums, whether they were regulatory proceedings, stakeholder meetings or meetings of senior executives.

• Provided written and oral testimony in several cases before the New York State Public Service Commission and the New York State Moreland Commission on Utility Storm Response.

• Provided expert testimony in power reliability matters.


• Union College, Schenectady, NY Bachelor of Science – Mechanical Engineering

• Union College, Schenectady, NY Master of Science – Power Systems Engineering



Gregory Oetting, CPA

With more than 20 years of regulated industries consulting experience, Mr. Oetting has experience in management audits, financial and regulatory reviews, and valuations. His management and regulatory audit experience includes reviews of cost allocation methodologies, compliance with competitive service standards, and internal controls.


• Lead Consultant in the comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. Responsible for assessment of program planning and management, as well as a comprehensive evaluation of the utility’s work management program.

• Lead Consultant in the evaluation of the acquisition of Pepco Holdings, Inc., by Exelon Corporation. This work was performed for the Staff of the Maryland Public Service Commission. Analyzed merger accounting and tax matters associated with the transaction.

• Technical Manager in a focused audit of all major electric and gas utilities in the state of New York. Responsible for analyzing the reliability and comparability of gas safety performance metrics reported to the New York Public Service Commission.

• Technical Manager in the focused audit of PG&E capital and operations expenditures related to the company’s gas distribution system. This work was performed for the California Public Utilities Commission.

• Technical Manager in the management audit of South Jersey Gas Company for the New Jersey Board of Public Utilities. Responsible for analyzing executive management and corporate governance matters.

• Technical Manager in the investigation of National Grid affiliate cost allocations, policies, and procedures. This work was performed for the New York Public Service Commission.

• Technical Manager in the review of the proposed merger between Constellation Energy Group and Exelon Corporation. This work was performed for the Staff of the Maryland Public Service Commission. Provided testimony on several subject matters, including the treatment of transaction costs related to the merger, financial and operational profiles of the applicants, and taxes.


• University of Kansas, Lawrence, KS Bachelor of Science – Accounting and Business Administration

• Certified Public Accountant Certificates in Kansas and Missouri

Don Racey, PMP

Mr. Racey is Managing Director within FTI’s Power & Utilities Practice. In recent years he has specialized in the design and implementation of various utility asset management, maintenance, and reliability programs. He has assisted utilities in implementing enterprise resource planning systems and participated in utility process improvement and merger integration efforts. He led the implementation



of National Grid’s end-to-end project and portfolio management process that standardized key processes within the company’s electric and gas businesses.


• Specialized in the design and implementation of Asset Management and Maintenance and Reliability programs.

• Responsible for ERP Implementations, Process Improvements, and Merger Integration. • Led the design and implementation of AEP Transmission’s Project Lifecycle Management

Process (PLMP) that governs the execution of AEP’s $2 billion annual CAPEX budget. • Led the implementation of National Grid’s End to End Project and Portfolio Management

Process that standardized key processes across the Electric and Gas businesses and three regulatory jurisdictions.

• Led process design and technology system selection for the implementation of a comprehensive Compliance and Maintenance Management program for Chesapeake Utilities’ three operation companies.


• Ohio Dominican University, Columbus, OH Bachelor of Arts – Economics Bachelor of Arts – Business Administration

• Project Management Professional (PMP), Project Management Institute • Six Sigma Black Belt, ASQ

Colin Hassett, PMP

With more than 15 years of operational experience in the Electric and Gas Utility sector, Mr. Hassett specializes in business advisory and litigation support services, including matters involved in power and utility operations, power reliability-related damages, utility regulatory strategy, emergency response, and strategic communications.


• During his tenure with National Grid, Mr. Hassett led numerous project management initiatives including the design, development, and management of the PMO for National Grid’s process excellence group; Emergency Response End to End Process Improvement which yielded a 20 percent reduction in response time in a 9-month span of time; and managed a portfolio of distribution line construction projects.

• Led the implementation of a Process Safety Management program to the electric business yielding improvements to risks around Process Safety.

• Implemented Contract Controls Code driven by the UK Bribery Act of 2010.




• Northeastern University, Boston, MA Bachelor of Science – Electrical Engineering

• Worcester Polytechnic Institute, Worcester, MA Master of Science – Power Systems Management

• Project Management Professional Certificate

Frank DiPalma

Mr. DiPalma is a Partner/Principal with Williams Consulting, Inc. He has an extensive background as a public utility consultant, with an emphasis on the electric and gas industries. His consulting expertise supports both management and technical projects, specializing in management audits, safety and reliability reviews, and operational assessments. He worked with Overland on the recent audits of Central Hudson and the self-reported performance metrics of New York’s investor-owned utilities.


• Technical Manager in the comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. Responsible for evaluation of existing processes, practices, systems, and organizational structures in the areas of gas planning, project management, and work management and recommendations for improvements.

• Technical Manager in the evaluation of the acquisition of Pepco Holdings, Inc., by Exelon Corporation. Conducted detailed analysis of the reliability, adequacy, and safety of electric service in Maryland and gas and electric services in Delaware on behalf of the Maryland and Delaware Public Service Commissions; developed testimony on behalf of the Public Service Commission Staff in each state concerning the benefits to the customers.

• Project Manager in a focused audit of the major electric and gas utilities in the state of New York. Reviewed completeness and accuracy of data collected by various systems, identified opportunities for improvements, and recommended best practices metrics.

• Project Manager in a management audit of Public Service Electric and Gas Company on behalf of the New Jersey Board of Public Utilities. Responsible for assessment of the technical and management practice of the company in the areas of electric transmission and distribution, gas transmission and distribution, gas procurement and supply, and contractor performance.

• Technical Manager in the review of the proposed merger between Exelon and Constellation Energy on behalf of the Maryland PSC. Considered the effects on reliability, adequacy, and safety of electric and gas service in the determination of public interest.




• New Jersey Institute of Technology, Newark, NJ Bachelor of Science – Mechanical Engineering

• Fairleigh Dickinson University, Teaneck, NJ Masters of Business Administration – Management/Finance

• University of Michigan, Ann Arbor, MI Executive Development Program

Ken Ditzel

Ken Ditzel is a Managing Director and has 18 years of experience working in and consulting for the energy industry. He has been both an expert advisor and an expert witness for clients in the oil and gas, coal, power generation, biofuels, and manufacturing industries. As an expert advisor, Mr. Ditzel has extensive experience performing energy and environmental market modeling and portfolio analysis for utilities, merchant generators, and coal developers. Before FTI, Mr. Ditzel was a Principal at Charles Rivers Associates where he led CRA’s proprietary coal, natural gas, and electricity market modeling. Prior to CRA, he was an Associate at Booz Allen Hamilton. Mr. Ditzel began his energy career as a power plant engineer for the Dow Chemical Company.


• Led the engineering planning of renovating a biodiesel plant in Delaware. Responsibilities included technical review for acquisition due diligence, project planning, recruiting operations staff, advising on corporate planning activities, including modeling of projected cash flows, assessing secondary acquisition targets, and conducting market assessments for feedstocks and final products.

• Led the development and application of CRA’s proprietary energy-economy model, electric sector model, and global gas and LNG models. These models were used to assess impacts on clients’ asset portfolios and strategic direction. Notable reports/presentations focused on the impacts of carbon polices and LNG exports on the US economy, natural gas prices, and electric sector generation, capacity additions, retirements, retrofits, and prices. As an expert witness, authored reports for both coal and gas litigation and arbitration cases. Testifying experience includes the London Court of International Arbitration and the US House of Representatives.


• University of Virginia, Charlottesville, VA Bachelor of Science – Mechanical Engineering

• Georgetown University, Washington, DC. Master of Business- Finance

• Harvard University, Cambridge, MA Ph.D. – Economics



John Cochrane

Mr. Cochrane has an extensive background in U.S. and international utility finance. He served as CFO of National Grid’s U.S. operations where he was responsible for a number of financial functions, including the renegotiated 15-year, $4.5 billion power supply agreement with LIPA. He was also responsible for fuel and power supply contracts for National Grid U.S. and was lead for the T&D contract, people, and assets to PSE&G. He also served as Executive Vice President of National Grid’s Global Business Development and Mergers and Acquisitions from 2006 to 2013.


• Consulting and advisory services to gas and electric utility clients. • Financial modeling for $5 billion transmission investment. • Structuring and analysis of $1 billion transmission project. • As an executive at National Grid, led all business development activities globally including all

merger, acquisitions, divestitures, and joint ventures. Managed teams of 15 in the U.K. and ten in the US. Presented frequently to Executive Committee and Board.

• Sold wide range of businesses totaling $10 billion, including U.K. wireless business to Macquarie, Australian Interconnector to Singapore Investment Corp, and Ravenswood plant to TransCanada during 2007 to 2008 financial crisis.

• Led joint venture negotiations, feasibility studies, project budgets and timelines, and vendor selections for four £1B sub-sea interconnectors between the U.K. and Norway, Belgium, France, and the Netherlands.


• Harvard University, Cambridge, MA Bachelor of Arts – Biology

• Northeastern University, Boston, MA Master of Science – Business Administration

Bill Williams

Mr. Williams is a Partner/Principal with Williams Consulting, Inc. He has an extensive background as a public utility consultant, with an emphasis on the electric and gas industries. Mr. Williams has a strong background in operations, team building, process improvements and performance monitoring. He is heavily experienced in project management, materials management, budgeting, corporate strategic planning, information systems planning, maintenance management, root cause analysis, property records, organization and staffing assessments in the utility industries. He worked with Overland on the recent audits of Central Hudson and the self-reported performance metrics of New York’s investor-owned utilities.




• Lead Consultant in the comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. Responsible for evaluation of existing processes, practices, systems, and organizational structures in the areas of gas planning, project management, and work management and recommendations for improvements.

• Participated in the evaluation of the acquisition of Pepco Holdings, Inc., by Exelon Corporation. Conducted detailed analysis of the reliability, adequacy, and safety of electric service in Maryland and gas and electric services in Delaware on behalf of the Maryland and Delaware Public Service Commissions; developed testimony on behalf of the Public Service Commission Staff in each state concerning the benefits to the customers.

• Participated in a focused audit of the major electric and gas utilities in the state of New York. Reviewed completeness and accuracy of data collected by various systems, identified opportunities for improvements, and recommended best practices metrics.

• Participated in a management audit of Public Service Electric and Gas Company on behalf of the New Jersey Board of Public Utilities. Responsible for assessment of the technical and management practice of the company in the areas of electric transmission and distribution, gas transmission and distribution, gas procurement and supply, and contractor performance.

• Participated in the review of the proposed merger between Exelon and Constellation Energy on behalf of the Maryland PSC. Considered the effects on reliability, adequacy, and safety of electric and gas service in the determination of public interest.


• Saint Leo College, St. Leo, FL Bachelor of Arts – Business Administration

• Saint Leo University, St. Leo, FL Graduate Level Business Courses

• University of Michigan, Ann Arbor, MI Executive Development Program

• FEMA – NMIS, ICS

RJ Arsenault

Mr. Arsenault has spent a combined 10 years in the energy and financial sectors. His expertise in the electricity industry covers each facet of the investment cycle from target identification and evaluation to commercial optimization asset portfolios. Mr. Arsenault interacts directly with senior management of client companies, adding value through business advice, regulatory strategy and transaction support.




• Working with utilities and independent power producers, provides advice relating to power purchase agreements, contracts renegotiations, merchant plant investment opportunities, and non-utility generation mergers and acquisitions.

• Provides support throughout investment process to investors, including target identification, transaction support, business creation and expansion strategy; experienced in valuing enterprises, power assets, power purchase agreements and trade books, and formulating negotiation strategy for executing transactions.

• For new entrants, develops strategy for expansion into new businesses technologies and market segments, including advice on the regulatory structures, government support, and entry strategies for investments in smart grid technology, energy storage solutions, and renewable resources.


• Fairfield University, Fairfield, CT Bachelor of Science – with concentration in Mathematics and Biology

• Boston University, Boston, MA Masters of Business Administration – with concentration in Finance

• Chartered Financial Analyst

Patrick Duffy

Graduating Magna Cum Laude from Westminster College with a Bachelor of Arts in Accounting, Mr. Duffy has three years of experience as an audit associate with a “Big 4” accounting firm and has worked in wealth management for a large bank.


• Consultant in the Central Hudson Gas and Electric Management Audit assisting Engagement Director and Technical Lead Howard Lubow in Corporate Governance and Finance. Duties include technical analysis, formulating ways to enhance Central Hudson’s processes, practices, and organizational structure, as well assisting in the drafting of the final audit report.

• Lead Senior on the annual audit of a growing publicly traded REIT, headquartered in Kansas City, MO. Supervised staff and interns while performing quarterly review procedures, SEC filing procedures, and the year-end integrated audit.

• Extensive experience with SEC filings and M&A activity including a $220M Asset Acquisition, $130M Business Combination, and several large equity issuances (preferred and common stock). Worked directly with the Lead Manager, Partner, and other engagement executives in developing and executing comfort letter procedures associated with the filings.

• Lead Senior on the annual audit of 27 separate investment accounts, totaling $4.4 billion in assets, for one of the nation’s largest insurance companies.




• Westminster College, Fulton, MO Bachelor of Arts – Accounting

Mindy Jack

With over 20 years of experience, Ms. Jack brings a strong background in project management to the team, specializing in the management of data processes for various energy and telecommunication projects.


• Support staff role in the comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. Responsible for all aspects of data management and project administration.

• Support staff role in the review of the Exelon Corporation/Pepco Holdings, Inc., proposed merger, assisting in the data request process, management of virtual data room, and administrative assistance in testimony preparation on behalf of the Maryland Public Service Commission.

• Support staff role in the review of the Exelon Corporation/Pepco Holdings, Inc., proposed merger, assisting in the data request process, management of virtual data room, and administrative assistance in testimony preparation on behalf of the Delaware Public Service Commission.

• Support staff role in a focused audit of all major electric and gas utilities in the state of New York assisting in the data request process, management of virtual data rooms, and report preparation.

• Project administrator in a comprehensive management and operations audit of Central Hudson, overseeing all aspects of data management.

• Project administrator in a focused review of the general rate application of Southwest Gas Corporation, managing all aspects of data request process.

• Support staff role in affiliate transactions audit of Questar Gas Company and Wexpro Company, assisting in all aspects of data management.

R esponse to Request for Proposal – Case 16-M-0610 – Comprehensive Management Audits of New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation


8. CONFLICTS OF INTEREST Neither Overland nor its subcontractors have provided services directly to any New York utilities or their affiliates within the past five years. However, both Overland and its subcontractors have been hired by state regulatory commissions to perform audit or other consulting services related to New York utilities and/or their affiliates.

In August 2016, Overland and its subcontractors were contracted by the New York State Public Service Commission to perform a comprehensive management and operations audit of Central Hudson Gas & Electric Corporation. This management audit is ongoing. In 2013, Overland and its subcontractors were contracted by the New York State Public Service Commission to perform the Operational Data Audits of multiple New York Utilities. Overland conducted a comprehensive audit regarding the accuracy of electric reliability, gas safety, and customer service data reported to the commission. In 2011, Overland was contracted by the New York State Public Service Commission to perform an investigative accounting examination of National Grid USA’s New York regulated utilities. Overland conducted a regulatory audit of the procedures and cost distributions of National Grid’s U.S. service companies to its New York regulated utilities. Other than the services described above, neither Overland nor any of its personnel or subcontractors is currently providing, nor has provided in the last five years, any professional services (including auditing services) to the NYSPSC nor any electric or gas utilities in New York State. Overland, its personnel, and its subcontractors will adhere to the highest business, professional, and ethical standards during the course of the engagement. We also agree that we will not perform any work for the utility or its affiliates during the course of this audit.



9. REFERENCES Overland has a solid track record of developing a strong, fully-documented foundation supporting our findings and recommendations which have been helpful in improving utility operations and regulatory oversight. Our recommendations have generally been adopted by regulators and the utility subject to regulatory review. We encourage the discussion of our firm with these industry contacts. Mr. Ken Bruno Program Manager, Safety & Enforcement Division California Public Utilities Commission 505 Van Ness Avenue San Francisco, CA 94102 (415) 703-5265

Mr. Anthony Myers Executive Director Maryland Public Service Commission 6 St. Paul Street, 16th Floor Baltimore, MD 21202 (410) 767-8010

Mr. Mark Beyer Director, Office of the Economist New Jersey Board of Public Utilities, Office of the Economist 44 South Clinton Avenue, 9th Floor Trenton, NJ 08609 (609) 292-2637

Mr. Robert Howatt Executive Director Delaware Public Service Commission 861 Silver Lake Boulevard Cannon Building, Suite 100 Dover, DE 19904 (302) 736-7516

Mr. Harry Rodriguez Chairman PREPA Governing Board Puerto Rico Electric Power Authority PO Box 364267 San Juan, PR 00936-4267 (787) 521-3434



10. INSURANCE ATTESTATION Overland Consulting confirms that we understand the mandatory insurance requirements related to Workers’ Compensation and Disability Benefits and will, upon selection, provide the required documentation to the Department.



11. MINORITY- AND WOMEN-OWNED BUSINESS ENTERPRISES (M/WBE) Overland Consulting confirms that it is not a New York State certified minority-owned business enterprise or a women-owned business enterprise.


© 2017 OVERLAND CONSULTING 1

APPENDIX A – PROJECT TEAM RESUMES

HOWARD E. LUBOW Page 1

Howard E. Lubow, President

Overland Consulting | 11551 Ash Street, Suite 215 | Leawood, KS 66211 | 913-599-3323 [email protected] GENERAL

Mr. Lubow is President of Overland Consulting. He has more than 30 years of experience as a public utility consultant. His consulting engagements have encompassed a broad spectrum of management, finance, and regulatory issues for electric, gas, water, pipeline, and telephone utilities. Recent project experience includes focused management audits, analysis of utility diversification and acquisition plans, prudence studies, accounting systems design, cost-of-service determination and allocation, utility property valuation, rate of return determinations, and rate design issues. Mr. Lubow has testified in more than 100 regulatory and civil litigation proceedings and has testified in approximately 20 jurisdictions through the county.

PROFESSIONAL WORK HISTORY

Overland Consulting 1991 – Present President

Responsible for administration and review of management auditing, regulatory consulting, and litigation support services. Provide expert witness services in projects involving decision analysis, damages assessment, ratemaking, valuation, and accounting.

Kansas Pipeline Company 1997 – 1999 Executive Vice President, Chief Operating and Financial Officer

Responsible for the day-to-day operations of this natural gas pipeline, as well as direct responsibilities associated with the financial, accounting, and regulatory functions of the Company. Implemented a reengineering and downsizing program that resulted in a major reduction in operating expenses. Negotiated new gas supply and transportation contracts. Renegotiated credit lines on more favorable terms. Responsible for the negotiation and acquisition of a natural gas marketing company. Developed and implemented a management incentive program for senior executives. Developed due diligence and presentation materials relied upon by potential buyers of Kansas Pipeline assets.

Amerifax, Inc. (Americonnect) 1990 – 1991 Chief Executive Officer

Directed the IPO for this telecommunications switchless rebiller. The company implemented a national marketing program, focusing primarily in the Midwest. After five years, the company was acquired for approximately three times its IPO valuation.

LMSL, Inc. 1983 – 1990 President

Responsible for administration and review of regulatory services projects and research studies. Expert witness in regulatory proceedings. Director of special projects including management audits, financing feasibility studies, property acquisition and merger feasibility studies, and development of innovative solutions to current regulatory issues.


Drees Dunn Lubow & Company 1976 – 1982 Managing Partner

Responsible for projects for utility clients. Responsibility included financial and managerial analysis of public utility companies and the presentation of expert testimony before regulatory commissions.

Troupe, Kehoe, Whiteaker & Kent 1972 – 1976 Senior Regulatory Consultant

Responsible for special services work for utility clients, including accounting systems design, cost-of-service determination and allocation, budgeting, and rate designs. Performed fair value determinations, developed cost analysis studies, curtailment requirements analysis, and forecasts of utility operations.

Kansas City Power & Light Company 1968 – 1972 Senior Accountant

Analyzed accounting and reporting procedures, taxes, and costs of operations. Assisted in the preparation of Federal and State income tax returns and the Annual Report to stockholders. Assisted with rate filings in Kansas and Missouri. Developed tax basis property accounting system.

PROFESSIONAL EXPERIENCE

ELECTRIC AND GAS

• Engagement Director in a comprehensive management and operations audit of Central Hudson, on behalf of the New York State PSC. The audit includes a comprehensive assessment of the utility’s construction program planning processes and an evaluation of the efficiency of the utility’s operations with a focus on opportunities to improve performance.

• Project Director in a focused review of the general rate application of Southwest Gas Corporation, on behalf of the Arizona Corporation Commission. The review addresses procurement activities, depreciation studies, rate design and revenue decoupling, and a class cost of service study.

• Project Director in the review of the proposed merger between Exelon Corporation and Pepco Holdings, Inc., on behalf of the Maryland PSC. Appeared as the lead policy witness, addressing financial, governance, and rate issues implicit in the merger review.

• Project Director in the review of the proposed merger between Exelon Corporation and Pepco Holdings, Inc., on behalf of the Delaware PSC. Prepared written testimony, addressing financial, governance, and rate issues implicit in the merger review.

• Project Director in a focused audit of all major electric and gas utilities in the State of New York. The audit addressed the reliability and comparability of operating metrics reported to the Commission concerning electric reliability, gas safety, and customer service.

• Project Manager in a management audit of South Jersey Gas Company and its parent, South Jersey Industries. The audit addressed compliance with affiliate transaction rules, as well as all primary functional areas of utility and corporate operations. Specifically addressed corporate governance, finance, gas operations, gas safety, and gas procurement functions within the audit. Reviewed implications of diversification on utility risk.

• Project Director in a focused review of PG&E practices associated with their gas transmission system. This project arose from the San Bruno incident, which led to intense investigations at the state and federal level. Overland was retained by the California PUC to audit the management operations and financial commitments of PG&E necessary to assess the adequacy of resources


supporting gas safety policies and procedures. In this context, capital expenditures and operating budgets were reviewed in relation to regulatory commitments reflected in customer rates over time. Provided testimony on the financial capacity of PG&E to support capital investments needed to upgrade gas safety and reliability across the transmission system, as well as to consider the implications of potential fines under review by the CPUC.

• Project Director in a focused review of PG&E gas distribution gas safety and reliability financial commitments and operations procedures. Considered the adequacy of financial commitments and management practices, as well as consequences of resource restrictions on safety and reliability metrics. Results were provided in a report filed with the CPUC on behalf of the Public Safety Division.

• Project Director in a focused audit of National Grid service and parent company charges to New York jurisdictional utilities. The audit included a review of internal control procedures, as well as an in-depth review of transactions over a 20-month period, ultimately associated with jurisdictional cost-of-service implications. The scope of charges considered in the audit exceeded $5.0 billion. Overland sampled the total population of costs through direct and statistical analysis.

• Project Director in the review of the proposed merger between Exelon Constellation Energy on behalf of the Maryland PSC. Appeared as the lead policy witness, addressing financial, governance, and rate issues implicit in the merger review. Considered the implications of market power and cost-benefit analyses in making recommendations concerning proposed settlement options.

• Project Manager in a management audit of Connecticut Natural Gas and its parent, Iberdrola USA. The audit scope included all significant functions of the company including a review of corporate governance and executive management, accounting and finance, conservation activities, and operations. A number of special topics were also addressed including: customer demand metering, billing determinates, and billing procedures.

• Project Director in the review of the proposed merger of FirstEnergy and Allegheny on behalf of the Maryland PSC. Appeared as the lead policy witness, addressing financial, governance, and rate issues implicit in the merger review. Proposed conditions necessary to comply with statutory criteria. Provided a set of ring-fencing conditions appropriate to maintain financial and governance policies necessary to protect Potomac Edison, the Maryland regulated utility under review.

• Project Director in the review of the proposed transaction between Constellation Energy and EDF involving, among other things, the sale of a 50% interest in Constellation’s nuclear facilities. Lead witness on behalf of the Maryland Staff addressing various transaction issues including: impact on Baltimore Gas & Electric customers, corporate governance and financial implications, ring-fencing measures, and cost-benefit analysis.

• Project Manager of the management audit of Atlantic City Electric and its parent PHI Holdings. The audit covered a detailed review of the corporate governance, strategic planning, executive management, and finance functions. Other key areas of review included affiliate transactions, generation and transmission planning, service quality, and system reliability.

• Project Manager in the review of long-term financial projections prepared by Midland Cogeneration Venture Limited Partnership to be used in regulatory proceedings concerning proposed modifications to a power purchase agreement. The engagement included the sensitivity testing of major variables in the partnership’s financial model.


• Project Manager in the review of accounting and finance issues raised by Connecticut utilities in connection with proceedings on long-term capacity measures. Addressed the implications of new generation facilities and DSM projects on regulated electric utilities.

• Project Director for a multi-disciplinary consulting team that reviewed the proposed Exelon/PSEG merger on behalf of the New Jersey Board of Public Utilities. Also the primary expert witness in areas of finance and regulatory policy; responsible for analysis of the merger’s financial impacts, in particular the impact on PSE&G, the New Jersey utility. Responsible for recommendations to insure that if the merger is approved, the transaction price, terms, and conditions are fair and reasonable in light of applicable standards for review, and that the New Jersey utility remains financially secure.

• Performed a financial and market feasibility study of a fiber optic network designed to provide SCADA requirements for a large multi-state electric utility interested in selling capacity to telecommunications carriers and high volume customers.

• Sponsored the overall development of utility revenue requirements, jurisdictional, and class cost-of-service studies and rate design issues in numerous electric, gas, water, and telecommunication cases throughout the country.

• Conducted an analysis of the adequacy of depreciation rates for a large independent telephone company located in Texas in order to assess the relationship of capital recovery in light of technological obsolescence.

• Directed and developed a two-day training seminar for the Kentucky Public Service Commission addressing energy and telecommunications issues raised in rate filings, utility planning, and forecast models required in considering the use of projected test year data.

• Supervised and directed a group of PSC Staff members in the review of a rate filing relying upon the use of a projected test year.

• Directed a comprehensive financial and regulatory base period audit of a large gas transmission and distribution company in connection with implementation of an incentive regulation plan. Reviewed savings resulting from force reductions of 1,200 employees and implementation of aggressive cost reduction programs.

• Performed a study of a LDC's gas supply and transportation procurement practices in a post-Order 636 operating environment, where the LDC's transportation and supply services continued to be provided by affiliated companies. The parent reorganized its pipeline transmission and gas supply services into a separate company, transferring jurisdiction from state regulators to the FERC. Developed a model to quantify an optimal supply and transportation mix for state ratemaking purposes.

• Performed a review of intrastate pipeline issues including the use of a straight fixed-variable cost methodology, regulatory treatment of stranded costs, pipeline competition issues, and the merits of a corporate restructuring and related effects on cost-of-service and changes in corporate operations.

• Developed a revenue requirement analysis of an intrastate gas transmission pipeline company addressing issues including: proper recognition of net operating loss carryforwards for ratemaking purposes, treatment of deferred start-up costs, application of criteria for consideration of acquisition premium in rates, and the recognition and relationship of financial criteria in the rate-setting process.


• Directed a comprehensive review of the $850 million PG&E gas transmission pipeline expansion project. This study included a review of regulatory considerations in recognizing construction and operating costs in light of competition in the California pipeline markets and, based upon the Commission intended allocation of risks among regulated customers, project shippers, and the pipeline owner.

• Directed a review of gas procurement policies and procedures and addressed the impact of FERC Order 636 for three Wyoming LDC’s. This study addressed the relationship of gas pipeline and LDC affiliate organizations associated with the gas supply and transportation functions and the impact of the affiliated organizational structures on gas prices measured against other utilities in the region.

• Reviewed impacts of FERC Order 636 on gas utility distribution companies including staffing and other operating requirements, changes in gas procurement and storage policies, and effects on marketing plans. Also reviewed various pipeline compliance filings, analyzing impacts on firm and non-firm customers.

• Reviewed electric and gas utility fuel procurement policies and procedures, organization, and internal controls in various engagements. Developed recommendations resulting in significant benefits to utilities under review.

• Performed fuel audit investigations in several jurisdictions addressing such issues as economic dispatch procedures, fuel acquisition policies, affiliated mine or pipeline operations, captive mine development, and compliance with Commission rules and regulations. These studies included the review of prices and returns produced from affiliated operations versus third-party options and market prices available.

• Reviewed gas supply issues including procurement policies, supply mix, affiliate transactions, and contract provisions in the context of both cost-of-service and management review proceedings. Provided policy analysis regarding considerations and benefits of increased gas supply and pipeline competition.

• Participated in three FERC interstate pipeline rate proceedings addressing cost-of-service issues, including appropriate classification and allocation methodologies. Also addressed construction costs, overhead, and pipeline operations issues in a major oil pipeline docket.

• Performed a detailed analysis and presented testimony regarding the relative economic benefits of the operation of a LNG plant versus meeting seasonal peak demands through pipeline contract commitments.

• Developed gas transportation pricing criteria and implementation guidelines in the development of tariff service offerings for several gas LDC’s.

• Developed numerous gas cost service studies and related rate design recommendations for local distribution companies, as well as pipeline suppliers. Testimony regarding such studies was presented before various state commissions, as well as the FERC.

• Responsible for gas distribution company revenue requirements in over 25 cases addressing accounting, cost allocation, operations, and rate design issues. These cases generally included an analysis of gas production, gathering, and transmission systems owned by the LDC parent.

• Developed a damages model for a gas utility in civil litigation arising from acquisition of a defective distribution system caused by improper installation practices. Measured incremental construction and operating costs associated with pipe replacement program.


• Developed a risk analysis model used to associate the relationship between cost recovery and changes in class consumption patterns for a gas distribution company.

• Developed a quantitative model to estimate jurisdictional and class-peak consumption for distribution gas companies.

• Performed an overview of regulatory considerations in the oversight of holding company formations and operations. This project was conducted on behalf of a PUC to analyze issues associated with holding company formations, utility diversification, and affiliated interest oversight and controls. The four largest electric utilities in the state were included in the study. The final report covered policy issues, as well as more detailed discussions of monitoring procedures and recommended filing requirements.

• Developed diversification guidelines for utilities in several jurisdictions. Addressed regulatory concerns and limits that might be implemented to control contingent adverse consequences to utility ratepayers.

• Performed an overview of regulatory considerations in the oversight of holding company formations and operations. This study addressed appropriate regulatory guidelines and oversight policies for utility and non-utility operations.

• Directed reviews of two major utility subsidiary gas intrastate pipeline systems, addressing cost-of-service, operating issues, and appropriate accounting for overheads and affiliated transactions from regulated electric utility parent companies.

• Developed a financing plan and reorganization of corporate structure for an electric utility having gas properties and a separate gas subsidiary. This project included preparation of SEC U-1 filings, filings with regulatory agencies, and testimony to address the impact of the proposed financing and reorganization on cost of capital and rates.

• Responsible for the independent analysis of the feasibility and economics of consolidation of two major electric utilities. The project focused primarily on the quantification of merger benefits associated with consolidated operations. This in-depth 12-month study also included a detailed review of the scope of services and basis of pricing such services among affiliates. The study addressed a number of affiliate interest issues including: the basis of pricing and level of capacity and/or energy supplied by affiliate versus third parties, the services provided by an affiliate "service" company versus internal resources or purchases from third parties, and the consideration of management resources devoted to non-utility functions and the basis of compensation for such resource transfers.

• Reviewed American Electric Power System Agreement to assess the reasonableness of fuel and purchased power costs incurred and allocated to its utility operating companies. The analysis also considered system dispatch and related fuel accounting issues associated with energy requirements of regulated customers versus wholesale transactions.

• Responsible for the development and implementation of phase-in plans utilized to defer initial costs of new generation facilities. Developed assessment criteria and related models to assign capacity from new plant additions between jurisdictional and non-regulated service.

• Developed and conducted a training program on the measurement of relative and absolute fuel productivity measures in ranking utility's effectiveness in fuel procurement and generation system operations.


• Developed a framework for implementation of competitive pricing for an electric utility facing higher costs due to nuclear plant additions. The analysis also encompassed an incentive rate program designed to induce greater use of excess capacity, as well as to improve the utility load factor.

• Analyzed and implemented economic dispatch models used to evaluate the effects of changes in generation capacity and fuel use.

• Conducted several comprehensive nuclear management and prudence reviews addressing construction, management, planning, and economics issues.

• Directed a two-year study of the impacts on and options available to an electric utility due to the abandonment of a nuclear plant near completion. Presented a workout plan to regulators. Study involved a five-year forecast of financial results including construction expenditures and operating costs.

• Developed commercial operation date criteria and guidelines for nuclear power plants which were supported by a national industry survey.

• Developed a financial analysis of a major municipal utility facing an extended outage of its nuclear power plant, with alternative pricing strategies, recognizing competitor pricing in adjacent service areas. Developed multi-year cost-of-service and revenue requirements models and presented results to the Utility Board.

• Performed studies for municipalities to determine the feasibility of acquiring street lighting facilities or, in the alternative, pricing options other than PSC-regulated tariffs.

• Conducted an industry survey of the effectiveness and relative benefits achieved from the use of uniform filing requirements in utility rate applications. The findings were published and distributed to the utility industry and regulatory commissions.

• Developed class cost-of-service studies including identification of direct assignments and review of distribution facilities, methodologies, and criteria for the allocation of generation and bulk power facilities and risk differentials associated with various classes of service.

• Project Director of a review of Kentucky current statutes, regulations, and policies governing integrated resource planning. The project addressed recommendations necessary to mitigate impediments to the development of appropriate demand-side management programs, energy efficiency, renewables, and new generation technology options available within the state.

WATER

• Senior Auditor on two financial audits of a large Kansas City area water utility. Lead Consultant working with this client on an engagement to develop an improved model to forecast water consumption. Provided consulting services to the client in the development of inverted rate design structure.

• Project Director in revenue requirement, cost-of-service, and rate design studies for a Kansas area water utility. Responsible for the filing of two cases before the Kansas Corporation Commission. Also advised this client on the going concern valuation of the utility, relied upon in a transaction for the sale of the utility assets.

• Developed a class cost-of-service analysis involving a St. Louis area water utility and submitted the study in rate proceedings before the Missouri Public Service Commission.


• Addressed tax issues impacting the revenue requirements of a large Indiana water company before the Indiana Utility Regulatory Commission.

• Developed rate filings on behalf of several water companies within the state of Missouri. Responsible for revenue requirement, cost-of-service, and rate design evidence in two applications on behalf of this client.

• Project Manager of a regulatory audit of California American Water Company’s general office activities and costs, including unregulated activities, cost allocations, and affiliate transactions.

• Project Manager in a rate design analysis of Cal Am Water Phase 2 Rate proceedings. Addressed appropriate rate design considerations in a market area highly constrained by available supply. Proposed use of inverted rates and other conservation mechanisms to address limited supply conditions. Reviewed price elasticity implications on usage, metering options for irrigation customers, cost-of-service analysis, and pricing of service charge component of customer tariffs.

VALUATION

• Conducted a feasibility study regarding the sale of a utility power plant used to provide steam heat and process steam to commercial customers through a downtown area distribution system. The feasibility study addressed energy alternatives and pricing options, cogeneration, and a financial and operating forecast assuming alternative case scenarios based upon various potential ownership structures.

• Performed a valuation analysis on behalf of an investor group for the construction and operation of a high-capacity fiber network between Seattle and Vancouver, designed to serve large commercial companies and telecommunications providers. Provided due diligence analysis of market demand and pricing assumptions, competition, and anticipated construction and operation costs.

• Performed a valuation analysis of an electric utility in the southwest on behalf of a private investor group interested in making a tender offer for the shareholder interests of this public company. Also participated in presentations to investment bankers and commercial banks who were to fund the acquisition.

• Performed a valuation study regarding two natural gas distribution affiliates in the Midwest, whose electric utility parent was seeking offers for a sale of the assets and related securities. Developed analysis of the impact of regulation on property values.

• Performed a valuation analysis of a gas transmission company used to evaluate offers for the company. Developed due diligence and information materials provided to interested parties. Participated in presentations to interested parties with investment bankers.

• Developed a valuation analysis used in litigation proceedings to support the reasonableness of the acquisition price for a rural electric company acquired by an investor-owned electric utility company.

• Developed and applied a model for the determination of the value of helium extracted from natural gas relied upon in litigation cases in federal courts in Oklahoma and Kansas. Analysis required the determination of extraction costs at plants involving four major pipeline systems in the Midwest. Developed studies of construction and operating costs associated with helium extraction plants, as well as the analysis of incremental costs and revenues related in by-product liquid extractions.

• Performed an analysis of the value of long-term gas transportation contracts relied upon in civil litigation and by regulators. The studies included the development of construction cost and operations estimates, as well as discount rates to be employed.


• Performed a reproduction cost study for a cable television company located in the west. As part of the project, developed a continuing property records system. The company used the results in the negotiation of the sale of its assets.

• Represented a member of a consortium formed to build a satellite network for cellular services with commercial applications throughout the United States. Developed a valuation analysis and business plan used in a private placement for equity financing. Acted as a co-investment advisor with a large Wall Street firm in providing these services and making presentations to potential investors.

• Developed a valuation analysis of nuclear facilities which included a detailed study of assets, and their costs, required for environmental protection as defined by state statutes and federal regulations. The study was relied upon in determining the proper classification and valuation of nuclear assets for property tax purposes.

• On behalf of a state department of revenue, developed a review of property tax rules and definitions as applied to telephone, cellular, and cable companies. The study included a national survey of valuation practices relied upon by each state department of revenue.

• Developed appraisals of telecommunications properties for property tax purposes using standard valuation methods. Presented studies in administrative and civil proceedings. Developed cost of capital analysis based upon applications of the DCF and CAPM models.

• Developed appraisals relied upon in property tax cases involving telecommunications properties where subject sales were involved within two years of the date of property assessment.

• Prepared appraisals for a natural gas transmission company in appeals of property tax assessments in administrative proceedings in Kansas and Oklahoma.

• Prepared appraisals of two investor-owned utilities on behalf of the Iowa Department of Revenue. The appraisals included a subject sale analysis and a review of economic obsolescence.

• Developed appraisals of two Class I railroad companies in contested property tax valuation in civil proceedings in New York. Valuation studies included the review of the cost method based on RCNLD.

• Assisted an electric G&T coop in valuation and due diligence analysis of electric and gas properties offered for sale by a large independent telephone company.

• Developed a manual for “Alternative Valuation Procedures” on behalf of the Virginia State Corporation Commission – Public Service Taxation Division in a state that otherwise relies on the cost method.

• Developed a business plan and other financial advisory services to the National Homebuilders Association joint venture subsidiary, “Smarthouse,” in connection with securities offerings.

• Developed a complete appraisal of a cogeneration facility on behalf of the Virginia State Corporation Commission – Public Service Taxation Division. The study included “Subject Sale” and “Comparable Company” analyses, as well as a review of capacity and energy forecast prices in the PJM market area.

• Prepared a complete appraisal of CSX Railroad operating property on behalf of the Florida Department of Revenue.

• Prepared a complete appraisal of Qwest Corporation on behalf of the Iowa Department of Revenue. The appraisals included “Subject Sale” and “Comparable Company” market analyses.


• Developed a complete appraisal of the Dickerson Electric Generation Plant located in Dickerson, Maryland, on behalf of the Maryland State Department of Assessments and Taxation and Montgomery County, Maryland. The plant was comprised of three coal and three gas units with a total capacity of approximately 900 Mw. The ultimate owner of these facilities was Mirant Corporation, now known as GenOn Energy.

• Retained by the Virginia Public Service Taxation Division to perform a valuation of the Portsmouth Genco and James River Genco, both coal-fired generation units. The units were owned and operated by Cogentrix Energy, whose ultimate owner was the Carlyle Group.

TELECOMMUNICATIONS

• Developed and directed a three-day nationally attended conference entitled, “Competitive Strategies in the Local Exchange Marketplace.”

• Directed audits of RBOCs regarding compliance with regulatory accounting requirements, procedures to allocate costs between regulated and non-regulated activities, policies and rules for pricing transactions among affiliates, and monitoring reports filed with regulators.

• Conducted a review of depreciation rates for local exchange telecommunications property of the central division of a national carrier.

• Directed a comprehensive review of the operation of a RBOC telecommunications incentive plan, based upon a revenue sharing mechanism, over a three-year period. The study reviewed quality of service measures, capital expansion programs, workforce reductions, and other major elements of operating expense for the review period. Provided policy options regarding modifications to the incentive plan for prospective consideration.

• Developed a business plan and other related materials for a telecommunications reseller in its initial public offering. Provided ongoing financial and regulatory services, including development of all SEC filings.

• Directed an analysis of switching and other LEC facilities required and costs of providing inter-exchange services to an alternative service provider in the Phoenix, AZ, area.

INCOME TAX

• Expert witness in numerous regulatory proceedings addressing the proper recognition of investment tax credits and accelerated depreciation for accounting and ratemaking purposes. Provided guidance on intent of IRS regulations in use of tax benefits in the rate-setting process. Such testimony was provided in a number of jurisdictions including: Arizona, Oklahoma, Missouri, Indiana, Kansas, and Mississippi.

• Addressed the implications of utility net operating loss carryforwards for GAAP and ratemaking purposes before the Kansas Corporation Commission and the FERC.

• Provided expert analysis and testimony on the proper recognition of tax benefits arising from participation of subsidiary utilities in consolidated tax returns that include regulated and unregulated affiliates.

• Expert witness testimony and analysis of tax timing differences arising from utility operations as considered for income tax, accounting, and ratemaking purposes. Provided an assessment of proper application of normalization or flow-through of tax timing differences for accounting and ratemaking purposes. These issues were addressed in over 20 cases in various jurisdictions throughout the U.S.


EDUCATION AND PROFESSIONAL CERTIFICATION

• University of Missouri – Kansas City, Kansas City, MO Bachelor of Business Administration – Accounting, Economics Minor, May 1968.

• University of Missouri – Kansas City, Kansas City, MO Graduate studies in quantitative and systems analysis, 1968 – 1970.

PUBLICATIONS AND PRESENTATIONS • Utility Merger Review – Training Workshop for Regulators and Consumer Stakeholder

Representatives. An advanced course discussion of utility M&A technical and policy issues. Presented to Regulators and Staff in Dover, DE, and Trenton, NJ, May 2015.

• Systematic Ring Fencing: A Quantitative Approach to Balancing the Interests of Utilities and Regulation. Presented at the NARUC Accounting & Finance Spring Meeting, Jacksonville, FL, March 2014.

• CPUC Knowledge Transfer Workshop – Executive Summary. A presentation for senior staff and policy makers, February 2014.

• California Public Utilities Commission Staff Workshop. An overview of management, financial, and regulatory considerations associated with the PG&E San Bruno incident, November 2013.

• How to Build a Fence (and When); Co-authors. Public Utilities Fortnightly, October 2013.

• Constellation/EDF Nuclear Joint Venture: Regulatory Issues and Subsequent Resolutions. Co-author. Published in the Electricity Journal, March 2010. Also presented at the Western States Association of Tax Administrators Annual Meeting, February 2010.

• Rating Agencies – Current Methods Employed and Recognition of Imputed Debt. WSATA Unitary Appraisal School, Advanced Class, Logan, UT, January 2008.

• Accounting Pronouncements Impacting Financial Reporting Associated with Utility Purchase Power Agreements. WSATA Unitary Appraisal School, Advanced Class, Logan, UT, January 2008.

• Accounting and Finance Issues Associated with Contracts for Differences – Generation/DSM Projects. Gregory Oetting, co-presenter. Connecticut Department of Public Utility Control, September 2007.

• Overview of FIN 46(R), SFAS No. 133, and SFAS No. 71. Gregory Oetting, co-presenter. Connecticut Department of Public Utility Control, May 2007.

• The Yield Capitalization Method – Application Issues. WSATA Unitary Appraisal School, Advanced Class, Logan, UT, January 2007.

• Blue Chip Method Overview. 21st Conference of Unit Value States, Memphis, TN, October 2004.

• Appraisers Find Help in Recent Accounting Rules. Gregory Oetting, co-author. Fair & Equitable, August 2003.

• Impact of Deregulation and Competition On Property Tax Valuation Within the Utility Industry. Western States Association of Tax Administrators, Austin, TX, September 1995.

• Considerations Associated with the Review of Rate Applications Based Upon Projected Test Periods. A two-day training seminar conducted on behalf of the Kentucky Public Service Commission, December 1992.


• Competitive Strategies in the Local Exchange Marketplace. A three-day telecommunications conference sponsored by Overland Consulting and the University of Missouri – Kansas City, September 1991.

• Framework for a Competitive Strategy. Southeastern Regional Public Utilities Conference, Atlanta, GA, September 1988.

• Regulatory Considerations Inherent in Assessing Utility Culpability. Richard Ganulin, co-author. Public Utilities Fortnightly, 1987.

• On the South Texas Project and Other Cases. Published in The Advisory, March 1987.

• Regulatory Implications Associated with the Prudence Audit Process. NARUC Biennial Regulatory Information Conference, September 1986.

• Review of The Proposed Amendment to FASB Statement No. 71. Presentation to the Financial Accounting Standards Board, June 1986.

• Rate Moderation Plan Considerations. Presented at the Public Utilities Accounting and Ratemaking Conference, sponsored by the Texas Society of CPAs, April 1985.

• Regulatory and Accounting Implications of Phase-in Plans. Presented at the NARUC Biennial Regulatory Information Conference with Gary Harpster, co-presenter, September 1984.

• The Use of Uniform Filing Requirements by State Regulatory Commissions – An Industry Survey. May 1980.

ROBERT F. WELCHLIN Page 1

Robert F. Welchlin, CPA, Director


Regulatory consultant to the telecommunications, cable, electric, and gas industries. Mr. Welchlin manages operational, financial and regulatory audits, reviews of rate filings and cost studies in the energy utility, telecommunications, and cable industries. He has 35 years of industry experience.


Overland Consulting 1996 – Present Director

Plan, supervise, and perform telecommunications and energy industry consulting projects, including audits, on behalf of public utility commissions and other government agencies.

KPMG Peat Marwick LLP 1993 – 1996 Senior Manager

Information, communications, and entertainment lines of business. Developed and managed cable TV and telecommunications and industry consulting engagements.

LMSL, Inc. 1987 – 1993 Manager

Conducted audits of energy and telecommunications companies and sponsored testimony in regulatory proceedings. (LMSL is a predecessor firm of Overland Consulting.)

Public Utility Commission of Texas 1984 – 1986 Senior Staff Accountant

Reviewed electric, telephone, and water utility rate and regulatory filings and sponsored cost-of-service testimony in rate hearings.

Illinois Power Company 1980 – 1983 Senior Internal Auditor

Planned, directed, and performed operational and financial audits of the company’s headquarters departments, power stations, and service offices. Prepared the annual department operating plan and drafted the report to the Audit Committee of the Board of Directors for approval by the Director of Internal Auditing. Coordinated work with external auditors.


ELECTRIC AND GAS

• Project Manager in the analysis of the Wexpro I and II Agreements and an audit of expenses charged to Questar Gas for 2005 to 2014. The audit included an in-depth review of costing procedures attributed to the Operator Service Fee and recognition of capital additions considered under the Agreement. The work is being performed for the Utah Division of Public Utilities. 2015 – Present.


• Lead Consultant in the evaluation of the acquisition of Pepco Holdings, Inc., by Exelon Corporation. Conducted a detailed review of Exelon’s merger savings and costs to achieve analysis on behalf of the Maryland and Delaware Public Service Commissions and developed testimony on behalf of the Public Service Commission Staff in each state concerning the net savings attributable to Maryland and Delaware. 2014 – 2015.

• Project Manager in a focused audit of all major electric and gas utilities in the state of New York. Responsible for oversight of the auditing of accuracy, completeness, and comparability of data submitted by nine investor-owned utilities to the NYSPSC. 2014 – 2015.

• Project Technical Manager in a regulatory and management audit of the affiliate transactions, management, and operations of South Jersey Gas Company. Responsible for accounting procedures and costs charged to the regulated gas company from the parent and service companies, transactions with affiliate South Jersey Energy Solutions and its subsidiaries, and operational and management reviews of various support services (supply chain, fleet management, facilities management), customer service operations, construction contractor management, and excavation damage prevention. 2012 – 2013.

• Project Manager in the investigation of National Grid affiliate cost allocations, policies, and procedures. The audit included a review of accounting and internal control procedures governing service company transactions, an analysis of service company cost allocation procedures, and a regulatory audit of the costs charged by the service companies to National Grid’s New York distribution utilities (Niagara Mohawk, KeySpan Energy Delivery New York, and KeySpan Energy Delivery Long Island). It also included a detailed analysis of sampled and targeted transactions between the service companies and the New York utilities over a 20-month period. The work was performed for the New York Public Service Commission. 2011 – 2012.

• Project Lead in charge of the evaluation of the acquisition of Allegheny Energy Inc. by FirstEnergy Corp., including the merger synergies and likely impacts of the merger on Potomac Electric Maryland service company cost distributions. This work was done for the Staff of the Maryland Public Service Commission. Calculated discounted cash flow value of net regulated synergies attributable to Potomac Maryland customers. Recommended post-merger review of the impact of allocation procedures on regulated Maryland utility operations. 2010.

• Technical Manager in the diagnostic management audit of Connecticut Natural Gas Corporation for the Connecticut Department of Public Utility Control. Areas of responsibility included transactions with and services exchanged with Southern Connecticut Gas, Energy East, and other affiliates, human resources (staffing, compensation, labor relations, and performance appraisal processes), customer service and call center operations, dispatch, field operations and appliance services, meter operations, distribution sales and marketing, supply chain management, fleet operations, facilities management, security and external relations. 2009 – 2010.

• Lead Consultant in the review and preparation of testimony concerning the potential impact of the proposed Constellation Energy Group/Électricité de France Nuclear Power Joint Venture. 2009.

• Technical manager in the management audit of Atlantic City Electric Company for the New Jersey Board of Public Utilities. Areas of responsibility included allocations of corporate and shared utility costs, transactions with affiliates, compliance with New Jersey’s Electric Discount and Energy Competition Act (EDECA), and the management of various functions, including information technology, fleet, stores and supply chain, security, facilities, real estate, and records management. 2008 – 2009.


• Assisted the New Jersey Board of Public Utilities in review of the proposed merger of Exelon (Commonwealth Edison, Pennsylvania Energy) with PSEG (Public Service Electric & Gas). Responsible for the review of the impact of combining the two holding companies’ service companies (the companies that provide managerial, technical, and administrative services to associated companies) on the New Jersey Genco and utility. 2005 – 2006.

• Project Manager for a review of the costs of Sempra Energy’s holding company. The review, conducted on behalf of the Utility Consumer Action Network (UCAN), was a part of the review of Sempra Energy’s rate application with the California Public Utilities Commission (A.02-12-027 and A.02-12-028). Performed a similar review in the subsequent rate applications of subsidiaries, San Diego Gas & Electric Company and Southern California Gas Company (A.06-12-009 and A.06-12-010). 2003 and 2007, respectively.

• Project Manager for audits of the affiliate relationships and cost allocations of Elizabethtown Gas, New Jersey Natural Gas, and South Jersey Gas conducted on behalf of the New Jersey Board of Public Utilities (BPU). The audits examined whether each Company maintained a strict separation of risks, functions, and assets between their regulated utilities and unregulated affiliates to comply with BPU Standards. The audits also documented each Company’s cost allocation methodologies and results for a two-year period. 2002 – 2003.

• Directed the cost of service component of the initial FERC “Section 7” cost-of-service and base rate filing of Kansas Pipeline Company, which had been exempt from FERC rate regulation prior to 1997. Submitted and defended testimony on behalf of Kansas Pipeline before the FERC covering the overall cost of service filing, the historical basis for the calculation of acquisition premium, and company’s test year operations and maintenance expenses. 1998 – 2000.

• Working on the Pacific Gas and Electric 1999 General Rate Case, reviewed projected test year administrative and general expense levels and allocation of costs between the utility and affiliates. Submitted and defended testimony on behalf of the California Public Utilities Commission. 1998.

• Managed an audit of Pacific Gas and Electric’s compliance with regulatory requirements and internal control over relationships and transactions between the utility and its unregulated affiliates on behalf of the California Public Utilities Commission. 1998.

• Conducted a review of Southern California Gas Company’s 1994 and 1995 base margin costs. Submitted testimony on behalf of the California Public Utilities Commission. Issue areas included operations and maintenance expenses, corporate allocations, employee and executive compensation, post-retirement benefits, and savings from restructuring and force reduction programs. 1996.

• Submitted cost of service testimony on behalf of Mid-Kansas Partnership and Riverside Pipeline, L.P., in connection with Missouri Gas Energy’s base rate filing. Issues included deferred gas safety costs, merger-related savings, and weather normalization. 1996.

• Reviewed fuel receiving and inventory policies and coal contract terms in connection with a focused management audit of Big Rivers Electric Cooperative’s fuel procurement for the Kentucky PSC. 1993.

• Participated in the Western Resources/Kansas Power and Light Rate Case by conducting a rate case audit and submitting and defending cost-of-service testimony on jurisdictional cost allocations, operations and maintenance expenses, and pension expenses on behalf of the Kansas Corporation Commission. 1992.


• Conducted focused management audits of the gas supply operations of Montana Dakota Utilities and Mountain Fuels for the Wyoming PSC. Assessed the management and organization of each company as it related to gas supply, the degree to which supply options were optimized, the potential impact of FERC Order 636, and the relationships between the LDCs and their pipeline and production affiliates. 1992.

• Performed internal operational audits of nuclear and fossil fuel procurement, natural gas procurement and delivery, various corporate, power plant and service area operations, and nuclear plant construction contracts of the Illinois Power Company (Illinova). 1980 – 1983.

TELECOMMUNICATIONS

• Directed a California statutory regulatory audit of Citizens’ California PUC financial reporting and shareable earnings, including transactions between Citizens, its Connecticut-based parent company, and its affiliates as part of the Frontier (Citizens) Telecommunications Regulatory Audit. 2004 – 2005.

• As a participant in the Roseville Telephone Regulatory Audit, directed and conducted a regulatory audit of the company’s compliance with affiliate and non-regulated activity transaction rules and reviewed the company’s calculation of earnings shareable with customers under the California PUC’s New Regulatory Framework rules. Submitted and defended testimony on the audit on behalf of the CPUC. 1999 – 2000. Performed a follow-up audit of 2001 – 2003 regulated earnings. 2004.

• Directed a California statutory regulatory audit of Pacific Bell’s California PUC financial reporting, including transactions between Pacific Bell, its parent company (SBC), and its affiliates and subsidiaries. 2001 – 2002.

• Directed a study of New York Telephone’s subscriber loop network. Coordinated the effort of a multi-disciplined team that included regulatory, network operations, engineering, and data processing specialists. The major work products included an inventory of subscriber facilities, determination of facility utilization in different geographic regions, determination of the relative accuracy of the major databases containing network facility information, and verification of billing records with installed facilities. 1991.

• Conducted a review of the affiliate management and accounting relationships among the subsidiaries of AT&T. Documented significant transactions and allocations through the AT&T organization that affected AT&T Communications. Examined policies and procedures that affected the Communication subsidiary’s decision to use internal sources of supply and the corporate entity's allocation of costs to subsidiaries. 1990.

• Analyzed the GTE Corporation’s Indiana local exchange rates and developed a computer model to distribute the carrier's revenue requirement over a matrix of local services and rate groups. 1989.

• Bay Area Teleport – Conducted a review of the impact of local exchange carrier price flexibility on competitive access in California. 1988.

WATER

• Twice Technical Manager for the regulatory audit of California American Water Company’s general office activities and costs, including “California Corporation” administrative and general activities, New Jersey service company activities and cost allocations, and related ratemaking issues. Submitted revenue requirements testimony covering CalAm’s projected test years covering the O&M expenses of functions allocated from the national, regional, and state levels to the district operations for which CalAm was seeking an increase in rates. 2008 – 2013.


CABLE

• Analyzed costs imposed on cable systems by late-paying customers and prepared studies to quantify the additional costs of handling past due accounts. 1995 – 2001.

• Analyzed cable system costs and prepared cost-of-service rate studies for cable companies, including two of the nation’s largest cable systems – TCI Chicago and DCLP. Developed cost-of-service methodologies to properly account for affiliate relationships and corporate and divisional cost allocations to the cable systems. Analyzed incremental cost of service under FCC Form 1235 rules for a group of systems calculating the revenue requirement impact of upgrading system capacity upgrades. 1994 – 1995.

• Developed a database application to calculate programming cost increases on a cable-system basis to comply with FCC requirements. 1994.


• Eastern Illinois University, Charleston, IL Bachelor of Science – Accounting and Business Administration, August 1979.

• St. Edwards University, Austin, TX Master of Business Administration, May 1986.

• Kansas CPA Certificate #9821

• Kansas Practice Permit #3349

PROFESSIONAL AFFILIATIONS

• The American Institute of Certified Public Accountants

Ellen S. Smith, P.E. Senior Managing Director – Power & Utilities Practice [email protected] 200 State Street Boston, MA 02109 Tel: +1.617.747.1871

General Ms. Smith is a Senior Managing Director at FTI Consulting. She has more than 30 years of experience on the physical operation, maintenance and design of electric systems. Ms. Smith has also provided testimony on utility storm preparedness and response as well as utility infrastructure and capital requirements, and cyber security. Recent experience includes testimony on participation in various state and ISO planning process and rate cases with respect to infrastructure. She has led large utility storm emergency restorations and provided testimony on utility infrastructure resilience and restoration response to the Mooreland Commission in New York State. Professional Work History FTI Consulting, Senior Managing Director May 2013 - Present National Grid US, Chief Operating Officer September 2009 – October 2012 Ms. Smith was responsible for 9800 employees including Long Island Generation, LNG operations, Transmission and Distribution Operations and all support organizations. In addition, Ms. Smith had responsibility for the LIPA MSA contract with National Grid USA. In this role, Ms. Smith also was the company witness for the 2010 Niagara Mohawk Rate Case 10-E-0050 on infrastructure. She also led the NYS DPS Audit action plan and provided quarterly updates to the NYS PSC on progress. Ms. Smith’s activities for National Grid NYS included

Led the management of the Gas and Electric system including the (3) control rooms in Buffalo, Syracuse, and Albany

Led the teams responsible for implementing the NYS Electric and Gas capital improvement program

Led the team responsible for LNG operations in NYS Led the team responsible for National Grid’s Power Plants on Long Island Lead the Support Services team responsible for fleet, inventory management, work order fulfillment

and other support functions in NYS Lead the Performance improvement team responsible for driving step changes in National Grid’s

operational performance, including improvements in Reliability and Safety Responsible for the safety of all National Grid operations Served at Incident Command for major NYS events

Ms. Smith was also a member on the Niagara Mohawk Power Company board of directors responsible for driving and implementing decisions that impacted Niagara Mohawk’s strategic direction. Hess Corporation, VP of Refinery Optimization & Planning November 2003 – September 2009 Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. In her role as a Vice President, Ellen completed a “cold eyes review” project of the HOVENSA $15B, Joint Venture Refinery (500,000 Bbls/day) on St. Croix, USVI. Project outcomes focused on Refinery Transformational initiatives included:

Implementing a Refinery-Wide Performance Management System including the development of the Refinery Strategy Map, linked Balanced Scorecards, and individual performance goals (pay-for-performance) tied to Scorecard results for the first time. Staffing an Energy Conservation Program Team and developed the initial plans to reduce the energy consumption ($900MM+ in 2008) by 10+% over 2 years. (w/o significant capital)

mailto:[email protected]

Restructuring the Power & Utilities area (250 MW cogen) including the hiring of 3 Power Industry leaders. Modified critical operating practices to improve system reliability while reducing overall cost. (Reduced spinning reserve from 35+% to 20%, improved capacity factors from 55% to 80% on most units). Led the daily start up meetings for the commissioning of a new GE Frame 5 PA gas turbine and heat recovery steam generator. Served as the in house Gas Turbine Subject Matter Expert on the EPA Petroleum Refinery Initiative (PRI) Development Team This work included defining and negotiating the work scope with suppliers and engineers for $200MM+ worth of new equipment to meet the PRI Consent Decree requirements.

Pratt & Whitney Power Systems, President November 1999 –February 2003 Pratt & Whitney is a world leader in the design, manufacture and service of aircraft engines and auxiliary power units. Ellen was accountable for all P&L activities relating to aeroderivative power generation product sales, projects and service.

Grew profitable revenues from $80M to $600+M. Completed the development of an upgrade to the FT8 (25MW) product. (+~3MW) Bid and won the first marine program contract in over 20 years. Developed the CalPeak, LLC project in California for five 50 MW peaking power plants. Acquired and integrated Energy Services, Inc. a $20MM power plant Engineering, Procurement and Construction (EPC) Management Company.

Prior to her role as President, as a Vice President of Commercial Engine Programs, Ellen led the development of the new PW6000 engine ($750MM) through critical milestones, and the PW4000, PW2000 and JT8/9D operational engine programs. Served as the P&W executive liaison with Airbus and Boeing. Utilized the Integrated Program Deployment (IPD) process including earned value management program planning and structured risk analysis to improve the predictability of complex program outcomes. GE Energy August 1980 – October 1999 Ms. Smith held a number of positions of increasing responsibility including various roles on large turnkey gas, steam and combined cycle power plant and substation projects in the US and in Egypt under US AID contracts. Ms. Smith was also the General Manager of GE Operations & Maintenance providing 3rd party services to asset managers/owners of GE power plants. Before leaving GE, Ms. Smith led the GE Energy 6 Sigma program for 3 years prior to being named to Vice President of Energy Services Sales. Professional Experience Ms. Smith joined FTI Consulting’s Boston office in 2013, continuing 30+ years of operational experience in the energy sector. Ms. Smith has expertise in the physical design, engineering, construction, system operation, and maintenance of electric, gas, LNG and power generation systems. She has participated in various state and ISO planning process and rate cases with respect to infrastructure. She has led large utility storm emergency restorations and provided testimony on utility infrastructure resilience and restoration response. Ms. Smith has experience in electrical system planning, design, maintenance, and operations. Ms. Smith:

has experience leading teams responsible with engineering, designing, maintaining and operating utility scale generation, transmission and distribution systems. has experience with leading teams in the restoration of utility system events. has experience in engineering, design and procurement of electrical equipment and systems. has led the implementation of process safety including an extensive review of operational control room procedures, strategic communication, and risk reduction. works with client and stakeholder groups and is experienced in simplifying the communication of technical ideas. Within client organizations, she works with engineers, economists, lawyers and senior management, providing consulting services geared to various forums, whether they were regulatory proceedings, stakeholder meetings or meetings of senior executives.

Ms. Smith has provided written and oral testimony in several cases before the New York State Public Service Commission and the New York State Moreland Commission on Utility Storm Response. Ms. Smith has also provided expert testimony in power reliability matters. Education and Professional Certification

BS, Mechanical Engineering; Union College, Schenectady, NY MS, Power Systems Engineering; Union College, Schenectady, NY Trustee, Union College, Schenectady, NY

GREGORY S. OETTING Page 1

Gregory S. Oetting, CPA, Director


Regulatory consultant to the electric, gas, water, and telecommunications industries, Mr. Oetting has experience in financial and regulatory reviews, management audits, and valuations. His regulatory and management audit experience includes reviews of cost allocation methodologies, compliance with competitive service standards, and internal controls. Mr. Oetting has also been involved in the valuation of several utilities and railroads in which industry cost of capital was analyzed. Mr. Oetting has over 20 years of regulated industries consulting experience, three years of experience as an auditor in a national CPA firm, and three years of experience as a controller of an interstate natural gas pipeline.


Overland Consulting 2000 – Present Director

Direct energy and telecommunications industry consulting projects on behalf of public utilities commissions and other government agencies.

Midcoast Energy Resources, Inc., Kansas Pipeline Operating Company 1997 – 2000 Controller

Supervised the accounting and cash management functions of an interstate natural gas pipeline company.

Overland Consulting 1995 – 1997 Senior Consultant

Participated in energy and telecommunications industry consulting projects on behalf of companies, public utilities commissions, and other government agencies.

Various 1990 – 1995

Served as special projects accountant and supervisor of accounting for various companies in private industry.

Arthur Andersen & Company 1987 – 1990 Senior Accountant

Planned, supervised, administered, and reported on audits and other engagements in a variety of industries including utilities. Experienced in the evaluation of internal controls.


ELECTRIC, GAS, WATER, AND TELECOMMUNICATIONS

• Lead Consultant in a comprehensive management and operations audit of Central Hudson, on behalf of the New York State PSC. Responsible for analyzing the utility’s performance management, customer operations, and project and work management. 2016 – Present.


• Lead Consultant in a focused review of the general rate application of Southwest Gas Corporation, on behalf of the Arizona Corporation Commission. Responsible for review of gas procurement, analysis of rate design and revenue decoupling, and a class cost of service study. 2016 – Present.

• Lead Consultant in the evaluation of the acquisition of Pepco Holdings, Inc., by Exelon Corporation. This work was performed for the Staff of the Maryland Public Service Commission. Analyzed merger accounting and tax matters associated with the transaction. 2014 – 2015.

• Technical Manager in a focused audit of all major electric and gas utilities in the state of New York. Responsible for analyzing the reliability and comparability of gas safety performance metrics reported to the New York Public Service Commission. 2014 – 2015.

• Technical Manager in the focused audit of PG&E capital and operations expenditures related to the company’s gas distribution system. This work was performed for the California Public Utilities Commission. 2012 – 2013.

• Technical Manager in the management audit of South Jersey Gas Company for the New Jersey Board of Public Utilities. Responsible for analyzing executive management and corporate governance matters. 2012 – 2013.

• Technical Manager in the investigation of National Grid affiliate cost allocations, policies, and procedures. This work was performed for the New York Public Service Commission. 2011 – 2012.

• Technical Manager in the review of the proposed merger between Constellation Energy Group and Exelon Corporation. This work was performed for the Staff of the Maryland Public Service Commission. Provided testimony on several subject matters, including the treatment of transaction costs related to the merger, financial and operational profiles of the applicants, and taxes. 2011.

• Lead Consultant in the evaluation of the acquisition of Allegheny Energy Inc. by FirstEnergy Corp. This work was done for the Staff of the Maryland Public Service Commission. Analyzed merger accounting and tax matters associated with the transaction as well as certain other areas relevant to the public interest criteria. 2010.

• Technical Manager in the management audit of Public Service Electric & Gas Company for the New Jersey Board of Public Utilities. Responsible for analyzing executive management and corporate governance matters, customer service, accounting, cash management, and finance. 2009 – 2011.

• Technical Manager in the diagnostic management audit of Connecticut Natural Gas Corporation for the Connecticut Department of Public Utility Control. Areas of responsibility included finance, accounting and internal controls, executive compensation, system design, planning, and construction. 2009 – 2010.

• Lead Consultant in the review of the impact on Baltimore Gas and Electric Company of the proposed transaction of its parent, Constellation Energy Group, with EDF. This transaction involved the sale of a 50% interest in Constellation’s nuclear facilities. This work was performed on behalf of the Staff of the Maryland Public Service Commission. Provided testimony on subject matters relevant to the public interest criteria, including costs associated with the transaction, credit ratings, cost of capital, and liquidity. 2009.

• Technical Manager in the management audit of Atlantic City Electric Company for the New Jersey Board of Public Utilities. Analyzed various matters including accounting and property records, cash management, financing, customer service, and support services. 2008 – 2009.

• Participated in the regulatory audit of California American Water Company’s general office activities and costs, including unregulated activities, cost allocations, and affiliate transactions. 2008.


• Participated in the review of long-term financial projections prepared by Midland Cogeneration Venture Limited Partnership to be used in regulatory proceedings concerning proposed modifications to a power purchase agreement. The engagement included the sensitivity testing of major variables in the partnership’s financial model. 2008.

• Participated in the review of Kentucky current statutes, regulations, and policies governing integrated resource planning. The project addressed recommendations necessary to mitigate impediments to the development of appropriate demand-side management programs, energy efficiency, renewables, and new generation technology options available within the state. 2008.

• Technical Manager in the review of the General Rate Case Applications of San Diego Gas & Electric Company and Southern California Gas Company on behalf of the Utility Consumers’ Action Network. Analyzed the shared utility services of both companies. 2007.

• Technical Manager in the review of accounting issues raised by Connecticut utilities in connection with proceedings on long-term capacity measures. 2007.

• Technical Manager in the regulatory audit of Verizon California. Analyzed the financial reporting of the Company in accordance with California Public Utilities Commission rules and requirements. 2006 – 2007.

• Technical Manager in the review of the Public Service Enterprise Group/Exelon Corporation merger petition on behalf of the New Jersey Board of Public Utilities. Analyzed the financial impacts of the merger, in particular the proposed money pool arrangement between affiliates. 2005 – 2006.

• Technical Manager in the regulatory audit of South Jersey Gas Company. Analyzed the allocation of costs between South Jersey Gas Company and affiliates and compliance with competitive service standards of the New Jersey Board of Public Utilities. 2002 – 2003.

• Technical Manager in the regulatory audit of Pacific Bell. Analyzed the allocation of costs from affiliates to Pacific Bell in accordance with California Public Utilities Commission rules and requirements. 2001 – 2002.

• Controller of a Midwest-based interstate pipeline. Responsible for all financial reporting ranging from monthly to annual financial statements and detailed regulatory reports filed with pipeline regulatory bodies. Position involved extensive analysis and evaluation of all financial transactions as well as supervision of accounting department staff. Assisted in the preparation of a rate case filing before the Federal Energy Regulatory Commission. Assisted in valuations related to the potential purchase or sale of utility assets. 1997 – 2000.

• Participated in the focused management audit of Harrison County Rural Electric Cooperative Corporation. 1997.

• Participated in Overland’s audit of the Southern California Gas Company’s performance based management (PBR) incentive rate plan application. 1995 – 1996.

• Participated in the determination of gas pipeline utility cost of service in Overland’s rate case audit of the Kansas Pipeline Operating Company. 1995.

• Participated in the planning, administration, and financial reporting of the first-time-through audit related to United Cities Gas Company’s acquisition of Union Gas Company. 1990.

• Participated in the audit of St. Joseph Light & Power Company for three years. Responsibilities included the planning, supervision, and reporting of numerous engagements (10Q and 10K). 1987 – 1990.


• Participated in the audit of Raytown Water Company for three years. Responsibilities included the planning, supervision, and financial reporting of the annual audit. 1987 – 1990.

VALUATION

• Technical Manager for an independent valuation of the Dickerson Plant located in Montgomery County, MD. This valuation was developed for use in a property tax appeal proceeding in the State of Maryland. 2013 – 2014.

• Technical Manager for an independent valuation of the telecommunications personal property of Verizon Virginia and Verizon South. This valuation was developed for use in a property tax appeal proceeding in the Commonwealth of Virginia. 2010 – 2011.

• Technical Manager for an independent valuation of the operating property of Qwest Corporation. This valuation was used in settlement negotiations related to a property tax appeal in the State of Iowa. 2006.

• Technical Manager in the development of alternative valuation procedures under consideration for use in utility assessments in Virginia. 2005.

• Technical Manager for an independent appraisal of the Hopewell Cogeneration Facility. This valuation was used in a property tax appeal in the Commonwealth of Virginia. 2004 – 2005.

• Technical Manager for an independent appraisal of CSX Corporation’s railroad operating property. This valuation was utilized in settlement negotiations related to a property tax appeal in the State of Florida. 2004.

• Technical Manager for an independent utility valuation of Interstate Power Company’s operating property. This valuation was utilized in settlement negotiations concerning a property tax appeal before the Iowa State Board of Tax Review. The valuation included a subject sale analysis as well as other generally recognized valuation approaches. 2002 – 2003.

• Assisted in the development of appraisals of two Class I railroad companies in contested property tax proceedings in New York. 2002.

• Performed a utility valuation appraisal relied upon in determining the market value of Citizens Utilities Company’s Arizona Telephone Operations for property tax purposes. The appraisal incorporated applications of the stock and debt method, direct and yield capitalization methods, and analysis of market transactions. 1995.


• University of Kansas, Lawrence, KS Bachelor of Science – Accounting and Business Administration, May 1987.

• Certified Public Accountant Certificates in Kansas and Missouri

• Kansas CPA Certificate #3823

PROFESSIONAL AFFILIATIONS

• The American Institute of Certified Public Accountants


PUBLICATIONS AND PRESENTATIONS • California Public Utilities Commission Staff Workshop. An overview of management, financial, and

regulatory considerations associated with the PG&E San Bruno incident, November 2013.

• Accounting and Finance Issues Associated with Contracts for Differences – Generation/DSM Projects. Howard Lubow, co-presenter. Connecticut Department of Public Utility Control, September 2007.

• Overview of FIN 46(R), SFAS No. 133, and SFAS No. 71. Howard Lubow, co-presenter. Connecticut Department of Public Utility Control, May 2007.

• Appraisers Find Help in Recent Accounting Rules. Howard Lubow, co-author. Fair & Equitable, August 2003.

Donald Racey, PMP Managing Director – Power & Utilities Practice [email protected]

651 Holiday Dr, Pittsburgh, PA 015220, Tel: +1.412.808.1174

General Mr. Racey is a member of a team of FTI consultants who specialize in the both operational improvements and economic and public policy analysis of electricity market design. Mr. Racey has more than twenty years of experience leading large-scale operational transformation engagements. He specializes in the design, development and implementation of Operational Excellence, Process Improvement and Merger & Acquisition Integration programs. Mr. Racey has worked extensively in the regulated utilities industry specifically in the electric generation, transmission, and distribution segments.

Professional Work History FTI Consulting, Managing Director July 2015 – Present Leader within the Economic Consulting business segment focused on the Energy, Power and Products practice. Specific areas include Operational Excellence, Performance Improvement and Strategic and Regulatory Issues. Reliability Management Group (RMG); Senior Vice President, Operations 2011– 2015 Vice President, Operations 2008 - 2011 Reporting to the company founders and a member of the Senior Leadership Team. Responsible for driving RMG’s P&L, leading the portfolio of consulting engagements and managing the day to day operations.

Lead business development efforts through Operational Analysis and Business Strategy development.

Increased revenue by 40% over the last three years. Developed an End to End Portfolio and Project Management service offering that generated $8

million in revenue over the last two years. Launched a Compliance Management service offering resulting in $3.5 million in revenue in the

first year. Delivered $250 million in improved CAPEX utilization (33%) for one of the largest regulated

utilities in the country through the implementation of a comprehensive Portfolio & Project Management process.

Designed and implemented a Maintenance & Reliability process for $3 billion power generation utility. Initiative focused on Corrective, Preventive and Predictive Maintenance functions that resulted in annual operating savings of $2.3million.

Synergetics Worldwide, INC, Director 2004 –2008 International management consulting firm specializing in Private Equity backed Turnaround and Merger Integration engagements.

Accountable for leading pre-sales analysis teams through operational and financial analysis to identify and develop strategies to impact bottom line results.

Led a $15 million cost reduction initiative for an Integrated Software Solutions provider serving the Healthcare, Banking, Treasury and Capital Markets industry in first year cost savings through centralizing product support activities, reducing contractor expenses and reducing product support costs.


Responsible for leading multiple project teams in the implementation of cost reduction

strategies to drive profitability of client portfolio companies in the US, UK, Australia, Canada and the Netherlands.

Parisella, Vincelli & Associates, Operations Chief 2002 –2004 Management consulting firm dedicated to serving North American manufacturers in the design and implementation of Supply Chain Optimization, Cost Reduction and Lean Manufacturing process improvements.

Responsible for client account management and service delivery. Led multi-site projects focused on Supply Chain Optimization and Lean Manufacturing Process Improvements.

Led Operational Analysis teams as a Presenting Analyst to drive the firms’ business development efforts, developed business cases for services, created implementation plans, budgets and staffing requirements.

BILLINGZONE.COM, Relationship Manager 2001 –2001 Joint venture between PNC Bank and Perot Systems to develop and deliver an internet based Business to Business Electronic Invoice Presentment and Payment solutions.

Responsible for Strategic Account Management. Served and the key client contact through the product implementation lifecycle. Established technical requirements, implementation scope and plans, managed the implementation launch and ongoing customer support.

Schneider Downs & Co, INC. Senior Consultant 1998 –2001 Regional Public Accounting and Business Advisory Services firm servicing privately held middle market companies.

Responsible for the planning, management and execution of Operational Due Diligence & Assessments, Post Merger Integration, Cost Reduction, Process Improvement and Workflow Analysis. Provided direct support to the M&A Transaction Services Group.

Dewolff, Boberg & Associates, INC 1994 –1998 Management consulting firm servicing Fortune 1000 companies in the implementation of Lean Manufacturing, Supply Chain Optimization and Process Improvement initiatives.

Led functional work streams, facilitated Kaizen events and conducted training workshops on Value Stream Mapping, 5S and Single Minute Exchange of Die (SMED) methodologies.

Professional Experience Donald Racey is a Managing Director and has more than twenty years of experience leading large-scale operational transformation engagements. Mr. Racey specializes in the design, development and implementation of Operational Excellence, Process Improvement and Merger & Acquisition Integration programs. Mr. Racey has worked extensively in the regulated utilities industry in generation, transmission, and distribution. Prior to joining FTI, Mr. Racey was the Senior Vice President, Operations for Reliability Management Group in Minneapolis. Mr. Racey is a certified Project Management Professional (PMP) and a Six Sigma Black Belt. Prior to joining FTI, I served as SVP, Operations for Reliability Management Group where I managed the firm’s portfolio of client engagements and supported all business development activities. The firms specialized in the design and implementation of Asset Management, Maintenance & Reliability programs. Began career at Schneider Downs & Co., a Pittsburgh based regional Public Accounting and Business Advisory Services firm. Responsible for ERP Implementations, Process Improvements and Merger Integration. Provided direct support to the M&A Transaction Services Group. Mr. Racey led the design and implementation of AEP Transmission’s Project Lifecycle Management Process (PLMP) that governs the execution of AEP’s $2b annual CAPEX budget.

Recently, Mr. Racey led the implementation of National Grid’s End to End Project & Portfolio Management Process that standardized key processes across the Electric & Gas businesses and three regulatory jurisdictions. Mr. Racey led the process design and technology system selection for the implementation of a comprehensive Compliance & Maintenance Management program for Chesapeake Utilities three operation companies. Education and Professional Certification BA, Economics and B.A. Business Administration; Ohio Dominican University, Columbus, OH Project Management Professional (PMP), Project Management Institute Six Sigma Black Belt, ASQ

Colin J. Hassett, PMP Director – Power & Utilities Practice [email protected]

200 State Street Boston, MA 02109 Tel: +1.617.520.0232

General Mr. Hassett is a member of a team of FTI consultants who specialize in the both operational improvements and economic and public policy analysis of electricity market design. Mr. Hassett has 15 years of operational experience, in the Electric and Gas Utility Sector, with areas of expertise in power systems design, construction project management, emergency response improvement Project leadership, Project Management Office design and leadership, and business process improvement projects. Notably, Mr. Hassett’s efforts in business process improvement projects drove the attainment of challenging strategic business goals. Professional Work History National Grid USA October 2000 – August 2015 Manager of Project Management – Process Excellence March 2013 – August 2015

Reporting to the Vice President of Process Excellence; designed, developed and manages the PMO for National Grid’s newly created process excellence group Developed 5 employees with limited project management experience to be project managers Developed reporting and communications management plan, manage system wide KPIs Provided strategic and tactical input on the design of National Grid’s Process Excellence startup Lead the deployment of Performance Excellence methodologies

Lead Project Manager - Emergency Planning PMO April 2011 - March 2013

Emergency Response End to End Process Improvement Project Lead which yielded a 20 percent reduction in response time in a 9 month span of time: Leading 14 Vice Presidents and mentored their designated team leads through process improvement Responsible for project templates, forms and progress reports Developing a continuous improvement model to be used for future improvement Responsible for the staffing of storm assignments for 5,500 management employees Supporting the development and deployment of training and drilling for all critical roles Responsible to lead communication initiatives for all internal and external stakeholders Presented project progress to the US executive team and Chief Executive Officer

Department Planner – Project Management and Construction June 2010 - April 2011

Reporting to the Vice President of Project Management and Construction lead department and organizational initiatives Co-Created and implemented a Contract Control Framework policy (C3) following the COSO model Developed and maintained the department’s Business Continuity Plans Co-Developed and rolled out the department’s Process Safety initiative Prepared and provided department communications to the senior executive leadership team


Co-Developed and rolled out various fleet and procurement based cost saving initiatives The voice of the Vice President while representing the department in various forums

Lead Distribution Project Manager January 2008 – June 2010

Managed a portfolio of distribution line construction projects (4-35kV) totaling 60 + Million Dollars Managed projects consisting of new distribution feeders, line refurbishment, and voltage conversions Generated scope of work, schedule, risk analysis, justification, and prepared project estimates Selected the appropriate construction resources to ensure the completion of project activities Reported project performance to various levels of management within the organization Coached project team members, with limited project management experience, to understand and apply project management methodologies

Senior Contract Management Engineer September 2007 - January 2008

Coordinated and provided support for a bare vs. fully loaded unit pricing review for the strategic assessment of existing Alliance contractor contracts Prepared and conducted training for all field personnel and contractors on various department systems and business practices Executed a design review process for all project level work, providing QA/QC and project scope for large distribution construction projects

Senior Operations Engineer: January 2005 – September 2007

Designed new distribution voltage class feeders with details including duct bank and cable installations, switchgear installations, aerial cable installations, asset replacement projects, and DOT road reconstruction projects

Engineering Co-op (Intern): October 2000 – January 2005

Performed tasks consistent with that of an entry level field engineer including development of electrical system designs to feed new residential/commercial businesses

Professional Experience Mr. Hassett has 15 years of operational experience, in the Electric and Gas Utility Sector, with areas of expertise in power systems design, construction project management, Project Management Office design and leadership, and business process improvement projects. Notably, Mr. Hassett’s efforts in business process improvement projects drove the attainment and sustainment of challenging strategic business goals. Prior to joining FTI Consulting, Mr. Hassett worked for National Grid serving many roles during his tenure. Reporting to various senior leaders Mr. Hassett completed a number of business initiatives and process improvement projects, including most recently supporting National Grid’s wide scale implementation of Process and Performance Excellence through creating and implementing a Project Management office (PMO). The PMO provided coaching, tools, templates, standards, reporting, scheduling support, change management, communications management, and Project Management framework support for the Process Excellence organization. In this role he also provided thought leadership for Governance design, Process Management frameworks, and Process Design Standardization. Mr. Hassett has extensive experience in Emergency Planning; leading National Grid’s Emergency Response improvement program. The program was the company’s first instance of a large scale end to end process excellence build out. The initial 8 months of project work lead to a demonstrated reduction of restoration time of 20 percent when compared to similar major events through process

improvement activities and software tools deployment. Prosci’s change management framework was utilized to ensure adoption and sustainment of the new processes and procedures which included the assignment of all 5,000 US based management employees to storm assignments. Mr. Hassett also led the implementation of a Process Safety Management program to the Electric business yielding improvements to risks around Process Safety. Other projects include a Contract Controls Code driven by the UK Bribery Act of 2010. The Contract Controls Code was a consolidated framework defining our controls in place for managing risk around bribery with a focus on contracts. Education and Professional Certification

MS, Power Systems Management; Worcester Polytechnic Institute, Worcester, MA BS, Electrical Engineering; Northeastern University, Boston, MA Project Management Professional Certificate, December, 2007

Name: FRANK T. DiPALMA Title: Partner/Principal Education: Fairleigh Dickinson University, MBA Management/Finance New Jersey Institute of Technology, BS Mechanical Engineering University of Michigan, Executive Development Program Professional American Gas Association Affiliations: Society of Gas Operators Institute of Electrical and Electronics Engineers (Past Member)

University of West Virginia, Institute of Technology (Adjunct Professor) Career Synopsis: An operations oriented engagement/project manager who leads teams of consultants to resolve complex business problems in power generation and energy transmission and distribution entities; skilled at directing, planning and implementing approach and objectives for client’s project; experienced in engineering and operations management, process improvement, project management, construction, business development, marketing, continuous improvement, strategic alliances, labor relations, strategic planning, change management, organization assessments and regulatory compliance. Consulting expertise supports both management and technical projects, with assignments grouped in the following categories: Management Audits, Merger Due Diligence, Safety and Reliability Reviews, Emergency Response, Integrity Management, Benchmarking, Operational Assessments and Various Studies. Selected Consulting Assignments: Management and Operations Audit of Central Hudson Gas & Electric Corporation (2016-present) New York State Public Service Commission The focus of this audit is to enhance the utility’s future performance by observing its existing processes, practices systems and organizational structures and determining how they can improve. My specific areas of concentration are gas planning, project management and work management. Energy Service Charge and Stranded Costs Review of Eversource (2016- present) New Hampshire Public Utilities Commission Review analyze and testify to the revenue and expense reconciliation of the default Energy Service for PSNH’s fossil and hydro generating assets for 2015. The scope of work includes: understanding the cause and duration of outages and recommending any disallowances or operational changes assessing purchases and sales of replacement power and analyzing a costly dispatch event. Management Audit of United illuminating (2015-2016) Public Utility Regulatory Authority Serving as Jacobs’ responsible officer and project manager we conducted a comprehensive diagnostic review the major functions of UI. The scope of the audit included: organization and management, financial systems and controls, marketing, engineering and operations, information technology, customer-service operations, and relationships with parent company. Gas Infrastructure Filing - Public Service Electric and Gas Company (2015) PSE&G wanted to initiate a gas infrastructure filing to replace approximately 4,000 miles of cast iron and bare steel, while recovering all associated costs in a timely manner. To address requirements for a comprehensive filing, Jacobs analyze and developed: a Safety case, a Business case and a Program execution plan. The analysis resulted in direct testimony that was filed with the NJ BPU.

Operational Due Diligence Consulting Exelon - Pepco Holdings Incorporated Merger (2015) Maryland Public Service Commission and Delaware Public Service Commission Analyzed and testified as to the potential impacts on Pepco Holdings’ two operating utilities in Maryland and Delaware. Jacobs’ role was to assist the MDPSC) and DEPSC Staff in determining if the transaction was in the public interest by assessing how it could affect the reliability, adequacy and safety of electric service in Maryland and gas and electric service in Delaware. Specific support activities included: analysis of pre-filed materials, participate in discovery, provide expert analysis, provide expert testimony, develop cross examination, assist in brief preparation, and support settlement discussions. Electric Reliability Reporting Metrics of the New York State Electric Utilities (2014-2015) New York State Public Service Commission The objective of the audit was to verify that the data provided by the six major New York State electric utilities to the NYSPSC is sound and accurate, and reflects the appropriate levels of reliability. Serving as project manager, we reviewed the completeness and accuracy of data collected by various systems, identified opportunities for improvements and recommend best practices metrics. Public Service New Hampshire Clean Air Project at Merrimack Station (2010 – 2014) New Hampshire Public Utilities Commission PSNH was installing a wet scrubber at Merrimack Power Generating Station, originally the project was estimated to cost $250M, at the time Jacobs was assigned to the project the cost estimate had increased to $457M. Acting as both responsible officer and project manager, our scope of work included: due diligence on completed portions of the project, monitoring of the ongoing portion of the project, quarterly reports to track the progress and summarization of project completion. The project due diligence was summarized in testimony and presented at a New Hampshire Commission cost of service hearing. Conduct Comprehensive Review of UGI’s Penn Natural Gas, Inc Gas Program and Activities (2014) UGI Corporation Conducted a comprehensive review of UGI PNG’s Natural Gas Distribution programs and activities based on their operating policies, processes, standards, procedures, systems, records, culture, staffing levels, and training programs. Serving as responsible officer, specific areas of focus were organizational silos, decision-making, knowledge sharing in the areas of leak management, corrosion management, transmission integrity management, and emergency response. Investigation into the Performance of Connecticut’s Electric and Gas Distribution Companies in Restoring Service Following Storm Sandy (2013) Connecticut Public Utilities Regulatory Authority Serving as responsible officer, Jacobs provided technical expertise to PURA’s staff in areas pertaining to electric distribution company and gas company preparation for and action in response to significant outages that occurred as a result to Hurricane Sandy. Responding to the Requirements of Public Act No. 12-148, An Act Enhancing Emergency Preparedness and Response (2012) Connecticut Public Utilities Regulatory Authority In the aftermath of Tropical Storm Irene and the October 2011 Snow Storm, Connecticut recognized the need to enhance emergency preparedness and response and establish electric and gas company performance standards for emergency preparation and service restoration. Acting as project manager, Jacobs facilitated an interactive process with five utilities, Rate Council and Commission Staff. Assessment of Pacific Gas & Electric Co. Pipeline Safety Enhancement Plan (2011-2012) CPUC The PSEP is a multiphase, multiyear, multibillion dollar program that is in addition to PG&E's existing transmission pipeline maintenance and integrity management programs. Jacobs was asked by the CPUC to review the PSEP, supporting work papers and testimony filed by PG&E, as well as interveners. Management Audit of Public Service Electric and Gas Company (2010-2011) NJBPU Jacobs Consultancy participated in an independent management audit of PSE&G mandated by The State of New Jersey's Board of Public Utilities (BPU). Serving as Jacobs’ project manager, the technical and

management practices of PSE&G were assessed in the areas of electric transmission and distribution, gas transmission and distribution, gas procurement and supply and contractor performance. Energy Reliability Consulting Exelon - Constellation Energy Merger (2011) Maryland PSC Analyzed the potential impacts on BGE in connection with the Exelon and Constellation Energy Merger; my role was to assist the Maryland Public Service Commission's (MDPSC’s) Staff in determining if the transaction was in the public interest by assessing how it could affect the reliability, adequacy and safety of electric and gas service in the State of Maryland. Management Audit of Fitchburg Gas and Light Company d/b/a Unitil (2010-2011) Massachusetts Department of Public Utilities Jacobs Consultancy was asked to conduct an independent management audit of FG&E. Serving as engagement director and project manager, the management practices of both FG&E and Unitil were assessed in the areas of strategic planning, staffing and workforce management, management and control, customer and public relations and emergency preparedness and response planning. Operations and Energy Reliability Consulting in Connection with the merger of First Energy Corp. and Allegheny Energy, Inc. (2010) Maryland Public Service Commission Analyzed from a reliability and operations perspective the problem areas, deficiencies, and merits of the proposed acquisition of AYE by FE. My role was to serve as the Maryland Public Service Commission’s expert electric witness testifying as to the potential impact on AYE’s Potomac Edison reliability and safety in a post-merger environment. Industry Assignments: Operations-Responsible for the installation, operations and maintenance of the gas distribution system, managed workforces between 500 and 1000 employees. Engineering- Managed the planning, budgeting, design, measurement and engineering support services. Quality Management/Process Improvement-Designed, implemented and promoted quality and organizational activities including organization design, culture change, knowledge transfer, workforce staffing, communications and process improvement. Technical Support and Regional Performance-Developed a technology and performance focus to improve performance, reduce costs and improve customer service

Designated Expert Witness:

• Eversource Energy Service Charge and Stranded Costs Review (New Hampshire Public Utilities Commission), 2017

• Exelon-Pepco Holdings merger (Delaware Public Service Commission), 2015 • Exelon - Pepco Holdings merger (Maryland Public Service Commission), 2015 • New Hampshire Clean Air Project at Merrimack Station cost of service (New Hampshire Public

Utilities Commission), 2014 • Exelon and Constellation Energy merger (Maryland Public Service Commission), 2011 • First Energy Corp. and Allegheny Energy, Inc. merger (Maryland Public Service Commission),

2010 • Rockford Eclipse valve replacement cost of service (South Jersey Gas Company), 2010 • Electricité de France purchase of Constellation Energy Group’s Nuclear Holdings (Maryland

Public Service Commission), 2009 • Exelon and PSEG merger (New Jersey Public Utilities Commission), 2006

Employment History: Williams Consulting Inc. (2016 – present) Partner/Principal Jacobs Consultancy Inc. (2002 – 2016) Director Stone & Webster Consultants (2000 – 2002) Associate Director Mountaineer Gas Company (1996 – 2000) Vice President of Operations and Engineering Public Service Electric & Gas Company (1968 – 1996) various senior management positions

Ken Ditzel Managing Director [email protected]

1101 K Street NW, Suite B100 Washington, DC 20005 Tel: +1.202.728.8750

General Ken Ditzel is a Managing Director and has eighteen years of experience working in and consulting for the energy industry. He has been both an expert advisor and an expert witness for clients in the oil and gas, coal, power generation, biofuels, and manufacturing industries. As an expert witness, he testified in April 2016 before the International Chamber of Commerce’s (ICC) International Court of Arbitration on a confidential U.S. power sector matter. In October 2013, he testified before the London Court of International Arbitration (LCIA) regarding a failed gas-to-liquids project in Trinidad & Tobago. He has also testified before the U.S. House of Representatives.

As an expert advisor, Mr. Ditzel has extensive experience performing energy and environmental market modeling and portfolio analysis for utilities, merchant generators, and coal developers. In these assignments, he uses scenario analyses to determine the impacts of changes in environmental policies and regulations, fuel prices, technology advancement, and demand growth on individual assets and entire fleets. In particular, Mr. Ditzel has extensive experience in evaluating existing and proposed greenhouse gas regulations and legislation. Mr. Ditzel has authored, coauthored, and presented on various environmental policies impacting energy markets.

Before FTI, Mr. Ditzel was a Principal at Charles Rivers Associates where he led CRA’s proprietary coal, natural gas, and electricity market modeling. Prior to CRA, he was an Associate at Booz Allen Hamilton. Mr. Ditzel began his energy career as a power plant engineer for the Dow Chemical Company at two cogeneration plants in Texas. Mr. Ditzel has a B.S. in Mechanical Engineering from the University of Virginia and an MBA from Georgetown University.

Professional Experience FTI Consulting, Managing Director July 2015 – Present Leads FTI's electricity market forecasting and economic impact analysis group. Provides business consulting and expert witness expertise to the power generation, oil and gas, biofuels, and manufacturing industries. Business consulting engagements have included economic impact analysis of environmental policies and energy projects, resource planning, asset acquisition / divestment, technology assessments, commodity forecasting, M&A due diligence, and corporate growth strategies. As an expert witness, has testified before the U.S. House of Representatives, the London Court of International Arbitration, and the International Chamber of Commerce on gas and LNG markets, the technology, costs, and construction of gasification and synfuels plants, and U.S. power markets. Charles River Associates, Principal August 2004-June 2014 Led the development and application of CRA’s proprietary energy-economy model, electric sector model, and global gas and LNG models. These models were used to assess impacts on clients’ asset portfolios and strategic direction. Notable reports/ presentations focused on the impacts of carbon polices and LNG exports on the US economy, natural gas prices, and electric sector generation, capacity additions, retirements, retrofits, and prices. As an expert witness, authored reports for both coal and gas litigation and arbitration cases. Testifying experience includes the London Court of International Arbitration and the US House of Representatives.


BgNergy, LLC, Vice President June 2012-October 2012 Led the engineering planning of renovating a biodiesel plant in Delaware. Responsibilities included technical review for acquisition due diligence, project planning, recruiting operations staff, advising on corporate planning activities, including modeling of projected cash flows, assessing secondary acquisition targets, and conducting market assessments for feedstocks and final products.

Booz Allen Hamilton, Associate January 2003-August 2004 Authored a report for NETL on integrated coal gasification combined cycle (IGCC) that examined the impact of different legislative, technology advancement, and natural gas price futures. As part of the effort, led technical assessments of coal gasification by performing engineering reviews, facilitating workshops, and interviewing industry executives and federal technical experts. The Dow Chemical Company June 1998-June 2001 Working in a natural gas cogeneration facility, the primary role was to monitor and improve upon plant efficiency and reliability. Daily activities included working with plant team to coordinate planned and unplanned maintenance on gas and steam turbines, heat recovery units, pumps, piping, valves, heat exchangers and vessels. Project-focused activities included serving on Six-Sigma teams to curtail fuel costs by improving gas turbine performance, implementing a multi-million dollar project to restore a water demineralization plant to original capacity, and acting as an advisor for a site-wide greenhouse gas reduction compliance effort. Selected Projects Ditzel, Kenneth “New Wind Resources at 2.5 cents/kWh? Not so fast,” Energy Pulse, October 09,

2014. Ditzel, Kenneth “Evaluation of the 2014 Annual Energy Outlook Early Release: Implications for

U.S. LNG Exports and Natural Gas Prices,” February 3, 2014. Ditzel, Kenneth “Evaluation of the May 2013 API Report: U.S. LNG Exports: Impacts on Energy

Markets and the Economy,” July 19, 2013. Ditzel, Kenneth, Plewes, Jeff, and Broxson, Bob, “US Manufacturing and LNG Exports: Economic

Contributions to the US Economy and Impacts on US Natural Gas Prices,” February 2013. Neimeyer, M., Bloomberg, S., and Ditzel, K. “The Merits of Combining a Renewable Electricity

Standard with a Greenhouse Gas Cap-and-Trade Policy: An Analysis of the American Clean Energy and Security Act of 2009 (H.R.2454),” USAEE, August 2009.

“Waxman-Markey and its Implications on Gasification”, presented at the 2009 Gasification Technologies Council Workshop, Kingsport, TN, June 2009.

Aiken, R., Ditzel, K., Wilson, D., and Morra, F. “Coal-Based Integrated Gasification Combined Cycle: Market Penetration Strategies and Recommendations,” August 2004

Education and Professional Certification MBA, Finance, Strategy; Georgetown University BS, Mechanical Engineering; University of Virginia

John G. Cochrane Senior Consultant – Power & Utilities Practice [email protected]


General Mr. Cochrane is a member of a team of FTI consultants who specialize in the both operational improvements and economic and public policy analysis of electricity market design.

John Cochrane brings more than 30 years of US and international utility sector finance experience to FTI. Mr. Cochrane has held senior executive positions at a major US and international utility, and served as a member of the Board of Directors on a variety of energy sector companies. His extensive experience includes all areas within corporate finance, mergers and acquisitions, joint ventures, partnerships, restructurings, regulation, gas and electric supply, and business development, both domestic and international.

Professional Work History FTI Consulting, Managing Director 2013-Present

Consulting and advisory services to gas and electric utility clients. Financial modeling for $5B transmission investment. Structuring and analysis of $1B transmission project.

National Grid Global Business Development and Mergers & Acquistions, Executive Vice President

2006-2013 Multinational electricity and gas utility company with market cap of £29B (LSE: NG., NYSE:

NGG). Led all business development activities globally including all merger, acquisitions, divestitures,

and joint ventures. Managed teams of 15 in the U.K. and 10 in the US. Presented frequently to Executive Committee and Board.

Sold wide range of businesses totaling $10B, including U.K. wireless business to Macquarie, Australian Interconnector to Singapore Investment Corp, and Ravenswood plant to TransCanada during 2007-2008 financial crisis.

Led joint venture negotiations, feasibility studies, project budgets and timelines, and vendor selections for four £1B sub-sea interconnectors between the U.K. and Norway, Belgium, France, and the Netherlands.

CFO and Treasurer 2001-2006

Responsible for Mergers & Acquisitions, Accounting, Tax, Pensions, Insurance/Claims/Risk Management, Energy Supply, Property, Investments, Cash Management, Forecasting/ Budgeting/Planning, Financial Analysis, and all third-party financing during period. Managed 500-person organization with 13 reporting functions.

Led financial analysis, due diligence, negotiations, and final regulatory approvals for acquisitions of publicly-traded Keyspan ($13B) and RI Gas assets ($600M) from Southern Union. Led Niagara Mohawk analysis and due diligence, and participated in $9B acquisition negotiations.

Managed finance function integrations for National Grid with NEES, Eastern Utilities Associates, Niagara Mohawk, RI Gas, and Keyspan, creating the 2nd largest US utility and total enterprise value of $27B.


https://www.linkedin.com/title/cfo-and-treasurer-national-grid-usa?trk=mprofile_title

Managed divestiture of several diverse businesses either owned by NEES or acquired with Eastern Utilities.

Served as US board member on US/European companies involved in cross-border tax structures including Luxemburg, Ireland, Jersey, Iceland, and Malta.

Progressive finance positions leading to Treasurer 1981-1999 Performed financial analysis supporting sale of power plants, performed and managed acquisition analysis and due diligence of Eastern Utilities, and led financial analysis supporting $4B sale of NEES to National Grid. Responsible for Treasury Services (cash management, securities issuances, bank relations), Forecasting/Planning/Budgeting, Financial Analysis, Rates, Insurance/Claims, Pensions, and Mergers & Acquisitions analysis.

Professional Experience As Chief Financial Officer and Treasurer for National Grid’s US business, Mr. Cochrane was responsible for mergers & acquisitions, accounting, tax, pensions, insurance/claims, risk management, energy supply, property, investments, cash management, forecasting/budgeting, planning, financial analysis, and all third-party financing. In this capacity, he managed 500-person organization with 13 reporting functions.

Mr. Cochrane led financial analysis, due diligence, negotiations, and final regulatory approvals for National Grid’s acquisitions of publicly-traded Keyspan and RI Gas assets from Southern Union, and Niagara Mohawk. He also oversaw finance function integrations for National Grid with NEES, Eastern Utilities Associates, Niagara Mohawk, RI Gas, and Keyspan, creating the 2nd largest US utility with a total enterprise value of $27B. Mr. Cochrane served as US board member on US/European companies involved in cross-border tax structures including Luxemburg, Ireland, Jersey, Iceland, and Malta.

As head of Global Business Development and Mergers & Acquisitions for National Grid, Mr. Cochrane led all business development, mergers, acquisitions, divestitures, and joint ventures globally. He led the sale of a wide range of businesses totaling $10B, successfully renegotiated a 15-year, $4.5B power supply agreement with Long Island Power Authority, and led commercial and regulatory negotiations for a $3B joint venture with six New York transmission owners. Mr. Cochrane also led joint venture negotiations, feasibility studies, project budgets and timelines, and vendor selections for four £1B sub-sea interconnectors between the U.K. and Norway, Belgium, France, and the Netherlands.

Mr. Cochrane has extensive experience testifying in rate case matters relating to capital structure/cost of capital, mergers and acquisitions, and financings before FERC and various state-level regulatory bodies.

Education and Professional Certification MS, Business Administration; Northeastern University, Boston, MA BA, Biology; Harvard University, Cambridge, MA

https://www.linkedin.com/title/progressive-finance-positions-leading-to-treasurer?trk=mprofile_title

Name: WILLIAM M. WILLIAMS JR. Title: Partner/Principal Education: Saint Leo College, BA, Business Administration

Saint Leo University, Graduate level Business courses

Certifications: FEMA- NIMS, ICS Career Synopsis: Mr. Williams is an experienced executive with a strong background in operations, team building, process improvements and performance monitoring. He is heavily experienced in project management, materials management, budgeting, corporate strategic planning, information systems planning, maintenance management, root cause analysis, property records, organization and staffing assessments in the utility industries. Career focus on leadership positions in operations, logistics, materials management, changes management, and total quality. Selected Consulting Assignments: • Participating in a Management and Operations Audit of Central Hudson Gas & Electric Corporation

for the New York State Public Service Commission. The focus of this audit is to enhance the utility’s future performance by observing its existing processes, practices systems and organizational structures and determining how they can improve. My specific areas of concentration are gas planning, project management and work management.

• Participating in an Energy Service Charge and Stranded Costs Review of Eversource for the New

Hampshire Public Utilities Commission. Review analyze and testify to the revenue and expense reconciliation of the default Energy Service for PSNH’s fossil and hydro generating assets for 2015. The scope of work includes: understanding the cause and duration of outages and recommending any disallowances or operational changes assessing purchases and sales of replacement power and analyzing a costly dispatch event.

• Participated in a management audit of United Illuminating as lead on audit sections covering Customer Service, Materials Management, Facilities, Safety and Fleet Management.

• Participated in a focused management audit of Fitchburg Gas and Electric Company, a unit of Unitil. The audit covers Strategic Planning, Staffing & Workforce Management, Management & Control, Customer & Public Relations, and Emergency Preparedness & Response Planning.

• Participated in a due diligence review as to the potential impacts on Pepco Holdings’ two operating utilities in Maryland and Delaware. Jacobs’ role was to assist the Maryland and Delaware Public Service Commission’s (MDPSC) and (DEPSC) Staff in determining if the transaction was in the public interest by assessing how it could affect the reliability, adequacy and safety of electric service in Maryland and gas and electric service in Delaware. The assignment covered thorough review of the operations and reliability functional areas of the current and merged utility and included preparation of direct filed testimony and surrebuttal testimony.

• Participating in a focus audit of the six electric companies in New York with an emphasize on assessing of each individual utility’s systems, policies, procedures and programs that are used to

compile its data that are used in the performance metrics that are currently reported to the Commission and Staff.

• Participated in a management audit of Public Service Electric and Gas Company. Focus areas include electric and gas system operations and maintenance, reliability, expansion planning, load management, fuels management, and SmartGrid.

• Project Coordinator in the NJBPU service reliability focused management audits of the four New Jersey-based electric utilities. To determine the effectiveness of their response and communications during a major outage.

• Participated as a lead consultant in a study for the City of Ocala to evaluate the city electric department’s operational efficiency and effectiveness, to evaluate the city’s full requirements contract with FMPA, and to assess quantitative and qualitative aspects for the city to remain in the electric utility business or consider selling.

• Participated in a due diligence review of the proposed acquisition of Allegheny Energy (AYE) by First Energy Corp. (FE). The assignment covered thorough review of the operations and reliability functional areas of the current and merged utility and included preparation of direct filed testimony and surrebuttal testimony.

• Participated in a due diligence review of the proposed Exelon/Constellation merger. The assignment covered thorough review of the operations and reliability functional areas of the current and merged utility and included preparation of direct filed testimony and surrebuttal testimony.

• Participated in an assessment of Pacific Gas & Electric Co. Pipeline Safety Enhancement Plan. The PSEP is a multiphase, multiyear, multibillion dollar program that is in addition to PG&E's existing transmission pipeline maintenance and integrity management programs. Jacobs was asked by the CPUC to review the PSEP, supporting work papers and testimony filed by PG&E, as well as interveners.

• Participated in a review of the San Bruno pipeline explosion for PG&E on behalf of the California Public Utilities Commission, with a focus on adequacy of PG&E’s Gas Emergency Plan and execution during the event in accordance with the plan.

• Participated in the analysis and development of testimony in support of a major East Coast combination utility regulatory filing related to a proposed accelerated gas mains replacement program. The work effort comprised three distinct areas safety case, the cost-benefit analysis and project execution that was presented in testimony.

• Participated in reviewing the capital investment program for New Jersey Natural Gas Company. Assessment included engineering issues, planning project management concerns, and developing measures for success.

• Participated in a review of Enbridge pipelines 79, 6B and Flanagan South construction operational risk management practices and procedures. The work effort included a comprehensive review of documents, site visits and interviews with staff.

• Participated in a review of Questar Gas Company’s gas gathering and processing contracts on behalf of the Utah Division of Public Utilities. This study included arms-length determination of relationships, costs, pricing and performance over the past five years with a particular focus on cost of service rate spike experienced in 2007.

• Participated in providing technical expertise to Connecticut Public Utilities Regulatory Authority’s (PURA’s) staff in areas pertaining to electric distribution company and gas company preparation for and action in response to significant outages that occurred as a result to Hurricane Sandy.

• Participated in an emergency response standards review for the Connecticut Public Utility Regulatory Authority. The review focuses on preparation and plans, restoration activities, including mutual assistance and communications to assist stakeholders. A comparison of standards emplaced by other regulatory jurisdictions is under review.

• Participated in a storm response audit of Connecticut Light and Power Company and United Illuminating preparation and response to a major winter storm in March 2010.

• Participated in the development of energy assurance planning documents, procedures and table-top exercises for the states of North Dakota and Idaho. This assignment includes development of critical asset information, identification and assessment of vulnerabilities and development of mitigation methods for energy supply system disruptions.

• Participated in a due diligence review of the proposed Exelon-PSE&G merger on behalf of the New Jersey Board of Public Utilities. This assignment covered a thorough review of the customer service functional area, including the call center, customer service centers, the customer information system, street lighting, customer billing and complaint resolution.

• Participated as a lead consultant for an engagement to provide an independent review and comments on a series of reports prepared by PacifiCorp in response to a winter storm outage that affected up to 190,000 customers over an 8 day period.

• Participated in a study led by Jacobs Consultancy to determine the workforce adequacy of the five Illinois investor owned utilities for the Illinois Commerce Commission. This effort included a review of work practices, labor resources both internal and external, work backlog, workforce management and construction and maintenance practices.

• Participated as a lead in a distribution plant evaluation for Central Maine Power on behalf of the Maine Public Utilities Commission. This effort included a review of reliability performance, system design and planning, vegetation management and a physical condition assessment of the distribution system.

Designated Expert Witness:

• Eversource Energy Service Charge and Stranded Costs Review (New Hampshire Public Utilities Commission), 2017

Employment History:

Williams Consulting, Inc. 2015 – Present Principal & Consultant Jacobs Consultancy Inc. 2010 – Present Group Manager Williams Consulting, Inc. 2000 – 2010 Principal & Consultant Stone & Webster Management Consultants, Inc. 1999 – 2000 Senior Consultant 1995 – 1999 Consultant City of Lakeland, Electric and Water Department 1984 – 1994 Assistant Plant Manager Thatcher Glass Manufacturing Company 1976 – 1984 Corporate Materials Manager Plant City Steel Corporation 1971 – 1976 Production Control Manager

RJ Arsenault Senior Director – Power & Utilities Practice [email protected]


General RJ Arsenault is a senior director in the Electricity Consulting Group within FTI Consulting, and is based in Boston, Massachusetts. Mr. Arsenault has spent a combined 10 years in the energy and financial sectors. His expertise in the electricity industry covers each facet of the investment cycle from target identification and evaluation to commercial optimization asset portfolios. Mr. Arsenault interacts directly with senior management of client companies, adding value through business advice, regulatory strategy and transaction support.

Professional Work History FTI Consulting April 2011 – Present Within the Energy Consulting Services, Mr. Arsenault is the senior director of investment valuations, responsible for coordinating, managing and delivering to clients’ sound analytical solutions to help them make informed, accurate, investment decisions. In this role, he couples investment valuation expertise across North America with extensive experience in the commercial optimization of power assets in a deregulated environment.

TransCanada Power Marketing; Senior Energy Analyst March 2009 – April 2011 Served as a Senior Energy Analyst at TransCanada Power Marketing Ltd. who provides power distribution services in Massachusetts, Rhode Island, Maine, New Hampshire, Connecticut, and New York. Additionally, the company develops natural gas and oil pipelines. It caters to industrial, hospitality, education, and government sectors. The company is based in Westborough, Massachusetts. TransCanada Power Marketing Ltd. operates as a subsidiary of TransCanada Corporation. TransCanada Power; Senior Energy Investment Analyst March 2007 – February 2007 Portfolio Analyst May 2005 – February 2007

Served analyst roles at TransCanada is one of the continent’s largest providers of gas storage and related services. A growing independent power producer, TransCanada owns or has interests in over 10,500 megawatts of power generation.

Merrill Lunch; Investment Consultant August 2004 – April 2005 As a financial advisor with Merrill Lynch, I work with a team with over 30 years investment experience. Our goal is to provide our clients with the time that is necessary to enjoy life while also giving them the peace of mind that their hard earned investments are being diligently cared for.

Fidelity Investments; FISC Consultant September 2003 – April 2004 As a consultant to the Fidelity Information Systems Corporation, I worked with team of six individuals responsible for the evaluation, selection, and implementation of a business intelligence tool. The purpose of the implementation was to eliminate ad hoc reporting that could was rudimentary and inefficient. The tool gives the user the ability to produce a report on a repeatable basis using parameters given by the user.


Professional Experience For investors he provides support throughout the entire investment process, including target

identification, transaction support, business creation and expansion strategy, he is experienced in valuing enterprises, power assets, power purchase agreements and trade books, and formulating negotiation strategy for executing transactions

For new entrants, he develops strategy for expansion into new businesses technologies, and market segments, including advice on the regulatory structures, government support and entry strategies for investments in smart grid technology, energy storage solutions and renewable resources

For utilities and independent power producers, he provides advice relating to power purchase agreements, contracts renegotiations, merchant plant investment opportunities and non-utility generation mergers and acquisitions

Selected Projects Transmission Investment: Advised Canadian energy company through successful acquisition of the

common shares of a merchant transmission developer in the northwest United States

Power Transactions: Key member of deal team closing a 2.5B generation portfolio in US Northeast. Primarily responsible for portfolio valuation and complementary insights from indicative bid through closing the transaction

Asset Valuation: Led valuation effort as independent appraiser of waste coal facility in PJM as part of Lessor and Lessee negotiations

Renewable Energy: Has led valuation of assets across the renewable sector, including wind farms, hydroelectric portfolios, and photovoltaic solar

Education and Professional Certification M.B.A. with concentration in Finance; Boston University

B.S. with concentration in Mathematics and Biology; Fairfield University

Chartered Financial Analyst

PATRICK D. DUFFY Page 1

Patrick Duffy, Senior Consultant Overland Consulting | 11551 Ash Street, Suite 215 | Leawood, KS 66211 | 913-599-3323 [email protected] GENERAL

Mr. Duffy attended Westminster College and obtained a Bachelor of Arts in Accounting, graduating Magna Cum Laude. He has three years’ experience as an audit associate with a “Big 4” accounting firm. He additionally has experience working in wealth management for a large bank.


Overland Consulting 2016 – Present Senior Consultant

Assists in conducting regulatory audits and valuation studies of electric, gas, railroad, and telecommunications companies.

Wells Fargo Advisors 2015 - 2016 Registered Client Associate

Teamed with a Senior Financial Advisor, providing analytical and operational support for numerous client portfolios totaling 130M in assets under management.

Ernst & Young 2012 – 2015 Senior Audit Associate

Audited multiple companies across several industries in accordance with PCAOB and AICPA guidelines.


AUDIT

• Consultant in a comprehensive management and operations audit of Central Hudson, on behalf of the New York State PSC. The audit includes a comprehensive assessment of the utility’s construction program planning processes and an evaluation of the efficiency of the utility’s operations with a focus on opportunities to improve performance. 2016 – Present.

• Lead Senior on the annual audit of a growing publicly traded REIT, headquartered in Kansas City, MO. Supervised staff and interns while performing quarterly review procedures, SEC filing procedures, and the year-end integrated audit. 2014 – 2015.

• Extensive experience with SEC filings and M&A activity including a $220M Asset Acquisition, $130M Business Combination, and several large equity issuances (preferred and common stock). Worked directly with the Lead Manager, Partner, and other engagement executives in developing and executing comfort letter procedures associated with the filings. 2012 – 2015.

• Lead Senior on the annual audit of 27 separate investment accounts, totaling $4.4 billion in assets, for one of the nation’s largest insurance companies. 2014 - 2015

PATRICK D. DUFFY Page 2

INVESTMENT MANAGEMENT

• Analyzed and evaluated strategic and tactical asset allocation strategies based on client investment objectives, risk tolerance, and third party research.

• Performed year-end analyses of several high net worth client portfolios, including evaluation of asset allocations and underlying investments. Assisted the advisor in determining the appropriate mix of individual securities, mutual funds, ETFs, and other investment vehicles.

• Completed an online Wall Street preparatory financial statement modeling and valuation course. Applied knowledge to build a fully integrated three statement model using established conventions for forecasting and schedule design.

• Passed Series 7, Series 66, and CFA Level 1 on first attempts.

EDUCATION

• Westminster College, Fulton, MO Bachelor of Arts in Accounting, May 2012. Magna Cum Laude.

MINDY JACK Page 1

Mindy Jack, Office Manager Overland Consulting | 11551 Ash Street, Suite 215 | Leawood, KS 66211 | 913-599-3323 [email protected] GENERAL

Ms. Jack serves as Office Manager for Overland Consulting, providing data management and administrative support in energy consulting projects. Her areas of specialty include project management in connection with various consulting projects and high-level administrative support. She manages data response processes for several regulatory audits and mergers.


Overland Consulting 2014 – Present Office Manager

Provides network and computer software/hardware support to employees. Develops and maintains programs utilizing a variety of software applications for various energy and telecommunication projects. Responsible for coordination of report production and discovery database processes.

Applebee’s Services, Inc. 2007 – 2012 Franchise Specialist

Virtual data room management for large-scale project to sell company-owned restaurants. Developed and managed tracking system designed to monitor remodel of all restaurants. Maintained and updated franchise segment of corporate website.

Applebee’s International, Inc. 1999 – 2007 Investor Relations Specialist

Coordinated compilation of annual reports and all SEC filings. Managed corporate press release distribution. Built and maintained relationships with investors.


• Project Administrator in a comprehensive management and operations audit of Central Hudson, on behalf of the New York State PSC, assisting in all aspects of project management. 2016 – Present.

• Project Administrator in a review of the general rate application of Southwest Gas Corporation, assisting in all aspects of data management. 2016 – Present.

• Support staff role in affiliate transactions audit of Questar Gas Company and Wexpro Company, assisting in all aspects of data management. 2015 – Present.

• Support staff role in the review of the Exelon Corporation/Pepco Holdings, Inc., proposed merger, assisting in the data request process, management of virtual data room, and administrative assistance in testimony preparation on behalf of the Maryland Public Service Commission. 2014 – 2015.

MINDY JACK Page 2

• Support staff role in the review of the Exelon Corporation/Pepco Holdings, Inc., proposed merger, assisting in the data request process, management of virtual data room, and administrative assistance in testimony preparation on behalf of the Delaware Public Service Commission. 2014 – 2015.

• Support staff role in a focused audit of all major electric and gas utilities in the state of New York assisting in the data request process, management of virtual data rooms, and report preparation. 2014 – 2015.

proposal to perform comprehensive management audits of new

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