Jay Beatmann Dentons US LLP 32517. Counsel 650 Poydras Street Suite 2850 iay.beatmann@dentons.com New Orleans, LA 70130-6132 +1 504 524 5446 United States i532 Salans FMC SNR Denton McKenna Long dentons com April 25, 2019 BY HAND DELIVERY Ms. Lora W. Johnson Clerk of Council Council of the City of New Orleans City Hall, Room lE09 1300 Perdido Street New Orleans, LA 70112 In Re: Resolution Directing ENO to Investigate and Remediate Electric Service Disruptions and Complaints and to Establish Minimum Electric Reliability Performance Standards and Financial Penalty Mechanisms, CNO Docket No. Dear Ms. Johnson: Enclosed please find an original three (3) copies of the Advisors? Comments on Response to ENO Filing in Prudence Investigation in the above referenced docket, which we are requesting that you file into the record along with this letter in accordance with your normal procedure. Sincerely, eatmann Counsel JAB/dpm Enclosures cc: Official Service List for BEFORE THE COUNCIL OF THE CITY OF NEW ORLEANS RESOLUTION DIRECTING ENTERGY NEW ORLEANS, INC. TO INVESTIGATE AND REMEDIATE ELECTRIC SERVICE DISRUPTIONS AND COMPLAINTS AND TO ESTABLISH MINIMUM ELECTRIC RELIABILITY PERFORMANCE STANDARDS AND FINANCIAL PENALTY MECHANISMS DOCKET NO. COMMENTS ON RESPONSE TO END FILING IN PRUDENCE INVESTIGATION INTRODUCTION The Advisors are of the opinion that Response has not met the burden of demonstrating that its prior actions over several years related to maintaining and improving its distribution system were prudent. The Advisors have reviewed the Entergy New Orleans L.L.C Response to Prudence Investigation (?Response?) ?led on January 10, 2019 pursuant to Council Resolution No. R-18-475, as extended, including the Supplemental Direct Testimony of Tad S. Patella, RE. and Direct Testimony of William L. Sones. The Advisors have also reviewed the Direct Testimony of Melonie Stewart ?led June 2018 and referenced in the Response. The Advisors have also reviewed additional materials submitted by ENO, transcripts of meetings of the Utility, Cable, Telecommunications and Technology Committee held on June 28, 2018 and July 19, 2018, and other relevant materials. Based upon the factual background that led to the adoption of the resolution and considering the information provided in Response, and considering the Direct Testimony of Mr. Joseph W. Rogers, the Advisors believe that the evidence of failure to properly maintain and improve its electric distribution system, its inaction and omissions in mitigating and remediating the resulting electric service disruptions, and its general unacceptable reliability performance supports a ?nding that ENO did not act prudently. BACKGROUND No regulator, including the Council, is responsible for directing a utility to operate in a speci?c manner with respect to distribution reliability. Every utility, including ENO, is required to operate prudently in all aspects of its operations. ENO has an independent and indisputable responsibility to maintain and operate a reliable distribution system. As well stated by the US. Fourth Circuit Court of Appeals: ?One of the most important duties of a public utility, inherent in its franchise to serve the public, is the duty to take the initiative in proposing reasonable rates and rendering adequate services, taking into account changing conditions; and the utility is not relieved from this duty because its activities are subject to governmental regulation, for a regulatory commission is not clothed with the responsibility or quali?ed to manage the utility?s business.?2 The Council initiated. this proceeding in response to signi?cant customer complaints regarding declining reliability on system. failure to maintain reliability on its system is directly contrary to the rights held by its customers pursuant to Sections 158-1044 and 158-1045(a) of the New Orleans City Code, which ?set forth the rights that, at a minimum, must be provided ratepayers by utilities operating in the city,? including ?[t]he right to safe and reliable service in accordance with industry standards.? Mr. Rogers testimony and exhibits are attached hereto as ?Exhibit 2 Water and Power Co. v. Consolidated Ga, Elec. Light Power Co., 184 F.2d 552, 567 (4?1 Cir. 1950). (Emphasis added.) degradation in distribution system reliability was evident in the increasing number of complaints received by the Council and in the high number of fair weather outages experienced during 2016/2017 and into 2018. The increasing number of complaints and outages led to Councilmember Jared Brossett?s June 8, 2017 letter to then-President and CEO, Charles L. Rice, Jr., expressing his extreme concerns with the unacceptable situation. Clearly, ENO was in the best position to know that this problem existed, was on the rise, and was not limited to one Council district, and yet, ENO failed to take suf?cient corrective action in a timely manner. At the June 28, 2017 UCTTC meeting, the Committee strongly voiced its concerns regarding reliability issues and posed numerous questions to ENO concerning these issues, which led to the adoption of Resolution No. R-18-427, establishing Docket No. Numerous distribution outages continued to occur with unacceptable frequency leading to growing customer complaints to the Council. At the June meeting, Councilmembers learned that ENO had cut distribution system funding just prior to the decline in reliability. Ms. Melonie Stewart, ENO Vice President of Customer Service, appeared at the meeting. Ms. Stewart admitted that we backed off on funding we did see the reliability go in the wrong direction.?3 The ?slight? reduction in funding was $1 million in 2014 alone according to Ms. Stewart.4 Councilmember Jason Williams re?ected the reaction of the Committee: . .I struggle with the fact that today you say you realize that you are not investing enough and you are falling short. You said that, but the reaction to that again seems delayed, and I am certain that shareholders of 3 Transcript, UCTTC meeting, June 28, 2018 at 75. 4 Transcript, UCTTC meeting, June 28, 2018 at 76-77. Entergy did not suffer during those times. . ..Businesses, people, citizens, ratepayers suffered during those times. Why wasn?t there a quicker reaction to reinvesting in that grid??5 At the July 19, 2018 UCTTC meeting, the Council expressed serious concern about inability to answer basic questions regarding the status of its distribution equipment and the overall condition of its assets, which raised the concern that ENO was not giving the necessary attention to the reliability problems. presentation at that meeting raised doubts as to whether ENO even properly understood its own system. Chair Helena Moreno pointed out ?this is a serious matter, that we need to understand just the overall condition of your assets, and I am not quite understanding your asset management process or if you really have one that?s fully vetted out or that. . .you can?t even come to the table and explain to us the very basics of what your assets look like.?6 Councilmembers also expressed frustration in ?nding that routine explanations for outages?Mylar balloons or squirrels?were not supported by the facts, facts which laid blame on ENO equipment failures. Councilmember Joseph Giarrusso, addressing Entergy executives said: ?So I added up based on your top ten outage causes-equipment and I got 5,065 from 2013 to 2018. If you divide that by six years, you get 845 per year, which means 2.3 times a day we are having an equipment failure right now.?7 Chair Moreno summarized: ?Well, at the end of the day, you still have the majority of the outages for Entergy being caused by equipment failures.?8 In response to these revelations and independent of other actions to ameliorate reliability de?ciencies, the Council adopted Resolution No. initiating a prudence investigation 5 Transcript, UCTTC meeting, June 28, 2018 at 77. 6 Transcript, UCTTC meeting July 19, 2018 at 17. 7 Transcript, UCTTC meeting July 19, 2018 at 39. 8 Transcript, UCTTC meeting July 19, 2018 at 31. regarding decisions and actions relating to service disruptions and complaints. The resolution directed ENO to testimony, evaluations, analyses, work papers, and other information, as the Company believes will be of assistance to the Council in this prudence investigation.?9 The resolution also provided that ?[i]ntervenors, if they choose, shall ?le their testimony responsive to ?ling.?10 The Advisors were directed to ?le this response on the same date. The date for ?the Advisors? response was subsequently revised to April 25, 2019. RESPONSE TO ARGUMENTS As noted in the Direct Testimony of Advisor expert Joe Rogers, two of the indices commonly utilized by electric utilities to measure their reliability performance are the System Average Interruption Frequency Index (SAIFI) and the System Average Interruption Duration Index (SAIDI). SAIFI measures the average number of interruptions of all customers over a de?ned period of time, usually a year. SAIFI is calculated by dividing the number of customer interruptions by the number of customers served. An upward trend in SAIFI generally indicates a reduction in reliability. SAIDI measures the average length of interruptions, usually in minutes, experienced by all customers served over a de?ned period of time, usually a year. SAIDI is calculated by dividing the total hours of interruption by total customers served. Like SAIFI, an upward trend in SAIDI generally indicates a reduction in reliability. A table provided by ENO witness Tad S. Patella con?rms decline in reliability since 2013. 9 Resolution No. R-18-475 at 14, dated October 31, 2018 10 Id. Table 1:11 2013 2014 2015 2016 2017 SAIDI 92 121.3 128 167.9 179.8 SAIFI 1.04 1.209 1.234 1.61 1.584 Subsequent to Councilmember Brossett?s June 8, 2017 letter requesting detailed information on the speci?c problems and causes of outages, data was provided to the Council and Advisors detailing outages during the period June 1, 2016 through May 31, 2017. The Advisors initial review of the data provided by ENO indicated that the majority of the outages were not occurring during adverse weather conditions, but rather during fair weather conditions. Table 112 EN0 Outages by Weather Condition Weather Condition Number of Outages Percent of Total Outages Fair 1,462 56% Cold 53 2% Fog 7 0.3% Heat 73 3% Rain 127 5% Thunder 726 28% Tornado 106 4% Wind 45 2% Total 2,599 100% Further, the Advisors? preliminary analyses revealed that of the total 2,599 outages from all causes that occurred in distribution system during the June 1, 2016 - May 31, 2017 period, more than one?third were the result of equipment failures. Because these equipment Direct Testimony of Tad S. Patella, Docket UD-17-O4, June 6, 2018, at 14. ?2 Report of Technical Advisors Docket No. UD-17-04, October 31, 2017, at 3. 6 failures occurred mostly during fair weather conditions, the condition of distribution system equipment was implicated as a primary cause. The equipment failure-related nature of outages and reliability performance was also observed by Quanta Technology, LLC (?Quanta?), the consultant ENO engaged in August of 2018 to perform an assessment of reliability performance and improvement plans and actions.13 Quanta noted that that Customers Interrupted (CI) and Customer Minutes of Interruption (CMI) are used as proxies for SAIFI and SAIDI and that ENO focuses on C1 and CMI as the primary operating metrics to track reliability internally. In reviewing ENO outage data from 2013 to 2017 with respect to the CI and CMI indices, Quanta observed: Analysis of ENO outage records indicates that 64% of the CI increase between 2013 and 2017 is due to three cause codes: equipment conductor and vegetation The same cause codes contributed 61% of the CMI increase between 2013 and 2017: equipment conductor and vegetation Quanta noted some improper coding by meaning proper outage code reporting is another area where ENO can and should improve. Nonetheless, the data clearly concluded that equipment failure was the overwhelming contributor to decreased reliability performance over the 2013 to 2017 period. Response suggests that its ?now-aging infrastructure present(s) increasing reliability challenges? and asserts that ?Quanta also con?rmed our belief and strongly emphasized - that given our legacy distribution construction and infrastructure, we will need grid 13 The Advisors note that decision to contract Quanta for this assessment was not a self-motivated or proactive effort to improve reliability; rather, as the Quanta Report?s ?Executive Summary? explains, ENO contracted Quanta ?to cooperate with the City Council?s resolution? issued in Docket UD-17-04. ?4 Quanta Report, page 20?21 ?5 Quanta Report, page 22 modernization and distribution automation to see signi?cant progress in distribution reliability.?16 As Advisor expert Rogers says ?[t]hese comments are excuses, not substantive responses or evidence of prudent conduct.? As witness Rogers further testi?ed ?[l]egacy construction, no matter how aged, in and of itself is not unreliable if adequately maintained on an ongoing and prudent basis. Numerous electric utilities throughout the country operate systems that have aging legacy construction, but still achieve acceptable levels of reliability. assertion that its reliability problems stem from its legacy construction simply highlights failure to maintain and improve its system over time.? ENO failed to take steps to correct and improve its infrastructure consistently, and as a long-term program, acting only after being forced to do so by the Council. Expert Rogers also notes a series of additional failings of Response as paraphrased below: Response largely ignores the essential question of whether ENO prudently maintained its system and made the necessary capital and operation and maintenance investments, relying instead on recent improvements that unquestionably resulted from the series of actions by the Council to force an effective remediation plan to urgently improve reliability, including the Council?s show cause Resolution in April 2018. Response fails to address why it decreased distribution system maintenance spending as reported by Ms. Melonie Stewart, or why ENO did not initiate an accelerated distribution capital spending program when its reliability performance subsequently declined and before the Council forced action. '6 Supplemental Direct Testimony of Tad S. Patella at 7. Response fails to address why it did not investigate or adopt the use of best distribution maintenance practices to improve reliability performance of its distribution system when problems started and before the Council forced action. Response fails to address why it did not take proactive measures to mitigate the number and duration of outages before the Council forced action. Response fails to address why it did not engage Quanta when the reliability problems began rather than in 2018 after the Council forced action. Response fails to address why in communications with the Council and Advisors it consistently blamed outages on causes other than equipment failures until forced to accurately account for causes by Council direction. The prima facie imprudence of these decisions is manifest in Response, which relies on the fact that the majority of its remedial efforts are programs prompted by the instant docket. Clearly, the remediation work being accomplished by ENO in its Reliability Plans in 2018 and 2019 was only in response to the Council forcing hand in this docket and has no bearing on the underlying prudence issue. As witness Rogers concludes ?[r]eaction to signi?cant regulatory pressure is not prudence. reactive remediation work does not relieve END of its preexisting and ongoing obligation to maintain and improve its distribution system to avoid the declining reliability that prompted Council action. ENO unilaterally chose not to adequately maintain its distribution system for several years, instead reducing distribution investment and spending.? LEGAL STANDARD The prudence standard ?essentially applies an analog of the common law negligence Accordingly, the utility must demonstrate that it ?went through a reasonable decision making process to arrive at a course of action and, given the facts as they were known or should have been known at the time, responded in a reasonable manner.?18 ?[T]he focus in aprudence inquiry is not whether a decision produced a favorable or unfavorable result, but rather, whether the process leading to the decision was a logical one, and whether the utility company reasonably relied on information and planning techniques known or knowable at the time.?19 In addition, prudence is an ongoing obligation of the utility and ?the inquiry encompasses a public utility's continuation of an investment as well as its decision to enter into that investment, and requires the utility to respond prudently to changing circumstances or new challenges that arise as a project progresses.?20 Moreover, when serious doubt about prudence is raised, as it was here, ?the burden shifts to the utility. . . 3?21 ?doubt? is created if the challenge raises a question the answer to which is not arguably in favor of prudence. A doubt is ?serious? if there appears at least a possibility that, upon due investigation, the answer to the question will lead to a ?nding against prudence.?22 ?7 Gulf States Utilities Co. LPSC(L.a 1991) citing Appeal of Conservation Law Foundation 127 N. H. 606, 507A 2d 652, 673 (1986) 13 Id. citing Re Cambridge Electric Light Co., 86 P.U.R. 4th 574 (Mass. D.P.U. 1987). 19 Id. citing Metzenbaum v. Columbia Gas Transmission Corp, Opinion No. 25, 4 FERC 161,277. 2? Id citing Re Vermont Public Service Corp, 83 532 (Vt.Pub.Serv.Bd.1987), and citing In Re Long Island Lighting Co., 71 262, 1985 WL 258217 (N .Y.Pub.Serv.Comm?n, 1985). 2? Id. citing Union Electric Co., 40 F.E.R.C. 61,046 (FERC 1987); Long Island Lighting Co. v. Public Serv. Comm'n ofNew York, 134 135, 523 615 (3d Dept.1987); Re Central Vermont Pub. Serv. Comm'n Corp, 83 532 22 ?for Alfordabie Energy. inc. Counciiot't?ity of'New Orleans, 578 .So' 2d 949, 958 (La. Ct App.) wr_it (La. 1991), and geigiaiited. 585 So. 2d 555 (La. 1991), and married ?1!;an Alliance. for A?ordabie If He: v, (?int, 588 So. 2d 89 (La. 1991) citing New England Power Co., 27 FERC 63,037, at 65,157 (1984), rev?d on other grounds, 31 FERC 61,047 (1985). 10 declining performance, and lack of any voluntary reasonable or deliberative response, raised this ?serious doubt,? shifting the burden of proof to ENO to demonstrate that it acted prudently. In addition, failure to maintain the reliability of its distribution system is a violation of both the Code of the City of New Orleans, and the Council?s utility regulations. Code Section 158-1045 addresses the enumerated rights of customers: Among the rights that are more fully set forth in the council-adopted customer service regulations governing the provision of utility services in New Orleans, customers shall have the following rights: The right to safe and reliable service in accordance with industry standards. Similarly, Section 10 of the Service Regulations Applicable to Electric and Gas Service by ENO (?Service Regulations?) provides: The Company shall use Prudent Utility Practice to provide safe, adequate and continuous Service but shall not be responsible for loss or damage caused by the failure or other defects of Service when such failure is not reasonably avoidable or due to unforeseen dif?culties or causes beyond its control. Section of the Service Regulations de?nes ?Prudent Utility Practice? as: ?The practices, methods and acts, which, in the exercise of reasonable judgment in light of the facts (including but not limited to practices, methods and acts engaged in or approved by a signi?cant portion of the utility industry) known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition.? As expert Rogers states: ?There is no evidence of any decision-making process, just references to actions taken much after the fact and in response to the Council?s insistence.? (Emphasis added). 11 As such, ENO clearly had a pre-existing obligation to engage in practices, methods and acts typically engaged in or approved by a signi?cant portion of the utility industry for the purpose of meeting its obligation and to provide safe and reliable service in accordance with industry standards. PENALTIES Section 10 of the Service Regulations is particularly relevant for purposes of imposing a ?ne and/or penalty, because Section 10 provides speci?c circumstances under which ENO ?shall not be responsible for loss or damage caused by the failure or other defects of Service.? The logical corollary of this clause is necessarily a counterfactual circumstance under which ENO shall be responsible for loss or damage caused by the failure or other defects of Service. Speci?cally, pursuant to Section 10, ENO shall be responsible for loss or damage caused by the failure or other defects of Service when such failure is reasonably avoidable, and due to foreseeable dif?culties or causes within ability to control. These standards -- reasonably avoidable, foreseeable, and ability to control -- are objective measures of Prudent Utility Practice. Accordingly, ENO has pre-existing reliability standards'that it must either meet, or face the consequences for failing to do so. In this regard, Section 3-130(7) of the Home Rule Charter provides: The orders of the Council shall be enforced by the imposition of such reasonable penalties as the Council may provide. . . . The Council adopted the Service Regulations discussed above in Resolution No. R-17-228, and, in so doing, the Council thereby ordered compliance with Section 10?s continuity of service obligations. To enforce compliance with those reliability obligations, Section 3- 130(7) instructs that the Council may impose reasonable penalties. 12 Additionally, ENO has been on notice since at least 1999 that inadequate distribution system reliability could result in penalties under Section In 1999, the Council reacted comprehensively to a previous decline in reliability with Resolution No. R-99-433, which established parish-wide remediation standards and a ?performance penalty mechanism.? The resolution placed ENO ?on notice? that failure to complete the remediation plans could result in the imposition of ??nancial penalties, which penalties shall be in an amount the Council deems suf?cient to constitute reasonable penalties and which assure the ultimate achievement by END of a reliable electric distribution system.? A 2011 Order of the Maryland Public Service Commission is highly instructive on determining an appropriate penalty in similar circumstances.23 The Maryland commission imposed a $1 million civil penalty on Potomac Electric Power Company (?Pepco?) for failing ?to satisfy its legal obligation to provide its customers with reliable service.?24 The investigation was in response to ?an unusually large number of customer complaints about chronic electric outages,?25 which the commission found was a result of poor vegetation management. The commission further found that ?the utility?s failure to maintain its system properly subjected ratepayers to an excessively large number of power outages of long duration, both during storms and on fair weather days. Pepco?s imprudent mistake was in not committing adequate resources to vegetation management in order to attain an acceptable level of reliability.?26 The Maryland commission rejected Pepco?s argument that SAIDI and standards are not reliable because of ?unique? tree canopy issues, not unlike legacy infrastructure 23 In re: Potomac Electric Power Company, 102 408, 2011 WL 7164366 295 373. 2? WL 7164366 4-5. 13 argument. The commission responded that ?as a matter of policy, each utility has an obligation to provide reliable service based on the particular circumstances and characteristics of its service territory.?27 The commission noted that if a utility is presented with a unique challenge like an extensive tree canopy, ?it should be more active than other utilities in executing tree trimming. . .it is not perpetually relieved from the obligation of maintaining a reliable system.?28 Signi?cantly, the commission rejected Pepco?s argument that ?the Commission may only penalize a utility pursuant to a regulatory standard with an objective metric. even though the Commission was concurrently engaged in rulemaking related to establishing standards.29 The commission found that Pepco acted imprudently and imposed a civil penalty of $1 million. ?A?er consideration of the substantial decline in reliability resulting from Pepco's inadequate vegetation management practices, and the signi?cant costs, both economic and non? economic, impOsed on the Company's Maryland ratepayers, we have determined that a penalty is appropriate in this case. In establishing the appropriate amount of any civil penalty, PUA ?13- 201(d) requires us to consider the number of any other previous violations, (ii) the gravity of the current violation, the violator's good?faith efforts in attempting to achieve compliance after noti?cation of the violation, and (iv) any other appropriate and relevant matters.?30 Similarly, the New York Public Service Commission examined whether, and to what extent, it should penalize two investor-owned utilities for reliability issues that were identi?ed by ratepayers and documented in a staff report, including Violations related to ?inadequate vegetation management, a reactive approach to storm events, late damage assessments, nonexistent, vague or inaccurate power restoration estimates, badly prioritized and coordinated restoration work22-24. 30 Id. at 22. 14 excessively long outages, and an inability to timely provide ?make-safe? services to ?rst responders.?31 The case was ultimately resolved through a joint settlement under which the utilities agreed to make non-ratepayer funded investments of up to $3.9 million that were designed to increase resiliency and improve emergency response.32 In its order accepting the settlement agreement, the NY. PSC found that ?the approximately $4 million settlement is reasonable? given that ?if each and, every one of the twelve alleged violations was fully litigated and the Commission determined that the maximum penalty was warranted for each violation, the ?nancial penalty could have been approximately $6 million.?33 What constitutes a ?reasonable penalty? is intentionally left to the Council, consistent with general regulatory principles: We do not agree that the term ?reasonable level? is susceptible of only one interpretation. ?Reasonable level? is a vague term, and its presence in an administrative statute such as the Public Service Commission Law suggests that the General Assembly intended to entrust the formulation of speci?c standards to the technical expertise of those charged with enforcing the statute.34 Given the facts as discussed by witness Rogers, including failure to prudently maintain its distribution system with proper capital and investments, failure to investigate or adopt best practices, failure to take proactive measures to mitigate the number and duration of outages, failure to proactively engage Quanta, and failure to act generally until after the 31 See Case 17-E-0594, Proceeding on Motion of the Commission to Investigate the March 2017 Windstorm, Related Power Outages, and Rochester Gas and Electric and New York State Electric Gas Restoration E?orts, Order Adopting Terms of Joint Proposals, at n.6 (N.Y. PSC Apr. 18, 2019). 32 Id. at Attachment B. 33 Id. at 12-13. 34 Baltimore Gas and Elec. Co. v. PSC of Maryland, 501 A. 2d 1307, 1314 (Md. 1986) citing See Spring?eld Ed. Ass'n v. Spring?eld Etc, 290 Or. 217, 621 P.2d 547, 555457 (1980); Brix v. City of San Rafael, 92 Cal.App.3d 47, 50?51, 154 Cal.Rptr. 647 (Ca1.Ct.App.1979); Roberts v. Police Firemen?s Retirement, Etc, 412 A.2d 47, 50 Kopp v. State, 100 Idaho 160, 595 P.2d 309, 312 (1979); WIPE v. Illinois Pollution Control Bd, 55 Ill.App.3d 475, 13 Ill.Dec. 149, 152, 370 1176, 1179 (Ill.App.Ct.1977) 15 intervention of the Council, the Advisors recommend that a reasonable ?nancial penalty is between $1.5 million and $2 million, especially in light of the fact that actions, inactions and delayed reactions caused adverse impacts on tens of thousands of ratepayers, both commercial and residential. CONCLUSIONS ENO witness Tad Patella admits in his testimony that ?we knew that our reliability metrics had slipped in recent years and suspected that they would not match up favorably with the reliability metrics of high performing utilities selected by Quanta for benchmarking analysis.?35 ENO took insuf?cient actions in response to these de?ciencies until after the Council demanded explanations and action in June 2017. In fact, while ENO takes credit for engaging Quanta that did not occur until August 2018, well after the Council?s demands.36 Because there is ?serious doubt? that actions in largely ignoring the rising reliability de?ciencies until forced to do so by the Council could be considered prudent, ENO bears the burden of proving it acted prudently in this regard, especially since the problems were overwhelmingly caused by equipment failures and at a time when ENO was actually reducing reliability expenditures. Nothing submitted by ENO meets the ?common law negligence standard? required to show prudent conduct. Therefore, the Advisors are of the opinion that Response has not met the burden of demonstrating that its prior actions over several years related to maintaining and improving its distribution system were prudent. Accordingly, the Advisors recommend that the Council ?nd that ENO was imprudent for the reasons stated above and that a ?nancial penalty as 35 Supplemental Direct Testimony of Tad S. Patella at 6. 35 Supplemental Direct Testimony of Tad S. Patella at 5. 16 recommended above be assessed, with the penalty, and the costs of these proceedings incurred by the Council, to be excluded from ratepayer recovery. Respectfully submitted, Basile J. Uddo (#10174) J. A. "Jay" Beatmann, Jr. (#26189) Dentons, U.S. LLP 650 Poydras Street, Suite 2850 New Orleans, LA 70130 Telephone: (504) 524-5446 Facsimile: (504) 568?0331 Email: jay.beatmann@dentons.com And Clinton A. Vince Emma F. Hand Presley R. Reed, Jr. 1900 Street, NW. Washington, DC. 20006 202-408-6400 (Telephone) 202-408-6399 (Facsimile) c1inton.vince@dentons.com emma.hand@dentons.com piesleyreedjrt?adcntonscom CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing has been serVed upon ?The Of?cial Service List? via electronic mail and/or US. Mail, postage properly af?xed, this 25th day of April, 2019. Gr J. A. "Jay" Beatmann, Jr. l7 BEFORE THE COUNCIL OF THE CITY OF NEW ORLEANS RESOLUTION DIRECTING ENTERGY NEW ORLEANS, INC. TO INVESTIGATE AND REMEDIATE ELECTRIC DISRUPTIONS DOCKET NO. UD-17-04 AND COMPLAINTS AND TO ESTABLISH RELIABILITY PERFORMANCE STANDARDS AND FINANCIAL PENALTY MECHANISMS DIRECT TESTIMONY OF JOSEPH W. ROGERS, P.E. ON BEHALF OF THE ADVISORS TO THE COUNCIL OF THE CITY OF NEW ORLEANS APRIL 25, 2019 EXHIBIT 10 11 12 Exhibit No. Docket No. UD-17-04 Page 1 of 21 PREPARED DIRECT TESTIMONY OF JOSEPH W. ROGERS. P.E. INTRODUCTION PLEASE STATE YOUR NAME, BUSINESS ADDRESS, AND OCCUPATION. My name is Joseph W. Rogers. My business address is 6041 Syracuse Way, Suite 105, Greenwood Village, Colorado. I am a registered Professional Engineer in the States of Colorado and Louisiana and I am an Executive Consultant with the ?rm, Legend Consulting Group Limited (?Legend?). ON WHOSE BEHALF DO YOU APPEAR IN THIS I am presenting testimony on behalf of the Advisors to the Council of the City of New Orleans (?Council?). The Council regulates the rates, terms, and conditions of electric and gas service of Entergy New Orleans, LLC Entergy Corporation is the direct and indirect holder of the common membership interests of Entergy Utility Holding Company, LLC, which is the sole holder of the common membership interests of ENO. The Entergy Operating Companies as of the preparation of this testimony, are Entergy Arkansas, LLC Entergy Mississippi, LLC Entergy Louisiana, LLC ENO, and Entergy Texas, Inc. Any reference to the EOCs or an individual EOC should include any successor organization. Exhibit No. Docket No. Page 2 of 21 PLEASE SUMMARIZE YOUR RELEVANT EDUCATIONAL BACKGROUND AND TESTIMONY EXPERIENCE. Exhibit No. (JWR-2) provides a summary of my relevant education and professional experience, and Exhibit No. (JWR-3) lists my previous testimony. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS My testimony today addresses the Council's prudence investigation established by Council Resolution No. to determine whether inaction and omissions in mitigating and remediating electric service disruptions and complaints and addressing the performance of the distribution system were imprudent. My testimony covers system reliability during the time period of approximately 2013-2018. WHAT MATERIALS DID YOU REVIEW IN CONNECTION WITH THIS In addition to January 10, 2019, Response [to] Prudence Investigat[i]on Submitted Pursuant to Council Resolution R-l8?475 Response?), I have reviewed: (1) Councilmember Brossett?s letter dated June 8, 2017 regarding numerous complaints from ENO customers with respect to the ongoing occurrence of unplanned outages and electric service disruptions; (2) response to Councilmember Brossett?s letter dated June 8, 2017, ?led July 10, 2017; (3) original Reliability Plan, ?led on November 10, 2017; (4) Response to the Show Cause Resolution, ?led on June 6, 2018; (5) Transcript of the June 28, 2018 Utility, Cable, Telecommunications and Technology Committee meeting; (6) Revised Reliability Plan, with Exhibits, ?led on July 5, 2018; (7) Exhibit No. Docket No. Page 3 of 21 Quanta Technology, Assessment of Distribution Reliability Improvement Initiatives, ?led on October 31, 2018; (8) Reliability Progress Report as of October 31, 2018, ?led on November 30, 2018; (9) Response to Comments of the Intervenors and the Council Advisors on the Quanta Technology Report, ?led on December 27, 2018, and; (10) responses to Discovery in this proceeding. PLEASE SUMMARIZE YOUR MAJOR CONCLUSIONS BASED UPON YOUR EXAMINATION AND EVALUATION OF THE MATERIALS REVIEWED. Based upon the materials reviewed, including ENO's Response, ENO has failed to demonstrate that it has acted prudently in its maintenance of its distribution system, and in its response to the decline of reliability of its distribution system. It is clear, through annual ?lings with the US. Energy Information Administration the frequency of fair-weather outages and the need for restoration from those outages, and statements by witnesses that ENO was aware of the decline in reliability. ENO indicated that they reduced funding in the distribution system at the start of the period of declining reliability, 2014, and subsequently noticed the reliability decline. While ENO did increase funding in 2016, it was too late to mitigate the outages ENO and its customers experienced in 2016 and 2017. ENO has not presented convincing evidence that it responded swiftly and adequately to mitigate the decline in reliability. Further, it was only after numerous outages, complaints, and the Council establishing this docket to investigate the outages that, in August of 2018, ENO proceeded to hire a third?party consultant to perform an assessment of reliability performance and improvement plans and actions.