1. The Authority’s Response
Presentation to the
Public Service Commission
The Authority’s Response to
PSC Orders 20/2013 and 21/2013 in Docket No. 289
and the
Report on the Authority LEAC Factors for January 1, 2013
prepared by Georgetown Consulting Group
Tuesday February 12, 2013

2. Principal Issues with the GCG Report
Reasons for the Filed Q LEAC Rate Increase
GCG: Predominantly (82%) due to efficiency assumptions
Reasons for the Deferred Fuel Balance
GCG: Authority’s own making
Efficiency of Plant Operations
GCG: Never meet efficiency targets
GCG: Efficiency below standards
GCG: Acceptable level of efficiency
Average system heat rate of 9,500 to 10,000 Btu/kWh
GCG: The Authority burns too much fuel
About 50% more fuel than an average system or
80% more than an “efficient system”

3. GCG Misstates Reasons for the Filed Q3 2013 LEAC Rate Increase
From GCG Calculations
GCG Report
w/Math Errors Corrected *
Higher Fuel Prices
(14%)
26 %
More Realistic System Operating Efficiency Related Assumptions
82 %
40 %
Lower Sales Forecast
2 %
Deferred Fuel and Other Charges
32 %
Total of Above
100 %
LEAC Rate Increase Effect * *
On Customer using 400 kWh/mo.
$/Month
% Increase
% of Total
$ 3.31
1.7 %
25 %
$ 5.40
2.8 %
41 %
$ 0.23
0.1 %
2 %
$ 4.18
2.2 %
32 %
$13.12
6.8 %
100 %
* From GCG worksheet; corrected and effects of lower sales forecast reflected.
* * From analysis of Quarter 3, 2013 LEAC filing.

4. The Essence of the Deferred Fuel Balance
The Deferred Fuel Balance has resulted from:
Actual Fuel Costs
EXCEEDING
Revenue from the
Fuel Component of the LEAC Rate
over an extended period

5. A Long Term Issue - still trending in the wrong direction
Source: From LEAC filing worksheets and financial records.

6. Reasons for the Deferred Fuel Balance
Differences between Actual and Estimated
fuel prices
generating unit status changes/outages
system average heat rates
fuel consumption per kWh produced
inverse of efficiency
station use and line losses
fuel used to produce water
weather and customer loads
The Deferred Fuel Balance is not a situation
Of the Authority’s own making
As indicated in the GCG Report

7. Decisions have Impacted the Deferred Fuel Balance
Since July 2007, the level of the LEAC Rates
approved by the Commission
based on GCG recommendations
Has been $55 million LOWER
than filed by the Authority
Over that time, the Deferred Fuel Balance
grew by approximately $30 million
and is at $52 million as of Dec 2012

8. Decisions have Impacted the Deferred Fuel Balance
Fuel price driven decision regarding
LEAC Level for Quarter 1, 2013
Basis
Fuel Price per Barrel
Filed by the Authority
$117
Recommended by GCG &
Approved by the Commission
$101
Actual
$123
The major contributor to the deferred fuel balance
increasing by $7 Million in that Quarter

9. Impacts of Cash Constraints
Constraints Increase Costs
Deferred Maintenance/ Improvements
Unscheduled Outages
Increased Maintenance Costs
Less Efficient Unit Operations

10. Efficiency of Operations
Misleading Concept 1 in GCG’s Report (page4):
the Authority’s efficiency is:
well below the equipment manufacturers’ standards for operation;
well below industry standards for the plants on the Authority’s system; and
below the standards set by the Authority’s consultants, Harris Group.
Key Facts:
It is inappropriate and misleading to compare to the efficiency data from manufacturers and other generation systems.
Without appropriate adjustments
The efficiency of the Authority’s operations has been reasonably consistent with the Harris Report.
Based on adjusted manufacturer data

11. Key Factors System Efficiency Generating units Characteristics
Availability
Mode of Operation
Simple cycle
Combined cycle (with HRSG)
Combination of units operated
Level of loads
Relative to generation unit size
Fuel consumed in Water Production

12. Efficiency Consistent with Harris Report

13. Efficiency Consistent with Harris Report

14. Efficiency Consistent with Harris Report

15. Efficiency of Operations
Misleading Concept 2 in GCG’s Report:
“…the level of production efficiency attained [by the Authority] is far below the industry average, and even further below current trends in production efficiency.
An acceptable level of system efficiency would be in the range of 9500 to 10,000 BTU’s/kWh,
meaning that the Authority burns about 50% more fuel than an average system or 80% more than an efficient system.”

16. Harris Report Inconsistent with GCG’s “Acceptable Level”

17. Comparisons to Guam’s Power Authority
2010 Average System Heat Rate *
(Btu per kWh Produced)
Guam ,670
The Authority ,200
Inappropriate to conclude that
the Authority should:
Achieve similar efficiency
Burn significantly less fuel
* Source: Page 8, Guam Initial Technical Assessment Report produced under direction of the U.S. Department of the Interior Office of Insular Affairs by the National Renewable Energy Laboratory (NREL) - NREL/TP-7A April 2011.

18. Significant System Differences
Misleading
Significant System Differences
GPA is a much larger single system
~ 4 to 5 times the size of the STT & STX systems
GPA has more efficient generation units
Due to size and environmental permitting issues
the Authority’s production of water
Adversely affects the efficiency of the Authority’s electric system
the Authority’s load characteristics
Relatively more costly to serve

19. Source: Prepared by nFront Consulting with PRMG, Inc
Source: Prepared by nFront Consulting with PRMG, Inc. Data from the Authority and the Guam Initial Technical Assessment Report produced under direction of the U.S. Department of the Interior Office of Insular Affairs by the National Renewable Energy Laboratory (NREL) - NREL/TP-7A April 2011.

20. The Authority and GPA are Very Different
Bottom Line on the Difference in
Installed Generating Unit Efficiency
Authority
GPA
Energy Produced from Base Load Units
Avg. Heat Rate less than 10,000 Btu/kWh
NONE
Target enough to serve
90%
of GPA’s load each year
Source: Prepared by nFront Consulting with PRMG, Inc. Data from the Authority and the Guam Initial Technical Assessment Report produced under direction of the U.S. Department of the Interior Office of Insular Affairs by the National Renewable Energy Laboratory (NREL) - NREL/TP-7A April 2011.

21. Past Study: SLOW SPEED DIESELS NOT AN OPTION FOR the Authority
Slow speed diesels have much better heat rates and can burn cheaper, dirtier fuels
Air impacts in our locale would be significantly greater than from existing turbines
No pollution control technology has been demonstrated to reduce NOx emissions enough to meet air quality requirements
Air permits not possible at existing plants
Source: February 2005 report by MACTEC titled "Engineering Report on Feasibility of Obtaining Air Permits for Slow Speed Diesel Engines”

22. Daily Load Characteristics
The Authority’s load is relatively more costly to serve
Greater variance in load level
From minimum to maximum loads
Much smaller load in proportion to generation unit sizes
Causes significantly less efficient use
of available generation resources
Source: Prepared by nFront Consulting with PRMG, Inc. Based on data from the Authority and the Guam Initial Technical Assessment Report produced under direction of the U.S. Department of the Interior Office of Insular Affairs by the National Renewable Energy Laboratory (NREL) - NREL/TP-7A April 2011.

23. The Authority’s Load Characteristics Adversely Impact Efficiency
Source: Prepared by nFront Consulting with PRMG, Inc. based on hourly data supplied by the Authority.

24. US Utilities - Not a Useful Benchmark
Source: Prepared by nFront Consulting with PRMG, Inc. based on Table 8.2b Electricity Net Generation, Electric Power Sector, for 2011, US EAI/Annual Energy Review 2011 published September 2012.

25. Overview - System Changes Considered
2005 Harris Report
System base line condition assessment
CFB PetCoke & STX/STT HRSGs
2008 R. W. Beck Report
Cost and dependence on oil
CFB PetCoke, wind, HRSGs, LNG (future)
Plans that would lower total costs ---- and improve efficiency to the levels deemed acceptable by GCG?
NONE !!!!

26. Changes Planned and Under Consideration
Improve the existing system resources
Diversify sources of fuel
including liquefied petroleum gas, liquefied natural gas, and/or coal
Electrically interconnect STT to Puerto Rico
through an undersea transmission line
Develop renewable energy resources
Pursue biomass and ocean thermal technologies

27. LEAC Filing Improvements
Document data sources/assumptions
Used within the LEAC filing
Clarify and comply with
Minimum Filing Requirements
Revise LEAC Spreadsheets to improve
Transparency
Reconciliations
Differential Analysis

28. LEAC Filing Improvement Process
Progressively Improve
Basis for Fuel Cost Projections
Fuel Prices
Unit availability
System efficiency
Reflect updates to sales projections
Provide narratives
Key assumptions and balances
Proposed methodology changes

29. The Bottom Line The GCG Report
Misleading and not productive
Should be rescinded
The Authority is improving the LEAC Filing
Efficiency assumptions
Documentation and process
System efficiency improvements will come from
Improving our existing Resources
Implementing more cost effective resources and fuel diversity
The Authority’s cost recovery is key
To improving future costs and reliability