Number:
RR-2372
Date: June 24, 2009
Mail Log No. 116225
PUBLIC VERSION
TO:
Douglas R.M. Nazarian, Chairman
Harold D. Williams, Commissioner
Susanne Brogan, Commissioner
Lawrence Brenner, Commissioner
FROM:
Anthony Myers, Assistant Executive Director
RE:
NAS Patuxent Interim Rates and Safety Waiver
_______________________________________________________________
Description of Application.
SMECO has filed an Application for the use of interim distribution rates at the Patuxent
NAS and other naval facilities and associated waivers of regulation.
Groups which should receive a copy of Staff Recommendation.
Mark MacDougal, SMECO
Paula Carmody, Maryland People’s Counsel
Recommended Action (Including Conditions).
Accept for filing the proposed interim retail rate for 24 months effective July 31, 2009.
SMECO should be directed to provide a final accounting of the privatized assets upon
completion of the transaction. The Commission should approve the request to operate
electrical vaults on NAS Patuxent that are not in compliance with COMAR for a period of
up to two years following SMECO’s acquisition of the existing facilities and approval of the
request to operate all other electric distribution facilities that are not in compliance with
COMAR for a period of up to five years during which time SMECO will bring all vaults and
other facilities into compliance provided:
1. Vaults and other electric distribution facilities are all in compliance with both
COMAR 20.50.02.02 and COMAR 20.50.08.03 within two years and five years
respectively.
2. SMECO will provide the Commission with semi-annual reports each year for five
years describing the progress in identifying and correcting major areas of noncompliance with COMAR 20.50.02.02 and COMAR 20.50.08.03 including each
individual area of non-compliance and the corresponding corrective action.
3. Any work that the Cooperative performs on the vaults and other existing facilities
will be in compliance with the current editions of the 2007 National Electrical Safety
Code (NESC) and the 2008 National Electrical Code (NEC) with the NESC being
recognized as the standard specifically applicable to electric distribution systems.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 2
June 24, 2009
PUBLIC VERSION
4. SMECO will, as part of its five-year compliance plan, survey overhead distribution
lines and equipment and develop a work plan to correct any non-compliant issues
including those regarding safety clearances referenced by Part 2, Section 23 of the
NESC. The progress will be included in the semi-annual reports to the Commission.
5. The Cooperative will, as part of their system vault and facilities survey, identify and
correct any risks of contact voltage hazards.
6. To assist in safe operation of the existing facilities, SMECO will, as stated in
communication with the Commission Staff, employ the assistance of an individual
thoroughly familiar with the existing facilities.
__________________ _____________ ________________
Phillip VanderHeyden Randy Allen
E. Frank Bender
Dir, Elec.
Dir. Acct.
Dir. Engr.
______________
Ronald A. Decker
Staff Counsel
Commission Action on ____________________________________:
Approved _________Disapproved __________ Accept for Filing __________
cc:
Heather H. Polzin, General Counsel
Terry J. Romine, Executive Secretary
Joel M. Bright, Chief Hearing Examiner
Gregory V. Carmean, Executive Director
LaWanda Edwards, Press Secretary
Obi Linton, Director, Office of External Relations
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 3
June 24, 2009
PUBLIC VERSION
Summary.
The Southern Maryland Electric Cooperative (“SMECO” or “the Cooperative”) has filed an
Application requesting an interim tariff rate for 24 months and approval of a plan to operate
certain facilities that are not in compliance with COMAR by waiving two regulations. The
Cooperative makes these requests in connection with its pending acquisition of the electric
distribution system (“the Existing Facilities”) owned by the Unites States Navy at Naval Air
Station Patuxent River (“NAS Patuxent”) and Webster Field Annex (“Webster Field”) in St.
Mary’s County and the Naval Recreation Center Solomons (“NRC Solomons”) in Calvert
County.1 The Cooperative requests that the Commission grant its Application no later than
July 29, 2009, to allow commencement of its contract with the Navy in accordance with the
schedule established by the Navy.
Bill Impact.
The Cooperative’s rate application is a request to assess temporary retail electricity rates on
an unmetered basis for billings based on metered usage and to change the nature of service
provided from that of primary (transmission level) to secondary service at retail rate class
rates. The instant filing produces no changes to current SMECO rates and charges (beyond
the two year interim rate). Analyses indicate the privatization of NAS Patuxent should have
no significant impact on retail rates.
Applicable Law.
Under Pub. Util. Cos. § 5-202, an electric company may not enter into any agreement or
contract that materially affects a franchise without prior authorization of the Commission.
The agreement or contract shall be in the public interest, promote adequate, economical, and
efficient delivery of electric services in the State without unjust discrimination, and comply
with requirements with respect to financial condition, capitalization, rates, and public safety
as required by § 2-113. Under COMAR 20.50.01.02,2 the Commission may temporarily
exempt an electric company from compliance with a regulation under Subtitle 50 for
unreasonable hardship to a utility or to a customer.
The Commission is preempted from regulating the federal government through the direct
approval of the contract. See Balt. Gas & Elect. Co. v. United States, 133 F. Supp.2d 721,
1
As the contract between SMECO and the Navy is entitled NAS Patuxent River Electric, the Staff
comments at times refer to all of the naval facilities affected by the contract as the NAS system or NAS.
2
C. Exemption. If unreasonable hardship to a utility or to a customer results from the
application of any of these regulations, application may be made to the Commission for the
modification of the regulation or for temporary or permanent exemption from its
requirements.
COMAR 20.50.01.02C.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 4
June 24, 2009
PUBLIC VERSION
745 (D. Md. 2001) (regarding whether the proposal to privatize the electric system at Fort
Meade was subject to regulation by the PSC), appeal dismissed, 290 F.3d 734 (4th Cir.
2002) (PSC lacked standing to appeal). However, the Department of Defense has
recognized that State regulation of safety and reliability of the utility system may be
justified, and generally allows purchase of utility services under general tariff provisions.3
Background.
The federal government had found that military installations had been unable to fully
upgrade and maintain utility services on its bases due to inadequate funding and competing
management priorities. See Maj. Jeffrey A. Renshaw, Utility Privatization in the Military
Services: Issues, Problems, and Potential Solutions, 53 Air Force L. Rev. 55-60 (2002). In
the 1990s Congress, by enacting 10 U.S.C. § 2688, directed the Department of Defense
(DOD) to privatize the utility services located on military bases. The purpose of the
privatization was to improve the efficiency and effectiveness of utility services and to allow
the military to focus on its core defense missions.
The Commission first became involved in military base utility privatization when it
intervened in a lawsuit regarding a DOD solicitation of bids for the privatization of the
electric distribution system at Fort Meade. See Balt. Gas & Elect. Co., 133 F. Supp.2d 721.
This case involved whether the solicitation was invalid for not stating that the Commission
would have jurisdiction over the successful bid that would become owner of the base
distribution system and that any winning bidder must hold franchise rights granted by the
Commission. Id. at 724. The court determined that the Commission lacked jurisdiction over
the privatization and was preempted from any approval of the solicitation by the military.
In 2001 the Navy sought bids for the purchase and operation of the electric distribution
system at NAS Patuxent and Webster Field. As discussed in the Application, SMECO was
determined to be the “best value” provider under the solicitation. SMECO began
negotiations with the Navy and inspections of the naval facilities. Following new
solicitations in 2006 and 2007, when NRC Solomons was added to the facilities with its
electric distribution to be privatized, SMECO and the Navy were able to agree to final
contractual terms regarding the privatization. The Contract was submitted to and approved
by Congress.
3
See DOD General Counsel Mem., The Role of State Laws and Regulations in Utility Privatization
(Feb. 24, 2000) (posted at http://www.acq.osd.mil/ie/energy/library/app_b.pdf), see also Maj. Jeffrey A.
Renshaw, Utility Privatization in the Military Services: Issues, Problems, and Potential Solutions, 53 Air Force
L. Rev. 55 (2002).
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 5
June 24, 2009
PUBLIC VERSION
SMECO’s Application.
The April 20, 2009, Application filed by SMECO details the transfer of the electric
distribution facilities serving NAS Patuxent, Webster Field, and NRC Solomons from the
Navy to SMECO. SMECO is purchasing the Existing Facilities for $464,329.92 and is
committing to various capital improvements of $19.86 million over a five year period.
SMECO has determined that the net book value of the Existing Facilities is $10.29 million.
Consistent with practice at naval installations, the majority of buildings on the three naval
facilities are currently unmetered. SMECO has evaluated these buildings and determined
that, under its tariff, 374 would be classified as Residential and 791 would be classified as
General Service. SMECO will install metering as specified in the Contract within two
years. During the two year period the metering will be installed SMECO will receive as an
interim rate $364,280.59 per month for providing electric service based upon estimated
usage. Following the two year period, charges for electric service to these buildings will be
based upon actual metered service under the SMECO tariff. The Application requests
Commission authorization of the interim rate for a two year period.
Inspections by SMECO have determined that the electrical equipment in certain vaults at
NAS Patuxent do not meet electrical safety standards. SMECO under the Contract will
upgrade these vaults within two years. In addition, certain other electrical distribution
equipment and property on the three facilities do not meet standards of good engineering
practice as required by Commission regulations. SMECO under the Contract will upgrade
these facilities within five years. The Application requests the Commission authorization to
operate these vaults for two years and the Existing Facilities for five years without being in
compliance with Commission regulations.
The Application was reviewed by the Electricity, Accounting, and Engineering Divisions
which provided detailed comments and recommendations as discussed below.
Comments of the Electricity Division.
Analysis.
SMECO currently serves the NAS Patuxent system with high-voltage primary service under
Schedules T, and GS at three metering points.4 The distribution system on the three naval
facilities is owned and operated by the United States Navy (“the Navy”). SMECO has
reached an agreement with the Navy to acquire and operate the distribution system on the
three facilities and charge for service under the Cooperative’s tariffed retail rates for interim
period of 24 months after execution of the agreement. During the interim period, SMECO
4
The three primary source monitoring points are NAS Patuxent, Webster Field, and NRC Solomons.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 6
June 24, 2009
PUBLIC VERSION
proposes to charge a rate that approximates the electric usage of the naval facilities, based
on the historic usage under the current primary service. The interim rate applies retail rate
schedules R, GS and SL to the naval facilities usage to develop a monthly charge of
$364,280.59 per month.
Interim Rate Methodology.
As described in the Cooperative’s Application on page 7, the interim rate is developed by
first estimating the average usage of the 374 residential services by assuming that each NAS
Patuxent residential service has usage equivalent to the Cooperative’s typical residential
usage. The resultant usage and demand of the residential accounts is removed from the total
NAS demand and usage to determine the aggregate non-residential usage. The nonresidential usage was then averaged over the 791 commercial accounts to determine the
demand and energy to which General Service rates were applied.
The usage and demand are forecasts based on expected use one year (the mid-point of the
two year interim rate period) after the implementation of the interim rates. The projected
use has also been adjusted to assume a 5% line loss factor.
In addition to retail billing, the monthly interim charge includes costs for Transmission
Meter Service, as those meters will still be in use, 320 street lights, and costs to set up about
49 new accounts per month, which spreads out the cost of setting up 1165 new accounts
over 24 months.
Staff has reviewed this method and agrees that it is a reasonable means to approximate the
use of individual services for this purpose. The assumption that each of the residences and
commercial locations on NAS have equivalent use would not be appropriate for
circumstances where individual customers paid for service separately. COMAR 20.26
describes procedures for using energy allocation systems for master metered locations, e.g.
with tenants in an apartment house. Those estimates are described as based on square
footage allowance, or operating experience. However, for this purpose, as there is no
individual billing, assumption of average use is reasonable.
SMECO’s interim rate request is essentially a request to temporarily use an estimate of
usage to convert a transmission service customer to a retail rate schedule customers for the
purpose of distribution service. The conversion of the Navy’s account to retail level rates
results in an increase to distribution revenue for SMECO. Evaluation of the appropriateness
of the revenue to support the level of SMECO investment necessary to take over ownership
and operation of the NAS distribution system is addressed in the following comments of the
Accounting Division.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 7
June 24, 2009
PUBLIC VERSION
As noted on page 2 of the Cooperative’s filing, SMECO will continue to provide Standard
Offer Service (“SOS”) to NAS based on the usage at the existing transmission level
metering points, i.e. the substations at NAS Patuxent, Webster Field and NRC Solomons.
The instant filing does not change the existing provision of SOS service to the Navy’s
facilities.
Conclusion of the Electricity Division.
Accept for filing the proposed interim retail rate for 24 months effective July 31, 2009.
Comments of the Accounting Division.
In the proposed privatization transaction between SMECO and the Navy, SMECO will
acquire property with an original cost of approximately $19.9 million consisting of the situs
distribution assets (poles, towers, conductors, transformers, etc.) and a substation at the
Webster Field location, all of which will be acquired without the of distribution of cash. In
the proposed transaction, SMECO will acquire the net distribution assets and then depreciate
them over their remaining life. However, at the time of acquisition these assets will have a
fair market value less than original cost. This reduction in value is recorded as a deferred
credit5 and amortized over the remaining life of property as an adjustment to revenue. The
credit offsets depreciation expense recorded on the new plant by an equal amount, ensuring
that income is unaffected by the introduction of the new plant. Staff is convinced the
acquired facilities will result in no rate impact for ratepayers. SMECO will pay for 60
percent of the substation6 through the receipt of service revenues from NAS Patuxent during
the two-year transition period. The substation will have a balance of approximately
$395,000 after the close of the two year transition period. This depreciable balance will be
reflected in future revenue requirements, but should not have a material impact on rates. In
addition to acquiring facilities in the transaction, SMECO will also commit to investing
approximately $20.0 million in upgrades to bring the facilities up to operating standards.
Over the five year period beginning in 2009 SMECO anticipates the following capital
requirements to upgrade existing facilities consistent with COMAR safety standards:
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The deferred credit recorded on the books is essentially a plant acquisition adjustment. The balance in
the deferred account at close of the transaction is approximately $10.3 million.
6
The substation is a multi-use property which SMECO will be able to use to service existing
operations.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 8
June 24, 2009
PUBLIC VERSION
Staff reviewed an incremental cost calculation (Exhibit C of SMECO filing) to determine
whether the proposed transaction will negatively impact ratepayers. Based on the proposed
rate that will be assessed to NAS Patuxent during the transition period7, the calculation
demonstrates the proposed transaction will not be subsidized by current ratepayers. The
transaction should produce financial results sufficient to support SMECO’s anticipated
distribution investments at NAS Patuxent and eliminate the possibility that current
ratepayers will be subsidizing the investment. On average, SMECO’s investment in new
facilities at NAS Patuxent should produce the following incremental financial results:
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The net margin analysis reflects projected impacts to SMECO’s operations during the five
year period ended 2013. The expected cash inflow is developed by adding the average noncash charges (depreciation) over the period to the expected incremental margin anticipated
from serving NAS Patuxent. Staff believes this calculation demonstrates the reasonableness
of SMECO’s planned investments necessary to service the distribution needs of NAS
Patuxent.
The privatization transaction should is expected to close in the third quarter. Staff
recommends that SMECO provide a final accounting of the privatization transaction as soon
as practicable.
Conclusion of the Accounting Division.
Staff reviewed the proposed transaction and believes it should not produce rate impacts.
Staff recommends that SMECO provide a final accounting of the privatized assets when the
transaction is complete.
7
The transition period reflects the expected two-year period it will take to install meters at the naval
installations. During the pendency of the transition period SMECO will continue to bill the Navy for
purchased power on a bulk basis.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 9
June 24, 2009
PUBLIC VERSION
Comments of the Engineering Division.
Summary of the Application as Related to Safety Issues.
SMECO seeks Commission authorization to operate 17 electrical vaults among the Existing
Facilities, vaults that are not currently compliant with good engineering practice and
applicable safety regulations referenced by COMAR, for up to two years following the
acquisition of the facilities. The Cooperative states it would complete work to make the
vaults compliant with all applicable regulations during the two years.
SMECO also seeks authorization to operate all other acquired electric distribution facilities
among the Existing Facilities, facilities that are not currently compliant with good
engineering practice, including safety practices, as referenced by COMAR 20.50.02.02, for
up to five years following the acquisition of the facilities. SMECO states it would complete
work to make the electric distribution facilities compliant with the regulation during the five
years.
SMECO is aware of what is needed within the first two years to make the 17 vaults safe and
compliant with applicable regulations. However, the Cooperative has not inspected the
remainder of the Existing Facilities in great detail. Therefore, the utility proposes to provide
reports to the Commission, one every six months for five years after acquisition of the
facilities, of SMECO’s progress with identifying and correcting major areas (costing more
than $100,000 to correct) of non-compliance of all the Existing Facilities. The reports
would also include a description of corrective actions taken or planned by SMECO,
according to the proposal.
Evaluation.
Engineering Staff’s primary concern as related to the Application is with the associated
safety issues. COMAR 20.50.02.02 requires electric utilities to use standards of accepted
good engineering practice, among which are the National Electrical Safety Code (NESC)
and the National Electrical Code (NEC), both of which are safety standards.
Although the Application indicates that the vaults will be made compliant with COMAR
20.50.08.03, this regulation only addresses electrical grounding, and requires the utility to
use the applicable provisions of the NESC and NEC to achieve that grounding. As the text
of the Application makes clear, rather than focusing strictly on COMAR 20.50.08.03,
SMECO would make the vaults compliant with all applicable safety regulations in the
NESC and NEC, which compliance is required by COMAR 20.50.02.02.
The 17 electrical vaults mentioned contain concentrations of electrical cables, connections
and switches, so that in the course of normal operations the level of service personnel traffic
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 10
June 24, 2009
PUBLIC VERSION
in the vaults is relatively high compared to most other specific areas throughout the
distribution system. SMECO noted in the Application at page 8 that the “17 vaults exhibit
existing conditions that are unacceptable safety hazards such that both the non-utility and
utility workers are at high risk of incidental electrical contact or arc flashover exposure.”
Therefore, much of the utility’s initial focus will be to correct the safety issues with the
vaults, with the goal to make them compliant with applicable safety provisions of the NESC
and NEC within the first two years after acquisition of the facilities.
In summary, as indicated in the Application, the safety concerns with the 17 vaults involve:
 inadequate working and other clearances
 the relative positioning of electrical equipment, walls and corridors so that service
personnel could be exposed to electrical contact or arc flash hazards
 shared-use of some vaults with other non-electrical elements or activity, including
storage
 unsafe relative positioning of primary and secondary cables within the vaults
 old, outdated equipment, with which many service personnel may be unfamiliar
In the Application at pages 8-9, SMECO describes the general approach that it will take to
correct safety issues with the vaults.
In order to protect the safety of personnel inside the vaults, upon purchase of
the Existing Facilities, SMECO will remove items inappropriately stored in
the vaults, change or install locks, and restrict entry into the vaults to allow
only qualified and knowledgeable people access to the electric vaults. Until
the safety problems at each vault are corrected, entry into the vault will not be
allowed unless the vault equipment has been de-energized.
The preceding SMECO statement reflects that the utility is well aware that compliance with
the NESC and NEC involves adherence to specific work rules, in addition to the rules
strictly related to equipment specifications and installation. In a written response to
Engineering Staff questioning, SMECO provided additional assurance that safety rules
would be followed when work with the vaults is performed. “[A]s needed, SMECO
personnel and SMECO subcontractors will use cover-up [electrically insulated] material,
wear appropriate personal protective equipment,” and “will follow all applicable safety rules
to assure a safe working environment.”
Concurrent with work to correct safety issues with the 17 vaults, SMECO also proposes to
complete work within five years to bring the rest of the Existing Facilities into compliance
with the NESC and NEC. As explained in the Application, the specific areas of concern are
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 11
June 24, 2009
PUBLIC VERSION
“aged and weakened utility poles, pole cross arms, pole hardware, conductor wire, switches,
and circuit breakers in need of replacement or repair.”
The Existing Facilities have heretofore not been required to meet NESC and NEC standards.
Engineering Staff had presented SMECO with a safety concern that workers performing
remedial work “will likely be experienced and knowledgeable working around facilities that
are already compliant, but may have little experience in working in the unique, aged largely
non-compliant environment of the Navy's Existing Facilities for distribution.”
In written response, SMECO provided assurance that the “instances of non-compliance with
COMAR requirements are generally a matter of age and equipment configuration rather than
situations so unique that trained SMECO and SMECO subcontractor personnel would be
unfamiliar with the equipment encountered. Nonetheless, SMECO intends to employ the
assistance of an individual thoroughly familiar with existing facilities.”
The NESC does not require that existing facilities which meet the requirements of earlier
editions of the standard to be altered or updated to meet the current (2007) edition of the
standard. Most of the provisions of the NESC have not changed radically over time.
However, given that the Existing Facilities referenced by the Application have not
previously been required to meet the requirements of any edition of the NESC, Engineering
Staff encouraged SMECO to comply with the current edition for the proposed remedial
activity involving the Existing Facilities. SMECO responded in writing that for “any work
SMECO performs specifically on the 17 vaults, or on the other portions of Existing
Facilities in general, SMECO will be in compliance with the current editions of the 2007
NESC and the 2008 NEC.” Although electric utilities are required to follow both the NESC
and NEC standards, the NESC is the standard that is specifically applicable to electric
distribution systems.
Engineering Staff presented SMECO with a few additional safety-related concerns related to
the Application, since the Existing Facilities are aged, and since they have not generally
received proper attention with regard to NESC compliance. A brief discussion of those
issues and SMECO’s written responses follows.
Safety Clearances of Overhead Electric Lines.
Although SMECO has not been involved according to Engineering Staff's records, a large
percentage of the reportable accidents over the past ten years have involved contact with
overhead electric distribution lines. Engineering Staff asked SMECO if it had plans to or
would agree to survey the overhead distribution lines and equipment among the Existing
Facilities, and agree to thereafter as necessary make those facilities compliant with Section
23 (Clearances) of the current (2007) edition of the NESC. There is no indication that the
overhead lines among the Existing Facilities were ever required to meet any specific, formal,
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 12
June 24, 2009
PUBLIC VERSION
clearance standard. Engineering Staff believes that, since those overhead lines would
receive considerable attention, anyway, according to SMECO’s proposal, perhaps
performing a concurrent safety “makeover” of the lines would be appropriate.
In response, SMECO stated that as part of its 5-year compliance program, it would survey
its newly acquired utility plant, develop a work plan addressing non-compliance issues,
including compliance with the safety clearances referenced by Section 23 of the 2007
NESC.
Contact Voltage.
Potentially dangerous levels of contact voltage can be associated with electric distribution
systems and can appear in areas or on structures accessible to the public in general, even on
structures that are not assets of the electric distribution utility. Contact voltage is an
abnormal condition in a distribution system and can result from breaks in electrical
conductors, conductors short-circuited to ground, wiring errors, electrical insulation failures,
and other abnormal causes.
Dangerous levels of contact voltage could potentially appear at innumerable spots
throughout any given distribution system at any given time. However, it is currently
Engineering Staff's belief that the risk of contact voltage is relatively low throughout well
maintained distribution systems that have for years been required to comply with NESC
standards, as is the case for Maryland electric distribution utilities such as SMECO.
Since the Existing Facilities are generally aged and have not previously been required to
meet NESC standards, Engineering Staff asked SMECO how it would attempt to ensure that
the Existing Facilities are safe or are made safe for the public, with regard to contact
voltage. In response, SMECO indicated it “will assure that the Existing Facilities are safe
for the public in the same manner it assures the public safety of its existing utility plant. At
the end of the 5-year initial Capital Program period, there will be no difference relative to
public safety … between the SMECO’s utility plant-in-service on NAS Patuxent, Webster
Field, or Solomons Annex and SMECO's utility plant-in-service serving other SMECO
members.”
As noted earlier, according to the SMECO proposal, the utility would conduct a survey of its
newly acquired utility plant and develop a work plan to address non-compliance issues with
regard to the NESC, the NEC, and with regard to good engineering practice, in general.
However, SMECO stated that it does not believe that a separate survey specifically related
to contact voltage is necessary for the Existing Facilities.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 13
June 24, 2009
PUBLIC VERSION
Contingent on overall approval of the Application by the Commission, the Commission
should approve slightly modified versions of the second and third waiver requests. SMECO
in the conclusion of the Application at page 10 requests approval of the following:
(2) Operate Existing Facilities which are not in compliance with COMAR
20.50.02.02 for a period of up to five years following SMECO's acquisition of the
Existing Facilities, during which time SMECO will bring such facilities into
compliance with such regulation and file the periodic reports …..; and
(3) Operate electrical vaults on NAS Patuxent that are not in compliance with
COMAR 20.50.08.03 for a period of up to two years following SMECO's acquisition
of the Existing Facilities, during which time SMECO will bring such facilities into
compliance with such regulation.
Both the second and third requests should be modified to include reference to both COMAR
20.50.02.02 and COMAR 20.50.08.03, since facilities of the type represented by all of the
Existing Facilities are normally subject to compliance with both regulations.
Reporting requirements.
The Engineering Division also supports the SMECO proposal to provide the Commission
with reports, one every six months for five years after acquisition of the facilities, of
SMECO progress with identifying and correcting major areas (costing more than $100,000
to correct) of non-compliance with COMAR 20.50.02.02 and COMAR 20.50.08.03. In
addition to addressing elements of COMAR 20.50.02.02 and COMAR 20.50.08.03 that are
applicable to any of the Existing Facilities, the reports should include a description of
corrective actions taken or planned by SMECO.
Engineering Division Conclusion.
Engineering recommends approval of the request to operate electrical vaults on NAS
Patuxent that are not in compliance with COMAR for a period of up to two years following
SMECO's acquisition of the Existing Facilities and approval of the request to operate all
other electric distribution facilities that are not in compliance with COMAR for a period of
up to five years during which time SMECO will bring all vaults and other facilities into
compliance provided:
1. Vaults and other electric distribution facilities are all in compliance with both
COMAR 20.50.02.02 and COMAR 20.50.08.03 within two years and five years
respectively.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 14
June 24, 2009
PUBLIC VERSION
2. SMECO will provide the Commission with semi-annual reports each year for five
years describing the progress in identifying and correcting major areas of noncompliance with COMAR 20.50.02.02 and COMAR 20.50.08.03 including each
individual area of non-compliance and the corresponding corrective action.
3. Any work that the Cooperative performs on the vaults and other existing facilities
will be in compliance with the current editions of the 2007 NESC and the 2008 NEC
with the NESC being recognized as the standard specifically applicable to electric
distribution systems.
4. SMECO will, as part of its five-year compliance plan, survey overhead distribution
lines and equipment and develop a work plan to correct any non-compliant issues
including those regarding safety clearances referenced by Part 2, Section 23 of the
NESC. The progress will be included in the semi-annual reports to the Commission.
5. The Cooperative will, as part of their system vault and facilities survey, identify and
correct any risks of contact voltage hazards.
6. To assist in safe operation of the existing facilities, SMECO will, as stated in
communication with the Commission Staff, employ the assistance of an individual
thoroughly familiar with the Existing Facilities.
Final Recommendations.
Accept for filing the proposed interim retail rate for 24 months effective July 31, 2009.
SMECO should be directed to provide a final accounting of the privatized assets upon
completion of the transaction. The Commission should approve the request to operate
electrical vaults on NAS Patuxent that are not in compliance with COMAR for a period of
up to two years following SMECO’s acquisition of the Existing Facilities and approval of
the request to operate all other electric distribution facilities that are not in compliance with
COMAR for a period of up to five years during which time SMECO will bring all vaults and
other facilities into compliance provided:
1. Vaults and other electric distribution facilities are all in compliance with both
COMAR 20.50.02.02 and COMAR 20.50.08.03 within two years and five years
respectively.
2. SMECO will provide the Commission with semi-annual reports each year for five
years describing the progress in identifying and correcting major areas of noncompliance with COMAR 20.50.02.02 and COMAR 20.50.08.03 including each
individual area of non-compliance and the corresponding corrective action.
Comments of the Technical Staff (RR-2372)
RE: NAS Patuxent Interim Rates and Safety Waiver
Mail Log No. 116225
Page 15
June 24, 2009
PUBLIC VERSION
3. Any work that the Cooperative performs on the vaults and other existing facilities
will be in compliance with the current editions of the 2007 NESC and the 2008 NEC
with the NESC being recognized as the standard specifically applicable to electric
distribution systems.
4. SMECO will, as part of its five-year compliance plan, survey overhead distribution
lines and equipment and develop a work plan to correct any non-compliant issues
including those regarding safety clearances referenced by Part 2, Section 23 of the
NESC. The progress will be included in the semi-annual reports to the Commission.
5. The Cooperative will, as part of their system vault and facilities survey, identify and
correct any risks of contact voltage hazards.
6. To assist in safe operation of the existing facilities, SMECO will, as stated in
communication with the Commission Staff, employ the assistance of an individual
thoroughly familiar with the Existing Facilities.
Comments provided by:
________________________
Rick Miller
Electric Distribution Engineer
________________________
David L. Valcarenghi
Assistant Director of Accounting
________________________
Phillip E. VanderHeyden, Director
Electricity Division
________________________
Michael A. Dean
Assistant Staff Counsel