On December 28, 2011, IPP Unit 1 generator suffered an internal failure of the generator windings, causing them to melt. The unit was expected to be out for several months while repairs were being conducted. Repairs on the generator were completed one month ahead of schedule and the unit was returned to service on May 29, 2012.
Concurrent with the IPP Unit outage, on January 9, 2012, a major transmission line owned by Southern California Edison and used by several California utilities, including Anaheim, to import power from New Mexico into California, failed due to a major transformer failure. This transmission line, referred to as the San Juan transmission line, was returned to service on February 10, 2012.
The unexpected loss of IPP Unit 1 coupled with the loss of the San Juan transmission line resulted in an approximate $13.2 million gross, $5.2 million net, loss. In order to avoid dropping under minimum financial indicators, the Department temporarily increased an aspect of electric rates, as previously authorized by the Anaheim City Council, and explained in the attached March 2012 Info Only Staff Report, in order to respond to just such an emergency event. Use of this rate adjustment is only permitted to the extent and time necessary to recover event specific associated costs. Therefore, this rate adjustment was initially applied on March 15, 2012 and is expected to have recovered approximately $5.2 million by September, 2012, whereupon collection for these emergency purposes will cease. For your information, I have attached a PDF of the Staff Report that we previously provided to you in March 2012 with the details available at the time.
This email update is simply to advise the Anaheim City Council that the circumstances necessitating the fairly brief use of the emergency rate adjuster are expected to end in September this year, as well as provide closure on the status on IPP Unit 1 and the San Juan transmission line.
DETAILED BACKGROUND IF DESIRED:
The Intermountain Power Project (IPP) located near Delta, Utah and the San Juan Generating Station (San Juan) located near Farmington, New Mexico combined provide 286 MW or nearly 65% of Anaheim’s power supply. These are two of the main energy resources providing power to Anaheim businesses and residents, and are a primary reason that Anaheim’s electric rates remain so competitive.
On December 28, 2011, IPP Unit 1 generator tripped off-line due to an internal failure that caused severe damage to the unit. The preliminary assessment was that the hydrogen and water systems failed, which resulted in a lack of cooling to the generator, causing the generator windings to melt. General Electric (GE) was called out to perform an evaluation on the scope of work and timing necessary to repair IPP Unit 1.
GE’s investigation found that the cause of the failure was the result of newly designed bolting hardware used to keep the generator cable connectors that carry electrical current from the generator, in place; they were inadequately designed and improperly installed. When one of the connectors broke, it created a large arc which vaporized the copper conductors sending carbon and molten copper throughout the generator winding.
As a result of this failure on Unit 1, Unit 2 was inspected, and one of the same connectors was found to be exhibiting the same symptoms and was in the early stages of failure. The bolting hardware for the connector was temporarily replaced until permanent repairs can be made in spring of 2013; this is the earliest time that repairs can be made by GE. As a precautionary measure, and until permanent repairs can be made, GE has installed vibration monitoring equipment near each cable connector in Unit 2, to continuously monitor for excessive vibration while the generator is operating. This precautionary measure should allow for the safe shutdown of the unit prior to any damage, should a cable connector show signs of failure.
Based on GE’s evaluation, the estimated repair time was expected to be 6-months. However, the repair process went smoothly and without further issues, resulting in a return to service one-month earlier than expected.
At this time we don’t know exactly what the full cost of repairs for Unit 1will be; GE has agreed to cover some of the costs, and the insurance coverage should pick up the balance, after the deductible has been paid (our share of the deductible is approximately $260k). LADWP (as the IPP facility operator) is still negotiating with General Electric and the insurance carriers on these costs, but we expect that the overall cost to Anaheim will be around $260 to $500k.
In an entirely separate event, on January 9, 2012, a major transmission line, the San Juan transmission line, owned by Southern California Edison and operated by the California Independent System Operator (CAISO) failed due to a major transformer failure. This transmission line is used by several California utilities, including Anaheim, to import power from New Mexico into California. The transmission line was returned to service over a month later on February 10, 2012 after the transformer was repaired.
The loss of generation from IPP Unit 1 through May, coupled with expenses related to the loss of the San Juan transmission line, unexpectedly resulted in approximately $13.2 million in gross cost increases to our operations. These cost increases are a combination of increases in wholesale energy purchases ($3.4 million) to replace lost energy and a reduction in projected wholesale revenue ($9.8 million).
These increased costs were offset, in part, by an estimated $8 million in savings from reduced fuel purchases and reduced fuel transportation costs through the duration of the IPP Unit 1 outage. With these fuel-related savings, the Department estimates that the net impact of the unexpected costs stemming from these two emergencies is approximately $5.2 million.
As outlined earlier, our tightly limited emergency rate adjuster permits us to only recover unforeseen and significant costs related to these specific events; however, in order to avoid too great of a short term rate impact to customers, we planned to collect the $5.2 million on a slower timeline. (In other words, our revenue recovery timeline did not mirror the facility outage timeline.) We say this to explain why the events themselves were over within 5 months or so from when they started, but the revenue recovery is planned to continue till September. We have collected, very roughly about 5/8 of the $5.2 million thus far, and should therefore have collected the $5.2 million related to these emergencies by September at which point the collection for these emergency purposes will cease.