REVISED CRITICISM OF HARRIS TESTIMONY

ELSINORE MAGAZINE 2

This is what EM2 has found out on the LEAPS project

Below copied in full Comments On Attachment A

To EVMWD's Letter to FERC dated April 24, 2006

by

Douglas A. Pinnow. Ph.D.

EVMWD'S letter to FERC of April 24, 2006, signed by Ronald E. Young, General Manager, to Magalie R. Salas, Secretary of FERC, requested that Attachment A be incorporated into the record for the LEAPS Project.

Attachment A is a 17 page testimony by Matthew P. Harris, who was retained by Nevada Hydro to make a favorable economical case for the LEAPS Project. It is unclear why Mr. Young chose to endorse the testimony of Nevada Hydro's " hired gun" to represent alternative viewpoints, as will be discussed below.

This raises two significant questions that should be answered by EVMWD's Board of Directors:

1. On what basis was Matthew P. Harris selected by EVMWD to speak on behalf of the

District in the LEAPS matter?

2. Who in EVMWD is in a positionto independently validate Harris's conclusion?

If there is no one, were other expert opinions sought and considered before

EVMWD decided to endorse Harris's?

HARRIS'S LIMITED QUALIFICATIONS AND CREDIBILITY

Before providing critical comments on Harris's testimony, it is of interest to note that his resume, which was included at the end of Attachment A, indicates that he has a single college degree, a B.S. In Mechanical Engineering. This is rather removed from the field of electrical power engineering. It is also noteworthy that he indicates that he is a Licensed Professional Engineer in the State of Nevada. A check with the Nevada State Licensing Board indicates that Harris's license is limited to mechanical engineering. Nevada also licenses electrical engineers. But Harris does not have a license in this discipline.

These meager credentials that are limited to mechanical engineering should have raised some cautionary flags at EVMWD. The same is true for a ridiculous statment Harris makes on page 9 of his testimony:(see EVMWD report dated April 24, 2006).

There are additional reliability benefits associated withthe TE/VS Tranmission project [ the LEAPS transmission line] given the project is actually scheduled to be in-service by January 2007.

It is simply impossiple to have the TE/VS transmission line up and running so soon. One wonders what Harris may have been smoking when he gave his testimony and what the members of the EVMWD's Board of Directors who supported this testimony were thinking when they decided to request that FERC incorporate it into the record.

COMMENTS ON HARRIS'S TESTIMONY:

The objective of Harris's testimony is to show that FERC overlooked three major economic benefits associated with the LEAPS Project when preparing the draft Environmental Impact Statement (EIS). Further, if these three factors had been included, the Net Annual Benefit of the LEAPS Project would exceed the benefit associated with the "No Action" alternative (that was favored in the draft EIS by $112 million per year).

In his testimony, Harris attempts to make a case that the following three items were overlooked by FERC:

1. The tranmission line associated with the LEAPS project would provide an "RMR" annual benefit of $114 million to the ratepayers inSan Diego. ( The "RMR" factor will explained and discussed below.)

2. The actual annual benefit from the operation of the hydroelectric power plant associated with LEAPS would be $55 million rather than the $17 million calculated by FERC in the draft EIS.

3. The value of " Ancillary Services" provided by the LEAPS Project would add an additional $9 milliom in annual benefits.

Harris adds up these three benefits on page 7 of Attachment A to a total annual benefit of $178 million. Since this exceeds the $112 million advantage of the " No Action" alternative in the draft EIS, one would be led to conclude that the LEAPS Project does make economic sense - provided that Harris's testimony is sound.

However, his testimony is far from being sound. In fact, it is much closer to a "smoke and mirrors" desperation attempt to justify LEAPS.

The following is a discussion of each of his three factors:

1. An "RMR" Annual Benefit of $ 114 Million was Overlooked

Harris fails to define what an "RMR" is in his testimony, perhaps in hopes that he might be able to slide this factor by casual reviewers. It is the acronyn for Reliability Must Run. This factor pertains to power generation and not to power transmission that LEAPS offers.

Specifically, ratepayers in a region such as San Diego, must pay for back-up generation capacity that this is available 24 hours per day- 7 days a week in order to avoid black-outs in the event of certain equipment failures. This reliable back-up generationpower must run if needed! ( Note: a hydroelectric pump/storage facility like LEAPS can't quality as a 24/7 RMR generation source.)

If the supply ( avaliability) of RMR back-up power is short, the cost can be high. That's presently the case for San Diego.. One way to mitigate the high cost would be to build extra RMR capacity within San Diego. Another way would be to construct new tranmission lines that would deliver power from remote generation sources.

San Diego Gas & Electric has chosen to take the latter approach. They have recently made a proposal to the California Public Utilities Commission to construct a new 120- mile transmission line, known as the Sunrise Powerlink Transmission Project, to deliver 1,000MWatts of power to San Diego from Imperial Valley (to the east). The remote sources for power will include the nations largest solar energy generation facility working in combination with wind geothermal, and conventional power facilities.

What Harris neglects to say in his testimony is that if Sunrise Powerlink Transmission Project is built, It will negate the entire $114 million RMR annual benefit that he touts for LEAPS.

Futhre, he fails to identify the source for the RMR generated power that would be transmitted to San Diego by the LEAPS Project if the Sunrise Powerlink were not built. Remember, LEAPS is not qualified as an RMR source, it merely connects the Southern California Edision System (on the North). to San Diego Gas & Electric (on the South ) And Edison does not have an overabundance of power and is not keen on sharing it with San Diego.

Thus with or without the Sunrise Powerlink Transmission Project, the $114 million annual RMR benefit Harris ascribes to LEAPS is elusive. Futher, it should be noted his $114 million per year RMR number is much less in the near term. Harris admits in his testimony that this benefit is protected to be only $53 million in 2010 and $91 million in 2016. However, he argues that it could be as high as $114 million per year when averaged over a projected 40- year useful life of the LEAPS Project (2010 through 2049).

Quite frankly, such long-range projections are often far from the mark due to unanticipated factors that tend to dominate in the long term. For example, if most Californians choose to build rooftop solar power generators over the next 40 years, there would be no need for RMR generation. In this case, the annual benefit of any RMR source, either local or connected by a tranmission line would be zero.

In summary, it is presumptious for EVMWD to assume that their LEAPS Project is a better than the San Diego Gas & Electric's Sunrise Powerlink Transmission Project. Futher, only the Sunrise Powerlink has identified the source of RMR power generation. In view of this and other uncertainties in the long term, it is extraordinarily misleading to credit the LEAPS Project with a $114 million annual RMR benefit as EVMWD has done by endorsing Harris's testimony.

2. The Annual Operation Benefit for LEAPS will be $55 million rather than $17 Million as Projected by FERC in the draft EIS.

There is no mystery as to why Harris projects a greater operation benefit for LEAPS. He assumes (1) that the plant will work longer hours than FERC did, (2) the cost for electricity to pump the water up the mountain during the night is cheaper than FERC projects, and (3) that the price the plant can sell electricity during the day is higher than FERC Projects. The real mystery here is how Harris can justify his assumptions.

Harris's testimony implicitly assumes that the LEAPS hydroelectric pump/storage plant will produce about 5% more electrical power annually 1,638 GWatt-hours) than the amount that the co-applicants EVMWD and Nevada Hydro) advised FERC in their most recent filing (1,560 GWatt-hours). However, Harris provides absolutely no justification for his inflated assumption.

Harris also assumes that the plant can purchase electricity at night for $34.50 per Mwatt-hour and can resell it at $75.20 per MWatt-hour in the daytime. This is in variance with the values assumed by FERC of $40.00 and $63.42, respectively, in the draft EIS. Here again, Harris provides no justification for why his assumptions are more favorable than FERC's.

However, he does say that his calculation of the $55 million benefit, using a computer model known as PROMOD.

was based on a simulation of the LEAPS project based on historically-reported prices from CAISO using SP15 Real-time Average Hourly Energy Prices.

Since no futher details were provided buy Harris in his tetimony, one can only guess why his computer model may have given results at variance with those provided by FERC in the draft EIS. However, before offering any guesses, it should be mentioned that FERC' analysis was well documented even to the extent that it was mentioned in the draft EIS (Section 4.3) that:

our {FERC'S} analysis may be SLIGHTLY OPTIMISTIC since several holidays throughtout the year are classified as off-peak periods. Additionally, it may take up to an hour to switch from the turbing cycle to the pumping cycle. We have not included that level of refinement in our analysis.

So, FERC's slightly optimistic estimate of the operational benefit was $17 MILLION vs. Harris's $55 million. One might guess that part of the difference that caused Harris's number to be inflated was that power shortages during peak daylight hours of the historic reporting period he used were exacerbated due to the unavailability of a major buyer/seller of electricity like the LEAPS plant. Elementary economics of supply and demand would suggest that the presence of a large buyer/seller would tend to level the price differential between day and night rates.

Another factor that one might guess would inflate Harris's $55 million number relates to a basic problem with all simulation analyses of the type he performed. San Diego Gas & Electric pointed out this problem in their comments to FERC by saying that even FERC'S $17 million number was probably inflated:

The FEIS { final EIS} should acknowledge that a simulation of the Proposed Project's capability over any period of time will likely overstate benefits because such simulations generally have perfect foresight; i.e., the simulation model knows what the future market clearing prices for energy will be {and thereby avoids the inefficiencies that are inevitable when pumps/storage plant operators make the necessary advance decisions as to when to pump and when to generate power}.

In view of the care that FERC gave to calculating the annual operational benefit for LEAPS that was reported in the draft- EIS and San Diego Gas & Electric's concern that even this number might be too high, the burden should be on Harris to demonstrate why his much higher number should be preferred. He did not do that! Further, EVMWD simply endorsed Harri's approach without recognizing or even mentioning that it was in substantial varance with FERC'S number.

In view of this, Harris's $55 million annual operational benefit is not credible.

3. Annual Benfit for Ancillary Services of $9 Million.

Harris attempts to justify this $9 million annual benefit for ancillary services provided by LEAPS by stating:

A conclusion from one of the more in-depth studies conducted in the WECC region found that there is an expectation that costs associated with wind intergration will add as much as a $5.50 per MWh to the costs of wind resources.

Then, with no further justification he assumes a 36% capacity factor for wind resources (probably relistic) and 500 MW wind output (probably " off the wall " as it relates to LEAPS' sphere of influence). He then calculates that under these assumptions there would be an $8.7 million annual benefit associated with LEAPS ancillary services. Finally, he rounds this numbers up to $9 million.

Harris's analysis should be critized on several major points.

While he recognizes that "wind intergration will add as much as $5.50 in his calculation of ancillary benefits. Further, he provides no justification that a hydroelectric pump/storage plant like LEAPS could mitigate any part or all of this integration cost. ( This is a complex issue with no simple resolution.) Finally, as stated above, the assumption that 500 MW of wind output would be in LEAPS' sphere of influence is simply off the wall. If there is any justification for it, it is Harris's obligation to present the supporting evidence. Lacking that evidence, the $9 million may be assumed to be similary " off the wall", and it should be ignored in any estimates of the annual benefits ascribed to the LEAPS Project.

Here again, EVMWD should bear the responsibility of supporting this sloppy analysis and promoting it to FERC as justification for the LEAPS Project.

SUMMARY

None of the three annual economic benefits that Harris identified in his testimony as being overlooked by FERC stands up to scrutiny. This renders his entire testimony incredible and calls into question the judgement of EVMWD for promoting Harris's unsuported views.

Elsinore Magazine (EM2) concludes by Mr. Pinnow's well done comments, LEAPS would be an ERRONIOUS SCAM PROJECT wasting ratepayers public funds. Pinnows comments indicates that the LEAPS Project is OBSOBLETE, NON-PRODUCTIVE, the use of power towers is stoneage /horse and buggy days. And that a LEAPS hydro pump/storage facility like LEAPS can't qualify as a 24/7 RMR generation source and has indicated that San Diego Gas & Electric's planned Project negate the need for LEAPS RMR back up generation source. Which in at least part or all characterize LEAPS as an OBSOLETE ,NON PRODUCTIVE PROJECT. Certainly, no one needs to spend the BILLIONS it would cost to construct LEAPS just to improve the water quality in the Lake (Lake Elsinore ) there are other sources. Areators are presently being used to improve the quality of the lake. EM2 recently attended a study session at EVMWD where as a phase 2 Areation Project Construction-Bid opened April 19, 2006. T o construct two blower buildings, installation of two in-lake areation systems and other necessary equiptment. for water quality improvements. EM2 saw the planned Presentation and it was absolutely ideal. 4 bids were already in and If, not mistaken the EVMWD Board of Directors has already accepted a bidder for the project. LESJWA will be reviewing for additional project funding.

Mr. Pinnow's, well investigated comments indicate that San Diego Gas & Electric's chosen approach,Sunrise Powerlink Transmission Project to deliver 1,000 MWatts of power to San Diego from IMPERIAL VALLEY (desert mostly open space) will include the nations largest solar energy generation facility working in combination with wind, geothermal, and conventional power facilities is a far better IDEA than the LEAPS Project.

EM2, thanks our blog readers for visiting our web site. And hope that reading the comments by Douglas A. Pinnow Ph.D will be helpful in comments to FERC and your CONGRESSWOMAN/CONGRESSMAN Energy Committee.

Below find the Federal Regulatory Energy Commission (FERC) address for comments:

Magalie R. Salas, Secretary

Federal Energy Regulatory Commission

888 First Street, N. E.

Washington, DC 20426

RE: PROJECT number 11858-02: Lake Elsinore Advanced Pumped Storage Project (LEAPS Environmental impact Statement ( Draft EIS.

Also write Comments to Energy Committe:

Congresswoman Mary Bono, 707 East Tahquitz Canyon Way, Palm Springs CA. 92662, Phone 760 320 1076

Congressman Darrell Issa, 1800 Thibido Road, Suite 310, Vista, CA. 92080, Phone 760 598 3535.

Congressman Duncan Hunter ,1870 Cordeol Ct.,,Suite 206, El Cajon CA., 1 619 448 5201,

Senator: Diane Feinstine, 331 Hart Senate Office Bldg, Washington, D. C. 20510-0504.

Senator: Barbara Boxer, 112 Hart Senate Office Bldg.. Washington D. C. 20510-0504.

Congressman Ken Calvert, 3400 Central Ave., Riverside CA., 951 784 4300