ML19210E675
| ML19210E675 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 12/03/1979 |
| From: | Hafer F GENERAL PUBLIC UTILITIES CORP. |
| To: | Vollmer R NRC - TMI-2 OPERATIONS/SUPPORT TASK FORCE |
| References | |
| NUDOCS 7912050511 | |
| Download: ML19210E675 (119) | |
Text
/
/
GPU Service Corporation p
=
J ONme 100 Interpace Parkway Parsippany, New Jersey 07054 201 263-6500 TELEX 136-482 Writer's Direct Dial Nuraber:
(201) 263-6013 December 3, 1979 Mr. Richard H. Vollmer Director, Three Mile Island-2 Support Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission 7920 Norfolk Avenue Bethesda, Maryland 20014 Re:
NRC Docket No. 50-289 -- TMI-l Restart Proceeding
Dear Mr. Vollmer:
In response to the NRC's supplementary requests for financial information telecopied to C. W. Smyth on November 9, 1979, and the NRC's initial requests enclosed with your letter dated September 21, 1979 to R.
C. Arnold, enclosed are eight copies of the following:
1.
Two responses to Supplemental Financial Information Request No. 1 (monthly breakdown of estimated cost of TMI-l restart modifications into capital and ex-pense components).
2.
Response to Supplemental Financial Information Request No. 6 (criteria for determining that no cost reductions at THI-l are related to safe operation of the unit).
3.
Additional response to Supplemental Financial Infor-mation Request No. 9 (Pa PUC's consolidated h?t-Ed/
Penelec show cause proceeding).
4.
Additional r.sponse to Financial Information Request No. 10-(c) (NJ BPU Rate Orders in Jersey Central Docket No. 7160-1021; Pa PUC Order approving cost plus 10% pricing of GPU 's interchange purchases from f
PJM ).
O G%+,
v 1502 056
'/f' g9 12050551;4.
7 GPU Service Corporation is a subsidiary of General Public Utihties Corpora. on G
Please acknowledge receipt of this material by signing, dating and returning the enclosed copy of this letter.
A stamped, pre-addressed envelope is enclosed for that purpose.
V
.truly yours, f
t 4
F.
D.
IIafer Vice President, Rate Case Management FDH:dmh cc:
J.
C. Peterson - With enclosures H. Silver - No enclosures; to be distributed by NRC 1502 057
Person Responsible for Preparation:
R. C. Arnold, Vice President Generation, GPU Service Corp.
Telephone :
(201) 263-6290 Date:
December 3, 1979 Page 1 of 2 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No.1 Restart Proceeding Response to NRC's Staff's Supplemental Financial Information Request No.
1, telecopied 11/9/79 (item numbers refer to initial requests dated 9/21/79):
"(1, 2 and 3)
The breakdown between operating costs and capital costs is stated to be preliminary.
GPU should provide the final breakdown when it is available."
Response
The operating and capital costs referred to in this request are the estimated costs of the TMI-l modifications required before the unit is returned to service.
Our initial response, which was sent to R.
H. Vollmer by J.
G. Herbein on 10/17/79, indicated that about $3.1 million would be expended on TMI-1 restart modi-fications in 1979, about S8.3 million in 1980, and S3.6 million in 1981, or a total of about $15 million.
The initial response included no monthly breakdown of the expendi-tures into capital and expense components, and this information is accordingly supplied on the next page.
1502 058
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1502 059
Person Responsible for Preparation:
John G. Graham, Treasurer GPU Service Corp.
Telephone :
(201) 263-6130 Date:
December 3, 1979 Page 1 of 2 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No.1 Restart Proceeding Response to NRC Staff's Supplemental Financial Information Request No. 1, telecopied 11/9/79:
"(1, 2 and 3) The breakdown between operating costs and capital costs is stated to be preliminary.
GPU should provide the final breakdown when it is available."
Response
The attached schedule shows the preliminary estimates of the cost of the TMI #1 modifications that were used in preparing the " Pro-Forma Sources of Funds for System-Wide Construction Expenditures & Capital Structure" statements filed 10/17/79 in response to the NRC Staff's Financial Information Request No. 3 dated 9/21/79.
The schedule also sets forth GPU's current estimates of 0 & M and capital expenditures for the TMI #1 modifications.
The schedule indicates that the differences between the preliminary split of 0 & M and capital costs and GPU's current estimate are small enough as to not warrant a revision in the statements previously submitted.
1502 060
\\
-2, Page 2 of 2 GENERAL PUBLIC UTILITIES SYSTEM Cost of TMI#1 Modifications-0&M vs. Capital Preliminary vs. Current Estimate
($ Millions)
Preliminary Budget Estimate
- Current Estimate
- 0&M Capital Total O&M Capital Total Oct. 1979
.2
.2
.4
.2
.2
.4 Nov.
.4
.2
.6
.3
.3
.6 Dec.
.4
.2
.6
.3
.3
.6 Total-3 months
.6
.6 1.6
.8
.8 1.6 Jan. 1980
.9
.3 1.2
.7
.5 1.2 Feb.
.9
.3 1.2
.6
.6 1.2 Mar.
.9
.3 1.2
.7
.5 1.2 Apr.
.9
.3 1.2
.7
.5 1.2 May
.2
.3
.5
.2
.3
.5 June
.1
.3
.4
.1
.3
.4 July
.2
.3
.5
.2
.3
.5 Aug.
.1
.3
.4
.1
.3
.4 Sept.
.1
.3
.4
.1
.3
.4 Oct.
.2
.3
.5
.2
.3
.5 Nov.
.1
.3
.4
.1
.3
.4 Dec.
.1
.3
.4
.1
.3
.4 Total-1980 4.7 3.6 8.3 3.8 4.5 8.3
- Costs reflected are on a system basis and are allocated among the three operating companies as follows:
Met-Ed 50%, Penelec 25%, and Jersey Central 25%.
1502 061
Person Responsible for Preparation:
R. C. Arnold, Vice President Generation GPU Service Corp.
Telephone :
(201) 263-6290 Date:
December 3, 1979 GENERAL PUBLIC UTILITIES CORPORATIOtt Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No.1 Restart Proceeding Response to NRC Staff's Supplemental Financial Information Request No.
6, telecopied 11/9/79 (item number refers to initial request dated 9/21/79):
"(9) Describe the criteria that were used to determine that no cost reduction actions at the TMI-l facility are related to safe operation of that facility."
Response
The con.pany criteria for the cost reduction program initiated after the TMI-2 accident specified that no reduction in TMI O&M expenses was to be considered.
A subsequest review of our performance ~against those criteria indicates that two environmental programs dealing with fish population and movement were inadvertently removed from the O&M budget.
Funds for these two studies have since been restored to the budget.
In April, under the direction of the Manager - Generation Engineering, Met-Ed, a review of the TMI Capital Budget was accomplished and based on compliance with regulatory require-ments, the plant operating condition at the time, and the practicability of cancelling existing commitments related to equipment and services, several TMI-l capital projects were postponed from the 1979/1980 Capital Budget unitl 1981/1982.
A subsequent re-evaluation of these postponements has resulted in a budget adjustment to accomplish these projects in 1980.
It should also be noted that increasec TMI-l incremental capital and O&M costs associated with the restart efforts were identi-fied following a comprehensive review and determination of the increased manning and physical separability between TMI Units 1 and 2.
These increased expenditures also covered the necessary analysis, procedure and hardware changes and training required to properly incorporate the lessons learned as a result of the TMI-2 accident into the future operations related activities of TMI-1.
1502 062
Person Responsible for Preparation:
F.
D. Hafer, Vice President - Rate Case Management, GPU Service Corp.
Telephone :
(201) 263-6013 Date:
December 3, 1979 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania. Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No.1 Restart Proceeding Supplementary response to NRC Staff's Financial Information Request No.
9, telecopied 11/9/79 (item numbers refer to initial requests dated 9/21/79):
"(10.b and 10.c} Subsequent to our September 21, 1979 request, it was reported (Wall Street Journal, November 2, 1979, p.
- 12) tr.at the Pennsylvania Public Utility Commission (PPUC) issued a show cause order to Met-Ed regarding the company's ability to provide utility service in Pennsylvania.
Provide copies of the PPUC order and copies of Met-Ed's response to the order, when available.
Continue to keep the NRC Staff informed of all developments in the show cause proceeding.
Provide copies of all subsequent PPUC orders and other directives and Met-Ed responses related to this proceeding."
Response
As a further response to this request, enclosed is a copy of the transcript of the second prehearing conference in this proceeding held on 11/27/79 in Harrisburg.
1502 063
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TIE PEIRISP.XIOTI.A PUBLIC Uw.2 ITY CCI2H3SICH i
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I-79040308 - Femmvivania Public Utility Corniscion versua 14trocoliten Edison Comoany, 6
et al, 1
7l Further pre-hanrin ccnferenca.
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be 11'I 12 Harrisburg, Pannsylw nin 13
- Tuesday, November 27, 1979 14 15 16 17 1
18l Pages 41 to 92 19 20' l
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23 MOHREACE & EtRSHAL, III.
27 N. Lackaillcw Ave.
24.j Harrisburg, Pennsylvanin 17112 1
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n 2-THE PEENSYLVAMIA PUBLIC UTILIT'? ComISSION 5
4 In re:
I-79040303 - Pennsylvm2ia Public Utility Commission versus Metrocolitan Edison Cotroany, 5
et al.
6' Parther pre-hearing evaf=runce.
7 8
9 10 S= -0
.phic report of hearing bald a
in Hearing Room No. 1, North Offica 11.
MMing, Harrisburg, Pennsylvania, 12
- Ttzesday, November 27, 1979 13 at 10:07 o'cloch a.s 14 15 MGEEt W. WIISON GOODE, Chairman MICFAEL JOHNSON, Commissioner 16 SUSAN SHARDEN, caustissioner 12
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JAES Ex CANEY, chasioner LIND& C. TAT.TAFERRO, Phasioner 18 D
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19 APPEARAECES:
20 SAEEEL 3) RUSSELL, ESqu.um W. EDWIN OGDEN, ESQUIRE 21! AIAN M. SELTZER, aqu.t.aE R.n, nas e n a neCen. geer 1502 065 7
22 530 Penn Squara center P. O. Har 699 23 Reading, Pennsylvania 19603 i
and 24' JANES 3.' LTemS&N, ESqu.ucs New Yoric, New York 25 Fort Metropolitan Edison Co. & Pennsylvania Electric Co.
tr,cfWuBAc5f 4 ifAftNE& TNC== 27 N. Loc?3WITLow ATE.-MAax:s 2tTJte..J'A.17112
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AFFEARAECES (CONTIMIED):
1 a
o 2
s 2 3 JOSEPH J. I&IAESTA, JR., ESQUIE l
G-28 No:-th Office Euilding 8
3 Harrisburg, Pennsylvania 17120 For:. Psunsylvania Public Utility Com::lission Trial Staff 4
CHADN B. ZUAT&T, ESQUIRE 5
IDEN E. FULIZETON, ESQUIRE 1801 North Frcot Street 6
Harrisburg, Pennsylvania 17108 Far:
Universal Cyclops Corp.; Electra 11oy Corp.; Erie 7
Mallechle Iron Co., et al, Industrial Customers of Pennelec 8.
LARRY B. SEIX0ifITZ, ESquutt; 9 Widoff, Reager, Selkcwitz & Adler, P.C, 1; 3552 Old Cettysburg Pad Camp Hill, Pennsylvania 17105 For:
Thrca Mile Island Alert, In=.
WILLIS F.' DANIELS, ESQUIRE 12 Duane, Morris & Backscher
(,
232 North Second Street, P. O. Boz 1003 13 Barrisburg, Pennsylvania 17108 Fce:
Pennsylvania Foundrynen's Association:
14 Imbanon Steel Foundry 15 MILURICE A, FRA'mR, E5yula McNees, Wallace & Nurick 16 P. O. Box 1166 Barrisburg, Pennsylvania 17108 17 Foe:
St. Regis Paper Co., et al 18 AIAN LINDER, ESQUIRE Central Pa., Tagal Services 19 10 S. Prince Street Lancastar, Pennsylvania 17603 20 For:
Senior Power Citizen Groupt Louise Riley 21 STEPHEN A. GEORGE, B5Quis 57th Flocr, 600 Grant Street 22 Pittsburgh, Pennsylvania 15219 Far:
Standard Steel 502 066 BERNARD A. RYAN, JR., ESyulu 24 800 North Third Street Harrisburg, Pennsylvania 17102 25 For:
Bethlehem Steel mennuen a unem. me.- n n. s.oexwre_ow avz. - mammune..n. ns u
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1 I APPFAEANCES (COwncusM -
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WAT1MM W. CUttsa, ESQUIRE a
tlHarrisburg,Penmylvanicr/127 1425 S w ' m Squars Fat's Office of Conscasr Advocate JOBE BORERS, ESQUIRE 6
L D. 7, Ba 385 York, Pennsylvania 17402 Fee:
Holly %eck; Deep Run Parm S
EAL RADCE, ESQUIRE Two World Trade Center
~m Tcck, New York "I
8 "*"
I 10 GE2ALD GCREISH, ESQuuus 11.
12th Flocr, Packard Building Philadelphia, Pennsylvania 19102 g
For:
Citibank, N. A.
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1l THE C21I25Mi:
We'd like to call the pro-Ienrint l
..g s
2f conference to crder and to indiente that the first item that YIll we will taio up this =craing vill be the additional requects 4[ that wa received of parties who will sceh to intervene.
We 1
5 i have Ecur or fisa, but I will proceed by first of all out-
)
0 l linf.ng who the pcrty is and then ashing whether or not any 7
other parties have any objection to in'aarvention; and then 8
polling the Comsiosioners on that.
9f Tiiin hava Mrs. Patricia A. Smith.
Mrs. Smith i
10f requeste permicsion to intervens "on tehnif of the people in 11 my aren".
She statas that she is a custoner of Ebt-Ed, a 12l resident living within two miles of THI, and the arca co-(
I 13 ardinator and chaf_= of the Hechorry Township 0*tttee on 14,
.gy, 15 Since Its. Staith is not an attorney and han 16 not studied the ability and interest of the people in her
~
17 area, the theeght here is whether or not she shoult latervens 18 for herself ar far other parties.
So I would ask wheths sr,
19 not there is any objection to Mrs. Faith's intetventien on
'20 har cwn behalf by any of the parties..
21 st,i RUSSEII.:
No objection, t
22 VOICE:
No objectien, 23 :
THE CFJ.IFEUT:
No objection from any of the C
1502 068 24 parties.
Carnicsioner Taliaferro?
25 COFaiISSIDER TAT.TAFERRO:
No objection, monauen a uxmwa me.-e u.s.eexw u.aw avn.- uammanana m. sm:-
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I; THE Cm N N:
Cesir 5* Shan:can?
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COWIS3ICER SEDEJ.22W:' Wo obbeti m,
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TE CTdIEl&N:
C e traioner Cawley7 4
CENISSICER CAUEY:
No obiection.
k E tmhT?D'.aN:
Camzi.asicner Johnson?
CUMMTESIDER JOBBSON:
No chiection.
7 TBB CMETTHAN:
The Canaission than accepts the '
8 intervention of Patricia A. Smith.
9 d W have hara a Petiticn to Intarrene, I believe r 10 frca Robert and Vada (phonetic) Shisaly.
Are titey p:ssent?
11 Yes.
Is this a Petition for Ints.vention?
12 Td!Li SHIVELY:
I don't imos abat that -- I'm k
/
13 hara on behalf c E Ishigh-Pocono Committee of Concern.
1 THE CEa11GiaH:
Are ycu an attarney, sir?
15 3g," SHIVELT:
No, sir.
-, m emAWW:. What is y m?
...., -n.
. 17
...r
.. A. ; SHIVEI;r Esbert Shively That-Iacter
_ 18 would probably Just be a persnaal 2.cr I written to the 19 Commission l
20 f
m im AT10 FAN:
Well, it says, "This letta l.
21, servan as a for:asi notice of our inesawrntion in tI:n taattar 21 oe ta. Pubne utility versus rae-Esa.
1502 069
- 16. IAIDIEN:. Ysc.
Thare's sos:a confusion.
5 24 I m Willian Y. Laidman, also a signer of that Imttar.
1 15 TEE CHANN:
Tcu want to incorvene as Lahigh-uomuca. - - me -::r m. wexvm.:.aw,va. - suna:=mma. m. m u:
5
45 i
l i
1 Fecone cctaietes of Concern?
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i I V 2j R. SEIW.LY:
Yes.j i
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31 31 1E. M5 ann:
'les.
4 IR StavsLY:
It:c fres Ecthleham, Pennsylvania.!
s 5
- m. IAImaN:
The man:bces of our organication F
6 are centemers of Metropolitan Edison, as well as residents 7
w-ithin the geographic area that was affected by the accident.
8 THE CFAIFJ M :
Is this an organized corporation?
9 IE IAIDH1N:
It is incorporated as a non-10i profit organization.
i I
II TiiE CHAIRMAN:
It's a nonprofit corporation?
12 Et,' LAIDNAN:
Yes.
It doesn't have IRS 501C-4
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k 13 L status.
14 THE CHAIE M :
But are you incorporated in the 15 Commonsealth of Pennsylvania?
16 EtJTAIDMaN:
Yes, we v.h
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- , y.-
- ; 7 17
_. THE CHAIRHaN: There was r' letter that was sent
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18
..a to us on 5. November 1979, at which time Robert and Veda 19
. Shively indicated a desire to make a statement.
Is the 20 letter that we received this morning of 26 Noveuibar intended 214 to be a substitution for it?
22 NR.IStuvtLY:
Yes.
Correct.
23 THE CHAIREN:
Is thsre any~ objection frca the o.
C x
parcies en the matter of thts group --
1502 070 4
25 Nt)YAIATESTA:
S e afraid I don't understand MCfGtEACN & malts 3U fMC.a= 27 N. LOCICWI!.t.OW AV2. = HARMISE17RG, PA. 27112 t
99 mD Y
D Sa b
gs 6
46 j
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I,oncetl7 chat the intaract of the Foup is.
Arc a u tb h
=*ahm of the gecap c stomrs of ihtr=politan Edisen C%i 2
?
w
- j 19., UJ3HGE
Not tin entire ership.
Th2rc
.p. are specific meeLars listad in eb lotter who cro customrs I
5l of stropolitan Edison, and co'ra usking to represont them 6. scocificany, as men ac the cesanisatica, which has other al
- 7) members whose names are not montiemd who are custo 4
3
- m. ETA"MW Does the Foup have a c;iecific 1
9 L purpose stated in its byla:rs ce its artielas of.inc motion?
t 4
10 l Mt." IAE223:
I don't h:mp a copy of tbs state-t 11 ' =arat of purpose.
There is n docus: nt to that effect.
It's i
12 a rather general citizens' crganisation, presently matting g
13 L
! arcirnd issues of nacIcar perar, as sen as many otmr issues..
14' HId IGIAESTA:
What interest would you pres:ote 15 in these proceedings?
.16 IEdIAIDMAN:
The. health and safety of the-i v.
.- e. n my
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.. y;77f;'1'I ', e<t%ne,/ the eccnoude effects oE eaa*w operation aE r.
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19' gd ravaw%
The Staff has no objection.
20 THE CHATw4M:
Is there any cbjection on the 21! pare of any oener pan:ies?
1 1502 071 22 m.' CCEH:
P.e. Chaim, it would be h:1pful for as to have a copy of this that thay hava filed and perhapsi 23 24{ to be able to speak with the:s as a echr g.,ug, 1;ia s
l 25 generany do not bzsc objecticas to other consuer grs=ps l
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!! ettering bat are not naara of rois group or of what they have !
,I a
2 "I filed, t
j 3i THE CHAIPE E:
wny con-t we indicate this, then:l
's t
- 4) that we will defer action en this, with the paraission of tho!
U 5
other Ce m13ciencuc, until cur public mating on Thtrsday of 6 l this week to allow opportunity fcr the Constmer Advocato to 7'
confer with the group.
And if any other party would have anyi
.I
<-[ ec::sents to file, objections to file, =o would like to Imve 11 the.m price to that tica.
I 10 IG - IAlONAN:
I hzve o copy of our let:ter to 11 di.stribute to the parties involved, if that uculd be halpful.,
12 THE CFliIFlEN:
That would be helpful if you did s
13' that, yes.
14 The next one that ce ha;e is the Pennsylvania If Foundries Assccintion and Lebanon Steel Foundty, Lebanon.
16 The attorney for this is Willis F. Daniels, Esquire.
.c
- ~
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17
^
The Association's Patition states that Isbanon 18 and 39 other fcmn.y members of the Association era caste-1 19 sers of Net-Ed and they wish to intervene on behalf of those 20 custcars.'
21 Is there any objsetion to th2t incarvention?
22 Objection from any other particc?
1502 072 23 MR
- MAIATESW We rould like to see copies of 2/t that Petition as well.
Ecrever, thera is no objectica.
N THE CHATPEAIi:
I assums that the Petition was nexaucx = xAn=m m: - =r v we cm.ew.avr. - um. ssuaw u. :ma
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' T Y oo Ju o N 1 1o 48 1. filsd and you shocid hava had c ccpy pricr to =cu.
2 ;,$
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IE. DalTIEIS:
Ua fIlad tuo ?stitienc, an e
3L eriginal. ard cz:s, but I have c hurs hua.
k n
f 'i TE CMmLMi:
Cerami.sciccor Tali 1ferro, co you 5g have any objectica?
s P6j CG9IISSIDER TEIAFERO:
No objection.
n7i TE.Cn N TI:
Ccumissiour Shnnmnan?
o'p CGEIIGSIDER SHAEu!AW:
Es objection.
t 9*
TE CBaI?F.ER:
Cc=d.acionar Cawley?
id(
CG9ESSICIER C25IEY:
No objectica.
'1
,'l 11 l TE q.1mME:
Crwasioner Jciruron?
~
12 CGUESSICIER.N:
Un objection.
g W
-~
c TEP. cFMTM5921:
All right.
There is no @
1+i{ jection.,
~
15' We have another heition which was filed by t
161 varicus ixxiastrial customars of Pennelac by Charles Zaally
'"- X. ' anf John 1%IIsrton. Ara: they beza?.
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~
18!
.m..Mti2WEI.T:. Yes, Et r w M onse.
I'm Mr.
19 Z=ny.
1502 073 20 !
TE CmmiE:
Wou2d you raad into the record 21f.the nnms of those indu:r.mial custcars that you reprasant?
22 liR.* Z5ELY:
Yeu, Ur, Chairmn: Universal l
23; Cyclopa Corporatica, EIactra!.loy Ccrporation, Eric Malloabis I
24i Iron Caspany, Franklin Seesi Cey, Ihticnol ?crge h
t t
i 25i cmy, tha Prcetcr & Gamble hper Prcduct Cagany, Talen-l menxa.wr o umrx me.-c n. :.oexwcr r w Av=.-xxnc=uno..'s, mas m-swa-v
---w=imm.--.
.w o w. -
swe--
j""}
- j' Y } $'
49
- c a
- u o;u_o..tuuo g
I I,
Tantron, and I?alch Foods, Inc.
i H
2 l-we filed a ?etitica to Intervare on 3 i, October 17, 1979, cad tm did scrve all partion of record at 4 j that tir2.
I 5!
TE CHAIPlGli:
Is there any chicetion en tha 6
part cf the partiac to the intervention of thaso various --
7' C01EESSIDER JomsoN:
I'd lim te asi: a S
questica of_ the ecunselor.
Ara all of these cliento vnom I
9 l you have on-rated -- are any of them se:. ed by Ect-Ed7 l
v I
10 gg, ZNR:
No.
They are all custo:aars of 11 Pennsylvania E2cetric Company.
12 l COMSSIOER JGHTSON:
Thay are all cust m a 13 w
of Penncylvania Electric Comenny?
14 l.
3g,. gggg7 Yes.
d CO'GiISSIDER JGHNSOR:
Thanic you.
16i THS CIMIPJnN:
Any objection on the part of
" 17 '
anyIof the parties? AnyIobjection by any Conmissionsr?
16 Comuni.ssioner Taliaferro?
19 C0}MISSIDER W.NERRO:
No.
20 TE CHAIRIEN:
Cc=missioner Shanaman?
~
21 CO M SSIOE R SEEEAIEN:
Ro.
t 22 THE CHATTEMN:
Cos:nissioner Cswiey?
23l Ca m SSIossa C a nT:
wo.
1502 074 24 THE CHAIREN:
Cs=trinsionar Johnsen?
2F COIGEISSIOER JOESON:
I have no objection, KO!EtBA31 & 3AAR3MA: INC. *-27 N. LCCTVII. LOW AYE. - MA:IntSDURG. PA. t7152
-4
~
%a mm o
D b
J
- s o
e f
1( but I fail co ces how thai-1st.:rects are involvsd in ti:
$'~-
2!. pertions of ett: proceedings did ddal with cur shou 0:=c.
N S f, Crder at Idst-E to inv::1re h thi:i C:rtificate of Cervenience
,.8
+j 1 0..' Z F.3.L L T : If I I:my cuspend, F.r. Chair =an.
8 li
,j TiiE CILE3IG2:
Tec.
i 3
IE,' ZEaLLY:
2 r. CmN<sionar, I think pro-t 7N bably timmr is a goestiac of that.
Ect:aw.r the Cc==i:sion g
I s
has callad the pro:sedf.ngc.
I thich there is no questian
,i I
ot that ca do havo un interust in that pcrtion of the pro-
"n h
D -
caedinge rel:tini to the questicus of ths ecstus of 'MI 1
'- )
romain6g in rate base, since Pennsylvania Einemic Cc::immy l
11 11 I
c: ens 23 I:ercent bf that generating facility.
6 So I do think me eczd5 have an interact in 14{ the consolidated procaadings.
h.
. CCHIESSIDER. JCy!S02f:~
I have no objection.
1d I2iE CHAIRIEN:
Tiss:a's na obiection tn :be
[g-
,..s-'. %s '.[p.. f.;ya
.g E ::17 $Jinter'ien'hidEM l2 Zeally and Ecl, Fullerton on 1$eha7 f $f ~
- a..&.e n..
..... e..>..
18 varfous f=Tantrial. customers of Phnmalec.
U' Va racsind thid :seming a minuta ago a M
?atition for Interventica frc:a Kr. Ecbert Abrams (pinocstic),
21l Attcrney General cf cho State tif Iiss York. We hcd previcusly t
2 been notifica there racy be sco:a regttacts by the New Tc k q* l. Attw.wy : earn 12s effica to ha recai?ad service of all 1
ef
.s dents in this proceeding.
i 1502 075 s.
I take it that the New York Attorney General's was-m a mxsnu. me. - n n. s c=vaa.cw.wr. - emms:ma, n. m a
.~
~~
~
_a j
1 J office hac gena beyond enat stS wichas to farmally intarvano
^
2dinthaec.ec.
Is that corract?
{
s I
3[I IE. Rid 3CE:
15a u"Sorstead, Ycur Honor, tiant in 4f order to receive all docuent in tha casa a fcrun1 inter-t 3!
vention status ecc required.
At this point es re not pre-s 6
parad to go beyond receiving papara chat are filed in this 7
proceeding and cill at a later data make the decision about 8
ubether or not sa vill participate mera fully.
9 THE CIMIRIWI:
The pcrpose, then, af ycur 10f Petition is sinply to petition to roccive decements from f
I' 11!
these precocdi=gs?
12 I4R) RAUCH:
'les, Ycur Hancr.
And at a later g
4 date we wculd like the option of baing able to participate 14 if, upcn review and analysis of the materials rocoived, it 7-becam appropriate to file testimony in this proceeding.
16 THE CHAIEMAW:
Well, I would probably suggest
.g
~
-" 17 that perhaps at that tisae that you would then petition the 18 Conmeission to beco:ne formally involved.
19' Tbs issue before us is whether or not there's 20 any objection to the New York Attorney General's office 21; being on the service list and racciving a copy of all the 22 matters which are filed with us.
1502 076 U
IE. N W YRSTa:
I have a question ano parcsps g
24 a suggestion, as cell.
I?e uculd ba oppcsed at this titta to E
any intervention as a party by Hacr York Stata based upea ru=su,: = x.w..,u: m=.-a n. s.oenn.:.=w ivr.- mam mma, m. m ia
D**]D
- ]D f o o Ju o Juu2.1
_=
52 I
t I[
the everaants in the P2tition thsy filed this cerning.
E We hwa no objection to 1:Sem znceiviny deco-3 '1
- mente, airsvar, I don't think it's apuragate irr ti:a 4l otiner parties to be responsibic for preciding them with f
3 copias of those dee=msnts, and I don't think they shoulf 5
6 '
appear on the officisi servies list, because that service 7
list ran12y does irply that tha.sambers of that list or the E]
persocs appearing on that list sra parties.
1 9
l So I spould sugpst that ebs resoonsibility 10 for peeriding copies of doenmnes to tha State of New Yod:
11 or any other entity or person who cichas to participata as a mons.cor of these preceedings fall upon the Sacratary's g
D k Buros.u azd nct upon the other parties to the casa.
II M (MATTGiAN:
Are there any other een:zents
'U i from any other parties't 16 PEL/ CEEN:
I think that we ad.ght, in the e-
.2 t... o c-.
'l '; 12 Connemer Advocate's Office, be'able to provide a rois that 18 might: be helpful to both the State of. New Tark, through the 19 Attorney General's office, and to the commissica.
20?
Again, se were net aware of this and had no 1
21 ccatact with this office until mi received the docu=snt 22 this morning. We have no problem with sending one more I
l copy cf what we send out to them, but I can uraferstand the I
1 e
Mp probica that otImrs might have.
1502 077 k
. And it might be balpful fer us to be able to 900bC3ACM e 14A2CRAL. L*4C. = EF M. WNW AVL = HARKt3DURS PA.17112
.y
%h D YD
[
D L
J\\
L SUAlrun x-11 i
h I') coet nith them and see if thre is a ray that ec con ba cf 1a 23l csaistance to provida the State of Eau YorI with the infor-a I
3;I mation that thay're saching, te:d thay mighe then be able te j s
l i
4[ discuse eith uc, and we with them, what their position is and !
5 {' what their interest to in cores of the broad iscues c I
l i
i 6
they mantion in t'mir Petition as we focus on the issues 7
involving just retropolitan Edicen and Fannelec, l
.d I
o[
IG.' PAUCH:
Mr. Chairmn, I':a slightly con--
I 9l cernsd, because 11: 0 been our crperience in Zou York State 2
0>; that not being on the service list in a Icnsthy procccding 1
u li eften usano that yee don't roccivo the doe-nts in a pro-f ceeding even in a collegial farthion that Wr, Cohan n:anticas.
12 13' That actually is why we've petitioned fcr forani intervention, 14 Lut we wonia leave it to Your Henor's diceration hcw eraetly 15 to heale our needs.
16 TE CHAIRMAN:
Is ch%-.e any objection on the J..
17 part 'of the Ceard.ssionera to having in the Secretary's Bureau M.
18 a zaonitoring list set up, as suggested by Couniel Malatesta, 19 and gesps put New York State on that and any other parties i 20 that petition un to be on to heap them notified uhat's go!.ng 21' on?
t i
22 I
Is tmre any objection to -- it's a kind of i
23 informi procedure.
It's sccatiling ticich is controlled w
24 internatiy.
1502 078 25 So we will sin: ply, therefore, mintain in the 1
- mue:u mue:w me. - = x. x.o==wn.:.ow m. - r.mee==. n. m rz 1
6
.-mme
- ~
D**]D
- ]D TY
_w w M oJu,1 1 a
54
{l n
',' Secretary's Offica e list of these parties :fno :: ant -- thcan t
1
^
2q interected porcora or corpcrations who :: ant to acaito: title, I
~ ij cnd ca'll cail cli dcc : ents to you.
Tcat z::iling t.411 p=-
3 i d
g hape be at socc fee, 6:cending, upon thr.t the Secrecary s t
5 j Bureau wanid decido in turaic of the coat of doing that.
]
2 6
7a there any objection to that?
7 hL RSICH:
Yocr Eo:.or, as long as the racaipt 8, in car effim ir, timely, I ticuM hwe no objectica.
- He52rter, W
c E I wonid enne to cahn it clear that after raviasing the ti 10 E :rsterials pracented, the Attorney Ge=aral may mire a decision to participatz zasre fully in eMn precceding, and we ucciv!
11 12 t' ask your 7aave at a later datn to perhaec formally interrane.
mh 13 CG!ifCSUIGER JCEIGON:
Mr. Chab.::an, I feel 14 that the Commonwealth of Pdanayinnia cud tho ?ublic Utility 15 Cnn=4aion :,2 the catwalth shecid tahm special noeur of the 16 intarasts af and desires of its statar stato, the State of
.. ~,..
' ';= 17 ' New Yoch and the Attorney General's office, whicir is-Twe
~
v
,....w.
.., n i.
- r...
~
18: bara to ask to receive documents in this case.
T
. would not want to tia the interests of tha 20 Attcrney Gonaral's affice of the State of Hew Tafic with an i
21 uni:nown me of pres who may hwe a similar interost, and 21; so I'd li~ze to deal with just this interest at this tw and 23 to affirm that I see no.?onscu : thy thn Secret =ry's Screau cf 24 this c-isciam shculd not proddo, at a mest reasonable fes,,
25! copies of all those documents which oth?r parties to tinse sciamen s unmi me. -er:s. ecxwu=w am -m:.=:= a. m. :: m 1502 079
D "
Dj
'" J
't ' y M D
_o o ju o Ju, 1.k m 55 9
k Ih proceedings m:uld othart:ise obtain.
2 TIIE C EIEr_4N:
Th t ses the suggestica uhich I !
l 3
had, cas thsre uns no objeetica to it, as I understand.
i I
4l; CCGIISSIDE.R JGE250N:
Well, you said "and 5hI. othar parties", and I want to separate it, a
6f TIE CFAIRIslii:
Wall, other parties any at scze 7
futura ti:ca pctition us to do that.
CGEESSIGIER JOE!SOE:
Tnay muy do that, but we oh
-lmaynotagree, But in the case of ?!a: Yori:, ca do.
10 TEC CHAIMFu!:
The only isste before us ce the !
11 p esent t b is Naw York State.
12'I CCMSSIDER JOSEm7:
Hight.
e i
TE chi 1E3N:
Is there any cthar objection?
u I don't thinic there was any objection to doing that.
E COIMSSIDER SHANGi1N:
Should we clarify for 10 the record the request that they be parmitted at some later 117 time, if they so determine, that we allow them to request to 18 intervene?
THE CHAIMEN:
Well, they may at a later time 20 petition us, and I thinI: that thare is -- that's their right 21 which they have et aziy time, to patition to intervena, 22 I think the question is whether or not em at r
i U' this tie:e should grant permissica to intervens, and Counsel
('
24 Malatesta has indicated opposition to that.
And therefors, I' 25; would prefer just to wait and ces if the question is asked i
Si!CE'TSACM O NAROH.',L. 3HC. = 27 N. LOC'. WILLOW AVT - IfA*.1:11S=I!3C. PA.17152 1502 080 annum MMpMg p M me m
u 9 EMe e.
g.
r c,
=
we e
56 1j ocbcoq=antly =t any tira bef ~, ;= rcio c that at cil.
Q['
2i C07:DG312En STC1.2.'I:
I cair cannt in thu r
t 3 s sensa uba: Doy eccid not ac cut =ff by tir.:2, s.pd z want to s
%maha thnt clos: on the reconf..
t 3 !,
IE. CCEEN:
Deus that rms.n, Mr. Chaircc2n, that vou men just amfa Q ae:Lo: on what is imbeled a Petition 7 1inr IntcIweton? If that's the case, than it could be,1
) suppose,dezaedtohavebacufiladtizalyinthatitisnor 0
l}bofere. the Ch r-ston. An:i if acticu is defe:rsd on it t
10! ;w.mding a supplorantal addition to it, that rnight be a tra.y to 1
't 11 be able to ';:::oceed step by secp.
TEZ CPME:
Uculd Cer::s:issic:::n Shansen s=h2 g
U a a:otion en that?
Crmm; ION SHAW4M:
I ccsid mal:a a actica to i
15 the effact that se consider the Petition by the State of New M
- Tark to ius sv mx presently _filsd befara as to be timly filed
'..U
.,but to be elzefht at e-latur date andhh suppumented o.
13 at a Imese data simnia chay decira to intsrwne as a party.
U THE cimTitMAN; Is there a second?
20 ;
CCPESSIO3ER JEESCH: I'll scccca it.
21 THE CFA N M:
Is thera any objectica fccra any j
1 A
cf the other ces:mzissioners? Without objection.
Thank you v.w-3l mch.
.f Ml i
IE.* EDF M A W :
II.r. Chairsan, cecid m just f
i 25 f
. clarify for the sake of curselves, are tha parties to treat l
MC.*EAct a St.MtSEAf INC. = 2:*.'t. 3.CChW::.:.cY! /e:.T - P.AltK:3203HB. PA.17f IR I
'< ~ "
1502 081
o o
o
.57 4
fi 4
I!l Neer York Secto at thic point in tice cc if tiny cura on the-I a
)
2 sei. <!.ca list?
In ethcr acrdo, =2 ra respencibb for I
l 3 ( serving then eith cny.:hing that t52 fils?
Cr is the i
4 Socrctary's cffico responsible for that?
f 5
T;s cnip s :
= 3 escratcry's office io e
6 responsible.
7 m/ EUncPJiSF:
Tha s yeu.
O 162 C" DIP M :
Before te proceed to the icsuss, '
I 9
do any cf tha partice have any c:ctionc or petitions to offer 10 at this tira?
11 1R.' 19.TMESTA:
I wealdn't call it a motion --
1 12 just a suggestion, perhapa, and a reqcest by the Staff.
And
%l it may bo joined in by other parties.
I don't know.
This is 14' an oral rogtest.
15 When we proceeded throdgh Rot:nd One of these 16 proceedings back in the spring of '79, the coanission issued 17-a final order in June without any opportunity for the parties 18 to respond te clut final order by way of exceptions.
We dia 19 file a Petition for Reconsideratica, but sesehow a Petition 20 for necensideratica after the fact of a final order doesn't f
21 hm;e quito the sama impact or doesn't provide the sama 21 flexibility.
Iwouldrehuest.therafore,thaeinthis 3
24 proceeding, since the Cocmicsien has electad not te prcceed 25 with the sar.e dispatch that the Ccamission tuitially mexxuca a u.meau me. :7 x. :.oc.:wn.:.cw me. - amarezcaa. u. m m 1502 082
D * *
]D *]D TY@
oo m
m 2 N IAL, 58 o
1 f contemplutod, that the Cocaission isses an C: der Nisi at the h
Ig end of thic proceeding cut! allo: other parties tha oppor-5,3 tunity to fi~m usceptices to that Oder Eici hafore the
,1 a
4( Connaission ruins on ubetbar it should baco:m absointe.
5 !:
M CID.IENsR:
Doas any other Wi.y have e ll 6f' comment on that suggestion by Cel Malatestu?
i 7
Milt. RUSSELL:
We wou24 eertainly join in that I
8j regoest.
I' j 3R. COEN:
The Consumar Advocate supports l'
10 j that position.
11 m cmmMH:
From a procedural point of view, 12 ) is there any thought by any edSmioner?
Ccesissionar g
13 Taliaferro?
'14 CGHMISSIOER 'DLLIAFERRO:
No, I have no ob-15 jection to that.
M
,,.i.,..M S& 6 :
Comunissioner Shananment w :. e.c...
. - 17
.....,..,",m..1 CCMfESSIONER SB&IEMBN:
No oblaction.
13 TR cnAmREr Commissioner Cawleyt 19 COMMISSIDER CJGTIEY:
No objection.
20 THE CB1IEF1N:
Cc M :sioner Johnson?
211 CGEISSIDER JOHESOD:
No objection.
22 TE CEAIE22R:
All right. Coansel leeClaren, 23 if me can just "cuild that into our procedure in terms of t~ e n
0 24 final ordar, it will be cederad to be done that way.
25 Yas? le.r. Ucuers.
riay I ask all ecunsel that I
mon =s.wr a -
- m. me.-e r acumuruvr.,-naamsrana, m. mix 1502 083
f f_-.mm j1 59 If whan yac spech, ycu speck diractly into tha micrcphone?
m 3
2 2. F R :5.0 :
Tan, cir.
In tha Co=.__.isaica's
.3 l Jtre.e ordar, tha Ccmi.csica crdered tin Ec3pondent te file II 4 N with the Cc:mt.ission at c":argy ccasorratica report.
That 5j repcrt was filed in tauguct, and at that tima the CQccion i
II, 6j deterzrined - excuse me -- July.
I And cpprc::itzately a ccoh afternarSc, the O
Cemniscion do;;crzined co perait parties to the proceeding 9
to submit ec:::nn:o on that ropert, k narcus parties did so, 10 including ottcolus.
.."l On approzizrs.tely Oct6er 2nd du Rospondent 12 responded to tbs contenta el.ich had been fi. icd to that report f
13 and I weald lite soma clarift:ation frota the Cmucien as 14 to exactly uhat or how that rnttor ic going to be handlod 15' from this time forward, whethar that would be appropriate 16 to be made a part of this proceeding or whether it's going 17 to be handlad 'soparately, or exactly what is going to be 18 happening.
19 TE CEAIICG:
It will not be a part of these 20' proceedingo.
That matter is nca in our Office of Special 21 Assistants.
Is that right? And what's tha tina for a 22 report to the Cczaission on the cos:ents chich han been 23 filsd, I.~r. Dotsey?
5 E
IG.I DORSEY:
V!ithin t'co nert tan days.
25
'iEE CHAIPF.AN:
The Conraission would expect to MORRBAON tt mar!32fA1 INC. = E"1 H. LOCX%" LCit AVE. - MA!:'t203:3G, PA.10"1I2 1502 084
.g
D""D D 'T Y f
~
n n
B S
t 60
~
i e
I have it ' car' ora it within the cart ten dcy:
nd to ac:
n.ma g 2<
ony on that ropart from c= Offico af Special A:: tat.tn=,
3,
, which win incit::la the C:. ;=ny ff.15g, the rnspons.a ':y cli 2
4g of those tino fD*J responna n, as sell s.a tb. Company's 8
5 respr.se to those responass.
6 And froc that acr office of Special AacUM: ants 7 I will analyno trant has been done and will mai:o a recez:mtds-jl tico to the commincion.
S The emmtmeicu can eithar accope or i
L 91 rejeet that and will act appropriately at that time.
10i w,; BEEE?:
Will this repact be sarved en all 11 parties and vill parties tbsreby beve an opportunity te conucape 11 on the traps.t thr.,t's sub::d.tted?
g.
13 L
'2EiB CBkI" M The parties have bzd an opper-14 tunity to ccanent.
You indicated that you filed ccmants en i
b g.
16 M2 ' BtEitRS:
No, sir.
I'm talking chout the I
~-
17 report frasr your Office af Special Assistants.
A t'
s' 13 ;
..,_ _ m rmamglLN:
Ne,. air.
That is an advisce7 19 zepart.to the ca-frsion The cm==f azion will. either accent 20 or zeieet that advice and will act withcut further notice t:o 21 the parties.
22 IGt.I EEERS: fnstk you.
23
.!!R/ EDSSELL:
I'm net scre what moticns, et I
j i h 24, cetera, are appu,u.inte at this tiro.
Farhaps se can defar l
M any further thoughts till we sea how the cca: mission'a men =aar. masau me -eu.z.ce::w=.:.cn 085
Df*]D *]D'9'}AlhI
/
b o Ju o m 2 ci
'l 1l egenda danicps in this pre csaring ecuforance, inctand of j
f 4
2L, parhcps intc~ruptins uhat *jeur ::equance nny bn.
)
1 i
i 3'
IE G11rEAli:
Tall, I can es11 yce ihe c:.<o i
1 4
other things that ro plan en do:.ng, Mr. Rucccit, anc ycu can i-5 3 unke year judgcant as to 'uhat you tmit.
I t
6 i ITe simply want to indiccte na:ct thet us hava 7 L received from all che parties a nuchar c2 iscuas and that o,{.
the Cc=nIsaion sill, c7ithin the ne=t tmch or so, iccco a pro-9 hacring cedor, which trill not fertis the issues ac un ces then:
10 r_fter examining rhat the parties ir ra in fact filed.
11
.td then tie plan en ra:7ing frca that peint to e'
setting up sces hearing dates.
.)
And so these are the only two itec3 that ce i,
14 hava left en eb: agenda for this corning.
f' IE. IUSSELL:
Do you contemplate cencidering 16 this morning the matter of the priority with which the 17 several issues are to be addressed?
18 TE GAnUGN:
We contemplate asking you at the 19.
very end, Mr. Russell, how you plan to picoceed with tim case, 20f unat yen plan on doing ca Decc@ar 10th,1979, and than on i
21 the lith and 12th, et catara, j
i 22 Va plan on asking that questica at the mf end',
23!
At thai: time you s:ay esnt to respond to that.
2%
All tha-pcrties, I halieve, hava in fcet had U
i cn opportunity to file with us issnas.
Esc:nse scze wers
?
- i 24C7:":"3ACM A ?.!A*.'.MIAL. INC. = 27 M. LCG*tr1.7 CTIT AYI".= KARRI::::tTRC, PA.17112 1502 086
.._ _.__ _ s.-
.N D""
" '0
' T I\\
< 5l 62 e
m n
1 only flied this corning, ua'vo not h:.6 an oppcrtenity to 2
rutily go 06such eu. of thort.
Ua wi.116 doLug thn and 3
us.'a be tahrs thora. into scents: as we issue c pre-ictring 4} order.
5; Is there any other sammucs frca any othur 6
Commissioners at this point ca the issues?
7j en the haaring datcc, at the last -- ce the E p pre-haaring cenference that we had prior to this, there was 9!
sur.a eh
.f. i. o" li=: icing cur hesring dates to t:n days por
- 10. se#g, and I'd lika to hacically hmro sect viecs from the lpartiesastohowyou'dliketoprocaedenthehearing.
11 I.se a
lk
" ' no eenet cut with Counsol Imlataatz.
~
End NTMRTA:
Sir, you ached ::2 whechar I 14!! N wo day a e is a good ident 13 THE CEAIRMD5 No.
I'm asking you what your 16 thoughts are.
I don't want to rascrice you by putting 17 thoughts in your mind at all.
..m 18
..:g d pi m sTgj Sometimes it. helps.
19
'tHE maTm%
Scas folks ara led better than 20' othara, yes.
21 M1 ' MTMSyA:
Ccald I paca?
No, I gzess I
{
N better not.
s 23 lg I think twe days a sack is a goed idea.
Ic s
giwis all parties an unusuutty to battar propa:e for the
)
J 2ar 2si 1502 087 3 egs.
1
-m. -.m. - _,.-:.
- m. _ -c.
m m
g**g *gy Jg' 63 ya o;u.
a
,tuuo 9
_o v au 1
I think the last ti52 arocad wo were going 2', almost three or foer day: a ucch, and there cara timas when I
3 I think a lot of tics was ecceed bececca ue acro handed I
i l
prapared testimony about 25 miratsc befo~e ec got to soss-5 czmirn the witnoss who prepared it.
6 And even if we had had it handed to us the day I
beforo at another hearing, we probably couldn't have had 8
sufficicut eppatunity to reviso it and tailor tha creac-a eramination in the most procico nacter.
10 {
So thora was a let of floundering around with 11 questions.
And I thiah that if no have enca:;h tims betwoon o
bacrings, un'11 probably need less tim fcr hearings.
That's basically ocr pacition.
Ik C051ISSIO1ER JOEiSOIi:
Mr. Malatesta, couldn't U
we cura this so-called defect by requiring the snhrainsion of 10 testimony, written testimony, a week in advance of the 17 appearance of the witness?
18 m,4 MATAWSTA:
Well, that would help, sir.
D But even if we did that, if we don't have time between 20 bearing dates, it dcasn't allcw much tina for review of the 21 testin:eny.
22 I have no objection to working 15 or 16 hours1.851852e-4 days <br />0.00444 hours <br />2.645503e-5 weeks <br />6.088e-6 months <br /> I
a day.
That dcasn't bother a:a particularly.
Euc after a k
24
,Inile :my offectivaness is impaired.
So if I han a greater 25 opportunity to review the testirr.ony at a reasonsble pace, I'm T,0?UtEACH a MAROMA1 IP O - 2:P N. LCcx.v!Lt.oY1 N!L = UAftfd33
- 1
D**D
- D 5
S-
_. o e o
64 1:
sara I'll be much m ec effse iv:: and tic proceedings util c
2 proceed meh uses crocisel1 3,
TEE CEAIE!E:
Kr. Oobcni 4
HR.I In7 ASCII:
If I might, Mr. Chairzsn, tha 5
Consuzaar AdWa*s view in the ::ta is, depending upon tim 6 d ceas that are being tchen up in ele pacceedings, more then i
two days of bearing any be vary fe=sibla.
It realIy is a 8 j Ivnetton cf what the subject maer.:re will ha.
I will agree with 'st. En2ctacta that having l
10 testis:eny in advance would be grantly appreciatad, would 11>
certainly aid us.
11 Depsoding on the nature of the ara s that tse g
13lk get into, it samme to ::n that throa days.rcsid be a anzizaan i
14 because we r111 need tira botmeen hearing dates to go over 15 the infazimation eca: piled and prepare fcrther croso m. natia t.
16
. TiiE NWAN:
Any othar *.houghts by any other
~ "
' 17 ~ parties?
Speak. into the atterophone, sir, and state year naus 18
.Mit.I SELIOEITZ5 My mien is Larry SeDaaritz.
19 I regrasent Thzoo Kile Isised Alert..
20 I'd agree with the ccacant of Mr. Barasch that Ol' three days be the maximcca par weet.
It is simply impossi L 22 to effectively prepare if you're tied up in bearings.
23-But I think two days on a rigid schedula is e
24 ;
going to ha too short.
There will be times when all parties s
25 enn proceed fer the third day, and I think ycu nasd that SI:3fUtEAC3r 3 M.M IEC. - C7 FC 2.CCXWILLOW AYL = EAJtitt95URS. & 17312
. L5 0 ?J)8 9-
geog o g rm
_M___51 \\. _j 65 I
sort of flozibility.
3' THE CE1IPJ3N:
Any other cor.r.2nta by any other 3
parties?
Mr. Russell?
4
!!R.* RUSSL*LI.:
I think I'd like to just address 5
the situation fror2 the point of view of the party tino will be 0
generating and called upon to generate by far the largest 71li bulk of the subjece matter.
I E
The c=pariance in the hurried proceedings last 9
' spring certainly des:mstrated that there are problems in 10 developlug adequate and satisfseecry testimony in a ecmpressed 11 tino frcua.
12 g
I think the issues raised here are far-reaching 13 issues.
They're artrocaly serious issues.
They should bc 14 dealt with thorcughly and rasponsibly.
And tnst is not se=e-U thing that can be done in a pell-mell rush.
16 I have no problem in principle with the
~
17 suggestica that prepared testimony be submitted a week in 18 advance of the proposed hearing date.
I have no problam 19 with that, provided that the parties are given adequate time 20 by that date in which to prepare the testimony of the 21 I character that yon're dealing with in this case.
22 So I guess what I'm saying is that our primary
- 23 concern in that adequate time be provided to permit the 24 parties to reancumbly and reepansibly prepare their positicas)l 25 prepare eheir tecetmony, and eo have enae 'mseineny mard and !
r.senxaust & MARSIW, INC.= W Ni LCCKWIM.oW AYF. - M.UUt!E: 3,02 090 A. l'It 12
D*"D *D'3S J.
66
_co o
n 11 I
be cross-e-iN.
g 2!j And I think it'c all part of t'.e procces thet 3;
is und,er ube garnral titla of h pr:cesc".
The partics
(
ti
)
4] are eucitled te c. reasennala oppe:tt:nity to prspare fcc and 5 ll to be heard.
6f TE CHAIRMAN:
Is there any other cocmanto!
7.
Ist ma Just -- ps?
8 '
COHtESSIOKER J E CE:
May I just make a ih 9;l comment to Er. E ssell?
I ag:.no with ycu that all parties i
10 '
I cre entitisd to be haard sad to enjoy dua precons, b:st 11 )
isn't it possibim, ri. Res: cell, that thera :=ty "ca differing i
Il via. s an what is due procasa and what is en eg.wiunity to o
9 13 l testify, a tin:aly or reasccable opportunity?
Or is there only one circumstanca that is acceptable?
15
.Mid EDSSEIL:
lib 11, there am clearly two 16 views, tha vise af the p Ly who has prepared the materical v
'7
~17b;. and the vier af the p uy who receives chef material.
. n.,,.. w.
16 Considering the cospisrity and scope of the
.t 19' situation, ma are very seriously concerned with the firnt 20 point of view.
I certainly respact the other point of view i 21 that the other parties shculd have an oppmi.uutty to review 22 the precared tacticeny with cufficient tine to praecre 23 adequate crossw*natica at the bearing, i
g 2fl t
And it seems to na that if adequata tics is c.
1 25 allowed for those twc vi2ws to be respect % then the Y-seemnaca o naesam ne. - a n. r.eermu.ew,m.
am.ismen
- a. mi 02 091
D**
3
67
~~
q l
l' henring tim 2, as has ':een suggected by ccan::c1, nill proccod
^
21 euch more erpeditiously.
% ti.a cf Ob fiJa Cc=nisaictors 3
cca be utiliced c:ach =cro expcilticacly, and I thid tie 4
prcecading can nwa abend ens ::cva choc6 at a caliber which 5[, is considerably above dr.nt could be the caca if adoqeste 4
6, time oozo uc: s allowed in tha first instance for the parties 7 f to prepara for tha haarings, t
B TEE CEAIRKiH:
Any other cc:: rants frc:a any 9
i of the Ccr.-Mnsicners? Any other parties hmra ny other i
10 cour.snts on the boaring schedulo?
t li Ist c:a indiente that in c.ma prelininary dis-i i
12 l cussion witn tha Oc:anisaionero, that us would lii;:e to
(
13 suggoot that ec have initial bearings on th2 10th, 11th, and 1h 12th, the tireac days the first uech; that feca that point en i
15 have hearings en Tuesdays and Wednasdays every week, leaving t
16l Mondays and Thursdays as kind of flexible schedules for a 17 third and, in rare circumstances, a fourth day; and that we 18' proceed along that line throughout December and into January.
19 The Comaission alli, accordingly, move its 20 regular Thursday public n:eeting to Fridays of overy week so 21 cs to have a cicar four days to concarn itcalf with thia 22 unteur.
23 and I'd liim to just -- that's tha basie r
24 schedulo.
Wo thinii: that, for c:ms!ple, that on the 10th 25 there may be scr:a administrativa things ua want to de, and MC!i!!DA:?f a mt13tIAf. It!C.= 27 N. Loc!cNmtovt Avs'. = - AMR!:'4Cf!G, P.% 17".12 1502 092
i
}
3'}S f 9
gem D D
68
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- _5
_n n
l C
1! it uny tria a chih to get re*1.isg.
Q
~
u 3l So va ennt to
- .mt int: with a definitn, w:
3 t~rao dayo e coek to pro::ec:i ca-2 tt:n to c.crra into Ecc ero-4 l cr thres-acy wock so tm pre:::ce to tec bc:: things are w ing t
s l'
5 ! at that point.
6 I think that's what every' edy said.
Is that o
I 7U
&gst? LY. IIslutesta, that's tcitat p caid, carn't it?
l 8 {
NR.* MBL M.STS:
So f.r, cir, yes.
I l
9 T EP. N T M W :
30 fer.
All right.
Wo htm I
10 l Imft th:t, and it will happan that osy.
11 We're going to cove to eb next thir.s while 12l they ecnfer. Mr. Russell, to went to knou now what yea pl. n g
i 13l cc, doing on thi10th,11th, and 12th, hev you plan en pro-14 cading.
1 MR.i sus 5LC.: Well, parbnpa if I cany, I mighe
?.6. give you an oves: view of ti:a evidenca as me see it from the 12 presene peine of view from our side oi' the case.
18
. y As se see it, to respond to the three issues 19 that tha coned.ssion has conselidated, we have a potential 20 list of scathing in excess of 20 witusasos to call.
21!
That soamIs like a barribla nne'mv cf witnessos :
22i I agroe.
But I think ycn erill h=ve to recognize that your 2a first Order to Sho:e cause in effoct rn:;airos testir.cny -
6 as ccupect and condensed no we can rmhm it, but, navertbe-M issa, tactimony representing tes base rata cases of each of I
l wenamex = uman. nee.- ar :2. :.earme.ow.m.
nacaw aa, n., tm=
1502 093
'D *
- l0
- lD ll3IlY ld M
MUJul L 69 I
e I
1 l thase tuo cases.
1 I
2 You cent to hacn thn.t -- and I asird you at tho!
9 3 h first pre-hearing cenference if a decisica, fo:: esnmple, 4)l f
cere to be c:nde that THI-1 care to be remoeci frem base
?
5 ratos, 10 it th2 intent of the C w ission under thoco cir-6 cumstancos then to prcceed ned c3.he any adjustmant 'w* base 7
rates.
And the enst.:or; was yen.
8 So in effect thct firct issue undar tha rule 9I to ahan ecuse involves in eine, to cover that centingruc/,
10 two base cata presentaticas.
11 So there ic a very substantici aron that thece Il three censolidatad precaedings will irrSolvc.
(
13 F.a have made availabic to the Cccmissicn and 14 to the parties today various documents that we will be earhin3; 15 for identification in due course.
They include Met-Ed/
16 Pannelec Exhibita A-1 -- A-1, which is the revolving credit 77 agreement which was entered into several weeks after the la Commission's order bach in June; 19 Ezhibit A-2, which is the Petition for Modifi-20 cation of Ziet-Ed's onergy classa level, together with the 21 varicus erhibits appended to it;
, 'c22 Kat-Ed/Pennelec Statemant B, which to the 23 stater: ant of the acccuating citnaco for ifat-Ed.
It gives 24 the pra1Nng income stateunnt and secseres of valua datz 25 far ifst-Ed.
emu.u:n a u.urm:u m=. - er u. i.eemu..w.ws.- wamraa1hi=094
og y mw
. R\\, 1 1
~
o 70 p
2g 3-1 covers --\\.
I'm ccrry.
E=hibit B-1, ticich
?-lt is described in Stata=out 3, in the incoma statsmant, cnd 3'1. 3-2 is the =aaseres cf vr.Inc.
4h With respect to Pactm2me, we have the acccartting 5f countert;ntrt:
in State:sent C and in Ezhibit C-1, the Pec=clac
- 6. : tentativa inensa stacament: and the c-2, the tentative 2
Pennalen measures of value.
8 Eo've also submitrad as background infecmation 9. the Exhibit F-1, which is the dats subad.tted to thn Ccca-
+1 10' missicc, afte.r the annual Ect-Ed/Pannelse revisw held back in 11 Septembar, t
12 Un have a battalion of peopla worHng on i
13 testimony with respect to other issues.
I thinic there's no 8
14 question sbact the fact that the two ordcrc te shen cause 15 represent by far the : nose comple= and difficult areas in
.,16 which to taspond, and we will subczit.as rapidly as possibla
,,j7 es all parties of =ecord. is/advamw of the-naze hearing or 18 the first hearing, what is avdTable fe them to zuview, 19 trith as snach time as possible.
20
- h can simply jurt stata that is cur under-21 eautas**da*-
1502 095 22 To tha extent that cross-a-m+ation can 70-23 casd en the 10th,11th, and 12th, thara can be sosa pre-24[ liszinsry cr=2s with respect to tho accounting ctatatsutc,
~~
25f but I think that, in all honesty, tha issue which is of the ermmexen = mAasm. me. - e x. r.c.*.TWM.OW AVE - HC.R:SMmS, F. m la
D**
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4 il greatest urgency, ac co ces it, in the iscus uhich is moet I
2[ readily able to proceed forthwith.
'~
3 The Mat-Ed Fetition for cn ediustcont in its 4 ~ energy clause is, to all intents and purposes, a ceif-rJ t contained doccmant, with tha cupporting data attcch26 to it.
6 We wocid propose to hsve IIssarc. Graham or If Hefer, or both of thec, crallable to tastify with respect to S
tilat clause situation and tha vary urgent situntien which it 9
represents for Met-Ed.
10 4
THE CHAIRIGH:
On tha 10th?
12J RUSSELL:
On tha 10th.
12 THE CHILIPEAN:
And what you're banically saying, 13 Ur. Runcall, is that you are preparod only to proceed on tha 14 10th with the nat enargy clance portion?
15 HR) RUSSELL:
I think what I've said. that is 16
- the clearest and simplest and inost easily directed issue as 17 to which we have prepared testimony available and prepared 18i exhibits available.
19' We have given you, as I said, the accounting 20 testimony.
It's obviously prelimincry accocnting testimony 21 and evidence because it's based on Mat-Ed's preliminary 1980 22 Ioudget data.
23, Ibt-Ed's final official 1980 hedget is in the
(
24j process of completten.
It will be cdopted officially later 1"G02 096 25 in Dece s ar or early in.Tancary.
, s W
F 72 o
.u..
-.=
n It P
Ifl So what se have includsd there, simply as c N
1[; mattar of giving the cartios ce :=ch inferactina in adv:ne2 i;
I 3 j} as poss'Jola, is tie castr.tiva duc.n ':ite: s =voilabls ncs.
S
'l 4 {
'N CWAREdh Er. H::ccc11, lot ma just put the 3 j ecrds en the tabla c=5 ask you thi.c qcastion:
The M nsion<
at the begh'frg of thi.s pre-haar^.ng ccafarence -- not today,1 7' but the prior tina -- indicaead may clearly that it was -
0I desirs not to ps.c 2d with rc:a 1: stas uncti cfter a I-t y daterminacica had been made cbcut t~.2 viability cf whather-n jl 10 l cr not the licecse of Et-Ed ough2: to be revched.
i il 11 I Deas Respccdent intend to ash 01-Cn m:msien 12 to raconsider that, to proceed with the rato issues firat?
~
13I And if so, whnu are yos planning to do that?
14 1R,2ETSSEE,:
You asked for what actions e 15 other applications the partios bad, and I ashad you thic i
16) morning what you. had in mi=d and we see how yoor agenda 12 davalops.
~
~
IS' We very definitely feel that the Nat-Ed energy
~
19: clause Isvel is an issue that is of highest acd first pricricy i
N We have two supcsals to snha that eccid ha censidered by II tb2 Ce i1m as nossibic :: cane of e=psditing the dingesition s
y i
22, oe thne.
1502097l 23 Tha first is that -- and it:s tIo cora drastic s
24.of the two -- that the energy clause issues he esvarad frca 251 this ecusolidated prcesading and go its ca.y for asgeditious l
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As na've :ittancted to ceint cr.t in tha i
Fatitha; ac ro hcve un':arp':2d to Ghc 7 in cr ~.000 10 eOj respence to tr.o pra-horing ccnt.arctco orcer, a. t..
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it:m cf considcrable ersancy.
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- , its cuate:nars of the currant cost it's a:;;riencing of ccying, i
1.7i energy to corve thoco custczcrs.
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is totaAJ.y 2.tenequate to n.o t.nat.
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1 ER., RINSE.,L:
Er'd 'co rary happy to file s h
2{b. rmi request.
fo 3N
'IE C?AlmGH:
I'::: eching yeur intone, cir, a
4[ 'I'm con suSgesting ruut ycu ought to do.
33 IS. EUSSELL:
Enll, to tha extent there's any 6
doubt in the Occrisc5 on's mind abcut acespting tha requent 7'
that I bnva made crally right new, se e.11 certainly confirm i
0 it in, writing fechaith.
Ih TE cFl@lBN:
Es'11 just ::::.ano a mim:ta, please.
10 )
(A racess was t:*on frem 10:37 a.m.
11 to 11:00 a.m.)
TE CI:aI!ns.N:
It. ~uns:rall, this Commiscica g,
- j. will not accept an cral petition.
Is it ye e desire to file N
the writton petition en tbs mattar yes'vs so crnlly peaaented U. i to us earlier?
I 15 7g,i RUSSELL:
We will file by tonorrow -- I
'7 ' don't think we can get it 'in today -- a petition which would 18 ask in the citernative that the ' energy clause petition be B
cevered from this consolid sted proceeding or, in the alter-
' native, that that cntter be given expedited treatmant and 21' early decision by tha Cc rntnsion in this ecasolidated pro-21 coedt"8-1502 099
,j
'IZE CZaIEWdi:
W uculd ach that ycc do that
~
g 24 and that ycu file it with thic CcTJ.asion and with all
>e parties not latar then Thursday, the 29th, which is the da7
~
n=ccaena an=ut. :uc.-m a. ac;w~. we.rcr.- u..cssouna..m m:=
D D
~
D g"
75 i4--
d:
-~~
wu-tuuo i,
n 1il cfter tor.:rrou.
Ha recid c.ch th2:: al?. pcrties fils thei.r i
- 9..
3 0 cc:ranto not later th n tralva =cr. en Decc::scr the 7th.
l 1
3!
A;d un Scvo no objectien trith 23 Rospondent I
I 4[i proceeding en the 10th with their trit:nocac cc the energy f
3p cicusa et thct tira, i
j 0*l 24t. RiiSSETJ.:
And I uculd say, in all honesty, 7'
no are prescred to put on all tim wit cacos e o h:ve e7ailable i
0 cc ccer as they are available to got the hacringc moving as n#
prosy:.17 =0 they can.
10 TIC OEAIRIG.H:
Nou, by indicating to you that i
11 se havo no chicetion to your proceeding initially with the l
E witnascos on the net energy cicace dcas not rasn to imply in U:
any cay car ceceptance of a priority as you've indicated.
14 We're ci= ply indicating that because that is the witnoss that 15 you ceco best suited to proceed uith, and we mant to proceed
.6 } with thenc things yce're rendy to proceed with at this point.
17 zg RUSSELL:
We accept it only as a practical 1
approcch to the problem.
19I TIE CEIRIEN:
Is thare any otver thoughts by anyotherCwkssioner?
20 21 i.Te have a cecond problem which came up the last ;
I 4g' tir:3 and that is that the Co:Iroany indicated that it wrmted 3
i
~2 1-( _
'"l to utili=3 the caletdar year 1979 as the test yacr.
At that 24> " " --
s 1502 100 1
- 'c MR.* RUSSELL:
I'm scrry -- 1930.
- .:::MCA:M Q WCIV. W. - U 3. 3. =.m2. W MY. - W. n13:"J%C..*/ Im:
9 mm9 r>9
- y w w Ib o N S k Lrd.=
7G p
1 TE CHAIN.19Ji:
1980? Ecc it 19807 O'
1 MIt.' TJSSELL:
Y90.
I 3.
55 CEATEMW:
As the test year.
- Ecu, n*.
that 4
tiac the partius indicated sce concern about that.
Un rculd 3
i ask that those partias sioo have concerne about the utili=atiem 6
of the calender yer.c 198C' as a test year sculd file these l
7 i comments as seu by r, acct:6er 7th,1979.
O Mt. h1atesta?
Would that be in the snca E;' doca:. nt, sir, or would you prafer that it be in n separata w
11 ;- docucant?
U TP2 CHAIR?nN:
I eculd prefer you do it in a g/
g s
s U f separate d eament.
Is that all right, Ifr.15alatesta?
14'
- 12. FAIAESTA:
That's fine with me, sir.
13!
1R. BERGRAFF; Mr. Chairmu, if I could, I 10 would like to ask Fr. Russell again -- be stated that the 17 f tgures we han at this point in tima ifnich thay've submitted 18 today vers preliminary budget figures for 1980.
I beliene 19 he gave a data for the final adopted budget, and I'd like 20 that dete. again, if I could, please.
21
- 12. HUSSELL:
If pact practicos are an indi-22 cation, Fc. Eury sff -- and I sea os reasen why they shocid 1
23 not ca -- the respective budgees wculd i:e ndopted by the 24 beards of the respectiva companics eithar in late Decachar 25i 1502 101 or early January.
Ec TitDAct 4 Aff.2SN!J. Dtc. - C/!L LCCKW1tO71 AVT.= H.UtEST"JM15. PA.17112
77 1
IR, EURGRAl?:
And how quickly oculd 1979 2
actuni figures be availabla?
I believe you sented at the 3
last pre-hearing it would bo mid-January.
-i la. RUSSELL:
The comptroller indicates about 5
the 20th of Janunry.
6 MR. EURGRAFF:
'Ihank you.
7 Tag CsAImBN:
Mr Cohen?
8 MR. COREN:
Yes, Mr. Chaircan.
Perhaps this 9
isn't the right mount to start, but I had som questions 10 of the Respondent on som of the comments that were made.
11 THE CHAImeN:
I would like to find out 12 whether or not there's any other discussion or questions 13 about the calendar yonr 1980 as the test year and just i
14 simply ask that those who have coments to file those coment s, 15 if you agree or disagree, by 7 December 1979, 16 All right.
You may at.this point address the 17 question you have, Mr. Cohen.
18 MR. COHEN:
What I think eculd be helpful for 19 us and perhaps for others as wa proceed on considering these 20 questions one by one is a furthsr expansion on what Mr.
21 Russell said in his opening remrks concerning two base 22 rate cases.
23 Is this an indication, first of all, of an
('
24 intention -- or a possibilit.y, parhaps I should say -- that 25 at some point in these proceedings the Company anticipates E1ofmEACH Q t.fARSitAL. fMm=.2l7 N. LCcKWILLot7 AVE.
RAnnis2tJRG, PA.17812 1502 102
D' D T)DIT}$
5 AG W MM. A 78 p
1, ;
filing a request for in adjustcant in the rate of retr.2rs or 2 }lfor a rate int::rease ci any Irinf:
o
$p Because I think that that impacts on e::rtly V
4 ;
how we pucemed on all af the issues, and I just didn't. cuite '
5 arrJctscand the scope of his inicial comments to that sffect.
6; MR4 RUSSCLL:
12all, all I can give you, Hr.,
7 (
Cohen, is our best judgment as to what consequences flow i
8 j from the 0~=f asion's fi.rst Or:ier to Show Cm:se.
9' As I previously mantioned, at the first pre-10 i bearing conference two weeks ago I asked the Cmmf aston 11 whether if the first Order to S~cour Cause by TMI-1 shou.1d be 11 ransved from rate base were decided in favor of the removal, g 13 was it the Cm-f aston's judg;-st that tharsopon ebare would 14 be some adjustrarmes of base ratas. And the answer was yes, 15 that that. was the thought aE the Commission.
16' Well, than the neart question is, How would the 17 commissian and within what factual centext would the Com-18 taission go about maicing an adjustment in base ratas?
19 Noer, in the case last spring, just as a matter 20 of expediency the than recently concluded records of the 21 Mat-Ed and Pennelec casos we a itsed as the factual basis 22 for a hace rate determination.
Those test years were 23 calendar year 1978 in the case of Pennalee and tha twelw 24 months ended March 31st, '79, in the case of Met-Ed.
25 I think those cases are obvicusly stale.
memimax = man oe. me. - a w. x.oexwru. w mr. - mannis c :
'l f"-
1
.2 79 m
1 n
1 Among other things, those cases reflected rates of recurn i
j 21 which included both -- which reflect the inclusion of both l TMI-1 and TMI-2 in base rates eithout any consideration of 3
I 4
the impact on return of the exclusion of DII-2 from base rater.
5 So it's, I think, pretty apparent that those 6
records are not only secle, but they don't pertain to the 7
factual circumstances that we're talking about now.
8 Tharefore, we took it upon ourselves to decide, 9
Well, what is an appropriate test year and sfnat are 10 reasonably apg eg iate presentations to make which would 11 enable this Crumniasion in early 1980, if it got to the point 12 of having to make a base rate determination, to found any 13 such determination upon.
14 And under the circumstaness, we concluded that 15 to the extent the Commission gets into ratemaking and that.
16 ratemaking is prospective, that a 1980 calendar test year 17 would be the most appropriate period to use to refleet the 18 base rates that should be charged by these two respective 19 companies, 20 MR. COIEN:
Mr. Chairman, if I my adopt a 21 phrase in your question of laying the cards on the table, can 22 I properly understand that your coments indicate that yes, 23 there is an intention to consider the rate process if -- well,'
n(
24 it wouldn't be "if" -- in any event because of the possi-25 bility that the Commission may take THI-1 out of the rate base ?
McBetIRACH Q MARSHAL.19fC. -::7 N. LocKWILLew AVL-HARRIS 2t!MS. PA.17112 1502 104
m D**]D *]D'S S waN o
lu
=
gr 1
HR,'RUSSdLL:
! thinh uhat I'd any, rt, Ceien, O
is this:
Can anyone ressmw.bly crpact that if base rnt:u rea g
i 3,' going tr. be i -ed in 19P4 for those too cerr:anina, that ths.
4r rate of return should not raflect the risks es uhich tha.
l 5 h stocicholders of the Ceny are.c2 posed.in that precisc cita i
6 i fram?
7 That we have dene wu offer as cur best i
t 8% suggestirm, 'If there in any battnr suggestion to be e.de as 9
to the contazt within which any base rate changes should be 10 madz, we are certainly open to reason.
11 But this is eur best suggestion as to how the 11 factual basis can be presented to the Connission which was1d D
anable than to make base rate determinations for these two li' e-tes.
1502 105 15 ER. COEEN:
To go a step further, then, Mr.
16 Russell, if, as I understand what developed in the previcar
.;;, ; 17, proceeding, although I was noe personally a part of' that, tha IIB f cash flow issue was a significant one, perhaps in the en...wt 19
- of the timetable the conmission sets on hearing various 20
. issues,. It might be approprince. to have the pies and tha 21 ccamission aware of tbs cash flow situation new se it impacts 22 upcn the Company over the next, say, six months.
23 Because in part the Ce*ssior, has indicated v
24 in its June 15th crder that January 1st is a date at w' ich n
25 the question of determiuttion of. TMI-1 in the rste base is menamaci a manzau me.-= N.1.CCam.MW AW.-F.ARR:ssuMG. FA. m 22
em e
- q-J o o Ju o
. A k lnL >
81 I
m 1 ] ripe fo consideratien.
I 2 l Wa are opposed to -- well, I guess we can 3
consider that at the tina the further petition is filed.
4 But I think it wocid be helpful to know the cash flou 5
question on a very general basis at this tim in torn:s of 6
setting the schedule of the witnesses.
7 1s., EnssELL:
Well, ebase utilities and any 8
- utility are concerned with not only cash flow, but earnings 9
as well Cash flow is the most ir:: mediate and direct eeneern, 10 for example, of Met-Ed.
Buc earnings are likewise a problem 11 which loom perhaps more as a longer-range problem than the 12 most inediaca problem.
13 But to respond to ycur spacific request about 14' cash flow information, I think the answer, very simply cnd 15 directly, is that's what Met-Ed's petition with respect to 16 its energy c2suse is all about.
17 Met-Ed's cash flow is going down the drain to 18 pay for energy costs which this Commission has determined to 19 be legally collectible from customers but which it is not 20 permitted by the levelized Cotmiasion charge of 8.8 mills te 21 collect fraa its current custorcers, for whom the energy is 22 purchased to enable them to be servad.
23 So I think the data that has been submitted "n
(
k 24 the petition with respect to the energy clause bears directly 25 on the issoe of cash flow, and it shows exactly what Med-Ed's somnen a, unsar., me.-.xr u..oexwn.t.awavr. - mancesimo, n. sn u -
me m
gy wc 3
1 - m. a=e.
2J If somsthing isn't dcne imeately tafore 3
nd.d-1980.11stf.d, because of tha necessity of financing these 4
energy coats it's nat pomitted to recover currently, will
.5 f have mzheustad all the reamining short-term debe capability 6
that it has.
7 So T'd 6ay if you taka a look at thnt petitlon, i
8 l I thi.uk your data as to cash flow wonid become protty i
9 i apparent, t
1C MR. C0tz;d:
And you mentien mid-1980 as the 11.
crucial date among soveral other crucial dates.
In other 11 words, the Commission, I thinh, today isas decided that the 13 initial witnesses, starting on the 10th, will be Mr. Crauw if and Mr. Hafar on that question of the fuel clause, 15
~ Is that correct, Mr. Cha1:sen?
16 TEE NANAN:
That's correct, but that was only
- - 17, done Mr. Caben,. because Mr. Enssall indicated that-that was 18 I the only witness be would have available at that time That 19 wa my unseratanding, se rease.
1502 107 20 1R) RUSSgli:
well, I'd say the only witnesses 21 that are available to cover nare than just the basic tentative 224 accoonting data, for example, that's there -- which I think 23 is thera *for information, but I den't think extended cross-24 examination with respec.t to that tantative data is going to 25 serve as useful a purpose as cross-e===fnntion with respect nominen = :rarsna: rue. - a n. s.acxvu.cw avr -n.ucussuna, n. niin
f"} ")'} }k' g
a.vvau v m um.
^-
1 to catarial that is there and firm and in place.
2 TIE CHAIMGN:
I would only point cut that the 3
order in which evidence is put on the reccrd is no indication 4 I of the order in which this Cemaission will decide thoce 5.
issues.
I think that's the best wcy to put it at this point.
6 Mr. Cohen, do you have other quantions?
7 MR. ccHEN:
Just a technicci question as to 8
whether their testimony will be available to the parties, then,
E on the 3rd or the 4th of Decembar.
10
'mE CHAIRMAN:
That's ns:tti Tuesday and Wednesday 11 next Monday and Tuesday.
12 Mt.' COHEN:
A week before they testify.
U MP.' RUSSELL:
I think we can undertake to do so, 74 Mr. Cohen.
But I think the receipt of that testimony is not 15 crucial to the ability of any of the parties to start pre-16 paring at this time fer cross-eramination, because that 17 testimony will siuply support and confirm the data that is 18 already contained in the petition with respect to the energy 19 clause.
20 And I think you'll find that fairly detailed 21 data in terms of statistical data, charts, et cetera, as well 22 as the several paragraphs of' averments contained in the 23 petition.
p 24 ug,. COIEN:
Will that testimony 'ce available on 25 December 3rd or 4th?
aronnuen a w. nam. we. - a n. i.oexv.r_i.aw wr. - n.anam:a..n. rn in 1102.10.8
D""]D *]D Y Yh"
'o o Ju o Ju 1 Ilru m M
1 MR,' RITSSELL:
I think l've indicated we will g
2 endeavor to bme it avnilabia.
3 TIE CIAIRMAN:
Hr. Mr~atesta?
4 19.." MAIA2EST.1:
I just have one question fc:-
5l Mc. Rusca11, just to make sure I understand what's been said
) about t=a information you're going to present on bsse rates.
6 7 and I'm just going to nahe a stacament.
You tell me whether 8
that's ubwe you said or a paraphrasing of that you caid, sad 9
I'11appraciate that:
IC-
%at the evidence or the information yo.:%
11 going :o present is not en be used to support an appliention 12 for an incrosse in your base rates; ratbar, it is to be used g-13 to develop a context in which the effects of removing THE-1 i
l 14 '. from ruta base any be considerad.
15 ;
MEJ EUSSEII: Well, perhaps, Mr., Malatesta, 16 you S strus3H% as we're struggling, to respond to the c-r 1
.a _. 7 Carefasioer Ocder to Show Casa. The Commission bas indicated
- 18) that it would, undee certain circumstances, want to adinst the 19 base-rates of both companies, and we're strnggling to ccan up 20 ;with a fcenart which would in=%117 support any such finding 21 by the t'r==tasion with respect to base rates, 1502 109 22.
E MILIA'!ESTA:
Well, let ma ack you this,. Mr.
23 Russell:
Absent a determination by the Commission that 24 THI-1 should be removed from'the rata base of Pennelee and g
v 25 Net-Ed, do you see any use at all for the ovidence you would seamex a maasm.mc. - us...remr-z.ow avz --mammaane, ex. svirs t
geog ag.g-F M
. M S \\ iM 25 li
'I present on base rates?
e g
2 MR. RUSSEU.:
I think as we road the Co:anission 3
order, it raisos the base ratos adjusta:onts only in the ovent 4
that the decision to remove EiI-1 is hold in favor of res:cval.
5 In the absence of an order directing the removal of EU-1, 6
as I view the structera within which we're functioning, tha 7
issue of base rates of the cen:panico has not been raised.
8 IR.'IEIATESTA:
That's my understanding as well.
9 Thank you.
10 THE C&URMAN: 'Mr. Linder?
Use the microphone, 11
- please, 12 MR.' LINDER:
Mr. Chairman, in light of Mr.
13 Malatesta and Mr. Russell just stated, would it be useful for 14 the Ccusrission to ' consider whether or not to consider the 15 issue of removal of HII-1 frcm the rate base initially, which 16 might avoid the naeassity of bringing in all tha rate base 17 data that we're going to be looking at?
18 THE C MIRMAN:
I'm sorry, You had a question, 19 sir?
20 MR.' SELKOWITZ:
It's not related to that subject 21 Mr. Chairman.
I'll hold it.
22 THE s M AN:
Yes, sir?
23 MR. GEORGE:
My nama is Steve George.
I repre
(
24 sent Standard Sts.el, a Pcnnelec customer.
25 I would like to support what Mr. Linder MCittDAcil O MAR $NAL. INC. = 17 N. Lcciav:LLow AY&-. MA:tR!sst!RG, PA. 27112 1502_110
D%h kkk
%m mmu-(
1 l suggested in the ebnory that if -on detsr:2ine first that g
2l TMI-I shec3d be in rata bese, then ycs ucrald givu us ar 5] indication of whethsr ese have ta considar a chang: in tb 4
base rates.
And ci:::::a thst is going to be a majcr under-5 taking, I eM* it==1ms a loc of sense to malca a determi-6 nation separately so thet we don't have to spand. a lot of time 7
en what af.ght be a hypochstical case.
8 ggg cuare gg; ' Are um going to debate that 9
isaua as to whethor or not we sho21d ce not?
I fM* if yon 10 ; want to file something with us, you any do that. Again, ca 11r with Mr. Russell, we're not going to accept cral petitionr.
C What you've said is a matter af recard.
We'll i
h
~
13 tales that into sceaant as we proceed.
If '
IE. COEN:
Mr. Chairman, I was going to ask 15 Mr Linder if, when be said "cuosider it first", if he meant 16 make a decision first ar if he meant bear testimony as that 17 issue firse IB HId TJ ~ ere I meant to mala a decision first.
19 MR. COEEN:
And that would be addressed really 20 in the centext of the petition that Mr. Russell is fil'q, 21 would it not?
Our responses would be cddressed in that 22 setting.
1502 111 23 TE CRATWW:
Sir, do ycu have a question?
24 ER.' SELKGvTIZ:
Yes.
I wonder, as a result of 25 conversations that Mr. Cohen and Mr. Russell had, whether in menemme = wumm mc-e x.s.ecxmuovu.vv. -.ma.mu o. n. msa
mm m
. 3 D
D gv l\\
I\\
51
_1_ _
mm
~
1; all that there una scro states: ant that the Company intendo to 2
call rate of return witncocos, such so Mr. Branncn.
I never I b
eard that questien anspored.
Parhaps it tecn't asked.
h 3
4 E. RUCS2LI:
1611, to the c:arant that a get 5
into the establishment of a record which ocuM oncble the 6
Commission to fis hace rates for cither or both companies, 7 " obviously rate of return is an issue and it would have to be j 8
covered by expert testimony, 9
h2,' SELI"0WITZ:
Thank you.
10 THE CTAIENAN:
Are there any other quastions?
11 HR. B1EASCH:
Yes, Pe. Chairman.
Following up 12
. on Mr. Russc11e stateent that if we are going to proceed
(
13 on the 10th with a discussion of energy clause muttars, I 14 presum that we can assuma that the cooperaticu of the 15 Company in getting som discovery conducted between now and 16
- then, 17 I wouM nota for the record that the Company 18 and the Consuser Advocate have already agreed to set up soma 19 metings this week to begin the general process of discovery, 20 though not specifically directed at tbs energy clause issua.
21
^a:I now that it appears that we're going em Ire 22 talking about the energy clauso, I eculd lika to, en the 23 record at this tima, if it's appropriate -- and I'm really
(
24 doing it far purposes of expediting catters, Mr. Chairman --
s t
25 make at least a preliminary data request, which I had pre-
- . =mmen a uemmt mm - a n. :.ec.w.m.t.ow xa-a:mt: mime. n. :ma 1502 112
sgo e
g e yo o
.S.
_a o M c
gg a
~
1{ viously nada infecmany of 3., Bafer yesterday on &
.2 f telapbcr.o, which is that in 1:%. ct Yz Russen's ne-bearing curder and stateman: cf the issuss, ha tcIks about 3
4, the fati. clause-underracow: cs ammmeing to five point --
1 5i as an:cunting to scme $5 tr.tllion per month and secens to
.6 identify that as being <.aused in part by an increase in the
?
Arab price of oil -- prica of Arab oil, I should say.
8]!!
fnd onepiaca ad informa: Lou. hat we would like
. 9 i is a WM of this $5 r.1'. lion a month, speciEcany 10 identifying abat porticas of that $5 minion a month are 11 paraly attributible to un increased cose of Arab oil and how 11 timt affmetst the PJM running rate, as oppos? co those g
~
13 l aspects of that $5.<m on a mouch that ar.e non-oil-price-14 increase-related and acroly reflect the fact that TMI-1 I5 continues to be out of service past Jamey 1 of 1980, which 16
- t. was nce. initially contempleted in our ceder of Jane 19th,197R.
~ 17
- ".,,., pine already made that requset of Mr. Bafar, laj who took it under advisement. And I'm just an~dng it on the i
19 record nor so the Commission is aware of'oor interest in 20 dewloping that rncord forthwith, 1502 113 21 MR.' RUSSELL:
Well, this is the first I %a 22 heard that request, sud I weald just simply lika to add a 23 word af caution that we tried to separata cut of PJM running 24 costs'.
For example, when you're buying oil-fired steam er
'N 25, combustion turbine ener27 from PJM would be a monomental
=emamen a naamw 15e.-eu.ux:..w.: w avs-swousano, m. mm
-p**g *(({gP 89
-m m
vm_mm,,
6 1
1' undernking, if possible at all.
1 But Mr. Enfer has it under advisement, I gather.
3 M't. B6HASCH:
I would juct like the record to 4 ' note that ne are trying to got sotra discovery moving on that i 5
issue, and I assum we'll hava~ 1:he cooperation of.the Omny 6
in that regers, 7
is.'RUSSEU.:
We'll certainly do everything 8
within car w,
9
~I might mho this suggestion in terms of any 10. procedural stepa that conceivably could be helpful:
To the 11 extent that data requests, discovery roquests, are made, we 11 found that infortal conforences of tbn parties, open to all D
parties to the proceeding who want to appear, fraquantly are 14 helpful in eliminating questions in the minds of the parties (15 and their counsel, in providing information which eliminates 16 the necessity of docuz::ent preparation, and things like that.
17 So to the extent that any informtica involved 18 can be made available at informal conferences, it seems to am 19 it's a vary ezpaditious tool to try to use to get the pro-3 20 ceedings moving, 21 THE CHAT 1rdhN:
I M11 eve that during the last 22 proceeding, that the parties utilized informal conferences 23 quite well and quite effectively, and I would expect that you 24 would want to do that at this point,
!502 114 s
25 I have one final question I want to ask,- When uenna.vm a tunsm. mc. - a u. s.ecxwn.1.aw.we.- uuuussunc. n. sma
_.,, - - ~ ~ - -
e Ry D,Md M
D O
L p
90 1
will Net-Ed be ready -- Met-EJ/Pennalec he rondy to procand
,g
^
a with testine.y on tha retnova.1 of M-i. itom -- the stat.2:- of 3
M-1?
4 EEi..' EDSSEIZ,:
W wenld hope to have ser::e of 5
that testinexy avr41=kle by the first hearing.
We're ahecting 6i 'for that.
I
?
Parti & ely tdre resture situation is a fairly 1
1 6
comphcr and detai. led matter But a woulil hope to ba n some 9 l testimony with respect to the restart cud Mal's past i
l performanca reco=6 avaihble by the first hearing.
10 11 TBrl GATTBEul:
AZE there any other questicca 12 ! from any other pertfas?. D'o the Camissiocars have any g
13 questions? Cnminaioner Ta14=Fam?
i 14 CC2 FESS ~tarER MttAEH!10:
No.
15 m mATnA3:
coad.ssioner Swe=nn?
16
, COMESSIONE"1 MUEANAM:
Bo, 17
~ '
M NTR!RN:
Cocatissioner Cawisy?
18' C3eESSIctER CAW 2Y:
No.
19 THE M :
f'e ioner Johnson?
s 20 COMESSICIER JOHESON5 No.
21 THE GANW:
Any parties have any qucStiGus?
22 v..,
sirr i502 ll5 23 IGC SEL20EITZ:
I just have one.
Would it be 3
24 am g iata precedure for those parties that wish certain e
25 answers to intarrogatcries or other diseceary to specifically mmun::x = mansau =c - a n. :.oenm.i. aware - unemaa, n. sma
m"]D D
]D
' 9
' }ko Ju
,2.
. m 91 h
o o Ju u
l!
j i
1 request the arsuers they'ra saeM.ng rcther than to hs ;2 tha j
s 2
Company or oth:r pcrties sending it cct to o re-ybody rary 3,i tinn they :ncuer a raqueat?
I
'l li f
4ij MR. RUSSZ,IL:
Well, thic is a probics that'c E
5 ll arisen vc:-icus tir.as.
To the entent tir t each part.y of the p
0l proceeding is not it:de -enare of each data raquest made and f
7}! occh data request supplied, I think tharc's a tendency on l t
the part of those partica to fecl that they haw ocan_ left
{
9' out of sora eccential part of the prc=cading.
10' So cur attitude is that tinntover we're usk2d i
11' to supply and do supply e a make available to everyhedy j
i 12 acroca the banrd, j
U As a pessible suggestion to, I think, espadits A4 the consideration of the item thet Mr. Lindar had raiced, l
l 15 Recpondent will propose in their motion eith respect to the
}
l 16 clause a further item that a preliminary decision be mcdc I
17 with respect to whether er not THI-1 should be included er j
i 18 e:scluded frcm base rates, and that will at least afford a j-1 19 structure within uhich the other parties can ccazant and gira !
I 20 their views to the Cc= mission and parhaus enable the Com-1 21 mission to function ea that at the sama tira as it dcas with i 1
22 respect to cur motion concerning the clause, 1
.i 23 TE CE4IRMAN:
Any othar questions or ccants?,;'
24 Yes?
1502 116 I
25 st; BURGRAW:
I'd like to make one comment. if me:m3ACH a M.M2NAt Wh. = 27 N.1. Car /C.:.CW J.V::. - 1:Em33*WC, M. m M
,y
.1
=
e.
w 92 Q
1 I could, Mr. Chairman.
We still hold basically -- the consuma:* h 2 Advocata still holds to the position that the. issue in the 3
last cars was cash flow.
4
.ne issue in this case is the long-term 5 viability of the system, and that to pier anal any matters 6 beface yaz dealing with the ultimate quascion is not the 7
proper course.
8-But since we were dealing with both the other 9 sidas of the rate question, a just wanted to go on racced as 10 making that stacament.
11 M CEIBMAN: And I presune that you will file 11 g
those ec===nes on or before the 7th of December.
.v 13 MEN EUEGRAFF: Absolutely.
14 M NATmRN: All right.
Any other com ants 15 ac questions? We will then adjourn at this point.
The first 16 hearing data is December 10th at ten ata.
. Y'~,".w(.Whereuncaz, at 11:30 a.mi, the pre-hearing
' 17 18 c-=P---nes in the abow-antitled matter was 19 ed5.o==.d.)
2o 1502 117 21 22 23
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24 s
25
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.oau m.wws n
1 s
2 C E, R T I F I C A T E 3
4 I berchy certify that the proceedings and 5
evidence are contained fully and accurately in the notes 6
tahan by a on the hearing of the eithin cause before the 7
Pennsylvania Public Utility Commission and that this is a 8
correct crnmecM.pt of the same, 9
10 MCHREACH & MARSHli, INC.
11 12 By_
d k
h Officini Reporter i o
I'd is 16 Reported byi 17 Deborah K. Hickey, R.'P.'R.i Mohrbach & Marshal, Inc.
18 27 North Lockwillow Avenue Harrisburg, Pennsylvania 17112 19 20 21 (The feregoing certification of this transcript 22 does not apply to any reproducticn of the suma by any mans 23 unless under the direct control and/cr supervisica of the r\\
1502 118 24 certifying reporter.)
25 memmen a u.msnu me.- a n. i.eexw._.ow.wr. - am.,,. a
- m. m:=
Persen Responsible for Preparation:
F.
D. Hafer, Vice President - Rate Case Management, GPU Service Corp.
Telephone :
(201) 263-6013 Date:
December 3, 1979 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company and Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit ' o.1 Restart Proceeding Supplementary response to NRC Staff's Financial Information Request No. 10-(c), dated 9/21/79:
" Describe the nature and amount of each licensee's most recent rate relief action and the anticipated effect on revenues.
In addition, indicate the nature, status, and amount of pending rate relief proceedings, if any.
Use the attached form to provide this information.
Provide copies of the hearing examiner's report and recommenclation and the interim and final rate orders and opinions, including all exhibits referred to therein.
Provide copies of all other orders and directives issued by the Pa PUC and NJ BPU related to financing the licensee's operations, including activities at TMI.
Provide copies of the submitted, financially-related testimony and exhibits of the PUC Staff and company in the most recent rate relief action or pending rate relief request."
Response
In response to a telephone request from the NRC Staff on 11/29/79, attached are copies of NJ BPU Rate Orders in Docket No. 7160-1021 dated 9/1/77 (Phase I) and 1/31/79 (Phase II).
Docket No. 7160-1021 is the rate proceeding that recognized Jersey Central's share of the capital and operating costs of TMI-2 in base rates.
Also enclosed is a copy of the Pa PUC's Order in Docket No.
I-79040308 entered 11/20/79.
This order grants Met-Ed's and Penelec's petition to the Pa PUC for a declaratory order approving PJM's proposed pricing of GPU's TMI-related interchange purchases at cost plus 10%, rather than on PJM's normal " split-savings" basis (see Supplementary Response to 10-(c) dated 11/6/79).
1502 119
s s*n:',y.
MkI 6'taff Ilf 5r111.3ri*SP1J DEPARTMENT OF PUBLIC UTILITIES BOARD oF PUBUC UTlWTv CoM MIS 5 LONERS tot comurn:t STREET NEWARK. Ntw JER$CY Q7102
..__________________x In the Matter of the Petitions of JERSEY CENTRAL POWER & LIGHT COMPANY for ORDER (1)
Increase in Rates for Charges for Docket Nos. 7610-102 Electric Service 7610-102
,' o (2)
Changes in Depreciation Rates 769-965
( 3')
Determination of a Method of 776-492 Making Provision for the Decom-missioning of Nuclear Generating igg Stations (4)
Determination of Rate and Method of Allowance for Funds Used During Construction (5)
Approval of Interim Implementation s
of a Levelized Adjustment Clause
X (Appearances Attached)
By the Board (Before Chief Hearing Examiner Michael J. Mehr)
This Order deals with petitions filed by Jersey Central Power & Light Company (" Company") seeking (1) increases in its rates and charges for electric service (Docket No. 7610-1021), (2) approval of changes in its depreciation rates (Docket No. 7610-1022), (3) determina-tion of a method of making provision for the decommissioning of nuclear generating stations (Docket No. 769-965) and (4) determination of the rate and method of application of the allowance for funds used during construction ("AFC") (Docket No. 769-965).
Moreover, while the proceedings in response to these petitions were in progress, the Board, by letter dated June 1, 1977, directed all New Jersey electric utilities to submit for the Board's consideration proposals for the establishment of levelized energy ad ustment clauses employ-3 ing prospective energy costs.
The Company did submit such a praposal, conferences with all parties and a hearing has been held thereon and, as hereinafter set forth, the Company is authorized to implement, on an interim basis, i ts proposed levelized energy adjustment clause with two modifications:
1502 120 n
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- -.. ~
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These proceedings involved a substantial number of complex issues.
There were extensive hearings, with active participation by the Office of the Public Advocate, Division of Rate Counsel
(" Rate Ccunsel"), the Board's Staff and others, over a period of many months.
The record comprises several thousand pages of testimony and exhibits.
During the course of the proceedings the Company and Rate Counsel developed for the Board's consideration a series of stipulations resolving all but one of the many factual issues presented in this proceeding.
No participant has objected to any of these stipulations and, in most instances, they have the active support of some or a'l of the parties. There is annexed as Appendix A a summary of the issues involved in such stipulations and their resolution.
Some of such stipulations involve matters which extend beyond the termination of these proceedings and which are intended to provide greater stability in the level of b
charges to customers and financing capability for this utili,ty..We have reviewed and hereby approve such stipula-tions.
The schedules annexed hereto reflect the results set forth in Appendix A and constitute our ultimate findings
- hL with respect to rate base, operating income, capitalization and revenue requirements.
All parties to the proceeding waived the sub-mission of a report and recommendation by the Hearing Examiner.
Briefs on the one issue in dispute between the Company and' Rate Counsel, namely, the appropriate allowance for return on common stock equity, have been submitted to us and we have carefully Leviewed them.
In its petition in Docket No. 7610-1021, the Company sought a revenue increace of $110 million, of which a substantial part is associated with its investment in the Three Mile Island nuclear generating station Unit No. 2 ("TMI #2") which is scheduled to be placed in service in the Spring of 1978.
The Company ectimates that the operation of TMI 12 will give rise to a significant reduction in its energy costs which will flow directly to its customers in the form of reduced energy adjustment charges, thus offsetting in part the increase in its revenue requirements associated with the investment and operating' costs of TMI 42.
All parties to these proceedings have agreed that it would be appropriate to determine the
, Company's revenue requirements associated with TMI #2 in the context of the overall results of operations during a more current test year.
In that light, the Company has proposed that the proceedings in response to its petition in Docket No.
7610-1021 be dealt with in two phases, namely, the Phase I aspects which are dealt with in this Order (which shall be deemed as establishing permanent rates pending our Phase II s.
Order) and the Phase II aspects which will be dealt with a
~
1502 121
1
. a later date and will be based upon the submission of updated information.
The Company has agreed that, if this procedure.ir authorized, it will waive until May 1, 1978 the statutory limit under N.J.S.A. 48:2-21 on the suspension period for the portion of its proposed rates,which will be involved in the continued pro-No party to this proceeding has objected to such pro-ceeding.
cedure and we have heretofore determined that it is appropriate and directed the Hearing Examiner to grant such request.
(See Footnote, page 3 of our Order, dated August 4, 1977 in Docket No.
771-32.)
Insof ar as the overall effect on the Company's customers is concerned, the net result is to maintain the Company's total charges to them at essentially their present level for the next ~~
several months.
This occurs by reason of the simultaneous imple-mentation of the levelized energy adjustment clause and the adjustment of base rates, both of which are authorized by this Order.
Speci-fically, this Order authorizes the Company to increase its base rates by approximately 4% of the Company's total charges, which is less than one-half of the general increase in costs (as measured by the Consumers Price Index) experienced since the period (the twelve months ended March 31, 1976) on the basis of which the Company's existing rates were established.
It also authorizes the reclassifica-tion of a portion of the Company's costs and charges to its customers
,, o from energy adjustment charges to base rates, without affecting total charges to customers or disturbing the Company's rate structure.
However, this increase in base rates will be offset by the 7hg reduction in energy adjustment charges for the next several months which would otherwise occur under the Company's existing tariffs, i.e., as part of its implementation of the levelized energy adjust-ment clause, the Company will defer and amortize over future years approximately $23.5 million of accumulated deferred energy costs which it would otherwise recover during the next several months under itr existing tariffs.
It should be emphasized that this modification in the energy adjustment charge will not only levelize the energy component of the' customer's bill but also result in a significant decrease in the energy charge.
The net affect of this Order is to stabilize the total bill to all Jersey Central Power & Light customers for at least six months without any increase.
It should be further emphasized that the modificatavns we adopt herein with respect to the energy adjustment charge have taken place only after extensive conferences (including the Public Advocate), public hearing and the development of a formal record.
Since the new levelized energy charge is interim in nature, further hearings are contemplated so that all interested parties, including the Public Advocate and other interested groups, may have an oppurtu-nity to be heard with respect to the new clause.
After such hearings, on full notice to the public at large, the Board will again review the new clause with respect to any proposed modifications.
In addition, the clause will be subject to periodic formal review on ann annual or semi-annual basis which will include participation by the Public Advocate and Board staff, notice to the public at large, and the development of a formal record.
1502 122
" ~ - * -
s The capital structure utilized in determining the revenue requirement as set forth herein is the Company's capital structure at March 31, 1977, adjusted to reflect the Company's S60,000.,000 First Mortgage Bond issue in May 1977.
The only issue between the Company and Rate Counsel relates to the allowance for Common Stock equity.
The Com-pany recommends an allowance of 13.5%, the same allowance which we authorized on June 10, 1976 in Docket No. 759-899, while Rate Counsel recommends that this allowance be re-duced to 13%.
The return on equity is important both to the Common stockholder and to the holder of the Company's senior securities since it is simultaneously the source of Common Stock dividends and the margin of protection for the con-tractual payments on the senior securities in the event that the Company's total earnings should be less than anticipated.
The higher the allowance for equity, the greater the potential dividends and margin of protection, 6
but, also, the greater the cost to the ratepayer; the
" investor" interest and the " consumer" interest must be balanced in setting "just and reasonable" rates.
ThL The evidence in this proceeding indicates that a range of realized return on equity of 13% to 13.5% would be adequate from the point of view of the Common stockholders (GPU stock has in recent months sold at close to book valu at considerably lower realized returns.)
The Company has testified that as a result of this Order and the provision for Phase II there should be little erosion of earnings.
Accordingly, we are assured that whatever return on equity is allowed should be realized.
A reasonable rate of return should also provide the Company with a reasonable opportunity to further improve its rating for its senior securities.
It is clear that the Company's unsatisfactory ratings have been due not to inadequate allowed returns but to inadequate realized returns.
We would hope that the improvement evidenced b1 Standard & Poors' upgrading of the Company's First Mortgage Bonds from "Baa" to "A " in May (when realized earnings were under 13%) will continue as the Company's realized earnings continue to improve and there is general awareness of the anti-erosion elements of this Order.
When we allowed 13.5% in Docket No. 759-899 we did so in an attempt to improve the Company's financial health and ratings so that they would be comparable to those of the two other major electric utilities in New Jersey.
Our decision to modify the allowance in this Order does not reflect a slackening in our determina-tion to achieve that goal.
We continue to recognize that the long-term interests of the Company's customers are best served if the Company has financial strength and a better market for its securities.
But, in view of the general improvement in financial and economic conditions and 1 g 1502 123 e
~
the growth in the Company's kilowatt-hour sales since the Order in Docket No. 759-899 was issued, we believe that some modification in rate of return in equity, coupled with the anti-erosion elements in this Order is the most appropri-ate way to implement the goal at this time.
In view of the foregoing, Commissioners comprising the Board agree that a rate of return in the range of 13 to 13.5 could be justified at this time.
After public discussion of the ~
case at the Board's " Sunshine Meeting" of September 1, 1977, i
both the Public Advocate and the company recognized this expression of opinion by the Board members and agreed to submit for the Board's consideration a recommended rate of return on equity of 13.25% for the purposes of Phase I of this proceeding, with the proviso that both sides be given further opportuni}y to urge other positions in Phase II of this proceeding.*
Under the circumstances of this case, the Board will accept this recommendation of petitioner and Public Advocate.
The Board will have further opportunity to g
evaluate the earnings, coverages, market to book ratios, and the other indicators of the utility's financial health during the course of the Phase II proceedings.
By permitting g
a Phase II proceeding, we are providing a vehicle for the appropriate resolution of the revenue requirement associated with TMI 2 in a timely and expeditious f ashion.
We will be willing to take another look at return on equity in conjunc-tion with Phase II of these proceedings and we will closely monitor the financial health of this utility.
We will, of course, keep in.the forefront the interests of the citizens of New Jersey to have decent service provided at reasonable rates.
We believe this order which holds the line and stabilizes bills for this utility for at least six months serves that public interest.
.As a result of this conclusion, the tabulation annexed as Schedule III sets forth the agreed-upon capital structure (in dollars and percentages), the agreed-upon 2nd weighted cost for each segment of capital other than Common stock equity, and our determination of the allow-ance and weighted cost for Common stock equity, resulting in an overall allowed rate of return of 9.7%.
The parties have agreed that, since the total revenues that will be produced by this Order will not increase and are essentially those which would be produced by the Company's existing tariffs, it is unnecessary to make any substantive change in the existing tariff design which was directed by this Board in its Order, dated July 13, 1976, in Docket No. 759-899.
We concur in this conclusion.
- 1 The permitted overall rate of return will be the same
'e as provided in the last proceedings, 9.70%
1502 124 O
t '
1 Accordingly, the Board HEREBY ORDERS that:
1.
The Company's petition for ~an increase in rates be Denied except in the respects hereinafter set forth.
2.
Petitioner file for the Board's consideration new tariff schedules providing for the following:
(a)
An increase in base rates designed to provide additional annual revenues of approximately S20,200,000.
(b)
Such increase in base rates as t-shall be necessary so that these rates reflect 10 mills per kwh of energy costs and the related cost of system losses and revenue taxes; (c)
The implementation, on an interim i
basis, of the levelized energy adjustment clause proposal submitted by Petitioner by its letter, dated July 19, 1977, modified in the following respects:
(i)
To provide that the Company shall make quarterly filings with the Board of its experience under the level-ized energy adjustment clause; and (ii)
To eliminate the provision that an adjustment shall be made to reflect a return requirement on under-recoveries under the clause; such elimin-ation is without prejudice to the consider-ation of this matter at a later date when there is more experience with tue operation of the clause.
e Said new tariffs shall become effective for bills rendered by Petitioner after review and acceptance of such new tariffs by the Board.
The genert.1 practice of the Board is to make new tariffs effective for service rendered by a utility after the effective date of new tariffs.
In this instance we are directing that the new tariffs be effective for bills rendered after the effective date of the new tariffs.
This depar ture from our general practice is justified since, as previously pointed out, the new tariffs will not 1502 125 9
. increase the Company's total revenues for the next several months; thus customers will not be adversely affected by such departure.
Moreover, the implementa-tion of the levelized energy adjustmant clause and the change in the base for that clause, all as a part of the new tariffs, means that the proration of customers' bills between the new tariffs and the prior tariffs would be confusing to them without benefiting them in -
any way.
3.
Petitioner shall serve copies of the new tariff schedules, which shall provide for the technical changes referred to in Section VI of Appendix A, proposed by it in response to paragraph 2 upon all active parties of record and include an affidavit of such service in the filing made with the Board of such new tariff schedules.
4.
The proceedings in Docket No.
6 7610-1021 be continued as heretofore authorized.
5.
Petitioner shall employ, commenc-ing with the effective date wf the new tariffs igg provided for in paragraph 2, the depreciation accrual rates set forth in Column I of Appendix B.
and, commencing with the effective date of the next subsequent general rate order of this Board, the depreciation accrual rates set forth in Column II of Appendix B.
6.
Petitioner shall make provision for the costs of decommissiening its nuclear plants as set forth in paragraph (G)(ii) of Section III of Appendix A.
7.
Petitioner shall accrue AFC at a net of tax rate of 7.4% on that portion of its CWIP related to certain major projects as described in
~
Appendix A, and at a gross rate of 9.5% on the remain-der of its CWIP on which AFC is to be accrued under paragraph (D) of Section III of Appendix A.
Petitioner shall continue to employ these AFC accrual rates until a further filing is made by it pursuant to the stipula-tion. filed in Docket No. 769-965, or until a further or(er of this Board.
8.
The proceedings in Docket
.Nos. 769-965 and 7610-1022 be terminated.
9.
Petitioner shall cause to be published in newspapers of general circulation in its service area not later than three days prior to the ef-
.i fcctive date of the new tarif f s provided for in 1502 126
O.
paregraph 2 of this Order o: (a) petitioner's new tariff rates and (b) notice of the continuance of the proceedings in Docket No. 7610-1021.
BOARD OF PUBLIC UTILITIES (SICHED)
By GEORGE H. BARDOUR PRESIDENT
'n RICHARD B.
McGLYliff COf!!!ISSIONER
'A O
Dated: September.
1, 1977 (SET.L)
Attest:
(SIG!JED)
RALPl! C. CAPRIO Secretary 1502 127 e
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s
(
Schedule I i
JERSEY CENTRAL POWER & LIGHT COMPANY Rate Base (S000)
Utility Plant:
Electric Plant in Service
$1 262 984 Electric Plant Held for Future Use 4 949 Nuclear Fuel 56 047
~;onstruction Work in Progress 157 806 Total Plant 1 481 786 Additions:
Deferred Debit-Accu =ulated Deferred Income Taxes 2 349 Deductions:
Accu =ulated' Provision for Depreciation 264 798 g'
Accumulated Provision for Decocsissioning Expense 1 275 Accu =ulated Provision for Amortization of Nuclear Fuel Assemblies 24 998 Customer Advances for Construction 450 Una=ortized Investment Tax Credit 1 511 Unamortized Gain on Reacquired Debt 4 149 Unamortized Litigation Recovery 934 Unamortized FIT Refund & Interest 1 786 Customer Deposits 4 689 Total Deductions 304 590 Working Caeital:
Materials 26 500 Cash Working Capital 31 286 Deferred Energy, Net 28 101 Revenue Tax Adjustment (11 588)
,' Total Working Capital 74 299 NET INVESTMENT-RATE BASE
$1 253 844 1502 128 e
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I Schedule II JERSEY CENTRAL POER & LICHT COMPAh7 Operating Income (S000)
Operating Income
$106 474 Adjustments:
1.
Revenue normalization 35 129 2.
Revenue taxes (11 588) 3.
Increased operation and maintenance expense (374) 4.
Annualization of modified retail 1 343 EAC, net of tax 5.
Base energy expense - increased M'1H sold (1 562) 6.
Reserve capacity and tranemission D
rents (5 321) 7.
Storm desage 371 8.
Wage rate increase (1 739) 9.
FICA taxes (99) 10.
Pensions (254) 11.
Nuclear refueling C & M - TMI 12.
Nuclear refueling 0 & M - OC (420) 13.
Contributier.s (113) ll 14.
Rate case expense 431 15.
Werner mothballing 64 16.
Depreciation (2 275) 17.
Decocsissioning (1 275) 18.
Interperiod taxes other than AFC 58 19.
Interperiod tr.xes AFC (968)
- 20. 'NJPUC assessment (83)
- 21. ' Amortization of net gain on reacquired debt 232 22.
Gilbert #8 in service (874) 23.
Tocks Island, Mt. Hope abandcnment, net of tax (423) 24.
Pennsylvania CNI tax (30) 25.
Federal income tax (4 165) 27.
Interest on customer deposits (281) 28.
Amortization of Federal Income tax refund 271 Taxes on annualized interest 2 323 Amortization of deferred energy balance at 6-30-77 (2 500)
Total adjusteents 5 878 Operating Income as adjusted
$112 352
'e 1502 129 g
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Schedule III
.)ERSEY CENTRAL PO'AR & LICHT COSTANY CAPITALIZATION AND RATE OF RETLTI (S000)
Capitalization:
Long-Term Debt S 800 711 Preferred Stock 160 000 Co==on Equity 519 194 26 631 Cost-Free Capital Total
$1 506 536
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Capitalization Ratios:
Long-Term Debt 53.15%
Preferred Stock 10.62 Co==on Equity 34.46 DL' Cost-Free Capital 1.77 Total 100.00%
,i Embedded Costs:
Long-Term Debt 7.78%
Preferred Stock 9.31 Co==on Equity 13.25 Cost-Free Capital Rate of Return:
Long-Term Debt 4.14%
Preferred Stock
.99 Co= mon Equity 4.57 Cost-Free Capital
, Total 9.70%
0 8
~
Schedule IV JERSEY CENTRAL POWER & LIGHT COMPANY Su=marv (S000)
Net Investment Rate Base
$1 253 844 Rate of Return 9.70%
Calculated Operating Income
$ 121 623 112 352 Normalized Operating Income
~
9 271 Operating Income Deficiency Tax Factor 2.183 Base Revenue Increase Required S
20 200 6
\\)g, Estimated Effect on Total Customer Charges:
Base Revenue Increase (from above) 20 200 Less:
Estbnated Reduction in Energy Clause ll Revenues during 12 months ending June 30, 1978, as a result of implementation of levelized energy
. adjusteent clause (ignoring impact of TMI #2)
(23 500)
Net Effect During Initial 12 Month Period (3 300) 1502 131 W
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e 9 99 *$3~
h w M J L[thl=
19 APPENDIX A This Appendix summarizes the major elements relating to the determination of rate base, operating income and revenue requirements which have been reflected in the stipulations between the Company and Rate Counsel and to which no other party to the proceeding has objected.
Our Chief Hearing Examiner, Michael J. Mehr, Esq., who conducted these pro-ceedings has recommended that such stipulations be approved and the Board's staf f has advised us that they have no -
As reflected in the Order to which. this objection thereto.
Appendix A is annexed, we have approved such stipulations.
I.
Two Phase Proceeding
- By a letter, dt'ed June 28, 1977, the Company requested that the proceedings in Docket No. 7610-1021 be divided into two phasas.
No and we party to the proceeding objected to this request have heretofore authorized the Hearing Examiner to grant
,' o that request.
(See Order, dated August 3, 1977, in Docket No. 771-32)
All references in this Appendix A to a test year ended March 31, 1977 and other specific data are 7610-1021 applicable to Phase.I of the proceeding in Docket No.
'qc and a later test year with corresponding adjustments of other specific data will be used for Phase II.
II.
Test Year.
The test year employed is the twelve month period ended March 31, 1977.
III.
Rate 3:se.
The principal components of Rate Base are (A) Utility Plant in Service, (B) Plant Held for Future Use, (C) Nuclear Fuel, (D) Construction Work in Progress ("CWIP") (E) Deferred. Debits, (F) Working Capital, and (G) Accumulated Provision for Depreciation and Other Deductions.
These items are reflected in the Order to which this Appendix A is annexed in the following mannery (A)
Utility Plant in Service.
The balance of Utili'ty Plant in Service at Maren 31, 1977 was S1,219,745,000.
From this balance there has teen deducted (i) one-half of the Company's investment in common facilities at the Three Mile Island ("TMI") nuclear generating station, namely S1,761,000, which will be-utilized in connection with TMI Unit i 2, and (ii) the Company's investment in certain lands and buildings at the Oyster Creek nuclear generating station site, which will be transferred to the Forked River
("FR") nuclear generating station, namely, S358,000.
Such.
investments, aggregating S2,119,000, will be transferred from Utility Plant in Service to CWIP on the effective date of the new tariffs authorized by the accompanying Or' der and allowance for funds used during construction "AFC") may be accrued thereon from such date.
To the resulting balance of Utility Plant in Service, S1,217,626,000, there has been added the Company's invest-ment at March 31, 1977 in the Gilbert Combined Cycle Unit No. 8, namely S45,358,000.
This Unit, which has been under the control of the PJM dispatcher since May 28, 1977, while its supplementary oil-fired equipment was being completed, was transferred from CWIP to Utility Plan' 7
E in Service in Augu'st.
1502 132
-~
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As a result of the foregoing adjustments, the Utility Plant in Service Component of rate base is 51,262,984 (B)
Plant Held for Future Use.
The Company's investment at March 31, 1977 of 54,949,000 in Plant Held for Use is included in rate base.
(C)
Nuclear Fuel.
The Company's investment in nuclear fuel (exclusive of the nuclear fue) included in CWIP) at March 31, 1977 was 556,047,000 and this amount has been included in rate base.
(D)
CWIP.
In its last rate case (Docket No.
759-899) and in this proceeding, the Company has proposed that a specified amount of CWIP, identified with particular projects, be included in rate base without an AFC offset.
This was approved in Docket No. 759-899 (Order, dated June
., o 10, 1976)which included S157,806,000 of CWIP in rate base.
In this proceeding, the same total dollar investment in CWIP has been included in rate base, but the allocation thereof to particular projects has been changed.
On the Nht effective date of the tariffs provided for in the acccmpany-ir.g order, the S157,806,000 of CWIP included in rate base will consist of (i) the March 31, 1977 level of accumulated AFC (S64,706,000), (ii) the March 31, 1977 investment in projects wnich do not normally accrue AFC (S18,984,000),
(iii) a portion (S74,116,000) of the Company's investment at March 31, 1977 in TMI # 2, and the Company will not thereafter accrue AFC on these investments.
The Company has proposed,.and we have authorized, the sale of one-half of its investment in FR to its Pennsyl-vania affiliates (See Order, dated August 3, 1977 in Docket No. 771-32).
That matter is now pending before other regulatory agencies.
One.alf (S14,164,000) the AFC ac-cumulated at March 31, 1977 on the Company's investment in FR will be included in such sale.
In re:Ognition of that fact, the portion of the S157,806,000 of CWIP that is included in rate base assigned to TMI #2 will then be correspondingly increased (i.e.,
from S74,116,000 to S88,280,
. the Company's investment in On that basis, the portion of TMI $2 that would then be included in rate bcse would be S117,394,000 (i.e., S88,280,000 plus the AFC on the Company's investment in TMI #2 included in rate base, S29,114,000).
When TMI #2 is placed in commercial service, the amount of the Company,'s investment in CWIP that is included in rate base will be reduced by the portion thereof assigned to TMI i
~
The Company has stipulated that (i) in any rate proceeding filed with us prior to January 1, 1979, it will not seek to have included in rate base any additional amount of CWIP that would normally accrue AFC and (ii) it will not request that it be permitted to employ the so-called
" offset" method of including CWIP in rate base so iong a 1502 133
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normalized treatment of the income tax reductions associated with the interest component of AFC is being requested by it in rate applications before us, (E)
Deferred Debits.
At March 31, 1977, the a
Company's deferred debit balance (representing prospective income tax deductions that will be available in future years but which have been treated for ratemaking purposes as if currently available, thereby reducing current revenue requirements) was 51,834,000.
This h;1ance is properly includible in rate base.
This icem is increased by S612,000 as a result of the treatment of decommissioning expense and decreased by $97,000 as a result of the treat-ment of a federal income tax refund, both of which items are discussed below, resulting in a net balance of S2,349,000 to be included in rate base.
c.
(F)
Workine Caoital The working capital component of rate base is S74,299,000.
It consists of (i) the Company's investment in materials and supplies at March 31, 1977 of g3 S26,500,000, (ii) an allowance for cash working capital deter-mined on the so-called "one-eighth" formula, which reflects an average lag of 45 days between disbursement for operating and maintenance expenses and the recovery of revenues based thereon, and (iii) deferred energy costs of S28,101,000, or a subtotal of S85,887,000, less (iv) the excess, S11,588,000, of the allowance for revenue taxes over the current year's liability for such taxes.
Of these items, only the deferred energy costs requires further copment.
At June 30, 1977, the Company's deferred energy costs (accumulated in accordance with our prior orders) was S55,291,000 before related income tax reductions of S26,540,000, or a net of $28,751,000.
In response to our directive, dated June 1, 1977, the Company (and other New Jersey electric u tilit'ies ) sub'mitted a proposal for the implementation of a levelized energy adjustment clause employing prospective energy costs.
As a part of the accompanying order, we are authorizing the implementation of the Company's levelized energy clause proposal on an interim casis, simultaneously with the other tarif f revisions authorized by that Order.
Under that proposal, differences between estimates of prospective energy costs and actual experience will be accumulated in a separate deferred energy expense account and reflected in the operation of the clause.
There will be no further accumulation of deferred energy costs into this account.
The accumulated balance of such deferred energy costs (estimated at S55,291,000) net of related income tax reductions (estimated at 526,540,000) at the effective date of the tariffs authorized by the accompanying.
order less one-half year's annual amorti:ation (estimated at S650,000) or a net of S28,101,000, is, therefore, a proper component of rate base.
1502 134
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D*
D D 'M 23 by du du u
In determining allowable operating expenses, provisien is made for annual amortization of such deferred energy costs in the amount of 52,500,000 before related income and revenue taxes (or S1,300,000 after such taxes).
In recognition of the fact that the accumulated balance of deferred energy costs at the effective date of the tariffs authorized by the accompanying order may be greater or less than that at June 30, 1977, the expense charged for such amortization shall be increased or decreased, as the case, may be, for the return requirc ment and associated taxes on such difference.
(G )'
Accumulated Provision for Deoreciation and Other Deductions.
In the aggreg:te, these items amount to 5304,590,000, determined in the following manner:
(i)
Accumulated Provision for Deoreciation.
The Company's accumulated provision for depreciation which has been accrued in accordance with our prior D
orders was $260,359,000 at March 31, 1977.
By a separate petition (assigned to Docket No. 7610-1022) as well as its claims in Docket No. 7610-1021, the Company sought authority to change its depreciation accrual gg rates, employing the equal life groupingt method and remaining service lives.
By the accompanying order we are authorizing changes, in two steps, in the Company's depreciation accrual rates, the first to be made effective on the effective date of the tariffs auth & z by the accompanying order and the second change to F made e.*fective with the effective.date of the new service rates to customers authorized by our next subsequent rate order.
Such depreciation accrual rates are based upon direct weighted remaining service lives.
The effect of the first change in depreciation accrual rates is to incrce'e the Company's annual operating expenses by $2,275,000 and its depreciation reserve by S2,375,000.
Moreover, as a consequence of
'the inclusion of Gilbert Station Unit No. 8 in rate
~
base (discussed above) and the recognition of the depreciation expense, amounting to S2,064,000 the depreciation reserve is increased by S2,064,000.
As a result of these two adjustments, the depreciation reserve utilized in determining rate base is S264,798,0
' The Company has agreed that it will not propose, in any proceedings filed by it prior to January 1, 1985, depreciation rates based upon the equal life groupings method.
(ii)
Provision for Decommissioninc Exocnse.
By a separate petition (assigned Docket No. 769-965) as as in its claims in Docket No. 7610-1021, the Company r ed authorization to provice for decommissioning expense its two nuclear units now in operation, with the result funds to be set aside in a separate independent trust f and not deducted from rate base, and with the earnings such trust fund being utilized to provide.for an'.i t
inflation in costs over the period before decom.ais.
i 1502 135
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'g-
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becomes necessary.
Rate Counsel agreed that it is appropriat.
to make provision for decommissioning costs but proposed that the resulting funds not be set aside in a separate trust and that the accumulated amounts be deducted from rate base and the associated deferred income taxes be added to rate base.
The Company agreed to accept Rate Counsel's treatment of the accumulated amounts without prejudice to the Company's renewal of its proposal for a separate trust fund at a later date.
This is the one item of the stipulations between the Company and Rate Counsel about which our-Staff has reservations.
Our Staff is of the view that there'may be some merit in the establishment of a separate trust fund which would not be deducted from rate base but, nevertheless, does not object to our approval of the stipulations in the light of our continuing jurisdiction and the Company's reserved right to renew its request at a later date.
In this connection, our attention has been called to a report issued by the General Accounting Office entitled
" Cleaning Up The Remains of Nuclear Facilities - A b
Multibillion Dollar Problem" (June 16,1977) and to a petition, dated July 5, 1977, filed with the Nuclear Regulatory Commission by the Public Interest Research hL Group and others.
This report and such petition may result in proceedings that will provide further insights in respect of this matter.
Under these circumstances, our deterb.ihati.pn of allowable operating expenses makes. annual prtvision of S1,275,000 for nuclear station decommissioning costs, with a corresponding deduction from rate base of 51,275,000 and addition to rate base (as noted above under " Deferred Debits") of the associated deferred income taxes of S612,000.
(iii)
Accumulated Provision for Amortization of Nuclear Fuel Assemblies.
In determining rate case, such ac-cumulated provision amounting to $24,998,000 at March 31, 1977 has been deducted.
(v) Unamortized Investment Tax Credit.
This item (amounting to S1,511,000 at March 31, 1977) represents the unamortized balance of the original (3%)
investment tax credit which is being amortized as a credit to income over a period of 10 years and, in accordance with our prior decisions, such unamortized balance is deducted in determining rate base.
(vi)
Unamortized Gain on Reaccuired Debt.
This item, amountt39 to S4,149,000 at March 31, 1977, has been deducted in determining rate base in accordance with our established policy.
'o (vii)
Unamortized Litication Recovery.
We previously authorized the Company to amortize over a five year period its net recovery applicable to plant items in a litigation related to its Oyster Creek station and, in determining rate base, to deduct the 1502 136
, -, ~ =
en en en 1 cg
- (
.J ' o o J u o
Ju ITU
- s 1977,suchunamorjl$
unamortized balaned.
At March 31, balance was-3934,000.
(viii)
Unamortized Federal Income Tax Refund The Company received refunds aggregating 51,396,000 of a portion of the Federal inccme tax refunds paid by it in the years 1961-1965 by reason of the allowance for Federal income tax purposes of depreciation and/or amortization of rights of way and interest thereon aggregating 51,154,000.
In October, 1976, the Company began the amortization, effective as of January 1, 1976, cf such refunds and interest (net of taxes on such interest) over a 10-year period so that the book results for the test year include 15 months of such amortization, or S318,000.
The parties have agreed that the unamortized balance of such refunds and interest (net of taxes on such interest) at March 31, 1977 shall be amortized, as a credit to operating income, over a five year period commencing with the
'i effective date of the tariffs authorized by the accompan b
ing order and that the unamortized balance shall be deducted in determining rate base.
The income adjustmen for the, annual provision for such adjustment is S271,000 and the associated rate base reduction is S1,786,000.
3,3 (ix)
Customer Decosits.
In accord with the policy of this Board, test year level of customer deposits of 54,689,000 have been deducted from rate base.
(H)
Net Investment Rate Base.
As a result of the matters discussed above, the normalized net investment ette case at March 31, 1977 is 51,253,844,000.
There is annexed as Schedule I a tabulation reflecting such rate base and its components.
IV.
Ooeratino Income.
The Company's operating, income for the twelve months ended March 31, 1977 was S106,474,000.
In determining its normalized operating income for the test year, various adjustments were made and the major such adjustments were as follows:
(A)
Revenue Normalization.
Base revenues rece'ived during the test year were increased by 535,129,000 to reflect on an annual basis (i) the rate increases which became effective July 19, 1976, (ii) the consumption by customers added during the test year and (iii) the levels of usage by customers at the end of the test year.
Similarly, energy adjustment charges received during the test year were increased by S1,343,000 to reflect changes in the structure of the retail energy adjustment clause which occurred during the test year.
(B)
Increased Costs Associated with Revenue Normalization.
The revenue normalization recuires provision for increased energy costs of S1,562,000 and increased operating and i
maintenance costs of S374,000.
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_7_
ao ys (C) Revenue Taxes The New Jersey revenue tax liability is casured by revenues received during the prior calendar year.
Our practice is tc make provision for the revenue taxes based upon the current year's normalized revenues.
This results in a normalizing adjustment to increase the test year's revenue tax accrual by S11,588,000.
This is consistent with the reduction in vorking capital allouance of 511,588,000 referred to in paragraph (D) of Section III above.
(D)
Installed Cacacity and EHV Rentals.
During the test year or shortly thereafter a nuncer of changes occurred that had an impact on these costs.
These changes included the mothballing of Werner Units Nos. 1 and 3, changes in the GPU System power pooling contract so that it would parallel the basis employed in the PJM power pooling agreement for allocat-ing installed capacity responsioility, changes in the rate 6
per kilowatt for installed capacity deficiencies and increases in charges for utilization of extra high voltage ("EHV")
transdission facilities owned by other utilities.
As a consequence of these factors, the allowance for operating the and maintenance expenses, installed capacity expenses.and EHV rentals was increased by an aggregate of 55,321,000.
(E)
Increases in
- daces, FICA Taxes and Pension Costs.
During the test year, a wage rate increase became e:fective and the Company axperienced increases in FICA taxes and pension costs.
Test year expenses have been normalized to make provision for the annualization of the portion of such increased costs chargeable to operation and maintenance expenses, namely, 51,739,000 on account of increased wages, S99,000 on account of increased FICA taxes and S254,000 on account of pension costs.
(F)
Rate Case Excenses.
. Allowance of S450,000 has been made,for amortization of the cost of this proceeding over a two year period.
Since the Company's book amortization during the test year of rate case expense from prior proceed-ings was S881,000, the effect of this adjustment was to de-crease operating expenses by 5431,000.
(G)
Deoreciation and Decommissioninc Excense.
As discussed in paragraph (G) of Section III, an increase in depreciation expense of S2,275,000 and provision for de-commissioning expense of S1,275,000 have been allowed.
(H)
Interoeriod Tax Allocation.
In Docket No.
759-899, we authorized provision for deferred income tax expense for the differences between tax depreciation and book depreciation for property added subsecuent to March 31, 1975'.
The effect of the increased book depreciation rates which we have authorized in this proceeding is to reduce the book test year normalization in respect of this item by S58,000.
The parties have agreed that the Company should be 1502 138
.-~n.
o O '
allowed additional provision for deferred income taxe.t associated with the interest component of AFC (such p ovision to be ef f ec ted by the use of a net-of-tax AFC accrual rate commencing with the effecti'se date of the tariffs authotit:d by the accompanying order) in respect of (i) one-half of the Company's investment in FR (the other half being the subject of the proposed sale to the Company's Pennsylvania affiliates),
(ii) all the Company's investment in the Seward generating station, and (iii) certain EHV facilities.
The result of such agreement is to increase the expense to make provision for deferred income taxes by S968,000.
This modest additional provision for deferred income taxes 5:111 not be burdensome to the Company's customers and is consisten Lius our objective of increasing the quality of the Company's earnings.
Moreover, it is particularly appropriate in the light of the treatment of CWIP in rate base (discussed in paragraph (D) of Section III) and in the light of the Company's undertaking that, if the stipulations are approved D
and in the 7.csence of a change in the governing tax laws or regulations, the Company will not seek authority to employ interperiod tax allocation (a) for liberalized depreciation with respect to pre-1970 property or (b) for capitalized 3,.3' pension and tax expenses in any rate proceeding filed prior to January 1, 1980.
(I)
Gilbert Unit No.
8.
Operating expenses have been increased to make provision for the depreciatio expenses (52,064,000) and deferred income tax expenses (S1,338,000) associated with Gilbert Unit No. 8 and have been reduced to make provision f,or the reduction in installed capacity expenses (S2,528,000) also associated with that Unit (J)
Amortization of Extraordinary Procertv Losses.
Operating expenses have been increased by S423,000 to make provision for the amortization (i) over a three year period of the Company's investment at March 31, 1977 in the proposed Tocks Island pumped storage project and (ii) over a ten year period of the Company's investment at March 31, 1977 in the proposed Mount Hope pumped storage project, (K)
Income Taxes Associated with Annualized Intere Operating expenses have been decreased by 52,323,000 to refle the reduction in income taxes associated with the annualized level of interest payable by the Company based upon the long-debt included in the agreed-upon capital structure, after eliminating the reduction in income taxes associated with the short-term debt that was replaced with a portion of the proceeds of the Company's 560,000,000 first mortgage bond issue in May 1977.
(L)
Amortization of Deferred Enercy Costs.
As discussed in paragraph (F) of Section III, an increase in operating expenses of $2,500,000 has been allowed to make t
provision for the amortization of the Company's balance o L
deferred energy costs existing at the eftective date of t.
150.2 139
D**D *D'3'T'f J,,,
tariffs authorized by the accompanying order when the Company is also to implement.a levelized energy adjustment clause utilizing prospective fuel and energy costs.
The Company has reserved the right to seek more rapid amortization of this item and Rate Counsel has reserved the right to seek to reduce the rate of amortization.
~
(M)
Miscellaneous Adiustments.
A number of minor adjustments have been mace.
Some of these adjustments in-crease and others decrease the allowance for operating expenses.
These items involve provision for storm damage, the costs associated with refueling tae Company's nuclear stations, charitably contributions, the mothballing of Werner Units Nos. 1 and 3, the assessments by this Board, the amortizatior of gains and losses on' reacquired debt, interest on customers' deposits and amortization of the refund of Federal income taxes and related interest referred to in paragraph (G) of g
S'ection III.
In the aggregate, these adjustments reduce allowable operating expenses by 541,000.
(N)
Related Incoce Taxes The net consequence of g
the foregoing ad]ustments is to increase operating income before income taxes.
The additional income taxes associated with such increase are 54,195,000.
(0)
Normalized Oceratinc Income.
The normalized cperating income resulting from tne foregoing is S112,352,000.
The details are set forth in Schedule II to the accompanying Order.
V.
Feclassification of a Portion of Enerev Adiustment Charce Revenues to Base Revenues.
For several years, the Company's case rates have made provision for the recovery of only 3.41 mills per kwh of its energy costs, with the balance of such energy ccsts being recovered through the operation of its energy adjustm.ent charges.
This has led to customer misunderstanding and dissatisfaction.
The im-plementation of the leveliisd energy adjustment clause provides a particularly favorable opportunity to remedy this situation, at least in part, by reclassifying a portion of such revenues from energy adjustment charges to base revenues.
Specifically,-
3,the base employed in the levelized energy adjustment clause
'dwill be 10 mills per kilowatthour and the difference (6.59 mills per kwh) between 10 mills per kwh and the base in the present' energy adjustment clause (3.41 mills per kwh) will be added, on a per kwh basis, to the Company's base rates.
The costs of system losses and revenue taxes associated with this addition of energy costs to base rates will similarly be included in base rates.
This reclassification does not affect the Company's total charges to its customers.
'a
- VII, Rate Desien The issue of rate design has been extensively litigated in the Company's prior rate proceedings.
\\
The rate design reflected in the Company's existing tariffs for its current level.of revenues was cctablished by us ap-proximately a year ago.
In view of the fact that the accompanying
!502 140
~-
O 10
~
h Order provides for virtually no change in the level of the Company's total revenues, the parties have agreed that it would be inappropriate to make any substantive change in the Company's existing rate design and we concur.
- However, rate design issues will be subject to full exploration in the Phase II proceeding.
Against that background, the accompanying Order directs the Company to file revised tariffs which allocate the allowed increase in base revenues between the rate classes on a basis which will essentially parallel the manner in which the S23,500,000 of deferred energy adjustment charges would have been recovered from the rate classes in the absence of such Order.
Such a tariff should pro"i?a additional base revenues essentially propor-tionate to those which would otherwise have been re-covered as energy adjustment charges under the existing tariff.
Except for the reclassification from energy adjustment charges to base revenues as discussed above d
and the technical adjustments discussed below, the tariffs authorized by the accompanying Order should be essentially similar within the rate classes as the existing ta' riffs.
However, where appropriate, demand charges will be increased
~
ig more than energy charges to reflect cost incurrence character-h istics.
Likewise, such new tariffs will reflect the same percentage relationship between the summer and winter I
energy and demand rate differentials as exist in the prese tariff.
The present energy adjustment clause fails to recognize the differential in loss factors depending upon the voltage level at which servide is received.
In recogni-tion of that fact, the new energy adjustment clause will multiply the computed composite adjustment factor by the following factors:
Servic-Voltace Voltace Level Adiustment Factor Transmission 0.953 Primary 0.980 Secondary 1.011 The current discount for curtailable service is
$1.33 per kw.
In determining the company's revenue require-ments, provision has been made for the increase in installed capacity charges and credits under the PJM and GPU power pooli' agreements.
In the light of that fact, the curtailable service discount will be increased to 51.625 per kw, rep-resenting the sum of S1.50 per kw related to sa"i ;.;
'n demand and S0.125 per kw related to savings in energy costs resulting from the approximate one cent per kwh average dif-ferential between day and night PJM running rates.
1502 141 e
dip.
The Company has also proposed mioner tariff re-visions which have an aggregate revenue impact of approxi-mately 5125,000 and, in designing its tariffs in response to the accompanying Order, will charge itself for such revenues.
On this basis, such revisions have been au-thorized.
VII.
Aperual of AFC.
Since July 19, 1976, the Company has uden accruing AFC at a temporary 9.3%
annual rate in accordance with the Board's directive.
Commencing with the effective date of the tariffs provided for in the accompanying Order, the Co=pany is to employ two AFC accrual rates, namely, (1) a gross AFC rate to be applied to CWI? for which tax normaliza-tion of the interest component of AFC has not been d
recognized and (2) a net AFC rate to be applied to CWIP for which tax normalization has been recognized.
Both the gross and net AFC accrual rates will be determined by application of the formulas set forth
'QL in the stipulation in Docket No. 769-965.
Essen-tially these-fSrmulas employ the rate of return as most recently adopted by this Board but also take cognizance of the utilization of short-term debt for financing a part of CWIP and are thus effectively integrated with our ratemaking determinaticas.
The Company is to file a redetermination of its AFC accrual rates in accordance with.such formulas an-nually and also whenever the Board enters an order determining the Company's allowable rates for service to customers.
1502 142
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e 0
f e
e
t JERSEY CENTPW. PCWER & LICitT CO.':PANY DOCKIT 50. 7610/1022 DEPKICIATION RATES Column I Column S, team Production 2.65 2.79 Sayreville Werner 2.70 3.01 Gilbert 1-3 3.67 4.39 2.63 2.63 Keystone
'n Pucced Storage 6
Yards Creek 1.77 1.83 h-Nuclear Production Oyster Creek 3.14 3.11 7
TMI #1 3.19 3.19 O
Internal Co=bustion and Co=bined Cvele Riegel 3.99 3.99 Cilbert 4-7 5.36 5.39 All Other 5.05 5.19 Cilbert S 4.55 4.55 Transmission Plant Land Rights 1.19 1.19 JC Territory 2.71 2.75 NJ Territory 3.12 3.55 Distribution Plant Land Rights 2.13 2.13 JC Terri*ory 3.67 4.00 NJ Territory 3.39 3.59 Ceneral Plant JC Territory 4.35 4.86 NJ Territory 4.96 5.73 1502 143
s
- rLL amr3
>t STATE OF NEW JEF.SEY DEPARTMENT OF ENERGY Board of Public Utilities 101 Commerce Street Newark, New Jersey 07102 In the Matter of the Petition of PHASE II ORDER JERSEY CENTRAL POWER & LIGHT COMPANY Docket Nos.
7610-1021 for and 776-492 (1)
Increase in Rates and Charges for Electric Service (2)
Approval of Interim Implemen-tation of a Levelized Energy Adjustment Clause (Appearances Attached)
By the Board (Before Hearing Examiner Stephen Marshall)
This Phase II Order deals with petitions filed by Jersey Central Power & Light Company
(" Company") seeking (1) increases in its rates and charges for electric service (Docket No. 7610-1021) and (2) further interim implementa-tion of a lev eli::e d energy adjustment clause ("LEAC")
(Docket No. 776-492).
In the Phase I Order, dated September 1,
1977, we approved a series of stipulations entered into between the Company and various active parties to the proceeding.
A summary of the issues involved in such stipulations and their resolution was annexed as Appendix A to that Order.
A significant part of the revenue increase initially sought by the Company in its petition in Docket No. 7610-1021 was associated with the capital and operating costs related.to the Company's investment in the second nuclear generating un i t, a't Three Mile Island
("TMI-2").
All parties to the 1502 144
proceedings agreed that it would be appropriate to determine the Company's revenue requirements associated with Till-2 in the context of the overall results of operation during a more current test year.
In tnat light, the Company proposed g
that the proceedings in response to its petition in Docket W
No. 7610-1021 be dealt with in two phases, namely, the Phase I aspects which were dealt with in the September 1,
1977 Order (which established permanent rates pending this Phase II Order) and the Phase II. aspects which were to be d er.l t with at a later date and were to be based upon the submis-sion of updated information.
The Company agreed that, if that procedure were authorized, it would waive until May 1, 1978* the statutory limit under N.J.S.A.
48:2-21 on the suspension period for the port-ion of its proposed rates which would be involved in the Phase II proceedings.
No party to the proceeding objected to this procedure and we determined that it was appropriate.
In the Phase I Order, we authorized, among other things, an increase in base rates approximating 3.9%.
Since that time, the total charges to the Company's customers have stabilized.
In part, this has been attributable to the good performance of the Company's nuclear generating stations.
In part, it has been attributable to the combined efforts of the Company and the parties to this proceeding, including the Board's staff, to find means to provide stability of rates to customers, while providing for increases in the Company's costs.
The Company, the parties to the proceeding, and g
the Board cannot completely hold back the tide of inflation in costs.
What we can do is adopt procedures which botn enable the Company to pursue the most economic means of discharging its public utility obligation to provide service and the Board to authorize rate increases in modest but timely amounts so as to moderate the impact on customers.
This Phase II Order is designed to serve both objectives.
On the one hand, this Phase II Order authorizes an average increase in retail base rates of approximately 6.6%.
On the other hand, it provides for an anticipated reduction in energy charges (attributable to the operation of TMI-2), as against the level existing at this time.
The result is that the total increase fcc the Company's retail customers is expected to be only 3.5% from present levels, we note that the Consumer Price Index has increased by 17% since these proceedings were initiated in October 1976 and by 10% since the Phase I Order was entered.
By a series of waivers, the Company subsequently exterded this waiver of the statutory limit on the suspension period until the effective date of this order.
G 1502 145 >
This Phase II Order does not adopt any new rate-making policies or principles that were not provided for in the Phase I Order..
Instead, it applies those policies and principles to updated information.
This is not to say that any party will be precluded, in any future proceeding, from presenting for our consideration any new or changed policies or principles which it believes are desirable.
However, we are in accord with the joint views of the active parties in this Phase II proceeding that it is appropriate to apply the policies and principles in the Phase I Order to the Phase II proceedings.
In so doing, the active parties to the Phase II proceedings have presented a great deal of data, initially on an estimated basis and then on an actual basis as such data became available.
Hundreds of data requests and responses have been submitted.
tiumerous hearings have been held, with extensive cross-examination.
In all, a very full record has been compiled.
The Company, the Public Advocate and the Department of Defense presented testimony on revenue requirements and tariff design.
Other Intervenors also presented testimony on tariff design.
The Staff after reviewing all of the testimony presented their position.
Based on that record, there is annexed as Appendix A-1 a summary of the major elements relating to the determination of rate base, operating income and revenue requirements on which the active parties to the proceeding have agreed for the purpose of this Phase II Order and which we endorse as
(
appropriate for that purpose.
Moreover, the schedules annexed hereto as Appendices B-1 through B-5 reflect the results set forth in Appendix A-1 and constitute our ulti-mate findings with respect to rate base, operating income, capitalization and revenue requirements.
Although we endorse this stipulation for this proceeding because it produces an equitable end result, by accepting this stipula-tion we have not ruled on the merits ot all of the par-ticular adjustments proposed by the active parties.
Al-though the Appendices summarize various positions, we recognize that unless specifically set forth in the Appen-dix, the positions stipulated by the parties are to be considered without prejudice to any position the parties may take in any future proceedin'gs.
All active parties to the proceeding waived the submission of a report and recommendation by the Hearing Examiner except as hereinafter noted.
Under the circum-stances, we find such waivers appropriate and accept them.
When we authorized the Phase II p'roceedings, there was an expectation that THI-2 would be placed in commercial ser.' ice in the Spring of 1978.
This did not occur.
How-
- ever,,as previously noted, the Company waived the statutory limit on the suspension period for its. proposed rate in-1502 146.
.-as,p w.e-
crease until after TMI-2 was placed in commercial service.
Since TMI-2 is now in commercial service, it is desirable that 1ts associated revenue requirements and energy benefits g
be promptly reflected in the Company's base rates and levelized energy adjustment clause charges.
In our Phase I Order, we commented in some detail on the basis for establishing the Company's allowed rate of return on common stock equity at 13.25%, pointing out that the evidence in the proceeding indicated that a range of realized return on equity of 13% to 13.5% would be adequate from tne point of view of the common stockholders.
We also noted that the Company had testified that, as a result of the Phase I Order and the provision for Phase II, there should be little erosion of earnings and that whatever return on equity was allowed by the Phase I Order should be realized.
While this expectation was realized for a time, the unanticipated delay in placing TMI-2 in commercial service and the coneommitant delay in the entry of this Order has resulted in some erosion in the Company's earn-ings.
We are hopeful that the prompt entry of this Order will reverse that trend.
In the Phase I Order, we also noted that, when we allowed a 13.5% return on. common stock equity to the Company in the Order, dated June 10, 1976, Docket No. 759-899, we did so in an attempt to' improve the Company's financial health and ratings so that tney would be comparable to those of the two other major electric utilities in New Jersey and that our decision in the Phase I Order to modify that allowance to 13.25% d id not reflect a slackening in our determination to achieve that goal.
We expressly stated at that time:
"We continue to recognize that the long-term interests of the Company's customers are best served if the Company has financial strength and a better market for its securities.
The active parties in this Phase II proceeding have concluded - that, given the fact that it is a Phase II proceeding which generally. seeks to apply the principles and policies of Phase I to more current data, it is appropriate to continue the allowance for the return on common ' equity at the Phase I level.
We are willing to accept their judgment on this score.
Three other items require comment.
In Phase I and in the Company's rate cases preceeding Phase I,
we allowed the inclusion of the Company's accumulated AFC in rate base in order to provide the Company with a return on its AFC investment that, in the absence of compounding, it would otherwise not have received.
In this proceeding, Rate 1502 147 O --
Counsel have proposed, with the concurrence of the Company and the other parties, that for that portion of previous]y-accrued AFC currently not included in rate base, the Company be permitted to accrue AFC on previously-accrued AFC, and we hereby approve of this method of providing the Company with a return on its AFC investment.
Second, Rate Counsel has raised an issue as to whether up to S12 million of the Company's investment in TMI-2
- should be~ disallowed from rate base for purposes of return, but not for purposes of depreciation allowance.
The Company disagrees with this suggestion by Rate Counsel.
Extensive testimony on that subject has been presented, but there has not yet.been an opportunity for the parties to submit briefs or for the Hearing Examiner to submit his recommendations on this issue.
The parties have agreed that the decision on this issue, if required, can be implemented in the next rate proceeding of the Company.
We agree with this proposal of the parties.
We are, therefore, providing that the Phase II rates authorized by this Order shall be placed in effect as permanent rates without delay, but we are continuing this proceeding for the limited purpose of disposing of this issue raised by Rate Counsel.
Specifical-ly, we are authorizing and directing the Hearing Examiner to establish a schedule for the submission of briefs based on the hearing record on this issue that has been made and we direct him to submit his report and recommendations to us for disposition of.this issue.
Finally, we wish to refer to the status of the Com-pany's LEAC.
Rate Counsel has submitted testimony proposing certain modifi;ations to that clause, as well as to the clauses of the two other major New Jersey electric util-ities.
The Ccmpany has agreed to certain of these proposed modifications but objected to others.
In order to provide an opportunity for a thoughtful resolution of these issues, we are authorizing the continued implementation, -on an interim basis, of the LEAC of the Company, calculated in accordance with those suggestions of Rate Counsel to which the Company does not object and which our Staff finds appropriate.
The proceedings in respect of the LEAC will otherwise be continued to resolve the additional issues on which there is no present agreement.
In the Phase I Order, we transferred a significant portion of the Company's energy costs previously recovered by its LEAC adjustment to its base rates, in recognition of the fact that large energy adjustment clause changes cause customer misunderstanding.
In keeping with that policy, the active parties in this proceeding have recommended that an additional portion of such energy costs be so transferred to base rates, which will correspondingly reduce the level of the LEAC.
Although our customary pract. ice is to
- make new 1502 148
_3_
e
%+
. rates effective for service rendered after the date of acceptance of sucn tariffs, the parties have proposed that the subject rates be made effective for bills tendered after the date of this Order in order to achieve consistency h between the new LEAC and the new base rates.
The active parties in this proceeding and staff have reviewed the tariffs sumitted by the Company to implement the rate. increase provided by this Order and recommend the acceptance of such tariffs.
The Board also notes that the Stipulation has resolved certain of the particular operating peoplems concerning rail transit.
Two of the intervenors have expressed extreme interest in this area:
The New Jersey Department of Trans-portation, whien operates Conrail; and the New Jersey Department of Energy, whose State Energy Master Plan calls for a further emphasis on mass transportation. The Board finds that the stipulation is a reasonable resolution of these issues, but retains its interest in this area for a review of the methodology in future rate p r o c e va d i ng s.
Accordingly, the Board ilEREBY ORDERS that:
1.
The Company's petition for an increase in rates ce Denied except in the respects hereinafter set forth.
2.
Petitioner has filed for the Board's considera-tion, new tariffs providing for the following:
(a)
An increase in base rates designed to provide additional annual revenues from retail customers of approximately 533.8 million.
(b)
Such additional increase in base rates (and corresponding change in the base for the Company's LEAC as shall be necessary), so that the Company's base rates reflect 14 mills of energy costs per KWil of sales and related revenue taxes; (c)
The implementation, on an interim basis, of the LEAC set forth in Appendix C.
3.
Such new tariffs shall become effective for bills rendered by Petitioner on and after February 6,
1979.
4.
The proceedings in Dockets Nos. 7610-1021 and 776-492 be continueo for the limited purposes heretofore set forth.
5.
As provided in the Phase I Order, Petitioner spall employ, commencing with the effective date of the new tariffs provided for 16 paragraph 2,
the depreciation accrual rates set forth in Column II of Appendix B to that
(
Phase I Order.
1502 149 _ _ _. _
6.
Petitioner shall accrue A'F C at a net of tax rate of 7.8% on that portion of its CWIP related to certain major projects, and at a gross rate of 9.7% on the remainder of its CWIP on which AFC is to be accrued. Petitioner shal1
- <uiti.nue to +npiny these AFC accrual rates until a further filing is made by i t pursuant to the stipulation filed in Docket No.- 769-965, or until a further order of this Board.
7.
Commencing with the effective date of the new tariffs provided for in paragraph 2,
Petitioner will begin accruing AFC on all previousl,y-accrued AFC not included in rate base, and add the AFC accrued on previously-accrued Arc to the AFC base semi-annually in accordance with the AFC compounding procedure prescribed by the Federal Energy Regulatory Commission.
8.
Petitioner shall cause to be published in news-
. papers of general circulation in its service area not later than three days prior to the effective date of the new tariffs provided for in paragraph 2 of this Order notice of Petitioner's new tariff rates.
SCARD OF.PUBLIC UTILITIES (SIGNED)
I I4EREDY C"I 's i T inat tk v" hic vr~ist document is a t e" at tl c D mr:i et 12blic Utilty t
h es d
' P_r e s id e n t L
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Bv-r Ger:d t. ':.+m 'n Commissioner /
s m m ry
- .v, v!
O By:
Commissioner s
Dated: January 31, 1979 (SEAL)
ISOP 150 Attest:
(SIGNED) i 4LY k.
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secreary
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APPEARANCES Jersey Central Power Kirsten, Friedman & Cher
& Light Company by:
Jack B.
Kirsten, Es Berlack, Israels & Liber by:
James B. Liberman, Office of the Public Advocate
. Alfred L.
Nardelli, Esq.
Division of Rate Counsel Deputy Public Advocate State of New Jersey Onkar Sharma, Esq.
Assistant Deputy Public Advocate John Hoffman, Esq.
Department of Defense Major Walton M.
Jeffress United States Government O
Department of Transportation Robert II. Stoloff, Esq.
State of New Jcrsey Deputy Attorney General Air Products & Chemicals, Inc.
Stryker, Tams & Dill by:
Bartholcrmw T. Zanelli, Staff, Board of Public Utilities Gerald N.
Tobia, Jr.
Chief, Bureau of Rates Paul Slevin Jose Catalan Walter S::ymans':i 1502 151 g
a e
LlP,PCNDIX A-1 This Appendix summarizes the major elements relating to the -determination of rate base, operating income and revenue requirements which have been reflected in the Phase II Order to which this Appendix is annexed.
I.
Test Year.
The, test year employed is the twelve month period enced August 31, 1978.
II.
Rate Base.
The principal components of Rate Base are (A) Utility Plant in Service, (D) Plant Held for Future Use, (C) Nuclear Fuel, (D) Construction Work in Progress
("CWIP"),
(E) Deferred Debits, (F) Working Capital, and (G)
Accumulated Provision for Depreciation and Other Deductions.
These items are reflected in the Phase II Order to which this Appendix A-1 is anexed in the f ollowing manner:
(A)
Utility Plant.
- n Service.
The balance of Utility Plant in Service at AL,ust 31, 1978 was $1,367,689,000 To this balance of Utility Plant in Service there has been added the Company's investment in TMI-2, namely, S163,853,000 This unit was transferred from CWIP to Utility Plant in Service on December 30, 1978.*
As a result of the foregoing adjustment, the Utility Plant in Service Component of rate base is S1,531,542,000.
(B)
Plant Held for Future Use.
The Company's investment at August 31, 1978 ot $5,874,000 in Plant Held for Future Use is included in rate base.
(C)
Nuclear Fuel.
The Company's average invest-ment in nuclear fuel (exclusive of the nuclear fuel included in CWIP) during the test year was $81,694,000 and this amount has been included in rate base.
(D)
CHIP In the Phase I Order (as in the Order, dated June 10, 1976 in Docket No. 759-899), the Board allowed S157,806,000 of CWIP in rate base without an AFC offset and identified with particular projects.
In the Phase I Order, the amounts so allowed in rate base included a portion (S74,116,000) of the Company's investment in costs other than As indicated in the Order to which this Appendix A-1 is annexed, Rate Counsel has reserved the right to question whether up to S12 million of the Company's investment in TMI-2 should be disallowed from Rate Base, the impact of which would be implemented in the Company's next rate proceeding.
1502 152
_1_
AFC and the Company's entire investment in AFC (S29,114,000) associated with THI-2 at March 31, 1977.
After deducting the amounts so associated with THI-2, the balance of CWIP in rate base authorized by the Phase I Order was S54,576,000 g
and that amount of CWIP is included in rate base for tne W
purpose of the Phase II Order to which this Appendix is annexed.
Of this amount, S24,030,000 represents the Com-pany's test year investment in CWIP projects that do not accrue AFC.
In view of the decision by Public Service
. Electric and Gas Company to stop construction of its Atlan-tic Units 1 and 2, in which tne Company has an interest, the Company has not included its investment in these units in rate base.
After reflecting these adjustments, the balance of CWIP allowed in rate bace in Phase I (exclusive of TMI-2 CHIP), or 530,546,000, has been assigned to the Company's Forked River nuclear unit, as summarized in Appendix B-5.
(E)
Deferred Debits.
At August 31, 1978, the Company's dererred debit nalance (representing prospective incone tax deductions that will be available in future years but which have been treated for ratemaking purposes as if currently available, thereby reducing current revenue requirements) was S3,907,000.
This represents deferred debits relating to Contributions in Aid of Construction, Oyster Creek Settlement, Decommissioning and Federal Income Tax on interest component of federal income tax refunds.
This item is (i) increased by S140,000 as a result of the treatment of decommissioning expense associated with TMI-2, (ii) increased cy $1,049,000 as a result of the treatment of the Pennsylvania gross receipts tax, and (iii) increased by g
S1,824,000 to reflect the change in deferred tax balances by reason of the 46% Federal income tax rate that became effect ve January 1, 1979, all of which items are discussed below, resulting in a net balance of $6,920,000 to be includ*d in rate base.
(F)
Working Capital In the Phase I Order, we atr%cized a working capital component of rate base of
$74,299,000, consisting of (i) the Company's investment in materials and supplies at March 31, 1977 of S26,500,000, (ii) an allowance for cash working capital determined on the so-called "one-eighth" formula (S31,286,000), and (iii) deferred energy costs (determined in the manner therein set
.forth) of $28,101,000, or a subtotal of S85,887,000, less (iv) the excess, Sll,588,000, of the allowance for revenue taxes over the current year's liability for such taxes.
In this Phase II Order, we are including in rate base the same total dollar level of working capital without identification of the particular components.
(G)
Accumulated Provision for Depreciation and Decommissionino and Other Deductions.
In the aggregate, these items amount to S377,416,000, determined in the 1502 153 4
4
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s following manner:
(i)
Accumulated Provision for Deprecia-tion and Decommissioning.
The Company's accumu-lated provision for depreciation and decommission-ing which has been accrued in accordance with our prior orders was $312,014,000 at August 31, 1978, of which $1,275,000 is the accumulated decommis-sioning provision associated with the Company's TMI-l and Oyster Creek nuclear units.
By the Phase I Order we authorized changes, in two steps, in the Company's depreciation accrual ratas, the first to be made effective on the ef f ective date of the tariffs authorized by the Phase I Order and the second change to be made effective with the effective date of the new service rates to cus-tomers auth rized by the Phase II Order to which
-l this Appendix is annexed.
Such depreciation accrual rates are based upon direct weighted remaining service lives.
The effect of the second change in dep eciation acerual rates is to in-crease the Company's annual depreciation expenses 4
by $2,132,000 and i ts depreciation reserve by i
S2,213,000.
Moreover, as a consequence of the inclusion of TMI-2 in rate base (discussed above) j and the recognition of the depreciation expense, 4
(?
amounting to S5,710,000, associated with TMI-2 the depreciation reserve is increased by $5,718,000.
In addition as discussed in item (ii) below, we have made provision for decommissioning expense q..
for THI-2 in the amount of $290,000.
As a result L.
of these three adjustments, the accumulated provision for depreciation and decommissioning h:
utilized in determining rate base is S320,235,000 The Company agreed in the Phase I proceeding that it will not propose, in any proceedings filed by i
it prior to January 1,
1985, depreciation rates based upon the equal life groepings m e t h o d '.
(ii)
Provision for TMI-2 Decommissioning Expense.
By a separate petition (assigned Docket No. 769-965) as well as in its claims in Docket No. 7610-1021, the Company requested authorization to provide for decommissioning expense of its nuclear units now in operation, with the resulting
...(i funds to be set aside in a separate independent trust fund and rio t deducted from rate base, and with the earnings on such trust f und being utiliz-ed to provide for anticipated inflation in costs over the p-iod before decommissioning becomes necessary.
Rate Counsel agreed that it is appropriate to make provision for decommissioning
+
costs but proposed that the resulting funds not be 150c 154
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c:--:-c--=----
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~ - " ~ - ' - ' -
=-
set aside in a separate trust and that the accum-ulated amounts be deducted from rate base and the e
associated deferred income taxes be added to rate g
base.
The Company agreed to accept Rate Counsel's treatment of the accumulated amounts without prejudice to the Company's renewal of its p" posal for a separate trust fund at a later date..
This is the one item of the stipu-lations between the Company and Rate Counsel in Phase I about which our Staff had reservations when the Phase I Order was entered.
Our Staf f was of the view that there may be some merit in the establishment of a separate trust fund which would not be deducted from rate base but, nevertheless, did not object to our treatment of this item i.
accordance with Rate Counsel's proposal in the light of our continuing jurisdiction and the Company's reserved right to renew its request at a later date.
There have not been significant developments in respect of this matter since the Phase I Order was entered and, in light of the general approach reflected in the Phase II order, we are according the same treatment to this item in the Phase II Order which was accorded in the Phase I Order.
Under these circumstances, our determination of allowable operating expenses makes annual provision of $290,000 for decommis-sioning costs associated with TMI-2 nuclear
..i t,
with, as noted above, a corresponding deduction from rate base of 0290,000 and addition to rate base of the associated deferred income taxes of S140,000.
(iii)
Accumulated P cvision for Amorti-
- ation of Nuclear Furl AssemD3 g.
In determining rate base, such accemulated prsvision amounting to S38,821,000 at August 31, 197d has been deducted.
(iv)
Unamortized Investmant Tax Credit.
This item (amounting to S322,000 at August 31, 1978) represents the unamortized balance of the original (3%) investment tax credit which is ocing amortized as a ' credit to income over a period of 10 years and, in accordance with our prior deci-sions, such unamortized balance is deducted in determining rate base.
(v)
Unamorti cd Gain on Reaccuired Cebt..
This item, amounting to $5,018,000 at August 31, 1978, less a normalizing adjustment of S40,000, or O
1502 155
_4_
a net of S4,978,000, has been deducted in deter-mininc rate base ir. accordance with our establish-ed pol..:y.
(vi)
Unamortized Litication Recovery.
We previously authorized the Company to amortize over a five year period its net recovery applic-able to plant items in a litigation related to its Oyster Creek station and, in determining rate
- base, to deduct the unamortized balance.
At August 31, 1978, such unamortized balance was S52,000.
(vii)
Unamortized Federal Income Tax Refund.
The Company received refunds aggregating S1,396,000 of a portion of the Federal income taxes paid by it in the years 1961-1965 by reason of the allowance for federal income tax purposes of depreciation and/or amortization of rights of way.
Interest associated with such refunds aggregated S1,154,000.
In October, 1976, the Company began the amortization, effective as of January 1, 1976, of such refunds and interest (not of taxes on such interest) over a 10-year period.
The parties agreed for purposes of the Phase I Order that the unamortized balance of such refunds and interest (net.of taxes on such interest) at March 31, 1978 should be amortized, as a credit to operating income, over a five year period commenc-ing with the effective date of the tarif f s auth-orized by the Phase I Order and that the un-amortized balance should be deducted in determin-ing rate base.
The income statement for the test year ended August 31, 1978 reflects amortization of such credit in the amount of S'447,000 and the associated rate base reduction at August 31, 1978 is $1,680,000.
(viii)
Customer Decosits and Advances for Construction.
In accordance with the policy of this Board, the test year-end level of customer deposits and of customer advances for construc-tion aggregating S7,212,000 have been deducted in arriving at ratc base.'
(ix)
Pennsylvania Gross Receiots Tax.
Late in 1977, the Commonwealth or Pennsylvania enacted an amendment of its gross receipts tax law, effective retroactively to January 1,
- 1977, which imposed additional Pennsylvania taxes upon electric utilities owning generating facilities in Pennsylvania but not rendering service to retail Pennsylvania customc:s.
In. common with a 1502 156
-S-
number of non-Pennsylvania electric u'tilities, the Company is contesting the constitutionality of this tax and, while it is accruing provison for this tax, it is not currently paying such tax, g
The accumulated provision for this tax at August 31, 1978, plus t!.e annual additional amount of this tax that will be associated with the Com-pany's ownership of TMI, if the constitutionality of the tax should be sustained, aggregating S4,116,000, has been deducted in a riving at rate base.
The Company has also agreed that, if the Pennsylvania tax should be held invalid, it will refund to customers within 30 days after such determination and in such manner as shall be determined by the Board the amount of the tax accrued subsequent to the effective date of this order (net of the associated incraase in federal income taxes).
Our present expectation is that, if this eventuality should occur, the refund would be effectuated by reflecting it as a credit in the operation of the Company's levelized energy adjustment clause.
(H)
Net Investment Rate Base.
As a result of the adjustments discussed above, the normalized net invest-ment rate base at August 31, 1978 is $1,377,489,000.
There is annexed as Schedule B-3 a tabulation reflecting such rate base and its components.
h III.
Ooerating Income.
The Company's operating income for the twelve months ended August 31, 1978 was $114,155,000 In determining its normalized operating income for the test year, various adjustments were made and the major such adjustments were as follows:
(A)
Revenue Normalization.
Base revenues receiv-ed during the test year were increased by S12,610,000 to reflect on an annual basis (i) the consumption by customers added during the test year and (ii) the levels of usage by customers at the end of the test year.
Test year revenues were decreased by S425,000 to eliminate waste heat revenues discussed below.
(B)
Increased Costs Associated with Revenue Normalization.
The base revenue normalization requires provision for increased energy costs of S3,650,000 and increased operating and maintenance costs of 5558,000.
(C)
Revenue Taxes The New Jersey revenue tax liability is measured by revenues received durir.g the prior calendar year.
Our practice is to make provision for tne revenue taxes based upon the current year's normalized revenues.
This results in a normalizing adjustment to O
1502 157.-
increase the test year's revenue tax accrual by S8,260,000.
'Th e working capital allowance referred to in paragraph (D)
^
of Section II above takes cognizance of the associated reduction in working capital requirements.
He have discussed above (in Item II(G)(ix) the status of the Pennsylvania gross receipts tax.
Since that tax was enacted late in 1977 but was retroactively effective to January 1, 1977, the book provision for such taxes during the test year included provision for that tax associated with revenues for eight months prior to the beginning of tne test year.
The provision for this' tax has been adjusted to the amount associated with the test year base revenues.
Moreover, the portion of this tax which is associated with LEAC revenues is being provided for in the LEAC.
(D)
Reserve Capacity Payments.
Under the PJM and GPU power pooling agreements, tne Company is obligated to pay for installed capacity deficiencies, measured in accor-dance with the formulae established in such agreements, at rates specified therein.
Such agreements are filed as tariffs with the Federal Energy Regulatory Commission.
The rates so specified were increased effective June 1,
1978 and, in the absence of THI-2, by reason of that fact and of the changes in the respective amount of reserve capacity required to be provided (or paid for), the level of the reserve capacity payments required to'bc made by the Company would have been increased substantially.
However, one.of the conscquences of normalizing the results of the test year to reflect the fact that TMI-2 is now in service is to reduce the level of reserve capacity payments that is recognized for ratemaking purposes.
The net result is that the reserve capacity payments made by the Company during the test year are adjusted to increase that expense by S83,000.
(E)
EHV Rentals.
Beginning in J u ly -19 7 6, pursuant to tariffs tnat were filed and became effective under the Federal Power Act, the Company paid rentals for certain EdV facilities that were placed in service in 1976 and were associated with TMI-2, upon the basis of the expectation thet the Compan,r would be permitted to become the owner of 65% of TMI-2.
T.at level of rental expense was reflected i r.
the Phase I Order and resulting tariffs that became effective September 1 1 977; the difference in EHV rental expense based upon a.',
cwnership of TMI-2 and a 65%
ownership amounted to approximately S2.5 million per year, so that, during the period between September 1,
1977 and February 1, 1979, the Company has collected from customers S3.5 million based' upon the 65% allocation of EHV rentals.
In the Spring' of 1978, the Pennsylvania Public Utility Commission denied the request of the Company's affiliates
-hat they be permitted to sell additional interests in TMI-2
~
1502 158
so as to increase the Company's ownership of TMI-2 from 25%
't o 65%.
The Company and its affiliates promptly tiled amendments to the tariffs relating to the EUV facilities that reduced the rentals to a level consistent with the 25%
g, ownership of TMI-2 and, in its normalized operating expense W
- claim, eliminated the 52,334,000 excess of the amount actually paid over that payable on a 25% ownership basis during the test year.
Rate Counsel have proposed and the parties h ay_c_a_c.c_e p_t e d that, in determining the level of allowable rates in this proceeding, the Company be treated as if it had received a refund of the
.lferonce (S4,252,000) in such rentals which it would have paid if it had always been anticipated that it would only own a 25% interest in THI-2.
The r e s t. l t is that, within 11 months after the ef fectiveness of t he tarif f s implementing. the Phase II rates authorized by thi.i Order, the Company's custome s will, in effect, have rece..ved (i) a refund of the entire, amount of revenues which they provided beginning September 1,
1977 associated with EUV rentals on the expectation that the Company would be a 65% owner of TMI-2, plus (ii) interest thereon at a rate equivalent to the rate of return authoriz-ed in the Phase I Order.
(F)
Increases in Wages, FICA Taxes and Pension Costs.
During the test year, a wage rate increase became effective and the Company experienced increases in FICA taxes and pension costs.
Test year expenses have been normalized to make. provision in the amount of SS14,000 for the annualization of the portion of such increased costs chargeaole to operation and maintenance expenses, that was g not ceflected in the operating r esul ts for the test year.
No provision has been made for the increase in wages, FICA taxes and pension costs that became effective subsequent to the end of the test year.
(G)
Rate Case Expenses.
Allowance of S900,000.
has been made for amortization of the cost of this proceed--
ing over a two year period.
Since the Company 's. book amortization during the test year of rate case expense from prior proceedings and to reflect provision for one-half of the expenses of the Phase II proceedings, was S1,193,000, the effect of this adjustment was to decrease allowed operating expenses by S293,000.
(H)
Deoreciation and Decommissioning Cxpense.
As discussed in paragraph (G) ot Section II, the provision for depreciation includes 52,132,000 associated with the change in depreciation rates contemplated in the Phase I Order.
Moreover, provision has been made for depreciation and decommissioning expense' associated with TMI-2 in the amounts of SS,718,000 and $290,000, respectively.
(I)
Interperiod Tax Allocation.
The Company did not make an election under Subsection 167(1)(4) of the O
1502 159 -
Internal hevenue Code anJ, connequently, its ability to employ an accelerated method OL riepreciation for income tax purposes is not constrained by that subsection, llowever, in Docket No.
759-899, we authorized provision for deferred income tax cxpense for the differences between tax deprecia-tion and book depreciation for property added subsequent to fla r ch 31, 1975.
The effect of the increased book deprecia-tion rates which we have authorized in this prococding is to reduce the book test year normalization in respect of this item by 3245,000.
llo r eove r,
in the Phase I Order, we allowed additional provision for deferred income taxes associated witn the interest component of AFC (such provi-cion to be effected by the use of a net-of-tax AFC accrual rato commencing with the effective date of the tariffs authorized by that Order) in respect of (i) one-half of the Company's investment in Forked River, (ii)~all the Company's investment in the Scward generating station, and (iii) certain LilV iacilit les.
The result of application of that policy to the test year conditions normalized to reflect THI-2, is to increase operating expenses by S5,068,000 to make provision ior deferred income taxes.
On the other hand, it is estimated that tne balance in the deterred tax reserve, which has !)cretofore been accumulated on the basis of a 48% corporate federal income tax rate (wnigh was the rate in effect when such reserve was accumulated) was, at December 31, 1973, approximately S3,038,000 in excess of the reserve that would be required on the basis of the 46%
corporate income tax rate that became effective January 1,
1979.
Tne Company ~ has agreed that it will seek such auth-orization, if any, as may be required to permit it to amortize this dif f erence in reserve balance over a two year period (
.c.,
in the amount of S1,519,000 annually) begin-ning with the effective date of the Phase II Order to which this Appendix is annexed and that we may take such amortiza-tion into accuunt in establishing the Phase Il level of rates.
In addition, provision for deferred taxes has been decreased by $140,000 to reflect provision for TMI-2 decom-missioning.
(J)
TMI-2 As previously noted, operating expenses have been increased to make provision for the depreciation and decommissioning expenses (S6,008,000) and related deferred income tax expenses ($4,928,000) associated with the Company's interest in TMI-2 and have been reduced to make provision for the reduction in reserve capacity expenses (S2,579,000) and amortization oL the investment tax credit (5279,000) associated with that interest.
The Company has a.l u o nought an inerenne of S3,769,000 in allow-able operating expenses to provide for the Company's share of the operations and maintenance expense of TM1-2.
The other active parties have opposed this adjustment.
All the Parties have anteed to an allowance of onc-half of the Company's request, namely, 51,884,000, and that amount is 1$02 160
_9_
b,
Internal Revenue Code and, consequently, its ability to employ an accelerated method of depreciation for income tax purposes is not constrained by that subsection.
!!owever, in Docket No.
759-899, we authorized provision for deferred g
income tax expense for the differences between tax deprecia-W tion and book depreciation for. property added subsequent to March 31, 1975.
The effect of the increased book deprecia-tion rates which we have authorized in this proceeding is to reduce the book test year normalization in respect of this item by 5245,000.
!!oreover, in the Phase I Grder, we allowed additional provision for deferred income taxes associated with the interest component of AFC (such provi-sion to be effected by the use of a net-of-tax AFC accrual rate commencing with the effective date of the tariffs authorized by that Order) in respect of (i) one-half of the Company's investment in Forked River, (ii) all the Company's investment in the Seward generating station, and (iii) certain EHV facilities.
The result of application of that policy to the test year onditions normalized to reflect TMI-2, is to increase operating expenses by S5,068,000 to make provision for deferred income taxes.
On the other hand, it is estimated that the balance in the deferred tax reserve, which has heretofore been accumulated on the basis of a 48% corporate federal income tax rate (wnich was the rate in effect when such reserve was accumulated) was, at December 31, 1979, approximatgly S3,038,000 in excess of the reserve that would be required on the basis of the 46%
corporate income tax rate that became effective January 1, 1979.
The Company'has agreed that it will seek such auth-h orization, if any, as may be required to permit it to amortize this difference in reserve balance over a two year period (i.e.,
in the amount of S1,519,000 annually) begin-ning with the ef fective date of the Phase II Order to which this Appendix is annexed and that de may take such amortiza-tion into account in establishing the Phase II level of rates.
In addition, provision for deferred taxes has been decreased by S140,000 to reflect provision for TMI-2 decom-missioning.
(J)
TMI-2 As previously noted, operating expenses have been increased to make provision for the depreciation and decommissioning expenses (S6,008,000) and related deferred income tax expenses ($4,928,000) associated with the, Company's interest in TMI-2 and have been reduced to make provision for the reduction in reserve capacity expenses ($2,579,000) and amortization of the investment tax credit (S279,000) associated with that interest.
The Company has also sought an increase of S3,769,000 in allow-able operating expenses to provide for the Company's share of the operations and maintenance expense of TMI-2.
The other active parties have opposed this adjustment.
All the Parties have agreed to an allowance of one-half of the Company's request, namely, S1,884,000, and that amount is st. '
1502 161.
e reflected in the allowable operating expenses.
(K)
Income Taxes Associated with Annualized Interest. Operating expenses have been decreased by S642,000 to reflect the reduction in income taxes associated with the annualized level of interest payable by the Company based upon the long-term debt included in the agreed-upon capital structure.
~(L)
Amortization of Deferred Cnercy Costs.
As previously noted, one of the changes made by the Phase I Order was the implementation on an interim basis, of a levelized energy adjustment clause, as a substitute for the energy adjustment clause that had previously been in effect.
A related action taken was to defer the recovery by the Company of the accumulated deferred energy costs amounting tc S57,418,000 at the effective date of the tariffs filed in response to the Phase I Order, which otherwise would have been recovered by the Company during the September 1,
1977-January 31, 1978 period, and to amortize that amount at the rate of $2,313,000 per year.
Such amortization is being continued in the Phase II Order.
There is another separate deferred energy account reflecting the energy cost savings that were at-tributable to the test operations of TMI-2.
Under the terms of the levelized energy clause
- tariff, these savings (amounting, at December 31, 1978, to S3,360,000 plus S38,000 of interest) were accumulated in a separate defe'rred energy account and will be reflected in the operation of the revised levelized energy adjustment clause authorized to be implemented, on an interim basis, by the Phase II Order to which this Appendix is annexed.
( t! )
Waste Heat Revenues The Company has a cogeneration arrangement witn one industrial customer whereby it makes waste heat available to that customer for industrial purposes and receives revenues therefrom.
Such revenues amounted to $425,000 during the test year and were reflected in the Company's operating income.
However, the level of such revenues can fluctuate widely, depending upon both the extent of operation of the combustion turbine providing the waste heat and the extent to which the cus-tomer can use such waste heat economically.
The parties have agreed that, under these circumstances,it is prefer-rable to elimincte such waste heat revenues from operating income in establishing base rates and, instead, to reflect such revenues in the operation of the levelized energy adjustment clause which will exactly track the Company's actual experience in selling waste heat.
The allowable operating expenses reflect this adjustment.
(N)
Miscellaneous Adjustments.
A number of a
t 1502 162...
miscellaneous adjustments have been made.
Some of these adjustments increase and others decrease the allowance for operating expenses.
These items involve provision for storm damage, charitable contributions, the amortization of gains and losses on reacauired debt, gains on the sale of proper-ty, correction of the misclassification of interest on the levelized energy adjustment-charge over collections, and interest on customers' deposits.
In tha aggregate, these adjustments reduce allowable operating expenses by S1,878,000.
(0)
Related Income Tax g.
The Company's operat-ing income for tne test year, adjusted to substitute the 46% Federal income tax rate which became effective January 1,
1979 for the 48% rate that was effective during the test year, was S115,705,000.
The net effect of the adjustments referred to above is to reduce the allowance for Federal income taxes by S3,506,000.
(P)
Normalized Occratina Income.
The normalized operating income resulting from tne toregoing is Sil5,863,000.
The details are set forth in Schedule B-2 to the Phase II Order to which this Appendix is annexed.
IV Reclassification of a Portion of Eneray Adjustment Charae Revenues to Base Revenues.
In the Phase I Order we reclassitled a portion of energy costs from energy adjust-ment clause costs to base revenue costs, in recognition of the fact that large energy adjustment clause charges cause customer misunderstanding.
In keeping with that policy, the active parties in this Phase II proceeding have recommended g
that tne Company's base rates make provislon for the re-covery of 14 mills of energy costs per kwh or sales (and of the associated revenue taxes), with the transferred amounts being added to base rates on a per kwh basis.
Correspond-ingly, the base energy cost employed in the levelized energy adjustment clause would become 14 mills per kwh of sales, so that the revised clause would deal only with differences between actual energy costs per kwh of sales and that higher base (plus revenue taxes associated with such differences).
We agree that this is r7propriate and the Phase II Order to which this Appendix is annexed makes provision for such reclassification, which does not affect the Company's total charges to its customers.
V.
Capital S tructure and Rate of Return.
The active parties in the Phase II proceeding have agreed that the Board may properly utilize the Company's actual capital structure existing at August 31, 1978, sobject to the ad]ustment refer:rd to in this paragraph, in developing the appropriate rate of return.
Under the procedures permitted by the Internal Revenue Code, the Company proposes to. employ the so-called " half-year convention" in determining its depreciation deductions for income tax purposes in respect
~
1502 163 0 _
of TMI-2 for the. year 1978.
The result will De that the Company will have 1978 depreciation deductions in respect of TMI-2 (which, as noted, was placed in commercial service on December 30, 1978) for six months.
As a result, the Com-pany's income tax expense for 1978 will be reduced by approximately S2,879,000 which will be offset by a normaliz-ing charge for deferred income tax expense.
There will, therefore, be'no net impact of this item on operating income, but this additional deferred income tax will provide additional cost-free capital in that amount, and such additional cost-free capital has been recognized in the capital structure employed for developing the rate of return.
The embedded costs of long-term debt (7.90%)
and preferred stock (9.24%) have been employed in developing the rate of return.
For the reasons discussed in the Phase II Order to which this Appendix is annexed, an allow-ance of 13.25% has been employed for the common stock equity component of capitalization.
With appropriate weighting for each of these, components of capitalization (including cost-free capital) the over-all allowed rate of return is 9.62%.
The details are shown on Schedule B-III of the Phase II Order to which this Appendix is annexed.
VI.
Operating Income Deficiency and Revenue Factor.
On che basis of the net investment rate base (S1,377,489,000) and allcwed rate of return (9.62%) set forth above, the Company would be permitted cc receive revenues sufficient to produce operating income of S132,514,000.
The adjusted normalized operating income found above is $115,863,000, resulting in an operating income deficiency of $16,651,000.
The revenue factor (taking into account Federal income taxes, New Jersey gross receipts taxes and Pennsylvania gross receipts taxes) is 2.115.
Consequently, the addi-tional revenues needed to provide for this operating income deficiency are S35,217,000, of which S33,817,000 is applic-able to retail customers, and the tariffs which the Company is authorized to file by the Phase II Order to which this Appendix is annexed may provide for increases in base rates for retail customers designed to produce additional base revenues of 33,817,000.
VII.
Rate Design.
The issue of rate design has been extensively litigated in the Company's prior rat? proceed-ings.
The rate design reflected in the Company's existing tariffs was established approximately two and a half years ago.
In view of the fact that the accompanying Order provides for approximately a 6.6% increase in the level of the Company's retail base revenues (prior to the inclusion of additional energy costs in base rates), the parties have agreed that it would be appropria_te to make minor changes in the Company's existing rate design and we concur.
The 1502 164 consent Ordct issued in the Phase I proceeding stated that rate design issues were to "De subject to full exploration in the Phase II proceeding."
Inasmuch as all parties have
(
participated in the Phase II rate design and have agreed to certain changes in rate structure, the revised tariffs which g
are authorized by the accompanying Order allocates the allowed increase in base revenues between the rate classes on a basis which will essentially be cost based.
The Company has not made any significant changes in the cost allocation procedures emplobed by it for rate design pur-poses, with the exception t it it has allocated one-half of the fixed charges associated with TMI-2 to demand functions and one-half to energy functions on the ground that the low energy costs to be derived from TMI-2 was an important element in the decision to install that unit.
Due to the relatively minor impact of making the THI-2 capacity allo-cation on either a 50% demand and 50% energy basis or the traditional 100% demand basis, the parties have agreed that resolution of this contested issue should be reserved for a tuture proceeding.
The Board finds that this Agreement is a reasonable settlement for this case.
The tariffs authorized by the accompanying Order, where appropriate, contain demand charges that are increased more than energy charges to reflect cost incurrence char-acteristics.
Likewise, such new tariffs reflect a greater increase in customer costs where such charges are separately set forth.
Additisaally, such new tariffs reflect summer-winter energy and demand rate differentials which are somewnat greater than existing differentials in the pre sent h
tariff.
The current discount for curtailable service is S1.625 per kW per month for transmission service.
In determining the Company's revenue requirements, provision has been made for the increase in installed capacity ~ charges and credits under the PJM and GPU power pooling agreements.
In the light of that fact, the curtailable service discount will be increased to S2.05 per kW per month for customers served at transmission voltages, representing the sum of
$1.925 per kW related to savings in demand costs and S0.125 per kW related to savings in energy costs resulting from the approximate 1 cent per kWh average differential between day and night PJM running rates.
The Company's new tariff eliminated space heating rates and riders.
Furthermore, the Company's new tariff provides general service by voltage levels (i.e.,
a se-condary voltage service schedule, a primary voltage service schedule, and a transmission voltage service schedule).
- Finally, the Company has made minor clarifications to its tariff for which there is no aggregate revenue impact.
All active p= ties to the proceeding have recommended acceptance G
1502 165 _
of these tariffs.
On this basis, the Board finds such revisions in the Company's new tariff appropriate and accepts such tariff.
tie also note that the stipulated tariff design is in accordance with the general policies of the state and federal governments urgfog a modification to encourage the conservation of energy.
There has been extensive testimony on tariff design in five of the six areas of federal stan-dards, enumerated by the Public Utilities Regulatory Poli-cies Act of 1978, P.L.95-617, section 111: Cost of Service, Declining Bloc Rates, Seasonal Rates, Interruptible Rates, and Load Management Techniques.
(The sixth standard of the federal act, Time-of-Day rates, is being extensively con-sidered in a separate proceeding under a different docket
- number, 767-799).
We believe that.t! e stipulated tariff design is consistent with the intent of the federal act in so far as it is appropriate.
VIII.
Determination of AFC Accrual Rates Commenc-ing with the eftective date of the tariffs provided for in the Phase I Order, the Company has been employing two AFC accru:1 rates, namely, (1) a gross AFC rate applied to CWIP for which normalization of the tax reduction associated with the interest component of AFC has not been recognized and (2) a net AFC rate applied to CWIP for which tax normaliza-tion has been recognized.
Both the gross and net AFC accrual rates are determined by application of the formulas set forth in the stipulation in Docket No. 769-965.
IX.
Comooundina of AFC.
In Phase I and in the Com-pany's rate cases preceeding Phase I,
we allowed the inclusion of the Company's accummulated AFC in rate base in order to provide the Company with a return on its AFC investment that, in the absence of compounding, it would not otherwise have received.
In this proceeding, Rate Counsel have proposed, with the concurrence of the Company and the other parties, that in lieu of including previously-accrued AFC in rate base, the Company be permitted to accrue AFC on previously-accrued AFC not included in Rate Base, and we nereby approve of this method of providing the Ccmpany with a return on its AFC investnient.
1502 166
Appendix B-1 JERSEY CCNTRAL POWER & LIGi!T COMPANY Docket No. 7610-1021 (Phase II)
Summary of Rate Base, Operating Income and Allowable Base Revenue Increase
($000'.s)
Rate Base S1 377 489 Rate of Return 9.62%
Allowable Operating Income S
132 514 Normalized Operating Income S
115 863 operating Income Deficiency S
16 651 Additional Total Revenue 'llowable (Revenue Factor = 2.115)
S 35 217 Amount A11ocable to h
Retail Customers S
33 317
- 1502 167 See Appendix D.
(
JEPSEY CENIFAL FOKER & LIGllT COMPANY Appendix B-2 Docket No. 7610-1021 (Pncsc II)
Operating Iacome, Including TMI-2 (S000's)
Rate Counsel's and D.O.D.'s Position sdj.
Company's Adjustments Stipulated by
!o.
- Claim Accepted Bv Comoany The Parties iperating Income, 12 Months Ended 8/31/78 sd 3ted to Reflect 46% Federal Income
. s...<a te S115 705 5115 705 ormalizina Adjustments, Including TNI-2:
Revenue Adjustment, Net of Base Fuel & O&M Expense S 8 402 S
(425)
S 7 977 Taxes Other Than Income Taxes-New Jersey (8 260)
(8 260)
Adjust EHV Rents to Reflect 25% TMI-2 Ownership 2 334 4 252 6 586 i,18-1 Reserve Capacity Payments (83)
(83)
Storm Damage 1 273 1 273
.hage Increases-11/1/77 and 11/1/78 (3 450) 2 936 (514)
Charitable Contributions (151) 69 (82)
Amortization of Rate Case Expense 293 293
' 18-2 Revised Depreciation Rates, TMI-2 7
Depreciation & Decommissioning (8 140)
(8 140)
,18-3,8 Deferred Income Taxes (4 683)
(4 683)
Gain on Reacquired Deot 314 40 354 2
Income Taxes-AnnoTlized Interest 642 642 3
Interest en Customers' Deposits (323)
(323)
.6 Annualization of Oyster Creek Radwaste (Net, Including Taxes)
(601) 601 L7,18-4,5 Taxes Other Than Income Taxes, Pennsylvania 757 285 1 042
!8-9 Amortization of Inv. Tax Credit (TMI-2) 279 279 L8-1 0 & M Expense (TMI-2)
(3 769) 1 885 (1 884)
Gain on Sale of Property 57 57 Interest on LEAC Moved "Below Line" 599 599 Deferred Tax Balance Change Due tn 19 1 519 Effect on Current Inccme Taxer (46% Federal Rate) of Abova Adjustments (Including Excess of Tax Over Book Depreciation) 7 658 (4 152) 3 506 Total Normalizing Adjustments S (7.508)
S 7 666 5
158 idjusted Operating Income
$108 197 S 7 666 S115 863_
eference: JC-II-107 1502 168
JEPSEY CENTRAL POWER & L131Tr COMPANY Appendfx B-3' Docket No. 7610-1021'(Phase II)
Rate Base, Including THI-2 (S000's) h Ratt Counsel's and D.O.D.'s Position Company's Adjustments Stipulated Claim Acceoted Bv Comoany The Parti Jtility Plant Electric Plant In Service
$1 531 542 S --
$1 531 542 Ele.tric Plant Held For Future Use 5 874 5 874 Nuclear Fuel 85 451 (3 757) 81 694 Constructien Work In Progress 84 431 (29 855) 54 576 Total Plant
$1 707 298 S(33 612)
Sl 673 686 idditions Deferred Debits - Accum.
Deferred Income Taxes S
6 622 S (2 575)
S 4 047 Deferred Taxes Associated with Pa. Gross Receipts Taxes 1 049 1 049 Adjusbnent to Deferred Taxes To Reflect Change in Tax Rate From 48% to 46%
1 824 1 824 Total Additions S
6 622 S
298 S
6 920 jaductions Accumulated Provision for Depreciation and Decommissioning S 321 179 S
(944)
S 320 235 Accumulated Provision for Amortization Of Nuclear Fuel Assemblies 38 821 38 821 Customer Advances For Construc-tion 1 834 1 834 Unamortized Investment Tax Credit 322 322 Unamortized Gain On Reaccuired Debt (Net) 5 018 (40) 4 978 Unamortized Litigation Recovery 52 52 Unamortized Federal Income Tax Refund 1 680 1 680 Customer Deposits 5 378 5 378 Pa. Gross Receipts Taxes 4 116 4 116 Total Deductions S 374 284 S 3 132 S 377 416
- orkina Caoital S
88 967 S(14 668)
S 74 299
$tInvestmentRateBase
$1 428 603 S([3.1041 S1 377 489 w.) 's - t===
- Same total amount allowed in Phase I (includes unamorti-As d.ferred energy costs of $28 541, net).
O
~
1502 169
JERSEY CLVfRAL POWER & LIGilT COf1PANY Appendix B-4 Docket No. 7610-1021 (Phase II)
~
Capital Structure & Rate of Return
($000's)
Rate Counsel's
~
and G.S.A.'s Position Company's Adjustments Stipulated by Claim Accepted By Company The Parties lapitalizatien Ratios:
Long-Term Debt 51.14%
(.05) 51.09%
Preferred Stock 12.76
(.01) 12.75 Common Stock Equity 33.29
(.04) 33.25 Cost-Free Capital 2.81
.10 2.91 Total 100.00%
100.00%
- omponent Costs:
Long-Term Debt 7.90%
7.90%
Preferred Stock 9.24 9.24 Common Stock Equity 13.50
(.25) 13.25 Cost-Free Capital
..eichted Costs:
Long-Term Debt 4.04%
4.04%
Preferred Stock 1.18 1.18 Common Stock 4.49
(.09) 4.40 Cost-Free Capital Total 9.71%
(.09L 9.62%
1502 170
JERSEY CCITrRAL POhER & LIGiff COMPANY Appendix b-5 Docket No. 7610-1021 (Phase II)
Comoosition of CWIP in Rate Base (S000's)
Allowed Phase II in as Phase I Adjustments S tipulated TMI-2 Net S' 74,116
' Accumulated AFC 29,114 Total S 103,230 S(103,230)
' Forked River Net S
0 1
Accumulated AFC 28,327 2,219 30,546 Total S 28,327 S
2,219 S 30,546 Atlantic 1 & 2 Net S
0 Accumulated AFC 865 Total S
865 S
(865)
Small Projects on Which AFC Had Not Been Accrued S 12,144 S
(2,298)
S 9,846 Projects That 2
Do Not Accrue AFC S 7,317 S
6,867
$ 14,184 Previously Accrued AFC (Other Than Above)y S 5,923 S
(5,923)
Total S157,806 S(103 230)
S 54,576 1 Subsequent to the entering of a Final Order in Phase II of Docket 7610-1021, the Company will begin accruing AFC on all previously-accrued AFC not included in rate base, and add the AFC accrued on previously-accrued AFC to the AFC base semi-annually in accordance with the AFC compounding procedure prescribed by the FERC.
2 Union Beach, suspended (deferred) projects, work orders inactive for more than three months, projects in service but not transferred from CWIP.
1502 171 O
Encegy Adjn:tr. cat Cin"se of Jersey Central Power & Light Compa ny l.
The net energy adjustment charge to be applied by the Company for the
-month period beginning January 30, 1979 pursuant to the Company's EAC i
less this Schedule shall be suspended by a revised Schedule filed in
_cordance with the terms of the Company's EAC) shall be.755 mills per kilowatt
.our.
2.
Such not charge has been determined on the following basis:
MILLS PER KWil As Filed in Adjustment Mills per KWH Sept. 15, 1977 to Reflect per Current LEAC Filing _
, Updated Data Es tima te (a)
Company's estimated average ost of energy during twelve months ovember 1, 1978-october 31, 1979.
For details see Appendix'A)*
14.663 14.663 (b)
Credit for waste heat revenues
.068 (1)
.068 (c) Less cost in base rates 10.779 3.221 (2) 14.000 (d)
Net cost 3.884 (3.289)
.595 (e)
Charge (or credit) to amortize ver the twelve month period beginning
/nuary 30, 1979 under collections (or r collections) pursuant to previous edule filed pursuant to Company's AC.
(For detaile see Appendix E)*
(.713)
.780 (3)
.067 Sub-Total 3.171 (2.509)
.662 (f) Amount resulting f rom appli-ation of tax factor.
.428
(.335) (4)
.093 Total 3.599 (2.844)
.755 (1) Waste heat revenue is now deducted from energy cost.
(2) Roll-in of energy cost to base ra tes.
(3)
Increase due to an under collection as of 12/31/78 versus an estimated over collec-tion at 10/31/78.
Es tima t ed Actual 10/31/78 12/21/78 Regular over (under) 56 333 012 S(3 180 227)
Test 2 210 445 3 359 S67 Interest 712 445 952 341 S9 981 302 S
(868 013)
- (4) Tax factor increased to include Pennsylvania Crss Receipts Tax.
o I
Prior factor - 1.1351 New f acto r - 1.1401
- of LEAC filing 15012 172
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D PENNSYLVANIA PUBLIC UTILITY COMMISSION Harrisburg, PA 17120 Public 'ieeting held November 8, 1979 Commissioners Present:
W.lW'ilson Goode, Chairman Michael Johnson Pennsylvania Public Utility Commission, et al.
Docket No.
I-79040308 v.
Metropolitan Edison Company and Pennsylvania Electric Company, Respondents ORDER BY THE COMMISSION:
The Commission, in its order at this docket adopted June 15, 1979, directed Metropolitan Edison Company (" Met Ed") and Pennsylvania Electric Company ("Penelec") to petition the Federal Energy Regulatory Commission ("FERC") and negotiate with other members of the Pennsyl-vania-New Jersey-Maryland Interconnection ("PJM") to eliminate split-savings pricing of sales of energy within the interconnection during periods of emergency and to price such power at cost.
Specifically, at ordering paragraph seven, we ordered:
"7.
That Metropolitan Edison Company and Pennsyleania Electric Company shall undertake in good faith to petition the Federal Energy Regulatory Commission, and to negotiate with other members of the Pennsylvania-New Jersey-Maryland Interconnection, for the pricing of purchases of energy during emergency conditions at cost, consistent with the findings of the Commission, and shall report monthly on its efforts."
Met Ed and Penelec have not petitioned the FERC to modify the PJM agreements. Although stating their willingness to do so, the Respondents urge the Commission to relieve them of that requirement noting that (a) the complexity and delay inherent in any contested, formal proceeding before FERC would probably preclude the obtaining of any benefit for Respondents' ratepayers from a favorable FERC decision until 1981 or beyond and (b) a tentative agreement has been reached among the members of PJM to reduce the cost to Respondents of power purchased from PJM.
1502 174
D On October 10, 1979, Met Ed and Penelec filed with the Com-mission a Petition For Declaratory Order requesting a determination that acceptance by Met Ed, Penelec and Jer ey Central Power & Light 1!
Company ("GPU Companies") of a proposal of -he other members of PJM for a modification of the pricing of interchange power sales would constitute compliance with ordering paragraph seven of the Commission's June 15, 1979 Order.
The PJM proposal for a modification of the PJM agreements, which modification would remain in effect until December 31, 1980 or the resumption of generation at Three Mile Island, Unit No. 1
("TMI-1"), whichever occurs earlier, would substitute average incremental cost plus ten percent for the presently used average incremental cost plus split-savings as the basis for pricing PJM interchange sales to the GPU Companies of up to 1100 FGM per hour and not to exceed 7,000,000 MWH in 1980. The hourly and annual limitations restrict application of the proposed pricing to sales approximating the average experienced energy output of TMI-1 and TMI-2.
Put simply, the PJM proposal would make TMI replacement power available to the GPU Companies at cost plus ten percent.
Certain other terms of the PJM agree"-
ments would be modified as well.
It appears that a condition of PJM proposal is that this Commission relieve Met Ed and Penelec of the requirement that they petition FERC f or the elimination of split-savings pricing of inter-change sales of energy during periods of emergency.
Also. the petition of Respondents states:
the GPU Companies have been involved in extensive negotiations with other members of PJM [but] have not been able to obtain the agree-ment of the members of PJM to price at cost their aales of energy to replace TMI generation."
This Commis sion views with some reservation the reluctance, or refusal, of the PJM companies to agree to the sale of energy within the inter-connection at cost during periods of emergency.
In the long run we shall be unstinting in our efforts to eliminate the inequities of split-savings pricing.
For the present, we are convinced that the public interest lies in the approval of Respondents' acceptance of this limited agreement.
In general terms the Respondents' petition, the appended schedules, and a letter dated Oct ober 18, 1979 from GPU Service Corpcration containing data requested by the staff, indicate that the PJM proposal will reduce significantly the cost of energy to the GPU Companies.
During the period April, 1979 through September, 1979, 1/
The other members of the PJM Interconnection are:
Philadelphia Electric Company, Pennsylvania Power & Light Company, Public Service Electric and Gas Company, Baltimore Gas and Electric Company, and Potomac Electric Power Company. 1502 175
the split-savings pr4_ce to the GPU Companies of energy purchased from PJM averaged, from 24% to 33% above the selling company's cost.
Had this proposed agreement been in affect throughout the first nine months of 1979 the GPU Companies would have realized nearly $20 million in savings over split-savings pricing.
Included with the petition of Respondents is a "PJM Study of the Effect of Three Mile Island Unit Outages". Although the study is somewhat cryptic, the conclusion cf the study is that in 1980 (assuming only a 200 MW energy-capacity purchase from outside PJM and assuming certain PJM costs of fuel, forced outage rates, etc.)
the cost to the GPU Companies of PJM energy would be reduced from
$345 million under split-savings pricing to $313 million under cost plus ten perc. mt pricing, with a savings of $32 million. The GPU Companies sep rately estimate, under assumptions of larger purchases outside PJM, that the savings in 1980 may be between $10 million and
$30 million.
The Commission's inquiry can and shall end here for purposes of this order.
The narrow question before us is whether Respondents' acceptance of the PJM proposal is reasonable compliance with ordering paragraph seven of the Commission's June 15, 1979 Order. The Commission hereby makes no determination of the reasonableness of the projected energy costs, the terms of the proposed modification of the PJM agr2e-ments, the proper allocation of cost savings among the GPU Companies, or any rate.
Although this matter is essentially ex parte, all of the documents before the Commission were served on all parties; and the Commission is unaware of any protest or objection of any party.
Met Ed and Penelec have identified their petition as one seeking a declaratory order.
Since the relief sought is a determination of compliance with a prior order, the need for the extraordinary form of a declaratory order is questionable. However, in this instance we find a sufficient uncertainty to justify a declaratory order.
The information before the Commission indicates that the proposed modification to the PJM agreements will reduce significantly the costs of energy purchased from PJM by Met Ed and Penelec from the levels which would otherwise be incurred pursuant to split-savings pricing.
Obtaining those savings for Respondents' ratepayers is clearly in the public interest, THEREFORE, IT IS ORDERED:
1502 176 e
l.
That the Petition For Declaratory Order filed by Metropolitan Edison Company and Pennsylvar. a Electric Company on October 10, 1979 is hereby granted.
2.
That a copy of this order shall be served on Respondents and all parties.
BY THE COMMISSION, 4
f--._
_M d v.
William P. Thierfelde Secretary
'r.,'
(SEAL)
'.i I k, t {- -
01 ADOPTED: November 8, 1979 0 201We ORDER ENTERED:
'I \\. \\ '
1502 177