ML19308A401
| ML19308A401 | |
| Person / Time | |
|---|---|
| Site: | South Texas, Comanche Peak  |
| Issue date: | 09/30/1976 |
| From: | Solomon J GEORGIA POWER CO. |
| To: | |
| Shared Package | |
| ML19208C305 | List:
|
| References | |
| E-9521, NUDOCS 7909260142 | |
| Download: ML19308A401 (4) | |
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cE0ac1A POWER C0xP^xv FPC DOCKET NO. E-9521 PREPARED TESTIMONY OF J. BERTRAM SOLOMON 1
Q PLEASE STATE YOUR NAME AND ADDRESS.
3 A My name:is J. Bertram Solomon. My business address is 1000 Crescent 4
Avenue, N.
E., Atlanta, Georgia 30309.
5 6
Q PLEASE OUTLINE YOUR FORMAL EDUCATION.
78 A I received the degree of Master of Business Administration from Georgia 9
State University in 1973. My area of concentration was Finance. I also 10 received the degree of Bachelor of Science in Industrial Manage =ent from 11 the Georgia Institute of Technology in 1972.
12 13 Q PLEASE STATE YOUR PROFESSIONAL EXPERIENCE.
1415 A As a Cooperative student at Georgia Tech, I gained approximately two 16 years' work experience as an assistant engineer in an industrial pro-17 duction setting. After my graduation from Georgia Tech in 1972, I worked 18 approximately one and one-half years as a program manager for a management-19 consulting firm and for another one and one-half years as a project analysc 20 for a resort development firm.
I was employed by the Southern Engineering 21 Company of Georgia, my present employer, in January 1975.
Since that time, 22 I have had assignments in both the retail and wholesale rate departments 23 of my Company, primarily in the area of electric utility rates.
In the 24 retail area I have participated in the preparation of rate increase filings
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25 for both GLT and distribution rural electric membership cooperatives as well 26 as the determination of revenue requirements and the proper rate design for 27 unregulated' rural electric membership cooperatives. My primary activities, 28 however, have been in the wholesale area where I have participated in the 29 analysis of approximately one dozen Federal Power Commission filings of 30 private utilities operating in eight different states.
I have also parti-31 cipated in the preparation of testimony and exhibits for several of these 32 rate filings. Additionally, I have participated in the preparation of 33 retail and wholesale allocated cost of service studies and power cost 34 projections.
35 36 Q HAVE YOU EVER TESTIFIFD IN OTHER COMMISSION PROCEEDINGS?
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37 38 A Yes, I have testified before the Public Service Commission of Kentucky.
39 I have also testified before the Federal Power Commission in proceedings 40 involving the Public Service Company of Indiana, FPC Docket No. ER76-149 41 and Georgia Power Company, FPC Docket No. E-9091.
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43 Q WHAT WAS YOUR ASGIGNMENT IN THE INSTANT PROCEEDING?
44 45 A My assignment was to review the material filed by Georgia Power Company 46 in this proceeding, that provided by the Company in response to data 47 requests, the testimony and exhibits filed by the FPC Staff r.td material 48 supplied.by FPC Staf f in response to data requests along with other public 49 information and to provide analysis and testimony on a cost of service 50 x
7 909260 /$/p('
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I study which accurately reflects the cost experienced by Georgia Power 2
Company in providing a kilowatt of capacity in each of the fe' lowing generating 3
categories:
base, intermediate, peaking, and reserve.
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5 Q THE PARTIAL REQUIREMENTS SERVICE CONCEPT EMPLOYED IN THE INSTANT PROCEEDING 6
HAS BEEN EXPLAINED BY THE COMPANY AND BY COOPERATIVE INTERVENOR WITNESSES 7
GROSS AND SPRINGS. PLEASE BRIEFLY DESCRIBE THE METHOD EMPLOYED BY 8
CEORGIA POWER IN REFLECTING THE COST OF PROVIDING PARTIAL REQUIREMEh~rS 9
SERVICE.
10 11 A Succinctly stated, the Company started with its total system cost as 12 adjusted in its WR-8 rate filing, FPC Docket No. E-9091, and then made 13 further adjustments to reflect the actual sale of transmission and 14 distribution facilities to Oglethorpe Electric Membership Corporation.
15 The next step was to functionalize the Company's investment and expenses 16 and, utilizing only the demand component of the production and step-up 17 substation service levels, allocate this investment and expense to the 18 generation catagories defined as base, intermediate, peaking, and reserve.
19 The Company then utilized the revenues request.ed in its last update in this 20 proceeding, which excluded the effects of having Construction Work In Progress 21 (CWIP) in the rate base, and used an income tax formula which in essence 22 relates the level of income tax deductions to the level of rate base 23 investment to calculate the income taxes associated with each of the generation 24 catagories.
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25 26 Q DID THE PROCEDURE OF THE FPC STAFF CLOSELY FOLLOW THAT OF GEORGIA POWER 27 COMPANY?
28 29 A Yes, however, the FPC Staff used the actual 1975 data filed by the Company 30 in FPC Docket No. E-9091 and that available through other sources such 31 as the Company's FPC Form 1 as the basis for its cost of service study.
32 The Staff also relied partialy upon the case filed by FPC Staff in FPC 33 Docket No. E-9091.
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'i5 Q WHAT PROCEDURE DID YOU FOLLOW IN PREPARING YOUR COST OF SERVICE STUDY?
36 37 A I followed the same general pattern employed by both the Company and the 38 FPC Staff; however, I used as a starting point the Company's investment and 39 expense femand component at the production and step-up substation service 40 levels for full requireuents rates as filed by the Company in FPC 41 Docket No. E-9091. As did the Company, I then made adjustments to reflect 42 partial requirements service. Before allocating the total Company cost of 43 service into the four generating catagories, I made further adjustments found 44 necessary by the other Cooperative Intervenor witnesses and others I found 45 necessary to appropriately reflect costs at the production and step-up 46 substation level.
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1 Q WHAT ADJUSTMENTS DID YOU FIND IT NECESSARY TO MAKE?
2 3 A I found only two adjustments necessary in addition.to those recommended 4
by the other Cooperative Intervenor witnesses: an adjustment to the 5
Company's method of functionalizing A & G cxpenses and general plant 6
investment and an adjustment to the 45-day cash working capital requirement.
7 8
The Company departed from this Commission's long-standing practice of 9
functionalizing both administrative and general-expenses and general plant 10 on the basis of allocated wages and salaries by first specifically 11 assigning to the production function a small portion of administrative 12 and general expenses and then functionalizing the remainder based upon 13 allocated wages and salaries. No separate analysis of each item of A & G 14 expense was made, rather a select few were analyzed while the majority of these 15 expenses were functionalized on the bases of the payroll allocation method.
16 17 My revision to Georgia Power's treatment of administrative and general 18 expense is shown on Cooperative Intervenor Exhibit No.
(JBS-1),
19 page
, lines 11 and 12, and is based on the wage and salary functionalization 20 shown in the Company's Statement "M", Period II, page 20 of 24, filed in 21 FPC Docket No. E-9091.
In keeping with this principle of functionalization, 22 I used the allocated wages and salaries to functionalize the 13-month 23 average general plant provided by Cooperative Intervenor witness Gross.
24 Georgia Power Company deviated from this allocation only by specifically
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25 assigning to transmission and distribution nome $535,438, representing 26 less than 1% of its total average net general plant.
27 28 The second adjustment I found necessary results from the use of different 29 expense figures in calculating the 45-day working capital allowance.
My 30 calculation of this allowance is shown on Cooperative Intervenor 31 Exhibit No.
(JBS-3). The variance in expenses results basically from 32 two it. ems.
The first is the difference between the Companys and my 33 functionalization of administrative and general expense.
The second difference 34 results from ny transfer of depreciation expense on Plant Hatch from Account 35 557 to actual depreciation expense which is not included in the 45-day 36 working capital allowance calculation.
37 38 Q HOW DID YOU INCORPORATE THE ADJUSTMENTS RECOMMENDED BY THE OTHER COOPERATIVE 39 INTERVENOR WITNESSES?
40 41 A The 13-month average rate base components recommended by Mr. Gross were 42 substituted for those used by the Company in its FPC Docket No. E-9091 43 filing.
Cooperative Intervenor Exhibit No.
(JBS-6) shows how Plant 44 Hatch 0 & M expenses and depreciation expenses were handles as a result of 45 placing' Plant Hatch in service as of July 1975 as recommended by witness Gross.
46 This change required the transfer of depreciation on Plant Hatch from 47 Accouac 557 into depreciation and classification of amounts remaining in 48 Account 557 into demand and energy components. The depreciation used for 49 Plant Hatch was developed from the Staff's filing in FPC Docket No. E-9091
's 50 and is shown on Cooperative Intervenor Exhibit No.
(JBS-2), page 2. -
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1 The bank balances included in rate base by the. Company were removed as 2
suggested by Cooperative Intervenor witness Eaert.
Dr. Ewert's recommended 3
rate of return of 9.14 percent was used in determining the Company's 4
allowabic return on investment. This rate of return was also applied to'the 5
total company rate base in calculating the income tax allocation formula.
6 7
The adjustments recommeded by Dr. Livingstone in the Company's income 8
tax calculations were utilized in calculating the total Company taxes 9
and the formula used by the Company was applied in order to calculate the 10 taxes associated with each generating catagory. These calculations are 11 illustrated on Cooperative Intervenor Exhibit No.
(JBS-8).
12 13 Q PLEASE EXPLAIN HOW THE ADJUSTED TOTAL COMPANY PARTIAL REQUIREFENTS EXPEN.SE 14 AND INVESTMENT WAS ALLOCATED INTO THE 4 GENERATION CATAGORIES.
15 16 A The orginal cost of plant, deprection reserve, nuclear fuel, Account 282, 17 and AFUDC adjustment items of investment were all specifically assigned 18 using the materials filed in both FPC Docket Nos. E-9521 and E-9091, and.
19 the Company's FPC Form 1.
These assignments are shown in the work papers 20 filed as Cooperative Intervenor Exhibit No.
(JBS-2) and (JBS-4).
21 The remaining items of investment were allocated as shown by the company 22 in its filing using these assignments as a basis.
23 24 The direct expenses and depreciation expense were also specifically 25 assigned using the same data sources. These assignments are also shown
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26 in Cooperative Intervenor Exhibit No.
(JBS-5) and (JES-7). The 27 remaining items of expense were allocated in the same manner as that used 28 by the Company in its filing, based upon the assignments of investment and 29 expense described above.
30 31 Q PLEASE EXPIAIN HOW YOU CALCULATED INCOBE TAXES.
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33 A I began by computing the income taxes allowable for the total company 34 cost of service. In making this computation I included the adjustments 35 recommended by Dr. Livingstone and the other Cooperative Intervenor 36 witnen es.
37 To calculate the income taxes allowabic for the partial requirements 38 cost of service and to allocate those taxes to the generation categories, 39 40 I applied the company's income tax allocation formula.
Cooperative 41 Intervenor Exhibit No.
(JBS-8) shows my adjustments to the total 42 Company cost of service and the application of the income tax allocation 43 f ormula. The notes included in that exhibit erplain the adjustments made to obtain the proper cost of service basis.
44 45 46 Q DOES THIS CONCLUDE YOUR TESTILDNY?
47 48 A Yes, it Ns.
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