ML19308A407

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Testimony in Response to Tx Utils Generating Co & Houston Lighting & Power First Set of Interrogatories
ML19308A407
Person / Time
Site: South Texas, Comanche Peak, 05000449  Luminant icon.png
Issue date: 08/01/1979
From: Gross R
CAROLINA POWER & LIGHT CO.
To:
Shared Package
ML19208C305 List:
References
ER76-495, NUDOCS 7909260194
Download: ML19308A407 (7)
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CAROLINA POWER AND LICHT COMPANY PREPARED T IM n F bBR i ROSS, JR.

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1 Q PLEASE STATE YOUR UAME AND ADDRESS.

2 3 A My name is Robert M. Gross, Jr. My business address is 1000 Crescent 4 Avenue, N. E., Atlanta, Georgia 30309.

5 6 Q UHAT IS YOUR EDUCATIONAL BACKGROUND?

7 8 A I graduated from Georgia Institute of Technology in 1965, receiving 9

the degree of Bachelor of Industrial Engineering. I also attended 10 Georgia State University and in 1971 received the degree of Master of Business Administration, najoring in finance.

11 12

( 13 Q PLEASE STATE YOUR PROFESSIONAL EXPERIENCE.

14 15 A I have been ecployed by Southern Engineering Company of Georgia for 16 approximately nine years. During this time I have been involved in 17 the preparation of cost of service studies of Class.A and B investor-18 owned utilities, rural electric cooperatives and nunicipal electric 19 systens and have participated in wholesale and retail electric rate 20 e nsulting assignments in 23 states. I an a registered professional 21 engineer in the State of Georgia.

22 23 Q HAVE YOU EVER TESTIFIED 15 OTHER COMMISSION PROCEEDINGS?

24 f ( , 25 A 26 Yes, I have testified as a rate expert and cost of service witness before the State Cor=issions of Kentucky, Indiana, Mighigan, Vermont 27 and Virginia. I have also testified before the Federal Power Cornission 28 in proceedings involving the Mississinpi Power Connany, FPC Docket No.

29 E-7685; Appalachian Power Company, FPC Docket No. E-7775; Duke Power 30 Company, FPC Docket No. E-7994; Gulf States Utilities Company, FPC 31 Docket No. E-8911; Appalachian Power Company, FPC Docket No. E-9101; 32 Virginia Electric & Power Conpany, FPC Docket No. E-9147; Arizona _

Public Service Company, FPC Docket No. E-8624; Public Service Cornany 33 f Indiana. Inc., FPC Docket Nos. ER76-149 and E-9537; and Georgia Power 34 ,

_Conpany, FPC Docket Nos. E-9091, E-9521 and E-9522.

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( 37 Q KHAT WAS YOUR ASSIGNMENT IN THIS PROCEEDING?

38 39 A My assignnent was to determine whether the nethods employed by Carolina 40 Power and Light (CP&L) to establish the proposed wholesale rate structure 41 were just, reasonable and consistent with sound ratemaking procedures.

42 43 Q UHAT DATA HAVE YOU R1'V EWED IN PREPARING YOUR TESTIMONY AND EXHIBITS?

44 45 A I have reviewed tho: iortions of the Company's filing which relate to 46 its wholesale rate c . ..gn including the testimony and exhibits of CP&L's 47 witnesses and other '. formation CP&L supplied in response to the FPC 48 Staff and various in irvenors request for data.

49 WOULD YOU PLEASE SUM IARIZE THE COOPERATIVE INTERVENORS POSITION WITH SO Q

(- REGARD TO THE PROPC',ED WHOLESALE RATE STRUCTURE FILED BY CP&L IN THIS PROCEEDING?

l l .

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( l A I believe there are basically two deficiencies in the Company's proposed 2 wholesale rate structure.

3 4 First of all the cost of service studies for the wholesale class as 5

reflected in the filings of Company, Staff, and Intervenors show that 6 there is a substantial difference in the cost of providing service

( 7 to wholesale delivery points at transmission voltages as compared to g wholesale delivery points receiving service at distribution voltages.

9 I believe that the wholesale rate structure should be redesigned to 10 accomodate a difference in pricing for service to transmission and distribution voltages.

11 12 13 Secondly, the Company's 95% summer-based billing demand ratchet con-( tained in the proposed wholesale rate "RS-ll", is entirely inconsistant, 14 as a rate device, with the_nethods employed by Staff and Intervenors 15 to establish demand cost responsibility on CP&L's system. Furthermore, 16 17 th Company provides no evidence linking its own filed cost of service studies with the level (95%) of the proposed ratchet provision. Finally, 18 CP&L has overstated the demand charge in the proposed wholesale rate "RS-ll" yg 20 by applying the 957. ratchet to erroneous wholesale billing data which pro-duces an understatement in the amount of test year billing quantities.

21 22 I IIAND YOU COOPERATIVE INTERVENORS' EXIIIBIT NO. (RMG-1) AND ASIC YOU 23 Q 24 TO IDENTIFY IT.

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(' 25 This Exhibit is entitled " Wholesale Delivery Point Statistics for 197 5 26 A and 12 Months Ending December 31, 1976."

27 28 WILL YOU PLEASE EXPLAIN TIIIS EXIIIBIT.

29 Q 30 This Exhibit shows the delivery voltage at wholesale delivery points A

31 served by CP6L. In addition it provides other statistical and load 32 data which will be utilized later in ny testimony.

33 Column (b) of this Exhibit shows the delivery voltage for wholesale 3 delivery p ints. The voltages range from 4.2 kV up to 230 kV. It is 36 obvious from this information that there is a considerable range in l the type of facilities associated with CP&L's service to who'lesale delivery points.

40 4y Q IFTilEREAWAYOFMEASURINGTIIECOSTOFSERVICEDIhFERENTIALBETWEEN TIIESE VARIOUS SERVICE VOLTAGE LEVELS?

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43 44 A Yes. Generally the method used by all parties in this case to allocate 45 transmission and distribution costs results in two distinct groupings of~

46 wholesale loads. The first group consists of those wholesale delivery 47 points which are served directly off CP&L's Power Supply Systen. CP&L 48 has defined its Power Supply System to include all transmission lines t 49 (66 kV and above) and all transmission substations with a low voltage

(, 50 side of 66 kV and above. The remaining wholesale delivery points have m

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l delivery voltages at distribution levels (33 kV and below). Whereas 2 the first group of wholesale loads requires only Power Supply Trans-3 mission support, the second group requires certain distribution line 4

and substation investment in addition to the cor: mon Power Supply Transmission facilities. There is obviously a significant unit cost 5

6 differential between providing service to delivery points at the Power Supply Transmission level (66 kV and above) as compared to service 7

at distribution voltages.

8 9

10 From a ratemaking standpoint I believe that it would be preferable to 11 design a. wholesale rate that would accomodate the difference in pricing 12 necessary to reflect the average cost of service difference between 13 transmission and distribution service.

14 I HAND YOU COOPERATIVE INTERVENORS' EXHIBIT E0. (PJ1G-2) AND ASK YOU 15 Q 16 TO IDESTIFY IT. .

17 18 A This Exhibit is entitled "Statenent 'F', as Revised".

19 20 Q WOULD YOU PLEASE EXPLAIN '.HIS EXHIBITi 21 22 A Yes, this Exhibit reflects the adjustments to the Company's filed 23 Statement "P" required to show (1) the Lepact of Cooperative Intervenor 24 cost of service adjustments on unit costs and (2) the development of demand charges associated with service to wholesale loads served at

( 25 26 transmission voltages and those served at distribution voltages. The 27 difference in unit costs between transmission service and distribution 28 service is $0.30/kW per month. This analysis is quite similar'.to the 29 simil r to the Company's calculations contained in Statement "P" for 30 f r Period II except that rather than averaging all the demand related costs regardless of delivery point voltage level as does 31 the Company, I have recognized the difference in costs between 32 service to distribution voltages as opposed to loads served to 33 transmissi n v ltages.

34 35 36 Q W0m YOU EME MWN WHY THE WHOWAI.E RATE SHOM DMERNME AS 37 BETWEEN TRANSMISSION AED DISTRIBUTION SERVICE LEVELS?

38 39 40 A There are a number of reasons that I believe this rate differential is 41 necessary.

42 43 The rate is applied by delivery point. There are currently 130 wholesale 44 delivery points with varying service voltages. I have distinguished 45 broadly between transmission and distribution voltage levels to provide 46 a nore accurate recovery of CP&L's cost of serving certain types of delivery 47 Points. This is important for two reasons. First of all there are 45 48 different wholesale customers served by CP&L. Some wholesale customers 49 are served entirely at transmission v'oltages, some wholesale customers are 50 served entirely at distribution voltages and some wholesale customers have

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- 1 delivery points at both transmission and distribution voltage levels.

2 Providing for a difference in rate level between transmissicn and 3 distribution service levels results in a more equitable recovery of 4 cost from each wholesale customer. Obviously it is not proper to 5 recover distribution related cost from a wholesale customer who pur-6 chases the entire requirement at a transmission level.

7 8 Secondly, as indicated in the Company's tariff, CP&L presently 9 requires the wholesale customers to build to the existing power supply 10 transmission system of CP&L when new wholesale sources of delivery 11 are required. Presently and in the future new delivery points will be 12 at transmission voltages, primarily at 115 and 230 kV, With this general 13 trend it would not be proper for CP&L to apply a wholesale ' rate to such 14 n w p ints of delivery that contains a component of distribution cost 15 when the wholesale customer is providing the necessary distribution 16 facilities. -

17 18 Q YOU HAVE PREVIOUSLY STATED THAT YOU DISAGREE WITH CP&L'S PROPOSED 95%

19 SUOIER-BASE BILLING DEMAND RATCHET. WOULD YOU PLEASE EXPLAIN WHY?

20 21 A I agree with Staff Witness Gallagher that it is not consistent from a 22 ratemaking standpoint to adopt a very severe seasonal billing demand 23 ratchet when system demand related costs are allocated based upon an 24 average of the demands imposed upon the system throughout the year.

' (' 25 26 CP&L includes in its proposed "RS-11" Wholesale Rate Schedule a 95% '

27 summer-base billing demand ratchet. This ratchet provision imposes a 23 monthly minimum billing demand based upon 95% of the highest non-coincident ~

29 demand experienced during the preceding months of June through September.

30 This ratchet, of couse, causes individual wholesale customers' power bills 31 to be greatly influenced by the level of demands experienced during the 32 Period of June through September. It makes littic sense on one hand to allocate demand related costs on the basis of an average of 12 monthly 33 34 demands as proposed by Staff and Intervenors and then turn around and 35 bill the wholesale customer predominately on the basis of that customer's 36 maximum demand established during a four month period.

i 37 38 Q ASSUMING FOR TIIE MOMENT THE APPLICABILITY OF CP&L'S POWER SUPPLY DEMAND 39 ALLOCATION METHODOLOGY, WGULD YOU THEN AGREE WITH THE INCLUSION OF A 40 SUMMER-BASE BILLING DEMAND RATCHET IN CPhL'S PROPOSED UHOLESALE RATE 7 41 42 A Yes, I believe the billing demand ratchet must be consistent with the method 43 used to allocate power supply costs. If power supply costs'are allocated 44 on the basis of the 4 summer months CP's then it would be consistant to 45 use a summer based billing demand ratchet, as CP&L has done in this case.

46 However, even assuming the applicability of CP&L's allocation methodology 47 which Staff and Intervenors certainly oppose, I do'believe that the 1cvel of CP&L's summer based ratchet is too high.

43 49 50

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( I SHOW YOU A DOCUMENT MAPJ*.ED COOPERATIVE It4TERVENOES' EXHIBIT NO.

l Q 2 (RMG-3) AfiD ASE YOU TO IDENTIFY IT.

3 4

A This Exhibit. is entitled " Metered Non-coincident Pholesale Peak Demand 5

Summati n For June Through September 1975".

6 Q WAS THIS EXHIBIT PREPARED UNDER YCUR SUPERVISION?

7 A Yes.

1 Q PLEASE DISCUSS THIS EXIIIBIT.

12 A Using the nost recent data available, I have selected for each wholesale 13 delivery point the actual naximum 15 minute integrated demand established 14 during the period of June through September 1975. For each wholesale 15 customer I show how such seasonal non-coincident delivery point demands 16 are incurred during the four nonth season. These delivery point demands 17 represent the amounts that would be used when applying the proposed summer-18 based ratchet. '1he arithmetical summation of these maximum seasonal demand 19 equals 1,250,495 kW for the wholesale class.

20 21 The purpose of che ratchet is to insure that should the wholesale customer r quir ap ci ty in the sucmcr peak season (by CP6L's definition), then 3

the customer would be held accountable for 95% of such capacity on a 3 billing basis for the remainder of the year. I believe that given the 25

( 26 necessity of such a ratchet, the level of the ratchet should reflect the diversity of wholesale loads during the summer season. The purpose of 27 the exhibit is to measure such diversity.

28 29 30 The seasonal diversity is measured by dividing the wholesale load coin-31 i cat with the four summer monthly system CP's, taken, from Statement "M"'

32 Peri d I f 1,072,767 kW, by the above figure of 1,250,495 kW. Tliis Calculation results in computed coincidence of 86%. I believe this computation shows that the summer based ratchet should be set'at a level of approximately 857. rather than 957.. Setting the ratchet at 957; would in my opinion place an unreasonable burden on certain wholesale customers.

37 38 Q PHY Do YOU BELIEVE TIIAT A WHOLESALE CUSTOMER COULD BE UNFAIRLY BURDEhTD 39 EY ESTABLISHING A RATCIIET AT A LEVEL THAT WAS HIGHER TIIAN TIIE LEVEL OF 40 RATCHET DERIVED FROM A STUDY OF THE SUI:MER SEASON DIVERSITY?

41 42 A Our studies show that many wholesale delivery points establish peak demands 43 (NCP's) at times other than when CP&L monthly system peak demand is occurring.

44 In other words nany delivery point demands are a function of tobacco drying 45 and farming requirements and are not significantly related to air condi-46 tioning requirements or industrial loads which cause the company's system 47 to peak. The Company's load characteristic of course is heavily air con-48 ditioning related whereas a sizable portion of the wholesale Cooperative 49 load is related to farning operations. The natural diversity of the 50 wholesale class summer peak loads should be recognized in the determination k of the ratchet level.

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1 It the diversity is not used to establish the ratchet,.then certain d

2 wholesale custorers who traditionally peak during the summer at times j not coincident with CP&L would be treated for billing purposes as if 3

4 their peak demands were coincident with the CPLL's system peak demands.

5 This would unfairly penali::e particularly many wholesale Cooperative g Customers.

7 C g Q I BELIEVE THE FINAL ASPECT OF YOUR TESTIMONY CONCERES THE COMPANY'S CALCULATION OF REVENUES UNDER THE PROPOSED RATE FOR PERIOD II. WOULD 9

10 YOU PLEASE EXPLAIN HOW THE COMPANY ERRED IN ITS CALCULATIONS.

11 12 A Yes. Since the proposed rate contains a 95% su==er-base billing demand 13 ratchet, in calculating revenues for calendar year 1976 (Period II),

L the wholesale billing , determinants were affected by peak wholesale 74 loads (NCP's) incurred during the period June through September 1975.

15 The maximum wholesale non-coincident load established during the period 16 June through September 1975 established a ninimum billing demand for the 17 period of January through at least June 1976 which in many cases exceeded g

the metered monthly demand. Enen compiling data to calculate test year 9 - revenues, CP&L used actual demands for June, July, and August, 1975 but t

20 used estimates for September, 1975 demands. Although the actual Septem.

21 ber, 1975 demands were available to the Company at the time it filed 22 its case, it elected to use an estimate. _In most cases the actual 23 September, 1975 demand is significantly higher than the estimated 24 demand and also sets the 1975 su=mer peak demand.

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( 6 Q I HAND YOU COOPERATIVE INTERVENORS' EXHIBIT NO. (RMC-1) AND ASK YOU 27 TO IDENTIFY IT.

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28 29 30 A This Exhibit has been identified earlier as "Knolesale Delivery Points f,, Statistics for 1975 and 12 Months Ending December 31, 1976."

32 33 Q ?OULD YOU PLEASE EXPLAIN THE REMAINING DATA ON THIS EXHIBIT THAT HAS NOT 34 BIEN PREVIOUSLY COVERED IN YOUR TESTIMONY.

35 36 A Yes This gxhibit shows the difference between the Company's estimated 37 September 1975 demandsused to calculate test year revenues and the actual L

38 SCPtember 1975 demands which were incorporated in ,other areas of the Company's 39 filing. Since the actual September wholesale demands significantly exceed the estimated wholesale demands, the level of 1976 revenues, as shown by the 40 41 Company in Statement M, Period II are significantly understated thereby.

42 producing also an understatement in the rate of return being earned under 43 the proposed rate.

44 45 Using actual September 1975 whoicsale demands, I show that wholesale 46 billing units for Period II would be increased by 189,010 kilowatts. This increase in billing kilowatts would have reduced the proposed demand charge 47 43 as shown on Statement "P", Period II from $4.90 per kilowatt to $4.83 per kilowatt. In summary the Company erred in its derivation of the proposed 49 "RS-ll" rate by overstating the demand charge by 7C per kilowatt.

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1 Q DOES T1UsT C0:3LUDE YOUP, TESIDIONY?

2 3 A Yes.

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