ML19308A426
| ML19308A426 | |
| Person / Time | |
|---|---|
| Site: | South Texas, Comanche Peak  |
| Issue date: | 08/01/1979 |
| From: | Rogers O AFFILIATION NOT ASSIGNED |
| To: | |
| Shared Package | |
| ML19208C305 | List:
|
| References | |
| ER76-495, NUDOCS 7909260347 | |
| Download: ML19308A426 (7) | |
Text
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BEFORE THE FEDERP-L POWER COFC4ISSION CAROLINA POWER & LIGHT COMPANY DOCKET NO. ER76-495 (RESALE TEMPORARY RIDER NO. 3 ISSUE)
DIRECT TESTIMONY AND EXHIBIT OF
\\d IhTERVENORS' WITNESS
- 0. FRANKLIN ROGERS k
7 9092603Vf
DIRECT TESTIMONY AND EXHIBITS OF 0. FRANKLIN ROGERS
[
BEFORE THE FEDERAL PO'4ER COMMISSION CAROLINA PO*4ER & LIGHT COMPANY FPC DOCKET NO. ER76-495 (RESALE TEMP 0iiARY RIDER NO. 3 ISSUE) b/
1Q PLEASE STATE YOUR NAME AND ADDRESS.
2 3A My name is 0. Franklin Rogers. My business address is 1000 Crescent 4
Avenue, N.
E., Atlanta, Georgia 30309.
5 6Q BY WHOM ARE YOU EMPLOYED?
7 8A I am a member of the firm of Southern Engineering Company of Georgia.
9 10 Q PLEASE STATE YOUR EDUCATIONAL BACKGROUND.
11 12 A I attended Emory University in Atlanta for two years and Georgia 13 Institute of Technology for two years, receiving a degree of Bachelor 14 of Industrial Engineering from Georgia Institute of Technology in 1955.
15 I also attended Emory University Law School.
16 17 Q PLEASE STATE YOUR PROFESSIONAL EXPERIENCE.
18 19 A Upon graduation from Georgia Tech, I served three years as an officer 20 in the United States Navy, af ter which I began working for Southern 21 Engineering Company in 1958.
I have, during that time, headed the 22 Retail and Wholesale Rate Departments in my Company.
I have performed 23 rate studies for over seventy-five rural electric cooperative and 24 municipal systems in thirteen states during this period of time.
I 25 have participated in wholesale rate and contract negotiations with (3/
26 thirty-six privately owned investor utilities in nineteen states.
27 During this period of time, I have prepared or participated in pre-28 paring numerous cost of service studies of investor-owned utilities, 29 rural electric cooperatives and municipal systems.
30 31 Q MR ROGERS, WITH PISPECT TO ELECTRIC RA'1E CASE MATTERS, HAVE YOU EVER 32 GIVEN TESTIMONY BEFORE THIS COMMISSION OR ANY STATE UTILITY REGULATORY 33 COMMISSION?
34 35 A Yes, I have.
36 37 Q WILL YOU PLEASE IDENTIFY THOSE PROCEEDINGS AND THE COMMISSIONS BEF0P2 38 WHICH YOU HAVE TESTIFIED?
39 40 A I have testified as a rate expert before several State Commissions 41 including North Carolina, South Carolina, Kentucky and Indiana.
I have 42 previously testified before the Federal Power Commission in the follow-43 ing proceedings: Mississippi Power & Light Company, FPC Docket No.
44 E-7577; Carolina Power & Light Company, FPC Docket No. E-7564; Georgia 45 Power Company, FPC Docket No. E-7548; Public Service Company of Indiana, 46 FPC Docket No. E-7645; Alabama Power Company, FPC Docket No. E-7674 47 Gulf Power Company, FPC Docket No. E-7686; Mississippi Power Company, 48 FPC Docket No. E-7625; Florida Power Corporation, FPC Docket No. E-7679; 49 Duke Power Company, FPC Docket No. E-7720; Pennsylvania Electric Company, 50 FPC Docket No. E-7718; Public Service Company of New Hampshire, Docket V
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kad 1-No.
E-7742; Indiana and Michigan Electric Company, FPC Docket No'.
2 E-7740; Virninia Electric and Power Company, FPC Docket No. E-8026; 3
Carolina Power & Licht Company, FPC Docket No. E-8881; Toledo Edison 4
Company, FPC Docket No. E-7929 ; Consumers Power Company, FPC Docket 5
No. E-7803; Appalachian Power comoany, FPC Docl'et No. E-7775; Missis-6 sippi Power Company, FPC Docket No. E-7625; Carolina Power and Licht 7
Company, FPC Docket No. E-8884; Alabama Power Company, FPC Docket No.
8 E-8851; Culf Power Comoany, FPC Docket No. E-8911; Potomac Electric 9
Power Comoany, FPC Docket No. E-8741; Florida ~ Power & Light Company, 10 FPC Docket No. E-8003; Delmarva Power & Licht Company, FPC Docket No. E-8947; and 'ississiopi Power Company, FPC Docket No.
11 M
12 E-9135.
13 I
14 Q MR. ROCERS, WOULD YOU PLEASE LIST FOR US THOSE PRIVATELY OWNED ELECTP.1C 15 COMPANIES WITH UHICH YOU HAVE PERSONALLY CONDUCTED NEGOTIATIONS O 16 BEHALF OF WHOLESALE CUSTOMERS INVOLVING SUBSTANTIAL CHANGES IN T 17 PATES OR CONTRACTS AND THOSE COMPANIES WITH UlIICH YOU HAVE PER 18 BEEN INVOLVED IN CASES BEFORE THE FEDEPAL POWER COMMISSION.
19 20 A Yes.
I'might add that all of these cases occurred durin3 the 1960's '
21 to the present time, so this constitutes recent experience.
22 23 Although I do not recall all of the docket numbers, I will indicate 24 the docket numbers of those cases filed since 1969. The companies are:
25 26
'ad Florida Power Corporation (two occasions)(E-7679), Gulf Power 27 Company (E-7686), Georgia Power Company (four occasions)(E-7548 28 and E-8170), Virginia Electric & Power Company (three occasions)
+
29 (E-7611 and E-8026), Carolina Power & Light Company (E-7564),
30 Delmarva Power and Light Company of' Delaware (three occasions) 31 (E-7560 and E-7769), Delmarva Power and Light Company of Virginia 32 (three occasions)(E-7560 and E-7769), Delmarva Power & Light 33 Company of Maryland (three occasions)(E-7560 and E-7769), West '"
34 Penn Power Company, Pennsylvania Electric Company (three occasions) 35 (E-7718), Metropolitan Edison Company (three occasions)(E-7630),
+
36 New Jersey Power and Light Company (two occasions), Jersey Central 37 Power and Light Company, Duke Power Company (four occasions) 38 (E-7557, E-7720 and E-7994), Public Service Company of Indiana j
(E-7645), Northern Indiana Public Service Company (E-7758),
{
39 40 Detroit Edison Company (E-7687), Central Illinois Public Service t
i 41 Company, Illinois Power Company,. Kentucky Utilities Company, New 42 York State Electric & Gas Corporation, Alabama Power Company (two' i
43 occasions)(E-7674), Oklahoma Gas and Electric Company, Public 44 Service Company of Oklahoma, Public Service Company of New Hamp-shire (E-7742), Central Illinois Light Company (E-7577), Niagara.
45 46 Mohawk Power Corporation, Mississippi Power Company (E-7625), Central 47 Vermont Public Service Corporation (two occasions)(E-7685 and L
48 E-7798), Florida Power & Light Company (E-8008), Indiana and Mich-t 49 igan Electric Company (E-7740), Appalachian Power Company (E-7775),
50 Pennsylvania Power and Light Company, and Consumers Power Company (E-7803).
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O 1Q HAVE YOU TESTIFIED BEFORE OTHER COMMISSIONS?
2 3A Yes.
I have testified before the Atomic Safety and Licensing 4
Board of the United States Atomic Energy Commission (now the 5
Nuclear Regulatory Ca=nission) in Consumers Power Company (Mid-6 land Plant, Units 1 and 2), NRC Docket Nos. 50-329A and 50-330A.
7 Additionally, I have testified before the Atomic Safety and j
8 Licensing Board in the catter of Alabama Power Company (Joseph j
9 M. Farley Nuc1 car Plants, Units 1 and 2), NRC Dockets Nos. 50-348A 10 and 50-364A.
4 11 12 Q BY WHOM IS YOUR FIRM RETAINED IN THIS PROCEEDING?
13 14 A By the Cooperative and Municipal Intervenors.
15 16 Q WHAT WAS YOUR ASSIGNMENT IN THE EXPEDITED PORTION OF THIS PROCEEDING?
17 18 A My assignment in the expedited portion of this proceeding was to 19 review the filed testimony and exhibits of the Carolina Power & Light 20 Company explaining and purporting to justify the fuel adjustment sur-21 charge proposed by the Company. After having made this review, it was 22 my responsibility to analyze the Company's proposal and determine the 23 extent to which the surcharge is just and reasonable.
1 24 25 Q HAVE YOU COMPLETED THIS REVIEW AND ANALYSIS?
V 26 27 A Yes.
28 29 Q WHAT CONCLUSIONS HAVE YOU DRAWN AS A RESULT OF YOUR ANALYSIS?
30 31 A The fuel adjustment surcharge as proposed by CP&L is highly unjust and 32 unreasonable.
If fact, the Company should be required to' refund 33 approximately $5,929,000 representing the fuel adjustment revenues 34 collected in excess of the related fuel expenses for the period January 35 2, 1975 through April 30, 1976.
36 37 Q PLEASE GIVE THE REASONS FOR YOUR CONCLUSIONS.
38 39 A There are four major reasons why CP&L's request for the surcharge 40 should be denied, and if an adjustment is made at all, the wholesale 41 customers should be made the recipient of refunds rather than having 42 additional dollars lifted from their pockets.
These reasons are as 43 follows:
t l
44 45 1.
The proposed collections would be in violation of the intent 46 of FPC Order No. 517 and FPC Opinion No. 717, issued in Docket No.
47 E-8881, involving CP&L.
48 2.
CP&L has in the past and will, under the rates proposed in 49 this filing, continue to be compensated through its rates for the 50 net amount of the lag between payment for operating and maintenance V _. _
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1 expenses and the receipt of revenues covering those expenses.
2 3
3.
The Company is requesting that it be given revenues 4
equivalent to a full two (2) months additional fuel cost rather 5
than the difference between the cost of fuel ac6c-11y incurred 6
and the amount of fuel adjustment revenues receivet during the 7
period When its deferred accounting and fuel clause were in 8
simultaneous use.
9 10 4.
During the 16-month period ending April 30, 1976, CP&L has 11 experienced declining unit fuel costs and as a result has collected 12 more in fuel related revenues than it has experienced in 13 fuel costs.
14 15 Q MR. ROGERS, PLEASE EXPLAIN YOUR FIRST REASON GIVEN ABOVE.
l 16 17 A The fuel clause proposed by CP&L as well as that currently in effect, 18 uses the unit cost of fuel in the second preceding month as an esti-19 mate,of the unit cost in the current month. This process has been common 20 in the u,tility industry since the unit cost of fuel in the current 21 month is not known at the time cuscomer bills are rendered.
It was 22 this use of past costs as a surrogate for current costs which prompted 1
23 the Commission to reject (Order No. 517, Page 4) suggestions ".
l 24 that utilities be permitted to recover only a portion of incr.ased 25 fuel costs in order to provide an incentive to bargain for lower
(,j 26 cost fuel," when it said, ".
. the lag in collections for fuel 27 expenses inherent in a typical fuel cost adjustment clause provides 28 some incentive for companies to bargain for favorable prices during 29 periods of rising fuel costs."
CP&L now proposes to have the Commis-30 sion remove the incentive to bargain for favorable prices by allowing 31 utilities to collect revenues which purport to offset the lag in 32 collections.
This request clearly contradicts the intent of the 33 assertions made by the Commission in Order No. 517 and is particularly 34 burdensome on the customer at a time when CP&L's average monthly fuel 35 cost is declining.
36 37 Q IN WHAT WAY IS CP&L ALREADY BEING COMPENSATED FOR THE LAG ASSOCIATED 38 WITH PAYMENT FOR FUEL AND COLLECTION OF FUEL RELATED REVENUES?
39 40 A In both Docket No. E-8884 and Docket No. ER76-495 CP&L filed rates 41 Which were based upon, among other things, cash working capital equal 42 to 12.5% of total operation and maintenanc,e expenses less purchased 43 power.
This allowance has traditionally been employed by this Commission 44 to provide capital to cover the cumulative effect of all lead / lag trans-45 actions (See Opinion No. 609, Union Electric Company, Docket No. E-7525, 46 issued January 24, 1972). Without a complete 1 cad / lag study of all 47 Payments and receipts of revenue related to such payments of expenses, 48 it is impossible to determine whether more or less than 45 days cash 49 working capital should be allowed.
I have been informed that the 50 meters of CP&L's wholesale customers are usually read on the last day '
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of the month, bills are rendered within ten (10) days, and payment 2
is received within fifteen (15) days of the date of the bill. Thus 3
a 40-day lag (15 + 10 + 15) has been established. This lag is then 4
offset to the extent the Company enjoys a lag in its payments.
If 5
such lag amounted to 30 days, the working capital requirement would 6
be reduced to but 10 days.
Nonetheless this 45-day allowance has 7
been claimed by the Company in both its pending rate filings (Docket 8
No. E-8884 and Docket No. ER76-495), and the effect of the fuel 9
portion of that allowance alone has been to inflate the RS-10 and 10 RS-11A rates to collect approximately $913,000 and $1,158,000 respect-11 ively, in additional wholesale revenues during their respective test 4
12 years.
In addition to this, CP&L has singled out one item and, without 13 any lead / lag study has requested in this proceeding approximately l
14 S5,000,000 to correct an alleged fuel revenue " lag" it claims to have 15 experienced. This request comes at a time when the Company expects i
16 total fuel costs to decline from $263,389,642 in Period I (year ending 17 September 30, 1975) to $210,353,000 in Period II (year ending September 18 31, 1976) on total sales of 23,908,116 1 sal and 25,000,000 MWu, respec-19 tively. It would be c1carly unreasonable and unjust to allow the 20 collection of these additional revenues purported to represent the 21 recovery of a fuel adjustment lag when the base rate is already 22 collecting revenues to finance a questionable lag, when no definitive 23 lead / lag study has been made to support the request for additional 24 revenue lag coverage, and when the Company has actually experienced 25 a leading situation (See Exhibit No.
(OFR-1), Page 1) since 14/
26 January, 1975.
27 28 Q PIIASE EXPLAIN WHAT CP&L IS REALLY TRYING TO COLLECT TilROUC11 ITS 29 PROPOSED RIDER NO. 3.
30 31 A In his filed testimony Mr. Paul S. Bradshaw cicarly states, on Page 32 6, Line 18, "the amount of revenue to be co11cceed will depend upon 33 the balance of deferred fuel costs at the time the new fuel clause 34 goes into effect." Exhibit No.
(PSB-23) shows the estimated 35 balance in the deferred fuel account at the end of April,1976 to be 36
$2,874,106. This amount represents not a lag in revenue collections, 37 but rather the total cost of fuel in excess of the base fuel cost 38 incurred during the months of March and April. Thus, the Company is 39 asking to collect additional revenue to cover March and April fuel 40 expenses above their base fuel cost.
Mr. Bradshaw, however, fails 41 to point out the fact that on May 1,1976 CP&L will have aircady 42 received fuel adjustment revenues, estimates though they may be, to 43 cover these very same fuel expenses.
It is absolutely unreasonable 44 and unjust to collect these revenues a second time. Furthermore, an 45 offect of the surcharge would be to recover fuel costs incurred during 46 1974, when a ' moratorium was in effect and when CP&L's ef forts to be 47 permitted to breach the moratorium by placing a fuel adjustment clause 48 into effect were denied by the Federal Power Commission in Opinion 717.
49 This would result because the fuel adjustment charges for January and 50 February 1975 reficcted fuel costs incurred during November and December
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1 1974. Considering the November and December 1974 fuel costs as a 2
surrogate for fuel costs in January and February 1975, those adjust-3 ments did not have a retroactive effect.
However, the approach now 4
advanced by CP6L is wholly inconsistent with surrogate treatment and, 5
if adopted, would displace the surrogate concept thereby resulting 6
in a retoractive rate increase.
7 8 Q MR. ROGERS, IS IT NOT TRUE THAT OVER A PERIOD OF TIME TIE OPERATION 9
0F A FUEL CLAUSE KHICH RECOVERS COSTS IN THE CURRENT MONTH BASED UPON 10 TIE UNIT COST EXPERIENCED IN THE SECOND PRECEDING MONTH WJLD PROVIDE 11 REVENUES SOMEWAT DIFFERENT THAN THE ACTUAL COSTS INCURR"_D DURING THAT 12 PERIOD 7 r
13 14 A Yes.
15 16 Q HAVE YOU MADE A DETERMINATION OF THE UNDER OR OVER COLLECTION OF 17 REVENUES EXPERIENCED BY CP&L AS A RESULT OF THE OPERATIONS OF ITS 18 FUEL ADJUSTMENT CLAUSE?
19 20 A Yes, Page 2 of Exhibit No.
(OFR-1) shows the computation of this 21 amount.
22 23 Q PLEASE EXPLAIN EXHIBIT NO.
(OFR-1) AND THE RGULT OF YOUR 24 COMPUTATIONS.
25 kad 26 A All data used in this Exhibit was obtained from filings made by 27 the Company with the Federal Power Commission in Docket No. ER76-338 28 and Docket No. ER76-495. All 1976 data are estimates.
Page 1 of 29 this Exhibit graphically depicts the comparison of the fuel related 30 revenues and the actual fuel expenses for CP&L's wholesale customers 31 for each month of the period January,19'S through April,1976.
Page 32 2 shows the computation of t,he monthly fuel expenses and related 33 revenues for this period. Column D of Page 2 shows the total fuel 34 related revenues collected by the Company from its mur.icipal and 35 cooperative customers for each month during the period January,1975 36 through April, 1976.
This figure was obtained by multiplying the 37 kilowatt hour sales in each month by the sum of the fuel adjustment 38 factor for that month and the amount of fuel in the base rate.
39 Column F shows the amount of fuel expenses actually incurred during 40 each month of the same period.
This amount was obtained by multi-41 plying the number of kilowatt hours sold during each month by the i
42 sum of the fuel adjustment factor used in the second succeeding month l
43 and the amount of fuel in the base rate.
Column G is the dollar 44 difference between the amount of fuel related revenues collected in 45 each month and the actual amount of fuel expense incurred in that 46 month. The results of these computations show that during the period 47 January, 1975 through April, 1976 Carolina Power & Light Company will 48 have collected fuel related revenues (through its base rate and fuel 49 adjustment provision) in excess of actual fuel expenditures during 50 that period of approximately $5,929,000.
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