ML19322C370
| ML19322C370 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 01/16/1980 |
| From: | Gordon S AFFILIATION NOT ASSIGNED |
| To: | |
| Shared Package | |
| ML19322C344 | List: |
| References | |
| TASK-TF, TASK-TMR NUDOCS 8001160905 | |
| Download: ML19322C370 (7) | |
Text
{{#Wiki_filter:. Docket No.ER78-494 exU SUPPLEMENTAL TESTIMONY OF STEWART E. GORDON, JR. ON BEHALF OF PENNSYLVANIA ELECTRIC COMPANY 1--Q. Are you the same Stewart E. Gordon, Jr. who has 2 previously presented testimony in this pro-3 ceeding? 4 5 A. Yes, I am. 6 7 Q. What is the subject of your supplemental 8 testimony? 9 10 A. My testimony is concerned with the allocation 11 of Penelec's overall cost of service to its 12 wholesale for resale customers in the revised 13 cost of service exhibit which Mr. Hafer dis-14 cusses. I sponsor Statement M to that exhibit, 15 Exhibit No. (PN-103). Mr. Carroll sponsors 16 the other statements. 17 18 Q. How does this revised cost of service differ 19 from that presented in the original filing 20 made July 17, 1978? 21 22 A. All schedule numbers presented today cor-23 respond to those initially furr.ished. This 24 study, like the original study, uses the 25 twelve coincident peak metbod of demand allo-26 cation in the demand and energy allocators 27 and billing determinants for the customers 28 remain unchanged. 29 30 Q. What major. changes were made in the cost of 31 service you submit today? 32 33 A. The principal and most important change in the 34 cost of service is to effectively eliminatete 35 return on the common equity component of the 36 investment in the Three Mile Island No. 2 new 37 plant. This was done by dividing the return 38 as shown in Statement L (based on adjusted 39 rate of return of 9.44%) by the proposed rate 40 of return desired on all property except 41 TMI-2 's common equity share to arrive at a new 42 rate base. The difference between this rate 43 base and the "L" rate base was removed from 8 0 01160 fC7
1 production plant and the study run on 10.05% rate 2 of return. In addition to this major change, 3 were other changes that evolved from discussions 4 at the earlier settlement conference as follows: 5 6
- 1) The functionalization of general and intan-7,,
gible plant on the basis of Staff labor ratios 8 allocator K929 revised to consider the K519 9 customer accounts allocator. 10 11
- 2) The functionalization of administrative 12 and general expenses on the basis of labor 13 ratios.
14 15
- 3) The functionalization of payroll taxes 16 on Staff labor ratios allocator K929 re-17 vised to consider the K519 customer accounts 18 allocator.
19 20
- 4) The interest expense deduction for tax 21 purposes is synchronized with the weighted 22 cost of long-term debt component of the 23 capital structure.
24 ( 25
- 5) Deferred energy and associated tax com-26 ponents are not allocated to the wholesale 27 electric customers.
28 29 Q. Why was it necessary to develop a rate base based 30 on 9.44% rate of return and then allocate on 31 10.05%? 32 33 A. When the overall cost of service was calculated, 34 it was intended that the full debt and preferred 35 portions of the return should be earned on all 36 property. It was more convenient for the account-37 ants to adjust the capital structure to reflect 38 the elimination of the common equity share of 39 TMI-2 than to immediately excise that number of 40 dollars from the plant in-service claimed. If 41 al'1 customers were' users of the entire investment 42 of the company, it would have been possible to 43 allocate the entire rate base at the 9.44% rate 44 and achieve a varied distribution of cost of 45 service. However, Penelec has a wheeling customer b
. - 1 (Allegheny Electric Cooperative) that uses no part 2 of the production plant, and to allocate on the "L" 3 basis would cause the cost of service to the wheel-4 ing customers to be understated since the proper 5 return for them would be 10.05%. By adjusting the 6 total rate base to produce the same return as was 7.,, produced by the 9.44% rate, applying a 10.05% rate 8 of return to the wheeling rate base, the distortion 9 caused by the presence of the wheeling customer is 10 eliminated. 11 12 Q. What does Statement M show as th'e result of using 13 this rate of return and this method on your resale 14 revenue requirement? , 15 16 A. Statement M, page 1, shows that the total revenue 17 requirement for resale is $34,722,015, an increase 18 over the prior rate of some S6,035,189. This is 19 a reduction of approximately S1,554,000 from the 20 original filing which included all of Three Mile 21 Island No. 2. 22 23 Q. Do you sponsor an additional cost of service 24 exhibit? 25 26 A. Yes. I sponsor Exhibit No. (PN-204) which con-27 sists of the Statement M for a cost of service which 28 was performed using a 10.56% overall rate of return 29 on our entire rate base. This exhibit shows the 30 revenue requirement needed to produce a 16% return 31 on common equity. As can be seen on page 2 of this 32 exhlbit, the total resale increase would be 33 S7,717,356. 34 35 Q. Does this complete your supplemental testimony? 36 37 A. Yes, it does. ( 1
AFF1DAlTIT STATE OF PENNSYLVANIA) ) ss. COUNTY OF BERKS) Af fiant, being first duly sworn, deposes and says that he has read the foregoing testimony, that if asked the questions therein his answers would be as shown, and that the f acts contained in those answers are true and correct to the best of his knowledge, inf ormation, and belief. / uvlt ', S. E. Gordon, Jr. ( Sworn to and subscribed before me this / f d ay d e of '; 19)). .c / . / NS ?> $ ,?
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Notary Public,/ My Commission Expires: b.$ / '#
EXHIBIT NO. (PN-204) DOCKET NO. ER78-494 PENNSYLVANIA ELECTRIC COMPANY
SUMMARY
COST OF SERVICE USING 10.56% RATE OF RETURN 4,
w ^ PENNFYLVANIA ElEETRIC C"'*ANY E051 0F SERVIEE Sil' ,'y FOR 12 NONTNS LNDING: 6/33/79 APPROXIHATE INEREASE RE4tlikED FOR LEVELIZED RETilRN USING LEVELIZED RETURN OF 10.560% CAIE OPERATING REV DR OPERATING INC DPERATING RATE RATE OF GR utfP ' EXf'ENSES STATE TX REVENUE TAX INCuttE BASE REltlRN (11) (12) ( 13 ) = ( f t 12 ) (14) (15)=(13-14) (tal (17)=(15/16) CATC PP ' 4922209. 93171. '2434051. 742473. 1691573. 16010693. 10.560 All.E G -SU
- 16500135, 1147150.
8169320. 2491945. 5677374. 53763012. 10.560 Wi!IFtING 1532441. O. 1733208. 520693. 1204516. 11406396. 10.560 1811 At. RLSALE 22954705.
- 1240329, 12336579.
3763111. 0573463. 01100101. 10.560 ' RETAIL 317505753. 21667690. 174714752. 53294474. 121420277.1149013233. 10.560 I TOT COMP 340540503. 22900027. 107051331. 5705750S. 129993740.1231001334. 10.560 0M OM OZ NH h Of O HH 4:43 PM z 255) E M %) SisD m fxne 26, 1979 C eZ C ~AO-bI (. 23
.I ? I. ) PENNSYLVANIA ELECTRIC COHPANY COST OF SERVICE STilDY FOR 12 NONillS END1HG: 6/30/79 . APPROXINATE INCREASE REQUll(ED FOR IEVELI7ED RETURN USINO LEVELIZED RElllRN OF 10.560% RATE DASE PERCENT DDLLAR OTilER TOT GRatiP HISC TOTAL HWit OF CDS IN
- INC.iS %
GROUP REVENUE INCREASE INCREASE REVEHilE REVENUE REVENUE REV i<EQ SALES 'PER isWil 0F TOT REV (1) (2) (3) (4)=(2X3) (5) (6)=(2+4*5) (7) (0)=(6*7) (9) (10)=(0/9)/10 (11)=(4/6) RATE RP. 5908565. 24.464 1445465. O. 7354030. 95400. 7449430 209352. 3.550 19.655 ALLED-SU 19373467. 31.584 6110V41. O. 25492400. 324205. 250166t3. 709526. 3.639 24.003 WHEELING' 2721992 10.304 200460. O. 3002442. 263207. 3265649. O. 0.0 9.341 f(ESALE 20004014. 20.013 7044tl66 O. 350403f10. 682012. 36531692. 910870. 3.976 21.083 RETAIL 371675423. 36.134 134302991. O. 505978414. 7909753. 513960167. 10544534. 4.074 26.543 TOT COMP 399679437. 35.565 142147057. O. 548027294. 8672565. 550499059. 11463412. 4.002 26.235 O D! OX O D: ?: H $N csg e x '5!5) Phh V1W lQ M~ o) M
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