ML19329E293
| ML19329E293 | |
| Person / Time | |
|---|---|
| Site: | Midland |
| Issue date: | 09/01/1978 |
| From: | Jefferson W CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.) |
| To: | |
| Shared Package | |
| ML19329E285 | List: |
| References | |
| U-5306, NUDOCS 8006120595 | |
| Download: ML19329E293 (16) | |
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p STATE' 'OF MICHIGAN i
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BEFORE THE MICHIGAN PUBLIC SERVICE C0101ISSION In The Matter of The Application
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of CONSGIERS POWER COMPANY For
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Authority to Conduct a Limited
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Case No U-5306 Time-of-Day Rate Study And
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Controlled Service Rate Study
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'I DIRECT TESTIMONY OF W J JEFFERSON
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DIRECT TE" TIM 0HY OF W J JEFFERS03 1
Q.
Will you please state your na=e and business address?
2 A.
Willia = J Jefferson, 212 West Michigan Avenue, Jackson, Michigan,
3 Q.
By who= are you e= ployed?
4 A.
Consu=ers Power Co=pany.
-Q.
What is your position with Consu=ers Power Cc=pany?
6 A.
I a= Executive Director of Rates,.Research and Data Control for 7
Consu=ers Power Company.
8 Q.
Would you please state your educational background?
9 A.
I 6raduated frem the United Statea Military Acade=y at West Point, 10 New York in 1953 with a Bacheler of Science Degree in General' 11
$161neering.
In addition, I have done graduate work in Survey Research 12 Techniques at the University of Michi6an. I have also studied Account-
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13 in6, Financial Mana6e=ent and Econe=ies at Stanford University and the 14 University of Michi6an.
15 Q.
What in your business experience?
16 A.
After Graduation from collese, until the end of 195h, I was e= ployed 17-as an Experinental Test EnSineer for the Pratt and Whitney Aircraft 18 Corporation, East Hartford, Connecticut.
19 From 195 to 1958 I was e= ployed by Middle West Service Co=pany 20 in Chica6o, Illinois as. a Sales and Marketing Consultant.
In this 21 capacity, I assisted electric and gas utility co=panies with various 22 sales and market research proble=s.
23 I joined Consu=ers Power Co=pany in 1958 as a Senior Studies 24 '
Analyst in Marketin6 and was responsible for organizing and super-6)(
25 Vising the market research activities of the Co=pany. I held this
, JEFFERSON 2
1 positica until June 1960 when I became Director of Rates and Economic
'2 Studies.
In May 1967, I became Director of Rates and Data Control.
3 In June 1972, I became. Executive Director of Rates, Research and Data 4
Control.
5
.Q.
What are your duties as Executive Director of Rates', Research and Data 6
Control for Consumers Power Co=pany?
7 A.
The Rates, Research and Data Control Departments which I supervise 8
are responsible for the development and design of the Company's elec-9 tric,. gas and steam service rates; for the evaluation of changes in 10 rates, for studies of factors affecting the cost 6f supplying ' service, 11 including the determination of the load characteristics of the various 12 classes of custc=ers, as well as the analysis and allocation to classes 13 of business of all eperating and capital costs involved in supplying 4
115 service, and for studies'of the competitive value of utility service.
15 In addition, this department is also responsible'for the prepara-16 tion and filing of reports with regulatory todies; for the making of 17 analyses, co=parisons and statistical studies as requested by Manage-18 ment; and for the coepiling of various statistical data for the Co=pany.
19 Q.
Have you ever previously testified before any regulatory commission?
20 A.
Yes.
I have testified on nu=erous occasions before the Michigan Public 21 Service Commission on various matters relating to rates.
I have also 22 submitted testimony to the Federal Power Co==ission on matters involving 23 electric wholesale for resale rate design.
24 Q.
Are you a member of any industry cec =ittees concerned with utility rates?
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JEFFERSON 3
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1 A.
Yes. I am a member and past Chairman of the Edison Electric Insti-2 tute Rate Research Committee and also a member of the Association of 3
Edison Illuminating Companies Load Research Committee.
In addition, 4
a member of my staff is a member of the American. Gas Association Rate 5
Cc=ittee. The membership of these com=ittees inci'udes rate managers.
6 of most of the major utilities in.the country. The coc=ittees hold 7
teetings two or three times a year at which many subjects relating 8
to utility rates are discussed.
9 In addition, I am also Chairman of the Project,Cocmittee of the 10 National Electric Rate Design Study. This group is in charge of con-I dacting this study which was requested by the National Association of 11 12 Regulatory Utility Co=mtssioners to evaluate the feasibility, cost and l,
13 technolosy of time-of-day pricing, in particular, and various lead 14 manage =ent techniques in~ general. Over 150 people frem all seg=ents 15 of the electric industry are participating in the study.
16 Q.
Mr Jefferson, have you ever lectured on' the subject of utility rate
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17 design?
18' A.
Yes. I am currently guest lecturer at the Edison Electric Institute's 19 Electric Rate Fundamentals Course held each year at the University of 20 Indiana.
I su also the lecturer on electric and gas rate design for 21 the National Association of Regulatory Utility Commissioners' Annual 22 Regulatory-Studies Program held at Michigan State University.
I have 23 also lectured on the subject of gas Vate' design at both the Universities 24 of Wisconsin and Maryland.
In addition, I have spoken before many 25 industry and regulatory groups on the nu=erous topics related to rate 26 design.
4 h
J m uSON 1
Q.
Please identify the exhibits you are sponso' ring in this proceeding.
2 A.
I.am sponsoring the following exhibits:
3 Exhibit A-(WJJ-1) 4 Exhibit A-(WJJ-2)
Exhibit A-(WJJ-3)
,5 6
Q.
Were the foregoing exhibite prepared at your direction and under your 7
supervision?
8 A '. Yes, they were.
9
-Q.
What,is your participation in this proceeding?
My responsibility in this' proceeding is to broadly define the need for 10 A.
these experimental rate studies as well as'to discuss various other 11 efforts which the Company is also making in the area of more efficient 3
use of tinergy. To begin with, the Company is now and has been for 'a con-g With costs siderable period of tine promoting efficient use of energy.
g skyrocketing and the availability of fuel becoming more and more scarce, yy it is in both the Company's and the customers' best interest that all
_ g A few natural resources and existing generating plant be used visely.
of Consumers Tower Companys measures in this area in recent years are yg a) the elimination of all sales prc=otion practice's,' b) progra s to pro-mote better home insula' tion, c) monthly tailing of various energy con-f
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servation brochures to many of our customers, d) direct custoce'r contact j
21 by Company representatives regarding effective and efficient use of 23 energy anci e) the participation in a national heat pump study which vill
' measure the feasibility of using these units in Michigan.
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J m u SON 5
1 All of these progra=s involve the potential reduction of electric energy 2
use or shifting of load. Utilities must build their systems large 3
enough so that they =est the highest demand for electric power that 4
all of their customers require at any one point in time.
One possible 5
vay to better use the company's existing facilities '.n the future vould 6
be to encourage existing customers to shift some of their energy uses 7
to other times of the day when the overall de=and for electric power 8
on-Consumers Power Company!s system is not as high.
These times of 9
lover. demand are defined in the company's experimental time-of-day 10 rates as the "off-peak" period. That is precisely what the experimental ll, time-of-day rate study and the controlled service rate study are all 12 about.
l 13 In January of this year, when ve experienced temperatures well 14 belov zero and vind-chill factors of h0-60 degrees belev zero, the gen-15 erating capability of the Michigan pool was dealt a severe blov vhen the 16 coal pile at a generating plant froze, thus taking away three nillion 17 kilowatts. With this large loss, the pool could not meet the de= ands 18 of its customers. Fortunately, through public appeal and voltage reduc-19 tions, we were able to avoid brovnout.s and revolving blackouts on a day 20 that was in many parts of Michigan the coldest day in recorded history.
21 This overwhelming response to the Co=pany's appeal (estimated 200,000 22 kilowatts df capacity saved through appeal outstate alone) is a very 23 good example that our custo=ers are v1111ng to cut back and conserve 9
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JEFFERSON 6
1 when called upon. Even though this was an e=ergency situation, similar 2
appeals but not of an emergency nature, have been tested and proven 3
successful in other states. For instance, the " Wait 'Til Eight" pro-4 gram in Ohio appealed to customers to vait until efter eight o' clock 5
at night before they did such things as their clothes washing; clothes 6
drying and dish vashing. From all reports, this has met with some 7
suecess. However, such volunteerism is generally of a temporary nature 8
as evidenced by the conservation after the President's plea in Nove=ber 9
1973 following the Arab oil embargo.
10 Another form of voluntary load shifting might be acco=plished 11 tbrough rate design. This could be achieved through so=e form 12 of ti=e-of-use rate or peak load pricing. This pricing concept 13 encompasses day-night rates, seasonal rates, off-peak rates, time-of-day 14 rates and interruptible iates, just to mention a few. Whatever the name 15 or specific application, the objective of this concept is to have elec-16 tric rates more correctly follow costs to serve. This means that peak 17 usage is charged more and off-peak usage is, charged less. For over 50 18 years Consumers Power Company has practiced a form of peak load pricing 19 by charging large concercial and industrial customers capacity charges 20 based on demands created during peak hours while per=itting off-peak 21 demands up to three times the on-peak de= ands with no additional demand 22 charges. These same customers nov have time-of-use energy charges as 23_
vell where their off-peak usage is priced at two mills per kWh less than 24 '
the on-peak charge to reflect the difference in energy costs between
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.J EFFlatSoN 7
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1 the two periods. Based on a recent study of the Company's.1600 large 2
primary co==ercial and industrial customers it is esti=ated that ap-3 proxi=ately eleven of 'these are consciously following the Co=pany's 4*
off-peak hours. While the reduction in their billing de=and presents 5
a significant savings to these customers it also results in v reduction 6
of approximately 85,000 lkflovattsjer mon $th frc=.the. Company.'s_[_ ]_
7 average monthly peak of almost h,000,000 kilowatts. This reduction of 8
over two percent is a valuable savings to the Company and the benefits 9
that are realized from this additional available capacity far outweigh 10 the higher cost of metering, which today is approxi=atel'y $2,000 per 11 customer of this type. These eleven customers are involved in various 12 types of industrial processing such as automobile parts, chemical prod-(
13 ucts, ce=ent products and metal = citing with electric furnaces. With 14 these experimental time-of-day rates, we want to investigate whether or 15 not the residential and small ce==ercial and industrial custo=ers also 16 show any propensity to shift their usage to the off-peak periods.
If 17 this should prove successful and the benefits are equal to or exceed the 18 additional costs, t. hen the Company would consider offering similar rates 19 as a per=anent part of their rate schedule.
20 Another for= of load shifting possibly can be acco=plished through a 21 program of load management where the utility actually controls the use of 22 the customer's appliance. This is being proposed in'the controlled service 23 study where the Co=pany will test the effect upon residential and co==er-24 '
cial customers of installing remote control load-=anage=ent devices on 25 electric water heaters, electric central air conditioners and electric
8 JEFFERSON 1
space heaters. This test vill involve a form of direct control where 2
ve vill attempt,to control the customer's load at peak periods. The con-3 trol vil1 be initiated'through a signal superimposed on the co=pany's
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4 electric distribution lines. This form of load management has proven 5
reliable in several European countries. ;some_U.S.electrieutilities
'6 are also experimenting with similar syste=s.
cons ers Power company, 7
for many years, offered controlled water heating service to its resi-8 dential customers and in 1972, just prior to eliminating this service, 9
there were over 100,000 customers on this rate. The reason that this 10 vas discontinued'vas that.the time clocks which were used to turn off 11 the water heater during certain hours of the day were an extremely in-12 efficient way of controlling the load and the additional cost of maintain-13 ing these devices and keeping them on time more than offset a:r/ benefits.
14 However, with a re=ote control system many of these deficiencies should 15 be overcome.
16 Q.
Mr Jefferson, having discussed the background of this study, would you 17 please now discuss the exhibits which you are sponsoring as they relate
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18 to this proceeding?
19 A.
Yes. To begin with, I would like to discuss Exhibits A-(WJJ-1) and 20 A-(WJA2) together since they are related. These two exhibits show 21-the system load curve for an average su=ner and vinter peak day with the 22 Company's current on-peak hours highlighted on each chart. The purpose 23 of_ these exhibits is to illustrate the basis for the on-peak hours which
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24 vere selected for Experimental Rates "X-1," "X h," "X-6," and "X-8."
25 These are the same on-peak hours which are included in the Company's cur-s 26 rent rate schedule except they do not exclude holidays unless the holiday 27 falls on a weekend.
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JEFFERSON 9
1 Looking first at Exhibit A-(WJJ-1) entitled " Typical Su==er 2
Peak Day," this clearly shows that the period of 10 AM to 5 'FM during 3
the su==ar is the =ost* critical period for the Cc=pany in ter=s of 4
meeting the custo=ers' de=and for energy.
It is this peak de=and 5
which causes the Co=pany to run more expensive for=s of generation 6
such as oil-fired peakers or to purchase very expensive power en a 7
short-ter= basis.
Consequently, by offering "ti=e-of-dhy" rates to 8
the residential and smil co==ercial and industrial customer in which 9
the "on-peak" rate is considerably ebove the "off-peak" rate, the cus-10 to=er =ay respond to these " price signals" by reducing his on-peak 11 consu=ption. An analogy can be =ade between this and a ce==on proble=
12 in =any co== unities today when a particular school or school syste=
13 has outgrown its available space.
In this case, many school syste=s 14 are going to split sessions as a =eans of better utilising their ex-15 isting classroo= space. This for= of " load shifting" has proved to 16 be a useful tool in =eeting the de=and caused by increased student en-17 roll =ent.
Therefore, it =ay be econo =ical for an electric utility to 18 shift some of the on-peak de=and to other times of the day, thus = ore 19 fully utilising existing generating capability.
Should these rate ex-20 peri =ents show that through the use of ti=e-of-day rates, these cus-21 to=ers have the propensity to shift so=e of their de=and to off-peak 22 periods, and the added costs do not exceed the benefits, then very 23 possibly this rate for= could be considered as one method for =oder-24 ating on-peak de=and growth.
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JEFFERSON 10 1
Turning now to Exhibit A-(WJJ-2) entitled " Typical Winter 2
Peak Day," this shows that the Company's peak de=and during the vinter 3
occurs in the evening hours between 5 and 9 PM.
Therefore, for Rates 4
ix-1," "X-4," "X-6" and "X-8," these are designated as on-peak hours 5
for the vinter period of october.through February and the higher ch'arges
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6 apply to usage during these hours.
These evening hours in the vinter 7
are equally as critical as the 10 AM to 5 PM hours in the su==er since 8
the peak demands during the two periods are approximately the sane.
9 In fact, for the year 1976 the su==er and vinter peaks were within 10 three percent of each other.
11 Q.
houldyoupleasenovdescribeExhibitA-(WJJ-3), " Average Weekday 12 Energy Cost by Hour"?
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- 4.. This chart shows the average coss of fuel and purchased power by hour 14 for a typical weekday. This energy curve is different from the two 15 de=and curves in that the duration of high cost power is longer than 16 the high demand duration and is not seasonal in nature, but year around.
17 The hours of 9.AM to 9 FM have been highlighted cince these are the on-18 peak hours which the Company is proposing for Rates "X-2," "X-5," and 19' "X-7."
Energy cons ced during these hours vill be billed at the on-peak 20 rate with all other energy including veekend usage being charged the off-peak rate.
21 22 Q.
Mr Jefferson, vould you please explain some of the aspects that must be 23 e nsidered in analyzing the results of these rate experiments?
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Eg A.
,0ne of the major considerations.is the Company's Ludington Pu= ped g5 Storage Plant. This is like a huge storage battery which is used to'
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J r.nuSON 11 1
displace expensive on-peak energy. The energy required to pu=p up the 2
pond is supplied from the Company's system during the off-peak periods 1
'3 when the ' cost of energy is less and the demands on our system are lover.
4 It then generates power during the cn-peak hours at a much lower cost 5
than vould otherwise have been p.ossible. This then has the effect'of
'6 filling in part of that valley that is shown on my Exhibit A '
(WJJ-1) 7 and Exhibit A-(WJJ-2). Therefore, what appears to be about a 1500 8
IG difference between the peak demand and the lowest demand really is 9
not.. What this means is that the potential amount of kilowatts that 10 could be shifted from the. Company's peaks is not as grea't as it might 11-appear on the surface. A shift of too many kilowatts could result in y
si= ply moving the peak itself without reducing it.
In addition, a 100%
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14 plants down at different times during the course of the year for cor-rective and preventive =aintenance. The last factor which must be con-yg sidered is the cost benefit analysis of this potential load shift.
Such costs as additional =etering costs, additional transmission and distri-g bution; costs,' and other additional administrative costs.cust all be Weighed against the benefit the Company receives from shifting these 20 kilowatts before a definite plan of action can be proposed.
Hopefully, 21 these studies vill-help provide many ansvers concerning the effective-22 ness of time-of-day rates and controlled service programs.
In addition, 23 and equally as important, they may provide the customer a means of
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24-using his energy more visely and thus reducing his bill.
Q.
Mr Jeffers n, d es this conclude your direct testi=cny?
25 26 A.
'.'es, it does.
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STATE-0 F-MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COSMISSION 1
In The Matter of The Application
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of CONSU>EES POWER COMPANY For
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Authority to Conduct a Limited
)
Case No U-5306 Time-of-Day Rate Study.and A
)
Controlled Service Rate Study
)
)
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EXHIBITS OF W J a m u SOU l
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Consumers Power Company
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