ML19345A804
| ML19345A804 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 11/20/1980 |
| From: | Hukill H METROPOLITAN EDISON CO. |
| To: | Novak T Office of Nuclear Reactor Regulation |
| References | |
| TLL-574, NUDOCS 8011250232 | |
| Download: ML19345A804 (36) | |
Text
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Metropolitan Edison Company
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Post Office Box 480 j
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Middletown, Pennsylvania 17057 717 944-4041 Writer's Direct Dial Number
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g November 20, 1980
- TMr;5 74 Office of Nuclear Reactor Regulation Atta:
T. M. Novah, Assistant Director Division of Licensing U. S. Nuclear Regulatory Commission Washington, D.C.
20555
Dear Sir:
Three Mile Island Nuclear Station, l'ait 1 (TMI-1)
Operating License No. DPR-50 Docket No. 50-289 Additional Financial Information Enclosed please find responses to items 16 and 17 of your letter of August 11, 1980, which supplements our response of October 9, 1980 (TLL 523' and October 27, 1980 (TLL 551). Responses to the remaining items wil
'e forwarded by December 1, 1980.
Sincerely,
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kill Director, TMI-l HDH: L'4H: CWS : hh Enclosure cc:
J. T. Collins Boos S
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f Metrocot. tan E2 son Cemoany :s a Member of t e General Puche Ut i t es System
Person Responsible for Preparation:
F. D. Hafer, Vice President - Rate Case Management, GPU Service Corp.
Telephone:
(201) 263-6013 Date: October 2, 1980 Page 1 of 2 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pen Jylvania Electric Company
& Jersey Central Power a Light Company NRC 'ocket No. 50-289 Three Mile Island Unit No. 1 Restart Proceedine Response to NRC Staff's Additional Financial Information Request No. 16, dated Augur 11, 1980:
"16.
(10.b.) - Describe updated aspects of each licensee's regulatory environment including, but not necessarily limited to, the following:
test year utilized (describe nature and timing), prescribed treatment of allowance for funds used during construction and of construction work in progress (indicate percentage and amount included in rate base), form of rate base (original cost, fair value, other (describe)),
accounting for deferred income taxes and investment tax credits, and fuel adjustment clauses in effect or proposed."
Response
In response to this request, please refer to our response to the NRC Staff's Supplemental Financial Information Rec,uest No. S telecopied November 9,1979.
As an addendum to that resp >nse, enclosed are an updated profile of the Pennsylvania Public Utility Commission prepared by Argus Research in April, 1980 and regulatory fact sheets concerning the Pennsylvania and New Jersey state utility commissions prepared by Duff and Phelps, Inc. in June, 1980 and March, 1980, respectively. Also enclosed are a copy of Argu:' Research Notes, dated May 13, 1980, regarding an informal meeting with President Bcebour of the New Jersey Commission and a copy of Argus' Research Notes, dated June 4, 1980, regarding such a meeting with Chairman Shanaman and Commissioners Cawley and Taliaferro of the Pennsylvania State Commission.
With respect to regulatory principles and practices of the state commissions as they have been applied to the CPU System operating companies, there have been no changes in base rate case treatment since the previous response.
It a.ould be noted that in the pending retail base rate cases of Metropolitan Edfoon Company and Pennsylvania Electric Company the parties have stipulated that tha final determination of " fair value" rate base will be equivalent to the ;ciginal cost rate base.
j
4 Page 2 of 2 With respect to GPU's Pennsylvania companies, the Pennsylvanit. Commission in its May 23, 1980 Order directed Metropolitan Edison Company and Pennsylvania Electric Company to file and comment upon a proposed Energy Cost Rate to be applicable in 1981. Our response to the NRC Staff's Additional Financial Information Request No. 17, dated August 11, 1980, addresses this matter.
h-1
(6 Argus UtilitySe{pe Q
REGULATORY SERVICE BASIC ANALYSIS
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April 1980 Regulatory Authority Pennsylvania Public Utility Commission P.O. Box 3265 Harrisburg, Pennsylvania 17120 (717-783-1704)
The Pennsylvania Public Utility Commission (PUC) con-sists of five full-time members appointed by the Governor for 10-year terms.
Members must be confirmed by a two-thirds vote of the Senate before assuming office on a permanent basis.
The Chairman of the Commission is appointed by the Governor and receives an annual salary of $42,500.
Each other Commissioner receives an annual salary of $40,000.
There has been extreme turnover at the PUC over the past year or so.
At one time during
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1979, the PUC operated with as few as two Commissioners.
Three
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of the four present Commissioners have served only since November 16, 1979.
A part of the reason for the delay in the Governor's filling the open Commissioner positions was a conflict between the Governor, who is a Republican, and the confirming authority, the Senate, which is predominantly Democratic. The Governor, Richard Thornburgh (Rep.) is serving an initial four-year term which runs to January 1983.
Became Term Commissioners Party Age Commr.
Ends
Background
Susan M.
Shanaman Rep.
33 11/16/79 4/1/83 Counsel to State Senate (Chairman)
Minority, PUC Attorne5 James H. Cawley Dem.
34 11/16/79 4/1/87*
Counsel to State Senate Majority, Pvt. Law Practice.
Linda C.
Taliaferro Ind.
32 11/16/79 4/1/89 Attorney for N.Y.
Life Insurance Co., Mgr.
Westinghouse Elec. Corp.
- Dem, 66 12/16/75 4/1/85 Exec.
V.P.
of Pa.
AFL-CIO, labor lobbyist.
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Vacancy 4/1/81
- Commissioner Cawley was originally appointed to a term extending to 4/1/81, but during April 1980, he was appointed and confirmed to the unexpired term of former Chairman Goode which extends to 4/1/87.
Copyrsht 1975, Argus Research Corporaten.140 Broadway, New York N.Y.10005 - Tel: (212) 425-7500
2.
General Information r
There are 594 staff positions allotted to the PUC, of
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which approximately 540 are currently filled.
The Commission's budget is $16.6 million for the fiscal year ending June 30, 1980, and will approximate $17.3 million in fiscal 1981.
Funds for the budget are raised by an assessment (a maximum of 3/10 of 1%)
against the revenues of all regulated utilities in the state.
Members of the staff are selected oy the Commission and, other than division chiefs, attorneys, and Commissioners' assistants, are covered by civil service.
Commission hearings are generally conducted by Administrative Law Judges.
The staff separately advises the Commission and participates in hearings.
Following enactment of new legislation requiring that the PUC staff testify, the staff has taken a more active role and now testifies in rate cases.
The PUC staff has been substantially reorganized in the past few years, partly as a result of legislation enacted in 1976.
Each Commissioner is now entitled to five personal as-sistants and one clerk.
In ' addition, certain other staff personnel report directly to the Commission.
Most other staff personnel report to the Director of Operations, who is responsible for the operation of the Commission on a day-to-day basis.
As a result of the 1976 legislation, the Bureau of Conservation, Economics and Energy Planning was created, as were the Bureaus Administrative Law Judges and Consumer Services.
While the structural re-organization of the PUC appears to be complete, the l'
Commission is attempting to make numerous policy and procedural
\\s changes within the present structure, so as to assure the timely handling of all matters.
In addition to gas, telephone, and electric utilities, the PUC has jurisdiction over private water and sewer companies, railroads, buses, trucking and taxicab companies, steam heat companies, water carriers and certain intrastate pipelines.
The Commission holds a public meeting once a week, usually on Thursday or Friday.
Its sessions are open to the public and all Commis-sion decisions are made at these meetings.
Court of Review Commission decisions may be appealed to the Common-wealth Court and then, by allowance, to the State Supreme Court.
A number of cases have been appealed to the Commonwealth Court in the past few years and, in some instances, the Court has remanded cases to the PUC for further action.
West Penn Power Company appealed the Commission's July 7,
1976 order permitting it only a $9.9 million rate hike out cf the S24.9 million sought on September 30, 1974.
The Commonwealth Court remanded this case cack to the PUC, requiring additional detail concerning the basis of the Commission's reasons for reducing rate base owing to excess capacity.
The PUC staff and the company agreed to a settlement of the remaining issues in this case.
However, the Consumer Advocate objected to the proposed settlement and, therefore, it went back to the PUC for
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i-further action.
In June 1979, the Commission issued for. comments a new order authorizing an increase of $8.5 million en an annual
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basis, thereby bringing the total increase to $18.4 million out j
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of the S24.9 million originally requested.
In its proposed order, the PUC proposed that the company reccup the pasu revenue short-fall.only from those customers actually served during the period August 30, 1975 to November 30, 1976 and that any revenues i
the company considered uncollectible should not be charged to other ratepayers.
In the further findings, the PUC noted that it was no longer contending that the company had excess capacity.
I Final PUC action has not yet been taken on the~ matter.
Pe'nnsylvania Gas & Water Company appealed a PUC order dated July 7, 19,6, in which the. Commission permitted the company only $1.3 million of the S2.6 million sought on January 15, 1975.
i The Commonwealth Court held that the PUC's finding concerning the i
fair value of the' company's property reflected " arbitrary and I
capricious action on-the part of the PUC and a manifest abuse of its discretion."
The Court therefore admonished the Commission to " disclose in some detail in its adjudications the figures upon i
which its conclusions are based and the methods employed in arriving at those conclusions."
The Court determined that a reasonable fair-value finding would-have entitled the company to i
the full increase sought and, therefore, it remanded the case to the PUC and directed it to enter-an order dismissing the complaints and allowing, as permanent rates, each of the rates proposed by the company.
The PUC appealed this case to the Pennsylvania Supreme Court.
On February 1, 1980, the Supreme Court issued a judgment overruling the Commonwealth Court of Pennsylvania in this and an earlier Pennsylvania Gas & Water case concerning the i
matter of fair value versus original cost.
The Supreme Court determined that the Commission had the leeway to use original-i cost rate base if it did so after examining all the evidence presented and found that the use of an original-cost rate base would enable it to provide "just and reasonable" rates.
We t
believe that the' Supreme Court' ruling concerning original cost will largely render moot several pending appeals and it seems
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likely that the PUC will rely on original cost in future rate proceedings.
(For a more detailed summary of the Court ruling, l
see Research Note dated February 21, 1980.)
i On January 25, 1980, the Commonwealth Court of Pennsylvania issued a decision in a UGI Corporation gas case in which it reversed the PUC in part and remanded the case to the Commission i
for findings and further disposition on certain issues.
This case had been initiated int UGI November 28, 1977 when it sought a
$12.6 million hike.
The PUC authorized a $4.6 million increase August 25, 1978 and UGI appealed on a number of grounds.
The l
Commonwealth Court reversed the PUC on a couple of issues and these could lead to a further rate hike of as much as $2 million.
i The portion of the decision the PUC considered of greatest-importance was the Court's upholding the Commission in its dis-cretion to rely importantly on the return to be allowed on book
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common equity.
The PUC was upheld because the record indicated
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that the Commission " Considered factors in addition to book common equity."
These included the " market performance of UGI stock, _the cost of issuance and market pressures, and the amount of incentive premium necessary to attract investors to purchase UGI's equity."
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Legislative Information The Pennsylvania General Assembly is bicameral and meets annually, starting the first Tuesday in January.
The present composition of the 50-member Senate is 28 Democrats and 22 Republicans.
The 203-member House of Representatives is comprised of 104 Republicans, 98 Democrats and there is one vacancy.
Utility matters and the PUC have ranked high on the list of attention-getting items of the General Assembly during the past few years.
During 1976, a bill was passed providing for the creation of a Consumer Advocate within the Department of Justice and also Senate Bills No. 1216 and 1217 were enacted.
Senate Bill No. 1216 amended the basic Act relating to the regulation of public utilities and Senate Bill No. 1217 amended the basic Act that created the PUC and defined its powers and duties.
A number of bills were introduced during the 1977, 1978 and 1979 sessions dealing with such matters as the proposed election of Commissioners, rate structures, fuel-adjustment clauses and the establishment of a Department of Energy.
The only substantial legislation passed during this time was legis-lation imposing a gross receipts tax on electricity produced in Pennsylvania by an cut of state corporation and transmitted to another state.
This legislation was enacted on December 21, 1977 and was subsequently repealed in 1979.
A number of utility-related bills are again pending in the General Assembly.
One that is receiving a great deal of attention and was passed by the Senate as Senate Bill No. 411 contains provisions concerning ex-parte communications, original-cost rather than fair-value rate base, particular requirements related to the use of a future test year, initial decisions, temporary rates, and the consideration of the effects of infla-tion or deflation when determining a reasonable rate of return on rate base, among other things.
This bill is presently being held in Committee by the Chairman of the House Consumer Affairs Committee and seems unlikely to be enacted during 1980.
Some of the measures contained in the bill can be implemented by PUC action changing its own rules.
Consumer Representation The PUC staff is charged with the responsibility of bringing all facts before the Commission in rate cases and, con-sequently, plays an important role in support of consumer interests.
Following legislation enacted-in 1976, the staff has taken a more t
aggressive stance
.n presenting cases before the PUC.
In addition, the Consumer Advocate Office brings another strong voice before the Commission pleading the interests of consumers.
The present 4
Consumer Advocate Office is headed by Walter Cohen.
Funds for the consumer advocate's budget, which for fiscal 1981 is estimated
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at $1.5 million, are raised by an assessment against the revenues of the state's utilities.
The PUC has taken a number of actions to be specifically responsive to the changes in consumer needs i
and among these it has mandated at least bi-monthly meter reading
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by the major electric and gas utilities in the state and has
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instituted policies concerning utility credit and shut-off practices.
The Commission has also required'the utilities to design new billing
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0 statements that give-customet_ acre information concerning their bilh and are easier to read and understand.
Major newspapers in g-the state include the Harrisburg Patriot-Evening News, the
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Philadelphia Inquirer, the Philadelphia Bulletin, the Pittsburgh Press, and the Pittsburgh Post-Gazette.
Regulatory Innovations In certain cases, the PUC allows a portion of non-revenue-producing tonstruction work in progress to be included in rate base, and also has allowed a portion of land held for future use to be considered as part of rate base.
The PUC had required flow-through of liberalized depreciation tax savings, but in most instances, has permitted normalization for post-1969 plant addi-tions.
Tax savings attributable to interest on funds borrowed for construction projects may be normalized for ratemaking purposes.
Prior to the past couple of years, the PUC permitted state tax benefits to be normalized; however, it has required flow-through of these benefits in recent cases.
The PUC requires the staff to extensively audit inter-nally energy cost adjustment increase filings and regular rate case data.
The PUC has established criteria for management audits and has e.1 ready initiated action causing a number of audits to be undertaken.
The first three audits were of somewhat smaller companies and occurred in 1978.
In 1979, Philadelphia Electric Company was audited by Cresap McCormick and Paget.
The company was identified as having 74 strengths and 58 opportunities for imprcrement.
Additional audits are expected to be undertaken in the future.
The Commission has formed'a 13-to-17 member Consumer Advisory Council, which meets quarterly, to keep the PUC informed about the public's thinking on utility matters.
It also has created a Utility Technical Advisory Council to advise it on financial and technical matters relating to the regulation of fixed utilities.
Significant innovations relating to Pennsylvania regu-l lation were brought about by legislative action during 1976.
These include substantial salary increases for the Commissioners, the requirement that they serve full time, and changes in the method and timing of approving rate increases.
The new law required the Commission to set guidelines for future test year filings.
The PUC initially established rules requiring that future test years should consist of a period of 12 consecutive months which should start immediately after the historical year.
Considering the' time it takes the company to prepare a case and the PUC to hear it, the future test year has proved to be historical, or virtually so, by the time the higher rates became effective.
As a consequence, the PUC is considering changing its rules so as to provide for fully forecast test years in future rate cases.
During 1978, the PUC initiated a procpdure known as
" annual review."
Under this plan, each major company meets
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annually with the commission and staff members, in a public
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session, to discuss the many issues and decisions made during the year and about which the parties could not communicate during a rate proceeding because of ex parte and other restrictions in the l
public utility law.
Among.the items discussed are the company's
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construction plans and forecasts, its financing plans, and its rate case results and the reaction to these by the financial 1
l community, the company's management and the public.
The sessions S
also provide the opportunity-for review of management audits, consumer complaints and special problems developing with relation to a particular company.
The next scheduled review is with Philadelphia Electric Company and it is to occur on May 28, 1980.
At times, it has been difficult to conduct these reviews, owing to the fact that many Of the state's utilities are in for rate increases almost cont urually.
t On March 22, 1979, the PUC issued an initial decision approving a flexible pricing tariff for' Bell Telephone Company of Pennsylvania.
A research note describing this action was issued on April 5, 1979.
Final PUC action, largely confirming the initial order, was taken in this case April 21, 1980.
During 1979, the PUC made a special statewide survey of consumer complaints to find out what was right and what was wrong in the company-customer relationship.
The survey was undertaken by the l
Consumer Services Bureau of the PUC.
l During 1979, the PUC decided to hear many aspects concerning the Three Mile Island incident as a panel of Commis-sioners, in order to speed the decision making process.
Final PUC action concerning a number of TMI issues is anticipated by May 23, 1980.
During 1979, the Commission instituted an inves-tigation concerning the extended outage of the Beaver Valley #1 i
nuclear unit, which is owned by Duquesne Light and Pennsylvania Power Company.
The company was ordered to file a statement as to 1
why its rates should not be adjusted to remove the cost associated with the outage of the Beaver Valley unit from March to August
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1979.
The Commission is exploring both the impact on. base rates during this period, and also the resulting purchased power costs
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that were recovered through the energy clause.
In a separate i
investigation, the PUC is considering whether additional construc-tion costs resulting from deferral of construction projects should be excluded from Pennsylvania Power Company's rate base in subsequent proceedings.
[
Earlier this year, the PUC voted unanimously to give Pennsylvania Power & Light Company-broad authority to require minimum insulation in neu; residential and business construction.
PP&L firstiput forward this plan in. April 1978.
The adopted i
tariff requires that all new residences and commercial buildings meet insulation standards before electric service is provided.
The PUC' continues to be concerned with the length of j
time it takes for virtually all regulatory matters to be processed.
Current budget restrictions have placed additional pressures on the PUC and it is continuing to endeavor to speed up the rate case process to the extent possible, both to maximize the use of its resources and to provide more timely adjudication of matters coming before it.
Recent Commission Actions m.
The PUC rate decisions issued since July 1974 are summarized-in theftable on pages 8.and 9.
Most of the major rate i
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7 decisions contained in this table have been discussed in Research Notes issued shortly after the date of the decision.
For additional
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detail concerning these cases, please refer to the appropriate
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Research Notes. For those cases decided during the past year, the Research Note dates are as follows: Bell Telephone Company of Pennsylvania --April 5, 1979; Metropolitan Edison -- April 16, 1979; Duquesne Light --July 18, 1979; West Penn Power -- September 11, 1979; Columbia Gas of Pennsylvania -- November 12, 1979; and the Philadelphia Electric Gas Case --January 28, 1980. A brief Research Note was prepared April 25, 1980 concerning Phila-delphia Electric Company's electric rate decision of that date.
A longer Research Note will be issued on that case in May following issuance of a definative order.
In addition to these cases, the PUC has also issued numerous rulings conce,rning Metrope fra.
Edison and Pennsylvania Electric as a result of the Three enic Island incident.
These actions have been discussed in Research Notes dated April 12, 1979, April 26, 1979, Jqne 21, 1979, Wovember 2, 1979, and February 8, 1980.
Further PUC action is expected on the TMI issues in May 1980.
Major Cases Pending There are currently several major rate actions pending before the PUC.
In addition, there are a number of generic actions being considered.
The highlights of the pending rate cases are outlined below.
On November 28, 1979, General Telephone of Pennsylvania requested a $13.2 million (12%) rate hike.
The petition is based on a 15.5% *aturn on common equity (41.7% of capital) and an 11.5% return on a year-end rate base for a test period ended July l
31, 1979.
Final PUC action is required on this request by August 1980.
On November 29, 1979, National Fuel Gas Distribution Company, a subsidiary of National Fuel Gas Corporation, requested a $21.4 million (10.12%) gas rate hike.
The petition is based on the company's request to earn a 13.5% return on common equity (42.8% of capital) and a 10.67% rate of return on a year-end fair value rate base for a test period ending June 30, 1980.
Final PUC action is required in this case by August 29, 1980.
On January 16, 1980,. Pennsylvania Power Company a subsidiary of Ohio Edison, requested an $18 million (12.4%)
permanent electric rate increase.
The company proposes a 15.5%
return on common stock equity (34.8%~ of capital) and a 10.9% rate of return on a year-end rate base for a test period ended Ju?v 31, 1979.
Final PUC action is required in.this case by October 16, 1980.
On March 31, 1980, Columbia Gas of Pennsylvania requested a $29.4 million rate increase.
This request was based on the company's petition to earn an 11.15% rate of return on a year-end
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fair value rate base for a test period ending October 30, 1980.
k The equivalent return on original cost rate base is 12.04%.
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return sought on book common equity is 17%, with common equi
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comprising 45.7% of the proposed-capital structure.
Final PUC action is not required on this petition until December 1980.
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MAJOR RATE DECISIONS IN PENNSYLVANIA SINCE JULY 1974 Attri-Increase Increase Test tion Common Type Requested Authorized Pe riod Adj.-
Equity Company of Amt.
Amt.
End Rate ROR
% or as %
ROE Case Citation Svc.
Date
($ Mil.)
Date (SMil.)
Mo. /Yr.
Base
_1_
$ Mil.
Cap.
t Duquesne Light C-R.I.D.
89 Elec.
4/3L/73 62.5 7/30/74 74.8(I) 12/72 YE/FV 8.75 32 42.3 C-R.I.D.
198 Elec. 11/27/74 80.6 7/13/76 36.3(I) 7/74 YE/FV
- 9. 3 33 14.9 C-R.I.D.
373 Elec.
10/1/76 127.9 9/28/78(1)81.6(I) 6/76
.YE/FV 9.11 35 12.5 C-R-79010740 Elec.
1/26/79 106.6 7/12/79 58.0(2) 9/78 YE/FV 9.46 33 13.15 Matropolitan Bdison C-R.I.D.
170&l71 El ec.
7/26/74 71.7 6/22/76 29.8(I) 3/74 YE/FV 9.82 39 13.7-C-R.I.D.
434 Elec.
7/1/77 44 5/31/78 2.6 3/77 YE/FV 9.74 37 13.6 C-R-78060626 Elec.
6/30/78 78.8(R) 3/29/79 49.2(3) 3/79 YE/FV 9.66
- 35 13.38 Pennsylvania Electric C-R.I.D. 172&l73 elec.
7/29/74 68.0 6/2/76 33.3(I) 3/74 YE/FV 9.53 35 14.8 C-R.I.D.
392 lec.
2/1/77 67.8 6/22/78 24.7(I) 12/77 YE/FV 9.56 33 13.43 c-R-78040599 Elec.
4/28/78 76.4 1/26/79 56.2(4) 12/78 YE/FV 9.55 33 13.12 03 Pennsylvania Power C-R.I.D.
243 Elec.
5/30/75 8.0 1/27/77
- 4. l ( I) 2/75 YE/FV 10.05 35 14.7 C-R-77110521 Elec.
11/28/77 35.5 8/31/78 23.3 7/77 YE/FV 10.17 36.1 14.13 i
Pennsylvania Power & Light
.C-R.I.D.
221&251 Elec.
3/31/75 78.3(R) 8/26/76 78.3(I) 7/75 YE/FV 9.83 31 14.28 Philadelphia Electric C-R.I.D.
51660 Gas 12/5/72 12.0 9/10/74 12.0(I) 9/72 YE/FV 8.24 36
- 10. 3( F)
C-R.I.D.
129 Elec.
1/31/74 136.0 3/25/75 105.0(I) 6/74 YE/FV 9.92 33 15 C-R.I.D.
227 Cas 4/3/75 14.0 11/22/76
- 9. 2 (I) 12/74 YE/FV 9.9 35 14 (E)
C-R.I.D.
295
'Elec.
11/19/75 94.6 2/3/77 72.0(I) 8/75 YE/FV 9.91 34 14.1 C-R.I.D.
438 Elec.
8/5/71 ll5.8(R) 12/28/78 78.9(I) 12/77 YE/FV 9.84 34 13.5 C-R-79030781 Gas 3/30/79 15.4 1/4/80 10.7 12/78 YE/FV 10.19 35.1 13.75 C-R-79360865 Elec.
7/27/79 122.7 4/25/80 88.8 3/80 YE/OC 10.51 35 14.35 West Penn Power C-R.I.D.
183 Elec.
9/30/74 24.9 7/7/76 9.9(I) 6/74 YE/FV 8.63 33.6 12.9 C-R.I.D.
369 Elec.
9/29/76 46.9 5/23/78 10.6(I) 6/76 YE/FV 9.32 35 14.16 C-R-78100685 Elec.
10/27/78 73.8(R) 8/30/79.
21.7 6/79 YE/FV 9.38 34 14 Columbia Ces
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C-R.I.D.
340 Gas 5/3/76 21.0 1/24/78 6.7(I) 12/75 YE/FV 9.9; 39 13.56 j
C-R-781 A424 Cas 12/29/78 26.5 3/16/79 8 5(2) 8/78 YE/FV 10.31 43.1 j 1Q.5(E) p
_ c-se
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Equitabi. Gas C-R.I.D.
135 Gas 3/29/74 10.9 8/20/74 9.4 12/73 YE/FV 9.3 --
C-R.I.D.
317 Gas 3/31/76 19.5 9/13/77 11.3 12/75 YE/FV 9.94 42 13.6(E)
C-R. I. D. 7 8- 0 40 598 Gas 4/28/78 27.9 10/23/78 15.8(5) 12/77 YE/FV 10.19 --
13.4(E) tutional Fuel Gas C-R-7 7110 514 Gas 5/1/78 13.0 9/22/78
- 5. 5 ( 2) 12/77 Pennsylvania Gas & Water C-R.I.D.
296 Gas 11/14/75 11.1 5/11/78
- 5. 9 ( I) 8/75 YE/FV 9.52 34 13.68 Peoples futural Gas C-R.I.D. 99 Gas 6/29/73 17.7 9/10/74 12.2(I) 3/73 YE/FV 8.25(F) 52 10(F)
C-R.I.D.
205 Cas 12/31/74 17.1 5/17/76 13.5(I) 12/74 YE/FV E. 9 ( F) 50.5 14.5(E)
C-R.I.D.
308 Gas 1/29/76 14.9 7/25/77 2.2(I) 12/75 YE/FV 10.4 50 13.6 C-R-78010545 Gas 1/27/78 14.3 10/27/78 3.6 9/77 YE/FV 10.54 50 13.5 U. G. I.
Corp.-
C-77110 518 Gas 11/28/77 12.6 8/25/78
- 4. 6 3/78 YE/FV 10.14 40 13.4 Dell Tul. of Pennsylvania C-R.I.D.
196 Te l.
11/15/74 116.4 6/22/76 83.3(I) 7/75 YE/FV 9.88 55 12 C-R.I.D.
367 1el.
11/5/76 139 12/15/77 38(6) 6/77 YE/FV 9.65 49 12.37 m
C-R-78120719 Te l.
12/12/78 156.3(7) 4/21/80 75.3(7,1) 9/79
--/--
9.65(7) --
(1) DUC votes increase. Order not issued until 2/5/79.
( 2) Settlement agreement approved by PUC.
( 3) On April 19, 1979 the PUC set temporary rates $49.2 million below approved rates. These rates were made permanent 6/15/79 following TMI investigation.
( 4) On Ap r il 2 5, 1979, the PUC ordered temporary reduction of $25 million. This reduction was made permanent 6/15/79 following qNI investigation.
( 5) Rates became effective 10/23/78 following PUC acceptance of settlement.
( 6) Revised to roughly $48 million 5/11/78.
( 7) Filed for two phase increase.
PUC approved 1st phase conditioned upon withdrawal of 2nd phase. Company permitted to implement flexible pricing.
IUC action followed stipulation by parties to the case and was based on ROR of.last case.
A $77.3 million interim increase was authorized 3/29/79.
C - Case Number.
F - Return on f air value.
FV - Fair value.
I - Interim increase implemented prior to issuance of final order.
L - Amount of request lowered while case was in progress (latest request shown).
R - Amount of requested increase raised while case was in progress (latest amount shown).
ROE - Return on original cost common equity.
ROR - Over-all rate of return on original-cost base.
e, YE - Yea r-eleu.
10.
On April 29, 1980, West Penn Power Company, a subsidiary of the Allegheny Power System, requested an S81.7 million (17%)
permanent electric rate increase.
The cc.npany proposed a calendar-f 1979 test year and the request equates to a 10.86% rate of return
['
on a year-end original cost rate base.
West Penn seeks a 16.5%
return on book common equity, which comprises 40% of its proposed capital structure.
Final PUC action is not required on this case until January 1981.
On April 29, 1980, Pennsylvania Power & Light requested a S123.3 million (16%) electric rate hike.
The company seeks a 14.45% return on common stock equity (32.6% of capital) and a 10.86% return on a year-end original cost rate base for a calendar-1980 test year.
PUC action is not required on this petition until January 1981.
On Acril 29, 198C, Duquesne Light requested a permanent electric rate increase of $113 million (18%), based on its petition to earn a 9.9% return on a year-end fair value rate base for a calendar-1979 test year.
The implied return on book common equity (33.2% of capital) is roughly 18% and the return on original cost rate base is approximately 11.6%.
PUC actio1 is not required on this petition until January 1981.
Consolidated Natural Gas Company, a subsidiary of Peoples Natural Gas, also filed a request on April 29, 1980.
Consolidated Natural seeks a $32.C million (8%) permanent gas rate increase based on its petition to earn an 11.04% return on a fair value rate base.
The equivalent return on an original cost rate base is 13.67% and the return on book common equity (55.5% of capital) la 17.98%.
PUC action is not required on this petition until January 1981.
Another major action pending before the PUC is the Metropolitan Edison case, which is really three cases combined.
The PUC permitted the company a temporary increase in its energy cost adjustment rate in February, and this $55 million annual increase will be reviewed as part of the present proceeding.
The Commission wil' also issue a decision concerning the future rate base treatment of TMI unit #1 and will determine whether or nor the company's franchise should be revoked.
The present timetable calls for an initial decision on all issues May 9, 1980, to be followed by a final order on May 23rd.
Regulatory Accounting The PUC permits normalization of investment tax credit benefits.
In the past, the Commission had required the flow-I through of liberalized depreciation tax benefits related to all electric and gas utility plant for those companies that did not elect normalization under the 1969 Tax Reform Act.
During the mid-1970's however, it permitted normalization of such tax benefits for property added after 1969.
The PUC appears to have adopted a new stance concerning further changes, and during 1978 denied the requests of Pennsylvania Power Company and West Penn
( ~
Power Company to adopt normalization for liberalized depreciation tax benefits.
In a 1978 Philadelphia Electric rate order in
11.
which it discussed tax normalization, the PUC stated "we consider
~
it improper to allow normalization except: (1) upon evidence that the deferred taxes will in fact be paid within the foreseeable
(',
future; or (2) where normalization is required by law in order to
]
obtain the benefits of accelerated depreciation."
In line with that policy, the company was. treated on a flow-through basis for state income tax benefits.
These same state tax benefits are now flowed through in all rate cases.
Several companies have been permitted normalization of the tax benefits attributable to interest on funds borrowed for construction projects.
Adjustment Clauses The state's largest utilities have historically had some type of fuel-adjustment mechanism.
Prior to 1978, some of the companies had an energy-cost-adjustment clause and some a j
fuel-adjustment clause.
During the coal strike, the PUC ordered that a temporary ceiling be placed on all clauses so that they not exceed the rate in effect in March 1978.
The PUC ordered all the state's utilities to prepare for implementation of an energy clause.
The Commission permitted Duquesne Light and West Penn Power, both of which were hard hit by the coal strike, to imple-ment emergency energy surcharges.
These were designed to allow l
the companies to recover extraordinary purchased power expenses incurred as a result of the coal strike.
Some of the amounts collected under these surcharges are still being contested.
As a result of PUC action, each of the state's major electric utilities has now implemented a not energy clause.
This clause
(
requires the utilities to pass through to customers net gains
(
from increases in interchange sales, but also provides for recovery of net reductions in interchange transactions.
The energy charge of the state's utilities contains an automatic factor which insures that the utilities collect only for the I,
actual cost of energy consumed.
For most utilities in the state, the average lag in the electric energy cost adjustment clause is approximately five months.
The PUC has also adopted a levelized gas cost rate adjustment clause.
The Commission established an independent auditing team to completely check all fuel cost surcharges automatically passed on to customers by electric and gas utilities.
Checks by these auditors and others revealed what the Commission considered certain discrepancies.
Accordingly, the PUC issued a number of show-cause orders to the various utilitie's directing them to show cause why they should not refund certain monies to customers because of the failure to enforce specific coal purchase contracts.
The alleged excess prices were paid during a period when suppliers were threatening to cut off utilities' coal supplies.
Two of these actions were taken concerning Metropolitan Edison.
In one action, the company was alleged to have paid excess charges of
$9.8 million in 1974, and in another, $4.6 million of excess charges were alleged to have been made during 1975.
The PUC recently voted on the 1974 charges and indicated that the company overcharged customers by S3.9 million and, therefore, should return
(. '
payments.
No final PUC action has yet been taken on any of the S4.9 million, which includes interest, because of these unnecessary i
other cases, but it appears to us that refunds, if any, in these other cases, will not be substantial.
12.
In November 1979, Philadelphia Electric sought to limit its energy charge so as to minimize the winter rate to customers owing to the sharp price hikes it was experiencing in fuel charges.
on March 31, 1980, Philadelphia Electric filed a request seeking
(}
permission to_ implement an energy cost rate which would be revised annually each January and would remain constant for the remainder of the year.
It proposes that this new rate be effective June 1, j
1980 and be based on forecast fuel expenditures.
The company believes that the plan will provide a closer matching of actual fuel cost incurred by the company and the amount charged to customers and will also minimize the fluctuation in the customer's l
bill.
No PUC acticn has yet been taken on this request.
Surcharge clauses to pass on increases or decreases in certain state taxes are permitted.
L s
Regulatory Timing f
l As a result of the public utility bills passed in 1976, i
substantial changes occurred in the regulatory timing in Pennsylvania.
The Commission is permitted to suspend a proposed rate increase, but for not more than seven months beyond the proposed effective date.
By the end of seven months, a majority of,PUC members serving are to issue a final decision and set forth the reason j
for their action.
If no decision is issued, the filed rates become effective, subject to refund.
When filing for a rate increase, the company must give 60 days notice, bringing the 1
total elapsed time from a rate application to a rate decision to nine months.
A requested increase of 3% or less is not consi-(
l dered a general increase and, therefore, is not subject to these
(
j hearing and suspension provisions.
A utility may seek " extraordinary rate relief" if a rate hike is "immediately necessary for the maintenance of i
financial stability," and if the increase will provide "no more i
than the rate of return on the utility's common equity" allowed
- n its last case.
The PUC adopted a policy requiring that comprehensive financial and operating data be filed with requests for extraordinary interim rate. increases. Requests must be accompanied by information showing the increase is needed to maintain financial stability, continue normal maintenance and service, and to prevent substantial job reductions.
The PUC must hold and conclude hearings and must issue decisions on requests j
{
for extraordinary relief within 30 days.
Under the new law, no temporary rates are involved and, thus, no recoupment (or retro-i j
active charges) will result.
Rate Base Determination Regulatory law in Pennsylvania requires that a utility be allowed a " fair return on the fair-value of its property used l
and useful in the public service."
Until recent Court decisions largely upholding the Commission's right to use an original-cost rate base as a surrogate for a fair-value rate base, the PUC f
j ostensibly gave consideration to the original cost of construc-(^~
tion of the property and also its reproduction cost at average j
prices.
What clearly seemed to have been happening, however, was
13.
that the dollar amounts of rate increases were determined by considering the return on original-cost common equity.
Generally, returns in the range of 12.5% to 14% were selected and, following 8
the selection of the return on equity, the return on fair-value rate base was determined arithmetically.
As a result of a 2
Pennsylvania Supreme Court ruling earlier this year, we believe the Commission will rely primarily on original-cost rate base in future cases. Year-end rate base is customarily used, with annualizing adjustments made to the income statement accounts.
Senate Bill No. 1216 provides that, in supporting a rate increase under the new rules, a utility may utilize a future test year.
Rules for future test years were promulgated by the PUC, but they provide that the future test year must start immediately after the historical year, which generally made it historical by the time the new rates were placed into effect.
The PUC is now considering issuing new rules concerning future test years so that fully forecast years may be utilized by the state's utilities so as to provide a better opportunity for them to actually earn the returns allowed by the PUC.
In certain instances, the PUC has permitted amounts of construction work in progress in rate base when certain standards are met.
The property must generally be completed within a short time after the end of the test period and be non-revenue producing.
Rate of Return In recent electric and gas rate cases, the PUC has generally permitted returns on original-cost rate base in the
(
9.5% to 10.5% range and returns on equity in the 13% to 14%
(
range.
(For additional detail concerning rates of return authorized on rate base and on equity by the PUC since July 1794, refer to the table on pages 8 and 9.)
Rate Structure During 1976, the State Senate and House passed joint resolutions requiring the PUC to examine the subject of rate structure and to look specifically into such alternatives as:
inverted rates, seasonal peak and off-peak pricing, higher tail block prices, energy conservation discounts. and lifeline rates.
The PUC responded by conducting an investigation (P RMD-7) into electric utility rate structures to determine whether rate structure redesign would conserve power and benefic consumers.
3 The'socio-ecanomic effects of rate structure revisions were also d
considered in the inquiry.
The PUC filed its conclusions with the General Assembly in December 1977, noting that the data gathered contained internal inconsistencies and that it was often possible to support alternative policies.
The PUC considered its report to be both " generic and preparatory."
It therefore con-sidered the recommendations not the end, but the beginning.
The Commission reported that it learned that there is no single rate structure or group of structures that will solve, in a simple manner, Pennsylvania's electric energy problems.
(
The Commission decided to commence the implementation of-certain recommendations where applicable and appropriate.
Among these recommendations are the following: (1) that electric l
rate structures should be based on cost-of-service principles; 5
l
14.
(2) certain preferential rate schedules should be merged into i
appropriate regular rate schedules; (3) declining block rates should be phased out; (4) optional load factor rates should be offered to all large residential customers; (5) extensive load f^.
studies should be undertaken; (6) experimental time-of-day rates
\\
should be offered; (7) off-peak rates should be promoted; (8) the maximum single peak monthly peak demand should be utilized for all demand metered rates; (9) master metering should be limited to existing locations and all new construction initiated prior to January 1, 1978; and (10) marginal cost concepts should be con-sidcred in the development of electric rates.
Despite these hearings, the PUC has moved slowly in the area of rate structure and has determined that further hearings need to be held to satisfy the Federal requirements under the Public Utility Regulatory Policies Act.
In Pennsylvania Power's last case, the PUC permitted the company to implement a customer charge, with no energy in this block, and required the flattening of its residential rate structure.
Pennsylvania Electric was required to implement a similar rate structure,to discontinue its special heating rate in the future and to provide a time-of-day rate for residential customers.
In Philadelphia Electric's gas case, the PUC implemented a residential rate schedule which contained a customer charge and a flat commodity charge.
In West Penn Power Company's last case, the Commission adopted the staff proposal that the residential rate design move from a declining block rate to a flat rate on a phased-in basis.
West Penn Power was also directed to investigate demand type metering and the feasibility of off-peak rates.
In Duquesne Light's last rate case, the residential rate structure was modified so as to introduce a customer charge and to eliminate all declining energy charges, with the exception of the winter tail block for residential electric customers.
The PUC has also introduced some new rate structure ideas in the telephone industry.
Its most innovative action came on March 22, 1979, when it approved flexible pricing tariffs for Bell Telephone of Pennsylvania.
A final order was issued in this case April 21, 1980.
For Additional Information For general information, contact David M.
- Bramson, Director of Public Relations (717-787-5722); John Wilson, Director of Operations (717-787-2393); or Glenn Kennedy Assistant to Chairman Shanaman (717-783-9972).
For financial, accounting and rate information, contact Robert L. Packard, Director, Bureau of Rates (717-787-4886).
Argus Evaluation Regulation in Pennsylvania has historically been highly politicized and extremely slow.
Improvement in both areas has developed in the past couple of years and, as a result, we raised our rating of Pennsylvania regulation from "below average" to "slightly below average" in February 1979.
Part of the improve-ment in the state's regulatory climate came as a result of legis-(
lation enacted in 1976 and part as a result of changes in the k
make-up of the PUC.
There have subsequently been further changes
15.
i in the composition of the Commission and we believe that the PUC as presently constituted is dedicated to bringing about further
(. -.
modifications in the regulatory process in the state so as to be able to respond in a more timely and constructive fashion to the issues confronting it.
We continue to regard Pennsylvania regulation as "slightly below average," but now consider it a strong rating in that category.
WGF 1
i O
=
Tot. Cap.
Ret. on Avg.
Pretax Aug.
Incl.
S.T.
Com. Eq.
of Beginning &
Coverage Approx.
Rev./KWil Total Rev.
Debt.
as %
End of' Year of Pixed Eff. PIT Res. Cust.
Major Utilities 1979 12/31/79 Tot. Cap.
Common Equity Charges Rate (Cents)
-in Pennsylvania (SMil.)
(SMil.)
12/31/79 1978 1979 1978 1979 1979 1978 1979 i
ELECTRIC Duquesne Light
$623
$1,904 33.0%
P.4%.
9.7%
2.4x 2.6x 31%
5.9 6.2 Metropolitan Edison Co. (a) 338 1,130 33.5 12.9 4.2 2.7 1.6 24 4.6 4.9 Pennsylvania Electric
-Co.
(a) 493 1,283 32.8 9.9 10.1 2.5 2.6 33 4.7 5.3 Pennsylvania Power Co. (b) 145 458 33.6 7.1 10.8 2.0 2.4 21 4.6 5.6 Pennsylvania Power &
Light 860 3,374 33.0 11.7 12.7 2.9 2.6 18 4.1 4.2 Philadelphia Elec-tric 1,579 4,614 34.2 9.7 9.8 2.4 2.2 17 5.5 5.8 West Penn Power Co. (c) 496 1,029 37.9 13.1 15.8 3.2 3.5 35 4.0 4.0 GAS Equitable Gas Co.
284 328 43.9 14.1 18.7 3.9 4.5 43 m
National Fuel Gas 617 488 42.8 10.3 11.4 2.9 2.9 32 1
' Peoples Natural Gas (d) 270*
204*
55.3*
11.1 NA 3.8 NA 38*
UGI Corporation 316 296 38.2 10.9 12.6 3.8 4.8 37 TELEPIIONE Bell Telephone of Pennsylvania 1,840 3,438 55.6 11.8 12.4 4.5 4.3 39 General Tel, of Pa.
132*
275*
42.9*
12.6 NA 3.4 NA 43*
1 i
(a) A subsidiary of General Public Utilities (b) A-subsidiary of Ohio Edison (c) A subsidiary of Allegheny Power (d)
A subsidiary of Consolidated Natural Gas 1
- 1978 Results April 1980 O
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PDMSYLVARIA PENNSYLVANIA PUBLIC UTILITY COMMISSION 2
I DUFF AND PHELPS RANKING: GROUP IV Number of Commissioners:
5 (Full Time)
How Chosen:
Governor Thornburgh (R - 1979-1982) - Senate Confirmation Term:
10 Years - staggered Two-Party Representation Req'd:
No State Consumer Advocate:
Yes - Independent of Commission Commissioner Current Term Commissioners Prior Experience
- Since Exoires i
Susan M. Shanaman (R), Chairman Legis, aid /PUC Lawyer 11/79 4/83 Michael Johnson (D)
Union Official 12/75 4/85 Linda C. Taliaferro (R)
Corporate Lawyer 11/79 4/89 James H. Cawley (D)
Chief Counsel to Senate Majority 11/79 4/87 4
4/81 Vacancy (one)
Principles and Practices I
Accounting:
Book / tax timing differences for accelerated depreciation ara generally normalized as is the investment tax credit.
Income tax credits are allocated.
In recent decisions the PSC has reversed itself and used flow-through accounting for deferred state income taxes arising from use of accelerated depreciation.
Test Period:
Forward looking at time of filing but close to current at time of deci-sion.
Rata Base:
Period-end, fair value with about 01-164 increment above original cost.
In Philadelphia Electric's 4/80 decision, the PUC found that fair value equaled original cost.
Interim Rates:
Emergency only.
Final Decision:
Statutory 9 months af ter filing or the increase becomes ef fective sub-ject to refund.
Returns Allowed:
14.0%-14.3% common equity in most recent electric cases.
I Adiustment Clauses Energy Cost Rate (ECR) clause effective July 1, 1978, includes net energy cost of fossil and nuclear fuel and cost of net purchased and interchanged power.
Demand charges and reserve capacity charges or credits are excluded. ECR utilizes six-month historical moving average period with subsequent mont hly correction; some utilities use or have used deferred fuel cost accounting. The ECR cla7se is monitored monthly and reviewed in detail annually.
I Deferred costs can be recovered annually with PUC approval.
In May 1990 Philadelphia i
Electric, Met Ed, and Penelec each received a prospective fuel adjustment clause which is to be reviewed annually each January 1.
Conclusion Some regulatory uncertainty exists because of three relatively new members plus one vacan-cy.
In out opinion, the PUC acted reasonably responsibly in its 5/80 decisions for Met Ed and Penelec.
These decisions provided for recovery of deferred energy costs, increased tarif fs to make the fuel clause current, and left Met Ed's operating franchise intact.
Earlier (4/30), Philadelphia Electric received a decision allowing a 14.3% common equity return on a fairly current test year.
Thus, to date the new Commissioners have been somewhat encouraging. The principal negative in the past has been the general inability of companies to earn anywhere near the allowed returns.
Address Secretary P.O. Box 3'55 Harrisburg, Pennsylvania 17120 Bernhard M. Fleming, C.F.A.
Revised 6/18/30 i(
SUITE :0C0 55 EAST MCNRCE SI9EET CMCAGO,IU.JNCIS 60603 -(312) 263-2610 TELEX 25-51c5 TNS mc' enol :$ Ccrificeoflot fcr the use of our CSenti onfy cnd fncy not ce reOnnted or reproduced.
Cocvrgnt ? N30 cv Cef and Phe'es. Mc.
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{' MAJOR ELECTRICS REGULATED a
General Rate Relief Date Lac (Mo.)
Amount Received Com. Ec. Return Comoany Rev'd Int.
Fin.
SMM 4 Inc.
% Rec.
Rcv'd Earned
(%)
(4)
(Year)
Dug. Lt.
9.4 1977 9/78 2
24 82 20 64 12.6 8.4 1978 7/79 6
58 11 54 13.1 9.1 1979 Met Ed 13.1 1977 5/78 11 2
1 6
13.6 13.1 1978 3/79 9
47
.4 59 13.4 4.2 1979 4/79 (47) - Remove TMI-2 from rate base 5/80 (27) - Remove TMI-l from rate base Penelec 10.4 1977 6.'76 12 17 25 36 13.5 9.9 1978 1/79 9
56 15 74 13.1 10.2 1979 4/79 (25) - Remove TMI-2 from rate base 5/80 (12) - Remove TMI-l from rate base
(
Penn Pwe 9.0 1977 8/78 9
23 25 66 13.5 7.1 1978 10.9 1979 Penn P&L 14.3 1977 11.7 1978 12.7 1979 Phil. El.
4/77 2
17 72 76 14.5 9.6 1977 12/78 6
17 79 7
68 13.5 9.7 1978 9.8 1979 4/80 9
89 6
72 14.3 1980 West Penn Pr.
14.4 1977 1/78 3
16 11 23 13.1 19PJ 8/79 10 22 6
29 14.0 15.2 1979 a Excludes fuel cost related rate increases.
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NEW JERSEY BOARD OF PUBLIC UTILITIES AU*CNCMOUS DIVISION OF NEN JERSEY ENEPGY DEPARTM $T E F AND PHELPS PANKING: GROUP III Number of Commissioners:
3 (Full Time)
How Chosen:
Governor (D), 1979-1982 Senate Confirmation Term 6 Years Two Party Representation Reg'd:
Yes Prior Commissioner Current Term Ccmmissioners Experience Since Expires George H.
Barbour (D), President Lawyer-Public 10/76 3/86 Service Richard B. McGlynn (R)3 Lawyer 3/76 3/83 Edward H.
Hynes (D)
Lawyer-Public 2/78 3/81 Service a Has indiC3ted his intention of leaving the Commission--probably during the next several months.
Pliyciolas snd Practices Accounting:
Deferred taxes f rom accelerated deprectation and ADR are normalized as are investment tax credits on post-1973 additions.
Incore tax credit allocation allowed in some cases.
Deferred fuel cost accounting permitted.
Test Per iod:
Historical adjusted or a partially projected test period.
Rate Base End-of-period original cost.
CWIP in rate base varies from case to
(
case as does the MC offset in operating income.
Working capital included in rate rase: accumulated deferred taxes are deducted.
Unamortized ITC is not deducted and earns the overall return.
Interim Rates:
Yes, when requestad on an " emergency
- basis.
Final Decision:
Statutory limit equates to 9 months.
However, in the past utilities have sometimes been inclined or induced to waive theit right to have a dectaton within the specified time limit.
Despite assurances that this situation is changing, it continues (a Public Service E&G case is everdue).
A 1979 court case, initiated by Lambertville Water Co.,
left the issue of time requirement unresolved.
Returns All]wed:
9.7% to 9.9% overall; 13.5% on common equity. Last Public Service E&G rate increase (June 1978) was based on a stipulated agreement which incorporated, among other things, a 134 return on comnon. However, a more recent Bell Telephone case allowed a 13% common equity return, which at the time was a relatively high return for a Bell subsidiary.
Adlustment Clause Energy and purchased gas adjustment clauses are on a levelized easis, generally based on a 6 month projection.
Adjustments take into account any over-or under-collection with imputed interest.
Energy adjustment clause covers all fuel related costs and purchased power.
Conclusion Ra nic ing is Group III.
Positives include CWI? in rate base, period-end rate base and capttal structure, and comprehensive adjustment clauses together with normalization of deferred taxes. Historically, however, returns have been below what we consider desirable levels, although on occasion electrtes have been able to earn near or above the allowed return. Also, Mr. McGlynn has been a very positive f actor on the Ccmmission. His leaving adds uncertainty to the Commission's future course.
Mailtnq Address Secretary 1100 Raymond Boulevard A
Newars, New Jersey 07102 (201) 648-2014 Edward A.
Pescatello, C.F.A.
Revised: 3/10/80 SUITE :000 55 E AST VCNRCE STREET CH'CAGO. LUNCl300603 -(312]263 2610 TELEX 25-545 Th$fnC enO 15 Corddennct for 'he use of CV CDeMS only Cnd MOV not CNr WMed of reOfoCUCe(1 CoevncM e A0 by Dun end he'es. inc.
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ww NEW JERSEY May 13, 1980 INFORMAL MEETING WITH PRESIDENT BARBOUR OF THE N"N JERSEY BPU Earlier today, President Barbour of the New Jersey Board of Public Utilities (BPU) met with a group of Argus clients in our offices.
The Commissioner was accompanied by the BPU Executive Officer, Anthony Zarillo.
President Barbour joined the Board in October 1976, was named President in July 1977 and is currently serving a term which ends in March 1985.
The Commis-sioner opened the meeting with brief comments and then the meeting was opened to questions from the audience.
Almost the entire direct presentation and question-and-answer session centered on problems related to the Three Mile Island incident.
President Barbour indicated that in conducting the business of the BPU, he keeps it upmost in his mind that it his obligation to balance the interests of all the parties and to be fair and equitable to all.
He has tended to stress the importance of explaining the rate case process to the consumer and to this end the Board now holds hearings in the franchise territory in every major rate case.
Not only is it important to communicate with the investor, the ratepayer and the company, but also recently the Board has increased its communication with the' Pennsylvania Public Utility Commission and its staff, owing to the commonality of the problems faced by these bodies.
The BPU representatives were somewhat limited in their ability to talk about certain issues related to Jersey Central Power & Light (JCP&L) owing to the fact that the BPU is expected to issue a decision in the company's interim rate case later today.
Many of the issues in the interim case have been discussed in open session and the Board held a news conference to make it clear to the public that it considers the company to be in serious financial difficulty and has ruled, that bankruptcy and insolvency are not viable options over the short run.
The BPU is committed to taking the necessary action to keep JCP&L going as an operating utility.
This will require adequate rate increases and the Board i
has stated that it fully expects to grant some amount of interim rate increase later today.
Nothing in the testimony so far had swayed President Barbour from the conclusion that a rate increase would be necessary.
He finds this a much more palatable option than submitting to the banks who request that the company assign some of its accounts receivable to them as collateral for the short term credit lines.
He does not want to see the fate of Argwg Research Cstoranc% 140 Broadaav. New York, N.Y.10005 - Tel. (212) 425-7500
v l th) GPU system in the hands.of what he considers an outside party.
The presently pending JCP&L action is just one of a serie over the past year.
The cases have been conducted primarily by representatives from the office of Administrative Law in the state, which is a new organization.
In some respects, this slows things down -and reduces the BPU's flexibility but President Barbour was pleased to report that the ALJ involved in the JCP&L case has been most cooperative with all the parties.
Mr. Zarillo supported i
the action taken by the BPU-in the JCP&L case to date.
This is a most unusual situation and he believes that the case will prove that in fact regulation does work.
He cited the speed with which the BPU'has acted on a number of issues and the fact that the company has been preserved in a viable. situation.
Both repre-1 sentatives discussed the removal of TMI #1 from rate base.
When it was decided to flow through to customer bills the power costs related to the TMI outage as rapidly as possible the BPU determined that it would not be equitable to have the consumers pay the costs of TMI fl in base rates at the same time.
The Commission is committed to restoring TMI #1 to rate base as soon as it is clear that the unit will be coming back into service at a predictable near-term date.
The BPU does not claim to be a pioneering body but neither does it believe it is at the tail-end of the spectrum of 3
flexibility.
It has taken aggressive stances in a number of issues related 'to the JCP&L problems and believes it will be able to continue to take such action as is necessary to maintain the g
company as an operating utility in the private sector.
President Barbour indicated that there is more to the regulatory process than just technical considerations and that it would be naive to think that customers will accept all regulatory decisions no matter how harsh on their pocketbooks.
The consumer is a vital part of JCP&L's survival and this is recognized by the Board.
The Board feels strongly that the Federal government should also become involved in the JCP&L problem and asserts that some Federal dollars should be forthcoming to help soften the blow on ratepayers.
One of the proposals being put forward by the Board is the possibility of a surcharge on utility customers nationally so as to create a fund for replacement power and to pay damages during nuclear unit outages.
Another proposal by the Board would be to have the i
government buy TMI unit #2 as a research lab so as to gain, for the whole nation, a better understanding of the lessons that were actually learned and the long run implications of the problems experienced at the unit.
, Up to now, the BPU has dealt mostly with the short-run or cash flow problems evolving from the TMI accident, but as the company has now filed a permanent rate case and is seeking interim relief the Board is beginning to look toward the longer term situation and re-establishing financing capability for the company.
It does seem likely to President Barbour that the exclusion of TMI #1 from rate base and the other considerations that must be
.i reviewed may well lead to allowance of a higher return on equity
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than was found appropriate before the TMI accident.
The Board is also aware that the customers of the company have seen a severe impact on their bills through the rate increases passed on through the Levelized Energy Adjustment Clause (LEAC).
It is partly i
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because of the sharp increase already borne by the customers that the BPU is pushing the Federal government to chip in and pay part of the bill.
Another way to minimize the impact on customers and provide for eventual recovery for the company is to permit capitalization of certain charges related to the inoperative units.
The Board has been so busy with the short-term solutions that it has not yet had a chance to address issues such as this in any detail.
The Bcard has tried to help JCp&L obtain a new contract arrangement which would allow it to buy power from other utilities in its power pool at cost but up to now, the parties have not been able to achieve a workable solution.
The Board has caused to be undertaken a post TMI Strategic Options Study.
Arthur Young has been selected to undertake this study which will provide the Board with reports in two phases.
The first phase report is expected in July with the final report due by October or November.
Among the things considered as options will be bankruptcy.
Until a full satis-factory report is ready for the Boards evaluation the BPU is not going to consider bankruptcy as a viable short-term optian.
Therefore, the staff report in the interim case was put forward on a basis whick the staff believed would enable the company to market close to S40 million of long-term debt in early 1981, if its recommendation in the interim were approved.
Commissioner Barbour responded that it would be very difficult and not responsive on the Board's part not to provide additional rate relief if a company's earnings were deteriorating 1
because of success in implementing conservation.
The BPU has been advocating this and would be remiss in its duty if it did not consider a positive response if the company's success in this area caused earnings to deteriorate.
At this point, President Barbour reiterated his statement that the utilities must be enabled to earn sufficient funds to continue in operation or the consumer will not be well served in the long run.
In the recent Public Service Electric & Gas Company case, the company was not provided an opportunity to earn a return on its deferred fuel balance.
This is not necessarily precedent setting and the BPU will consider any options proposed by the parties in the presently pending Public Service LEAC case.
The most recent decision required amortization of deferred fuel balances over a period of greater than two years and Commissioner Barbour indicated that this was not a period he favored but that he was in the minority.
President Barbour would prefer to see such amounts written off over a shorter period.
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REGULATORY SERVHCE RESEARCH NOTES
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PENNSYLVANIA June 4, 1980 INFORMAL MEETING WITH PUC CO OiISSIONERS On Tuesday afternoon, June 3, 1980, Chairman Shanaman and Commissioners Cawley and Taliaferro of the Pennsylvania Public Utility Commission (PUC) met with a group of Argus clients in our offices.
All three Commissioners joined the PUC on November 16, 1979.
Susan M.
Shanaman was named Chairman in January 1980 and is serving a term that expires April 1, 1983.
Linda C.
Taliaferro is serving a term that ends April 1, 1989, and James H.
Cawley is serving a term which ends April 1, 1987.
The other Commissioner serving is Michael Johnson, whose term concludes April 1, 1985.
There is currently a vacancy on the PUC.
All three Commissioners made brief opening remarks and then answered numerous quest 7ns from the audience.
Chairman Shanaman noted that utility regulation in Pennsylvania certainly cannot be described as " business as usual."
She expressed a deep concern for the poor regard accorded the Pennsylvania utilities by the financial community and wished it were possible for all of the companies to receive the highest financial ratings so as to be able to attract capital on advan-tageous terms.
Since not all of the state's utilit. s are able to achieve triple A ratings, it is the Commission's job to determine what are the best financial ratings that can be achieved and how reliable regulation can contribute to the achievement of such ratings.
The elimination of regulatory lag remains one of the PUC's most important objectives.
L.gislation enacted in 1976 brought about some reduction in the regulatory lag and the Commis-sion is now reviewing the recommendations contained in a report by the Utility Technical Advisory Council, concerning changes which could further lessen regulatory lag.
Within the next couple of weeks, Chairman Shanaman expects to put a motion before the Commission which would provide for the utilization of fully forecast test years so that the test years considered by the PUC would be the first full year the new rates would be in effect.
Another factor that might lead to a reduction in the Commission's calendar load would be more frequent use of the settlement process.
There are presently so many cases awaiting PUC action that it l
seems almost mandatory that some of them be resolved through the l
stipulation or settlement route.
Comm'issioner Shanaman was l
Argus Research Cc*porate,140 Brcadway. New York, N.Y.10005 Tel: (212) 4 5 7500
~2-i particularly hopeful that those monitoring PUC actions will note a sharp increase in the consistancy of the Commission's decisions when confronted with similar situations. This is something she will be striving hard to accomplish.
One of the important achievements the Chairman hopes to make is to be an effective communicator with the ratepayers, the people who rate the Commiasion (such as the financial community),
and the companies regulated by the PUC.
Toward this end, the Commission is increasingly conducting meetings and having dis-cussions with consumer groups, is holding meetings with the regulated utilities so as to better understand their problems and to be sure the companies understand the things the Commission would like them to consider, and is meeting with members of the financial community.
Commissioner Taliaferro expressed concern about the effectiveness with which the Commission goes about its business and also with the efficiency of the public utilities regulated by the PUC.
She noted that many of the intervenors in rate cases are becoming more concerned with the procesa and she particularly noted the increasing participation in rate cases by industrial customers. She also expressed concern with the way the PUC is regarded by the financial community and acknowledged that this will have an impact on the cost of raising capital for the utilities.
Commissioner Cawley noted that the PUC has undergone substantial change since the mid-1970's and he contended that the presently constituted Commission is much better able to work together than were earlier Commissions.
Commissioner Cawley lamented the fact that the Three Mile Island case had consumed so much of the Commission's time, because it took away from the time they might have spent remodeling some of the procedural processes at the PUC.
He backed up the other Commissioners' statements that the PUC is determined to make whatever changes are necessary to increase procedural efficiency.
With the first phases of thu TMI case largely behind, the Commission will now be devoting more attention to this procedural revision.
In addition to consideration of future test years, the Commission would also like to see rate cases completed in less than nine months.
Many of the innovations proposed will tend to be received favorably by the investment community, but the Commissioners also stressed their responsibility to consider the human element and that while it is clearly necessary tc maintain a good rating on Wall Street, it is also important to keep in touch with their consumers in the state and to achieve public acceptance of what they determine to be necessary for the long run financial well-being of both the utilities and the consumers.
Following issuance of a dccision in the TMI case on May 23, 1980, it seemed that all of the parties to the case made comments critical of the Commission's decision.
The PUC believes that its ac*. ion in that case was only a first step toward getting General Public Utilities back to a financially viable position, noting that the company is still in dire financial straits and probably will need government help, particularly if TMI #1 never operates again.
a Numerous questions were asked concerning the possible consideration of a future test year.
It was noted that Chairman Shanaman and Commissioner Cawley had both participated in proposing that the Commission be required to consider future test years when they were counsels to the Pennsylvania State Senate.
The Commissioners did not seem optimistic that it would be possible for Metropolitan Edison to attract capital in the public market during 1980 and probably not before there was some s
indication that the TMI Unit #1 would be operable. There is almost a'" religious fervor" again:t further operation of the plant within a five-to-ten-mile radius of the TMI units; many people within this area are continuing to contend that they are experiencing " mental anguish" owing to the Three Mile Island incident.
While many locals may have genuine concern, much of this concern continues to be expressed by anti-nuclear activists from outside the Three Mile Island vicinity.
In addition to the response of the Nuclear Regulatory Commission, the Commissioners suggested that an important consideration would be the response of the Governor of the State to the various steps that must be taken to get to Three Mile Island unit operating again.
In response to a question, the Commissioners discussed the excess capacity adjustment made in the Philadelphia Electric case last month.
They notec that the decision was arrived at following a failure of all four Commissioners to agree on an initial order and that not all of the Commissioners favored making the adjustment.
Nevertheless, it was made, anc represented some-
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what of a sharing of the burden of what the FUC considered excess
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capacity.
The PUC had determined that the units were prudently constructed.
The PUC acknowledged that it may have somewhat under-estimated the adverse response of the financial community toward this decision and stated that in the future it would consider such djustments on a case -by-case basis.
The Commissioners also acknowledge that there followed a recognition that this action was shifting some of the risk to the investor and, therefore, a higher return would be required.
They believed they provided a higher return in the PE case to compensate for this risk.
It was acknow-ledged that the companies are not earning the returns allowed and this is something the Commission is looking into because it believes that it is imperative that the companies actually earn at or near their allowed returns if they are to attract capital on reasonable terms.
The " Annual Review" practice was briefly discussed.
When utilities are not in for rate reviews, public sessions are held at which the companies are present as well as the public.
These sessions give the PUC a chance to find out a little bit more about what is really going on at the companies and it also provides the Commissioners an opportunity to signal to the companies the issues that they wish to cover in rate cases and other proceedings.
The Commission recently made an offer to General Telephone to settle its presently pending rate pase for an $8 million annual
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increase.
The Commission considered it advantageous to provide the company an $8 million increase immediately, and settle the case, rather than to complete the case.
If the case went to conclusion, the company would have the opportunity to get a greater increase,
_4 but would lose some of the time value of money during the period the case was adjudicated.
General Telephone is seeking a S13.2 million rate hike and final PUC action is not required until August.
One of the innovative procedures being considered by the PUC is to have an executive summary made of each rate filing so that the Commissioners can bring themselves up to date on the major issues in a case early in the proceeding.
This would enable a Commissioner to have input in the case early should there be a desire to get extra information on a particular subject into the record.
There was a difference of opinion among the Commissioners as to whether it was better to use an original-cost or fair-value rate base.
Chairman Shanaman pointed out that use of original-cost would be particularly unworkable in water company rate cases.
Recent Court decisions have given the Commission greater discretion to use origina11-cost in its findings so long as it provides ample opportunity for the utility to attempt to support a fair value rate base.
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Person Responsible for Preparation:
F. D. Hafer, Vice President - Ra te Ca se Management, CPU Service Corp.
Telephone:
(201) 263-6013 Date:
October 9, 1980 Page 1 of 7 GENERAL PUBLIC UTILITIES CORPORATION Metropolitan Edison Company, Pennsylvania Electric Company
& Jersey Central Power & Light Company NRC Docket No. 50-289 Three Mile Island Unit No. 1 Restart Proceeding Response to NRC Staff's Additional Financial Information Request No. 17, dated August 11, 1980:
"17.
(10.c.) - Describe the nature and amount of each licensee's most recent rate relief action and the anticipated effect on revenues.
In addition, indicate the nature, status, and amount of pending rate relief proceedings, if any.
Use the attached form to provide this information. Provide copies of any financially-related hearing examiner's report and recommendation and any interim and final rate orders and opinions, including all exhibits referred to therein, which have been issued or may be issued af ter May 19, 1980 for the NJ BPU and after May 23, 1980 for the PA PUC.
Provide timely copies of all other orders, opinions, and directives issued by the PA PUC, the NJ BPU, after said dates, and FERC related to the financing of any of the licensees' or GPU's operations, including activities at TMI.
Provide copies of the submitted, financially-related testimony and exhibits of the PUC staff and company in any pending rate relief request, as well as timely copies of all such future filings with any other State or Federal Utility Commission proceeding directly relating to finance."
Response
Attached hereto is the requested information concerning the rate proceedings of Metropolitan Edison Company (" Met-Ed"), Pennsylvania Electric Company
("Penelec") and Jersey Central Power & Light Company (" Jersey Central")
prepared in accordance with the NRC format attached to the request. This response provides the requested information on all rate actions to-date since our previous response to this question, dated October 19, 1979, filed in response to the NRC Staff's Financial Information Request No. 10-(c) dated September 21, 1979.
Like our previous response, referred to above, page 3 of this response, is a
" Summary of Completed /Pending Retail Base Rate Proceedings". The " Summary of Completed Resale Base Rate Proceedings",page 4 attached, provides the requested information on tie operating companies' rate cases before the
Page 2 of 7 Federal Energy Regulatory Coc=ission which were recently concluded.
The " Summary of Completed /Pending Energy Clause Proceedings", page 5 attached, adapts the NRC format for responding to this request with respect to base rate cases, to provide the information regarding the operating companies' energy clauses.
With respect to the balance of the request for financially related material stemming from the operating companies' rate cases, GPU has been and con-tinues to provide all such items concurrently to :tessrs. Vollmer (8 copies),
Peterson (1 copy) and Karlowicz (1 copy) of the NRC.
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1 Pa pe 3 o f 7 M hi ltAL PtlBl !C UTILITIES O*PupATloN Metropolitan Edison Company, Pe nnsylvania Eles.t ric Company as.J Jersey Cent ral Power & Li ght Company Summary of Completed / Pen. lint blait Ed*e Nte ProcecJings (Pursuant to hkC Format for Respoose t o N4C 61 nancial Inform.ation Repeest_ No. 17) h Met ropolitan EJ t.on Company Pennsylvania tiectric Company Jersey Cent ral rever 6 Light Company P4PUC l'oc k et No.
P rt)C Doc b e t No.
NISPU bucket No.
I-79040308 (1) k-8605'1.19h (2 )
1-7904 ming O )
3-80051197--
79fi2fg) 804-28s(5)
Test year utilfred (year ended) 1/31/79 3/31/61 12/31/7s 3/31/81 6/11/78 12/31/80 Annual amount of revenue Inc.rease requesteJ -
test year baste ($ allisons)
$ 76.5
$ 67.4
$ 17).S J
Nte petition fileJ 7/29/80 7/29/80 4/29/60 f
Annual amount of revenue increase allowed -
'"--J test year basis ($ mt!!!ans)
$ (2 6.9 )
$ (11.7 )
(Note 4 )
(Note %)
b".. g' Percent inc r ease in base revenues requesteJ 38.01 16.11 29.71 Pe rcent increase in b.e sevenues allowed (80.2)1 0.0 )1 Date by which decision must be reached 4/27/s1 4/27/81 2/01/81 Date of final crJer (Jate entereJ) 5/23/80 5/23/so 4/d1/80 Effective J te e/01/80 6/01/no 4/01/80 Ra t e ba se request =J ($ attitons)
$ 72 8.0
$1067.9
$l571.6 hae I,ase finding ($ millions) 5522.1
$931.0 Stil9.7 Const risc tion work in progress request ed
$ 278.2 for inclu tun in rate L ee ($ millions)
(enstruc tion wor k in progress allowed
$ %4,6 for incluelon in rate hee ($ millions) hte of return on rate 1.*me req ue s t ed 10.611 10.541 10.811 hte of return on rate base authorized (6 )
4.411 9.551 9..
hte of return on commun equity requested IS.501 15.$'J1 l$.501 h ts of re t urn on commun equit y authorized (6 )
12.661
$ 1.3 21 13.
(8 ) The Pennsylvania Pul,lic Ut ilit y Comat eeton (t t.e *P4PUC") ef f ec tive June 1,1980 set t empor ary rates unt il December 8,1960 which rates s s leu.4 a reJact ion of
$26.9 million ansa.mily f or t'.e revenues as.ociated with the capital and non-f uel operating costs of 1NI-l.
Eis has rate reJw t lon ensue.1 f rom a PaPUC order, lasucJ Septemter 20, 1979, to show cau e why 1181-8 should not be removed rate base.
In making this b me rate reduc t ion, the Part!C Jid not make any detesminat ten of rate base or rate of return. On July 29, 1980, Met-EJ filed a complaint against such temporary rates with th PaPUC. The inf ormation shown above re. rate I.ase and rate of return represent derived assiseptions by Met-EJ f or the information of the hkC, and du not re pr ese nt PaPUC findings.
(2) In conjunction with this request, Met-EJ filed a petition for emerrency sete relief requesting that $15 million, apprualmately 46% of the total $76.5 million requeet, I,e allowed to go into effect not later Ebn September 1,1980 On August 26, 1960, the PaPUC JenteJ Met-EJ's reque st f or emergeory rate relief witt.out pre jud ire. On Se pt em be r 29, 1980, Me t -Ed pe t i t ioned t he Commonwea l t h Cour t to set astJe t he P.PUC's August 25, l984 orJer.
(3) The PaPUC af f ec tive June I,1980 set temporary rates until tecenLer I,1980 which rates reflected a reduction of $11.7 million annually f or the revenues associated with the capital and non-f uel operating costs of TML-l.
This base rate reduct ion ensued f rom a PaPUC order, issued Se ptember 20, 1979, to show cause why THI-l should not be removed f rom rate base.
In making tiels base rate reduction, the PaPUC J tJ not m4be any Jetermis ation of rate base or sete of return. On July 29, 1980, Penelec tiled a complaint against such temporary rates with the PaPUC. The thformation shown above re. tate Lee and rate of return repsesent derived assuasptions by Penelec f or the inf ormat ion wf the NRC, and du not represent P4PUC findings.
(4 ) In an otJer issu=J Apr il I,1960, the New Jersey Board of Public Utilities (t he 'NJ5PU") removeJ TMI-l f rom rate base which entalled a base rate revenue reduction of $18.0 million f or TML l's capital and non-f uel operating costs. The revenue seduction f rom this decision was of f set by $l8.0 million of aJJ4 tional revenues annu. ally to accelerate the amortization of def erred energy costs.
In maktug this base rate determination, t he NJEPU dlJ not make any findings of s ete base, const ruct ion work in progress in rate base or rate of return. On Apt t 1 14, 1950, Jersey Cent ral fileJ a Nutice of Appeal of this order with th state Supes tor Court. The informat ion shown 4t,6ve re. rate bane, construction work in progresa in rate base and rate of retuin sepresent derived assumptions t,y Jersey (entral for the informattua of the NRC, and Jo not represent NJSPU findings.
()) In con junction with this reque st, Jersey Central filed a flution for Interle stelief requenting the $60 million, about 15% of the total request, be allowed to go into effect not later than June I, 1980. In me order JatcJ May l), 1960, the NJbPU approved t he request, e f f ec t i ve tia y I S, 8 9th), sub je c t t o r e f und.
The NJB Pil in t his orJer supported the allowance of the request by cit ing the f e!Iowing specific positions: a) an allowable original cost rate base of $1.222.0 million including $129.8 million of construction work in progress, b) an overall sate of return of 10.121 and c) a rate of retura on common equity of 11.751.
(6) 1he Jerived rates of return shown are used upon the state commissions last rate of return linJings wl.ich preceded the THI-2 acc!Jent and which included THI-l&2 in rate base.
Currently, with TMI-l&2 out of each operating companies' rate base (f or Met-EJ, Penelec asui feracy Cent ral TNI-l&2 constitute about 451, 201 and IS1 of their respective aggregate investor suppliej capital) none of the operating companies are earning, nur es e they aut t orized to earn, retserna near t he level shuwen above on their total rate har including THI-l&2.
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6 Page 4 of 7 EED LEt.t kAL rtinLIC UTILITILS CORPo# 411oN
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Ne t ropolitan EJ1 mon Company, Pennsylvant a Flec t ric Gmpany and Je rsey (kut ral Power & Ilght Company Summary of Completed kemale h we hte ProceeJings (4 )
MC (Pursuaar t o WRC Format for ha gone to NRC Fieancial lorormat t un hguesit No. 17)
Het ropolitan LJimon Company Pena =ylvania Electric Company Jersey Cent ra..ower & Li ght G areaY lt EC Iw het h tR 79-$B (2 )
itpc tw 6et No. l'R 78-4 94 0 )
IPRC th let Nu. t W-7 9-il2 (2 )
Test year utiltaed 12/31/79 6/Jo/79 12/31/79 M
Aanval aavuut of revenue increase requested -
test year basis ($ millions)(AJ justed-See ble 3)
$4.6
$6.$
$2.0 teate petillun filed 11/83/78 7/18/78 12/10/76 Annual amount of revsouw increase ellowed -
l" test year bants ($ millions) 51.8
$ 4.4 53.5 rercent inc rea e in base sevenues allowed 11.0%
15.71 te.St late of final crJer 7/l ?/so 3/o4/no 3/04/80 Effective date 6) 6/13/79 12/01/78 7/87/79 hte tra se finjing ($ million )
Construction work in progress incluJed in rate base ($ millions)
Ita t e e t r e t ur n on ra t e ba se aut hor iz eJ Itate of seturn on commun equi t y authur tzed
(! ) Tliere are no pending t,ane rate inc rease request e before Lt.e 6 ERC f or any CPU operating coepany.
(2 ) T1.e ti pC urder in eac h of these cases accepted t he set t lement arteemrut reac hed by the par t les to t he 8,r ut ccJi sig whic h pec i t t ed t he revenue inc rease level only. tt#C made no finJluga of rate bene, const rw tion wurk in progrees incluJeJ la rat e base or rat e of ret urn.
O) Redw ed f rom asuuut s es tginally requested to seilect lower f rJeral Income tea rate anJ ut he r ad justment s.
6)
Tt.e requested rates went into effect, sub jec t to refund, penJing tiaal ttDC orJess as indicated above.
In e ac h c a me, the final 6thC orders required ref unds which L. eve teen maJe.
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I Page 5 ef 7 (EED SEE Ct.ht.itAt. PtisLIC 4:IILITIES G kiwaATION Nt ropolitan EJlson Company. Pennsylvania t: lect ric Company aml Jeres y Cent ral Power & Lt ght Gempany Summary of CompleteJ/ Pending Ener gy Claume Pr ccJisage C.'
(Pi 4 r a uan t to NMC Fosmat for Res m e to hkC Finanstal Information keguen_th. 37, As Adap t ed )
=
N t ropulle en EJ ison Company Pennsylvania Electric Company Jersey Central Pomer & light Omseny P4POC Waket N.
PaPUC Ncket b.
NI8ru Nrket N.
1-7464n308 (t)(7) 1-7M40308 (2 )(6 )
ikitT5fl[TitM {4]
Na7-4 tl8 Q}
W Period of estimated energy costs (12 mos. enJed )
12/31/80 12/31/80 2/28/88 2/28/88 8/11/81 Isato petition filed 18/01/79 1/28/80 1/21/80 7/23/80 it=que st ed inc rease f or recovery of retail energy coats:
1.
In allt./buh of retall sales, escle lve of grows receipt s tas 9.5 2.
In revenues, eactusive of gross receipts taa ($ millions )
7.1 2.6 S.S
- Pro forma for (Iret 12 mont hs of clause increase
$77.3
.$92.9 514.6 568.6
- Autkrised pe rloJ vf clauwe lacrease (6 )
5%.9
$92.9
$34.6 568.6 AlluwcJ inc rease fur recuvery of setall energy coats:
1.
In allis/lwh of setall males, esclunive of gross receipt s tan 9.8 8.9 6.0 2.4 0.0 2.
In revenues, es(lusive of gross receipts taa ($ millions)
- Pro torna for first a2 months of claume increase
$79.7
$20.5
$76.0
$30.2 0.0
- Aut6:14eJ per twJ of clause Inc rease (6 )
$$7.3
$11.2
$ 76.0
$ 10.2 0.0 Pe rc e nt Inc r ea se in energy cost rates (base and clau. ) alloweJ 59.81 11.72 26.11 s.3 g o,o Nte of fanal order (Jane entered)
$f23/go 5/23/80 3 /06/bu 4 /ul/80 10/02/n0 Ef f ec tive date 6/01/80 6/01/80 3 /06/B0 4/01/80 See Notes on following pages. Also, refer to *btes to Stamary of Energy Clausen", pages 5 through 8, of our response to NkC Staf f's Financial Information keguent N.10-(c) dated Sept ember 21. 1979.
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Notes to Summary of Energy Clauses (1) On November 1,1979, Met-Ed filed a petition requesting an energy clause increase designed to maintain the Company within its credit limits. This increase was structured as a 6.9 mill increase,.2 mills for gross receipts tax, ef fective January 1,1980 and/or incre-ments above the 6.9 mill level if the effective date of the increase extended past January 1,1980. The PaPUC consolidated this request with two "show cause" proceedings against Met-Ed.
On February 8, i
I i
1980, the PaPUC allowed Met-Ed to increase its energy clause by 6.9 mills, including.2 mills for gross receipts tax, on an interim basis effective March 1, 1980.
In its wrap-up p.osition in the case, 1
Met-Ed requested a 3 mill increase above the then effective level, j
as well as accelerated recovery of its outstanding deferrcl energy cost balance. The PaPUC in its final order in the case, entered May 23,'1980, af firmed the 6.9 mill increase granted in February 1980 and authorized a 3.4 mill increase, including about.15 mills for gross receipts tax, in Met-Ed's levelized energy adjustment clause through December 31, 1980. In addition, the PaPUC author-ized an energy surcharge designed to recover Met-Ed's deferred energy balance, incurred prior to the 3.4 nill increase, over 18 months (see Note 7).
Also, the PaPUC ordered Met-Ed to comment upon and file a proposed Energy Cost Rate (the "ECR") to be appli-cable for the year 1981. Such ECR would be levelized for.the year 1981, based upon prospective energy costs, with provision for in-terim revision and with provision for refunds to customers with 4
interest on over-collections of energy costs. As of this date, Met-Ed has commented _upon the proposed ECR, but has not yet pro-1 posed a specific ECR for 1981.
1 (2) The PaPUC consolidated various proceedings in this docket including a "show cause" order re. the retention of TMI-1 in Penelec's base rates.
In its final order in this proceeding, entered May 23, 1980, the PaPUC authorized a 2.0 mill increase,.1 mills for gross receipts tax, in Penelec's levelized energy adjustment clause through December 31, 1980. In addition, the PaPUC authorized an energy cost surcharge t
designed to recover Penelec's deferred energy balance, incurred prior to the 2.0 mill increase over 18 months (see Note 8). Also, the PaPUC i
ordered Penelee to comment upon and file a proposed Energy Cost Rate (the "ECR") to be applicable for the year 1981. Such ECR would be levelized for the year 1981, based upon prospective energy costs, with provision for interim revision and with provision for refunds to customers with interest on over-collections of energy costs. As of this date Penelee has commented upon the proposed ECR, but has not yet proposed a specific ECR for 1981.
(3) ' On January 21, 1980, Jersey Central petitioned the NJBPU for an-increase in its levelized energy adjustment clause ("LEAC") of 10.9 mills (S142.5 million in annual revenues), including 1.2 mills for i
gross receipts tax, ef fective March 1,1980, for both TMI accident and non-TMI accident-related energy cost increases. During the course of
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the proceedings, Jersey Central ayreed to the request of the parties 1
to bifurcate the request for hearing purposes into a non-TMI portion (8.0 mills / S104 million in annual revenues, including gross receipts tax) and a TMI portion (3.0 mills / S39.0 million in annual revenues, including gross receipts tax). On February 29, 1980, Jersey Central and certain other parties to the proceedings stipulated the non-TMI portion of the case and the NJBPU in its order, dated March 6,1980, adopted the stipulation. This column provides the requested informa-tion re. the non-TMI related portion of the proceedings.
(4) This column provides the requested information re.the TMI-related portion of the proceedings described in Note 3, as stipulated by the parties.
(5) On July 21, 1980, Jersey Central petitioned the NJBPU for an increase in its LEAC, ef f ective September 1, 1980, for increased total energy costs, i.e. TMI and non-TMI related. On October 2,1980, the NJBPU denied Jersey Central's petition. As of October 6,1980, no written order is available.
(6) As cited in Notes 1 and 2, both Met-Ed and Penelec have been ordered by the PaPUC to file an ECR to become effective January 1, 1981.
Hence, the revenue increases showr. for both Met-Ed and Penelec for the " Authorized period of clause increase" reflect the projected revenues through December 31, 1980. The revenue increases shown for Jersey Central for the "Authotized period of clause increase" reflect the projected increased revenues for the 12 months following the effective date of increase consistent with the basic provision of Jersey Central's energy clause. However, is should be noted that the energy clause is subject to earlier revision, upward or downward, under specific provisions including a general review every 6 months.
(7) For Met-Ed, the PaPUC's May 23, 1980 order authorited an energy surcharge of 7.4 mills, including.3 mills for gross receipts tax, ef fective June 1,1980, designed to recover Met-Ed's deferred energy balance during the 18 month period ended November 30, 1981. Based upon Met-Ed's projected retail sales implicit in the surcharge level, the energy surcnarge would produce increased revenues for previously deferred energy costs of $57.7 million " Pro forma for first 12 months of clause increase" and $31.9 nillion in 1980.
(8) For Penelec, the PaPUC's May 23, 1980 order authorized an energy surcharge of.5 mills, including.02 mills for gross receipts tax, effective June 1,1980, designed to recover Penelec's deferred energy balance during the 18 month period ended November 30, 1981. Based upon Penelec's projected retail sales implicit in the surcharge level, the energy surcharge would produce increased revenues for previously deferred energy costs of SS.4 million " pro forma for first 12 months of clause increase" and $2.9 million in 1980.