ML19347E662
| ML19347E662 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 04/09/1981 |
| From: | Thierfelder W PENNSYLVANIA, COMMONWEALTH OF |
| To: | METROPOLITAN EDISON CO. |
| Shared Package | |
| ML19347E637 | List:
|
| References | |
| M-80070221, R-80051196, NUDOCS 8105130192 | |
| Download: ML19347E662 (14) | |
Text
{{#Wiki_filter:-'o n; e PENNSYliVANIA p'- PUBLIC, UTILITY 10MMISSION Harrisburg, F.4 17120 Public Heetings held April 2 and 9 1981 ~ .w.- Commissioners Present: 3, Susan H. Shanaman, Chairman Michael Johnson James H. Cawley Linda C. Taliaferro Pennsylvania Public Utility Commission R-80051196 v. M-80070221 Metropolitan Edison Company OPINION AND ORDER BY THE COMMISSION: We hereby adopt as our action tLe Recommended Decision of Administrative Lau Judge Joseph P. Hatuschak (ALJ), dated March 20, 1981, to the extent not specifically modified herein. Our action of adoption of the Recommended Decision signifies our general concurrence with the disposition of the issues contained therein, as well as the stated basis for that disposition, considering that the overall result achieved is in the public interes.t. Consequently, the Recommended Decis' ion should be vieued as having only limited precedential value. There are a number of areas in which we find it. Besirable or necessary to modify the Recommended Decision. At the outset we note that exceptions have been filed to the Recommended Decision in this proceeding by: 1. The Metropolitan Edison Company (Met. Ed.); [ 2. The Trial Staff (Staff); 3. The Office of Consumer Advocate (OCA); 4. Bethlehem Steel Corporation (Bethlehem); 5. ' Hospital Council of Central Pennsylvania (Hospital); 6. Standard Steel Division of Titanium Metals Corporation of America and P.P.G. Industries, Inc. (Standard); 7. Louise Riley and Senior Power Action Group of York (SPAC); 8. National Cypsum Company, P.H. Clatfelter and St. Regis i Paper Company (Gypsum); 8105130 N ~ L
l = ? j 9. Citibank, N. A., and Chemical Bank (Citibank); s 10. American Society of Utility Investors (Society);
- 11. Victaulic Company of America, S.I. Handling Systems, Inc.
and Swain Electric Company, Inc. (Victaulic); and, '" 7~ 12. Electralloy Corporation, Erie Malleable Iron Company, Franklin Steel Company, National Forge Company, The Proctor & Gamble Paper Products Company, Talon-Textron,. United Refining Company and Universal Cyclops Corporation (Electralloy). Accrued Depreciation (R.D., p. 23) Although Metropolitan Edison Company excepted to the adoption by the ALJ of a calculated depreciation reserve and a concomitantly modified depreciation expense, not noted was the fact that the ALJ had mischaracterized the result of the adoption of the eniculated reserve, as advocated by the Trial Staff, as a reduction to the reserve rather i than an increase to the reserve (R.D., p. 27). The fact that the adoption of the calculated depreciation reserve, as advocated by the l h' Trial Staff, results in an increase to the depreciation reserve, is [ clearly demonstrated in Staff Exhibit EUG-1, sponsored by Staff witness Gruber. No adjustment to the ALJ's adopted rate base is required. 'The tions of Metropolitan Edison Company presented no arguments not. excep'ously heard and considered and are accordingly denied for.the previ reasons set forth in the Recommended Decision. s ~ Revenues -- Non-Jurisdictional Operations (R.D., p. 64) The Staff advocated the imputation of a total of $1351,000 s (an increase of $1,324,000) of revenues from sales for resale,* subject to the jurisdiction of the Federal Energy Regulatory Comnission. The ALJ adopted the position of the Staff, but recognizing that the specific l proposed adjustment is predicated and dependent upon a specific rate of return, directed the Respondent to allocate the total allowed increase in operating revenues in such a manner as to achieve equivalent rates of return for Pennsylvania and FERC jurisdictional operations. Metropolitan Edison Company has excepted to the recommendation of the ALJ arguing that its long term contract with the Borough of Middletown is a unique situation and that efforts to achieve relief from the contract have been unsuccessful.- It conclu' des that because of this fact revenues should not be imputed. This argument was heard and rejected by the ALJ. Absent a jurisdictional separation of rate base, revenues and expenses, the imputation of revenues is but a convenient alternative to achieve the same result. See Fa. P.U.C. v. Duquesne Light Co., Docket No. R-80011069, February 20, 1981. e 2- ,y w ~.- -- ,.g--p-- wm.. -
J That this tatt2r of the imputatien cf n:n-jurisdicticnal revenuss w s cgsin cn iceus in this precceding is troubling, fcr it was our intention to eliminate this subject as an issue when we directed in our Order at R.I.D. 626, entered March 29,1979 (Ordering Paragraph 8) that any future general rate increase filing by Metropolitan Company would be on a Pennsylvania jurisdictional basis only.-{pison The Respondent did not seek nor was it granted a waiver of this requirement, for good cause shown,.in filing the instant application. This failure to comply with the requirement of our prior Order at R.I.D. 626 did not, in this instance, result in a rejection of the instant application, because of the strained financial circumstances since the accident at Three Mile Island. However, we wish to place all utilitics on notice, of that which should be obvious, which is that our Orders are not to be treated lightly or deliberately ignored. To the extent that our Orders in general rate increase proceedings impose requirements applicable to future rate increa'se applications or otheruise, which a utility feels are unreasonable, unduly burdensome or otherwise inappropriate, it has the remedy of seeking from us a waiver of, a modification of, or a delay in complying with the requirement. Needless to say, the Commission always has available to it the remedy of the rejection of an application for failure to comply with a prior Commission Order. We would not wish our comments interpreted as implying that the Respondent is the only or the most serious or frequent offender in this regard; it is not. Rather, we merely find that this is a con-venient occasion and opportunity to express ourselves generally on this icbject, since ve-uill again order Metropolitan Edison Company that khen filing its next general rate increase application it do so on a Pennsyl-vania;jurisdictiona? basis only. Reserve Capacity Expense (R.D., p. 69) The Cons umer Advocate proposed an adjustment to reduce the Respondent's claimed reserve capacity expense relevant f.o the outage of THI-1 and THI-2. The ALJ rejected the proposed adjustwent. Exceptions have been filed by S"AG cnd the Office of Consumer Advocate. The exceptio.ns have two aspects, first, to deny the expense claim, and second, to require normalization accounting if the expense.is allowed. While the ALJ denied the Consumer Advocate proposal, it is only clear to us that he denied the proposed expense adjustment, and he agree for the reasons stated. In so doing, he only recituJ the amount of $10,916,000 applicable to THI-l and omitted the amount of $12,187,000 applicabic to THI-2. We deny the proposed adjustment as to both amounts. 1/ We also note here Respondent's failure to comply with Ordering Paragraph 7 of that Order with respect to the future test year. i e ! l l i
As to the matter of normalization accounting, we believe that this is the Proper accounting and ratemaking treatment to be accorded to this " hypothetical expense", and that such treatment is fully consistent with the position taken, and the commitment made, by the Respondent'in its Brief at page 142, that _is, that this expense collection will be credited against the future expense incurrance when the THI-l and TMI'2,, -- outages are reflected in the Respondent's reserve capacity expenses, and' we will so order. The exceptions noted above are granted in part and heuted in ~ part. Load Data for Cost of Service Studies (k.D., p. 100) ~ The ALJ recites the Staff position regarding the Mespondent's rather stale load data for the residential and commercial customer classes, from which it extrapolated data for its cost of service study. Although the Staf f did not file an exception to this treatment, we note that the ALJ did not state a conclusion or make a recommendation. We believe that more current data must be obtained. We expect the Respon-dent to proceed as rapidly as is possible on a demand metering program for these customer classes. Progress on load research will be an item of special interest during the Respondent's next general rate increase application proceeding. ~ 8 i._ Allocation of Maintenance Expense for Transmission Plant. (R.D., p. 102) The ALJ rejected the position (_ several parties that trans-mission maintenance expense should be allocated in the cost of service study on demand rather,than on an energy basis. Exceptions have been filed by Bethlehem, Electralloy and Victaulic. In a prior order in Pa. P.U.C. v. Pennsylvanie Electric Company, at R.I.D. 392, we expressed ourselves on this subject as follows: The Industrial Complainants object to Penelec's allocations of transmission maintenance expenses and distribution maintenance expenses on an energy basis rather than a demand basia. The complainants point out that, according to the NARUC Manual, all transmission expenses accounts should be allocated as demand related and that distribution maintenance expenses should be allocated on the basis of the underlying plant. It is clear that Penelec here has departed from recognized, accepted cost allocation methods. There might well be a valid reason for this i l l 1 l
] 'departura. If no, it has not been eet farth en the rec rd h*ra. In view of this, th7 com-plainants' exception will be adopted and the compaty will be directed to revise its cost of servi:e study's allocation of maintenance expenses to reflect their demand-related nature. 'P' The rates filed in compliance with our order here should reflect this reallocation." Jgi P.U.C. v. Pennsylvania, Electric Company, R.I.D. 392 (Order entered June 22, 1978,-mimeo
- p. 28) (Emphasiu added.)
There is nothing in the record in this proceeding to persuade us that our conclusion reached on this subject in that proceeding is no longer appropriate, and for this reason are ' constrained to grant the exceptions. The effecc of this modification to the cost of service study is one which we onsidered prior to concluding that the revenue .'~ allocation proposed by the Respondent, as approved by the ALJ, was appropriate. Accordingly, our granting of the instant exceptions does not require a change in revenue requirement allocations. Cash Working Capital-Accrued Long Term Debt Interest and Preferred Stock Dividends (R.D., p. 33) The.Adr.inistrative Law Judge reduced the Respondent's clain for cash working capital Lecause of " accumulated" debt interest ($1,428,000) and preferred dividends ($209,000) for a total of $1,437,000. Ve approve such an adjustment as we have in numerous recent Cases. ~ / The OCA has excepted, stating that because of the disparity between its calculations and those of the Administrative Law Judge there may be an error in calculations Our eyamination has revealed that the ALJ utilized a revenue lag of'31 days in his calculat' ion, while h'e should have used 59 days; that is, the net of the revenu'e lag of 31 days and the mid-point of the lag in interest payment of 90 d'ays. The recalculated offset to cash working capital then becomes, accumulated interest of $3,341,J00, plus accumulated preferred dividends of $209,000 for a total of $3,550,000. The Respondent's claim of $17,014,000 is reduced to $13,464,000. Tables IV and VII of ths Recom-mended Decision have been corrected and are attached hereto. i. Rate Design - Demand / Energy Charges (R.D., p.103) A number of customers participating in this proceeding asserted l j that the rate design proposed by the Respondent for Rate Schedules TP l and CP were unbalanced in that demand charges were substantially below cost, while energy charges were substantially above cost. The Hospitals e. 9" im. -- e n.wn ,, n. --q==~*~--- - w :-.- - -J -u_ e,
further urged that the customer charge in Rate Schedule GP is substan-tially below cost. The Administrative Law Judge rejected, without discussion, the proposal that the charges be modified to bring the Icvols of charges more in line with the cost levels. Exceptions have been filed by Bethlehem, Standard, Victaulic, Electralloy, Hospital, and-Cypsum. Recognizing that 'thls issue is solely limited to the issue of '"'~~ the relative rate levels within the customer classes and will have no impact upon the rates charged to, or revenues derived from, other classes, we perceive of no reason not to bring rate levels closer to cost icv =.1<, in conjunction with the redesign of rate schedules which is necessitated by the reduced levels of operating revenues allowed in this proceeding. Uc believe first, that the proposed millage differential between on-peak and off-peak energy charges must be maintained. Second, we believe that the icvels of customer and demand charges proposed by th'e Respondent are generally appropriate. Consequently, the reduced level of operating revenues to be derived from these rate classes should be primarily utilized to reduce the proposed energy charges.. The exceptions are granted to the extent consistent with the above discussion. Cessation of Depreciation of TMI-1 and TMI-2 (R.D. ,p. 111) This portion of this Opinion and Order supersedes the similarly ,( captioned portion of the Recommended Decision. Het. Ed. has continued to accrue depreciation for TMI-l and TMI-2. The Staff proposed that depreciation accruals be terminated and that the reserve be adjusted retroactively in light of the fact that these plants ceased producing revenues some time aSo. The ALJ adopted the common date of May 31, 1980, for both units. Met. Ed. and the Staf f have excepted. - Staff and Het. Ed. are in agreement thad May 31, 1980, in the appropriate date for THI-1, as that was the d' te it was removed from rate base and ceased a ~ producing revenues. As to THI-2 the Staff propcscs the date of April 19, 1979, the date THI-2 was removed from rates. Met. Ed. proposes the date of January 1,1979, in that TMI-2 has never been recognized for the purposes of ratemaking, presumably in the sense that rates recognizing TM1-2 were never charged to customers. We believe that January 1, 1979, is the more appropriate date. Accordingly, the exceptien of Het. Ed. is granted and that of the Staff is denied. The Respondent will terminate accruing depreciation expense for these two units and will adjust the accrued reserves as indicated herein. Appropriately, I l the units should be transferred to plant held for future use until such l time it is factually appropriate to again return the units to the plant l in service account. As to the future recognition of capital additions and retire-ments, it is inappropriate and practically impossible to commit the l Commission at this time as to the ratemaking treatment to be afforded to l these items at scme future time. Suffice it to say that detailed records l l v
ef expanditures, capitalized and. expensed, will be closely cerutinized for appropriate ratemaking treatment. It is the sole responsibility of the Respondent to determine whether.~these expenditures'are to be accordedi current or deferred accounting treatment. JLATE O[ RETURN (R.D., p. 39) [ ~ We adop.' the conclusions of the ALJ as to the capital structure of 50.1% long term debt,13.1% preferred stock, and 36.8% common equity, together with a debt cost of 7.87% and a preferred stock cost of 7.40%. An issue of major porportion in all rate proceedings is a determination of the appropriate cost rate of common equity capital. Before us is an array of computations presented by experts for Metro-politan Edison, the Consumer Advocate, und Trial Staff. The variance of the ranges and recommendations presented in this case is particularly indicative of the lack of precision in this endeavor. 'For exampic, the Consumer Advocate recommends an equity return of 14%, and Respondent recommends a variety of equity returns up to 24%. These recommendations result in an incredible overall return range of 10.06% to 13.74%, w~nich range results in s possible disallowance of $36.5 million from the company's requested increase of $76.5 million, to an increase of $2.6 million above the company's request - or a $39.1 million difference. The fd.J, recommended a cost of common equity.of 16.5% for Metropolitan Edison Company and Pennsylvania Electric Company, on the basig that 16.5% is the m!.dpoint of the recommendations of Dr. Brigham and Mr. Rothschild. Whilt we agree that the evidentiary record supports the ALJ's recommendat. ion, we arrive at. similar conclusions,17.0% for Metropolitan Edison Company and 16.5% for Pennsylvania Electric Company, using different rationale. k'e note that exceptions have been filed by SPAG, OCA, and Victaulic arguing that 16.5% is too high, and by citibank and Society arguing that 16.5% is too, low. We believe that the ALJ's recitation at pages %4 through 56 of the Recommended Decision adequately summarizes the positions of the parties. Dr. Brigham, having derived from his risk premium analysis, a l~ range of 16.0% to 17.5% added 1% to each as the amount necessary to achieve a price / book ratic of 1.10, and then derived a midpoint.of 17.8% as the' cost of equity capital. His Discounted Cash Flow (DCF) analysis results of 15.0% to 18.5% were similarily adjusted upward and a midpoint of 17.8% was. derived. Assuming that the market price / book value ratio is a legitimate and proper concern, and that an attempt to influence that relationship wo21d succeed, subjects concerning which we have some reservation, Pa. P.U.C. v. Metropolitan Edison Company, R.I.D. 626, be have in the recent past denied an allowance for flotation costs and market l p _7_ f 3
? 2l pressure.- We do not view a new issue of stock by General Public Utilities to be a realistic probability for.the foreseeable future. Consequently, for this reason, we conclude tha; an additional 1% allow-ance is inappropriate. We note also that within Dr. Brigham's 1% allowance he includes an allowance for a 3% to 4% treak in the stock market during the underwriting period. Even were we to consider an e s-- allowance for flotation costs and market pressure, the allowance of an t additional increment for a break in the stock market seems to be unjus-tified protection for current investors in.a regulated industry. In his DCF analysie, Dr. Brigham rejected the traditional DCF formulaofky+g,whereinkisthecostofcapital,'Disthe~div end, P is the market price, and, g is growth in dividends and earnings;- Dr. Brighan describes this relationship as the constant growth formula. Instead of utilizing this lattet formtila, Dr. Brigham employs a non. constant growth formula, described at page 37 of his Statement H. The non-constant growth formula assumes a horizon at 4.5 years. Based upon data from Value Line, he derives a growth rate of 4.08% and various dividend-levels. Utilizing these estimates plus a current market price of $6.25, results in a value for k of 15.0%, which is offered as a " reasonable estimate of GPU's DCF cost of equity" for the period uti-lized. However, since Value Line projects only until 1984, he hypothesizes that it is reasonable to expect a continuation of the increase in return on book equity which would result in a higher value of k. Dr. Brigham then extends the horizon to 10 years (the end of 1989) and solves his for=ula for a value for k of 18.5% (page 40), which he then characterizes as GPU's current DCF cost of equity. et Analyzing what Dr. Brigham has said, first, it seems that he says that if the assumptions utilized in the formula are realized, an investment ut a market price of $6.25 will result in a tot'al average annual yield (dividend yield plus an increase in market price) of 15% or 18.5%, as the case may be, at,the end of the 4 1/2 or 9 1/2 year periods. Second, it seems that he urges us to fulfill the prophesy by granting an earnings level now, at a 1cvel well above the Value Line prophesized return on equity wt ich was utilized in developing the re'sult. Third, that in some fashion the Value Line estimates of what wi11 occur, published on July 4,1980, based upon a current market price of $6.25, is in fact the cost of capital for an investor in GPU stock. We f: 1 to perceive that Dr. Brigham's derived percentage figures represent what is fair to the investor, or that the derived cost figures represent the investor's requirement, and for these reasons we must reject Dr. Brigham's non-constant growth formula and his DCF results as described above. 2/ Pa. P.U.C. v. Peoples Natural Gas Co., 28 PUR 4th 181, 200 (1978). 3/ We note that Dr. Brigham describes growth in dividends and earnings as if they were the same. -
As to Dr. Brighas's derived calculaticas cf the DCF market C value cost of equity for Pennsylvania and contiguous electric companies as shown in his Schedule 5, we shall accept them for what they may be worth, since they were derived from the constant growth DCF formula. We turn now to Dr. Brigham's risk pren.ium method, described at pages 29 through 33 of Statement H. As is customary, Dr. Brigham acknowledges that the cost of capital has"three components: (1) the real rate; """"~ (2) the inflation premium; and, (3) the risk component. Dr. Brigham's first comparison is between Standard & Poor's 399 Industrials and 20 year i .Covernment Bond yields. Dr. Brigham. develops a it yer average (im-1; '9) l of 5.97% (Schedule 3, Statement H), with an average for !nc Inst 5 years l of 7.17%. However, we find that the StP data is, expected DCh returuc based upon Compustat data from which he subtracted the expecte_d_ yields on U.S. Covernment long term bonds for each year. Again, we must fault the results as being based upon assumptions as to expected earnings, as t f distinguished from recorded earnings and yicids.' We are not convinced that the derived risk premiums are valid to the extent that they are estimated rather than derived from recorded data. The risk premiums developed for the Dow Jones Industrials and Electrics suffer from the ( same disabilities.- Hr. Rothschild first presented his DCF methodology using the i classic constant rate DCF formula. At Schedule 2 of his exhibit l Mr. Rothschild reduces his derived growth rate for Moody's 24 Electric Companies by 1.27% to reflect the negative effect upon growth as a result of new financings belcw book value. The application of a DCF derived cost oT capital to a rate base at or near the book value of commo,n equity will tend to move market value toward book value, all I other' things remaining equal. Mr. Rothschild's ascumption that there will be new financing before this happens is without foundation, as would be the assumption that such an expectation is not al eady reflected t in market price. Consequently, we would not make. such an adjustment and would look inst.ead to the unadjusted growth which would indicate a 14.2% cost level. By adding an increment to move market' price to'Took dnd another increment for financing costs, Mr. Rothschild arrived at* his conclusion I of 13.4%. We reject these two adjustments for the reasons previously l stated in our discussion of Dr. Brigham's testimony. As of Eovember 1980, Mr. Rothschild concluded that his overall l. cost of 13.4% had increased to 14.0%. If we were to na the.6 incre-mental increase to the 14.2% cost derived above, the to a.1, indicated current cost would be 14.8% which is similar to the 14.99% shown on Dr. Brigham's Schedule 5. Consequently, a conclusion that 15% is an approprince cost of capital for CPU might be warranted, considering the evidence of record in this proceeding. Further, were we to utilize a more reasonable risk premium of 5% to Dr. Brigham's 10% rate for recent U.S. Covernment bonds (p. 83, Statement H), the same 15% rate would be indicated. 1 I 1 t
] Lef t fer cur cencideratica era the subjecto of tha relativa risk of CPU as contrasted with the electric utility groups utilized by the two witnesses, the suspension period which Section 1308(d) of the Code (66 Pa.C.S. 51303(d)) mandates that we consider, and our deter-minations in other recent electric utility proceedings. These latter three considerations require an upw.=-d adjuntcient to the 15.0% figure. We do not believe chai it is either feasibic or appropriate to ottempt to quantify ind*vidua11y these items. However, it is apparent that our ' con:Idcration of relative risk weighs more heavily in the case of Metropolitan Edison Company than in the case of Pennsylvania Electric Coupany due to the relatively poorer financial condition of the former company; therefore, a somewhat different conclusion is warranted by the circumstances. We conclude that a rate of earnings for common equity of 17.0% is appropriate for Metropolitan Edison Company, and a rate of carnings for common equity of 16.5% is appropriate for Pennsylvania Ele'etric Company. The exceptions as noted above are granted and denied to the extent indicated. Conclusion Uc have concluded that Metropolitan Edison Company is entitled to an opportunity to earn income available for return of $58,309,000, based upon an overall rate of return of 11.17%, based upon its total operations, i.e., Pennsylvania jurisdictionni operations and operations subject to the. jurisdiction of the Federal Energy Regulatory Commission. In furtherance of such an objective, Metropolitan Edison Company is authorized to establish rates which will produce $303,574,000 in total' revenues, in accordance uith the methodology more fully described in the appropriate ordering paragraph. Our adjustment to revenues, expenses and taxes to reflect our adjustment to the allowance of thu Administra-tive Law Judge is set forth in the Appendix hereto; THEREFORE, ~ IT IS ORDERED: 1. That Metropolitan Edison Company shall not~ plac in , effect the rates contained in its Tariff Electric - Pa. *P.U.C. No. 44, the same having been found to be unjust, unreasonable, and therefore unlawful. 2. That Metropblitan Edison Company is hereby authorized to. file tariffs or tariff supplements containing rates consistent with our findings herein (including those portions of the Recommended Decision not modified), exclusive of revenue to be derived from the State Tax Adjustment Surcharge, not in excess of $303,574,000', based upon the year-end level of operations of the test year ending March 31, 1981. When establishing the levels of rates in the tariffs or tariff supple-monts to obtain this IcVel, the Respondent shall impute revenues from sales for resale subject to the jurisdiction of the Federal Energy Regulatory Commission at the rate of return of 11.17% authorized herein. i -
~ 3, That tarif fo or tarif f cupplemento may be illed uptn luc than sr.atutory notice, and, pursuant to the provisions of 52 Pa. Code $3.321(b), the tarif fs or tariff supplcments may be filed to become ef fcctive for service rendered on and af ter April 9,1981. 4. That, in support of such tariffs or tariff supplements, there shall accompany such filing a procf of revenues for each rate schedule, reflecting the normalized level of operations at year-end of the test year ending March 31, 1981, in the format and detail as pr.v. viously provided in the Respondent's Exhibit C-4. 5. That Metropolitan Edison Company shall allocate its increase in Pennsylvania jurisdictional operating revenues, derived as described in paragraph 2 above, to each customer class and rate schedule within cach class as proposed by the Respondent, reduced proportionally to reficct the reduced level of operating revenues authorized herein. That is, that the relative revenue percentage increase relationrhips are to be maintained at the reduced level of revenues authorized. 6. That the rates for Rate Schedules TP and GP shall be redesigned in the manner set forth in the body of this Opinion and Order. 7. That Metropolitan Edison Company shall, in any future gencrttl rate increase application, file on a Pennsylvania jurisdictional basis only,.s,uppo_rted by data regarding the jurisdictional separations and/or allocations which were made. \\ 8. That Metropolitan Edison Company shall engage in normal'ized accounting foi reserve capacity expenses related to the THI-l and THI-2 4 units in accordance with generally accepted accounting principles. 9. That Metropolitan Edison Company shall, in future cost of service studies, allocate tran,smission, maintenance expense on a demand basis. 10. That Metropolitan Edison Company shall pro *cced with a demand metering / load data, data collection program for. residential and commercial customers. The Company shall report to the Commission, by letter, its progress on this program at three month intervals commencing on August 3,1981.
- 11. That the State Tax Surcharge will be recomputed in accor-I dance with the State Tax Surcharge Order of March 10, 1979, as revised.
- 12. ' That Metropolitan Edison Company s iall adjust its deferred energy surcharge as described in pages 105-106 of the Recommended Lacision of the Administrative Law Judge, for service rendered on and '
af ter April 9,1981. 13. That Metropolitan Edison Company shall terminate depre-clation accruals for THI-l and THI-2 units and adjust the depreciation l l' L J
res:rvsa cpplicable to these units as discussed and determined in the body of this Opinion and Order.
- 14. That, to 'the extent not granted in the Recomm' ended Decision of the Administrative Law Judge and herein, the several complaints of ~
the parties are dismissed. Y 15. the exceptions of all parties, to the Recommended Decision of 'h Administrative Law Judge, are denied. BY THE CO.T! SSION, ,.as,q.7 />s. A- / a. _ William P. Thierfel er Secretary ORDER ADOPIED: April 2 and 9, 1981 ORDER ENTERED: April 7, 1981 .? Y W 9 " $8 e e 1 l l e 12 - l l l
o ,o TABLE IV NEASURES OF VALUE Original Cost Rate Base Per Respondent $ 719,507 e (Exhibit B-152) ALJ Recommended Adjustments: ntI-1 Removal (162,660) Accrued Depreciation ( 4.061) Unamortized Expenses ( 27,068) %.ferred Taxes ( 155) nad ' interest and Preferred Stock DivAcends ( 3.550) Total Adjustments _$(197.494) ALJ Recommended Rate Base $ 522 n13 2 e e
- 5 e
n e 4 e O e 4 e 9 O ee o e e i 4 L- ~ --.a.--. w ----
g l [ ~ 5 el TAB!.E VII Rt(VENtfES. EXPF.NSES AND TAXES ($000) Pro Forma Pro t'oma At.1 Recoamended L Present Excluding a Excluding Present kxclud!nri Present Rateg _ Increase Tots) TMt-2 (n) utt-1(13) _ 'tHI-1 & 2 M f ustment s $ 251,770 $ 49,789 $ 301.559 3 251,770 Operating Ravenues $ 251,770 Op3rutlng Expensest 175,290 oi. oration & Hatatenance 179,397 (10,793) 168,606 10.684 (c) 179,290 Dupreciation 28,173 ( 6.551) 21,622 ( 188) 21,434 ~ 21,434 12,247 . 996 13,243 12,247 Tamus, other 12,247 Incomo T.exos ( 2.260) 13.569 11.309 ( 5.317)(d) 5.992 '24.253 30.275 217.557 ( 3.773) 213.784 5.179 218.963 2~,.279 244.242 lucome Available for Return S 34.213 $ 3,773 $ 37.985 $( 5,179) S 32.807 $ 24,510 $ 57.317 (e) 5 d) Income Taxes: c) Exhib1L 5-153, p.1 Expense Adjustments 10.684 Tax ractor x.497674 b) Exhibit 5-153, p.2 Tam Decrease 9 5.3171 4) Espense Adjustments: 3 e) A!J Reconomended Rate asse a Rate of Reters .(87) Rate Case Expense H.anagument Audit (156) $522,013 s 20,982 8 tore thieugo (73) 3 THl=1 Restart
- M
.Y g $10.684 s } g ~
~' ,,e 0' n APPENDIX l 1' StDDIARY OF REVENUES, EXPENSES AND TAXES _ (T (S000) t By the Comission .. s - Revenue Requirement ALJ Allowance i Adiusement Allowance S S S 2,015 303,574 I 301,559 Operating Revenues: Operating Revenue Deductions: 179,290 " 179,290 21,434-Expenses 21,434 13,283 40 I Depreciation 13,243 31,258_ 983_ Taxes - Other 30,275_ l Income Taxes 245,265 f 244,242_ 1,023 Total 58,309_ Net Income Available 57,317_ E For Return: il 522,013 i 522,013 Rate Base: 11.17% 10.98% f Rate of Return: J e e j i ti I s I i LA - - - - -}}