ML19347E682
| ML19347E682 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 02/17/1981 |
| From: | Frater M MCNEES, WALLACE & NURICK, NATIONAL GYPSUM CO. |
| To: | PENNSYLVANIA, COMMONWEALTH OF |
| Shared Package | |
| ML19347E637 | List:
|
| References | |
| R-80051196, NUDOCS 8105130220 | |
| Download: ML19347E682 (10) | |
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BEFORE TRE PENNSYLVANIA PUBLIC UIILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY C0KHISSION Docket No.
v.
R-80051196 METROPOLITAN EDISON COMPANY MAIN BRIEF OF NATIONAL GYPSUM COMPAhT P. H. GLADFELTER CO.
()
ST. REGIS PAPER COMPANY Maurice A. Frater, Esq.
McNees, Wallace.& Nurick P. O. Box 1166 Harrisburg, PA 17108 Counsel for Industrial Intervenors Due: February 17, 1981 O
18105130hN
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pd BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY COMMISSION Docket No.
v.
R-80031196 METROPOLITAN EDISON COMPANY MAIN BRIEF OF NATIONAL GYPSUM COMPANY P. H. GLADFELTER CO.
ST. REGIS PAPER COMPANY I.
INTRODUCTION This brief is filed on behalf of National Gypsum Company, P. H. Gladfelter Co., and St. Regis Paper Company. This bri.~ will be limited in scope dealing with only two principal issues; total revenue requirement and rate structure issues as they relate to rate revenue responsibility.
A.
The Commission's Findings of Operating Revenues for Metropolitan Edison Company should be Adequate to Maintain Financial Viability.
The Commission has enunciated a policy of maintaining the financial viability of Metropolitan Edison Company.
Although the Commission has removed TMI-l and TMI-2 from rate base as being not used and useful in the public service, Metropolitan Edison, as a corporate entity, still must bear the current expenditures necessarily associated with those facilities, in addition to the expenditures of its on going utility function. Unfortunately, 1
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the record of this proceeding appears to demonstrate that traditional approaches to the determination of an appropriate operating revenue for Metropolitan Edison will not in fact provide ad4onate operating revenues to
. Metropolitan Edison. Therefore, if traditional approaches are used the financial viability of Metropolitan Edison appears to be seriously threatened.
Given the Commission's determination that Metropolitan Edison is to be maintained as a financially viable entity, other approaches to the determina-tion of operating revercias would appear te be warranted.
Witness Packard., Director of the Bureau of Rates, testifying on behalf of Commission Trial Staff, said,
...using conventional accounting and financial analysis Met-Ed is not a financially viable entity....However, insolvency is not a solution....Some method of rationale must be used on bridging the gap between the revenue requirements of an additiortl S9.7 sillion and the short term cash need of an additional $26 million.
Witness Packard went on to recommend that, First;...the cast of capital could be as high as 25%.
Second:...up to $11 million may be allowed for the express purpose of enabling TMI-1 to return to service.
Third: a restatement of the amortization of deferred energy balances
[could be used].... (Tr. 2636)
The $26 million referred to by witness Packard is the cash deficiency or short-fall which the company will experience by the end of 1981 with the i
use of " austerity spending" level of operations and without a rate increase.
This cash flow requirement of the company needs to be translated into an annualized operating revenue increas_.
These parties support the recommendation of witness Packard particularly with respect to providing funds for the earliest possible restart of TMI-1.
There seems to be wide agreement that one of the principal keys to the O
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financial survival of Metropolitan Edison is the restart of TMI-1.
In O
addition to providing improved financial stability to the company, the restart of TMI-1 will benefit the company's customers by reducing the proportion of purchased power necessary to serve the company's customers and thus reduce the cost of energy experienced by the company's customers.
l B.
The Revenue Responsibility of Each Rate Class shou,14 be Determined by Reference to the Allocation of Investment and E4penses for Each Rate C1.ss.
The revenue responsibility of each rate class should be determined by a cost-of-service study which allocates investment and expenses as practicably as possible to each rate class.
This is a reasonable approach to the equitable distribution ar.tg rate classes and also protects the utility from severe erosion of earnings which can result from changes in use charac-teristics by any or all of the rate classes.
If races track costs of O
providing service changes in usage patterns will not produce severe impacts upon the utility's earnings (Industrial Statement 1, p. 3, et seq.).
The company has proposed to distribute the increase in operating revenues in this proceeding on an above-averags basis to general service rates and a below-average basis to residential class rates. This proposal is inconsistent with the cost of service since the residential rates are already below the cost of service and the general service rates are already above the cost of service. Further, the cost-of-service study performed by Metropolitan Edison, overstates the cost of serving General Service customers by allocating maintenance expense on the transmission plant on the basis of energy rather than on the customary demand basis and by failing to include recogniti" of costs associated with the revenues from the Energy Cost
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Adjustment (Industrial Statement 1, p. 6) l
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p Witness Drazen calculated the increase by rate classes as proposed by d
the company and expressed them as an index of return. This index of return provides a range from 84.4 for residential service through 116.6 for Rate TP
-(Industrial Statement 1, Schedule 3).
Witness Drazen, on the basis of a corrected co '.-of-service study and the application of his principles with respect to applying the increase among rate classes, recommended an alternate approach to increas).o; the various rate classes which produced index rates of return which had a narrower range from 95 to 105 (Industrial Statement 1, Schedule 4; Copy attached hereto).
By looking at the overall revenue responsibility witness Drazen was able to propose rate class increases which result in class revenue respon-sibility closer to the cost of serving those rate classes than was proposed by the company.
Revenue responsibility by rate class should reflect the cost of providing utility service to the rate classes. The allocation of the increase proposed by witness Drazen results in overall revenue responsibility by rate class closer to the cost of providing service to each of the rate classes than the increase proposed by Metropolitan Edison.
C.
Rate TP should be Designed to Increase Demand Charges more than Energv Charges.
In the same way as the revenue responsibility should be allocated
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amongst rate classes on the basis of the cost-of-service study revenue responsibility should be allocated among customers, within a rate class, also, on the basis of cost of service.
Although witness Carter testifying in support of Metropolitan Edison's proposed rates stated that the two part demand / energy rates were increased l
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.amand charge witness Drazen discovered that Rate TP was increased mostly in the energy charges.
For Rate TP, the energy charge is far overstated. Although the base cost of energy is 1.3058 cents per kwh the rates proposed by Met-Ed are 1.5 cents per kwh for off peak and 2.05 cents per kwh on peak. Although the cost cf off peak energy is below the average cost of energy, the company's proposed rate for off peak energy is significantly above that average cost of energy (Industrial Statement 1, p.
10).
The effect of overcollecting energy charges, and thus undercollecting demand charges, is for high-load factor customers to provide a significant subsidy to low-load factor customers in the same rate lass.
Further, it encourages inefficient use of the company's facilities by customers (Indus-trial Statement 1, p. 11).
Witness Drazen recommended a rate design for Rate TP which is set forth O
on Schedule 7 to his testimony (copy of which is attached hereto), which is designed to collect the revenue responsibility determined by witness Drazen in Schedule 4 This rate more closely follows the cost of providing service and achieves witness Carter's objective of increasing demand charges approx-imately the same as the increase to energy charges.
D.
In the same way, Rate GP should be Designed to Reflect a Greater Increase to the Demand Charges.
The company's proposed Rate GP actually provides for a reduction in demand charges for high-load factor customers and up to an 81.7% increase in on peak energy charges.
As in Rate TP, these proposed increases have the effect of over-emphasizing energy charges in comparison to the cost of energy and under-emphasizing demand charges. l 1
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Witness Drazen provided a recommended Rate GP which provides for more balance between the demand charges and energy charges.
Schedule 9 attached hereto sets forth the recommended Rate GP.
II.
C_0NCLUSION The Commission should recognize the cost of restarting TMI-l and a sufficient rate of return to permit Met-Ed t, maintain its financial viability in the immediate future.
Overall revenue responsibility should be allocated between rate classes by use of a ratio of recommended increase set forth on witness Drazen's Schedule 4.
Rates TP and GP should be designed to provide a greater increase to demand charges and a lesser increase to energy charges by adopting rate designs, appropriately adjusted, as recommended by witness Drazen.
Respectfully submitted, NATIONAL GYPSUM COMPANY P. H. GLADFELTER CO.
ST. REGIS PAPER COMPANY l ly,
By' I h, a a.. - -
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b-e-
Maurice A. Frat.er Counsel for Induptrial Intervenors Of counsel:
McNees, Wallace & Nurick P. O. Box 1166 Harrisburg, PA 17108 February 17, 1981
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r Exhibit MMD-1 (
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j Schedule 4 IO I
METROPOLITAN EDISON COMPANY
)
Recommended Distribution of increase Requested by Met-Ed Year Endine March 31, 1981 1
1 Recorrrnended increase Resulting Amount Percent on index of Line Rate Class (000)
Base Rates Return (1)
(2)
(3)
Residential 1
RS
$19,478.3 36.61%
95.0 2
WH & RST 7,378.3 39 96 95.0 3
AE & RSM 7,762.2 30.18 95.0 4
Total residential 34,618.8 35 55 General Service 5
GS 23,847 0 32.72 105.0 Q
6 GSSH 759 3
- 35.84 95.0 u
7 GP 7,837.6 23 55 105.0 8
TP 6,313 1 26.30 105.0 9
MS 2,187.1 48 31 97.3 10 Total gen. serv.
40,944.1 29 93 Lighting 11 ALTG 0.0 0.00 103.0 12 SLTG 486.5 18 39 98.6 13 Total lighting 486 5 14 Borderline
.4 6.64 105.0 15 Total retail S76,049.8 32.04%
100.0 O
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'l Exhibit MMD-1 (
)
Scheduto 7 Pega 1 of 2 lC)
METROPOLITAN EDISON COMPANY I
Recommended Rate TP Based on $6,313,000 increase Effective i
Present Proposed increase Line Description Rate Rate Amount Percent (1)
(2)
(3)
(4) 1 Customer charge
$700.00
$700.00 2
Demand charge
$3 76
$ 4.72 96 25.5%
O Energy charge 3
on peak 1.08c 1.68e
.60c r.
4 Off peak 1.08c 1.13c
.05c 5
Average 1.08c 1 37e*
.29c 26.9%
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- Weighted average using on peak and off peak usage.
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Exhibit MMD-1 (
)
Sch2dulo S Page 1 of 2 I
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ME R0POLITAN EDISON COMPANY
. l Comoarison of Present Rate LP with to rr "r::ned Rate GP.
l Effective I
Present Recommended increase Line Description Rate LP Rate GP Amount Percent (1)
(2)
(3)
(4)
Load Factors from 34% to 62%*
1 Customer charge, per mo.
575.00
$ 75.00 2
Demand charge, per kW
$4.235
$ 5.84
$ 1.605 37.9 %
Energy charges, per kWh
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3 On peak 1 39c 1 97c 0.58 e 41.7 %
4 Off peak 1.39c 1 37c (0.02)e
( 1.4)%
J Load Factors Above 62%**
5 Customer charge, per mo.
$75.00
$ 75.00 6
Demand charge, per kW
$ 5.09
$ 5.84
$ 0.75 14.7 %
Energy charges, per kWh 7
on peak 1.20c 1.97c 0.77e 64.2 %
8 Off-peak 1.20c 1 37c 1 37c 14.2 %
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- Between 250 kWh/kW and 450 kWh/kW.
- Above 450 kWh/kW.
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