ML20003B471
| ML20003B471 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 12/04/1980 |
| From: | PENNSYLVANIA, COMMONWEALTH OF |
| To: | |
| Shared Package | |
| ML20003B456 | List: |
| References | |
| NUDOCS 8102120161 | |
| Download: ML20003B471 (98) | |
Text
.
I Befors ,
e g '
( 2' THE PEESYL7aNIA ?UBLIC UTILI'IY COM 153ICII l O i; --oCo--
3 6
,;jInre: R-80051196 - Pennsylvania Public utility Cor. mission, i '
et n . v e rs uTMe% EfoTftTn7d'iTdn~V6doYn3. J.6fe5Vf-g gation into requested $76.5 million dollar rate 3g t
increase.
6; j C-80072105 - Metronolitan Edison Comcany versus 7 ij Pennsvivenia Public utility Conmission. Complaint jl against temporary base rates fixed by the Commission 8 'j in its Order of May 23,1980 at I-7904c308.
l 9 Il B-80051107 - Pennsvivania Pub 1_ic Utility Cc= mission.
- l et al. versus Pennsviva.pD Electric Comranv. Investi-10 gation into requested $67.h million dollar rate y increase, ig I
~1 1
d 1 C-80072106 - Pennsvivania Electric Comennv versus Pennsv1vania Public Utility Commission. Complai$t against temporary base rates fixed by the Commission f 12 t
Is j in its Order of May 23, 1980 at I-79040308.
Hearings.
14 4 4
_-ooo__
15,]
d Harrisburg, Pennsylvania 16 l
$ December h, 1980 17 1 5 ..oco _
10 1
19 ) Pages 798 to 895 3
20 !:
21[ THIS DOCUMENT CONTAINS
- POOR QUAL.ITY PAGES 22$ .
.O MOHRBACH & MARSHAL, INC.
!. 27 North Lockwillcu Avenue I (S) M( Harrisburg, Pennsylvania u ,
inia ,
1.5 '. ,
.w ; u .= :. mmt me. - 27 n. s.ccawu.cw m. ,*a.m a u.u. =^. t7it: -
8102120 %l
798 a
- Before 1$
THE PENNSYLVANIA PUBLIC UTILITY CO: MISSION e
b t 2 a 9 --oCo--
3; 5In re: R-80051196 - Pennsvivania Public utility commiasion, Y$ et al. versus Metrocolitan Edison Comcany. Investi-
,f 3;
gation 1Yto requested 7$76.5 million dollar rate increase.
6 l; , C-80072105 - Metropolitan Edison Company versus
,)
~ ~-
Pennsylvania Publ1c 0t1'lIty Commission. Complaint a a6ainst temporary base rates fixed by the Commission l in its Order of May 23,1980 at I-79040308.
R-80051197 - Pennsylvania Public_ Utility Commission, 9 i et al. versus Pennsylvania Electric Comcany. Investi-gation into requested fo'IJ million dollar rato
- ~~
10 f increase.
a 11 i C-80072106 - Pennsylvania Elcetric Comcany_versus_
Pennsylvania Public Utility Commission. Complaint
" against temporary base rates fixed by the Commission r
L 13 in its Order f May a , 1980 at I-79040308. g Hearings.
14 3 4
--oOo--
15 4 Stenographic report of hearing held in 13 i Hearing Boom E. 2, Noi'th Office Building, j Harrt.sburg, Pennsylvania,
~7 7 '
l Thursday, 13 December 14 , 1980 9
at 10:12 o' clock a.m.
19
--ooo--
~~ al JOSEPH P. MATUSCHAK, ADMINISTRATIVE LAW JUDGE 21' --oCo--
i 2N; APPEARANCES:
?
~?~: I 5TEVEN A . McCLAEEN, ESQUIRE g Deputy Chief Counsel W
- "T TJLIAN S . SUFFIAN, ESQUIRE
,,' 3.ssistant Counsel
"~ .
!'G . ? st. 3 H to mar.SM A%. (NC. - 27 k LOC:n dLt. 'Pa ~ V E. - '! A i* ':' 3 8 'J 3 5. 7 A. 17tf2
799 l
1fAPPEARANCES: (Continued) 2- ECHDAN R. PANKI'd, ESQUIRS O 3l Assistent Ceunset Room 19, North Office Building i P. O. Box 3265 4i Harrisburg, Pennsylvania 17120 For - Coraission Trial Staff 5
W. EDWIN OGDEN, ESQUIRE 6i Ryan, Russell & McConaghey
- 530 Penn Square Center 7i P. O. Box 699
- Reading, Pennsylvania 19603 8 For - Metropolitan Edison Company and i Pennsylvania Electric Company 9l
. DAVID BARASCH, ESQUIRE 10 ; ASHLEY SCHANNAUER, ESQUIRE ll 1425 Strawberry Square 11 ; Harrisburg, Pennsylvania 17120 l For - Office of Ccnsumer Advocate 12 ;
' BERNARD A. RYAN, JR., ESQUIRE
(] 13 l l]
800 North Third Street a rQfg'BkEf$$$NEa"N$eFbHvoration l 14 5 li MAURICE A. FRATER, ESQUIRE 15 McHees, Wallace & Nurick
- 3 P . 0. Bo
- : 1166 16 3 Harrisburg, Pecnsylvania 17101 i y For - Aber, Inc., et cl.
17j ROBERT E. KELLY, ESQUIRE 18 i P. O. Box 1003 Harrisburg, Pennsylvania 17108 19 For - Victaulic Company of America i .20 i STEPHEN A. GEORGE, ESQUIRE l ) Buchanan, Ingersoll, Rodewald, Kyle & Buerger i
21; 57th Floor, 600 Grant Street Pittsburgh, Pennsylvania 15219 22 ' For - PPG h
23:
>nN./
4h )
J 254
' f!Oh:*0W & MAR $HAL, INC. - 27 K LCCKWILLOW AVE. - H AR RISSURG 74. f7812
800 f,,
7[ THE ADMINISTRATIVE LAW JUDGE: We had called e this aucting for the purpose of trying to obtain an input fromg
- b W the varicus parties as to the issues involved in these 3
4 p complaint proceedings against temporary rates, and in regard t
5 lto the implementation of those issues. We are not going to 6 attempt ourselves to define the issues and restrict any of 7; the parties to any preconceived issues that we may have, nor i
8} are we going to restrict any of the parties from submitting i
9l whatever evidence they want on the issues as they envision l
10lthem.
We do that for the purpose in the eventthat 11 f
- g any of our views in regard to such matters are incorrect, the 13 j partics will have presented their case on the record, and $
14 ; whether we have considered any aspects of that evidence or 13kthoseissuesornot,theCommissionwillneverthelesshave 4
16 them before it and can make a final determination thereon.
17! I west 16 like to call counsel's attentica to N
18 h a c:stter in which somewhat of the same issues are involved i
19 and that is the case of Central Maine Power against the 20 Public Ui;ility Commission at 414 Atlantic 2d 1217 involving 1
6 31 $ Maine Yankee, which received sorce notoriety a few weeks ago Y
22 -
on the ballot question whether it should remain in service,
)
4 23 ' and in that case Maine Yankee had been cut of service for y 3cce indeterminate time, it went out of service on March 15, O
' 1979 for a period then undetermined, but later returned out 2 I, fG > RUACH A M A3 SNAL IN S. = 37 N. LOC:Cw1LLOV/ .W E. " HARM 178 UMG. PA. 17112
801 l i
l 33 to be June 9, 1979
( '! The Nuclear Reguintory Commission had ordered 3
- the shutdewn panding its reevaluation of whether a particular
,t
,I safety system within the Maine Yankee plant would withstand f
3j earthquakes of calculated intensities. ,
The Commission issued a notice of investiga-6[
7( tion in which the subjects to be investigated were, one, the 8 reasonableness of passing on to ratepayers charges regarding 9l the fusi adjustments occasioned by the Maine Yankee shutdown; I
10 ; see nd;, and this is the one that probably pertaina particularly yy in this case, the reasonableness of the manner in which costs 12l associated with the shutdown should be borne by ratepayers; -
O 13 l and third, the advisability of establishing temporary rates V j pj pursuant to the statute in that jurisdiction.
I i
15; I might.say also that we are somewhat 16l disturbed becauFe the Company in its petition to segregato 1
l 77jthe complaint proceedings from the general rate proceedings
'S-had indicated that the testimony that was to be offered would i
be materially different from that to be offered in the l
19 :b 20 l perm nent proposed rate increase proceeding, that the complaint 1 'l .
g proceeding was to be expedited, and therefore it should not be combined with the general rate preceeding.
22l 33 ,
Since then it appears that the company has
() now indicated it desires the same evidence and the same treat-25 timent subnitted in a general rate increase proceeding to be Il MCHRSACH & ? MARSHAL PNC. - 27 IL' LOCKW1LLOW AVE. - N ARRt3SOR G,
- A ~ 6 7112
l . .
802 r
7la applied to the conclaint prcceeding.
3 ljl It further appears that the ccapany proposes $
a j that the evidence submitted as to the future test, year ending March 31, 1981 be considered in censidering the complaints 4
u 2
jagainst temporary rates.
1 I might state that in the Central Maine 6 ii Power case the court has stated in that case that the company' s gj position was -- and it seems to coincide with the position of the two companies in this case -- the company's position i
tiere was that the Commission, to make a valid temporary g
alteration of an existing permanent rate, must first 1!2. ,
investigate, and on the basis of that investigation, make 12j 13 a finding regarding whether the existing permanent rate to g be altered has itself continued to be just and reasonable 74 {
15 h as a permanent rate, and that en1y in this manner can the gj Commission have an adequate foundation for a second requisite t
i 1., [ step, and that is a determination and finding that the
-l 3g ( temporary alteration the Commission would be putting into to i effect is just and reasonable.
The Commission staff in this case arguec 9 0I n a
that by requiring the Commission to evaluate the continuing ol;.
22; f justness and reasonableness of the existing rate as a permanent
.,3fratewouldinjectintothetemporaryrateproceedingthe
~
s prolonged and complex kind of investigation involved in a h a
~((generalratecase.
,y MC MM3ACM & MARSHAL. INC. - 27 4 LOCKWILt.cw AVC. - M A R R f 3 8 tM G. P A. 17172
803 y; In that case the court has said that the i
0 2j Position of the utility there was indeed unsound. They say 0 i
,i the Commission may make a temporary alteration of an existing O
4 rato under their temporary rate section without need for an 5
investigation and finding regarding the continuing justness and reasonableness of the existing rate to be altered from 6l the perspective of.its being a perttanent rate, that is, as 7l viewed from the perspective that the rate is to continue in 8f 9l effect during an indeterminate future period. Considerations 10 h geared to the indeterminate future are uniquely matters g for the general rate case section and to introduce them 12 into the temporary rate section proceeding would render 13 lsuch proceeding nugatory through the commission of the p error of critical shift of material time-frame pers.pective, 15; and they refer to New England Telephone and Telegraph I
16 y Coalpany versus Public Utility Commission at 354 Atlantic i
l 17 ) 2d 753.
l h l 18 It looks like what we are heading for 19 l here is a submission by the company of a general rate case 4
20 ! proceeding testimony and evidence, and we would like to i
know exactly what the parties feel where we are going in 21 I
g this thing, in view of the company's position and its 23 h change of position, just what is the exact position of O. .,,!the company.
V Ccamissinn 25; Is it the company's position that when the /
I MGHREACN & MARSHA .. INC. - 27 N. LCCXW1 LOW AVE. - M ARR!$3 U 8t 3, PA. 17112
803-A f
f y 1, made the temporary rates--and we think that our duty here t' 3 is to consider a de novo matter rhether the Ccomission acted g a.f, properly in setting the rates that they did on March 23, t
1980--is it the company's position that at that time the 4
g i Commission was under a duty to reevaluate and determine not' 6 only whether TMI should be in or out of rate base, but also 7! whether the existing permanent rates then in effect should 8; be updated to render a proper return to the company?
9i I (Transcript continued on next page.)
10 ;
i 11 L 12 I 13
(} i 14 i 15 f 16 j l-17 18 lf 19 $
2 10i 21t 22 i 23l -
, O w' :j 25
$ 4caneeca c. x*a sart. :se. - -7 s. Loexw:ttew avr. - sAantacuno. ex. ivi 2
. . 0C4 1 THS ADMINISTRATIVE LAW JUDGT: I.would f 2 like to have the position of the company as to where we are O 3 going because it seems to me the the company is now, by its I
4 i position last expressed, that the company now has in effect 5; merged the two and if it has not, and it considers that we 6 must consider the test year ending March 31, 1981, that in 7l fact it renders the inability to render any decision on the 8 temporary rate case until the matter is fully concluded.
9j MR. OGDIN: Your. Honor, I want to hit on 1
10 L the very specific questions that you have. I think what I 11 l would like.to do, if I may, is take a little bit of time and 12 go through with you and the other parties what the company's positions are in this case, what its position is on the legal p# 13 f ;
14} matters , . and so. forth, and feel free to interrupt me any 15 time you want to ask a question.
16 THE ADMINISTRATIVE LAW JUDGE: First, I 17l want to know what do you view the issues to be and how you 18 , view the issues that have been resolved.
i 19 li MR. OGDEN:. Under the complaint against i
20 temporary rates, which is now before Your Honor for 21, deceraination, the company views the issue to be what is the 22 f just and reasonable level of rates tc,be charged by Met-Sd' l
23 and Penelee now and what--
l O- 24; 1
THs 4DM1N1sTa4TIv3 law JUDGE: No. er es 0
25 II of June first?
McHRS ACH fa f.! ARSHAt INC. ~ 27 N. CSCXWILLOW AVE - H AMRIsetJRG. P A. 87112
, m. , , _ . _ _ ._. ._ , _ _
i 003
'l f
1l MR. OGD3N: Right now, first of all, and
(' 2 what should the just end reasonable level of rates have been g 31 as of June first. I think there are two pieces because thers i
4; is a piece because there is a piece as of the present and 5 going forward and there is a piece that goes back in time to 6: the June first period.
l 7i Now having said that, let me if I may just f
8 go back and review what has happened. I am sure it has been 9 stated before on the record and I am sure you are aware of i
10 ' the fact that the Commission did not want to get into a base i
11 i, rate presentation during Phase II of the TMI proceedings.
12 They made that clear in their December order.
13 THE ADMINISTRATIVE LAW JUDG3: No. If a
14 you are getting into that, reading Section 1310 (d) says 15 i when the Commission ' uconexamination of any annual or other 16' report, of any papers, records, books or documents or of the-17 property of the Public Utility, and that is what the 18 ; ,
Commission considers, the property of the Public Utility, so 19 [ it does not say anything about any investigation.
l 20l MR. OGDEN: That is right, and back in 21 Phase II of the proceeding the company was prepared to put on a rate case if' the Commission decided they wanted to take 22l 23 TMI-1 out of rate base. The Commission, for reasons which 24L they know and I can't tell you, decided they did not want to O il 25; bave a full rate case at that point and time. Now you have to
" MQHRDACH & M;.itSHAt INC. - 27 N. !!c22CWILt.GW AVE. - H ARRI5 SURG P A. 17112
f:il,6 i
1 remember they were sitting en banc~in Phase I and Phase II of f' 2 these proceedings. Their answer, and I'am not saying the 3 l company agrees with it, but their answer for better or for l
4 worse was in their 'May 23 ' order and what they said in their 5f May 23 order, and I can refer you to page nine first of all,'.
6l and th'is- concerns the decision of some hospitais that wanted l
7! .t a intervene in the proceeding and they wanted to intervene 8,. for ratemaking purposes. 'On page nine of the Commission's -
9;I May 23id order they said, and I quote; "The commission finds i
10 l that it' cannot now determine and fix the just and reasonable
.. l 11 l base rates to be charged by respondent."
12 ,
Now over on page 14 in the sections of 13 the order dealing with temporary rates they say again, and 'I v !
14 quote; "The Commission wil'1 not fix new permanent rates."
15 THE.ADMINISTRATIV3 LAW JUDGE: If you 16! read further, doesn't it say that those things can be i
I 17 [ considered.in the next rate proceeding case?
j .
What they say is that they 18 f MR.OGDEN':
I' i 19 have examined the things .they have outlined in 1310 (d) and I
20: on the basis cf that, they make a reduction of rate base of 1
\
21 L 26.9 million for Met-Id and 11.7 million for Penelec.
22 , What they do go o1 to say.on the next '
23l page, on page 15 of the set temporary rates under Section l
24 131') (d), what they then say is if respondent files a o
25' complaint against the temporary rates and subsequently the
! '" .:ennica c. unsuu mc. - 27 n. coexwru.cnv Avr. - unmsaunc. % i7,i2
- y. 3 , - + . .,._y.3--.-e,, , -- +,,
,y --,.m,=_.e - - - - _.
I 60/ , ,
I I
1l Commission determines that the temporary ratos were set !
2 unreasonably low an adjustment can be granted through a
{'- . I I 3' restatement of the deferred energy balance so they obviously 4 comtemplated that there may be some adjustment and if there 3; is soma adjustment needed back to the June first date, it can 6! be done through the deferred energy balance.
7, -
THE ADMINISTRATIVE LAP JUDG3: There was 3 another paragraph in there that refers to correcting the 9 matter in the next rate case. Is that in that paragraph 7 i
10 ) I don't have that here before me.
t 11 i MR. OGDEN: It is not in that paragraph.
12 [ Pages 14 and 15 were the pages I was looking at.
i 13 THE ADMINISTRATIVE IAW JUDGS: I think on g 14l page 22 in rate structure.
15f MR. OGDEN: Dealing with rate structure 16: matters, I think you are right.
17: THE ADMINISTRATIVE LAW JUDGS: It said i
18 these change. .pel a re-examination of Met-Ed rate 19' structure. As noted previously in this order, rate structure 20f is an issue that has been excluded from the current proceedit.g .
(
21.l However, it is a matter that cannot be ignored. If 22 appropriate, a rata investigation could be consolidated on the hearings of temporary rates of Met-Ed or on hearing of 23 f 1 .
24 any general rate increase filing. $
l 25h MR. OGDEN: That is right, so even on 2 I
- .mcu -mi me. - n u. s.-=.w = - maaiseum n. mi l
f
ovo I
1 page 22 when they made that statement, they obviously 2 contemplated there could be a complaint against temporary O, 3,i rates and a temporary rate proceeding.
I 4I ;
I guess the point I want to make by 5; citing those sections is that like it or not, that is what 6f the Commission decided.
I 7! "HE ADMINISTRATIVE LAW JUDG3: Let me ask I
S you this question. Isn't the position of the company right 9f now, isn't the position of the company this, that the same 10 temporary rates should be fixed as will be fixed in a general rate proceeding except that there would be a mattel-11 f 12 of recoupment? Is that the only difference?
13 MR. OGDIN:' No, sir. It isn't.
I4 THE ADMINISTRATIVE IAW JUDG3- Fell, what l
13l is it?
16: MR, OGD3N: First of all, I think that as 17 a legal proposition, having been in a temporary rate 18 i proceeding and under that Section 1310 (d) there 'is a pure 19 I think setting just and reasonable rates legal proposition 20 insofar as it takes into account proper rate of return, and 21l so forth, could very well end up meaning that the company 22f receives an increase over and above the rates which were 23fi taken out. There is a legal proposition. As a legal O 24t i
proposicion, 1 think that is sound. There may be some 25} disagreement with that, but as a practical matter in this MOMRGACH Q MAR SH AL. INC. - 27 N. ESC;CWILLOW AVE. - M A R M158 WR G. P A. 17112
1
. 1 5U9 1 [ proceeding, based upon the testimony in this case, what the i
- '^ 2 company is asking for is either 25 million dollars with the g 3 package that we put together, the various accounting 4 L treatments that we put together, or in the alternative we .
5 suggested if you look at the September 30 actual data, if 6 you look at the historical test year, if you look at the.
I 7 future test year data, all of that, if you take TMI-1 out, S! if you take the rate of return down to what the Commission 9' allowed in the last case, you are well above 26.9 million 10 !
4 which is what the Commission took out in June 1.
11 i So our position would be that the i !
l 12 i Commiasion should have lef t the base rates alone and absent 13 an greement on the 25 million dollar package in the g
14 l accounting treatment, the company's position and the testimony i
15 ! supports that 26.9 million should be restored to the company' s 16! rates retroactive to June first.
i 17j THE ADMINISTRATIV3 IM JUDGE: This seems 18 ; to me to be against the grain. At least in my way of is 19 l thinking if what the company is saying/that the Commission 20! cannot on its 1310 (d), cannot taka a major capital invastment i
21l out of rate base and thereby reducing the cost associated i
22 .
with that capital improvement on the ratepayers. It cannot 23! do that withour risking the fact thatsthey have to update i
g 24 all the other factors involved with the company and may, in 25l '
fact, have to give an increase despite that elimination of a
,t-M cHasACN & ?JARSHAL. f MC. - 27 N. t.ScxWtLLew AVE. - H ARR438ustG. PA. 87182
810 3 ; capital improvement. It just dossn' t reason.
I
~, 2 MR. OGDEN: Could I suggest to you this?
3 I think that is an issue which, as a practical matter ,is not 4f before you in this proceeding, and if I could just take a 3; minute to go back and explain where I think we are and what 6; I think the issues are maybe that would be helpful and you i
7i can throw stones to me with respect to statements I make 8 then.
9' Under 1310 (d), and as I say, like it or i
10 ! not, the Commission took .TMI-1 out of the company's rate i
base.
li t 12 THE ADMINISTRATIVE IAW JUDGE: That is not 13 ! an issue as I understand it.
Csl- !.
MR. OGDEN: As I understand it, that is 14 [
i 13; not an issue before Your Honor in the complaint proceeding.
16 Next, they took 26.9 million dollars out 17 f of the company's base rates for Met-Ed.
18l THS ADMINISTRATIVE IAW JUDG3: Now how did 19 , they do that? Do you know how they based that 26.9 million?
- i l 20l MR. OGDEN
- I certainly do. They based
\ i.
21 i the 26.9 million dollars for Met-Ed and the comparable 22 f ~ number for Penelee upon some exhibits which the company had 23;I put in which were based upon the revenue levels in their 24 last rate base cases which were about one and a half years 25 ,
old for Met-Ed and about 21 month's old for Penelee. Never -
McHRSACH & MARSH At INC., - 27 N. EecKWILLew AVE. - HA R RLSSURG. PA. 17112
311 ' '
I 1! thales si, those ware thn last rate ba'se cases for the I 1
] 2 companies because of the Three Mile Island accident. g 3l THE ADMINISTRATIV3 LAW JUDGE: What did 4l. they do, just multiply the' rate of return involved in those
-f 5 ,
cases by the depreciated original cost of TMI-l and--
^
6 .
MR. OGDEN: I would have to refresh my 7i recollection of the precise e::hibits but the 25.9 million t
8i dollars represents the revenue level as of. that prior rate 9 . case for TMI-1. The company has no quarrel with that 10 f calculation as a calculation given that point in time. I 11 think in a sense we are not even really suggesting that j
13 [ that is an issue before you at this time because we are not 13 suggesting that you should put TMI-l back in the rates h 14 ;. through the temporary rate proceeding. What we are faced
?
15l with is a complaint proceeding under 1310 (d) and that 16f ,
section of the Code clearly says that when you file a 1 t l 17f complaint, the Judge determines the issues,i.e. you i
18 I determine the proper and reasonable level of rates now and i
19 ! you determine when those became the proper and reasonable - >
0 20 [l level cf rates, i.e. were they the reasonable level back on f v...-
21l June 1 or just when, so I think that is- the proceeding we l
l 22l are involved in at this point in time.
1
! 23 Now the company faced with that propositic n 24r'J, faced with the fact that TMI-l is out of the rate base and sc 4
il 25 E is 26.9 million dollars, has to put together some kind of d uenmen . uansw me. - 2, n. coonwu.ew ave. - maise*ma a. ima l
l
8G.
1 presentation. Now obviously we can't come in with a 2I presentation that puts TMI-l back in because the Commission i
3, 1
already said it comes out. What we'did have in the prior 4 [ proceeding,andsomeoftheotherpartieshadtestimonyas i
3 well, saying " Gee, the company could have supported some 6
attrition allowance here which would have made up some or all t
l 7.! . of that 26.9 million,"but we don't have the record bafore .
8I us to do that right now.
9 Now what I suggest to you is that the 10 ! company's position in this case is that had the Commission L
11 ! gone through a rate proceeding back in May, they would have 12{ found out that there should be at least an off-setting 13 '
~
attrition allowance of the 26.9 million dollars. .
14l - THS ADMINISTRATIVE IAW JUDG3: But thae'is 15 not what you are arguing in this case? You are not basing 16, your case on that attrition that existed from the time of the i
17l last rate case up to June first? You are going way beyond 18 that to March 31, 1981.
19 MR. OGDEN: Only to support the first, 20 f.Your Honor. Let me suggest this to you.
(
21,[ I think there.is, as I said, a legal i
22l argument that can be made that if you are in a complaint l
23 against temporary rates, you are in a rate proceeding, you O 24! gresent your rate of return testimony, vou find a fisure vou I
25 can put in evidence that supports any figure you want to make
- MOHRSACH & MARSHAL. tNc. - 27 N. I;ecKWILt.OW AVE..- H AR R I S B UTt G. s* A. 17112
8L3 .
? l 2 so long as it is a just and reasonable level of rates and l I 2 that may be a level above prior rates, but as a practical '
3!' matter in this case what we are saying is if you look at the l
i 4i ;
March 31,198') data, you see two things. First of all, had -
6 5{ we presented a rate case back in May that would have been the 6f future test year we would have had to use because it would 7:
t have been the most recent test year we could have gotten the 8! da.ta together for on a fu .ure test year basis.
t 9! You look at the future test year.. data and 1
10 [ you take out TMI-1, 'which is not in the temporary rate i
proceeding. You take out a lot of things that were 11 l 12! -controversial in our on-going rate proceeding here. You 13 take out the rate of return at 15 percent and you put it $
14 l .in at 13.38 percent, which is what the Commission allowed 15: in the last rate proceeding and you still end up with more o
16d than the 26.9 million dollars which the Commission took 17; away. That is the only reason we have that in there is to i
18j support that proposition.
19 [ If you look at the september 30 actual l 20: dat.a adjusted to exclude THI-l and 2, that shous you al exactly where the company stands. You look at 1310 (d) and
! 22 li it talks about a trial period.. Well, if you want to look at 23l how the rates have actually . measured up in terms - of the c 24 6 just and reasonable standard over that trial. period, you look b 25 il at tha September 30 data which is the most recent data we
! ,,esas,ca a uxaswit. inc. - 2, n. coccuittaw ava. - waa iset!=o P4- i7'ia f.
U Lo.-
1 j Were able to get together for this tamporary rate portion of .
i -
3lthiscase. That is not data that we would rely on for our 3 case in chief in the regular rate proceeding because we hope 4 to have later available data than that but that data shows 5 you a picture at September 30 that says Met-Id can justify 6, more than$26.9 million based on that actual data just in terms 7 'lh of attrition, not including TMI-l or TMI-2 matters at all.
t 3] TIE ADMINISTRATIV31AW JUDGS: I am 9( confused as to whether the temporary rate proceeding is a a
10 proper vehicle to establish increased rates.
.i 11 A MR. OGDEN: Well, Your Honor, I don't 12 think the company is asking for increased rates in the 13 temporary rate proceeding. All we are asking for is a
.14 reinstatement of the amount of money that we lost.
15 1i THS ADMINISTRATIVE LAW JUDGE: In effect 1
16 aren't you doing exactly in effect what the new Code attempted 17 to do to prevent any temporary rates during the progress of a i
18 rate proceeding except that in addition to that prohibition 19' ,
you are asking not only for tempory interim rates in the 20 rate proceeding,but you and up by asking for a recoupment 31; since June first for that interim rate increase associated 22 3 with your general rate increase?
l I
23 i.
MR. CGDEN: No, Your Honor. We are not Q 24 j and I think ' as you correctly pointed out in your order in i
i 25g which you dealt with the consolidation issue, we have got to 1 ?!O1423AOM fa .'.!ARGii AL. !NC. " 27 ?L t.OC:;W LLOW AVE. = T4 A lt M t 3 8 U 4G. P A. 17117.
I
615 - -
I 1l bear in mind we have two separate proceedings going on here.
i
( 2: THE ADMINISTRATIVE LAW JUDGT: That is b
3 what I thought and I thought we had ruled there but from my I -
44 observation now, I said we are noc going to merge them and I il 5 ,1 think the company itself is merging.
6' MR. OGDEN: No, Your Honor. We haven't.
7! Let me say this to you. - I think as the proceedings go on s
8i their way separately you have got issues to consider in the 9.' general rate proceeding which don't arise in the temporary
?
10 ) rate proceeding.
4 11 j For instance, the filing that the company 3
12 : made in the general rate increase includes TMI-1. It include s 13 l H
a 15 % percent rate of return and some other associated lll 14 ; matters which, as you can see, some of them are controversial ,
s 6
15 ? some of them are not. ,
16 ,' The purpose of a temporary rate procedurec, l
17 h all we are asking for is a small chunk of what we feel we l 0
! 18 j are actually entitled to. That is, what we are saying is 1
l 19 0 the Commission should have Icft our rates alone and the l 1 20 raason we are saying that is that if you look at our data,
- 21) ,
fully normalized as the two test years are,. and you also t
22.;
look at the actual September 30 data, you see that we 23 f actually could justify more than 26.,9 million or the 24 ', 25 millica if you take the attrition approach.
25l THE ADMINISTRATIVE LAW JUDGE: Well, if I !
l
'4CH:1C ACH 1 M AM GHAL. !!!C. " 27 M. L3cy, WILLOW AVI. ~ H ARetssuRS. PA. 17192 f
l l .
815A e
l 1j the company felt it was entitled to increased rates, there~is ~
2 a vehicle provided for that purpose for an increase in rates, 3 isn'.t there?
4 (Testimony continued on next page.)
5 I
6
?
7}
l 8'
9 l 10 i f
al 12 l t
13 b O 14 '
l !
15 l l
16i-17 t ,
18 ,l t
19 ,
20!.
2i I i
22l i
23) i ul 41 M 3HRDACM Q MARSHAL. (NC. - N fi C#CM =t.cw AVE. - H ARRISSUMG. PA. 17112
'816
- r MR CGDEN: And we have, and that is our 1i ongoing general rate proceeding.
'. 2 g
. I guess I am concerned that perhaps you mis-3i interpret what we meant. You ask inwyers about legal things 4e
, {. and you get very legal, but as a practical matter I am not
! sure how much application it has here.
I 6j i- In dealing with excessive rates there is no 7L t
doubt in my mind as a lawyer -- there may be some doubt in
{
some other lawyers ' minds here -- that when you deal with a 9.
i temporary rate proceeding it is a rate prcceeding.
10 ;.
0 You have got just and reasonable rates to 11 i
,,(fixandtheymayberatesthatarehigherorlowerthanthe l
3 gjratesthatarecurrentlyineffectastemporaryrates, }g r
Nevertheless, the company in this case as 14 l 13k!} a practical --
THE ADMINISTRATIV3 LAW JUDGE: But in that l 15 ?
i case the Code does not say that the Ccamission has to make 17 :l, l
i 18 j an investigation and find out what the true updating of the g rates should be, update all the data, all the information.
19 ,j a
l 20 l The act does not say the Commission has to conduct an a
l I f investigaticn.
l 21, 1
j All the act says, the Commission can look l 22 3 l ,, [ over the annual r.eports and some other data and the properties La
. involved. llh 2 4 .'
3 MR. CGDEi: And we are not urging upon Tcur l
25'
~
4 n me, cx a -su u. m:. - 27 n. waw _cw <<r. - nx,idisa u a s. : .s irisa l
817 Honor the proposition that this company, through its c temporary rate complaint, shott1d have something more than O' 3; i the $26.9 1 11on.
But what Section 1310(d) does say is that 4l: \
,,' upon complaint the Connaission shall determine the issues a
! involved, i.e., the unjustness or unreasonableness of the
'6 temporary rates, and fix a just and reasonab1e leve1 et rates.
7{,
i THE ADMINISTRATIVE LAW JUDGE: Well, that 8s t 1s easier said than done. When you say reasonable rates, 9l !
! then you have got to figure out on what basis you are going 10 y to figure that they are reasonable rates and that is where 11 !
the controversy comes in.
MR. OGDEN: In other words, as I see it, OT. 2n[that.
I is our main issue that we are dealing with here: what 14 i is the just and reasonable level of rates for this company 15 ;i 4
i new in the context of the temporary rate proceeding and how 16' long were those rates just and reasonable if you take the A 7,
! pcried from June 1 and look forward.
18 f l All I am suggesting to you is that based 19 r hupontheevidenceofthecompanyyoufindthatrightnowwe i' are entitled to at least $26.9 million, if you disregard all 21; i the controversial items that are part of the general rate 22,
- increase proceeding, if you look at the test year. data we
, 231 have, you see we are entitled to at least $26.9 million, and p that is all we are asking for.
?!3MR3AC1t & MARSH AL. !Fic. - 27 It' t.OCKW6Lt.3W AVE.- NAMrtt3 GU?t s. PA. 37112 l
818 3
- I As I say, it is not what perhaps we feel !
1
('
we are legally entitled to under other circumstances, but as a practical matter in the context of this case that is all we i are asking for here.
4 1 If the petition is satisfactory to all the a '
6j. Parties and gets Commission approval, that $26.9 million f figure for Met-Ed becomes $25 million with the accounting 7i -
treatment that is afforded in some of the other areas.
9j I guess what I am.saying is that we really n4 have to read eat poM of contenh abod wh you 10
, are having some difficulty, and that is, should you as a judge',,
when you make your decision, say should this company have an
{
' ~ increase in rates over and above the level that the Commissior 13 L i worked from when they decreased the rates --
l i
THE ADMINISTRATIVE LAW JUDGE: But you are h.>>
I Itinferring that the Commission when it took TMI-l out of rate 16 il J
1 base did a useless exercise.
17 '!
{ Mil. OGDEN: No, sir, I am not. That $26.9 l l million for TMI-l when it was taken out has stayed out. It l 79 8 8 "
- l 20 ]
9 .
We are not asking for any TMI-1 piece to l
i be put back in.
22,
- u n 23 effect you are saying that the fact that the Commission k TMI-l ut has n effect at all nd they just went through 25;.t
]
l MO MRS ACH & MAft SHAT. INC. - 27 f t LOCKhlt. LOW A VE. " H Af!Ri33bRG. P A. 17112 a$
t l - -
g I
,ga lot of motions.
-i
~
,f MR. OGDEN: No, sir, I am not. I think O 3 what 1e importent to understend ie the information which 4l the Commission presumably had, at least if .fon look at the f $26.9 million figure for Met-Ed, the information which they '
5.
6li had was that based on a prior case. . That prior case dealt 7
i with other matters in addition to TMI-1 and 2 and those other l
l j matters were matters that were dealt with on the basis of a g!
aj test year which was a year and a half old.
'i 10 ,
) THE ADMINISTRATIVE LAW JUDGE: I will agree took that if the Commission, for instance, /the rate of return-11 ;f 12 ;; that was allowed in the last rate cases and multiplied that
{ 13 [ by the depreciated original cost of TMI-1, that that exercise p may not have fully made a proper deduction on that. hasis 15t i because there are certain costs that we recognize, overhead I
J
,6i
!!cests and different costs that are not reflected merely on 1
I can see that.'
1g 7 l one item ofButthat kind.
the company has submitted no proof on gg that. I can see there that there could be some difference 20 a nd eat eat mamemmal eerdse my not M sacMy MgM.
3 MR. OGDEN: Your Honor, I guess the poin t 22 I would make is I don't see that as an issue in this case as I
i
..,3 \.to whether the $26.9 million should have been twenty-seven or twenty-fcur or twenty-two for TMI-l --
25l THE ADMINISTRATIVE LAW JUDGE: Regardless of htGHRBACN & LEARSHAL. INC. - 27 N. LOCKWILLOW AVE. = H ARM 131UR G, P A. 17112
820 how you slice it, what you are saying, the Commission took TMI-1 out, that was a useless exercise and had no effect on the rates of the company at all, and the Ccamission was just making motions and catering to the public --
4 MR. OGDEN: Absolutely not, sir, that is not 2 ,-
6 f what I am saying at all.
7g If the Commission would have taken TMI-1 out ,
g ( at $26,9 million, which is what they did, here we are today 11ecting rates which are $26.9 million less than what we 9l i
j had before. It was hardly a useless exercise from the fCommission'sviewpoint.
11 i g Eut now we are in a different proceeding.
33 ,l Now we are in a proceeding to determine what the just and g reasonable rates should be, bearing in mind that the i Ccomission has already taken TMI-1 out of rate base.
o le, . .
THE ADMINISTRATIVE LAW JUDGE: Now you
.i g have indicated in some of the testimony, I think your figure 1
4 was ar und $31 million, now the inference as we get it is 18 39 3
~
ra' sher than be a decrease in rates as a result of takin l l
1 20 ;
cu , the Commission actually at that' time should have i
e
., l !
5 increased the rates of the company under that section, and that just does not make sense to me. I just can't read that.
22l MR. CGDEN: If I can take a minute to try to l
23-M, straighten out what I think are some differences in under- h
]
,i standing here, we =ay disagree -- in fact we do disagree --
l l !
scuanca a wAm sHAL. tNc. - 07 E Loex uittow ave. - HAnnissu=o. P A. 17tta l
821 with the propositien that the Commission did not have a rate 4
case to determine how much should be taken out for THI-1, O g heceuse even thoush they my went to teke s-ethins =t for TMI-1, there were other offsets to that amount that they .
w uld take out to reflect what had happened to the company 5,
i 6
by way of attrition from late 1978 and March 31, 1979 in the other cases --
7 8
m NISTRATIVE LAW JUDGE: But the c spany has submitted no evidence so far in this. proceeding 9(
as to that aspect, has it?
10 MR. OGDEN: No, and the reason for that is IA i that, like it or not, the Commission took away what it took i
s 13 ! """I*
t Now we may disagree with the way that they t
[
i did it, but, like it or not, we are in a complaintqgainst 1s. '
i temporary rates proceedings, those are the proceedings we are in now, so that before you as an Administr.ative Law f
' Judge is the issue of setting the just and reasonable level 18 of rates in the context of this May 23 order.
19
~
- e - ssion den n issued Ms oder 20 -
i on May 23 took away the $26.9 million for THI-1, and I 21l repeat, there was testimony in that proceeding which would 22l 3 have supported some offsetting adjustments, not for TMI-1 g
I but for other matters.
O 24: ,
The co==t==toa dia not rix ver=aneat 2s!
MOM 7tSACM & MARSHAL. INC. - 27 Nt LeCMWILLOW AVE. ~ H 4RRISBURG PA. 17112
822 level of rates. They did not deal with that then. Instead, n l 2{ they said in their order, we are going to set temporary rates h
,!. and we are going to deduct $26.9 million, and if the company b
i files a complaint against that, we will have a proceeding before an Administrative Law Judge, he can determine what 5:
t 6,{ the rate should be, and if there was any error, not with 7, ! respect to TMI-l but with respect to rates in general, it e uld be c rrected through the deferred energy balance.
8 THE ADMINISTRATIVE LAW JUDGE: In effect 9l
+
then what you are saying is that at the time the Commission 0
22
! made its judgment that they should have updated the permanenti g existing level of rates of the company, isn't that what you
, 13 are saying? h n, , ' MR. OGDEN: That is what we are saying, but I don't think it is necessarily before Your Honor in la.
s that context. I don r t think you have to determine what the 1c t g Commission should or should not have done on May 23rd --
18 THE ADMINISTRATIVE LAW JUDGE: Well, I think 19 that is one of the issues here. Isn't your complaint against h
,,O ; the testorary rates set by the Ccamission? Isn't that what o
g we decide, whether the' Commission acted properly at that t
I time?
! 22 1
MR. OGDEN: It is not quite in that conte.xt.
53
?
- 3. ,;
THE ADMINISTRATIVE LAW JUDGE: Are we &
.,; y supposed to take that and find out whether that -- even if 3
MounoA:H Cs MA*tSH AL. INC. - 27 fL' LOCXWILLOW AVE. - M AR fhlSSURG. PA. 17112
i
. - 823 i 3 [ the Commission acted properly at that time -- whether their I
2, decision, even if it was proper at that time is not proper at this time, is that your position?
3 I
4j MR. OGDEN: ,
Fine, let's assume for the
}
53 moment -- that is a good point to pick up on -- let's assume 6f for the moment, for the purposes of our argument here, that i
7l .the Commission acted completely properly in doing exactly 8 what they did, the way they did it.
9 Now, we file a complaint against temporary 10 ! . rates --
3l THE ADMINISTRATIVE LAW JUDGE: Excuse me, i
73l you understand that under the Code the Commission has a i
13 i i
right during the 'six months that they set the temporary 14 rates to change'from month to month if they want to.
15 MR. OGDEN: They certainly do. One of the 16! threads that runs throughout all the temporary rate sections, 17 at least as I see it, is the fact that there is a continuing 18j look-see at how the rates are actually in effect working, I i because the Commission has a continuing obligation as 19 l l ,
- 20 ! respects ,just and reasonabic rates.
f 21j So let's assume for purposes of argument i
! that the Ccand.ssion was exactly right in what they did on 22 May 23rd.
23j
~
p We filed our complaint against temporary 1
25 l, rates. The Commission itself said, we are not setting 0 PACHR3ACH & MARSHAL. Itic. - 27 tJ. LOCMWILLOW AV!:. - H A8tkiSEUR 4, PA. 17112
' 824 ' \
l permanent rates, we are setting temporary rates; not only 1;
that, but if after hearing it is determined by us that these g
2l i rates were too low, we can always adjust the deferred energy 3l I balance. They recognized that.
4i So let's assume that everything they did was l
i right. We hold hearings in this proceeding. We put in 6l evidence, which it is assumed for the moment that the 7l; widen e shows -- no matter how you slice it and what evidence 3f I you look at -- but it shows that attrition would account 9l
! for more than the $26.9 million which the Commission right-1
,0l l f fully deducted for TMI-1. I 11 i
! It seems to me that your duty and the duty 12 !,
t g of the Commission under Section 1310(d) is to say, yes, you g are entitled on the basis of your complaint to $26.9 million, 14 l i not because we are reinstituting TMI-1 but because there is 15 i an attrition offset that we had not accounted for.
16:
l I THE ADMINISTRATIVE LAW JUDGE: Well, that is a point that I can maybe see some merit to. Your position is that we cannot be blind to what has taken place since 19
- r i June the 1st.
20 .
, 3 MR. OGDEN: I don 8t think, Your Honor, that oly the Commission can do that consistent with its statutory 22 ll duty.
23 I
- 24i THE DMINISTRATIVE LAW JUDGE
- But you come h 25j up to this proposition, once you assume that the Commission b MONMBACH & MARSHAL. INC. - ::7 Nt L&CKWILLOW A V E. - "ARRi$ 3URG. PA. 17112 j
, . 825 1
acted properly on Juns the 1st and assume that th31r decicion .,
p, though proper at that time, is not proper.new, then you come up to the proposition that if you allow recoupment, as the 3;. i company would suggest, to June the 1st, that recoupment could 4
g he Out of whack, out of terms, because how are you going to .
6 recoup -- for instance, suppose you were given a base of t
7j $25 million, how do you recoup that to June the 1st if that i
8l is a progression that has taken place since June the 1st i
that has created the present situation?
9l i 10 MR. OGDEN: You do what the Commission has suggested. If there is any ad.justment that needs to be made g
fr m June the 1st forward based upon the evidence in this 12 13 case, you adjust the deferred energy balance to pick up J
p that increment. .
g THE ADMINISTRATIVE LAW JUDGE: But you are a ng recoupment, at least ya suggest H somewhere in 16j .
your proposed agreement. You suggest recoupnent.
l!e Now if the Commission, for instance, acted -
18 properly June the 1st and since June the 1st there has been 79 a SUCCESSIVE Continual rd.se in Cost and whatnot, so that even though their decision was prope'r at that time, it is not proper at this time, it is deficient at~this time I -
because f attriti n, then how are you going to recoup 23l ;
what the company.wants now back to June 1st when at that time the present rate would not be applicable?
25 I
MMtR3ACH & M ARSHAL. INC. - 27 Plc LOCXWILLOW A*/E. " H AR[tl5 BUR G. ?A. 17112
826
,f MR. OGDEN: I see what you mean. It seems
( to me that is a matter of evidentiary proof in this regard.
i Your first obligation and our first obligatiori 3
to present proof is as to the present level of rates, how 4 ,i
! are those present level of rates measuring up today, and 51 do we need an increase right now just to cover attrition?
l 6[I
,, { Now if we have met that burden of proof, l ,
g you say, yes, Company, you are entitled to $26.9 million
- ***# * #* *E "8 * * *#* " ""
9 gj because your rates now need to be bumped up by that amount, i .
t in the temporary rate proceeding as apart from the Beneral g rato increase, just as a matter of attrition.
(',
~
13 l Now, if the company has also presented g
g prov you that although the Commission, even though it may have been right based upon the information it had at g,
e m, as une me 1st We just and reasonaMe 16 g level of rates as of June 1 would have been $26 9 million more than what the company was collecting then, that does g(l not necessarily do violence to what the Commission did and 19
.,,' thought because that was things which they did based upon af I
.,l o li what they knew.
I THE ADMINISTRATIVE LAW JUDGE: You are i 22; l .g j ascuming that the proper level of rates en June the 1st should be the same as the proper level of rates new. But h y suppose the proper level of rates at June the 1st was
- .e M4F.R83ACH & MARSMAL. iHO. " 27 IL LeCXWiki.OW AVE. - H A R N6 S B W A G, .1 A. 17112 l
. 827 I differcnt than thty are now because of attrition, then how
~
If would you put recoupment in operation?
s (v 2 It O 3j MR. OGDEn: / 2ceae to me the compan7 wou1d be entitled to a rentatement back to June the 1st of what-4[i j ever portion of its increase from here on could be determined l
.to be applicable to those various parts in time - June,
. 6lg
~
- July, August and so forth.
7 \
THE ADMINISTRATIVE LAW JUDGE: Very well, do you have anything further?
J MR. OGDEN: Just that this temporary rate 10 !
t i section is less than completely clear --
11 i f THE ADMINISTRATIVE LAW JUDGE: Well, that is the whole problem.
13-b MR. OGDEN: But, Your Honor, I would like, 14 !
if I can, to just take five minutes or so to make s couple points that I want to make sure that we are squared away --
16 '
THE ADMIlfISTRATIVE LAW JUDGE: We will let 17 you respond further after you hear what the other parties i have to say. Does the Commission staff have any statement 19l
! to make?
20l
! MR. PANKIW: I wou1d like to defer to the 211 i
other parties, Your Honor.
22 THE ADMINISTRATIVE LAW JUDGE: Very well.
N MR. EARASCH: I, perhaps, Your Honor, could O. 24 q follow up on the sentiment of Mr. Ogden. I would just 25 i acunucu c. unsu: :xc. - av u. i.oexwiu.ow m. - san 'issuno er. ima .
828 1
greatly exaggerate the centiment. I don't think it is a 2
catter of anything unclear, if you just give me a littla g bit of latitude here.
3 I may seem to bc poetic, but this is my 4g 5 sincere feelings. I think the whole problem we are faced 6 with here and the whole problem we have been faced with for 7' ,
a year and a half is that you have got what I would describe 8l as a black hole in regulatory theory, which is the result of 9 an unprecedented accident and an unprecedented financial 10 , impact upon the company and upon the ratepayers.
What we are trying to do is, if you will, 11 l ,
12 kind of apply Newtonian physics to an Einsteinian world, 13 perhaps, and if you fust bear with me, I can explain what C- :
14 , I mean.
I really think that both in our memoranduus 13
.1 15,] of law and all the questions that you have asked of the 17f Parties and everybody for quite sometime now what we are 18 { trying to do is make sense out of the Public Utility Code 19 and make sense out of Section 1310 and Section 1308 at tho l 20 } same point in time.
?
21 ., I have labored with this as hard as I am i
22j sure tha rest of us have and I think we are presented with 33 [ a kind of a Gordian knot, which is, I don't think the a G l 24 h drafters ever envisioned a situation where Section 1308 li 25 l and Sec tion 1310 could cc:ue head on at each other at the 4
N von.,aAcn a 74Ansatt. inc. - 27 u. Locnwittow Ave. - Maas ssuno. PA. v7tta
829 l sams point in time.
1l p i I think Section 1310 as far as excessive 2l rates is concerned was lookingac /a piece of the world back 3[!
l in the thirties and forties and fifties where the Commission 4{ was faced with companies had too high rates --
5
' DIE ADMINISTRATIVE LAW JUDGE: I think that l
was a recodification of something that was inserted back in 7
1913, probably.
l MR. BARASCH: Right. What I a:n saying is, f
I that was left in the Code to handle -- you know, if you just 10 i r
! look at it linearly -- to handle situat ions where companies 11 !
) rates upon examination of their books are too high and wo 12 j i have to roll them back and that is Section 1310(d).
) 13 l l Then we roll over and look at 1308 and 14, i 1308 says, well, the company files a base rate incresse, 15 ;
with all the reforms of the seventy-six code there is no 16 }
interim relief, unless you can prove extraordinary relief, 17;;
l h and that is the rule, and that would probably work in 99 18i percent of all cases that would be up before the Commission.
19 l i Tnis case is tha case where it all breaks 20l t down because what we have here is a Commission that determined 21; I
! that because Three Mile Island 1 was not used and useful,
! 22) .
f the rates in fact on the used and useful property were l 23 ;
4 excessive and had to be reduced, lp k THE ADMINISTRATIVE LAW JUDGE: Tae Code 25q li MGHREACH & MARSHAL. TMO. - ?.7 Ne L9cKWILLOW Avt. - H ARRIS9tJRG. PA. 17112
-830
- I
! provided that the Cocunission could look at the property of
,J A
l the public utility --
3: g
! MR. BARASCH: Exactly.
3 f THE AD5ENISTRATIVE LAW JUDGE: And they did 4!
l that.
3.
I MR. EARASCH: So the Commission is looking 6j .
at this situation and they say, the kind of base rates this 7;l 8:} company is collecting today are too high based upon the used I
and useful property. They made that decision and then they 9;
f looked around to figure out how to value it.
10 l THE ADMINISTRATIVE LAW JUDGE: If they did
,2<
! nothing at that point, what would have happened?
1 MR. EARASCH: The rates that were in effect j would have continued to ren;ain as permanent rates.
THE ADMINISTRATIVE LAW JUDGE: That is right.
15 I
MR. BARASCH: So they looked around, they 16 g 3
P 17 d asked the company, and as I recall the proceedings there d
was no dispute about the value of removing TMI-1. It was 18 [
t
- kind of stipulated to that for the sake of argument we can 19 h l use $26 9 million, the dost recent piece of information 1 20[.i
! available to the company at that time, and they set a level 21!
j of temporary rates.
22l' Now the problem is that what you are faced 23l .
?
with is a world where thecompany does not have enough money g
!! to stay in business and they feel their rates are too low.
25d l :.iernexcu c. uannuai i:<c. - 27 ne i.oexwi:.t.w *ve. - i44adissuno. ,4. i 7i t z
. . 831 r
,. Now one of the problems is thst thcy feel
,, [ that TMI-1 really is used and useful or whatever, and they O ll want to eet rates that ere h18her than that to ster in business. So they file a rate increas c.
4f i THE ADMINISTRATIVE LAW JUDGE: But they are 5{
6 not contestin8 TMI-1 in this temporary --
7, MR. BARASCH: Yes, I understand that. The-6 gl circumstance that you are presented with is, a company
~
9 arguing, as they did back in September -- I lose track of the time at this point -- that even with the filing of a 10 base rate increase they were entitled to extraordinary rate 11 i
12 l relief because the present levels of revenues were not
^
13 lI adequate.
h 14 {
Now, Your Honor, the Commission said that I-73 }; is wrong, that in fact they could not meet the standards 4
16 j of extraordinary relief.
I THE ADMINISTRATIVE LAW JUDGE: Even beyond 17 18 that, what the company is really saying is that when the 19 Commission acted as of June 1 or in the May 23rd order as 20 of June the 1st, that the rates then in effect were not the pro,cr rates.
,, l
{ . MR. BARASCH:, ,That is what I believe to be
, i g
A the case, Your Honor, but I am ;iust trying if I could --
THE ADMINISTRATIVE LAW JUDGE: But assuming
,, _ ! that they were not the proper rates, there is a vehicle to
~3; MWW.CM & SMRSHA1 WC. - 27 N/1.GGXWROW W-. - W S.4URG. M. Im2 1
~
'832 i
establish the proper rates and that is by a general rate 1$
! increase application.
2;
! MR. EAIMSCH: That is our argument, Your g
3[
i Honor. Now what I was trying to do, if I could, I would get A:.
'? to my argument, if there is any pu:%ose to hearing it, but
- \ ;
6\, I am just trying to set a little bit of a framework, because t
I am not going to stand here and pretend this is a simple 7::
b issue, I don't think that it is, and I think that people who Ob f point to one section of the Code and say that is the one that drives this thing or another section are trying to
~
10
- l simplify something that is not simple. It is much more 11 ;
,! complicated than that.
In my opinion what you are faced with is g
I two sections of the Public Utility Code that just cannot 14 ;
be blended together because I don't think anybody ever i thought we would be in a posture where one party would be i 16 h i arguing that the rates are excessive, the Commission is l 1 ,4 J saying that the rates were unduly high, the company at the 18 :
- j very 3ame time is not really trying to say no, no, they are j to not excessive, but in fact we have a right/a rate increase.
20[
- TEE ADMINISTRATIVE IM JUDGE: We appreciate 21.
l our problem. We thought you could provide a solution for it.
22' s
! MR. BARASCH: I certainly will provide what 23'
.M J
.. We see as the solution to it, which is that you have to try .h
.i and read those sections together and figure out where the 25 )
3 4 M atiRD ACH & f, TAR SHAL. INC., - 27 N. L 2CJCW4'.OW AVE - H AMMISB USG. P A, 17112
d33 thrust is of what the Public Utility Ccde reforms were all
,-):j
, tl about.
3 j!
] f To state it simply 3 I think the Ocmmission --
-it gets all the way back to the legal memorandums that the t) varioun parties submitted in this proceeding -- that the 5 e pa y, while perhaps technically could have pursued both, 6
practically we are placed in a position where they had to 7,:
g, make an election, either proceed against the temporary rates cl or the base rate increase, but to do both creates all the
-i
, } problems that we are facing now where the company is using 10 '
11 4 a future test year to justify both the forward-looking rates j 1 12 ; and also to show that the rates set back in June 1980 were i
too low.
13 j Fnen you have done that, you have created
.:.4, ]
154 ] what amounts to -- call it any name you want -- snother way 4
-- and this is what we suggested to Your Honor in our legal 16j memorandum -- basically a second way to interim relief during',
a ,t
[ the process of a rate case.
,8t g; THE ADIENISTRATPIE LAW JU.0GE: Under the Code they are entitled to have that adjudicated, they are entitled to have their complaint gainst the ten:porary rates adjudicated and --
27 3 ,
MR. EARASCH: That is correct, and I could 1 23! ]J j2st drop one point in passing, that rc.y be the ticke' cut j
2.j .
, , ,, j of this whole mess, which is that under Section 1310 --
l 2.: y I U- :cs:.e.sen , unsxx me. - :: 1. t.w:w : ow wz. .u temru. n- t 721: -
~
83h '
7 I everybody is talkinE about Sections (a), (b), (c), (d) and J
no one seems to be talking a'cout Section (e) -- Section (c) says that at the end of the whole process the Cairmission, 3
4 at the final determination of the rate proceeding -- now that 3 phrase I am sure in Section 1310 when it was written was 6 referring to a complaint against temporary rates, but I am 1
being a little bit creative hera because I think that is 7
i 3
3 what is required -- can consider the impact of that lower g rate level in setting the final rates, and certainly, Your 10 Honor, when you make your final determination in a base rate b l 1; i case, if you don't Erant any relief to this company against l 12 - the complaint against the temporary rates ,will be considering 13 a lot of factors, one of which may be the impact of whatever h 74 , level of rates were in effect for a period of time, which 15 really is not since May of 1980 but is since April of 1979 ,
4 l
16 New I vigorously oppose the suggestion of j 17 the ecmpany that somehow the Commission prevented them from 1g filing a base rate case. I mean, I was a party to that t
- p 1 proceeding and the point was the Ocamission said we are l 20 i going to lower the rates by $20.9 million and the company - '
I THE ADMIHISTRATIVE LA'J JUDGE: The company n ]4 22 at that time could have filed their rate proceeding --
i '
23 h MR. EARASCH: It is our position, Your Honor,.
that this company could have filed a base rate increase to IO 3
1 33h *2ndl.e attrition, if that is what this is all about, anytima l .
?ng;! AOM Q 1 AR';M AL, !!8C. - Tf 't, t.3C/.WILL3W WE. - P A Mit15 p U rt o ,s A, 39312
835
{ since April of 1979 If i There was nothing that stopped them from 2i s O 3ia " 'ias r " = r* ""*** " "" ^9"i 979 *
- d"7> ""' *7
,q waited till July of 1980 to file a base rate case, 16 months.
t f If the data is stale, as Mr. Ogden suggests, l'
it is stale because the company did not proceed with a base 6
! rate case and they could have at any time and they did not 7i g have to do it in a proceeding before the Ccmmission.
g[ The Commission says we don't want to get i
into offsetting considerations when we are looking at the 10 )[ il
!! value of pulling TMI-1 out. We will take it up later.
11 l
!! That did not stop the company from at any time prior to 12 !
i Phase II or since Phase II to have filed the base rate case.
As far as I am concerned, base rate cases I deal with making prospective rates and as far as I am 1:,3 ,.
t concerned the companies' difficulty with any attrition l
i,s, i that they have been experiencing since their last rate order g for Met-Ed or April of 1979 is the companies' concern, to gj be dealt with in a base rate case, which is exactly.what 1
1 the issue is before Your Honor in the general case that we 2G" l
]areproceedingwith.
Now I would also make another comment, l 22[j
.,3j
, which is that the logical extension of the companies' position is that every time chat this Commission makes an 4
O- ..
J evaluation, that some set of dollars of the company, whether
,3 l
- 1CMflaACH 4; MARSHAL. ?tM. - 27 N. LOCKWlLLOW AV E. - H A R fTL5 9 0RG P A. 17112
'836 -
i 1l- in a rate case or in the energy clause or any place else h
2; was improperly billed to customers, that somehow anytime i G 3 the Commission looks at the set of rates that the company 4f is billing to customers, that triggers a total relock at j i
5j every aspect of their operations, and as far as I am con-
.I 6l corned, that burden is on the company, and it coczes in the 7 f place of a general rate increase.
8; This Commission has made adjustments in f.
9[ cnergy clauses, and even back in Phase I when there nas a 10 ! difference between the value of TMI-2 and the amount of rate 11 : relief handled, it was done through the deferred energy 12 ; balance. There are many other mechanisms the Ccmmission
^
i . . .
13
.I can use. I don't believe every single' time that is done
~
.14 f it puts the Commission at a risk of totally reevaluating 15 the overall rates of the company at that time. l 16 .' It is the companies: obligation to protect j r . i l 17 their cwn interests and that of the stockholders through !
18, filing general rate increases and they have certainly never i ;
l 19 !- shown much reluctance to do that over the last three or
.4 20! four years.
, 4 1
21 l4; But in the year and a half ein0c the 22f accident, for a variety of reasons, both in terms of their l 23 own in-house ability, I am sure, and also the political l
.. g i 24j aspect of it, they chose not to file a base rate increase W 3
25j because they did not want to take the results that would j i e oc4:n a n4nsa.u.. me. - e7 n. wer.w.u.sw An. - unmsaun. m. ima -
~
, 837 i
i l
! come from that. l THE ADMINISTRATIVE LAW JUDGE: I think the 2ilt
] company had plenty of problems at the time.
< MR BARASCH: I am sure they have had plenty 4i of problems, but what we are now doing is in effect back-5 ,
door, making them whole for the fact that they did not b
request attrition rate cases since April 1979 7l; The companies basically said that the value N of TMI-1 is not in dispute here. What we said in Phase II, 9 I i
when this whole matter came up, we were of the view the 10 l value of TMI-1 is one matter, if the company has an attrition 11 k
! offset, let them file a base rate case. We ma(.e that point 12 i 1.,2 o
[ on the record. The company for a variety of reasons chose not to pursue it.
14 l Mr. Ogden will point to what the Commission 15l;
. said, but I can take the same words and read them a little 16 3 bit differently.
! For example, at page 15 of the order, where the Commission said if the rates are set unreaconably low, f we will reevaluate, from that the company assumes what we
,O.
a i
- are talking about io the overall level of rates.
21
! I presumed that what that meant was if we 22; did not properly value the removal of TIE-1 --
23 ;l .,
i THE ADMINISTRATIVE LAW JUDGE: Tnat is
,j what I was suggesting, that if they just took the rate of 23; 4
' ~
S1ChWD ACH in MAR SHAL. IMC. - 27 fl.1.QCKWILLOW AVT - 14 ARR155GGG. ?A. 17!12
'838 1:
l return and multiplied it by the depreciated cost of TMI, fx 2l that may not have created a proper picture because there f 3l are certain overhead costs and certain other costs that l
4 continue on whether TMI is in or out.
5 MR. BARASCH: That is correct.
6f THE ADMINISTRATIVE LAW JUDGE: My thought I i i 7 'I was that the Commission was probably thinking of that aspect 1
in the case.
8f MR. BARASCH: It is hard to know what they 9l i
10 ! were thinking of, but in my perspective I would say the only 11 ! issue that was in d.spute when the temporary rates were set l 12 , -- this is our first position -- is whether or not TMI-1 was 7
v 13 properly valued when it was taken out of rate base.
i 14 ) As far- as I can see from the record of t
13 f these proceedings, both back then and now, the company has 16 never contested that.
1 I THE ADMINISTRATIVE LAW JUDGE: I will ask 17 i
i 18 you what I asked the company. If the Commission wanted to l
(
19 j take a major item of capital investment out of rate base, 20i could it do so without risking the chance that they may l
, 21i have to give an increase to the company instead of a decrease 1 l 22{ in rates?
l i I
l 23 MR. BARASCH: I definitely think they can 24 .. do it without taking the risk. I am getting back to my O 1 l l
25l first point. We are trying to put together 1308 and 1310 MONRDACH & M ARSH AL.1:3C. - 27 N. LOGKWRLOW AVE. - H AR M155 W R G. P A. 17112
839 I
! cnd it is difficult to do so.
1l l This is the first time in the history of s 2l i this Ccmmission that we ever tried to remove .40 percent 33 of the assets of a company from their earning column and 4 li
! that is what has presented the problem here.
5!
! But I don't think that this Commission when 6i 1
! it looks at rates is constantly putting itself at the risk 7j j of having to totally reevaluate for the company what their 3;
i attritien is.
9j
! The attrition the companies face is the 10 '
companies' problem to deal with with rate filiugs as they 11 l
{ see fit.
The company has now chosen to come in and I say we have attrition and we want a future test year and
.14 }
,,, we are filing a rate case looking to the future. As far as to ,
I am concerned, that is perfectly valid and we will fight i that and we will deal with what the companics' attrition is 17' going forward.
18 ,
k But I don't think there is any provision in 19 20 g the general rate increase section that would say we are now
! going to try and make them whole for things that happened 21!
before.
22)
It puts me in an awkward position because 23 ,l
! I am in effect saying that you are left with either saying s
24i
~-
when the Commission pulled the ratos out they took a nugatory L
d- Lt 3*4RDACH & M ARSHAL, IM O. - 17 H/ LOCKWILLOW AVE. - HAAMf 8 BURS, P A. 17112
'839-A l
ac2, because in fact there was attrition, or you are left Il! 4
! with kind of negating an apparent remedy under the temporary zi ,
- rates provision, and I don't think you have a simple choice.
3i
! THE ADMINISTRATIVE LAW JUDGE: Aren't you 4 ,!
also put in this position, what the company then is trying 5l i to get is an interim temporary rate during a rate case proceeding that is even more objectionable from the stand-f point, evidently, of the Legislature, by even not only 8i I giving an interim rate increase, but also giving a recoupment 9;
of that rate increase since sometime in the back which makes 10
(
it even worse than what was objectionable, as I understand, i 11 ;l
, to the Legislature when they provided that no temporary
,2j 1
! rates should be given during a general rate increase 2
(..
23 ,
G 14 (Transcript continues on next page. )
isl 16 1
17 '
i 18 l 19 l
20 l ,
j 21 (.
I 22; 23 b .
24 d
- l 25 4 ;
il I McHRB ACH 3 M AR SHAL. INC. - 27 N/ t OCptWit. LOW AVE. - P ARMi$tels R 3. 8 4. 17112
04U 1l MR. BARASCH: I guess the way~I respond, I
( 2 Your Honor, is to the extent to which the company would 3l eharacterize interim forward-looking piece as being permanent ,
4l then perhaps you don't face that problem, it becomes 5i identical to all the issues in the base rate case in terms of the attrition.
6l '
i 7; I car. look at the base rate case and say i
aj Mr. Ogden thinks there is $25 million that is u.ndisputabla
) .
9! in this case. We wouldn't agree with that at all. But for .
10 the sake of argument, let's presure that 25 million was i
11 i undisputable. Well, that tells me basically what the 12 : company is asking for is its non-TMI portion,of this rate I
13j increase, this $25 million going forward. Yet it is C 14 i i
interesting to note that in the company's petition we were 13 not offering to settle the entire 7MI case for $25 million.
16 It is obvious that the petition is designed purely to look 17 7 back and grab the recoupment side of this issue and I think ,.
18 : recoupment is clearly out of bounds here when you have a i
19 , rate case going on and, secondly, if I could, the second 20; problem of using a future test year to establish the amount 21; of recoupment.
22 Again, I say there is another case where l
I 23: the kind of classic laws of regulation breaks down.
(} 24l Historically when we are dealing with v >
~
23iI recoupment we had historic test years in rate cases going on i
h MOHR3ACH & MAftsWAL. INC. - 27 ti. CeCKWILLGW AVE. - M A R fr1S S U:4 G P A. 17f12
cu .
I a for a long time. Historically we were looking at historic
( 2
! periods of time and questioning later at the end of the periot I I 3 I whether or not we really snt the rates correct.
)
40 THE ADMINISTRATIVE LAW JUDGI: The l
5 recoupment was to bring up the regulatory lag, 6l '
MR. BARASCH: Exactly.
7: THE ADMUTISTRATIVE LAW JUDGE: And there SI is no lag in the future.
, l l 9l MR. BARASCH: You are saying it much I i l 10 ! quicker than I was saying it. I mean, that is the problem.
! i l 11 l We have a future test year being used to justify recoupment.
i 1
12i It seems to me to be a kind of gooney bird that can't fly.
g- 13 l We either go. to the future test year or have a rate case in j 14 going to the future or we are trying to deal with the l t 15l co:nplaint, but what the company is trying to do is take both 16[ a..d to. the extent to which Your Honor's order disposing of 17l this issue basically took the position that we were urong, 18 li as I understood your order, is because you said look, there 19; is two separate matters here. There is a matter of the 20{ complaint against the temporary rates looking backward and j
21l future test year rate case looking forward and they can be i
22 l severed . Now we hadn't seen it that way because we interpreted i
23; everything the company had said as basically saying they cze 24 trying both cases along the same lines, but taking Your Hcnor point of view at face value, that has plenty of pragmatic 25l '4 A R 4 t S B U't G. P A. 17112 MCMRDACH 3 M ARS&tAL. INC. - 27 N. IAcucNrt. LOW AVE. "
044 l
1i sense.
, C I would say the issue is whether or not
] i 3' $27 million is the correct value to pull out of the company, 4l and as far as any attrition is concerned, it is up to the 5j company to make a rate base filing if they feel they have got i
6j attrition. They can't wait two years later and the n reach l .
7' back and say by the way, we had all that attrition and we 8l want it back. It was ever a year that proceeded, that i
9{ followed the accident before the Commission removed TMI-l i
10 [ and apparently there was attrition in that period in the t
11 ; company's view. Now here we are, the first time in July of 12 1980 the company said, "By the way, we have had attrition 13 since 1979".
- 14 THE ADMINISTRATIVE LAW JUDGE: Woulddt l
.t 15 l that put the Commission in a peculiar situation by taking 16 ! TMI-1 out if you take the position of the company that it 17 was a vain exercise?
[
18 l MR. BARASCH: Because they triggered the 19; need to re-evaluate the rates. That is the way I understand 20l the argument.
21l What I am saying I think the re-evaluatier
.22 ) of that regulation was opened for consideration on any I
23! moment and time that the company chose to file a rate base O 24j case. We can e now tee =h back and indirectly get recoupcune 25!i in a general rate case. That is the way I see this. We have
!\
MCMRDACM & St.AR6h AL. IbfC. " Of M. COCXWILLGW AVE. ~ H AR 8t f S S UR G. P A. 17182 l
l
$43 1j a case looking out to the futuro, a future test year, but 2l they are not satisfied with that. They want to reach back 3'
and make themselves whole for a perica that follows the O
4l accident for a period of some 17 months.
5 Aside from the fact we would. contest tha f
6r factual size of the attrition, I don't think that is I
7' consistent with the reforms of the Public Utility Commission G, rule.
9f TIE ADMINISTRATIVS LAW JUDG3: What is 10 f your opinion oc the other position of the company? The i
11 company says now that our duty and the Commission's, the 12, Commission's duty in the Code seems to infer that the 13 u
Ccamission should have a continuing look at the tegorary g 14 i rates because it gives the Commission the power to change 15- the temporary rates from month to month. What is your 16 opinion as to the argument of the company that if the 17 ' Commission had acted properly on Juna first in the May 23 18 ' order, on June first that althcugh the icvel of rates at i
19l that time may have been proper, that as a matter of fact as
! 20' of now, because of attrition, thoca rates are not appropriate 21 / that we cannot be blind to what has taken place in the mesn-22! time?
23.1 MR. BARASCH: I w]uld make two ccmments 24l i
to that. Number one, that ends up being the same thing as h 25: the rata case because June of 1980, if you add six months,
" 17112 MOMRBACH & MARSHALt INC. - 27 N. L9CICNILLGW A */ E. - M A R RIS S U 7t 3. PA.
d44 l 1I would bring us down to December where the conclusion of the i
21 direct case almost of the company on the future basis and, O
3' in fact, any remedy in forward-looking rates you give thia 4 company will be based upon the most recent level of operatioo s 3i in your opinion so that matter is handled, but I still come i
back, I am not going to pretend that the issue is simple. I 6lI '
still come back to the fact that Section 1310, probably if 7l i
8 there was no rate case, could fu'ction very nicely, but the 9: trouble is we have a rate case, too and you can't put the 10 { two of them together and walk away and say everything fits.
g 11 i They don't fit and you are going to have to make a decision 12 ! whether anybody likes it or not and decide whether 1508 runs f
13 > the show or 1310.
14 i THE ADMINISTRA"IVE MW JUDGE: Imt's take i
15 [ the situation absent the general rate case now. What is che i
16i company entitled to at this time now under the complaint i
against the temporary rates?
17l 18 f MR. BARASCH: They filed a rate case.
19f Excuse me.
! ?
20l THE ADMINISTRATIVE MW JUDGE: Assuming l
there is no general rate case and they are just proceeding 31l i
22l on the temporary rate complaint.now, what are they entitloa
\
23l to under that complaint?
O 24; MR. BARASCH: In my opinion, under that, l 25! if you had no race case going on at all, you would be
' McMRSACM & htA?.sWAL. INC. - 27 N. EGCKWtLLOW AVE - HARMissynG PA. 17112 e
845 - -
1 1 evaluating what the situation is now, okay, and you would 2 have to make a decision as to whether or not any recoupment i
3! or looking back was necessary since Section 1310 (c) seemc 4I to say that you can make a final order looking forward .that t
3l will handle any considerations of past attrition or anything 6 else if you choose to do so. If it really were possible to 7l isolate that, that would be the situation you would be facing ,
t i
8l TIE ADMINISTRATIVE IAW JUDGE: But your l
cituation would be to determine the effect of taking TMI-1 9l l
10{ out or would it also be a concern with finding also what t
i 11 l attrition has taken place since June first?
1 12 i MR. BARASCH: I think, and I put a hugh f
13 asterisk on this because I think you can't read the sections g
.14 l separately. You can't have these two things going on at the I
15! same time. The theories of both contradict each other, buc if l
16 we were just dealing with the 1310 section, the question in 17l my mind would be whether or not the Commission properly i
18 1 valued TMI-l when they pulled it out now prospectively since l
19 ! this applied to set a new permanent rate for the future.
20f The Commission wouldn't be looking today at .uhat the l
21 Commission looks like forward, but rshether or not you should 2,2 f be trying to make up for attrition in an intervening period I think is under your discretion under, I think,1310 (e) .
23l 24f UIE ADMINISTRATIVE IAW JUDGE: Ist's take J $
25lg a tan minute recess. . .
' MOHW4ACH & M ARSHAL. INC. - 27 N. COCKWlLLOW AVE. ~ H A R Rt$8URG, P A. 17112
846 1 (A short recess was taken.)
'2 THE ADMINISTRATIVE 1AW JUDGE:
l Mr. Fra tar.
j Ji MR. FRATER: Your Honor, 'l would like at 1
4 this point to generally support the anunciation of the i
5 l principles which Mr. Barasch made. I would like to briefly 6 . suggest a couple of things for your consideration.
I 7 Number one, it has been my position, with l l 8 f all due respect, that a proceeding which contemplates a 9 ; change of rates, whether they be permanent or temporary rates 10 ; under the statute, is prohibited by 1308 (d) once a general 11 l rate increase is filed. That does not mean that a complaint 12 filed under 1310 (d) cannot be considered during that period g-)
U.
13 ! of time, but an adjustment of rates is prohibited, it seems M. to me, under 1308 (d) .
15! It seems to me that a general rate increase i
16! proceeding could be considered at the final determination I
17 referred to under 1310 (e). Now after saying that, and I i
18 l recognize that that somewhat may be at variance with your 19,! ruling in this proceeding already, and it is offered i
20{ respectfully, Your Honor, I will go on to this point.
21 .
The company has~ acknowledged that they are I
22j , not raising as an issue by their petitions the valuation of 23 .
TMI-1. The company has acknowledged that they are not'
~
O 24l raisins br their geeitions the issue of the removal of TMI-1.
25 It seems to me that--the complaints, excuse me. It seems to I MOMMEACH & MARSMAL. (NC. - M H. LASFWu. LOW AVE " M R M S S W G. PA. IN2
~ _ - _ - - _ _ . _. - - -
847 I
f 1i me that the complaints raise no issue. In other words, it 1
g 2l La back to the question that you raised before, does the 3 Commission risk a review of all issues simply by making an 4I adjustment to rates for one issue under 1310 (d), and my 5 answer to that is no, it should not be that way and I give ,
t 6! this reason for it.
t 7, Under section 315 the company has the 8 burden of proof with respect to its rates. I will agree 9l with the company that they may have been enduced not to 10 l pursue a rate proceeding whether it be a general rate t
i 11 l proceeding or some other rate proceeding, during Phase I and 12! Phase II of the Commission's investigation resulting from 13 ! the Three Mile Island accident. However, they have the duty 14 ! at any time they choose to exercise the rate to perform I
15, that duty of establishing the justness and reasonableness of 16' their rates. The only issue which the Commission had acted 17l upon, it seems to me, in its Phase II order was the justness 18i and reasonableness of the valuation of TMI-1. The company 1
has acknowledged they are not challenging that. Therefore, i 19l l
l 20l; there is no issue that they have to complain against.
l 21: t As a result of the Commission's actions 22l; in the May 1980 order, the complaint against temporary rates 23 3 therefore become:a collateral attack on the company's rates j
24 9 as they existed in May 1980. I don't think they have legal e
25f standing to launch such an attack. I think they had a legal MOHR B ACH & MAR SHA1 INC. - 27 PL LSCKWILLOW AVE. - H A RE.50lli4 G P A. 17112 I
1
847A 1 duty to establish at that time or at any other time normally 2 through a general rate proceeding, the unreasonableness of-3 their rates in general and I think that is all I want .to say, 4 ' Your Honor, f
(Testimony continued on next page.)
5l 0l l
t 7' f,
8l 9
- 10. P i
11 l f
j 12 {
13 4
- s j 14 ii t
15! t 16; l
l 17 l ,
i .
18 , ,
t .
19!i 20, i
21' l
23 ll 23l o, u V !
25 3 1
" McHRSACH & M ARSHAL, INC. - 27 N. CSCXWILLOW AV11.
- HARMISSUMG. PA. 47811
i
.l fM8 l t
MR. RYAN: Your Honor, I find myself in the 1ll
,I awkward and somewhat unco::Lfortable position of disagreeing l p?
(.
2}
r with my colleague representing another industrial, Mr.
gl 3 l Frater, and supporting the companies' position in almost i every detail on this issue.
5i t
i As a preliminary comment, I would like to _
6 .
! observe, however, that I think it is somcwhat unfair to 7L f
8; constantly refer to the failure of the company to file for i
! rate increases during all this period of time, because we 9i
, have to realize that in fact they had a rate case completed 10 ,
in which they had been granted rate relief a few days before 11 ;i i the accident, that was suspended, and through the proceedingE 12 ;
{;. 13 h
by the Commission's own actions, particularly its orders in 14 ,i 15 ;klDecember of 1979 in the what is referred to as Phase II proceedings, where the Commission said it would not adjust 17 fg rates, it would simply decide, first, whether or not one was used and useful, and then proceed.
g I realize that Mr. Barasch's office did not
. agree with that approach, but that was the decision the Commission made.
l So it seems to me that if they failed to 22, exercise it they were certainly misled into failure by the statements of the Conaission, no suggestion ever being h u, _ ;'aade about a temporar/' rate bein5 imposed.
~
McHRSACH & MAR 3HA4 (NC. = 27 ti.1.3CXWIt. LOW A VE. - H Aft ki S S V 8t G. P A. 17112
i 1
~ '
849 l 1
Now to got back to the lasues right here !
i 1l; today --
p ,l THE ADMINISTRATIVE LAW JUDGE: But could 3i I the ccmpanyst that time have requested a general rate increase 4l 1 if they wanted to?
5l .
MR; RYAN: Yes, they could, but it seems OlI '
to me they had no reason. They were willing to forestall l
l l
7l4 -
that because they understood, and I understood as a party in this case, that if Unit I was going to be removed from i rate base, they would then begin hearings in which all of l these issues would then be involved, in other words, what 11 ' .
1, j is the proper adjustment to rates?
l It was ugy feeling at that point that in that proceeding they could bring up any issue going to the
.14 ,;
I question of just and reasonable rates including a claim that 15:
,j they were entitled to a greater rate of return.
They put all that off, 17 ;l I In fact, my recollection factually is that 18!
gf they had data ready to go into the record. I don't know how complete it was. But Mr. Russell, I recall, had financial
~0;
) data ready to submit. I think he put some of it in the 31l l record before that decision in December.
221 '
! But let's get back to the question here.
23, My point was that I think that if they failed to do it they O'
N 24 )t .
, were certainly led or misled into that failure by the 25j I zmucw a unsut. me. - 27 m tecxwittow avs. - H AR.ilS9URG PA. 17112
. . 850 -
1l Cn miasion's words in the earlier parts of Phase II.
l
( 2h 1
But today we find ourselves now where we
- 3) have parallel proceedings going on. It seems to me that I
4 reading 1310 -- and I do agree with Mr. Barasch's general 5 l obserystion that it is very difficult to fit 1310 and 1308 1
6l together, they were undoubtedly designed for different 7! ;
purposes and it was not contemplated that a situation like 8 this would arise, I also hope it never arises again, and 9I I am sure the company and everybody else agrees and would join. me in that sentiment --
10 f 11 THE ADMINISTRATIVE LAW JUDGE: We agree.
12 , MR. RYAN: The temporary rete complaint O 1 fi ed by the company under the specific language of 1310(d), h 14 , I submit, requires the Commission -- you in the first 15 instance, ulticately the Commission -- to determine just 16 and reasonable rates for this company.
17; Since we don't have to worry about whether 18{ Unit 1 is in or out of rate base, it is agreed to be out 19; for that purpose, it is a question of deciding what the
.1 l
20h rates ought to be.
21 It seems to me.that the rates that are set 22l as a result of that complaint are permanent rates of this 23 company and they would continue to be the rates of that
(
O 24l company until they are changed in some other proceeding.
l 25 In this case it would be the results of the
'I uown..ex . .unsuit, me. - 27 m toexwituow 4vc. - 84==is iina. o irii l
l
851 i
l concurrent general rate case that happened to be going on Il
[ at the same time. 'that wo*21d ordinarily not be the case.
'O !
l Now the burden, of course, is on the utility 3[ '
to prove reasonableness of its rates. I think the Code gives 4l it several options of how to do that. But it has to prove l
the rates it is seeking are just and reasonable.
6!
- l. It has filed, I think, three separate sets 7l 8
8 8uPPod us da h Wat M is at M st
!' entitled to what was removed.
'l I don't really want to get into an argument 10 >
f.
- whether a future test year can be used or not. They have 11 l f made their submission and they have asked for a certain 12 [
level of change in the temporary rates, that their permanent g
l rates set on this complaint should be set back to the pre-i 14 :
existing base rates before the temporary rates, f Now it seems to me that the rates -- where I do agree with Mr. Barasch is that I believe that 1310(e) of the code is the provision which says what those rates should be and would prevent recoupment. -
g Again I think the Commissien's statements 20 g f may have misled the company and the provisions of the May i
l t 23rd order which Mr. ogden read clearly said that they 22 [
l would make adjustments hy the deferred energy balance.
O. '
s ,A a I riaa no at *= torr =ursort ror taat-
' 1310(e) says, as Mr. Darasch said, that in 0 x.unuca a msut. mc. - e ne tac <wu.ow us. - mdsmo. **. ima i
852 1
setting the rates following a complaint against the temporary 1 -
rato, the Commission is to take into account the effect of t the imposition of the temporary rates, so that if the tempora: y 3j ,
! rates were in effect for six or eight months, it seems to 4.!
! me that would be a factor you would take into account in 5l
! determining what the rates would be from then on.
.6[ ,
l You have no power, I don't think, to order 7
recoupment.
8l THE ADMINISTRATIVE IAW JUDGE: But that
, a 1most similar Innguage has been interproted by a case in 10 i l New York as requiring recoupment, on almost identical 11 i language, Mr. Ryan. I think I cited it --
12l MR. RYAN: Yes, I think you did in your g
[ order. ~
14 !
16 j l MR. RYAN: But our statute, it seems to me, 17 ll l - simply says the Commission shall consider the effect of 18 '
s uch rates, obviously referring to the temporary rates l
29l q which were attacked.
l 20 t i THE ADMINISTRATIVE IN JUDGE: In the New 213
$ York case it was aleost identical. language. I think they l 22 I k had one or two wordsdifferent. Almost identical language 23 1 24 was held by that court to require recoupment. h
'- 2 MR. RYAN: All I can say is that I respect-
! 25 i n . 1 I
P
._ McHR S ACM a MAR SH AL. tMC. - 27 N. LCCKwtLLOW A VT. - H 4'tMidauRG. P A. 17112
853 I
fully submit the New York court impropsrly construed the li i words, because it says rates to be thereaftdr demanded.
j 2 l When it talks about rates thereafter detaanded I don't 3l how you get recoupment. But I am not prepared to try to 4lli distinguich the case.
5 '
It seems to me that the other question that has come up here as to whether or not the prohibition added i
7 in the provisions of Section 1308 about voluntary changes 8l yI in rates, that prohibition against interim rate increases would not prevent the setting of permanent rates based on
. the temporary rate ccmplaint, at a time even prior to the .
11 { conclusion of the general rate cases going'on, because it 12 talks in terms there about the Connission has no authority 13 during the pendency of, a general rate increase to impose -
i
.14 temporary rates.
.La The temporary rates that were imposed, were 16 l, imposed before the general rate case was filed.
17 ll 18
-- and it is not a neat fit -- would be to say that in fact g
~
20;
! it is quite conceivable that a decision would come down on f the temporary rate complaint proceedings which would, if 21 the companies 8 position were sustained in the full, have the effect of returning its base rates, and they would be
] permanent rates, to the same level that existed before
,_. June 1 or some level. lower than that.
so; now.tDACH & MARSHA! INC. - 27 N. LOCKWu. LOW AVE. - HA ndisaURG. PA. 17812 2
1 . .
85h It could be lower than that if you don't
! 1
( .- feel the evidence warrants going back that high. But it h
2i I could go up as high as that level. Those rates would con-3 tinue in effect --
l 4ll 1 THE ADMINISTRATIVE LAW JUDGE: Could it go 5
beyond that level?
! MR. RYAN: Not in this case but to answer 71 the theoretical question you asked before --
THE ADMINISTRATIVE LAW JUDGE: Is there a 9
ceiling to the relief that the company could have on the 10 i, i temporary rate increase? Is it limited to the rates then 11 l in effect June the 1st?
12 l l
\'
MR. RYAN: I think the answer is no, and I g would rather answer it by answering the question you asked,
.14 j l
i I think, Mr. Barasch, where you said if we had no general to, :,
rate case filed, and we were only acting in the context of a complaint against temporary rates, so we don't have the l,e lj i problem of the interim type of thing --
19, TEE ADMINISTRATIVE LAW JUDGE: Would the l
1 1 20 (, only issue then be whether the rates then in effect were l
excessive or not excessive?
21}
l MR. RZAN: No, I don't think so. I think
( 22!
i i
l 3 the end result of your decision on a complaint would be i
23!
1 24j f what are the just and reasonable rs.tes at this point. h
- If the company had the temerity to come in
.,D g e .
MOHREACH & MARSHAL. It4C. - 27 PL LOC;; WILLOW AVE.- HARetIS BURG. PA. 17112 '
l
e i
! and ask for more than the rates that existed before they n '
were cut, and-it could prove that, I think the rates could O' 3' b e ordered to be higher.
! That in fact does not haupen in this case f 4
5 ever get m e than they ask for.
g, f THE ADMINISTRATIVE LAW JUDGE:
That is whatJ 7t f I am trying to find out from you is what your position is. $
g) .,
~
Where the Commiss1on attempted to determine whether or not a
the rates were excessive, could the company in fact come in 10 ;, ,
and say they are not only not excessive but they are not enough and we should have an increase instead of a decrease?
MR. RYAN: Tes, I think they could. I O) -
23 li f think the Commission by taking action in setting temporary
,,! rates, removing property from rate base, could by its action
.a :
g fi trigger a general rate case, because the complaint being gf filed does initiate a rate proceeding, a rate investigation, i and all the normal questions of a rate case become applicable.
g 19 ,
THE ADMINISTRATIVE LAW JUDGE: You have 1
20.
.' to conclude then that if the level of rates June the 1st k was not a proper update, at that time there was not a 21l .
proper update of the level of the rates of the company at that time, that the Commission by deleting a portion of
}. l the capital investment of the company, by doirs that act, 24;
) i' risked the possibility that they may have to give the
~
\
34CHRSACH & t. TAR 3HA1 !NC. - 27 H.' 1.OCKWit. LOW AVE. - HARdis9URG. PA. 17112
856 I
company an increasb rather than a decrease? Do you have C 2 to reach that conclusion?
g MR. RYAN: Yes, but prospectively only, and 3l o only afteb a hearing on a complaint against the temporary 4l I
5I rates. -
6 What I think the Commission risks when it 7 does it is triggering a general rate case, and that is what 8 ! I think actually happened here, but then they filed a --
9 . THE ADMINISTRATIVE LAW JUDGE: The Code o
10 ' does not ask for a general investigation. All the Code 11 i says,1310(d), is whenever the commission upon examination i
12 of any annual or other report, of any papers, records, O 2 i
" "" I d Cument3s r f the Pr Perty of,the public utilit$r. h t
14 i Now that is exactly what the Commission did.
15 h They enmined, perhaps not all the papers and books, but t
16 f they did examine the property of the public utility and 17
- determined that a certain part of the property of that 18 , utility or those utilities was not to be included in rate I
19 I base.
MR. RYAN: Yes, Your Honor. The hearing 20 f l I am talking about is triggered by the temporary rate 21l complaint. I don't quarrel with their right to make the 22 lL
. adjustment and in fact the adjustment they have made, in 23l! '
- 243 j my view, is not one that can be recovered through what I $
U l always understood to be a recoupment, which is a retro-25, meansaca a wansw me. - 27 m tocicwittow m. - m#issew. .A. 17M 2
7l active collection of what it should have been.
~
THE ADMINISTRATIVE LAW JUDGE - If we take 2
your position, then we h&Ve to require the Com:Dission in setting temporary rates to make an investigation, and in 4l 1
- really, to have a rate proceeding, to determine 5! '
6 all aspects of the operation of the company, to see whether they are entitled to a rate increase. Isn't that a proper 7 .
conclusion from your position?
8 9j .
Temporary rates, weren't they intended to .,,
10 be a matter of expediency and a matter that was to be 77 l resolved promptly rather than to take the time to investigate all the data that is usually involved in a general rate 12 , .,
13 increase? , ( .
MR. RYAN: Yes, I agree.
14 h THE ADMINISTRATIVE IAW JUDGE: And if the 15 16 Commission is going to set a proper new level of rates for the company, then they cantt do anything else but that, 17 j t
conduct a general rate increase proceeding.
18f MR. RYAN: I don't think they are forced 19 i
to do that until the complaint is filed against the temporary 20 !
i rates.
21I I think it is an extraordinary provision, 12 23 this provision to allcer a reduction in rates based on just an examination of records, and it is designed, I would y
(> assume, for an extraordinary circumstance. If we ever 25, i
MOH43ACl4 & MARSHA! INC. - 27 N. LOCKWILLOW AVZ. - H ARRf SBU'tG. PA. 17812
858 I
l 1! had one we probably had one in this case.
C 2 But I think the company did have a right g 3 and did offer to provide that kind of information to avoid
(
4i this. They were told they would not have to do it because 1
5! I it would not happen to them.
t 6j Now all that is history. All I am simply
)
7 f saying is that once the complaint was filed against the 8, temporary rates, a rate proceeding began at that point.
i 9t It is prospective only.
5 10 i TEE ADMINISTRATIVE LAW JUDGE: That is a f
11 ; new position we had not considered and that is a new I
12 j position that has not been, I don't think, suggested here
{; 13 so far. h 14 j Your position is that the Commission itself i
15 ' could have done what they had done at the time. As soon as l
16l the complaint proceeding is filed then that temporary l ,
l 17[ rate matter becomes a general rate increase --
i 18i MR. RYAN: It becomes a rate proceeding.
F I
l 19 I don't like to use the word general rate because that has l
a statutory definition that may not fit.
20 ll I
21; THE ADICTISTRATIVE L.W JUDGE: Are you t
22; through, Mr. Ryan?
t 23 MR. RYAN: Yes.
24i i
MR. KELLY: Just so we know where we are e
e t / t 23! aligned, Your Honor, I think we find ourselves in this case
- tGH*tBACH & MARSHAL. INC. - 27 N. LOCXWILLOW AVE. - MARR 3 BURG. P A.
17112
i . .
859 1
l aligned with Mr. Earasch and Mr. Prater, but I would like 1}
to put my own gloss on it.
2 i As we understand, what you are struggling 3~
with now is trying to understand the scope of the complaint 4
proceeding.
5 '
We see.what 1310(d) was designed for was to permit a company to argue. that when the Commission set 7 L temporary rates that it erred in some fashion, either mis-interpreted the facts or erred as a matter of law, but the complaint must be within the framework or the context of j the action within wlich the Commission acted.
11 j
! In this case, as we understand it, what the 12 l ,
company has tried to do is to incorporate by reference data Q. 23 in their general rate filing. That is what we think is the l 14 l incorrect action by the company, that they have attempted t'a 15 j:
go beyond the box of the complaint procedure and bring in 16{
data from the general rate filing to prove their complaint 17 case, and we think that is beyond the scope of what the Legislature intended in 1310(d).
! TEE ADMINISTRATIVE LAW JUDGE: Mr. Ryan 20; says in his opinion when the complaint is filed then the 21 temporary rate matter becomes a rate case.
22 l
MR. rRTJ.Y* That is a twist that I had not 23!
! really thought about until Mr.'Ryan brought,it up, but my f quick analysis is that it is wrong for the reason I just 25i r.10MRDACH & M AR SHAL. Ifl0. - 27 N.- LGCKw!LLOW AVE. " HARdlS80PG. P A. 17112 l
-,,s.
860 .
I stated, that 1310(d) in designed colely to examine whether
,n ,
or not the Cc:nmission erred factually and legally in settine l
i., 2 3!
j temporary rates, and it must be exar.rined solely within the h factual record that the Cormission was working with.
4 i
! The company, if it believes there is new 5j data to be utilized, has the opportunity of filing a rate ,
t increase and that is at least from my quick analysis uhere 7
j Mr. Ryan!s interpretation would be wrong.
8i The filing of a complaint against Commission action in setting 4.emporary rates does not' trigger in effect 10 ;
I j a new rate case. That is only trig 5ered by the company i
11 ,i i filing a new rate case.
12 .
,! The Commission is only to c.ct under 1310(d)-
L \ - when it concludes that the company is producing a return in &
14 ,
l excess of fair return on fair value of property.
- - TEE ADMINISTRATIVE LAW JUDGE: What should 16 ]
f that be based on? In determining the fair value of property l i what would you base that on? On the existing permanent l 18 ,
g rates? On the existing permanent rate matters, data?
MR. KELLY: It was designed historically 40 j; I 5 -- I think Mr. Barasch pointed this out -- historically 21 ;,
l when the Commission felt that the company was receiving I
22; ,
! too much based on fair return of fair value property, the 23 r ,
! Commission after looking at the annual report or papers,
('
24 h property, et cetera, made that conclusion and then acted.,
l i MSM* TEACH ts MAR SHAT IMO. - 27 N.- f OCKY'lLLOW A VE. - M ARft158tlRG. PA. f711:
l
861 h i 1 d the company then is permitted to file a complaint challenging $
q 2 that action, but it is within the centext of the factual O 5 3 h data on which the Commissicn acted.
4 THE ADMINISTRATIVE LAW JUDGE: Let me as k i
3 l you this, suppose the Commission just locked at the property
.0 0 that they were excluding from the rate base, suppose they l 7 jus t looked at the property and they had not considered I
8fanyannualorotherreportsoranypapers, records,b'coks l or documents of the company then in existence, when in fact l i
10 # some of those reports may have shown that the company was l t
i entitled to an additional level of rates: what then?
11 [
- 13) MR. ubLY: In other words, your question i I
r; u) 13 $,, is the stctute says that the Corrnission is to look at annual 14 ! and other reports, papers, records, books, documents and i
15 4; prcperty, and theichose to look at only one of those seven a n
- 15) identified items? .
THE ADMINISTRATIVE LAW JUDGE: Yes, one
?? h '
I 13 i where some of the other items may have indicated a need !
19 for some effect or where those other items may have had a
, i l
20; bearing on determining wnat were the reasonable rates. I i l' o
l$ MR. ICTl?l: The company could always .
e !
- 22) institute a complaint, use that as its ammunition against a
1 23 ! the temporary rates.
(
f3 .:
O 1h THE ADMIDISTRATIVE 1AW JUDGE: Would that
?
l l
,5:
~
necesst.rily mean they have to conduct an investigation * ,
- tOMR3AC.*! a M AJt silA'.. P'O. - f.7 * . LO CKWi* L C W AVE. - 9 Ait *f tsaC P G. % 17112
d62 .
7 MR. ImTLY: Tne distinction 'nere is that, as p 24 I understand, what the cocgany did in the session we hr.d a w
, y couple weeks ago ---
g!'
THE ADHINISTRATIVE LAW JUDGE: I don't know
)
5lwhethertheCommissioninfactdidlookattheannualreports 6 l and the other things involved in determining the --
B NR. KELLY: What we are faced here with is, 7l
\
8j as I understand what happened in, I think, Hearing Roon No.
9 ) 3 a couple weeks ago, is that the company in effect incorporated by reference all or a large part of its general rate incresse 10 A1,,e filing into the temporary rates, and that is what I am saying-12 '
is in error under 131o(d).
l 13 THE AD E ESTRA M N M GE: Did the g: Commission in any manner state in their decision, either
- 23, 1980 decision that 15,l the 1979 or 1980 decision or March 16 >
h they were considering other aspects, the annual reports and t
1 1
so forth, as the Code provides, any annual reports, papers, l
77 ggj records, books, documents that were then in existence in l 19hsettingthe--
MR. HELLY: Your Henor, it has been a while 20 L.
o3l fsinceIreadtheorder.
i I was not persvnally involved in i
l I can only gues that that was all evidence l 22fthatproceeding.
1 in the record, but I can't state where or categorically 33:i
,, 4
.a y 't
] state it was. g g I can only assume that that type of evidence 5
\tCH 43ACH G MAReH AL. I:lC. - 27 * / LOC'CWii. BOW e.VC. " H A R R13 3 U t G. r> A. 17112
l 863 !
! I 1[wasinthere,oratleasttheopportunitytopresentthat I
(' 3
,_ 2 evidence was there.
There is one other point I would like to 3f n 4 y make, and unfortunately this simply raises ancther question --
i 5i THE ADMINISTRATIVE LAW JUDGE: Let me ask 6). you this, could the Carnission decide whether they want to 7 } consider those other aspects or whether they just want to S look at the property that was to be included in rate base 9: and that was the only thing they were considering and let I
- 10) everything else as it had been in the permanent rate case?
i 11 MR. HELLY: I am sorry, was ycur question 12i whether the Commission could --
Q 13 , THE ADMINISTRATIVE LAW JUDGE: Just l 14 , consider the property involved and nothing else.
t 15 { MR. KELLY: I am not sure what the terms 16 mean. I don't know if we can separate property from records
- 17 ah and books, or simply the Legislature here was defining what 18 !! the Commission may look at was simply listing in a sense i
19 i different words for the whole.
20! You say the property of the company. I mean 4
that in a sense is what is on the tooks of the potrpany or 21l 0
22 f in the records of the company. Vnen you say the commission, i
23i. could only look at the property -- .
b- 24 9 THE ADMIT.STRATIVE LAW JUDGE: Or could b '
253 the Coi:rmission just look at the rate of return that was in P
StGrtR3ACH & f.t AitSHAL. INC. - 27 !!/ t.9CKWTLLOW /YZ.- H AR.itS8DPG. . A. 17112
8Gs I
the annual report and say your rate of return is in excess g;
R l 4 of what we allowed you and so we are going to cut you based 2g '
on that report and quit and do nothing else? l i MR. KELLY: I think so, Your Honor.
k 4 g
- '" # I 5
else -- are you through?
6 ,
,, i MR. KELLY: I am sorry,.the'last point I
\
wanted to just mention, unfortunately is not an answer, just 8
another question, but something that you asked I think Mr.
94s Ogden,about could the Crvnmission change monthly and I will 10 )
g !) just point out that 1310(c) does state the Ccamission may g) fix, determine and prescribe temporary rates every month 13 h but on the contrary,1310(d) states that the Commission may ~g
- \
34 j by order prescribe a trial period of at least Six months,
.and those two provisions appear to be contrary.
1 5 ji g[ .L note that the Commission in this esse did
'4 37 act under 1310(d). I Just point that out for what it is 18 i, worth.
3 THE ADMINISTRATIVE.LMT JUDGE: What does 19 lj l'
20j that mean, then? Reading the two t gether, what does it mean?
21 MR. KELLY: I don't know. What it does l
l y
a, I say is that the Commission under one section may change !
s it monthly and apparently under another section has to sat .
h I l gj it for a minimum of six months.
1 .-
l 0 %f 0HM3ACM & ?1 AR SH AL. INC. - 27 fu LOCMWILLOY3 A VE. ~ H 4,"Nisa uRG. 7 A 17112 1
. 865 r
- THE ADMINISTRATIVE LAW JUDGE: Does staff p 1l have any statement?
i.
O. ' 2l
? MR. GEORGE: Your Hcnor, cight I make a
. 3l t con: ment or two?
4)
! THE ADMINISTRATIVE LAW JUEGE: Yes.
5l l MR. GEORGE: I will be quite brief because 6l .
! many posit' ions have already been stated.
7i
. Without going into all 'o f the details, I generally agree with many of Mr. Ryan's points. I have had i the advantage of participating in both of those last two 10 l i rate cases, I participated in both 31ase I and Phase II of 11 :
! the TMI investigation. It is my recollection the TMI 12 i investigation was initiated upon Commission complaint, .\
13 i therefore provided a basis under 1310 for the setting ' of .
14 - -
i , temporary rates when that was done. ,
15 g
- I suggest the language of the Commission .
161. ,
I j order concluding the case providing for the option of the 17;
! GPU companies to file a complaint against the temporary 18; f rates set in that case was to protect the utility companies 19lo i procedurally, since there had not been time. Anybody who 20; I was in that case knows that the Commission was rushing to 21 :
get a decision made under very difficult circumstances in '
22 -
both Phase I and Phase II.
23, !
{[-
0 24 j!
It was always my inrpression that this was 3 a procedural device adopted by the Commission for that l 25 ll tt 0 woHnS ACH & M ARSHAL, LNC. - 27 M. LC4KWILLOW AVE.
- HAR. ISSURG. PA. 17112
1 l . .
866 )
3 )
T particular case, so that if the GPU companies were able to 1 1i .
I
! ',demenstrate that there was something that had been not 2j considered -- we all knce that the rate structure questions 3l -
and the allocation of that increase, all of those questions 4{
f were put aside because there just was not time to consider 5!
,l them in that case -- that they then could be considered
- ?
later by the procedural device of a complaintagainst the 7j l
i temporary rates which the GPU companies were permitted to Si
! file.
9[
i They did that and that is what is coming along before Your Honor. !
11 ,
I think Mr. Ryan raised a very good point 12 ;:
that when you add to it the fact that the GPU companies have g
~
! filed general rate increases, that a way through is to 14 i consider in this overall proceeding setting now of new 15 rates that will take up from the end of the last rate cases, 16' and procedurally the GPU coscanies are protected for that entire period of time.
Now you want to look at what was said on
- the temporary rates. Were they set properly? If you read 20.
l the order, it is speaking in the past tense, if you are 211 f looking at information that would be applicable to the 22i period of time I suppose from the end af each respective
.> c 44:1 rate case until presumably December 1,1980, the period oc fO time that would be covered by the temporary rs,tes under that {
np]h h
MONR3ACM 3 M ARSHAL. INC. ~ 07 Ni LOCXWILLOW W E. " H A RMi 3 Did R S. F A. 17112
867 order, you can also look at the period that is concluded 1
in the general rate increase, and I think that is a way O 2 through which -- we all recognize there is some difficult 3 ,
language in the statute -- to say that the companies are 4I I protected and that the end result of this proceeding should 5
- be an order setting new permanent rates which in no way 6i I penalizes the GPU coorpanies or says they cannot raise 7l something because they did not do something right procedurally, i
8!
t t
but rather anything that is important to be considered by I
t the Ccmmission from the end of each of the last rate cases 10 l l until the date of the new order, is a proper subject for 11 l consideration.
12 ' ,
! I appreciate maybe that does not solve
,O* 13 l
[ all of the problems or the questions that you have raised 14 [
l here, but it seems to me that there is an overall way of 15i i looking at this combined proceeding, at least that is my 16 ( ,
l view of how the thing should be handled, and would also 17 l" enable any party such as my clients I represent to raise 18
! such issues we might want to raise, because certainly I 19 i
! think it is fair to say that some of the features of the 2 0 :,
i temporary rates were not the most attractive from the 215 customer's point of view.
l 22l l
! THE ADMINISTRATIVE LAW JUDGE: Suppose 23 L when the Commission made the temporary rates June 1, O
f 24?
'I J f suppose the rates were proper when made, then your position 25f McHRSACM & f4 AR SHAL. tHC. - 27 til t.CCKWILLOW WE. - H AP.blSOURG. PA. 17112
~ -- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . .
868 '
i '
is that even if they were proper at that time they may not 1l p l be proper at this time,1 roper 5 as' permanent fra ;cs?
O 2; -
MR. GEORGE: It is difficult because of the g
,l b -
!, language of the order, but as I recall it the Commission said 4[ rates . were isoroperly set,
'i if it is determined that the 5[
- l. the temporary rates, if those were improperly set, it used 6i. .
'! the past tense, you would be looking really backward and 7i f
Now your point is j seeing if they were properly set then.
assums they were properly set. I suggest if you find that
! to be the answer, the case is over cn the temporary --
10 i l THE ADMINISISATIVE IAW JIIDGE: What is our 11 .i I duty, to find out whether the rates set by the Commission as 12 l of June 1,1980 were proper? Or is our duty to find out
(,
~
13 l ,
g l what the rates should be at this ticle?
I 14 i MR. GEORGE: I think under the complaint 15 y j] proceeding it is the former. Were they set properly as rf j the date of the Cnamissionfs order there? I don't have the 17 ;
l exact date, but going back to June 1980.
18I I
! THE ADMINISTRN11vs LAW JUDGE: If you take 1 29I l [ that position, then the presentations of the company should
! ?
! be as to what the level of rates should have been at that 21k j l time, not what they should be March 31, 1980 or at the 22i l present time.
I 23 g i M!I 3 MR. GEORGE: I think that is a fair reading g l
jl of the Cecmission's order in the Phase II order. Yes, I 1
a3 I
- AQHRDACH at F.1AR $F3AL. IPtC. - 27 II. L3CKWILLOW AVE. - '4 A RM3 8 URG, P A, 17112 w
. . ~. .
869
, agree with that.
1l l The point is this, that has protected- the
) 2i
- GPU companies procedurally from the end of the last rate 3i l cases, that period of time up until June 1,1980 they are 4;
- p rotected, and it is not a case of waiving a right to 5l l obtain rate relief for that period of time because they 6i ,
~
l [ did not file something.
l 7 THE ADMINISTRATIVE LAW JUDGE: If you take 8
1 your position, as I understand it, it is that the Commission
. 9:
! should have considered the extent of any decrease in the 10 j
! rates by the proper level of rates as of June 1, considering 11 l l not only the taking out of TMI-1, but considering also the.
12 !
attrition that occurred since the last rate case up to that h
13
- time? Is that your position?
14 :
- MR GEORGE
- I am not sure I followed the 13i l first part of your question.
16i
- THE ADMINISTRATIVE LAW JUDGE
- Is your
! position that the Commission in setting the tes:porary rates 18 ;
as of June 1 should have considered not only the revenue f
i effect of taking TMI-1 out of rate base but should also l
20:
have. considered the proper level of rates excluding TMI-1 l
21,l at that time?
22;i
! MR. GEORGE: I would not want to go so far l
23' Q 24i as to say that the Commission should have considered some-l thing at that time, because it is my recollection each MeH*tSACH & MARSH AL. INC. - 27 N) t.GCKMLLOW AYI - H ARRISBUR G. PA. 57111 l
t
'870 '
r phase had to be decided very quickly and there was not time.
,l. So it would not be ray view that the (q ; ~> g i Concnission should be held up to a standard that said they 3
did not do something they should have. I think what the 4j i
Commission did, they set temporary rates and they did the 5l i 6
best job they could under the circumstances and they told
! the GPU companies, look, if you think those rates are too 7
8 low, then you file a eomplaint against them and we have have 9
a further proceeding to resolve what issues you are raising.
M AMESNM M MGE: R en you say 10 f g now when the complaint was filed, then the Commission has a 12 duty at that time to determine not only the effect of TMI-1 13 exclusion but also the effect of any attrition and determine g a proper level of rates?
14 l n MR. GEORGE: In essence, although I would 13 16 { not want to make -
1 THE ADMINISTRATIVE IAW JUDGE: As Mr. Ryan 17 H 18 indicated, he considered when the complaint was filed the i company was entitled to have a rate proceeding at that time.
19 ll.
n 20j MR. GEORGE: I would not put the emphasis on attrition as you have, Your Honor, and I am not basically 21 li disagroeing with Mr. Ilyan, basically, though, what I think 22 f 23 you have is a rate case that would have ended with the June l p 1 period, because that is when the Commission set the rates.
~
25 They said, look, if these are too low, you n
'f 0HR3ACH & MARSHAL. INC. - 27 bi t.CCKW LLOW AVE.- HA R t 9 2 V R G. P A.
. 17112 l
871 file a complaint and we will look at them. I think that is
(
'f how to treat the complaint of the companies.
O ,j
! I don't believe the purpose would be to then 2
i set the new rates prospectively except -- well, it would be except that you have the general case enminI in which I think is a t- ff, y u start over on a new general rate case. ,
61 But I think if you lock at the Commission's 7
anguage n a n e estiga non -- and that 8
at least to me makes sense as a way to protect the GPU
! companies and also to protect the rights of the other 10 ;
i
- parties -- there was reference earlier to the hospital 11 l
! association that wanted to come in, they were told no, you 12 :
n cannot intervene, the questions you have raised are not k.d 13[l !
i going to be considered now, and I know as a participant 14 t I was very concerned about some of the issues, particularly in the rate, structure field -- the point was made, you ca.nnot 16 l i don't
,7l raise those questions now because we just/bave time to 1
consider them.
i So I think not only the rights of the GPU 19 companies but I think the rights of any custoter are
- preserved to go back and look at what has been done since 21; I the last rate case in each company.
22!
t j If you want to call it a new rate case, 23, i
Q ,
e L; in effect it is. You have got the 'ight to go oack to the [
last rate case, come forward and take a lock at the information 25E .
J
- l a
uoxaues masw me. - 27 n. t.ecxwa.t.ow an. .an. aun . ,4. i,,22
l 872 presented and determine whether thoac June 1 rates were 1 l l correctly set.
, 2; ~
THE ADMINISTRATIVE LAll JUDGE: Your position g
3 l would scem to indicate that the matters should be merged and 4I i that the only matter involved should be is whether or not 5 '
there is a matter of recoupment.
6 If we are going to open up this temporary 7
rate matter completely to update everything on a future i test year basis, we can't very well do it until the rate 9: f i case is concluded.
10 }
MR. GEORGE: I would not say that the 11 { i .
! complaint proceeding would raise that future consideration.
12l The question really was whether those rates were properly
\~
set at the time, whether they were too low. That is what 14 the Comission said, if they are too low --
l ;
151 THE ADMINISTRATIVE Laid JUDGE: Yes, but the 16 I company is going beyond that. The company is not taking the 17j j position that the rates set by the Commission at that time 18j I were too low.
19 }
! As I recall, there has not been any 20?e i evidence shown as to the effect at that tine what the level 1
21L
[ of rates should have been. The company is proceeding way 22l' beyond that with a March 1981 test year.
23' h
- . Now if we are going to do that, why would w , we have to decide any ccmplaint on the temporary rate mattern l ,
5, MC1tRS ACH & MAR $H AL. trtC. - 27 ft. LOCXW tLLOW AVE. " HAR#iSBURG PA. 17112
873 at all, and just resolve the whole thing in the final rate q f case, and then the only issue involved is whether the company v :
is entitled to any recoupment at that time or whether it is 3j .
f i not.
4' q
MR. GEORGE: Except for the recoupment feature that might be the practical solution. I think you
! have got to keep your track procedurally correct. But the 7l end result might be to decide the overall rate case and 8l t I tako into account what the effect of the temporary rates 9,'
t I has been and look at the information that is given by the 10 [
company and then decide the general rate increase and wrap 11 j[
I up the temporary cases at the same time, because you have 12 l l two cases pending.
' .\
t l M! (Transcript continued on next page,) ,
l i
15i l t 16 i
17 18 19 !
i 20l l
21; 22 I
I 23 i .
l l
2Af ,
k!
25 '
l l MOAABA.CH & PtARSHAL. tMC. - 27 Ni LGCXWILLOW AVE.- H A R R13a v r.G. .s A. 17112 I
874 .;
i 1
1 THE ADMINISTRATIVE LAW JUDGE: That would
.] 2 be something Mr. Ryan suggested, I think, under 1310 (a),
3 ,' and that would almost follow, I would say.
9 4I - -
MR. GEORGE: That takes some imaginative I
5l reading of what the term proceeding means in there and I 6 '
think it could be done, but I' think the proceeding has to do 7i with going back to the earlier .one.
8' THE ADMINISTRATIVE LAW JUDGE: I&at you 9 have to realize is that the law of the language,.I guess, 10 ; f .the I.egislature felt had been judicially interpreted in the 11 ! past and to change an i or cross a t and dot an i because it ;
12 may effect the prior decision in the case, a lot of the stuff, i
{ 13 f as I see it, as I read it, is just the exact language that g 14 { has been adopted some time previously when these problems 13l we have today were not prevelant.
16 MR. GEORGE: That is right, 'and,Ythink, 17i too,you have one feature and that is the specific language 18l in the Commission's order which would seem to say that in t
19 the Commission's opinion here is specific authorization to 20[ come in and have further consideration and given the broad 1
21 !
1 powers the Commission has, it can be treathd as a finding 22l in the public interest or in its broad powers, given 23 extraordinary circumstances. -
24 1
THE ADMINISTRATIVE LAW JUDC3: Commission h 25 Staff.
875 i
l 1i MR. PANKIW: Your Honor, I don't have 3 a prepared oral argument to make on this, but I would take 3 I this opportunity to state our position on the issues 4' surrounding this temporary rate complaint, t
5{ First of all, we agree with the propositic a 6i that the exclusion of TMI Unit Number One is not an issue in
- b. -
7; resolving the temporary rates ' complaint.
i , .
8{ Secondly, with respect to the justness 9 and reasonableness of the level of temporary rates set by 10 , the Conunission, we believe that the future test year data -
t 11 [
that is available to us is the most appropriate base upon 12 ; which we can determine the appropriate level of temporary l
13 I rates.
I r.
14 l THE ADMINISTRATIVE IAW JUDGE: If you 15I take that position, if you use the future test year data 16I as the prospective rates to be in effect, then where do you 17j end up as a portion of the Code which says that we are to 18 i give effect of the rates that are fixed to the time that the i
19 ! temporary rates were established on June first? In other i
20l words, the matter of recoupment. How are you going to 31i consider the matter of recoupment by determining what the 22f rates should be in the future by determining as the company - 3' 23! indicated they want a recoupment of the rates as of June 1
- O 24l first? How are you going to resolve that if you use what you
~
25 have?
MOHMBACH & M ARSHAL. INC. - 27 N. CGCKWILLOW AVE. ~ M ARRj38URG PA. 17112
l 876 r
1 1 , MR. PANKIW: Well, Your Honor, it is 3 labeled future test year data. It is a 12 month period that g 3 lendsMarch 31, 1980, but I would note that the data begins on I
i 4 l April 1st, 1980 which is prior to the June 1st date,1980
(
5 when those rates went into effect. It appears to be a period 6 that coincides with the period during which those temporary I
7! rates were collected r.2d would seem to be almost an ideal l
Sl measurement.
9 THE ADMINISTRATIVE IAW JUDGE: That may be
! I 10 l so, but the thing is this, in this inflationary period these 11 : rates have not become stationary since June 1st. I think we 12 ; would all agree and take judicial notice there has been an 13 inflationary period that has carried on since June lat and i
l 14 [ will carry on to March 31st, 1980. Shou 1El we consider that 15! future inflationary period in setting up, for inscance, i
16i recoupment from June 1st to the present time?
t 17i MR. PANKIW: Well, Your Honor, I think in
?
1G [.
setting up the rates you would look at an annual period and
\
9f the annual period we would look at would be a period, that 20{ would have within it the time rates period..
t 21[ THE ADMINISTRATIVE IAW JUDGE:- Of course 22l: the Code was changed of the prior language. ~ The prior 23 : language provided there-had to be a recoupment.. The language 24l now says there has to be some effect given to the new rates O
m 9
25 3 but Mr. Ryan suggested some midway discretionary resolution MQPfRS ACH & M ARSHAl !NC. ~ 27 N. LOCXWILLew AVE. - M A R Prt s s JM e. P A. 17142
877 1 mada as to what the effect is.
2 There has been, as I indicsted, in a 1
3 New York case would seem to indicate that when the new rates 4 ,
were fixed, temporary rates were established, that there had 5 to be recoupment from the time the Commission fixed the rates .
i 6' MR. PANKIW: Well, Your Honor, we don't
\ .
7 ') believe that the recoupment should be a problem in this case l
8f because we believe that because the company has filed a i
9: general rate increase, Section 1308 (d) prohibits the type 10 i of recoupment that would otherwise have been available to l
11 the company through the establishment of temporary rates.
12l THE ADMINISTRATIVE IAW JUDGE: How do you-13 '
interpret this section? In every proceeding in which 14 , temporary rates are fixed, determined and prescribed under 15 l this section, the Commission shall consider the effect of l i 16- such rates in fixing, determing and prescribing rates i -
17l thereafter demanded received by such public utility upon the I
18; final determination of the rate proceeding?
?
l 19 i MR. PANKIW: Is that 1310 or 1308,
{
20l Your Honor?
i 21l THE ADMINISTRATIVE IAW JUDGE: 1310 (e),
22; and at least the New Yorkicase considered that that requires l
a recoupment.
23f O.
v 24f MR. PANKIW: Well, I think that that 25 language is quite general and 1 am not aware of any
- StcHRB ACH & StAFISHAL. INC. - 27 N. t.GGKY/lLLCW AVE. - H A Mtsst#RG. P A. 17112
678 I
1, precedence in Pennsylvania that have spelled out exactly what I
(' 2 the Carrmission must do in considering the prior period. g 3! THE ADMINISTRATIVE LAW JUDGE: No, this 4 language is new language and it apparently has followed the 5~ 1anguage of other jurisdictions because there is maybe one 6; word ~different from the New York language so the language I -
?! itself was copied from some other jurisdiction.
8f ,
MR. PANKIW: I would note from my 9 . recollection that the Commission is required to consider the 10 f effect of the suspension period in determining final rates 11 l and I am not aware of any Pennsylvania courtd that have i
12l spelled out exactly what way the Commission must give L
13 consideration to that, whether it must add an annualized h
.14 l measure to the amount of revenue increase tnat the company l
15 might otherwise be entitled to. -
16j THE ADMINISTRATIVE LAW JUDGE: Anything 17 ! further?
~
18 MR. PANKIW: Well, it is our position 19 ' that because the company was prohibited from obta.ining i
20 recoupment with respect to these temporary rates, our 21j purpose here would be to set rates prospectively. Also, we l
22 believe that the future test year data is the most 23 ,' appropriate data for the purposes of determining the just 24f and reasonable level of tecporary retes, that for all O
s- i 25 practical purposes, the general rate increase case and the l
MOHRDAcM & MARSH Al., TNc. - 27 N. C2CKWILLew A VE. - 4 ARRissWRG. PA. 17192 -
l w G . _ _ - _ - _ - - - _ - _ _ _ _ _ _ _ - _ _ - - -
& ///
S ' '?'
, R $ ; ,b>
q,+
14, cy.
_E__ <.
TEST TARGET (MT-3) 1.0 llsmll El na I.l j,5 IllE I.8
~
1.25 1.4 1.6 6,, ,
4 4 % y ,, 4 4W v O %i f+>h,4
<$ 4 i
ob e 'q)
$If f> '
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TEST TARGET (MT-3) 1.0 9EE EM IE m m
'M lllE
=-
l,l h_,
- lll!!==N
.g 1.25 1.4 - 1.6
__ l
6,
- k
/b/ *k:l b
>'>, v i
879 i, temporary raten case are merged.
2' TIE ADMINISTRATIVE I.AW JUDGE: And they
- 3) should be decided at the conclusion of the general rate 1
4! proceeding, is that your position?
- 5. . MR. PANKIW: That is correct, Your Honor.
6j THE ADMINISTRATIVE LAW JUDGE: Anything
'I
~7 further by any counsel?
8 MR. BARASCH: I have a couple comments.
9 THE ADMINISTRATIVE LAW JUDGE: Maybe you i
10 I better comment first and be can respond.
I 11 [ MR. BARASCH:. I would just like to take i
12 a couple seconds, Tour Honor, just a couple comments on 13 '
some matters Mr. Ryan raised.
.14 It is true that the Commission indicated 15! that certain matters were not going to be taken up in i
16 Phase II. Where I would draw the difference with Mr. Ryan 17 i is I don't think we have any clear indication of what matters 18 were being delayed for subsequent consideration, whether it 19 l was the direct evaluation of TMI-l or total evaluation of t
20l everything. The Commission had before it at least the oral 21 . representation of various parties as to what they thought
- 22. l about attrition offsets. I don't think the Coanni.ssion spoke '
l -
23: to the matter at all. I thinic they said you can set 24 temporary ratas and I am going to hold the rest out and you V i .
25, can fight it out in front of an Administrative Law Judge, 1
MoHRsACM & MARSHA! INC " 27 M. I=ggicytLt.ew AVE, a MARRISDWPG. P A. 17112
,p9a.- -. - -- ,y .-_m,_- n -. ,- .,_-,yg , ~w+ . - . - - . - , - - , +-e--w=s-,v -- -r --w' =---
880 l
1' which unfortunately is what is going on in here now.
p' 2, The other point I would make kind of gets l
3i back to a point I think we referred to in our Memorandum
.Q 4 of Law, which is following the logic of some of what Mr. Ryan 5 suggested and I appreciate that Mr. Ryan is struggling with 6j the sarce battle we all are struggling with to interpret the 7; various sections of the cede. I think it does create, if it 9
8 opens up the possibility o'f an effect, an attrition off-9 I set lfor base rate increase. It basically creates a backdoor i
10 ( route around Section 1308 (d) and (c) to say we are not going i
l 11 ;
to allow any kind of interim rate relief in the trying of the i
12 i rate case.
i If Mr. Ryan is of the belief that a general rate j 13 ! case is triggereds which I think is what he is saying, then g 14 f I have a hard time understanding why we only trigger some 15 ,' aspects of the general rate increase and not all of these.
16; In other words, if we are in a general rate increase or base 17 ,
rate determination, again it seems to me the Code is cicar.
l ,
a 18 ) There is a suspension period. There is/ 60 day notice 1
19 ij requirement to all the parties. There is all the provisions 20;3of 1308 (e) which says you should not be given interim rates l
l 21i daring the process. It seems to me you must choose which way 22l you are going to go. It seems to me we have got to provide 23 ,, tie apparent procedural safeguards that Section 1308 in b'
24 l ' general has established in the trial of the rate case and h 25 g that gets us, I guess, indirectly back tio the conflict I first
- 6 1
MOHR3ACH & M AT4 SHAL. INC. - 27 f t. GCKWLLLOW AVE. - re AR RISSW*to PA. 37132 f 4
831 I spoke of between 1308 and 1310. It would be nice if you 1
O 2i could read the sections together, but I don't think you can O 3!
and I think ultimately you are going to have to come to the l
4 4 ccnclusion when faced with two sections that don't jive with 4
- 5. each other and along the lines of what Mr. Kelly was saying 6 even in terms of consistency in Section 1310 itself yon ere l
? going to have to come to a determination of what was the 8l thrust of what the Legislature was trying to ace'omplish in 9 the 1976 reform.
10[ I have given you my prejudiced view point I
11 of what I think those reforms are and I think in the last -
12l analyses you are going to have to decide how to put these 13 I incongruous actions together. I don't think you can just 14 pick and choose freely and move back and forth between the t
15 f two sections. ,
16; The only last conments I would make is i
17i eluding to a comment by Mr. George where he said somehow I
13 since the period of the last rate es:se is also protected.
19 : Even if I agreed with the rest of Mr. George's argument I 1 i 1
20 r don't think that is the can. At best the only thing l 31 protected is the rates as of May of 1980 going forward.
l 22l There is no complaint at all involving the rates that were l.
t 23 I set even after TMI-2 was removed, after the decisions back
[
O,. 24; in January and March of 1979 and until we get out to May and 25i the company's complaint against temporary rates filed in July .
MOHRBACH ts M AR SHAL. INC. - 27 N. LOCKw n. LOW AW. - H A R N S e ttet G PA. 17112 -
I 882 i
1 I don't see any way they can now reach back and start 7
what a 2 talking about/the rates were at the time they were set. If 3i Mr. George had a problem with the final rate detercanaticn 9
l 4! at 599 for Penelee and 626 for Penelee, his remedics were 5f two, either he could have appealed those cases back then or 6 as the rates were in effect, if he felt those to be unjust 7 and unreasonable, a complaint should have been filed against 8l those rates,, but I don't see any way that the Commission's l
l 9) action in the spring and snmmar of this year somehow refers i
10, us back and grandfathers us 1.2 a set of rates that had been l 11 , totally uncontested since at the latest March of 1979. .
12 -
The last matter I. just make in passing 13 ,
is a lot of mention ha's been made to the quick decision that 14 : the Commission was rushing to in Phase I and Phase II. It is t
15' certainly not a matter the Commission just out of the top of
! 16! its head decided it wanted to rush to get a quick decision.
I 17, It was the company who was repeatedly telling the parties if 18 , they didn't have any rate relig f imrradiately, all sorts of 19 disasters were going to befall it, so it is interesting that 20 f we would be in a position now saying because there was a l
1 21{ press of' time somehow they can hide behind that press of time l 22! as a way of reopening doors that they themselves were trying 23' to close to get a quick resolution. The problem was the 24! resolution uent against th:m as far as I am concerned. h C
- 25l THE ADMINISTRATIVE IAW JUDGE: Mr. George.}
k 17112. -M ucunsAc. a :.:ARSHAL. !MC. - 27 N. toCKWILLOW A'/E. - M A RMIS S UM G. R A.
i 883 I
i 1I MR. GEORGS: I would like to make a I
m 3 I clarifying point. Maybe my coments were not clear. I dida' t i
3 mean to suggest that this was a proceeding to go back and 41 reopen 599 or whatever the number of the last Met-Id rate cast was. If I said that, I am sorry.
5{ ;
6l MR. BARASCH: You said from the end of i
7[ the last rate cases.
8!
MR. GEORGE: From the end. Those cases 9' are decided and over with.
I am coming forward from that- I 10 { point in time and I didn't mean to suggest that we should go 11 i
back and open up those cases.
i.
13 l THE ADMINISTRATIVE IAW JUDGE: Mr. Zwalley .
13 l MR. ZWALLEY: I have nothing, Ycur Mc.sor.
W 14 h THE ADMINISTRATIVS IAW JUDGE: Mr. Ogden.
15 MR. OGDEN: Your Honor, I guess I would 16 ! appreciate five minutes to pull together these notes and go 17 f over the various things we had gone over the last couple hours.
L 18 , THE ADMINISTRATIVE LAW JUDGE: I uish you i
19 would consider to give me a categorical statement as to whether 20: or not the company is seeking recoupment.
21l MR. OGDEN: Fine.
22 (Whereupon, a short recess was taken.)
23! (Testimony continued on next page.)
lO 24l 25 l
H- MOMADACH Q 6t ARsMAL, INC. - 27 fie ESC!fWILLew A*/E. - H A R M,t S B U R G P A. 17912
'884 '
l MR. OGDEN- Judge Matuschak, we have had
, t an opportunity to review some of the notes here. Let me k
Q just say, first of all, I think I ought to respond to some h
3j
,I of the things that were said on the other side of the table, ,
3;
_ even though I don't think they are particularly pertinent 1
because of the issues before us.
6{
I appreciate the candidness of some of the 7
8-. Parties at least in recognizing that the company was under some amount of pressure over the last year and a half. But 9
seems to me M M may nspects he copy nnds uself 10 t
,11. ) between a rock and a hard place.
I
- After the TMI accident we just had a rate 7~,, l u
13 l increase for both companies go through. The TMI accident g
, j threw that in a cocked hat. TMI-2 was pulled out.
14 .- ,
. In Fnase II we had no less than three show is; 1
16 q ause rders issued against the company. One involved the 1
77l certificate of public convenience of Met-Ed. Despite that, when the Commission was talking in terms of deciding whether 18 19 to pull TMI-1 out of base rates, the company asked, during lI 20f the course of Phase II, whether or not they should present I g some testimony, and they listed 20 some witnesses they
! would call. 'Ibe Ccamission said no, don't do that. We 221 l
l are going to determine whether we take TMI-1 out or not
! first, then we will worry about that, h 24]
25 j I guess I find myself a little annoyed N C HR G ACH & MAR S H AL. tNC. .*7 N. LOCKwiLLOW At. ** W A M1S E U R t). PA. 171t2
885 i
j with the proposition thac the company somehow has prejudiced 1:i m i itself because it failed to file base rate cases in the 2i context of those proceedings.
3li '
I guess I also fir.d myself substantia 1'.J 4
annoyed with the proposition that tow it appears that some I of the parties argue the company had pre,judiced itself by 6 '-
filing a base rate case.
1 7 You know, no matter what we do it seems as g
, though we can't win.
t,
- Irrespective of that, I think Your Honor was 10 i quite correct in the decision that you made on the various 11 [ l issues in this proceeding, in your order dated sometime ago, 12 .!i referencing the consolidation of the issues.
g
~
I It seems to me clearly under the old 14 l S Section 1308 temporary rates were often used by the 15; Commission to extend a suspension period, when they had I a tough case and the issues had not been resolved and the 17l I record had not been closed.
18 The new 1308 does away with that temporary g
rate provision. ,
! I don't think that the restructuring of 21j l 1308 in any way is intended to take away from the clear 221 e j
23g provisions of 1310 under which all of us have to operate, Q and most of all, under which the Commission has a firm obligation, and that is to deal with the complaint against
"]
5 -,um o m.am m c. - 2, ,uoc . .m. m. -- m ,,,...m. . .. m,,,
586 y temporary rates in a prompt and reasonable fashion.
t 2j I think the company is entitled to have Your i
Honor and the rest of the parties censider its complaint G
3l 4 against temporary rates as though it had no rate increase l
5 pending otherwise.
l 6' Now true, for purposes of hearing we have i
7 9 consolidated the various matters, and as a matter of l {
8j evidentiary presentation, having been faced with hearings 9' in both matters together, we already had presented a historical 10 test year and a future test year, which as Mr. Fankiw 11 pointed out, is precisely the kind of test year we would
- 12. have presented to support temporary rates; wo have also i
13 [j presented evidence as to the actual results of the companies for September 30, historical data.
l 14 f.
15 Now it seems to me, going back to the u
16 j Commissior. 's order, if all the Commission had intended to 17 h have done i as to have a decision made with respect to TMI-1 it a
13 ") and to decide whether or not the amount that they deducted '
l 19 ) from base rates was accurate, they rouId have set permanent s
20 rates.
I The Commission did not need to set te:nporary 21.]1 a
22 rates just ';o determine whether TMI-1 should have been 23 renoved and whether the amount they calculated was right.
pf This was the Commission setting en ' cane. It seems to me g 25.f ludicrous to suggest that the Comm12sion would set temporary M3HR3ACH & M AftSi4AL. lf40. - 27 ?J. LOOKWILLOW A / E. - ;4 AnR)3BU 9G. PA. 17112 l
l
887 y rates with the proposition that, well, we will let the 2
Parties decide later on in a complaint proceeding whether 3
1 should Mve been removed and wheh the amount we 4 removed was correct.
I suggest to you the very reason the 3
6l Commission set temporary rates was because they recognized i
i that they had dealt with one piece of rate making. They did 7
g not want to sit en bane through a whole rate case. There-fore it seems to me they clearly said in their order we are 9
10 not fixing permanent rates, we are fixing temporary rates at yy this level lower because we removed TMI-1.
r Now if the company files a complaint, it 12j goes to an Administrative Law Judge, they can determine
@w 13 l; _ . , _
14 what the. proper level of overall rates should have been fr a June 1 on. Mne .
15i If there is any need to restate the overall 16 1 '
rates because of something we did not consider with the one 77 18 piece, we can restate the deferred energy balance to take -
19 4 care of recoupment.
l 20 Why? Because without recoupment 1310 is flatly unconstitutional. I have no doubt in my mind about 37 that.
22
)
23; With recoupment, everybody has got problems 24' with customers and so forth.
i To restate the deferred energy balance sort 25 MOf fRSACH & MARSHAL. f MC. - 27 fu LOCKWILLOW AVE. " H A R T1S W U rt G, P A. 17112
888 of takes care of that kind of a problem.
m TEE ADMINISTRATIVE LAW JtDGE: How would we e 2i
, t take care of recoup:aent if you are fixing rates in the future o
aI
! on a future test year?
l MR. OGDEN: Well, Your Honor, I guess I go 4
5 \
l back to this point. Sure, the future test year ends on March 31, 1981 but we are about in the middle of that test 7:;
year, in fact we are more than in the middle of that test 8
9 ' " * * * * * ' " " ** " E"
! rate proceeding, for a full level of rate increase measured 20 [
hy the full part of that test year presentation.
.:.1 l j What we are saying with that future test "l
13 y ar Presentation is that that'suggesta on a future test g year basis that we should be entitled to more than $26.9
~
14 r l i I
million or the 825 million under the petition terms.
13, So in addition to that we have the actual 16 :
h September 30 data. That actual data also suggests that the 17 18 iI company is entitled to more.
g Furthermore, we have the historical test year data and that historical period is the period ended
&O !
t j
March 31, 1980, ended clearly before the commission's~ order; l that historical data likewise suggests that the $26.9 million 22 yl l 23 [ fi8ure 18 a e 5Pletely conservative and reasonable figure in term 3 of what the company should have by way of a m,.
. i ^
Teasonaole rate increase over and EDove itS preSent rates.
0 neanuca a casm. inc. - n u. tocrwiu.OW A /E. - M R Nf 38 tJ R G. PA. 17112
889 l
1 Now the company, as I said, is not asking in 3 ,I this proceeding that you reach the issue of whether as a O ~i 3j judge under this section you have to grant the company a 4 l rate increase over and above what the Commission had dis-allowed in the May 23 order. We are not asking that.
5 6 What we are asking is on the basis of the ,
7 evidence, which shows that we could be entitled to more, what we are asking is that the $26.9 million be restored 8>
gf from June 1 forward, because that amount of money, not i i t
7g including any pieces of TMI, constitutes what just and g reasonable rates should have been from June 1.
12 , That is basically our position on it. I GD 13 'i
'"*"" "* *"*'* ' "* ' " ""d '"* "*"*'*" *"
~
p this case without subjecting us to some prejudice because 1
we als happened to file a general rate increase, and in fact 15l nk we have Med to present teshy and dah h M 16f 17 f related solely to this complaint proceeding and does not 73 f go further than' that sind try to pick up all the miscellaneous i
79 j pieces which we have tried to cover in our general rate 20j increase request.
And, yes, we are seeking recoupment, in the sense that we feel that toe $26.9 million figure or the
$25 million if the petition is considered for Met-Ed, is 23[
h the anount of just and reasonable rates which should have U !
been charged from June 1 and that those rates have nothing 25; I- r4ounexca ,. uanssat. inc. - 27 Nc LOcKWILLOW AVE. - H ARRl88URG. PA. 17112
890 1
- q to do with TMI, just simply pick up the pieces that the i
2{ Cescission intended for us to pick up through this pro-3'f. Ceeding.
4j THE ADMINIS'2RATIVE LAW JUDGE: Did you 5j present any evidence as to vhat the proper level of rates 6 abnuld have been June 1, 1980?
7l E. OGDEN: Judge Matuschak, i think we did.
8: I don't want to get into a review of the testimony at this 9[ point, but --
10 $ THE ADMINISTRATIVE LAW JUDGE: No, but I I
1~3 R
am saying if you take the positic.1 now that you are entitled ,
12 to recoupment and you are using a future test year, March a
{ 13 31, 1981, and Just excluding 'IMI-1 out of that, how would g u
4 14 that recoupment be proper if the' rates from now to the 15 future, to March 31, may have been progressively increased, 1
16 j the costs have been progressively increased for that period a
- I 1- @U and try to apply them back to June 1, 19807 IS .' Of course, you understand the prior act 19 i talked abou: recoupcent, recoupment had to be allowed.
1 1
20 ) Tou will ncte that the change in the act does not refer 31 ! to recoupment. It says the Comraission shall give effect, 22 which does not mean, as the prior act provided, that you had 33f to give the full recoupment of the exact amount over the 2/, past period, h 234 Tne new Code does not use the uord, recoupsect.
d i VCHRBACH is MAR SHAL. IMC. " 27 FL LOCitWILL OW AVT. " H A R P.13 G U R 3. 8 A- 171'2
1 .-
891 t
i f It provides that the Commission will give effect, which I m i
/'
2i suppose giving effect, to allow recoupment in any or no o- i 3; amount for that matter.
l l MR. OGDEN Tour Honor, in terms of the 4l 5 legal concept of recoupment, I agree with the cases which 6( you cited in your order in terms of how this particu1Ar f
~
t 7j language has been interpreted .by other jurisdictions.
- 8) In terms of how in practicality you 9 accomplish recoupment, it seems to me that if you grant an 10 [ increase of $26 million effective tomorrow, and in fact you 11 determine that the company should have been entitled to 12 i collect that additional $26 million from June --
I 13 THE ADMINISTRATIVE I.AW JUDGT. Where is-l 14 , that evidence? Where is the evidence of what the proper 15 level of rates should have been June the 1st?
N 16l 1"' . OGDEN: I am sorry, let me get back to i
17j that. That was your first question.
t i 18 j The future test year data which we have, l !
19 if you take out TMI-1, supports sometbing in the order of 20; $40 million plus at a 15t percent rate of return.
l ,.
21' Now at the rate of return allowed in the i
22 last rate proceeding, a 13.38 percent rate of return, that i
23l future test year data suggests $35 million for , rate relief 24 I Justified.
L Now we era not asking for $35 million. We 25]
MCHRBACH & MARS **AL. INC. - 27 N. LOCKWILLOW AVE.- M AR:d3 BURG. PA. 17111
802 '
5 3 ore only asking for $26 million.
18 s THE ADMINISTRATIVE LW JUDGE: You are 2
3j i assuming then that the Commission must guarantee a certain h
, jrateofreturn,whentheysetratestheyhavetoguarantee
?s
,j the eccpany is going to get that or else the company should
'b l have more money, just because they have not for some reason
+
f or other reached their rate of return that was tha marimum 7l ,
g rate of return that was established by the Commission.
9' ** *" #"##" " " # "# ""
- to a certain rate of return, is there?
,9 MR. OGDEN: There is no guarantee, Your 11
. Iionor, but all we have done for purpoacs of calculation is 12 ;
i to utilize the same rate of return the Commission itself I; :
! has utilized when it made its calculations of revenue h
14 ;
, ,, I levels in the last case, which for Met-Ed was back in 10' 1
1
,,: the beginning of 1979 wi l
i Test rate of return is certainly not one 17' d
which we would urge in terras of our general rate increase, 18 ;;
79 :,' but we have accepted that rate of return for purposes of
- * "" "" # " 8 "
20L l , . . future test year data - and we are more than half way 21' through the future test year, and it is only one tooJ to mmm a the am unt f revenues needed -- n the basis of 23:
that data, if you utilize the same return the Commiscica g
. utilized in calculating revenues in the last general rate a1 M@HRB ACH & M AR S HAL. INC. - 27 N. LOCKWILLOW A /E. - H s R R13EUR G. P a., 17112 i
893
,i 1l Proceeding you come up $35 million, but we are not asking O 2 for 35 million, we are asking for only $26.9 million, and O~ l if all the other accounting matters are wrapped up in this 4
petition it would become $25 million.
I suggest to you there is a lot of room for 5
6 i elimination of what you may censider to be centroversial l 7[ items, attrition from June 1 forward is an awful lot of t
8 room for movement between the $35 million and the $26.9 9 million.
I Furthermore, that is not the only evidence 10j 3
y1 we have submitted. We have submitted the actual data for
! 33 ! September 30.
Now we have said candidly that is not a 13 :
.LJ p, fully normalized test year. But those are the actual results of the company. Tnat is how you tell how the 13 16 l rates really measured up.
.i On the basis of the September 30 actual 17 [
18 without TMI, at the same rate of return the Cernmission i
used in calculating the revenues in the last general rate 19 f 20; increase tiack in 1979, we can support $31.2 million. Again clearly above what we are seeking in this case.
21l i :
Now if you go back to the historical data, 3j f
. again the historical data for the year ended March 31, 1980 23;.
g would support in c cess of $31 million.
S therefore again you see we are not asking 25 a
I - P..OMR3ACM & MAR $ MAL. It4C. - 27 Mt LOCXWILLOW A /E. - :0 S P U M G. PA. 17112
894 r <
I gj for $31 inillion, we are only asking for $26.9 million.
4 (l 2 ! We are not asking you as a practical matter
!. O 3l in this proceeding to take that extra step and say, not only 4; am I going to reinstate the $26 9 million but I am going to ,
I 5 i give you more, because that is what you have shown here, we 6, are not going to put you in that position as a practical l 7 matter in this case; but what we are saying is that when you a look at this data it becomes pretty darn clear that the g companies ' $26.9 million is an ascunt of money which would 10 f represent a conservative and just and reasonable level of l
yy j rates for the company to have been co.~1ecting frca June 1 l I
fonard.
12 l 13 THE ADMINISTRATIVE LAW JUDGE: Anything $
! 14, further?
l i 15 [ MR. BARASCH: Just one ccament. I assuteed 16i that this argument was for' the .i.: gal issues and not the factual issues. I would not want my silence in any way to 17l 30 i be construed as agreement with Mr. Ogden that there is l $
19 thirty-one, thirty-five, or forty-one million dollars un-20l contested i+cas at the old rate of rei; urn.
l l 21; I would just, if I could, point out at i
22l 1 east one tiny matter on the recori that has already been t
i
! 23 brought up, the reserve capacity expenses would show some- .
Q l ?
24 place between twenty and twenty-five million dollars, of a
l 25[ dollars that the company thinks it should be collecting i
8 MOHR3Acat & MAvi? MAL, INC. - 27 N. LOCKWf'.L OW A it. - H AMT!SBOPQ, PA, 17112
894-A i
from ratepayers, and in fact are not even going to be paying 1<l t
m ; to PJM for another couple years.
I don't think without too much difficulty 3l .
i you can get into high.ly contested areas about how much 4,! .
I money might be actually there that is uncontested.
5l l
6
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11 g 12; 14 1
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ui l 25a il MGMRS ACH & LtARSHA* IP!C. - 27 ff; LC04W! LCW AV E. - 9 4 9 R f3 8 U M G. P A. t7172
1 1
895 ' 1 1 MR. OGDEN: My intention, Judge, was 2 merely to show you ho'w we feel the e v idence ties together g
3l with the issue that is before you in this case using the 4{ numbers that we have. Obviously, we have not either 5j argued on the merits of the numbers, i
6j -
THE ADMINISTRATIVE IAW JUDGE: Anything i
~7i further?
i, 8 MR. RYAN: If we are finished with the 9l oral argument, I would like to bring up a matter before we 10 j break. ,
I t
11 , THE ADMINISTRATIVE LAW JUDGE: Let's 12 j conclude the oral argument.
s 3 13 t
(An off-the-record discussion was had.) h
.14 l MR. OGDEN: I just wanted to note for the
? .
! 15 record that yesterday I handed to Mr. Morris on behalf of 16)hisclientVitrolic, in the Met-Ed case several documencs 1
17l in accordance with interrogatories which th;7 have filed.
l I
1S ; I would also note that I have here a copy of l
19!,
some material that I will make available for inspection and 20 . copying in response to Question 39 of the Consumer Advocate's 21 interrogatories. Since it is quite voluminous, I would make 22l it available to the Consumer Advocate for inspection and . 3 23! copying 'first and if any other parties would like to look 24 through it and copy it, they are welcome to ?o so.
25 MR. ZWALLEY: What is the subject area?
h MCHRDACH & M ARSHA1 TNC. - 27 N. I;CC1CWlLLOW AVE. - M AR Rj 3 BUR S. P A. 17332
1 l l P '
I l1 1 MR. OGDEN: Do you want me to read it to t ) 2 you?
3 MR. ZWALLEY: No, the witness in the area.
l I l 4 [I, MR. OGDEN: Oh, I am sorry. This is mainly 5 ; in the area of Mr. Newton and it deals with megawatt hours l 6 ; consumed on the Met-Ed' system for each of six four hour l
I 7' segments from April 1st 1979 forward.
l Sj MR. BARASCH: I would be happy to make
. t 9; that available to anybody that wants te see it.
10 i THE ADMINISTRATIVE 1AW JUDGE: Very well.
l 11 j MR. OGDEN: I might also note for the 12 record that Mr. Carter and I reviewed with Mr. uise his i
13 interrogatories on bah,21f of the Senior Power Action group.
14 ; I think we ~ have reached some agreement as to making certain-l 15 things available to .htm and we intend to have some of those 16l items available tomorrow, so I just would notify them of that .
L 17: MR. RYAN: One of the purposes of my 18 inquiry was to sea if there was a reason to have a proceeding 19 I tomorrow, if we could in fact get it all done next Wednesday?
l 1
20 THE ADMINISTRATIVE IAW JUDGE: No, we are '
21' going to proceed tomorrow. We will adjourn until tomorrow !
22l morning at 11:00 o' clock.
23: (Whereupon, the hearing was adjourned
'4j at 1:15 o' clock p.m.) ,
()
25 h
MOMRRACH & MARSHAL. INC. - 27 N. tDSWWILI.TN AVE.
- H A R R 4 58 U7t G. P A. 17113
i r 1]
--00o--
2 p G
I 3 ll' I hereby certify tha' the proceedings and 4';
5 ll evidence are ccntained fully and accurately in the notes 1
taken by me during the hearing of the within cause, and that this is s. true and correct transcript of the same.
7 8'
MOHREACH & MARSHAL, INC.
9 0 By $s 8 hm.,/d LL l
,, 2li ay B Ph G v 13 j' a
/2 - & f d 14 l: ;
ii
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g -
i l 16.)
17 (The foregoing certification of this transcript t
13! doe s not apply to any reproduction of the same by any manc ii 19 I u:.less tu der tne direct ecntrol anc/cr supervision of the l
20!, certifying reporter. '
1 :
21'
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l t l 23; g l 1 24a i
25l i
' ?.tesa's :M e w ntMAt txe, - 7 N. tcc: art.:.cw Ave. - t'i'q'es:.:.eo. ? 4. trit:
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