ML20003B525
| ML20003B525 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 10/27/1980 |
| From: | PENNSYLVANIA, COMMONWEALTH OF |
| To: | |
| Shared Package | |
| ML20003B456 | List: |
| References | |
| NUDOCS 8102120347 | |
| Download: ML20003B525 (82) | |
Text
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9 1k B2 fore' 3
h E THE PEUNSYLVANIA I"J3LIC UTILITY COMMISSION n -_---
4 5[! In re: R-80051196, etc.. - Pennsylvania Public Utility Commission vs. Metropolitan Edison Company.
6!
! Investigation into a requested $76 5 million annual
,, rate increase.
gf Hearing.
?
9 I 1
IC j l 11 15 ?
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Harrisburg, Pennsylvania A i October 27, 1980
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i 31 MOHRBACE & MARSHAL, INC.
, 27 North.Lockwillow Avenue l 22 f" Harrisburg, Pennsylvania l -17112 23( .
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j THIS DOCUMENT CONTAINS 25 'j P0OR QUAllTY PAGES
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8102120 % "
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Before 5 THE PENNSYLVANIA PUBLIC UTILITY ColmISSION { }
3 "
k 4 In re: R-80051196, etc. - Pennsylvania Public Utility S; Commission vs. Metropolitan Edison Company.
l Investigation into a requested $76 5 million annual rate increase, 6
i u
Hearing.
'l gy -
e - .
A Stenographic report of hearing held 9j in Hearing Room No. 1 3 North Office 10 p
., Building 3 Harrisburg, Pennsylvania, i Monday, 11 l October 27, 1980
, j at 10:00 o' clock a.m.
4.2 !
(~ i JOSEPH P. MATUSCHAK, ADiINISTRATIVE IAW JUIGE l I 14 l 15 g ,
APPEARAMCES :
26*I i STEVEN A. McCLAREN, ESQUIRE
.t 7 B0HDAN R. PAEKIW 3 ESQ,UIRE
., y P. O. Box 3265 North Office Bu$.lding Harrisburg, Pennsylvania 17120
~g]7 For - Public Utility Commission Trial Staff i
- 2) SAMUEL 3. RUSSELL, ESQUIRE
. W. EININ 00 DEN. ESO.UIRE 21 '- ERIC L. 3, STRAEN, ESQ.UIRE a 530 Penn Square center 23 h P. O. Box 699
,, j Reading, Pennsylvania 196o3
'; ? Por - Met-Ed 1
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voM?*E AC .* 'J.* 5 F**N. 'NC. " M ? . ?./J %iYe%1.W! AYE ~ *+A"lPIS BU *C. PA. I'Il l E
l 2 i
El, APPEARANCES: (Continued)
MAURICE A. FRATER, ESQUIRE f
V 2
McNees, Wallace & Hurick 3 P. O. Box 1166 I Harrisburg, Pennsylvania 17108 4l For - St. Regis Paper Co.
! P. H. Gladfelter Co.
National Gypsum Co.
5[
I 6 l- DAVID BARASCH, ESQUIRE
! ASHLEY SCHANNAUER, ESQUIRE
? 1425 Strawberry Square Harrisburg, Pennsylvania 17120 8$ For - Consumer Advocate 9 ROBERT E. KELLY, ESQUIRE i Duane, Morris & Heckscher
! 20 ! P. 0.-Box 1003
- j Harrisburg, Pennsylvania 17108 11 1 For - Victaulic Co. of America r
12 BERNARD A. RYAR,JR. , ESQUIRE l 800 North Third Street 13 I Harrisburg, Pennsylvania 17102 l
,3 '
For - Bethlehem Steel Corporation 14 j i ROBERT JUDE JENISON, ESQUIRE 15 f R. D. 1, Box 280-6 Wellsville, Pennsylvania 17365 16 [j For - PROSE 17 i KENNETH A. WISE, ESQUIP2
- 213-A North Front Street 18 ! Harrisburg, Pennsylvania 17101
- For - Louise Riley and S.P.A.G.
19 5 20 (
uit 32l 23 ?
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35 }
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' ue:nser: A *.tes.%L, rMe. - 27 t:. coe=;tLLou Av:. - :-tAamsauRG. PA. t M f f.
l
3
- a r h
s 1 INDEX TO EXHIBITS b 3gMET-ED IDENTIFIED AIMITTED { )'
3 .B-7 Response to Pa. PUC Staff Valuation
( Interrogatory No. 1 . .. . . . . 5 4:
I B-7 Response 't o Pa. PUC Staff Valuation 5{ Interrogatory No. 4 . .. . .. . 5 i
6 B-7 Response to Pa. PUC Staff Valuation Interrogatory No. 5 . ... .. . 5
?'l C ,
Replacement Pages 4-16 . . . . . . 5 f
I B-ll7 - Monthly Letter to the Pa. PUC for 9l the Months March 1980 and August
- 198o . . . . . . . . . . . . . . . 5 10 l B-118 - Response to Consumer Advocate il l. Interro6atory No. 4 . .. . .. . 5 1
12 B-119 - Response to Consumer Advocate
' Interrogatory No. 5 . . . . .. . 5 C'.
2 ",;
B-120 - Response to Consumer Advor, ate .
e 34[j Interrogatory No. 18 .. . . . . . . 5 1-13 i B-121 - Response to Consumer Advocate 8
Interrogatory No. 19 . . . . . . . 5 16 [ .
j B-122 - Response to Consumar Advocate 17 h interrogatory No. 20 . . . . . . . 6 3
16 f B-123 - Response to Consuner Advocate Interrogatory No. 21 . . . . . . . 6 19 ;
l e.
t B-124 - Respon :e to Consumer Advocate Interrogatory No. 22 . .. . . . . 6 l
20 hl 21; B-125 - Response to Consumer Advocar,e Interrogatory No. 25 . . . . . . . 6 22!
33 l B-126 - Response to Consumer Advocate Interrogatory No. 28 . . . . . . . 6 M k B-127 - Re3ponse to Consumer Advocate 3 Interrogatory No. 30 . . . .... 6 g
25a 3
1 uwn=m s 1.uamuu u:e - z, n. uezxct.uru n~ 1. - :<r?.rwati- a. ex rrsse 1
3-A r .
1 1j INIEX TO EXHIBITS i (Continued)
O. 5!
P 3l MET-ED IDENTIFIED ADiITTED 1
4i B-128 - Response to Consumer Advocate I Interrogatory No. 31 . ..... 6 al1 B-129 - Response to Consumer Advocate.
6li Interrogatory No. 33 . . . . . . 6 7 } B-130 - Response to Consumer Advocate i Interrogatory No. 11 . ..... 6 3!
l B-7 Response to Consumer Advocate 9f Interrogatory No. 26 . . . . . . 6 10 [ B-7 Response to Consumer Advocate l Interrogatory No. 27 . . . . . . 7 11 j B-7 Response to Consumer Advocate 12 Interrogatory No. 38 . . . . . . 7 Q 13lB40-1 Respcnse to Consumer Advocate Interrogatory No. 24 . . . . . . 7 14 {'
15 ) B-73-1 ' Interrogatory Response to Consumer No. 6 . . Advocate
. .. . . 7 1
16/B-76-1 Response to Consumer Advocate i Interrogatory No. 12 . ..... 7 17 (
9 B-76-2 Response to Consumer Advocate 18 j Interro5atory No. 13 . . . . . . 7 l
( 19lB-76-3 Response to Consumer Advocate l
Interrogatory No. 14 . . . . . . 7 l 203 l hB-76-4 Response to Consumer Advocate 31 l Interrogatory No. 15 . . .. . . . 7
,4 t
22i B-76-5 Response to Consumer Advocate l ( Interrogatory No. 16 . . . . . . 7 33 4o l B-76-6 Response to Consumer Advocate M3 Intorrogatory No. 34 . . . . . . 7 C) ~
b 35 h
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- TAR $ MAL. t*41 .77 4. LCCMV.'1LW A'/2. - HAMICSU?.G. .*.% 17t12
--3-3 ,
a 1l INITFJ TO EXHIBITS
~
Z l (Continued) 1 MET-ED IDENTIFIED !
3j' l l E-19 Letter dated september 5, 1980 1 4I to the GPU Corporation from i Philip C. Kron . ........... 8 5 .1
- Letter dated October 13, 1980 to the d).J-2 Commissioners of the Pa. PUC from i H. Dieckamp ............ 8
?B E-5 Quarterly Financial Statements......... 79 83 I E-6 General Public Utilities Corporation
? Second Quarter Report to Stockholders.. 79.
3
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4 S e, 4
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13 '2 16 3 DIDEX TO WITNESSES l
4 "7j DIRECT CROSS 1
E'3jEdmondNewton,Jr. . . . ....... 8 9
.# ~,; ) Eugene F. Carter 46
. . . ....... 47 a
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I{I t THE ADMINISTRATIVE I.AW JUDGE: Are the parties
(] 3 ready to proceed?
3- MR. ST w it' Yes, sir. We are, Your. Honor.
4{. THE ADMINISTRATIVE LAW JUEGE: Do you have 5I any preliminary matters? .
6 MR. STR/ dei: We have none. We have a few i
7f items to be marked for the record.
8I MR. CODEN: Your Honor, this morning I have 9 handed to the parties the following exhibits:
I J
10 ; Met-Ed Exhibits B-7-4 through B-7-6, and also i
11 i replacements Pages 14 through 16 to Exhibit C-5
, 13 [ MR. OGDEN: In addition, I have handed to the 1
13 ' . reporter three copies of the following exhibits which were 34 I distributed earlier, and these are Exhibits B-1-17 through -
i 15 B-1-30, 3-7-1 through'B-7-3, B-40-1, B-73-1, B-76-1, s-76-2, 16 through B-76-6, E-19-1 and' Met-Ed Exhibi.t No. J-2.
i 17 [ In addition, I might just note for the i
10 record that we had promised to have available for inspection 19n ]iand copying today certain operating reports and certain 20 forms 1 and 12. The Consumer Advocate has in its possession 21, the operating reports and they can be made available to any f
22 [. other party if they desire to look at them. The forms 1 and 33 h 12 are likewise here and an'y party who would like to look at 1
24 them is free'to do so. .
l "4 THE ADMINISTRATIVE LAW. JUIGE: Very well, the l
l $ n.cescw a maewu me. - :, :.. Lee:rmew urz. - :umusseac n. m :2 It
5 1 , exhibits will b'e identified.
~
3 2 { }
l 3l (Whereupon, a document entitled " Response to Pa. PUC Staff Valuation Interrogatory No. 1" 4 ;l was marked Met-Ed Exhibit B-7-4 for identification.
5 Whereupon, a document entitled " Response to 6{ n Pa. PUC Staff V luation Interrogatory No. 4" h,, was marked Met-Ed Exhibit B-7-5 for 7? identification.
I Gf Whereupon, a document entitled " Response to j Pa. PUC Staff Valuation Interrogatory No. 5" 9l :
was marked Met-Ed Exhibit B-7-6 for identification. '
10 I .
) Whereupon, a multi-page document containing 11 i replacement Pages 4 through 16 to Exhibit C-5 l was marked C-5 for identification.
12 ! .
I Whereupon, copies of the Monthly Letter to
' 13 l the Pa . PUC for the months March, 1980, August, 1980, were marked Met-Ed Exhibit B-ll?
g f
14 i for identification.
i 15 ll Whereupon, a document entitled " Response to 3 Consumer Advocate Interrogatory No. 4" was 16l . marked Met-Ed Exhibit B-llB for k identification, 17 l Whereupon, a document entitled " Response to
/
10 l Consumer Advocate Interrogatory No. 5" was marked Met-Ed Exhibit B-119 for 19 identification.
20 Whereupon, a document entitled " Response to 1 Consumer Advocate Interrogatory No. 18" was 21j , marked Met-Ed Exhibit B-120 for. l y identification. !
j 22] Whereupon, a document entitled "Response to '
s 23 i Consumer Advocate Interrogatory No. 19" was i marked Met-Ed Exhibit 3-121 for My identification.) gl d
25t
)
11C bm ACT-! & !!Ait $7fM FNC. - ?.7 N. LOWIN.f TV AVE. " H AT.M*S3CRG F A. 17112
0 i
I ;l (Whereupon, a document entitled " Response to
!! Consumer Advocate Interrogatory No. 20" was Q 3l g marked Met-Ed Exhibit B-122 for identifica tion.
32 3
Whersupon, a document entitled " Response to 4 Consumer Advocate Interrogatory No. 21" was f marked Met-Ed Exhibit B-123 for 5f identification.
i Sl Whereupon, a document entitled " Response to i Consumer Advocate Interrogatory No. 22" was 7j marked Met-Ed Exhibit B-12L!. for a identification.
Oh
! Whereupon, a document entitled " Response to 9' Consumer Advocate Interrogatory No. 25" was
! marked Met-Ed Exhibit B-125 for 10 identification.
J 11 . Whereupon, a document entitled " Response to
- Consumer Advocate Interrogatory No. 28" was 12 i . marked det-Ed Exhibit B-126 for
! identification.
13 .
Whereupon, a document entitled " Response to 14 l Consumer Advocate Interrogatory No. 30" was I marked Met-Ed Exhibit B-127 for 15 [ identification.
I loj Whereupon,.a document entitled " Response to Consumer Advocate Interrogatory No. 31" was-17 li marked Met-Ed Exhibit B-128 for
! identification.
18 !
Whereupon, a document entitled " Response to A,, . Consumer Advocate Interrogatory No. 33" was l marked Met-Ed Exhibit B-129 for 20f identification.
1 .
31 Whereupon, a d'cument o entitled "Respense to a Consumer Advocate Interr'o gatory No.11" was 22 A marked Met-Ed Exhibit B-130 for 3 identification.
n?
l k Whereupon, a document entitled " Response to
() 24 y
Consumer Advocate Interrogatory No. 26" was mar ek d Met-Ed Exhibit B-7-1 for
~] identification.)
f:CMR9t.CM & MARSP!E IMO. - 27 .V. 'J3C'W.2:Lt OW AW. - MAM!SSURG. ?A. 171t2 I
_ _ _ - -.s 7
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-]
I/ (Whereupen, a document entitled " Response to Consumer Advocata Interrogatory No. 27" was 3lq marked Met-Ed Exhibit B-7-2 for identificationg t
, 32 Whereupon, a document entitled " Response to Consumer Advocate Interrogatory No. 38" was 4 marked Met-Ed Exhibit B-7-3 for identification,
\g \
5l Whereupon, a document entitled " Response to Consumer Advocate Interrogatory No. 24" was
"!l marked Met-Ed Exhibit B-40-1 for identification.
's
- a l.
Whereupon, a documcrit entitled " Response to O Consumer Advocate Interro5atory No. 6" was j marked Met-Ed Exhibit B-73-1 for 9 t identification.
i IO l Whereupon, a document entitled " Response to i Consumer Advocate Interrogatory No.12" was 11 l marked Met-Ed Exhibit B-76-1 for identification.
12 i 1
- Whereupon, a document entitled " Response to
( 13 l t
Consumer Advocate Interrogatory No.13" was marked Met-Ed Exhibit B-76-2 for g
24l identification.
i 15 ? Whereupon, a document entitled " Response to
,, i Consumer Advocate Interrogatory No. 14" was 26 h marked Met-Ed Exhibit B-76-3 for 4 identification.
l 17 %
1 1, 8 l Whereupon, a document entitled "Re'sponse to I
l Consumer Advocate Interrogatory No; 15" was marked Met-Ed Exhibit B-76-4 for 29 [
identification, i
l Ol Whereupon, a document entitled " Response to O Consumer Advocate Interrogatory No. 36" was 31l marked Met-Ed Exhibit B-76-5 for
, identification. .
22 l1 '
Whereupon, a document entitled " Response to 23 n Consumer Advocate Interrogatory No. 34" was 5 marked Met-Ed Exhibit B-76-6 for 44l identification.) g
.3
.,O tj MOHRC ACM & f'A3 5W%L. TPC. " .*.7 M. L ak3W.7 LO*.'! A'.'I. - P AMP.5 set!;tG. PA. 17112 --
8 I@ (Whereupon, a letter dated September 5,1980 i to the General Public Utilities Corporation h 2h i
from Philip C. Kron was marked Met Ed Exhibit No. E-19-1 for identification.
3E
- Whereupon, a letter dated October 13, 1980 to 4 lj the Commissioners of the Pennsylvania Public d Utility Commission from H. Dieckamp was marked 35 Met-Ed Exhibit No. J-2 for identification.)
5g I
- I 9h MR. afangg We have Mr. E. Newton, Jr.
O He appeared on August 4th 3 available for cross-examination.
f 9l Your Honor, and has already been sworn. He inas also i
10 identified his exhibits, so we -would simply ask that he state t
al j,' his name and address for the record and we will then tender 4
U him for cross-examination on transmission and distribution
~
O 23 and maintenance expense.
{}- t 14 I THE ADMINISTRATIVE LAW JUDGES You better 15 have him sworn. He was sworn in the other case.
?
16l-17 Whereupon, ErMOND NEWTON, JR., having been 10 h first duly, sworn, was called as a witness and testified as 19 1 jfollows:
l 20 21 DIRECT EXAMINATION 22
- BY MR. x ..
M Q. Please state your name and address for the a
24 record.
^34 A My name is Ed:cnd Newton, Jr. My business 3
- .te,muen a .uasm.. uc. - a n. = wvs.w.. .wz. - w.msav=.a. n. ms:
Wa b;n-cross 9
s 1 address is Box 1018, Reading: Pennsylvania.
(~ 3 I
Q And have you previously testified in this g
2 proceeding on August 4 of this year?
Ia 4fi A' Yes, I have, i
MR. STRA3N7 We would tender the witness for 5l ?
6l 1 cross-examination, Your Honor.
- 7) .
9 ;
.- CROSS-EXAMHIATION 9 )i BY MR. PANKIW:
3 10 tt Q Good morning, Mr. Newton.
3 i 11 5 A Good mornin6- - -
12 THE ADMINISTRATIVE IAW JUIGE: Did you 13 inquire as to the statement he has made?
i Did you verify g
I4 r the statement that he made?
4 15 3 MR. STRAHF:- Yes.
16! THE AEMINISTRATIVE L.W JUEGE: Very well.
BY MR. PANKIW:
17lil 18 h Q Mr. Newton, in your prepared testimony, you a
19 indicate particularly at Page 18 that transmission and 20 $ distributi a expense since 1968 has been at a reduced level a
31,L due to the 1973-1974 embargo. could you tell us why that d
l 22] had an effect on the reduction in T and D expenses? >
J .
A Well, at that point the outgo of dollars for 23 {4 .
s 24 j fuel, energy, were so great 'that the only way we could 3
g 23 a maintain cash flow appropriately was to cut back on all other
L
Newton-cross 10 9 3 i
1 ( areas of expense other than energy.
I 2 Q In other words, the company had to reduce J
3;. its expenditures?
l 4[ A That is correct. The second area of the effecu 5 j) of the embargo was the recession or whatever they descr 6 it, industrial, and so forth, that cut back in all level of 7f industry's activity and the resulting reduction in base 1 l 1 1 8l revenues.
i 9j Q Are you saying it caused a reduction of 10 electricity censumption that resulted in your company's i
11 requirement for fewer T and D expenses?
[ .
12 .) A - No, not at all.
13 [ Q I just want to be clear that the effect of
' N
.14 l ' the embargo on the company was a need to conserve cash and .
15 h that was the reason for the reduction in T and D expenditures, A
16 ) is that correct?
1 17 I A That and the fact that we also had a
! 2 18 0 reduction in base revenues. The recession effected all the 19 industries and so forth.
3 20 j Q How would a reduction in base revenues s
21 k effect the levels of T and D expenditures?
a 5
22 i A Well, it is the base revenues that are i
1 23 j utilized for all other elements of the business, all our 5
M j costs other than the energy costs, which are, of course, w y 23 revenues.
U :omaan s uns.a: ure. - a >: oewmow Ave - unm:r>na. n. swe o_ _
Neuton-crosa 11
.j 1
1l Q In other words, the company had less money to 5
f 2yspend?
3 3l A Yes.
4 Q On Page 17 of your testimony, now you t
3 ,' indicate that the level of employees at year ending May 31, 5 j 1980 are reasonable and appropriate in light of all existing l
7 circumstances. Are these existing circumstances that you i s are referring to again a need to conserve cach on the part of 8f 9i the company?
10 f A Yes. The totality of a'l1 the impacts of TMI, I
11 [ their removal from rate base, removal from revenue, the 13( continuing rise of energy costs and all other costs that we t
13
{ bear, all of those things were the circumstances that I was g
14,I referring to here.
I Q Eut the basis reason is a need to conserve 13 ]
4 16 / cash due to all these events?
17 h A Yes, i
18 g Q, Further, in that same portion of your 19 testimony, you indicate that that level of e.sployees is not i
30 sufficient r,o maintain the . existing quality of service. In 31: this regard what adverse effects are you referring to in the 22 $ future?
h 23 j A Well, basically it is the reliability of the o
1 24 service to the customer, the condition of all of our plans. g 23i The most dramatic one that we all see and I am basing on is 1
$ ;4 e:-;U AC*d ;h ?:! ARS}ffi. INC. - 5,7 ;f. Locitr,T.LCri/ N!%. - IFAJ'R'33'4.tG, ?A. t f t 12 -- -
dewton-cross 11-A '
).
I )g the cutback in tree trimming expenses which, when we have a 4
3; stor:n, causes censiderable interruptions, less reliability, 3l !
but all other elements of our service is also going downhill 4
4 $ steadily since we can't replace it due to the c:aintenance, t
3l t preventive maintenance. -
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Q Could you be any more specific than the fact 3{t
/ 2 that a reduction in tree trimming expenditures may cause more i
ut ges in the future? I mean how will reduction in 3[ seri t
us 4{.T&D expenditures in the long term, you know, reduce the 3 qu lity f service?
i 6 A If I might refer to Exhibit 22 -- F-22, this 7 ipossibly puts it in as good a perspective as I could. One i
g( of the major elements of expense, not the only one by any 9 hmeans, but it is the most drastic one is in the tree trimming.
TO
!And Page 1 of Exhibit F-22 shows distribution maintenance and ~
~ t man-hours of contractor tree crew effort. 'And we have 33 i ~
12;,' pr jected that dotted line as showing the level of effort, man-13 hours, the contractor effort that would be required in order to maintain something in the order of a four or five-year 14 i cycle of trimming all of the trees, so that we are not 15 16l subject to interruptions every time the wind blows or a heavy storm hits.
37 t
yg j The bars down here in the lower right-hand i
39 georner are the actual effort we have been expending over 3
And at '79 where it's scmething like 20 a the last few years, gg 60,000 man-hours of effort, whereas in order to maintain 7 l what we think is a good level we ought to be up to something t
"3 like 230,000, 240,000 man-hours of effort. That's the kind 4, 4 iof thing that the lack of T&D money, money that we can gf expend on cur T&D operation and maintenance produces. Ql 1
f*cMRCACM CetuR5 MAL t = - 27 P8 L.OCXVrft.L,0W AVO. - H A* TRIS CtJ*G, PA. 171 ??.
IT2uton-cross 13 Eq Now, over on the other -- second page -- oh,
'l 3 that's the tabulation. The third page is the tree caused 3 finterrupt. ions, just showing how they have gone up in the 1
4,f period of restricted trimming effort. Now, this is just i
y& tree trimming less major storms. The same data is shown on 6; Page 4, including the storm problem.
y1 Tota 1. interruptions, tree caused interruptions s
8 l and the -- in 1980, the six months ended June, we had 86,000 gf customer minutes of interruption due to major storms, and to that has continued to go up somewhat since then. So that l'
in 1980.we expect to be way beyond anything we've ever 11 l 12 { experienced before in terms of tree caused interruptions.
I Q Well, your tree trimming expenditures are only 13 l
,14 ,
a portion of total T&D expenditures, is that correct?
i 15 ; A That's correct, yes. '
16 Q In the non-tree trimming expenditures brea, in i
17j whst way will maintainirig the existing level of T&D expenditures .
18 ! diminish the existic.g quality .of service in the long term?
19 A. We're below the -- what we would call the ideal B
30 level. One of the things that we would do is to inspect 31 .' Poles on a routine basis 3 inspect the condition of the poles t .
22 j at the ground line. where the rotting takes place. And when i
1 23 ;4 the pole has begun to deteriorate, we would then havs. a ground i
y treatmant procedure that will tend to preserve that pole for g3 a considerable number of years.
U .wir.ne , o ammm. me. - 27 n. t cx irt.t.w .wr - n2=>sev es. ex. treiz
Newton-cross 14
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l 1.
1I And normally a pole might last 20, 25, 30 years, 1 And as it begins to deteriorate at the ground line, then that 3 glife can be extended for 10 or 15 years by this . ground line o
4[i treatment. The lack of adequate budgeted dollars for con- 1 5( tinuation of that program is causing the -- all' of the poles 6l we have up to continually rot very gradually at the ground 7 line and they do. So we just have a bigger catch-up job 8 when tha t comes along.
i 9l The same type of thing is true with every piece l
10 ( of steel we have in substations and tower lines. They should L
11 l be painted on a fairly routine basis every fi.ve or ten years, i
12 j depending on how bad the conditions are, and that is just not r
13 being done. We simply don't have the funds to do it. g 14 [ Q Now, referring again to your testimony on Page 17 ,
15 when would you expect this reduetion in the existing quality 16 1 .
of service to be felt?
i 17 i A Well, it is already being felt very -- very 18 ,
markedly. Our total non-storm related customer minutes of i
19 f outage, those are increasing steadily, and they will continue i n 20 { to increase, I'm afraid, at an accelerating rate unless we're s
31 f able to put into place programs to catch up those things that 22 f should have been done over the past five or six years when 23 d we've been in very straightened cirecmstances. I don't have i
R] any of those statistics with me regrettably. g 35 d Q On Page 17 as one example, when you're referring
' C;mA821 3 MAR 9"tAL. INC. - f 7 2 . LOOM'?MLLO71.W
Heuten-c ross 15 a{ to the -- say the current level of T&D expenditures, are you i -
2 referring to the original budget for T&D expenditures or the 3 three plus nine revision budget for T&D expenditures ?
4j A I'm not sure that I am -- do you mean the three 1
3j plus nine 1980, the update of the original budget?
Q Yes.
4[i i 7e A All of my figures here are based on the original a budget. Everything I show in my exhibits is -- is the original 9; budget. Exhibit F-16 shows the '79' original budget -- well, i
to [ I have to qualify that because we do have in 1980 three and i
12 [ nine level in there.
l l 12 ; Q I'm trying to get clear when you testify to the 1
l .
! 13 fact that the current level of T&D expenditures are unreason-O i able '- 'ight of existing circumstances, that level of
,14 .
r 13 i expes.%.tures t , are you referring to the original budget or 16 j the revised three plus nine budget?
17 li-i A The revised three plus nine is even -- well', I 18; would say that that -- that is the level specifically. I 19 [ uasn't talking about any specific budget. We were at a i
20 level that was cdequate under all the circumstances. That 21 . was all we had to spend.
22! Q Let -me ask it in just a little different way.
I 23 i Would you say that 1980 current revised budget three plus i
yl nine 'is reasonable and appropriate in light of. the existing a ~
3 25 3 circumstances but would not be sufficient to maintain the i
l renasm, a manew me. - a : . coexwnwt ,ws. - HAan:ssues. m. tmz
neucon-cross 16 l 2 existing quality of service in thelong; term? l 3 A That's correct, yes. q 3
I Q Okay. Now, on September 12, 1980, the company 4 sent a letter to t.he Commission indicating that there would Are you faniliar 3l be a reduction in budgeted expenditures.
i 6hwith that letter? I think it's Met-Ed Exhibit E-25.
t 7[: A Yes, I have that letter. I've read it, am 3l familiar with the general thrust of the letter.
i 9l Q It identifies certain reductions in budgeted i
- g f expenditures. Would there reductions further reduce the t
gg f.budgeted T&D expenditures as indicated on your three plus 13 nine projection of expenditures ?
They would reduce it below that three point --
12 i i
A e
,g three plus nine level ~, yes.
i Q I see.
15 l '
l 16 i Now, how would that further reduction that's, l t 17 ! I suppose, summarized in E-25 affect the quality of service?
L 28f In other words, in your opinion would that revised level of 19 l expenditures be reasonable and appropriate in light of 20i exiseing circumstanees?
( :;;g [ A Well, if you accept the reasonable and appropriate 22 statement, as I did, th9t that's all you have goc and all you 23af can get, you can't do anything else, I regarded that as
- 34. reasonsble, a reasonable part of what the total available i funds to the company were. They are certainly belcw the 23f uen.wcx a :msw er:c. - 27 : . uccenu.en Av:. - xmimm. m. m4:
t
N:wton-cross 17 n = .
g E level of the ideal expenditures that we should be making to 5
g f c:aintain service at the same quality we have. These reductions 3 that are referred to in the September 12 letter will indeed further reduce our ability to respond to trouble, to maintain 4g 1
3i. ongoing preventive maintenance programs. Probably the most 6( critical point will be the reference on Page 5 in the letter y where we will reduce T&D capital expenditure by about one-halff, and tha t will have an immediate impact on our ability to 3f i
p[ connect up with the customers, and that will be a very 10 traumatic experience for us and the customers. We've never
- , { done it before.
'1 12 l Q I'd like to direct your attention back to 4
13 l Exhibit F-16 which displays for T&D expenditures the O i yl original budget and the current revised budget three plus i
15 { nine.
3 .
16 ' Could you tell me if this three plus nine budget 17 j is reflected in the future test year data ?
10 l MR. ERAHN: Do you have a specific reference i
19 j to that, please?
20 [ BY MR. PANKIU:
,4 31' Q The data that's sumarized at Exhibit B-1, Part 8 ,
22 Page 1, Column 1, which is :the basic income statement for the 23 rate case.
3 2 A No, sir, frem this exhibit I can't cell. It 33 d would be necessary to go back into the details supporting O *!O"rt7tL%CM S X TS: fab f MO. - 27 ft 'JCM".*/1 LOW N/L =
A
' A"tRi2 9VptG, f8A. 7711 %
.#, ,- -.v. - . . , -
H uten-crocs 18
}
1 l this to be sure whether they would be reflected in thara cr I
( ;i not. My guess would be that they are, but I'm really not sI sure. Mr. Huff would have to respond to that I think.
e "f
MR. PAEIW: Could counsel indicate which witness 3l will be able- to respond to the question of whether the t
6[ original T&D budget or the revised T&D budget is the budget t
- 9. that's reflected in Column 1 on B-l?
- i 8I MR. STRAHN: Mr. Huff would be the appropriatie l
9 { witness.
Io i MR. PANKIW: All right, thank you, t
I have no further questions, Your Honor.
11 i
- 12. THE ADMINISTRATIVE 1AW JUDGE: Consumer Advocate.
I 13 i MR. BARASCH: Thank you.
l 14 'i' BY MR. BARASCH:
1 15 Q Mr. Newton, if I could just ask you one 16, Preliminary question following u'p on a question by Mr. .
I 17j Pankiw, the last question referred to your E:khibit B-16.
f 18 j THE ADMINISTRATIVE IAW JUDGE: Keep your voice b ,
19 4 up.
1 201 EY MR. BARASCH:
I Es:cuse me, F-16, which is the three plus nine
~
21; Q i I think you were asked whether or 22 f budget revision for T&D.
23 h not Mr. Huff's e::hibit incorporates this revision. Let me e
Your answer was that you don't 2, . just r= view that with you.
know ?
e 25j
' ucuveu a nas:st me. - a u.1:oxc:nu. w av=. - un.,mauna, n m sz
Nencon-cros: 19 t -
1 A I don't know.
3 Q MR. BARASCH: Is the company going to offer to 3 f check into that? Could they report back to us on the manner 1
4h in which Mr. Newton's exhibit jives with Mr. Huff's' exhibit?
I 5I MR. STRAHN: Well, we have already indicated I
4 3 '
that Mr. Huff is the accounting witness and as such would I
7 have that global responsibility.
8; MR. BARASCH: What I would like to do, if ,
9f possible, is make a data request for a response to that i
10 j before Mr. Huff gets on the stand.
11 I MR. STRAHN: That's fine. '
12 l MR. BARASCH: It would be helpful for us in i
] 13 [ cross-examination preparation.
i MR. ST3AHN: We will endeavor to give you an 14 {
15 early response. ,
16 . MR. BARASCH: Thank you.
I 17 f BY MR. BARASCH:
1 IB ! Q Good morning, Mr. Newton.
19i A Morning.
20 $3 Q Mr. Newton, 'I wonder if you could ask your a
31 f counsel to provide you with a copy of Met-Ed E as in Eric i
22j 25.
I 23:1 A Yes, I have one now.
A
- M Q Thank you. Now, as I undarstand it, Mr. Graham --
23' strike that -- Mr. Newtoa, Mr. Graham provided Exhibit E-25 MeM173Acit e M A!!3 MAL. 8:70. - W W '46c:4W;*.LOVI AVL - MAM&SSU*0. PA. W112 --
Newton-cress 20 y _
1 [ relating to O&M and other budget cuts belag made by Met-Ed a
g in light of the Comission's denial of emergency rates. Is g
- 3. f that your understanding of what that exhibit represents ?
4 A Yes , that's correct.
3 Q Now, have those cuts been reflected in your I
di testimony in this proceeding to date?
7 A Not to date. These go beyond anything that I 3r have testified to so far.
I l
9[ Q And do you know what the actual operating status i
10 h of those proposed budget cuts mentioned by Mr. Graham I gg ! believe it was on September 12th are at this date?
(
12 l A They're in the precess of being implemented.
13 The first layoffs are to take place I believe on the 31st g
.14 I of this month, Phase 1. Phase 2, which presumably will have 15 a to follow shortly thereafter, will take place sometime 3
16 l during November. The companies areipreparing -- this is 17.3 sll the companies including Met-Ed -- are preparing revised i
is [ budgets consonant with the reductions shown on their --
i 19 ' discussed in the September 12th letter.
i )
l 20 $ Q Aside from the layoffs here, are there other l *>
21[ aspects of these cuts you have been implementing at this 22 [ date?
MR. STRAliN : Your Honor, if I might interject, 23 {
- j - we are going to be going into this in some depen tomorrow g 7, i and Wednesday with other witnesses. And so I would request a
3
-:cmm.sen a stumw ute. .~.r :. t.eemn. .ov. w:. - duemsauna. _m. sms
Hewton-cross 21 a
g, that the questioning. be limit'ed to the area of transmission i
g and distribution --
i MR. BARASCH: You should read the question in 3 ,
that light, Mr. Strahn.. That is what I was aiming my 4
3! question at. I was aiming my question to the cuts that do 6 relate to Mr. Newton's area only.
i yf THE ADMINISTRATIVE 1AW JUDGE: Objection is over-1 8: ruled.
I pf THE WITNESS: Well, .I was saying that we are io preparing revised budgets. They are in a preliminary form i
11 i now consistent with this September 12th letter. Those are 23 ! to be reviewed with management t nmorrow and Wednesday. And i.
I at that point presumably they will be made official and O 13 ;
modified, reduced in some way. But there are, indeed, all 34l I
13 j of these steps going forward at every -- every level of the .
!' i 16j business.
17 Specifically I can't tell you everything that is 18 l going on, but travel, for example, to the meetings has been ll 19 greatly restricted. It is.just one of the very small but 20 'j indicative things . As I said earlier, all of the people l 21 that retire or resign are not being replaced, and that's y
22; another move along the same direction.
(
33 ! BY MR. BARASCH:
3
- g. Q Two questions that perhaps .will limit the scope
~
25j of this considerably, the actual layoffs referred to to be MSMROAC*? O f.1A*35tAL. 7:tc. = : 7 % t.CC*"**/T*.t.OW A*.*:". " !!Ait8tt3 SURG. PA. 17tt L. -
E= t:n-cross 22 ,
- 7. h put into place at the end of this month, will these con-4 3 ; stitute the first actual cuts of employment since the t
g 3l issuance of the September 12th letter?
, 4i Have you been taking intervening steps between 1
51 the September 12th letter in your division in the area of l
6[ your responsibility other than the one that is coming up now 1
7l at the end of the month?
i 0i A Well, so far as personnel is concerned, there 9 l have been no specific layoffs. It's been a tightening up Io { in every area we can get a handle on. ,
gg Q Okay, fine. And aside from payroll cuts or I
12 i employment cuts, can you cite up to' any specific cos.t i
13 saving actions in the area of transmission and distribution g
,14 f that, have been pLaced in effect subsequent to the September
- 1 13 12th letter, or perhaps a better way to describe it, in 16 2 response to the September 12th representations other than E
17 ! what is being anticipated in the way of employee layoffs 18 coming up at the end of the month?
19 ; MRa 5TRAHN. May we have a minute to discuss l 20 f tha t ?
21 I (Whereupon a discussion was neld off the 1
22] record.)
l . t
%3 !. THE WITNESS: I can give you two specific steps 3
y we have taken since September 12 or right around that same g 25 Period uhen the extreme need became obvious. And that is
'l b (!OM':t: Act 3 LURS?MI., MC. - 37 & LOCKYfft.LGW AYE. " HARPt$3tJMG. FSA. 1711.*.
liewton-crcss 23 J
19 that we have totally eliminated our pole maintenance program I
2, l at Met-Ed, and we have cut back on the contract of tree il 3 l trimming crews that we had in the field over the summer down
. R 4 g to four crews in the -- in the company, four tree trimming d
3 crews. Those are the only specifics I can point to.
6U BY MR. BARASCH:
a il Now, regarding those two specific cuts, were
?l a Q
3l chose cuts that were already contemplated in your~ three plus 9f nine budget or perhaps in your six plus six budget or are i .
10 those incremental cuts that were implemented in view of the 21 ? September 12th letter?
12 i A They were incremental.
S 13 Q Over and beyond anything that you planned in 14 f either three plus nine or six plus six budgets?
13 : A We presumed that we would be able to maintain l . .
.16 d those programs going forward with that budget level, d
17 [ Q Your testimony here today, sir, is predicated 10 'g on the three plus nine budget, isn't that correct?
4 19 $ MR. STP.AMN: I object to that, Your Honor. His 2C[ testimony is just what he gives today plus his prepared 31 direct testimony. I don't think we can make a sweeping i
22 'a statement like that.
3 33 ! MR. BARASCH: Perhaps counsel is misunderstanding.
)
24 the purpose of the question or perhsps I didn't state it very 25f well. I am just trying to understand what wara the parameters
. m: men a mas:w_. mc. -:v m acew-:.ove c:. - :ortms:ao. m. m s:
Newton-cress 23-A
= _ -
r
?. surrounding the various exhibits that Mr. Newton has filed 3 in this proceeding to date and what his testimony addresses - { }
3 to date.
45 THE ADMINISTRATIVE LAU JUDGE: Which is his 5, testimony to ref1cet on, the nine plu:s three or the original 4l budget?
7 \
s 3f (Transcript continues on Page 24.)
9i, 10 I
11 l; 12 i 13 i I i
.2 4 f, 15i i 1
16 f a 17 l l
18 ;
I 20i i
21j i
22t I
23 9
'l g
24) a .
EI' b h I n.muca = :. wsmc enc. - n er. tor:.nu.3w wr. - ti~wswno. .u. mt I
--Newton .e.POSS 2k If THE AEMINISTRATIVE LAW JUEGE: It is our 3 understanding that you are depending on the three plus nine 3l budget?
8 4[ IG. ST3AW: No, that is not the case, Your 3 Honor. Mr. Newton will be able to provide a response.
6 THE WITNESS: Insofar as my testimony and 7 I exhibits go to the level of asking in rate case, in base f; -
3 j rates, it is all the original budget. Now there was the 1
9 { original budget. We call it the nine and three budget of i
10 g about a year ago,1979, that formulated the. original 1980 a
11 budget, 1981.
12 l BY MR. BARASCH:
13 $ Q. Calendar year 1980? -
O M A Yes. '1 hey're based on calendar year. Now i
15 ,I for the test year, of course, we took out the appropriate 16 12 months windmill. For Exhibit 16 and some of my other 17 ' exhibits, we were attempting to illustrate where we were in i
18 : the original budget and what we had had to do to further i
19 j respond .to the cash problems resulting frcm 'IMI. That is l 20 3 why in the 1980, we went from the original to the current 7'1 j revised just to show we had responded to the need. Now we 22 l are going below that level in our present budget b
23I determination.
4 m Ml Q Just to make sure I understand what you are l -
h D f saying, if you took a look at your Exhibit B-1, Page 1, the d :sonw.ec a ?:rutanA mc. .v ?t. Ocm:wn t o'/t Avz - Me amissu-o. n. m te l
_ . .,_H_e'4 ton-c ros e
~_
25 5
1 first column there represents as budgeted figures. Now 3bshouldIconcludethatthatfirstcolumnwasbaseduponthe g 3 original budget that was prepared in October of 19797 fI A It is my presumption' that that 10 what those
$4 numbers in there would be. Mr. Huff would have to respond C'g to it specifically.
I Q And the basis of your rate case claim then is 3
3 ) to start with that bud 6eted number and adjust it for rate s
9[ case purposes as normalized in Columns 2 and 3 on ED Exhibit B-1?
li -
A That is correct, yes.
12 Q And just to complete this lit';1e piece, the l
o i 13 I outstanding uncertainty here is whether or not the M'{normalizationadjustmentsshownonColumns2and3 reflect a
13 l an attempt by Mr. . Huff to update each area for the three I -
15 il plus nine revisions in your budget forecast?
)
17 i MR. SELTZER: Was the question, was that the 18l3area d
of uncertainty?
i 91 MR. BARASCH: I am just trying to make sure !
.I !
Uj that what we are dealing with here is just another way of i 3
21j restating the questions of Mr. Pankiw. !
3 l 22 j MR. SELTZER: I think it is.
53 ) MR.-BARASCH: Well, I just want to get it '
., 1
. from the witness, if possible.
"32 THE WITNESS: Well, as I stated, what is in i i
uonnne4 a :.u.nr.:in. me. - = u. i.ocnetu.e m. - amtnum. .v. enz -I
Newton-cress M 1 i Exhibit B-1 is the or161 nal figures. That is in Column 1.
3 gS 3 } Now whether there were any normalizing adjustments to bring V 1 3louttothethreeplusninelevel,Ihavenoidea. None of
.i
- ' my exhibits purported to do that other than these d , illustrative ones.
t 0 BY MR. BARASCH:
't 7 Q Thank you. I wonder if we could talm a look 0 at Exhibit E-25, Attachment P-17 Excuse me, Attachment 1, f
9 [ Page 1. Do you have that now, sir? .
10 f A Yes, I have Attachment 1.
l' 11 ! 4 Now looking at that exhibit, sir, it appears i
Ut that non-payroll 0 and M is to be reduced by- 1.1 million as 23 : of March 31, 1981. Do you see that? '
d, .(* A 0 and M expense, non-payroll? Yes, sir.
23 Q Now do you know whether or not those cuts i
10 { are expected to'be in the transmis'61on and distribution area?
a 17 A Some portion of them, I am certain is. I
~
13 can't tell you exactly how much though.
3
'9 Q Now if we wanted to understand the piece of 30 j that which is associated with T and D, is that a question 3
31/ that you could provide an answer to or uculd that have to be l
t2 Mr. Huff?
i 33 " MR. STRAHN: Mr. Graham, I would think.
, g M i Mr. Graham will be here tomorrow.
l 'd 39f MR. BARASCH: Should I take that to be a d neawes a me.t. sa. - er a. :. cre:.teu w2. - a u m eu.w. n. im2 l
Hewton-cross 97
.i 1 s! representation by counsel that if we wish to pursue
-3 4
3 various items shown on E-25, whether it be o and M expense, ( )
33 non-payroll, payroll or other catters, these are areas 4 g Mr. Graham is goin5 to be the company witness for as opposed 3
) to the people in the operational areas of the company?
0 MR. STPJith Well 3 it is Mr. Graham's l
7 ! exhibit.
4 .
8k , MR. BARASCH: Well, I understand that, but I
of 9l I also know the budget process /the ccspany involves taking i
M i things from the operating area of the company and 11 lIcentralizing them and putting them together in the budget.
M I just want to make sure we have the right witness here to 1*
.t ask the question. g dj MR, STRAEi: I would say Mr. Graham would be 13 i the appropriate witness.
1 16' BY MR BARASCH:
17 h Q Perhaps, you could turn your attention to
'l M; Attachment 5 of E-25 How looking at the set of items o j;J proposed reductions, I see 15 some odd items.
2-I wonder, 1
20 j} Mr. Newton, if you could tall us which of these items, line d
El ) for line, would fall in the area of; T and D resulting in 22 a reductions in expenditures?
2k .
A Well, Line 6, deferral of T and D, 1 .
24]constructionprojects,yes. I believe Line 14 would be g 2")g another one.
l There may be something in Line 13 of T and D
- ernem a menu mc. - w . seme.ow vc .mmesuno, n. rm:
Newton-cross 28 b
1 1 as well that I can't identify.
i ;
l i O'
V I t Q Mr. Newton, will you assume hypothetically.
f 3l that this Commission granted you 25 million dollars, 30 1
million dollars of revenue specifically directed at enabling 4l 3 the company to catch up on its deteriorated transmission and 6 distribution maintenance situation, what assurances would 7l this Commission have that the money so granted the company-0! in relief, would, in fact, be spent for that purpose?
9! A That is a difficult question to answer because i
20 ; of the problems you have in identifying dollars that come l
11 j into a common fund, but I do recall that in one of our l 12 .
earlier cases where the al ster company, Pennsylvania Electric 13 specifically, there was a specific amount granted for some 14 i catch up purpose. I don't recall what it was at the moment, t
- 15 I and the company was obligated to report on a continuing l
16l basis on how they had spent in that area, That is one way i
17i that it could be accomplished.
18 f Q In the past, when this company has found it 19j is in an underearning position, I gather that cuts generally 3
20 have occurred in the tree-trimming and T and D maintenance 31 areas, first? Would that be an accurate description?
I 31l A That is correct.
l 23 ! Q Then should we expect then that these items l 1 e
24 would probably be the last to be restored and returned te 25]1 nozual in vicw of this company's rather serious financial
- .:cune mu s n:.nsu: me. - n u.1.ox:nu.ew .v:z. - u .-mum.
. : s, w
Hewton-cross 29 _,
1 ] bind and present circumstances?
=
(^ 2 A Well, no. I thinic quite the contrary, that g 3L they would be the first one to be restored if anybody could v
Q 4 ; do it, if the funds become available.
As Mr. Dieckamp has 5 ,iI; testified, as Mr. Graham has testified, and others, we have 6 l two or three priorities of things that must be done and one d
7 l of them is to protect the public health and safety in the Gl! clean-up of TMI-2.
9 We also have the obligation to provide i
10 3 service and it is the T and D area, and the T and D budgeted i
11 l funds that are the most directly connected with provision 13 of cervice.
t 13 : MR. BARASCH: That is all the questiens I g 1
14 i. have for Mr. Newton at this time.
i 15ii THE AI24INISTRATIVE LAW JUIGE: Any cross-
?
- 16) examination?
i 17 BY MR. JENISON:
1 10l Q My name is Bob Jenison. I am representing 19 f myself.in case you haven't seen me at any of these previous i 3 l 20j hearings.
4 31 Whe.n the Public Utility Commission Staff was 22! questioning you, you indicated that part of the cuts would 2
23 l be the funds that were set up for the connection of new 24fcustomers,.thatthatwasgoingtobeoneofthecuts,isthatg
. t 25hcorrect?
t; OHM 3ACM O '!/.M3*fAL. 0:c. - 27 f f. LOT *%* LOV. AVO. ** H a m AIS S UR C. P A 1791
Nawton-crosa 30 Ig A That is correct. Yes, sir.
I n Q How does Het-Ed obtain revenue?
V 2[
i 3; A The only place it has to obtain any revenue l
13 from its customers.
4l I
Q So you are going to cut your life blood, is 3{
6l that correct?
l 7i A Well, the existing customers are the ones that 6fproviderevenue.
9 Q But to get more revenue, more customers would i
10 'i produce more revenue, correct?
i 11 ! A. Well, at our present level of rates, I am confident that when we connect new customers, we begin 12 il s 13 j losing on that customer immediately. '
i 14 j Q And that is why you are cutting that area?
l i t
15 $ You say you are losing money by connecting new customers?
l 9
16: A No, sir, it isn't. The reason we are t
17 f proposing we will not be connecting new customers is because 16 f we don't have the capital funds to construct the facilities s
I?.d necessary to serve the customer. There is an absolute N
- s 20 i limitation on the aucunt of funds that we have to dedicate il u
31 ; to that function. We cannot go to the capital markets in 22 ) our present circumstances. We can only get funds through i
- 13 revenues and short term borrowing.
n 24i Q What type of facilities were you referring to?
V ! .
25j A Well, starting with the .very basic one, the a
E MOhM 3ACM *. *1 A2 3H it. If!C. - 27 !!. *.0cellf.1.O'll AV2. - HA3Mts UM. !*A. 173f:
.s
- . - ~ _ - _ _
i Newtc.n-crosa _31 ,
a 3
1lceteratthecustomer8spremise,theservice,thesecondary, '
1 3 it may be necessary to extend into them, one or two pole s ,
~
g 3 l trnnsformers, equipment like that. Tae very basic Q
4 3.. fundamental equipment.
.t S: Underground custccers, it is obviously C* I underground cable and pad mounted transformer.
i i
7! Q And your present level for a normal 1
8{ residential customer, how long would it take you to start to 9i turn a profit after you installed it with the start up 3
10 f expenses?
i 11 ; A Well, that is a question that is extremely k
13 l difficult to ariswer. It tabes about $15,000 on the average i
13 of capital expenditure to provide the facilities to connect g 14 l a residential customar. Other types of customers will cost 1
1.5 ) more or .less, but on the average that is about it, $15,000.
16 j We are not earning what we believe to be our necessary rate v
17 f of return on any of the e' uipment q that we have got 18' installed, so from that standpoint, we would begin to lose 19 money immediately. As I said, the hope being that we will l
20.i comehow through the regulatory process restore our level of
?
01] revenue to the point that it w11.. not produce a profit as fl 22.I, you say, that will return to as the cost of the capital that 3
23 j we had to put into that equipment.
24 MR. JEUISON: I have no further questions, g
// 'h
- i
. 3}cae Ct a itx* AWL. t:"C. - 27 M. LocmW.* OV? .Wt'. - MAMPJ33U?*G. PA. 171 1 f."
Mston-cross 32 3
1 BY MR. WISE:
C 3 Q Mr. Newton, my name is Ken Wise. I represen, 3llLouiseRileyandS.P.A.G. Good t3rning.
4i A Good morning.
3 Q Mr. Newton, I would like to pick up on a 0f question of n
Mr. Pankiw which he asked you or a length of 7l questions. This cencerns the outages and I believe you i
0 mentioned how supporting exhibits showing the amount of time 9 l that outages, currently attributable to lack of maintenance.
10 Are you familiar with the exnibit?
I 11 i A I believe it is A.
13 4 My question, Mr. Newton, is for the current 13
] outages, what percentage of major rate classes u e affected3 Mi commercial, industrial or residential, where are the outages 15 l occurring most?
I 16 A Going back to your question for the moment, 1
17 . if . I might clarify one point. You refer to outages being
- ir due to the lack of maintenance. Now that is not strictly I
O E true because we are going to have a certain nunber of 3
2 N outages no matter how goo'd a maintenace job you do, It is 1
OlfJustthekindofthingthatisgoingtohappan. You never l
22f know when a car is going to run into a pole and knock down l !
23( a transmission line. That is an interruption that gets j .
O M $ reflected in all our statistics.
J 25h What we were trying to. portray is the fact that i
h mven a mnsm. nt . -:s n. .seem.n.ow x::. - unmauna ex. s,ss= \
i
ilenton-crocs 33 1 the interruptions are Eoing up because of the inadequate 2j caintenanco job we are able to do. The type of custcmers g
3 that are hit by these interruptions, to my knowledge, we
<} } are unable to tell. They are all across the spectrum of 5 our customers. I would think that the largest amount of 6 f, them probably would tend to be the zural customers as 7i opposed to the urban customers, but to the extent that they 1
8i are coc:mercial, light industrial, residential in the rural be hit more or less across the board, 9 l areas, they would all i
lo 1 Q Well taking out of account geographical i
11 l, consideration, rural versus metropolitara area, can you give i
12 j me any . breakdown as to what percentages of the outages 13 attributable to lack of maintenance effect each major g
14 {~ class of customer?
E 15 ; A No, sir. There is no way we can determine a
16 l that without an extremely laborious check of history. We 17 l have to identify which line went out, which facility went i
18 i out, and those customers served frot that facility. Our 19 : statistics don't break it down beyond the facility.
20 t Q Do you have any breakdown with respect to 21l the voltage capacity or the voltage rating of the line that l
0
- 22! is knocked out? The primary versus secondary versus the l 23 [i low voltage or however?
l s
24j r
A Yes. There would be some breakdown on that g j
25 j as to how much down. I am not certain, but there would be ,
itaatt33 C1* f. ?? A'L aML. ?:3.C. - 07 ?' ' OCVN/1LI.OW AVC. - lIAM *lSBt44G PA.
. 17112, i
Newton-cros3
'34 l
1'lsomebreakdownofthevoltagelevelinterruption.
2{i Q Can you identify any major area of lack of 3 maintenance that is attributable to this increase in outage?
4j A Primarily tree related, Exhibit' F-22, Page 4, 5: is, I think, the exhibit that you were referring to which :
I
, 6[showedthestatisticsofinterruptionsand,forexample, I
? l in 1979, total customers, and then it is worth $30,396 'Itat 8 l includes major storms. The tree-caused interruptions were 1
9 t 14,000 of that, slightly over a third. Tnen, the projected
?
IC f first, that total tree-caused interruptions in 1979 was 40 r
li l i minutes per customer on the average and we have projected 13 [ for 1980, and this f, urns out to be somewhat optimistic, that U.' ,
13 would go up to 263 minutes per customer on the average and 14 ) that includes the major storm that we had in January and i
i 13 4 July of 1980, trea-caused interruptions.
I 16 % Mr. Newton, when you say new residential
~
l I? i customers are udded to the system, how are the transmission t I
(
- 16 ) costs spread? Are they spread across the entire system with S
19 2 a certain extention to residential service?
"0, A The customer that is connected will pay the a
M {t same rate as any other customer of the same class. 'Ihose 1
l 22i rates are determined by procedures that Mr. Carter has 23 h testified to3 I presume, and could explain more fully, that i, ~
24 every custc:uer of the same class, the same voltage of v j
'5- delivery will pay the same rate or pay acccrding to the same l
w.mm a un>w m. - v v..a.mu ru n=. - >ams=um. n. sw F %
Heuton-cross w 4 ,~ #
1 1
1 f rate schedule and the transmission costs are assigned to that 3 rate schedulo accordin5 to cost of service allocation which g 3[ Mr. Carter performs.
t 4 Q Now are you saying then that for expansion 3a1 of residential customers, residential classes pay,' and of similarly for expansion of commercial customers, commercial 7! customers pay, is that in effect your testimony?
8; A I didn't understand your question fully, sir.
I 9 ,; Q Vell, we will start as an example again, for 10 I residential expansion, if the company allocates the cost 11 l among all the rate classes or among certain portions of the i
12 i rate classes for residential customer expansion, if the i
13 expansion to serve a specific customer or group of custc=ers .
.14
- in a distribution area were all distribution expenses as 15 i opposed to transmission?
- i . .
i 16 g A Those costs would be spread to all of the e
17 P customers, distribution customers of the same level. That 13 h is, they would just automatically go into the cost which in 4
3 19 s turn is allocated to the totality of customers in that class.
.1 20 $ Q So, for example, if we are to pull a figure 4
31 out of the air, an extra ten million dollars of additional a
22 f distribution expense in the commercial class, that cost a
23 j would be spread over the rates paid by all commercial A .
34i customers? g 23 M R . S T R t. H N : Well, ' lour Honor, we are getting il uo.muer . uns <.u.. mc. - n n. .cw:w.ow m=. - mm =ua n. smz
, , Na ton-cross
, 36 1l into the area of cost of service in respect to various rate 2 classes.
Sh THE AIMINISTRATIVE IAW JUIGE: Yes, I think 4 l we are getting far afield.
1 5I MP.. SELTZER: I think Mr. Carter, who is also 6 here today, would be able to respond to your questioning..
7! MR. WISE: Very well. I will wait for him.
I 6 That is all I have.
9II THE ADMINISTRATIVE LAW JUDGE: Mr. Frater.
10 ! BY MR. FRATER:
12 Q Mr. Newton, earlier today you discussed the 12 experience that the company has had with respect to reduced 13 sales and therefore reduced revenues. Do you recall that'
.14 j testimony?1 .
15 A Yes, I recall it.
16 i Q And in that testimony you make reference to i
17 [ a so-called recession and associated this so-called 18 recession with this reduction in sales and revenues. Can 19:) you define for us the period of time that you are referring l
l 20 to during which this impact has taken place?
l l 21 A Well, that recession that I was referring 'to i
22i was the 1974 period starting in 1973 when the initial oil 3
23 j embargo occurred, running on into 1974 and continuinS
)
l q 24:1 basically through into 1975 The exhibit that I was trying C,~
2 25 l to locate --
b .:oM*gAc; . *JA9 EMAL. NfC. ~ at M. !.Ge*cN1LLo"?.' AV2. - MARfttr a'J T4. .*A. 17:10 s
Iwwten-cros:
--- . -- --37 a
1j Q Well, my cocuents are not totally 5
4 3I illustrative of the phencconon. Have you completed your I )
I 3l response? That is satisfactory for my purposes.
b 4; A Yes, I ha'ie completed it..
f 3l Q '8o with respect /t'o your comments about 0 , recession and with respect to your comments about tha 7 decline in sales and revenues, you are not talking about an 0 impact that is current that should be taken into considera-9 9 tion in this proceeding, is that correct?
3
?
10 ! A No, sir. Only to the extent that this 11 f initial reduction we bc.d tri gered E by the 1973 oil embargo 12l and its effects on industry, effects on our load, and so I
2
~ 3 l'forth, those reductions have never been made good and so we g 14 f are still as a company operating at a considerably reduced i
15 ! level.
M ;, MR. FRATER: That is all I have, Your Honor.
4 4l BY MR. ICLLY:
~g s
- Q My name is Robert Kelly and I represent 19 h 3Vitaul.icCompany o f America.
20 ): To follow up on a hypothetical question that te m: 1
~^
'a I think Mr. Barasch posed, assuming that you would receive
)o n3"I or that Mat-Ed would receive about ten million dollars right l
t now, to pick a fi6 uro, would that assist ?ou in your T and M'h D cutbacks, tree-trimming services and the like?
^
4 3 .1
)~ A Are you referring to where there is ten n unucu s nuw_. me. - a n. eemuew e.vs. - .u.wmo. PA, 17:10
liewton-cro::a .-. .--.
38 1
1 g million do)lars showing up in our availablo funds or are you 2
% g talking about --
O -
Q Ten million showing up in your available 3l i
- 4. [ funds. ,
3 MR. STRAIW:: On an canual days basis?
I 5j MR. KELLY: Yes, on an annual basis.
! ~
7i THE WITNESS: If it were on an annual basis, of course, only one twelfth of that approximately would show 0li 9 [ up each month as it began to flow in. I have no specific l
10 j knowledge of what the needs for the company in total would 11 j be for that use of that ten million dollars.
i 12 i BY MR. KELLY:
+
IS j Q How would you handle it in your area?
O :
A If.we were able to get that or a large share 14 {
15 of that, it would permit us to put into place the I
16:1 maintenance programs that we have had to cut back on over '
_ .. . n ..
~
7 .,
the past five or six years. , Itwould immediately have the 17 l ,
i !
l 18 , effect of bringing our quality of service back to where it (
t 19l had been. Not immediately, but bring us toward it.
l l
20( Q How close? (
i t 313 A How close?
I Q Yes, towards your norm or the level that you 22f 23 would like to see. Can you give me a proximation, a half, .
3 l e;. .! a third, 90 percent? I don't e:gect you to know exactly.
O '
?.5 A I can't give you any proximate fi 5ure. I am MennnAtt & MARS >t.% D.*C. - 27 N t,0Gr.*.Ylit.t.1W AVC. - "Mt.7t!SOURG. **,4 1"t12 ;
1 l
Nawton-cross 39 li 0
1 f sure I would use the whole of it in the T and D area.
2f Q But it would be of a great assistance, is that g i
3 [ a fair statement?
5 .
4j A It would be a great help.
4 ._
5l Q Would it also assist in the probleci you would i
6I experience in handling new customers?
l 7i A I t would be of a help in that area.
0j Let me quantify one thin 5, and we are i
9 i possibly dwelling too much on the tree-trimming because it is i
3 It is something we can look at. We 10laveryvisiblething.
3 11 i are proposing in the budget that is being presented right 12
- now to our board that T and D contract or tree-trimming l
13 effort of one million and a half. We think a normal level g 14 0 would be about 3} million and if we were able to spend about 15 l 7 million on tree-tri= ming over tha next 12 months, we would 16 f get back to a level of tree tri= ming that would permit us to
, 1 17 j return to 3i million per year, with somewhere in the l 18 l neighborhood of a five to seven year cycle where we think we
' i 19 would like to be. That is just tree trimming. There are 20l all these other phns that are also like dormant.
C 311 Q Now you cannot give me a percentage of how l
22.3 much the figure of about ten million would help you in the l t 1
.03 :] T and D area?
l
- M A No. g 25j Q Can you identify a witness who could answer
'to -T3ACi? 1 M Al* 3HAL. IMC. " '7
- kOC K*?dLLOW AYE. ~ FARLS CU.70. Pt 17M 2 that question?
..,--~.:.
Newton-cross 40 E MR. Wi>J2;: I would say the appropriate witness
- s 3 would be Mr. Dieckamp or Mr. Graham. Both of those gentlemen
! Q' 3[ will be here tomorrow.
4f MR. KELLY: That 's fine. Thank you, Mr. Newton.
I 3i THE ADMINISTRATIVE IAW JUDGE: Any cross- .
I 6 examination?
l l 7l\ Anything further?
SI MR. PANKIW: Your Honor, I have a follow-up 9 question, if I may.
10 THE ADMINISTRATIVE LAW JUDGE: Very well.
12 { BY MR. PANKIW; 12 l Q < Do you have Exhibit E-25 there, Mr. Newton,
,, i 13 Attachment 57 It --
1
.14 j A Yes , sir, I have it. .
1 ~
13 l Q It lists the items that the company has proposed 1 .
16i in order to conserve cash, and I believe you identified two 1
1 17 y items primarily that would affect the T&D area, Item No. 6 18 ' and Item No.14, is that correct?- That's on Attachment 5.
19 f A We have Attachment 5. I'm just looking for the - -
20 $ yes, we have it. Six and 14,' yes , sir, that's correct.
21 Q Now, both of those refer to T&D construction 22 expenditures?
23 ! A That's correct. -
24j Q In other words , they would than have -- if you 23 l refer to your Exhibit F-16, Page 2 of 2 compares the original g
I t.te! m A c : M.*#,5ML 11:0. ~ 27 f t. CCCKW11.f.C'.'t AVE. - HMMis3IJRO. PA. 17f82
Nertcn-croso ,
%l .
. J budget and a revised budget for T&D capital expenditures.
N 3, The budgeted cutbacks in E-25 then would only affect the T&D g 3 f construction expenditures and the T&D O&M expenses as set t
.s [ forth on Page 1 of 516 would remain basically unaffected, i
3 q isn't that correcr?
4 You would --
?f A Sorry, I failed to follow you all the way through C [L that question.
9L (Whereupon a discussion was held off the record.)
i 10 i THE WITNESS: I think the problem is in the table 11, we were looking at. That was the identified reduction for 12.h the period October 1980 through April '81. On Attachment 4 i
gv 13 j g
I think there are other reductions shown that would affect g
.14 y in some way Exhibit F-16, that is the distribution --
15 transmission and distribution O&M expenditures other than l
26 3 those that appeared on that one table. There are some
! 5 l
17 l personnel reductions in the non-service related T&D that a
lal'are reflected in Phase 1. I confess to an inability to i
- 19. traca them through these attachments.
20 BY MR. PANKIW:
3t { Q Let me ask it another way then, Mr. Newton.
1 !
7,2 [ On F-16, Page 2 of 2 you currently expect to spend approximately 1
l l
23 f 19.5 million in the T&D area for construction expenditures u
1 l g u
as far as the three plus nine budget is concerned? Ig 25 t A That was for 1980, and that was -- that was the --
1
- !9HMBACH f. 3*AMSHW t:1C = 27 N.- LCC?mLLO?. AVE. - HArtF!!G3URG. PA. 17212
Newton-cross 47 i
2! from the perspactive of March 1980.
% Q Okay. Now, if these reductions in cash outlays 3l: summarized in E-25, Item 6 and 14 were to take place, the
?
4 company would end up spending less than its 19.5 figure?
51 A Yes.
6; Q By approximately 5.9 million?
I 7 j, A Well, those -- the 5.9 million was October '80 t
8 through -- was it March or April of '81; whereas, F-16 deals 9j only with the calendar year 1980. So --
10 Q I understand, but the 5.9 is all that's proposed t
11 l currently, is that right?
12 i MR. PANKIW:
Your Honor, I would request that 1
13
- the witness be able to answer these questions on his own.
0 :
14 f MR. STRAmi: Are you referring to Attachment f
15 ,: 57 16l MR. PANKIW: Yes, 17 i MR. STRAHN: To line Item 6 and 14?
18 l MR. PANKIW: Yes.
i 19 ! MR. STRAHN: 1.1 a nd 3.8 ?
20l MR. PANKIW: Yes.
21- MR. STRAHM: Thank you.
- 22) THE WITNESS: We ~ finally located it. Tha t 's the l'
23.! 5.9 million, and I say so far as Page 2 of Exhibit F-16, J
24;! that was in 1980 calendar year; whereas, these numbers here, 23! the 5.9 million are through the period October through April mmanen a russa, m. - av n. e=mna..w .w=. - awussuna. n. :ma
4-4 Wevcon-cross 43 .
w a
- '81. So there is an overlap. Certainly some of the Z
- ; reductions shown on Attachment 5 would reficct itself m 1
(
j.
,p in the 1980 figure in E::hibit F-16.
1 BY MR PAMKIW:
4f 4
j Q Can you identify any itera on Attachment 5 that 3?
.l uo would affect the 1980 revio.ed budget figure of 19.7 million
) for T&D expenses? That would be Page 1 of F-16.
3 A The tree trimming expenditures, Line 12, have g g already put in place prior -- reduction there has already f been made before this period October through April. So t
,2 there would be -- that. would be an impact in 1980 O&M 4
g figures, g Q That reduction is _ already reflected in the g
I. revised three plus nine, is it not?
44 !,
,3 A Yes, there is a large reduction, but we s [e 2.6a [ reduce slightly below that.
. . I think in Exhibit J-2'--
s.
" Exhibit J-1, I beg your pardon, Page 1 of 4 -- this is 17 1
Mr. Deacon's exhibit -- tree trimming ' expenditure reduction 8 ,4 l
79 f between September '80 through March '81 is 400,000. So
- that is a reduction below the three plus nine level, and
_g that brings us doun to'one crew per division. That's alu h ' the. only one that I can specifically identify on that that 22; 5
e would impact on Page l'of F-16.
23 r 9 .
MR. PANKIW: Thank you.
24;j 1 That's a11, Your Honor .
.. 25 ,j
- tec*m3Act c: YAf??:4A1 C!C. - 2? N ' fjbO"W11!.OW AY~ - HfE*! $3 t:RG. PA. 1*7:12
! ~
4-5 Newton-crocs 44
. t THE ADMINISTRATIVE LAW JUDGE: Mr. Newton, Ij; lp 3 ,' the reductions that are proposed in personnel as of October V 4 3 f 31, what kind of personnel, what are their duties?
4[ i What personnel would that be affecting? Would 3 that affect O&M transmission and distribution T&D employees, 8[ or would that affect the employees that are engaged in 3 other operations?
1 8h. N E WITNESS: Well, it affects employees 1
9i across the spectrum of activity. It affects a very few 10 j in the T&D area, and they are ones who are primarily 11 h engaged in the construction activity, which we've stayed i
12 i away from any reductions that would impact on the level of r
13 } operation and maintenance to the extent. we can.
O 14 I THE ADMINISTRATIVE LAW JUDGE: So that even if il 15 that reduction took place, there would be little, if any, 16 effect on T&D operations of the company, at least for the 17 l time being?
IS ' THE WITNESS: That's correct , wich this one 19 ' proviso that, of course; by having fewer men in the line 208 crew, the electric construction and maintenance crew,-
I a
i 21 j although they normally would be working on construction 22 l4expenditures, if you have a storm, you immediately stop h
23 4. all your construction activity and divert those -- that
. 24 j canpcwer to restoration of service.
25f So if you don't have them, you till indeed d n o,, ,, ,,,,,,,,, m, _ ,, n, u c,:wu.y ,y 2 _ ,, ,m,,,, , ,,,,,
46 EEulon-cros3 ,,
- r. - m 1 l reduce your response time to restoration of service, but 9
5
% j only to that extent do2s it impact on C&M. g 31 THE ADMINISTRATIVE LAW JUDGE: Has your 4q September 12 schedule of reductions been affected by the 3; Con: mission's September 18th order?
- 6) THE WITNESS: Have they been affected by it?
?a There was a -- on September the 29th, I believe, I
S E the notification went out, and then on October the 10th l -
9i the -- a hold was put on the layoffs. And then it was 10 ! reinstituted in part on the 13th of October, to become b
11 ,1 effective the 31st.. So those -- those. reductions have 12 q not occurred as yet.
13 'MR. OGDEN: If the Judge please, I might just 4 g 14 I note for the record that Met-Ed Exhibit J-2, which is a i
15 l letter of Mr. Dieckamp dated October 13, provides some 16j update as to the status.
l 17 :l THE ADMINISTRATIVE LAW JUDGE: Very well.
f 18 i Anything further with this Witness?
3 l 19 $ (No response.)
1 !
20$
i THE ADMINISTRATIVE IAW JUDGE: Thank you, 21lp Mr. Newton.
221 i [ (Witness excused.)
23 ' -
.}
THE ADMINISTRATIVE LAW JUDGE: Ect's take a g 24l ten-minute recess, 25l xmsacn c massu n::. - :n x. :.acmviu.ow Av:. - wuisucsvaa. n. nue l
l l
4-7 46 . . -
2 2y ,
(Fnere=on a brief racess vae held.)
O *i aa. SruHu: ree,voor Honor,ee te readv 3'
with Mr. Carter.
4l THE ADMINISTRATIVE UM JUDGE: I think he was B[
6 (( sworn in last time.
( MR. STMEN: Yes , that's correct.
Sf EUGENE F. CARTER, called as a witness, having a
3 7a been previously sworn, was examined and testified as 4
M f fo11ows:
15 !
3 MR, STRAHB: He has also identified his 15 l ll prepared direct testimony and exhibits, with the exception 13 3 0 .24 *
! of three geses thee were susmiteed tode7, reses 14,15 and
, 16'of Met-Ed Exhibit C-5.-
l 15 l 1 16 [ DIRECT EXAMINATION N
17 y BY MR. STRAUN:
(
18 j Q I show them to Mr. Carter and ask whether d
19 y they were prepared by you or under your supervision?
?
20-) A Yes, they were. And the only additional I
i 31j information that's shewn there is the annual bili for the i
22 j amount of energy that are plotted on the tables.
23 {$ ' MR. STRARN: We have nothing further.
245 THE ADMINISTRATIVE I/N JUDGE: Co:nmission Staff.
bU v l l 25j MRo 3ARASCH: Your Honor, can we go off the
' ,m,aaca a nesna. me. - a n. saamm t.*u x:= -- "Annsaun. .n mu -
4-8 Carter-direct _ . . -
4'l 1 record for one second? I .
s i..
33 ! \
{ )
- j. (Whereupon a discussion was held off the 3L record.) /
1 /
4i
! THE ADMINISTPATIVE LAW JUDGE: You may
$\ l proceed.
6l ;
I i
7, CROSS-E:'dMINATION i
8! :
BY MR. PANKIW:
9I Q Mr. Carter, I'd like to direct your attention i
10 i to Met-Ed Exhibit B-1, Part 8, Page 1, which is the basic i
i 11 l income statement in support of the company's rate increase.
22 [ Do you have that page?
13 A B-1, Part 8, Page l? g Mk Q Yes.
I 15 l A Yes, I have it.
t 16j Q Are you generally familiar with what that data l 17 l there displays?
i 18 f A I'm generally familiar with it and specifically 19 l familiar with the normalizing adjustment number one.
I 20i' Q In Column 1 under operating revenues, Line 1 1
21; base rates as budgeted, could you tell us 'what the source i !
32 ) of that figure is?
I ;
23[ A Well, I believe this is Mr. Huff'a testimony, 24 a
and it is my understanding that the as budgeted data g.
- 23. utili=ed by Mr. Huff is the original 1980 budget as he n.nues e, =ww_. me. - a n. toexwu ow Avz. - u m.u.,ac.. g, in:
4 -9 Ocreer-cross 47a
_k
,i.
5! testifies to in his statement, r
O
- l 3
(Whereupon the testimony is continued 4! on page 48.)
5l1 -
i 6
.l Y
8 :
9c 16 i 11 l f y {I
+
L 13 ,
I
.k
- 15 (l
-16 1
17 lll 18 1 19i i,
20i 31 3
1 23 l .
25f 9 m. . ,. _ _ _-=,m._- - m - - - - m m.. , =
l
cartar-direct 48 7
1 Q In Column 2 3 Lino 1, we have a normalization ir
- p. 3 adjustment ~ downward approximately 42.8 million dollars.
3 l: That is the a'djustment that you are responsible for, is that i:
4 correct?
5' A Tes, that is correct.
l
'5 Q Could you tell me generally what your Goal is j
7 I when you seek to normalize revenues?
S j A The normalization of revenues is for the t
9! purpose of bringing up to th.e end of the test year a
(
10 ; portrait of what the usa 6e would have been for the test year
[
11 ' reflecting the traditions of the customers at that point in -
l 12 i time, the load characteristies and~ usage requirements of all I.
13 j of their appliances that are connected into the system at 14 I that period of time.
I.
L Q I believe in your response, you used the past 15 l 16 L tense. Since this is a future test year we would be i .
j 17 l referring to, you would be estimating the consumption at 18 ' March 31st, 19P1, a point in the future?
4 A That is correct.
19 f
(
4 on Page 3 of Part A, we have the detail or 20l 21; some level of detail with respect to your normalizing 1
i 22; adjustment of appro:rintely 42.8 million dollars- and in 23 [ there you display a consumption reduction for retail and .
- 24[ resale of electricity. Can you .tell us what the source of g C 4 W
- -"~~ "
25; that data is?
,a'e,ACH Gs It M SHAL. Ulc. - 07 P!. f.bC*fY.%LGW AVI. - M ARR!$ T.'JRG. .A. 17?t2 l
l
mrtev- Sq
,i 1! A Yes. The numbers that are shown there, and I
?
'] 3j believe there was also an interrogatory which we provided a l 3i response to the parties with the reconcilliations, it is my 4
4 recollection that it is OCA-32. The specific number of 5 Line 2 and Line 33 however, is the reduction attributed to 6
- a more current forecast of the bsce revenues and sales of 7 Met-Ed Company, specifically as I described in my statement f contained in the three plus nine budget.
t 9f Q Are you saying these consumption reductions 10 are based upon the three plus nine revision to the budget?
i 11 [ A That is what my statemen says on Page 2 3 yes, i
12 l q Is Mr. Cherry the witness vthe !J responsible 13
'] 1 4 for these consumption estimates?
! . A Yes. ,
Mr. Cherry is the company witness on I
15 the forecase of energy insofar as the difference between the 16 original 1980 and the three plus nine.
17l Q So then are you or are you not familiar with 18 [Ei the assumptions that went into forecasting these levels of consumption that is reflected in your normalization 40{ adjustment?
31l A I am generally familiar with the assumptions 22 [ utiliced by Mr. Cherry in preparing the three plus nine 23j revision to the sales and I am specifically familiar with the I
h 24h, further adjustments made for changes in usage and for 25) l l differences 4
for numbers of customers that are included uoneica , :aas:s me. - a n. . ecwn i.ow m. - 84.wssizeo. n. im in l
l I -
l . . . .
Carter-direct 50 1
1 the nornalization procesa. !
^
r 3 Q To the extent that you are familiar with the O
3 y! assumption that went into forecasting a consumption 4 l reduction, could you describe them to us?
1 5l A In the residential sector, specifically the 6[ total electric category 3 based on knowledge that we i
? obtained early in 1980, we determined'that throughout l
3 l Metropolitan Edison Company there is approximately 15 percent i
9i saturation of wood-burning stoves installed in homes, so 10 t one of the large reductions in residential was what we i E 11 l perceive a change in habit a.ttributed to those installations.
1 12 [ _
In the commedial category there were I
13 ) federally mandated themostat settings for public buildings
(-
.as far as summertime-wintertime usage of electricity and 14 f '
l , 15 j those permanent type changes, due to federally mandated I
16l standards 3 are reflected in. the revised commercial sales, I i 17 The level of eccnomic activity in the '
4 18 industrial sector was lower than what we bad forecasted 19l originally and to the extant that we.were able to ascertain 1
20 those limits, they are also reflected in the three plus nine.
\
l can you tell us where in the filing we would-21 h Q, 22; find the detail for these, we will say for the figure on 23 consumption and reduction of 336,000 megawatt hours?
s A I am not certain what kind of detail you u
1.,4 ;
23]wouldbeaskingfor3 but if you want detail on it by e
l MC'4 REACH & 744R'MW Itsc. - L7 m *;CC(Y/tLLOW A% " *dM m85V3G. PA. 17142
Carter-direct 51 t
1lFPCcategories,IbelieveMr. Cherry'sstatementcontainsin n
% { it the amounts in the original 1980 forecast. The three i
3' plus nine FPC pieces would be available or if they are 1
4i required by rate schedule basis, they are also available, i
5l Q Let me ask it another way. Where did you get i
6i :
these figures from?
! 7{ A These are right out of the forecast. It is 3 a summation of all the pieces that are contained in the 9l three plus nine.
10 ) Q Is that data in the filing?
I
- A Not to my knowledge. Me material has been la l 13
- r made available to 'different parties for inspection and i
13 copies, and so forth.
14 l' q Could you tell us how your normalization r .
l 15 f adjustment relates to your Exhibit C-1, Page 2, with normali-
- 16.1 zation adjustments?
i 17{ A Well; I am referring generally to the 42.8 3
- 7 18 f million dollar downward adjustment. Mere are essentially, i
19 ; I guess- you would call it four. or five peices here. ~
The
- i. -
l 20 f portien we were just describing in Mr. Huff's Part 8, Page 3, 21 ten million of that amount is 10.8 million and is related to 22 ! the lowering sales forecast. in the three plus nine as
- 1 03f . compared to the original 1980. The change for re. tail T,4[ cuatcaers bringing all the customer levels up to the year j
[ 25j end, March 31,1981,isthe)812.,000 on Line.5 of bir. Huff's
! -=.- u. .unu , . - w , e .6=w>. s - uu.r.n e. .,> . m m l
I ,
1
~**
Carter-direct 52 V
i!
1 ! Pase 5 of Part 8 under Column 2. That amount is also shown 6
{ 2 fin greater detail on Page 3 of my Exhibit C-1 under { g i
3j Column 6, "the total being Line' 25 5
4(
Inasmuch as Mr. Huff rounded numbers to 5 ! th ousands of numbers, he will be using rounded numbers where-i 6j as I carry numbers down to the dollar. Mr. Huff's 7 h Exhibit B-1, Part 8, Page 3, Line 6, the $269,000 negative 3 fnumberisalsofoundonmyExhibitC-1,Page3inColumn10.
9 The elimination of the TMI-1 revenues, 26.9 million dollars 10 ' is directly as per the order at the docket that is cited 11 l R-79040308, and then finally, in Mr. Huff's retail adjustments 12 under Column 2, he has elimination of 5.6 million which he 13 describes in his testimony, but what that amount 13 to is an g 14 j assumption that we would have'obtained a rate increase at the beginning of 1981 so those are th'ree months of rate 15 f s 162 increase that were implicit in the budget that he was using.
i 17 - Q Getting back to customers increased year end 13 , levels, retailaand specific revenue adjustments for resale, 19 ) you were responsible for calculating those adjustments and 20i that is displayed on Page 3 of your Exhibit C-1, is that 1
E 21 correct?
i 22l A Yes.
I 23 h Q And I note on that Page 3 that you begin the 24 q first column of figures with budgeted usage. Ynat is the g 25 source of that data?
a ?4C*tM AC'.! C /^ Af15 MAL. *f!O. ~ 27 M. *.3 CW W1 OW A *!E. - HARRIS 3RRG. ?A. ??!12
Carter-direct 33 i
1 1j A As I state in my statement, that in the three 2 plus nine.
]'
3$ Q' One final question about the budgeted usage.
- k 4 l In Column 2, if one were to take the difference between the 1
3j budgeted usage displayed on Column 2, Page 3, and the 6 budgeted usage as per the original budget, *.3 that where you 1
7 it would get the differences that are displayed at Part 8, l
6kPage3, Lines 2and3?
4 9 A Yes. You could arrive at the parts that 10 l would add up to those totals. I didn't mention it l
11 specifically when you had asked me the question earlier about 13 j all of the elements that went into the makeup of the three i
13 f plus nine budget revision, but certainly a factor not to be 14 overlooked is the overall conservation effort being made by 13 4 Met-Ed customers, specifically as a result of the two-phase 4
- 16) 91I hearings and as part of the ongoing Wise Use Program 17 !
of Met-Ed. We are evidencing the results of all those 4
[
18 k efforts and all the publicity that has been associated with 19 g!
the THI proceedings.
20f MR. PAIM: No further questions, Your i
31j Honor.
l 22 N THE ADMINISTRATIVE IAW JUIGE: Consumer.
i 4 a
l 23 ) Adyccate.
- j O.
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! => nase >t a nrasmu ms. - :7 n :.co:wu ow Avr. - 9 Arms =ues. .-A- tnr 1
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- na rter-c ross 54 3
[!
3 CROSS-EXAMINATION 3!BYMR.BARASCH: q g I
3 1 Q Good morning, Mr. Carter.
47 A Good morning, Mr. Barasch.
The sales forecast that you have put together 3f Q 0 l for the year ending March 31, 1981 does not include any l
7; months of actual results, is that correct?
! i 0l A 1 hat is correct.
l 9h Q And the' forecast, I take it, was finalised at
?
10 f a point in time in which March 1980 actuals were available I
l 11 i or were not available?
12 A Yes, we were using March 1980 actuals. The 13
( significanceofathreeplusnine'meanswehavethreemonthsg M! ;
of actual data in hand in our data bank at the time we i
13' prepared the revisions.
h a
16I Q But since the test year, the future test year i
17 l starting April 1, you would not be using actual numbers as .
4 18 you reached out into the future test year sales, is that i
-10JE correct?
- Ot - A That is correct, and I suspect as we proceed 213 along with the case, we will be presenting ccmparisons of .
'l 22! budgeted and actual data which, as we get closer to a wrap-l up position, we will . tend to ecnfirm or point out where the 23 [l 30 weaknesses, if any, may occur. g l 33 , Q Now in terms of a theoretical goal of your 3 yemuc>i a ausm. me. - a n. .o:xmu.ov. .w:. - mmesum % im:
1
Carter-cr_oss _ _ _ .
SAA s_ _ _ . - -
1 g sales forecast for test year purposes, Mr. Carter, the year n
~
% yl ending thrch 31, 1981, that forecast would attempt to 3lduplicatewhatyouexpectwillactuallyhappeninthe'sayof n
4 *3 IGH sales during that year?
.4 l
3l A No. Unless I misunderstood your question, 6 l Mr. Barasch.
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. u,ur..sw , zunwu me. - a n. =,m.1..a m=. -- w.,num. n. ,n ,a
6-1 Carter-crc 33 55 y -
r _,
d 33d Q We are looking at forecast. If we could 2
g j perhaps severe out any normalization adjustment that you're 3 making to end of period numbers, looking at the forecast
,3 3 you have in your exhibits for the year ending March 31, '81, i
1 5j what you are there attempting to describe is a duplication 6[ of what you expect will actually happen during the March 31, I
y ! 1981 year, is that correct?
3 gj A That's the purpose of any forecast when you 1
9,i make no adjustments, is to predict at what level of L
g{ I detail, in our case, on a month by month basia what the gl actual sales would be. In retrospect, you could look back 12 and make your comparison, yes.
13 ; Q Okay. Now, would you agree, Mr. Carter, that I
y i Metropolitan Edison has experienced an economic slow-down 35 . in its service territory during the calendar year of 19807 i
3g A I believe in' response to one of Mr. Pankiw's 175 g questions, I did indicate a lower level of industrial 3
3 I activity, yes.
l f at Would you also cgree that/the time that you 19i Q li 2O [ Were Preparing your March 31, 1981 forecast for this rate 3
l g; proceeding, that the economic slowdown had already begun?
Isn't that correct, that you could see some reflection M4
.u g! of that in the first three months of 19807 A Yes, that was apparent insomuch as it was
- h. ) 1 g a, .. j incorporated as part of the three plus nine in the industria'.
3 pc+mv.c3 a ttr.Ftsual., !!'c. - ny :=c nocunen AW. - w.msmo. :*A. Its10 O
6 Carter-crees 55
. -2 , u 4
1 Ej area.
t c'
\
- 3) Q Now, as I understand it, Mr. Ce rter, for 3 {!!purposes of this proceeding you have computed growth rates 4(4 in use per customer in order to do your normalization l-31 adjustment to your forecasted sales studies, is that
~
0 4 n} correct?
7f A That's correct.
i 8 Q And growth rates compare usage per customer 9 g for the year ending 3/31/81 versus 3/31/80, is that correct?
i 10 ? And. also for the years ending 3/31/80 versus 32 ; 3/31/79 and 3/31/79 versus 3/31/78, is that correct, sir?
22 .- A Yes , we utilized, as I explained in my o E3 statement, one half of a three year average experience
.14 ;" change in customer usage?
Q So then to the extent.that the growth ra?.e 13 f 16 reflects a slowdown in the year ending - economic sl<ndown I
17.j in the year ending March 31, '81, the growth rate for 18 i that period would likewise be reduced from what it would 5 -
19 5 have been in the absence of an economic slowdown, is that 4
.50l correct? 2 f
- 31. A Not -- it is not correct insofar as we were i
7.2 i discussing industrial slowdown, and specifically for 3
.u $ industrial customers we make a 100 par cent analys.is. We ;
i i .> t p, } do not impute a three year average . growth rate to those {
h' . , , .
customers, o, ;
.w.ncss:Jno, riA. I non t:Aer o :r'Ntsw.f Mic. - *.S* ?!.' 'JC*cvit.1.evt A'>:. 3 7t t.*.
l l
6-3 Ca rter-c cuas 57 l -_
l ;
i 1 Q Mr. Carter, a little earlier you referred to l k l (m 2 the economi: slowdown as an impact upon your industrial 3 g sales level. Do you recall that, sir?
il 2, [
In addition to any economic impact in terms 3{ of sales levels from your industrial market, did the l
l 6l: company make any assumptions about sales decreases or 7li. decreases in sales growth for commercial customers or 8 small industrial accounts as a result of the economic 9; slowdown?
10 j A I'm not aware that insofar as the smaller 11 [ commercials that we made an adjustment there. It would be i
12 j true that .for small industrials , to the extent they would 13 I
be, let's say, contained in the GPL rate, that we would f
- ,14 j not have made a 100 per cent analysis for those accounts.
, I is ! Q What about larger commercial customers ?
3 16 A Well, I was specifically~ referring in answer 17 l to your eerlier question with respect to rates LP and TP, I
t' 13 ; and there are no commercial customers served thereon.
I 1
19: <
Q I understand. But generally in putting together e
l 30 your forecast which you are presenting here for test year 31; purposes, did the company make any assumption at all about l 4 l 22; a decrease in sales growth in the commercial sector as i
i 23 y a result of the economic slowdown that has been experienced 34- in its service territory in general during the 1980 calendarg 33 year?
d v.mmne : 3 x.wsmi me. - as m cerc.ev.y Ave. - unmeev=. e4. i7::=
om carter cros3 58 1! A Not to my knowledge. But I would have to defer
)
& 2 [ to Mr. Cherry for the ne:tc level of detail as to the O i 3[ assumptions for those revisions.
4 Q Mr. Carter, I have a data request similar to 5 the one that weput to you in the Penelec proceeding last week, which is whether you could provide the computations 4l; 7 i of annual growth rate for the period of March 31, '78, 3[ through March 31, '81, that we were discussing a little i
9 ; earlier, and that additionally you provide the growth rate 10 for the year ending March 31, '77, versus March 31, '78.
11 . Wonid that be possible to provide, sir?
12 ; A I believe the -- if I understand your request, i
, n 13 j you're asking for the information to calculate the three f};
14 '
year average growth rate used for Exhibit C-1, and we can 15 provide that.
16 Q Plus the exact year, go back a year earlier, 17 I which would be the statistical basis for comparison cif the 18 ' year ending March 31, 1977, with the year ending March 31, i
19 ! '78.
k 20g A I believe we can provide that, t
21j Q Thank ycu.
.I
! 32 Now, Mr. Cherry, I gather that you are _ -- I'm l i' l 23, sorry, Mr. ' Carter, I gather ~ that you are aware that 74l 3 .Mr. Cherry's October '79 energy and load forecast, which is 4
0~".;
25j Met-Ed Exhibit I-11, r&flects 8,299,000 megawatt hours of a ._ _ ,._ _ - ,, _ _ - -, .m ,_
l
[
Gr3 Carter-cross 59 i7 . .
I f sales ror the test year -- for the year, rather, ending 2, Ma rch 31, ' 81.- Are you aware of that, sir?
Sl A I'm familiar with Mr. Cherry's exhibits.
4i ;
Q And your forecast of megawatt hour sales for 5 the test year shown at Page 2 of your Exhibit C-1 reflects 6[7,953,000 megawatts for the test year, is that correct, sir?
A 7f Yes.
0 Q So, in other words, the test year claim in this i
9{ proceeding in the area of sales is approximately 350,000 1
10 [ megawatt hours less than the forecast that GPU made in 11 ! October of 1979 for Met-Ed, is that correct, sir?
i 12 l A Yes , and that's set forth in Mr. Huff's Exhibit i
, 13 ' B-1, Part 8, Page 3, Column 1, Lines 2 and 3.
L ! l )
14 Q And I gather from your testimony that some of i
the difference between the original forecast made in 15l 16 h October of.1979 and your test year claim in this proceeding
.N 17 ( is due to the impact of conservation on Met-Ed's customers?
i 18 TIE WITNESS: Could I have the question read i
19 j back, please.
l 20{'
(Whereupon the referred to question was 21! read back as follows :- Q "And I gather from your testimony that some of the difference between the original forecast 22 [ made in October of 1979 and your test q
23 N year claim in this proceeding is due to j the impact of conservation on Met-Ed's 24" cus temers ?")
h 1sl . t9M."IGACH ca h1ArtsMAL. !*c . ~ 27 M; ';tDCXYtfLLOW I.VC. - HAnttISSUM PA.
17f 1?.
60
- . I E b. THE WITNESS: Yes. '
1 6' S Y BY MR. BARASCH:
3') Q And additionally some of the difference between 4 that original for'ecast and the one that you are providing 5' in this proceeding is due to the impact of the economic G i: slowdown which is occurring during 1980 that we had been
-? discussing' a -few minutes ago, is that correct, ~ sir?
{b
~
O t) A It - - yes , that is correct. And there are two i
9 l or three other elements which I described earlier as well.
5 10 l Q Fine.
f 11 [ Would you agree that your data presented here 1% } shows normalized KWH sales as growing by 1.2 per cent for 13 ) the year ending March 31, '81, versus the historic year '
O 14 i
L of March 31, 19807 -
15 A The number sounds reasonable, yes.
56 Q Are you also aware, sir, that the data shown 3
t 17l on Mr. Cherry's Exhibit I-9 shows that the October '79 l
6 16 energy and 1 cad forecast reflected growth in IG7H sales of te 19 f: 2.1 per cent for 1979 over 1978 and approximately -- not 30 ,., . approximately -- and 2 per cent for 1980 over 19797 l
/
A Yes, I-- I'm aware of those numbers in general.
21{s 22 k While I haven't made the specific calculations, I assume 23 they're all there 'and can be done. But I'm also aware of --
2 Mr. Barasch, of some of our past problems with respect to g 24 }
V' f!
25 l normalization in rate cases and achievements as to those l 1
A emmt a v.nsm. hx. - n u. tcaww., m. - m.wsevm. n. ma
6-7 _
Carter-cross 61 1 normaliza tions .
3
^
2 Specifically I could refer to the last test g 3i: year of Met-Ed, the 12 months ended 3/31/79 wherein Met-Ed 1
4 h was assessed an additional over and above its proposed
+
5 } normalized test year --
f 6I MR. BARASCH: Your Honor, would it be possible 7li to restrict these comments to redirect instead of elaborating 8f on what I think was a relatively direct . question?
f 9I THE ADMINISTRATIVE IAW JUDGE: Yes, I think 10 you should respond to him. You can submit that on redirect.
11 BY MR. BARASCH:
1 Q Mr. Carter, would you also accept --
12 f 13 THE ADMINISTRATIVE 1AW JUDGE: Please respond
- 14) ' to the question, 15 ! MR. BARASCH: I believe the Witness has 16 g responded already.
THE ADMINISTRATIVE IXJ JUDGE: Very well.
l 17i .
l 18 BY MR. BARASCH:
19 j Q Mr, Carter, would you also accept that
, 3 20 h Mr. Cherry's forecast -- October '79 forecast shows growth 4
2,1 in KWH sales of 3.9 per cent in 1981, 4.5 per cent in 22 1982 and.3.7 per cent in 1983? Are you aware of that, sir?
3 23 ! A Could you tell me the source of those numbers, 24j Please? g 25 Q To the best of my knowledge, it's I-9. If it
?
3 _ :am.sen e ne:m. >: r=. - a :.. c.c==.wu m. - >:n : sam. n. emz --
69 Carter-cross 62 1 is not I-9, it would be I-11.
3 A I'm looking at I-9, and I don't see those 3i percentages that you stated.
I
' 4l! THE ADMINISTRATIVE LAW JUDGE: Do you have I-9
'5 [ or 11?
MR. BARASCH: Mot in front of me, Your Honor..
df l 7i Thanks very much.
8l 3Y MR. BARASCH:
9j Q Mr. Carter, the percentages are not shown on to ! I-9 but can be computed by simply comparing the forecast t
11 l years of 1980 with '81, '81 with '82 and '82 with '83 under 12 [ the title total sales, would you accept that's what the i
13 [ percentages would yield after mathematical calculation?
O i 14 ;[ MR. STRAHN: Could we have those percentages 15 : again, please?
16 [ BY MR. BARASCH:
i 17{ Q The percentages are 3.9 in 1981 over '80, 18 l 4.5 in 1982 over '81 and 3.7 in 1983 over 1982.
i 19 l A The percentages appear to be reasonable.
I 20i Q Furthermore, Mr. Carter, would you accept that 31; Met-Ed's annual growth rate for the five years between 222 1975 and 1979 was approximately 4.3 per cent per year?
23 i A Could you give me the year by year percentages 1
4
- 24. ; that make up that 5.3 per cent composite?
OL i 25; Q For the year 1976 over '75, 7.3 per cent; for mma a nes:n m. a n. s.aer.w en .we. - mmcunc n. mn
6- 10 Carter-crose 63 7 - _ _ _
t i
2 l the year '77 over '76, 4.5 per cent; for the year 1978 E
over '77, 6.8 per cent; and for the year 1979 over '78, g 31 2.1 per cent.
}
A 4f Those percentages appear reasonable, and I
- 3. believe that if you took an average, that would be a correct i
6[ average.
I 7 Q And similarly for the three year period r
Gt beginning in 1977 through 1979 you would accept that I
I is that 9 @ the comparable rate would be about 4.5 per cent, 10 ! correct, sir?
11 i A That appears reasonable.
i 12 i Q Mr. Carter, do you recall that this office i
13 ' filed Interrogatory No. 30 of the Consumer Advocate's q g c
14 ! office in which we requested the expenses, revenues and i
is f rate base allocable to FERC customers and that the company 16 provided a response at Exhibit B-1-27 in which Met-Ed l 17 , apparently suggests that we look for the calculations at 18 i I wonder if you could tell us where in
- your Exhibit C 3.
- 19. { C-3 we could identify the allocations tlut we could then s
20 g apply to Exhibit B-1, Part 2, Page 1?
f 21: THE WITNESS: Could I have the question read b
22 bach.new, please.
23 [j .
9 (Whereupon the referred to questien 2<. li j
was read back as follows : Q "Mr. Carter, do you recall that this office filed g
35 j no:monen a nasi:n me. - a u. :.ece::n t.ru x:1. - umck=.c. n. a n
~ ~
6-11 Carter-cross 64
. e i.
t 1l Interrogatory No. 30 of the Consumer Advocate's office in which we requested the expenses, l ,
2- revenues and rate base allocable to FERC customers O 3!
i and thee the compan7 grovided a resgoose et Exhibit B-1-27 in which Met-Ed apparently
[ suggests that we look for the calculations at 4i your Exhibit C-3. I wonder if you could tell us where in C-3 we could identify the allocations Sli that we could then apply to Exhibit B-1, Part 2, j Page l?")
SV I
l THE WITNZSS: I don't believe that I can 7!
{ specifically agree 'n total with the response that 8!
! Mr. Huff has given to this extent, my supervisor of cost 9
- studies ta1ked with Mr. Huff's staff when they were 10 ?
I preparing this, and while the information can be provided, 11 ;
i I do not believe it would appear as a line item in the 13 !
e form that you are asking for, Mr. Barasch.
13 i
.O j; an. sinisca: rour nonor. I thia
- it oouta 14 lgreatly expedite the rest of my cross-examination if we 15 j j could go off the record for a second.
16i I
THE ADMINISTRATIVE IAW JUDGE: Very well.
17 h Off the record. '
18 l.t 195 (Whereupon a discussion was held off 4 the record.)
203
! 11 l 21l THE ADMINISTRATIVE IAW JUDGE: We will now
- 22. recess until 1:30, 23l (Whereupon a lunch recess was held.)
os. ;
25 THE ADMINISTRATIVE IAW JUDGE: When you are
- ot.tR2ACH c T4AMMAL. *?lt - O N. t.OCfCWILLO'M AYE. " HAMMISSURG. PA.
17143
5-12 _ carter-cross QS _
i a
2i ready.
)
'] % ll MR. OCDEN: Your Honor, before we resume { )
3 ,l Mr. Carter's cross-examination, could we go,off -the record, 4lg -
for a minute to discuss scheduling?
3f;- THE ADMINISTRATIVE IAW JUDGE: Very we11, let's 6 l go off the record.
l
?l i (Whereupon a discussion was held off af the record.)
1 9j 3
THE ADMINISTRATIVE LAW JUDGE: We are on the 10
- record.
12 $
1 Is there anyone else who has any objection?
! 12 I i MR. JENISON: Your Honor, the only question 13 )
j I have is I am trying to fit the temporary rate case and g
l 14 IT e I the base rate case together, and I. am a party to the 196
~
l '
l 15 l
! but I am not a party to the temporary rate case. In other-16.
! words, we have got two separata proceedings going on here ,
L7 g -
at the same time.
18 j THE AEMINISTRATIVE IAW JUDGE: The t 's right. '
IP 8 j MR. JElilSON: And today was scheduled for the M .j !
j 196, and tomorrow and Wednesday were scheduled for the other I
preceeding. Are we overlapping the testimony? I'm not 22 L_
j quite sure how it all ucrks.
23 A -
i 1 THE ADMINISTRATIVE IAW JUDGE: Any testimony i 24 hlthat's given in these proceedings can be applicable to both g
- ll 23F
! ---- m uu m a r m -e , .r_ me. - a .. . t , m,,u.
. ..,1. . 2. ._ m - ym .m .% ,,
6-13 , carte _r__cr.o.ss 66 1 cases. But in order that persons who are interested in the I
Q 2 , genera?. rate ecse, we try to indicate that tomcr row and l 3 ! Wednesday we are to take up testimony relating to the 1
4! complaint proceeding. You are in 196 but you are not in the 5l- complaint proceeding?
6 MR. JENISON: Correct. The only other problem
(
I am having, if I am not in this temporary rate case and 7{
i 3' do not appear tomorrow and they present witnesses which I l
9 4 would like to cross-examine for the base rate case, would i
10 i they be presented at a later time or do I have to do it la tomorrow in the temporary rate case? '
12 ; THE ADMINISTRATIVE LAW JUDGE: The testimony is i
Q 13 [ going to be related to temporary rates, but that testimony 14 -can be used in either case. For the purpose of hearing, 15 l these cases are consolidated. So that any testimony in 16j either case, in either proceeding is applicable, inter-17 ,N changeable for that matter. -
.18 MR. JENISON: Even though I am not a member 19 ;
l .of the temporary 2:ste case, I cou'ld cross-examine the t
20 5 uitnesses tomorrow for use in the other -- '
i 21 i THE ADMINISTRATIVE LAW JUDGE:: If it pertains 22i to general rate increase.
23 i MR. JENISON: Yq s .
h C
~
24 THE ADMINISTRATIVE I.AW JUDGE: At the request a i of the company, with no objections from the other parties, 25 Pd 9
um me c . .sm, m.- er n. i.ocnwuow m:. - uw 6m. u, me
4
<>de
.9. *<do
/ ^
%%> 4f$e, l/// 'i'4%
llll ~ kb? Rh '5
- 9 #%,,g*
/
$,+gy* _ .. _ _
TEST TARGET (M.T-3) 1.0 5 82 ttM y EE I.I i'" ll%
l.8 1.25 1.4 1.6 4 6" d
4> 4 +4%
QVb)/ o
/// 4A+.y(Oe' v
c)
A 'a$4> 0
//
\\\\ IMAGE EVALUATION \
. TEST TARGET (MT-3) 1.0 !s m ng
[d ,Ey llE I.l ?.. = l\\%
,g 1.25 1.4 1.6 ll
< c =
A**%g,,
' /+4 td;h+1
- $P>4/f of7777 gf
6-13 Carter-cross p7 ,
6 4
11 we will begin tomorrow's hearing at one o' clock instead of 3
C 2ften-o' clock.
3[i I think you were on the floor, 4
0l , MR. BARASCH: Yes. Thank you, Your Honor.
t Sl As a result of off the record conversations 0It and in view of the fact that Consumer Advocate's office F
7 has at least one outstanding interrogatory that relates to 0[ the catter that we were about to take up, we would have no i
9 f further questions of Mr. Carter at this time, Your Honor.
4 10 MR. STRAHN: Excuse me, is that interrogatory 11 the one that was mailed on Friday?
13 I MR. BARASCH: Yes, t
13 THE ADMINISTRATIVE iM7 JUDGE: Do you have any $
14 l cross-examination?
i 15 l MR. JENISON: Yes, I do, Your Honor.
16 [
[ CROSS-ELU4INATICII 17 j j BY MR. JENISON: i 18 y Q Mr. Carter, my name is Bob Janison. In the 19 jl i course of your teetimony yo'1 indicaacd that one of the 20 3 4 reasons for the reduction of usage was a 15 per cent 3
21s j saturation of wood burning stoves in the Met-Ed area. What 22i is the source of that information?
23 $
A Residentiel customer survey, 7-L..
Mj j Q Did you send out fliers or in part of their h 25 j ,
G- '"Mrmfew a P:/..uM et. "'I ~ 'T Me LeC AWILLCV? NC. - XA *t91 S r'JM4. :'A. M142 ,'
1
, , Carter-cross 68 2l bills --
h 3!
i A No. Each year we conduct appliance saturation 3i surveys.
i And the most recent one was conducted in the P
4j spring of 1980. We seat out questionnaires to about 20,000 5l customers, and we received a response from somewhere around 6 p 10,000 of those, and based on that response.
7I t Q Did they indicate the reason they put these I
3i stoves in, or were they asked why they did it?
9i A No, we did not ask why.
10 i Q Did anybody volunteer information as to why they 12 h put it in? .
12 j A There were numerous comments on the questionnaires, 13 but I did not do the analysis of all the comments , so I --
r 14 [ it would be speculation on my part to answer that question.
i 15l Q I believe your Exhibit C-5 discusses the
?
16i per cent of increase in customer bills that would apply i
l 17 j. should the proposed schedules be granted, is that correct?
I 18 l A Yes , that's correct. It's a bill comparison of 3
19 l, present service versus proposed rates for different customer 3
20 ! Classes.
31 Q Okay. The proposed rates are those in effect l
22l as of what date -- or the present rates?
23 [ A Rates effective today.
OV 24
)
Q As of -- okay, Sep tember 1980 -- or October 1980, 25] is that correct?
3 neam a uwsun. c:c. - e n. wermu.eu w:. - sm:s=m. m. mie
. _ _ - . - . .- . .-. .~ . , - -. -- -. . . - - - . . --- -. ..
Carterecross 69 o .
)
1, A Well, as my statement identifies them, they're i
3 i the rates that became effective on June 1,1980, . including l I I 3 l the levelized energy adjustment factor and the tax surcharge.
s 4l Q If you go to Page 6 of 22, the comparison of 8
5 present and proposed RSWH and RSH Summer, the present rate 6 jI for a thousand kilowatts is $62.36, is that correct?
A Yes, sir, you're reading right.
?f 2 Q All right. And the proposed revenue is what, 5
9 l proposed net rate for the same thousand --
1 10 dl A .For the same kilowatt hours it's made up cf 1
12 g $44 of base rates, $26.50 energy adjustment, total of I
13 l $73.71, which includes a tax surcharge of 7.29 per cent.
(~
12 Q Okay. That shows a base increase of what?
i Your Line 9, what's that percentage represent?
.14 I 3
13 i A Well, as the column is headed, it reads base i
1 16l increase, and the number shown on Line 9 for 1,000 kilowatt i
l 17 j hours is 31.7 per cent.
\ 1 18 j Q Compare that to Line 11, which is 18.2 per cent, i
19 j What is the difference of percentage -- or 20 uhy is there a difference in percentage? I'm not quite i
313 understand,*ng -- you have got a base increase and then an 22 overall increase?
i l 23 ( A Yes. The -- I think you point out one of the
.-. g4/
. . fundamental problems why we like to tell customar 23 overall impact is on their electric bill because very few
-euna a w =-n m - n n. cum.ur:: m. - su.mam. n. mn
Cartar-cross 70
-- 1 0
g l of our customers can relate a base rate increase to their Q 2 total bill. Inasmuch as the total bill is made up of a 3l base rate and energy adjustment factor and the tax t
4f adjustment surcharge, the difference between the two 3l percentages is namely the fact that on the overall bill, l
6l in other words, the total bill that you pay the company the 7 i [ increase in the base rates alone will result in an overall increase in your total bill of 18.2 per cent.
Sf i
9' However, when we talk base rates and in rate i
10 f cases where we're focusing on the base rates, there are r
11[ PeoPle who have cn interest in the magnitude of one t
12 - component of the bill, namely the base rate portion. And, 13 therefore, this -- this exhibit is meant to basically J.4 , provide you with a multitude of answers for most any type 1
13 ; question that you would have related to the rates, whether i
they're based on energy factor or overall, 16ls 17 l- Q So basically you're saying that an increase in 18 h your overall bill, should this proposal go through, shall i
19 j increase 18.2 per cent?
s 20! A That's correct.
2 31l Q Should this proposal go through, what would be b
22 g the percentage increase from March or April of 19797 8
The rates in effect -- or take March 1979, 33 J 1
Q 24j the overall increase includi..g these proposed rates.
/ 4 25 ;j A Fcr 1,000 kilowate hours ?
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Carcar-crocs pa 3 Yes, is this class.
1 Q 4
3 i;t (Whereupon the testicony was continued on m W
page 71.)
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Cartar-cross 71 i
If A I would have to make a computation using the O' 3idaerte=$natwereinerrectettnatnotat2atiraeana 3
S 1while I do not have that information with me, it could be
!l 4 d made available.
3! Q With the base rates and the energy charge?
0 - A Well, I assumed that you would like to see the 7'same pieces. You probably would want to compare base rate.
O Just the overall increase in the bill since Q
4 9fMarch1979withouttheincreaseandwiththeproposed i
20 increase. In other words, I suppose what you would do if 11 you have the increase now, you would just have to add on the 12 )3 :
19 2 percent?
13 A Now if I understand your question correctly, 14 f you would like to know what the total bill was for a 15lthousandkilowatthoursinAprilof1979?
1 16 l Q. Correct.
']
17 ! A And I can prepare that for you, but I don't 1
18 I have that with me today, and I would compare that with the a
.t
'E j proposed bill for a thousand kilowatt hours and I would 20 ;; compute it on a percent, l
i..
j 31} Q Okay. Could you alco do that for March, l :i 22 # although I am not sure there would be a change.
23 A For March of when?
O ",
n 2 xeren or 1979.
"5 dy A Okay. In March, I can prepare it for March NG:"la.tCM & M.1RSHAt fMc. - 07 M. LOCXWIL* OW AV; . - ;fAM ATStuas, PA. 17 $2
{
t
uari.cr-c ros s , 72 is 2 .! of 1979 and I would like to have a clarification though.
1 1
Would you like me to reflect the final rate order allowed h 3 for metered prior to the D!I accident?
.=
Q I just want what the b 11 would have shown.
+(i and 3 l You know, you may have been granted an increase /if it was i 3
6lreflectedinthebill,showit.
If it was not reflected in
?$ the bill. don't show it.
c f'
E A I think we can prepare that for you.
y 4
, 3 (' Q Okay. In your previous testimony you were IO {' talkin6 about the reduction of usa 6e and the various 11 g being the wood-buming stove and Met-Ed customer conservation:
II[,nndyounamedsomeprogramthatevidentlyMet-Edwas i
1 13 3
conducting. Do you remember what that was? $
l 14 j A I don' t know that I named the prograu, but i
15' perhaps you are refe. W to -- yes, I did. I spoke of the 16 j Wise Usa, which is a program really that began back'in 1974 3
17 $ predominantly addressed to all classes of customers, more l
- 4 13 i specifically directed to residential customers, pointing out i
I3fhowyoucouldtakewiserorbetteruseofelectricityand i perhaps, as a result of that, you could (a) conserve in a
~lb; actual kilowatt hours or (b) use enery/ in other than peak
- A i
v* <
~
.] hours when it would be less expensive to farnish.
n i
'~
Q Would you also believe that another reason
.i for the reduction of usage wculd be the increase in rates?
"3 A Inrolicit in all of these would be the changes
?
un m>:a unhu e.-=~:..s:wuuc: en. - :mmw a. n. mu l
, Ca rter-cross _-- . . _
73 y _.
i i fin rates over the past several years, yes.
i Q gl Q Okay, so have you made any analyses of the 3[ effect the proposed rates would have on the usage?
l.
A No, sir. I have not.
4l 5 Q. Do you anticipate that the usage would go up, i
6 remain the same3 or go down?
7 A Well, to the extent that 1 am unable to a j! quantify what I believe you are referrin6 to as the i
9 elasticity of price, I can't answer your question, sir.
i' 10 i. Q Well, based on past experience that Met-Ed has a .
Ilfhad. In other words, in the past when Met-Ed was granted a i
12l rate increase, did usage go down? ,
1 Well, as Mr. Sarasch gave me some information
] 13 A
Nl this morning, in some years the usage went up on a per A
is j customer basir. . More'recently on the EII proceeding, the
- i 4
15 growth in usagn has been going down, the growth rate itself.
Q Have you made any studies as to why that is 17 ))
18 ] except for these other items that you listed?
i 19 A No, I have mado no elasticity studies.
- 20) Q Are you familiar with the rate of customer 1
21fdelinquenciesthatmayhavebeengoingonoverthepastyear
}
Are you familiar with that area?
22l . and a half ?
?
23 r i A I see reports from time to time and I am J ~
aware generally of the delinquer,.cy situation, yes.
I5 Q Can vm +a ^4 ~- ~~ to what the rate has been
!.!OP.*t CAC-f C M A.'".3!! AL. I?'C. - ?.7 N LOC;W+LL O .7 #.3. - M ARRIS E1JM 74. 17t t ?.
Carter-cross _ 74 ,
}a E $ over the past year and a half?
(- 3 A No. Mr. Huff can testify to that.
I have no further questions at !
3! MR. JENISCN:
l 4I this time.
1 THE ADIINISTRATIVE IAW JUDGE: Mr. Wise?
3{
6 B'? MR. WISE:
a 7! Q Mr. Carter, with reference to Exhibit 19 of 3
Sj your testimony, which is a cost of the customer charged u
9fcomponents3 is there anywhere in the current exhibits a 10 ) breakdown of percent class of customer as to what comprises 3
.11 [ the customer charge end can that be provided?
i 12 A Well my testimony" describes what determines 4
13 l the elements of cost making up the customer charge and then g 14 ,3q the customer cost itself is developed in the cost of service 3
13 l Exhibit C-3 and is set forth as a separete element of cost.
16 Q Could you provide a breakdown per customer 17 ) class of your workpapers as to what went into the customer
)
l 18 j charge per class?
f 19 l A Well, that is contained in Exhibit C-33 l t l
20 j Mr. Wise.
- 41 Q I note in each of the residential classes, 22 li the customer charge proposed in Tariff 44 is somewhat below a
23 l what Met-Ed fi6ures to be the actual cost of the custcmer
~I 24 .- charge. Can you tell us how that difference is made up? g
~
A The unrecovered portion of the customer 25 [I-
Carter-croas 75 1
a 1 ;$ charge is recovered en a uniform mill per kilowatt hour en the t
h' 2 ' basis of all kilowatt hours that would be consumed.
3 Q In proposing Tariff 44s you . mention that while 3^i1 4 li Met-Ed proposes a $5 charge for checks that have been 55 returned, this audit or otherwise have been returned from 0 the bank?
7I !
A res, sir.
Sl Q Do you have the cost studies that went into 9 'h deteminin5 the $5 charge";
10 A Yes, we do.
E 11 l 4 Can you provide those or are those now an i
12' exhibit?
Y Q 13 i
A It is not among the exhibits. They are part 141 of the work papers and it could be provided.
l
! 15 1 Q With reference to your testimony concerning 1
4 16 i the 15 percent saturation figure for all electric customers i
17 l that are using wood-burning stoves for the winter, could you 4
18 y provide a copy of the survey form that went out to the 19 $
gcustomers?
20j A yes, we can provide it. I was just trying 31l$ to think as to whether it was already in the record or not.
22 I don't believe it is.
1
'4 23 & Q Would that be Hr. Cherry's? Should I ask 1
iO w i tuas or ar 4
Cuerrve EL A- We can check Mr. Cherry's testimony, but I t
5
- .:enmc>t a ta Ansat s:sc. - a to '_oc:ccr.:.t.w Av.r. - :nmissumo eA. in u
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Carter-crcas - - . .
76
).
163 don't believe that is included as part of his response at 9
P- 3 i3 this point in time.
3i Q Eave you done any cross studies to assess the f 4 f, feasibility of an inverted rate structure per different 5 ) classes of customers?
6 5g A I am not so sure I understand what you mean by 74j feasibility.
t Sf Q Well, your current rate structure, at least
' 9 for residential classes, is a flat charge per kilowatt hour.
10 ! A For most customers, not all.
I i
11 ; Q Was there any consideration or any studies 3
12 done to assess the feasibility of assessing tailblocks, c Ufhigherchargeperkilowatthourfortailblocks? g
\ j, 14 I THE AH4INISTRATIVE IAW JUIGE: I think we are 1.52 getting into the rate structure features of this.
h 16l MR. BARASCH: I am not sure Mr. Wise is aware 17 ! that the witness is here for revenue normalization issues 1
18 i rather than rate structure.
4 19 ( THE AH4INISTRATIVE IAW JUIDE: I think you i
20 3 Ought to defer that until you have testimony on the rate I .4 1 31 ll structure. It is apparently part of that discussion.
l 22 Anything else, Mr. Wise?
23 !; MR. WISE: I have nothing further.
il 4
24 i THE AIIfIi!ISTRATIVE IAU JUIGE: Mr. Kelly?
O 25 !j MR. IGLIX: Ho questions.
I $ . mum 2 -u me. - at a. ocawn :.on m. - u wesum. n. ima 1
, u . _ _ . _ _
- 77 3
THE ADMINISTRATIVE LUT JUEGE: Any redirect?
1l 3 MR. STRAHN: May I consult with the witness, 3 i please? No redirect at this time, Your Honor, s
4 THE ADMINISTRATI'/2 LAW JUDGE: I think 5 Mr. Carter wanted to explain something. I want to be fair l
64 with
- u There was an objection and a comment he wanted to 7 make on cross-examination. We indicated that we would permit 4
3$ you to submit'that on redirect if you wanted to.
i 9 n.! MR. STRAHN: We discussed that and we thought 10 l we would wait for rebuttal to their witness' testimony.
11 l THE ADtINISTRATIVE IAW JUNE: Very well. I 12fAnythingfurtherfromthiswitness?
13 (No response.)
14 'j. THE AIMINISTRATIVE LAW JUDGE: The witness i
- 15 ! -
is excused.
16 h MR. CGDEN: Your Honor, the parties indicated A
17 3 that Mr. Carter and Mr. Newton should plan to be here today.
3 18i They have been. It is 2 o' clock. We have no other 19 ' witnesses available at the moment to put on the stand.
l y
20W IHE ADfIIiISTPATIVE LAN JUDGE: Let's go off 0
31 E the record.
!I i
22 3 (Whoreupon, there was an off the record
( 23jdiscussion.)
9 M$ THE ADMINISTRATIVE LAW JUm E: At the hearings
' C*)
l . a J *%
25 j scheduled for November 12th,13 and lit, we will have joint
- :iana:sauns. aA. 17:12 1 :som.: a :<mswx r:-tc. - 07 :. t.scravit.t.ovt At?
~s A
i 2 g hearings in the Met-Ed case at 1196 and Pennsylvania 4
^
% l Electric case at 1197 g i
3, On those days, the 12th, the company will offer.
4 j witnessess Arnold, Cherry and Huff. On the 13th, Garland,
\
3 f Newton and Carter.
t' And on the.14th, testimony of the company' s 6 ! witnesses relating to complaints against te:::porary rates will
,4
? be heard.
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8-1 1l THE ADMINISTRATIVE IAW JUDGE: Let's go on the O Si record-3hI After discussion, we have set additional joint 4 L hearings in the Met-Ed case and the Penelec case, and it 3 will also include the complaint proceedings and temporary 6,9 rates, if necessary, on those cases on November the 19th,
- / 20th and 21st. ,
)
8i Is there anything further we could accomplish t
il 9 [ this afternoon?
10 I MR. JENISON: Your Honor. .
t 11 h THE ADMINISTRATIVE LAW JUDGE: Yes.
(
Ig i MR. JENISON: Who are the witnesses scheduled i
2' '
O <
' ' ' = "" "' '
14 i THE ADMINISTRATIVE IAW JUDGE: The eempany caa i
13 respond. I don't know who we have.
3 16 MR. OGDEN: At the present time we have 17 ! Mr. Graham and possibly Mr. Huff as a backup witness.
10 Primarily it will be Mr. Graham on the level of temporary I? 1 rates.
20 $ THE ADMINISTRATIVE LAW JUDGE: Anything further?
i Your Honor, I have one housekeeping 31i 9 MR. CGDEN:
33 : matter.
3 THE ADMINISTRATIVE IAW JUDGE: Very well.
23fy y MR. OGDEli: It has been called to my attention Q.
33 that I c:ay have neglected this morning to mark two e:.hibits 2 LCC'<WTbi-@W AVZ. " :!/e:tM:59tn*G. Pt.. 17tt2 --*
A
- 3MADSoff e 'JMt?"!AL, *f!C. - f.'7 't
.m. ---. -
8-2 * .
- I i
1 j which I indeed did hand out. Just to make the record clear, a
'2 ) I would like to have marked for idantification Met-Ed-Fenelech
~'
0 3; Exhibit Nes . E I and E-6-1.
4l THE ADMINISTRATIVE IAW JUDGE: Very well.
$[
[ (Met-Ed-Penelec Exhibit No. E-5-1, 6[i being a multi-page document entitled,
" Quarterly Financial Statements June 30,
?! 1980, General Public Utilities Corporation",
.I was produced and marked for identification.)
0i i
- 9) (Met-Ed-Penelec Eyhibit No. E-6-1, r being a multi-page document entitled, 10 i " General Public Utilities Corporation k Second Quarter Report to Stockholders 1980",
11 was produced and marked for identification.)
12 f i THE ADMINISTRATIVE LW JUDGE: We will adjourn CI 13 i 5
h 14 h until tomorrow afternoon at one o' clock.
?
13 5 (Whereupon the hearing was adjourned i at 2:19 o' clock p.m.)
16i i i 17 l 18 [
I 19 h '
73[:
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24: h 25 3 1
't@*tR?ACM & rd A8tSMAL. (NC. - M N. %CCXWP 1.AW AYi. - HARM:6DV W. PA. 17tti - - -
y.~ --
4 4
3 1 --o00--
Q %f i I hereby certify that the foregoing is a 3i
! true and correct transcript of my stenotype notes taken by 4h me during the hearing on the above cause, at the herein 5}1 4 indicated time and place, before the Pennsylvania Public 61 il
? g Utility Commission.
l 8I <
' MOHRBACH & MARSHAL, INC.
2 By ~ 1 - At A Be[ty B. Marshal 11 l.
12 B MA em
, ,, N
' ~'
Debra ~II. Olifief ai O-
~
A /d-A ?-f C 14 i REPORTED BY:
1 13 I MOHRBACH & MARSHAL, INC.
! 27 North Lockwillow Avenue 16f Harrisburg, Pennsylvania 17112 17; (The foregoing certification of this transcript 13 h does not apply to any reproduction of th:
i
$ same by any means unless under the direct .
19 !! control and/or supervision of the certifying
) Reporter.)
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