ML20032D952
| ML20032D952 | |
| Person / Time | |
|---|---|
| Site: | Black Fox |
| Issue date: | 10/02/1981 |
| From: | Baker H, Dawson B, Eagleton N OKLAHOMA, STATE OF |
| To: | PUBLIC SERVICE CO. OF OKLAHOMA |
| Shared Package | |
| ML20032D948 | List: |
| References | |
| 199748, 27068, NUDOCS 8111180555 | |
| Download: ML20032D952 (17) | |
Text
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DXFETED BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA
'81 W 16 P3:25 APPLICATION OF PUBLIC SERVICE
" d !ECRETtJY COMPANY OF OKLAHOMA AN
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N" OKLAHOMA CORPORATION, FOR AN CAUSE NO. 27068 ADJUSTMENT IN ITS RATES AND ggg g CHARGES FOR ELECTRIC SERVICE ORDER NO.
IfPTHE STATE OF OKLAHOMA HEARINGS: Pre-trial hearing for interim relief request, July 22, 1981 before Lee W. Cook, Referee Hearing for interim relief, July 23, 1981 APPEARANCES: See Official Record On January 19, 1981, pursuant to Order of this Commission, Public Service Company of Oklahoma (PS0) filed its Amended and Supplemental Application in the above-entitled Cause of action seeking 142.2 million dollars in permanent rate relief and at the same time updated its applicable test year for the proceedings under this Cause to the year ending October 31, 1980.
Thereafter, on April 22, 1981 Applicant filed its Supplemental Application for interim relief alleging that on September 14, 1980 it had placed into commercial operation a new coal-fired generating unit, Northeastern Station Unit #4, that said unit has been serving Applicant's customers since the succer of 1980 but that the investment in that plant has not been recognized by the Commission for rate making purposes. In its Supplemental Application for interim relief. Applicant seeks additional irterim rates in the amount of 43.5 mfilton dollars above those authorized by this Commission to be charged in its Order No. 180877. On May 18, 1981, this Commission entered its Notice and Order Setting Request for Emergency Temporary Increase in Rates for Hearing conmencing at 9:00 a.m. on the 23rd day of July, 1981 and continu1>ig thereafter unti) completed.
Thereafter, on the 23rd day of July,1981, af ter due and prcasr notice of these proceedings had been made and given as required by law and the Order of this Commission, this matter came on fo* hearing before the Commission, en banc, and the Comission proceeded to receive evidence and testi: cony in connection wi th Public Service Company's Supplemental Application for interim relief together with statements made by various parties both in favor of and opposed the temporary request. At the conclusion of said proceedings, the Commission took this Cause under advisement and same comes on now for determination and order of the Commission.
FINDINGS AND CONCLUSIONS In its Supplemental Application for interim relief, the Applicant asks the Commission to recognize its investment in its Northeastern Station Unit No. 4 and the revenue requi,rement on that investment.
Applicant advances the position that the interim relief granted by the Commission in Order No. 180877 did not address Northeastern No. 4 which went into commercial operation on September 14, 1980; that the plant is in service and benefiting ratepayers, and that the Company needs additional relief to arrest erosion in its fiscal condition and allow it access to external financing to seeet cash requirements on' a timely and reasonable basis. The primary issue before the Commission in this instance is indeed the Company's investment in Northeastern No.
4, its Fo
use and us2 fulness, and the ben 2 fits of th2 invsstment to th2 Company's customers. The matter cannot be separated from the extended history of this case and its larger frawwork of complex legal, regulatory and economic issues, however. Such a backdrop is important to a fair and reasonable decision on any issue in any case before this Conv11ssion.
It is particularly essentini in an application such as this for interim relief, in which the issues at hand are limited,'and the e'xamination ard hearing process controlled.
This Commission has stated before in cases involving this Applicant (Cause No. 26959, Order No. 180877) and others (Cause No. 26782, Order No.166818) that requests for interim relief by their nature present us with special issues and concerns.
We have noted that they are the result of the time lag which is an unfortunate if unavoidable product of our current regulatory process, and of the difficulties that lag presents in an accelerated and often unpredictable eurketplace. And we have said that because of those special issues and concerns, tne Commission must make sparing use of interim relief, denying it when conditions make it inappropriate (Cause No. 27142, Order No. 187056) and granting it under protective bond when the conditions and evidence warrant interim relief.
It is a regulatory tool to be applied with balance and reason so as to reduce the wearing effects of inflation and regulatory lag while protecting the ratepayers against over-compensation to the utility.
In answering this Applicant's request for interic relief within the guidelines we have established, the Commission must make at least two basic determinations.
It must assess the evidence on the record regarding Northeastern No. 4, and determine how that plant fits into a many pieced equation inclucing service demand, generating capacity, reserve margin, and operating costs and benefits. If the sum of that equation then indicates the Company's investment was sound, and that the plant indeed was used and useful and of benefit to.the Company's ratepayers, we must cetemine an appropriate amount of relief to recognize that investment.
Applicent presented testimony establishing that its newest coal-fired generating station, Northeastern Station Unit. ho.
4, went,
into commercial operation on September 14, 1980, but that prior to that time and during the sumer of 1980 the plant had burned natural gas and 7 generated electricity to accomocate Public Service Company customers' during the extraordinarily hot summer, experienced that year.
The Company also provided testimony showing that the optimal reserve margin is obtained when generating capacity is from 15% to 30% greater than the normal peak demand.
We discussed the issue of the capacity and reserve margin of this App 1tcant substantially in Order No. 180877 filed in Cause No.
26959 and dealing with a request by Applicant for recognition of its Northeastern Station Unit No.
3.
At that time we said that wita Northeastern No. 3 in service Public Service Company had experienced an actual reserve capacity of just 3.4% on July 16, 1980, and that even under more nomal weather conditions the reserve margin would have been a comparatively low 14.6%.
In that case, Company management selected the test year for the Applicant's pemanent rate case. In the case now before us, the Commission determined that the test year should end October 31, 1980.
In the current case, the testimony showed that without Northeastern No. 4 Applicant's reserve margin would have deteriorated substantially during 1981.
The testimony further showed that Applicant's 1980 reserve margin was less than half of the average reserve margin maintained by the industry and at the very bottom of the range considered optimum in that industry. The testimony showed trat with increased demand actually experienced during the summer of 1981 the Applicant's reserve margin would have fallen even lower without Northeastern No.
4, and that in the week of the hearing on this-Application the Cogany had recorded a peak consumption of 2930 megawa tts, or some 130 megawatts more than projected for the sumer of 1981. The Staff testified that Public Service Company ratepayers have been benefiting from the availability of Northeastern No. 4 for ; core
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than one year, and that the unit was both used and useful in i
maintaining system reliability for Applicant's customers.
We believe the evidence in this case ' establishes the need for Northeastern Unit No. 4; that the usefulness of the plant to Applicant's ratepayers has been demonstrated, and 'that slippage by the Company of the in-service date for this generating facility would have increased the cost of plant and had a substantial financial impact on l
Oklahoma ratepayers and could have resulted in a deterioration in the 4
quality of service which those ratepayers are er. titled to receive. On the issue of financial impact, we would note that testimony was presented in this cause showing a delay of one year for construction and in-service date for Northeastern No.
4 would have added approximately 15 million dollars to the cost of that facility.
Additionally, we would note that operation of Northeastern No. 4 has provided 38.7 million in fuel cost savings to the ratepayers; and that by Order of this Commission the Applicant has been returning those t
, savings to its customers since August of 1980, even though those customers have not yet paid a return on the plant from which the savings wre gained.
As was the case with Northeastern Unit No. 3 prior to our granting interia relief in Order No. 180877, Northeastern No. 4 is earning no return at all to the Company.
AFUDC ea rnings on this investment stopped when the unit became plant-in-service over one year ago.
In such a case as this where a Company is earning nothing on a major investment which has demonstrated its usefulness, we find that there shou'l t.
be some recognition of that investment for rate-making purposes
, on an interim basis. We incorporate herein our discussion of advance planning set forth in Order No. 180877 and we specifically disallow
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inclusion of Construction Work in Progress for the Ccapany's Black Fox nuclear project.
This Commission has meticulously eliminated expenses relating to the Black Fox in this proceeding as it has in all previous
'j proceedings.
That matter will be taken up during hearings scheduled in Applicant s permanent rate request.
In regard to the amount of relief to be granted in recognition of Northeastern No. 4 Applicant has requested 43.5 million dollars, including return on investment, expenses, depreciation and taxes.
Comission Staff - recommended that additional relief be granted Appiteint based only on the appropriate amount of Applicant's inves tnent and a rate of return predicated on 157. return on equity, the return allowed this Company in its last permanent rate order (Cause No.
26669, Order No. 168923). After considering the effect of taxes. Staff concluded that Applicant should be allowed to recover 24.4 million
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dollars in interim relief in addition to the interm relief grarited by this Commission in Order No. 180877. In developing the rate of return, Staff used a capital structure as of October 31, 1980, the end cf Applicant's test year for the permanent rate request now on file.
In his testimony, Staff Witness Howard W.
Motley, the Commission's Director of Public Utilities, testified that Staff's recommendation for permanent rate re7fef will be approximately 75 million dollars during the hearings scheduled to connence before this Commission on September l
14, 1981.. la qualified his testimony by saying that the staff reccamendation in the permanent case makes no recognition of any l'
. investment or expense associated with Black Fox; staff further presented testimony that the recommendation for interim relief is based sole)y upon the investment in Northeastern No. 4.
The testimony showed that if the amount recommended for that investment were granted and added to the interim relief granted on Decenter 12, 1980, the total interim rate relief would be 365,700,000, which amount is still nearly
$10,000,000 less than sta ff will recommend in the permaner.t case set before the Comnission.
Applicant essentially has asked the Commission to recognize its Northeastern No. 4 investment as it might after a full hearing for permanent relief. As we said above, appitcations for interia relief c
present this Commission with different issues and must be so treated.
We believe Applicant is entitled to some recognition for its investment, but only a minimum amount antil it can be heard fully in the framework of the Company's permanent rate case.
The Staff's J
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s recommendation provides the coopany a return on that investment, but no more.
I' As a final point of discussion on this Application,- we would note that the-issue of ' time and regulatory lag above r.entioned is particubr?y relevant in this case.
This Applicant last received a 4
permanent rah order from this Commission' on May 7,1980, and has been L
waiting on a final decision on the issues presented in its current permenent application for 15 months. Applicant certainly must shoulder a measum of responsibility for the length of the current cause anc' for the developments that have contributed to its extension. The size and nature of one major issue in the case -- the Black Fox nuclear power project -- alone has added to that extension. There have been other factors and other contributors, however, factors and events which perhaps were products of new and more uncertain times in energy and the l
t econany but which did nothing to allay the' effects of those 1
uncertainties on the Applicant or other parties. Additionally, with "the hearing on the merits just weeks away, this Commission in Order No.
197606 agreed to expand the scope and depth of the hearing tc include a full investigation of issues related to the Black Fox project.. We agreet' at that time and remain convinced with Intervenors and Staff that st:h art investigation is necessary and timely.
Whether as a presence ' or an absence, the Black Fox looms large enough in the future of this Company and its customers that we must go beyond the test year expenditures and the Company's current investment to search out the viability and value of the entire project. Such an examination must be in-depth and comprehensive. Such an examination of necessity will take time both in hearing and analysis, and will add perhaps considerably to a
the - length of time between the filing of this application and our final decision.
If, as we conclude above, the Company does have substantial trvr tment in Northeastern No. 4; and if, as again we have concluded, the piant has been used, useful and of benefit to Oklahoma ratepayers t
since the middle of 1980; and if, as seems likely with the expanded e
scope of hearings it may be several months before a final decision _is mached. in this-case and permanent rate relief either granted or
. denied, then the standard of reason and balance requires that we make some -recognition of that investment and the benefits in security and fuel savings which it has provided ratepayers.
For the reasons stated, we find Public Service - Conpary should be l
allowed to recover additional interim rate relief in the amount of 24.4 million dellars and that the increase granted herein should-be l
recovered from.the various classes of service as set forth in Staff Exhibit No. 70. Additionally, we find the Company should execute a refund bond conditioned such that Applicant will faithfully and p
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prosptly refund to its customers the relief granted pursuant to this Order and which may be subsequently ordered refunded by this Commission in further proceedings
'n connection with our ' current -filing for permanent rate relief - with interest thereon at the rate of 15% per annum from the date such surcharges are received by the Applicant from its customers.
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s O R D E R IT IS THEREFORE THE ORDER OF TH.S COMt11SSION that the Applicant be and it is hereby authorized to recover additional. interim ra te relief under bond in the amount of 24.4 million dollars annually, and that said increase be recovered based upon pro fama kilowatt hour sales for the twelve months ended October 31, 1980 all as hereinabove set forth.
DONE AND PERFORMED this day of M d d o 82 1981.
CORPORATION COMMISSION OF OKLAHOMA HAff BAKE 7, Chairman BILL DAWSON, Vice Cnat rman N
NDRFA EAGLETON, Commigioner ATTEST:
nawNUt BERDEE 5. HOLT, Secretary pdm 9
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- - U[y?py APPLICATION OF PUBLIC SERVICE COMPANY )
,.F'E OF OKLAHOMA, AN OKLAHOMA CORPORATION, )
'CAUSE NO. 27068 FOR AN ADJUSTMENT IN ITS RATES AND
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CHARGES FOR ELECTRIC SERVICE IN THE
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199748 STATE OF OKLAHOMA.
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ORDER NO.
- DAWSON, B., Dissenting:
On December 12, 1980, Applicant ir this cause was granted S41.3 midlion in " Interim Rate Relief" by Commission Order pending a hearing on a request for permanent rate in-creases. The issues presented in the hearing leading to that Order were addressed in some detail in a ten page Dissenting opinion filed by this Commissioner. We are still awaiting the hearing on the request for permanent rate in-creases. Meanwhile, we are here presented with a still further request for special relief by the Applicant. Most of my reasons for objection as stated in the December 12, 1980, Dissenting opinion serve as well in this instant. I incorporate that Dissenting opinion as a part of my present remarks.
The main difference between the Applicant's present claim as compared to that preaented earlier is that then they were seeking to foist the cost of their Northeastern No. 3 coal-fired generating plant on the Oklahoma ratepayer, now it is Northeastern No. 4 on which they say they should have an immediate return.
And, though I would not have thought it possible, the Applicant has played even faster and looser with the figures in its effort to justify its present claim than it did in presenting the earlier one.
REVENUE DEFICIENCY Applicant's Case Applicant presented, through the testimony of W'.' R.
Stratton, calculation of their revenue deficiency in Exhibit WRS-2.
It was contended that the calculations utilized a format similar to that used by staff and adopted by the Commission in the preceding PSO interim rate case. However, through a series of concise and telling questions by staff attorney Patton, it became clear that there were significant differences between the methods--differences so pronounced as to make the Appli-cant's suggestion of similarity appear quite misleading, if not utterly and intentionally deceitful.
The Commission staff had calculated the Oklahoma Jurisdictional rate base as 91.69% of the Net Utility Plant in Service as was done in Cause No. 26669.
Ap-plicant used the total' plant in service--a difference of S65.6 million.
Applicant included in their calculated rate base, a
$14.9 million investment in coal piles for N.E. No. 3 and N.E. No. 4.
Staff's calculations, adopted by the Commis-sion, eyeluded that addition.
Applicant used an overall rate of return of 11.45%
i as opposed to the 10.64% used by staff and allowed by the Commission in Cause No. 26669--a difference of $6.5 million.
Finally, Applicant made additions totalling over S5.1 million for depreciation and ad valorem taxes. These ad.
I ditions had not been made by staff or adopted by the Commission.
While Applicant presented the exhibit as one using the same format as adopted by the Commission in the prior interim case, staff attorney Patton indicated through cross-examination that if the actual formula were used I
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the result would be a revenue deficiency, not of $43.5-i million but on the order of $8.8 million.
Perhaps attorney Patton was too effective, for his
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participation was silenced at thst pcint as other staff members took over to present a " staff case" that bore the appearance of an effort to rehabilitate the Applicant's.
f case through its own major changes of the very format it I
had applied in the earlier interim hearing for the Appli-4
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oant.
Given such assistance, needless to say, Applicant's 4
attorneys saw no reason to cross-examine.
Staff's Case In what was apparently a last minute change of posi-tion the Director of Public Utilities came forward with a 1
rate increase recommendation of $24.4 raillion. That recommendation was based on a new formula, a unique con-caption of "used and useful", a 15% return on equity and a seeming misunderstanding of his own late-entered table reporting the reserve levels of various power pools around the country.
3 The adoption of staff's recommen3ation by the majority today, together with the earlier granted relief, means that the Applicant has thus far been granted 87.6% of the staff's presently stated recommendation for relief in the permanerat hearing. And all of the total $65.7 million granted by the maiority to date has been backed by less than two full days
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of hearings! The six weeks of scheduled hearings with which we.are now invo_lved may, then, prove little more than 4 time to further sanction that amount and add more.
Staff's " surprise" exhibit and case recommending a
$24.4 million increase in this hearing was premised on "a new formula". That formula involves several changes from the one used in the earlier Public Service Company interin i
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Indeed, as earlier noted, staf f attorney Patton's questions revealed that the earlier applied formula would
- call for 58.8 million in relief as' opposed to the S24.4 million that follows from the late announced "new formula".
But both the "old" and "new" staff formulas, it must be understood, consist primarily of inclusion of Applicant's investment in its Northeastern No. 4 generating plant in the rate base calculations. And the argument set forth to support such inclusion turns on the Director of Public Utilities' conception of "used and nseful".
"Used and useful" is a term of art with no clear meaning within the regulatory arena. It is normally ac-cepted however that "a public utility is entitled to a just compensation or a fair rate of return on the value of its property used or useful in the public service (64 Am Jur 2d S 135). Certainly what is envisioned by such a statement is not simply a determination of whether a plant literally works and whether it generated a kwh of electricity. Ra ther,
the commission must determine whether the plant is currently needed to satisfy reasonable reliability requirements of the Oklahoma ratepayers. If a negative finding is made, the conclusion may, and should, be stated in terms of the plant not being used and useful.
The Director of Public Utilities introduced a table which indicated the various levels of reserve maintained by power pools around the country. Upon this evidence, he in essence, submitted that 24.3% reserve for the Southwest Power Pool is not out of line.
But even if one were to agree with the Director, the fact is that reasonable calculations suggest that Applicant may have far more than a 24.3% reserve capacity. Indeed, one intervenor witness in the present case has pre-filed testimony for consideration in the hearing for permanent relief charging a 40% plus reserve capacity for
Applicant. More will be said about that in the section which follows.
The Director of 'Public Utilities misunderstanding ap-parently, however, runs much deeper than just the method of calculation of reserve margin. He would, indeed, have us believe that if the various power pools have excessive reserve levels it is appropriate for Applicant "to go and do likewise".
It is this type of reasoning that perpetuates overbuilding and ceuld eventually help send Applicant into bankruptcy by resulting in rates its customers cannot or will not pay.
As stated by Dr. Charles M. Studness in a March 12, 1981 article in Public Utilities Fortnightly, The persistence of avoidable excess capacity will represent an unnecessary misallocation of re-sources, which diminishes the nation's economic well being.
Ratepayers and shareholders will have a mutual interest in eliminating excess capacity that cuts across their traditional adversary relationship. Accordingly, reluctance of a management to address excess capacity vigorously could eventually pose a threat to its tenure, as shareholders come to focus on the benefits of alternative courses of action and regulatory trepidation about utility financial optimization fade.
This Commission continues to say with its Orders that it con-cludes just the opposite--that "more is unquestionably better" and that no amount is too much.
It does so, this Commissioner believes, to the detriment of the Oklahoma ratepayer.
RESERWE MARGIN Applicant's case for the inclusion of out of test year expenses related to its Northeastern No. 4 unit was largely presented by Witness Frank Meyers. It involves the basic argument that the plant is needed to adequately serve PSO customers.
Mr. Meyers offered Exhibit FJM-3 to demonstrate the company's reserve capacity with and without the inclusion of Northeastern No.
4.
In addition to generation sufficient to meet forecasted I.
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annual peak demands, an electric company must have some ad-ditional generating capacity to insure that there is a margin
- to allow for day-to-day variations 'in the operation condition of installed generation and for deviations of the annual peak demand from its estimates.
Upon cross-examination by the attorney representing Intervenor Groups the calculations of fered by Applicant as to reserve capacity came to appear misleading and intentionally deceptive--as had the figures earlier presented with regard to revenue deficiency.
A critical examination of the Applicant's exhibit provides results ruch different from those presented by Applicant.
Under the "1981 Actual" column the installed capacity is re-ported to be 3736 mw.
This figure is increased by 208 mw to account for the SPA Entitlement and the TVA Diversity.
Applicant then reduced the total capability figure by 676 mw to account for off-system sales. Naturally, the Company should be encouraged to actively pursue the sale of unneeded capacity in order to reduce the amount of idle reserves. For the purposes of determining the capacity requirements and the reserve margin of the system, however, it is more significant
. to examine the system without those sales. That is especially true in this case in light of the completion of a new 490 mw unit by the Grand River Dam Authority which will end GRDA's needs for the 258 mw of electricity which has been supplied to them as a part of Applicant's off-system sales. Also, it must be noted the 103 mW delivered to Gulf States Utilities is delivered during the off-peak season and does not affect Ap-plicant's ability to serve its peak. These sales, therefore, would not reduce reserve margin calculations. Taking those matters into account and factoring out all off-system sales except the firm sale of 100 mw to AEC leaves a total of 3844 mw L
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as the capability to serve net system--as opposed to the 3268 mw submitted by the Applicant.
To determine the reserve margin the Applicant then used the actual 1981 peak rather than a weather normalized peak.
As earlier mentioned, one purpose of maintaining a reserve margin is to allow for the deviation in forecasts. To use the abnormally high 1981 peak is to overstate the needs of the system and to understate the reserve margin. In the Company Exhibit FJM-3 offered in the hearing for permanent relief the 1981 weather normal ~ized peak is reported to be 2840 mw.
Given the above described adjustments, the 2840 mw weather normalized peak would be subtracted from the newly calculated 3844 mw capability revealing a reserve margin of 1004 mw or 34.3% reserve capacity.
This, one must be re-minded, is compared to the Applicant's reported 338 mw or 11.5% reserve capacity.
At this stage of analysis of the Applicant's case, the foregoing calculations have to be recognized as based upon rough, albeit conservative, estimates. But the fact that the two methodologies can produce a difference in reserve figures on the order of 666 mw or 23.8% leads one to wonder if the Commission has an adequate record on which to base a decision. This Commissioner is of the strong opinion that l
it does not. 'That seems even more the case when one realizes that with the newly calculated figures suggested by testimony i
and reflected above, it becomes possible to remove North-l eastern No. 4 from system calculations and still leave PSO with a reserve margin of 19.5%.
Thus, while the information in Exhibit FJM-3 was offered to support the need for additional capacity, the adjusted l
i calculations indicate instead, what appears to be ample i
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reserve capacity even without the inclusion of Northeastern No. 4 in the rate base. At the very least it may be noted
, that at the end of the interim hearing Applicant had.left pronounced questions unanswered as to the true picture of its capacity and the reserve margin of the system. The extent to which these questions were left unanswered has been avidenced by the amount of t.me spent on the issue in the hearing for i
permanent z elief. Hours of testimony have been dedicated to those questions in the permanent hearing and they are not yet fully addressed at the time of this writing.
But, at the same tine, while the foregoing discussion is important insofar as it indicates much higher reserve margins than presented by Applicant, it should also be noted that reserve margins are not alone adequats support for the alleged need for additional capacity.
The amount of generation reserves required depends on the amount of reliability desired.
Indicies such as reserve margin though, are not directly indicative of the reliability per-formance--e. g., forced outage rates. This can be illustrated by considering a-hypothetical system with a peak load of 1000 mw and a supply system consisting of a single facility, a baseload unit of 3000 mw.
The loss of load probability in this case would be equal to the outage rate for the one unit, probably 1000 days in ten years. This would be well in excess of even the most lax standards. The reserve margin however, is 2004, which is considered very high. This example, while exaggerated, helps drive home the point that the reserve margin is in itself not a reliable indicator of reliability. It further suggests the possible outcome of a utility that becomes increasingly base-loaded. The matter of system reliability was not addressed in the interim hearing. Much remains to be said about it in the hearing for permanent relief before any hard conclusions may be drawn.
i Thus, even if we were to ignore the above mentioned discrepancias in figures, focusing on Applicant's reserve 4
margin calculations alone, as staff did 'in 'the interim
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hearing, is an inappropriate method of proving the "need" for a baseload plant such as Northeastern No. 4.
" SAVINGS" ATTRIBUTABLE TO NORTHEASTERN NO. 4 Fuel Savings Both witneases for the Applicant testified that bills to consumers were reduced due to the fuel efficiency of Northeastern No. 4.
Several aspects of that claim were left unexamined and, where inquiry was made, the response was less than adequate.
When inquiry was made concerning the possibility that take or pay gas contracts would be affected, for example, neither of Applicant's witnesses was capable of providing info rmation. If inclusion of Northeastern No. 4 results in the early retirement or lowered use level of gas-fired plants, less gas will inevitably be used.
If, because of coal displacement, an amount of gas is to be paid for but 4
not taken under the take or pay features of most gas con-tracts, or, ' gas is to be sold off-system for less than PSO pays for -
then, those factors must properly be l
calculated into any alleged " fuel savings". With the issue of " cost" attributable to displaced gas usage and other issues related to a claim of " fuel savings" attributable to l
Northeastern No. 4 still unsettled, it would seem ill-advised to give approval in any form to the construction of that unit based on such a claim.
l Savings on Stepped up Completion Witness Meyers offered testimony and exhibit FJM-5 to support the alleged customer savings achieved by completing Northeastern No. 4 on schedule rather than completing it in 1984. Aside f' rom' reflecting inflated dollar figures rather 1
than more meaningful real dollar figures exhibit FJM-5 was
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shown to be deceptively presented and totally inadequate to demonstrate the import suggested through the effective cross-examination of'the attorney for Intervenor Groups.
Faced with that cross-examination Mr. Meyers admitted that what his exhibit compared was not, after all, the savings zesulting from completion of Northeastern No. 4 on schedule versus completing i.t in 1984, as he had led the Commission to understand. What it compares, rather, is the savings which would result from building a plant, the cost of which is the average of the cost of Northeastern No. 3 and North-eastern No. 4 versus the cost of a " typical" 450 mw coal plant based on 1984 projected figures.
Mr. Meyers acknowledged that the actual cost of Northeastern No. 4 completed in 1984 would, for several reasons, have been expected to be much less.
While the comparison made in exhibit FJM-5 is.
peripherally interesting it is of very little help in determining any "real" savings attributable to early com-pletion of Northeastern No. 4 and is of even less help in determining the "need" of that plant. That exhibit like the testimony that accompanied it offered no evidence of the need. of Northeastern No. 4 now g in 1984--and a plant sooner is not a plant cheaper if it is not needed.
Mr. Meyers was asked to prepare a " corrected" FJM-5 exhibit for late-filing. He did so.
But until there is opportunity for cross-examination--particularly in view of what appeared to this Commissioner to be more than one incident of revealed " deceptiveness" on Mr. Meyers ' part in the presentation.of his testimony--that exhibit should be given little consideration.
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POST HEARING DEVELOPMENTS Since the hearing in this case it has been publicly
- acki.owledged by the Appl'icant that it' has re~ ently negotiated c
a. sale of approximately $60 million worth of oil and gas leases--leases apparently acquired for about S10 million.
It would seem that these leases may have been purchased with ratepayer money by employees whose salaries were, indirectly at least, also paid by Applicant's ratepayers.
Such a sale of gas leases would certainly have an im-pact upon the revenue requirements of this company. At this time, it is not clear what the impact of this sale will be.
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Should the revenues of this sale be credited to the Oklahoma ratepayer all in one year, and the staff's recommendation of
$66.6 million in rate relief be the decision of this Commission, after the first interim rate order of $41.3 million, it would still leave the Oklahama ratepayer with a rate reduction order rather than a rate increase.
- And, even if other treatment is given to this sale, it has a real potential of affecting the revenue requirements of this company. It would therefore, on this point, too, seem to be appropriate to deny any interim rate increase at this time until the Commission has a full opportunity to explore at public hearing what the impact of this sale is and the way that it will affect Applicant's revenue requirements.
Concerning a related subject, it has come to this Commissioner's attention that the transfer of Applicant's Transok Pipeline subsidiary to its holding company Central and Southwest is to be made as an extraordinary dividend to 1
Central and Southwest. The apparent plan, as this Commis-f sioner understands it, is to transfer Transok at its historical embedded cost rather than at its current market value. That would seem to mean that a pipeline which has
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been oparated, maintained and expanded by the Oklahoma ratepay. es willabe transferred without any recognition of
- its true value. If that is the case Central'"and Southwest stands to realize an " extraordinary dividend" of tremendous proportions. If this transfer proceeds as planned by Applicant, it also should have a significant impact on their revenue needs, or, at least, a significant impact on the return being realized by the investors in this company.
The impact could be such that investors, in fact, will realize a far greater return f' rom their investment in this company than is currently reflected on the books.
CONCLUSION With all the foregoing in mind this Commissioner must conclude that the Applicant has not made an adequate case for additional interim relief. The case here presented is, in my evaluation, as woefully wanting as was the one which preceded it.
I think a further assessment to Applicant's ratepayers based on the evidence and information before us is simply unwarranted. For that reason I here enter my dissent.
DONE AND PERFORMED this OM d
of C. F (v 1981.
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BILL DAWSON, ViyeCnairman ATTE T BERDEE HOLT, Secretary ej g" 1
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