ML20062M662
| ML20062M662 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 12/14/1981 |
| From: | Ellis J Citizens Association for Sound Energy |
| To: | NRC OFFICE OF THE SECRETARY (SECY) |
| Shared Package | |
| ML20062M652 | List: |
| References | |
| NUDOCS 8112170390 | |
| Download: ML20062M662 (3) | |
Text
{{#Wiki_filter:- . rcc::n;" - F.':Crtd;;;,lJ".f.@A"- A S E f ik26 S. Polk " > - Dallas, Texas 75224 1 tasc 214/946-9446 (CITIZENS ASSN. FOR SOUND ENERGY) 214/941-1211, work, usuaQy DEC 15 P4:13 December 14, 1981 Tuesdays and Fridays dHly C N L. Secretary ~ SE'J.ET M.: U. S. Nuclear Regulatory Comission l'S'N& SERVKE Washington, D. C. 20555 Attn: Chief, Docketing and Service Section
Dear Secretary:
Subject:
Docket Nos. 50-445 and 50-446 Application of Texas Utilities Generating Company, Et A1. for an Operating License for Comanche Peak Steam Electric Station Units #1 and #2 (CPSES) Attached are the following original documents, copies of which are attached to certain copies of CASE's 12/14/81 Transmittal of Documentation As Agreed Upon At 12/1/81 Prehearing Conference: All of the following have been certified by Martha M. Bartow, Director of Record Services, Public Utility Comission of Texas, Austin, Texas: The direct testimony of Joe D. Karney, September,1980 (including exhibits and affidavit); a portion of the direct testimony of Max H. Tanner, Jr., September,1980 (pages 1, 2 ~and affidavit only, for the limited purpose of showing qualifications, and subject of testimony);, a portion of the direct testimony of Max H. Tanner, Jr., from the transcript of the November 24, 1980 City of Dallas Hearing (pages 85 through 89); all from Public Utility Comission Docket No. 3460. A portion of the cross examination o# Charles E. Olson from the transcript of the December 9,1980 Hearing from Public Utility Comission Docket No.- 3460 (pages 270, 271, and 307). , A portion of the transcript of the hearing for July 9,1979 and July 10, 1979 from Public Utility Comission Docket No. 2572 (cross-examination of Max H. Tanner, pages 91 through 93, 138, 139; and cross-examination of Erle A. Nye, pages 364,365,377,392,397,398). These items correspond to the following items in CASE's 11/18/81 Motion to Allow Testinony To Be Admitted On Affidavit Only, respectively: Item 6 (CASE Attachrant E of CASE's ll/18/81 Answer to NRC Staff'.s Motion for Sumary Dispos ' of Contention 25); Ite'm 7 (CASE Attau.. ant I of our 11/18/81 Answer to Staff's Motion); Items 10 and 8 (CASE Attachments L and J, respectively, of our 11/18/81 Answer to Staff's Motion); Item 11 (CASE Attachment M of our 11/18/81 Answer to Staff's Motion); 8112170390 8112'14 I PDR ADOCK 05000445 i G PDR j
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1 Item 9 (CASE': Attachment K to our 11/18/81' Answer to Staff's Motion). Respectfully submitted, CASE (Citizens Association for Sound Energy) Mk Mrs.)lJuanita Ellis President , cc: Service List e e 4 v 4 _ , ,_s - _ _ , . _ . . . .- . . , . . - . --
a-I C: . ~ 2. 1.Y.hl$ b. Public Utility Commission i.3; UNIV
*~.'.ygy of Texas
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81 DEC 15 P4:13 George M. Cowden Chairman 3 ggn u.rt H. M. Rollins
,3 & gERV;CE Commissioner
;EANCH Garrett Morris Commissioner I, Martha M. Bartow, certify that this is a true and correct copy of.the direct testimony of Joe D. Karney, September,1980; a portion of the direct testimony of Max H. Tanner, Jr., September, 1980; a portiori of the cross examination of Max H. Tanner, Jr. , from the transcript of the November 24, 1980 City of Dallas Hearing, from Public Utility Commission Docket No. 3460.
/X ISSUED UNDER MY HAND AND SEAL on this the
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9' day of December, 1981. SEAL @Martha M. Bartow Director of Record Services l l An Equal Opportunity / Affirmative Action Employer 7800 Shoal Creek Boulevard
- Suite 400N
- Austin, Texas 78757
- 512/458-0100
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i s:
'81 DEC 15 P4:14
;f liCRETAF.Y
;? t'.5 & SERV!CE ERANCH DIRECT TESTIMONY OF J0E D. KARNEY FOR DALLAS POWER & LIGHT COMPANY
- SEPTEMBER 1980 n
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- 1-.7 DIRECT TESTIMONY OF J0E D. KARNEY' 2- ,
3 Q. PLEASE STATE YOUR NAME.AND BUSINESS ADDRESS. 4 A. My name is Joe D. Karney. My business address is 1506 Commerce St.eet, 5 Dallas,' Texas 75201. 6 Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? 7 A. I am employed by Dallas Power & Light Company, hold the ' position of 8 Treasurer & Assistant Secretary and have responsibility fer the 9 financial, accounting, and' internal audit activities of the Company. 10 Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND PROFESSIONAL 11 QUALIFICATIONS. 12 A. I graduated from Southern Methodist University in 1961 with a Bachelor 13 of Business Administration degree in accounting. .I have been employed by 14 Dallas Power & Light Company since July,1952 and have worked in various 15 areas of the Accounting Department prior to becoming Head of the General 16 Accounting Division in 1964. I was elected Assistant Treasurer of the 17 Company in 1971, Assistant Treasurer and Assistant Secretary in 1975, and 18 Treasurer and Assistant Secretary in 1977. In addition, I headed the 19 Company's Accounting Department from 1970 through 1978. I am a Certified 20 Public Accountant in the State of Texas and hold memberships in the 21 American Institute of Certified Public Accountants, the Texas Society of 22 Certified Public Accountants, the Financial Executives Institute, and the 23 Edison Electric Institute Financial Committee. I have testified 24 previously in rate proceedings before the City of Dallas and the Public 25 Utility Commission of Texas (PUC). 26 Q. TO WHAT DEGREE D0 YOU HAVE CONTACT WITH THE INVESTMENT AND FINANCIAL 27 COMMUNITY? 28
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PAGE _2__ a 1 A. I have extensive involvement in and responsibility for the financial 2 affairs of the Company. My contacts with the financial community include 3 regular meetings and discussions-with representatives of commercial 4 banks, investment banking firms and rating agencies, as well as 5 consultation with individual and institutional investors and security 6 analysts. 7 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING?
'8 A. My testimony will discuss: (a) the importance of the Company's ability 9 to attract capi ~tal; (b) the Company's current financial condition, 10 including f1xed charge coverages, internal generation of cash, return on 11 common stock equity, and quality of earnings; (c) the basis for the 12 Company's request to include construction work in progress (CWIP) in the 13 rate base; (d) the adjusted value rate base for the Company; (e) the-14 capital st'ructure of the Company; and (f) the Company's composite cost of 15 ca pi tal .
- 16 Q. PLEASE EXPLAIN THE SOURCES OF FUNDS'AVAILABLE TO THE COMPANY AND THE 17 IMPORTANCE OF THE COMPANY'S ABILITY TO ATTRACT CAPITAL AT REASONABLE 18 COSTS.
19 A. In addition to funds generated internally, the Company traditionally has 20 obtained permanent capital principally through the sale of long-term 21
, debt, preferred stock and common stock. In recent years, however, the 22 Company has had to resort to a higher level of short-tena debt and the 23 sale, through private placeme'nt, of intennediate-tenn debt.
24 Electric 'itilities are generally conceded to be the most capital 25 intensive of all industries. Therefore, they must enter the capital 26 market on a regular basis. Since capital costs represent a significant 27 portion' of total costs, and continue to increase in an inflationary 28
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e JDK a. PAGE _3 I environment such as we have experienced over the past several years, it 2 is extremely important to maintain a high credit rating in order that 3 capital-may be obtained at the lowest possible cost. The Company's 4 ability to keep its capital costs low in 'the past has helped to maintain 5 ~ reasonable electric rates for its customers. 6 As pointed out in Mr. Tanner's testimony, the Company is engaged in 7 a continuing construction progrhm to provide facilities that will bring 8 the cost benefits resulting from the use of lignite and uranium fuels to 9 its customers. The Company's regulatory authorities have acknowledged 10 the benefits the custome'r receives from the conversion to lower cost 11 l alternate . fuels in the Company's past two r ate proceedings. Based on 12 current estimates, the Company's construction expenditures will average 13 approximately $130 million per' year for the next several years. It 14 should be noted that a construction prograin of this size represents 15 annual expenditures equal to approximately 19 percent of the net cost of 16 all the plant currently in service. It is therefore important, and to 17 the direct benefit of the customer, that the substantial quantities of 18 capital that will be required to provide these facilities be available at 19 the most reasonable cost. 20 Q. CONSIDERING THE COMPANY'S NEED TO ACQUIRE CAPITAL TO FINANCE THE 21 CONSTRUCTION PROGRAM, WHAT IS THE SIGNIFICANCE OF THE FIXED CHARGE 22 COVERAGE? 23 A. One of the most important indicators of the financial integrity of a
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24 utility company is the extent to which earnings will cover its fixed-25 charges on debt. The fixed charge coverage that the Company maintains 26 over a period of years has a substantial' impact on the ratings the 27 agencies assign the Company's bonds. It is generally recognized 28 r
JDK PAGE 4 s-I throughout the financial community that for an electric' utility, a fixed 2 charge coverage, including all applicable debt, of at least 4.0 times is 3 the minimum requirement to maintain a triple A bond rating. 4 WOULD YOU EXPLAIN THE TEP " SUPPLEMENTAL FIXED CHARGE C0VERAGE"? Q. 5 A. The computation of the supplemental ratio of earnings to fixed charges 6 is made pursuant to Securities and F,xchange Commission (SEC) Accounting 7 Series Release No. 122, the purpose of which is to include, for interest 8 coverage purposes, interest requirements on debt which is not on the 9 Company's balance sheet but which the Company has guaranteed or is in 10 some manner obligated to assume in case of default. In the case of 11 Callas Power & Light Company, the supplemental coverage calculation 12 includes the Company's proportionate obligations for senior notes issued 13 by Texas Utilities Fuel Company (TUFCO) and Texas Utilities Gener.ating 14 Company (TUGCO). 15 Q. MR. KARNEY, WHAT HAS BEEN THE RECOMitENDATION QF THE COMPANY'S REGULATORY 16 AUTHORITIES AS TO AN ADEQUATE FIXED CHARGE C0VERAGE FOR DALLAS POWER & - 17 LIGHT COMPANY? 18 A. The staffs cf the regulatory authorities exercising jurisdiction over ~ 19 the Compahy have recognized the need for a 4.0 times coverage to maintain . 20 a triple A bond rating. 21 WHAT HAVE BEEN THE COMPANY'S FIXED CHARGE COVERAGES AND SUPPLEMENTAL Q. 22 FIXED CHARGE COVERAGES IN RECENT YEARS? 23 A. They have declined substantially. As shown in JDK Exhibit No.1, prior 24 to 1974 the Company's fixed charge coverage was generally in excess of 25 4.0 times. 'For the test year ended June 30, 1980, the fixed charge 26 coverage was 3.12 times and the supplemental fixed charge coverage was 27 2.76 times. These coverages are obviously below the minimum needed to 28
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JDK 4 PAGE 5 6 l
} retain the triple A rating and have been for several years. Since 2
capital costs are such a major portion of the Company's expenses, 3 retention of the triple A rating is vitally important to the Company and : 4 its customers. 5 Q. HAS DALLAS POWER & LIGHT COMPANY BEEN ABLE TO ACHIEVE A 4.0 TIMES 6 SUPPLEMENTAL FIXED CHARGE COVERAGE AS A RESULT OF RECENT RATE ORDERS? 7 A. As shown in JDK Exhibit No. 2, the Company's supplemental fixed charge 8-coverage is substantially below the minimum 4.0 times coverage needed. 9 Although'recent rate orders of the Company's regulatory authorities' have 10-addressed the need to restore the Company's financial integrity, tile 11 amount of, rate increase granted in each case has been inadequate to 12 accomplish this objective. 13 Q. MR. KARNEY, WILL DP&L'S CUSTOMERS BENEFIT IF THE COMPANY IS ABLE TO 14 MAINTAIN ITS TRIPLE A FIRST MORTGAGE BOND RATING? 15 A. Yes. The triple A rating allows the Company to, borrow funds at the 16 lowest possible cost. This is reflected in JDK Exhibit fM, 3 which shows 17 Moody's average of yields on long-tenn public utility bonds for the years 18 1969 through 1979. For example, the spread between triple A and double A 19 was, on average, approximately 30 basis points from 5974 through 1979. 20 During periods of greatest financial strains, the spreads are even 21 wider. With a difference in financing rates of 30 basis points, the 22 savings over the 30-year life of a $75 million bond issue would be over 23 $6.7 million. The spread to lower rated bonds is even greater. With a 24 high credit rating there are additional savings in the cost of shor't-tenn 25 debt, pollution control bonds, and preferred and common stock. 26 Q. IN ADDITION TO THE SAVINGS OF INTEREST AND DIVIDENDS, ARE TH'ERE OTHER ~ 27 REASONS FOR MAINTAINING THE TRIPLE A BOND RATING? 28 l
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A. -Yes, other benefits of maintaining the triple A rating are the greater 2 availability and flexibility of capital financing. Strong credit 3 . indicators lead to better financial health at a lower cost to the 4 ratepayer. Investors will generally accept a lower return on their 5 investment if the Company is financially strong, which results in a_ lower 6 cost of capital. The magnitude of the Company's construction program and 7 the required external financing necessitates that t,1e Company have ready 8 access to th'e capital markets at reasonable cost. 9 IF DALLAS POWER & LIGHT COMPANY WERE.T0 LOSE ITS TRIPLE A RATING, WHAT Q. 10 WOULD BE NECESSARY TO REGAIN THAT BOND RATING? 11 A. 'It would take many years of sustained financial performance above the 12 established minimum requirements before the rating agencies would 13 consider upgrading the Company's bond rating. Therefore, retention of 14 the Company's favorable bond rating is extremely important at this time. 15 Q. TO WHAT EXTENT ARE INTERNAL SOURCES OF FUNDS AVAILABLE TO MEET THE 16 COMPANY'S CAPITAL NEEDS? 17 A. A portion of the Company's net earnings are reinvested in the Company in 18 support of the construction program. JDK Exhibit No. 4 shows retained 19 earnings, combined with other internally generated filnds, as a percentage , 20 of construction expenditures for the period January,1978 through June, 21 1980, as compared to the range of 40 to 60 percent recommended by the PUC 22
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Staff in Docket 2572. As shown in the exhibit, the percentage for the
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23 Company has fluctuated during the past several years, but has averaged 24 less than 40 percent during this period. For the test year, the level of
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25 internally generated funds as a percentage of construction expanditures 26 was 32.1 percent. JDK Exhibit No. 4 further Illustrates that the rate 27 increases granted in the Company's last two rate orders have been 28
JDK PAGE 7 1
. insufficient to provide the level of internal cash generation recommended 2
by the PUC staff for the mairstenance of financial integrity. 3 Also, from 1969 to the end of 1979, construction expenditures have 4 increased more than four times. This means that the Company must attract 5 additional capital. In order to obtain new capital in an inflationary 6 and recessionary environment, internally generated cash must be 7 maintained at a level adequate to ensure investor confidence. 8 Q. WHAT PERCENTAGE OF DALLAS POWER & LIGHT COMPANY'S CAPITAL REQUIREMENTS 9 SHOULD BE' MET THROUGH INTERNALLY GENERATED FUNDS ? 10 A. Dallas Power & Light Company should generate on a consistent basis'50 11 percent of its capital needs internally. In view of the prevailing rate 12 of inflation and the size of our construction program, this level is the 13 minimum requirement. 14 Q. ANOTHER TEST OF FINANCIAL PERFORMANCE IS RETURN ON COMMON STOCK EQUITY. 15 WHAT HAS BEEN DALLAS POWER & LIGHT COMPANY'S RF. TURN ON COMMON EQUITY 16 SINCE 1969? 17 A. The return on equity has declined dramatically since 1969, as shown by 18 JDK Exhibit No. 5. This exhibit shows return on common stock equity, 19 including and excluding Allowance for Funds Used During Construction 20 ( AFDC), for the period 1969 through the test year ended June 30, 1980. 21 This decline has occurred in a period which has seen the cost of high 22 quality debt issues increase from just above 6 percent to over 14 23 percent, approximately 3 percent above the Company's actual equity 24 earnings of 11.0 percent for 1978 and 1979 and 11.3% for the test y' ear 25 ended June 30, 1980. The level of earnings for the Company has simply 26 been inadequate for several. years. Reasonable investors will not - 27 continue to accept the risk of an equity security at 11 percent when they 28 can earn 13 to 14 percent on a low risk mortgage bond.
JDK PAGE _8 9 1 Of even greater concern is the trend in return on equity excluding-2 AFDC. The sophisticated analyst, particularly rating agencies and 3 institutional investors, considers calculations of return on equity both 4 including and excluding AFDC. Earnings are discounted when a significant 5 portion is attributable to AFDC. It the case of Dallas Power & Light , 6 Company, over one-third of its test year earnings were non-cash. With-7 such a large portion of non-cash earnings, the Company's earnings are 8 subject to substantial discounting by investors. At the end of the test 9' ~ year the cash return on equity, that is, the return excluding AFDC, was 10 7.2 percent. If allowed to continue, this condition will not permit 11 capital to be attracted at reasonable costs. 12 Q. WHAT D0 YOU CONSIDER NECESSARY TO IMPROVE THE C0ff.'""'S FINANCIAL 13 INTECRITY? 14 A. In addition to obtaining an adequate return on common equity, the 15 inclusion of all Construction Work in Progress *(CWIP) in rate base is 16 necessary. 17 Q. IS THE COMPANY REQUESTING CONSTRUCTION WORK IN PROGRESS IN RATE BASE? 18 A. Yes, the Company proposes to include $308,313,988 of CWIP in rate base. 19 This represents all CWIP at June 30, 1980 with the exception of a 20 noncurrent payable related to Martin Lake SES Unit 4. 21 Further, it should be understood that the amount of CWIP requested 22 to be allowed in the rate base is substantially less than will be 23 invested in CWIP before the giroposed rates are in effect. At an average 24 monthly investment of $10 million, an additional 570 to $80 million will 25 be added to CWIP after the end of the test period and before these rates 26 are in effect. I 27 28
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1 Even with' 100 percent of test year CWIP in rate base the Company's 2 actual investment in CWIP will be substantially more during the period 3 when the rates are in affect. In Docket 1526, $87.7 million of CWIP, 4 approximately 48 percent of a requested $182.3 million, was allowed in 5 rate base. By the time new rates were in effect, the amount in rate base 1 6 represented only 36 percent of the Company's actual investment in 7 construction and the average during .the period covered by those rates was 8 only 23 percent. In Docket 2572, the Company was allowed $194.6 million 9 of CWIP in rate base, which was approximately 80 percent of a requested 10 $243.2 million. However, after the new rates were in effect only nine 11 msnths, CWIP in rate base as a percent of the total CWIP' for the period 12 was only 62 percent. This is estimated to decrease to 51 percent by 13 December, 1980. The Company is presently requesting that 100 percent of 14 adjusted CWIP at June 30, 1980 ($308,313,988) be included in rate base. 15 As shown on JDK Exhibit No. 6, the percent 4 CWIP. in rate base will have l 16 been reduced to approximately 77 percent by the time the rates could 17 reasonably be expected to be placed in effect and further reduced to 58 i 18 percent by the end of the first year the new rates are in effect. This 19 exhibit graphically reflects the capital attrition problem which exists 20 when rates are set on a historical test year isasis and substantiates the 21 need for all CWIP at the end of the test year to be included in rate ! 22 base. 23 DP&L's ongoing construction program assures that the Company will in 24 the future, as it has in the past, incur substantial additional 25 investments in CWIP after the end of the test year. Since a. cash return 26 has not been allowed on this portion of the Company's investment in CWIP, 27 the Company is virtually assured that its earnings will be inadequate to 28 recover on a current basis the full carrying costs associated with the
n J, P A G E __.l_0.__ I construction program, a program which the Co.npany undertakes for the Thus, it is extremely important from the 2 benefit of its customers. I 3 standpoint of the Company's financial integrity that.the full requested Any lesser amount will only 4 amount of CWIP be allowed in rate base. f 5 result in additional non-cash earnings, further eroding the Company's - 1 l 6 financial integrity. 7 Q. ARE THERE OTHER REASONS FOR REQUESTING TH 8 BASE 7 9 A. 'In addition to enhancing the financial integrity of the Company, it is When the construction of a 10 the best alternative for the customer. 11 facility covers an extended period of time, interest costs for the fun These costs must be
' 12 necessary for the construction program are incurred.
13 borne by the customer whether they are capitalized and recovered ov When CWIP is included in 14 life of the project or recovered currently. When 15 rate base, the costs of construction are pa,id as they are incurred. 16 these costs are capitalized, they add to the cost of the facilit'y being It is better 17 constructed and earn a return over the life of the plant. 18 to pay the costs currently rather than to pay interest on interest. 19 Q. IS THE COMPANY'S ABILITY TO ATTRACT CAPITA . 20 CONSTRUCTION WORK IN PROGRESS IN THE RATE BASE 7 21 A. Yes. The engineering and construction periods for major projects such During these extended 22 as power plants range from eight to twelve years. 23 periods the Company is required to obtain large amounts of capita ; 24. finance the projects and, therefore, must pay for the use of these fu i 25 in cash. Including CWIP 'in rate base results in a recovery of these 26 -costs currently, providing higher quality earnings, which helps the Conversely, capitalizing these s 27 Coinpany maintain its financial integrity. 28
JD1 PAGE 11 _ costs defers their recovery by the Company, leaves the quality of b f 1 2 . earnings at an inadequate level, and increases the overall cost of 3 providing service'to the customer. l' .4 -Q. HOW CAN COMPLETION OF A CONSTRUCTION PROJECT AFFECT THE COMPANY'S 5 ELECTRIC SERVICE RATES IF CWIP IS NOT ALLOWED IN RATE BASE? 6 A. -To the extent that CWIP is excluded from rate base, completion of a 7 major project will cause revenue requirements to increase dramatic 611y. at { l 8 the time the project is included in rate base. This is the result of 9 accruing'AFDC which is capitalized and becomes part of the cost of a 10 project. Upon completion of a project, AFDC is discontinued, the ' project l 11 is placed ,in service, and revenue requirements must subsequently be 12 increased sufficiently to cover the return on the full amount of the 13 project, including the capitalized AFDC. By allowing CWIP in rate base, 14 rate increases tend to be more gradual which again is in the best 15 interest of customers. . 16 Q. IF CWIP IS NOT INCLUDED IN RATE BASE, WHAT EFFECT 00 AFDC EARNING; HAVE 17 ON THE COMPANY'S FINANCIAL INTEGRITY? 18 A. When non-cash AFDC makes up a large part of earnings, the amount of cash 19 earnings available to pay common dividends can be inadequate to pay those 20 dividends. At.ti.e end of the test year, the dividend payout ratio, 21 excluding AFDC from earnings, was 123.3 percent. This ratio is 22 unacceptably high and must be reduced. The inclusion of CWIP in rate 23 base will hcve a positive uect in reducing this ratio to more 24 acceptable levels. 25 Q. HOW IS THE QUALITY OF THE COMPANY'S EARNINGS AFFECTED Bi INCLUDING CWIP
-26 IN RATE BASE?
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JDK PAGE _12-I- A. ' As shown in JDK Exhibii. No. 7, the construction program to convert to 2 alternative fuels has caused CWIP to increase rapidly in relation to 3 electric plant. CWIP has increased from approximately 9 percent of 4' electric plant in 1969 to almost 24 percent at the end of the test year. 6 As a result, the portion of the Company's earnings attributable to ~AFOC 6 has increased significantly. JDK Exhibit No. 8 shows that AFDC has 7 i increased fran less than ten percent of earnings in 1969 to a high of 8 ! 43.2 percent in 1978 and 36.7 percent for the test year ended June 30, t I 0 1980. The reduction fron the higher level in 1978 results principally 10 from the sale of portions of the Comanche Peak Steam Electric Station. I II AFDC earnings have a negative influence on the Company's financial 12 l i integrity and its credit rating. The incone statement reflects AFDC as ! 33 income, when in fact it is a non-cash item which cannot be used in i I4 meeting the Company's . capital requirements. Actually, AFDC represents a 15Y cost which cannot be fully recovered until the* plant with wnich it is W associated is fully depreciated. The Company's regulatory authorities II I i have recognized the impact of AFDC on the quality of earnings and the PUC W staff, in the Company's most recent rate case, has recommended that rates IU be set such that AFDC not exceed 20 percent of earnings. JDK Exhibit No. 20 9 shows that the Staf f's recommendation for AFDC es a per cent of earnings 21
, has never been attained during the periods of time following the 22 h implementation of rates resulting from the Company's last two rate
,?3 proceedings. The amounts of 'CWIP allowed in rate base in those proceed-24
, ings have been inadequate. As a result, the Company's AFDC as a percent 25 of earnings has not dropped below 34 percent. Even with the requested 26
$308 million of CWIP in rate base, additions to CWIP subsequent to the 27 test year will result in additional AFOC earnings. For all of the ab'ove 28
JDK PAGE _l3___ I reasons the Company is requesting'that the amount of CWIP shown in 2 Schedule B, page 3, be included in rate base. 3' g, DOES THE' INCLUSION OF CWIP IN RATE BASE AFFECT THE FIXED CHARGE 4 C0VERAGE? 5 A. Again, to the extent that AFDC is included in earnings, the quality of 6 those earnings is reduced. In evaluating a company's financial condition 7 most financial analysts, the rating agencies and the sophisticated 8 investor will. consider the fixed charge coverage ratio excluding earning: 9 a ttribuf a'ble to AFDC. As shown in Schedule H-7, the Company's 10 supplemental fixed charge coverage, excluding AFDC, has dropped to 2.42 Il times for .the test year ended June 30, 1980. This coverage is inadequate 12 and underscores the importance and necessity of including the requested 13 amount of CWIP in the. rate base. 14 Q. WHAT WEIGHTINGS WERE GIVEN TO CURRENT COST AND ORIGINAL COST IN 15 CALCULATING THE COMPANY'S ADJUSTED VALUE RATE EASE? 16 Sixty percent original c, st and forty percent current cost. A. 17 Q. WHAT FACTORS WERE CONSIDERED IN DETERMINING THESE WEIGHTINGS? 18 A. The need to attract capital, quality of service, the growth in the l9 Company's service area, and inflation, as it has affected and will 20 continue to affect the Campany's construction program were considered. 21 As discussed in Mr. Tanner's testimony, the Company is engaged in a 22 substantial construction program to convert from the use of scarce and 23 costly fuels such as natural gas and oil to cheaper, more abundant fuels 24 such as lignite and uranium. As can be seen in MHT Exhibit No. 2, 25 construction expenditures have increased dramatically in the past ten 26 years.
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Our construction expenditures over the next three years are - 27 estimated to be almost $400 million, which is approximately 58 percent of 28
JDK PAG? _.14_ 'O I the net cost of all the plant currently in service. The Company must be 2 in a position' to attract large sums of money from the investment 3 community if it is to carry out its required construction program. 4 As to. quality of service, the Company has met and is meeting the 5 needs of its customers by. providing dependable electric service'within 6 its service area. In order-to continue to provide quality service, the 7 construction of facilities to' utilize alternate fuels must be 8 maintained. Thus, the maximum current cost weighting of 40 percent is 9 appropriate in view of the need to support this construction program and 10 to continue the record of high quality service. 11 Inflation continues to have a serious impact on the Company's 12 operations, a's well as its construction program, since inflation 13 increases the costs of all goods and services purchased. Also, interest 14 rates continue to be high compared to our present embedded rates. 15 Current interest rates for higher quality longstenn debt are in the .13 16 percent range compared to our present embedded interest rate of 6.96 1 17 l percent, as shown on Schedule H-6. Each new dollar of long-tena debt or 18 preferred stock increases our embedded cost of money, whether it is 19 issued to finance our construction program or to refund maturing bonds - 20 and debentures originally issued 25 or 30 years ago. 21 In view of these factors, a 60 percent weighting for original cost 22 and a 40 percent weighting for current cost is reasonable-and should be
.23 allowed.
- 24 Q. W ULD YOU BRIEFLY DESCRIBE THE CAPITAL STRUCTURE OF DALLAS POWER & LIGHT 25 COMPANY AT THE END OF THE TEST YEAR?.
26 A. At the 'end of the test year the capitalization was composed of 41.6 27 percent'long-tena debt,12.7 percent preferred stock and 45.7 percent-28 common; stock equity.
JDK PAGE 15
) 1- Q. PLEASE DESCRIBE THE COMPANY'S LONG-TERM DEBT.
2 A. At June 30, 1980, the Company had three basic types of long-tenn debt 3 outstanding. The majority of this debt is first mortgage bonds. As 4 reflected in Schedule H-6, the Company had thirteen series of first 5 mortgage bonds outstanding in the' principal amount of $305 million. 6 These series range in principal amounts from $9.0 million to $50.0 7 million and have maturity dates from 1983 through 2005. Interest rates 8 range from a . low of 31/8 percent to a high of 9 3/8 percent. 9 At' June 30, 1980, the Company had approximately $23.3 million of 10 sinking fund debentures outstanding. This debt is not secured by any 11 lien on the Company's property, but is issued on the basis of the 12 Company's general credit. As reflected in Schedule H-6, there are two 13 separate issues of 25-year debentures outstanding with maturity dates of 14 1989 and 1993. The interest rates are 41/2 percent and 6 3/4 percent, 15 respectively. - 16 Also reflected in Schedule H-6, is other unsecured debt consisting 17 of three series of 30-year pollution control revenue bonds of 18 approximately $16.7 million, net of funds on deposit with the trustee. 19 These three series were sold by the Sabine River Authority, a 20 governmental agency of the State of Texas, for the purpose of 21 constructing pollution control equipment to be installed at certain 22 jointly-owned generating stations of the Company, Texas Electric Service 23 Company and Texas Power & Light Company. Interest on the bonds is exempt 24 from federal income taxes to the holder. By agreement with the 25 Authority, the Companies contract for the repayment of the bonds sold for 26 the purchase of the equipment installed at the generating stations. The 27 Company is obligated for $8,590,000 of the 61/4 percent series, 28 F 9
JDK PAGE 16 1 $7,125,000 of the 5.70 percent series and $2,025,000 of the 6.60 percent 2 series. The ' bonds are due in 2006, 2007 and 2008, respectively. This 3 type of security is similar to the sinking fund debentures in that they 4 are based on the Company's general credit and are not secured by property 5- of the Company. _ 6 The Company's embedded interest cost on long-term debt has steadily 7 increased to 6.96 percent. T5is represents a 63 percent increase from
-8 the embedded cost of 4.26 in 1969.
9 Q. WHAT RATINGS HAVE BEEN ASSIGNED TO THE COMPANY'S FIRST MORTGAGE BONDS, 10 SINKING FUND DEBENTURES AND POLLUTION CONTROL REVENUE BONDS? 11 A. The Company's first mortgage bonds have been designated triple A by both 12 Moody's Investors Service, Inc. and Standard & Poor's Corporation. The 13 sinking fund debentures and pollution control revenue bonds have been 14 assigned a double A rating by both agencies since they are not secured by 15 property but are based on the genera' credit of the Company. 16 Q. PLEASE DESCRIBE THE NOTES PAYABLE INCLUDED IN THE COMPANY'S CAPITAL 17 STRUCTURE.
; 18 A. The notes payable, amounting to an adjusted $202,821 as shown in Schedule H-5, page 2, were issued as partial payment for land acquired 19 20 for plant sites, lignite reserves and water rights.
21 Q. WOULD YOU DESCRIBE THE COMPANY'S PREFERRED STOCK? 22 A. At June 30, 1980, the Company had seven preferred stock issues
- 23 outstanding as detailed in Schedule H-4. The amount outstanding was 24 'approximately $104.7 million with annual dividend rates ranging from 25 $4.00 per share to $7.48 per share. The pref rred stock is cumulative, 26 without par value, and entitled to $100.00 per share upon liquidation.
27 The embedded annual dividend rate for all of the series is currently 6.27 28
'JDK a
+
PAGE 17 1 percent, as shown in-Schedule H-4. The Company's preferred stock, like 2 the sinking fund debentures and pollution control . revenue bonds, is rated 3 double A by both Moody's Investors Service, Inc. and Standard & Poor's 4~ Corporation. 5 Q. PLEASE DESCRIBE THE COMFANY'S COMMON STOCK. i 6 A. At June 30, 1980, there were 14 million shares of common stock
~
7- outstanding, 99.9 percent of which were owned by Texas Utilities 8 Company. The common stock equity on the books of the Company at this I 9 date am'o0nted to $377.9 million. 10 Q. ARE THERE ANY OTHER ADJUSTMENTS NECESSARY TO DETERMINING THE PROP R 11 - CAPITAL STRUCTURE OF THE COMPANY FOR THIS PROCEEDING? 12 A. Ye s .- A pollution control revenue bond issue is scheduled to take place 13 in October of 1980 in which the Company will be obligated for $6,334,000 14 of the issue. This adjustment more accurately reflects the Company's1 15 capital structure and is shown in Schedule H-6, page 1, of the rate 16 filing package. 17 Q. HAVE YOU CALCULATED THE COMPANY'S WEIGHTED COST OF CAPITAL AT JUNE 30, 18 1980 AS .4DJUSTED? 19 A. Yes. Schedule H, page 2, shows the outstanding capital, as adjusted, at 20 the end of the test year. The weighted cost of capital is the composite 21 cost of the various classas of capital used by the Company. The cost of 22 long-term debt is the embedded cost of debt taken from Schedule H-6. 23 Notes payable are detailed in Schedule H-5, page 2. The cost of 24 preferred stock capital is its annual dividend requirement as shown in 25 Schedula H-4. The cost of common stock equity capital is the amount 26 necessary to yield a fair return as described by Dr. Charles E. Olson and ~ 27 is reflected in Schedule H, page 2. lne cost of equity was determined 28 A- _ .._-. - . . _ . - - - - - . - - - - - - - _
JDK PAGE 18 .
. i l
1 from Dr. 01 son's recommended range of return on common equity of 17.0 to
'2 18.0 perc'ent. In view of current circumstances, I believe a 17.0 percent 3 return is appropriate. Although the 17 percent return is the minimum of 4 the range recommended by Dr. Olson, such return together with the 5 inclusion of 100 percent of the test year balance of CWIP which the 6 Company'is also requesting should be adequate to allow the Company a 7
reasonable oppurtunity to improve its financial integrity. However, it 8 is apparent that with the inclusion of less than 100 percent of CWIP in l 9 - rdte base, a higher return-on common equity would be necessary and 10 appropriate. 11
-Q. WHAT IS THE COMPANY'S WEIGHTED COST OF CAPITAL?
12 A. The weighted cost of capital is derived by taking each cost element 13 expressed as a percentage rate as shown on Schedule H, page 2. This 14 results in an 11.44 percent weighted cost of capital on a total adjusted l 15 capitalization of $886,029,596.
- 16 Q. MR. KARNEY, WHY DO YOU CONSIDER 17.0 PERCENT RETURN ON COMMON EQUITY TO 17 DE REASONABLE?
18 A. Since the equity component is the foun'dation of the capital structure 19 and the common shareholder bears the most risk, the return to the common ~ 20 shareholder must be higher than the return to either the bondholders or 21 the preferred shareholders. Currently the return on high quality 22 corporate. bonds with little or no risk is approximately 13 percent. 'The 23 return to the risk bearing equity investor must be substantially higher. 24 dith the Company's present depressed level of earnings and interest
-25 coverage, the recommended return on equity is justified and necessary to 26 assure its financial integrity.
27
-28
- 4. - 1 JDK PAGE .__ll I' Q. WILL YOUR PROPOSAL GUARANTEE THE COMMON EQUITY INVESTOR THAT HIS RETURN 2 . WILL.BE 17.0 PERCENT? 3 A. No. .Recent history shows that the allowed return on common equity has , 4 .not been earned. This results from the use of a historical test year to 5 detmnine the Company's rate base and cost of service. In our last 6 proceeding it was nine months after the end of the test year before the 7 Company was able to begin billing a portion of the requested rate 8 increase under bond, and it was eleven months before. current rates were D' billed un' der an interim rate order. During this period, the Company's 10 costs continued to increase and the investment continued to grow, making i 11 the test year out of date well before the rates went into effect. This 12 assured that the Company would be unlikely to earn the rate of- return 13 granted based on a historical test year. Although some adjustments have 14 been made for post-test year events, these adjustments do not fully i 15 of fset the effects of attrition on the Company; Unless the Company's [ 76 regulatory authorities recognize the reality of attrition, the Company 17' will be denied the cppnrtunity to earn the return granted. l 18 Q. MR. KARNEY, WILL THE REVENUE INCREASE REQUESTED IN THIS CASE ALLOW THE 19 COMPANY A REASONABLE OPPORTUNITY TO RESTORE ITS FINANCIAL INTEGRITY? 20 A. An analysis of the Company's projected results of operations based upon 21 rate increases resulting from various levels of return on equity and CWIP 22 - in rate base clearly indicates that the Company has virtually no chance 23 of earning the 17 percent return on equity requested, unless all of the 24 CWIP requested is included in rate base. If such amount of CWIP is 25 included in rate base, there' .is a reasonable opportunity. to earn the 26 requested return on equity'by the end of the first year the new rates 27 Lwill be in effect; however, the return declines significantly 28 1
t -
- *~ .PAGE 20^
fl g.*
~
'l thereafter. . Although return on equity on a twelve month basis' reaches 17-
~
12 Jpercent at one point in; time (the twelve months ended De~cember 31,1981), 3 the return - for .any other twelve month period .is below this' level. It - , i l 4 'should be noted that such results are based upon receipt of the full-5 amount of rate increase requested by;the Company; anything less ca'nnot be 6 expected to produce these results. !
^j 7 Q. WHAT HAS BEEN DALLAS POWER & LIGHT COMPANY'S RETURN ON EQUITY SINCE l~ 8' JANUARY. 1, 19787
~
9 'A. dDK Exhibit No.10 clearly illustrates that' the Company has not earneE 10 the rate of return allowed. The Company's authorized return was l 11 increased,from 13.75 percent in Docket 1526 to 14.5 percent 'in Docket ! 12 2572, represented by the horizontal lines near the top of the exhibit, 13 yet the return actually earned has continued to fall below the amount 14 authorized. Further, the deficiency' between the earned and' authorized 15 return is increasing. This indicates that ptevious rate orders have been 16 inadequate and that in determining the. amount of revenue deficiency, the 17 ! Company's regulatory authorities must more carefully appraise the impact i 18 of economic and other factors that will exist during the period the rates 19 will be in effect.
'20 Q. DOES THIS CONCLUDE YOUR TESTIMONY?
i- 21 A. Yes. i ,. 22 ' 23 . l 24 I 25 l 26 27-28 .
---a-# - w w--e m, e.- e.w
DALLAS POWER & LIGHT COMPANY . L 3 _ RATIO OF EA'RNINGS TO FIXED CHARGES AND l 5.84 SUPPLEMENTAL RATIO OF EARNINGS TO FIXED CHARGES 1969 - 1980 5 - l , O g4 ______________________ __.______.____________________ CI 3.97 Fixed Charge Coverage { 3.12 3 - a 3.00 2.76
, f Supplemental Fixed Charge Coverage 2 -
Y n e-I I I I I I I I I I I I ,p 0
'69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80
- 9. 2.
a T. YEARS E
- TEST YEAR ENDED JUNE 30,1980 P i -
1
DALLAS POWER & LIGHT COMPANY RATIO OF EARNINGS TO FIXED CHARGES AND SUPPLEMENTAL RATIO OF EARNINGS TO FIXED CHARGES 4 - JANUARY 1978 - JUN E 1980' 3.69 3.31
/
j Fixed Charge Coverage 3.36 3.22 - 3.12 9 g 3- - E 2.76 e Supplemental Fixed Charge Coverage 2 - 2 E5 2% 0' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
. (7 JFMAMJJASONDJFMAMJJASONDJFMAMJ z 1978
- l: 1979 z': 1980 H g MONTHS
MOODY'S AVERAGE PUBLIC UTILITIES BOND YlELD BY RATING GROUP 1969 - 1979 - 10.96% 11 r- ,., . Aaa RATING f ,
. 10.49 %
f ---- Aa RATING / 10.09 % [
- - - - A RATING g .* ,
. .. 10~06%
10 -
......... Baa RATING f
y\ ,
., j
,/ *
/
, 9.86%
',[-
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j/ , /s 9.44 % ., ,, 9.54 % s . .- -
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g '. N %N 7.84 %
,/ l 7.93 % ,j N y,, . */ 7.72 % ,
// % l 7.54 % / 7.60 % .
7.34 % , l 7.12 % l 7 - m e-- 6 - EN'
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.O
'69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 ' b
*EIGHT MONTHS ENDED AUGUST,1979 YEARS
50 -
, DALLAS POWER & LIGHT COMPANY PERCENT OF CONSTRUCTION EXPENDITURES 4s2 '.
GEN ERATED INTERN ALLY - 45 - JANUARY 1978- JUNE 1980 Staff Criteria 40-60^,6 40 ------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - n 5 a. 35 - , 32.1 % 30 - e 25 - 24.8 % 20 -
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J F M A M J J A S O N D J F M A M J J A S O EA N. D J FM A M J $ 5-l: - 1978 rje 1979 :l: 1980 :l 25 MONTHS k
^
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[ .
- t4;;
- DALLAS POWER & LIGHT COMPANY ~
' RETURN ON COMMON STOCK EQUITY 1969 - 1980 l I RETURN ON EQUITY INCLUDING AFDC
-- - RETURN ON EOUlTY EXCLUDING AFDC 16.2%
15 - 14.6% s 13.4%
's s
'N 12.1%
N s
*~~s '% 11.0 %
j 11.3 %
's
$ s' ~~
$ 10 -
5
' \
7.8'/ 7.2%
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/
e 5 - 2 bi ox t i 1 i i e i e i i *m l i
'75 '76 '77 '78 '79 '80' ;3 0- . '74
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'71 '72 '73 69 '70 '
YEARS
?
un
' TEST YEAR ENDED JUNE 30,1980
DALLAS POWER & LIGHT COMPANY CWIP IN RATE BASE ACTUAL VS. AMOUNT REQUESTED.-
$530 Total CWIP* .
RATES EFFECTIVE CWIP IN EXCESS (EST.j i:igi:' k OF AMOUNT g REQUESTED 400 - TEST YEAR 6-30-80 S308
,w u;.u;w;w;w; u; ,ww; ; .=;;; ;u; .;mwu;;u,w;ww; ;
g Amount Requested O LL. & O cn z o d 200 - 2
? N5 0 ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' i i SX J J A S O N D J F M A M J J A S O N D J F' -7 E
}a 1980 rl: MONTHS 1981 : : 1982 " =h '
Z
' ACTUAL AT JUNE 30,1980 AND ESTIMATED THEREAFTER o cn o
DALLAS POWER & LIGHT COMPANY CWIP AS A PERCENT OF TOTAL ELECTRIC PLANT - 1969 - 1980 30.1 % 30 - 23.7 % 20 - e a 10 -
- 9.0%
0 ' ' ' ' ' ' ' '
'70 '72 '73 '74 '75 '76 '77 '78 '79 '80
- 69 '71
*7 YEARS $ vf
- TEST YEAR ENDED JUNE 30,1980
~
DALLAS POWER & LIGHT COMPANY AFDC AS A PERCENT OF EARNINGS 1969 - 1980 i 45 - 43.2 % 40 - 35 - 36.7 % 30 - z
$ 25 -
5 n. 20 - e 15 - 10 - 9.8% 5 -
}b ox
. *m 0 i 3 ' ' ' ' I ' ' ' ' ' k$
'G9 '70 '71 '72 '73 '74 '75 '76 '77 '70 '79 '80 * "$-
YEARS &
- TEST YEAR ENDED JUNE 30,1980 6
4 DALLAS POWER & LIGHT COMPANY . AFDC AS A PERCENT OF EARNINGS DECEMBER 1978-JUNE 1980 e 50 - 43.2%
/ - 42.2 %
40 - 36.7% 34.2 % 30 - H z w o E w Q. 20 20%
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. 1979 '< 1980 r ~
E MONTHS E 9 e
1 l DALLAS POWER & LIGHT COMPANY RETURN ON AVERAGE COMMON EQUITY ACTUAL AND AUTHORIZED ' 15 - SEPTEMBER 1977- JUNE 198O 14.5% Authorized in Docket 2572 14.3% , 14 - 13.75% Authorized in Docket 1526 113.5 % : ')"
< N l'
q r m 12.7% ' ~ L>x , o . . C w &. ; , 12 - l '
. a'l ^
11.3 % 11 - 10.6% 10 - o[ S O. N D J F M A M J J A S O N.D.J F M A M J J A S O N D J . F. M A M J 325
*m t=- 1977 ;, 1978 $ 1979 :;c 1980 l ,-- (.
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g x ^- .; s - . , . j - - THE STATE OF TEXAS -)'
- COUNTY:0FiDALLAS )
r . BEFORE-the undersigned. authority on this day personally. appeared-J. . D'. KARNEY, who,' having been placed 'under ' oath by me, did depose.as - s
-follows:
~"My name 1s'J. D.'Karney.. I am of legal age and a' resident of,Ehe *
,s-t State of Texas.- The foregoing testimony, and exhibits, offered by me on behalf' of- Dalla [ Power. & Light Company, are true and correct, and'the [" . opinions stated therein d~e,
- c. , .
r to the best of my knowledge and belief,
- accurate, . true, and corr,e ct."-
A h., s, li NO 5 '
&}
, f. D. KARNEY-r ._ ,,
v W }- , s l.,- % l l ', x p N s SUBSCRIBED AND SW0RN T0 BEFORE ME by the said J. D. Karney this 23rd day of September,- N., D. 1986.
- s,_
* ~
h e'
% ~- Carla F. Stroud Notary Public-in and for, Dallas
. Co~unty, Texas Ie -# '- ' ***' ~
s My commission expires 3-31-84' _w 8 g e
- *; * , o& %
Q *
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t. V-l ?.) l .s
, * ~ ' ,- - -. . , , . - , , . - - -. . - . , ,+
DIRECT TESTIMONY OF
. MAX H. TANNER, JR.
FOR DALLAS POWER & LIGHT COMPANY SEPTEMBER,1980 . o O C+ e au2mer
- TANNER
.. . PAGE 1 6
1 DIP.ECT TESTIMONY OF M AX H. TANNER, JR. 2-3 *0. PLEASE STATE YOUR NAME AND ADDRESS. 4 A. Max 11. Tanner, Jr.,1506 Commerce Street, Dallas, Texas 75201. 5 Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? 6 A. I am a Vice President of Dallas Power & Light Company. 7 Q. IlOW LONG ll AVE YOU BEEN WITII THE COMPANY AND IN WIIAT 8 CAPACITIES? 9 A. 1 have been a full-time employee of DP&L since 1953 and have served in various 10 technical and managerial espacities in the design, construction, operation and 11 maintenance of the Company's distribution, transmission and production facilities, I 12 including fuel requirements. I served as Manager of DP&L's Production Depart-13 ment from 1968 until 1974 and as Manager of System Operation until 1976, when I 14 was elected Vice President. - 15 Q. WilAT IS Tile NATURE' OF YOUR RESPONSIBILITIES AS VICE PRESIDENT? 16 A. I am responsible for planning and engineering system facilities; managing the j 17 Company's power production, transmission and distribution activities; and j 18 securing fuel supplies for DP&L's plants. I am also responsible for coordinating 19 operations with other Texas Utilities (TU) companies and other interconnected 20 systems. 21 Q. WHAT ARE YOUR EDUCATIONAL AND PROFESSIONAL QUALIFICATIONS? 22 A. I have a Bachelor of Science Degree in Electrical Engineering from Texas A&M L 23 University and am a Registered Professional Engineer in the State of Texas. 24 Q. ARE YOU A MEMBER OF ANY INDUSTRY OR PROFESSIONAL ORGANIZA-25 TIONS? , l 26 A. I am presently active in the Texas Interconnected System (TIS), Electric Reliability , 27 Council of Texas (ERCOT) and the National Electric Reliability Council (NERC).
^
28, In addition, I am a member of the Power Engineering Society of the Institute of
T TANNER PAGE- 2 1 Electrical and Electronics Engineers (IEEE). 2 Q. MR. TANNER, PLEASE TELL US WHAT YOUR TESTIMONY WILL COVER. 3 A. I will review the Company's construction program, fuel utilization plans,' opera-4 tions, depreciation and related matters. 5 Q. HAVE YOU PREVIOUSL,Y TESTIFIED ON ANY OF THESE MATTERS BEFORE 6 Tile COMPANY'S REGULATORY AUTHORITIES? 7 A. Yes. I testified in the Company's last three rate applications before the City of 8 Dallas and in Dockets 1526, 1903, 2572, and 3090 before the Public Utility 9 Commission. 10 Q. WOULD YOU PLEASE DESCRIBE THE FACTORS WHICH IMPACT THE PLAN-11 NING OF FACILITIES NECESSARY FOR SUPPLYING ELECTRIC SERVICE? 12 A. Yes. There are many factors which affect the planning of facilities to meet the 13 needs of our customers. These factors include: (1) the availability, cost and 14 transportation of fuels; (2) the projected growth in both peak load and energy; 15 (3) availability and location of water rights and plarat sites; (4) availability and cost 16 of capital; (5) the overall level of system reliability and (6) the time required to 17 engineer, obtain regulatory approvals and construct new facilities. In view of the 18 uncertainties associated with each of these factors, it is imperative, and in the 19 best long term interests of our customers, to maintain viable options and flexibility . 20 in planning for additional facilities. 21 To supply electric service to the Company's service area, extensive facilities, 22 resources and capital investments are necessary. In today's environment, the long
, 23 lead tirnes required to place new facilities in service and the high rate of inflation 24 severely impact construction costs. Such parameters necessitate careful planning !
25 and engineering to provide facilities to meet the needs of our customers during a 26 time when uncertainties prevc.i! in every facet of the industry. 27 Q. ~MR. TANNER, Wily DOES IT TAKE SO ' LONC.TO PLAN AND BUILD. NEW 28 GENERATING FACILITIES?
-3 ' g. -
Tile STATE OF TEX AS X COUNTY OF DALLAS X BEFORE the undersigned authority on 'this day personally appeared MAX 11. TANNER, JR., who, having been placed under oath by me, did depose as follows:
"My name is Max II. Tanner, Jr. I am of legal age and r, resident of the State of Texas. The foregoing testimony, and exhibits, offered by me on behalf of Dallas Power
& Light Company, are true and correct, and the opinions stated therein are, to the best-of my. knowledge and belief, accurate, true, and correct."
Trh% 16 Cy. M AX 11. TANN ER, JR. 'V SUBSCRIBED AND SWORN TO BEFORE ME by the said MAX 11. TANNER, JR. this 17th day of September, A.D.1980. 4 - Yd br Notary Publie$and for Dallas County, Texas My commission expires June 26,1981 g wamm., w= = l
l' DALLAS POWER AND LIGHT COMPANY .) f
--, 1 , 2 APPLICATION FOR RATE CHANGE ,
SUBMITTED TO THE CITY OF DALLAS , 3 4 5 --- 6
,7
~
APPEARANCES: 8 MR. THOMAS Z. JAMES 9 THE EXAMINER 10 J . DALLAS POWER AND LIGHT COMPANY 11 Mr. Al Engelland Mr. Robert A. Wooldridge 12 F For the Applicant
# MR..GALEN M. SPARKS I T 14 r
4~ Assistant City 15 Attorney for the
- City of Dallas 16
- MS. PAM O'BRIEN 17 Assistant to the 18 I! earing Examiner -
19 MRS. JUANITA ELLIS 20 President, CASE 21 liR..GEOFFREY, GAY MR. ROGER.JOYNER 22 MS. FAITH SIMMONS 23 For ACORN 24 MS. KIM BATCHELOR 25 For CCEE - ST ANLEY. H ARRIS. Rict. LANoroRo & ASSOCIATES REcisTEpc0 PROFESSION AL REPORTERS DALLAS. TEX AS 75201
~
/ ,
2.
.. 'O 2 -TRANSCRIPT OF- PROCEEDINGS HAD ON THE 24TH DAY
.. 3- OF NOVEMBER, A '. D . , 1980, IN THE' DALLAS-CITY HALL,
-4' ' ROOM 6E SOUTH, CITY OF. DALLAS,. COUNTY OF 5 . DALLAS, STATE OF TEXAS, AT 9:00 O' CLOCK A.M.
6 7 ., 8 Q 10. _11 1 12 13 14 3 15 16 17 . 1',. 3r . - 18 19 20 21 22 23 24 , 25 STANLEY. HARRIS. Rict. LANCFORO & ASSOCIATES
, ' REGISTERED PROFESSION AL REPORTERS DALLAS. TEXAS 75201 s .
.ee
85 6 1 O Right. So you're raying, then, aro you not, 2 that as regards your lower growth projections, you s reduced your interest in the nuclear plant?
. 4 A And some lignite plants and delayed some othe.r 5 lignite plants.
6 0 You postponed or rescheduled or reduced your 7 interest in some of these lignite _ plants? 8 A (Witness nods head affirmatively) 9 0 Can you review the history of some of those 10 transactions briefly for us, bring us up-to-date on 11 what's transpired in regard to your interest in 12 these joint projects? 13 A Well, we had in Comanche Peak, a third 14 interest. It was agreed back in 1976 that a ten per-15 cent interest in that plant, which was required by the 16 construction permit, to be sold to some third parties,
- 17 would come from DP&L's portion.
Because of the lengthy le negotiations, that wasn't finalized till 1979. ' And 19 then in 1980, early 1980, we sold an additional five
. 20 percent to our sister companies. So we now have an 21 eighteen and a third percent ownership in Comanche Peak, 22 which is very close to our projected energy portion of 23 the other operating companies. Or our subsidiary other 24 operating companies.
25 :Porest Grove, it's laid out until 1987, STANLEY. HARRIS RICE. LANGFORD '& ASSOCIATES RCGtSTERED PROFES$10N AL REPORTERS DALLAS. TEXAS 75201
> ~ ,.
Bb o 1 Martin Lako 4 was schoduled at one time earlier and 0 Martin Lake 4, also, we have
' 2 it's scheduled for '84.
a 20 percent interest now, we had a 25 percent
. 3 4 interest earlier.
5 0 Did you change the percentage interest share s in Forest Grove? 7 A No. , 8 G You just delayed? 9 A That's correct. 10 G All right. Would you agree with mq, 11 Mr. Tanner, that the City of Dallas has generally been 12 supportive of the construction program and the move 13 away from gas as a primary fuel? 14 A Yes, very definitely. .
~
15 0 And has Dallas also been, at least generally , 16 somewhat supportive of the inclusion of a part of the 17 CWIP in the rate base? . 18 A Yes. 19 0 Let's look now at your Exhibit No. 4 where 20 you show a projection of the relative fuel mix through 21 1989. 1 When did we hit the low point on gas, l 22 23 Mr. Tanner, was it in '797 24 A That's the low point we hit so far. 25 0 And isn't that the low point that we're going e STANLEY. H ARRis. RICE. LANGFORD & ASSOCIATES REGISTERED PROFES$50N AL REPORTERS DALLAS. TEX AS 75201
, **Y' -
e *~ '* . . . . =
o 87 o 1 to hit for a long time? D 2 A. Well, looks like out through this part of 3 the '80's, we're going to be in the 50 percent 4 range or a little under 50 percent. 5 0 And what was the percentage of gas in your 6 fuel mix in '797
.7 A Forty-eight percent. -
8 0 And then in '80, it jumps back up a little 9 bit over 50 percent, does it not? 10 A That's correct. 11 0 Are we going the wrong direction? 12 A. Well, I don't think so. l 1s 0 Well, as I recall, I believe we agreed that i 14 the objective of the construction program was to move 15 away from gas. 16 A. That's correct, but we have had some changes 17 which have caused us to shift that somewhat and delay 18 it somewhat, because Docket 600 was repealed, the Fuel 19 Use Act o' owed us to burn gas in our existing units te
. 20 a great r extent through the '80's. Natural. Gas Policy 21 Act caused more gas to come on stream so there - .and 22 for peak and intermediate load purposes, the gas, even 23 at a higher cost, low imbed cost and the capital 24 expense of those units, it is more economical to go 25 ah'ead and build replacement units.
STANLEY. H ARRis. RICE. LANGFORD & ASSOCI ATES REGISTERED PROFESSeON AL REPORTERS D ALLA S. TEX AS 75201
On c 1 lf All right. Well,-what we see here on your 2 Exhibit 4, isn't it correct that there is no substantial 3 reduction in gas in your fuel mix on out until 1987 4 or '88, when the western coal plant comes on line? 5 A We're going to be at 40 percent in '86, 6 looks like about the same amount in '85. 7 0 But in any event, it's a pretty flat curve s 8 until that western coal plant comes on line, isn't it? 9 A That's correct. . 10- 0 Okay. Can you tell us about TESCO and TP&L 11 with regard to fuel mix? Will their percentage of gas 12 be lower in the 1980's than DP&L? 13 A I do not know. 14 0 I'believe you say in your testimony that 15 DP&L now wants to reschedule the retirement of some of 16 these gas /cil units. 17 A That's correct. 18 Okay. 0 Can you compare for us the retire . 19 mont plans you testified to last year in Docket 2572 20 against the present plans? 21 A Ey units or -- Dallas 3 has been delayed fror 22 '83 until '85. Dallas 9, from '82 to '85. Mountain 23 Creek 2, from '79.to '83. Mountain Creek 3, from '80 24 to '83. ' 25 0 Parkdale? ST ANLEY, HARRes. Rict. LANGrono & ASSOCIATES REGesTErato PnoFESSioN AL REPORTERS D A LLA S. TEX A5 75201
99 o 0 3 i A Parkdale 2, from '81 to '84. 2 O So we're looking at three or four years delays 3 on 1, 2, 3, 4, 5 gas units? 4 A Yes. 5 0 Well, we don't seem to be making much pro-6 gress, Mr. Tanner, do we, during this decade of the 7 '80's away from gas. 8 A That's by a conscious decision. 9 G And is it consistent with what you repre-10 sented to the regulatory authorities in the previous 11 cases? 12 A No, because the fuel situations in regard to 13 gas has changed since then. 14 G All right. 15 A And our objective is still to shift off of 16 gas and oil, but we're shifting at a slower pace than 17 we were earlier. 18 G Well, despite rate increases in, I believe it 19 was '76, '78, '79, and the propo, sed application in this
. 20 case, and despite all that CWIP in the rate base that 21 the Dallas customers pay for, we're not making much 22 progress, are we, towards getting away from gas herc 23 over in the near term?
24 A I think we are. And what we are doing is 25 very beneficial to the customer, as is shown in my ST ANLEY. H ARRIS. RICE. LANGFORD & ASSOCI ATES REGtSTERED PROFESSIONAL REPORTERS D A LLA S. TE X A S 75201
c==== pce . t; pp:. ous en Publ.ic Utility Comm;ssionp.=.a i om.r .R:WL.N v
.we K<w.'4 of Texas .
81 DEC 15 P4:14 George M. Cowden Chairman
., :; pg;,,- ,, H. M. Rollins Commissioner
; ,g..e
- 3. cep;j,;g
' " ' ~ "
Garrett Morris Commissioner I, Martha M. Bartow, certify that this is a true and correct copy of a portion of the cross examination of Charles E. Olson from the tran' script of the Decemt,er 9,1980 Hearing from Public Utility Commission Docket No. 3460. W ISSUED UNDER MY HAND AND SEAL on this the 9' f day of December,1981.
$AC/-r -
Martha M. Bartow SEAL D rector of Record Services l An Equal opportunity / Affirmative Action Employer 7800 Shoal Creek Boulevard
- Suite 400N
- Austin, Texas 78757
- 512/458-0100 l i
.c . TRANSCRXPT ~OF PROCEEDINGS A.g'\ --~~a[h;,t.[. V. BEFORE--THE gg. ;'
- f. PUBLIC. UTILITY COMMISSION OF-T K4 g'(SDO i p
.c gi.C j AUSTIN, TEXAS
.s..**'Y g./
I [ = l,
$;ht.!, /'
-IN THE MATTER'OF THE I
. APPLICATION OF DALLAS X DOCKET NO. 3460
. j' POWER & LIGHT COMPANY I i
! FOR A-RATE INCREASE I l
PUBLIC HEARING ON APPLICATION TUESDAY, DECEMBER 9, 1980 MORNING SESSION l VOLUME III-t
'l Pages 214 to 297 u
> 1 i ' i HICKMAN-KENNEDY REPORTING SERVICE INC. '
! i
/ 7800 SHOAL CREEK BOULEVARD. SUITE 346-WEST
!, ,\
AUSTIN, TEXAS 78757 d l
~~
]$ (512)458 3297 ny,a .
r o N. 3 n b npa truc lr.P J (%.,,_ _ icih MS MdC .., S t i v o h6 v a m s o.s Gt t s
-__._____.-_________._______I__- _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
y1
-g1 jABLEFOF CONTENTS-2 4- Page.No..
- 3. : PROCEEDINGS -'. TUESDAY DECEMBER 9, 1980 215 4= PRESENTATION ON' BEHALF OF.TIIE APPLICANT-'(cont'd) 216 si CHARLES U. OLSON - Cross -(Blanchard) '216 ,
Cross -(Sparks) '2 3 0 n- - Cross = (Quintanilla)- '259:-
- Cross (Joyner)- 263 ,
7 ~- Cross'(Ellis)^ ;268 x AFTERNOON SESSION 298 9' , CHARLES E. OLSON - Cross (continued) 299 to JOE D. KARNEY - Direct (Wooldridge)- 319' Cross (Blanchard) 320 11 .--Cross- (Sparks) 330
- Cross (Joyner) 343
. 12. - Cross (Ellis) -352 1;; Ti!OMAS L. BAKER -
Direct (Wooldridge) 363 Cross -(Blanchard) 366 14 - Cross (Sparks) -388
~
1:, EVENING. RECESS ~ 404-lu 17 18-pi 24) r, 4 2:l . 21 2,*, b HICKM AN KENNEDY REPORilNG SERVICE INC. 7800 SHOAL CREEK BQUL[VARD SUITE 346-WEST AUSilN. TEXAS 78757
-(512)458 3297
7127" Olcon'--Cross
. , . 270 ~' - A l l : r i g h't . -Arc you1saying,.then, that the
- 0~
2~ : increased revenues from--the increased revenues from
-3 lTP&L', because~of the hot summer, have helped, have
. .i they'not?
3 A Yes, as DP&L's and TESCO's to.the extent they
- c. contributed.also helped.
; Q All right. What I'm getting at is the need 3 for rate _ relief now. Is thi s--Ilas n ' t this alleviated 9_ .part of,the problem already?' In other words,-DP&L 10 needs a rate increase based on this test year, but.there
~
11 have been factors which have come into play since the 12 test year.which have alleviated part of that problem, la have they not? II A No. They haven't alleviated it. In spiteuof 15 this record summer, in spite of the lact'that Staff is 16 recommending a higher return on equity than has 17 probably ever been recommended for any Triple A 18 public utility ever in the United States,' we still 19 see the common shares of. Texas Utilities rating at less 20 than 75 percent of book value. It's a long ways from 2i 110. 22- And in spite-of the fact that the--that Texas Q 23 Utilities revenues for the first eight months:of'1980 21 increased by 23 percent and DP&L's increased by 25 2 percent? - h HICKMAN KENNEDY REPORTING SERVICEINC.
- 7800 SH0AL CAEEK BOULEVARD. SUITE 346-WEST AUSTIN, TEXAS 78757 (512)458 3297
. .f
c3 .
-Olson - Cross o
271
; A In snite of all that, inflation is at record 2 levels, interest rates are at record levels. Yesterday, a southwestern Bell, a Triple A' company, sold long-term
.: debt at a rate of 14.25 percent. That's higher than 5 the returns on equity that this commission was granting
~
6 a couple of years ago, and the cost of debt, obviously, 7 sets the floor for the return on equity, and there 8 is just not very much spread between 14 and a quarter 9 a n,d 17. 10 0 So you don't think that--you don't think that 11 this has alleviated the problem at all? 12 A It really hasn't. Interest rates are at-high 1:1 . levels, and if the company is going to have a capital 11 attracting a rate'of return that's going to be such that 10 the shares will sell at a price equal to or, let's say, l'i 110 percent of book value, they have to have more than II they do right now. They just have to have more; l' otherwise, it's just going to be a continued situation I" of selling at less than book. 2" All right.
, Q I would like to talk to you for a 21 minute about something which was said yesterday. I believe it war. when I was discussing this with
' ' Mr. Tanner. He stated something to the effect that the
~
sale of part of Comanche Peak does not affect the N ratepayers. Do you recall that? h HICKMAN KENNEDY REPORTING SERVICEINC. 7800 SHOAL CREEK BOULEVAPD. suite 346 TEST AUSTIN. IEXAS 78757 (512)458-3297
~.:7,; ,
-TRANSCRIPT..OF PROCEEDINGS-y BEFORE THE.
[ PUBLIC' UTILITY COMMISSION'OF TEXAS. AUSTIN, TEXAS: i . INiTHE MATTsR OF-THE I APPLICATION'OF DALLAS I DOCKET NO. 3460-POWER & LIGHT COMPANY I l 5.
'FOR A RATE INCREASE l' PUBLICJllEARING~ON APPLICATION TUESDAY, DECEMBER 9, 1980 AFTERNOON SESSION' VOLUME IV 1
Pages 298 to 404 .
. .l '
'I h -
HICKM AN-KENNEDY REPORTING SERVICE INC. [ 7800 SHOAL CREEK BOULEVARD, SUITE 346: WEST l-AUSTIN. TEXAS 78757.. (512)458 3297 ONe*, A;so At P O Bcu 3E6 A a .; ten. Teen M10
<cth 4 9 8930 v w u,u,neu n sce<ars V
E uc3 : x'
. Olson~-Cross
,m '.307 3
an, increased role ~for~ the distribution.activityfof-the
- y. . .
4 -electric utilities and a lesser production role. p . p 3 -O- All ri g h t , Could this also : go ba'ck to -what i ~
~
~.E .we were talking about, .that perhaps there needs to b'e 7, another~ method arrived' at 'for rewarding the: utilities r; -
'rather than strictly by. 'how much electricity. they s' ell?
; A I' don't~'s e e how you make that link. There.
.8 has been a great deal written that says that utilities 9 are' rewarded for the amount of rate base they have. But li for the past five or six years, initially, DP&L and TU-11 and other utilities have been penalized as'they have 12 'added. rate base. In other words,.the more' rate base la they have'added, the more rates have gone up, and the 11 more the market-to-book ratio has fallen. So the la shareholders haven't.come out ahead by these expansions 1G of rate bases and new issues of common share.? at prices i l
II l less than book value.
.l 18 Q This goes back, too, to the large.~ construction ID program, does it not? i l
1 2" A Yes, it does. 21 Q All right. I'm going to refer to the Dallas
-m transcript of this year's hearings, if you would like 21 -
to refer to it, also, on page 233, beginning about-line 14, there. Uhere you state that, "You don't f i n'd . ' ve ry , b HICKMAN-KENNEDY REPORTING SERVICE INC.
' 7800 SH0AL CREEK BOULEVARD. SU:TE 346 '.EST AUSTIN. iEXAS 78757 , -(512)458-3297
- y. .
00CKETE3 Public Utility Commission g>."- 3 I!$NRC i of Texas !
'81 UT 15 P4:14 George M. Cowden Chairman x .r e 7c m ;,; y H. M. Rollina
*::; 3 EEhyiC[ Commissioner
.. ;::T '
Garrett fAorris Commissioner I,11 artha 11. Bartow, certify that this is a true and correct copy of a portion of the Transcript of the her. ring for July 9, 1979 and July 10, 1979 from Public Utility Cora.1ission Docket No. 2572.
/T
~
ISSUED UNDER MY HAND AND SEAL on this the //
~
day of December,1981. l SEAL
. ,/,M !. Martha St. Bartow Director of Records Services An Equal Opportunity / Affirmative Action Employer
. 7800 Shoal Creek Doulevard
- Suite 400N
- Austin, Texas 78757
- 512/458-0100
c , .- m -.
~
.,2c..
Nya - Cross 397 p-;
- s. ; _ ,
~ - - -
3g 80b1 Q You testified to in response to a question by $$$$
.. .'. i:a .6:%a (3
~
Mr. Bell about the level of residenti :1 bills' for the [ "~ U ' E===1 companies of the Triple A and the Dcable A ratings. I h:as a La=:wzu think I heard you say that making'ths. corrparison you , .$f.$m. m
, I..........E*"
dropped DP&L out, j[j][ n - A Yes. -
- m. .
Q Why-waa that? ~.' ~. . . . .,. ;:, um GG. k. A Well, I'think there was a little bit of circular
,;.;;;;n n .
reasoning I'm trying to compare it against the~others. !r e O s==== r V I'1'1 go a little further and be candid with you. I'm not ht ===
' I haven't ,;.j]s(([
nure whether we are Triple A or Doubl a A. Eim. ..s i enanced it in awhile'. The same rehults would--I think b <m l;; ra. g=. rz .= =s.=c.. ~ would come forward. Our rate for,that particular month u.. ll . wan a little higher than the average in that respect maybe '.0.M. .-M l' I made an undue comparison. I don't remember the number JF= "" exactly, but maybe if you add one dollar to the average g.3.
. . . .: : =
17 h (n,) that I gave you for the Triple A you could put it for all "_.". four companies. I can get you that number, but it's not-- [ 10 Q I was just interested ebout why you dropped DP&L i-
) c._ = =
o u t. . That wa).my'only inter =st. And.also in response to
., ii
','4 '
}l ,
Mr. Bell you u'se'd a' term that .I'm not familiar with and
~~
I'think some of'the other. foiks he're, perhap',s theExamineb. . . =_p=.... . .
~ ~~~
may'not be familia,r,with.when _! you were talking about private . . . . .
~g
'placed bonds. And I bel'ieve I heard you make reference to . . i...
(-)s q ,,g
, :w:::
; SAMA bonds? I
=..s.......
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e '
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- h T- T , M & . g 9 $ ' . ,- .
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.. Nya - Croes 398
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20b2 1 A All right. [""~'.7.[
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,s Q Could you define that term for us? \v) A Yes, sir.
bz. am:. pm-:: . That's--I guess a colloquialism-- .;.;.1;e2
,.,.wm
$3f.f What we had there was a private placonent bond.
, a.as Q Could you first define the t e rm fo r us ? pgM=#=
..g A Oh, SAMA, is the Saudi Arabian Monetary Agency, A23
. .:a:=- :.=
the.t was the purchaser. l37] NA=. ..... . Q An'd that was a private nonrated olacement of R.;;.E.
; p--= ~~
9 how much? I$ m
~h h.?h.T.'
(V I" A Total of. 75 million dollars. f.'.".f3 ... g..... 13 Q All right, sir. _
' ~
~------
A I might say that that whole transaction was Q: discussed both with the PUC Staff and the Dallas Staff. Q Just really wanted to know what the abbreviation %@ l' meant, Mr. Nye. .=.== :i.G . A Yes, sir. N::...==9
- m. l~
MR. SPARKS: We pass the witness. (O 1* MS. S11ELLMAN : Thank you. Now are you g... . . .: l ready? - - - E t::. I {.'-. .
'.'" , MS, O'CONNOR: Yes.
. . ~..,a'
.. , 4=4.
21 ' CROSS; I:XAMINATION .. i 22 BY MS. O'CONNOR
~
(, . ..;.y;; M " Q Mr. Nye.
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g- .23 a' ' Yes, ma'am. A .a
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S q Is 'he Compcny's primary need for capital now t
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; . > _,w Mr. S gthoff',r I wasn't sure how to pronounce ==s=
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pm= =-
' r. , t..
n
* . .. 1 w.. . ...a -
5 testimony that' Comanche Peak will not be icss expensive !; i 1 s. -
.c g-8I torunthanoli;an'dgas. , . ;, .e plan.rM,,fof_at . .
1 cast the firs t two L y. - --
- a. .. ,. .7: y . >
L;. m th ey.l wo;,uld .b e; i . .jp. ;; ,n. . .: s.u rvi c e. . years that f.as a= -
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' You 'albo' s t's t o'd 'en tliur" this morning that you '
s ; v . u, : ; . .- .
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] anticipate Coman'c pe , Peak *woul'd ,run,1 c 70. percent capacity , .
- n. .
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b ' afte.r the f.ir s't . t h.r.;e,e.'.,ye, ,d. r a . .
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,' 'Q Or,jinJeher third year;.. Do you have'an analysis 6 " . ' lef .'
- t. .. 2 . - ^
w
- - f. . . . .
~
- g.x I%i of what capaci.tiy' thdt 1 omanche C Pe'akc wi'll'li ~eoperating in m..; ,
.u,, ,, . '. i. , : a p .. . .s
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, ., . . th e . fi.r. si.t .two y.'.ea. r.s. .?'
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- - * .s
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J h. ' A ' WC a re,! p 3,annin gl f or f ue l 'pur'po s'e s 35' percent
. p. , .
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. ' I.6 the ; f irs't - yeNr".J. .'50M' percent
'.7 the. second year , and 70 percent ..J
,, .v.
.,.s... ..
. ~ ,-
[E w....-....- H p> . .f. . chea birt.,year'and thereafter. We hope that we can =.=.=1 1 - a .. .
....y
, 38 insprove 'on ,that and.. all ,our o'tij ec tions would b'e to do so.
c:= ..
' : f72J.,
, m..;
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j .. 3 . , z.---- 19
,But yo u p l an ,'lon th~a t an'd you might not have enough fuel
,i=e=:=
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.lti" #' sources tb *o ek:1.t$tp'. .$ ~
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- [ .v . .
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- 4 'u@ Vif 7'.,\ .' understand you correctly. you.? ,
, Q .
P i
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~
' ... s,.w 3e
.y . ' gt2 31,y,o 2. I :g.,:.: have,.Ie.'nbi.igh ., . , , ; f f.uel to full'y .utili:'e ' Comanche F cak' H==ss
...c
.. , . :. .m
**,.p...
,,w..,...
,is'thatfwhat you're saying?
l" during the fi,rs%,t3/o'llyyars
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.W A .TNEe$b .# . .v.Coisanch'e jeak?, ' = ,g,.c$..:2f,a,yM . ;.g% j.; ;.-;. ;c 9 e .; e.
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11mH4 1 A' I'4'O dp e! Lyssl'J Vir:d.I n dd haVe f uel s
, but just examining c,,..e,,.g s .
==
2- . wh a t 'h a n ' o clcu. . < ,- .r rea' o'6.,inucleurY.u'n i t s as coal units, you O .
' > : '" ' ~
3 have a peri.pd where t hgy, . . _ . . . . .
,devel o p and are improved afcer
. =
4., they gc in s d r v. .eice. , You,'have'.a maturity period. So, .
.5 &" '
g ,
, 5 3; to figure it in a conservative mode, we've calculated on p=
y . 0- 35 percent.the first y e s'r , ~ 5 0 , and then 70 ' " - h=. .z ~ Hou, we.wou[d hope't'o-d'o better than 33, and 7 . D..
~
w . n. . .a. . . ,
. . ....z .1 -
a. we have fuel. t.o'do< bettor. .
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,9 '
r qu, s.ti
. .. b,,' l d. n t i.. c.ip a t i .g that the . initial s
W .. C 10 > problemsyou'mih,hthfach.'withbringing it on line would
- 1. <.
c .ec c, , y:sm . . ((." ...~
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11 .:a at full capacity? m c a u 's.c y o.u, .' n6 cdo s _ j . ,
+ a','.b
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.Vi th';N eg.ard to the studies that the, [.-
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i=--=;w t.
+ .amounts, th e,,- b e n e. fi t s of It C _omp an y h a s.. riz = =.m d o.n..e.k,.'?.*W ~.ord..
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different prosrams,'what~ studies ha.ve been?,done to cost 15 m- [
. sp. .,5-
, i; . - . .
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j; la -* out the relative bene; tics 'o.f a delay of bringini; on >
.$ ~. r .; v- ,
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, p.. - :=-
O. 0' 11 .'.: camncho Peak o'n flitie -
..'.;*. in . .s.1981 - and '837,:. ,
r
.s A- W il', we.'had not made,any detai'i..s
. t........
18 , on that7, r
- j. .
,.. .,,. . i .. t .
+i .
since aroundc --th.e?. ' 7 5 ~ ' 7 6 pe riod,! b e caus .- basically we're E~~ ~ 19 i
. s , , .
r=
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'beyond the. point'and,had.so much commitments that 'it was
~
2.
.s
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. , * ',; , . . . . . i:a ........
w-;;=; r::. 21 - obviously not'something.that was economically beneiicial. E.c.:.
, ,y
. .],
i,
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r y-M": I did,: .follos'ing trevisw o f' tes t imbn'y , r e N ew' .the delays (j.r.
- ==;
o, ,a . c, . ,, 7 ., g that weraf sugges ted by 'Ifr N'ichols.,an.d i'f you delay k
'. 13 i =;
., .' , , , . . . y ,. .
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.. Comahche Peak-17,1.for'.ytwo! '.1 y,off look a t ,the,
. ;,years , and O,.. . .
25 ,o first a.
.,;.,,,<,q .- .
i;< four-year op.eration -and then presen'., worth it e to
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, - 19 81,' Y 'ch t s i .tk[ . ,("sId'mer '$'2) mil lion
^
11cn5 \ cu to delay it for. 5hkin
<- . e. ..
.xg 1, 3. <,; t-u..~ .s m .
- w. . . . , > :.=.=u,s.=
c ,= 2 ' r' two ye,ar s. O . Th'a t%. ?w . can get gas to; burn and r4 assuming..
..c> '
- t .u .<,N ..;
ca 4 ;.g M.y; ,
;ggM
.. f.y, ,. 3 'a proj e c ted,.,g a s.,. at g 7, .; . ;
* ~. :i;a.
.g;;;
E"~~q
. W. 4 -Q- Okay. Now, do you hav_e chat analyses--have you 3
. . r===w nw.uw.cs.:.r.W
- r. . . . . . . ~..g 6 detailed that out, or is that j ust something out of g==7... ,j G: '
.. %. %;;;;;= q .
your. head?.' .5 "
. 2 ,," . .c; .. .; . 4 .
s . m. t.,~
,. ,. .. . . ;; > ~ . :.s.e
. .- ,.. , .=.-.=..m.
u
.7 r .
A.Ay,A %,.etscri N. iedbit down on a piece of' paper. . t:.: r '~~
~
' , ,S. j, . . . I ' [::. . .. . .
.g ye, s,, . ._ . o .s.y. .; .'k ? f") a -
y =~=.
; bm...--
. a .,. 3 m:
>y,.c N =.;g 9~ ,
Q . Do' youLh.avef.th'a t~ aVaiia,,b.1e for us ? g.; .,faz,..
. . - .w ' y . s - t
. .i ....q... .. _. t (n F:... -
i t s h'e r. . ~.. vt ,e.on'some notes. I could show a l' 10 A - I '.ve got " amnD
. , . . .. .3 .
, __..._. w,
. .. ..,r.
it CA;.y.N .,a.t ..the, breaik,b.or, li gs <some thing . L;;= ?l3
. . s. , y.
- p. .. a y. ;. -
- 7. o. a.g.. .
p .. =
..W.
So; th'e' ,las t detailed analysis or 12 Q;,, . M ay.
, .. f
.k. *
. . 4. ,f,~..f.,.. * -'. . .-
' .w. . >.-s. @.,. .
t
. 13 a l t e rn a t i.yu.' i.3",;tu.dy
, . . . ... byltheEC_o'mpany was in 475.'767 . .
.r"E.' dm.. ._
. , . . .. , x . ". . .: . , .y =
f.- ui t 'A
..:.I;.,b e lie .q ve"th.a't_' we s the.last time. I.t was one . .
==
* , i . .
. .Z 9 . ?;, ' ~. ,. .
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of the optidus.tliat.deZI.obked~at seriously when we made 1 r, "b:q =
. . , ,# 7 , . ,, w
.. ./e . . g -
ba.
. in 'a d. e t a i l ,e d.nalysisco : a . v . -;n , f ' o'u r . ;' .eqansion? plan. h..
==
. . ,. +
..,...,: . , e.
. n.
.g . .
~
~
. ~
. i =
e + .; 17 , . Q .[ ' Wii{t was 's h'E plroj ect ed gro~wt h' f.o r the Company m?: =
.~ . .o . . . ,t ,
a t. t h a 't'. t t a c 7' 1s - 2:' :2.=i
.C
.s.
w .. :.r - . !
?,
. ?,- .
ti
- p. AA We pere d.own around,..'fo u,r p e r . cent, but at that.
~a .. m .
t . . m t . , . , w .a-- g,i time.wc'were.still.ha,ving '
<.T a very uncertain gas s i t ua ti'on ; N
#.. . t t .
~. 5
- s. . .. .. .. .
w . . Do cko't' . 6 0 0. 'h$dDus t 'Iv.,. .i cow 5 ai'n , and we.had,had to anticipate:
.;f. 21 r..' e i- -
, 7 .c .'a . . .. N A. , t .
the
~ 21 . 'if Comanc.he m,,- : ?. ( . ;.
s Peak wasn't'.y
. . _> s. <retit'was on o'ii,.and oil das
- . t . '
- i. . .;. . .-
. . . .- 4
.:3 l' at ' around . twelve or' fourtden ,.a t . t h a t. .t ime . I forget just .F
....5
,., +... ..d.,
L.;. , , , ' . - .
.r * ,
3 .p 't.P . 4 , . . ("- 9
, 2t ,' e x a'c.t-ly whent h11, *the' , ,w,cs ;,... .itan . . .
ge s f r. 4' .om. OPEC oscurr.ed. . But-
'..T'.','. ;f 7'.c - '
o; . t= r,
- D y'o,.1 :i ,u w'e'ref.] ookin'g; oomea.t very,high.a1 tern'ati'ye,a.tb
, rep 1aee 1
...,ry .. , g. %-
.. . 1 . . . . . -. . - -
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yb 'y
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d Q gf g s 4 . ., . .. L
. ,s 4 . .; :. .=
l{.;
, t'i .* / y ,y ;% *'p*.' . .?, r ,'. ' i t' n s,h,t e,., xvi:' f. A '**
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e
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'Tcnnar - Croce 138 E-==a pxa.:ug 18bl I Q In regard to' another ques tion asked by Ms. [
g... a
--=:==-
O'Connor, yb6' sbat ed , 'T b51'ieve , r h t, t there h.d been no , [:;;._;._ studies made sinc'e the"'75, M V .i ' 76 period to cost out ene 3
."'. ,0 ,
- rJ I delay of Commanched Peak plaht.' Is that correct?
5 A It was nocIconsidered in detall. Now, we lookeli g:y!.r_ n e a ch y e ar -- as we are reviewing our system expansion plans. Z_,_.y n .* * ' ' w ;..:- - 7 we look at the various al tfrn, ,a t i ve s we could consider. n buena
, ,e ,
1 q p == : z:: 8 ,t was obvious'ly onefthat
- 4. was considered, but it was not g;-;p;r" D;;:.: =<
9 one that we ele,cted to do a dhtailed analysis on. n;":=-- () r *x . . to O All right' I be'lieve'you also stated that at -9;jE
. . ent:m=
11 that time,you-had i:dsted out' 25 'Enillion dollar costs for
. ~ ~ .,
f.k. .;s;;; 3 :.. .. . .
- g. . . t_
12 delaying Uni t 1 for tw6' y'e'ars ? "=S4. G G.S. i u A I'just di d . th a,t ' h e r'e this week, or last week. '
$l;..;, ~
. . . .s' .
- i.a 11 Q All right. You said', I'believe, also that you in were, assuming gas and' ' projected gas cost there. If you "?M ,: g;;
.' . at in delayed the Cominan che Peak plant. .it would'be because you f..[5]..,,_ .
n: n 17 did not have as much' loa'd growth as had been anticipated. lil: .. t 3 immt. m2.. v .. . m Is that correct? Was this why you made the analysis, was-- WA...-... t-*:::ww 19 A I just assumed a tw year delay on Unit i aad E=2im
~
.*,- '-- .t=s =r 2a the three year del)y on U. nit 2 because it was suggested
. f::.
21 by some other teshimony, I'just looked to see what that '
.1 .. l , tur.:
"2 ' 'co s t would be and I dssumed that gas would be available.
. .' .,. . ! [ . 5+
'I con s ide. red the carrying, cost, the O&M cost, and carce up 23 EF "~~"~"
's- .t p. = mf 24 ' .with an annual cost und'ef those two scenarios, I present ,. . . , .
r[ [.'. [ . . . Q' : 25 worthed itsun'd the diffe re.nce between those two on'a ..=.. 7
. .' , ? . k%',. 3. ' *
, N' , . . - i :11.
. . . _a,.. .
- 9. #* ,_. ,
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g Ef_5.."i
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n g$. ,.,.
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- .= = = =-
l .=.
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.. e
- A I--
- E - *- -
a -- - 7 w - ;. 7 y . m - r ~ - -- m - w w . " -
- 139
. -.,. ... Tcnnerj- ptoas' ,
a .. .. . .; . 18b2 1 present wo rth b,a s is ,is -,.25 .inillion dollars for a four ye.2r m .. g4 2 period.' ., , ~ {*r,.j;) i ~/,..
'=-~=
. u. .., ..
-.d
'- 3- .
Q All 'right.. Are .you saying ~- that--you are assuming' . . ,
.. .~*
1 that gas'would'b'e
*g. .
use'd to replace -that-- ,~ . m z"' ""
'A GenerEtion. - -
- 6. .
6 If the reason. for delaying the
~
'Q All right.
- e. .. . . - .
Commanche Peak plant ~ was that you did not'need'that~ -.m. generating capacity, why would you need to use the--assume
.....m 9
that ~ there would.be a replacement cost using gas ? . .,.. . . Je?.i. g =.m m
- A Well, I'm'noE$eady[.,...r'oi'onceive c that we won't =-
'. .,. . ; . .m ; .
', . - m.
M grow at. the That is our , ra te s thatlI(f ,,.' ,*we "re. proj ec ting. e 12 , b e's t e s timates 'siid wd's e planning on that basis and I don't . . . = think any ana1Ysis of considering two alternatives you're
~
13 M considering how you would supply c'ertain amount of load ,
===
3 *.
' . an d i f yoit e.liminate.the: load,well neither conside.ation . . _ . .
. _ . , q ,- -
'is vali d ,' I a ss um' e"r:.': 7" I r' -
r,.,
-l. i,'l'y , ,,,
== .==.
l ,' n w . Q I',m sorry rome o f these are ' a little disj ointed.
- " =~~~
18 M.y notes didn' tj tally a, little bit here. .
. ~ , , . . , . . .
. , i* ** - '?. ..
.....y...
Ip I '.ve. :got ;all g) .sf ,a t e rno on . A
. *;. s:* -,
Re ga3 d Eng } a.',.nothdr. que stiton by Ms . O ' C o ni r.o r.-- , you 2" , Q ' -
- 7
. , = = = -
21 were discussing th~elDepartment of Energy figures and
! "T;.t::?
=
n ,
. .,..nt.. ,
MQ 22
~,
, mentioned thacLthis was'a f,airly recent report, approxi- I M ' ma t e ly . l'a s t fall atid that these figures were for '81, '82,' ===-
.* , . . . i W
, an d ' ' 8 3',' were th es e forfthe same' size units as the 7;~;;~;!;1 Q m . , ' : ". .. +
25 Commani:he Peak?,- ' ' ' '
.m.= =
m'.- *' -
.,., v.=- =
{ n
- ~
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g.gg
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t -
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l . m .g a
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( ._ w . = :1 :
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ug t_
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g
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, _ ;1 22:E.....
- , ,,.. . m.m.
.- .a, -
zw ruac Nye; ".prood . 364 NR.,w
.e,.
' nc 16c7 I qtie s tion that you did $ot hav'lea s tudy showing, lik e., ' wha't i ha 2
ggy kind of a rate inc r ea s ey' 'ou '.wo'uld ne e d if youe*were going' 0 ' to be a Double A rated $.dapany and you neede'dr3. 5 percent
-u aE
. ;:.:23 mas.u
,s time s -in tore s t co9erage? .
. m. .r~..n
~
- =.n
...=.=.
A John, I haven't made c.st'udy that if I fall o'ut
, >/
Lll] . _ .y ..- r of that chair-I'm going to hi. tithe floor, I.'m not' going to is m .rq
.u u 7 .. ,; p:9. W.: =
..... .mr hit the ceiling, and I-don't.think you j nesd to study.
g- '.~
. . .csa ., :
{l=E"32
.3 things that are apparent f rom.lexamina t ion .
~
-I'll'go . . ,
.* )
63.g.7
. , . Ly==: ==
through it one more time. It's apparent _ to me . t h a. t. . the-
^
F
,f .,, .
.,. p.-
x " bills are lower. ..- ., ,.,. .r:t:.... _
" -4 v.e - ..(. w
.r:xac ar:
U . Q Are you telling me.that ycu: c j .. . . . . . .
. p. ...
~..Just' . . .
- p. ;. dont . . _e . . .
have . (... P'
^
study of the nature tha t.cl.' ve. inquired :aliout ?. ' iE: r;:., ,=.
' . L ,l, , y y ,. . m.2:: - ;
A I will describi my men [all rocidNes1 which allow . T:...
- . .r;=-
,,.n. . ,.
Il me to conclude -- and I th4.nk. mos t wonid agre e '-- tiha t it -
' tr:4=
4., , , 3 is.not more expens1.ve to mainta3.n,..'a Triple.A.- And let me ., < -
=
I" say it one' more time. The f ac't cirs that! .ceutirol in this -
.:]
G case, it s'e e m s to.me, would control anyway, independent
- 2. ... l.1
. <- .ii:iif o f whether y'on inaintai'.i thu financial ihdicators that I 7-[.'
. =m==
. think are neces sary' for, a Triple. A, as they w'ere in the .5[
. =
2" . v last.'caser
- *< 't: .,
f
' c . , ,.!, ,,
i'*')
- W; 3: ,~ . . + .. .'
.' a:.
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- I t ;
- 'It's impo(tant, i. c i s. . vital,ly important, .
and I I
,,.-~.m.e ..i .c * /
,,, . . . , . _,- . / -
E:n don',t I t'hink it '. s probably the most
~"
' d. ,a n i t o' i,i,i.S., ..n m, , n.(s.h. .i i.. t.*
5)
.~', ,
e
<m .,... s. . . . . , , .
--4 critical, facto -
e. r.. in 'th'is . rat e - case. You made, the point ;:.;;: s
l
'4 .
that we ha'ven'.t lost our Triple A. We'v.e.ask.ed'for' it =#E O *,
~
2,,,
. . . =,=:: =.,A ..
.. three times. We haven't ^
sold any bondsduring that period " J"iii Q, . ..
;:g];;
mm
, .:a . , . . :, - .
, . -- m. v.nN ,,, .7 at , a. s -
. %.;. ;k".< c b.'c. *. : 2 r.w'p.1,
,,, a 9
)- , g y' m : -
;;;;f.:.p:a::n;
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.* ~. +
=
gy t . . . - . .=::::.:. I
.. j
-y.
. . . ,- l L. 4 $ _ aa '
-- .a .
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g
M' .__.........--...:- '
.-,....Y=...':...-.._---
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>- -=
.* . ;i, e i . _ , . 's ; f..-- .&
- [' .Mye.- Cross 365 ;::=; :n
~' l::274.10 16cS' 1 of time. Now, we're' going to sell bonds. We have put it p"'..
c.w . . x 5.E f g off as long a s w'eE c'an . We cold SAMA bonds, we sold hg;;
'O
. equity, we've sold plant, bnt we're going to, sell bonds, j l[l
, e . Li:5". .
There is no way to get around it. L'f"gg[]
.% * '. b;<an ^^
-,......V':
Q But during this'tiac, DP&L has raised the capital
'. "~^1t .
.. ... 4 needed to meet its needs and to' meet its construction J.:.T :.i.siq x . a ;:w:
_ T \ prog, ram?
.y i
,3. *
, 2H5f :===::.
~
- f. .
A- I believ.e I..de' scribed tihat we sold BAMA bonds . 7 k: .. ... . . .
,' g..........
which do not require a rating. :We'soid equity which was ,. ......_ gO "' . 7.- -. from the holding-company;that thbs.far has been' patient ir
. .:g; .==
and provided us the c ap'It al .
'I Weve sold ' plant which I -"' "
, g.;;.;:.= >
U
' don't think is the best'nay to.rai~se capital in a general
'( 's s s e .
I don't b e l.ieve mose peop"le <- would.suggest7.most, , .
' mas 11
- experts would suggest, that'a jpproprir.te. Otherwise, 1 ;;gg ps "'
1 presume that you're suggesting'that I go out an'd sell some e .
~ - -
. . .:..,:=;;.
- 3"
more plant. ;,, ,
.....m U
g I'm not presuming anyt'hinh.
~
, -Q I'm as' Ming questi.ons. 7. . .
. u= - - .
' ' A Mr. Fairchild has . -
suggested that my e'quity ratio $ . :r-
.' . , ' . ~
'==t::;..
Ec ..
,ii'too high,. I don't believe.that it is , but it clearly n
i.:7 ='- e { .:=,.:.. was nn ef. fort,to avoid.. going /co the bond market. Now, _ s, -.
.',: ! 2, -
y;
*l v.
eve.rybodyNough't,toun'dersfandwehavenot had a public
.2 ,
rating' since: financigls for ' 74. -
.. '\/2 '
~
... ;a .l w ' . . .
. .w , -
- .,. r w......
.A, .n d y ou have n..o. .t n' ~ . >s been hamstrung in your financing i.;;
- r. . . . . . . .
y c,;
~
, 1 .. -
~
L_:... ..~.';. ;
~ , ' , _since,.'74, h' ave you? '
=- E g_ #'
=.g...
A I' d': say Se . v. car $$in1[liave bend
- h'amstr.u'nh.'
I j55 =n s .< . g "- :' . E. .-
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C-7g;
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;i.l l-fjj;qs'
*{-.I .
ii}..
- 4 * . 44&J.i.
* \^
4g , i;;;;;;;;.E;.O n- - _ 7 - _ - - - - - - . . .., cz. ;,-;w bb]$NN5'NbN5$ L.;n M j 4 .
- A N "ocO-- _ _^ - _ . _ . _ _ _ _ _ _ _
^ ^ -
g-._.- - . g 1 * ~ - ~
.93.,* P. , Nyo. *. . Croc s 392 -
n..
- s. w.
i (.99 porcant ce rtain of .clist.
, ="==
=+
2- A O " Is i t your testimony that your Triple-A bond ik =~ rating is less difficult to maintain today than it may ]s,..m2C
+ ' - wumai i
have been last yea'r in Docke t.15 26 7 :m==M
- 7gg.{
- . = ===m
- a. I would say that if'we had filed. ""Ej if we had .
.n ' " rij
- n:.a
'i
' sold bonds since 1526, we would have been derated. ~
In .; = mi 7 that b e s_ _p e c t , , the results that',we got were simply not
- FEN
?.'.,.
8 adequate. I t 's . di f ficul t for..:pe to go back to relate f' ==.= " gl_...
~~ ,,e r. . . . ;.:.
t:.
!' ' i to that c a s ti . I don't think that case.provided sufficient b.mi.. .:4 r._
.W
. v, t--=r=5j O) l ' *.
coverage to take care of the'; bond rating and accordingly, e. ..
.1...
~
f=f.- my 11 - I did not finance., . - g."...". a. 9
. ,, =--e.:.
I'm notseure' ..t1at. answered the queseion. 12 Q W. . ,
. f.=. . . _
... r::.
=:- .y,. . . _ . .
~*
IS A 'I m sorry.".- 4' P
- t. .
====
31 Q Let's' go back
- to the ' case before that. -
~I.[,,.
is A .Yeg, si.r. ...
.c .;
m Q. You will recall in,the.' previous case in ::.h
. . . :::.mp "
17 other words juar O the... third successive case in which the f=. .5If =~ Id , Company has corse to the regulaitory authority with
' NN
.I t xra.=:d in tes timony, to "th'e- ef fec t that ths bond , rating was in ,
t,. 1
.~ EE ==~~1
.M. .. ~. . , . . . =4:==s4 =s y 20 j e o;~p a r.dy . r , -
u . ., [..i. . ;;=g.. 21 , ~-A* , Yestc, air,,*+ . '
- 2-
. g. . - ,
.: ...s .
2" s Q. Js fip..yopr testimony
. . e ,;( t, .
,.i
_ today that your bond rating M would b~e 'easiai c'to maint'ain today than it would have 'been
, .:v. - -
't .. .....==
in either 1526 or the ca s e b'e f ore,. th a t ? ~~~ ~~.~ u-OI - - -
= -=m Mr.' Sparks, I really'cant rel'atelthat.
2i A I would ==..arS
=:==
.J.
;f . '
Y * *
- f.b r Y'~=-
..p , g.g
'.- t
.. == *
) '. ' n . ,
3
- :::f w
rean nwnCE
.. am: n"a-eds
- .=.a-==....,.;- -
B
. . a;;
6 a r. u,,_ ~ _ s .u. s m . 2 ._ _. u , ,,1 . 3 , , l h Mb6tg..,,.,J l
;g 3, ..
Nya - Cross 377 Ini
- .~
18f ' I Q If'you were a bond rating analyst--this may be E. ...j.
~
~
an unfair question--if you were a bond rating analyst , j O would you perhaps be more cokcerned with HL&P's eight or u=-
;=lz;zc
$ . .. . . . ~
nine hundred million dollar. construction budget in %E@: trying to raise funds and issue. bonds for their construc-h5E r : . .....
, [94.:"::j C
. tion budget and the lesser extent the smaller companies, i.: . j B"'"""g;}
GSU and El Paso Elcetric Company?
~
7
, . + -
Would you be more 4 concerned about wh&P's happening with those companies ' 4.56.bd
*L . . .. . ~:=:;
5 and~more apt to be taking, a ,fa'r der.1 ook at their bond U% p) s , u. wn 1" ratings than with DP&L? "E,
. =:
il A' Frankly, Mr.' hell, Ho6'ston[at this point, has 4ff".=
- nw . .
l .: subs tan tially better financial find'i.cato rs than Dallas $ES$$ nu Rmi I8 Power, either on a eurrer;t bacis, on a fiye year average, .;.r.;. 2:y; 11
> , . .. ~wE: . .
almost any way you want; to look at it. I.believe they do n lhd .=:. . li look at your'financials'. I believe they do judge your :.[
'~ '
&:.:7 .
I' record, and while Houston is.a t.A. I think they're a h" 17 arrong AA. And while~D'allas .., Power is a AAA' presumably, '
.h 4
1- I am corifi* dent thath[,a;r',aweakAAA. You know, you.' 19 don't press t h e .. . i s s u e ,
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