ML20236B774

Suppl to Comments & Reply Comments of Cap Rock Electric Cooperative,Inc.Info Re Util Need for Antitrust Review at OL Stage Encl

ML20236B774
Person / Time
Site:	Comanche Peak
Issue date:	03/10/1989
From:	Adragna J CAP ROCK ELECTRIC COOPERATIVE, INC., MILLER, BALIS & O'NEIL
To:
References
CON-#190-9872 A, NUDOCS 8903210284
Download: ML20236B774 (91)

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' UNITED STATES OF AMERICA BEFORE THE

' NUCLEAR REGULATORY COMMISSION j

Texas Util'ities Electric.

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Docket Nos. 50-445A 1

Comanche Peak Steam Electric

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50-446A.

Station, Units 1 and 2

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Jl SUPPLEMENT TO COMMENTS AND REPLY. COMMENTS l

OF CAP ROCK ELECTRIC COOPERATIVE, INC.

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-i Cap. Rock Electric Cooperative, Inc.~(" Cap Rock") hereby supplements. its' comments 1/ and reply commentsa/ concerning.the ongoing anticompetitive activities of' Texas Utilities Electric Company ("TUEC") as they pertain.to the need for an antitrust 4

review at the operating license stage.

Cap Rock has demonstrated that,'while TUEC is permitting-and-

' facilitating economy energy purchases by two of.its wholesale customers from Houston Lighting.& Power Company ("HL&P"), it is at the same' time refusing to permit Cap Rock to make the identical kind of economy. energy purchase from HL&P.2/

Cap Rock

- has-also demonstrated that TUEC is preventing Cap Rock from obtaining generating resources from Panda Energy Corporation

(" Panda") and oth'er potential cogenerators by refusing to provide I

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Comments of. Cap Rock Electric Cooperative, Inc. Concerning Significant Changes In Licensee's Activity That Warrant An Antitrust Review At The Operating License Stage, dated-August 9, 1988 (Comments").

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Reply Of Cap Rock Electric Cooperative, Inc. To Comments Of

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Texas Utilities Electric Company, dated February 10, 1989

(" Reply Comments").

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Comm'ents at 20-27; Reply Comments at 19-22.

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Cap Rock and Panda the rates, terms and conditions of partial requirements, back-up, transmission and other essential services, thereby effectively refusing to provide those services in

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violation of TUEC's existing antitrust license conditions.4/

Appended hereto are the reports of two hearing examiners of the Public Utilities Commission of Texas ("PUCT"), one approved by the full PUCT and one still pending before that commission, and a i

letter from Panda that confirm and directly support the 3

allegations that Cap Rock has raised before this Commission.

The substance of those documents are summarized below.

I.

. HEARING EXAMINER'S REPORT APPROVING THE ECONOMY ENERGY SALES AGREEMENTS BETWEEN EL&P AND CAP ROCK AND THE i

OTHER TWO COOPERATIVE CUSTOMERS OF TUEC.

On January 30, 1989, a PUCT hearing examiner issued a report and proposed order that recommended approval of the HL&P economy energy sales agreements with Cap Rock, Rayburn Country Electric Cooperative, Inc. ("Rayburn Country"), and Tex-La Electric Cooperative, Inc.

(" Tex-La").1/

The hearing examiner's report, which is appended hereto as Attachment A, was approved by the j

PUCT on February 22, 1989.

I The hearing examiner's report confirms and directly supports the representations made by Cap Rock concerning the economy

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Comments at 27-34; Reply Comments at 26-28.

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HL&P filed the three economy energy agreements with the PUCT pursuant to Section 32 of the Public Utility Regulatory Act

("PURA"), Tex. Rev. Civ. Stat. Ann. art. 1446c (Vernon Supp.

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1988) on June 21, 1988.

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energy purchase agreement with HL&P.

The hearing examiner stated q

that-(emphasis supplied):

.The terms of the three agreements are almost identical, although the maximum level'of MWH l

delivery that HL&P will offer monthly differs for the three cooperatives.

. The Cooperatives are responsible for maintaining wheeling arrangements for the transfer of the energy from HL&P's system to their own.

1 Additionally, the cooperatives are responsible for retaining scheduling agreements with Texas Utilities Electric Company which maintains the control area for each of the cooperatives.

Attachment A at 5.

The hearing examiner further concluded that:

The evidence shows that past economy energy sales to.the Rayburn Country and to Tex-La has been economically efficient.

HL&P has received marginal revenues from the sales that have been well.above its marginal costs.

Rayburn Country was the only one of the three cooperatives that presented evidence of its savings resulting from the purchase of economy energy from HL&P.

. Although there is no direct evidence of the savings experienced by the other two cooperatives, if one merely assumes that Tex-La and cap Rock have behaved rationally in making their purchase decisions (that is, they purchased i

energy from HL&P only when the price was lower than that of the next source available to them), it follows that they too were able to reduce their purchased power -expense by buying economy energy from HL&P.

14 The conclusion is erroneous in only one respect: it assumes i

that Cap Rock has been able to purchase economy energy from HL&P.

Cap Rock has not been able to purchase any economy energy from HL&P because TUEC has refused to provide Cap Rock the same scheduling and related services that the Company is provided to j

the other two cooperatives.

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? The hearing examiner recommended approval of each of HL&P's economy energy agreements, concluding that "the agreements are in the best interest of all four utilities and their ratepayers."

Id2 at 20.

In addition, the hearing examiner specifically found that the economy energy market in Texas is competitive (Idt at 25, Finding 27) and that each of the economy energy agreements was reasonable and in the public interest (1d2 at 27, Finding 43).

The hearing examiner also concluded that, as a matter of law, the implementation of the economy energy sales agreements between HL&P and its three cooperative wholesale purchasers "will not constitute the grant of an unreasonable preference or advantage.

nor will it subject any corporation or person within any classification to any unreasonable prejudice or advantage."

Idx at 28, Conclusion 6.

II.

THE FEBRUARY 23, 1989 SUPPLEMENTAL REARING EZAMINER'S REPORT CONCERNING RAYBURN COUNTRY ELECTRIC COOPERATIVE, INC.

On February 23, 1989, a PUCT hearing examiner issued a supplemental report concerning Rayburn (cantry's status under Texas law as a public utility and the reasonableness of Rayburn l

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) Country's filed rates.f/ 'The hearing examiner's report, appended hereto as Attachment B, provides further support for the allegations raised in Cap Rock's Comments and Reply Comments.

Cap Rock demonstrated that TUEC has facilitated economy energy purchases'from HL&P.2/

The hearing examiner explained how TUEC facilitates this and other economy energy purchases by Rayburn Country.

Rayburn Country has negotiated agreements-with TU Electric, HL&P, and West Texas Utilities Company ("WTU") that enable it to purchase economy energy from HL&P or WTU if the energy is offered at a rate lower than TU Electric energy charges.

Under'the arrangements, Rayburn Country pays TU Electric the full demand charge under the wholesale rate for all energy that is delivered to the customer cooperatives (of Rayburn Country].

Each month, HL&P and WTU-submit offers to sell economy energy to Rayburn Country for the calendar month.

If Rayburn Country accepts an offer, it provides a schedule to TU: Electric showing the amounts and timing of the economy energy to be purchased.

TU Electric acts as Rayburn Country's agent and schedules the delivery of the power from the supplying utility to Rayburn Country.

Rayburn' Country receives a monthly credit from TU Electric that reduces its power costs I

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An October 28, 1988 hearing examiner's report had recommended denying Rayburn Country public utility status and denying approval of Rayburn Country's rates.

At a l

Commission meeting on November 22, 1988, the PUCT declined I

to adopt the hearing examiner's recommendations and remanded the matter with direction that the hearing examiner issue findings of fact and conclusions of law that would support approval of Rayburn Country's rates.

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Comments at 20-27.

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os by an amount equal.to the difference between the cost.that would have1been: incurred under'

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TU Electric's. wholesale rate.

According to Ra alternative' economy yburn Country,.having energy arrangements creates competition among the power suppliers

.I and provides alternative sources of power in the event of curtailments because of.

transmission limitations or other. reasons.

Unfortunately. Rayburn Country will orobably not be'able to neactiate additional = economy enerav arrangements, because TU Electric has.

refused to enter into any more schedulina-acent acreements for' economy enerav.

Attachment'B at 8-9.(emphasis supplied).

TUEC's arrangements with Rayburn Country (and Tex-La) make

.j it clear that there is no real impediment to TUEC' permitting Cap.

Rock to purchase economy energy from HL&P.

The' cooperation required of TUEC is minimal.

With the exception of Rayburn i

Country's small allocation of preference ~ power from the Southwestern Power Administration ("SWPA"),R/ the characteristics.

of Rayburn' Country and Cap Rock.as customers of TUEC are virtually identical.

Both purchase power from TUEC under that company's full requirements rate (Cap Rock under contract'and Rayburn Country, whose full requirements contract with'TUEC lapsed in 1987, under TUEC's full requirements tariff) and neither has generation of its own at this time.

Yet TUEC has-denied Cap Rock the savings and competitive advantages of lower H/

SWPA is a federal power marketing agency.

The SWPA power is delivered to TUEC, which in turn provides a similar amount of power to Rayburn Country under rates that purportedly reflect the economic benefit of the SWPA power.

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cost-economy energy from HL&P and others, even though the.Rayburn j

Country economy energy transaction shows that such mutually beneficial transactions can readily be. facilitated and are in the overall public interest.

Now it appears that TUEC is increasing-its anticompetitive conduct.by refusing to permit Rayburn Country to engage in further economy energy purchase.

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III. THE MARCH 2, 1989 LETTER FROM PANDA.

Cap Rock has sought for some time to conclude the purchase of electric. generating capacity from Panda.

Such a purchase is dependent upon' Panda being provided appropriate transmission and coordination services by TUEC if the generating plant is located outside Cap Rock's service territory and is, regardless of the location of the generating plant, dependent upon-Cap Rock 4

obtaining reasonable partial requirements and back-up services from TUEC.

Cap Rock demonstrated that TUEC has refused to provide Cap Rock with the rates,-terms and conditions under which the company would sell Cap Rock the services essential to such a capacity purchase by Cap Rock, thus effectively preventing Cap Rock from negotiating such a purchase from Panda or any other

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seller.

Recent correspondence from Panda makes it clear that I

TUEC's refusal provide the rates, terms and conditions of these services has made it impossible for Panda to proceed with the cogeneration project.

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) By letter dated March 2, 1989, Panda informed Cap Rock of the problems it has encountered in attempting to negotiate with TUEC for the services necessary to make a sale to Cap Rock.2/

Panda had a willing supplier of the steam necessary for electric power generation and intended to construct a generating facility that would constitute a Qualifying Facility under the Public Utility Policies Act of 1978 ("PURPA") near Sherman, Texas. Idi at 1.

There are more than adequate TUEC transmission' facilities between that site and Cap Rock's service territory.

At the time, Panda did not feel it was essential to find a steam supplier in the Cap Rock service territory because Panda " felt that necessary arrangements could be made with TU Electric on a sufficiently expeditious basis." Id2 Subsequent TUEC ccnduct, however, led Panda to conclude that it can expect no cooperation from TUEC (Idz):

Our perception stems from delavs which we have encountered (and which we anticipate) and from the extremely hostile attitude which TU Electric has evidenced toward Panda.

For examole, it took a period of some months to obtain an initial. response to our first

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inquiry regarding coordination servic s - a longer period than we thought necessa:. and when given, it showed absolutoly no incent to furnish or even to negotiate any arrangements beyond those clearly required by law or l

regulation (i.e., wheeling).

Further, by letter of October 20, 1988 (from TU Electric i

to C. H. Guernsey & Company), TU Electric indicated (in view of the NRC complaint filed by Cap Rock) that "further discussions l

between us at thin time will not be t

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Attachment C.

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3 f fruitful." ' obviously, there is no possibility of resolving the coordination L

services dilema (sic] with TU Electric at the present time.

L Panda Chairman Robert W.' Carter concluded.that, in light of those

. events and the' extreme animus toward Panda exhibited by TUEC in its answer before this Commission, "there is simply no realistic chance of dealing with TU Electric." Idr at 2.

TUEC's strategy with respect to Panda has been to agree to i

provide wheeling service-(which it is obligated to provide a 1

Qualifying. Facility under PUCT regulations), but to refuse to provide the rates, terms and conditions of essential coordination-services.

Transmission and coordination services are equally essential to the viability of the transaction; the absence of either service will kill the deal.

TUEC is well aware of this

-l obvious fact and has apparently exercised its monopoly. power over coordination services to frustrate Panda's sale to Cap Rock, while at the same time it is exercising its monopoly power over partial requirements and back-up' services to prevent Cap Rock from moving forward with its efforts to acquire generation resources.

TUEC'is more than able to provide the services requested by Cap Rock.

TUEC has not suggested that it can not provide these services, only that it will not do so.

IV.

CONCLUSION The attached hearing examiner reports and correspondence provide further support for the relief sought by Cap Rock.

For

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! i that reason, Cap Rock asks that the Commission accept this~

supplement to Cap Rock's Comments and Reply Comments, and that it j

be made a part of the record in this docket.

I Respectfully submitted, By:

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-A f' Robert A.

O'Neil l

f John Michael Adragna Attorneys For Cap Rock Electric Cooperative, Inc.

I Miller, Balis & O'Neil, P.C.

1101 Fourteenth Street, N.W.

Suite 1400 Washington, D.C.

20005 (202) 789-1450 March 10, 1989

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January 30, 1989 Blu Cassin c-

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Chairman Greytok-

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!i Commissioner Cassin-

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Re:

Docket No. 8231--Application of Houston Lighting & Power Company for-Approval of Economy Energy Sales Contracts and Generic Tariff q

Dear Madam or Sir:

Please find enclosed a copy of my Examiner.'s Report and proposed Final Order in the referenced docket.

This case will_bo. considered by the Commission at an open meeting scheduled to begin at. 9:00 a.m.

on-Wednesday, February 22, _1989, at the Commission offices at 7800 Shoal Creek Boulevard, l

Austin, Texas.

Any. exceptions to_the Examiner's Report must be filed in: writing by 4:00 p.m., Tuesday, February 7,1989.

Any replies to exceptions must be filed by 4:00 p.m., Tuesday, February 14, 1989.

An original and ten copies must be filed with the Comission Filing Clerk, and a copy' must be served upon the Commission General-Counsel and every other party of record.

Commission Procedural Rule 21.143 requires requests for oral argument to be made in writing, filed with the Commission, and served on all parties of.

record by Wednesday, February 15,.1989.

Oral argument is heard at the discretion of the Commission.

If a request. for oral argument is made' in this j

docket, parties may call Lisa Ruedas at 512/458 0266 after 9:00 a.m. the day i

before the open meeting. to; learn if oral argument will be allowed by the -

1 Commissioners.

If. oral ^ argument is allowed at the open meeting, the Commission may delay their decision until the following day.

Parties should also keep in mind that even if a request for oral argument is not granted, the Commissioners may still have questions they wish the parties to address.

Summary of Examiner's Reoort l

On June 21, 1988,- Houston Lighting & Power Company (HL&P) filed three agreements providing for the s ale of. economy energy to three electric ~

i cooperatives.

The agreements were approved on an interim basis in August and the examiner is recommending final approval.

There is no opposition to this l

proposal.

l During the course of this proceeding, HL&P also filed a generic tariff which would enable it to legally participate in the economy energy market developed by ERCOT (Electric. Reliability Council of Texas).

Although th.

economy energy market has been operating in Texas for a number of years, the Commission has not formally regulated the market.

The generic tariff being

s.:

DOCKET NO. 8231 APPLICATION OF HOUSTON LIGHTING 6

PUBLIC UTILITY CottilSSION a

AND POWER CCMPANY FOR APPROVAL OF ECONOMY ENERGY SALES. CONTRACTS 9

OF-TEXAS AND GENERIC TARIFF s

EXAMINER'S REPORT I.

Procedural History On June 21, 1988, Houston Lighting & Power Company. (HL&P) filed three

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agreements providing for the sale of economy energy to three electric utilities -

Tex-La El ectric Cooperative, Inc.

(Tex-La),

Rayburn Country Electric Cooperr.ti ve, Inc. (Rayburn Country), and Cap Rock Electric Cooperative, Inc.

~(Cap Rock).

The agreements were filed ' pursuant to section 32 of the Public l

Utility Regulatory Act (PURA), Tex. Rev. Civ. Stat. Ann. art. 1446c (Vernon Supp. 1988).

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A prehearing ' conference was held on July 14, 1988, with Administrative Law Judge Charles Smaistria presiding.

Appearances were made on behalf of HL&P and the Commission. staff.

It was decided at the prehearing conference that hearings on.the merits would be scheduled for consideration of-both interim and final approval of the three agreements, and that the company would file a generic tariff for economy energy sales which would be considered for approval at the final hearing on the merits.

The three economy energy agreements initially filed were granted interim approval by ALJ Smaistria on August 3,1988, following an interim hearing and stipulation of all the parties (HL&P, Tex-La, Rayburn Country, and the Commission's general counsel).

1 HL&P filed a generic tariff on August 29, 1988.

Implementation of the proposed tariff change was suspended for 150 days beyond the otherwise effective date of October 3,1988, to March 2,1989, pursuant to P.U.C. SUBST..

R. 23.24(i).

On September 20, 1988, this case was reassigned to the undersigned hearings examiner.

Intervention was granted to Occidental Chemical Corporation

DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 2 l

(Occidental), Dow Chemical Company (Dow) and CoGen - Lyondell, Inc. (CoGen) on l

September 22, 1988. The hearing on the merits was convened on October 31, 1988.

Appearances were entered on behalf of all the parties previously mentioned, as j

well as the Office of Public Utility Counsel (OPC).

(The OPC represe5tative left shortly after the hearing was convened and did not reappear.)

All of the parties except CoGen and OPC entered into a written stipulation which settled I

all disputed issues.

(The stipulation is attached to this report as " Attach-ment No.

1."

The exhibits are; not included due to their bulk.) _

Because an agreement with all the parties could not be reached, a full hearing on the l

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merits was conducted.

The hearing was adjourned on November 2, 1988.

Post-t hearing briefs were filed by all parties except OPC, which did not participate in the hearing anyway.

Reply briefs were filed by HL&P, Rayburn Country, and l

CoGen.

II.

Jurisdiction l

HL&P, Tex-La, Rayburn Country, and Cap Rock are public utilities as the

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term is defined in section 3(c) of PURA.

The Commission has jurisdiction and authority in this proceeding pursuant to sections 16(a), 17(e), 32 and 37 of PURA.

III.

Background and Overview Economy energy transactions involve the off-system sale and purchase of energy between utilities at prices that are economically efficient for both the seller and the purchaser.

The transactions occur voluntarily and on a short-term basis when one utility can generate, or otherwise acquire, energy at an incremental cost that is less than the incremental cost of production, or acquisition, of another utility.

Through the testimony of one of its witnesses, Charles F.

Ham, HL&P demonstrated that economy energy sales have been occurring within Texas for over 25 years, and that the Commission has been l

encouraging economy energy sales since 1977.

(HL&P Exh. No. 5, Ham Testimony.)

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i DOCKET NO. 8231 EXAMINER'S REPORT e

PAGE NO. 3 I

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Perhaps because of the the short-term nature of these transactions, they i

have gone virtually unregulated by the Commission.

Utilities in Texas routinely negotiate transactions over a short time frame for the sale and purchase of short-term firm and non-firm energy.

Under such conditions, regulation has apparently been deemed unfeasible.

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On December 17, 1987, the Comission affirmed, on appeal, Examiner's Order No.13 in Docket No. 7361, Filino by Rayburn Country Electric Cooperative. Inc.

j of initial Rates and Inouiry into Rates Pursuant to Section 42.

In part, Order I

No.13 held that the member coops of'Rayburn Country could not use their PCRF l

(purchased cost recovery factor) clauses to automatically pass through varia-q tions in purchased power costs resulting from the rates charged by Rayburn

!i Country.

This was because Rayburn Country's rates had not been approved by the Comission after a hearing or accepted by a federal regulatory authority, and therefore, under ~section 43(g)(4)(A) -of PURA, the member coops' PCRF clauses would not be applicable to increases or decreases in the cost of electricity purchased from Rayburn Country.

t Rayburn Country began purchasing economy energy from HL&P in April of 1987.

For the period from April of 1987 through August of 1988, receipts of economy energy from HL&P accounted for 63.7 percent of Rayburn Country's total sales of energy to its customers, and allowed the cooperative to save 55,356,200 in purchased power expense.

Yet, because the economy energy f

transactions had not been approved by the Commission after a hearing or

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accepted by a federal regulatory authority, neither Rayburn Country nor its member coops could pass the saving through to their own customers until August 3, 1988, when interim approval, after a hearing, was granted in this docket to Rayburn Country's economy energy agreement with HL&P.

I In light of section 43(g)(4)(A) of PURA and the Commission's affirmance of Order No.13 in Docket No. 7361, it would seem that approval of economy energy transactions after a hearing is necessary in order to enable purchasing utilities [ eligible under P.U.C.

SUBST.

R.

23.23(b)(3)] to pass through the costs / savings that they incur from the transactions.

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i DOCKET NO.2823 n EXAMINER'S REPORT 1

PAGE N0e 4

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.i Section 31 of PURA makes it unlawful for. any utility to charge, collect, or receive any. rate that is not provided' for under the' authority of. PURA.

To the extent,that utilities have been selling economy energy :in Texas without prior q

Comission approval of the rates charged, it appears that they have been7doing j

so illegally.

In fairness to the utilities, the Comissionihas long been aware of the industry practice of engaging in economy energy transactions and, as was j

stated. earlier, has encouraged.the practice.-

The Comission seems to have-acquiesced with the' industry practice concerning economy tenergy transactions insomuch as the Comission has not formally regulated such transactions.

Because of the nature of these transact' ions, prior approval of specific transactions is not feasible.

Having reviewed the application of HL&P and the l.!

. evidence developed at the hearing, the examiner suspects that. the best course of action. to deal with this industry-wide situation. would be to encourage utilities which sell economy energy in Texas file generic tariffs, similar to the one proposed in the partial stipulation admitted at the hearing in 'this docket.

Those utilities with approved tariffs would be able to legally. sell economy energy in Texas in accordance with PURA.

Furthermore, utilities with PCRF clauses would be able to pass through to their customers any costs / savings realized-from purchases of economy energy from utilities with approved t a ri f f s '.

Industry-wide action cannot properly be taken in this docket, R

however.

Therefore, the examiner recomends that the Comission have its staff-review the situation and recomend a proposal.

IV.

Three Cooperative Agreements i

Before discussing the proposed generic tariff, the examiner will briefly discuss HL&P's agreements with the three cooperatives.

Each of these agreements 'was approved in August on an interim basis, and no party has any opposition to final approval of these three agreements.

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b' l',. ) h t DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 5-l

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The terms of the three agreements are almost identical, although the maximum level of MWH' delivery that HL&P will offer monthly differs for the three cooperatives.

(igg Joint Exh. No.

1.

Final Stipulation, Exhs. A-1 through A-3.)

Under the agreements, HL&P may quote a price per MWH to the cooperatives each month, and the cooperatives have the option of accepting or rejecting the offer.

The prices remain fixed' for the duration of any calendar; j

month in which the cooperatives-elect to receive deliveries.

The cooperatives are responsible for maintaining. wheeling arrangements for the transfer.of the~

energy from HL&P's system to their own.

Additionally, the cooperatives are s

responsible for retaining scheduling agreements with Texas Utilities-Electric-Company which maintains the control' area for each of the cooperatives.

The - evidence-shows that past. economy energy sales to Rayburn Country and Tex-La have been economically efficient.

HL&P has received ma'rginal revenues from the sales that have been well above its marginal costs.

Rayburn Country was the only one of the three cooperatives that presented evidence of its savings resulting from the purchase of economy energy from HL&P.

Rayburn

.i Country reduced its purchased power expense by $5,356,200, or 7.1 percent, j

during the period from April of 1987 through August of 1988 as a result' of l

purchases from HL&P.

(Rayburn Exh. No.1, Moore Testimony, p. 5.)

Although l

there is no direct evidence of the savings experienced by the other two cooperatives, if one merely assumes that Tex-La and Cap Rock behaved rationally in making their purchase decisions (that is, they purchased energy from HL&P

.only when the price was lower than that of the next source available to them),

it follows that they too were ablo to reduce their purchased power expense by buying economy energy from HL&P.

Staff rate analyst George Mentrup reviewed the three agreements and recommended approval.

(General Counsel Exh. No.

1-A, Hentrup Supplemental Testimony, p. 2.)

The evidence shows that the agreements are beneficial to the ratepayers of all four utilities involved insomuch as the savings experienced by each utility can be expected to lower the cost for service of each utility.

The record also reflects HL&P's intention of proposing, in its next rate case l

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DOCKET NO. 8231 l

EXAMINER'S REPORT l

PAGE NO. 6 (which was filed short'y after the hearing on the merits in this case was adjourned), that all revenues from its economy energy sales be booked to reconcilable fuel accounts and be subject to a fuel reconciliation proceeding.

Mr. Mentrup testified that if HL&P were to make sales for less than its 1

marginal cost, the Commission could disallow the expenses associated with-those sales.

For these reasons, the examiner recommends that final approval be'given to these agreements.

V.

Generic Tariff The. three agreements with the cooperatives discussed in the previous section are based upon a _ type of economy energy transaction known as Economy B.

Guidelines for this type of transaction were first adopted by the Electric Reliability Council of Texas (ERCOT) in 1985.

(HL&P Exh. No. 5, Ham Testimony, p.

5.)

Economy B sales are energy sales that are firm for each twenty-four hour period of sale.

If approved, the generic tariff proposed in the partial stipulation would permit HL&P to legally offer Economy B energy, as well as the other types of economy energy services provided for in ERCOT guidelines.

Other types of economy energy services specified in the proposed tariff are Economy A and Broker, and Economy C.

Economy A and Broker energy are hour to hour interruptible sales that are based upon oral agreements between utilities and take place less than twenty-four hours at a time.

Economy C energy sales are firm for more than four but less than twenty-four hours.

(HL&P Exh. No. 1, Standish Testimony,

p. 2; Joint Exh. No. 1, Final Stipulation, Exh. B-1.)

The tariff, which is attached to this report as " Attachment No.

2",

does not specifically identify any other type of service, but does state that sales are not limited to the services that are specified.

(See Attachment No. 2, EES tariff, p.

1, section titled " Billing".)

Sales must be per ERCOT guidelines, however, and all economy energy sold under the tariff must comport with the i

restrictions and limitations therein.

For reasons to follow, the examiner recommends that the stipulation and the proposed generic tariff be adopted.

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t DOCKET NO. 8231 EXAMINER'S REPORT I

PAGE NO.:7 l

A.

Pricino j

The tariff specifies a price floor for each of the economy energy services.

Services must be priced to cover HL&P's projected marginal fuel cost, adjusted 1

for line losses of one percent when averaged over the time period of the transaction.

Additionally, Economy B and C prices must include a margin of not

.l less than 1.2 milla per kwh to cover incremental variable O&M (operation and g

I maintenance) cost.

Actual. prices will result from agreements. between HL&P and the purchasing utility.

The evidence shows that the economy energy market is competitive,.with West Texas Utilities being the major competitor of HL&P.

(10/31/88 HOM Tr.,. pp. 72-73.)'

Because the market is competitive, it will serveito set effective ceilings on the prices at which HL&P may successfully j

offer these services.

HL&P witness Thomas Standish, manager of HL&P's rate and economic research department, testified that in response to the market the l

company.is currently seeking margins of 10 to 15 percent on its Economy A sales, and margins of 10 to 25 percent on its Economy B sales.

(10/31/88 HCM Tr., pp. 71-72.)

In testimony, both Messrs. Standish and Mentrup explained why the price l

floor proposed in the tariff is appropriate.

In order to make a profit on the sales, HL&P would have to sell its economy energy at a price greater than its extra production costs.

In economic terms, this extra production cost is referred t!o as short-run incremental cost (also commonly referred to as marginal cost) and includes the additional fuel cost, line losses, and 0&M cost associated with the production of the additional energy sold.

The proposed t

tariff is designed to cover each of these components of incremental cost, although the 1.2 mills per kwh does not apply to Economy A and Broker sales because any incremental 0&M costs associated with this service is de minimis.

The major component of short-run incremental production cost for economy energy is, of course, the fuel cost.

HL&P projects incremental fuel cost hourly'through the use of its computerized production dispatch model, GENSOM 0.

0 DOCXET NO. 8231 EXAMINER'S REPORT PAGE NO. 8 Production dispatch models are commonly used by major electric utilities in -

Texas to project incremental cost for economy energy sales.

(HL&P Exh. No. 6, p.

5; 10/31/88 HOM Tr.,

p.

521.)

Using GENSOM D to project the hourly 1

incremental fuel cost associated with an economy energy transaction should result in the most accurate projection possible because GENSOM D is the same program that' determines, hourly, the actual dispatch of units within 'HL&P's.

generating system.

(10/31/88 HOM Tr., pp. 41, 307.)

HL&P will add a one percent. (1%)

loss factor above the calculated incremental fuel cost to offset. for possible energy losses on its lines

.resulting from expanded use of its transmission system for economy energy sales.

In' HL&P's last rate case, Docket No. 6765, the Commission found that HL&P's average line loss was.08%.

The evidence shows that a 1 percent '(1%)

l additive is - sufficient to cover line losses associated with economy energy sales.

(10/31/88 HOM Tr., p. 243; HL&P_Exh. No. 6, Meyer Testimony, pp. 7-8.)

The generic tariff also requires HL&P to include a 1.2 mills per kwh additive in the calculation of 'short-run incremental cost for Economy 8 and C energy to cover incremental variable O&M caense.

The evidence shows that an additive of 1.2 mills /kwh is more than sufficient to cover incremental variable

]

0&M expense.

HL&P witness Thomas Standisn testified that, in his opinion, incremental O&M cost for these sales is zero because the sales can be used to reduce cycling (the starting and stopping of generating units in response to changes in sys' tem load) and thereby lower incremental 0&M expense.

(HL&P 1

Exh. No.

1, Standish Testimony, p.

5; 10/31/88 HOM Tc., pp. 89-90, 240 241.)

-Staff analyst George Mentrup did not disp. e th possibility, but since Mr.

Standish had not offered any quantifiaole :. aport for his opinion, order to cover the 1

Mr. Mentrup recommended an additive of 1 millikwh possibility of positive incremental variable O&M cor (General Counsel Exh.

No.

1, Mentrup Testimony, p.

9.)

On cross-examin; _.

3, CoGen witness Thomas Edmonds admitted that an incremental O&h expen:

of

.88 mil'. s/kwh was reasonable.

(10/31/88 H0H Tr., pp. 374-377.)

The a-

,ce variable ohm expense r

r found reasonable in the company's last rate case,

^et No. 6765, was 1.2

_,ce w -

_ _ ~ ~

~

- ~

~a a

o :.

I L

1 i

4 DOCXET NO. 8231

)

l EXAMINER'S. REPORT I

PAGE NO. 9 The additive for 0&M expense does not apply to Economy A and Broker sales.

Economy A and Broker energy are sold out of on-line spinning reserves which are in excess of the utility's spinning reserve obligation.

Thus, no additional units are committed, nor does additional cycling of units occur, in order to make these sales.

Incremental O&M cost is, therefore, de minimis.

B.

Purchaser Obligations Purchasers of economy energy under the generic tariff must have firm purchase power arrangements in place or capacity available as required by ERCOT guidelines, but not necessarily on lin6, to back up this service.

'(Sit Attachment No.

2, section titled

" Services Provided".)

Additionally, purchasers are responsible for maintaining scheduling and wheeling arrangements necessary to complete deliveries.

TU Electric currently provides these services to Rayburn Country and Tex-La in connection with the existing agreements which have been given interim approval.

(Rayburn Exh. No. 1, Moore Testimony, p. 4; 10/31/88 HOM Tr., pp. 102,292.)

4 Per ERCOT operating guidelines, service under the tariff may be terminated if the purchasing utility fails to maintain back-up capacity.

Rayburn witness Michael Moore identified one instance when such a termination occurred.

Mr. Moore testified that when a fire in April of 1987 took two of TV Electric's generating units out of service, economy energy deliveries from HL&P to Rayburn Country were terminated because Rayburn Country no longer had back-up capacity available.

(10/31/88 HOM Tr., pp. 292-293.)

The proposed generic tariff would continue HL&P's participation in Broker, Economy A,

Economy B,

and Economy C transactions as they are currently

)

conducted under the auspices of the ERCOT organization.

Contract periods under the proposed generic tariff are not to exceed twenty-one (21) days.

Agreements i

with contract periods greater than twenty-one (21) days (such as the agreements with the three cooperatives) must be submitted to the Commission for review and approval.

e,-

3 s'

I DOCXET NO. 8231 EXAMlHER'S-REPORT l

PAGE NO.-10 h

VI.

ERCOT Practices 1

a The three cooperative agreements, as well as the-proposed generic t'ariff, l

are designed to comport with the industry practices concerning economy ' energy as. developed by ERCOT members.

Approval of agreements and generic tariffs, such as the ones proposed here, should ' enable economy energy transactions to continue as they have for a number of years under ERCOT guidelines.

Atsummary of some' of the testimony-which describes. the existing ERCOT practices; should

~

therefore be useful.

.e At the hearing, Mr. Meyer ' described how Economy A and Broker transactions are handled.

' Economy A and Broker sales are non-firm hourly sales that are

-i interruptible by the buye'r or the seller at any time upon notice.

The transactions are handled through ' ERCOT, which acts as an agent for. each of the

[

participants.

Any utility wishing to participate in the brokerage program must i

submit buy and sell bids with ERCOT five minutes before the hour.

ERC0T l

matches - buyers and sellers to maximize split savings for the each buyer and seller.

Transactions are then immediately finalized by ERCOT without further input from the individual utilities.

The program is designed to match buyers j

and sellers to maximize savings for the participants and the industry as a.

j whole.

Mr. Meyer estimates that an entire transaction takes less than five minutes to complete.

(10/31/88 HOM Tr., pp. 496, 506-509.)

Because these transactions 'do' occur within such a short time frame it is obvious that prior approval of each specific transaction is not feasible.

Requiring prior Commission approval of the specific rate charged for economy energy sold under this system would be unworkable and would destroy a program which has served j

the ERCOT utilities well since at least 1985.

(HL&P Exh. No. 5, Ham Testimony,

p. 6.)

Mr.

Meyer also described the mechanics of an Econcmy B transaction.

Economy B sales are energy sales that are firm for twenty-four hours.

Economy lB transactions are used by utilities for daily planning purposes.

As ERCOT j

4 DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 11 members develop their daily generation plans, they may utilize their production dispatch models to look at such things as projected system loads, projected incremental production costs, and projected incremental costs of producing additional energy for sale in the economy energy market.

They may then decide i

whether to submit a bid to ERCOT for the sale of firm energy the following day.

Submitted bids are posted on the ERCOT " bulletin board" for transactions to be completed the following day.

Utilities may then review the bulletin board and decide whether to purchase.

If they decide to purchase, wheeling arrangements are made, and wii.h the help of ERCOT personnel, the transaction is usually finalized in about an hour.

A There is no testimony describing the Economy C transactions, but they are l

presumably handled similarly to the Economy B transactions since Economy C is essentially equivalent to Economy B, except that the duration of the Economy C sale is for less than 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br />.

l ERCOT began reporting total savings figures for the electric industry as a result of these transactions in May of 1987.

For the first fifteen months, over 515 million dollars has been saved, for an average of over $1 million per j

month.

(HL&P Exn. No. 5, Ham Testimony, p. 6.)

At present, HL&P accounts for about thirty percent (307.) of the ERCOT economy energy martet.

(HL&P Exh.

{

No. 6, Meyer Testimony, p. 11.)

VII.

CoGen Lyondell's Position 1

f As stated earlier, OPC and CoGen are the only parties that have not signed I

l the stipulation.

Although OPC intervened, the agency has not participated in the case.

At the hearing, counsel for CoGen stated for the record that CoGen i

does not oppose final approval of the three cooperative agreements, but CoGen i

does oppose approval of the generic tariff proposed in the stipulation of the other parties.

The examiner has carefully considered the matters raised by

)

CoGen during the three-day hearing and in its post-hearing briefs, and is l

nevertheless persuaded that the evidence shows that approval of the proposed l

k x

8, DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 12 j

j i

generic tariff is in the public interest and should be approved.

The examiner will discuss the arguments made by CoGen and explain why she believes the i

arguments are without merit and that HL&P has met its burden of proof in this.

I I

case.

~

A.

Recovery of Wheelino Costs l

CoGen argues that the proposed tariff should be denied because it will not i

recover any revenues from purchasing utilities for the use of HL&P's transmis-sion system.

The evidence shows, however, that it is proper to price economy f

energy at short-run incremental

cost, and that there are no significant incremental transmission costs associated with the sale of economy energy.

As

' described earlier, the incremental O&M costs associated with economy energy j

sales are related to generation, not transmission, i

Staff analyst George 'Mentrup explained why it is inappropriate to design

{

the minimum rate for these economy energy transactions to, include the recovery of embedded costs.

Embedded costs are investment costs that are usually fixed and which have already been incurred - and allocated to the native system rate-payers.

HL&P's generation and transmission system was built, and embedded l

costs incurred, for the purpose of providing service to HL&P's native custo-mers.-

The presence or absence of economy energy sales in no way alters the size or cost of the existing system.

Those costs are " sunk" costs and are not properly consid'ered for recovery in economy energy sales.

(General Counsel Exh. No. 1, Mentrup Testimony, pp. 7-8.)

Because economy energy sales are sales of opportunity, whereby the company may utilize its e.xisting spare capacity and available transmission to sell off-system energy at a profit (marginal revenue above marginal cost), the company has in the past used the extra revenue derived from economy energy L

sales to reduce the fixed cost burden of the native ratepayers.

The benefit to l

HL&P ratepayers will continue in the future.

As explained earlier, the company intends, with Commission approval, to book the revenues from these transactions

)

Ij DOCKET NO.'8231 EXAMINER'S REPORT PAGE NO._13

,r ~ &

to reconcilable fuel accounts.

Thus, the savings can be used to offset known-

.or reasonably predictable fuel costs allocated to HL&P ratepayers.

For these reasons, the' examiner finds that CoGen's argument is misplaced, and that the only transmission costs that the generic tariff should' be designed to recover are incremental transmission costs, which the evidence shows are Zero.

B.

O&M Cost Recoverv 4

CoGen also argues that HL&P has not shown that the proposed generic tariff will recover all O&M costs to be incurred with the sale of economy energy, and a

that the tariff should be denied for this reason.

. As was stated earlier, the 1.2 mills per kwh additive for Economy B.and C 1

is areater than the figures supported by the evidence.for recovery of l

incremental O&M.

The evidence simply does not support CoGen's assertion that there will be an underrecovery of O&M costs.

CoGen's own witness testified on cross-examination that a figure of.88 mills /kwh would be a reasonable additive for 0&M cost recovery.

The ' examiner finds CoGen's challenge to be without.

merit.

C.

Incremental Fuel Cost Recoverv

.CoGen also argues that the proposed generic tariff should be denied because of its reliance on GENSOM 0 to calculate incremental fuel costs.

'HL&P's

, witnesses, as well as the staff analyst, testified that use of GENSOM D is proper because the closer the incremental costing model reflects the company's dispatch behavior, the closer the projection of incremental costs will be to true incremental costs.

(10/31/88 HOM Tr., p. 307.)

The evidence shows that i

use of dispatch models for projecting incremental fuel costs is common through-

~ out the electric industry.

.J

4.,

i.'

Q-DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 14 1

j e

CoGen asserts that the GENSOM program is complex, and therefore cannot be

]

successfully audited.

(CoGen Brief, p.

14.)

The evidence, however, will not f

support the conclusion that the use of GENSOM D for purposes of this tariff 1

cannot be successfully audited.

HL&P has been using the program for some -time 1

now, and its use has not been challenged in previous rate cases or fuel recon-ciliation proceedings.

.(10/31/88 HOM Tr., pp. 384-385, 442-443.)

Mr. Mentrup expressed confidence in the Commission staff's ability to accurately determine f

reconcilable fuel cost.

(10/31/88 HOM Tr.,

p.

319.)

Evidence concerning HL&P's use of.the. GENSOM program to determine its incremental fuel cost would certainly be relevant and discoverable in any rate case or fuel reconciliation proceeding.

For these reasons, the examiner concludes that use of the program is auditable and rejects CoGen's argument.

j i

D.

Discriminatory / Anti-Competitive Issues Finally, CoGen argues that the proposed tariff should be denied because it is discriminatory and anti-competitive in nature.

CoGen correctly points out that the tariff sets only a price floor and that the actual price charged to utilities purchasing economy energy from HL&P will likely vary with each transaction.

CoGen is incorrect, however, in its conclusion that this fact demonstrates that the proposed tariff does not satisfy section 38 of PURA, which requires that rates not be unreasonably preferential, prejudicial, or discriminatory.

There is no evidence to show that a utility will be economical-ly disadvantage'd, or otherwise harmed, either from its own purchase of economy i,

energy from HL&P, or from another utility's purchase of economy energy from HL&P.

Indeed, these transactions were described by some witnesses as a " win-win" situation because not only does HL&P sell at a profit, but purchasing

}

utilities buy at a price lower than the cost of their next available source of I

energy.

Section 38 of PURA is designed to protect consumers against discriminatory l

rates of a utility with monopoly power.

HL&P, however, does not have monopoly power in the economy energy market.

Rates charged to purchasers of economy

1 DOCKET NO. 8231 4

EXAMINER'S REPORT PAGE NO. 15 energy will be voluntary, as well as responsive to mar.ket pressures.

The.

differences that will result among the prices p,_id by purchasing utilities I

under this tariff will result not from any superior bargaining power or leverage on the' part _of HL&P, but rather from the - competitive pressures that exist in the economy. energy market.

1 f

For the reasons just given, the examiner does not believe that the-existence of a price floor within a tariff -designed for a competitive market l

allows for unequal ' treatment ' of customers by the utility operating under the -

tariff.

However, even if the tariff does allow for unequal treatment of d

customers, the examiner believes that allowing for such unequal treatment does not constitute unreasonable, or unlawful, discrimination.

The courts have held that unequal treatment of customers is not unlawful if there are reasonable public policy. reasons for it.

Texas Alarm & Sional Assoc.

v.

Public Utility l

v.

Public Utility

' Commission, 603 SW2d 766 (Tex.1980); Amtel Communications.

Commission, 687 SW2d 95 (Tex. App. -- Austin 1985, no writ).

The preservation and legalization of HL&P's participation in an. economy energy. market that is saving money for ali participating utilities is surely a reasonable public policy objective.

CoGen also argues that the proposed tariff violates sections 45 and 47 of PURA.

Section 45 prohibits utilities from establishing or maintaining any unreasonable differences as to rates or services' between localities or classes of s e rvi c e'.

Section 47 prohibits utilities from discriminating against competitors, or engaging in any other practices that tend to restrict or impair

cmpetition.

l Mr.

Mentrup testified that pricing above short-run incremental cost

'scludes anti-competitive pricing (pricing below cost to win sales away from mpetitors), as well as cross-subsidization (pricing services to one group of astomers below cost and " making up the difference" by over-pricing another l

aroup of customers).

(General Counsel Exh No.1, Mentrup Testimony, pp. 6-8.)'

13 evidence has shown that the price floors within the tariff are designed to

im i

L DOCKET NO. 8231 l

EXAMINER'S REPORT

'I oAGE NO. 16 I

I 1

ensure that each of the economy energy services is priced above short-run -

incremental cost.

Thus, the' tariff will prevent the possibility of violations of sections 45 and 47 through pricing.

j As was discussed on' page 12 of this report, CoGen has objected to the ' fact that the tariff is not designed to r2 cover wheeling costs from purchasing utilities.

CoGen includes this objection in its discrimination argument.

CoGen argues that since qualifying facilities (QFs) must pay wheeling charges to HL&P if they transport electricity over HL&P's lines to make an economy energy-type sale, HL&P should have to include its own wheeling cost in the j

price it charges for economy energy.

CoGen argues that for HL&P to charge QFs for the use of its transmission system, while not charging itself, constitutes discrimination.

This argument does not make sense.

There are fundamental differences between the two situations.

The 'QFs are competitors of 'HL&P and 1

may or may not be native system custom.ers of HL&P.

Why should HL&P offer its competitors free use of its system which was build for and paid by HL&P's native system customers?

When HL&P makes an economy energy sale, however, it is doing so with the use of spare generation and transmission capacity, and it is doing so with the objective of earning revenues that can be used to offset embedded costs previously incurred.

Why should HL&P risk the loss of a profitable sale by including non-incremental costs in the price?

Anti-competitive pricing is, of course, not the only means by 'which a utility might v'iolate sections 45 and 47 of PURA.

Discriminatory practices are also a concern.

Several of the interveners in this docket were concerned that 1

the generic tariff might facilitate such practices, but all except CoGen were satisfied that the revised tariff and stipulation adequately addressed those j

concerns.

In brief, Dow Chemical explained why it is satisfied that the proposed tariff will not permit HL&P to " unduly affect competition."

Originally, Dow was concerned that the tariff would create " backdoor" capacity contracts that would unfairly disadvantage cogenerators who compete for such capacity sales.

The tariff provision that requires purchasers to have l

,r 1

1 DOCKET NO.,8231 1

EXAMINER'S REPORT

]

PAGE NO. 17 1

l firm purchased power, or capacity, in place to. back-up the sale, as well.-the provision that' HL&P will not be obligated to provide finn energy for more.than; j a

twenty-four hour period, assures' Dow -that there will be no " backdoor" capacity - agreements.

Dow was also satisfied by the requirement, added to the' 1

final version of the proposed tariff, that contract periods' may not exceed twenty-one -(21) days, and that Commission approval must be obtained for l

additional contracts of five days or more when the additional contract is made within ninety (90) days from the beginning of. the 21 day contract.

Dow is.

confident that.this will. give'any aggrieved party an opportunity to demonstrate' j

that HL&P is, in fact, using the tariff a's a means.of making capacity sales.

Finally, Dow is reassured by the testimony of Mr. Standish that HL&P will not-include economy energy sales in the calculation' of its capacity reserve margins.

(HL&P Exh. No. 2, Standish Testimony, p. 4.)

I Dow's second concern was that HL&P would give preference to economy energy sales over tiheeling' agreements with QFs.

The stipulating parties-agreed,.

however, to include the following language in their stipulation:

It is -further understood and agreed that no economy energy' sales are or shall-be utilized by the Company in evaluating the available capacity on its transmission system for planning purposes.

Further-1 more, off-system economy energy sales shall not be made if the effect of such sales is to limit the availability of transmission capacity l

for fi rm capacity -transfer by cogenerators when ACW (available capacity wheeling) or PCW (planned capacity wheeling) service has been scheduled.

(Stipulation, p. 2; emphasis in original.)

Concerning the treatment of new wheeling agreemerrts, Mr. Standish testified that in deciding whether to make an economy energy sale or to sell wheeling to i

the company will undertake whichever transaction returns the i

cogenerators e greater amount of revenues to its ratepayers.

That is, if the company deter-mines that more revenues can be collected from selling wheeling

- and allowing I

a cogenerator to make the economy sale -- than from HL&P making the economy sale directly, then the company will take the revenue from the wheeling

, transaction.

(HL&P Exh. No. 2, Standish Testimony, p. 12.)

=

DOCKET NO. 8231 l

EXAMINER'S REPORT l

PAGE NO. 18 i

Dow's final concern was that economy energy sales might create an economic incentive to interrupt native interruptible customers, such as Dow, prior to interruption of. economy energy purchasers.

This concern, shared by other interveners, was addressed to the satisfaction of the signatories t'o the stipulation with the adoption of the following language in the stipulation:

HL&P will not interrupt interruptible sales within its retail service area for economic reasons.in order to continue off-system economy energy sales.... [T]he Cbmpany-reserves the right to interrupt any interruptible customer (s) should HL&P determine that the continuation of interruptible sales will threaten to create or : contribute to an emergency situation within the ERCOT system.

Should an emergancy condition arise while the Company is making economy energy sales, the Company will initiate the following actions in order of priority as may be necessary to remedy the emergency:

1) interr'upt Economy A and.

Brokerage sales, 2) attempt to schedule Emergency power, 3) request interruption of Economy B and Economy C sales, and 4) interrupt interruptible sales within the Company's retail service area.

(Stipulation, pp. 5-6.)

I The examiner believes that the safeguards present in the tariff and in the stipulation will prevent the possibility of HL&P engaging in discriminatory or anti-competitive practices.

VIII.

" Rate" Approval The nature of the tariff being recommended here is unusual, at least among electric tariffs, in that no customer's actual rate can be identified on the face of the tariff.

The price floor is identified in the tariff, as well as certain requirements designed to prevent abuse, but because tho tariff gives HL&P price fl exibility to competitively participate in the economy energy market, the actual rates that will be charged cannot be determined from the tariff.

The examiner has already discussed the practical reasons and public policy concerns that justify the existence of such flexibility in the tariff.

She has also concluded that the proposed tariff does not violate sections 38, 45 or 47 of PURA.

A separate legal question is whether there are any legal impediments to approving a generic tariff which identifies a crocess by which a

q 1

DOCXET NO. 8231 EXAMINER'S. REPORT PAGE NO. 19 rate will be determined, rather than identifying the rate (s) within the tariff itself.

The definition of " rate" in PURA is broad.

The term is defined in section '

3(d) as follows-

)

(d) The term " rate," when used in this Act, means and includes every compensation, tarif.f, charge, fare, toll, rental, and classifi-l cation, or any of them' demanded, observed, charged, or collected whether directly or indirectly by any public utility for any service, product, or commodity described in. Subdivision (c) of this section, and any rules, regulations, practices, or contracts affecting any such compensation, tariff, charge, fare, toll, rental or classification.

The Commission is considering, as part of the evidence :in this docket, the l

process by which HL&P -- or ERCOT acting as HL&P's agent -- will set specific I

rates under' the generic tariff.

That process will be subject to retrospective review during any HL&P general rate case or fuel reconciliation proceeding. 'In l'ight of this, the examiner submits that approval of the proposed generic ;

tariff will constitute approval of a practice affecting-the specific rate actually charged under the tariff, and will therefore satisfy PURA's definition of " rate".

There is considerable Commission precedent for approval of tariffs that do not set sp,ecific rates, but which establish a process or methodology for determinincj the actual rates to be charged.

Tariffs for the sale of i interruptible-type services, for example, often define the rate to be charged in terms of mark-ups to either the utility's incremental fuel or energy costs, or to the utility's average weighted cost of fuel or gas.

(See ISB tariffs approved in Docket No. 7783, Gulf States Utilities, Docket No. 7720, Central i Power & Licht., Docket No. 7044, Houston Lichtina & Power, and Docket No. 6765, Houston Lichtino & Power.

/

/

i C) s a

DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 20 The difference between these tariffs and the one proposed here is, of course, that there is no set margin (other than in the price floor) to be added to HL&P's incremental fuel cost in this tariff.

The actual margin will be determined by competition.

Because the market is competitive and the participants are all utilities, the examiner does not believe that" this distinction between the proposed tariff and tariffs previously approved b'y the

~

Commission is significant.

Section 2 of PURA describes the legislati e p~olicy that is to be applied-to-the administration of the Act.

To summarize the secticn, PURA was enacted to protect the public interest and to regulate public utilities, which are natural monopolies in the areas they serve, with the objective that regulation operate as a substitute for competition.

The examiner submits that approval of the The proposed generic tariff is consistent with this legislative directive.

evidence clearly shows that HL&P is not, and cannot, participate as a natural monopoly in the economy energy market.

Rather than operating as a substitute for competition, price regulation of HL&P's participation in this market would greatly hinder the utility's ability to compete.

The generic tariff will allow HL&P to continue its competitive participation in an economy energy market which the evidence shows is in the best interest of HL&P, its ratepayers, and the electric industry.

The examiner concludes that approval of the generic tariff is in'the public interest and consistent with the legislative intent of PURA.

IX.

Conclusion For the reasons stated in this report, the examiner recommends approval of each of HL&P's agreements with Rayburn Country, Tex-La, and Cap Rock.

The evidence shows that the agreements are in the best interest of all four utilities and their ratepayers.

The three cooperatives will benefit because the agreements have lowered, and should continue to lower, the cooperatives' purchased power costs.

Final approval of the three cooperative agreements will enable the cooperatives to pass these savings along to their members through mm __ _ m m

l

-1., o o

DOCKET NO. 8231 EXAMINER'S REPORT

{

i PAGE NO. 21

.HL&P benefits from the agreements with the cooperatives because profits from the sales can be used to offset HL&Ps revenue requirement.

HL&P stated in this docket that it will propose in its next rate case, which has now been filed, to book. revenues. from all economy energy sales to. reconcilable fuel accounts.

The transactions will be subject to audit during any HL&P general.

j rate case or fuel reconciliation proceeding.

Furthermore, HL&P will' have the l

burden of proving, among other things, that it has generated electricity efficiently.

To the extent that it fails to meet that burden, the Commission' may disallow unreasonable expenses.

If, however, the transactions generate savings, as the evidence overwhelmingly suggests they will, the revenues will offset the company's reasonable and necessary fuel costs.

The examiner recommends approval of th'e generic tariff because the evidence shows it, too, is reasonable and in the public interest.

The evidence shcws that' economy energy transactions handled through ERCOT save the electric industry an average of ' 51 million per morth.

HL&P is a major participant in l

'that economy energy market.

Although the transaction have been beneficial to Texas ratepayers, they have taken place without formal Comission approval and in violation of section 31 of PURA.

Approval cf ; tariff legalizing these i

economy energy transactions is needed.. Because to the short-term nature of the transactions, prior approval of specific rates is not feasible.

The examiner believes that the stipulating parties have proposed a desirable and' workable solution to this situation.

The examiner recommends approval of the stipulation ind proposed generic tariff.

X.

Findings of Fact and Conclusicms of A. Findinos of Fact 1.

On June 21, 1988, Houston Lighting & Power Ccapany iL&P) filed three l

agreements providing for the sale of economy energy 'o thra..iet.tric utilities Tex-La El ectric Cooperative, Inc.

(Tex-La),

Raybc Country Electric ~

Cooperative, Inc. (Rayburn Country), and Cap Rock Electr:

% operative, Inc.

(Cap Rock).

r q

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1 0

1 DOCKET NO. 8231 j

EXAMINER'S REPORT PAGE NO. 22-

.l 2.

The agreements were filed pursuant to section. 32 of the Public Utility -

Regulatory Act (PURA), Tex. Rev. Civ. Stat. Ann, art. 1446c -(Vernon Supp.

.1988).

i 3.

A prehearing conference was held on July '14,1988, with Administrative Law Judge Charles Smaistria presiding.

Appearances were entered on behalf of HL&P j

and the Commission staff.

It was agreed that HL&P would file'a generic tariff 1

which ~would be considered at a fi.nal hearing on the merits.

4.

An interim hearing was convened on August 3,1988.

Motions to intervene filed by Rayburn Country and Tex-La were granted, and the three agreements j

originally filed. by HL&P were granted interim approval following the ' hearing and stipulation of'all the parties.

l 5.

HL&P filed o a generic tariff on August 29, 1988.

Implementation' of the proposed tariff change was suspended for 150 days beyond the 'otherwise effective date of October 3,1988, to March 2,1989, pursuant to-P.U.C. SUBST.

R. 23.24(i).

6.

On September 20,

1988, this case was reassigned to the undersigned hearings examiner.

1 7.

Intervention was granted to Occidental Chemical Corporation (Occidental),

Dow Chemical? Company (Dow) and CoGen

Lyondell, Inc.

(CoGen) on-September 22, 1988.

8.

A hearing on the merits was convened on October 31, 1988 for final I

consideration of the three cooperative agreements, as well as the subsequently filed generic tariff.

9.

All of the ' parties except' the Office of Public Counsel (OPC) and CoGen entered into a written stipulation which was presented to the examiner at the start of the hearing.

The stipulation (minus exhibits) is attached to this

.i

=

DOCKET NO. 8231 i

EXAMINER'S REPORT PAGE N0. 23-.

l report. as " Attachment No.

-1. "

The generic tariff proposed by the stipulating-parties.is-attached to this report as " Attachment No. 2."

'10.

All parties except OPC participated in the hearing.

The hearing was i

adjourned on November 2, 1988.

11.

Economy energy transactions involve the voluntary off-system sale and purchase of energy between uti.lities, at prices that are economically efficient.

for both the :011 err and the purchasers.

12.

Economy energy transactions have been occurring within Texas for over.25 years, and the Comission has been ' encouraging the transactions since 1977.-

13.

Under each of the three cooperative agreements, HL&P.may quote a price per MWH to the cooperatives each month, and the cooperatives have the option of accepting or rejecting the offer., Prices remain fixed for the duration of 'any; l

calendar month in which the cooperatives elect to receive deliveries.

The cooperatives are responsible for maintaining wheeling and scheduling i

arrangements.

i 14.

Rayburn Country reduced its purchased power expense by $5,356,200, or 7.1 i

i percent, during the period from April of 1987 through August of 1988 as a result of ec.onomy energy purchases from HL&P.

15.

HL&P has received marginal revenues from sales of economy energy to the cooperatives that are well above marginal cost:; of providing the service.

16.

Staff rate analyst George Mentrup reviewed the three cooperative agreements and recommended approval.

17.

The generic tariff proposed in the partial stipulation admitted at the hearing on the merits specifically covers Economy A, Broker, Economy C, and Economy B transactions.

The tariff is not limited to these services, but any

1

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a DOCXET NO. 8231 EXAMINER'S REPORT l

PAGE NO. 24 i

service offered under the tariff must satisfy the restrictions and limitations q

of the tariff, such as the ones described in Findings of Fact Nos. 21-25.

18.

Economy A and Broker energy are hour to hour interruptible sales that are based upon oral-agreements between utilities and take place less - than t'wenty-four hours at a time.

.i 19.

Economy C energy sales are firm for more than four but less' than twenty-four hours.

20.

Economy B sales are energy sales that are firm for twenty-four hours.

21.

HL&P is prohibited under the proposed generic tariff from obligating itself to supply economy energy for periods greater than twenty-four hours on a firm basis.

22.

Contract periods under the proposed generic tariff are not to be greater than 21 days'.

In the event another sale of five or more days is made to the same customer within a ninety day period from the beginning of the 21-day-contract ' period, then the second sale to the same customer must be manifasted h

by a written contract and submitted to the Commission for review.

23.

Purchasers. of economy energy under the proposed tariff must have firm purchase power ' arrangements in place or capacity available as required by ERCOT (Electric Reliability Council of Texas) guidelines, but not necessarily on line, to back up the service.

24.

Under the proposed tariff, purchasers are responsible for maintaining scheduling and wheeling arrangements necessary to complete deliveries.

Service may be terminated if the purchasing utility fails to maintain back-up capacity.

1 1

- ((, i 4.

DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 25 25.

Services for economy ene'rgy sold under the proposed tariff must be priced to cover HL&P's projected marginal fuel cost, ' adjusted for.line-losses of one percent when averaged over the time period of the transaction.

Additionally,.

f Economy 8 and C prices must include a margin of not-less than 1.2 mills per kwh to cover incremental variable O&M (operation and maintenance) cost.

I 26.

The prices identified in Finding of Fact No. 26 represent the minimum prices that HL&P must charge for services under the tariff.

Actual prices will I

result from agreements between HL&P and the purchasing. utilities.

27.

The economy energy market in Texas is competitive.

28.

It is appropriate. to design the price floor-for economy energy to cover.

the short-run incremental cost of providing the service.

It is not appropriate to include non-incremental costs in the design of the price floor.

29.

HL&P will utilize its computerized production dispatch model, GENSOM D, to -

f project the incremental fuel cost of economy energy transactions.

- 30.

Utilizing GENSOM 0 to project incremental fuel cost for an economy energy sale is reasonable and should give the most accurate projection possible.

t 31.

The 1.2 mills per kwh additive to the price floor of Economy 8 and C is adequate to ' cover incremental O&M costs associated with making those sales.

32.

There are no significant O&M costs associated with the sale of Economy A l

and Broker energy which are sold from excess on-line spinning reserves.

33.

HL&P incurs no incremental wheeling costs with making economy energy sales under the proposed tariff.

34.

The price floor contained in the generic tariff and ' described in Finding of Fact No. 25 is reasonable.

i j

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-DOCKET NO. 8231 EXAMINER'S REPORT PAGE NO. 26 l

1 35.

No utility will be economically disadvantaged, or otherwise ' harmed, either from its own purchase of economy energy from HL&P, or from another-utilfty's purchase of economy energy from HL&P under the terms of the generic. tariff.

a' e reasonable public policy reasons for approving the proposed,

36. There r

generic tariff for the sale of economy energy, namely the preservation and legalization' of HL&P's participation in a economy energy market that is saving money for all participating utilities, j

37.

Because the services under the proposed tariff will be priced above short-run incremental cost, anti-competitive pricing (pricing below cost -to win sales away.from competitors), as well as cross-subsidization (pricing services to one group of customers below cost and " making-up the di fference" by j

over-pricing another group of customers) will be avoided.

38.

Adoption of the stipulation would result in HL&P's not being allowed to use economy energy sales in evaluating the available capacity on its transmission system for planning purposes.

4 39.

Adoption of the stipulation would result.in HL&P's not being allowed to make off-systam economy energy sales if the effect of such sales is to limit the availability of transmission capacity for firm capacity transfer by_

cogenerators when PCW (planned capacity wheeling) or ACW (available capacity l

wheeling) has been scheduled.

40.

Adoption of the stipulation would result in HL&P's not being allowed to interrupt-interruptible sales within its retail service area for economic reasons in order to continue off-system economy energy sales.

41.

Adoption of the stipulation would result in HL&P's being allowed to interrupt interruptible customers if the company determines that the continua-tion 'of interruptible sales will threaten to create or contribute to an L

= _ _ _ _ _ _ _ m _. m m_

mme __

DOCKET NO. 8231 l

EXAMINER'S REPORT PAGE NO. 27 4

42.

Adoption of the stipulation would result in HL&P initiating the following actions in -. order of priority as may be necessary to remedy: an emergency situation:

1) interrupt Economy A and-Brokerage sales, 2) atterr.pt to schedule.

Emergency power, 3) request interruption of Economy B and Economy C sales, and.

4) interrupt' interruptible sales within the HL&P retail service area.

.43.

Based upon the above Findings of Fact, the cooperative agreements, as well

~

as the. proposed stipulation-and generic tariff are reasonable and in the public interest.

B.

Conclusions of law 1.

HL&P, Rayburn Country, Tex-La, and Cap Rock are public utilities as the term is defined in section 3(c)(1) of PURA.

2.

The Commission has jurisdiction and authority over this application, including the subsequently filed generic tariff, pursuant to sections 16(a),

17(e), 32 and 37 of PURA.

3.

None'of the three cooperative agreements, nor the generic tariff proposed by the stipulating parties, is unreasonably preferential, prejudicial or discriminatory, but rather each of the agreements and the tariff is sufficient, equitable and consistent in application, within the meaning of section 38 of PURA.

4.

The interim approval granted to the agreements between HL&P and the three cooperatives on August 3, 1988 constitutes approval after a hearing by the Commission and thereby satisfies the requirements of section 43(g)(4)(A) of PURA.

I i

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00CXET NO. 8231' i

EXAMINER'S REPORT PAGE NO. 28 i

5.

Approval of the proposed generic tariff will constitute approval after a hearing by the Commission and thereby satisfy the requirements of section 43(g)(4)(A) of PURA.

6.

HilP's implementation of any of the three cooperative agreements or' the proposed generic tariff will not constitute the grant of an unreasonable preference or advantage to any corporation or person within any classification, nor will it subject any corporation or person within any classification to any unreasonable prejudice or advantage.

The agreements and the proposed tariff 1

therefore do not conflict with section 45 of PURA.

7.

Implementatlan of the three cooperative agreements or the proposed generic

~

tariff will not work any discrimination against any person ' or corporation performing services in competition with a public utility nor will it tend to restrict or impair such competition, within the meaning section 47 of PURA.

8.

The three cooperative agreements and the proposed generic tariff are just and raasonable within the meaning of section 38 of PURA and should be approved.

Respectfully submitted, J B-BECKY'BRUNER HEARINGS EXAMINER 14 APPE'"!ED w.

lis the bayof

1. M 1989.

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PHILLIP A.

_.0ER l

DIRECTOR OF

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Public Utility Commission of Texas m amot f

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February 23, 1989-

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-ALL PARTIES OF RECORD

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Docket' No. 7361--Inquiry Into the Rates of Rayburn Countryf Electric-4 Cooperative, Inc. and Application for;a Certificate of. Convenience and

Necessity Ladies and. Gentlemen:

j

' Please find enclosed a copy of the Supplemental ~ Examiner's ' Report; and proposed final Order -in' the above styled and numbered docket. "This. docket:will-be considered by: the_ Comission at an open meeting scheduled to.begin 'at 9:00 a.m..on; Tuesday, L March 7, o1989, ateits offices - at 7800' Shoal Creek 'Boulevardt in Austin, ' Texas.

Youi may : attend the meeting if you L wish, < but it is i not..

necessaryD that..you. do so.

A copy of the ! signed Order willj be. mailed to you 1

shortly after the meeting.

4 Exceptions : to. the Supplemental Examiner's Report must be filedL by 12:00-

' noon on Wednesday, March 1,.1989.

Replies. to exceptions must be filed by 12:00:-

noon on Friday,' March ' 3, 1989.

An : original and fif teen -copies.of exceptions-4 1

and replies. must be filed with the Comission's filing clerk and.'a copy _ served -

on each' party'of record.

Requests forloral argument must be filed by 5:00 p.m. Wednesday, ' March 1, l

1989.

If a request for oral argument is made, parties may: call Ms. Lisa'Ruedas

. as ' (512) 458-0266 after 9:00 a.m.. the day before the ' final" order meeting. to learn whether -oral argument will Jbe allowed 'by the Commissioners.

If oral.

y

argument is not granted, the Commissioners may' still -have questions they want to address to the parties.

Rayburn Country is a federation of six member cooperatives and.-one nonmember cooperative that serve about 200,000 retail customers in a 16-county area east of Dallas.

Rayburn Country has no retail customers, and its - only utility service is to resell power at wholesale to the customer cooperatives, a

This docket began on January '16, 1937, when Rayburn Country filed its initial tariff with the Commission.

On that date Rayburn Country began operation af its only transmission line, a 36 foot, 12.5 kv tie-line connecting a customer cooperative to Southwestern Electric Power Corporation.

j i

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3 00CXET NO. 7361 PAGE 2 An Examiner's Recort was issued in this' docket on October 23, 1988.

The report recommended that the Comission deny Rayburn Country status is a public 1

utility and that the Comission deny Rayburn Country's proposed ra:as.

At the November 22, 1988, Final Order Meeting the Comission elected not to adopt the recommendations.

The Comission therefore remanded the case to the hearings division to prepare findings of fact and conclusions of law that wculd support 1

approval of rates for Rayburn Country.

The partiel to this

case, Rayburn Country, the i ntervenor member cooperatives, and the Comission's general counsel, submitted a " Stipulation of Parties" on January 30, 1989.

The agreement was intended to resolve all matters raised by this docket.

Prior to the agreement, Rayburn Country's proposed rates would produce a. rate increase of $1,305,074 or 2.59 percent over actual test year revenues.

The Comission staff and general counsel had recommended a rate increase that totalled $444,074 or.91 percent over actual test year revenues.

The Stipulation of Parties provides for a rate increase of

$772,027 or 1.59 percent over actual test year revenues.

i The Stipulation of Parties asserts that Rayburn Country should be granted status as a public utility and that the application for.a certificate of convenience and ' necessity for Rayburn Country's transmission line should be approved.

The parties attached to the agreement proposed rate schedules that are designed to recover the stipulated revenue requirement.

Finally, Rayburn Country agrees that if the Stipulation of Parties is approved by the Comission Rayburn Country shall refund to the customer cooperatives certain excess funds held by Rayburn Country.

1 I concur with the Stipulation of Parties and recommend approval of the proposed tariff attached to the Stipulation of Parties.

Pursuant to the Order of Remand, this Supplemental Examiner's Report sets forth proposed findings of fact and conclusions of law that would support the approval of rates for Rayburn Country.

I further recommend that the Comission approve the

' application for a certificate of convenience and necessity for Rayburn Country's transmission line.

Sincerely,/5oE

[

2/;

Richard S. O'Connell Hearings Examiner l

9

1 DOCXET NO. 7361 l

INQUIRY INTO THE RATES OF RAYBURN PUBLIC UTILITY COMMISSIGH COUNTRY ELECTRIC COOPERATIVE, INC.

AND: APPLICATION FOR A CERTIFICATE 3

0F TE'(AS OF-CONVENIENCE MID NECESSITY SUPPLEMENTAL EXAMINER'S REPORT' I.

Procedural History l

A.

Introduction

]

An Examiner's Report was issued in this docket on October 28, 1983.

The report recommended that the Conmission deny Rayburn Country Electric Cooperative, Inc. (Rayburn Country) status as a public utility and that the Commission deny approval of Rayburn Country's proposed rates.

Following the Commission's Hovember 22, 1988, Final Order Meeting, this docket was remanded to the hearings division.

At the meeting the Commission considered and elected not to adopt the recommendations in the Examiner's Report. ; This Supplemental Examiner's Report is issued pursuant to the Order of. Remand, dated November 22,

1988, which directed the hearings division to issue a

" supplemental examiner's report with findings of fact and conclusions of law that would support approval of rates for Rayburn Country Electric Cooperative, Inc."

The case was reassigned to the undersigned examiner on November 28, 1988.

This description of the procedural history of the docket is intended to supplement the procedural history portion of the October 28, 1988, Exuiner's Report.

The following discussion _ explains generally the procedure leading to the Commission's Order of Remand, and describes the subsequent procedure leading to this Supplemental Examiner's Report.

B.

Nature of the Case Rayburn Country Electric Cooperative, Inc. (Rayburn Country) initiated this docket on January 16, 1987.

On that date Rayburn Country began operation of its only transmission line (Rayburn Country does not own generating facilities) and filed with the Commission its original tariff for electric service.

The

)

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4 :

d.

DOCXET NO. 7361

-SUPP. EXAMINER'S REPORT

)

PAGE.2-l

~

' nature of the case has changed several times since that original tariff was filed.

First,. the case consisted of a review of. an initial tariffifiling.

Second, thef Commission's : general counsel filed in jJuly.1987 'a request for a

]

he ari ng. --

Examiner's' Order cNo._13 concluded that the request invoked' the Commission's authority to conduct a hearing to inquire into the reasonableness of Rayburn Country's rates.

Public Utility Regulatory Act --(PURA), Section 42,

- Tex. Rev. Civ. Stat. Ann.. art. 1446c (Vernon Supp. 1988)'.

Finally, in response.

l to the PURA Section L42 inquiry, Rayburn Country and the other-parties' agreed that Rayburn Country should - prepare a -rate filing package.

The rate package,

]

filed on Aprili 4,1988, included a statement of intent to. change rates pursuant l

J to PURA Section 43(a).

Examiner's Order No.13 also concluded -that Rayburn Country must obtain-a certificate of convenience and necessity _.(CCN) for its transmission line.-

(_

Rayburn Country therefore filed in this docket.on December 11, 1987, an L

< application for a CCN for its transmission line.

C.

Interveners, Protest Stataments There were two intervening parties in' this docket.

LHunt-Collin Electric -

Cooperative, Inc (Hunt-Collin)- intervened in.this docket and later took the

-position. that the Commission sh'ould deny approval of the' rates proposed by Rayburn Country.

(The customers of Rayburn Country consist entirely of seven electric' distribution cooperatives (the customer cooperatives).

Upon the l

initial ' filing in this docket each customer cooperative was also a member of i

Rayburn Country.

Hunt-Collin, 'however, is a customer of Rayburn Country but is l

no.. longer a member of Rayburn Country.)

As subsequently described in this g

report, Rayburn Country and Hunt-Collin were engaged in litigation outside of l

L this docket.

As part of a settlement of disputes between Rayburn Country and u

1 i

1-__-__-____.__-_-

i t1 DOCXET NO. 7361 SUPP. EXAMINER'S F50RT PAGE 4 1.

Revised wholesale power and PCRF schedules.

Both the rates already granted interim approval and the proposed rates ' pass 4

through the entire costs of purchased' power to the customer cooperatives.

But the proposed schedules would reduce rates due to a recalculation and reduction of non-purchased power revenue requirements.

i 2.

A request that the proposed interim rates be declared " approved j

after hearing by the Public ' Utility Commission of Texas."

The customer cooperatives' PCRF clauses permit the cooperatives to pass through only charges by Rayburn. Country that reflect Rayburn Country rates that have been approved by the Commission.

3.

A request for permiss'lon to forward econcmy energy savings to the

.)

customer cooperatives.

Examiner's Order No. ~13 prohibited Rayburn Country from passing en to the custcmer cooperatives savings obtained through economy energy purchases.

Approximately i

$2.2 million accrued during the period November 1987 to September 1988.

The motion sought approval of the payment of the accrued savings plus interest earned over a twelve month period.

After an open meeting during which Rayburn Country called two witnesses in support of the motion, the motion was granted on January 20, 1989.

E.

Notice:

Suscension of Goeration'of Procosed Rates Notice of the CCN application was required pursuant to the Commission's authority under PURA Section 54(a).

Rayburn Country submitted an affidavit

' that established that notice was published in accordance with P.U.C. PRCC. R.

21.24(c)(1).

Raybur'n Country Exhibit No.

1.

(Exhibit cites in this Supplemental Examiner's Report refer to the evidence taken at the. heari::g on the merits that began on July 26,1988.)

Rayburn Country was not required to mail notice of the CCN application to the other utilities that were located within five miles of the transmission line.

P.U.C.

PROC.

R.

21.24(c)(2).

Direct notice of the CCN was not necessary because the " neighboring utilities" consisted of the customer cooperatives.

The customer cooperatives partici;ated in this docket and had actual notice of the CCN application.

PURA Section 43(a) requires Rayburn Country to give notice of its J

April 4,1988, statement of intent to change rates.

Rayburn Country submitted l

g i

4 DOCXET NO. 7361

]

SUPP. EXAMINER'S REPORT d

PAGc o H

1 affidavits on November 10,- 17, and 22,1938, that established 'that notice had o

1 been published ror Tour: consecutive ' weeks in the sixteen counties. served by the j

customer cooperatives.

l Notice of the statement of intent to change rates al'so must include: direct notice 'to-affected municipalities.

PURA Section 43(a),

iThere were, however,

. no "af f ected-mu'nicipalities" in this - docket because there were no.

- municipalities..within the service area of the customer cooperatives that (may

.have jurisdiction over the proposed rates. and because'the municipalities.wifi be. indirectly affected if the proposed rates are approved.'

q a

The determination of which municipalities 'are "affected" should turn upon the two purposes bahind-the ' requirement of notice to municipalities.

First, 1

notice must be given ' to municipalities that may have jurisdiction ~-to' regulate

.]

the proposed rates;.

Municipalities may regulate local' utility'stevice withinL

[

their boundaries.

' PURA Section 22.

The PURA makes no distinction-between 1

1

-regulating service : that is retail service or, as is the case in ' this docket,.

.j wholesale service.

Rayburn Country does not, however, have any service area of-j its own. : The bills paid-by the municipalities located within th-16 counties l

~

served by;the customer cooperatives are determined according to theirates ' set by the, customer: cooperatives.

Those rates are not the' subject of this docketi The municipalities also may - have jurisdiction _ over utilities.titn ' facilities located within municipal boundaries.

But Rayburn Country's caly tran:: mission line is not located within the boundaries of a municipality.

]

'l Second, notice must be provided to affected municipalities, just as notice must be provided to affected individuals, so that. the affected municipalities may choose to participate in the Commission's evaluation of the propaw rate changes.

j s

The examiner concludes that the published notice in this docht l

t sufficient' notice to the municipalities located within the 16 countiu nd

!j by the customer cooperatives.

The municipalities do not have juriscict rcer i

1 1

_______.i.______________.__.

r DOCKET N00 7361 SUPP. EXAMINER'S REPORT PAGE 3 Hunt-Collin, Hunt-Collin agreed to withdraw its intervention in this docket.

The examiner granted the motion to withdraw as an intervening party on December 5, 1988.

1 i

]

The six electric distribution cooperatives that are both customer cooperatives and members of Rayburn Country are Fannin County Electric l

1 Cooperative, Inc.;

Farmers Electric Cooperative, Inc.;

Grayson-Collin j

Electric Cooperative, Inc.;

Kaufman County Electric Cooperative, Inc.;

Lamar County Electric Cooperative Association; and New Era Electric Cooperative, Inc.

]

(the member co-ops).

The member cooperatives were granted intervenor status as a single party.

The member cooperatives supported the rates proposed by Rayburn Country.

There were no protest statements in this docket, s

1 D.

Interim Acoroval of Rates The rates filed by Rayburn Country on January 16, 1987, were approved on an

' interim basis on February 10, 1987.

Rayburn Country filed an amended Purchased Power Cost Recovery Factor (PCRF) schedule on May 4, 1987.

The amended PCRF schedule corrected errors made in the original" PCRF schedule that were the result of mistakenly double counting a transmission credit.

The amended PCRF

- schedule was approved on an interim basis on May 19, 1987.

Examiner's Order No. 13, dated November 9, 1987, concluded that the initial tariff filing in this docket was not subject to Commission review under PURA Section 43(a) and that interim approval was nc! appropriate.

The Order therefore rescir.ded the interim approval of the rates filed January 16, 1987.

Interim approval of the amended PCRF schedule was retained because it was subject to Commission review under PUPA Section 43(g).

After the Order of Remand, on December 15, 1988, Rayburn Country filed a l

motion seeking interim approval of revised tariff sheets.

Both the general counsel and the intervenor member cooperative group supported the motien.

The principal features of the motion were:

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O N'

DOCXET NOE 7351 c

1 SUPP; EXAMINER'S REPORT :

.PAGE 6 j

t t

Lthe;preposed : rate changes and will.be indirectly affected if the Lproposed' rates:

4

.are. approved..

The municipalities in; the sixtaen ' counties served. by; 'the '

l customer cooperatives <are therefore not "affected municipalities" :and directL notice to them is not required.

j k

Examiner's,' Order - No. 23 suspended the operation,of Rayburn Country'sl i

proposed rates. for '150 ' days beyond the date publication-of notice was i

1 completed,.until'Harch 20,J 1989.

.F.

Acreement of the Parties that Would Resolve 8v Stimulation i

-1 Everv-Contested issue in the Occket 1

1 i

A " Stipulation of Parr.ies" wasl fiied.an January -30, 1989.

A copy of the -

' Stipulation of Parties and its Exhibits A: and B are attached ' to this l

. Supplemental Examiner's Report.

The stipulation was ' signed by the; representat'ives-:of Rayburn' Country, the member cooperatives,- and generall counsel, and asserts that the stipulation is intended to resolve all ;::atters raised in this docket The parties' principal ' agreements consisted of the following:

.1.

Rayburn Country is a utility, as defined by PURA..

q

-2..

Rayburn Country's. transmission line should be granted a CCN.

3.

Rayburn Country's. revenue requirements, excluding; purchased pcwer j

costs, are $550,000.

(The rate filing package requested annual-i revenue, excluding' purchased power costs, of about $1.1 million.)

l 4.

The proposed rates, attached to the Stipulation of Parties as l

exhibits "A"

and "B," should be approved.

The proposed rates are' I

identical to the rates approved on an interim basis on January 1

20, 1989.

Two of the four schedules require amendments to reflect that Hunt-Collin has agread to no longer be a custcmar of.

i Rayburn Country.

The dollar amounts received by the remaining customer cooperatives pursuant to the two schedules will not change.

Following the next

section,

" Description of Utility," the recaining portions. of this ' report evaluate both the positions of the parties prior to the Order of Remand, and the Stipulation of Parties.

__._-m_____..m_

-..m

00CXET NO. 7361' SUPP. EXAMINER'S REPORT PAGE 7 II.

Description of Utility A.

Membershio and Durcose Rayburn Country is a federation of six ' member cooperatives and one nonmember cooperative that serve about 200,000 retail customers in a_16-county area east of Dallas.

Rayburn Country has no retail customers, and its only utility service is to resell power at wholesale to the' customer cooperatives.

Its only service facility is a 36-foot,12.5 k'l tie-line, which is one of about 100 tie-lines connecting its power suppliers to the customer cooperatives.

A Rayburn Country was formed in 1979 by seven co-ops that split from the Tex-La Electric Cooperative. of Texas (Tex-La) because of a disagreement over participation in the Comanche Peak Nuclear Plant.

The customer cooperatives opted not to participate in the nuclear power plant and : formed their own group.

Until summer 1986, Rayburn Country existed only as a shell corporation, with no offices or employees.

It was operated primarily through the part-time efforts of the general manager of Kaufman County Electric Cooperative, Inc.,

Mr. Ray Raymond, who drew no salary.

In 1986, Rayburn Country hired a full-time manager, Mr. John Kirkland, i

whose main objective has been to obtain alternative sources of bulk power for Rayburn Country.

When he began as manager, Rayburn Country received all of its

]

' load requirements from Texas Utilities Electric Company (TU Electric) and l

Denison Dam.

Currently, Rayburn Country obtains power through five power

)

arrangements:

(1) TU Electric; (2) Denison Dam, South Unit; (3) Denison Dam, 1

North Unit; (4) Pickton delivery point; and (5) economy energy.

Before January 1987, Rayburn Country did not own or operate facilities to provide electric utility service; therefore, it was not a public utility pursuant to section 3(c) of PURA.

At that time, however, Rayburn Country assumed ownership of a 12.5-k'/ tie-line at the Pickton delivery point.

When the Pickton tie-line was energized, Rayburn Country became a public utility.

r..

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DOCXET NO. - 7361.

i L

SUPP. EXAMINER'S-REPORT l

PAGE 8 3.

Firm Dower Arrangements In splitting off from Tex-La, the customer cooperatives obtained a share of an allocation of 35 megawatts (MW) of relatively inexpensive hydroelectric capacity from the Denison Dam, operated by the Southwestern : Power

' Administration,(SWPA).

In 1983 and 1984, Rayburn Country negotiated agreements to purchase. that allocation of power and an additional 35 MW of hydroelectric capacity.

In addition, it is negotiating to obtain firm power fr m Houston

~

Lighting & Power Company (HL&P), and it expects to obtain power from other power producers, such as qualifying facilities.

In addition to the above activities, Rayburn Country is renegotiating its contract with TU Electric.

The contract expired on June 30, 1987, and has been renewed on a month-to-month basis since then.

Rayburn Country's peak load is about 300. MW, and TU Electric provides whatever capacity and energy is net supplied from the other arrangements.

TUEC also delivers power over its lines from the Denison Dam units to the customer cooperatives and schedul es the generation with SWPA.

r The tie-line at Pickton enabled Rayburn Country to obtain its first power i

from outside TU Electric and the Energy Reliability Council of Texas (ERCOT) interconnect system.

The Pickton delivery point is part of the SWE?CO system (and thus outside ERCOT).

A part of the area served by Farmers Electric Cooperative, Inc. was isolated to receive the power.

Under the ar angement, Rayburn Country receives a 1.6-MW allocation of power from SWPA to serve the isolated area; the balance of its load is provided by SWEPCO.

C.

Economv Enerav Arrangements i

l Rayburn Country hu negotiated agreements with TU El ectri c, MLLP, and West Texas Utilities Company (WTU) that enable it to purchase econny energy i

1 from HL&P or WTU if the energy is offered at a rate lower than T') Electric l

energy charges.

Under the arrangements, Rayburn Country pays TU Elec:ric the full demand charge under the wholesale rate for all energy that is delivered to the customer cooperatives.

s t

00CXET N0. 7361 SUPP. EXAMINER'S REPORT PAGE 9 Each month, HLh? and WTU submit offers to sell economy' energy ~ to Rayburn Country for the calendar month.

If Rayburn Country accepts an offer, it l

provides a schedule to TU Electric showing the amounts and timing of the economy energy to be purchased.

TV Electric acts as Rayburn Country's agent and schedules the delivery of the power from the supplying utility to Rayburn Country.

Rayburn Country receives a monthly credit from TU Electric that reduces its power costs by an amount equal to the difference between the cost i

of delivering the economy energy and the cost that would have been incurred under TU Electric's wholesale rate.

l I

According to Rayburn Country, having alternative economy energy arrangements creates competition among the power suppliers and provides alternative sources of power in the event of curtailments because of transmission limitations or other reasons.

Unfortunately, Rayburn Country will probably not be able to negotiate additional economy energy arrangements, because TV Electric has refused to enter into any more scheduling-agent agreements for economy energy.

i D.

Litication and lobbyina For much of the time since 1984, Rayburn Country has been involved in litigation.

In one case (the "Brazos" case), it intervened on behalf of SWPA to prevent a reallocation of the Denison Dam power.

According to Rayburn Country, its efforts in the case preserved all of the benefits from the Denison Dam arrangements, which otherwise would have been lost.

In addition, Rayburn Country intervened in TU Electric's last rate case, Aeolication of Texas Utilities Electric Comoanv for a Rate Increase, Docket No. 5640, 10 P.U.C. EULL. 659 (November 19, 1984).

Apparently because of Rayburn Country's growing expenses, one of the

]

co-ops, Hunt-Collin, withdrew from membership in July 1987 and sought also to withdraw from its wholesale power contract with Rayburn Country and to take with it a portion--about 900 kW--of the Denison Dam allocation of hydro-electric power.

Rayburn Country sought a declaratory judgment in federal court enforcing the wholesale power supply contract and declaring that Rayburn Country held the hydroelectric power allocation.

Hunt-Collin

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c DOCXET NO. 7361 SUPP. EXAMINER'S' REPORT PAGE 10 I

j counterclaimed for actual and punitive damages, control ofhthe' hydroelectric'

.l

. power ~ allocation, ' and annulment' of the wholesale power contract.

Rayburn

~

l Country. considered its continued existence to be' at' stake in the' litigation; the litigation expenses for; the. lawsuit' against ? Hunt-Collin make up a o

significant portion of its requested administrative.and general fexpenses' in this case.- 'The litigation was, however, resolved by an agreement reached by.

Rayburn Country and Hunt-Collin -after the July -1988l hearing Jon the merits 'in this docket.

Rayburn Country tack' the lead in lobbying efforts against.several, j

. recreation associations ~ and the-North -Texas Municipal Water District.

The'

. associations attempted to restrict the use of water in Lake ' Texama fe r electric power production at -Denison Dam.. Rayburn Country contends that its efforts are largely responsible for. preserving the allocation for power production.

To resolve the battle against the water district $ Rahburn Country-negotiated an amendment.to.its contract with SWPA that provides for a monthly.,

credit ' (reduction); to its invoice from SWPA for the Denison Dam power.

The credit;is a negotiated compensation for a reallocation of water in Lake Texama

~

to the water district.

According to Rayburn Country, it must continue to monitor the situation'because of the competing uses for the ' lake water..

E.

Summarv According to Rayburn Country, the savings from its various alternative -

]

power arrangements totaled about 57.4 million in 1987.

About 58 percent of this amount, or S4.3 million, is attributable to the -Denision Dam power.

The economy eiiergy purchases accounted for about $3.0 million of the savings (beginning April 1987), and the Pickton interconnection with SWEpCO accounted for about $115,000, i

It was the cost associated with searching for and arranging the i

alternative power supplies and protecting its hydroelectric power that i

apparently led Rayburn Country to file this case.

In 1984, Rayburn Country's annual budget was about $314,000, which it paid out of assessments against the customer cooperatives.

The annual budget jumped to about $831,000 in 1985 and l

_ m7 w

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$"$YP I 00CXET NO.c7361.

u j

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-SUPP. EXAMINER'S REPORT-1 1

PAGE-11:

gy n

o v.

+-

+l

{4l ji.(il In i1987, lRayburn L Country.' collectadi frbm. the. custoser -

7

' ^g

^[:5854,000.in;1986.-

j cooperatives a total of: about!$I.'2 million'(excluding purchased-power costs).

+

,1 y

y III.a ~ Evaluation of Proposed ; Rates and Stipuiati6n ofe Parties n

a oeA.,. Introduction 3

d L i.

HThe rate changes -~ proposed by Rayburn Country would = affect LallEofithe-h

' customer cooperatives and :would = produce 'a rate - i.ncrease lof $1,305,074 or.2.69-.

1

percent over actual test year revenues.'

The Comission staff and heneral h

e counsel recommended a rate increase that totalled $444,074 to'r.91 percent over l actual test year revenues.

The difference-of positions taken by Rayburn

Country an' - the'.Comission staff relates entirely to.' the proper determination d

i'

• of~ non-purchased power expenses.

The informatitq in Rayburn Country's-rate-

i filing-package'was: based.upon a test year that ended December 31, 1987.

B.

Invested Canital' The" partia took the following positions concerning.Rayburn Country's rate-basa::

m'>

INVESTED CAPITAL Staff-

, Co-op Staff _

Recommended Recuest Adiustment Amount Plant in Service

$ 61,809 S(5,326)

S56,483

~ Accumulated Depreciat3cn (7,285) 0 (7,2851-a Net Plant in service S 54,524 5 (5,326)

S49,-198 i

Working Cash. icwr 127,576 (78,844) 48,732

.j L

Prepayments 21,373 0-21.373 Total Investrd Ca::

3203,473 S(84,170) 5119,303 l

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DOCXET NO. 7361 1

93.. w SUPP. EXAMINER'S REPORT l

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PAGE 12 ir-x q

Rayburn Country witness Mr. Carl N. Stover is a financial analyst enployed.

q

]

by C.

-H.

_ Guernsey.

He asserted that Rayburn Country,. unlike other

~ cooperatives, has essentially no ' rate base.

According to.~ Rayburn Country, itsi total adjusted. rate ' base-is $203,473.

Staff witness Mr. Raymond' Orozco made two adjustments -to.Rayburn Country's proposed adjusted. rate ' base.

The adjustments totalled $5,326.

Mr. Orozco subtracted from. plant.in service an I.D. camera and computer equipment purchased after the end of the test year.

He :did not a'dj us t the-figures for accumulated ' depreciation' and for

. prepayments.

The ' Stipul ation of-Parties - reflects. Mr. ' Orozco's position on these three elements of rate. base.

The remaining element of Rayburn Country's rate base, working cash' allowance, _is discussed below.

C.

Rate of Return-(Workina Cash 4110wance)

)

Mr.. Stover asserted that, in determining the rate of / return on L Rayburn d

. Country's invested capital, the ' primary consideration is to maintain a satisfactory cash reserve. 'Because Rayburn Country is a new organ'ization,it is difficult to -predict-the appropriate cash reserve.

Further, the nature.of its business activities is changing and expanding,-which requires an adequate cash reserve.

Mr. Stover testified that the cash reserve fund at~ the end of-the

. test year was approximately $600,000.

This amount is adequate and therefore Rayburn~ Country sought a rate of return that would produce zero cash margins.

nIn other words, Rayburn Country sought a rate of return that would neither inc. ease or decrease its current cash reserve.

According to Rayburn Country, the appropriate rate of return is-10 percent.

L Staff witness Orozco pointed out that Rayburn Country does not service a.

L.

debt, 'and has an extremely small rate base relative to its revenues.

He therefore recomended a zer: rate of return.

During rebuttal, Mr. Stover

-.---_-iu,-...

_-.-...._._-_m..___m

e

.DOCXET NO. 7361 SUPP. EXAMINER'S REPORT PAGE 13 argued that Rayburn Country intends to purchase land and a building for a headquarters.

Rayburn Country rust also purchase Supervisory Control anc Data Acquisition and telemetering equipment (SCACA).

The SCADA equipment snail be used to monitor remotely the energy delivery points.

These purchases will reduce the cash reserve to less than S268,000.

A zero rate -of return would cause Rayburn Country to continuously draw down on its cash reserve.

He concluded that drawing down the cash reserve too far would be imprudent and impractical.

The parties stipulated to a cash reserve of $152,270.

During the 1

negotiations leading to the Stipulation of Parties, Rayburn Country stated that the land and building for a headquarters had already been purchased.

The parties therefore agreed that the cash reserve should only reflect Rayburn Country's cash needs pertaining to the purchase of the.SCADA equipment.

Schedules R0-6 and R0-7 attached to Mr. Orozco's testimony filed in support of~

the stipulation show tha't the parties agreed to permit the funding of 10 J

percent of the purchase with cash.

The cash expended plus the annual debt service on the related loan is S152,270.

The parties stipulated to a rate of return of zero percent.

A zero rate of return is reasonable because Rayburn Country has no outstanding debt and therefore no debt coverage requirements.

A rate of return greater than zero would produce excess cash that Rayburn does not need.

Rayburn Country has no

. plans to invest in new transmission or generating plant in the next five years, and already has a cash reserve sufficient to finance the purchase of the SCADA equipment.

D.

Reasonable and Necessarv Excenses In fixing the rates of a utility, the rates shall be fixed to permit the recovery of the utility's reasonable and necessary operating expenses.

PURA Section 39(a).

Rayburn Country requested recovery of its operating expenses as shown below:

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.,;. 3 DOCXET No.-7361-t SUPP. EXAMINER'S REPORT-

-PAGE 14 Test Year

.idjustment

' Adju'sted Test-' Year' 1

l i

Purchased Power

'47,396,724 1,410,205 48,806,929

.0perations & Maintenance 861,022

,:184,843' 1,045l865

Depreciation-9,007=

l1,201

'10,208.'

Taxes 5,892-735-i 6,627:

~

Total Operating Expenses:

$48,272,645 S 1,596,984' LS49,869,629 1.

Purchased Power Expenses power > systems ! analys'is Rayburn Country witness Mr. Michael Moore,- a engineer with C.M. Guernsey & Company, explained that to calculates.the adjusted

- purchased! power expense, he corrected the-t'est-year. cost for billing errors,=

annualizedEthe power costs from the Picktonidelivery point and.the'. economy.

J energy purchases to reflect a full Tyear_ of operation, and adjusted TUEC's: fuel:

factors to current rates.

Prict to the hearing on the merits.the. Commission :

staff Laccepted the. Rayburn Country purchased power ' calculations.

The-Stipulation of Parties also concludes that the proposed purchased ' power expense-of $48,806,929 is ~ appropriate.

The examiner can'cludes that a purchased power

, expense - of c S48,806,929 is just and reasonable.

.The calculation offered by' Rayburn -Country' is-based upon the test ' year purchased. power expense, adjusted:

to' annualize expenses and to re? lect new TU Electric rates.

2.

Operations and Maintainance Expenses Rayburn Country requested recovery of operations and maintainance 2xpanses as presented below:

1 11

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i DOCXET N0c 7361 SUPP. EXAMINER'S REPORT.

PAGE 16 Test Year Co-op' Co-oc Amount Adiustment Reauest 0 & M Expense Not Adjusted 5111,890 3

0 S 111,S90-Payroll 83,563 10,198 93,761' Medical Insurance 4,325 737 5,062 1

Dental Insurance 762 64 826 Life Insurance 622 24 646-l Lcng-Term Disability Insurance 312 (40) 272 Savings Plan 5,600 684 6,284 General liability Insurance 3,254 796 4,050 Workers Compensation Insurance 704 (331) 373 Automobile Insurance 890 39 929 Sick Leave Accrual

'4,221

-(313) 3,908 Load Research Data 0

7,500 7,500 Accounting 38,444 (8,424) 30,020 Engineering 127,168 94,340 221,508~

Rate Case

. 89,458 (31,125) 53,333-Legal 295,102 205,401 500,503 Legislative Advocacy.

94.707 (94.707)

'O Total Operations and Maintenance 3861,022 5184,843 S1,045,865 l

2.1 Payroll' Rayburn Country witness Ms. Judy Lambert, an electrical rate analyst for I

C.H.

Guernsey, testified that the adjusted payroll was calculated using estimated 1988 wage rates for Rayburn Country's two full-time employees and one part-time employee.

.The Commission staff recommended a reduction of 59,081

' from the Rayburn Country figure because Rayburn Country planned to employ only the two -full-time employees after June,1988.

During its rebuttal case Rayburn Country increased its estimate to $106,100 because it had increased its payroll to three full-time employees.

Staff accountant Mr. Paul Bellon testified that the parties stipulated to a total payroll expense of $106,104.

The stipulated amount includes wage increases to the President and the Administrative Director and the salary of an additional employee hired on July 1,1988.

2.2 Employee Benefits The following discussion concerns adjustments to the expense estimates for medical insurance, dental insurance, life insurance, long-term disability i

l 4

DOCXET NO. 7361 SUPP. EXANINER'S REPORT PAGE 16 insurance, savings plan, general liability insurance, workers compensation insurance, automobile insurance, and sick leave accrual.

Ms. Lambert used 1933 premium rates.or contribution ratas and, where appropriate, adjusted base wages, to adjust the test year employee benefits expense estimates.

Mr. Bellen l

made several adjustments based upon the position that Rayburn Country would in the future have only two full-time employees.

Notwithstanding the fact that the parties stipulated to payroll expenses adjusted to reflect employment of three full-time employees, the parties stipul,ted to all of the employee benefits expenses according to the staff's position reflected in the testimony '

of Mr. Bellon.

s 2.3 Load Research Data According to Ms. Lambert, the estimated expense was increased from zero to

$7,500 to reflect the cost of raw demand data for the Rayburn Country purchased power delivery points.

The staff did not adjust this estimate.

The parties stipulated to the S7,500 figure.

2.6 Accounting This category includes expenses related to preparation of the annual audit report, monthly accounting services; and changes to accounting software.

Ms.

Lambert adjusted downward the expense estimate by SS,424 to S30,020 to reflect the current costs of these services.

The staff did not ada st this estimate.

u The parties stipulated to the $30,020 figure.

2.5 Engineering Rayburn Country paid $127,168 for engineering services during. the test year.

Mr. Xirkl and,

the president of Rayburn Country, testified that the services are not the conventional engineering services performed for an electric utility, because Rayburn Country owns only one 26 foot tie-line.

Rather, the services are rel ated to power planning and power supply activities.

The activities generally consist of investigating potential

L DOCKET NO. 7361 1

SUPP. EXAMINER'S' REPORT.

PAGE 17-sources of-powe.r. supply, evaluating' proposals for ' alternative power ' supply :

)

J

arrangements, negotiating power ' supply agreements, and administering current agreements.

In addition, the, services include'; associated activities such as j

processing and' analyzing' load : data.

b I

p 1

~Rayburn Country-adjusted. upward.the engineering : services estimate by

$94,340 to- $221,508.

Since Rayburn Country's 1ong-term ' contract f with 'TU f

. Electric has expired, it will be necessary for Rayburn Country.to' negotiateL another power supply agreement ~ with TU Electric.

Because of the technical i

nature of the arrangements, engineering services will 'be. necessary 'in' the negotiating and ~ computer 'modeling of the agreements.

Further, 'according to

' Rayburn _ Country witness j Moore, the upward adjustment. reflects the cost of projects that have been : approved by 'Rayburn Country's Board.

New power supply planning activities, including the investigation of alternative power. supply-arrangements, will require. additional engineering ' services.

./

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Staff witness -Bellon made the.following adjustments to the figure proposed.

l by Rayburn Country for engineering services:

Co-op Staff Staff' l

Enaineerina Proiect Recuest Ad.iu s t.

,Ry m Transmission Planning S

2,620 S (2,620)

S 0

Interval Load Data (2,494) 37,817

.35;2??

TU Electric Contract 19,900 (16,196) 3,704 Alt.-Power Supply Arrangements 136,778 (60,264) 76,514 Hunt-Collin Litigation 13,882 (13,882) 0 Load Forecasting Model 28,490 (12,563) 15,927 Miscellaneous Services 22.332 Id 833) 17.499 To tal S221,508

$(72,541)

$148,967 1

Mr. 'Bellon explained that he reviewed the invoices provided by C.H. Guerns%

to substantiate the work performed for Rayburn Countr'y.

According to Mr.

Bellon, the general descriptions of the services performed provide little or ne specific information about the services actually provided, the time spent, th

individual performing the services, the hourly billing rates, or the purpose of out-of-pocket expenses.

The disallowance of all of these expenses would,

00CXET NO.'7361 SUPP. EXAMINER'S REPORT l

PAGE 18 howsm r, prevent Rayburn Country fr:m performing its functicas.

Further, the engi..eering services appear to be consistent with Rayburn Co un try's obligations.

Mr. Bellon therefore believed that Rayburn Country should be allowed to recover the amounts recommended in the above chart, which are the actual expenses incurred for the 12 months ending May 1988.

According to Mr. Bellon, all of the engineering services related to the Hunt-Collin litigation should be disallowed.

Rayburn Country had failed:

(1)

- to demonstrate that the potential financial harm from Hunt-Collin's claim was sufficient to offset such large expenditures, (2) to show how long the litigation would take, (3) to demonstrate that the expenses are recurring in nature, or (4) to estimate for the general counsel the annual hours of work the litigation is expected to require.

In response to Mr. ' Bellon's testimony, Rayburn Country submitted invoices showing in considerable detail the engineering services to be provided and the associated charges.

Mr.

Moore asserted that the known and measurtble engineering services would cost $260,287, or $38,779 more than requested in the t

rate filing package.

The increase was due to an error in Rayburn Country's original workpapers.

The stipulated amount for engineering services reflects the position taken

, by Mr. Bellon, adjusted to reflect more recent data.

The stipulated amoun: of j

S163,173 is comprised of the actual engineering expenses incurred from August 1987 through July 1988.

Expenses related to the Hunt-Collin litigation vere excluded.

)

2.6 Rate Case Rate case expenses during the test year totalled $39,453.

Rayburn Cot =:ry estimated that the total expense for this docket would be S175,000, and proposed to amortize the expense over a three year period.

The annual rate case expense would be $58,333.

DOCXET NO. 7361 SUPP. EXAMINER'S REPORT PAGE 19 i

Mr. Bellon recommended the disalloware:e of all estimated expenses.

Further, he noted that Rayburn Country had r quested S18,750 for annual rate case expenses in its testimony supporting its initial tariff filing.

In his opinion, Rayburn Country will therefore have been recovering these expenses for 20 months by the time its new rates are approved The inclusion of these expenses in cost of service would permit a double-recovery.

He recommended that Rayburn Country be permitted to recover only its actual rate case expense incurred from January through May 1988.

According to his calculations, actual expenses totalled 556,534, which Mr. Bellan recommended be amortized over a three-year period for an annual rate case expense of $18,878.

During Rebuttal, Rayburn Country responded to Mr. Bellan's testimony that -

concerned double-recovery.

According to Ms. Lambert's calculations, the total unrecovered rate case expense was S166,990, which included S20,000 of estimated expenses.

Amortized over three years, the expense is $55,663.

The parties stipulated to an annual rate case expense.

The figure is based upon the total actual rate case expense for this docket, 3210,700, less rate case expenses previously recovered through current rates, 535,938.

The remaining 5174,762 was then amortized over a three-year period, for an annual expense of 558,254 The Stipulation of Parties does not discuss why the total actual rate expense is more than $50,000 greater than Rayburn Country's Acril 1988 estimate.

Exposes related to the remand of this case may be responsible

. for a majority of the dirference.

2.7 Legal Rayburn Country paid $295,102 for legal services during the test year.

The test year amount was adjusted upward $205,401 to $500,503.

Mr. Kirkland, the f

president of Rayburn Country, explained that the legal services were directeG towards the litigation with Hunt-Collin, negotiations with TU Electric, and arranging economy energy purchases.

Mr. Phillip Ricketts, an attorney who specializes in regulatory law, testified for Rayburn Country.

He asserted that the legal services provided by four law firms were reasonable and prudent and

Q 4

00CXET NO. 7361 SUPP. EXAM 1NER'S REPORT PAGE 20 that the increases in legal services reflected in the adjustment to the tes:

- year were also necessary, reasonable, and. prudent.

Expenses for legislative

-advocacy were not included under the legal services category.

Staff witness Bellan recommended a 96 percent reduction ta Rayburn Country's adjusted test year figure.

According to him, only a small portion of the legal j

services were adequately supported by invoices.

He recommended the following adjustments:

Co-op Staff Staff Law Firm or Proiect Recuest Adiustment Recomm.

Verner Liipfert S392,553 S(392,553)

S 0

'McGinnis, Lochridge & Kilgore 103,209 (85,566) 17,643 Payne & Vendig l',628 (1,628) 0 Stanley Harris Rice 221 (221) 0 Sheey Lovelace 157 (157) 0 Denison Dam / Tex-La 2.735 (2.735) 0 Total

$500,503

$(482,860) 517,643 He recommended disallowing all of the fees paid to the law firm of Verner, Liipfert because the invoices for legal services were too general to determine

' the reasonableness of the services, and because the invoices did not clearly specify whether all legislative advocacy expenses were excluded.

He recommended disallowing a large portion of the fees paid to the law firm of McGinnis, Lochridge 3 Kilgore.

According to Mr. Bellon, only the months of I

l January through March 1937 were adequately supported by invoices.

This prevented him frem concluding that the legal services for the other months during the test year and the estimated expenses are recurring in nature and necessary to providing utility service.

Further, the estimated expenses were not known and measurable, as required by P.U.C. SUBST. R. 23.21.

He recommended disallowing all of the fees paid to the law firm of Payne &

Vendig.

All of the legal services provided related to the Hunt-Collin

DOCXET H0. 7361.

SUPP. EXAMINER'S RPORT PAGE 21 litigation.

In Mr.

Sellon's opinion, none of the Hunt-Collin litigation expenses were properly recoverable through ra:es, based upon the same enumerated reasons Mr. Bellon recommended disallowance of the engineering expenses related to the Hunt-Collin litigation.

With respect to the remainder of the requested legal expenses, Mr. Bellan stated that Rayburn Country failed to provide any information to support the amounts, despite the staff's discovery requests.

Accordingly, he rec:= ended that the amounts not be allowed.

Curing Rebuttal Rayburn Country contested the conclusions of Mr. Bellon.

Mr. 'Kirkland asserted that the staff position would prohibit Rayburn Country from performing legal services necessary to secure lower cost power.

Ac:ording to both Mr.

Kirkland and Mr.

Ricketts, the Hunt-Collin litigation is nece'ssary.

.Mr.. Ricketts asserted that annual fees of $286,800 are reasonable for the litigation.

Rayburn Country al so contested Mr. Bellon's conclusions concerning the adequacy of the invoices.

According to Rayburn Cou.ntry, sufficient invoices were provided with the same degree of detail that is generally provided by law firms.

The staff's recommendation for the adjusted test year was $17,643.

The parties stipulated to $58,208.

According to Mr. Bellon, the stipulated' amount reflects the total lega' fees paid to the firm of McGinnis, Lochridge 1 Kilgore for general legal services rendered during the test year.

According to Mr.

Ricketts, this law firm performed work clearly of a recurring nature. The firm negotiates transmission service agreements and power supply agreements, attends boaro saeetings, and other general corporate work.

As previously stated, the Hunt-Collin litigatien was concluded through a settlement amcng the parties.

There was therefore no reason to anticipate future legal expenses for litigation against Hunt-Collin.

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DOCXET N0. 7361-SUPP. EXAMINER'S REPORT PAGE 22 k

2.8 Legislative Advocacy f

i legislative advocacy expenses may not be considered for ratemaking purposes.

PURA Section 41(3)(A).

Legislative advocacy work performed by the i

{

firm of Verner Liipfert was separated from other legal work performed by the firm.

The entire amount attributed to legislative advocacy, S94,707, was deducted from the test year. operations and maintenance expenses.

The Stipulation of Parties also reflects this elimination of legislative advocacy l

expenses.

During the hearing on the merits the only issue l raised concerning legislative advocacy expenses pas whether additional " legal-services" provided

]

by outside counsel should be classified as legislative advocacy expenses.

)

According to Mr. Ricketts, it was clear' that McGinnis, Lochridge & Kilgore did l

not perform any legislative advocacy services for Raybur~.' Country.

Because this firm is the only firm whose legal services are included in the Stipulation l

of Parties, no legislative advocacy expenses are included.in operations and l

maintainance expenses.

29 Travel Rayburn Country sought $41,102 of travel expenses in the adjusted test year operations and maintenance expenses.

Mr. Bellon sought to exclude $20,581 of i

this amount because $13,209 of the expenses were better categorized as

, legi sl ative advocacy expenses and $2,372 of the expenses were better categorized as rate case expenses.

The Stipulation of Parties adopts the position taken by Mr. Bellon.

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l 2.10 Miscellaneous Expenses l

l Mr.

Bellon reco= ended the disallowance of S4,853 associated with ths 4

writing off of a video brochure because Rayburn Country had not demonstrated that the expense was reasonable and necessary to provide utility service.

J Concerning the Stipulation of Parties, Mr. Bellen explained that the S4,058 increase to the staff's recommended other miscellaneous expenses of $2,262

]

represents miscellaneous expenses which the parties agreed to include in

]

Rayburn Country's cost of service for settlement purposes.

g-DOCXET N0. 7361 StJPP. EXAM 1NER'S REPORT PAGE 23 t

2.11 Summary of Operations and Maintenance Expenses The staff's recommendation for adjusted operations and maintenance expenses was $415,112.

Rayburn Country sought 51,045,865.

As discussed above, the Stipulation of Parties indicated a stipulated-amount for each of the categories under operations and maintenance expenses.

The stipulated amounts total 5534,741 for operations and maintenance expenses.

The examiner concludes that the record supports the stipulated amounts and indicates that they are just ' nd a

reasonable.

Each of the sections above note how the record supports the s t i pul ated amount.

Further, the stipulcted amounts reflect that Rayburn Country's expenses will be more moderate now that the Hunt-Collin litigation has been settled.

3.

Depreciation Expense Rayburn Country sought approval of an adjusted test year depreciation expense of $10,208.

Schedule G - 5.' 1 in the rate filing package shows that Rayburn Country's depreciable assets consist mostly of offica equipment and transportation equipment.

The assets are depreciated at an annual rate of 3.2 percent.

Mr. Bellon recommended decreasing the requested amount by S1,055 to remove amounts associated with a computer and I.D. camera purchased af ter the end of the test year.

During rebuttal Ms. Lambert asserted that the 51,055 in 1

depreciation expense is incurred in connection with property that is used and

. useful by Rayburn Country in providing service, and the expense should be included in the revenue requirement.

The parties stipulated to an expense of S9,143, which was the position of staff witness Bellon.

t 4.

Taxes Other Than Income Taxes Rayburn Country saught approval of an adjusted test year expense of $6,527.

Schedules G-9.0 through 11.0 in the rate filing package show that property tax is the only expense under this category that is not related to Rayburn Country's wage base.

Mr. Bellon asserted that the expense should be adjusted according to his determination of the wage base.

He recommended a 5511

.t DOCXET NO. 7361 i

SUPP. EXAMINER'S rep 0RT PAGE 24 decrease to Rayburn Coun ry's request, based uoan the staff's recommended annual wage base.

The pa.-cies stipulated to an expense of 56,l'.6, which is the' position taken by Mr. Bellon.

E.

Summarv of Rein _ l'auirements The parties stipulated to an adjus % test year figure for each of the elements'of Rayburn Country's revenue requirement:

return on invested capital, purchased power, operations and maintenance expense, depreciation, and taxes

{

other than income taxes.

The record supports each of the stipulated figures.

Staff member Orozco's testimony showed that a zero return on invested capital

]

is appropriate because a higher return would produce an unnecessary cash reserve.

Hr.

Moore's testimony concerning purchased power expenses was uncontested and showed that Rayburn Country's expenses in this category would j

j be comparable to tha test year figure, after consideration of severai adjustments to reflect more current information.

The preceding discussion in this report showed the reasonableness of each of the operations and maintenance 1

l xpenses.

Concerning depreciation expense, Mr. Bellon's testimony showed that 1

the expense relates or.'/ to those assets that were ' owned by Rayburn Country

{

during the test year.

Mr. Bellon's testimony concerning taxes shows that the stipulated figure 5,

except for small adjustments, identical to the tax expense during the test yur.

The examiner therefore concludes that the revenue requirement stipula;sd to by the ' parties, S49,356,929, is just and reasonable.

F.

Rate %:ian-Proonsed Rate Schedules Rayburn Country wi"ess P~ 2 testified that a cost of service study was not

)

prepared because RayVn C;-,

y serves only one customer class.

He asserted that the proposed ratas us, wigned to meet three objectives:

the rates must provide revenue tc meet purcha

.:ower costs, and to meet non-purchased power i

costs.

The rates must aisa ocate to the customer cooperatives the benefits

)

I arising from the rights o L:

expensive hydro-electric power.

The variances in demand and energy costs -

butable to the separate customer cooperatives are recovered through separat mand and energy components.

1 1

w DOCXET H0. 7361 SUPP. EXAMINER'S REPORT PAGE P.5

\\

The Stipulation of Parties seeks the Ccmissica's approval of two exhibits that. consist of the proposed rata schedules.

Exhibit A is a copy of the rates approved on an interim basis on January 20, 1989.

Exhibit 3 is a copy of two rate schedules with the necessary amendments to reflect the withdrawal of Hunt-Collin as a Rayburn Country customer.

1.

Pate WP Exhibit A consists of Rate WP, Rider PCRF, and schedules SUA and NUA.

Mr.

Moore pointed out that Rate WP is similar to TU Electric's Rate WP because Rayburn Country cbtains most of its load obligat' ions from TU Electric.

Staff witness Xalso King testified tl it Rate WP is designed to recover Rayburn Country's entire revenue requiremen..

The demand component was set according to the demand cost of adjusted test year purchased power cost As previously state 1, the determination of the adjusted test year purchased power cost was uncontested.

The parties therefore all agreed that the appropriate demand charge was 56.33/kw.

Schedule KMK-1 attached to Mr. King's direct testimony illustiaten the calculation.

The energy component is designed to recover anergy purchased power costs and non-purchased power expenses.

Because the non-purchased power expenses

' were contested in this docket, the rel ated energy component was also contested.

In the rate filing package Rayburn Country sought a rate of

.025818/kwh.

General counsel's position was that a rate of.025244/kwh was most appropriate.

The proposed rates in the Stipulation of Parties utilizes a rate of.025408/kwh.

The examiner notes that if the stipulated operating expenses, $550,000, are used in Mr. King's calculation at XMX-1, the energy component should be slightly lower than tha stipulated rate.

The examiner's calculation produces a figure of.025338/kwn.

l e

c DOCXET HO. 7361 1

SUPP, EXAMINER'S REPORT PAGE 25 The examiner concludes that the Rate WP included in Exhibit A of the Stipulation of Parties is just and reasonable.

The record contains information to support each of the parties' calculations.

The demand comoonent is identical to the rate uncontested in the hearing.

The energy component reflects a settlement figure between the positions taken by the parties.

2.

Rider PCRF Rider PCRF is designed to flow through to the customer cooperatives changes in purchased power costs, as compared to the purchased power costs during the test year which were used to formul ate the rates in Rate WP.

Similar to Rate WP, Rider PCRF has both a demand and energy component.

The Rider PCRF energy component formula is adjusted in part due to savings from economy energy purchases during the test year.

The rates of HL&P through which Rayburn Country purchased economy energy were not approved by the Commission at the time Rayburn Country filed the rate filing package.

Examiner's Order No. 13 in this docket, which was affirmed by the Commission, prohibited the savings from econumy energy purchases from passing through Rayburn Country's PCRF to the customer cooperatives.

The PCRF clause could not be used to pass through changes in power costs due to rates that were not approved by the Commission.

The examiner concludes that Rayburn

untry should

' not be permitted to adjust its PCRF formula based upon HL&P rates that have not been approved by the Commission.

This question is, however, moot here because the rate for HLaP economy energy has now been approved by the Commission in Occket No. 8231, Acolication of Houston Lichtina & Power Co. for Acoroval of Economy Enerav Sales Contracts.

The examiner concludes that the Rider PCRF in Exhibit A of the Stipulation of Parties is just and reasonable.

The ccmponents of Rider FCRF are based upon the rates determined appropriate for Rata WP.

The record supports the calculation of both rate schedules.

Further, the Rider PCRF adopts the recommendations of the Commission staff.

}

l 4

00CXET NO. 7361 SUPP. EXAMIHER'S REPORT PAGE 27 3.

Rider SUA and Rider NUA Rider SUA allocates the power cost savings accaciated with the south unit of Denison Dam to the five customer cooperatives that received benefits from the south unit prior to Rayburn Country gaining utility status.

Part of the settlement of litigation between Rayburn Country and Hunt-Collin is that Hunt-Collin will no longer be a customer of Rayburn Country.

This portion of the settlement shall take effect in mid-March,1989.

Hunt-Collin shall, however, continue to receive benefits from Denison Dam power arrangements that are attributable to it.

The Stipulation of Parties is not clear on this point, but it appears that Rayburn Country shall be the agent of Hunt-Collin.

Rayburn Country shall directly receive the benefits of Denison Dam Power and the portion attributable to Hunt-Collin shall be paid to Hunt-Collin.

Because Hunt-Collin shall no longer be a customer of Rayburn Country the tariff cannot be used to pass the savings through to Hunt-Collin.

The Stipulation of Parties seeks approval of two versions of Rider SUA.

Exhibit A includes the Rider SUA that was approved on an interim basis on January 20, 1989.

Exhibit B includes Rider SUA with the references to Hunt-Collin deleted; this version of Rider SUA also revises the allocation factor for the remaining customer cooperatives under the schedule.

According to Mr. Moore, the customer cooperatives will not be affected by the amendments to the schedule.

Rider HUA is simular to Rider SUA, but provides for the allocation of power cost savings attributable to the north unit of Denison Dam.

The Rider NUA in Exhibit A was approved on an interim basis on January 20, 1959.

The Rider NUA in Exhibit B is revised to reflect the withdrawal of Hunt-Collin as a customer of Rayburn Country.

l 00CXET NO. 7361 SUPP. EXAMINER'S REPORT PAGE 28

\\

l The examinar concludes that Riders SUA and NUA in Exhibit A of the Stipulation of Parties are just and reasonable.

Further, the Riders SUA and NUA in Exhibi t B are just and reasonable and should be approved; Rayburn Country should be directed to put them into effect the first day Hunt-Collin is no longer a Rayburn Country customer, or April 3,

1989, whichever date is earlier.

IV.

Refunds A.

Refund of Excess Cash Reserve Staff witness Bellon stated in his supplemental testimony that Rayburn Country's available cash reserve was $434,190 as of November 30, 1988.

As previously discussed, the parties have stipulated that the appropriate cash reserve is S152,270.

Rayburn Country therefore has excess cash reserves of

$281,920.

In the Stipulation of Parties Rayburn Country agrees that as soon as a Final Order in this Docket implementing the Stipulation of Parties is promulgated, "Rayburn Country's Board of Directors will approve a rotation of capital credits that have previously been assigned by Rayburn Country to its customers in the amount of $231,920."

B.

Refund of La'<e Texema Storace Reallocation Credit As previously discussed, through its lobbying efforts that lead to a settlement with the North Texas Municipal Water District, Rayburn Country obtained a monthly credit to its invoice frca SWPA for Denison Dam power.

The credit is a negotiated compensation for a reallocation of water in Lake Texcma to the water district.

In the future the credits will be received each month and distributed to the customer coccaratives.

But Rayburn Country received one lump sum payment for prior months' credits.

As of December 31, 1988, the lump sum plus interest held by Rayburn Country totalled 5216,991.90.

Examiner's Attachment A is a copy of Mr. Kirkland's JWK-2 (Stipulation Document).

The attachment shows the amount of the proposed refund to each of the seven

7.

j

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i i.

DOCXET NO. 7361 SUPP. EXAMINER'S REPORT l

PAGE 29 customer cooperatives.

In the Stipulation of Parties Rayburn Country agrees that as soon as the Final Order implementing the Stipulation of Parties is

approved, Rayburn Country will refund the accumulated storage reallocation credit plus interest based upon the allocation factor in Rider NUA.

C.

Refund of Savinas From Economv Enerav Purchases Rayburn Country collected in an escrow account money saved from econcay energy purchases that it, due to Examiner's Order No. 13, could not pass through its PCRF to the member cooperatives.

This situation existed from November 1987 through September 1988.

According to Mr. Kirkland, the escrow account holds a principal amount of $2,181,672.

The principal amount is earning interest at a variable rate.

The parties agree that the principal and interest should be refunded to the customer cooperatives.

The witnesses Moore and Kirkland both asserted that the most. equitable method to refund the money in the escrow account to the customer cooperatives was a month-to-month refund plan. over a twelve month period, with the first actual refunds to be included in the billings mailed in early February 1989.

The month-to-month refunds shall return the escrowed amounts in the same calendar month in which they were first escrowed one year ehel i er.

For example, fiayburn Country proposes to refund the January 1988 economy - energy

- savings in ' January 1989; the actual refund of savings would occur with the billings sent out in early February 1989.-

The economy energy savings accrued in November and December 1987 shall be refunded to the customer cooperatives in November and December 1989.

The refunds will be in proportion to the amount of the customers' monthly bill.

For examole, the greater proportion of the winter months refunds will be f

returned to the customer cooperatives who have the larger winter months bills.

Rayburn Country asserts this is equitable because the customer cooperatives who receive the greatest refunds are the same customer cooperatives who one year l

_ _ _ _ _ _ _ _ _ _ _ _. _ _ _ _ _ _. _. _ _ _ =

n q

1 J 1_;

Y O'

DOCXET H0.-7361-

)

SUPP. EXAMINER'S REPORT:

PAGE 30 y

j m

ago. Suffered the - most because of the bar against passing the economy energy savings to the custcmer cooperatives.

I The refunds to the customer cooperatives of the savings from economy l

energy purchases were put into effect on an : interim basis pursuant to o

Examiner's Order No. 27.

Examiner's Attachment B is a copy of Mr. Kirkland's.

attachment JWX-1 (Stipulation Document).

The attachment shows the principal-1 and interest that Rayburn Country agrees to. return to each of the customer l

cooperatives according to the above-described method of returning the funds..

j g.

4 D.

Written Recort of Refunds Made Rayburn. Country has agreed to make the above-described refunds as soon-as j

the Commission approves.the Stipulation of Parties.

The Commission should order Rayburn Country to file a sworn written report with the Commission confirming that lthe refunds have been made, and demonstrating the details of L j

their -.calcul ation.

.The ' rotation of capital credits -and 'the refund of the

. ith respect to the reallocation credit, should not' take more than 45 days.

W refund of the economy energy savings, Rayburn Country should file a report no later - than - February 1990 to confirm that the refunds have been made.

The.

]

proposed order attached hereto so provides.

V.

The CCN Case Examiner's Order No'.13 required Rayburn Country to submit an application for a CCN for Rayburn Country's transmission line.

Rayburn Country opposed the Order, asserting that PURA Section 50(1) did not apply to the transmission line and that the Commission's substantive rules also indicated that Rayburn Country need not apply for a' CCN.

Rayburn Country pointed out that the Commission's j

substantive rules provide that a CCN is necessary for construction cf a transmission line, not a distribution line.

P.U.C. SUBST. R. 23.31(c)(1)(C),

(c)(2)(E).

The rules also define

• transmission line."

A transmission line includes all lines operated at 60 kv or above.

P.U.C. SUBST. R. 23.31(a)(1).

--,---_----_-.---n--

00CXET H0.'7361 SUPP. EXAMINER'S REPORT PAGE 31 Any public utility must, however, obtain a CCN prior to rendering service -

directly-or indirectly to the public.

PURA Section 50(1).

The Commission's substantive rules provide that all lines operated at above e0 kv or absve are transmission lines.

Rayburn Country operates its one line at 12.5 kv.

The line therefore is not on the basis of voltage necessarily a " transmission line."

The line is, however, not used to serve end-use customers, and therefore on this basis the line is a " transmission line" that must be licensed by the Commission.

The Commission may grant.a CCN for the line only if the Commission finds I

that the CCN is necessary for the service, accommodation, convenience, or safety of the public.

PURA Sectiou 54(b).

The Commission must consider the adequacy

,j of existing service, the need for additional service, the effect of the granting of a certificate on the recipient of the certificate and on any public utility of the same kind already serving the proximate area, and on such factors as community values, recreational and park areas, historical and aesthetic val ues, environmental integrity, and the probable improve:ent of service or lowering of cost to consumers ir such area resulting from the granting of such certificate.

PURA Section 54(c).

1 Rayburn Country's transmission line is a 36 foot,12.5 kv overhead tie-line connecting Farmers Electric Cooperative, Inc. to SWEFCO.

Staff witness Mr. Mel

- Eckhoff reviewed Rayburn Country's application for a CCN.

He noted that the I

tie-line is in the unincorporated community of Pickton, in Hopkins County, and is in the right-of-way of and parallel to State Highway 11 near the intersection of that road and Farm to Market Road 269.

According to Mr. Eckhoff, the cost of the Pickton tie-line (about $250) was reasonable.

In addition, he reviewed the effect of the tie line on the i

f l

l

3-DOCXET N0. 7351 SUPP. EXAMINER'S RE? ORT PAGE 32 surrounding area.

There are three businesses, four church buildings, and t..ree residences within 500 feet of the line.

Mr. Eckhoff noted, however, tha: the tie-line is farther frca the structures than are the distribution facilities of SWEPC0 and Farmers Electric Cooperative, Inc.

Given the size of the tie-line, he concluded that the tie-line does not adversely affect the structures.

Similarly, he concluded that the tie-line does not affect any television transmitters or similar electronic facilities, registered airstrips, pastures or croplands, parks, camps, or other recreation areas, or historical or archeological sites.

He therefore recommended approval of the application.

I Rayburn Country witness Mr. Pete Montes is the engineering manager of Farmers Electric Cooperative, Inc.

He testified that the tie-line lies in the most direct and economical route.

Further, the tie-line does not affect recreational, park, or historical sites, or environmental or aesthetic values.

He noted that while the tie-line does not improve service in the area, it does lower the cost of service to consumers.

1 Rayburn Country witness Mr. Kirkland explained the need for, the line from the perspective of power supply.

Rayburn Country is obligated to provide to the customer cooperatives all of their bulk power requ'irements.

To provide its customers with the cheapest power, Rayburn Country arranged to buy power frcm SWEPCO, which is part of the Southwest Power Pool.

The Southwest Power Pool is 1

isolated from the delivery system the customer cooperatives are connected to, ERCOT.

Rayburn Country determined, however, that a portion of the Farmers Electric Cooperative, Inc. service area could be isolated and transferred from ERCOT to the Southwest Power Pool.

Accordingly, the tie-line was constructed to transmit power from SWEPC0 to the isolated portion of the Farmers Elec:ric Cooperative, Inc. service area.

According to his calculations, the transfer of load from TU Electric to SWEPC0 sa/ed the customer cooperatives about 593.000 4

during the period January through September 1937.

The examiner concludes that the Rayburn Country tie-line is necessary for the service, accommodation, convenience, and safety of the public.

The tie-line

DOCXET H0. 7361 SUPP. EXAMINER'S REPORT PAGE 33 runs a distance.of only 35 feet.

It does. not affect c:mmunity values, recreational and park areas, historical and aesthetic values, or.the environmental integrity of the area.

The two other utilities that ser,'e the area, SWEPC0 and Farmers Electric Cooperative, Inc., will not be adversely affected.

The tie-line permits SWEPC0 to serve a new customer, Rayburn i

Country.

Farmers Electric Cooperative, Inc., along with the other customer cooperatives, will receive less expensive power.

Finally, the tie-line does i

not promise more or less reliable service but.does promise to provide' less expensive power.

VI.

Findings of Fact and Conclusions of Law-The examiner recommend. that the Commission adopt the following Findings of j

Fact and Conclusions of Law l

1 A.

Findinas of Fact 1.

Rayburn Country is a federation of six member cooperatives and one nonmember cooperative that serve about 200,000 customers in a 16-county area east of the City of Dallas.

Rayburn Country has no retail customers, and its only utility service is to resell power at wholesale to the customer cooperatives.

2.

Rayburn Country operates one transmission line.

The line is a 35 foot, 12.5 kV overhead tie-line that connects the facilities of SWEPC0 to the facilities of Farmers Electric Cooperative, Inc.

The line is located in the unincorporated community of Pickton, in Hopkins County.

3.

On January 16, 1987, Rayburn Country filed its original tariff with th; Ccmmission.

On that data Rayburn Country began operating its trans:ission line.

4.

The Commission's general counsel filed in July 1987 a request for a hearing to review the materials filed by Rayburn Country in this docket.

j l

a 4

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u N

.00CXET N0.'7361 SUPP.LEXAMINER'S REPORT

-PAGE 34' il 5.

On April 4,

1988, -Rayburn Country filed a-rate ' filing package and.. a~

statement of intent to change rates pursuan: to PUFA Section 43(a).

1 6.

'A hearing on the merits was held. in.this case beginning;an July-26, 1988.

7.' An Esaminer's Report was issued in this ' docket on October-28,.1988.

The report recommended that the Commission. deny. Rayburn Country status 'as a 'public.

utility and that.the Commission ~ deny Rayburn Cou'ntry's' proposed rates.

At the November 22, 1988, Final Order Meeting the Commission elected not to adopt the recommenciations.

The Commission therefore : remanded the case to the ' hearings

. division. to prepare findings of fact and conclusions of law that would support-approval of. rates for Rayburn Country.

8.

The case was reassigned to the undersigned hearings examiner on 4

. November 28, 1988.

The undersigned' hearings examiner has read the record.

i 9.

Hunt-Collin intervened in this case and opposed RayburnLCountry's proposed

. rates.

' Pursuant.to an agreement between' Rayburn Country and Hunt-Collin;

' Hunt-Collin ; moved to withdraw its intervention on. November,15, 1988.

The'

. motion was granted on December 6, 1988.

y

10. The member cooperatives (Fannin County Electric Cooperative,. Inc.; - Farmers Electric' Cooperative, Inc.;

Grayson-Collin Electric Cooperative, Inc.;

Kaufman County - Electric Cooperative, -Inc. ;

Lamar-County Electric Cooperative, Association;- ' and New Era Electric Cooperative, 'Inc.) were granted intervenor status as a single party.

The member cooperatives supported the rates proposed by Rayburn Country, i

11. There were no protest statements in this docket.

12. The rates filed by Rayburn Country on January 16, 1987, were approved on an interim. basis on February 10, 1987.

Rayburn Country amended its Rider PCRF on May ~ 4, 1987.

The amended Rider PCRF was approved on an interim basis on

DOCKET NO. 7361 i

SUPP. EyRilNER'S REPORT PAGE 35 l

May 19,1937.

Examiner's Order No.13, dated November 9,1937, c:ncluded that the initial tariff filing in this docket was not subject to Ccmmission reviw

)

under PURA Section 43(a) and that interim approval was not appropriate.

The Order therefore rescinded the interim approval of the rates filed January 16, 1987.

Interim approval of the amended Rider PCRF was not rescinded because it was subject to Commission review under PURA Section 43(g).

l

13. On December 15, 1988, Rayburn Country filed a motion seeking interim approval of revised tariff sheets.

The revised tariff sheets reduced rates due to a recalculation and reduction of non-purchased 'ower revenue requirements.

p The revised tariff sheets were granted interim approval on January 20, 1989,

14. On December 11, 1987, Rayburn Country filed an application for a CCN.

Notice was published in Hopkins County for two consecutive weeks.

The neighboring utilities providing the same utility service within five miles of the requested facility had actual notice of the CCN application.

1

15. Rayburn Country submitted affidavits that established that notice of the April 4,1988, statement of intent to change rates, had been published for four consecutive weeks in the sixteen counties served by the customer cooperatives.

l

16. Examiner's Order No. 23 suspended the operation of Rayburn Country's proposed rates for 150 days beyond the date publication of notice was completed, until March 20, 1989.

17. Direct notice of the April 4,1988, statement of intent to change rates was not given to the municipalities located in the sixteen counties served by the customer cooperatives.

18. On January 30, 1980, Rayburn Country, the intervenor member cooperatives, and the general counsel filed a " Stipulation of Parties."

The agreement was i

submitted for purposes of resolving by stipulation every centested issue in the docket.

1 l

e i

4 00CXET H0'. 7361 SUPP. EXAMINER'S RE.MRT J

PAGE 35-

19. Pursuant to paragraph 15 of the Stipulation of Parties, the parties agned that the supplemental testimony of witnesses Xirkl and, Moore, Orozco, and Bellon filed in support of the Stipulation of Parties should be admitted into evidence.

The parties waived their right to cross-examination.

20. Rayburn Country's proposed rates would produce a rate increase af

$1,305,074 or 2.69 percent over actual test year revenues.

The Commission staff and general counsel recommended a rate increase that totalled.5444,074 or

.91 percent over actual test year revenues.

The Stipulation of Parties provides for a rate increase of 5772,027 'or 1.59 percent over actual test year revenues.

21. Rayburn Country has total invested capital, excluding working cash allowance, of S70,571, based on the original cost of property used and usaful in providing service, as set forth in the testimony of staff witness Bellon.

22. The parties stipulated to a cash reserve of $152,270.

The stipulated amount reflects Rayburn Country's cash needs with respect to the purchase of SCADA equipment.

The SCADA equipment shall be used and useful in provHing service to the customer cooperatives.

)

i

23. The parties stipulated to a zero rate of return.

A zero rate of return is reasonable because Rayburn Country has no outstanding debt and therefore no debt coverage requirements.

A rate of return greater than zero would produce excess cash that Rayburn Country does not need.

Rayburn Country has no plans to invest in new transmission or generating plant in the next five years, and already has a cash reserve sufficient to finance the purchase of the SCADA l

equipment.

24. The parties stipulated to 548,S05,929 for purchased pcwer.

The figure was uncontested during the hearing on the merits.

It was adjusted to annualize j

expenses and to reflect new TU Electric rates.

The stipulated figure is just I-I and reasonable.

V

l-l?

' 00CXET NO.:7361-

.SUPP. EXAMINER'S REPORT

'PAGE 37 L

25. The parties stipul ated to S534,741 for operationsf - and maintenance expenses.

The stipulated amount-is just and reasonable,, and reflects that Rayburn Country's. expenses will be more mcderate new that the Hunt-Collin

- litigation has-been settled...

26.-The parties stipulated to a depreciation expense of 59,143.

The stipulated j

. figure reflects' the position ltaken by staff witness Bellon and is-_.just. and

- reasonable.

q

27. The parties stipulatad-to an expense for taxes other than inccme taxes of 1

-36,116.

The stipulated figure - reflects the position taken by staff witness Bellon and is'just and reasonable.

28. The rates ' set forth -in the stipulation of Parties Attachments A and B~ are

designed to meet three; objectives.

Theratesproviderevenubtomeetpurchased power costs, and.to meet non-purchased power costs.

The rates-also allocate: to the - customer cooperatives the benefits' arising from. the ' rights to less expensive hydro-electric power cats.

The variances.in demand and energy costs l

attributable to the separate customer cooperatives are recovered through i

separate demand and energy components.

- 29. The rates. set forth in the Stipulation - of Parties Attachment A are appropriate to recover the con of service.

The rates do not make unreasonable differences or preferences with respect to rates or service provided to the customer cooperatives.

' 30. The rates set forth in the Stimulation of Parties Attachment 8 are appropriate to -allocate the pc r ci savings associated with the north and south units of Denison Dam, upon the r drawal of Hunt-Ccilin as a custcmer of Rayburn Country.

The member c:ccor & ies will no: be affected by the amendments to Schedules NUA and SUA fw in Stipulation of Parties Attachment B.

u_u _ _ ____ __

j

.c DOCXET NO. 7361 SUPP. EXAMINER'S REPORT PAGE 38

31. The' rates sat forth in the Stipulation of Parties Attachments A and 3 are fair and equitable, clear, understandable, and predictable.

In addition, the rates would generate sufficient revenue to enable Rayburn Country to recover its cost of. service as determined in the preceding findings of fact.

i

32. The rates set forth in the Stipulation of Parties Attachments A and' B conform with the terms of the Stipulation of Parties.

33. Rayburn Country's cash reserve as of November 30, 1988, was 5434,190.

The appropriate cash reserve for' Rayburn Country is S1S2,270.

Rayburn Country therefore has excess cash reserves of $231,920 that should be returned to the customer cooperatives through a rotation of capital credits.

l

34. Pursuant to the Stipulation of Parties, Rayburn Country agrees that as soon j

as the Commission's Final Order implementing the Stipulation of Parties is signed, Rayburn Country will approve a rotation of capital credits in the amount of $281,920.

35. Rayburn Country received a lump sua payment from SWPA to compensate Rayburn Country for the reallocation of water in Lake Texoma.

As of December 31, 1988, the lump sum plus interest held by Rayburn Country totalled $216,991.90.

Examiner's Attachment A illustrates the portion of this sua attributable to each customer cooperative.

This zum should be returned to the customer cooperatives according to the amounts attributable to each of the customer cooperatives, as set forth in Examiner's Attachment A.

The sum should be returned in a single lump sum payment to each of the customer cooperatives.

36. Pursuant to the Stipulation of Parties, Rayburn Country agrees that as soon as the Commission's Final Order implementing the Stipulation of Parties is

signed, Rayburn Country will refund to the customer cooperatives the accumulated storage reallocation credit plus interest, based upon the allocation factor in Rider NUA.

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DOCKET NO. 7361 SUPP. EXAMINER'S-REPORT PAGE 39 I

37. Rayburn Country collected in an escrow account money saved from economy energy purchases that it, due to Examiner's Order No. 13, could not pass through its Rider PCRF to the member cooperatives.

This situation existed from November 1987 through September 1988, The principal and interest should be returned to the customer cooperatives.

38. Examiner's Attachment B shows the principal and interest from economy l

energy savings that Rayburn Country should return to each of the customer cooperatives.

The most equitable method to refund the money to the member cooperatives.is a month-to-month refund plan over a twelve month period.

The

' month-to-month refunds shall return the escrowed amounts in the same calendar

{

month in which the economy energy savings were first escrowed one year earlier.

The refunds should be in proportion to the amount of each customer's l

monthly bill.

For example, the greater proportion of the winter months refunds will be returned to the customer cooperatives who have the larger winter months bills.

The refund plan was put into effect on an interim basis. pursuant to l

Examiner's Order No. 27.

l

39. Pursuant t'o the Stipulation of Parties, Rayburn Country intends to continue to pay to the customer cooperatives the accrued economy energy savings plus

-1 interest in the manner outlined in Examiner's Order No. 27.

i

40. Rayburn Country's transmission line does not adversely affect nearby structures.

The tie-line does not affect any television transmitters or I

i similar electronic facilities, registered airstrips, pastures or cropl ands,

parks, camps, or other recreation areas, or historical or archaeological sites.

41. The tie-line follows the most direct and economical route and permits Rayburn Country to purchase power frca S'JEPCO.

The transfer of load at the Pickton tie-line from TU Electric to S'JE?C0 saved the customer cooperatives about $98,000 during the period January through September 1987.

42. The tie line does not affect community values, recreational and park areas, i

historical and aesthetic values, or the environmental integrity of the area.

Fr i.

s DOCKET NO. 7361 SUPP. EXAMINER'S REPORT PAGE 40 t-ihe two other utilities that serve the area, S'JE?CO and Farmers Electric

-Cooperative,.Inc.,

will.not be adversely effected.

The tie-line does not promise more or less reliable service but does premise ~ to provide less j

1 expensive power.

43. The Rayburn Country tie-line is necessary for the service, accommodation, j

convenience, and safety of.the public.

B.

Conclusions of Law E

1.

Rayburn Country'is a public utility as that term is defined by PURA Section 3(c)(1).

1 The Commission has jurisdiction and authority to evaluate and approve 2,

Rayburn Country's proposed rates.

PURA Sections 16(a), 17(e)'and 37.

l 3.

Rayburn Country's rate filing package meets the requirements fcr a statement of intent.

PURA Secticn 43(a).

4.

This docket was reassigned to the undersigned examiner pursuant to Section 15 of the Administrative Procedure and Texas Register Act, Tex. Rev. Civ. Stat.

i Ann. art. 6252-13a (Vernon Supp. 1988).

5.

Proper notice was given to all affected persons in compliance with PURA Section 43(a).

6.

Proper notice was given to all affected persons concerning the application for a CCN.

P.U.C. PROC. R. 21.24.

7.

The operation of the proposed rate schedules was suspended in accordance with PURA Section 43(d).

8.

The methods of calculating and rates recovering allowable expenses, which were approved by the staff and' accepted in the Stipulation of Parties, are proper and adequate and have been uniformly and consistently applied.

00CXET NO. 7361

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SUPP. EXAMIMER'S REPORT PAGE 41

-9.

The invested capital stipulated to by the parties is based on the original.

cost of proper y used and useful to Rayburn Country in providing service.

PURA Section 39(a).

10. The return on rate base stipulated to by the parties constitutes-a reasonable return on Rayburn Country's invested capital used and useful in rendering service to the public.

PURA Section 39(a).

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11. The overall revenue stipulated to by the parties will permit Rayburn i

Country a reasonable opportunity to earn a reasonable return over and above its' reasonable and necessary operating expenses.

PURA Section 39(a).

12. Rayburn Country has met its burden of ' proof to show that rates producing the base rate revenue stipulated to by the parties 'are just and reasonable.

PURA Section 40.

13. The rates labeled as Attachments A and B of the Stipulation of Parties are just and reasonable. and are not unreasonably. preferential, prejudicial, or discriminatory.

PURA Section 38.

14. The rates and services of Rayburn Country set forth in Attachments A and B of the Stipulation of Parties do not grant an unreasonable preference or advantage to any customer or subject any customer to unreasonable prejudice or f

disadvantage.

PURA Section 45.

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_a g ;;.9' DOCXET NO. 7361 SUPP." EXAMINER'S REPORT PAGE 42

~15'. The rates and services.'of Rayburn Country set forth.in Attachments A and 3-.

of _ the Stipulation of Parties are just and reasonable and:otherwise comply 1with

' the. ratemaking mandates of Article IV of' the PURA..

Respectfully; submitted,.

l j d S6/

' RICHARD S. O'CONNELL

/

HEARINGS EXAMINER

'I-fAPPROVED~on the day of Ox1La/

'1989.

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-l PHIAIP A. HOLDER /'l DIMCTOR OF HEARIMS

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ATTACHMENT C s

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h PANDA ENERGYCORPORATION An Altemate t.nergy Company March 2,1989 Mr. David W. Pruitt General Manager Cap Rock Electric Cooperative, Inc.

P.O. Box 700 Stanton, Texas 79782 Re: Cap Rock / Panda Cogeneration Agreement

Dear David:

Pursuant to our recent conversation, I am writing to briefly describe the problems which Panda has encountered in connection with Subject Agreement.

At tha time of contract execution, Panda had an existfnr steam host (Oscar Mayer near Sherman, Texas) Land contemplated building a Qualifying Facility at that location to serve cap Rock. Panda recognized the advantages of,

securing a steem host in Cap Rock's sery!ce ares (i.e. saving wheeling costs through TUE!actric System as well as avoiding the necessity of negotiating other coordination services to be supplied by(to one in the cap Rock service TUElectric). At the time, Panda did not consider a change in st&am hosts area) to be either essential or a priority item. It was felt that necessary arrangements could be raade with TUElectric on a sufficiently expeditious basis.

Subsequent events have proven us wrong.,-It Is now our perception that we cannot hope to deal with TUElectric on a sufficiently reasonable or expeditious basis to utilize Oscar Mayer as a host. Our perception stems from delays which we have annnuntered (and which we anticipate) and from the extremely host!!e attitude which TUElectric has evidenced toward Panda.

~

Ior,, example. It took a peric4 of some months to obtain an initial response to our first inquiry regarding coordination services - a longer period than we thought necessary. And when given, it showed absolutely no intent to furnish or even to negotiate any arrangement beyond those clearly required by law or regulation (i.e. Wheeling). Further, by letter of October 20, 1988 i

(from TUElectric to C.H. Guernsey & Company), TUElectric Ind!cated (in view of the NRC complaint filed by Cap Rock) that "further discussions between us at this time will not be fruitful". Obviously, there is no possibility of resolving the coordination services dilema with TUElectric at the present time.

4100 Spring Valley, Suite 2001 Dallas. Texas 75244 214/980 7139

Mr. David W. Pruitt E

>e.

' Cap Rock Electrie March 2,1989 i

Page 2 i

Perhaps more significant is TUElectric's apparently hostile attitude toward Panda. We will not belabor this point - it la readily apparent in TUElectric's response to Cap Rock's NRC complaint in which Panda is accused of in effect being a movine earty in Cap Rock's action. For example, we were accused (on 1

pags U of using "this Commissions lleensing. proceeding to obtain i

preferential treatment", and (on page 5) of " attempting to use Cap Rock to force TUElectric to do what it could not do directly." Said response further accuses Panda (on page S) of using the NRC to " pressure TUElectric into a preferential power purchase arrangement." The response evidenced a bitter TUElectHe attitude toward Panda (in the above quoted portions and in other portions as weld. TUElectric's response almost appeared to be directed toward

~

Panda,instead of Cap Rock.

j l

The truth !s that Panda has not been involved (directly or Indirectly) in Cap Rocks NRC complaint. It doesn't even involve Panda's relationship with Cap Rock. TUElectric's response, however clearly evidences a bitter attitude toward Panda and makes it clear that TUElectric W111 neither negotiate or contract with us in good faith. Accord!ngly, we are relegated to seeking l

a host in Cap Rock's service area to replace Oscar Mayer. There la simply '

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. no realistic chance of dealing with TUElectric.

Very trut yours,

')

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%hG Robert W. Carter Chairman RWC/tb

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UNITED STATES OF AMERICA BEFORE THE NUCLEAR REGULATORY COMMISSION l

Texas Utilities Electric

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i company, at:Al2,

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Docket Nos. 50-445A Comanche Peak Steam Electric

)

50-446A Station, Units 1 and 2

-)

j CERTIFICATE 0F SERVICE I hereby certify that a copy of the foregoing " Supplemental Comments and' Reply of Cap Rock Electric Cooperative, Inc." was served by hand delivery to:

Cecilf0. Thomas, Jr.

William Lambe Chief Office of Nuclear Regulations l

Policy Development Technical U.S. Nuclear Regulatory Support Branch Commission Main Stop 12-3 One' White Flint North-One White Flint' North 11155 Rockville Pike 11155-Rockville Pike Rockville, MD 20852 Rockville, MD 20852 and by first class mail, postage prepaid on the loth dLy of i

March, 1989 to:

Peter B.' Block, Esquire Chairman Administrative Judge Atomic Safety and Licensing Atomic Safety and Licensing Appeal Board Panel Board U.

S.

Nuclear Regulatory i

U. S. Nuclear Regulatory Commission I

Commission Washington, D.C.

20555 Washington,.D.C. 20555 Dr. Walter H. Jordan Ellen Ginsberg, Esquire Administrative Judge Atomic Safety and Licensing 881 W. Outer Drive Board Panel Oak Ridge, TN 37830 U.S. Nuclear Regulatory Commission Washington, D.C.

20555 i

Da w

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My.7 l'

e : Elizabeth-B; Johnson.

Stuart A.JTreby, Esquire r

Administrative' Judge' Office of Lthe Executive Legal-Oak. Ridge 1 Natural-Laboratory U.S.LNuclear. Regulatory P.no.rBox N,cBuilding'3500 Commission Oak" Ridge,sTN. 378301 Washington, D.C.

20555-Chairman

~ Thomas G. : Dignan, ~ Esquire i

Atomic'Safetyfand Licensing-William E. Eggeling, Esquire

~BoardfPanel-Ropes:.&-Gray.

U.S.. Nuclear Regulatory

-225 Franklin: Street:

Commission

' Boston, MA 02110 Washington, D.C.

20555 i

Mr.4 James E.:CumminsL Roy P.

Lessy, Jr., Esquire i

' Resident. Inspector.

Wright & -Talisman, lP.C..

Comanche; Peak S.E.S.

1050 17th Street, N.W.

P..O.

Box 38' Washington, D.C.

20036-5566 Glen Rose', Texas 76043 l'

Mr. William'L. Clements Mrs. Juanita Ellis

Docketingl&LService Branch' President, CASE LU.S. Nuclear Regulatory 1426.S. Polk Street:

Commission Dallas, Texas 75224 Washington, D.C.i20555

. Nicholas?S.-Reynolds, Esquire Anthony ~Z.

Roisman, Esquire Wiliam A. Horin, Esquire; Executive Director Bishop,--Liberman, Cook, Trial Lawyers for Public PurcellE&'Reynolds Justice-1200~17thLStreet, N.W.

2000 P Street, N.W., Suite 611 i

Washington,--D.C. 20036-Washington,:D.C. 20036 l

-i

-Robert A. Wooldridge, Esquire Billie Pirner Garde,l Esquire LWorsham,-Forsythe, Sampels Citizens Clinic Director

& Wooldridge Government Accountability 20011 Bryan Tower

, Projects Suite 2500-1901-Que-Street,:N.W.

1 Dallas,.-Texas'75201

-Washington, D.C.

20009

'Renea Hicks, Esquire Nancy Williams Assistant-Attorney General Cygna. Energy Services, Inc.

Environmental: Protection Div.

101 California Street P. O.JBox 12548 Suite 10000 Capitol' Station.

San Francisco, CA 94111 Austin, Texas.78711

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~Mr. Lanny'A. Sinkin:

-l Christic Institute

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1234~ North Capitol Street

- Washington, _'D.C. - 20002 -

1 Mr.1Kenneth A McCollom

? Administrative Judge-1

'1107 West'Knapp l

Stillwater, OK-74075

'Geary Sk Mizuno, Esquire ~

Office of'the Executive

.LegalLDirector U.

S. Nuclear. Regulatory commissica Washington, D.C.20555

Joseph /Gallo,qEsquire.

Hopkins,'Sutter, Hamel1& Park 888.t16th. Street, N.W.

W a s h i n g t o n,- D. C. 20006.

Mr. Robert'D. Martin'

.RegionalLAdministrator, Region IV~

['

U.S. Nuclear Regulatory

. Commission jf 611 Ryan Plaza Dr., Suite 1000

'l Arlington,.TX-76011L

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John 5fchael Adragna l

~

Miller,.Balis &-O'Neil~,

P.C.

1101-Fourteenth. Street, N.W.,

Suite 1400 3.

Washington,.D.C. 20005 (202).789-1450-l 4

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