ML18230A830

in Matter of Application of Carolina Power & Light Company, for Increase in Rates & Charges - Testimony of N. Edward Tucker, Utilities Engineer, Division of Engineering

ML18230A830
Person / Time
Site:	Harris
Issue date:	03/23/1977
From:	Tucker N State of NC, Utilities Commission
To:	Office of Nuclear Reactor Regulation, State of NC, Utilities Commission
References
Download: ML18230A830 (8)

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DOCKET NO. E-2, SUB 297 g. g, Uy(Lg(Q COl IMIBSlDN BEFORE THE NORTH CAROLINA UTILITIES COMMISSION IN THE MATTER OF APPLICATION OF CAROLINA POWER AND LIGHT COMPANY FOR INCREASE IN ITS RATES AND CHARGES Docke't8 4Mgoo/<<3~>

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RMUULlOH DOCKH FlLE le 0-TESTIMONY OF N. EDWARD TUCKER UTILITIES ENGINEER DIVISION OF ENGINEERING STAFF, NORTH CAROLINA UTILITIES COMMISSION MARCH 23, l977

DOCKET NO. E-2, SUB 297 1 g. Please state your name, address, and place of employment.

2 A. My name is N. Edward Tucker, Jr. I am employed as an engineer on the Staff of the North Carolina Utilities Commission. My business address is One Mest Morgan Street, Raleigh, North Carolina.

7 g. Briefly describe your education and experience.

8 A. I received a B. S. Degree in Electrical Engineering from 9 North Carolina State University in May, 1971. In June 1972, 10 I received an 'M. E. degree in Electrical Power Engineering ll from Rensselear Polytechnic Institute. I joined the Commission 12 Staff as a Utilities Engineer in July 1972.

Since my employment with the Coamission, I have been involved 15 in the "taff investigations and offered testimony in rate pro-

.16 ceedings bv Carolina Power and Light Company, Duke Power Company,

'I 17 Yirginia Electric and Power Company and Nantahala Power and Light 18 Company. In general, my areas of responsibility in these cases have been the review and analysis of jurisdictional allocation 20 studies, fully distributed cost of service studies, and rate 21 design.

22 23 Recently I was a member of Task Force 5 (rate design) of the 24 Electric Ut',lity Rate Design Study conducted by the Edison 25 Electric Institute and the Electric Power Research Institute 26 for the NARUC.

1 g. Has the Staff reviewed the al'iocation of the revenue increase to 2 each rate classification proposed by Carolina Power and Light Com-3 pany in ",his docket?

4 A. Yes, Since the rates of return earned would give an indication of 5 the effect." of the proposed increases on each rate class, a review 6 was made of the rates of return earned for test year operations by 7 rate class on the Company's present and proposed rates as determined 8 by the Retail Operations Cost Allocation Study. The study is dis-9 cussed i>> Mr. Bumgarner's testimony.

10 It was found that the rates of return for the major rate schedules 12 proposed by CPKL are within ll~ of the average retail rate of re-13 turn witn one exception. The rate of return for the proposed GLF schedule would be 16.65> above the average rate of return. This represen.'s a reduction in the 22.52< variation from average return 16 currently being earned on the present GLF schedule.

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~ 17 18 g. Does the Staff have an opinion with respect to the appropriateness 19 of the Company's allocation of the proposed revenue increase to 20 each rate class?

21 A. Yes. The Staff would agree with the proposed allocation of the 22 revenue increase to rate classes. The Company's proposal results 23 in a general reduction in the variations in rate of return.. As 24 discussed, the returns for all but one of the major proposed rate 25 schedules are within ll~ of the average return, and significant re-26 ductions were made in the variation from average return for that 27 schedule.

Althougn costs must be a major input into rate design, consideration must be given to factors other than cost such as possible customer 3 impact, inherent relationships between rates, and historical rate 4 design. For example, CP&L's general service rates as a group were 5 originally designed to recognize differences in customer size and 6 load factor. Large changes in the rate levels of these general 7 service schedules relative to each other could produce significant 8 impact on individual customers and on the validity basic design of 9 these schedules.

10 ll In addition, cost studi=s are performed to determine cost respon-12 . sibility associated with a specific historical test period under 13 static corditions. A utility system is not static but is dynamic.

14 For this reason, rates which equalize returns between classes for 15 a specific test period may produce variations in returns on any

.16 other test period. inis is particularly true under the current

. 17 situation discussed by t(r. Bumgarner where conditions may require 18 an alternation in cost allocation methods in the future.

19 20 Mith these factors in mind, the Staff is of the opinion that a 21 further reduction in the variations in rates, of return is not neces-22 sary at this time.

23 24(. Does your response to the previous question give any indication of 25 the reasorableness of the total revenue increase requested by the 26 Company?

1 A. No.,In my previous answer I was speaking only to the appropriateness 2 of the rela.ive rate levels between rate classes not to the reason-3 ableness'f the total amount of revenue increase being requested 4 by CPKL in this docket.

6 g. Has the Staff reviewed the design of the rate schedules and the 7 changes in .he service provisions proposed by Carolina Power and 8 Light Company in this docket7 9 A. Yes. Dr. Goins has reviewed the Company's residential rate pro-10 posals and will present the Staff's recommendations with respect to those rates in his testimony.

12 13 I have reviewed the rate schedules proposed for the other classes of service and the changes proposed for the Service Rules and 15 Regulations.

17 g. Would you please describe the changes in rate structure (other than 18 residentialj and Service Regulations proposed by the Company in 19 this proceeding.

20 A. Yes. Hr. Davis'estimony, (the Company's witness on rate design) 21 includes a detailed description of the proposed changes to rate 22 schedules and to Service Regulations. For this reason, I will not include a detailed discussion of all of the Company's proposed 24 changes; nowever, I will briefly indicate some of the major proposals.

With respect to the Service Regulations, one major adjustment was 27 the inclusion of a $ 5.00 charge for the connecting of service. This

charge was increased from $ 2.00. Another proposal is to '.nclude wordinc. which would prohibit "peak-splitting" for customers who utilize some type of load control equipment. The Staff has reviewed these two major proposal's as well as several other minor wording changes and is in agreement with the Company's proposed changes to its Service Regulations.

8 There were no rate design changes in Schedules G-2 (now designated 9 GS-l), G-3 (LGS-l), GLF (GLFS-1) and in the Lighting Schedules 10 (several schedules include the offering of additional sodium vapor ll lighting). Schedule G-1 (SGS-1) was changed by the addi tion of a 12 Basic Facilities Charge of $ 6.50 and by a simplification of the 13 blocking of the rate structure. Host of the remaining Small General 14 Service rate schedules were modified to include the $ 6.50 Basic 15 Facili'.ies Charge. This TW-2 schedule was eliminated and was re-16 placed with a rider to the SGS sch dule. (This change only affects 17 two customers).

18 19 Hany of CP8L's rate schedules were either closed to new customers 20 or eliminated as a result of the last application. The Company pro-21 poses to continue this trend of reducing the number of rate schedules 22 available to new customers thereby greatly'simplifying the Company's 23 overall rate structure. In this application the Company proposes 24 to eliminate the large municipal pumping schedule, MP-2 (currently 25 has no customers) and serve all municipal pumping customers on MPS-1 26 (previously HP-1). In addition the Company proposes to make HPS-1

unavailaole to new customers. CPSL also proposes to close schedules CSG-1 (previously GS-1) and CSE-1 (previously CS-2) to new customers.

Closing these schedules to new customers reduces the number of effec-tive rat.es while minimizing the impact on existing customers.

The Staff is in agreement with all aspects of the design of the 7 rates (other than residential) proposed by the Company with one ex-8 ception. '.n the general service rates which include a demand charge, 9 the Company proposes to use the ratchet provision approved by the

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10 Commissioa in the last CPEL rate case. This ratchet sets the mini-ll mum billing demand as the maximum of 1) 905 of the maximum demand 12 recorded during the billing months of July through October of the

.13 preceding eleven billing months, or 2) 50~ of the maximum demands 14 recorded during billing months of November through June of the pre-15 ceding eleven billing months. Since the winter demand appears to 16 be increa'ing relative to the summer demand (discussed by Mr. Humgarner),

17 the Staff is of the opinion that this ratchet provision should be 18 changed tn reduce the relative difference between the value of the 19 summer and winter ratchet factors. A reduction of the differential 20 in the seasonal ratchet percentages should give the customer a 21 pricing indication that the cost, differential between summer and 22 winter demands could be decreasing and should ease the possible 23 future impact of adjustments in allocation methods. The Staff would 24 propose an 85% ratchet factor based on summer demand and a 60Ã factor 25 based on wHrer demand. This change in ratchet provisions would re-26 suit in a change in demand billing determinants for each rate which

~ ~ er includes the ratchet'provisions and would require an adjus"ment in demand re~ated prices to maintain the appropriate revenue levels for each rate. The new billing determinants on which to redesign the rates were not available at the time of the f'.ling of this testi-mony.

Nth th"= change in the ratchet provisions of the general service rates (with associated changes in demand related prices), the Staff would agree with the Company's rate design (excluding residential) 10 and Service Regulation proposals. It should be noted that approval ~

of a total increase in revenues other than that proposed by the 12 Company and/or approval of the adjustments to the base of the fuel 13 adjustment factor as proposed by Mr. Williams will require a re-pricing of all of the rates filed.

16 g. Does this complete your testimony?

17 A. Yes, it does.

18 19 20 21 22 23 26