ML18230A833

Testimony of Donald R. Hoover, Studies of Original Cost New Investment, Revenues, Expenses, & End-Of-Period Rates of Return Under Present & Company Proposed Rates

ML18230A833
Person / Time
Site:	Harris
Issue date:	03/23/1977
From:	Hoover D State of NC, Utilities Commission
To:	Office of Nuclear Reactor Regulation, State of NC, Utilities Commission
References
Download: ML18230A833 (65)

Text

BEFORE THE UTILITIES C~ISSION OF THE STATE OF NORTH CAROLINA g EG~I ZEg NR 23 mn CHIEF a.Ey<

~'C. UTlUTlES Cgyg~SSigg in re CAROLINA POMER & LIGHT COMPANY Docket No.'-2, Sub 297 Sb- 40o- Vo3 Docket 4 Control N v I 4 0< i4I Date 4 of Document:

REGU TOi Y DOCKH FlLE Testimony of Donald R. Hoover Stud of Ori inal Cost Net Investment Revenues enses and End-of-Period Rates of Return 'Under 'Present'and Com an Pro osed Rates Test Year Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

March 23, 1977

1 g: Mr. Hoover, m'.ll you state for the record your name, address, and 2 present position?

3 A: My nam is Donald R. Hoover. My business address is One Vest Morgan I

P 4 Street, Raleigh, North Carolina. am Coordinator of the Electric 5 Section of the North Carolina Utilities Commission's Accounting Division.

8 Q: How long have you been employed in your present capacity with the 9 Commission?

10 A: Since June, 1974.

12 0: Vill you state briefly your training and experience prior to and after becoming associated with the Accounting Staff of the North 14 Carolina Utilities Commission?

15 A: I have a Bachelor of Arts Degree in Accounting from Belmont Abbey 16 College, Belmont, North Carolina, granted in 1964. My work 17 experience includes three years as a Foreign Corporations Field 18 Auditor with the North Carolina Department of Revenue in Raleigh, 19 North Carolina, during which time I held the positions of 20 Auditor I, II, and III; and two and one-half years both as a 21 Staff Accountant and as Senior Accountant in the'nternal Audit 22 'nd Financial Studies Department of Duke Power Company in Charlotte, 23 North Carclina. .Since )oining the Commission Staff in January of 24 1972, I have held the positions of Public Utilities Accountant I and 25 Public Utilities Accountant II, and I presently hold the position of 26 Public Utilities Accountant III, which has been designated as

Coordinator of the Electric Section of the Accounting Division.

My du-ies at the Public Utilities Accountant I level included performance of the less complex audits, investigations, and other special studies of public utilities regulated by this Commission, including the preparation and presentation of testimony and exhibit- during hearings before the Commission. Additionally, my duties at the Accountant I level included assisting other Staff Accountants in performing the more complex audits and investigations of public utilities including assistance in the 10 preparation of testimony and exhibits. At the Public Utilities Accountant II level my duties included supervising and performing the more complex audits, investigations, and other special 13 studies of public utilities regulated by this Commission, in-cluding the preparation and presentation of testimony and 15 exhibits. during hearings before the Commission. As Coordinator 16 of the Electric Section, I am responsible for planning, organ-17 izing, assigning, and controlling the work performed by the 18 Staff Accountants assigned to this section of the Accounting 3.9, Division. I have the responsibility of coordinating the 20 activities of the Electric Section with other sections of the 21 Accounting Division and with other Divisions of the Commission.

22 More specifically and with regard to electric utility general I

23 rate case investigations and such other rate proceedings as 24 may be assigned to me by the Director of Accounting, it is 25 my responsibility to analyze the testimony and exhibits 26 presented by the parties before the Commission. I have the

further responsibility of supervising and performing examinations of the books and records of utilities involved in these proceedings and summarizing the results into testimony and exhibits for presentation before the Commission.

With regard to the previously mentioned audits and studies, I have prepared and presented exhibits and testimony during the following general rate increase hearings before the Commission:

Western Carolina Telephone Company, Docket No. P-78, Sub 25; 10 Westcn Telephone Company, Docket No. P-58, Sub 85; Idlewild Utilities, Inc., Docket No. W-167, Sub 1; Providence Utilities, 12 Inc., Docket No. W-181, Sub 3; Springfield Utilities, Inc.,

13 Docket No. W-194, Sub 2; Derita Woods Utilities, Inc., Docket 14 No. W-'2, Sub 2; Sharon Utilities, Inc., Docket No. W-193, 15 Sub 1: Scientific Water and Sewerage Corporation, Docket No.

16 W-176. Sub 6; General Telephone Company of the Southeast, 17 Docket No. P-19, Sub 136; Duke Power Company, Docket No. E-7, Sub 159; Nantahala Power and Light Company, Docket No. E-13, 19 Sub 23; Western Carolina Telephone Company, Docket No. P-58, 20 Sub 93; Westco Telephone Company, Docket No. P-78, Sub 32; 21 Duke Power Company, Docket No. E-7, Sub 173; and Carolina 22 Power and Light Company, Docket No. E-2, Sub 264.

23 24 am a Certified Public Accountant licensed by the North Carolina 25 State Board of Certified Public. Accountant Examiners, and I am a 26' member of he North Carolina Association of Certified Public

C I

Accountants, and the American Institute of Certified Public Accountants.

4 Q: Mr. Hoover, has the Commission Accounting Staff made an exami-5 nation of the books and records of Carolina Power and Light 6 Company (CP&L)?

\

7 A: Yes, an examination was made for the twelve months ended June, 8 30, 1976.

10 Q: Were the results of the investigation summarized into 'an exhibit for presentation in this proceeding?

12 A: Yes.

13 14 Q: I now hand you a document captioned "Study of Original Cost Net 15 Investment, Revenues, Expenses, and End-of-Period Rates of Return 16 Under Present and Company Proposed Rates", and ask if this 17 'ocument was prepared by you or under your supervision for pre-18 sentation .in this proceeding?

19 A: Yes, it was.

20 21 Q: Please describe for the Commission that portion of Hoover Exhibit 1 22 which sunaaarizes the North Carolina end-of-period original .cost 23 net investment and net operating income for return.

24 A: The summary is presented on Schedule 1. The rates of return have 25 been calculated using the Company's actual capital structure at 26 December 31, 1976, adjusted to include additional deferred income

taxes and investment taxcredit arising from pro forma adjust-ments to reflect the related effect of additions to utility plant fn service. The embedded cost of debt and .the preferred dividend requirement are based on the Company's annualized cost at December 31, 1976. The re'turns after Staff accounting and pro form+ adjustments and after the Company proposed increase in rates may be summarized as follows:

After Accounting And Pro 'Forma 'Ad ustments Present Proposed item Rates 'ates 10 (a) (c)

Return on original cost net investment 7. 69% 10.13%

12 Return on common equity 8. 67% 15.47%

14 Q: Mr. Hoover, in your calculation of return on common equity, have 15 you in luded cost-free capital arising from the Job Development 16 Investment Tax Credit implemented by the Revenue Act of 1971~

17 A: Yes, the unamortized balance of the Job Development Investment l

18 Tax Credit (JDC) was included as common equity, thus, allowing 19 the company to earn the full equity return on the unamortized 20 balance of this cost-free capital (JDC). This treatment is con-21 sistent with the Commission's findings in its Order Setting Rates 22 in the most recent Carolina Power 6 Light Company, General Rate I

23 Case, Doc¹t No. E-2, Sub 264, Order issued February 20, 1976.

24 25 Q: Will you please describe and explain the noninvestor supplied 26 'ost-free capital included in Schedule 1 of Hoover Exhibit 1?

I a~ iC A: Yes. The cost-free capital shown in Column (b), Line 4 represents accumulated deferred income taxes. These deferred taxes result P

from normalizing the tax effect of accelerated depreciation and amortization. 3y use of the "normalization accounting concept",

the ccmpany reflects, for financial reporting and ratemaking 6 purposes, a greater Federal income tax expense than it actually incurs. For example, the company uses an accelerated method of depreciation to calculate the depreciation deduction in deter-mining its actual income tax liability, but calculates income 10 tax recense for ratemaking purposes by using a depreciation deductian based on the straight-line method of depreciation.

12 Thus, income tax expense for ratemaking purposes is calculated 13 without giving effect to accelerated depreciation. The excess 14 of the normalized tax expense based on straight-line depreciation 15 over the actual tax liability based on accelerated depreciation 16 is recorded in the account entitled accumulated deferred income 17 taxes accelerated depreciation. Until such time as the actual tax liability based on accelerated depreciation exceeds the book 19 income tax expense based on straight-line depreciation, the company 20 has use of this cost-free capital; In substance, the ratepayer has pa"d in through the rate structure a cost that the company 22 has not incurred and will not incur until such time as stratght-23 line book depreciation exceeds tax depreciation.

24 25 Consistent with the Commission's decision in Docket No. E-7, Sub 26 173, this cost-free capital has been included in the Company's

capital structure at zero cost, as shown in Schedule 1 of Hoover Exhibit 1.

4 g: What components make up the North Carolina retail original 5 cost net investment7 6 A: As shown in Schedule 2, the original cost net investment is.

7 composed of net electric plant in service and net nuclear fuel plus an allowance for working capital. These costs have been adjusted for known changes through December 31, 1976.

10 ll Q: Mr. Hoover, how have you determined the Company's working 12 capital requirement'?

13 A: Consistent with the Commission's findings in Dock t No. E-7, 14 Sub 173 and as shown in Schedules 2-4, 2-4a, and 2-4b, I have 15 . used the formula method in developing the allowance for working 16 capital.

17 18 9: Mr. Hoover, will you please explain Schedule 3 of Hoover Exhibit 1?

19 A: Yes, Schedule 3 is a statement of operating income for the test-20 year ended June 30, 1976 allocated to the Company's North Carolina 21 retail operations. Column (b) of Schedule 3 reflects operating 22 income after accounting and pro forma adjustments presented >y i

.23 Company W"'tness Davis. Column (c) reflects Staff adjustments to 24 the Company's operating income for return in addition to those 25 presented by Mr. Davis, and Column (d) reflects operating income 26 for return arter Staff adjustments. The calculations of adjustments

to operating income are set forth in Schedules 3-1 through 3-7 ~

Schedu e 3-1 presents a summary of Staff adjustments to North Carolina retail operating revenues. The calculation of each adjustment to operating revenues is set forth in Schedules 3-la through 3-1d.

Schedule 3-la reflects a $ 1,333,000 increase in industrial revenues and is required to annualize to an end-of-period level (June 30, 1976) the in rease in industrial sales actually experienced by the Company 10 during the twelve-month period ended June 30, 1976.

12 Schedule 3-lb reflects a $ 8,619,000 increase in operating revenues 13 and is required to reflect the annualized level cf operating revenues at December 31, 1976. This adjustment is consistent with 15 related adjustments to investment and expense.

16 17 Schedule 3-lc reflects a $ 110,000 decrease in operating revenues 18 and is required to base the Company's weather normalization adjust-ment on present rates and to exclude surcharge revenues applicable 20 to deferred fuel costs which were inadvertently included by the 21 Company.

22 23 Schedule 3-ld reflects a $ 6,826,000 increase in revenue and is required 24 to reflect the revenue effect of the Commission Engineering Staff's 25 adjustments to fuel expense.

Schedule 3-2 presents a summary of Staff adjustmentsto operation and maintenance expenses (0 & M expenses). The calculation of each adjustment to 0&M expenses, with the exception of the Engineering Staff adjustment shown on Line 7, is set forth in Schedules 3-2a through 3-2f. The Engineering Staff adjustment shown on Line 7 was provided and will be explained by Staff Witness Williams.

Schedu'e 3-2a reflects a $ 2,105,000 increase in 0&M expenses and is required to include in the test-year level of expense the related 10 e ffec t n f Company and S ta ff revenue annual iza t ion and weather normalization adjustments for the twelve-month period ended June 30, 12 1976.

'3 14 Schedule 3-2b reflects a ~5,410,000 increase in OGM expenses and is 15 required to include in the test-year level of expense the related 16 effect cf the Staff adjustment to annualize operating revenues to 17 the December 31, 1976 level.

18 19 Schedule 3-2c reflects a $ 2,223,000 increase in 0&M expenses and is 20 required tn include in the test-year level of expense the annualized 21 level of 0&M expenses exclusive of fuel and wages at December 31, 1976.

22 23 Schedule 3-2d reflects a $ 2,723,000 increase in 0&M expenses and is 24 required to include in the test-year level of expense the annualized 25 level of wages and fringe benefits at December 31, 1976.

Schedule 3-2e reflects a $ 125,000 decrease in 0&M expenses and is required to normalize the test-year level of expense with regard to costs associated with abandoned plant sites.

4 Schedule 3-2f reflects a $ 240,000 decrease in 0&M expenses and is required to normalize the test-year level of expense with regard to costs associated with the management audit of the Company as ordered by the Commission in April of 1976.

10 Schedule 3-3 presents a summary of Staff adjustments to depreciation expense. The calculation of each adjustment to depreciation expense 12 is set forth in Schedules 3-3a and 3-3b.

13 14 Schedule 3-3a reflects a $ 667,000 decrease in depreciation expense 15 and is required to include in the test-year level of expense the 16 depreciation applicable to the actual construction cost of Brunswick 17 Unit No. 1 at December 31, 1976.

18 19 Schedule 3-3b reflects a $ 420,000 decrease in depreciation expense 20 and is required to include in the test-year level of expense depre-21 ciation nn additions to plant in service (other than Brunswick Unit 22 No. 1) for the period July 1, 1976 through December 31, 1976.

23 24 Schedule 3-4 presents a summary of Staff adjustments to taxes - other 25 than income. The calculation of each adjustment to taxes other 26 than income is set forth in Schedules 3-4a through 3-4d.

Schedule 3-4a reflects a $ 1,000,000 increase in taxes - other than income and is required to include in the test-year level of expense gross receiots tax (net) applicable to the previously mentioned adjustments to ope ating revenues.

Schedule 3-4b reflects a $ 123,000 increase in taxes - other than income and is required to include in the test-year level of expense payroll taxes applicable to the previously mentioned adjustment to wages and fringe benefits expense.

Schedul 3-4c reflects a $ 1,735,000 decrease in taxes - other than 12 inoome and is required to include in the test-year level of expense 13 property'ax on additions to plant in service (other than Brunswick 14 Unit No. 1) for the period July l, 1976 through December 3l, 1976, 15 and to base this adjustment on the 1976 effective tax rate.

16 17 Schedule 3-4d reflects a $ 155,000 increase in taxes - other than 18 income and is required to include in the test-year level of expense 19 'roperty taxes applicable to the actual construction cost of Brunswick 20 No. l at December 31, 1976.

21 22 Schedu..e 1 3-5 presents a summary of Staff adjustments to state and 23 Federal income tax expense. The calculation of each adjustment to 24 income tax expense is set forth in Schedules 3-5a through 3-5e.

25 Schedule 3-5a reflects a $ 1,644,000 increase in state income tax

expense and is required to exclude from the test-year level of expense the tax effect of a prior period operating loss carry forward.

Schedule 3-Sb reflects a $ 1,479,000 net decrease in state and Federal income tax expense and is required to give effect to the Staff's depreciation adjustment applicable to Brunswick Unit No. 1 and to correct an oversight in the Company's calculation of deferred income taxes arising from normalization of accelerated deprecia-tion applicable to Brunswick Unit No. l.

10 Schedule 3-5c reflects a $ 214,000 net increase. in state and Federal 12 income tax expense and is required to give effect to the Staff's depreciation adjustment applicable to additions to utility plant in 14 service (other than Brunswick Unit No. l) for the period July 1, 1976 through December 31, 1976 and to provide for deferred income 16 taxes arising from normalization of accelerated depreciation appli-cable to these plant additions.

18 19 Schedule 3-Sd reflects a $ 634,000 increase in income tax expense and is 20 required to adjust for the income tax effect of Staff adjustments 21 to the test-year level of revenues, Q&N expenses', and taxes - other 22 than income.

23 24 Schedul 3-Se reflects a $ 1,527,000 increase in income tax expense and is required to adjust for the income tax effect of the

.26 difference between interest expense, exclusive of interest on

13-1 customer deposits, used by the Company in its calculation of end-of-period income tax expense and the end-of-period interest 3 expense assigned the Company's North Carolina retail operations 4 in the Staff's calculation of return on common equity.

6 Schedule 3-6 reflects a $ 390,000 net increase in the amortization 7 of investment tax credit and is required to include in the test-year level of expense amortization of investment tax credit arising 9 from pro forma adjustments to reflect the related effect of additions

]O to utility plant in service. Additionally', as shown in Sche'dule 3-6, the pre-1971 inve'stment tax credit which was fully amortized at June 30, 1976 has been excluded from the test-year level of expense.

13

]4 Schedule 3-7 reflects a $ 3,000 increase in interest on customer de-posits and is required to adjust this item of cost to an end-of-period level.

g: Mr. Hoover, do you have any further comments concerning the test-

]g year level of revenues under present rates as reflected in the pO testimony and exhibits of both the Company and the Staff?

A: Yes. Both the Company and the Staff have included in the test-year level of operations the pro forma effect of the addition of Q3'" Brunswick Unit No. 1 to utility plant in service. The Company (Davis Exhibit No. 1, Page 2 of 9, Column ll) decreased North p5 Carolina retail revenues under present rates by $ 34,518,582, 26 to reflect the level of revenues which would have been realized

14-1 had this unit been in service throughout the test year.

7 Consistent with this revenue adjustment, the Company 3 decreased the test-year level of fuel expense to reflect 4 the effect of Brunswick Unit No. 1's lower cost nuclear 5 generation which would have displaced higher cost fossil 6 generation had this unit been in service throughout the test year.

7 The Company's adjustments were based on the inclusion of Brunswick 8 Unit No. 1 in the test year level of operations at a 75% load factor.

The Staff increased the Company's adjusted'evel of North Carolina retail revenues under 'present rates by $ 3,872,321 to reflect the level of revenues which would have been realized had this unit been in

]3 service throughout the test year. This adjustment is consistent with the Staff adjustment to increase the Company's adjusted level of fuel expense '-hich results from the inclusion of Brunsw'ck Unit No. 1 in the test year level of operations at a 65% load factor as recommended by Staff Witness Williams. Thus, the only difference in the Company and Staff adjustment to revenues and the collorary adjustment to fuel

]9 expense tc reflect the pro forma inclusion of Brunswick Unit No. 1 in the t-st year level of operations is that the Company included this unit at a 75% load factor, whereas the'taff included this unit 22 at a 65% load factor.

23 24 The Company's base rates include fuel expense at the level of 8.5 mills per kwh. Therefore, $ 24,366,296 of the reduction in North Carolina 26 retail revenues as proposed by the Company and $ 20,493,975 as proposed

- 15,-

1 by the Staff represents fuel costs included in the Company's base P rates in excess of the fuel expense which the Company would have in-3 curred had Brunswick Unit No. 1 been in service throughout the 4 test year. This excess fuel expense would have been returned to the'.Company's customers through operation of the fuel charge rider.

8 The Company proposes to increase its base rates by $ 69,238,676. In 9 designing the proposed rates instead of including its pro fnrma level of 10 fuel expense in its proposed base rates the Company included fuel expense 11 at the level of 8.5 mills per kwh, which is the same, level included in its present rates. The Company views the fuel charge rider as a part of its

]3 rate structure and considers the fuel clause an appropriate means by which 14 to return ro its customers the excess fuel expense of $ 24,366,296, which

]5 under the Company's proposal would be included in revenues produced by 16 the base rates. In substance, the Company is asking the Commission 17 to include in its base rates excess fuel cost of approximately $ 24,366,296, 18 and to set the fuel clause base at 8.5 mills per kwh, thereby providing 19 for the return 'of the $ 24,366,296 excess cost included in the base rates .

1 20 to its customers throu'gh a negative fuel charge.

21 P2 The fuel clause protects the Company from sudden and dramatic P3 increases in the cost of fuel over and above the level included in 24 its base rates. At the same time it protects the customer from 25 sudden and dramatic decreases in the cost of fuel below the level 25 included in the base rates. I do not believe the fuel clause was .

- 16 1 ever intended to protect the customer from an excessive level of fuel cost included in the base rates at the time those rates were fixed. Therefore, I recommend that the level of fuel expense

'ncluded in the base rates be equal to the pro forma test year 5 level of fuel expense rather than equal to a level of fuel expense 6 in excess of the pro forma test year level as proposed by the Company. Thus, if the Commission finds the Company's pro forma level of fuel expense to be proper, this level of cost (expressed 9 in mill:,'er kwh) should be included in the base rates and the 10 fuel clause base set to reflect this same level of cost (expressed 11 in mills per kwh). If the Commission finds Staff Witness Williams'2 pro forma level of 6.89 mills per kwh to be proper, then this level 13 should be included in the base rates and the fuel clause base set at 6.89 m'lls per kwh.

15 16 Q: Do you have any additional comment concerning Hoover Exhibit 1?

17 A: Yes.. The Commission presently has before it for consideration an amendment to the Federal Power Commission's "Uniform System of 19 Accounts for Licensees and for Natural Gas Companies". This amend-ment establishes a procedure to be followed in the determination of the rate to be used in computing the Allowance for. Funds Used During Construction (AFUDC). The FPC's stated objective in its proposed 23 rule was "to establish a method which would give recognition to the interrelationship between capital utilized for ra e case purposes

,25 and the capital components of AFUDC in a manner that would permit a utility to achieve a rate of return on its total, utility operations,

including its construction program, at approximately the rate which would be allowed in a rate case".

The Commission Accounting Staff is in complete accord with this objective as stated by the FPC. However, for rate-making purposes certain items of cost and capital are treated differently by the FPC as compared to the North Carolina Utilities Commission (NCUC).

Therefore, if the calculation of AFUDC is to interface with rate-making in North Car'olina, it will be necessary for the NCUC to modify either the FPC AFUDC formula or its own rate-making practices and procedures. Should the Commission adopt the FPC's AFUDC formula 12 without modification, it will become necessary for me to revise my 13 testimony and exhibits to reflect the related effect of the Commission's 14 decision in this regard.

15 16 g: Does this complete your direct testimony?

17 A: Yes, it does.

18 19 20 21 22 23 24 25

Hoover Exhibit 1 BEFORE THE UTILITIES COMMISSION OF THE STATE OF NORTH CAROLINA in re CAROLINA POWER 6 LIGHT COMPANY Docket No. E-2, Sub 297 Testimony of Donald R. Hoover End-of-Period Rates of Return Under Present and Compan Proposed Rates Test Year Ended June 30, 1976 (Ad)usted for Known Changes Through December 31, 1976)

March 23, 1977

Page 1 of 3 INDEX Schedule Item Number (a) (b)

Return on Comnon Equity and Original Cost Net Investment Calculation or Total Common Equity Calculation of Accumulated .Deferred Income Taxes 1-2 Original Cost Net Investment Calculation of Adjustment to Reflect Actual Construction Costs of Brunswick 8'1 at December 31, 1976 2-1 Calculation of Adjustment to Reflect Actual Net Additions to Plant in Service From July 1, 1976 to December 31, 1976 2-2 Calculation of Adjustment to Nuclear Fuel 2-3 Summary of Working Capital Requirement 2-4 Material and Supplies 2-4a Calculation o Cash Working Capital 2-4b Operating Income Statement Summary of Staff Adjustments to Operating Revenues 3-1 Calculation of Adjustment to Annualize Industrial Revenues to an End-of-Period Level - June 30, 1976 3-la Calculation of Adjustment to Reflect the Annualized Level of Operating Revenues at December 31, 1976 3-lb Calculation of Adjustment to Reflect Revised Weather Normalization 3>>1c Calculation of Adjustment to Reflect Revenue Effect of Engineering Staff's Adjustment to Fuel Expense 3-ld Summary of Staff AdjustmeMs to Operation and Maintenance Expenses 3-2 Calculation of Adjustment to 0&M Expense to Reflect the Related Effect of Company and Staff Revenue Annualization and Weather Normalization Adjustments to June 30, 1976 3 2a

Page 2 of 3 INDEX Continued)

Line Schedule No. Item Number (a) (b)

19. Calculation of Adjustment to Reflect Additional 0&M Expense Applicable to the Staff Annualization of Revenues to December 31, 1976 3-2b

20. Calculation of Adjustment to Reflect Annualization of 0&M Expense Exclusive of Fuel and Wages to December 31, 1976 3 "2c 2l. Calculation of Adjustment to Annualize Wages and Fringe Benefits to December 31, 1976 3-2d

22. Calculation of Adjustment to Amortization of Abandoned Plant Sites 3 2e

23. Calculation of Adjustment to Reflect Amortization of Management Audit Expense Over Five Years 3-2f

24. Summary of Staff Adjustments to Depreciation Expense 3-3

25. Calculatiov. of Adjustment to Reflect Depreciation Expense on Actual Construction Costs of, Brunswick 81 at December 31, 1976 3~3a

26. Calculation of Adjustment to Reflect Depreciation Expense on Net Additions to Plant in Service for the Period July 1, 1976 Through December 31, 1976 3-3b

27. Summary of Staff Adjustments to Taxes - Other Than Income 28, Calculation of Adjustment to Reflect Additional Gross Receipts Tax Applicable to Staff Adjustments to Operating Revenues 29, Calculation of Adjustment to Annualize Payroll Taxes Applicable to December 31, 1976 Wage Adjustment 3-4b 30, Calculation of Adjustment to Reflect Property Taxes on Plant in Service ~ t December 3'1, 1976 3-4c

31. Calculation of Adjustment to Reflect Property Taxes on Actual Construction Costs of Brunswick 81 at December 31, 1976 3-4d

32. Summary of Staff Adjustments to State and Federal Income Taxes 3-5

33. Calculation of Adjustment to Current Book Accrual of State Income Tax Expense 3 5a

page a oz ~

INDEX (Continued)

Li,ne Schedule No. ruder Numb er (e) 34.'alculation of Adjustment to Reflect Change in Income Tax Expense Due to Brunswick gl Depreciation Expense Adjustments 3-5b 35 Calculation of Adjustment to Reflect Change in Incane Tax Expense Due to Depreciation Expense Adjustments Applicable to Net Additions to Plant in Service From July 1, 1976 to December 31, 1976 3-5c 36 ~ Calculation of Adjustment to Reflect the Income Tax Effect of Staff Adjustments to Revenues, 0&M Expenses and Taxes "

Other Than Income 3-5d

37. Calculation of Adjustment to Reflect the Income Tax Effect of Interest Expense Allocation Adjustment 3 5e

38. Calculation of Adjustment to the Amortization of Investment Tax Credit 3-6

39. Calculation of Adjustment to Interest on Customer Deposits 3-7

Docket No. E-2 Sub 297 CAROLINA POWER ~ ~IGHT COMPANY Hoover Exhibit Schedule 1 North Carolina Retail Operations RETURN ON COMMON EQUITY AND ORIGINAL COST NET INVESTMENT Twelve Months Ended June 30, 197o (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

A~dusted Before Pro osed Iecrease Ad usted After Proposed Increase Total N.C.Retail Overa 1 N.C.Reta 0 u Company Original Embedded Cost Net Original Embedded Cost Net Line Capital- Ratio Cost Net Cost5/ Rat~ Operating Cost Net Cost Rate Operating No. Item ization X Investment  %

% Income Investment  % X 8/ Income (a) Tce

1. Long-term debt $ 1,103,463- 45.17 $ 589, 593 7.71 3.48 $ 45, 458 $ 589, 593 7.71 3.48 $ 45,458

2. Preferred stock 336,018- 13.76 179, 606 8.01 1.10 14,386 179,606 8.01 1.10 14,386

3. Common equity 875,967 35.86 468,072 8.67 3 11 40, 583 468,072 15. 47 5.55 72,396

4. Cost-free capital 3/ 5.21 127 161 68~005

5. Total $2 442 609 100.00 $1 305 276"/ 7 '9 $ 100 7/

427 $ 1 305 276- 4/ 10.13 $ 132 240-1/ Company Financial and Operating Report for the month of December, 1976 filed with the Commission.

2/ Hoover Exhibit 1, Schedule l-l, Line 6, Column (b).

3/ Hoover Exhibit 1, Schedule 1-2, Line 5, Column (b).

4/ Hoover Exhibit 1, Schedule 2, Line 14, Column (b).

5/ Debt and preferred cost rates were provided by Company. Return on common equity of 8.67% is calculated by dividing Line 3, Column (g) by Line 3,. Column (d) and 15.47 by dividing Line 3, Column (k) by Line 3, Column (h).

6/ Column .(c) x Column (e).

7/ Hoover Exhibit 1, Schedule 3, Line 13, Column (d).

8/ Column (c) x Column (i).

9/ Staff adjusted net operating income for return Hoover Exhibit 1, Schedule 3, Line 13, Column (d), $ 100,427 plus net operating income for return from proposed rate increase Davis Exhibit No. 4, Page 1 of 5, Line 13, Column (3), $ 31,813.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 1-1 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF TOTAL COMMON EQUITY Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omi.tted)

Total Line Company No. Item Amount (a) (b)

Stock 1/

Common $ 634,821

2. Retained earnings 1/ 197,258

3. Accumulated deferred Job Development Investment Tax Credit-1 s

46,897

4. Add: Additional Job Development Investment Tax Credit available at 12-31-76, applicable to Brunswick 81 and other additions to plant in.service for the twelve month period ended 12-31-76 3,089

5. Deduct: Accumulated deferred Federal taxes on income resulting from amortization of emergency facila.ties 1/ (6 098)

6. Total common eauity 8878 967 1/ Company Financial and Operating Report for the month of December, 1976.

2/ Calculated from information provided by the Company.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 1-2 CAROLINA POWER &. L'IGHT COMPANY North Carolina Retail Operations CALCULATION OF ACCUMULATED DEFERRED INCOME TAXES Twelve Months Ended June 30, 1976 (AdJusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a) (b)

Accumulated deferred income taxes - Accounts 281 and 282- $ 119,068

2. Add: Accumulated deferred Federal taxes on income resulting from amortization of emergency facilities- 6,098

3. Accumulated deferred income taxes applicable to Brunswick 812/ 9,221 Deduct: Accumulated deferred income taxes - Account 190- ~7226)

Total accumulated deferred income taxes $ 127 161 1/ Company Financial and Operating Report for the month of December, 1976.

2/ Hoover Exhibit 1, Schedule 3-5b, Line 12, Column (b).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Scnedule 2 Page 1 of 2 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations ORIGINAL COST NET INVESTMENT Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

N.C.

Line Retail No. Item erations (a) (b)

Electric plant in service 1/ $ 1,495,418

2. Decrease in Brunswick Ill adjustment 2/ (14,415)

3. Decrease to reflect actual g)t additions from July 1, 1976 to December 31, 1976 (12 703)

4. Electric plant in service, adjusted (Ll + L2 + L3). 1 468 300

5. Less: Accumulated depreciation 4/ 241,939

6. Difference in annualized depreciation expense and actual depreciation expense for the year ending December 31, 19765/ 8 715

7. Total accumulated depreciation (L5 + L6) 250 654

8. Net electric plant in service (L4>> L7) 1 217 646

9. Net nuclear fuel- 26,652

10. Net increase in nuclear fuel to December 31, 1976- 1 224

11. Net nuclear fuel - adjusted (L9 + L10) 27 876

12. Net electric plant in service including net nuclear fuel (L8 + Lll) 1,245,522

13. Allowance for work'ng capital-8/ 59 754

14. Total original cost net investment (LI2 + L13) $ 1 305 276

Docket No. E>>2, Sub 297 Hoover Exhibit 1 Schedule 2 Page 2 of 2 CAROLINA POWER & LIGHT COMPANY North Caro1ina Retail Operations ORIGINAL COST NET &RESENT Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

FOOTNOTES 1/ Davis Exhibit No. 4, Page 4 of 5, Line 1, Column (7).

2/ Hoover Exhibit 1, Schedule 2-1, Line 5(d), Column (c).

3/ Hoover Exhibit 1, Schedule 2-2, Line 8, Column (d).

4/ Accumulated depreciation at 12-31-76 provided by the Company.

~ 5/ Hoover Exhibit l, Schedule 3, Line 5, Column (d) less actual depreciation expense provided by the Company ($ 50,343 - $ 41,628),

6/ Davis Exhibit No. 4, Page 4 of 5, Line 4, Column (7).

7/ Hoover Exhibit l, Schedule 2-3, Line 12, Column (b).

8/ Hoover Exhibit l, Schedule 2-4, Line 3, Column (b).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 2-1 CAROLINA POWER &'L'IGHT "COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT ACTUAL CONSTRUCTION COSTS OF BRUNSWICK /!1 AT DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line Total Com an No. Item Attount Amount (a) (b) (c)

1. Investment in Brunswick !/1 production plant:

(a) Per Staff 2/ $ 303, 038 (b) Per Company- 331 384 (c) Decrease in Brunswick 81 plant (Line l(a) - Line 1 (b)) $ (28,346)

2. Investment i Per i Brunswick I/1 transmission lines:

Staff 1/ 4.788 (a)

(b) Per Company (c) Increas('. in Brunswick /r'1 transmission lines (Line 2 (a) Line 2 (b)) 4,788

3. Investment in Brunswi,ck //1 general plant:

(a) Per Staff 148 (b) Per Company (c) Increase in Brunswick 81 general plant (Line 3 (a) - Line 3 (b)) 148

4. Total decrease in Brunswick 81 investment 3(23 410)

5. Amount applicable to North Carolina retail operations:

(a) Production plant (Line l(c) x .615973/) (17,460)

(b) Transmission lines (Line 2(c) x .61258 /) 2, 933 (c) General plant (Line 3(c) x .754633/) 112 (d) Total 3(14 415) 1/ Provided by Company.

2/ Davis >~ibit No. 1, Page 7 of 9, Column (2).

3/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 2-2 CAROLER POWER 6 LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMEiNT TO REFLECT ACTUAL hET ADDITIONS TO PT~T IN SERVICE FROM JULY 1, 1976 to DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line Total Alloca tion N.C. Retail No. I tern ~Comaan Factor3/ 0 erations (a% (c) (d)

Staff net additions to electric plant:

2. Productionl/ $ 13,573 .61597 $ 8,361

3. Transmiss ion-/ 203864 .61258 12,781 Distributior1 I 17,092 .82395 14,083 Genera11/ 710 .75461 536

6. Total (Sum of Lines 2-5) 52,239 35, 761

7. Company estimated additions from2/

July 1, 1977 to March 31, 1977- 71 210 48 464

8. Total decrease in electric plant additions ~18 971) ~12 703) 1/ Information provided by the Company.

2/ Davis Exhibit No. 1, Page 7 of 9, Columns (2) and (3).

3/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 2-3 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO NUCLEAR FUEL Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line Total No. Item ~Com an (a)

1. Nuclear fuel at December 31, 1976:

2. Nuclear fuel materials and assemblies- 1/ $ 4,957 3 Nuclear fuel assemblies in reactor 35,168 4, Spent nuclear fuel 8,886

5. Accumulated provision for amortization-1/ ~22. 535)

6. Net nuclear fuel at December 31, 1976 (L2 + L3 + L4 + L5) 26,476

7. Brunswick Ill nuclear fue$ actual cost at December 33., 1976-2/ 20,610

8. Additional accumulated provision for amortization of Brunswick gl and $P2 nuclear fuel for test year ~3535)

9. Staff adjusted nuclear fuel at December 31, 1976 (L6 + L7 + L8) 43,551

10. Company adjusted level of nuclear fuel 5/ 41 639

11. Net increase in nuclear fuel (L9 L10) 9 1 9'12

12. N.C. Retail net increase (Lll X .64007 /) 3 '1'24 1/ Company Financial and Operating Report for the month of December, 1976.

2/ Information provided by the Company.

3/ Calculated from information provided by the Company.

4/ Company jurisdictional allocation study.

5/ Davis Exhibit No. 4, Page 4 of 5, Line 4, Column (4).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 2-4 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations

SUMMARY

OF WORKING CAPITAL REJUI1U2fENT Twelve Months Ended June 30, 1976 (Ad)usted for Known Changes Through December 31, 1976)

(000's Omitted)

Line N. C. Retail No. Item erations (a) (b)

1. Materials and supplies 1/ $ 49,213

2. Cash working capital 2/ 10 541

3. Total allowance for working capital (Ll + L2) $ 59 754 1/ Hoover Exhibi" 1, Schedule 2-4a, Line 3, Column (d).

2/ Hoover Exhibit 1, Schedule 2-4b, Line 9, Column (d).

Docket E-2, Sub 297 Hoover Exhibit 1 Schedule 2-4a CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations MATERIAL AND SUPPLIES Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line Total Allocation N. C. Retail No. Item ~Cnm an Factor 3/ erations (a) (b) (c) (d)

1. Fuel stock 1/

$ 54,845 . 64007 $ 35,105

2. Other mater(als and supplies 18 791 . 75076 14 108

3. Total (Ll + L2) $ 73 636 $ 49 213 1/ Company adjusted level of coal plus thirteen month average ending December 1976, level of fuel oil. ($ 45,132 + $ 9,713)

Balance at December 31, 1976.

3/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 2-4b CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF CASH WORKING CAPITAL Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line Total Allocatiy. N. C. Retail No. Item ~Com an Factor- erations (a) (b) (c) (d)

1. Minimum bank balances 1/ 9,777 .67077

$ S 6,558

2. Prepayments2/ 2,302 .48411 1,114

3. 45 days expenses - cash 3/

26 270

4. Total (Ll + L2 + L3) 33 942

5. Deductions:

6. Tax accr als 2/

30,467 .67077 20,436

7. Customer deposits 4/ 3 831 2.965

8. Total deductions (L6 + L7) ~34 298 23 401

9. Total cash working capital (L4 L8) 610 541 1/ Company response to NCUC Form E-l, Section C,. Item 5-q5 Page 1 of 2.

2/ ,Thirteen month average for the period ending December, 1976.

3/ One-eighth operations and maintenance expense lehs purchased power.

(0209,073 - (,"1,084))

4/ Information provided by the Company.

5/ Company jurisdictional allocation s tudy.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3 CAPBLINA POWER 6 LiGHT COMAJW North Carolina Retail Operations OPERA.T iNG INCOME STA'1'ZKNT Twelve Months Ended June 30, 1976 (Adjust d for Known Changes Through December 31, 1976)

(000's Omitted)

N.C. Retail N.C. Retail Line After Company S tazf After Stafz No. Item Ad'ustments Adjustments (a) (b) (c) (d)

1. 0 eratinm Revenues:

2. Net operat'ng revenues S446 250 $ 16.668 2/ S462 918

3. Ooeratin Revenue Deductions:

4. Net operating and maintenance 193,337 15,736 3/ 209,073

5. Depreciation 51,430 (1,087)4/ 50,343

6. Taxes other than income 40,545 (457) 5 40,088

7. Income taxes - state 2,350 878 6/ 4.,228

8. Income taxes - Federal 20,289 969 7/ 21,258

9. Investment tax credit net 14, 744 (390)8/ 14,354

10. Deferred income "axes 24,094 (1,096)9/ 22,998

11. Interest on customer deposits 146 10/ 149 12 ~ Total reverue deductions 346 935 ~15 556 362 491

13. Net operating income ~

or retu 'n 8 99 315 ' 112 $ 100.427 1/ Davis Exhibit No. 1, Page 1 of 9, Column (7) .

2/ Hoover Exhibit No.. 1. Schedule 3-1, Line g, Column (b) .

3/ Hoover Exhibit No. 1, Schedule 3-2, Line 8,= Column (b) .

4/ Hoover Exhibit No. 1, Schedule 3"3, Line 3, Column '(b),

5/ Hoover Exhibit No, 1, Schedule 3-4 5 Line 5, Column (b).

6/ Hoover Exhibit No. 1, Schedule 3 ~

5, Line 6, Column (b).

7/ Hoover Exhibit No. 1, Schedule 3-5, Line 6, Column (c).

8/ Hoover Exhibit No. 1, Schedule 3-6, Line 7, Column (c).

9/ Hoover Exhibit No. 1, Schedule 3-5, Line 6, Column (d) .

10/ Hoover Exhibit No. Schedule 3-7, Line 7, Column (b) .

Docket No. E-2, Sub 297 Hoover Exhibit. 1 Schedule 3-1 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations

SUMMARY

OF STAFF ADJUSTMENTS TO OPERATING REVENUES Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Amount Line Increase No. Item Decrease (a) (b)

l. Adjustment to annualize industrial revenues to an end-of-period level - June 30, 1976-1 9 1,333

2. Adjustment to reflect the annualized level pf operating revenues at December 31, 1976-2 8,619

3. Adjustment to reflect revised weather normalization-3/ (110)

Adjustment to reflect revenue effect of engineerirg.

S ta f f

' ad us tmen t to fuel expense 4/

j 6 826

5. Increase in operating revenues (Ll+ L2 +L3+ L4) $ 26 668 1/ Hoover Exh'b't 1, Schedule 3-1a, Line 7, Column (b).

2/ Hoover Exhibit 1, Schedule 3-lb, Line 8, Column (g).

3/ Hoover Exhibit 1, Schedule 3-lc, Line 3,'olumn (b).

4/ Hoover Exhibit 1, Schedule 3-1d, Line 9, Column (b).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-la CAROLINA POMER 6 LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO ANNUALIZE INDUSTRIAL REVENUES TO AN END-OF-PERIOD LEVEL JUNE 30, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

N.C.

Line Retail No. Item Amount (a) (b)

Growth in actual kwh sales ~f year ending 6-30-76 1

over year ending 6-30-75 S 600,241

2. Growth included in actual year ending 6-30-76 kwh sales (1/2 x Ll) 300 121

3. Adjustment to annualize kwh sales for year ending 6-30-76 (Ll L2) 300,120 4, Price per kwh 2/

S .016265 Staff annualization adjustment for industrial revenue (L3 x L4) 4,881

6. Amount inguded by company to annualize industrial revenue 3 548

7. Adjustment to increase industrial revenue to annualized level at 6-30-76 (L5 L6) 3 1 333 1/ Company workpapers filed in response to NCUC Form E-l, Section C-10, relating to Company Adjustment No. 1.

2/ Calculated by the Staff from information provided by the Company.

6 E1 Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3'-lb CAROLINA P(WER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OP ADJUSTMENT TO REFLECT THE ANNUALIZED LEVEL OP OPERATING REVENUES AT DECEHBER 31, 1976 Twelve Months Ended June 30, 1976 (Ad)usted For Known Manges Through December 31, 1976)

Avg. Kwh/ Increase No. of No. of Tncrease Customer In Customers Customers in year Inc ease Revenue Line at at Custo- ending in 4/ (000' No. Item 6-30-76-/ 12-31 mers 6-30-76 / Kwh ~Om 66e6d (a) (b) (c) (d) (e) (g)

Residential:

2. R2 106,402 111,485 5,083 18,877 95,951,791 $ 3,014 R3 290,523 291,478 955 9,827 9,384,785 339

4. 76, 703 76,405 (298) 5,230 (111,558,540) ~66)

5. Total 5,740 103,778,036 3,287

6. Commercial 76,646 77,264 618 41,718 25,781,724 791

7. Industrial 2,618 2,734 116 279,192,691- 4 54)7/

8. Total inc ease in annual revenue 8 619 (L5 + L6 + L7) 1/ Company workpapers filed in response to NCUC Form E-'1, Section C-10, relating to Company Adjustment No. 1.

2/ Information provided by the Company.

3/ Column (c) less Column (b).

4/ Column (d) X Column (e).

5/ Average revenue per kwh during test year X kwh level in Column (f).

6/ Company projected increase in test year actual level of kwh sales of 8.26% x 1/2 year (6,760,113,582 kwh x .0826 x .5).

7/ Average increase 'n revenue per kwh increase for the test year x kwh level in Column (f).

Docket No. E 2, Sub 297 Hoover Exhibit 3-lc 'chedule CAROLINA POWER 6 LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT REVISEL WEATHER NORMALIZATION Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

{000's Omitted)

N. C.

Line Retail No. Ii:ea Amount (a) (b)

l. Amount of revenue included by Company for weather normal'zation 1/ $ 1,611

2. Staff weather nornaliaa)ion revenue calculated using present rates 2 1 501

3. Adjustment to decrease revenue to reflect revised weather normalization (Ll L2) 2 110 1/ Davis Exhibit No. 1, Page 2 of 9, Column (3).

2/ Revised calculations using present rates provided by the Company during Staff examination.

t

't Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-ld CAROLINA POWER & LIGHT COMPANY North. Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT REVENUE EFFECT OF ENGINEERING STAFF'S ADJUSTMENT TO FUEL EXPENSE Twelve Months Ended June 30, 1976 (Ad)usted for Known Changes Through December 31, 1976)

(000's Omitted)

Line No. Item Amount (a) (b) 1/

l.

37'08 Adjustment to Brunswick Unit (/1 generation $ 3,640

2. Company and Staff ad)ustments to annualize kwh sales to 6-30-76 555,193

3. Staff ad)ustment to annualize kwh sales to 12-31-76 752

4. Total inc"ease in kwh sales (L2 + L3) 963,945

5. Difference in base fuel cost in present rates and fuel cost included by Staff (11.37968 1/ - 8.50 mills/kwh) 2.87968

6. Increase in revenues due to increase in fuel expense associated with increased kwh sales (L4 x L5) 2 776

7. Total (Ll + L6~ 6,416

8. Gross Receipts tax (L7 x 6.383%) 410

9. Increase in revenue (L7 + L8) 86 826 1/ Provided by Staff Witness Williams.

2/ Hoover Exhibit 1, Schedule 3-2a, Line 20, Column (b).

3/ Hoover Exhibi" 1, Schedule 3-2b, Line 1, Column (b).

'I 0

~

No. E-2, Sub ?97

'ocket Hoover Exhibit 1 Schedule 3-2 CAROLINA POWER & LIGHT COMPANY

'North Carolina Retail Operations

SUMMARY

OF STAFF ADJUSTMENTS TO OPERATION AND MAINTENA'ICE EXPENSES Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976) .~"

(000's Omitted)

Amount Line No. Item

' C'1 In'crsase '.

(a) (b)',

Adjustment to O&M expenses to reflect the related effect of Company and Staff revenue annualization and weather normalization adjustments to June 30, 1976 1/ $ 2,105

2. Adjustment to reflect additional O&M expenses applicable to the Staff annualization of revenues to December 31, 1976K/ 5,410

3. Adjustment to reflect annualization of 0&M expenses exclusive of fuel and wages to December 31, 1976 3/ 21223 4~ Adjustment to annualize wages and fringe benefits to December 31, 19764~ 23 723

5. Adjustment to" amortization of abandoned plant sites (125)

6. Adjustment to reflect amor(ization of management audit expense over five years (240) 7/

7. Engineering Staff adjustment to fuel expense 3 650

8. Increase in operation and maintenance expense (Ll through L7) $ 13 736 1/ Hoover Exhibit 1, Schedule 3-2a, Line 34 Column (b) 2/ Hoover Exhibit 1, Schedule 3-2b, Line 7, Column (b) ~

3v~

3/ Hoover Exhibit 1, Schedule 3-2c, Line 7, Column (b) ~

4/ Hoover Exhibit 1, Schedule 3-2d, Line 4, Column (b) ~

5/ Hoover Exhibit 1, Schedule 3-2e, Line 6, Column (b) 6/ Hoover Exhibit 1, Schedule 3-2f, Line 3, Column (b).

7/ Provided by Staff Witness Williams.

4s

Docket No. E-2, Sub 297 Hoover Exhibit 1 CAROLINA POWER & LIGHT COMPANY Schedule 3-2a Page 1 of 2 North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO 0&M EXPENSE TO REFLECT THE RELATED EFFECT OF COMPANY AND STAFF REVENUE ANNUALIZATION AND WEA'HER NORMALIZATION ADJUSTMENTS TO JUNE 30, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

N.C.

Line Retail No. Item Amount (a) (b)

1. Expenses per books at 6-30-76 12/ 219,994

2. Deductions: 1/

3 Fuel expense 138,339

~

2/ 3,206

4. Purcha~~d power (energy)

5. Labor 25,540 Pensions and benefits 4/ 311

6. 3

7. Nuclear property insurynce- '289

8. Deferred fuel expense 12/ 12,235

9. Customer accounting and sales 12/ 11,085

10. Total deductions 194 00

11. Net 0&M expenses (Ll L10) 25, 989

12. Add: Research & development- 1 328

13. Net 0&M expenses to be annualized (Lll + L12) 27 317 14.

'&MN.C. retail kwh sales 12/ 15 980 561

15. Cost/kwh (mills per kwh) (L13 + L14) 1. 70939

16. Fuel cost (mills per kwh) 11. 37968

17. ,0&M expense (mills per kwh) (L15+ L16) 13.08907 8/

18. N.C. retail kwh increase to 6-30-76 9/

499,885

19. N.C. retail kwh increase included in weather adjustment 55,308

20. Total increase in kwh to 6-30-76 (L18 + L19) 555 193

21. Total staff increase in 0&M expense to 6-30-76 due to increase in kwh sales (L17 x L2 ) 7,267

22. Amount included by the company 5 080

23. Increase in 0&M expenses due to increase in kwh sales (L21 L22) 2 187.

24. Customer accou~ting and sales expense 11,085

25. Less: Labor 5 .

(6,105)

26. Add: Postage 11/ 122

27. Total customer accounting & sales expense (L24 y L25 + L26) 5 102

28. Average number of customers 12/ 549,029

29. Cost/customer (L27 + L28) 9.29277

30. One half customer growth to year end 6-30-76 7 536

'31. Cost for customer growth (L29 x L30) 70

32. Amount included by company for customer growth 152

33. Decrease in 0&M expense (L31 L32) 34 Net increase in 0&M expense (L23 + L33) 2 105

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-2a Page 2 of 2 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO 0&M EXPENSE TO REFLECT THE RELATED EFFECT OF COMPANY AhD STAFF REVENUE ANNUALIZATION AND WEATHER NORMALIZATION ADJUSTMENTS TO JUNE 30, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

FOOTNOTES 1/ Fuel expense from Company response to NCUC Form E-l, Section C-10, relating to Company adjustment No. 8 less miscellaneous expense

($ 138,832 - $ 493).

2/ Estimated amount of purchased power which would be recovered through the fuel clause (Energy portion of purchased power x N. C. retail allocation factor = $ 5,009,197 x .64007).

3/ Total labor charged to expense including clearing accounts less labor included in fuel and customer accounting and sales ($ 32,235 - $ 590

- $ 6,105 = $ 25,540).

4/ Pensions and benefits charged to Account 926 less labor included

($ 4,534 - $ 15 = $ 4, 519 x .73272).

5/ Calculated: from information provided by the Company during Staff examination.

6/ Davis Exhibit No. 1, Page 4 of 9, Column 3.

7/ Provided by Staff Witness Williams (10.64 + .935).

8/ Increase in kwh consumption when the test year level is annualized to year end.

9/ Company response to NCUC Form E-l, Section C-10, relating to Company adjustment No.

10/ Company response to NCUC Form E-l, Section C-10, relating to Company adjustments No. 23 and No. 8.

ll/ Company response adjustment No. 18.

to NCUC Form E-l, Section C-10, relating to Company 12/ Company response to NCUC Form E-l, Section C-10, relating to Company adjustment No. 8.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-2b CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT ADDITIONAL 0 & M EXPENSE APPLICABLE TO THE STAFF ANNUALIZATIONOF REVENUES TG DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

N. C.

Line Retail No. Item Amount (a) (b)

Total increase in kwn sales to December 31, 1976 due to increased customers- 408,752

2. Cost/kwh (mills per kwh) 13.08907

3. Increase in 0 & M expense (Ll x L2) $ 5,350

4. Total increase in number of customers-3/ 6,474

5. Cost/customer of customer accounting and sales- S 9. 29277

6. Increase in customer accounting and sales expense (L4 x L5) 60

~

7. Total increase in 0 & M expense (L3 + L6) $ 5,410 1/ Hoover Exhibit 1, Schedule 3-1b, Column (f), Line 5 + Line 6 + Line 7.

2/ Hoover Exhibit 1, Schedule 3-2a, Line 17, Column (b).

3/ . Hoov'er Exhibit 1, Schedule 3-lb, Column (d>, Line 5 + Line 6 + Line 7.

4/ Hoover Exhibit 1, Schedule 3-2a, Line 29, Column (b).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-2c CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULPTION OF ADJUSTMENT TO REFLECT ANNUALIZATION OF 0 & M EXPENSE EXCLUSIVE OF FUEL AND WAGES TO DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

N. C.

Line Retail No. Item Amount (a) (b)

1. Total qppualized level of kwh sales at December 31, 1976-'.

16,944,506 Cost/kwh (mills per kwh) 2/ 1,70939

3. 0 & M expense included by staff excluding fuel, labor, customer accounting, etc. (Ll x L2) 28,965 4., Customer accopnting and sales expense included by the s tv 3/ ff-I 5 232

5. Total 0 & M expense to be annualized (L3 + L4) 34,197

6. Average percent change for any twelve-month period from June 1975 to December, 1976 in the Wholesale Price Index 6. 5'/

7. Increase in 0 & M expense (L5 X L6) S 2,223 1/ Actual kwh s"les for test year plus total increase in kwh to 6-30-76 plus increase in kwh sales to 12-31-76 (15,980,561 + 555,193 + 408,752).

2/ Hoover Exhibit 1, Schedule 3-2a, Line 15, Column (b).

3/ Hoover Exhibit 1, Schedule 3-2a, Line 27 Column (b) plus Line 31, Column

. (b), Plus Schedule 3"2b, Line 6, Column (b) ($ 5,102 + $ 70 + $ 60).

4/ Average calculated from information published by the U. S. Department of Labor, Bureau of Labor Statistics.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-2d CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO ANNUAI>IZE RAGES AND FRINGE BENEFITS TO DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a) (b)

Staff adjustment to wages and fringe benefits to reflect employ(.s at December 31, 1976 and wage rates at March 31, 1977 $ 9,187

2. Company adjustment to wages and fringe benefits to reflect June 30 1976 level of employees and March 31, 1977 wage rates-zf 5 472

3. Increase in wages and fringe benefits (Ll - L2) 83 716

4. N.C. retail inc~t;ase in wages and fringe benefits (L3 x .73272 I) $2 723 1/ Calculation provided by the Company and checked by the Staff during the Staff investigation.

2/ Davis Exh'bit No. 1, Page 3 of 9, Column (2).

3/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-2e CAROLINA. POWER & LIGHT COMPANY North Carolina Retail Operations CAICULATION OF ADJUS&iENT TO AMORTIZATION OF ABANDONED PLANT SITES Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a) (b)

1. -

Amortizatiop of Craven County plant site per company-1 $ 78

2. Amortizat'op of Madison County plant site per company- 188

3. Total amortization of abandoned plant sites per company (Ll + L2) 266

4. Amortizat'on of Madison County plant per Staff for one year (L2 + 3) 63 5 Decrease in amortization of abandoned plant sites (L3 -'4)

~

per Staff $ 203

6. N. C. retail decrease (L5 x .61597 2/ $ 125

)

1/ Davis Exhibit No. 1, Page 3 of 9, Column (2).

2/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Scnedule 3-2f CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT AMORTIZATION OF MANAGEMENT AUDIT EXPENSE OVER FIVE YEARS Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a)

1. Total cost of management audit per company-1/ $ 300

2. Amortization for one year per staff (Ll + 5) 60

3. Net decrease in 0 & M expense (Ll >> L2) $ 240 1/ Davis Exhibit No. 1, Page 3 of 9, Columns (2) and (3).

NOTE: Total cost of management audit assigned to N. C. retail.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-3 CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations SUMMARv OF STAFF ADJUS~~ NTS TO DEPRECIATION EXPENSE Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Amount Line 'ncrease No. -Item Decrease (a) (b)

1. Adjustment to reflect depreciation expense on actual construction costs of Brunswick Unit No. 1 at December 31, 1976- (667)

2. Adjustment to reflect depreciation expense on net additions to plant in service for the period July 1, 1976 through December 31, 1976-2/ ~42D)

3. Decrease in depreciation expense 1 087 1/ Hoover Exhioit 1, Schedule 3-3a, Line 8, Column (d).

2/ Hoover Exhibit 1, Schedule 3-3b, Line ll, Column (d).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-3a CAROLINA POMER 6'LIGHT'COMPANY North Carolina Retail Operations CALCULATION OP ADJUSTMENT TO REFLECT DEPRECIATION EXPENSE ON ACTUA'ONSTRUCTION COSTS OP BRUNSWlCK 81 AT DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusts for Known Changes Through December 31, 1976)

(000's Omitted)

Cost et Depre- Total Line December 31, ciatiy Company No. Item 1976 Rate Amount (a) (b) (c) (d)

1. Actual construction costs of Brunswick Pl at December 31, 1976:

2. Production 1/ 4.224

$ 303,038 $ 12,800

3. Transmission 1/ 4,788 2.274 109 General 1/ 148 3.410

5. Total Staff depreciation (L2 + L3 + L4) $ 22 924

6. N. C. Retail amount of Staff depreciation on Brunswick //1 $ 7, 955

7. N. C. Retail amount of Company estimated depreciation on Brunswick 81 -5/ 8 822

8. Decrease in depreciation expense on Brunswick 81 (L6 " L7) $ 667 1/ Company workpnpers obtained during examination presenting actual investment through December 31, 1976.

2/ Depreciation rates shown on Bradshaw Exhibit No. 3.

3/ Production $ 12,800 x .61597-/ = $ ?,884 Transmission 109 x ,61258 67 General 5 x .75461-/ 4 Total Q4 Company jurisdictional allocation study, 5/ Davis Exhibit No. 1, Page 4 of 9, Column (3).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-3b Page 1 of 2 CAROLINA POWER 6 LIGHT COMPANY North Carolina Retail Operations CAL('ULATION OF ADJUSTMENT TO REFLECT DEPRECIATION EXPENSE ON NET ADDITIONS TO PLANT IN SERVICE 'FOR TRF. PERIOD JULY 1, 1976 THROUGH DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Cost of Net Amount Line Additions 6-30-7j Depreciat< ~n of No. Item throu h 12-31 / Ra tes- Deoreciation (a) (b) (c) (d)

1. Steam production 9,599 3.240 $ 311

2. Nuclear production 3,939 4.'224 166

3. Hydro product'on 1. 143 Other production (9) 4.000

5. Transmission 20,864 2.274 474

6. Distribution 17,092 3. 151 539

7. General 710 3 .410 24

8. Total depreciation expense on net plant additions for the period July 1, 1976 through December 31, 1976 (Sum of Lines 1-7) 61 515

9. N. C. retail amount of Staff depre-ciation expense / $ 1,046

10. N. C. retail amount included by company for plant additi.ons through March, 1977- 1 466 ll. Adjustment to decrease depreciation expense included by company (L9 - L10) 420

~ C ~

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-3b Page 2 of 2 CAROLINA POMER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REPIZCT DEPRECIATION EXPENSE ON NET ADDITIONS TO PLANT IN SERVICE FOR THE PERIOD JULY 1, 1976 THROUGH DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Footnotes 1/ Company workpapers obtained during examination presenting additional investment through December 31, 1976 .

2/ Depreciation rates shown on Bradshaw Exhibit No. 3.

3/ Production $ 4?8 X .61597- 294 Transmission 474 X .61258-/ 290 Distribution 539 X .82395-/ 444 General 24 X :754614/ 18 Total $1 046 4/ Company jurisdictional allocation study.

5/ Davis Exhibit No.l, Page 4 of 9, Column (3).

r '

Docket No, E-2, Sub 297 Hoover Exhibit 1 Schedule 3-4 CAROLINA POWER 6c LIGHT COIQ'ANY North Carolina Retail Operations

SUMMARY

OF STAFF ADJUSTMENTS TO TAXES - OTHER THAN INCOME Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Amount Line Increase No. Item (a) (b)

Adjustment to reflect additional gross receipts tax applicable to adjustments to operating revenues 1/ $ 1,000

2. Adjustment to annualize payroll taxe~ applicable to December 31, 1976 wage adjustment 123

3. Adjustment to reflect property taxes on plant in service at December 31, 1976 3/ (1,735)

4. Adjustment to reflect property taxes on actual construction 'cost Brunsuick Unit No. 1 at December 31, 1976 p) 155

5. Decrease in taxes - other than income (Line 1 through L4) $ 457 1/ Hoover Exhibit 1, Schedule 3-4a, Line 3, Column (b).

2/ Hoover Exhibit 1, Schedule 3-4b, Line 4, Column (b).

3/ Hoover Exhibit 1, Schedule 3-4c, Line 8, Column (b).

4/ Hoover Exhibit 1, Schedule 3-4d, Line 8, Column .(b).

Pocket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-4a CAROLINA PCMER 6 LIGHT CAPABLY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT ADDITIONAL GROSS RECEIPTS TAX APPLICABLE TO STAFF ADJUSTMENTS TO OPERATING REVENUES Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line No. Item Amount (a) (b)

l. Increase in operating revenues-1/ $ 16,668

2. Gross receipts tax rate .06

3. Increase in gross receipts tax (Ll x L2) 8 1 000 1/ Hoover Exhibit 1, Schedule 3-1, Line 5, Column (b).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-4b CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO ANNUALIZE PAYROLL TAXES APPLICABLE TO DECEMBER 31, 1976 WAGE ADJUSTMENT Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a) (b)

Staff adjustment to payroll tax expense to reflect 12-31-76 'evel of employees and 3-31-77 wage rates- $ 469

2. Company ad'ustment J to payroll taxes to reflect 6-30-76 level of employees and 3-31-77 wage rates-2/ 302

3. Increase in payroll tax expense (Ll L2) $ 167 N.C. retail increase in payroll tax expense (L3 X

.732723/) $ 123 S

1/ Calculation provided by the Company and checked by the Staff during the Staff investigation.

2/ Davis Exhibit No. 1, Page 5 of 9, Column (2).

3/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-4c CAROLINA POMER 6 LIGHT COMPANY North Carolina Retail Operations CALCULATE)N OF ADJUSTMENT TO REFLECT PROPERTY TAXES ON PLANT IN SERVICE AT DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a)

Plant in service at June 30, 1976-1/ $ 1,852,852

2. Net plant additions for the period June 30 through December 31, 1976 52 239

3. Total plant in service at December 31, 1976 (Ll + L2) 1,905,091

4. 1976 effective property tax rate per $ 100- .7363

5. Property taxes on December 31, 1976 plant (L3 X L4) 14,027

6. Property taxes incl~ged by the company on plant other than Brunswick fP1- 16 613

7. Adjustment to decrease property tax expense (L5 - L6)

8. N.C. retail decrease in property tax expense (L7 X

.67077 5/). 1,735 1/ Davis Exhibit No. 4, Page 4 of 5, Line 1, Column (2).

2/ Hoover Exhibit 1, Schedule 2-2, Line 6, Column (b).

3/ Calculated fran information provided by the company.

4/ Actual property tax expense for test period plus adjustments made in Davis Exhibit 1, Page 5 of 9, ($ 12,321,605 + $ 3,675,301 + $ 616,000) 5/ Company jurisdictional allocation study,

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-4d CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULA ION OF ADJUSTMENT TO REFLECT PROPERTY TAXES ON ACTUAL CONSTRUCTION COSTS OF BRUNSWICK 81 AT DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Total Line Company No. Item Amount (a) (b)

1. Total inve"tment in Brunswick 81 at December 31, 1976-1/ $ 307,974

2. 1976 assessment ratio- 2/ 83.966%

3. Taxable value for 1976 (Ll X L2) 258, 593 1976 e ffective tax rate-/ S .0042

5. Staff property tax expense for Brunswick 81 (L3 x L4) 1,086

6. Amount included by the Company- 834

7. Adjustment to increase property tax expense for Brunswick 81 (L5 - L6) ~252

8. N. C. retail increase in property tax expense (L7 y,

. 61597 5/) 155 1/ Company wo kpapers obtained during examination presenting actual investment through December 31, 1976.

2/ Company response to NCUC Form E-l, Section C-10, relating to Company adjustment No. 5.

3/ Actual tax rate for calendar year 1976.

4/ Davis Exhibit No. 1, Page 5 of 9, Column (2).

5/ Company jurisdictional allocation study.

Docket No. E-2, Sub 297 Hoover Exhibit 1 CAROLINA POWER & LIGHT COMPANY Schedule 3-5 North Carolina Retail Operations

SUMMARY

OF STAFF ADJUSTMENTS TO STATE AND FEDERAL INCOME TAXES Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's 'Omitted)

Amount Increase and Decrease Line Current No. Item State Federal Deferred.

(a) (6) (c) (d)

Adjustment to current book accrual of State income tax expense $ 1,644 (789)

2. Adjustment tc reflect change in income tax expense due to Brunswick Unit No. 1 depreciation expense adjustments 78 -'84 3

/

-4/ (2,141)

3. Adjustment to reflect change in income tax expense due to depreciation expense adjustments applicab'e to additions to plant in service for the period July 1, 1976 through December 31, 1976 (97)- (734)- 1,045-/

4. Adjustment to reflect the income tax effect of Staff adjustments to revenues, 0&M expenses and taxes other than income. 74-"

Adjustment to reflect the tax effect of interest expense allocation adjustment 179 11/ 1 34812/

6. Total (Ll through L5) 81 878 8 969 S(1 096) 1/ Hoover Exhibit 1, Schedule 3-5a, Line 18, Column (c) .

2/ Hoover Exhibit 1, Schedule 3-5a, Line 18, Column (c) x .48.

3/ Hoover Exhibit 1, Schedule 3-5b, Line 6a,, Column (b) ~

4/ Hoover Exhibit 1, Schedule 3-5b, Line 6b, Column (b) ~

5/ Hoover Exhibit 1, Schedule 3-5b, Line 15, Column (b).

6/ Hoover Exhibit 1, Schedule 3-5c, Line 5, Column (b) ~

7/ Hoover Exhibit 1, Schedule 3-5c, Line 8, Column (b) ~

8/ Hoover Exhibit 1, Schedule 3-5c, Line 14, Column (b).

9/ Hoover Exhibit 1, Schedule 3-5d, Line 6, Column (b).

10/ Hoover Exhibit 1, Schedule 3-5', Line 7, Column (b).

11/ Hoover Exhibit 1, Schedule 3-5e, Li.ne 4, Column (b).

12/ Hoover Exhibit 1, Schedule 3-5e, Line 5, Column (b)

Docket No. E-2, Sub 297 Hoover Exhibit 1 Scnedule 3- 5a CAROLINA POWER & LIGHT COiWANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO CURRENT BOOK ACCRUAL OF STATE INCOME TAX EXPENSE Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omi'tted)

Line No. Item Amount Amount (a) (b) (c)

Book taxable operating income $ 118,035

2. Add: N. C. audit assessment 344

3. Federal depreciation 106,816

4. Preferred dividend deduction 228 107,388

5. Deduct: N. C. depreciation 112,434

6. Gain on Harris Environmental Center 545 112 979

7. Taxable operating income (Ll + L2 - L3) 112,444

8. North Carolina allocation factor .85

9. North Carolina allocated taxable

10. Operating income (L7 X L8) 95,577 Add: Gain on Harris Environmental Center 545

12. North Carolina taxable operating income (L10 + Lll) 96,122

13. Tax rate .06

14. Total tax expense (L12 X L13) 5,767

15. North Carolina retail allocation factor .9252

16. North Carolina retail tax (L14 X L15) 5,336

17. Book acc'eual 3 692

18. Increase i'n State income tax expense (L16 - L17) 6 1 644 NOTE: Adjustment calculated from State income tax worksheet provided by Company.

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3- 5b Page 1 of 2 CAROLINA POWER 6c LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT CHANGE IN INCOME TAX EXPENSE DUE TO BRUNSWICK //1 DEPRECIATION EXPENSE ADJUSTMENTS Twelve Months Ende'd June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Line Total No. Item ~Corn m~n (a) (b)

Total tax depreciation for Brunswick 81- $ 28,169

2. Tax rate .5112

3. Decrease in tax liability (Ll X L2) 14,400

4. Amount of decrease included by the company- 15 475

5. Increase in tax liability due to change in depreciation (L3 -L4) 1 075

6. N. C. Retail increase in income tax .liability:

(a) State tax liability (L5 x .06 + .5112 x .61597 ) 8 78 (b) Federal tax liability (L5 x .4512 + ..5112 x .61597

)

7., Increase in deferred income taxes - full normalization:

8. Tax depreciation 1/

$ 28,1)9 9; Book depreciation 1/ 10 131

10. Subtotal (L8 L9) 18,038 Tax rate .5112

12. Increase in deferred taxes as calculated by Staff (L10XL11) 9,221

13. Amount of increase included by the company -/ 12 697 Decrease in deferred income taxes (L12 L13) 3 476

15. N. C. Retail amount of decrease in deferred income taxes (L14 x .61597 ) 2 141

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-5b Page 2 of 2 CAROLINA POMER 6 LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT CHANGE IN NCOME TAX EXPENSE DUE TO BRUNSWICK 81 DEPRECIATION EXPENSE ADJUSTMENTS Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Footnotes 1/ Calculated from information provided by the Company.

2/ Davis Exhibit: No. 1, Page 6 of 9, 3/ Company jurisdictional allocation study.

4/ Davis Exhibit No. 1, Page 7 of 9, Column (2).

C d Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-5c CAROLINA POWER E LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT CHANGE IN INCOME TAX EXPENSE DUE TO DEPRECIATION EXPENSE ADJUSTMENTS APPLICABLE TO NET ADDITIONS TO PLANT IN SERVICE FROM JULY 1, 1976 TO DECEMBER 31, 1976 Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

N.C.

Line Retail No. Item Amount (a) (b)

1. Total tax depreci~tion for net additions 1/

$ 3,091

2. State tax rate .06

3. Decrease in State tax liability (Ll x L2) 185 4, Amount of decrease included by the Company 2/ 88

5. Decrease in State tax liability due to change in depreciation (L3 L4) 8 97 Decrease in Federal income tax liability ((Ll - L3) x .48) $ 1,395

7. Amount of decrease included by the Company 2/ 661

8. Decrease in Federal income tax liability due to change in depreciation (L6 - L7) 6 734

9. Increase in deferred income taxes - full normalization:

10. Tax depreciation 1/

$ 3,091 Book depreciatic n3/ 1 046

12. Difference in book and tax depreciation (L10 - Lll) 2, 04'5

13. Tax rate . 5112

14. Increase in deferred income taxes (L12 x L13) $1 045 Calculated on net plant additions shown on Hooves Exhibit 1, gchedule 2-2, using depreciation rates provided by the Company.

2/ Calculated from information in Company workpapers filed in response to NCUC Form E-l, Section C-10, relating to Company adjustment No. 36, 3/ Hoover Exhibit 1, Schedule 3-3b, Line 9, Column (d).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-5d CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT THE INCOME TAX EFFECT OF OF STAFF ADJUSTMENTS TO REVENUES, 0&M EXPENSES AND TAXES - OTHER THAN INCOME Twelve Months Ended June 30, 1976 (Adjusted for Known Changes Through December 31, 1976)

(000's Omitted)

Amount Line Increase No. Item Decrease (a) (b)

Increase in operating revenues 1/ $ 16,668 2.

3.

Increase in operating expenses Decrease 2/

in taxes - other than income '/ 15,736 (457) 4, Interest on customer deposits 4/ 149

5. TotaL (Ll - L2 + L3 - L4) $ 1 240

6. Increase in State income tax expense (L5 X .06) $ 74

7. Increase in Federal income tax expense (L5 - L6 X .48) S 560 1/ Hoover Exhibit 3., Schedule 3-1, Line 5, Column (b).

2/ Hoover Exhibi 1, Schedule 3-2, Line 8, Column (b).

3/ Hoover Exhibit 1, Schedule 3-4, Line 5, Column (b).

4/ Hoover Exhibit 1, Schedule 3-7, Line 5, Column (b).

Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-5e CAROLINA POWER & LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO REFLECT THE INCOME TAX EFFECT OF INTEREST EXPENSE ALLOCATION ADJUSTMENT Twelve Months Ended June 30, 1976 (Ad)usted for Known Changes Through Decemb'er 31, 1976) .

(000's Omitted)

Line No. Item Amount (a) (b)

Interest expense per Company 0 48,446

2. Interest expense per Staff 45 458

3. Decrease in interest expense (Ll - L2) 8 2988 Increase in state income tax expense (L3 x .06) $ 179

5. Increase in Federal income tax expense (L3 - L4 >:.48) ~1, 348 1/ Davis Exhibit No. 4, Page 3 of 5, Line 1, Column'.

g'oover Exhibit 1, Schedule 1, Line 1, Column (g).

6-Docket No. E-2, Sub 297 Hoover Exhibit 1 Schedule 3-6 CAROLINA POWER 6 LIGHT COMPANY North Carolina Retail Operations CALCULATION OF ADJUSTMENT TO THE AMORTIZATiON OF INVESTMENT TAX CREDIT Twelve Months Ended June 30, 1976 (Ad]usted for Known Changes Through December 31, 1976)

(000's Omitted)

Amount Line Amount of Annual No. Item of Credit Amortization (a) (b) (c)

1. Estimated investment tax credit related to Brupswick Unit No. 1 excluding ESOP-I $ 11,900 $ 496

2. Estimated investment tax credit related to additions to utility plant in service for the twelve month period ended I]ecember 31, 1976 excluding ESOP 10 063 373

3. Total estimated investment tax credit and amortization (Ll + L2) $ 21 963'69

4. Less: Amortization of pre-1971 invest-ment tax credit- 279

5. Net increase in amortization (L3 L4) 590

6. N. C. retajl jurisdictional allocation factor 3I L6)'66084

7. N. C. reta 1 net increase in amortization (L5 x 8 390 1/ Calculated from information provided by the Company.

2/ NCUC Form E-l, Section C, Item 13-a, (5).

3/ Company )urisdictiona1 allocation study.

Docket No. E-75 Sub 297 Hoover Exhibit 1 Schedule 3-7 CAROLINA'POWER & LIGHT 'COMPANY North Carolina Retail Operations CALCULATION OP ADJUSTMENT TO INTEREST ON CUSTOMER DEPOSITS Twelve Months Ended June 30, 1976 (Ad)usted For Known Changes Through December 31, 1976)

(000's Omitted)

N. C.

Line Retail No. Item 'Amount (a) (6) .

l. End~f-period customer deposits 1/ $ 2,965

2. Actual interest expense for the twelve months ended December 31, 1976 6'53

3. Average customer deposits for the prelve months ended December 31, 1976 1 $3 '052

4. Effective interest rate (L2 + L3) 5.01X

5. End-of-period interest cost (Ll x TA) 149

6. Amount 'included by Company 2/

7. Increase in interest expense $ 3 1/ Provided by Company.

2/ Davis Exhibit No. 1, Page 1 of 9, Line,20, Column (5).