ML19345G868

Testimony of Tq Smith (PSC of Mi) Filed 800430 Before PSC of Mi.Util Historical Data & Analysis of Revenue Deficiency for Forecasted 1981 Test Yr Encl

ML19345G868
Person / Time
Site:	Fermi
Issue date:	10/31/1980
From:	Tanya Smith MICHIGAN, STATE OF
To:
Shared Package
ML19345G856	List: ML19345G855 ML19345G858 ML19345G860 ML19345G862 ML19345G863 ML19345G864 ML19345G865 ML19345G866 ML19345G868 ML19345G869 ML19345G870
References
U-6488, NUDOCS 8104220563
Download: ML19345G868 (25)

Text

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O STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE C0"14ISSION e e e,e e In the matter of the application of )

THE DETROIT EDISON COMPANY for

)

authority to amend its rate

)

Case No. U-64G8 schedules governing the supoly

)

of electric anergy and to amend

)

other miscellaneous rates.

)

)

(

l O Direct Testimony of Thomas Q. Smith 1810 4 2 206fo3

Direct Testimony O

of ThomEs Q. Smith Q.

Will you please state your name and business address?

A.

My name is Thomas Q. Smith. My business address is 6545 Mercantile, Lansing, Michigan 48909.

Q.

What is ycur current employment status?

A.

I am presently employed by the Michigan Public Service Comission as a Public Utilitier. Auditor.

Q.

What is your educational background?

A.

I was graduated from Michigan State IJniversity in 1974 with a Sachelors Degrae in Accounting.

O Q.

Are you licensed to practice as a Certified Public Accountant in l

l the State of Michigan?

A.

Yes, I am.

l 0.

What organizations do you belong to?

A.

I am a member of the Michigan Association of CPAs, the American l

Institute of CPAs, and the Beta Alpha Psi National Accounting Honorary Fraternity.

Q.

Have you previousl/ cest1fied before this Comission?

A.

I have testified before this Comission on several occasions. Fast recently I have testified in connection with Indiana and Michigan O

l l

~

~

~

~

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2-Electric Company's rate application U-6148, Upper Peninsula Pour Company's rate application U-5121, and Michigan Power Company's rate application U-5885.

I also presented to the Cornission, the Staff's recomendation for imediate and partial rate relief in Rate Case U-6121.

Q.

What were your responsibilities in connection with Rate Case U-64887 A.

I served as " auditor in charge" of the rate case review of the Applicant's books and financial records for the historical year ended December 31, 1979.

I was also responsible for analyzing the Applicant's historical revenue deficiency as filed and detennining its propriety, Finally, in association with the other Staff witnesses in this case, I was charged with developing the Applicant's revenue deficiency based on a 1981 forecasted test year.

O.

Are you sponsoring any exh hits which deal with the 1979 historical test year?

A.

I am sponsoring one historical cxhibit S-entitled, " Historical Data". This exhibit consists of three :hedules: 1) " Adjusted Net Operating Income," 2) " Net Income With Standard MPSC Adjustments,"

and 3) " FICA Adjustment to Net Operating Income".

In all cases the jurisdictional amounts which appear on this exhibit were provided to me by James Padgett.

2.

'ihat is the purpose of your " Historical Octa" exhibit?

O A.

The purpose of S-is to provide the Commission. with accurate t

+

y-

. historical infomation which it could use to develop a revenue deficiency based on the 1979 test year ff it so desired. Mcwever, it is important to point cut that the infomation e,ontained in my

" Historical Data" exhibit is not, in and of itself, sufficient to develop a meaningful revenue deficiency.

In order to do that, my infomation would have to be combined with the 1979 historical case as presented by Detroit Edison and intervening parties in their Cases.

Q.

Is it accurate to state that you are not recommending a revenue deficiency based on the 1979 test year?

A.

That is correct.

Q.

Will you please describe the " Adjusted Net Operating Income" schedule of your " Historical Data" exhibit? ^

A.

The " Adjusted Net Operating Income" schedule begins with booked net operating inceme of $273,202,000 on a total electric basis, and adds total electric cooked AFDC of $81,467,000 to arrive at a total of $354,669,000. To this figure are added and subtracted, the MERC consolidation and.arious o^cer adjustments for abnormal and cut of pericd items. The result is adjusted 1979 net operating inecme of

$352,981,000 on a total electric basis.

Q.

What does the figure of $352,981,000 represent?

A.

This figure represents the net income which Detroit Edison's electric department realized due to normal operations in the 1979 calendar year.

. ~

Q.

Will you please describe the Net Income with Standard MPSC Adjust-ments" schedule of the " Historical Data" exhibit?

A.

This schedule starts with total electric adjusted 1979 net income of $352,981,000 as shown on the " Adjusted Net Operating Income" schedule. To this amount, I have made various standard adjustments and adjustments which are called for by MPSC orders. The result of these adjustments creates total electric adjusted not ir.come pricr to cost level and year end level increases in the amount of $359,334,000.

Q.

What is the significance of this income figure?

A.

Total electric net income of $359,334,000 can be eted as the starting point for detennining tne adjusted net ocerating inccme to be used in detemining the 1979 historical year revenue deficiency.

O Q.

What adjustments would have to be n de to the 5359,334,000 number in order to arrive at adjusted net operating income?

A.

The adjust =ents which would have to be made are the cost level and year end level adjustments as detailed en pages 3 and 4 of Exhibit A-3.

Q.

Have ycu reviewed the adjustments which the Applicant has detailed l

on pages 3 and 4 of Exhibit A-37 A.

Yes, I have.

Q.

What is your opinien of these adjustments?

A.

I feel that with one exception, these adj'ast:nants are reasonably O

. accurate and proper.

I further feel that these adjustments, if the O

Connission so desired, could properly be used to determine a revenue deficiency based upon d 1979 historical test year.

Q.

What is the exception which you mentioned in your previous answer?

A.

That exception is the FICA or FOAB tax adjustment. The Applicant on Exhibit A-3, Page 3, Line 16 shows a total electric increase in FOAB tax expense of $1,600,000 ($864,000 net of tax). The " FICA Adjustment to Net Operating Income" scnedule of my " Historical Data" exhibit indicates that an FOA8 tax adjustment of $1,489.384

($804,000 net,of tax) is more reasonable. My adjustment of $804,000 (total electric) arsumes that the company will pay FICA taxes on the full increase in the FICA base for all of its employees.

Because many employees will nnt earn wages egn1 to the maximum O

FICA base; the company will not pay taxes on the increased base for these employees. Consequently, my FICA adjustment as shown on my

" Historical Data" exhibit, while being an exaggeration, is more reasonable than the FOAB adjustment on Exhibit A-3.

Q.

Have you reviewed the total electric rate base figure of $4,787,015,000 as shown on Exhibit A-2, Page 2, Line 257 A.

Yes, I have.

Q.

Do you feel that a total electric rate base of $4,787,015,000 could be properly used to detennine a revenue deficiency based en a 1979 test year?

A.

I feel that such a rate base is reasonable.

O 9

.g, Q.

Are you also sponsoring Exhibit S-entitled " Investment Ys.

O Rate Base (U-60es> 2 A.

Yes, I am.

Q.

What is the purpose of the " Investment Vs. Rate Base (U-6005)"

exhibit?

A.

In the past there has been a certain amcunt of criticism of staff's method of calculating working capital by the company. The company has claimed that the staff method results in a rate base which does not fully reflect the company's investment. My exhibit shows that the staff method of calculating working capital (t.Ne staff method was adopted by the Cemnissicn) in U-6006 resulted in a rate base of

$4,370,113,000 based on a 1979 average year. The actual historical investment based on a 1979 average year was $4,226,838,000. Thus, O

it is aa reat that ta starr = thod or c icuietias orkias c>ait i provides for an adequate rate base.

Q.

Are you presenting ar, exhibit in connection with the forecasted

'981 test year?

A.

I am presenting one Exhibit S-

_ entitled " Analysis of Revenue l

Deficiency" in connection with the 1981 test year.

S-censists of a cover sheet and four additional schedules: 1) " Revenue Deficiency

-Electric", 2) " Rate Base-Electric", 3) " Working Capital-Electric",

4) " Income Statement-Electric".

Q.

Are you responsible for Exhibit S-in its entirety?

A.

No, I am not. I am responsible for tne overall presentation.

O

j Mr. Padgett is respcnsible for jurisdictional allocations and production maintenance expense in total. Mr. Stojic is responsible for the required rate of return. Mr. MacGregor is responsible for fuel, purchased power, and fuel handling expenses. Dr. Bhatia is responsible for other 0 & H expenses. Larry Bailey is responsible l

for revenues. I am responsible for the remainder of the exhibit.

l Q.

What is the purpose of the " Revenue Deficiency-Electric" schedule of Exhibit S,

?

A.

The " Revenue Deficiency-Electric" schedule develops staff's reccmended revenue deficiency based ucen a 1981 forecastec test year. All numbers en this schedule come frcm other schedules within this exhibit or are developed on the face of this schedule, except for the required rate of return which was prcvided by Mr. Stojic. Line 8 of this scheduh shows the staff's recernended revenue deficiency.

O.

Why have you used the high eri of Mr. Stojic's range of required rate of return?

A.

I have used the high end purely for illustrative purposes.

I also calculateo AFUDC and the nomalized deferred taxes on the borrcwed l

1 funds portion of AFUDC based on the high end of Mr. Stojic's range.

Consequently, when the Commission finally detemines a required rate of return, AFUDC and the associated deferred taxes will have to be adjusted to confom with the Comission's detemined required rate of return. Similarly, the pro fama interest tax savings must also be revised to confom with the Comission's ordered capital struccure.

. O o-Are ther >#1 ota r it s whica ta coma ar a = iaciuded in rete base, but which you have not?

A.

Yes. The company included approximately $86,672.000 of CWIP for Greenwood 2 and 3 in its rate base. Since the Greenwood 2 and 3 project has been cancelled; I have not included'any Greenwood 2 and 3 CWIP in rate base as shown on Line 17 of the " Rate Base-Electric" schedule.

Q.

Will you please describe your method for calculating the working capital allowance as shcw on Line 9 of the " Working Capital-Electric" schedule of Exhibit S-

?

A.

I have used the method which was utilized by the Comission in its orders in U-5502 and U-6006. This method is based on the historical Q

relationship between 1/8 0 & M working capital base and the tottl i

working capital allowance.

Q.

How was the calculation spn:ifically made in this instance?

A.

My " Working Capital-Electric" schedule begins on Li.1e 1. Column A with other 0 & M expenses. To this number I add Lines 2, 3. and 4; which are fuel, fuel handling, and production maintenance expenses.

All of these items come from the " Income Statement-Electric" schedule of this exhibit.

I then divide total 0 & M by 8 to arrive at the 1/8 0 & M working capital base. Dividing by the historical relationship between working capital base and work *ng capital allowance results in working capital allowance as shown on Line 9.

Q Q.

Do you believe that the calculated working capital en Line 9 is adecuate?

. A.

I most certainly do.

I base my opinion on my " Investment Ys. Rate Base (U-6006)" exhibit which I have discussed earlier in my prepared testimony.

Q.

What is the final schedule in Exhibit S-

?

A.

The final schedule is " Income Statement-Electric".

Q.

What portions of this schedule are you responsible for?

A.

I am responsible for Column A, Lines 8 through 19.

Q.

Will you please describe Lines 8 through 19 of your " Income Statement-Electric" schedule?

A.

Line 8 is the forecasted 1981 depreciation expense.

It is based en O

my forecasted depreciable plant without transportation equipment.

Depreciaticn on transportation equipment is part of 0 & M expense.

I have 4pplied the composite depreciation rate based upon the stipula-tien in Case U-6461 to my forecasted depreciable plant. Again, the l

rate used for Pennsalt is the currently authorized depreciation rate.

Line 9 represents various amortization expenses as authorized by the Comission.

Line 10 is the forecasted current FIT expense. This number is developed through the use of other items contained in the " Income i

l Stateaent-Electric" schedule and the company's forecasted schedule O

. M items.

O I do not deduct ITC because this Ccemission for the purpose of ratemaking, nonnalizes ITC expense.

Line 11 is the forecasted deferred FIT expense including indirect construction costs per U-5281 and the feedback of accumulated deferred ITC.

l l

Line 12 represents forecasted MSBT based on forecasted operations.

Line 13 is forecasted property and other taxes. Of the total electric (Column A), amount $38,076,000 represents property tax expense.

Line 14 is the total of Lines 3 thrcugh 13.

Line 15 is'Line 1 minus Line 14.

Line 16 is the AFUDC which I have calculated.

I have used an AFUDC rate equal to the required rate of return without Belle River 1 and comon financing.

I have not included polluticn control equipment, Greenwood 2 and 3, or Selle River 1 and comon in in my AFUDC calculation.

Line 17 is the pro forma interest tax savings adiustment.

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I Lines 18 through 21 are varicus amortization items, net of tax effect, which have been approved by the Comission for ratemaking i

trea tment.

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Q.

In connection with the amortization expenses shown on Line 9 of your " Income Statement Electric" schedule, are you aware that Detroit Edison, under Docket U-6474, is seeking audiority to enortize costs associated with the cancelled Greenwood 2 and 3 projects?

A.

Yes, I am.

Q.

What is the staff position in respect to the treatment of Greenwood 2 and 3?

A.

The staff believes that Greenwood 2 and 3 should not be included in rate base at this time. The staff would also recommend that the revenue deficjency in U-6488 be changed to conform with the treatment authorized for Greenwood 2 and 3 in any order which may be issued O

by the Ccmmission in U-6474 Q.

In connection with tne depreciation expense and accumulated depreciatien which were used in your " Analysis of Revenue Deficiency" exhibit; I

you stated that you based your calculations upon rates which were in turn based upon a stipulation entered into in Case U-6461.

Is that correct?

A.

Yes, it is.

Q.

What is the purpose of the application 1n Case U-64617 A.

This is an application by Detroit Edison for permission to increase its depreciation rates.

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13-Q.

Has an order been issued in U-6461 at this ti=e?

O x.

ilo.

O.

What do you suggest be cene if no order has been issued in U-6461 at the time an order 's to be issued in Case U-6488?

A.

If no order in case U-6461 has been issued, then the creer for U-6488 should detemine accumulated depreciation and depreciatico expense based upcn currently authorized rates.

Q.

What is 1981 ferecasted accu =ulated depreciatien and depreciatien expense based upcn currently authorized rates?

A.

Based ucen currently autherized rates, forecasted 1951 accumulated capreciaticn is $1,232,426,0C0 and decreciatica ex;ense is 5146,626,000.

0.

If the Cerrnissien were to appreve new rates for Pennsalt, shculd depreciatien be recalculated te reflect the change?

4 Frem a theoretical standpoint, that is ccrrect. Hcwever, Pennsalt de::reciaole plant is only $13,931,000 compared with ::tal depreciable piant of 54,307,598,000 (0.323t of the total). Ccnse:;uently, any enange in Pennsalt depreciation rates, when translated to a change in overall revenue deficiency wculd prchably be very minimal.

i Therefore, I do not feel it is necessary to recalculate the everall revenue deficiency based solely upon a change in Pennsalt depreciation rates.

O.

So ycu wish to spenser any additicnal exnibits?

A.

I wish to sponsor ene adciticnal exhibit.

O

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-14 Q.

Will you please describe that exhibit?

A.

The exhibit is identified as S-and entitled " Rate of Return -

Without Belle River". The purpose of this exhibit is to determine a required rate of return without considering the Belle River financing. The numbers on this exhibit were provided to me by Mr.

Stojic. Because the interest associated with Belle River 1 and l

comen is capitalized; my AFUDC associated with the remaining CWIP Ithe remaining CWIP is the CWIP associated with projects other than Belle River 1 and comon) was calculated using the required rate of return shown on this exhibit. My AFUDC' can be found on Line 15 of the " Income Statement - Electric" schedule of the " Analysis of Revenue Ceficiency" exhibit.

Q.

Do you wish to address any additional items?

O A.

Yes, I do.

In his direct testimony, Mr. Grove, addressed the issue of test generatien credits as they apply to Femi 2.

I would also like to aqss two items as they apply to Fermi 2 test generation l

credits.

Q.

What is the first item you wish to address?

A.

Mr. Grove states that "The company uses the ' displacement cost' method of determining the fair value cf the electricity produced l

during this pre-comercial phase".

(TR384) I wculd simoly like to state, it is also the staff's positien that the " displacement cost" method of determining fair value, is the proper method.

Adoitionally, the staff reccmended the use of the " displacement cost method in Indiana and Michigan's Ratr, Case U-6148.

l

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-- Q.

What is the second item which you wish to discuss?

A.

Mr. Grove indicates (TR 385) that it is the intent of the company to nomalize the tax effect of the pre-commercial adjustment for test generation.

It is the position of the staff, that in light of the non-regular non-recurring nature of pre-comercial adjustments, normalization of the tax effect of this item is proper. Horaver, it is also the position of the staff, that for administrative purposes, this treatment should be authorized in a separate order.

Therefore, the staff recomends that the company file an application for accounting treatment for nomalization of this item before authority is granted.

Q.

Does this conclude your testimony?

A.

Yes, it does.

O 1

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Cas2 N3. U-6480 Witnesses:

T. Smitn &

J. Padgett Exhibit S-Q, Date:

4 THE DETROIT EDISON COMPANY U-6488 HISTORICAL DATA 1

FOR THE TEST YEAR ENDED DECE!tBER 31. 1979 O

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-Page 1 of 3 O

THE DETROIT EDISON C0f9ANY Adjusted Net Operating Income For the Test Year Ended December 31, 1979 Total Michigan Electric Jurisdictional (In Thousands of Dollars)

(Net of Tax)

(Net of Tar)

(A)

(3) 1.

Scoked Net Operating Income

$273,202 5265,352 2.

AFDC - Electric 81,467 78,341 3.

Total 354.669 343.693 O

4.

Adeos: ents:

5.

365 Days of Revenue (669)

(669) 6.

MERC Consolidation 3,707 3,558 7.

Bad Debt Expense 212 212 8.

FIT Recorded Out of Period (3,172)

(3,086) 9.

SBT Recorded Out of Period (562)

(565) 10.

Property Tax Recorded Out of Period (1,204)

(1,169)

(1,628)

(1,719)

11. Adjusted 1979 Net Income

$352,981 5341,974 O

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Page 1 of 3 O

THE DETROIT EDISON COP 9ANY Adjusted Net Operating Income

'For the Test Year Ended December 31, 1979 Total Michi an 9

Electric Jurisdictional (In Thousands o,f Dollars)

(NetofTax)

(Net of Tax)

(A)

(B) 1.

Booked Net Operating Incer.e

$273,202

$265,352 2.

AFDC - Electric 81,467 78,341 3.

Total 354,669 343,693 4.

Adjust:nents:

l 5.

365 Days of Revenue (669)

(669) 6.

MERC Consolidation 3,707 3,558 7.

Bad Debt Expense 212 212 8.

FIT Recorded Out of Period (3,172)

(3,086) 9.

SBT Recorded Out of Period (562)

(565) 10.

Property Tax Recorded Out of Period (1,204)

(1,169)

(1,588)

(1,719)

11. Adjusted 1979 Net Income

$352,981 5341,97:

I O

Page 2 of 3 O

THE DETROIT EDISON COMPANY Net Income With Standard MPSC Adjustments For the Test Year Ended December 31, 1979 Total Total Michigan Electric Electric Jurisdictional l

(In Thousands of Oc11ars)

(Gross of Tax)

(Net of Tax)

(Net of lax) l (A)

(B)

(C) l 1.

Adjusted 1979 Net Income

$352,981 5341.974 2.

Adjustments:

3.

Income From Reacquired Sec. (160)

(154)

(

4 Centributions 5.

Advertising Disallowed 367 194 190 6.

Social and Service Clubs 83 44 43 7.

Revenue to 365.25 days 817 431 431 8.

Monthly Billing Amortization 1.165 649 649 9.

Area Development Amortization (75)

(40)

(39) 10.

Nuclear Fuel Gain Amortization 1,039 566 543 11.

FERC Compliance Audit Amortization (301)

(301)

(289) 12.

Reserve for Temporary Over-l 13.

Recovery of Energy Cost 892 470 470 14.

Anti-Discrimination Law Suit 4,500 4,500 4,412 6,353 6,255

15. Adjusted Net Income Prior 16.

to Cost Level and Year-17.

End Level Increases

$359,334

$348,230 l

1

Paga 3 of 3 THE DETROIT EDISON COMPANY FICA Adjustment to Net Operating Income For the Test Year Ended December 31, 1979 Total Michigan Electric Jurisdictional (A)

(S) 1.

Total Year-End Emloyees 10,940 tg 2.

X Increase in FICA Base 3,000_

l U

3.

Maximum Increase in FICA Wages

$32,820,000

$32,179,682 l

4.

FICA Rate 6.13%

5.

Increase in FICA

$ 2,011,866 1,972,614 6.

Electric Portion 74.03%

7.

Increase in FICA Expense

$ 1,489,384 1,460,327 l

8.

Increase Net of FIT (54%)

804,267 5

788,577 1

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Case N. U-6488 Witness: T. O. Smith Exhibit S-Date:

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THE DETROIT EDISON COMPANY Investment Vs. Rate Base (U-6006)

At December 31, 1979 (In Thousands of Dollars)

Average Beginning Ending Balance Balance Bal.ance (Col. 2 + Col. 3)+ 2 (A)

(B)

(C) 1.

Stockholders Equity 1,748,765 1,913,649 1,831,207 2.

Long-Tem Debt 1,888,855 2,088,351 1,988,603 1

3.

Unamortized Debt Expense (16,215)

(17,929)

(17,072) 4 Notes Payable 52,510 144,216 98,363 5.

Deferred ITC 123,408 132,692 128,050 6.

Deferred Income Taxes O

7.

Accounts 281-283 296,403 331,200 313,802 8.

Account 190 (10,801)

(9,458)

(10,130) 9.

Customer Deposits 3,456 3,933 3,695

10. Total Detroit Edison 4,336,518 11.

Debt 45,600 45,600 45,600

12. Unamortized Debt Expense (1,230)

(1,144)

(1,187)

13. Deferred Income Taxes 5,026 6,126 5,576

14. Total Midwest Energy 49,989

15. Total Consolidated Investment 4,386,507

16. Jurisdictional Percent 96.36P.

17. Jurisdictional Consolidated Investment 4,226,838 l

18. Rate Base U-6006 4,370,113 l

O

Case No. U-6488 Witness: T. Smith Exhibit S-Date:

l l

l THE DETROIT EDISON COMPANY U-6488 ANALYSIS OF REVENUE DEFICIENCY FOR THE FORECASTED 1981 TEST YEAR O

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Page 1 of 4 Witnesses:

T. Smith l

G. Stojic J. Padgett O

THE DETROIT EDISON CCMPANY Revenue Deficiency - Electric Forecasted for the 1981 Test Year (In Thousands of Dollars)

Total Michioan Electric Jurisdictional (A)

(B) 1.

Rate Base 5,540,081 5,369,323 2.

Adjusted Net Operating Income 408,394 396,441 3.

Overall Rate of Return 7.37".

7.38t O

4.

aequired Rete of Return 9.09t 9.09t 5.

Income Requirement 503,593 488,071 6.

Income Deficiency 95,199 91,630 7.

Gross Revenue Conversion Factor 1.896 1.896 8.

Revenue Deficiency 180,497 173,730 l

O

pag 3 2 of 4 Witnesses:

T. Smith J. Padgstt O~

l THE DETROIT EDISON COMPANY Rate Base - Electric Forecasted for tht 1981 Average Test Year (In Thousands of Dollars)

Total Michigan Electric Jurisdictional (A)

(B) 1.

Utility Plant:

2.

In Service 4,652,098 4,527,860 I

3.

Held for Future Use 29,002 28,010 4

Construction Work in Progress 1,928,866 1,854,685 l

S.

Gross Utility Plant 6,609,966 6,410,555 1

(1,205,390)

( M,235 640 6.

Less Accumulated Depreciation i

326 5,205,165 l

7.

Net Utility 8.

Working Capital Allowance 186,743 184,969 9.

Miscellaneous Items 10.

Retentions from Contractors (20,777)

(20,220) 11.

Refundable Customer Advances (1,870)

(1,870) 12.

Non-Refundable Customer Advances (3,020)

(3,020) 13.

Miscellaneous Work in Progress 1,266 1,017 14 Preliminary Surveys & Investigations 3,468 3,335 15.

Temporary Facilities Work in Progress (55)

(53)

16. Total Miscellaneous Items (20,988)

(20,811)

17. RATE BASE 5,540,081 5,369,323 l

l 1

Pag] 3 of 4 Witnessts:

T. Smith J. Padgett O

i THE DETROIT EDISON COMPANY Working Capital - Electric Forecasted for the 1981 Average Test Year (In Thousands of Dollah)

)

Total Michigan Electric Jurisdictional (A)

(B) 1.

Other 0 & M Expenses 353,001 345,941 2.

Fuel Expense 791,971 761,649 3.

Fuel Handling Expense 25,869 24,861 O-4.

Production Maintenance Exptase 97,521 93,864 5.

Total 0 & M Expenses 1,258,362 1,256',315 6.

1/8 0 & M Working Capital Base 158,545 157,031 7.

Divide by Percent of 0 & M Base 8.

to Total Working Capital 84.9%

84.9%

)

9.

Warking Capital Allowance 186,743 184,969 O

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Page 4 of 4 Witnesses:

T. Smith J. Padgett H. Shatia L. MacGregor L. Bailey THE DETROIT EDISON COMPANY Income Statement - Electric Forecasted for the 1981 Test Year (In Thousands of Dollars)

Total Michigan Electric Jurisdictional (A)

(B) 1.

Revenue 2,140,162 2,073,147 2.

Expenses:

3.

Purchased Power 174,632 167,617 4.

Fuel 791,971 761,649 5.

Fuel Handling 25,869 24,861 6.

Production Maintenance 97,521 3'5,864 93 O

$4' 7.

ota r oaeraciaa > x <at a ace ass.coi 8.

Depreciation 153,049 149,292 9.

Amortizations 2,913 2,860 10.

Current FIT 25,207 25,075 11.

Deferred FIT 66,317 64,167 12 FSBT 6,968 7,037 13.

Other Taxes 116,417 113 199

14. Total Expenses 1,813,865 EMFI

15. Het Operating Income 326,297 317,585

16. AFUDC 01,848 88,323 17.

ProFoma Interest Tax Savings (0,907)

(9,642)

18. Monthly Billing Amortization 649 649

19. Area Development Amortization (40)

(39)

20. FERC Compliance Audit Settlement (301)

(289) 21.

Expenses on Reacquired Securities (152)

(146) 1

22. Forecasted Ad' justed 23.

Net Operating Income 4C8,394 396,441 O

e 9

- - = + -

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Casa No. U-6488 Witnesses:

T. Smith &

G. Stojic Exhibit S-Date:

THE DETROIT EDISON COMPANY Rate of Retum - Without Belle River December 31, 1981 Percent of Weighted Total Cost Cost Capital Rate Rate (A)

W (C) 1.

Long Tem Debt 42.95%

8.76 3.76 2.

Short Term Debt 61 10.97

.07 3.

Preferred Stock 10.30 9.84 1.01 i

4.

Preference Stock 2.53 10.84

.27 O

5.

Common Equity 32.71.

13.5-14.0 4.42-4.58 6.

Accumulated Deferred Income Taxes and ITC 8.52 7.

Accumulated Deferred JDITC 2.38 9.76-9.93

.23.24 8.

Total 9.76-9.93 4

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u-evoo SCHEDULE'NO.

EXHIBIT NO.

WITNESS:

Georce R. Stojic TITLE PAGE O

THE DETR0lT EDISON COMPANY Capital Structure, Capital Costs, Related Financial Data,

()

and Rate of Return GEORGE R. ST0JIC j

Michigan Public Service Commission Staff Wi tness i

October, 1980 I

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