ML18230A832

in Matter of Application of Carolina Power & Light Company, for Increase in Rates & Charges - Testimony of J. Reed Bumgarner, Utilities Engineer, Division of Engineering

ML18230A832
Person / Time
Site:	Harris
Issue date:	03/23/1977
From:	Bumgarner J State of NC, Utilities Commission
To:	Office of Nuclear Reactor Regulation, State of NC, Utilities Commission
References
Download: ML18230A832 (9)

Text

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I DOCKET NO. E-2, SUB 297 ul lB COMhllSSIO I'EFORE THE NORTH CAROLINA UTILITIES COMMISSION IN THE MATTER OF APPLICATION OF CAROLINA POWER AND LIGHT COMPANY FOR INCREASE IN ITS RATES AND CHARGES Docket@ $ 0- V0- <~g;>>

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REClltnTO RV 0 Onttg Ftg TESTIMONY OF J. REED BUMGARNER UTILITIES ENGINEER DIYISION OF ENGINEERING STAFF, NORTH CAROLINA UTILITIES COMMISSION March 23, l977

1 g. Mill you state for the record your name, address, ard present position?

3 A. Ny name is John Reed Bumgarner, Jr. I am employed as a Utilities Engineer by the North Carolina Utilities Commission, One West Norgan Street, Raleigh, North Carolina.

7 g. Will you state your education and experience?

8 A. I graduated from North Carolina State University in 1972 with a B. S. in Electrical Engineering. In February of 1973, I started 10 in my present position as a Utili.ties Engineer with the Commission Staff. That following summer I underwent a four-week training 12 program in distribution engineering with Duke Power Company. I 13 have participated in several major service investigations in con-junction with requests for general rate increases, and have also 15 investigated numerous complaints of individual customers concerning 16 thei r quality and level of electric service.

17 18 In New River Light and Power Company's general rate case in Docket 19 No. E-34, Sub 7 I reviewed and revised that company's cost of ser-20 vice study. I also reviewed Carolina Power and Light Company's 21 'urisdictional allocation study in its most recent rate case (Docket 22 No. E-2, Sub'64) and Nantahala Power and Light Company's cost of 23 service and jurisdictional allocation studies (Docket No. E-13, Sub 24 29).

25 26 g. What is the purpose of your testimony in this proceeding?

1 A. The Commission Staff has reviewed Carolina Power and Light Company's 2 cost of service and jurisdictional allocation studies. One purpose 3 of this testimony is to briefly describe the methods used by Carolina 4 Power and Light and to present the conclusions of ihe Staff's review 5 of these studies. The results of the Staff's investigation of the 6 Company's adjustment for probable future revenues and expenses ap-7 plicable to electric plant in service at the end of the test year 8 are also presented in this testimony.

10 g. What is the purpose of a jurisdictional allocation study7 ll A. Carolina Power and Light Company operates one sytem which supplies 12 electrical power to customers in both North and South Carolina.

13 In addition, in both states, Carolina Power and Light has whole-14 sale customers whose rates are regulated by the Federal Power Com-15 mission. Before the North Carolina Utilities Commission can de-16 termine a just and reasonable leve'i of rates for Carolina Power 17 and Light's North Carolina retail customers, the Company's plant 18 revenues, and expenses must be separated to obtain that portion 19 of the Comoany's operations applicable to these customers. The 20 jurisdictional allocation study is an engineering study which 21 separates the utility's operations between states and regulatory 22 jurisdicti'ons.

23 24 g. Would you briefly describe the allocation m thods used by the 25 Company in its jurisdictional allocation study'6 A. Yes. The bas'ic allocation factors used in Carolina Power and

1 Light Company's study were the power supply-production, power 2 supply-transmission, and energy factors.

The power supply demand factors were based on the system coinci-dent peak demand which occurred August 25, 1975.

The energy factors were calculated by obtaining energy ( KWH) sales by jurisdiction then expressing them as percentages of total sys-tern.

10 11 Electric plant in service was allocated basically as follows:

12 Production plant was allocated using the power supply-production 13 factor. Transmission plant was allocated on both the power supply-14 transmission and the power supply-production factor". Distribution 15 plant was directly assigned to states and between wholesale and 16 retail by specific analysis. General plant was functionalized into 17 production, transmission and distribution categories and allocated 18 on the basis of related plant. Intangible plan. was allocated on 19 the basis of all oth'er electric plant.

20 21 Allocation of other items in the rate'ase are as follows: The 22 depreciation'eserve, functionalized into the plant categories, 23 was allocated on the basis of related plant. Net nuclear fuel 24 was allocated using the energy factors. Minimum bank balances were allocated on the basis of total plant investment. Prepay-26 ments were allocated on gross plant where direct assignment was

1 not possible. Cash requirements were determined as 1/8 of oper-ating and maintenance expense less purchased power, Contributions 3 in aid of construction were directly assigned.

6 Expenses were functionalized and allocated on varying factors.

I 6 Production expense was separated between demand and energy and 7 was allocated on power supply-production demand or energy factors, 8 respectively. Transmission expense was allocated on related plant.

9 Distribution expense, functionalized into substations, overhead 10 lines, underground lines, meters, and other, was allocated on the ll basis of related plant accounts. Both customer accounting expenses 12 and sales expenses were specifically assigned. Administrative and 13 general expenses were allocated by various factors when direct 14 assignment was not possible. Depreciation expense was functionalized 15 into production, transmission, distribution and general plant cate-16 gories and then further assigned and allocated based on related 17 functional plant. After direct assignment to North Carolina and 18 South. Carolina, state income taxes were allocated on the basis of 19 taxable income. Federal income taxes were calculated using taxable 20 income. Taxes deferred in prior years were allocated using power 21 supply-production demand factors. Both the. provision for deferred 22 income taxes and investm nt-tax credit were functionalized and then 23 allocated on related plant factors.

24 25 Revenues, for the most part, were directly assigned.

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1 g. What conclusions did the Staff reach after its revi ew of Carolina 2 Power and Light Company's jurisdictional allocation study?

3 A. The Staff agrees with Carolina Power and Light Company's use of 4 the coinc'.dent peak method of determining the demand allocation 5 factors, and with the other'rocedures and factors used in the 6 juri sdicti onal al 1 ocati ons. The coinci dental peak m-thod, more 7 closely than any other, allocates demand related plant and asso-8 ciated expenses needed to supply the maximum system load to the 9 customers which are causing the load. This is even more appro-10 priate in that most of the extensive amount of plant now being ll constructed by CPEL is being built to supply an ever increasing 12 peak load.

13 14 The Commission's Accounting Staff is, however, proposing to use 15 a method di fferent than the Company for calculating material and 16 supplies and cash working capital.

17 18 9, Did the Staff investigate the Company's adjustment for probable 19 futur e revenues and expenses?

20 A. Yes. This adjustment is usually called the growth to year end I

21 adjustment.

22 23 g. What were the Staff's conclusions with regard to this growth ad-24 justment?

25 A. For the most part, this m thod is essentially the same as employed in previous rate hearings and the Staff is io agreement with its use,

However, in the case of the industrial class, the company substituted 2 a rate of growth which reflects the historical growth rate of this 3 class. It is the Staff's opinion that this variance is inconsistent 4 with the purpose of the gr owth to year end adjustment. The 5 accounting staff has therefore adjusted the revenue and kilowatt 6 hours for the industrial class to reflect the method. used in the previous docket (E-2, Sub 264).

8 9 g. Did you also review the company's cost of service study in this 1O docket?

ll A. Yes, as a part of its investigation in this docket, the Staff has 12 studied. the Retail Operations Cost Allocation Studies (Cost-of-.

Service S+udies) filed by the Company in this proceeding.

16 g. What is a Retail Operations Cost Allocation Study2 16 A. This study is an allocation procedure to separate the costs of 17 operating a utility system among rate classifications. In this 18 study revenues, expenses, and rate base are divided among the 19 rate classifications. From this data, a rate of return can be 2O calculated for each classification. Thus, this study gives an indication of the actual costs of serving each, rate schedule and can be used as a guide in the design of rates which reflect these 23 costs. In addition, since all items can be separated on demand, customer, or energy related factors, it is possible to determine from the study the demand, customer, and energy related costs.

These separated costs provide another useful tool or use in de-27 sign of rates.

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g. Are you familiar with the Retail Operations Cost Allocation Study 2 filed by CPKL in this docket2 3 A. Yes. I have reviewed CPEL's study in detail.

5 g. What were the results of your review of 'the studies filed by the Company'<

7 A. I will not summarize the details of CPSL's study because a good 8 descri ption of the Company's study is included in the Company's 9 Exhibits as Horne Exhibit No. l. This study was performed in a 10 similar manner to past studies filed with the Commission, and in 11 accordance with Commission Staff recommendations in past dockets.

12 13 g. Does the Commission Staff agree with the Company's use of the single 14 summer coincident peak for the cost allocation study in light of 18 the growth of the winter peak in recent years'6 A. Yes. During the past several years Carolina Power and Light has 17 clearly been a summer peaking system. During the. same period 18 though, the winter peak has been growing in magnitude faster than

& v 19 the sueeer peak. In fact, the ]97/'-197+ winter peak far exceeded 20 all predictions because of the record co'id weather occurring during 21 the week of January 17, 1977.

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.23 .Discounting this abnormal peak, however the company has historically 24 been summer peaking and the staff feels that the sumer coincident peak is the appropriate one to use in this study. The staff would recommend however, that in future proceedings the Commission should

1 look not only at a single peak method of allocation, but also at 2 other methods utilizing more than one peak.

3 4 g. Does this conclude your direct testimny7 5 A. Yes, it does.

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